2019-TIOL-NEWS-024 Part 2, Dated: Tuesday, January 29, 2019

SERVICE TAX

2019-TIOL-327-CESTAT-KOL

Bagla Enterprise Vs CST

ST - The assessee-company is engaged as a 'Clearing & Forwarding Agent' - As per its agreement with a certain party, the assessee received goods manufactured by such entity & it dispatched them to the customers as advised by the principal - The assessee also collected cheques & demand drafts issued in the name of the principal & performed some other related functions - While service tax was paid on the commission received by the assessee, it also received some reimbursable expenses - The Department raised duty demand on such expenses, on grounds that they formed part of the reimbursable expenses received by the assessee - On appeal, the Commr.(A) remanded the matter - In this regard, the assessee claimed that the remand was directed without laying down any law & without any directions and that the Commr.(A) lacked authority to remand the case.

Held - It is clear from the decision of the Apex Court in Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India that Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, has become ultra vires - These rules seek to treat any expense incurred by the service provider during course of providing taxable service, as consideration - Hence the duty demands are not sustainable: CESTAT (Para 1,5)

- Assessee's appeal allowed: KOLKATA CESTAT

2019-TIOL-326-CESTAT-DEL

Bharat Sanchar Nigam Ltd Vs CCE

ST - The assessee-company is a leading provider of telecommunication services - During the relevant AY, duty demand was raised on account of sale & registration of post-paid SIM cards, access registration of pre-paid SIM cards as well as sale of life time pre-paid SIM cards - Such demands were confirmed by the Commr.(A).

Held - Though the assessee claimed that the amount paid by customers was either refunded if SIM is not issued or adjusted when the SIM is activated towards Service Tax plus service charges - However, perusal of records revealed that the difference between service tax paid & payable is equal to the tax demanded - Hence the duty demands must be sustained - Moreover, the assessee apparently did not bring to the knowledge of the Department about the sale of SIM card & its value not being included in the taxable value - The assessee was working under the self-assessment mechanism & so should have sought clarification from the Department regarding inclusion of sale value of SIM cards & other plans for levy of service tax - Hence the invocation of extended period to raise demand is sustainable as well: CESTAT (Para 1,5,6)

- Assessee's appeal rejected: DELHI CESTAT

CENTRAL EXCISE

2019-TIOL-41-SC-CX

CCGST Vs Ultratech Cement Ltd

CX - The assessee-company is engaged in manufacturing Cement and Clinker - It availed subsidy under the Rajasthan Investment Promotion Scheme, wherein it got credit of certain subsidy on account of wages and loans subsidy which was credited to their account with Form VAT 37B challan which was used for discharge of sales tax liability - The Revenue opined that the subsidy availed is additional consideration - Duty demand was raised - Later, the Tribunal held that the incentive is of the nature of subsidy received from the State Government - Therefore such subsidy cannot be considered as an additional consideration - Hence the demands were set aside.

Held - Delay condoned - Notices be issued - Matter be tagged with Civil Appeal Nos. 1259-1270/2018: SC

- Notice issued: SUPREME COURT OF INDIA

2019-TIOL-325-CESTAT-HYD

CC, CE & ST Vs Amrutha International

CX - The assessee is a manufacturer of vulcanised rubber tubes and were paying duty accordingly - As per Notfn 49/2008-CE (NT) amended by Notfn 9/2010-CE (NT) , certain goods were to be assessed to Central Excise duty based on the retail sale price as per Section 4A of Central Excise Act - SCN was issued covering period 01.07.2007 to 31.05.2008 seeking to recover differential duty by calculating the duty under Section 4A read with aforesaid notification - The short point to be decided is whether the description of goods, ‘parts, components and assemblies of automobiles' in Notfn 2/2006-CE (NT) r/w Notfn 11/2006-CE (NT) includes tubes or not - Firstly, it is evident that as far as this notification is concerned, for parts of automobiles to be covered, they need not fall under chapter 87 and they can fall under any heading of the Tariff - The second question is whether tubes should be considered as parts of automobiles or otherwise regardless of the fact that they are covered under chapter 40 of Central Excise Tariff - In case of J.K Tyre & Industries Ltd - 2017-TIOL-2220-CESTAT-DEL , it has been held that tubes and tyres cannot be considered as parts of automobiles because they are also used for animal drawn vehicles and aircrafts - Follow the said decision, it is held that the tubes manufactured by assessee cannot be called as parts of automobiles and therefore the Notfn 2/2006-CE (NT) r/w Notfn 11/2006-CE (NT) prescribing Central Excise duty under Section 4A based on RSP does not apply - As issue was decided on merits, the retrospective applicability of Circular or otherwise becomes irrelevant - As a result, the impugned orders dropping the demand are are upheld: CESTAT

- Appeals rejected: HYDERABAD CESTAT

2019-TIOL-324-CESTAT-HYD

Atma Petrochemical Products Ltd Vs CC, CE & ST

CX - The assessee procured used lubricant oil from many refineries and Indian Oil Corporation which they repacked and sold including some after blending and some after addition of additives, heating and filtering - SCNs were issued alleging that these activities will amount to manufacture under section 2(f) of CEA, 1944 - It is not in dispute as to what activities were undertaken by assessee - These include packing, repacking, filtering, cleaning, heating of lubricating oils after which they were sold under the own brand name of assessee - The short question to be decided is whether these activities amounted to manufacture during the relevant period i.e. prior to the introduction of chapter note 9 to chapter 27 of the Central Excise Tariff - Evidently, if these activities already amounted to manufacture there would have been no need to introduce the aforesaid chapter note creating a legal fiction that labelling, relabeling and repacking and adopting any other treatment to render the product to the consumer as manufacture - This chapter note was subsequently renumbered as chapter note 4 - It has been clarified by CBEC in their circular dt. 11.04.2016 that these activities amount to manufacture - Further, in case of Indian Oil Corporation , Supreme Court has clarified that repacking of lubricating oils does not amount to manufacture and in case of Mineral Oil Corporation - 2002-TIOL-530-CESTAT-DEL , the Tribunal held that reclamation of transformer oil from used transformer oil does not amount to manufacture - In the case of Bangalore Petroleum & Chem. Ltd. the Tribunal has held that purification and refining of these oils do not amount to manufacture - Respectfully, following the decision of Apex Court and the Tribunal of Bangalore Bench on similar cases, assessee's activities did not amount to manufacture during the relevant period and therefore no duty is liable to be paid - Consequently, the question of interest and penalties, fine and confiscation do not arise: CESTAT

- Assessee's appeals allowed: HYDERABAD CESTAT

2019-TIOL-323-CESTAT-BANG

Jojo Joseph Vs CC, CE & ST

CX - DGCEI conducted a raid on premises of appellants, M/s. TRPL and M/s. TTRPL, manufacturers of pre-tread Rubber - On conclusion of investigation, a SCN was issued alleging clandestine removal of tread rubber without payment of duty - Demand of differential duty confirmed with equal penalty on appellant while imposing penalties on other appellant's other companies and their directors - While the allegation of department is that both the appellant companies, i.e. M/s. TRPL & M/s. TTRPL have resorted to clandestine removals, the duty was confirmed jointly on both the companies - There is no mention of amount of duty/penalty recoverable from each of appellant companies although the department does not dispute the independent existence of both the appellant companies - It was submitted that during relevant period, TRPL had paid total duty of Rs. 50.54 lakhs and M/s TTRPL had paid Rs. 408.507 lakhs towards Central Excise duty - In the subsequent years also, they have been paying duty separately to the tune of Rs. 1 to 2 crores - Therefore, it is a recognized fact that both units are existing and paying duty separately - In such a situation, the legality of demand of duty from both units becomes questionable - Confirmation of duty on both the units not only leads to inference that both the units exist differently but would also pose difficulties in execution of the order - It is not clear as to how much amount is to be recovered from which unit - In the absence of the same, this Bench is handicapped to conclude on the merits of the case - Therefore, matter is remanded: CESTAT

- Matter remanded: BANGALORE CESTAT

CUSTOMS

NOTIFICATION

ctariff19_003

CBIC notifies prescribe effective BCD rates for Electric Vehicle & their specified parts & raw material for manufacture of Lithium ion cells

ctariff19_002

Seeks to further amend notification No. 57/2017-Customs dated 30th June, 2017 to prescribe effective BCD rate on parts of power bank of Lithium ion and Battery pack of cellular mobile phones

CASE LAW

2019-TIOL-322-CESTAT-HYD

Lewek Altair Shipping Pvt Ltd Vs CC

Cus - The assessee filed bills of entry for the import of vessels "Lewek Altair" and "Lewek Atlas" classifying them under CTH 89019000 - The assessee claimed exemption under Notification No. 12/2012-Cus - The Revenue denied the exemption on grounds that the imported vessels were misclassified in the bill of entry & the correct classification under CTH 8905 9000 is not eligible for the benefit of the notification - Therefore, the Revenue confiscated the vessels u/s 111 (m) of the Customs Act & gave option of redemption fine -Penalties u/s 112(a) & 114AA were imposed - Duty demand was raised with interest.

Held - The vessels in question are meant to support the ONGC's oil drilling platform - The vessels carry out the function by carrying personnel and equipment from shore to the platform and back - Such a function is essential for the off shore oil drilling platforms which are located far away from the shore - Thus, the navigation is the primary function of the vessels and dynamic positioning system helps to perform this function efficiently - Loading or unloading goods or embarking or disembarking personnel are incidental to the transportation - Therefore, the vessels are rightly classifiable under CTH 8901 9000 and not under CTH 8905 9090 - The CTH indicated in the bill of entry is only a self assessment by the assessee as per his understanding which is subject to re-assessment by the officers - Therefore, an assessee, not being an expert in the customs law can claim a wrong tariff or an ineligible exemption notification which does not make his goods liable to confiscation - The confiscation of vessels was incorrect - Making an incorrect classification does not amount to making an incorrect statement because it is not an incorrect description of the goods or their value but only a claim made by the assessee - Thus, even if the assessee makes a wrong classification, there is no reason to impose penalty u/s 114AA: CESTAT (Para 7)

- Assessee's appeals allowed: HYDERABAD CESTAT