2019-TIOL-NEWS-33 Part 2, Dated: Friday, February 08, 2019

SERVICE TAX

2019-TIOL-418-CESTAT-AHM

Deep Chemicals Vs CST & ST

ST - The assessee-company entered into a contract with M/s Tata Chemicals Ltd, wherein the assessee paid service tax in its capacity as C&F agent - It also recovered some charges from M/s Tata Chemicals as reimbursement - SCN was issued upon invoking extended period of limitation, raising duty demands.

Held: In the present case, the contract involved is not a composite one - The payment for each contract is measures as per the quantum of service provided - The payments for the entire contract was not one composite fixed payment but its depends of each component individually - The billing of separate services is done separately - Moreover, the single agreement embodies separate contract for each find of service being provided as well as separate compensation for each - Hence the Revenue cannot be said to have vivisected the composite service, since there is no single composite service - The amounts recovered under the independent separate clause of the agreement of the rate schedule constitute independent & separate service - Hence the demand is sustainable on merits - Moreover, extended limitation cannot be invoked where the issue raised in both SCNs issued to the assessee, is the same - Hence penalty u/s 78 of the Finance Act 1994 is untenable - Besides, penalty imposed u/s 76 must be restricted to duty levied within period of limitation: CESTAT (Para 2,9,11,12)

- Assessee's appeal partly allowed : AHMEDABAD CESTAT

2019-TIOL-415-CESTAT-BANG

Karnataka State Tourism Development Corporation Vs CCT

ST - The assessee is a State Government undertaking which is engaged in providing various taxable services and after audit, assessee themselves computed the tax liability and paid Service Tax on 25th March 2006 whereas the SCN was issued on 16th January 2008 much beyond the period of one year - Further, assessee have not suppressed any material fact with intent to evade payment of tax - The Revenue has wrongly invoked the extended period of 5 years which is only applicable in the case of fraud, collusion, wilful mis-statement, suppression of facts or contravention of provision with intent to evade payment of Service Tax whereas in the present case, no material found to hold that there was an intention on the part of assessee to evade the payment of Service Tax - In assessee's own case, this Tribunal has held that the assessee being a Statuary Government Body there could not be any mala fide intention to evade payment of tax - The decision of Calcutta High Court in case of Infinity Infotech Parks - 2012-TIOL-987-HC-DEL-ST is squarely applicable in present case - Similarly, the grounds on which extended period of limitation can be invoked have not been specifically pleaded by Revenue in SCN - On merits also, assessee has a good case but since the appeal is allowed on limitation itself, no need to go to the merits of case: CESTAT

- Appeal allowed : BANGALORE CESTAT

2019-TIOL-414-CESTAT-BANG

Honest Distributors Vs CC, CE & ST

ST - The assessee is engaged in providing services of recovery agent to M/s. ICICI Bank Ltd. - Assessee is collecting dues from borrowers of ICICI Bank Ltd. and to take possession of assets from the borrowers of bank - It is not disputed that assessee has paid the entire service tax before the adjudication order - There is no suppression of facts with intent to evade payment of tax because after taking the registration, assessee started paying service tax and the departmental officer called for details and based on details furnished by assessee, SCN was issued alleging suppression and invoking the extended period - Further, the Department has also invoked suppression even for the second SCN - The assessee has submitted that there was delay in payment of service tax because the service recipient refused to make payment towards service tax in spite of repeated demand - Further the apex court in case of Hindustan Steel Ltd. - 2002-TIOL-148-SC-CT-LB has held that the direction to impose a penalty must be exercised judiciously - A penalty will ordinarily be imposed in cases where the party acts deliberately in defiance of law, or is guilty of contumacious or dishonest conduct or acts in a conscious disregard of its obligation, but not in cases where there is a technical or venal breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the matter prescribed by the statute - Penalty is not imposable since the assessee had a reasonable cause which resulted in failure on the part of assessee to pay service tax in time for which assessee is liable to pay the interest - Therefore, by invoking the provisions of Section 80, penalty imposed on assessee waived under Section 78 - But since there is a delay in payment of service tax, assessee is liable to pay the interest on delayed payment - Further as per assessee, he has paid Rs.3,54,199/- before the issue of SCN whereas as per Commissioner (A), he has paid Rs.1,19,153/- before the issuance of SCN - The original authority will also verify as to how much the payment was made before the issue of SCN and thereafter will calculate the interest which assessee is liable to pay for delay in payment of service tax - Accordingly, both the appeals are disposed of by dropping the penalty under Section 78 and by holding that assessee is liable to pay interest for the delayed period: CESTAT

- Appeal partly allowed : BANGALORE CESTAT

CENTRAL EXCISE

2019-TIOL-57-SC-CX

Deena Jee Sansthan Vs CCE

CX - In the present case, the finding of fact recorded by the Commissioner in his order dated 27.11.1997, after evaluating the material on record was that the product in question was not used as ayurvedic medicine but was a "shampoo"- position in the present case about the composition of the product and the curative properties thereof have been seriously disputed and not admitted as was the case in Meghdoot's case (2004-TIOL-103-SC-CX) wherein there was no dispute that the products had medicinal value and were used for ayurvedic treatment, hence treated as ayurvedic products - no fault can be found with the impugned judgment of the High Court holding that extended period of limitation would be applicable, inasmuch as the goods in question were excisable and removal thereof without paying duty was in contravention of the provisions of the Act – Special Leave Petition disposed of accordingly: Supreme Court [para 4, 5]

- Petition disposed of: SUPREME COURT OF INDIA

2019-TIOL-417-CESTAT-HYD

Yash International Vs CCT

CX - Assessee is manufacturer of electrical fans - An offence case was registered on assessee on the charge of irregular availment of CENVAT credit without receiving the inputs - The issue involved in this case is regarding the refund of amount of Rs.25 lakhs which is rejected - The only reason for rejecting the refund claim is that the assessee has not debited PLA with the amount of Rs.25 lakhs and debited the same in April, 2017 only - Hence, the refund claim is premature - The first appellate authority has not considered the issue holistically, as it is on record and admitted, O-I-O confirmed demands raised by assessee contained in the order portion, an appropriation of amount of Rs.25 lakhs already paid by assessee - If an amount of Rs.25 lakhs stands appropriated on 30.10.2009, the case made out by revenue that assessee had not debited amount in PLA and hence not eligible for refund is totally incorrect proposition - It is also to be noted that Tribunal has also recorded that this amount is debited by assessee to the Government Treasury - On perusal of certificate issued by State Bank of India which is annexed to appeal memoranda, it is found that SBI has categorically stated that amounts are debited to assessee’s account on 13th and 14th September, 2007 which would mean that the amounts have been credited with CBEC/Government of India - On such overwhelming evidence indicating the payment to the Government Treasury, both the lower authorities were in error in not sanctioning the refund claims of Rs.25 lakhs to assessee - Impugned order is set aside: CESTAT

- Appeal allowed : HYDERABAD CESTAT

2019-TIOL-416-CESTAT-ALL

Vaishno Devi Enterprises Vs CCE

CX - The dispute in present appeal relates to classification of product being manufactured by assessee - Whereas the revenue has classified the product as "PU Foam Sheets" classifiable under Chapter Heading No.39211310 which is not entitled to Small Scale Exemption, the assessee have contended that the product being manufactured by them is "Waste Scrap Foam Sheet" and is properly classifiable under Tariff Heading No.39211900, which is eligible for benefit of Small Scale Exemption Notfn 8/2003-CE - On going through both the orders of Original Adjudicating Authority and as also of Commissioner (A), the Appellate authority has simplicitor gone by the facts of pre dominance of PU polyurethane in the product as reported by Chemical Examiner - He has not gone through the other part of said report which indicates that sample is of different colours and also contains plastic material and also adhesives material - Apart from that, there is no rebuttal to findings of adjudicating authority that the assessee do not have the machinery to manufacture PU Foam and the manufacturing process adopted by them clearly show that what is being manufactured is Waste Foam Sheet - The Original Adjudicating Authority has also examined the raw materials required for manufacture of PU Foam and has clearly come to a finding that no such material was purchased by assessee from the market - Such evidences adopted by Joint Commissioner, has not been considered by Commissioner (A) and there is neither any finding on the same nor any rebuttal - As such, no merit found in impugned order of Commissioner (A), same is accordingly set aside: CESTAT

- Appeal allowed : ALLAHABAD CESTAT

CUSTOMS

2019-TIOL-425-CESTAT-MAD

Msk International Vs CC

Cus - The assessee-company attempted to clear 'Ceftriaxome Sterile' by declaring its chemical name instead of its generic name - The Department alleged that the goods were imported from China and the chemical name had been declared in a bid to evade Anti Dumping Duty - The Department also alleged that the assessee had undervalued the clearances - The premises of the assessee-company were searched & summons were served to its proprietor - In his statements, the proprietor claimed to have obtained an IEC code but the same was used by two other persons known to him, to import the consignment of goods - He claimed to know nothing about the imported goods - Statements taken from of one of these persons led the Department to another individual, who in his statements admitted that the goods were under-valued & having originated from China, also attracted Anti Dumping Duty - Hence demand for differential amount of duty was raised with interest - The goods were held liable for confiscation u/s 14 of the Drugs & Cosmetics Act, 1940 r/w Section 111 (d) & 111 (m) of the Customs Act, 1962 - As the goods were not available for confiscation, no order was passed u/s 125 of the Act - Penalty was imposed on the assessee-company along with personal penalties were imposed on the proprietor of the assessee company and upon all the connected persons.

Held - It is clear that the entire exercise was masterminded and executed by the third persons who were known to the proprietor of the assessee-company - Though penalty merits being imposed, it is seen that penalty imposed u/s 13(b) of Drugs & Cosmetics Act, can only be warded by a court not inferior court of a Metropolitan Magistrate or of a Judicial magistrate of the first class - Moreover, penalty u/s 114A of Customs Act mandates penalty equivalent to duty or interest so determined - In the present case, no duty demand has been raised with interest against this individual - Hence penalty u/s 114A cannot be sustained & must be set aside - Moreover, the penalty imposed on the proprietor of the assessee-company merits being reduced in quantum, considering that he was not directly involved in importing the consignment - It is also seen that the modus operandi of declaring the chemical formula was effective enough to hoodwink the Department - Hence the proprietor cannot be saddled with huge quantum of penalty simply for lending IEC code - Consequently, the appeal filed by the assessee-company also becomes infructuous: CESTAT (Para 2-3.4,7.1,7.2)

- Assessees' appeals partly allowed: CHENNAI CESTAT