2018-TIOL-NEWS-220 Part 2, Dated: Tuesday, September 18, 2018

ST - CENVAT - Refund - Rule 5 of CCR, 2004 - refund denied on the ground that some of the services are not conforming to the requirement of the definition of rule 2(l) of the CCR, 2004 inasmuch as they have no nexus with the output service provided by the appellant; additional grounds are of non-submission of invoices, non-payment of value of service to vendors, non-submission of proof regarding payment of service tax on import of services, out of pocket expenses etc. - appeal to CESTAT.

Held: For claiming the refund benefit of service tax paid on input service, Rule 5 of CCR provides for refund subject to observance of the procedures laid down therein - said rule provides the formula which has to be complied with by assessee for claiming refund benefit - TRU vide letter dated 16.03.2012 has clarified that the new scheme introduced by substituting rule 5 does not require the kind of co-relation between exports and input service, which were hitherto provided under the un-amended rules - since TRU has clarified the legislative intent behind the amendment of Rule 5 of CCR explaining that no nexus needs to be established, denial of refund benefit on sole ground of non-establishment of nexus cannot be sustained for judicial scrutiny; however matter is remanded to original authority for passing of fresh adjudication order with regard to documents which were not produced at the time of original proceedings: CESTAT[para 7, 8]

ST - The assessee and REC entered into agreements with respective State Governments and State Power Utilities - In terms of such agreements, assessee provided certain services including formulation of terms of tenders for execution of works in terms of sanction granted by REC to proposals of concerned State Governments - State Power Utilities; scrutiny of the bids received pursuant to invitation to tender, i.e. bids by contractors for carrying out electrification works; scrutiny of the bids and award of contracts on appraisal of the bids; and in addition, on the request of State Governments - State Power Utilities remittances of funds received from REC to the contractors after retaining a commission for channelizing the funds, after monitoring successful execution of the contracts by the contractors concerned - In respect of the later activity, the assessee was proceeded against on the ground that it had provided erection, commissioning or installation service, on the assumption that they had failed to obtain registration; to fate returns and remit the tax due on the consideration received for providing this taxable service - Notfn 11/10-S.T. exempts services relating to transmission and distribution of electricity provided by a person to any other person from 27-2-2010 - Further for the past period upto 26-2-10, Notfn 45/2010 exempts such service invoking provision under Section 11C of CEA read with Section 83 of FA, 1994 - Hence, the impugned orders, demanding service tax on transmission and distribution of electricity are not sustainable - By following the precedent decision of Tribunal in case of M/s M.P. Power Transmission Co. Ltd., no service tax is payable by assessee - Accordingly, impugned orders qua demanding service tax and imposing penalties on assessee are set aside: CESTAT

CENTRAL EXCISE

2018-TIOL-2852-CESTAT-MAD

Asscot Electricals Pvt Ltd Vs CCE

CX - The assessee manufactured transformers which were cleared without payment of duty as per Notfn No 06/2006-CE which exempts duty on parts of windmills - The assessee also availed Cenvat credit on various inputs used to manufacture dutiable items as well as used to manufacture transformers cleared under the exemption Notfn. - The assessee also did not maintain separate records for the credit availed on various inputs & so paid a portion of the value of the transformers upon their clearance, as per Rule 6(3)(b) of CCR 2004 - Such payments were reflected in the Departmental records - Based on an AAR judgment, the Revenue opined that transformers were not parts of windmills & so were not entitled for exemption - Duty demand was raised for recovery while duty paid for normal period was appropriated - Penalties were also imposed - Such levied were upheld by the Commr.(A).

Held: The aspect of limitation was not dealt with properly in the sense that suppression was alleged on mere grounds of non-payment of duty - There is no evidence suggesting mala fide intent - The Revenue's case stands entirely on AAR ruling, prior to which transformers were treated as entitled to exemption - Hence the extended limitation is not invokable - Demand for extended period is unsustainable as is the penalty: CESTAT (Para 1,4)

- Appeal allowed: CHENNAI CESTAT

2018-TIOL-2851-CESTAT-CHD

Kuma Stainless Tube Ltd Vs CCE

CX - Assessee is engaged in manufacture of Stainless Steel Tubes and Pipes - During audit, it was found that assessee had taken Cenvat credit during year 2008-09 on their own supplementary invoices, which were issued in other party's name - Cenvat Credit Rules prescribe the documents on which Cenvat credit can be taken - One of the documents is supplementary invoice issued by manufacturer from his factory on which recipient can take the Cenvat credit - The recipient did not accept the impugned invoices - In that situation, impugned invoices do not become the eligible document for taking credit by manufacturer himself as the invoices are in name of recipient - As rightly pointed out by Commissioner (A) in his order, the assessee did not follow the said instructions while canceling their invoices - They should have sent the cancelled invoice, in original to jurisdictional Range Superintendent and would not have been in a position to avail Cenvat credit on basis of original and duplicate copies of these invoices - Considering that there is specific procedure prescribed by CBEC and suo motu credit cannot be taken in the light of BDH Industries Ltd. 2008-TIOL-1211-CESTAT-MUM-LB , there is no infirmity in the order of Commissioner (A) and the same is upheld: CESTAT

- Appeal dismissed: CHANDIGARH CESTAT

2018-TIOL-2850-CESTAT-BANG

AK Woods Industries Vs CCE

CX - Department has made certain allegations against assessee on the conclusion of investigation conducted by officers of DGCEI - The department has alleged undervaluation of excisable goods manufactured by assessee to the extent of 40% i.e., it was alleged that the actual price was suppressed and only 60% of the price was declared on the invoices - Commissioner (A) has taken a fairly judicious view of the case of assessee and has given directions to restrict the duty liability to the extent of documents, statements which corroborate the actual transactions whereas the SCNs were issued with a generalized principle extrapolating one instance to the entire set of clearances by assessee - As per the statements of dealers, they had purchased excisable goods knowingly paying a lower amount on which duty was paid and paying the balance in cash - These statements are incriminating the dealers themselves because they had connived with assessee in evading excise duty - This was also for their gain - They could be penalized under the Act and Rules made thereunder - In the absence of retraction or allegation of coercion to give an involuntary statement, their initial statements accepted as voluntary and valid evidence - Revenue has also relied upon the decision of Abdul Aziz Reshamwala and D.R. Chakrapani Chettiar and Others wherein it was held that if the appellant did not controvert the confession immediately and did not make any grievance on remand before the Magistrate about any alleged act of extortion or coercion regarding the statement, confession cannot be said to have been extorted by coercion or was not voluntarily and that "Retraction of confessional statements after a period of more than six months from the date of its recording not attached any credence" - Commissioner (A) opined that as penalty under 11AC is imposed on the firms, penalty on firms under Sections 25/26 is not required - Commissioner (A) has however, reduced the penalties imposed on partners - By following the ratio of decisions in Jai Prakash Motwani 2009-TIOL-121-HC-AHM-CUS and Jaybee Industries 2004-TIOL-720-CESTAT-DEL, penalties imposed on partners of the firm set aside: CESTAT

- Appeals partly allowed: BANGALORE CESTAT

CUSTOMS

NOTIFICATION

ctariff18_063

Notification 24/2015 relating to MEIS scheme amended

CASE LAWS

2018-TIOL-2847-CESTAT-AHM

Pravin R Ajudiya Vs CCE

Cus - The appellants were served SCNs alleging their involvment in smuggling of diamonds - The diamonds had been smuggled by a foreign national - They were acquired by the first appellant and they were later acquired by the second appellant - The second appellant owned a locker in which the diamonds were to be concealed and he had also been in regular contact with the foreigner smuggling them - The foreigner handed them over to the first appellant - However, a raid by the DRI led to the seizure & subsequent confiscation of the diamonds - Penalty was imposed u/s 111(d) of the Customs Act 1962 - Pursuant to remand by the Tribunal, the Revenue imposed penalty on the first appellant while the penalty imposed on the second appellant was considerably lower.

Held: Considering the facts of the case and the evidence at hand, the Revenue is seeking to discharge the burden of proof regarding placed on it under Section 123 of the Customs Act - The entire evidence revolves around the appellants' failure to explain legal possession of the diamonds - Their claim to have imported the diamonds on an earlier occasion was falsified by their income tax returns showing nil balance - Their claim to have sold the diamonds was also falsified by the statements of the purpoted purchaser - Now the Revenue seeks to shift the burden of proof onto the appellants - While Section 123 puts onus of establishing smuggled nature of goods on the Revenue, barring some notified goods, diamonds are not included in the list of exceptions - Hence mere failure to explain licit acquisition does not discharge burden of proof - Failure to explain legal acquisition does not automatically imply smuggling - Such assertions must be supported with evidence - The statements of the foreign national had been retracted & no recovery was made from him - Hence the Revenue's case is not backed by evidence and cannot be sustained: CESTAT (Para 2-5,18-20)

- Appeals allowed: AHMEDABAD CESTAT

2018-TIOL-2846-CESTAT-AHM

Radha Trading Vs CC

Cus - The appellants herein are importers who purchased goods from an SEZ unit - Such goods were seized by the DRI on allegation of under-valuation - Demand for differential duty was raised - The appellants sought provisional release of the goods - However, a condition was imposed, directing furnishing of bond of re-determined assessable value as well as bank guarantee covering the entire differential amount - The appellants were also directed to pay 25% of the re-determined assessable value - Hence the present appeal.

Held: The appellants seek that a lenient view be taken in light of the Board Circular No. 35/2017-Cus - However, the Circular differentiates between cases involving mis-declaration and those which do not - The modus operandi of the appellants here shows that they routed their import through the SEZ unit with intent of under-valuing the goods - The import negotiations were carried out between the appellants & the exporter but the import was routed through an intermediary in the SEZ unit - Hence in view of such attempt to defraud, no lenient view can be taken for provisional release - Although the conditions imposed on the appellants do not prima facie appear to be harsh, considering the decision of the Delhi High Court in Mala Petrochemicals & Polymers the quantum of bank guarantee is revised to cover 100% of the differential duty - Other conditions will continue: CESTAT (Para 1,2,4)

- Appeals partly allowed: AHMEDABAD CESTAT