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CASE LAWS
2017-TIOL-1488-HC-MUM-CX
INDO SWISS EMBROIDERY INDUSTRIES LTD Vs CCE: BOMBAY HIGH COURT (Dated: July 10, 2017)
CX -(1) Whether, in the facts and circumstances of the present case, the Tribunal was correct in holding that the appellant is liable to pay interest when there is no provision in law for charging interest (2) whether, in the facts and circumstances of the present case, the Tribunal was correct in holding that the appellant has not agitated this issue and hence, the same cannot be gone into - Assessee appeal before Bombay High Court.
HELD - Admittedly, sections 11AC and 11AB of the Central Excise Act, 1944, [CE Act] have not been incorporated in the Additional Duties of Excise (Textile & Textile Articles) Act, 1978 [ADE (T&TA) Act] - in absence of any statutory provisions, it is settled that any demand of penalty (11AC) and/or interest (11AB) would be without jurisdiction and authority of law -it is settled that a clear statutory mandate requires for authority to collect and/or raise demand of any tax and penalty and/or interest - in the absence of such provision, any demand in the present case, of penalty/interest is unauthorised, impermissible and unsustainable -if there is no provision and authority to raise such demand, the rectification application filed or not, in no way confirm the power to collect tax or penalty and/or interest without the provisions of law and authority -there is no estoppel against the law -such demand itself was not based upon any facts and/or finding so recorded on the interest or penalty -the Supreme Court in many cases, specifically in Orient Fabrics Pvt. Ltd. - 2003-TIOL-32-SC-CX expressly concluded that in the absence of any specific provision for any penalty and/or confiscation proceeding, any imposition of this nature is unwarranted and without authority of law - the authority has to be specific and explicit and expressly provided in view of law and Article 265 of the Constitution of India -the present case falls within the ambit of protection so provided for such law - all the authorities have confirmed the finding so arrived at about the interest, but without giving any reason to charge such penalty and/or interest referring to sections 11AC and 11AB of CE Act -mere confirmation of such demand of penalty and/or interest by the authority, in the absence of provisions of law, as it goes to the root of the matter for want of law and authority, is unsustainable and is required to be interfered with -the taxing provisions must be clear and so also the charging section and the mechanism to collect it -it needs to be construed strictly - if interest is not payable for want of specific authority and provision, there is no question of appropriation of any amount towards any other refund - the order of recovery of interest at appropriate rate for delayed payment by invoking the provision of section 11AB of CE Act, therefore, is unjust, unclaimable as it is illegal - in view of above reasons, the confirmation of the same by the impugned order dated 27.9.2013 is also unsustainable and is required to be set aside - the appeal is required to be allowed - both the questions are answered in the negative - appeal is allowed by quashing and setting aside the impugned order : HIGH COURT [para 13, 14, 15, 17, 18]
Appeal allowed
2017-TIOL-1487-HC-MAD-CX
CCE Vs BHARATH SANCHAR NIGAM LTD: MADRAS HIGH COURT (Dated: June 30, 2017)
CX –The assessee is in the business of providing telephone services throughout India - in order to render service, the assessee has created Secondary Switching Areas [SSA] in various parts of the country, including the State of Tamil Nadu - the SSA are divided into three zones i.e., Salem, Chennai and Madurai - the assessee had purchased certain capital equipment, qua which, cenvat credit was claimed by it - admittedly, the capital equipment, which was received by the Salem SSA was used for provisioning of telephone services by other SSAs - whether the assessee could have claimed cenvat credit in respect of capital equipment, which was removed for use to another place within the same zone – CESTAT allowed appeal - 2012-TIOL-1897-CESTAT-MAD, therefore, Revenue before Madras High Court.
HELD - The factum of removal of the capital goods from the premises, in which they were received, is not in dispute - it is also not disputed that though the capital goods were removed to a place outside the premises of Salem SSA, they continued to be used by other SSAs, who had not, in fact, claimed cenvat credit qua the very same equipment – therefore, the assessee cannot be denied the right to avail the cenvat credit -the position in this behalf is supported by the manner in which rule 3(5) of Cenvat Credit Rules, 2004, is framed– further, the submission of the revenue on the interpretation of rule 3(1)(i), cannot be accepted, for the reason that rule 3(1)(i) allows, inter alia, a provider of output service to take cenvat credit of any duty of excise, which is paid on capital goods received in the premises of the provider of output service, whereas, there is nothing in the said rule which suggests that cenvat credit would be available to an output service provider, only if, the capital goods in issue are used in the very same premises -this interpretation accords with what this Court has stated with regard to rule 3(5) read with the proviso appended thereto –accordingly, no substantial question of law arises - the appeal has no merit -consequently, the Civil Miscellaneous Appeal is dismissed : HIGH COURT [para 9.1, 9.2, 10]
Appeal dismissed
2017-TIOL-2792-CESTAT-DEL
KAKATEEYA FABS PVT LTD Vs CCE: DELHI CESTAT (Dated: July 5, 2017)
CX - The main appellant got a work order dated 15.7.2009 from the second appellant for fabrication, erection and testing of CW liners and pipes -the second appellant had entered into a contract with M/s.NTPC in connection with setting up of Vindhyachal Super Power Project -a part of the work covered in the said contract was awarded to the main appellant in terms of the above-mentioned work order -the main appellant fabricated pipes out of steel supplied to them by the second appellant - the main appellant paid ST on the work executed by them as a sub-contractor to the second appellant -the dispute in the present case is relating to central excise duty liability of the main appellant with reference to the manufacture of pipes -revenue of the view that the pipes manufactured by the main appellant will fall under the CETH 730539, under the main heading of ‘other tubes and pipes and steel' -SCN issued to demand and recover central excise duty not paid on such manufactured pipes - duty confirmed, goods confiscated, penalties imposed on the appellants - appeal to CESTAT.
HELD - On careful consideration of various provisions of the said work order, the main appellant cannot be considered as a labour contractor, simply providing labourers for certain work -it is clear that they have undertaken various fabrication work in terms of work order in their own account using the material supplied by the main contractor - the original authority exhaustively examined this issue with the help of ratio laid-down in various decided cases -the Bench is in agreement with the findings as recorded by the original authority - as such, the findings of the original authority regarding the duty liability of the main appellant with reference to manufacture of pipes and bends is upheld - regarding the question of time-bar, it is noted that the appellants have discharged central excise duty liability while undertaking similar activity at Vishakhapatnam -further, their claim that the department is aware of their activity is not correct -they are registered for payment of ST for the work of erection and commission of the pipelines - payment of ST in terms of provision of Finance Act, 1994 by itself will not absolve them from central excise duty liability for manufacture of any excisable items which might have been used in completion of the service rendered by them -the Bench is in agreement with the findings of the original authority- regarding the claim of the main appellant for exemption under notification no.3/2005, there is no legal basis to hold that the amendment carried-out through notification no.4/2011-CE in the said notification will have retrospective effect covering the impugned period also - regarding the claim for exemption in terms of notification no.67/1995, the said exemption has no application as the main appellant is not using the capital goods in the factory of manufacture - the claim of the main appellant for adjustment of central excise duty liability with the ST already paid is neither factually nor legally tenable -similarly, the claim of revenue neutrality is not tenable in the present case -the main appellant received, free of cost, the main raw material and as such have not paid any central excise duty on such input -hence, the question of availing credit is not for consideration in the present proceedings - the main appellant contested the method of arriving at the value for central excise duty purposes -the Bench finds force in their submission - on looking at the calculation of duty liability as enclosed to the SCN, it is apparent that the claims of the main appellant have not been considered in detail before quantification of duty liability by the original authority - the main appellant contested the confiscation of detained goods and impostion of redemption fine for releasing the same - there is no specific finding regarding seizure of the goods and whether the said goods were available at the time of ordering confiscation - the main appellant has undertaken manufacture of excisable goods and are liable to pay duty -the demand for an extended period is sustainable -however, the quantification of duty demand as well as the correctness of finding regarding confiscation and consequent redemption fine has to be re-examined by the original authority - the second appellant has contested the imposition of penalty under rule 26 of the CER, 2002 - the second appellant is a limited company - in various decisions, the Tribunal has held that penalty under rule 26 can be imposed only on individuals and not on companies - even otherwise, the original order did not bring out the existence of required ingredients attracting the provisions of the said rule - the original authority is required to decide the case of penalty, afresh - the appeal filed by the main appellant is disposed of in terms of the observations recorded above - the original authority is directed to re-decide the case to the limited aspect as mentioned above : CESTAT [para 6, 8, 9, 10, 11, 12, 13, 14, 15, 16]
Appeal disposed of
2017-TIOL-2791-CESTAT-DEL
GLOBAL ENTERPRISES Vs CCE: DELHI CESTAT (Dated: July 4, 2017)
CX - The main appellant M/s.Global Enterprises [GE] are engaged in manufacturing/trading of multi media speakers with or without FM radio - searches were conducted at their premises, goods seized - SCN issued to GE and various persons proposing classification of multi media speakers with woofer having FM radio under CETH 85279990 and to be assessed under section 4A of the CEA - vide impugned order, multi media speakers without FM radio and with FM radio were held classifiable under CETH 85184000 and 85279990 respectively - multi media speakers with FM radio were held to be assessable under section 4A - duty demand confirmed along with interest - seized goods ordered to be confiscated with option to redeem on payment of fine - penalty of equivalent amount of duty imposed on GE under section 11AC of the CEA - penalties of Rs.1 lakh each imposed on the buyer companies under rule 26 of the CER, 2002 - revenue filed 6 appeals against the same impugned order contesting non-imposition of penalties under rule of CER, 2002 on 6 individuals for their role in non-payment of duty - another appeal is by M/s.Kaizen Computech Ltd., engaged in trading of multi media speakers in their own brand name, against imposition of penalty under rule 26 of CER, 2002.
HELD - There is no dispute about classification of multi media speakers without FM radio under CETH 85184000 - the dispute is only with reference to classification of multi media speakers with FM radio -the original authority fell in error in appreciating the factual details of the impugned goods, commercial parlance as to how it is brought and sold and also applicable scope of tariff entries in terms of the provisions of section note/chapter note - multi media speakers with built in FM radio basically contains two speakers and a woofer - FM radio is built in, in the woofer - he whole set is a multi media speaker system generally connected to other devices like computers or audio players for sound output -a comparison of the above goods with multi media speakers + sub-woofer, without FM radio, indicates that both the products are almost identical except for the fact that in one, there is a an additional built in FM radio, in the sub-woofer -the Bench is not in agreement with the lower authority in the conclusion that the speaker system combined with sub-woofer having built in FM radio, attains clearly defined function of an FM radio rather than a speaker system -in a plain trade parlance it is clear and apparent that a person intending to buy a multi media speaker system will consider the impugned product for his requirement -the FM radio is an added, in built feature - the main function of the product is being provided by speaker system with sub-woofer - almost similar issue of classification of multi media speakers having additional function of USB port and FM radio came up for consideration by the Tribunal in the case of Logic India Trading Company - 2016-TIOL-1800-CESTAT-BANG wherein it was held that the impugned goods are speakers with added function and the main role of the item, in question, remains amplifying the sound received from outside source or from inbuilt feature -applying the interpretative rules and section note 3 of Section XVI, the Tribunal held that the product should be classified as speakers only -the said decision is affirmed by the Supreme Court [ 2016 (342) E.L.T. A34 (S.C.)] - i n view of the above legal position, the impugned order regarding classification of multi media speakers with added feature of FM radio is not sustainable -the product should continue to be classified as speakers - regarding the liability of GE for CE duty in terms of Schedule III of CEA, heading 8518 (speakers) are not covered in the said schedule for applying the provisions of "deemed manufacture" -accordingly, printing of brand name and packing of these products alone cannot be considered as manufacture -regarding manufacture of speakers with other's brand name, GE is affixing brand name of buyers on the speakers purchased from M/s.Krishna Technologies and M/s.JMD Computers - applying the test of ‘manufacture' as enumerated by the Supreme Court in the case of J.G.Glass Industries Ltd. - 2002-TIOL-112-SC-CX, it is found that mere printing of brand name or packing will not amount to manufacture in case where there is no legal concept of "deemed manufacture", specifically provided by any provisions applicable to the said product - the impugned order is not sustainable on the question of classification of multi media speakers and usage of brand name of others, without involving manufacture at the hands of GE - the applicability of SSI exemption for the products manufactured by GE has to be re-verified with the details submitted by GE to arrive at duty liability, if any -- impugned order set aside and appeal of GE allowed on the above terms - in view of the above findings, the appeal against penalty under rule 26 of the CER, 2002 filed by M/s.Kaizen Computech Ltd. is also to be allowed - in view of the above findings with reference to GE, there is no merit in the appeals by Revenue for imposition of penalty on various individuals -these appeals are dismissed : CESTAT [para 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15]
Assessees' appeals disposed of/ Revenue's appeals dismissed
