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CASE LAWS
2017-TIOL-1443-HC-DEL-IT
BDR BUILDERS AND DEVELOPERS PVT LTD Vs ACIT: BOMBAY HIGH COURT (Dated: July 26, 2017)
Income Tax - Writ - Sections 147, 148 & 153A.
Keywords - Abated re-assessment - Non-existent entity - Revival & Warrant of authorization.
The Assessee Company and Verma Buildtech & Promoters Private Limited (VBPPL) both were engaged in the business of real estate. They both were amalgamated. The assessment was completed for relevant AY. Later AO started re assessment proceeding and issued notice u/s 148 on the ground that income chargeable to tax had escaped assessment.The Assessee objected re-opening, but the same was rejected by AO and asked to furnish a return for VBPPL for the AY in question. Later, another notice was issued to VBPPL by AO u/s 153A. The assessee pointing out that VBPPL ceased to exist. But AO issued the impugned notice u/s 148 of the Act on the ground that with the dropping of the proceedings under Section 153A of the Act, the proceedings u/s 148 of the Act, which had abated due to the initiation of the proceedings u/s 153A of the Act, had revived .Aggrieved assessee approached the High Court seeking the quashing of the notice u/s 148 of the Act.
On Writ, the High Court held that,
Whether entire proceedings u/s 153A is void ab initio when started against a non-existent entity which is already amalgmated with another entity - YES : HC
Whether when company loose its existence the question of invoking Section 153 A (2) to revive the abated re-assessment proceedings under Section 147/148 of the Act does not arise - YES : HC
++ here not only the initial notice u/s 148 was issued to a non-existent entity even the search under Section 153A took place against a non-existent entity. Both the warrant of authorisation and the panchnama were drawn in the name of VBPPL on 3rd January, 2014 by which date even the order of the High Court approving the amalgamation of the VBPPL with the Assessee had been passed. Clearly, therefore, the entire proceedings u/s 153A were void ab initio. Therefore, the question of invoking Section 153 A (2) to revive the abated re-assessment proceedings u/s 147/148 did not arise. It requires reiteration that the proceedings u/s 148 which commenced with the notice dated 3rd April, 2012 issued to VBPPL were itself void ab initio for the simple reason that on that day VBPPL was not in existence as a result of the order dated 20th February, 2013 of the High Court approving its amalgamation with the Assessee with effect from 1st April, 2012. The question of revival of such proceedings at a later point in time, with there being no change to the legal position regarding VBPPL having ceased to exist, did not arise. The mere fact that prior to 20th February, 2013 (being the date of the order approving the amalgamation) VBPPL and/or the Assessee may have responded to such notices, will to make a difference to the said legal position. The facts show that after 20th February 2013, the Assessee lost no opportunity in reminding the AO at every stage that VBPPL no longer existed in the eye of law. Despite being made aware of this legal position, the AO persisted in continuing the proceedings against VBPPL.The reassessment proceedings u/s 147 were barred by limitation since limitation for framing the assessmentu/s 143(3) r.w. Section 147 expired on 31st March, 2014. On this ground also, the question of revival of those proceedings by the impugned letter dated 14th March, 2016 was bad in law.
Assessee's Writ allowed
2017-TIOL-1440-HC-MUM-IT
PR CIT Vs HINDUJA VENTURES LTD: BOMBAY HIGH COURT (Dated: July 26, 2017)
Income Tax - Section 10A.
Keywords - Independent business unit - Investment & Expansion - Remand report.
The assessee Company is engaged in the business of IT and IT enabled services. It has 4 units. While Unit I was engaged in the business of software development, Unit II was engaged in non-voice BPO business. Unit III was engaged in voice BPO. While Unit I earned revenue predominantly from within India, Unit II and Unit III earned profits wholly from exports. The assessee in its return claimed deduction u/s 10A in respect of its Unit II and Unit III. During assessment, AO did not allow deduction u/s 10A. On appeal, CIT(A) called for remand report. The AO submitted the remand report, which favored the assessee. However, the CIT(A) dismissed the appeal but Tribunal allowed the same.
On appeal, the High Court held that,
Whether Sec 10A benefits claimed can be questioned when the Revenue has allowed the same in case of two Units of assessee - NO : HC
Whether when the business of two different Units are independent, distinct and separate, exemption u/s 10A should be allowed even though the permission earlier was sought by way of an expansion - YES : HC
++ it had been noted that the assessee sought permission to start Unit II at Bangalore for carrying out business of processing insurance claims and vide letter dated 26th July 2000 the STPI authorities at Bangalore granted the said permission to start a BPO for claim processing. On or about 12th September 2001, permission was granted to Unit III to do the business of international call center. The assessee also took, separate registration with STPI, Mumbai, for BPO call processing activity at Bangalore for the purpose of back end data backup. The AO in his remand report has held that both Unit II and Unit III duly fulfill all the conditions laid down in Section 10A(2) of the Act. The AO in his remand report has specifically observed that both units were set up with fresh investments. The assessee purchased plant and machinery for these units and it was not the case that these units were formed by splitting or reconstructing existing business. It was also contended that separate books of accounts were maintained. The employees of each of the units were fresh set of employees and were not transferred from existing business. The nature of activity of both units was totally different, not only vis-a-vis each other, but also vis-a-vis the activity carried on by the first unit. It was also observed by the AO in its remand report that customers of each unit were completely different and unrelated and both the units have new and independent sources of income. Hence Unit II and Unit III could not be said to be formed by reconstruction nor can be said to be an expansion of earlier same business. Though the permission was sought by way of an expansion, the facts on record categorically and succinctly establish that the business of Unit II and Unit III were independent, distinct and separate and are not related with each other or even with Unit I. The Tribunal also considered the letter from Director, STPI, issued to the AO. After considering all the documentary evidence and the remand report of the AO, the Tribunal agreed with the remand report of the AO and held that the assessee would be entitled for benefit of Section 10A of the Act. Considering the aforesaid conspectus, the Tribunal haD not committed any error while passing the impugned order.
Revenue's appeal dismissed
2017-TIOL-1439-HC-DEL-COFEPOSA
SHABNAM ARORA Vs UoI: DELHI HIGH COURT (Dated: June 28, 2017)
Appellants Rep by: Mr Mohd. Nasir, Mr Juned Alam, Mr Mohd. Tabreq & Mr Umesh Kumar, Advs.
Respondents Rep by: Mr Sanjay Jain, ASG with Mr Ajay Digpaul, Ms Mohita and Ms Adrija, Advs.
COFEPOSA Act - Writ Petition instituted for issuance of a writ of habeas corpus to and for another writ, or direction for quashing the order of detention dated 10.10.2016 passed under section 3(1) of COFEPOSA A ct, 1974 against the husband of the petitioner, namely Mr.Raju Arora (detenue) and directing the release of the detenue.
FAILURE TO PROVIDE GROUNDS AND DOCUMENTS IN VERNACULAR Language
Petitioner contending that the documents and the grounds of detention were not supplied to the detenue within the stipulated time prescribed by section 3(3) of COFEPOSA Act and in the language known to him, which is a clear violation of Article 22(5) of the Constitution
HELD - In the present case, the detenue was detained on 18.11.2016 and accordingly, the grounds were to be served not later than 23.11.2016 -it was only after his detention that the respondents learnt that the detenue was not well versed in English and hence, an extension was sought for 10 more days -this was granted by the letter dated 21.11.2016 and the time limit was extended upto 3.12.2016 -as the grounds and the documents were served on 1.12.2016 along with their Hindi translations, it cannot be said that there was any violation of section 3(3) COFEPOSA Act or the constitutional mandate [para 10]
SUBJECTIVE SATISFACTION HAVING BEEN WRONGLY ARRIVED AT
Petitioner contending that the subjective satisfaction of the detaining authority has been wrongly arrived at and without independent application of mind
HELD - The submissions of the petitioner in this regard are twofold: first, the detaining authority has passed the detention order in a mechanical manner which is evident from the fact that the same was passed within less than one day of the proposal and the documents being placed before it; and second, that there is no link of the detenue with the alleged smuggling activities -in respect of the former, the Court is of the view that the same is without any force in view of the stand of the respondents that owing to the sheer scale of smuggling and its continuation since 2014, the case was processed as top priority and the detaining authority worked overtime on the weekend -in this regard, the Court is fortified by the judgment of the coordinate bench in the case of Sandhya Jain v. Union of India & Anr., W.P. (Crl) 245/2017 dated 31.5.2017 wherein a similar argument pertaining to ante dating of the detention order was urged and rejected by the bench -the bench had gone on to observe that "there is no presumption that official duty is not performed on Saturdays and Sunday" (paragraph 14)–the second contention that there was no link between the detenue and the smuggling activities is misplaced -a perusal of the detention order reveals that the detaining authority had come to the subjective satisfaction that the curtailment of the liberty of the detenue was necessary to prevent further smuggling activities - the detaining authority had come to the subjective satisfaction that the detenue was working as a "close associate" of Shri Narendra Kumar Jain and was involved in the syndicate since 2014 - the contention of the petitioner that the detenue was neither involved in smuggling of the goods nor the transportation thereof is also misplaced -as evidenced from the Grounds of Detention, the detunue was playing a vital role in the whole smuggling operations - the detenue was a vital cog in the smuggling operation handling the business of M/s.Rara Brothers in Delhi including ensuring the delivery of goods, their conversion into marketable form and their ultimate sale as well as ensuring the distribution of the bounty -there was material before the detaining authority to come to the conclusion and hence, it cannot be said that the subjective satisfaction of the detaining authority was wrongly arrived at or the grounds of detention are self-contradictory or vague -the role of the detenue has been specifically described - accordingly, the submission of the petitioner must be rejected[para 17, 18, 19, 20, 22]
MISPLACED RELIANCE ON THE STATEMENT OF SH.NARENDRA KUMAR JAIN
Petitioner contending that the detention order cannot be based upon the statement of the co-detenue Shri Narender Kumar Jain as he had later retracted his statements before the Chief Metropolitan Magistrate, New Delhi on 5.9.2016
HELD - It cannot be said that the detaining authority could not have relied upon the statement of Shri Narendra Kumar Jain recorded under section 108 of the Customs Act, 1962 on 2-3.9.2016 - it is a well settled proposition of law that the confessional statement can be relied upon by the detaining authority provided the retraction of the same is also placed before it - in the present case, both the statement and its retraction were placed before the detaining authority - no merit found in the submission that the detention order is per se illegal as being based on the retracted statement of Shri Narendra Kumar Jain - it is settled law that this Court does not sit in appeal and the subjective satisfaction to be arrived at is of the detaining authority and not this Court -the scope of interference is limited and this Court may only see whether there was material before the detaining authority - the detention order of the detenue is not solely based upon the retracted statement of Shri Narendra Kumar Jain as the same stood corroborated by the statements of Shir Omkant Soni, Ravi Prakash, Kamal Prakash and Pravin Patel as well as the records seized during the investigation - accordingly, the contention is rejected [para 25, 26, 28, 29, 30]
FAILURE TO INFORM FAMILY MEMBERS OF DETENUE
Petitioner contending that no information was given to the family members of the detenue after his detention in violation of Article 21 of the Constitution
HELD – Respondents submitted that the petitioner herein, being the wife of the detenue, was informed about the detention of the detenue on 18.11.2016 itself and hence, all the procedural safeguards had been strictly adhered to – the respondents also drew attention of this Court to a report submitted by the Delhi Police dated 30.11.2016 – a copy of the certificate signed by the concerned officer of the Delhi Office and also signed by the detenue himself has been placed on record - accordingly, in view of the stand taken by the respondents, the contention of the petitioner must be rejected as being factually incorrect[para 32, 33, 34]
RESORT TO PREVENTIVE DETENTION WHEN ORDINARY LAW IS SUFFICIENT TO DEAL WITH THE SITUATION
Petitioner contending that the ordinary law of the land was sufficient in the case and the resort to preventive detention was not necessary
HELD - This very bench in the case of Atikur Rahaman v. Union of India & Anr [2017-TIOL-854-HC-DEL-CUS] had extensively dealt with the law in this regard, including the case of Rekha v. State of Tamil Nadu [(2011) 5 SCC 244], on which reliance has been placed by the petitioner – the present case is also to be decided on the basis of the settled principles of law in the case of Atikur Rahaman – the detenue was not a mere carrier and was in-charge of the Delhi operations of the racket – the activities of the detenue were of a serious nature and perpetrated with a great deal of expertise and co-ordination – the activities were of a massive scale and had been continuing for about two years – this had led to the detaining authority satisfying itself about the propensity and potentiality of the detenue to further indulge in such activities – hence, it is clear that the ordinary law of the land was insufficient to curtail the activities of the detenus and the resort to the law of preventive detention was justified [para 36, 37]
FAILURE OF THE RESPONDENTS TO DECIDE THE REPRESENTATION DATED 9.12.2016
Petitioner submitted that there is no reply from the detaining authority of the representation of the detenue dated 9.12.2006 till date, which is a clear violation of Article 22(5) read with section 3(3) of the COFEPOSA Act – petitioner further submitted that the failure of the respondents to decide his representation makes the continued detention of the detenue bad in law
HELD – The impugned order of detention was passed on 10.10.2016 and the detenue was detained on 18.11.2016 -the matter was remitted to the Advisory Board on 9.12.2016 -thereafter, the first representation dated 9.12.2016 was received by the respondents on 14.12.2016 -a second representation dated 19.12.2016 was also received -as the reference was already made to the Advisory Board, both the representations were forwarded on 4.01.2017 -the Board opined for the continued detention in its report dated 27.1.2017 -thereafter, the second representation dated 19.12.2016 was processed and rejected, while the first representation dated 9.12.2016 was not processed – the first representation dated 9.12.2016 is in the nature of a request, i.e. alleging certain defaults and seeking documents / information -the second representation merely alleges the defaults and submits that the detention order stood vitiated because of the lapses -barring their nature, all the grounds raised in the representation dated 9.12.2016 stand covered in the second representation dated 19.12.2016 – on going through the contents of both the representations, it is clear that all the grounds and the material urged in the representation dated 9.12.2016 were also mentioned, much more elaborately, in the representation dated 19.12.2016 -thus, in view of the dicta of the judgments in Abdul Razak Dawood Dhanani [ (2003) 9 SCC 652 ] and Shahidul Islam Mondal [ 2015 (150) DRJ 491 [DB] ], it was not incumbent upon the detaining authority to pass a separate order for the representation dated 9.12.2016 -accordingly, this ground is also rejected [para 50, 53, 54]
To conclude, the petitioner has failed to urge any ground warranting the quashing of the detention order or vitiating his further detention - accordingly, the writ petition is dismissed as devoid of any merit [para 55, 56]
Writ Petition dismissed
2017-TIOL-1438-HC-MUM-CX
CCE & C Vs INDIA CONTAINERS LTD: BOMBAY HIGH COURT (Dated: June 23, 2017)
CX - Respondent no.1 is a company holding CE registration certificate for the manufacture of "oval tin cans for Colgate Tooth Powder" - the legality and correctness of the impugned order has been challenged by this Writ Petition to the extent it quashed and set aside the order, by which the petitioner, disallowed modvat credit for Rs.23.87 lakhs obtained by respondent no.1, imposed penalty of Rs.50 lakhs on respondent no.1 and further imposed penalty of Rs.5 lakh, Rs.1 lakh and Rs.50,000/- against respondent nos.2, 3 and 4, respectively.
HELD –The petitioner had disallowed the modvat claim of Rs.23.87 lakhs in respect of the material described in Annexure B-2 and ordered recovery thereof from respondent no.1 – the persons [employees of respondent no.1] examined by the petitioner disclosed that the necessary record was not maintained and fake record was created in respect of the tin plates of which, modvat credit was obtained – the thickness of the tin plates seems to have been deliberately kept ambiguous in Annexure B-2 – however, from column no.5 of Annexure B-2, it is clear that the tin plates having thickness ranging from 0.30 mm. to 0.49 mm. also were purchased by respondent no.1 -it was, therefore, necessary for respondent no.1 to specifically classify and state the quantity of the tin plates, which were having thickness below 0.24 mm. as well as above 0.24 mm -the petitioner has rightly held that respondent no.1 has deliberately suppressed the said information -if that be so, respondent no.1 cannot be allowed to take benefit of its own wrong and it will have to be held that the tin plates described in Annexure B-2 were of thickness above 0.24 mm. and were not used by respondent no.1 for manufacturing oval tin cans – the Tribunal has totally ignored the statements of the persons recorded by the petitioner under sub-section (2) of section 14 of the Central Excise Act, 1944 [Act], which have evidenciary value - there is absolutely no reference of these statements in the impugned order passed by the Tribunal -the Tribunal has rejected the demand in the sum of Rs.23.87 lakhs by giving a single-sentenced reason that the description as to thickness of the material described in Annexure B-2 can also cover the tin plates below 0.24 mm -the petitioner has given sound reasons for disallowing the modvat credit in the sum of Rs.23.87 lakhs in respect of the tin plates described in Annexure B-2 –the Court is not inclined to subscribe to the single-sentenced reasoning of the Tribunal for rejecting the demand for the said amount – the Court, therefore, holds that respondent no.1 is liable to repay the said amount since respondent no.1 has wrongly obtained the modvat credit in respect of the said amount – the petitioner has inflicted penalty of Rs.50 lakhs under rule 173Q of the Central Excise Rules, 1944 [Rules] - the Tribunal has set aside the order for payment of penalty merely on the ground that in the SCN, the petitioner has proposed penalty under the provisions of rule 57I of the Rules read with proviso to section 11A(1) of the Act and not under rule 173Q of the Rules – the Apex Court in the case of J.K.Steel Ltd. [1978 (2) ELT J 355 (S.C)] held that if the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question – thus, mention of wrong Rule in the demand notice would not be an impediment in the way of the petitioner in inflicting penalty under the correct Rule though the said Rule was not quoted in the demand/SCN - the total amount of Rs.38.38 lakhs was wrongly availed of by respondent no.1 on account of modvat credit -therefore, the Court is of the view that respondent no.1 should pay penalty at least to the extent of this sum, though not in the sum of Rs.50 lakhs as has been ordered by the petitioner - so far as the order of the petitioner passed against respondent nos.2 to 4 directing them to pay penalty in the sum of Rs.5 lakhs, Rs.1 lakh and Rs.50,000/- respectively, is concerned, the Court subscribes to the findings of the Tribunal setting aside that part of the order -the Tribunal has observed that respondent nos.2 to 4 looked after the affairs of respondent no.1 – Company in Aurangabad, while substitution of the imported inputs is stated to have been done at Mumbai at the end of the jobworker M/s.Divecha Glass Company[para 13, 17, 19, 20, 21, 22, 23, 24, 25, 26]
In the result (i) the writ petition is partly allowed (ii) the impugned order passed by the Tribunal is partly quashed and set aside (ii) respondent no.1 shall repay the amount of Rs.38.38 lakhs towards the moddvat credit wrongly availed of plus penalty of Rs.38.38 lakhs i.e. total amount of Rs.76.78 lakhs (iv) the amount, if any, repaid by respondent no.1 earlier on account of modavt wrongly availed of, shall be adjusted towards repayment of the amount that has been directed to be repaid by this order [para 28]
Writ Petition partly allowed
2017-TIOL-2709-CESTAT-MUM
CCE, C & ST Vs UTTAM GALVA STEEL LTD: MUMBAI CESTAT (Dated: 24 April, 2017)
CX – The original authority held that the credit of tax paid on services related to handling of goods outside the factory, but up to and until export of goods, could not be availed by respondent owing to the restricted scope of the definition of 'input service' in rule 2(l) of the CCR, 2004–Commissioner (Appeals), set aside the order of the original authority and, therefore, revenue in appeal before CESTAT.
HELD - Considering that the goods are permitted to be deposited without payment of duty at the port of export, it would appear that the 'place of removal' in relation to exported goods is not the factory but beyond -any service used till the place of removal would qualify as an 'input service'-there can be no cavil about the availment of credit of any tax that has been paid in connection with such input services - there can be no dispute that the services on which credit of tax paid was taken had been rendered to the respondent -to the extent that this credit has been taken on services that are not ineligible for inclusion as 'input services', the availment of credit cannot be objected to - appeal of revenue is dismissed [para 5, 7, 8]
Revenue's appeal dismissed
2017-TIOL-2708-CESTAT-MUM
MAHINDRA AND MAHINDRA LTD Vs CCE: MUMBAI CESTAT (Dated: April 11, 2017)
CX - Appellants are engaged in the manufacture of tractors, IC engines and parts -they were paying duty on the value arrived on cost construction basis which is based on cost certificate issued by cost accountant -it was observed that the appellant had been taking the material cost of the inputs based on the cost standards as on 31 st March of the previous accounting year instead of the weighted average cost or the moving average cost of the current period with reference to the clearance date -similarly, the freight and octroi cost factor, R&D expenses cost factor both have been taken based on accounting period of the previous year but not of the current year -also the conversion expenses cost was taken based on the accounting for the period of the first 9 months of the previous year and not of the current period -appellant were, therefore, clearing the goods for captive consumption on payment of duty based on the assessable value of the previous year audited cost price -it was contended in the SCN that as per Rule 8 of Central Excise Valuation Rules, 2000 the value should be 110% /115% as applicable of the cost of manufacture of such goods -accordingly, there was a short payment of duty the same was proposed to be demanded - the adjudicating authority confirmed the demand and imposed penalty and interest - assessee filed the present appeal - as regards appeal E/2222/06 the facts involved is IC engine manufactured and supplied to their Nashik plant for which they filed the price list in Proforma I -the contention of the department is that the appellants are also selling IC engine in the local market -therefore, the comparable price of the IC engine is available and the same is applicable in case of supplies made to their Nashik plant for captive consumption - demand made of differential duty - appeal to CESTAT.
HELD - Appellant is manufacturing and clearing IC engine and parts of tractors to their own unit located at Nagpur and Rudrapur - Nagpur and Rudrapur units are manufacturing tractors by using the IC engine parts supplied by the appellant -they are clearing the goods on payment of duty - Nagpur and Rudrapur are availing cenvat credit and as per the submission of the appellant during the relevant period the Nagpur and Rudrapur have paid excise duty from PLA to the tune of Rs.6.88 crores and Rs.113.53 crores - therefore, even if the duty as demanded in the SCN would have been paid by the appellant, the same was available as cenvat credit to their Nagpur and Rudrapur units; that there was neither gain nor loss either to revenue or to the assessee -in the appellant's own case, this Tribunal has considered the issue in hand and the appeal was allowed vide order dated 16.1.2017 - in view of the Tribunal's order in appellant's own case, the issue is no longer res integra - therefore, the impugned order, on the ground of revenue neutrality, is not sustainable, hence same is set aside - appeals are allowed : CESTAT [para 9, 12]
Appeals allowed
2017-TIOL-2707-CESTAT-MUM
CENTUARY ENKA LTD Vs CCE: MUMBAI CESTAT (Dated: February 28, 2017)
CX –Appellant opted for provisional assessment for the year 2003-04 - the provisional assessment was finalised by the proper officer vide order dated 28.4.2005 - in the said final assessment order, the assessing authority raised demand of duty of Rs.37.25 lakhs on comparison of duty paid and payable on monthly basis – appellant filed appeal before the Commissioner (Appeals) on the ground that since the provisional assessment is for the entire year 2003-04, the total duty paid during the said year should have been considered against the duty payable in the final assessment – vide impugned order, the Commissioner (Appeals) rejected the appeal, therefore, appeal to CESTAT.
HELD –In view of rule 7 of CER, 2002it is clear that at the time of the finalization of the assessment, total duty paid/payable has to be taken in to account and if there is net amount either short paid or excess paid, only that amount will be available either for recovery or refund –therefore, final assessment is done in consolidation in respect of clearances made in particular financial year -there is no specific provision in rule 7 of the Rules that finalization of assessment shall be done either on consignment basis or monthly basis –therefore, the Asstt. Commissioner, suo-moto assessing the duty on monthly basis and wherever there is short payment, demand raised ignoring the excess paid duty is not permitted -issue is also no more res integra, accordingly, adjustment of excess paid duty against short paid duty is permissible for the entire year i.e. 2003-04 at the time of finalization of the assessment - impugned order is not sustainable and same is set aside -the assessing authority is at liberty to quantify the correct duty liability, if any, following the above observation -appeal is allowed in the above terms : CESTAT [para 5]
Appeal allowed
2017-TIOL-2706-CESTAT-MUM
CEAT LTD Vs CCE: MUMBAI CESTAT (Dated: April 28, 2017)
CX - Appellant have been paying excise duty on provisional basis for the reason that they were claiming various discounts to arrive at the assessable value by filing price declaration -during the period 1974 to 1983 appellant filed refund claim being excise duty paid on certain post manufacturing expenses (PME) - that matter travelled up to the Supreme Court - after a series of litigation, the Asstt. Commissioner, vide order dated 25.5.2007 rejected the refund claim of Rs.39.65 lakhs filed by the appellant on 23.4.2004 on time bar as well as unjust enrichment - on appeal, the Commissioner (Appeals) upheld this order - appellant before CESTAT.
HELD - Initially, when the duty demand was determined by allowing/disallowing deduction claim by the appellant the matter travelled up to Supreme Court and thereafter quantification of the demand of duty was made by the department and again same was challenged by the appellant before the Supreme Court -in the subsequent proceedings and earlier proceedings, the SCN was issued and demand was raised, then the matter travelled up to Tribunal where the appeal of the appellant was allowed -therefore, entire issue of valuation and consequential determination of duty has finally came to an end only after Tribunal's order -the Tribunal's order was passed on 12.11.2003, therefore, refund arises only thereafter, hence refund claim filed on 23.4.2004 is within the time limit -moreover, if it is presumed that finalization of assessment is done in the year 1997, the appellant even at that stage through letter dated 11.6.1998 lodged their claim - from the above letter, it can be seen that appellant have lodged their claim of Rs.39.65 lakhs which is involved in the present case -claim filed way back on 11.6.1998 vide the said letter should also be treated as refund claim -for this reason also, refund claim is not time barred -as regards unjust enrichment, it is admitted in the adjudication that assessment was finalised on 15.7.1984 and by way of corrigendum dated 15.10.1984, and necessary adjustment of duty was made on 18.7.1997, therefore the present refund claim is arising out of the deposited amount of provisional assessment -therefore, refund which is arising out of finalization of assessment will not be governed by the provisions of unjust enrichment as held by the Larger bench in the case of Hindustan Zinc Ltd.- it was also held in the case of CEAT Ltd.[2016 (331) ELT 456 (Tri.-Mum)] that in case refund claim arising out of the finalization of the assessment, the provisions of unjust enrichment is not applicable as specific provision of unjust enrichment was brought in Rule 9B of the CER, 1944 w.e.f. 26.6.1999 -the present period is for 1974 to 1983, hence unjust enrichment is not applicable-moreoever, in the facts of the present case, assessment was provisional, duty was paid in excess after clearance of the goods - therefore, for this reason also, incidence of duty cannot be said to have been passed on to any other person- for this reason also unjust enrichment is not applicable - refund claim is neither hit by time bar nor hit by unjust enrichment -appeal is allowed : CESTAT [para 5]
Appeal allowed
2017-TIOL-2705-CESTAT-DEL
NITIN SPINNERS LTD Vs CCE: DELHI CESTAT (Dated: June 6, 2017)
CX - The appellant-assessee, engaged in the manufacture of cotton yarn and knitted fabrics and earlier operating under 100% EOU scheme, were allowed by the jurisdictional Development Commissioner, Noida to opt out of EOU scheme and operate under EPCG scheme in terms of para 6.18 of Foreign Trade Policy - during the course of verification of records of the appellant-assessee, it was noticed that they have paid duty @ 3.09% on the capital goods and spares/accessories in terms of notification no.64/2008-Cus. dated 9.5.2008 -it appeared that the appellant have not discharged correct duty on the capital goods/ spares parts procured indigenously - accordingly, the Revenue proceeded against the appellant-assessee, alleging short payment of CE duty on indigenous capital goods/spares parts/accessories, during the course of debonding of EOU unit - SCN issued demanding CE duty of Rs.7.31 crore and customs duty of Rs.22.26 lakhs in respect of imported spare parts alleging the same were not includible in the EPCG benefit - the original authority, vide impugned order, held that indigenously procured capital goods could be de-bonded under the EPCG scheme on payment of CE duty of 14% and not 3% as contended by appellant-assessee and CE duty of Rs.6.63 crore was confirmed - he further held that depreciation is to be calculated based on rates prevailing on the date of debonding and not on the rates prevailing on the date of receipt of the capital goods as contended by revenue and further held that certain items (like fire control systems, water storage tank, etc.) fall under the definition of capital goods and eligible for depreciation and demand of CE duty of Rs.68.03 lakhs on this count was dropped - he further held that imported spare parts were included in the EPCG licence for concession and demand of customs duty of Rs.22.26 lakhs was dropped - appellant-assessee before CESTAT challenging the O-i-O to the extent it is against them - department before CESTAT challenging the findings given on issues where demands have been dropped
HELD - Admittedly, in the present case, the appellant-assessee are entitled for debonding as they have achieved positive NFE -accordingly, debonding was permissible in terms of the notification no.22/2003-CE dated 31.3.2003 - notification no.22/2003-CE is for providing exemption to goods brought into EOU -this notification does not provide any exemption to the capital goods, spare parts etc. for supply under EPCG Scheme - the Bench is in agreement with the original authority regarding absence of any exemption notification covering the situation to support the claim of the appellant-assessee for an exemption from Central Excise duty- the concept of Revenue neutrality cannot be considered as a bar for non confirmation of tax dues, otherwise payable by the appellant-assessee - no merit in the appeal filed by the appellant-assessee against demand for differential duty on capital goods as confirmed by the impugned order [para 11, 13, 14]
In a similar case, Tribunal in the case of Pudumjee Plant Laboratores Ltd. [2013 (295) ELT 593 (Tri. Mum)] held that the rate of duty on the depreciated value should be on the date of debonding under EPCG scheme - when the debonding is done in terms of notification no.22/2003-CE, then the rates of depreciation as prescribed in the notification has been correctly applied - [para 15]
On careful consideration of paras 9.2 and 9.12 of Foreign Trade Policy as well as para 6.6.1 (b) of Handbook of Procedure of Foreign Trade Policy, the original authority concluded that the items like cord can, fire control system, water storage tank etc. will fall within the scope of " capital goods " as understood in the trade parlance -accordingly, the original authority allowed depreciation applicable to capital goods and dropped the demand for differential duty on this account -the Bench is in agreement with the reasons recorded by the impugned order [para 16]
Regarding, the spare parts and accessories procured from domestic sources and also imported, it is found that the original authority has recorded categorical reasons for extending the benefit to these items -the application dated 14.4.2008 filed by the appellant-assessee for EPCG authorisation gave details of various spares imported as well as procured locally -on analysis of the authorisation as well as nature of items as recorded in the impugned order, the Bench is in agreement with the findings of the original authority regarding the eligibility of these items under EPCG Scheme -in the present appeal, the Revenue could not bring out any substantial issue either in fact or in law to interfere with the finding of the original authority [para 17]
The Revenue also raised the point regarding non imposition of penalty under rule 25 of the Central Excise Rules, 2002by the original authority - in the impugned order,it is clearly recorded that the appellant-assessee have not breached any of the provisions of rule 25 of CER as they have not removed the excisable goods in contravention of any of the Rules - no reason found to interfere with the categorical finding of the original authority -as such, no merit found in the appeal filed by the Revenue [para 18]
The impugned order is as per law and same is upheld -the appeals filed by the appellant-assessee as well as Revenue are rejected: CESTAT[para 19]
Appeals of Assessee/Revenue rejected
