2018-TIOL-NEWS-078, Dated: Wednesday, April 04, 2018

ST - Mumbai police is not a ‘Security Agency' – not liable to pay service tax for security provided to banks, individuals, cricket matches etc.: CESTAT [para 4] - Appeal allowed : MUMBAI CESTAT

ST - the assessee-company paid IPLC Charges to its parent company - It classified the same under Lease Circuit Service whereas the Department opined that it was classifiable under Business Auxiliary Service - Duty demand was raised for IPLC Charges, plus service tax on payment made on account of other expenses, which appeared to the Revenue to be taxable under Management Consultancy Services - Further duty demand was raised for alleged suppression of taxable value, emerging from scrutiny of balance sheets and ST-3 returns - Interest & penalties u/s 76, 77 & 78 of the Finance Act, 1994 were raised as well - Subsequently, the Commr.(A) upheld the demand made on the other expenses, and also the penalties u/s 77 & 78 - The other demands raised were dropped - Hence the Revenue's appeal -

Held - Considered relevant findings of the Commr.(A) w.r.t. whether payment of IPLC charges would be covered under Business Auxiliary Service - Also considered relevant findings of the Tribunal in Infosys Ltd. Vs. Commissioner of Service Tax, Bangalore - Such services not falling under Business Auxiliary Services but under Telecommunication Service - But without licence under Indian Telegraph Act, 1985 for the foreign supplier, demand on this issue is unsustainable - Hence the O-i-A is upheld in this regard - Moreover, w.r.t. differences in balance sheets & ST-3 returns, the demand was raised without explaining how the duty demands were calculated & how liability arose - Lastly, w.r.t. other expenses and management consultancy service, the Commr.(A) gave no reasons for dropping the demand - Hence matter needs fresh verification in this regard: CESTAT (Para 2,7-15) - Case Remanded : CHANDIGARH CESTAT

ST - Assessee engaged in providing various taxable services and were availing the credit of service tax paid on input services - During audit, it was found that assessee had availed credit of service tax paid on Real Estate Agency Service and Rent-a-Cab Service as well as Insurance (Mediclaim Policy) Service which, according to department was inadmissible - Assessee has vehemently argued that the disputed services have been availed by assessee prior to 1.4.2011 and the invoices were also raised prior to 1.4.2011 whereas department however has issued SCN for period after 1.4.2011 also - It is indeed correct that definition of 'input services' prior to 1.4.2011 had wide ambit and it included almost all services - Said aspect has been discussed in as in Ultratech Cement Ltd. 2010-TIOL-745-HC-MUM-ST - Therefore, assessee has contended that Real Estate Agency Services were availed by them for providing accommodation to foreign nationals who visited assessee's factory/office - So also, said services were availed to ensure residential accommodation for assessee's employees as it was essential for ensuring availability of staff to carry on its business - The insurance/mediclaim has been availed for purpose of staff under Workmen's Compensation Act and Employees State Insurance Act to insure all employees - In such circumstances, it is deemed fit that matter be remanded to original authority who shall consider the question whether assessee has availed services prior to 1.4.2011 and also to consider the eligibility of master circular - Matter remanded to original authority for reconsideration: CESTAT - Matter remanded : CHENNAI CESTAT

ST - Assessee is a private hospital engaged in providing health care services - They provided treatment to patients under 'Kalaignar Kapeetu Thittam' health insurance scheme floated by Government of Tamil Nadu - The expenses incurred for treatment was paid directly by insurance company - The assessee paid service tax under said category of services after making some deductions - It appeared to department that assessee had not discharged service tax on entire taxable value of services for period 1.7.2010 to 31.3.2011 - The foremost argument put forward on merits by assessee is that the treatment rendered under Kalaignar Kapeetu Thittam floated by Government would not be covered by definition of 'Health Services' - Said issue was agitated before jurisdictional High Court in case of M/s. Arvinth Hospitals 2016-TIOL-2838-HC-MAD-ST - Said case was remanded to adjudicating authority to analylze the issue whether the services would fall under taxable category of health services - The facts presented are identical and the submissions made are similar - Issue has to be given reconsideration in line with observations and directions of High Court rendered in case of M/s. Arvinth Hospital - Matter remanded to adjudicating authority who will reconsider the issue whether the services are taxable or not - As regards to limitation, since the main issue is remanded to adjudicating authority, this issue left open with a direction to adjudicating authority to decide the issue of limitation also in denovo adjudication - Assessee has paid to Government the service tax collected from insurance company - Taking these facts into consideration, invoking section 80, the penalty is set aside: CESTAT - Matter remanded : CHENNAI CESTAT

CX - Valuation - Section 4A of the CEA, 1944 - Aerated water sold to institutional consumer namely Spicejet - since package contains the MRP, therefore, the valuation was correctly done under Section 4A of CEA, 1944 - appeal allowed: CESTAT [para 4] - Appeal allowed : MUMBAI CESTAT

CX - Assessee engaged in manufacture of Brake Linings, Clutch facings, Assembly pods and Disc pads - They manufactured and cleared 'inner assembly pad' and 'outer assembly pad' to M/s. Mando Brake Systems India Ltd on job work basis - The issue is that assessee after job work, while clearing the goods to their Principal did not include the cost of free inputs / raw materials supplied - In Ghatge Patil Inds. Ltd 2014-TIOL-1760-CESTAT-MUM the Tribunal has relied upon International Auto Products 2005-TIOL-81-SC-CX-LB case to hold that such addition of free supplied parts is not to be included in assessable value - Same view has been maintained by Apex Court by dismissing the Civil appeal filed by department - Following the judgment in case of SRF Ltd, situation being a revenue neutral one, authorities below have rightly dropped the proceedings - Impugned order calls for no interference: CESTAT - Appeal dismissed : CHENNAI CESTAT

CX - Assessee engaged in manufacture of chains and imported goods like rubber pads, slates and support plates without payment of duty by availing exemption under Notfn 32/97-Cus. in terms of Customs Rules, 1996 - Revenue entertained a view that assessee is using substantial items which are domestically procured and that is against the purported intention of exemption envisaged in rules and notification - Revenue is pressing its contest only on the ground that the activities under taken by assessee are much more than simple jobbing and the ratio laid down by Apex Court in case of Prestige Engineering (India) Ltd. 2002-TIOL-151-SC-CX will make them ineligible for concession - Relying on the decision of Tribunal in case of Saptagiri Leathers , Commissioner (A) held that there is no violation of import conditions by assessee - He also note that the High Court in case of Sujag Fine Chemicals (India) Ltd. 2012-TIOL-914-HC-MUM-CUS held that the ratio of the Apex Court decision in Prestige Engineering (India) Ltd is with reference to the job work Notfn 119/75-CE and has no application to the dispute under Notfn 32/1997-Cus. - There is no violation of the conditions of concessional import by assessee and the ratio adopted in the impugned order cannot be interfered with: CESTAT - Appeal dismissed : CHENNAI CESTAT

CX - Assessee engaged in manufacture of Dry Battery Cells - For delivery of goods at buyer's premises, assessee avails services of GTA and pays outward freight on such transportation - Department issued SCN for period April, 2005 to March, 2016 seeking disallowance of cenvat credit on the ground that outward freight paid on GTA service is not conforming to definition of 'input service" contained in Rule 2 (l) of CCR, 2004 - Purchase order issued by one of the buyers shows that delivery of goods was on FOR destination basis - As per the terms of purchase order, assessee had issued invoice, showing all inclusive rate and paid central excise duty on such assessable value - Since the goods were delivered at buyer's premises, place of delivery should merit consideration as "input service" and therefore, freight paid by assessee from 1.4.2008 to 10.07.2014 should merit consideration as "input service" and service tax paid thereon should be eligible for cenvat credit.

With regard to period after 11.07.2014, though the "place of removal" was specifically defined in Rule 2(qa) of Rules, 2004, but on analysis of such definition Clause, CBEC vide Circular dated 20.10.014 has clarified that the place, where sales have taken place or when the property in goods passes from the seller to the buyer, is relevant consideration to determine the "place of removal" - Since copy of purchase orders /invoices demonstrate that the ownership of goods were in fact transferred from assessee to its buyers at their premises and transaction was on FOR destination basis, service tax paid on freight element should be eligible for cenvat benefit - Since the assessee has not produced all the copies of purchase orders/invoices in respect of all the buyers and only submitted sample copies issued by few numbers of buyers, matter remanded to the Original Authority for verification of purchase orders/invoices in respect of buyers, to whom the goods were sold by assessee on FOR destination basis: CESTAT - Matter remanded : DELHI CESTAT

CX - Assessee is manufacturer of "Re-bars and CTD Bars" and cleared substantial quantity of their production to two units viz; M/s A.S. Steel Traders and M/s Sri Vijaylaxmi Steel Traders - These two firms had partners, who also held shares in assessee company - Department views that assessee and the two firms are related to each other and having mutual interest - The combined shareholding of partners of A.S. Steel Traders, namely S/Shri A. Nagesh, A. Mahesh and A. Jagadish as Directors of assessee works out to 30.80% - In case of Sri Vijayalaxmi Steel Traders, S/Shri Ramesh Gupta and A. Jagadish, partners cumulatively own 33.80% of the shareholding as Directors of assessee - Discernibly then, combined shareholding of concerned partners in each of the firms as Directors of assessee does not touch the 50% bench mark in each case, to bring the entities within fold of "interconnected undertakings" and by implication "related persons", for the purpose of Section 4 of CEA, 1944 - Attempt of lower authorities to add the shareholding of shareholders in assessee "related" to concerned partners is surely a misconceived interpretation of relevant statutory provision - Combined shareholding of partners in each firm, who are also shareholders in body corporate can alone be added up for purpose of determining whether they cross the 50% shareholding bench mark - There is no ground for the conclusion that the partners of the two firms exercise control, directly or indirectly, over the body corporate - This being so, the litmus test as envisaged for considering entities "inter-connected undertakings" in section 2(g) (iv) of MRTP Act is not satisfied - In consequence, assessee and the two firms cannot be considered as "related persons" for the purpose of section 4(3)(b)(i) of Act, 1944 - Impugned order set aside: CESTAT - Appeals allowed : HYDERABAD CESTAT

CX - Assessee engaged in manufacture of PVC Pipes in their factory and were availing benefit of small scale exemption Notfn - Revenue found that another factory located at district Hamirpur engaged in manufacture of ingots has the same Directors as present assessee - By clubbing clearances of both units, Revenue entertained a view that Fatehpur unit would also not be entitled to SSI exemptions - The impugned order has taken into consideration the precedent decisions of Higher Courts and has held that both the units are registered separately under various authorities and being limited companies have to be held as separate units and entitled to benefit of small scale Notfn separately - Revenue in their memo of appeal have not advanced any reasons so as to interfere in impugned order of Commissioner (A), which is based upon the Board's own clarification as also on the decision of various authorities - Impugned order upheld: CESTAT - Appeal rejected : ALLAHABAD CESTAT

CUSTOMS SECTION

2018-TIOL-1053-CESTAT-BANG

Subash Projets And Marketing Ltd Vs CC

Cus - Assessee registered themselves for Project Imports in respective Customs Houses under CTH 98.01, Sl. No.26 of Notfn 42/96-Cus. extended the benefit of Project Imports for Drinking Water Supply Projects for supply of water for human or animal consumption - Both the assessees imported goods and claimed the benefit of Project Import and 'nil' duty under Customs Notifications - Appeal in respect of M/s. Subash Projects and Marketing Ltd. was already considered by Bangalore Bench of Tribunal in 2008-TIOL-352-CESTAT-BANG wherein Tribunal referred to the decision of Bombay Bench in case of Pratibha Industries Ltd. 2004-TIOL-946-CESTAT-MUM wherein it was held that the benefit of Project Import Regulations will be restricted only to water treatment plant and will not be allowable for pipes used in existing water distribution systems - The Bangalore Bench differed with the view expressed by Bombay Bench and referred the matter to President for constituting a Larger Bench to decide the issue - In the meantime, the decision of Bombay Bench came up before the Supreme Court, wherein the decision of Bombay Bench was upheld - The Supreme Court in said case dismissed the appeal filed by assessee - Since the issue stands finally decided by Apex Court, both the appeals are taken up for decision without waiting for decision of Larger Bench - Hence, in the light of the apex court decision, assessees will not be entitled to benefit of Project Import as well as Customs Notification No.21/2002 - The Bombay High Court in the case of J. V. Gokal & Co. 2017-TIOL-203-HC-MUM-CUS followed the decision of Supreme Court in case of Pratibha Industries and held that Sl. No. 26 of Notfn 42/96 is applicable only to water treatment plant and cannot be applied to ductile pipes and assessee is not entitled to benefit of Notification: CESTAT - Appeals dismissed : BANGALORE CESTAT

2018-TIOL-1052-CESTAT-MAD

Chola Logistiks Pvt Ltd Vs CC

Cus - Penalty - On information received, customs officers identified one container loaded in lorry - On examination, it was found that original cargo that is "cotton tufted floor mats" which was declared in shipping bill and stuffed inside the container at M/s. Chola Container Freight Station (CFS), Tuticorin and granted let export order had been taken out while going to the harbor to an unknown godown and was re stuffed with red sander logs for export to Jebal Ali, Dubai - The officers seized the red sanders as well as other goods - SCNs were issued and lower authority imposed penalty on M/s. Chola Logistiks Pvt. Ltd. and M/s. Bhavani Shipping Services (India) Pvt. Ltd. and also imposed redemption fine in lieu of confiscation of container - The penalties were imposed under section 114(i) r/w Section 117 of Customs Act, 1962 - In regard to penalty imposed on M/s. Chola Logistiks Pvt. Ltd., since the assessee had sought permission for outsourcing the transportation with effect from 8/2015 and as they had already taken necessary steps to comply with provisions of Regulations, there is no violation of Regulations - Imposition of penalty cannot sustain - The grounds put forward by M/s. Bhavani Shipping Services India Pvt. Ltd. as well as M/s. Sea Port Lines (India) Pvt. Ltd. are almost similar - The allegations raised against both these assessees are that they did not obtain KYC details of exporter - M/s. Bhavani Shipping Services India Pvt. Ltd. is a shipping liner and they did not have any direct transaction with the exporter - Their immediate client was Ms/. Sea Port Lines (India) Pvt. Ltd. and they have produced the KYC details of M/s. Sea Port Lines (India) Pvt. Ltd. - Similar is the case with regard to M/s. Sea Port Lines (India) Pvt. Ltd. who have submitted the KYC details through M/s. John Cargo and Transport Service, Chennai - Department does not have a case that these assessees have any direct transaction with the exporter.

In IMSA Shipping Agency Pvt. Ltd. , the issue whether the container can be confiscated was discussed and it was held that a container is distinct from package - The High Court of Calcutta observed that there is an option for release of container after detaining and warehousing the goods - Therefore, the container cannot be subject to confiscation - P enalties imposed on M/s. Bhavani Shipping Services India Pvt. Ltd. as well as the confiscation of the container and the redemption fine imposed set aside - Similarly, the penalty imposed on M/s. Sea Port Lines (India) Pvt. Ltd. is also set aside: CESTAT. - Appeals allowed : CHENNAI CESTAT