SERVICE TAX
2018-TIOL-2409-HC-DEL-ST + Case Story Vodafone Mobile Services Ltd Vs CST
ST - CENVAT credit is admissible on Towers, shelter and accessories used for providing telecom services - CESTAT LB decision - 2016-TIOL-539-CESTAT-DEL-LB - reversed – Assessee appeals allowed: High Court [para 36, 38, 46, 47, 56, 65, 72, 74, 75]
Observations of High Court:
+ In the present case, the entire tower and shelter is fabricated in the factories of the respective manufacturers and these are supplied in CKD condition. They are merely fastened to the civil foundation to make it wobble free and ensure stability. They can be unbolted and reassembled without any damage in a new location.
+ A machine or apparatus annexed to the earth without its assimilation by fixing with nuts and bolts on a foundation to provide for stability and wobble free operation cannot be said to be one permanently attached to the earth and, therefore, would not constitute an immovable property.
+ Tribunal erred in relying on the Bombay High Court in Bharti Airtel Ltd (2014-TIOL-1452-HC-MUM-ST). It is also important to understand that when the matter was carried out in the Bombay High Court and the judgment was delivered, the whole case proceeded on the presumption that these are immovable properties. The tribunal failed to appreciate the “permanency test? as laid down by the Supreme Court in Solid and Correct Engineering (2010-TIOL-25-SC-CX).
+ All components, spares and accessories of such capital goods falling under chapter 85, would also be treated as Capital goods.
+ It was highlighted during the hearing of the appeals that the towers are structures installed to support GSM and microwave antennae. These antennae receive and transmit signals and are used for providing output service.
+ Without them, the antennae cannot be installed high above the ground and cannot receive or transmit signals. Therefore, the towers too have to be considered as essential component/ part of the capital goods, namely BST and antennae.
+ Further, BTS is an integrated system and each component in the BTS have to work in tandem to provide cellular connectivity to phone users and to provide efficient services. In the facts of the present case, it is evident that the towers form part of the active infrastructure as the antennae cannot be placed at that altitude to generate uninterrupted frequency. Further, these shelters are accessories for the placement of various BTS equipment and other items for it to remain in a dust – free, ambient temperature.
+ From the foregoing discussion, clearly towers and shelters support the BTS in effective transmission of the mobile signals and, therefore, enhance their efficiency. The towers and shelters plainly act as components/parts and in alternative as accessory to the BTS and are covered by the definition of “capital goods”.
+ The CESTAT has failed to appreciate that the towers and the parts thereon and the pre-fabricated shelters are inputs, in accordance with the provisions of Rule 2(k) of the Credit Rules.
+ The inputs such as MS Angles and channels are used for the providing infra-support service/ telecom service.
+ In the opinion of this court, clearly goods in question have gone into the making of such towers which in turn are used for providing infra-support service/ telecom service. It is, therefore, held that the CESTAT erred in applying the nexus test and, therefore, credit has to be extended to the duty paid MS angles and channels.
+ The definition of “input? does not contain any condition relating to emergence of immovable property to be ineligible for taking credit.
+ The eligibility of credit must be determined at the time of receipt of the goods in terms of Rule 4(1) of the Credit Rules. Credit cannot be denied so as long as the goods are used for the provision of the output service. [Mundra Ports and Special Economic Zone Ltd. 2015-TIOL-1288-HC-ST relied upon]
+ The entitlement of CENVAT credit is to be determined at the time of receipt of goods. The fact that such goods are later on fixed/ fastened to the earth for use would not make them a non-excisable commodity when received.
+ The conclusion of CESTAT, denying the assessee CENVAT credit on the premise that the towers erected result in immovable property, is erroneous and plainly contrary to Solid and Correct Engineering (supra). The towers that are received in CKD condition, are erected at site, subsequently, giving rise to a structure that remains, safe and stable (commercial reasons of use).
+ The fact that in the intermediate stage, an immovable structure emerged, is of no consequence case. It is a settled principle of law that entitlement of CENVAT credit is to be determined at the time of receipt of the goods. If the goods that are received qualify as inputs or capital goods, the fact that they are later fixed/fastened to the earth for use would not make them a non-excisable commodity when received.
Conclusion: All the questions of law were answered against the Revenue and in favour of the assessee/appellants.
- Assessee appeals allowed/Revenue appeals dismissed: DELHI CESTAT
2018-TIOL-3430-CESTAT-MUM
Vodafone Essar Ltd Vs CCE
ST - Value of SIM is includible in the services of telecommunication -Issue is no longer res integra and has been settled by the Apex Court in favour of Revenue in the case of Idea Mobile Communication Ltd. [2011-TIOL-71-SC-ST] holding that value of SIM cards is part and parcel of the services rendered by the appellant: CESTAT [para 6]
ST - Whether, if thevalue of SIM's is includible in the taxable value of services provided, whether the benefit of exemption under notification 12/2003-ST can be extended. Held: Definition of ‘sale' and ‘purchase' appearing in section 2(h) of the Central Excise Act, 1944 needs to be understood in the context in which it has been made - the definition refers to sale and purchase of goods for the purpose of levy of CE duty in which there is transfer of possession of goods - The term possession cannot be interpreted in isolation - Possession implies both intent to possess and control - Possession without both the ingredients present cannot be effective possession - It cannot be the case that consumer of telephony services provided by the appellant had the intent to possess the said SIM - intent of the consumer is to avail telephony service - further, even the appellant does not have the intent to transfer the property in the said SIM's to the consumer as is evident from the sale invoices - Since there was no intention to transfer the property in the said SIM's by the appellant to consumer either on the date of transference of possession or thereafter, mere transfer of possession cannot be held to be said to be sale within the meaning of section 2(h) - It is also a settled law that every contract of bailment is not a contract for sale of the goods - From the invoices it is quite evident that appellants have themselves on the invoices declared that there is no transfer of property or right to use SIM cards and at all the times the property in the SIM vests with the appellants - Thus, when from start to end, if there is no transfer in the property, then handing over of the SIM to the customer cannot be for any other purpose other than as part of supply of services - Bench is not in a position to agree with the contention of the appellant that any sale of SIM cards independently have taken place in the process of providing the taxable services - benefit claimed of notification No 12/2003-ST, therefore,cannot be extended: CESTAT [para 7.1 to 7.5]
ST - Cum-tax benefit - Appellants have claimed that the quantum of tax should have been computed by treating the value of SIM claimed by them as cum-tax price - Apex Court in the case of Dugar Tetenal Ltd. [2008-TIOL-41-SC-CX] has held in favour of allowing such benefit - following the said decision, Bench is of the view that the benefit of cum-tax value should have been allowed - Since Commissioner has not rendered any finding in this regard, matter is remanded for consideration of this plea and determining the tax liability and penalties: CESTAT [para 8.1, 8.2]
ST- Penalty & Interest: Demand of interest is a natural consequence on account of delay in payment of tax - since appellants have short paid the tax, interest is demandable from them u/s 75 of the FA, 1994 - Penalty u/s 76 of FA, 1994 is for the delay in payment of service tax and there is no reason to alter them - Since penalties imposed u/s 76 are upheld, no justification in imposing separate penalties u/s 78 of FA, 1994 moreso when all the demands for taxes have been made within the normal period - Penalties imposed u/s 78 are set aside: CESTAT [para 9, 10.1, 10.2]
ST- Adjustment of VAT - VAT is levied under the State Act and Service Tax under the Central Act - Since both the authorities, under which Service Tax and VAT are levied are not the same, the Tribunal being creature of the Central Act, would not be in position to determine such transfer and adjustment of VAT paid under State Act, towards the tax liability under a Central Act - Plea rejected: CESTAT [para 11]
- Appeals disposed of: MUMBAI CESTAT
2018-TIOL-3416-CESTAT-MAD
Velur Town Panchayat Vs CCE
ST - The assessee received proceeds from renting of immovable properties such as commercial complex, shops & land - Duty demands were raised under Renting of Immovable Property service & penalties were imposed.
Held: The issue of legislative competence to raise such duty demands was raised in several cases - Considering the divergent views on the topic, it is appropriate to close the files in respect of the present appeals for statistical purposes - However, the appeal number & year assigned to the cases will remain the same - Both sides may file application before Tribunal to re-open the matter, pursuant to decision of the Apex Court in Union of India Vs. UTV News Ltd. : CESTAT (Para 1,5.1,5.3,6)
- Assessee's appeal disposed of: CHENNAI CESTAT
Vijay Television Pvt Ltd Vs CST
ST - During the period of dispute, the Department noted that M/s Satellite Television Asian Region Ltd. provided broadcasting service to the assessee in India - It was also noted that it had no office in India - Hence the Department opined that such receipt of service amounted to import of service & so raised duty demand.
Held: A similar issue arose during a previous period & involving the same assessee - Therein, the Tribunal held that where no broadcasting signals have been uplinked by foreign service provider to the assessee, but instead such signals have been directly sent to the MSOs/COs, no duty demand could be raised - Following such findings, the demands raised in the present case are set aside: CESTAT
- Assessee's appeal allowed: CHENNAI CESTAT
CENTRAL EXCISE
CX - The assessee company manufactures automobile door parts & availed Cenvat credit on input goods, services & capital goods - It availed credit on Pallets, storage racks, conveyor system & certain steel tubes, angles and flats used to make steel cover of welding area for safety - The Department denied credit on grounds that these are not capital goods for manufacture of their final products & some of the products like conveyor were immovable upon installation.
Held: Pallets & Storage racks are essential items for safekeeping & further use of raw materials, components, finished & semi-finished goods before processing & clearance from factory - Hence they can be considered as being essential for manufacturing process - Moreover, the conveyor belts too are essential for manufacturing process - The classification adopted by the supplier per se cannot decide eligibility for credit - The use of the product determines the same - Conveyor belts on their own specifically classify as machinery - Even if iron & steel items were made into conveyor belt inside the assessee's premises, such items are eligible considering their end use - Similarly credit is available on teel tubes, angles and flats used for creating steel cover around welding machine for industrial safety - Hence denial of credit is unjustified: CESTAT (Para 2,3,6,7)
- Assessee's appeal allowed: CHENNAI CESTAT
CX - The assessee company is engaged in manufacture of various alloys ingots of lead, aluminum, tin & zinc - The Department received intelligence that the assessee procured duty-paid aluminum, lead, zinc but used only lead retrieved from rejected battery scrap - Thus it carried out search & investigations, upon which it emerged that the assessee was unable to account for some quantity of raw materials found to be in shortage - The Department also noted that the purchase of raw materials was relatively high compared to production & clearance - The Department opined that the assessee had cleared some quantity of inputs without reversing proportionate amount of credit - Duty demand was raised & equivalent amount of penalty was imposed u/r 15(2) of CCR 2004 r/w Section 11AC of CEA 1944 - Personal penalty was imposed on the authorized signatory for the assessee.
Held: The entire case of the Department is built up on statements taken from the assessee's authorized signatory - Such statements were later retracted - Statements were also taken from some raw material suppliers & a few buyers - Most of the depositors retracted their statements during cross-examination - The unfounded & un-corroborated charges levelled in the SCN were mechanically upheld by the adjudicating authority without application of mind - The assessee's counter objections were not considered & the retraction of statements given by key persons, was also overlooked - The assessee was also not allowed to cross-examine the buyer - Hence the Department's case does not hold any water: CESTAT (Para 1,5.10,7)
- Assessee's appeals allowed: CHENNAI CESTAT
CUSTOMS
CIRCULAR
cuscir44-2018 Implementation of PGA eSANCHIT - Paperless Processing under SWIFT-Uploading of Licenses/Permits/Certificates/Other Authorizations (LPCOs) by PGAs CASE LAW
CC Vs Shakya Technologies Ltd
Cus - The assessee company imported touch star finger print devices & classified the goods under CTH 8471 9000 claiming nil rate of BCD - However, the Department classified the goods under CTH 8543 7099 attracting BCD @ 7.5% - On appeal, the Commr.(A) classified the goods under CTH 8479 9990.
Held: The heading favored by the Commr.(A) covers machines which are all kind of machines which are basically mechanical appliances or machines such as machinery for buildings, oil seed crushing or grinding machines, rope or cable making machines, industrial robots, car washing machines - Hence the items in question are not classifiable under CTH 8479 - The heading 8543 covers electrical machines and apparatus having individual functions not specified or included elsewhere in the chapter - Hence the finger print reader is more appropriately classifiable under this heading - The Department's contention that when an item is prima facie classifiable under two headings u/r 3(c) of the General Rules of interpretation of Import Tariff, the goods must be classified under the heading which comes last in numerical orders which among those which equally merits consideration - Hence the classification favored by the Department will prevail: CESTAT (Para 2,5,5.1)
- Revenue's appeal allowed: BANGALORE CESTAT
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