SERVICE TAX

2018-TIOL-3190-CESTAT-MUM + Case Story

Sarjak Container Lines Pvt Ltd Vs CST

ST - Activity for which consideration has been received has not been tested for conformity with legislative intent - appellant accepts custody of international cargo that is carried by shipping lines - 'Support service of business or commerce' are activities that the recipient-client would normally have to undertake to carry out its business of manufacture or service and which includes delivery to the customer but which, instead, is outsourced to the service provider - facility of 'international ship and port security' and 'special equipment surcharge' could not have been offered by the appellant - Only the shipping line could have offered the facility and, if it was not a constituent of freight costs, as a service provided from outside India for use in India, should have been subject to tax under section 66A of Finance Act, 1994 - shipping line offers these two facilities in relation to transport of goods and it is, therefore, clear that legislative intent did not cover any facility that was offered on the carrier vessel and any attempt to deviate from the legislative intent would have the absurd outcome of taxing the consideration under two mutually exclusive provisions of Finance Act, 1994 viz. s.66 and s.66A of FA, 1994 - consideration sought to be taxed is freight and, with freight excluded from tax during the relevant period, the demand cannot be sustained – Appeal allowed: CESTAT [para 4 to 8]

- Appeal allowed: MUMBAI CESTAT

Plansee India High Performance Materials Pvt Ltd Vs CCT

ST - The assessee provided services of GTA, BAS and Technical Testing service and Information Technology Support Service - It received services from commission agents who aided in export of the assessee's goods - The assessee availed exemption under Notfn No 18/2009-ST after making payments of commission - The Department held such availment to be incorrect & attracting penalty - The assessee also received services from abroad from its parent company - The Department claimed that the payment of service tax on this transaction was to be made in cash only & not by using Cenvat credit - Although assessee made cash payment, the Department alleged there to be delay in payment of service tax under reverse charge mechanism - Demands for interest were raised u/s 75 & penalty u/s 77(2) of the FA 1994 was raised - The Commr.(A) later dropped the penalty while upholding demand for interest.

Held: There is no bar on utilization of Cenvat credit for deemed service provider to pay the service tax liability caused in terms of Section 66A - As per Rule 2(r), the assessee is deemed service provider - Besides, Rule 5 of Taxation of Services (Provided from outside India and received in India) Rules do not refer to utilization of credit & only refer to its availment - Besides, the Commr.(A) noted that no suppression was found on the assessee's part - Hence the extended limitation is not invokable -Besides, considering the date of issuing of SCN, the entire demand is time-barred: CESTAT (Para 2,6,7,8)

- Assessee's appeal allowed: BANGALORE CESTAT

Green Agro Pack Pvt Ltd Vs Pr.CST

ST - The assessee is a 100% EoU which is engaged in procuring, processing and exporting of preserved Gherkins and other vegetables preserved in Natural Vinegar, Brine ad Acetic Acid - Due to its EoU status, it was unable to utilize Cenvat credit due to which it got accumulated - Hence it filed applications seeking refund of unused credit for several periods - However, the claims were denied on grounds of being time-barred - On appeal, the Commr.(A) upheld such rejection of refund.

Held: Considering the decision of the Gujarat High Court in Indo-Nippon Chemicals Co. Ltd. Vs. Union Of India and that of the Madras High Court in CCE, Coimbatore Vs. GTN Engineering (I) Ltd. wherein it was held that the one year limitation as provided u/s 11B is applicable for claiming refund under Rule 5 of CCR, it refund applications were rightly dismissed on account of being time-barred: CESTAT (Para 1,5)

- Assessee's appeal dismissed: BANGALORE CESTAT

CENTRAL EXCISE

2018-TIOL-3187-CESTAT-DEL

J K Cement Works Vs CE & ST

CX - The assessee is engaged in manufacturing Ordinary Portland Cement (OPC), Pozzolana Portland Cement (PPC) and Cement Clinker - It availed credit based on supplementary invoices issued by M/s South Eastern Coalfields Ltd. - The Department opined that the same fell within the exclusion clause u/r 9(1)(b) of CCR 2004 - Hence it contested availment of credit - Duty demand was raised with EC & SHEC for recovery of such credit, u/r 14 of CCR 2004 r/w/s 11A(4) of CEA 1944 - Demands for interest were raised as well, u/r 14 of CCR r/w/s 11AA of CEA 1944 along with equivalent penalty u/s 11AC r/w Rule 15(2) of CCR 2004.

Held: The issue is whether credit can be availed based on supplementary invoices issued by coal companies & whether such credit can be denied if the supplementary invoices are issued for duties which became payable by the manufacturer on account of willful misstatement or suppression of facts on their part - It is seen that the demand raised against M/s SECL is under challenge before the Apex Court - Hence credit can be availed based on supplementary invoices - This is because such amount of duty cannot be said to be paid on account of any non-levy or short levy by reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any provision of the Central Excise Act/Rules with intent to evade payment of duty - Hence the demands are set aside: CESTAT (Para 3,9,10,13)

- Assessee's appeal allowed: DELHI CESTAT

Manglam Cement Ltd Vs CCE

CX - The assesse company is engaged in the manufacture of Cement & availed Cenvat credit on certain capital goods - Such credit was denied on grounds that they had been used for fabrication & erection of supporting structure for supporting capital goods & platform which were embedded in the earth - Hence such platform & capital goods did not qualify as machinery, components or spares & so did not qualify as 'capital goods' - The Department also claimed that the disputed items had no nexus with manufacture of final product - When the matter initially reached the Tribunal, the same was referred to the present Larger Bench due to divergence of views on the issue.

Held: It is undisputed that without the use of the items in question for erection & support, the machines used in the assessee's factory would not be erected & so would not be functional - This would impact the manufacture of finished goods - Hence they must be trated as accessories to capital goods - Moreover, 'user test' is best way to determine whether an item classifies as 'capital goods' - Presently, without the use of the items in questions, the machines would not be functional enough to achieve the desired results - Hence the disputed goods in the present case must be treated as capital goods & eligible for credit - Further, it has been settled that Steel & Cement used for laying of foundation for erection of capital goods should be eligible for Cenvat credit - Hence the availment of credit cannot be disputed & the reference is answered in favor of the assessee: CESTAT LB (Para 1,2,6-10)

- Assessee's appeal allowed: DELHI CESTAT

Dharampal Satyapal Ltd Vs CC, CE & ST

CX - The assessee company is engaged in manufacturing Pan Masala - One of its units is located in Noida & which manufactures Pan Masala in retail pouches & tin packs - For the pouches, duty demand is paid u/s 3A of the CEA 1944 r/w the Pan Masala Packing Machines Rules 2008 - For the tin cans, the duty is paid u/s 3 based on actual production - The assessee availed Cenvat credit on various inputs & input services - It did not avail any credit on inputs used in relation to the pouches & duty payable was paid in cash - The assessee advertised its products & utilized Cenvat credit to discharge tax liability on it - The Department alleged that while promoting the tin, the assessee had also promoted the pouches - As the duty liability had been discharged in respect of the latter under the PMPM Rules, 2005, there was a restriction on the availment of credit - Hence the Department challenged availment of credit - Duty demand was raised with interest & equivalent penalty u/s 11AC.

Held: Considering mandate of Rule 15 of the PMPM Rules, it is a non obstante clause prohibiting availment of credit of Excise duty paid on inputs used for manufacture of goods & also requiring that duty for notified goods be paid in cash - Upon comparison of the provisions of Rule 15 with Rule 2(l) of CCR 2004, it is seen that the former is a restrictive provision while the latter has wider scope - Also, the prohibition in Rule 15 is not in respect of input services as defined in Rule 2(l), but is in respect of input services used to manufacture notified goods - Hence as the advertisement services are not used to manufacture MRP pouches, the prohibition in Rule 15 is inapplicable - Hence the demands are set aside: CESTAT (Para 1,2,3,8)

- Assessee's appeal allowed: ALLAHABAD CESTAT

CUSTOMS

2018-TIOL-3184-CESTAT-KOL

Vedanta Ltd Vs CCE, C & ST

Cus - Appeal has been filed by assessee against impugned order regarding non-fixation of brand rate of duty drawback for export of electricity to SEZ, on the ground that under CTH 27.16 of CETA, 1985 the rate of duty chargeable is not mentioned in Notfn 110/2015-Cus.(N.T.) and thus the same is also not excisable goods - Also, the Commissioner held that the assessee has received consideration for supply of power in Indian Rupees and not in foreign exchange, thus drawback is not applicable to the assessee - In this case, Commissioner has to pass an appropriate order following the decision of Supreme Court regarding binding nature of departmental circulars as mentioned and also following the case of Hindustan Zinc Ltd. - Brand rate fixation for electrical energy and clean energy cess exported to SEZ is permissible - Commissioner is directed to pass an appropriate order taking into consideration of the above findings and fix the brand rate with respect to electricity and clean energy cess within 3 months: CESTAT

- Matter remanded: KOLKATA CESTAT

JSW Steel Ltd Vs CC

Cus - The assessee company imported various types of Coking Coal & Steam Coal - The import was permitted upon provisional assessment wherein the assessee paid Customs duty with 1% EDD - The transaction value was accepted & proceedings for final assessment were commenced - As the assessee was later found eligible for refund of 1% EDD, a claim for refund was filed - The refund claim was held to be pre-mature, as the DRI had initiated investigations & had directed to not finalize the provisional assessment - On appeal, the Commr.(A) sanctioned the refund but not the interest thereof - This was because the claim for refund of interest was found to be incomplete as per mandate of the Board's Customs Manual in the sense that relevant documents were not enclosed - The Commr.(A) also observed that the assessee furnished the relevant material in a piece-meal manner & so the assessee was disentitled to claim interest.

Held: The Apex Court in Ranbaxy Laboratories Ltd. vs. UOI held that an assessee is entitled to interest after expiry of three months from date of filing refund application till date when refund is finally sanctioned - Also considering the decision of the Karnataka High Court in CC, Airport & ACC, Bangalore vs. Pfizer Products India Pvt. Ltd. the assessee in the present case is eligible for interest on delayed sanctioning & payment of refund: CESTAT (Para 2,6.1,6.2)

- Assessee's appeal allowed: BANGALORE CESTAT