SERVICE TAX

2018-TIOL-3683-CESTAT-HYD

ST - The assessee entered into a memorandum of understanding with Government of Andhra Pradesh to provide Israeli technology in the field of agriculture to help the state - SCN was issued to assessee alleging that services provided by them to Government of Andhra Pradesh amount to scientific or technical consultancy service - It was alleged that assessee had not discharged their service tax liability and hence the same was recoverable from them along with interest - The agreement is not a composite works contract as it does not involve supply of any materials by assessee - This is in the nature of providing technical expertise for implementation of project as well as the management of project itself - As the title to annexure 3 of MOU indicates, it involves technology transfer, supervision, implementation and marketing support - The first appellate authority records that MOU is not pure consulting agreement as it involves duties of an integrator of agricultural technologies and operations and to act as technical, implementing and supervising agency - He further concludes that the contract is divisible and the consideration received by assessee for the services are taxable services - However, the O-I-O does not discuss what portion of the services rendered by them are technical and consultancy services and how much tax is leviable thereon - The Commissioner had confirmed the demand taking the entire amount received by the assessee as only scientific and technical consultancy fee which is not correct - Having held that the contract is divisible, it was necessary for the lower authorities to discuss what portion of the amount received for the services can be attributed for scientific and technical consultancy services and re-calculate the service tax payable accordingly - Therefore, without passing any remarks on the merits of appeal, matter remanded back to the original authority to reexamine the issue and pass a reasoned order: CESTAT

- Matter remanded : HYDERABAD CESTAT

2018-TIOL-3682-CESTAT-MAD

ST - The assessee is in the business of providing Advertising Services, a taxable service in terms of Section 65(105)(e) of FA, 1994 - Assessee, during course of rendering Advertisement Service, got a discount of 15% from media where advertisements were placed - In the SCN stage itself, Revenue had entertained a serious doubt on the receipt; itself had termed the same as discount and later called it commission - Be that as it may, but after receipt, assessee did pay service tax at applicable rates - It is also an undisputed fact that in many cases, the assessee passed on a portion of discount received to respective clients and the service tax was remitted by assessee on the amount retained - In this scenario, therefore, there is no service-provider – service-receiver relationship between the assessee and the media and therefore, the media is not the customer of assessee nor could the assessee be considered as a commission agent of media - This view is supported by M/s. Thangammal Traders and the decision relied on by Commissioner (A) - Therefore, no force found in the contention of Department that the assessee is liable to pay service tax on the discount received under BAS and, therefore, dismiss the Revenue's appeal: CESTAT

- Appeal dismissed : CHENNAI CESTAT

CENTRAL EXCISE

2018-TIOL-3686-CESTAT-DEL

CX - The assessee has established their factory in State of Rajasthan and were operating under Rajasthan Investment Promotion Scheme - They were eligible for subsidies as per the various schemes applicable to them and they were required to deposit VAT/CST/SGST at the applicable rate with the Government and in terms of the scheme notified, will be entitled to disbursement of subsidy by appropriated authorities - The subsidy concern is sanctioned and disbursed in Form 37B and as such challans in the form VAT 37B can be utilised for discharge of VAT liability of the assessee for subsequent period - The Revenue proceeded to include such subsidy amounts in the value of goods cleared by assessee and demanded the difference of the duty - The identical issue has come up before the Tribunal in case of Shree Cements Ltd. 2018-TIOL-748-CESTAT-DEL - By following the said order, impugned order is set aside: CESTAT

- Appeal allowed : DELHI CESTAT

2018-TIOL-3685-CESTAT-MAD

CX - Assessee had adopted this modus operandi to keep the value of clearances within the SSI exemption limits, with the sole intent of evading rightful excise duty that was required to be discharged to the exchequer - Adjudicating authority, on the one hand, has prejudged the matter by his 'finding' that the invoices have been able to substantiate the claim by submitting documents of movement of goods showing that raw materials were supplied by assessee on behalf of the buyers - At the same time, adjudicating authority also takes note that the documents retrieved by investigating agency were returned to the noticee after two years and that no investigation was conducted with regard to those papers - Tribunal is unable to fathom that such a peremptory conclusion has been drawn by the Commissioner, especially when SCN has clearly relied upon such documents only to establish the allegations against the assessee and the other assessees herein - Similarly, adjudicating authority, with regard to allegation that M/s. Selvanayaki did not have facilities of shearing and cutting, has accepted the defence submissions that there was no charge for the shearing and cutting machines since these preliminary operations were done by 'some other job workers' of the noticee - Although in para 58 a similar affidavit and documents were produced, the adjudicating authority refuses to take cognizance of the same only on the grounds that 'owner of premises did not cooperate with the Department in ascertaining the factual position' - Thus, it is found that the adjudicating authority has blown hot and cold on the various issues raised in SCN - The conclusions have been arrived at without reasoned analysis or findings - While in some cases, the adjudicating authority took into consideration various evidences produced by the concerned noticees, in many other cases the authority has rejected the allegations made in the SCNs without sufficiently countering them or giving reasons for their rejection - The interests of justice would be best served for all the assessees by remanding the matter back to the adjudicating authority for de novo consideration: CESTAT

- Matter remanded : CHENNAI CESTAT

2018-TIOL-3684-CESTAT-BANG

CX - The assessee is engaged in manufacture of aerated water and entered into franchisee agreements with M/s. Venkateswara Essences and Chemicals Ltd. to manufacture soft drinks with brand name Ruch, Sprint and Thrill - They also had an agreement with M/s. McDowell to manufacture plain soda of McDowell brand - The assessee was availing exemption under Notfn 175/1986 and No.1/1993 - It has been alleged in SCN that assessee, have cleared their entire products to M/s. Concept Sales and the price at which it was sold to M/s. Concept Sales was less than the cost of production; different distributors of M/s. Concept Sales are nothing but companies created or controlled by assessee - It is seen from the records that though M/s. Concept Sales was in existence even before the confirmation of the assessee's company, huge amounts were transferred back to assessee from M/s. Concept Sales by book entries and fictitious debits towards unspent expenses - A statement of proprietor of M/s. Concept Sales shows that there was mutuality of interest - Mutuality of interest is established by investigation and has been brought out by Commissioner in his O-I-O - It has been established that the Directors of assessee were managing various distributors of M/s. Concept Sales either by themselves or through their employees - None of the distributing firms were functioning independently and were for all practical purposes controlled and managed by Shri George Varghese of assessee - It is amply seen that there is interdependence between assessee, M/s. Concept Sales and other distributing firms - There have been number of financial transactions shown in the name of different companies which are in favour of Directors of assessee - Therefore, it has to be held that leave about mutuality of interest, all the companies were one and the same managed by Shri George Varghese; corporate entities are created as a façade - The adjudicating authority being convinced of the issue, not once but twice, Tribunal have no doubt in arriving at the conclusion that units are interdependent and mutuality of interest is amply demonstrated - Such frauds cannot be allowed to be perpetrated and the Government cannot be denied of its due of revenue by a mere intellectual interpretation of words and phrases of the statute - One needs to be circumspect about fraudulent activities of some persons to defraud the Government of its exchequer - Therefore, conclusions drawn on the mutuality of interest of different firms involved; rejection of the transaction value claimed by assessee and valuation arrived in SCN and affirmed by Commissioner, not once but twice, need to be given credence and requires to be held up.

Regarding discounts, the principle has been fairly set right by various judicial pronouncements that the discounts which are known at the time of clearance and are passed on can be allowed - Discounts, if any, can be extended only after producing full evidence in support of their claims and cannot be extended to the entire clearance - In respect to quantity discount, it was held that the investigation has taken the value adopted by M/s. Gautham Traders to independent buyers as the assessable value for determination of duty liability of assessee - Here for such determination, only the sale value adopted by the M/s. Gautham Traders would be relevant and not the quantity cleared by M/s. Gautham Traders - The Commissioner held that the quantity discount based on free supply shown in the invoices of M/s. Gowtham Traders cannot be extended to assessee.

As regards to the penalties, the original adjudicating authority has imposed certain penalties on different companies which were later revised upward by Commissioner while deciding the matter in remand - Only one of the Directors of assessee i.e. Shri George Varghese had a prominent and dominating role in managing the affairs of different companies - The role of other directors is hardly forthcoming, hence, they are not liable for any penalty - Accordingly, while confirming the duty demanded by Commissioner from main assessee, penalty imposed on the main assessee reduced to Rs.5 lakhs and the redemption fine from Rs.10 lakhs to Rs.2 lakh - Personal penalty of Rs.5 lakhs imposed on Shri George Varghese is upheld and penalties imposed on all others are set aside: CESTAT

- Appeals partly allowed : BANGALORE CESTAT