SERVICE TAX

Barathi Data Service Pvt Ltd Vs UoI

ST - Impugned order, though passed by considering the merits of the matter, cannot be sustained, only on the reason that the same was passed without following the principles of natural justice in its full sense - Section 33A of CEA, 1944 as applicable to service tax matters u/s 83 of Finance Act, 1994 contemplates that the Adjudicating Authority shall give an opportunity of being heard to the party in proceedings, if the party so desires - petitioner while making their reply dated 02.08.2018 has specifically sought for personal hearing - Impugned order is, therefore, set aside and matter remitted to adjudicating authority for passing order on merits after hearing the petitioner - Order to be passed within six weeks: High Court [para 7 to 9]

- Petition allowed: MADRAS HIGH COURT

CC, CE & ST Vs PC Thomas Classes

ST - The assessee is engaged in running a commercial training or coaching center - During the period of dispute, the Department noted that the assessee provided study material to the students of another coaching centre - The Department claimed that service tax was not paid on the value of such study material - Duty demand was raised with levy of EC and interest and penalties u/s 75, 76 & 78 - On appeal, the Commr.(A) allowed relief to the assessee.

Held: While the Department claimed that no separate records existed showing the assessee's salary and the cost of study material, the SCN categorically states both amounts differently - The Commr.(A) also noted correctly that it is for the Department to prove that the cost of study material was not shown separately and that the professional charges were not towards the classes conducted by the assessee - Hence the SCN is self contradictory and the demands based on such SCN are unsustainable - Regarding the assessee's salary or remuneration, it is for the Department to show that service tax liability was sought to be evaded by the assessee or that his explanations were incorrect - The Department put forth no material as to why such value of the study material cannot be treated as salary or remuneration - Hence in absence of any evidence, the assessee's salary/remuneration cannot be taxed - Duty demands are set aside - Consequently, the penalties are set aside too: CESTAT (Para 1,2,6,7,8)

- Appeal dismissed: BANGALORE CESTAT

2018-TIOL-2997-CESTAT-MAD

Krishna Constructions Vs CCE

ST - Assessee is engaged in construction services - Based on enquiry conducted, SCN was issued to assessee proposing to demand service tax on Maintenance and Repair Services, Commercial or Industrial Construction Service and Construction of Residential Complex Service - The assessee is not contesting the demand in respect of maintenance and repair services, same is upheld - In regard to demand in respect of Commercial or Industrial Construction Services, said building was constructed for assessee's own use as an office - Therefore, demand on such service cannot sustain - The issue that remains for analysation is demand in respect of Construction of Residential Complex Services - The assessee has constructed two complexes, namely, Nelson Square and Krishna Sarathy - The Department has relied heavily upon the agreement entered with prospective buyer to allege that undivided share of land (UDS) has been transferred to prospective buyer and therefore, since the land does not belong to assessee, the construction is not for oneself but for the prospective buyer and would attract levy of service tax - Assessee has not engaged any other person for construction and construction activity was carried out on his own - The land belonged to him as he had purchased the right/share of the land from M/s. Nelson Type Foundry Pvt. Ltd. - Similar is the situation in the case of Krishna Sarathy Residential Complex also - By the joint development agreement entered by assessee with the land owners, part of the undivided share in the land was handed over to assessee and, in turn, it was agreed to hand over certain portions of constructed area (flats) to land owner - The flats which are handed over to the land owners were for their own use as a consideration for the undivided share of land - Though assessee may have received payments prior to completion of flats from prospective buyers, these amounts do not attract service tax prior to 01.07.2010 for the reason that the explanation to Section 65(105)(zzzh) was added only on 01.07.2010 - The land remained in ownership of assessee till completion of construction of flat - Thereafter, sale deed was executed to the buyer, whereby right/title/interest in undivided share of land as well as the flat is transferred to the buyer - In case of Vijay Shanthi Builders Ltd. 2017-TIOL-3845-CESTAT-MAD, said issue was considered and held that no service tax is payable when developer has constructed the flats in land belonging to him - Therefore, demand of service tax on construction of Residential Complex Services cannot sustain: CESTAT

- Appeal partly allowed: CHENNAI CESTAT

2018-TIOL-2996-CESTAT-BANG

Hewlett Packard India Sales Pvt Ltd Vs CCE & ST

ST - The assessee company is engaged in providing services of the nature of annual repair and maintenance services - The assessee began to pay service tax when the exemption available on activity of maintenance of computers was withdrawn - Pursuant to an adjudication order, the assessee paid some amount of duty and interest & then claimed benefit under Notfn No 12/03 & sought refund of service tax on grounds that excessive amount of tax had been paid - The assessee claimed that value of material used in service is 60% & so tax was payable only on 40% of total annual maintenance contract - The assessee also availed Cenvat credit on inputs - However, the assessee's refund claims were rejected on grounds that the assessee was not maintaining separate records as mandated u/r 6(2) of CCR 2004 & there was no separate statement for taxable & exempted services - Such findings were upheld by the Commr.(A).

Held: It must be seen whether the Commr.(A) can adopt a reasoning completely different from the issues raised in the O-i-O - The SCN rejected refund for non-maintenance of records as per CBEC Circular No 59/8/2003 dated 20.06.2003 - The adjudicating authority did so for non-adherence with Rule 6(2) of CCR 2004 - The Commr.(A) did not for non-maintenance of separate accounts showing taxable & non-taxable service - The findings of commissioner as per whose order the assessees paid the duty by way of cash & Cenvat credit were completely ignored - The assessee's claim to have not taken credit on exempted services was not verified - Hence the O-i-O & O-i-A gave findings separate from issues raised in SCN - Also the Commissioner confirmed the demand but gave no findings regarding availment of credit - The SCN did not seek to reject refund on this ground - Hence both adjudicating authority & original authority travelled beyond scope of SCN - Hence both orders are set aside: CESTAT (Para 2,3,4,11)

- Appeal allowed: BANGALORE CESTAT

CENTRAL EXCISE

Bayer Material Science Pvt Ltd Vs CC, CE & ST

CX - The assessee company received service of construction of factory from another entity & the assessee availed Cenvat credit on the same - The Revenue made enquiries into such firm and found that it provided such services to the assessee from premises which were not its registered premises & that no service tax was paid by the service provider - The assessee claimed that the service provider had given a proper invoice mentioning address and registration number - Hence any duty was recoverable from the service provider only - However, the Revenue proceeded to deny the Cenvat credit availed by the assessee and raised duty demand to recover the same with interest & imposition of penalty -

Held - The assessee had been provided with the service provider's registration number - Hence it is not obliged to determine whether the service provider paid the service tax - The assessee cannot be held responsible for any default in non-deposit of duty by the service provider & the credit of the service tax paid by the service provider for further deposit in the exchequer kitty cannot be denied due to lapse of the service provider - Hence the Revenue must initiate proceedings against the service provider only - Hence the duty demands with interest & penalty are set aside: CESTAT (Para 1,2,5,6,8)

- Appeal allowed: ALLAHABAD CESTAT

2018-TIOL-3000-CESTAT-HYD

CCE Vs VST Industries Ltd

CX - Whether the assessment which was kept provisional during relevant period should be treated as provisional for the limited period of determining post manufacturing expenses claimed as abatement by assessee or it should be treated as provisional for all purposes - This was a case of manufacture on job work basis - The valuation of goods manufactured on job work basis is governed by formula laid down by Supreme Court in case of Ujagar Prints Ltd. 2002-TIOL-03-SC-CX-CB - The O-I-O was correct in finalizing the assessments as per principles laid down by Supreme Court - There is no provision in Central Excise Act for limited provisional assessment in respect of each aspect of calculation of the assessable value - In this case the goods were cleared prior to the introduction of concept of unjust enrichment, i.e., for the period August, 1979 to September, 1982 - However, the assessments were finalized subsequent to this date in 2009 - The question is whether the principles of unjust enrichment under Section 11B apply to such cases - The constitutional Bench of Apex Court in case of Mafatlal Industries Ltd. 2002-TIOL-54-SC-CX-CB, it was held that the bar of unjust enrichment would not apply to refunds arising on finalization of provisional assessment for the period prior to the introduction of the concept of unjust enrichment in Section 11B - Therefore, assessee is entitled to refund as consequence of finalization of provisional assessment - The third question to be decided is whether an amount of Rs. 25 lakhs which is claimed by the assessee made during the interim period should also be considered the collected amount of duty during the period of provisional assessment - There cannot be any dispute at all amounts paid before finalizing the assessment - The amount of Rs. 25 lakhs said to be deposited by assessee should also be taken into account while calculating the amount of refund which the assessee entitled to as a consequent to finalization of the assessment: CESTAT

- Revenue's appeal rejected: HYDERABAD CESTAT

Zen Tobacco Pvt Ltd Vs CCE

CX - The assessee company is engaged in manufacturing Tobacco which was declared as Chewing Tobacco classified under Heading No. 24039910 of the First Schedule to the Central Excise Tariff Act & which was sold as 'Zafrani Zarda Flavoured Chewing Tobacco' - The assessee paid Excise duty u/s 4A of the CEA 1944 - Based on some intelligence the Department visited the assessee's factory and noted that the assessee was manufacturing 'Zarda Scented Tobacco' - The Department claimed that this was not covered under the MRP based valuation u/s 4A - The Department proposed valuation u/s 4 of the Act - Demand for differential duty was raised by extending cum duty benefit -

Held - The present appeal can only be disposed off on grounds of time bar - The case made out against the assessee was only when the Notfn No 02/2006-CE was issued - However the assessee continued with the same description and classification even after the Notification was issued - Since the assessee maintained such claims prior to the date of dispute, the assessee's bona fide is clearly established - In its registration application, the assessee declared the goods as 'Chewing Tobacco' & details of raw material which include perfume - Thus the assessee's product is 'Zarda Scented Tobacco' - As the product has been declared in the ER-1 returns, no suppression of facts can be alleged - The Department could have taken action when the Notfn No 02/2006 was issued and it could have directed payment of duty u/s 4 - As the Department failed to do so within the normal period, no extended limitation can be invoked - Hence the demand is time-barred: CESTAT (Para 1,4)

- Appeal allowed: AHMEDABAD CESTAT

CUSTOMS

Elton And Sons Vs CC

Cus - The appellant is a Customs broker whose license was issued by the Customs commissionerate at Cochin - It applied for working under Form C at the Tuticorin commissionerate - Proceedings were initiated against the appellant based on complaints received from the Tuticorin commissionerate, alleging that the appellant attempted to smuggle Red Sanders wood by misusing IEC & AD code of a certain company - It was also alleged that the appellant undertook to do Customs related work for export of readymade garments through a freight forwarder using such IEC & AD code - SCN was issued alleging failure to exercise due diligence by the appellant as it omitted to check authenticity of documents submitted by its employee & well as failure to ensure proper conduct of such employee as mandated under CBLR 2013 - The appellant claimed that the SCN was time barred & that its employee had acted beyond the scope of his employment for which the firm could not be held liable - However, the adjudicating authority upheld the SCN and directed revocation of the appellant's license & forfeiture of its security deposit -

Held - The date of knowledge gained by the Commissioner of any communication be it an SCN or the O-i-O or a letter narrating the offence committed has to be construed as an offence report & the date of receipt by the Cochin Commissionerate has to be taken as the date of offence report - Further the SCN proposing revocation of the license was issued beyond the 90 days limitation period prescribed in the CBLR and so is unsustainable - Hence the order revoking the license is set aside without delving into merits of the case: CESTAT (Para 2,6.1,6.2,7)

- Appeals allowed: BANGALORE CESTAT

2018-TIOL-2994-CESTAT-MAD

Biocon Ltd Vs CC

Cus - The assessee company imported certain items declared as 'Miglitol' classifying it Customs tariff under Customs Tariff Heading 2942 0090 under heading of "other organic compounds" - It subsequently imported goods declared as 'Mifepristone' which they classified under the same CTH - The Department opined that both items were classifiable under CTH 3003 9090 under heading of "Medicaments" - This led to the assessee being liable to pay higher rate of duty - On appeal, the Commr.(A) upheld the classification favored by the Department -

Held - It is seen that the clearance of 'Mifepristone' had earlier been permitted under CTH 2942 0090 - Such practice was also being followed by other importers - Hence the classification cannot abruptly be changed without recording adequate reasons and that too only after serving SCN proposing to adopt a different classification - Manufacturers & importers like the assessee who import such goods regularly are entitled to some consistency & permanence in classification matters as the same affect the Customs duty payable and consequently the landed cost - They cannot be subjected to such inconsistencies which could have adverse ramifications on their business strategy and compliance cost - It is inexplicable that during the same period, some importers are allowed to import the same goods under CTH 2942 0090, while the same allowance is not extended to the assessee - The Department also contravened the principles of natural justice by not issuing an SCN - Hence such summary change in classification cannot be sustained: CESTAT (Para 2,6.1-6.10,7)

- Appeals allowed: CHENNAI CESTAT

HDFC Bank Ltd Vs State Of Maharashtra

- Case disposed of: BOMBAY HIGH COURT