2019-TIOL-NEWS-35 Part 2, Dated: Monday, February 11, 2019

SERVICE TAX

2019-TIOL-444-CESTAT-MAD

Kriticons Ltd Vs CST

ST - Assessee is undertaking turnkey works contracts for Interior Works since 2002 - They initially obtained service tax registration under "Construction Services" upon introduction of service tax levy on services w.e.f. 10.09.2004 - They surrendered their Service Tax Registration on 26.04.2007 and thereafter obtained registration under Works Contracts Services and started discharging service tax under "Works Contracts Services" - On scrutiny of records, it was noticed that assessee ought to have paid service tax under "Commercial or Industrial Construction Services" - The period involved in the case is from 10.09.2004 to 31.05.2007 - That the issue being a works contract whether subject to service tax prior to 1.6.2007 has been settled by judgment of Supreme Court in case of Larsen & Toubro Ltd. - The Coordinate Bench in case of CCL Products (India) Ltd. in a similar matter had set aside the demand relying upon the judgment of Supreme Court on identical set of facts - Following the same, demand is unsustainable: CESTAT

- Appeal allowed : CHENNAI CESTAT

2019-TIOL-443-CESTAT-MAD

Syed Ahamed Vs CGST & CE

ST - The four assessees are equal co-owners of property which was rented out - They received rental income from the property and TDS was deducted separately for each co-owner for income tax purposes - Department was of the view that since co-owners have an undivided share in the property, all the co-owners have to be treated as an association of person and the rental income has to be combined together - Assessee has given the break-up of share of each co-owners in value of rent alleged in SCN - It would show that the same would fall below the threshold exemption under SSI notification during the relevant period - The demand has been raised on all co-owners to treat them as association of person and levy service tax on the amount of rent received by them - When the co-owners are treated individually, the amounts undoubtedly fall below the threshold exemption - The Tribunal in case of Sarojben Khulsanchand & Ors. - 2017-TIOL-2284-CESTAT-AHM had occasion to consider similar issue and held in favour of assessee - Following the same, demand cannot sustain: CESTAT

- Appeal allowed : CHENNAI CESTAT

2019-TIOL-442-CESTAT-AHM

Raj Petro Specialities Pvt Ltd Vs CCE & ST

ST - The assessee is engaged in manufacture of excisable goods namely, different type of Industrial Oil, Lubricating Oil and Petroleum Jelly - During audit, it was noticed that assessee have made payment under head of Foreign Banks Charges to Foreign Banks towards interest, Foreign Bank Commission / Charges, Foreign Bank Charges for LC-retired and other charges - It was also observed that assessee has exported their goods and Foreign Bank collected report proceeds and after deducting their commission, they made payment to assessee - On the basis of information and further clarification by assessee, a SCN was issued wherein the demand of service tax was proposed - From the Circular dated 10.02.2014 it is abundantly clear that when the Indian Banks are collecting charges including the charges of Foreign Banks toward import and export of the goods of their client - In such case, as regard the service tax liability under Reverse Charge Mechanism, the Indian Banks are recipient of service, therefore, assessee cannot be held as recipient of service provided by Foreign Banks to Indian Banks - Accordingly, assessee is not liable to pay service tax under Reverse Charge Mechanism - This very same issue has been considered by Tribunal in case of Greenply Industries Ltd - As per said judgment, it was held that when assessee is not directly making the payment to Foreign Banker towards any service provided by said Foreign Banker to the Indian Bank, assessee is not liable to pay service tax - With this settled position, any bank charges paid by Indian Bank to Foreign Banks even though in connection with import and export of goods and the same was debited to assessee, the service tax liability does not lie on assessee - However, Tribunal is not going into the exact calculation of service tax and demand, in case any service charges is paid directly by assessee to Foreign Banker towards the service received by assessee from the Foreign Bank in such case the service tax liability will be on assessee - Matter remanded to adjudicating authority to verify the quantification and if any service tax liability arises, the same may be demanded from assessee: CESTAT

- Matter remanded : AHMEDABAD CESTAT

CENTRAL EXCISE

2019-TIOL-441-CESTAT-AHM

Bijal Packaging Vs CCE & ST

CX - The assessees, located in one factory premises, are engaged in manufacturing Tin containers - They were also engaged in manufacturing Metal Steel Containers in their own capacity as well as on job work basis - They also split up the clearances after availing exemption under Notfn No 08/2003 - Search proceedings & pursuant investigation revealed that the assessees manufactured Tin containers without obtaining Excise registration - The Revenue observed certain transactions indulged in by the assessees & concluded that they carried out job work in some cases & in other cases, purchased metal Tin containers, which did not amount to job work - The Revenue also alleged that in some cases, the assessees transferred metal Tin plates to a third unit for conversion into containers, on job work basis - It was also noted that in some cases, Tin plates were purchased from the third unit & transferred between the assessees for conversion into containers - Hence duty demands were raised with interest & penalties were imposed.

Held - Considering the decision of the Apex Court in M/s Ispat Industries it is seen that the Excise duty liability must be computed considering the sale value charged to the independent customers, as the assessable value for the purpose of valuation of job worked goods - As such valuation is as per Section 4, the assessees are permitted deductions, such as transportation - Moreover, regarding the the invoices on which the assessees sought to avail Cenvat Credit, the goods of such invoices were admittedly used by the assessees for job work - The same was endorsed by the Department by taking cost of raw material from the same invoices - Hence credit cannot be denied merely because the assessees' name did not appear on the invoices & also considering that the duty paid goods were used by the assessee to manufacture job worked goods - Therefore, the valuation of job worked goods computed based on adding cost of raw material & job work charges, is incorrect - The duty demand warrants fresh computation - Moreover, as the issue involved pertains to interpretation of SSI exemption Notfn., no mala fide can be attributed to the assessees - Thus the penalties merit being set aside: CESTAT (Para 1,4,5)

- Assessees' appeals partly allowed : AHMEDABAD CESTAT

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CASE LAW

2019-TIOL-440-CESTAT-AHM

Abubakar Ismail Kapadia Vs CCE & ST

Cus - The assessee is a 100% EOU engaged in manufacture of twisted yarn and fabrics, filed two appeals - The appellant's unit received the warehousing certificate in respect of six consignments out of the eight, which the appellant handed over to the Range Superintendent without having any covering letter - The consignments covered by the ARE-3 Nos 61 and 62 were diverted to M/s Khan Garments which rejected it - Subsequently, another customer M/s Asharani Garments (consignee) accepted the consignments, as the appellant had valid CT-3 certificate thus, the goods were diverted to the consignee - On verification by the jurisdictional authority of appellant of the reware housing certificates from the consignee, it was reported that Range record of the relevant period was not available in the Range as the same was taken by the investigation agencies - Accordingly, the assessee was served with SCN imposing demand duty forgone on the clearance of finished goods, and also on the duty free raw materials consumed in the SCN on the ground that the assessee had failed to submit the genuine reware housing certificates within the stipulated time period - The SCN also imposed demand of duty equal to custom duty on finished goods and penalty - Further, in addition, the Central Excise duty on raw materials procured by the appellant and which were consumed in finished goods were also imposed equivalent amount of penalty - The SCN confiscated the finished goods cleared and raw materials procured without payment of duty for finished goods and on inputs - Thus, the adjudicating authority confirmed the demands made in the SCN - On appeal, the Appellate Commissioner confirmed the order of the original authority.

Held - The approach of the adjudicating authority and the appellate authority was incorrect - Once the re-warehousing certificates were produced by the assessee, the same had to be considered as genuine unless any evidence of non- receipt of goods by the consignee was reported - Thus, only because the diaries of the Superintendent or the Inspector having jurisdiction over the consignee were are not available with the Department, or the records with the investigative team of the Department, or that the re-warehousing certificate does not bear the name of the Superintendent concerned, the re-warehousing certificates cannot be considered as fake - Therefore, the Revenue is required to show from their own records or from the investigation at the consignee's end that the goods did not reach the consignee - Further, the Department had contended of non re-warehousing of the goods at the consignee's factory, thus, the Department was required to prove the same by substantial evidence, not based on assumption - Thus, in present case there was no evidence of diversion of goods - The assessee had submitted the lorry receipt and the payment details to support the contention of clearance of goods to the consignee - Therefore in the given set of facts and in absence of any adverse evidence, it cannot be said that the goods did not reach the consignee or were not warehoused - Thus, the demands are not sustainable - The raw material duty cannot be demanded as the same were consumed for intended purpose of manufacture - Lastly, confiscation of finished goods is quashed - Hence, the order of the adjudicating authority merits being quashed: CESTAT (Para 7,8 & 9)

- Assessee's appeals allowed : AHMEDABAD CESTAT