2018-TIOL-NEWS-048, Dated: Monday, February 26, 2018

ST - Assessee engaged in providing facility to merchants on their website to offer their merchandise for sale and receive consideration for use of said portal - Payments for sale made by merchants using assessee's portal was collected by assessee and goods were delivered to buyer by merchant on confirmation of receipt of price - Assessee remits the net sale price after deducting their consideration - Department was of the view that they were rendering services under category of BAS for consideration received by deducting their commission - Assessee challenges the demand only for period 1.7.2003 to 8.7.2004 on two grounds - Firstly, that they would be covered by definition of 'commission agent' which exempts payment of service tax under BAS for period prior to 9.7.2004 - The authorities below have failed to accept this contention of assessee observing that assessee does not fall into the definition of commission agent - When activity of assessee is to identify the customer through their web portal and receive the sale proceeds on behalf of merchant and pay the same to merchant, it does have same bearing to the definition of commission agent - Assessee cannot be found fault with if they believed bonafidely that they would fall within the definition - Following the decision in case of Brindco Sales Ltd. 2015-TIOL-2811-CESTAT-DEL , demand for the period 1.7.2003 to 8.7.2004 is unjustified - Taking into consideration the fact that assessee has made payment of service tax along with interest even before issuance of SCN as well as of the fact that issue was an interpretational one and during the relevant period there was much confusion as to whether the said activity would fall within BAS or under internet advertisement services, which was introduced after 1.5.2006, the penalty imposed under section 78 is unjustified, same is set aside: CESTAT - Appeal allowed : CHENNAI CESTAT

CENTRAL EXCISE SECTION

NOTIFICATIONS

etariff18_18

Seeks to clarify the applicability of the notification No. 2/2018-Central Excise dated 02nd February, 2018, that the said notification shall not apply to the goods manufactured on or before the 1st February, 2018 and cleared on or after the 2nd February, 2018.

etariff18_17

Seeks to clarify the applicability of the notification No. 1/2018-Central Excise dated 02nd February, 2018, that the said notification shall not apply to the goods manufactured on or before the 1st February, 2018 and cleared on or after the 2nd February, 2018

CASE LAWS

2018-TIOL-343-HC-AHM-CX

Chandra Dyeing And Printing Mills Pvt Ltd Vs UoI

CX - Whether the department can seek recovery of the dues of Harshwardhan Exports through sale of the property of the petitioner?Petitioners have challenged the action of the respondent authorities in attaching the immovable property and preventing the petitioners from using the same by placing a prohibition on the petitioners entering the premises.

HELD - The department would rely on the proviso to subsection (1) of section 11 of the Central Excise Act as well as on sub-clause (ii) of clause (c) of subsection (1) of section 142 of the Customs Act -for various reasons, in the present case, invocation of the said provisions by the department is defective - the central excise dues are that of Harshwardhan Exports –it is not the case of the department that entire creation of Harshwardhan Exports as the company was a sham transaction only with a view to defraud the government revenue or other creditors and in fact it was behind the scene that the petitioner alone was operating the entire business -the case of the department simply is that Harshwardhan Exports had sizable unpaid dues of the department and such dues can be recovered from its property even after its transfer -the property referred to by the department was nothing other than the lease for a period of six years granted to Harshwardhan Exports by the petitioner to utilize the plant and machinery situated on the plot no.342, GIDC, Sachin –such lease was terminated on or around 20.2.2004 since Harshwardhan Exports could not pay its rental dues - possession of leased premises was handed over by Harshwardhan Exports to the petitioner on 31.3.2004 -the transaction of transfer of the leasehold rights of Harshwardhan Exports to the petitioner took place before the order of attachment was passed - the said provisions apply in case of transfer of business and not merely transfer of property or assets as held by the Supreme Court in the case of Shreyas Papers (P) Ltd. - 2006-TIOL-01-SC-CT - to realize the unpaid dues of Harshwardhan Exports in any case, the department could not have sold what Harshwardhan Exports did not own - merely because Harshwardhan Exports agreed not to vacate the premises till full export obligations are discharged, would not create any additional right in the property which can be sold for the purpose of recovery of the dues of Harshwardhan Exports - in the result, the attachment and distress imposed by the department on the property in question are set aside -petition is disposed of accordingly : HIGH COURT [para 12, 14, 15, 16, 17, 19] - Special Civil Application disposed of : GUJARAT HIGH COURT

2018-TIOL-342-HC-MAD-CX

Indian Additives Ltd Vs CCE

CX - Appellant is engaged in the manufacture of additives for lubricating oil – SCNs dated 6.11.2007 and 4.6.2010 were issued to the appellant demanding a sum of Rs.4.14 lakhs and Rs.1.02 lakh being the cenvat credit taken on inputs, which were not used in the manufacture of final products nor the said inputs were accounted for satisfactorily, as per rule 9(5) of the Cenvat Credit Rulesduring the period from January 2007 to September 2007 and during the course of physical inventory undertaken on 31.3.2010 –demands confirmed –on appeal, the Commissioner (Appeals), vide order dated 6.1.2004, rejected the appeals – on further appeal, the Tribunal dismissed the appeals on 29.10.2015 on the alleged wrong premise that the appellant had sought for parallel remedy, on the very same issues before the High Court and before the Tribunal – the appellant filed Rectification Petition before Tribunal seeking rectification of the error -the Tribunal, vide impugned order dated 21.10.2016, dismissed the appeals - appellant before High Court.

HELD: From the reading of the facts, Court is of the view that the order passed by the Tribunal cannot be sustained and has to be set aside for the reason that the Tribunal has not applied its mind and decided the appeals, but mistakenly passed a cryptic and non-speaking order in the appeals, which arose from the order dated 06.01.2004 - the Civil Miscellaneous Appeal stands allowed, thereby setting aside the impugned order dated 21.10.2016 in entirety and the matter is remitted to the Tribunal for fresh consideration : HIGH COURT [para 14, 15] - Matter remanded : MADRAS HIGH COURT

2018-TIOL-341-HC-MAD-CX

Standard Shoe Sole And Mould India Ltd Vs CC, CE & ST

CX – Appellant was a 100% EOU and importing machinery spare parts and raw materials during the period upto March 1996, for manufacturing and exporting "Thermo Plastic shoe and polyurethane shoe soles" – SCN dated 22.9.1997 was issued to the appellant demanding duty of Rs.3.28 crore on the ground that since the export obligation was not fulfilled by them, the duty on the imported machinery and raw materials has to be recovered–appellant filed application for settlement before the first respondent [Settlement Commission] admitting a sum of Rs.25.29 lakhs –the Settlement Commission, vide Final Order dated 25.5.2016, settled the case at Rs.46.52 lakhs (Rs.10.27 lakhs for capital goods on the depreciated value and Rs.36.25 lakhs on the raw materials) –challenging a portion of the order, viz., demanding duty of Rs.36.25 lakhs on the raw materials, the petitioner filed W.P.No.38054 of 2016 - the same was dismissed by the Writ Court [single Judge] on 2.11.2016 holding that the order impugned therein, requires no interference – appellant in writ appeal.

HELD: It is rightly held by the Writ Court that findings of fact recorded by the Commission are not open for examination or re-examination, by the High Court under Article 226 of the Constitution of India -merely because, the order of the Settlement Commission does not suit the appellant herein, the appellant cannot be permitted to dissect the order of the Settlement Commission - on perusal of para 20(a) of the affidavit filed in support of the writ petition, it is seen that the letter/submission dated 10.5.2016 is the reply/submission filed by the Jurisdictional Commissioner against the letter/submission of the appellant dated 25.4.2016 -the aforesaid submissions of both the appellant and the revenue have been extracted as 'post hearing submissions of the applicant dated 25.4.2016' and 'post hearing submissions of the jurisdictional commissioner dated 10.5.2016' and have been discussed in detail by the Settlement Commission in the order dated 25.5.2016 -therefore, the contention of the appellant that there is violation of principles of natural justice, cannot be accepted - the Settlement Commission has exercised its jurisdiction properly, under section 127F(1) of the Customs Act by going through the factual aspects, as well as the legal position, and exercised discretion and allowed 90% depreciation on capital goods and directed the appellant to deposit the admitted liability of Rs.10.17 lakhs and thus, settled the liability on capital goods at Rs.10.27 lakhs, including the moulds, as capital goods and given categorical finding regarding the duty on raw materials at Rs.36.25 lakhs and granted immunity from payment of interest under section 127H of the Customs Act and by imposing a penalty of Rs.50,000/- only, also granted immunity to the appellant - Writ Court has rightly held that the argument of the appellant that the Settlement Commission should have exercised the power as an Assessing Officer does not merit acceptance -there is no infirmity in the order of the Writ Court and the said order cannot be interfered with - for the above stated reasons, this Writ Appeal fails and accordingly dismissed -consequently, connected Miscellaneous Petition is also dismissed : HIGH COURT [para 22, 23, 24, 25] - Writ Appeal dismissed : MADRAS HIGH COURT

2018-TIOL-657-CESTAT-MUM

Asahi India Glass Ltd Vs CCE

CX – CENVAT – Rule 2(l) of CCR, 2004 – Input service - Period involved is December 2010 to August 2011, March 2013 to September 2014 - Issue is regarding denial of CENVAT credit availed of service tax paid on outdoor canteen service, bus and car hire service and garden service. Held: On similar issue, in the case of Reliance Industries - 2016-TIOL-2392-CESTAT-MUM Tribunal had occasion to go in depth on the issue and finally held that the said services are Input services and credit is admissible – similarly, as regards garden maintenance services, the issue is settled by Karnataka High Court in the case of Millipore India Ltd. and which decision was followed in Life Long Meditech - 2016-TIOL-1685-CESTAT-CHD – in view thereof, impugned orders are unsustainable and hence set aside – Appeals are allowed: CESTAT [para 8 to 10] - Appeals allowed : MUMBAI CESTAT

2018-TIOL-656-CESTAT-MUM

Hindustan Unilever Ltd Vs CCE

CX - During the course of manufacture of final product viz. Soaps, Detergent, Distilled Fatty Acid and Soap Noodles etc. some intermediate byproducts emerge namely, CPS-DFA, CPS-Low Voltaire, CPS-Pitch Oil and CPS-Glycerin and out of all these products only CPS-DFA is further used captively in the manufacture of final product upon payment of duty and availment of credit thereon and rest are cleared outside upon discharge of CE duty – case of department is that aforesaid intermediate goods are final products and not inputs, therefore, no CENVAT credit is available of the duty paid on such intermediate goods – demand confirmed by original authority and in appeal Commissioner(A) dropped part of demand on ground of time bar – appeal before CESTAT by assessee and Revenue.

Held: Once the goods are retained in the factory on which excise duty was paid, the same can be treated as input and CENVAT credit can be availed, therefore, there is no reason as to why on duty paid byproduct, credit cannot be allowed – Even if it is presumed that credit is not admissible on the intermediate byproduct, once the assessee have paid excise duty on its removal for captive use, CENVAT credit availed by them stands reversed, therefore, in any case no demand can be raised – demand is set aside on merit hence Revenue's appeal which is only on time bar will also not survive – assessee appeal allowed and Revenue appeal dismissed: CESTAT [para 5] - Assessee appeal allowed : MUMBAI CESTAT

CUSTOMS SECTION

2018-TIOL-340-HC-AHM-CUS

Bhargavraj Rameshkumar Mehta Vs UoI

Cus - Petitioner, a Dubai based NRI, is also a partner of a partnership firm M/s.Rajkot Impex having its establishment at Rajkot – in a case of systematic attempt to smuggle gold concealed in zinc ingots, the petitioner was imposed penalty of Rs.2 crore under section 112(a) of the Customs Act, 1962 [Act] and Rs.10 lakhs under section 114AA of the Act – petitioner before High Court :

HELD - Sincere attempt was made by the Customs Authority for dispatch and serve notices and summons -the petitioner cannot take a stand that the notices and summons were not duly served - the petitioner may have been called upon in his personal capacity to answer the charges, nevertheless, he cannot disown the establishment of the partnership firm, of which he was an active partner and claim that any summons or notice dispatched at the address of the partnership firm would not amount to service on him - this would be way too technical - even otherwise the department had sent one summons to his address at Sharjah/residence at Rajkot and finally relied on exhibition of such notices and summons at the Mundra Customs House - the question of breach of principles of natural justice, therefore, does not arise: High Court[para 7]

From the definition of term 'prohibited goods', in case of goods, import of which is permitted, would be excluded subject to satisfaction of the condition that conditions for export have been complied with -by necessary implication, therefore, in case of goods, import of which is conditional, would fall within the definition of prohibited goods if such conditions are not complied with – when clause (ii) of section 112 refers to dutiable goods other than prohibited goods, it shall necessarily have the reference to the goods, import of which is not prohibited or of which import is permissible subject to fulfillment of conditions and such conditions have been complied with -condition of declaration of dutiable goods, their assessment and payment of customs duties and other charges is a fundamental and essential condition for import of dutiable goods within the country -attempt to smuggle the goods would breach all these conditions -when clearly the goods are sought to be brought within the territory of India concealed in some other goods which may be carrying no duty or lesser duty, there is clear breach of conditions of import of goods though perse import of goods may not be prohibited - in an elaborate judgment, Division Bench of Madras High Court in the case of Malabar Diamond Gallery Ltd. - 2016-TIOL-1664-HC-MAD-CUS has taken such a view -interpretation of section 112 of the Customs Act in context of prohibition for import of goods came up for consideration before the Court –the Court held that the expression "prohibition under this Act" used in section 2(33) of the Act has to be examined bearing in mind other provisions of the said Act – the Court further held that “s muggling in relation to any goods is forbidden and totally prohibited -failure to check the goods on the arrival at the customs station and payment duty at the rate prescribed, would fall under the second limb of section 112(a) of the Act, which states omission to do any act, which act or omission, would render such goods liable for confiscation under section 111 of the Act" - Court has recorded independent reasons and sided with the view expressed by the Madras High Court in the case of Malabar Diamond Gallery Ltd. - in the result, the petition is dismissed [para 15, 16, 17, 20, 21] - Special Civil Application dismissed : GUJARAT HIGH COURT

2018-TIOL-339-HC-MUM-CUS

Tristar Pvt Ltd Vs DGFT

DGFT - the petitioner-company imports & exports rough and polished diamonds - Thereby, the assessee holds a REP license - Based on policy circular no. 11 of 1993 dated 5th May, 1993, the petitioner claimed 8% premium on the unutilised CIF value of the REP Licence - The petitioner claimed that the DGFT failed to pay such premium - The petitioner also filed an application claiming to be the bona fide claimants of such premium - Hence the present writ seeking payment of such premium amount with interest.

Held - A writ filed in 2018 cannot seek consideration of an application made in 1993 - an entirely new regime came into force, since the EXIM policy and the Circulars relied on - Considering the policy circular in question, it was not an open-ended scheme - It was in effect for a particular period only & cannot be extended unless directed in the policy itself - This Court cannot direct continuation of a policy or a circular or framing of a new policy - Therefore, the action of the DGFT in denying such premium is not perverse, considering the 18-year gap in filing such claim - In garb of a writ, the revival of a policy or a circular cannot be claimed: High Court (Para 2,3,4,8) - Writ Petition Dismissed : BOMBAY HIGH COURT

2018-TIOL-664-CESTAT-DEL + Story

Mascot Footcare Vs CC

Cus - During the relevant time, the notification granted concession only to "Ethylene Vinyl Acetate" until its substitution on 01.03.2007 by "Ethyl Vinyl Acetate" – both the goods are different - as goods imported is "Ethyl Vinyl Acetate", benefit of notification 21/2002-Cus cannot be extended treating the substitution as correction of mistake with retrospective effect – Exemption Notification, being an exception, is to be strictly construed - Impugned order upheld and appeal dismissed: CESTAT [para 6, 7] - Appeal dismissed : DELHI CESTAT

2018-TIOL-658-CESTAT-MUM

Jharsanya Logistics Pvt Ltd Vs CC

Cus – ROM application against Final order.

Held: As regards issue raised regarding jurisdiction of adjudicating authority, the same was neither raised before the lower authorities nor even in grounds of appeal, therefore, non-consideration of the same does not lead to error apparent on record in Tribunal's final order dated 06.12.2016 – as regards other issue on merit of valuation of imported goods, Tribunal in para 5 of its order has dealt with the issue in detail, therefore, raising the same issue once again in ROM application is illegal and cannot be accepted – no error in Tribunal's order: CESTAT [para 4]

Cus - Penalty – Section 112(a) of Customs Act, 1962 – As Tribunal has not discussed or given any finding in respect of the appeals filed by M/s Jharsanya Logistics pvt Ltd., therefore the order to the extent it dismissed the appeals of M/s Jharsanya Logistics Pvt Ltd. is recalled and taken up for fresh decision - After sale of goods on High Seas basis by High Seas seller, M/s Jharsanya Logistics Pvt. Ltd. transferred all the rights and liabilities to High Seas buyer, who entered into the shoes of importer, accordingly if at all there is any short payment or non-payment of Customs duty is committed, the responsibility of the same is on the High Seas buyer, however, in the facts of the present case M/s Jharsanya Logistics Pvt. Ltd. was involved in payment of duty on behalf of High seas buyers, therefore, the fact of under valuation of goods was known to M/s Jharsanya Logistics Pvt Ltd. – Accordingly, to some extent M/s Jharsanya Logistics Pvt Ltd. is also responsible for short payment of duty as the charge of abetment of short payment is established against M/s Jharsanya Logistics Pvt Ltd. - taking into consideration the overall facts and circumstances of the case and limited role of M/s Jharsanya Logistics Pvt Ltd, they deserve leniency – Penalty reduced to 10% of the differential duty amount involved in all the cases: CESTAT [para 5, 6] - ROM Application dismissed : MUMBAI CESTAT