SERVICE TAX

2018-TIOL-443-SC-ST

CST Vs MSD Pharmaceuticals Pvt Ltd

ST - The assessee company entered into an agreement with its holding company located abroad, for R&D as well as manufacture of medicines & vaccines - The holding company sought to conduct clinical trials in India & entered into two separate contracts for the same, one of which was forged with the assessee - Thus the assessee finalized testing protocol, training of staff, obtaining approval from DGCI, imported of drugs, monitoring of protocol, finance management, reporting of results & documentation of final reporting - The Department raised duty demand - Later, the Tribunal noted that the services in question were exempted under Notfn No 11/2007-ST - Besides, the Tribunal found that such activities provided to holding company located abroad constituted export of service, on which no duty could be raised - Held - Delay condoned - Admit appeal: SC

- Appeal admitted: SUPREME COURT OF INDIA

2018-TIOL-3658-CESTAT-BANG

Lalit Ashok Vs CCT

ST - Audit raised an objection and pursuant thereto the appellant reconciled his accounts and paid the service tax along with interest much before issuance of show cause notice - Appellant has also accepted that the CENVAT credit was wrongly taken on account of clerical mistakes - Demand confirmed along with imposition of penalty and interest - appeal to CESTAT against imposition of penalty of Rs.1,27,80,168/-.

Held: It has been consistently held that if the service tax is paid along with interest before issuance of the SCN, then under section 73(3) of the Finance Act, 1994, the department is precluded from issuing the show-cause notice - further, the SCN was issued merely on Audit objections - no suppression can be alleged merely on the basis of audit objections - Delhi High Court in the appellant's own case - 2018-TIOL-178-HC-DEL-ST has under similar facts and circumstances dropped the penalty - following the same, impugned order is not sustainable and hence set aside: CESTAT [para 6]

- Appeal allowed; BANGALORE CESTAT

2018-TIOL-3641-CESTAT-BANG

Sindhu Cargo Services Ltd Vs CST

ST - Assessee, a CHA is registered with service tax - Department issued a SCN demanding service tax under 'Agency Commission' received by them on the 'Brokerage Commission' received by them - There are two issues to be decided - One is whether the 'Agency Commission' received by them from M/s. UPS Jet Air Express Pvt. Ltd. is chargeable to service tax and other is, whether the 'Brokerage Commission' received by them from the airlines for booking of space is liable to service tax - M/s. UPS Jet Air Express Pvt. Ltd. are registered as 'Courier Service' whereas the assessee is registered under 'Custom House Agent' service; therefore, the exemption claimed by assessee under subcontracting Custom House Agent under the Trade Notice appears to be not eligible - The Commissioner has erred in reading the provisions of Trade Notice - The department has not disputed the fact that M/s. UPS Jet Air Express Pvt. Ltd. are paying them commission from amount collected from their customers, which includes the bill raised by assessee on M/s. UPS Jet Air Express Pvt. Ltd. after paying the service tax due on it, so the Commission received by assessee has already suffered the service tax - In such a case, applicability or otherwise of provisions of Trade Notice and the Circular relied upon by revenue in his arguments have no bearing on the issue - In terms of the Circular issued by CBEC, subcontractors are liable to pay service tax whether or not the services are provided by a person in his capacity as a subcontractor and whether or not such services are used as input services - In view of the aforesaid, assessee is not required to pay service tax on 'Agency Commission' received by them from M/s. UPS Jet Air Express Pvt. Ltd. - Coming to the issue of commission received from airlines/shipping lines, the assessee submitted that they are engaged in buying and selling of space in airlines and depending on the volume of space bought by them from airlines, they had received the commission/incentive - They are not engaged in providing any marketing or promoting services for airlines or shipping lines - The demands confirmed in impugned order do not stand the test of law; therefore, they need to be set aside - As the main demand itself is not sustainable, penalties are also set aside: CESTAT

- Appeal allowed: BANGALORE CESTAT

2018-TIOL-3640-CESTAT-MAD

Samrajyaa And Company Vs CCE

ST - Assessee was doing job work of machining, drilling and milling on goods received under cenvat challans from one M/s.Magna Electro Castings Ltd. - Pursuant to verification of invoices and other records, it appeared to department that assessee is involved in activity of production of goods on behalf of the clients on which service tax is required to be paid as per Section 65 (19) (v) of FA, 1994 under category of BAS - It is evident that till verification done on 11.09.2006 by department, the assessee was not discharging any duty or tax liability on the activities carried out by them - It is not disputed that they were doing job work such as machining, drilling and milling on the goods received under cenvat challans from Magna Electro Castings Ltd. - It is also evident that only after the verification action by department started, assessee had filed the first return on 24.10.2006 claiming exemption under Notfn 8/2005-ST - The main ground for initiation of proceedings against assessee in both the SCNs is that their client Magna Electro Castings Ltd. were not using the returned goods in the manufacture of final products but were exporting the goods as such - At the same time, nothing is forthcoming from the notices as to whether any SCN has been issued to Magna Electro Castings Ltd. in this regard and whether such proceedings have culminated in a finding that in fact no manufacturing activity is being carried out by them - Mere allegation against Magna Electro Castings Ltd., that too in passing, in SCN cannot be taken as a bulwark for initiating proceedings against their job workers, assessee - On the other hand, assessee have been crying hoarse all along that the activities carried out by them do amount to processing of manufacture - SCNs also did not dispute that assessee performed machining, drilling and milling on the rough castings supplied by the client - The activities carried out by assessee will indeed amount to ‘manufacture’ for the purpose of Section 2(f) of CEA, 1994 and in consequence, the same will not be a BAS under Section 65 (19) of FA, 1994 and therefore no service tax liability will arise in consequence - This being so, the impugned orders confirming demand of service tax under BAS cannot then sustain: CESTAT

- Appeals allowed: CHENNAI CESTAT

2018-TIOL-3639-CESTAT-HYD

State Bank Of Hyderabad Vs CCT

ST - The assessee is a public bank having its headquarters at Hyderabad - It carries out various transactions on behalf of the Central & State Governments - It also receives commission from the RBI for services rendered, classifiable as 'Agency Services' - During period of dispute, the assessee paid service tax under protest, on such services provided - Further demands were raised to appropriate the amount already paid and also impose demand for interest & penalties u/s 76 & 77 of the Finance Act 1994.

Held - The Notfn No 22/2006-ST exempts taxable services provided or to be provided by an person to the RBI when service tax is liable to be paid u/s 68(2) of the Finance Act 1994 r/w Rule 2 of the Service Tax Rules 1994 - It also exempts taxable services provided or to be provided to any person by the RBI - The Tribunal in State Bank of Patiala held that banks receiving commission for services rendered as agent to the RBI are not liable to pay service tax - Following such findings, the demands in the present case are set aside: CESTAT (Para 1,5)

- Assessee's appeal allowed: HYDERABAD CESTAT

CENTRAL EXCISE

2018-TIOL-442-SC-CX

Ashok Leyland Ltd Vs CCE & ST

CX - The assessee-company is engaged in the manufacture of commercial vehicles as well as parts thereof - It received duty paid motor vehicle chassis due to some defect, which the assessee repaired & made fit for use - The assessee was found liable to reverse credit taken upon second clearance of the goods - The assessee claimed that the repair process involved dismantling & re-assembling the goods, which did not require simple reversal of credit - The assessee claimed that such processes amounted to fresh clearances of re-manufactured items - However, the Tribunal opined that the assessee only replaced certain critical components - It held that replacement of such parts was not tantamount to manufacture of motor vehicle - Thus the provisions of Rule 16 of CER 2002 were found to be applicable to the clearances made by the assessee - Hence the Tribunal partly sustained the demand raised against the assessee - Held - Delay condoned - Appeal admitted: SC

- Assessee's appeal admitted: SUPREME COURT OF INDIA

2018-TIOL-3645-CESTAT-MUM + Case Story

Technocraft Industries India Ltd Vs CCE

CX - Denial of carry forward of accumulated CENVAT credit upon de-bonding is not correct in law - provenance of the accumulated credit is not questioned - Denial of such utilization would have the impact of taxing the exporter as ultimate consumer and burdening the appellant with an implied duty on exports that is not authorized by law - provisions of rule 10 or rule 11 of CCR, 2004 will not apply to de-bonding units - It is also patently clear that a similar provision has not been explicitly incorporated in the CENVAT Credit Rules, 2004 for such de-bonding units - Unlike the limitation of periodic eligibility for recourse to the refund route, utilization is open-ended - impugned order is set aside and appeals are allowed: CESTAT

- Appeals allowed: MUMBAI CESTAT

2018-TIOL-3638-CESTAT-ALL

RS Infraprojects Pvt Ltd Vs CCE

CX - The assessee company availed Cenvat credit of service tax paid on bank and financial services based on certificate issued by banks - The Revenue objected to such availment since the services were availed by the assessee's sister unit - Such credit was reversed by the assessee & then availed by the sister unit - However, equivalent amount of penalty was imposed on the assessee, which is being contested.

Held - There was no mala fide intent on part of the assessee so as to avail any ineligible benefit - Besides the credit availed was later reversed, making the situation revenue-neutral - Besides, credit cannot be denied on technical grounds such as that the bank certificate did not mention the requisite details, when it is clear that the service was provided & received - Moreover, credit availed by an ISD even if availed prior to its registration as ISD, is proper availment - Hence the penalties imposed on the assessee & its authorized signatories are set aside: CESTAT (Para 2-7)

- Assessees' appeals allowed: ALLAHABAD CESTAT

Rashtriya Ispat Nigam Ltd Vs CCE, C & ST

CX - During the period 2004-2005 to 2008-2009, it was noticed by authorities that there was under valuation of goods like Iron and Steel products which were consumed within factory premises - Assessee is manufacturer of various Iron and Steel products and clear from their factory directly or through their depot - During period in question, assessee consumed various Iron and Steel products in relation to the expansion project for use within their factory for sheds and fabrication of structurals - Assessee undisputedly, discharged the Central Excise duty on these captively consumed Iron and Steel products, assessed the products as provided under Rule 8 of CEVR, 2000 - The Officers of Department held a view that all such clearances affected within the factory premises will not be covered by provisions of Rule 8, and hence has to be assessed on the value by adopting Provisions of Rule 4 after following the Provisions of Rule 11 of CER, 2002 - Whether the Revenue’s case of demand of differential duty from assessee by adopting a transaction value of independent buyers, to the clearances made for captive consumption would be correct or otherwise - The Revenue’s arguments on the adoption of transaction value to independent buyers is a correct proposition of the law, inasmuch as Larger Bench of Tribunal in case of Ispat Industries Limited - 2007-TIOL-245-CESTAT-MUM-LB has specifically ruled that provisions of Rule 8 of Valuation Rules will not apply in case where some part of a production is cleared to independent buyers - Assessee has not consumed the goods for production or manufacture of other articles but has consumed the same for Civil construction from the expansion of the projects, hence the claim of applicability of the Rule 8 is ruled out - There is no dispute as to the fact that assessee did discharge the Central Excise duty on captively consumed goods based upon the cost of production as per his understanding of rule 8 of Central Excise Valuation Rules, and may be influenced by decisions of Tribunal holding for during the relevant period - The issue of valuation of captively consumed goods under Rule 8 when partly consumed and partly cleared outside the factory premises, had to be decided by Larger Bench in case of Ispat Industries Limited - 2007-TIOL-245-CESTAT-MUM-LB - Since, there was litigation on the issue at various forums, the plea of assessee that there was no malafide in valuing the captively consumed goods based upon the cost of production formulae consumed goods needs to be accepted - In view of this, demands raised in these appeals by invoking the extended period of time are unsustainable - Consequently, the interest liability and the penalties are also set aside - The demands raised and confirmed within the limitation period are upheld along with interest and penalties imposed for such an amount is also upheld: CESTAT

- Appeals disposed of: HYDERABAD CESTAST

2018-TIOL-3636-CESTAT-HYD

Sree Ramicides Chemicals Pvt Ltd Vs CCE C AND ST

CX - The assessee sells mosquito repellent coils with their brand name ‘STOP’, which they get manufactured by supporting manufacturers - A SCN was issued to one of such manufacturers, viz; M/s Sada Healthcare products Pvt. Ltd. who were found by the officers to have manufactured these coils bearing the brand name of assessee wrongly availing benefit of exemption Notfn 8/2003-CE - This exemption notfn is not applicable to products manufactured with the brand name of another company - Accordingly, it was felt that M/s Sada Healthcare Products Pvt. Ltd. cleared the goods irregularly availing the benefit of exemption notification - During investigation, the Director of M/s Sada Healthcare Products Pvt. Ltd. informed the assessee that they were liable to pay duty on these products - Thereupon, assessee paid the full excise duty alongwith interest although they were not the manufacturers but the recipients of the manufactured goods - After following due process, original authority confirmed the demands, confiscated the seized goods and imposed penalties as proposed in SCN except that the penalty on assessee was imposed under Rule 25 of CER, 2002 and not under Rule 26 as proposed in SCN - Insofar as penalty on assessee is concerned, the SCN proposed imposition of penalty under Rule 26 whereas the O-I-O has imposed penalty under Rule 25 of CER, 2002 - The assessee was never given an opportunity to defend themselves against imposition of penalty under Rule 25 and therefore the penalty needs to be set aside on this ground alone - The first appellate authority was not correct in holding that mentioning Rule 25 was a typographical error and the intention was to impose penalty under Rule 26, because in O-I-O, the lower authority has discussed as to why penalty is liable to be imposed under rule 25, both on M/s Sada Healthcare Products Pvt. Ltd. and the assessee - Penalty under rule 25 can be imposed on any producer, manufacturer, registered person of a Warehouse or a registered dealer for various contraventions - It is not the allegation in SCN that assessee is the manufacturer - As far as penalty under rule 26 is concerned, it is imposable on any person who acquires possession of or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or dealing in any other manner with any excisable goods which he knows or has reason to believe are liable to confiscation - SCN does not bring out any facts which can support the allegation of both involvement of assessee in any of the aforesaid activities nor the intention to do so except for the uncorroborated statement by the Director of M/s Sada Healthcare Products Pvt. Ltd. - The appeal is allowed and the penalty imposed on the assessee under Rule 25 in the O-I-O and affirmed by the impugned order is set aside: CESTAT

- Appeal allowed: HYDERABAD CESTAT