2018-TIOL-NEWS-007 Part 2, Dated: Monday, January 08, 2018

ST - Assessee in pursuance of an agreement entered into with M/s United Breweries Ltd., undertaken various activities in connection with receipt, storage, sale and sale promotion of goods manufactured and sold by their principal - The dispute relates to tax liability of assessee for these activities under category of BAS as defined under Section 65(19) r/w Section 65(105)(zza) of FA, 1994 - There are two issues involved for decision; the first one is with reference to availability of exemption to assessee under Notfn 13/2003-ST - The second one is with reference to valuation of taxable services after withdrawal of said notification - On the first issue, almost similar set of facts came up for consideration before the Tribunal in Premier Enterprises 2009-TIOL-1116-CESTAT-BANG wherein it was concluded that assessee received commission based on sales of goods and looking the totality of agreement, it was held that assessee cause sale of the goods - The amount paid to assessee is linked with the sales quantum - The same is pre determined as per the agreement - As such, applying the ratio of said decision, assessee is eligible for exemption as commission agent under Notfn 13/2003-ST - In this connection, decision of Tribunal in assessee's own case in 2015-TIOL-2811-CESTAT-DEL also referred - In said case also, the Tribunal examined the applicability of said Notfn and held in favour of assessee.

On the second issue, assessee did incur various expenditures which they claim are reimbursable in nature - It is clear that various expenditure which were claimed on actual basis to be reimbursed by M/s United Breweries Ltd. are in effect reimbursable expenditures which are incurred on behalf of the principal - These are in terms of pre-arrangement with the principal - It is clear that such expenditure which are on behalf of principal is in accordance with agreement which are reimbursed on actual basis without any mark up are not to be included in assessable value - In this connection, Tribunal refer to the decision of Delhi High Court in case of Intercontinental Consultants & Technocrats Pvt. Ltd. 2012-TIOL-966-HC-DEL-ST and the decision of Madras High Court in Sangamitra Services Agency 2013-TIOL-606-HC-MAD-ST - Considering the ratio in these decisions which have been followed in various decisions of this Tribunal, no justification found to tax the reimbursable expenditures which are based on pre-arrangements with the principal and are received on actual basis: CESTAT - Appeal allowed: DELHI CESTAT

ST - the assessee-company engaged in installation of Structural Glazing for buildings & is registered under 'Commercial or Industrial Construction Services' - The assessee claimed abatement under Notfn. No. 15/2004 as amended by Notfn. No. 19/2005 - The Department opined that such service would fall under heading 'Completion & Finishing Services' and so the assessee would be ineligible for abatement - Duty demand with interest was raised and penalty imposed u/s 76 -

Held - The assessee paid abated amount of duty under 'Commercial or Industrial Construction Services' - The activity of finishing and completion services is a sub-category of 'Commercial or Industrial Construction Services' - Considering decision in Commissioner Vs. Larsen & Toubro Ltd. which squarely applies to present case, duty demand merits being set aside: CESTAT (Para 1,4) - Appeal Allowed: CHENNAI CESTAT

CENTRAL EXCISE SECTION

2018-TIOL-110-CESTAT-MUM

Harinagar Sugar Mills Ltd Vs CCE

CX - Appellants were manufacturing biscuits for their principal, Britannia – The principals had issued debit notes to the appellants on account of variation in the consumption of inputs in the manufacture of biscuits – department demanded and confirmed CENVAT credit in respect of the debit notes raised by Britannia Industries Ltd. – appeal to CESTAT.

Held: In the appellant's own case, on identical issue, decided on 27.01.2017 - 2017-TIOL-947-CESTAT-MUM Tribunal held that issuance of debit note does not show that appellant has neither received the input or diverted outside the factory; no verification carried out by department; no sufficient reason for denial of credit – relying on the said decision, impugned order set aside and appeal allowed: CESTAT [para 5, 6] - Appeal allowed: MUMBAI CESTAT

2018-TIOL-109-CESTAT-MUM

Hindoostan Spinning and Weaving Mills Ltd Vs CCE

CX - Appellants were engaged in manufacture of Textile articles and were also exporting the finished goods under Bond/Letter of Undertaking - As they were not in a position to utilize the credit, therefore, an amount of Rs. 13,19,885/- got accumulated in their CENVAT credit account - Pursuant to closure of their Unit, appellant filed refund claim of Modvat/Cenvat which was lying in their credit account in terms of Rule 5 of CCR, 2002 read with Notification No. 11/2002-CE (NT) dt. 01.03.2002 – Claim rejected on the ground that the refund of credit is admissible only in case where the goods has been exported and that such refund claim has to be filed alongwith proof of due exportation and relevant extract of the records maintained under the said rule or deemed credit register maintained in respect of the textile fabrics – appeal to CESTAT.

Held: Revenue has relied upon the LB judgment in case of Gauri Plasticulture (P) Ltd. = 2006-TIOL-1121-CESTAT-MUM-LB - However, the judgment of Karnataka High Court in case of M/s Slovak India - 2006-TIOL-469-HC-KAR-CX was cited before the Larger Bench but the same was not discussed - In the case of Jain Vanguard Polybutlene Ltd. = 2010-TIOL-911-HC-MUM-CX the High Court held that there is no express prohibition in terms of rule 5; that there is no manufacture in the light of the closure of the company, therefore, rule 5 is not available for the purpose of rejection; that the Tribunal was fully justified in ordering refund particularly in the light of the closure of the factory and in the light of the assessee coming out of the MODVAT scheme – since the Bombay High Court is the jurisdictional court for this Bench, the ratio of the same would be applicable – Appellants are eligible to the refund claim – appeal allowed with consequential relief: CESTAT [para 5 to 7] - Appeal allowed: MUMBAI CESTAT

2018-TIOL-108-CESTAT-MUM

Ion Exchange (I) Ltd Vs CCE

CX - Proceedings were initiated against the appellant for recovery of education cess on goods cleared into the domestic tariff area by the hundred percent export oriented unit of the appellant.

Held: In the case of Kumar Art Tech Pvt Ltd - 2013-TIOL-614-CESTAT-DEL-LB , it was held that such levies are not liable for the third time – Order set aside and appeal allowed: CESTAT [para 2, 3] - Appeal allowed: MUMBAI CESTAT

CUSTOMS SECTION

2018-TIOL-107-CESTAT-DEL

Rajendra P Kapur Vs CC

Cus - The assessee is a licensed CHA involved in processing of import and export through Customs - Based on certain intelligence, Customs Officers intercepted an import consignment covered by Bill of Entry and it was found to contain micro S.D. Memory Cards in place of 'Herald Frames' as declared in document - Findings of original authority is to the effect that by issuing a letter for a Pass in favour of Shri Biplav Kumar whose 'H' Card expired in 2008, assessee attracted penalty under Section 112 & 114 AA of Customs Act, 1962 - Original authority did not bring out the reason for penal liability of assessee for his act or omission - The Bill of entry for present consignment was falsely filed in name of the assessee, by others on 16.11.2010 - Even if, it is held that the act of assessee in issuing a letter dated 20.10.2010 is an infringement, it is not tenable to hold that such act made the goods imported on 16.11.2010 liable for confiscation - There is no link between these two acts - Further, assessee is not liable for penalty under Section 114 AA as the said penalty relates to act of a person knowingly signing any declaration or documents, which he knows, as false or incorrect in the transaction of any business under the Customs Act - The penalty imposable is with reference to value of goods - As already noted, there is no link between confiscability of impugned goods and the letter dated 20.10.2010 of assessee to the Security Manager - In the present case, the impugned consignment cannot be linked to assessee - Penalties imposed on assessee are not sustainable: CESTAT - Appeal allowed: DELHI CESTAT

2018-TIOL-106-CESTAT-DEL

Moon Light Exim Pvt Ltd Vs CCE & ST

Cus - Assessee engaged in manufacture and export of recycled non-ferrous and ferrous metals - They were registered as 100% EOU and are having private bonded warehouse - Assessee availed the benefit of Notfn 53/1997-CUS on imported goods for purpose of manufacture of articles for export - Assessee imported goods and claimed exemption of Customs duty - Proceedings were initiated against assessee to demand and recover Customs duty forgone, on the ground that they have not fulfilled the condition of said notification as they have failed to export goods in terms of the LOP given to them and bond executed - Original Authority passed the order in respect of certain aspects showing indifference, if not defiance, towards the remand directions of the Tribunal as contained in final order dated 28/10/2016 - The impugned order had clearly traveled beyond the scope of SCN itself - There is no ground raised by Revenue regarding the question of ‘manufacture' with reference to processes undertaken by assessee - Even then the Original Authority elaborately discussed the provision of Section 2 (f) of CEA, 1944 and held that segregation of waste and scrap does not amount to manufacture in terms of Section 2 (f) of the Act - There is no basis or reason for Original Authority to examine this aspect at all when there was no allegation made in SCN - Tribunal also refer to the decision in case of Unitech International Ltd. 2012-TIOL-111-CESTAT-AHM , Tirumala Impex 2009-TIOL-1858-CESTAT-BANG and Stone Age Ltd. 2016-TIOL-2940-CESTAT-DEL - As such, there is no merit in finding of Original Authority on this account.

The Original Authority again, acting beyond the scope of remand direction, held that FOB value of exports will include only physical exports out of country and shall not include deemed exports - We note that this matter has come up before the Tribunal on many earlier occasions - In Shree Rohini Enterprises, it is clearly held that EOU is entitled to make clearance to DTA - The value of deemed export is also to be taken into account for determining the FOB value to arrive at quantum of sale to the domestic market - The Tribunal relied on various earlier decisions on the same issue - As such, no merit found in contrary findings recorded in denovo order.

The only issue left for consideration is non-submission of documents by assessee in support of their claim for export/deemed export - Original Authority in impugned order raised serious doubts regarding genuineness of certain documents submitted by assessee - He recorded that photocopies of documents submitted by assessee are attested by person of another company and also there were some over-writings and corrections on these documents - Assessee submitted that they have provided all the documents to Adjudicating Authority - All the records were duly maintained by assessee and the statutory records were also filed to the concerned authorities - They have submitted bank realization certificates, copies of challans evidencing payment of duty for DTA clearance against foreign exchange and statement showing details of all sales alongwith sample invoices - In case of any doubt, Original Authority could have referred to concerned bank authorities to counter verify the genuineness of documents - Further, the fact of export or DTA clearance against foreign exchange realization can also be collaborated by various other contemporaneous documents, which the assessee submits, will establish to the satisfaction of Original Authority, the facts as claimed by assessee.

In view of discussion and analysis, impugned order set aside and matter remanded to Original Authority to comply with the directions as contained in the final order dated 28/10/2016 of the Tribunal - The Original Authority has to only determine the duty liability of assessee which should be limited to the gap between the foreign exchange outgo for the imports and foreign exchange earned on account of exports made - The Tribunal has already held that assessee cannot be held liable for duty forgone in case of all the imports - Proportionate benefit of exports made on foreign exchange realization should be allowed - What is needed is only verification of documentary evidence in this regard - Confiscation and penalty has already been set aside by the Tribunal in the final order: CESTAT - Matter remanded: DELHI CESTAT