Author: Amit Sharma

Author of Tax Concept

In Works Contract Services, Benefit Of Abatement Has To Be Extended To An Assessee:CESTAT

The  Customs, Excise And Service Tax Appellate Tribunal Chennai, ruled that in works contract services, as cost of materials also form part of the contract, the benefit of abatement has to be extended to an assessee.

Facts 

The appellant had provided taxable services under the category of ‘Works Contract Services’ to PWD, Local bodies etc. These services involved construction of buildings for school, colleges, Court building, office buildings, hospital etc. 

The appellant had not obtained service tax registration and had not filed ST-3 returns. The appellant had entered into contracts with the Government Department and other local bodies for construction of buildings after 01.03.2015, executed works and collected the amount for the works executed. They failed to discharge the service tax on the consideration received. Investigation was initiated. Documents were verified and statements were recorded.  

On scrutiny and analysis of documents and statements it was seen that the appellant has not discharged their Service Tax liability under works contract services. Show Cause Notice was issued to the appellant proposing to demand Service tax along with interest and for imposing penalties. 

Submissions 

Advocate S. Durairaj appearring for the appellant submitted that the Department has classified the service under works contract services; the valuation of works contract service has to be done under Section 67 read with Rule 2A of the Service Tax (Determination of Value) Rules, 2006. However, it is submitted that in the instant case, the adjudicating authority had confirmed the tax liability of Rs.4,84,79,036/- on the value of Rs 32,94,21,693/-, which is inclusive of value of goods for the reason that the appellants had not furnished the relevant details.

Rudra Pratap Singh, Authorized Representative, submitted by him that the appellant had sufficient opportunity to furnish evidence and also to reply to the Show Cause Notice and therefore, the documents produced belatedly cannot be accepted or relied.  

Decision 

The division bench of Sulekha Beevi C.S., Member (Judicial) And Vasa Seshagiri Rao, Member (Technical) said that in works contract services, as cost of materials also form part of the contract, the benefit of abatement has to be extended to an assessee.

The bench observed that in case of works contract services rendered to Government authorities, the amount is paid to the contractor on the basis of work completion as recorded in the Measurement Book (M-book) which is maintained by the departments. 

The bench opined that the appellant has to be given an opportunity to put their defence on the basis of the documents furnished by them. 

Case title: M/s. Sivaparameshwari Engineering Construction & Co v/s The Commissioner of GST & Central Excise

Citation: Service Tax Appeal No. 40467 of 2022

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Liquidation Process Leads to Withdrawal of Appeal in Customs Case

In a significant development, the Learned Counsel representing the appellant, M/s. C & C Constructions Ltd, informed the court that the appellant’s company is currently undergoing a liquidation process. The National Company Law Tribunal (NCLT), in its order dated 7th October 2022, had appointed the Official Liquidator to oversee the proceedings.

Considering these circumstances, the appellant expressed their intention to withdraw the appeal in the case against the Commissioner of Customs (Port), Kolkata. Subsequently, the court has dismissed the appeal as withdrawn.

The case, identified as Customs Appeal No. 75068 of 2016, was presided over by Hon’ble Mr. R. Muralidhar, Member (Judicial), and Hon’ble Mr. Rajeev Tandon, Member (Technical).

This development marks a crucial turning point in the legal proceedings, as the liquidation process takes precedence over pending litigation. The withdrawal of the appeal signifies a shift in focus towards resolving the liquidation matter and addressing the financial and operational concerns of M/s. C & C Constructions Ltd.

Please note that the content of this article is for informational purposes only and should not be construed as legal advice.

Case title: M/s. C & C Constructions Ltd v/s Commissioner of Customs (Port), Kolkata 

Citation: Customs Appeal No.75068 of 2016

Central Excise Refund Claim Rejected Due to Department’s Misinterpretation: CESTAT Remands Matter Back to Adjudicating Authority

The Customs, Excise And Service Tax Appellate Tribunal Chennai remanded the matter back to the adjudicating authority as the central excise refund claim was rejected due to the department’s misinterpretation. 

Facts 

The appellant holds Central Excise Registration and are engaged in manufacture of Excisable goods viz., Motor Cars and their parts falling under Chapter Heading 8703 of Central Excise Tariff Act, 1985. The appellant is availing CENVAT credit of duty paid on inputs, capital goods and Service Tax paid on input services. They clear their goods to M/s. Renault India Private Limited (RIPL) and M/s. Nissan Motors India Private Limited (NMIPL) both being related persons to the appellant. 

The appellant filed a refund claim for the period from February, 2015 to July, 2015 citing that in majority of the cases (clearances) the assessable value was higher than the NMIPL/RIPL price and claimed that this had resulted in higher amount of excise duty payment by the appellant.

A verification report was sought for, from the Jurisdictional Superintendent of Central Excise, Oragadam I Range. After verification of the invoices and connected records, the Department was of the view that the appellant is not eligible for the refund-claim. Show Cause Notices both were issued to the appellant proposing to reject the refund-claims. After due process of law, the original authority vide two Orders-in-Original rejected the refund claims.

Submissions 

Consultant Rajaram R. appeared and argued for the appellant, submitted that the appellant sold cars manufactured by them to their related parties (traders). Since in majority of the clearances, the value on which duty was paid was higher than the price at which cars were further sold by the related parties to their dealers which resulted in payment of higher amount of excise duty by the appellant, of which refund was sought. 

Authorised Representative Harendra Singh Pal urged that the appellant has not opted for provisional assessment and therefore the refund-claim cannot be allowed. 

Decision 

The division bench of Sulekha Beevi C.S., Member (Judicial) and Vasa Seshagiri Rao, Member (Technical) noted that the appellant had made an application to the Department dated 06.05.2011 seeking provisional assessment. 

The bench held that the rejection of refund-claim alleging that the appellant has not opted for provisional assessment is not justified.

The Tribunal said that to check whether there is excess payment of duty sale price of the related parties to the unrelated dealer has to be looked into and not the sale price of the unrelated dealer to the end customer.

The tribunal inferred that the Department got confused with regard to the use of the word ‘end customer’ in Section 11B of the Central Excise Act, 1944. In the case of valuation and payment of excise duty under Rule 10, the sale made to the end customer does not come into picture. So in order to check whether there is excess duty paid the sale made by the appellant to related parties and subsequently sale to dealers are only to be verified. 

The bench viewed that the allegation in the Show Cause Notice that the appellant has not furnished documents with regard to the sale price to end customers so as to verify whether the excess excise duty is paid is totally erroneous. 

The bench remanded the matter back to the adjudicating authority. 

Case title: M/s. Renault Nissan Automotive India Private Limited v/s Commissioner of GST and Central Excise

Citation: Excise Appeal Nos. 40289 and 40290 of 2019 

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Vodafone Idea’s Service Tax Evasion Case Remanded for Fresh Adjudication, Rules CESTAT

Facts 

The appellants are providing taxable service under the category of ‘Telephone Services, Business Auxiliary Services, Business Support Services, Maintenance or Repair Service, Intellectual Property Service, Transport of Goods by road and sponsorship service’. Telephone services were brought under the service tax net by the Finance Act, 1994 (FA 1994) vide Notification No. 1/94 dated 28.6.1994. 

The appellant raises bills against subscribers in respect of cellular mobile telephone service for the gross amount, The trial balance of the appellant for the financial year 2004 – 2005, 2005 – 2006 and 2006 – 2007 were scrutinized in detail. It was found that there was a huge difference between credit balance items in the nature of subscriber service charges shown in the trial balance and the value of taxable services billed during the financial year 2004 – 2005, 2005 – 2006 and 2006 – 2007 as furnished by the appellant. 

The timely investigations conducted by the department, the entire gamut of evasion of service tax by the appellant would not have come to light. Hence Show Cause Notice dated 14.10.2009 was issued to the appellant proposing to demand service tax.

Submissions 

Advocate Krithika Jaganathan for the appellant, submitted that the demand is based entirely on the differential value arising out of the revenue figures furnished in the Trial Balance as compared to the value of taxable services as furnished in the ST-3 returns by the appellant. 

She submitted that the Trial Balance and Profit & Loss Account for the financial year is prepared on ‘accrual basis’ as per the relevant provisions of the Companies Act, 1956. 

Decision 

The division bench of P. Dinesha, Member (Judicial) and M. Ajit Kumar, Member (Technical) said that it is not in agreement with the appellants assertion that no demand can be raised on the basis of values reflected in financial statements, especially a Trial Balance which is the issue in this case.

The bench found that after introduction of the self-assessment regime it is incumbent upon the assessee to make a truthful declaration of facts in the declarations, ST-3 returns etc. made to the department. Trust brings with it responsibility. In the event of discrepancies noticed by the department in statutory returns it is the duty of the appellant to clarify the matter to the satisfaction of the officer. It is thereafter that the onus of establishing taxability lies with the department. Hence the onus of establishing the truth of what is self-assessed and declared in a statutory Return is on the assessee (appellant). 

The tribunal observed that the appellant has not disclosed any facts on which the inference was made by them. It is not disclosed whether the delay, if any, was on the part of the Adjudicating Authority or caused by the appellant themselves. This is even more relevant as it was pointed out in the impugned order that the appellant was not diligent in responding to the queries of the Department in reconciling the Trial Balance with the ST 3 Return. Further whether there was any legal requirement not to adjudicate the matter during a particular period etc. has not been disclosed. They have also not referred to any provision in the Act that permits statutory authorities to set aside the impugned order based on delay, if any. 

The bench remanded the matter back to the Original Authority for de novo adjudication. 

Case title: M/s. Vodafone Idea Ltd v/s Commissioner of GST & Central Excise

Citation: Service Tax Miscellaneous Application No. 40284/2023 And Service Tax Appeal No.41929/2017

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CESTAT Rules in Favor of Assessee: Rs. 1 Crore Duty Re-credit Allowed

Facts 

The appellant has paid duty on export of all the goods at the time of clearance. Subsequently, while making the monthly payment of duty inadvertently they also included the duty paid on export in their monthly dues of the duty and same was paid. 

Thus, they have paid the same duty twice. When it was detected the appellant have taken the suo-moto credit in their Cenvat account. During the audit it was objected that the appellant should not have taken the suo-moto re-credit, whereas they should have applied for refund, on this the appellant reversed the re-credit. 

However, the show cause notice was issued whereby, it was proposed to demand the amount of suo-moto re-credit and also to appropriate the same amount, which was reversed by the appellant on the direction of audit officers. 

Submissions 

S. Suriyanarayanan, Counsel, appearing on behalf of the appellant, submitted that once the appellant had reversed the credit of duty, which was paid second time no show cause notice should have been issued and case could have been closed after reversal on the direction of the audit. 

He submitted that by adjudicating the show cause notice and Adjudicating Authority has confirmed the duty paid twice, which is absolutely incorrect. Under any circumstances on the clearance of goods duty cannot be demanded twice 

Decision 

The division bench of Ramesh Nair Member (Judicial) And C L Mahar Member (Technical) observed that there is no dispute that on one clearance duty was paid twice, therefore the duty paid second time needs to be restored to the appellant as credit, the appellant had taken suo-moto credit. If no discrepancy is found as regard the second time payment of duty and suo-moto re-credit thereof then no objection could have been raised by the department. 

The bench found that the appellant being law abiding assessee even though suo-moto credit was available to them, they had reversed the same on pointing out by the audit officers. Thereafter, the department could have regularized by allowing the re-credit but instead the appellant were issued the show cause notice for demand of re-credit made by the appellant suo moto despite the fact that they had already reversed the same. 

The Tribunal held that the appellant is correctly entitled for the re-credit and the appellant has legal right to re-credit the amount of Rs. 1 crore, in their Cenvat Account.

Case title: Bayer Vapi Pvt Ltd v/s C.C.E. & S.T.-Daman

Citation: Excise Appeal No. 11435 of 2014- DB   

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CESTAT Confirms Penalty and Demand for Suppression of Facts in Service Tax Case

The Customs, Excise & Service Tax Appellate Tribunal New Delhi confirmed the penalty and demand for suppression of facts in Service Tax case.  

Facts 

M/s Gurukripa Yuvraj Veg. & Non-Veg. Restaurant, Hospital Road, Beawar Dist. Ajmer is engaged in providing “Restaurant services” but is neither registered with the department not paying service tax, the Superintendent, Central Excise and Service Tax Range, Beawar visited the business premises of the M/s Gurukripa Yuvraj Veg. & Non-Veg. Restaurant, Hospital Road, Beawar Dist. Ajmer. 

It appeared that Restaurant is engaged in providing taxable service viz „Restaurant service‟. Hence, the service provider was requested to get themselves registered with the department to pay service tax and also provide details of the amount received on account of services provided by them during the period from May 2011 and onwards. 

Whereas, it appears that the Service Provider has provided the services under the category of “Restaurant Service” defined under Section 65(105)(zzzzv) & is taxable under Section 66 till 31.12.2013 and thereafter under Section 66B of the Finance Act, 1994 and having a valid license to serve alcoholic beverages issued by the State Govt. Authorities. During the period from May 2011 to March 2015 the notice appears to have evaded service tax of Rs. 6,36,396/- under Restaurant service and the same appears recoverable from them in terms of provision to Section 73(1) of Finance Act, 1994 along with interest under Section 75.

Decision  

The division bench of Binu Tamta, Member (Judicial) and P. V. Subba Rao, Member (Technical) concluded that the extended period of limitation is clearly applicable as the appellant suppressed the correct fact with regard to the facility of AC being available at the restaurant and mis-represented and misguided the department with the sole intent to evade payment of duty. 

The bench observed that the intention to evade duty is writ large in the conduct of the appellant and it cannot be said to be a case of bonafide belief of non liability of service tax or a case of ignorance of service tax liability. For the said reasons, penalty under section 77(1)(a), 77(2) and 78 of the Finance Act,1994 is confirmed.

The Tribunal said that unless and until, the appellant is able to produce any cogent and substantive evidence in support of his statement that he does not have the AC facility in the restaurant, he is not eligible to claim the benefit of the exemption notification. 

The bench upheld the demand of service tax for the period from 01.05.2011 to 31.03.2015 alongwith penalty under Section 77(1)(a), 77(2) and 78 of the Finance Act, 1944.

Case title: Gurukripa Yuvraj Veg. & Non-veg. Restaurant v/s Commissioner and Additional Director General

Citation: Service Tax Appeal No. 51002 of 2018

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ITAT Rules in Favor of Assessee, Rejects Quantum Addition and Disallows Agricultural Income in AY 2016-17 Assessment

Facts 

Appeal by assessee for Assessment Year (AY) 2016-17 arises out of order passed by Commissioner of Income Tax in the matter of an assessment framed by AO u/s 143(3). r.w.s. 153C of the Act. In the original grounds of appeal, the assessee has assailed quantum addition of Rs.200 Lacs as confirmed by CIT(A). The assessee is also aggrieved by the fact that agricultural income of Rs.10 Lacs belonging to HUF entity has been considered in the hands of the assessee. The assessee has filed additional grounds of appeal wherein the assessee has submitted that in the absence of any incriminating material, the addition of Rs.10 Lacs on account of agricultural income and disallowance u/s 37(1) for Rs.8.16 Lacs is without jurisdiction. 

Decision  

The division of Mahavir Singh, Vice President and Manoj Kumar Aggarwal, Accountant Member noted that during search operation on assessee, certain material was found and seized. The material include a sale agreement which, inter-alia, contain the details of advance paid by the assessee to the tune of Rs.200 Lacs for purchase of certain property situated at Survey no. 15/94, VGP Golden Beach.

It was further noted that there is no concrete evidence on record to suggest that the assessee paid an alleged sum of Rs.200 Lacs at agreement stage itself. It is also inconceivable that the assessee would part with approx. 48% of sale consideration at agreement stage itself when the sale transaction was to be completed within 6 months from the date of the agreement.  

The Tribunal said that it is admitted fact by the assessee that it has paid only sum of Rs.5 Lacs to the sellers and therefore, the investment, to that extent, could be considered as undisclosed investment by the assessee. 

The bench found that the assessee had been searched. It is undisputed fact that on the date of search, no assessment proceedings were pending against the assessee for the year under consideration. Therefore, this is a year of unabated assessment. 

The bench held that there is nothing on record which would show that any incriminating material was found during search operation which would show that the agricultural income belonged to the assessee instead of HUF. Therefore, the agricultural income is not to be considered in the hands of the assessee.

Case title: Shri Duraisamy Parameswaran v/s ACIT

Citation: ITA No.1025/Chny/2022 

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JSW Steel Limited Prevails in Central Excise Duty Dispute over Export Gas: CESTAT Decision Overturns Demand Confirmation

Facts 

JSW Steel Limited, Bellary is engaged in the manufacture of Hot Rolled Coils, Sheets, Plates and Direct Reduced Iron. The appellant claims that it had become necessary to remove the impurities from the top gas which had emerged from the Reduction Shaft during the process of manufacture to ensure compliance of the directions issued by the Ministry of Environment and Forests. The top gas, according to the appellant, is refuse like dross and skimmings which are merely scum thrown out in the manufacture of aluminium sheets and have been held not to be manufactured goods. 

It is for this reason that the appellant believed that central excise duty could not have been levied on the export gas that emerged after removal of impurities even if the export gas was supplied to Jindal Praxair Oxygen Company Pvt. Ltd. and JSW Energy Limited. 

The demand has been confirmed by the orders impugned in these appeals holding that since the top gas that emerged from the Reduction Shaft had been subjected to a refining process for removal impurities, the process had resulted in changes that made the resultant export gas marketable which indicates that it was manufactured, an essential factor for levy of central excise duty.

Submissions 

Vipin Jain and M.S. Nagaraja assisted by Vishal Agarwal, counsel for the appellant, submitted that the Export gas arose as a technological accident in the course of the manufacture of Direct Reduced Iron and the said gas is refuse like dross and skimmings, which are scum and have been held not to be manufactured goods. 

P.R.V. Ramanan, special counsel for the department assisted by Rajiv Kumar, authorized representative for the department, Export gas is excisable and is nothing but Carbon Monoxide which is classifiable under Tariff Item 2811 29 40 of the Excise Tariff Act. The appellant has, while, contesting the excisability of the product, wrongly claimed classification of the said product under heading 2705.

Decision 

The two member bench Justice Dilip Gupta President And R. Bhagya Devi Member (Technical) observed that the process undertaken on the top gas for removal of impurities to satisfy not only the conditions set out in the letter granting permission to the appellant for continuation and expansion of its manufacturing facilities but also to ensure compliance of the process design of the Technology supplier would not result in manufacture of the export gas. The Commissioner was, therefore, not justified in confirming the demand.

Case title: JSW Steel Limited v/s The Commissioner of Central Excise & Customs

Citation: Customs, Excise & Service Tax Appellate Tribunal Bangalore

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Vedanta Ltd. Wins Legal Battel Against Erroneous Rebate Demand in Central Excise Case

The Vedanta Ltd. Won the Appeal against erroneous rebate demand in Central Excise Case.

Facts 

The appellant M/s. Vedanta (Formerly known as M/s. Sterilite Industries Ltd) are engaged in manufacture of copper anode, sulphuric acid, anode slime, phosphoric acid etc. They are availing Cenvat Credit on inputs, input Services and capital goods.During the period from February 2012 to March 2012, the appellant filed two rebate claims being the duty paid by them on the export of copper cathode, anode slime and selenium powder falling under chapter heading 74031100, 71129990 and 28049000 respectively. After due process the Assistant Commissioner, Tuticorin Division, sanctioned the entire rebate claim. 

Show Cause Notice dated 07.11.2012 was issued to appellant proposing to recover the erroneously granted rebate along with interest. After due process of law, the original authority vide order impugned herein confirmed the demand of Rs. 35,34,86,306/- along with interest holding that the rebate has been sanctioned erroneously.

Submissions 

Counsel Akshit Malhotra for the appellant submitted that against the sanction of refund the department has filed revision before the government and the same is pending.

He submitted that for the earlier period (August 2011 to Jan 2011) the department had issued similar notice and upon the confirmation of demand by the original authority, the appellant had filed appeal before the Tribunal. Taking note of the fact that the clarification from CBEC is awaited, the Tribunal vide Final Order remanded the matter to the adjudicating authority. In denovo proceeding, the adjudicating authority vide order-in-original, set aside the demand based on the clarification issued by Board.

Decision 

The division bench of Sulekha Beevi C.S., Member (Judicial) And Vasa Seshagiri Rao, Member (Technical) observed that the Board vide Circular dated 14.07.2015 has clarified that duty is payable on anode slime. Being so, the rebate sanctioned in regard to anode slime exported is legal and proper. The demand confirmed by the adjudicating authority cannot sustain and requires to be set aside.

Case title: M/s. Vedanta Ltd. v/s The Commissioner of Central Excise & Customs

Citation: Excise Appeal No. 42420 of 2013

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Section 11D of Central Excise Act, 1944 Can Be Invoked Only If Duty Is Collected, But Not Paid: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad ruled that the section 11D of Central Excise Act, 1944 can be invoked only if duty is collected, but not paid. 

Facts 

M/s. Shree Renuka Sugar Limited, At and Post, Bharapar, Gandhidham (Kutch), was industrial unit engaged in manufacture of excisable goods, viz., Sugar falling under Chapter No. 17 of the Central Excise Tariff Act, 1985, availing the Cenvat credit of duty paid on inputs, capital goods and input services under Cenvat Credit Rules, 2004, and holding Central Excise Registration under rule 9 of the Central Excise Rules, 2002.

The Noticee was not required to pay Sugar cess manufactured from such other sugar on which cess is leviable under sub section (1) of Section 3 of the said Act has been paid already and other cesses on further clearance when they have already paid the Cess.

The Noticee had availed and utilized Cenvat credit of sugar cess amounting to Rs1,94,84,774/- of which they have filed rebate claim for Rs.1,20,44,820/- and the remaining moment as ten the of Rs 74,39,954/- was required to be recovered from them, as per the department. In fact, the Noticee were not allowed to avail and utilize the Cenvat credit of sugar cess and other levies as per Board’s Circular and they were also not required to collect the same from the buyers/ customers. 

Submissions 

Advocate for the appellant submitted that this issue is no longer res-Integra as this issue has been considered and decided in favor of the assessee including in their own case of the appellant themselves.

Decision 

The two member bench of Raju Member (Technical) And Somesh Arora Member (Judicial) observed that the appellant is legally entitled for the cenvat credit on the sugar cess paid on import of raw sugar.

The Tribunal said that Section 11D can be invoked only if duty is collected, but not paid, whereas in the instant case, same was paid from accumulated CENVAT Credit, the case of the department has no legs to stand. 

It was observed that when levy i.e. Sugar Cess in this case has not been done away with, but has only been exempted vide Notification by Ministry of Consumer Affairs, party always has the right to avail or not to avail exemption, as per the trite law relied upon by appellants. And all consequences regarding payment of duty as well as availing permissible credit will follow in such a situation. Department cannot force availment of exemption as distinguished from withdrawal of levy in which case requirement of payment of tax becomes non-est.

Case title: Shree Renuka Sugars Limited v/s C.C.E. & S.T.-Rajkot 

Citation: Excise Appeal No. 10161 of 2015

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CESTAT Orders Reconsideration of Penalty Imposed on M/s. Beach Minerals Company for LOP/Green Card Non-Renewal

The Customs, Excise & Service Tax Appellate Tribunal, Chennai, ordered reconsideration of the penalty imposed on M/s. Beach Minerals Company for LOP/Green Card non-renewal.

Facts 

M/s. Beach Minerals Company, Muthiapuram, Tuticorin, which is an 100% EOU, were holders of LOP/Green card valid up to 6.10.2014 for manufacture of garnet, ilmenite, rutile and zircon. However, their LOP/Green card along with bonded warehouse license and in-bond manufacture sanction order were found to have not been extended after its expiry on 06.10.2014.

They were hence issued a Show Cause Notice (SCN) demanding an amount of Rs.34,88,133/- being the duty forgone on capital goods, packing material and finished / semi-finished goods under the provisions of Central Excise Act, 1944. After due process of law, the learned Adjudicating Authority has vide Order in Original confirmed the demand with interest and imposed penalty.  

Submission 

Advocate A.K. Jayaraja, submitted that it has been admitted in the Show Cause Notice and the Order in Original that even prior to the expiry of their LOP/Green card, they had applied for extension to the Development Commissioner, MEPZ, Chennai.

Decision 

The single member bench of M. Ajit Kumar, Member (Technical) found that the issue before it falls on a short compass i.e. that the impugned order was passed without taking into consideration the request made by the appellant to the D.C. for extension of LOP/Green Card. Subsequently, due to operation of law, mining operations have been banned and they were forced to exit from the EOU operations. Their application for the same has since been obtained and the in principle exit order has been extended up to 16.12.2021. 

The tribunal found that the Show Cause Notice does not contain any allegations of a blameworthy act by the appellant except his license was not renewed by the D.C. A person who sets out to do business is at times caught in circumstances beyond his control. 

The bench said that to have a setback in business is not a punishable offence. Each situation has to be examined on its merit and hardship should not be caused to a compliant assessee just because a provision in law enables the discretionary imposition of penalties. 

The bench found that the SCN has been issued invoking the B-17 bond executed by the appellant. Hence, although the action of the Commissioner (Appeals) in setting aside the penalty was right, he should also have asked the adjudicating authority to examine the duty liability in terms of the exit order given by the D.C.

“The appellant has showed his willingness to pay the duty as per the normal process of debonding at the time of exit from EOU scheme. Hence, I feel that in the light of the development the matter needs to be remanded to the adjudicating authority to examine the facts and decide all the issues raised by the appellant regarding depreciation, destruction of obsolete goods etc. and arrive at the duty payable along with interest, afresh”, the tribunal said.

Case title: M/s. Beach Minerals Company v/s Commissioner of GST & Central Excise

Citation: Excise Appeal No.40120 of 2022

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Refund Claim Under Central Excise Act Dismissed by CESTAT Due to Revised Capacity Determination

The refund claim under Central Excise Act was dismissed by the Customs, Excise & Service Tax Appellate Tribunal Allahabad due to the revised capacity determination.

Facts 

Appellant filed the declaration for fixing annual production capacity (ACP) under Section 3A of the Central Excise Act, 1944. The Commissioner fixed the ACP provisionally and the appellant started depositing a sum of Rs 20 lakhs against the duty liability to be determined in terms of the provisions of Induction Furnace Annual Capacity Determination Rules, 1997. The amount was deposited pro-rata during the period September 1997 to June 1998. The Commissioner determined the ACP as 43174.72 MT and Monthly Duty Liability of Rs 22,48,868/-. 

Decision  

The single member bench of Sanjiv Srivastava, Member (Technical) found that Appellant has opted to carry out his operations in terms of Section 3A of the Central Excise Act, 1944 as inserted by the Finance Act, 1997 read along with the Induction Furnace Capacity Determination Rules, 1997 and Rule 96 ZO of the Central Excise Rules, 1944. 

The bench noted that the entire proceedings in the matter are in respect of Application for Refund filed by the appellant under Section 11B of the Central Excise Act, 1944.

It was further noted that the tribunal has in order, held relying on the decision in the case of National Ceramic Works, held that the refund made under compounded levy scheme will not be governed by the provision of Section 11B. 

“The present claim for refund has arisen on the account of Finalization of Annual Capacity of Production, in terms of sub-section 2 of Section 3A, which is lower than the provisional capacity fixed by the order 30.09.1997 and 21.03.1998. The Annual Capacity was fixed at 43174.72 MT and the appellant was paying the monthly duty accordingly. After successive round of litigations the capacity as determined by the order dated 21.03.1998 was revised to 32670.848 MT by the order dated 31.12.2010. This refund which has arisen on account of the above revision cannot be said to refund under the provisions of scheme of Section 3A. The order of Commissioner (Appeal) which has been made without taking the note of above facts cannot be upheld”, the tribunal observed.  

The bench viewed that the request of the appellant for interest on the refund will have to be considered only in terms of Section 11BB of the Central Excise Act, 1944 and in the manner as prescribed by the said section.

Case title: M/s Jalan Castings Pvt. Ltd. v/s Commissioner of Central Excise, Varanasi

Citation: Excise Appeal No.70728 of 2019

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CESTAT Remands Service Tax Case of M/s. Bharathi Constructions back to Lower Authority for Recalculation of Taxable Service Value

The Customs, Excise & Service Tax Appellate Tribunal, Chennai remanded the Service Tax case of M/s. Bharathi Constructions back to lower authority for recalculation of Taxable Service Value. 

Facts 

During the audit of accounts of M/s. Bharathi Constructions, Erode by the officers attached to Salem Commissionerate in November 2008, it was noticed that the appellants had carried out erection and installation related work to the tune of Rs.34,96,200/- and no service tax had been paid by the appellants. It was ascertained from the records that the appellants were liable to pay Rs.4,79,603/- towards service tax for the period 2009 – 10. 

On the above basis, Show Cause Notice (SCN) was issued to the appellants. After due process of law, the original authority confirmed the proposals for demand of Rs.4,79,603/- under Section 73(1) of the Finance Act, 1994 along with interest, being the service tax liability for the services rendered by them under the category of ‘Erection, Commissioning and Installation’ under Section 65 (39a) of the Finance Act 1994, for the period 2009 – 10. Penalties were also imposed.

Submissions 

Advocate M.N. Bharathi, appearing for the appellant, submitted that the appellant is providing taxable service under the category “Works Contract Service. The condition of the contract entered into with M/s Bannary Amman Sugars Ltd is only for repair of shed by replacing the worn out materials with fresh ones supplied by the said Bannari Amman sugars.

He argued that such an activity being ‘manufacture’ is not exigible to service tax but only to Central Excise duty.

Anandalakshmi Ganeshram, Superintendent (AR) for the Revenue, stated that the activities of the appellant are taxable service carried out as per a works contract and cannot be termed as manufacture.

Decision 

The division bench of P. Dinesha, Member (Judicial) and M. Ajit Kumar, Member (Technical) observed that as per the Explanation, given at S. No. (1) of the Notification pertaining to the service of erection, commissioning or installation, the gross amount charged from the customer shall include the value of the plant, machinery, equipment, parts and any other material sold by the commissioning and installation agency, during the course of providing erection, commissioning or installation service. 

The bench held that the value of goods and materials supplied free of cost by M/s Bannari Amman Sugars Ltd are to be excluded from the value of the taxable service for computation of duty. 

It was further held that the tax liability has to be calculated by treating the total consideration received as value of taxable service plus service tax payable.

The Tribunal found that the appellant had failed to pay the service tax and also have failed to report provision of service in their periodical returns. Hence the fact that these activities were suppressed from the department with intention to evade payment of tax has substance. We are therefore not inclined to interfere with the imposition of penalty or issue of Show Cause Notice invoking the extended period of time limit. 

“The matter is remanded back to the lower authority to determine the value of the taxable service afresh allowing cum-tax benefit and by not including the value of goods and materials supplied free of cost by M/s. Bannari Amman Sugars Ltd. Penalty may thereafter be imposed suitably as per law” the bench observed. 

Case title: M/s. Senthil Engineering Works v/s Commissioner of GST & Central Excise

Citation: Service Tax Appeal No.40026 of 2014

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Penalty Imposed on Director of Schurter Electronis India Pvt. Ltd Dismissed by CESTAT

The Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad held that the penalty of Rs. 1 Lakh imposed on the director of the company is not sustainable.    

Facts 

The appeal is filed by Shri Azaz Lokhandwala who is director of Schurter Electronis (India) Pvt. India Pvt. Ltd challenged the imposition of penalty of Rs 1 Lakh under Rule 26 of Central Excise Rules, 2002. As regard the case of demand of duty against the company M/s Schurter Electronis (India) Pvt. Ltd the same was settled under Sabka Vishwas (Legacy Dispute Resolution Scheme), 2019 and the appeal stand dismissed as deemed withdrawn by this Tribunal. 

Submisisons   

Saurabh Dixit, Counsel, appearing on behalf of the appellant at the outset submits that the short payment of duty is due to inadvertence on the part of the company which is procedure lapse.

Decision 

The two member bench of Ramesh Nair Member (Judicial) and C L Mahar Member (Technical) found that in the show cause notice there is no charge made against the director of the company and straightway the penalty under Rule 25(1)(d) of Central Excise Rules, 2002 was proposed however in the Adjudication order the penalty was confirmed under Rule 26 of Central Excise Rules, 2002. The adjudicating Authority has given the findings that merely by motioning wrong provision the penalty cannot be set aside.

The Tribunal observed that in the case there is a procedural lapse on the part of the company the goods were cleared on payment of duty. The only lapse is that the appellant could not obtain the permission for the quantity cleared in DTA. 

Case title: Azaz Lokhandwala Director v/s C.C.E. & S.T.-Vadodara

Citation: Excise Appeal No. 10275 of 2013 – DB

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Importer Not Liable for Anti-Dumping Duty on Goods Imported from China: CESTAT Chennai

The Customs, Excise And Service Tax Appellate Tribunal, Chennai held that the importer is not liable for Anti-Dumping duty on Goods imported from China.

Facts 

The respondent imported goods from China and filed a bill of entry for warehousing the goods. The goods were warehoused and thereafter the respondent filed exbond bill of entry for clearance of the warehoused goods for home consumption. At the time of import of the goods there was no levy of Anti Dumping Duty (ADD) on the goods Diethyl Thio Phosphoryl Chloride (DETPC) imported from China. Later Notification was issued whereby ADD was imposed on the goods imported from China. The department was of the view that, respondent is liable to pay the ADD on the goods imported. Demand notice was issued for payment of ADD along with interest.

Submissions 

AR Rajaraman submitted that the Commissioner (Appeals) has erroneously relied on the decision of the Apex Court in the case of Sneh Enterprises Vs Commissioner 2006.

Counsel P.V.B. Chary appeared and argued for the Respondent and submitted that subsection (8) was amended so as to include the provisions of section 15 of Customs Act, 1962 (Date of determination of rate of duty) only with effect from 19.08.2009 and therefore the import being prior to this date, the appellant is not liable to pay ADD on the imported goods. 

Decision 

The two member bench of Vasa Seshagiri Rao Member (Technical) And Sulekha Beevi C.S. Member (Judicial) said that the issue that arises for consideration is whether the appellant is liable to pay ADD on the goods imported. The sub section (8) to 9 A of Customs Tariff Act, 1975 adopts the provisions of Customs Act for implementation of Anti-Dumping Duty Notifications. 

The bench stated that prior to 19.08.2009, subsection (8) did not specify that the provisions contained in Section 15 of Customs Act would be applicable to determine the date on which the rate of duty / ADD is payable. The Hon’ble Apex Court in the case of Sneh Enterprises was dealing with the situation prior to amendment to subsection (8) of 9 A and held that ADD would be payable at the time of import of the goods. 

It was observed by the tribunal that the date of bill of entry in the present case is prior to 19.08.2009. Therefore, the decision of the Apex Court in the case of Sneh Enterprises (supra) would be squarely applicable. 

The bench held that the appellant is not liable to pay the Anti-Dumping Duty as the Notification No.73/2009 dated 22.06.2009 was not in existence at the time of import of goods. 

Case title: The Commissioner of Customs, Chennai v/s M/s. Hyderabad Chemicals Ltd.

Citation: Customs Appeal No. 42118 Of 2013

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CESTAT Upholds Service Tax Demand against M/s. Hans Travels for Passenger Transport Services

The Customs, Excise & Service Tax Appellate Tribunal New Delhi, Upheld the Service Tax demand against M/s. Hans Travels for Passenger Transport Services.

Facts 

The appeal has been filed by M/s. Hans Travels to assail the Order-in-Original passed by the Principal Commissioner, Service Tax, Indore wherein the demand of Rs. 69,61,910/- along with interest and penalty has been confirmed.  

The Appellant is engaged in providing daily passenger transport service from one state to another i.e. Interstate or Intrastate Passenger Transport service. 

Submissions 

Counsel for the Appellant submitted that the allegation in show cause notice was that since the bus permit issued to the Appellant are of Contract Carriage/ Tourist, hence the Appellant is liable to service tax, whereas the Commissioner confirmed the demand on a completely different ground. 

Authorised Representative appearing for the department submitted that one of the basic contentions by the appellant in the grounds given in the appeal memorandum is that the impugned Order is beyond the scope of show cause notice. 

He submitted that the Tribunal vide its earlier order had categorically upheld the allegation of the department in the show cause notice that impugned service rendered by the appellant using a contract carriage would fall under the category of tour operator service. 

Decision 

The division bench of Justice Dilip Gupta President and Hemambika R Priya Member (Technical) observed that owing to the retrospective amendment of the notification, the Commissioner had to specifically examine the issue afresh by asking the appellant to establish their eligibility to the benefit of the notification no. 20/2009-Service Tax dated 7th July, 2009 only. 

It was further observed that the exemption was available to the service of tour operators for interstate or intrastate transportation of passengers, other than for the purpose of tourism, even for vehicles plying with tourist permit. 

The bench noted that no cogent explanation was provided by the appellant to clarify the block booking of tickets for officials of Laxmivilas Bank Ltd during the period under consideration.

The Tribunal held that the appellant has not been able to discharge the onus on him prove his case that they are eligible for exemption under the said notification. Despite clear directions of this Tribunal to the adjudicating authority to determine the eligibility of the appellant for the benefit of the said notification, keeping in view the fact that the vehicles involved were tourist vehicles and not stage carriages, he has failed to produce the relevant documents to support his contention that he did not fall within the exclusion condition of the Notification.

The bench upheld the demand for the normal time period, and set aside the demand for the extended period. 

Case title: Hans Travels V/S Commissioner Of Central Excise & Service Tax, Indore (M.P.)

Citation: Service Tax Appeal No. 53128 of 2016 

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Income Tax Appellate Tribunal Upholds Reassessment Proceedings Against Assessee for Alleged Accommodation Entries

The Income Tax Appellate Tribunal upheld the reassessment proceedings against assessee for alleged accommodation entries.

Facts 

The appeal has been filed by the assessee challenging the order, passed under section 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals), Mumbai, for the assessment year 2009-10.

Decision 

The division bench of B.R. Baskaran, Accountant Member And Sandeep Singh Karhail, Judicial Member noted that the Assessing Officer received the information from DGIT (Investigation) Wing, Mumbai about having vital information initially received from the Sales Tax Department of Maharashtra indicating that the assessee is a beneficiary of accommodation entries by way of bogus sales/purchase bills. On the basis of the aforesaid information, the Assessing Officer initiated proceedings under section 147 of the Act and issued a notice under section 148 of the Act. 

The bench observed that on the basis of information received from the investigation wing, reassessment proceedings in the case of the assessee were initiated. Further, it is also well settled that sufficiency or correctness of the material is not a thing to be considered at the stage of recording of reasons.

The Tribunal found no infirmity in the reassessment proceedings initiated by the AO under section 147 of the Act and upheld by the CIT(A).

Case title: Nakoda Metal Industries v/s Income Tax Officer

Citation: ITA no.4958/Mum./2018 

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Customs Tribunal Upholds Penalty and Classification Decision in Light Oil Import Case

The Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad upheld the penalty and classification decision in Light Oil Import Case.

Facts 

The appellant filed Bill of Entry for clearance of 198.32 Mts of “Industrial Composite Mixture” classifying the goods under CTH 27101990, assessable value of which was declared as Rs.82,57,556/- involving duty of Rs.20,22,276/-. 

The goods were given first check with order to draw samples and forward the same to CRCL, Kandla for testing. As per the test report of the Customs Laboratory, Kandla, is concerned, the imported goods were found “Light Oil, and not “Industrial Composite Mixture”. The adjudicating authority found that the imported goods are classifiable under tariff heading 27101290 i.e. ‘Other of sub heading Light Oils and Preparations’. 

The adjudicating authority also found that goods falling under tariff heading 27101290 are allowed to be imported through State Trading Enterprises (STE) only as per Policy conditions. 

However, the appellant is neither STE nor they have submitted any documents showing grant of such rights by the DGFT to import or export any of the goods notified for exclusive trading through STEs, therefore, they have violated the policy conditions of Foreign Trade Policy. 

The appellant had waived show cause notice and personal hearing. 

Submissions 

Advocate for the appellant submitted that the Respondent-Department, as per note 4 of Chapter 27 seeks to classify the impugned goods under Customs Tariff Heading 27101290, as against Heading claimed by them under CTH 27101990. As per the test report the distillation has not been done in the present case. Therefore, the goods cannot be classified under CTH 2710 1290 as the goods do not confirm to the light oil. 

Decision 

The two member bench of Raju Member (Technical) And Somesh Arora Member (Judicial) found that the party had brought a test report with 9 parameters, which it asserts are relevant and decisive for determination of the nature of product and which was drawn purportedly in the country of exportation i.e Bandar Abbas.

The bench observed that the report sought to be relied upon by the appellant was drawn behind the back of the department and in another country and therefore cannot be given precedence over the report relied upon by the Department, which has much higher credence, in the factual matrix of the matter, as the party’s report does not even match on the parameters tested by the department. 

The Tribunal noted that after having got the goods cleared by waiving Show Cause Notice or personal hearing and requesting for imposition of minimum fine, which were clearly brought in violation of EXIM policy relating to light oil at the relevant time as the same was a canalised item and was allowed to be imported only through State Trading Enterprises, as per the policy condition 5 of chapter 27.

“An after thought of the appellants cannot be allowed to help their cause. Reliance in this regard is placed on Fine Chemical Suppliers to emphasize that when violation in relation to goods are accepted, penalties get attracted. Party had all the opportunity to seek re-test or even cross examination of Chemical analyst, if it found it to be erroneous, but it chose not to do the same. Having acquiesced with so termed erroneous report, it cannot now be allowed to resist it. Error, qui non resistitur. (An error not resisted is approved) will therefore, in any case apply in the facts and circumstances of the matter”, the bench said.

Party having accepted the classification and the nature of goods without seeking any re-test of the sample, the tribunal found that the appeal is devoid of merits both on classification issue as well as violation of ITC policy and penalties imposed. 

Case title: M M Trading Company v/s C.C.-Mundra

Citation: CUSTOMS Appeal No. 10800 of 2019-DB

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CESTAT Allows Exporter’s Claim for Rebate on Tools and Dies Charges, Sets Aside Central Excise Duty Demand

The Customs, Excise & Service Tax Appellate Tribunal Chandigarh  allowed the exporter’s claim for rebate on Tools and Dies charges, set aside Central Excise Duty Demand

Facts 

The appellant is engaged in the manufacture of Rough Forgings, Tractor Parts and MV Parts and had cleared the goods for export both under LUT on without payment of duty as well as on payment of duty and claimed rebate (refund) of duty paid. During audit it was noticed that the appellant was recovering tool and die charges from various parties on sale invoices issued to them without charging central excise duty. 

A show cause notice was issued to the appellant on the ground that the amount was being charged in addition to the sale amount recovered from the parties and in view of Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000, tool and dies development charges form the part of the assessable value as additional consideration and are thus liable to Central Excise duty. It was stated in the show cause notice that the appellant had realized tool and development charges of Rs. 74,01,143.00 (Rs. 74,01,143.00 (Exports) + Rs. 25,000.00 (Domestic)) from various buyers on sale invoices issued to them on which central excise duty of Rs. 9,96,674.00 was not paid and hence the same was demanded along with interest and proposal for imposition of penalty.

Submissions 

Counsel appearing for the appellant submitted that the entire charges received on account of export of goods and the appellant is entitled to claim rebate of duty since there is no dispute of export of goods, foreign remittance and also submission of proof of exports. 

Decision 

The two member bench of S. S. Garg Member (Judicial) And P. Anjani Kumar Member (Technical)  found that the entire charges received by the appellant on account of tools and dies which were used in the production were on account of export of goods and there is no dispute regarding the export of goods, foreign remittance and proof of export.

It was further found that the distinction made by the Commissioner (Appeals) that the export under LUT is different from export under rebate is against the export policy because the exported goods are not subject to central excise duty and the entire situation is revenue neutral. 

The Tribunal held that the impugned order is not sustainable in law and set-aside the same by allowing the appeal. 

Case title: M/s R. B. Forging (P) Ltd. (Unit-I) v/s CCE, Chandigarh

Citation: Excise Appeal No. 58116 Of 2013 

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CESTAT Rules in Favor of Appellant, Rejects Department’s Classification of Service as Supply of Tangible Goods

The Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad ruled in favor of the Appellant and rejected the department’s classification of service as supply of Tangible Goods. 

Facts

The appellant are inter-alia engaged in providing services under the category of “Transportation of Goods Service”, “Commercial or Industrial Construction Service”, others. The appellant have provided services of services of transportation of Ready-mix Concrete (RMC) to Ultratech Cement Limited (RMC Division) by Transit Mixture Vehicles from batching plant of Ultratech Cement Limited, Udhna & Magdalla, Surat to the construction sites. 

The work orders issued by Ultratech for the aforesaid works states that the work assigned to the appellants is of transportation of RMC, wherein it is the responsibility of the appellants to transport and deliver RMC as per given schedule.

The case of the department is that the appellant by providing vehicles to Ultratech Cement Limited for transportation of goods has provided the service of supply of tangible goods for use on the ground that right of possession and effective control of the vehicle remains with the appellant.Therefore, the activity is liable to service tax under supply of tangible goods for use.

Submissions 

Advocate Jigar Shah, appearing on behalf of the appellant submitted that there are various contracts for supply of identical service to M/s. Ultratech Cement Limited for transportation of RMC from their plant to the construction sites of the customer under a contract between the transporter and M/s. Ultratech Cement Limited. 

Decision

The two member bench of Ramesh Nair, Member (Judicial) And C.L. Mahar, Member (Technical) found that department has sought to classify the service of the appellant under the Supply of Tangible Goods for Use service.

The bench observed that M/s. Ultratech Cement Limited is concerned only about the transportation of RMC from their plant to their customer‟s site and the charges for such transportation is also on the basis of quantity of the goods and per kilometer basis.

The Tribunal viewed that the appellant‟s service is correctly classifiable under Goods Transport Agency service for which service recipient M/s. Ultratech Cement Limited have discharged the service tax as required under Rule 2(d) of Service Tax Rules, 1994 under reverse charge basis. Therefore, the demand under the category of Supply of Tangible Goods service shall not sustain. 

Case title: Shripad Concrete Pvt. Limited v/s Commissioner of Central Excise & ST, Surat

Citation: SERVICE TAX Appeal No. 12453 of 2014-DB

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Court Upholds Assessee’s Appeal on Transfer Pricing Adjustments, Emphasizes Consistency in Royalty Payment Aggregation Approach

The Bombay High Court Upheld the assessee’s appeal on Transfer Pricing Adjustments, emphasizes consistency in royalty payment aggregation approach.

Facts 

These appeals are filed by Assessee under Section 260A of the Income Tax Act 1961 against the order dated 28th September 2022 passed by the Income Tax Appellate Tribunal (ITAT) for A.Y.2015-2016, 2016-2017 and 2017-2018. The issue is in respect of transfer pricing adjustments.

Submissions 

Advocate Mistri submitted that the Tribunal was not justified in rejecting the contention of Assessee with respect to aggregation approach of royalty payment with other international transaction in the manufacturing segment for determining the ALP activity carried on by Assessee. 

Suresh Kumar submitted that the TPO has not disputed the fact that the Assessee has received technology. The TPO has also accepted and acknowledged that Assessee has used the TNMM method as the most appropriate method to benchmark its international transactions all under the manufacturing activity which included the royalty that it has paid on the export sales as well.

Decision 

The division bench of Justice Firdosh P. Pooniwalla and Justice K.R. Shriram observed that once the Tribunal in its earlier orders has held that the transaction of payment of royalty for use of technology is inextricably linked with manufacturing activity and should be aggregated with other international transactions in the manufacturing segment for the purposes of benchmarking the same, and the TPO having accepted the aggregating of international transaction of payment of royalty with other international transactions in the manufacturing segment and not drawn any adverse inferences in respect of such aggregation of royalty payment under identical agreement, the Tribunal should have followed the order of the co-ordinate bench rendered under identical facts. 

The court held that when in a majority of the years from the Assessment Year 2006-07 up to the Assessment Year 2014-15 it was under the very same agreement and the orders were passed after thoroughly scrutinising the international transactions entered into by assessee, the transfer pricing report obtained and the transfer pricing documentation maintained.

Case title: Cummins India Limited v/s Assistant Commissioner of Income ) Tax

Citation: Income Tax Appeal No.126 Of 2023 

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Appellant’s Classification of Lawn Mowers under CTH 8433 Upheld

The Customs, Excise And Service Tax Appellate Tribunal, Chennai upheld the Appellant’s Classification of Lawn Mowers under CTH 8433.

Facts 

The appellants appear to have filed a Bill-of-Entry No. 6058653 dated 21.02.2012 for the clearance of “lawn mowers”. The said item was declared under CTH 8433 1110. The adjudicating authority entertained a doubt that the impugned goods under challenge were required to be re-classified under different heading namely, CTH 8467 9900.

Submissions 

Advocate S. Murugappan, appearing for the appellant, submitted that Lawn mowers are specifically covered under heading 8433. They weigh more than 40 kg., and cannot be held in hand while working. They will not fall under the excluded category mentioned under heading 8433. The portable machines for trimming lawns mentioned under heading 8467 are of a different type altogether, which may get covered under the exclusion category.

He argued that the classification adopted by the appellant under CTH 8433 was correct and in order and hence, the classification adopted by the Revenue under CTH 8467 does not stand.

Assistant Commissioner contended that the importer did not supply the technical specifications of the imported goods and therefore, requested for upholding of the impugned order.

Decision 

The two member bench of P. Dinesha, Member (Judicial) and Vasa Seshagiri Rao, Member (Technical) said that the maxim Expressio Unius Est Exclusio Alterius – the special mention of one thing operates as the exclusion of things differing from it, is squarely applicable.

It was held that when the lawn mower in question is specifically included under heading 8433.11, it did not have to consider the applicability or otherwise of other HSN. 

The bench held that the product under consideration is classifiable under CTH 8433 1110 as declared by the appellant and hence, the impugned order deserves to be set aside.

Case title: M/s. Honda Siel Power Products Limited v/s Commissioner of Customs (Imports)

Citation: Customs Appeal No. 40738 of 2014  

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Appeal Dismissed under Sabka Vishwas Scheme

In a recent development, M/s Mahendra Educational Pvt. Ltd. has had their appeal dismissed by the Commissioner of Central Excise & Service Tax, Lucknow, under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. This scheme allows for the full and final settlement of tax dues, providing a platform for resolving pending disputes.

The appellant submitted a copy of Form No.SVLDRS-4, which represents the discharge certificate for the settlement of their tax liabilities as per Section 127 of the Finance (No.2) Act, 2019, in conjunction with Rule 9 of the Sabka Vishwas Scheme.

By submitting this form, the appellant sought resolution under the scheme, leading to the withdrawal of their appeal. Consequently, the case titled Service Tax Appeal No.2318 of 2012, initiated by M/s Mahendra Educational Pvt. Ltd. against the Commissioner of Central Excise & Service Tax, comes to a final conclusion.

The Sabka Vishwas Scheme serves as a definitive step towards resolving legacy tax disputes, promoting ease of business and fostering a more taxpayer-friendly environment. This successful resolution highlights the effectiveness of the scheme in tackling such matters and bringing about legal closure.

It is essential for taxpayers and businesses alike to be aware of such schemes, as they offer a valuable opportunity to mitigate legal disputes and settle outstanding tax liabilities. 

Case title: M/s Mahendra Educational Pvt. Ltd. v/s Commissioner of Central Excise & Service Tax, Lucknow

Citation: Service Tax Appeal No.2318 of 2012

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CESTAT Ruling: Beneficial Circulars Prioritized for Assessee’s Advantage, Defying Legal Classification Norms

The Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad any Circular which is beneficial to the assessee should be given effect irrespective to the different correct legal position of classification. 

Facts 

The issue involved in the present case is classification of goods i.e. Parts of Drier/ parboiling parts namely Heat Exchanges, Drier Fan and Aluminium Fin Tubes cleared by the appellant for Rice Mill machinery. The department has classified the said goods under Chapter Heading 8419 which attracted duty at the appropriate rate whereas the appellant plea was that the said goods were not chargeable to duty as the same were classifiable under Chapter heading 8437 of the Central Excise Tariff Act, 1985.

Submissions 

Advocate Vikrant Kackaria, appearing on behalf of the appellant, submitted that demand in the case pertains to period 2011-12 to 2012-13 thus the entire demand is for the period prior to 15.05.2014 i.e. the date of rescinding of the Circular. Since the issue is no more res-integra and decided by the Hon’ble Supreme Court as well as the Tribunal that no demand can be confirmed for the period during which the Circular was in vogue and hence the entire demand of Central Excise along with interest and penalty needs to be dropped.

Rajesh Nathan, Assistant Commissioner, (AR) appearing on behalf of the Revenue submitted that since the show cause notice was issued subsequent to rescinding of Circular, in the present case, the show cause notice was validly issued and Circular will apply. 

Decision 

The two member bench of Ramesh Nair Member (Judicial) and C L Mahar Member (Technical) said that it is a settled legal position that the Board Circular issued by CBEC/CBIC is binding on the departmental officers. In view of this settled legal position, the show cause notice ought not to have been issued by following the binding Circular. Therefore, the issuance of show cause notice itself is illegal and incorrect.

The bench added that it is a settled position under various Supreme Court Judgments that any Circular which is beneficial to the assessee should be given effect irrespective to the different correct legal position of classification. Therefore, even though subsequently the Larger Bench has decided the classification under heading 8419 but by virtue of Circular during the currency of the said Circular the goods is classifiable under heading 8437 and consequently no duty could have been demanded on this very issue. 

It was observed by the Tribunal that even though the Larger Bench has decided the merits of classification under heading 8419 but despite that the issue that when the Board Circular was in force which classified the goods under heading 8437 shall prevail as per various Supreme Court decisions discussed by the Larger Bench in the decision.

The bench further observed that the period involved is 2011-12 to 2013-14 and during this period the circular dated 15.05.2014 was not in force but during the relevant period the Circular dated 19.05.2010 was prevailing and according to which the goods were classifiable under Chapter heading 8437. 

It was held that in view of the Circular dated 19.05.2010 the appellant was not liable to pay any duty for the clearances made prior to rescinding the Circular dated 19.05.2010.

Case title: Rippen Radiators & Heat Exchangers Pvt Ltd v/s Commissioner of Central Excise & ST, Ahmedabad

Citation: EXCISE Appeal No. 10291 of 2015-DB

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CESTAT Rejects Service Tax Demand, Grants Deduction in Extended Warranty Case for Car Manufacturers

The Customs, Excise & Service Tax Appellate Tribunal, Chennai  rejected the Service Tax demand and granted deduction in extended warranty case for car manufacturers.

Facts 

The appellant are manufacturers of cars and have obtained service tax registration for the services rendered by them. The cars manufactured by the appellants are sold to Authorized Dealers (dealers), who in turn sell the cars to the ultimate buyers. 

During the audit, it came to light that the appellant extended factory warranty to the ultimate customers for a period of two years from the sale of cars and after the completion of two years, the appellant canvases for purchase of extended warranty, scheduled plan and total maintenance plan which are optional in nature. 

As there have been continuous sale of these services to the customers through their dealers without indicating the same in their returns and without discharge service tax, it appears that the appellant have indulged in mis-statement of facts with an intent to evade payment of service tax, thereby attracting proviso to section 73(1) of the Finance Act, 1994. Consequently, Show Cause Notice was issued to the appellant proposing to demand service tax to the tune of Rs.3,89,87,290/- for the period from 1.5.2011 to 30.6.2012 under proviso to section 73(1) of Finance Act, 1994 along with appropriate interest under section 75 besides imposition of penalty under sec. 78 of the Finance Act, 1994. 

Submissions 

Raghavan Ramabhadran, counsel for the appellant, submitted that the extended warranty plans are composite contracts involving labour by way of repairs and material by way of parts being replaced. Under the service tax regime, taxability on service tax portion of a composite works contract was made taxable for the first time w.e.f. 01.06.2007 vide insertion of Section 65(105)(zzzza).

Decision 

The two member bench of P. Dinesha, Member (Judicial) and M. Ajit Kumar, Member (Technical) observed that the extended warranty plans are composite contracts involving labour by way of repairs and material by way of parts being replaced. Service tax is not leviable on composite contract for maintenance and repair of vehicle which entails both supply of goods and services for the period upto 01.07.2012.

It was further observed that after the insertion of section 65B(54) in the Finance Act 1994, from 01.07.2012 onwards, the definition of ‘works contract’ was expanded to include repair and maintenance services of movable properties also. Hence, the composite contracts for repair and maintenance of motor vehicles are leviable to service tax from 01.07.2012 onwards. 

The Tribunal said that VAT and Service tax are mutually exclusive levies. The present demand has sought to subject the entire value to service tax, despite the fact that the spare parts were subjected to VAT. 

It was held by the Tribunal that the Appellant is entitled to claim deduction on the value of goods and materials in terms of Notification No. 12/2003. 

The Tribunal held that there can be no interest liability and penalty fastened on the Appellant. 

Case title: M/s. Ford India Pvt. Ltd. v/s Commissioner of Customs 

Citation: Service Tax Appeal No.40501 of 2014

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Manufacturer Entitled to Refund of Central Excise Duty for Non-Functioning Machine: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad ruled that the manufacturer is entitled to refund of Central Excise duty for non-functioning machine.

Facts 

The appellant are engaged in the manufacture of branded unmanufactured tobacco without lime tube having brand name “Suresh Tamaku” for retail sale price of Rs. 1.50 per pouch of 5gms, classified under Chapter sub-heading 2401 of Central Excise Tariff Act, 1985. 

Since the product bearing brand name manufactured with the aid of packing machine and packed in pouches are notified goods under Section 3A of the Central Excise Act, 1944 and accordingly, the appellant was paying Central Excise duty as prescribed under Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. 

The dispute in this case arose when the appellant filed claim of abatement in the form of refund in terms of Rule of 10 of the said Rules, 2010 which were notified on account of non-production of notified goods i.e. branded and unmanufactured without lime tube for the continues period for 17 days thus the amount of Rs. 4,66,129/- was demanded by the appellant as refund of duty deposited by him in the beginning of the month on proportionate basis for the machines not working in 17 days in the month of May 2010. 

On the receipt of refund claim from the appellant, the jurisdictional Assistant Commissioner issued show cause notice, saying that as per the provisions to Rule 10 it was mandatory for the appellant to get both the machines sealed so as to get the benefit of abatement of above referred Rules and since one machine was in working condition and therefore refund of duty deposited in advance was denied.

Submissions 

Chartered Accountant, appearing for the appellant, contended that a close scrutiny of Rule 10 of the said Rules, 2010, if are made applicable prudently it clearly reveals that manufacturer is required to give an intimation to the proper Central Excise officer at least three working days prior to the commencement of the period for non functioning of the packing machines, intended to be sealed by the authorities so that the manufacturer is not able to run such machine.

Decision 

The two member bench of Ramesh Nair Member (Judicial) and C L Mahar Member (Technical) noted that the only question which need to be answered is whether for the purpose of availing abatement under Rule 10 of the said Rules, 2010, the appellant statutorily need to stop manufacturing from both the machines which are installed in his factory.

The Tribunal said that any prudent person will reach to the conclusion that only machine which is working need to pay the required amount of compounded Central Excise duty and if any machine in a month is not working for more than 15 days, as per Rule the duty deposited in advance need to be abated in their favour.

The bench found that since one of the machines of the manufacturer was not engaged in the manufacture of notified goods for more than 15 days and therefore, it is clear that they are entitled for abatement of the duty which has been deposited by them in advance in the beginning of the month. 

It was held by the Tribunal that since one machine of the appellant has not worked for 17 days in the month of May 2010, they are legally entitled for refund of the amount deposited by them in advance. 

Case title: Suresh Tobacco Co v/s Commissioner of Central Excise & ST, Vadodara

Citation: EXCISE Appeal No. 24 of 2012-DB

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Jammu & Kashmir And Ladakh High Court Rules Jammu Development Authority Not Obliged to Deduct TDS on Interest Payments

The Jammu & Kashmir and Ladakh High Court Ruled that the Jammu Development Authority was not obliged to deduct TDS on interest payments.

Facts  

The two appeals filed by the Revenue under Section 260A of the Income Tax Act, 1961 are directed against a common order dated 28.02.2017 passed by the Income Tax Appellate Tribunal, Circuit Bench at Jalandhar for the assessment year 2010-11 and for the assessment year 2011-12. Both the appeals have been admitted by this Court on the following substantial question of law: 

“Whether the ITAT committed an error of law in confirming the order passed by the Commissioner of Income Tax (Appeals) deleting the non deduction of TDS on account of interest paid to the Jammu Development Authority even when the same is taxable entity and as such the assessee-Bank was under an obligation to deduct the TDS on interest payment to Jammu Development Authority under Section 194A of the Income Tax Act, 1961” 

Decision 

The division bench of Justice Javed Iqbal Wani and Justice Sanjeev Kumar said that from a plain reading of sub-section (1) of Section 194A of the Act, it clearly transpires that any person except when he is an individual or Hindu undivided family who is responsible for paying to a resident any income by way of interest, other than the income by way of interest on securities is under an obligation to deduct income tax at source at the time of credit of such income to the account of payee.

The bench observed that a corporation established by a Central, State or Provincial Act is exempt from the operation of sub section (1) of Section 194A of the Act and such corporation is, thus, not obliged to deduct TDS on the interest payment made by it to the payee. 

“If we could conclude that JDA is a corporation established by the State Act, then inescapable conclusion would be that the assessee-bank shall not be obliged to deduct TDS from the interest payments made to the JDA on its amount kept in FDRs. We could have ventured into a detailed discussion as to whether the JDA is a corporation established by or under the State Act, but we would refrain from doing so, for the simple reason that the issue raised before us is no longer res integra” the court said. 

The court held that the JDA is not incorporated like the company which is incorporated under the Companies Act or the Cooperative Society which is registered under the Cooperative Societies Act. The JDA is a statutory body which owes its origin to the Development Act 1970 and is regulated in its functions by the provisions of Development Act 1970 and the rules framed thereunder. 

It was held by the court that ITAT committed no error of law in confirming the order of CIT(A) deleting the non deduction of TDS on account of interest on fixed deposits paid to the Jammu Development Authority even when JDA is a taxable entity. 

It was further held that the assessee was under no obligation to deduct TDS on interest payments made to the JDA on its fixed deposits in terms of Section 194A of the Act. The JDA being a corporation established by the State Act. i.e the Development Act 1970 was, thus, outside the purview of sub-section (1) of Section 194A. 

Case title: Pr. Commissioner of Income Tax v/s M/S The J&K Bank Ltd.

Citation: ITA No. 6/2017 c/w ITA No. 4/2017 

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Holding Company’s Capital Gain Treated as Business Income: Setoff of Losses Allowed

The Income Tax Appellate Tribunal Mumbai while allowing the Setoff of Losses held that Holding Company’s Capital Gain Treated as Business Income. 

Facts 

The assessee is a holding company and has made investment in the joint venture in JM Morgan Stanley Security Pvt Ltd in which the assessee is holding 49% along with Morgan Stanley (India) Securities Pvt Ltd (MSSPL) which holds 51% share. 

The assessee filed return of income for A.Y. 2008- 09 declaring total income at Rs.1191,60,94,839/-. The case was selected for scrutiny and the assessment order under section 143(3) was passed on 06/12/2010 assessing the total income at Rs.1761,62,51,490/-. During the year under consideration, the assessee has shown long term capital gain of Rs.1730,58,51,513/- on sale of shares in JMMSSPL to MSSPL. 

The Assessing Officer proceeded to treat this gain as the business income of the assessee for the reason that the assessee was in the business of shares and securities as a broker and was also involved in share trading business. 

The CIT(A) upheld the order of assessment by holding that the termination of the joint venture was to avoid commercial inconvenience accruing in the future as a joint venture and that termination was a result of split of business arrangement between the assessee and its partners.

Submissions 

AR submitted that the shares are held as investments and reflected under the head “investments” in the financials of the assessee from year to year and that the assessee has earned a substantial dividend on the said investments. 

DR submitted that CIT(A) has not appreciated the fact that at the very outset when the assessee entered in the Joint Venture with the Morgan Stanley Group in the year 1999, it was its “institutional equity business” (including the existing institutional equity sales and trading business assets of the assessee) which had been transferred by it to the Joint Venture Company, namely, J.M. Morgan Stanley Securities Pvt. Ltd.

Decision 

The two member bench of Aby T Varkey (Judicial Member) and Ms. Padmavathy S. (Accountant Member) noticed that the AO rejected the claim of set off of short term capital loss of Rs. 4,65,44,19,508/- and long term capital loss of Rs. 54,90,36,870/- on the ground that the assessee with the help of its own group companies made a colourable device to artificially create loss to cancel profit earned on sale of 49% shares to the J.V. and thereby evade the tax.

It was further noted that the shares were sold by the assessee from the Demat account for which the consideration is received by the assessee and that shares sold had been issued under the ESOP scheme of the Trust where the options are being exercised by the assessee.

The bench set aside the order of the CIT(A) disallowing the setoff of long term capital loss of Rs.54,90,36,870/- and short term capital loss of Rs.4,65,44,19,508/-.

Case title: M/s J.M. Financial Ltd v/s Deputy Commissioner of Income-tax

Citation: I.T.A. No.3987/Mum/2015

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CESTAT Declares M/s ATA Freight Line Private Limited Not Liable for Service Tax on Transportation Services

The Customs, Excise & Service Tax Appellate Tribunal, Chandigarh declared M/s ATA Freight Line Private Limited not liable for Service Tax on transportation services.

Facts 

The appellants, M/s ATA Freight Line Private Limited, are duly registered with Service Tax; an Audit of the records of the appellant was conducted and it appeared that the appellants were engaged in the transactions and that they did not pay appropriate Service Tax on the services rendered/availed. The appellants, under an Agreement with their principals i.e. ATA, USA provide services to them and receive services; they bifurcate the charges for ex-work services, handling charges and sea freight charges payable to each other; these services are in the nature of transportation of goods provided to the principals; the appellants were required to discharge Service Tax as the service is rendered in the country.

A show-cause notice was issued to the appellant seeking to recover Service Tax of Rs.2,80,26,749/- along with interest while seeking to impose penalties under Sections 76, 77 & 78 of the Finance Act, 1994; the said show-cause notice has been confirmed by the Commissioner (Audit), CGST.

Submissions 

Advocate Mahesh Raichandani, appearing for the appellants, submitted that the appellant reserves space in carrier vessels or aircrafts for export of cargo; the appellant does not have contract  with the carriers but reserves space on spot rates and books space on various vessels/ aircrafts.

Nikhil Kumar Singh, Authorized Representative for the Department reiterated the findings of the impugned order and submitted that the appellant‟s contention on the discount received for booking the space in aircrafts/ vessels is an accrual of gain and not consideration for an activity is mis-placed.

Decision 

The two member bench of S. S. Garg Member (Judicial) And P. Anjani Kumar Member (Technical) found that the Revenue has picked up some activities, from the bundle of services rendered by the appellants, in a convenient manner. One has to see the nature of the service in total. Segmenting the series of actions involved in the provision of a particular service, would result in ridiculous propositions. The Department has not viewed the service rendered by the appellants in a holistic manner, ignoring the very fact that the services rendered by the appellants are not complete just by loading of the goods on a vessel or on an aircraft. They go beyond.

The bench observed that if the case of the Department is accepted, the provisions of Section 66F of the Finance Act, 1994 would become redundant. Such an approach is not permissible under the law. 

The bench held that the amounts collected by the appellants from the Indian clients is towards the expenditure such as customs duty, delivery order charges, port handling at the foreign ports; as the charges pertain to the activity rendered at a foreign destination, the same cannot be charged in India. 

The Tribunal did not find any type of service rendered by the appellants in regards to promotion of the business of their Indian clients. Their activity and the payments received thereof squarely fall under the main activity of goods transport operator or cargo handler.

Case title: M/s ATA Freight Line Private Limited v/s The Commissioner of Central Excise And Service Tax, Gurugram 

Citation: Service Tax Appeal No.60105 Of 2022

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CESTAT Upholds Commissioner’s Decision on Classification of Color Measurement Equipment

The Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad upheld the Commissioner’s decision on classification of color measurement equipment.

Facts 

The classification sought by the respondents was changed by the assessing officer, resulting in a payment of duty of Rs. 10,13,647/-. The Respondents requested the assessing officer to pass a speaking order, but no speaking order was passed. 

Therefore, the respondents challenged the assessment made on the bill of entry before the Commissioner (Appeals). The respondents produced a Chartered Engineer certificate. The Commissioner (Appeals) allowed the appeal of the respondents and accepted the classification sought by them, in respect of item No. 1, 2 & 3 of the table. However, in respect of item no 4 in the assessment order of the original Adjudication Authority was upheld. 

Aggrieved by this order revenue has filed an appeal before the Tribunal challenge the reclassification done by the Commissioner (Appeals) of item No. 1 & 2 of the table. The respondents have filed cross objection, seeking to challenge the order of Commissioner (Appeals) in respect of Item No. 4 of the table.

Submissions 

AR submitted that the Commissioner (Appeals) has allowed the classification under Heading No. 90273020 without ascertaining, if the said equipment uses optical radiation. From the order of Commissioner (Appeals), it is seen that the Commissioner (Appeals) has relied on the Chartered Engineer certificate.  

Decision 

The division bench of Raju Member (Technical) And Somesh Arora Member (Judicial) found that Chartered Engineer has clearly stated these goods measure the intensity of the color distribution at different wave lengthy for every measured point.

The bench observed that it is not in dispute that the data is obtained in digital form. As the equipment converts color data into digital data. The very function of converting color data to digital data in itself is a data processing function. 

The Tribunal did not find any merit in the appeal filed by the revenue on the ground that no processing is done by the machine. 

Case title: C.C.-Ahmedabad v/s Smaltochimia India Pvt Ltd

Citation: CUSTOMS Appeal No. 12797 of 2014-DB

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