2019-TIOL-NEWS-39, Dated: Friday, February 15, 2019

SERVICE TAX

2019-TIOL-493-CESTAT-MAD

Raga Foundation Vs Commissioner of GST & CE

ST - The assessee was involved in Construction business of independent houses and residential flats who entered into a joint development agreement neither by obtaining service tax registration from the Department nor had paid service tax for undertaking such construction activity - Further, Further, the assessee obtained the service tax registration and paid the dues with interest - However, a SCN was issued while proposing to demand service tax u/s 73(1) of the Finance Act, 1994, interest u/s 75 and also penalty u/s 76, 77 and 78 as the assessee failed to discharge the entire service tax liability - On appeal, the Commissioner of Service Tax, hence confirmed the demand of service tax and imposed equal penalty upon the assessee.

Held: In the case of M/s. Aswini Apartments Vs. Commissioner of G.S.T. & Central Excise it was held that the demand of service tax under commercial or industrial construction service (residential complex) cannot sustain after the period 1.6.2007, the levy of service tax prior to 1.6.2007 cannot also sustain by application of the decision of the Supreme Court in the case of Larsen & Toubro Ltd. - The decision in this case squarely applies to the present case & the Revenue was unable to show any distinguishing factors - Hence the order in question merits being set aside: CESTAT (Para 1,6,7,8)

- Assessee's appeal allowed: CHENNAI CESTAT

2019-TIOL-492-CESTAT-DEL

CST Vs Resolution Capital And Global Pvt Ltd

ST - Assessee's company got incorporated in year 2007 to render Management Services and Management, Maintenance and Repair Services duly taxable under Section 65(105)(R) and 65(105)(ZZG) of Finance Act - Subsequent admission is that the company was never got registered under Service Tax - It is also on record that despite the summons being issued to assessee to provide complete details of his business for period in question to the department, he failed to supply complete data - The Commissioner has miserably failed to appreciate the conduct of assessee while not obeying the Excise Officer, who was discharging his duty under the prescribed law - The mere affidavit ofassessee that he had no bank account except the one since the year 2010-14, is highly insufficient to prove that there were no transactions by assessee's company during period in question or till the said account was got opened - Assessee should be allowed one more opportunity to prove that no service was rendered and no consideration was received during the period covered by SCN and that the record of ROC is not correct - Assessee offered to submit CA's certificate to this effect - To facilitate submission and consideration of such a certificate, matter is remanded to the adjudicating authority for a de novo decision: CESTAT

- Matter remanded: DELHI CESTAT

2019-TIOL-491-CESTAT-AHM

Messers John Energy Ltd Vs CCE & ST

ST - The appellants engaged in the mining services made payment to a bank and certain parties - However, these services being received from overseas were liable for payment of service tax - Accordingly, a SCN was issued demanding Service Tax for the period May, 2006 to March 2007, and the adjudicating authority confirmed the demand of service tax - On appeal, the Commissioner (Appeals) upheld the order of original authority.

Held: The Service Tax liability was on the appellant in terms of Rule, 2(1)(d)(iv) of Service Tax Rules, 1994 read with section 66A of the Finance Act, 1994 - Further, from the ST-3 return it's evident that the appellant paid major amount of service tax in cash and small portion of tax was paid from CENVAT - Therefore, the service tax in cash would stand reduced was available as CENVAT Credit - Thus, clearly it was a case of revenue-neutrality & and non-payment of service tax was without malafide intention - Hence, the demand for extended period was not sustainable and the same was quashed - However, if there was any amount of Service Tax arising in the normal period of limitation only that much amount was required to be paid - Lastly, penalty attributed to the recoverable amount of Service Tax is also set aside: CESTAT (Para 4, 5)

- Assessee's appeal allowed: AHMEDABAD CESTAT

CENTRAL EXCISE

2019-TIOL-351-HC-ALL-CX + Case Story

CCE & Central GST Vs Kurele Chemical Company

CX - Revenue was using GRs repeatedly for framing charges against various manufacturers of Gutkha without connecting the GRs with the goods manufactured by the particular assessee - there was no investigation conducted about procurement of raw material of allegedly clandestinely cleared goods - statements of various persons were recorded under duress and all the submissions made therein were retracted by the witnesses and during the cross examination they had also stated that the statements were recorded under pressure by the officers - entire show cause notice has been based on bilties/GRs claimed to have been recovered from M/s Vinod Forwarding Agency, Kanpur. It further reveals that the goods transported by M/s Vinod Forwarding Agency, name of the manufacturer, have not been stated on the alleged GRs and its brand name and it was only presumed by the Revenue that wherever no names/brands were mention of Rajshree (Brand name, M/s K.P. Pan Flavours) is established, the said bilties/GRs should be treated as if the said goods were booked by the respondent-assessee - bilties/GRs which were recovered from the transporter, M/s Vinod Forwarding Agency and were lying with the Revenue were being used for issuing show cause notice without conducting any investigation - finding of facts recorded by the Tribunal need no interference - Revenue appeal lacks merit, hence dismissed: High Court

- Appeal dismissed : ALLAHABAD HIGH COURT

2019-TIOL-490-CESTAT-HYD

ITC Ltd Vs CCE, C & ST

CX - During the relevant period, the assessee-company cleared both exempted and dutiable goods & it availed Cenvat credit on common inputs used - As it had not maintained separate accounts, the Revenue issued SCN seeking reversal of 8% of value of exempted goods - The assessee reversed such amount before the adjudication order was passed - However, the Revenue opined that the amount reversed was insufficient & so raised duty demands, seeking reversal of 10% of the value of exempted goods cleared.

Held: The retrospective amendment to Rule 6 of CCR 2004 clarified that in respect of availment of Cenvat credit on common inputs used to manufacture both dutiable & exempted goods, the reversal of credit attributed to inputs used in manufacturing exempted goods would suffice - Such amendment is applicable onto the present case - As the assessee reversed the proportional amount of credit availed on exempted goods, the orders demanding duty equivalent to 8% of valuation of exempted goods, is set aside - Moreover, considering that the assessee is unable to prove that interest liability was discharged on the specified date, no relief from imposition of penalty can be extended - Hence the assessee is also liable to pay interest applicable upon the amount reversed, along with penalty: CESTAT

- Assessee's appeal partly allowed: HYDERABAD CESTAT

2019-TIOL-488-CESTAT-MAD

Bay Forge Ltd Vs Commissioner of GST & CE

CX - The assessee-company, engaged in manufacturing Steel rings, steel forgings & aluminum forgings, availed credit on various input goods & services during the relevant AY - The Revenue issued SCNs proposing to deny credit irregularly availed - The Revenue alleged that the assessee availed second instalment of Cenvat credit on capital goods for the second time - It also claimed that credit was availed twice based on the same documents & that credit was availed on inputs used in manufacturing exempted goods - The Revenue also alleged that the assessee did not correctly reverse credit on inputs used in manufacturing exempted goods - It also alleged incorrect reversal of credit for LPG / Furnace oil used in manufacturing exempted goods, by incorrect adoption for value of exempted goods - Duty demand was raised with interest & equivalent penalty imposed u/s 11AC and u/r 15(2).

Held: The assessee does not contest the demands raised on four counts - Regarding demand raised on account of irregular credit availed by assessee for manufacturing exempted goods, which the assessee is liable to reverse - However, the assessee reversed credit proportional to quantum of inputs physically contained in the final product - Under Rule 6 of CCR 2004, there is nothing on record to show that waste & scrap also qualify as final products - Hence the provisions of Rule 6 in toto establish that credit is not eligible on inputs used to manufacture exempted final products - It does not make any separate dispensation when the waste and scrap arising during the manufacture of such exempted final products are cleared on payment of duty - Hence if there is an embargo to avail credit on inputs used to manufacture final products, the assessee cannot claim that credit would be eligible since the waste & scrap is cleared on payment of duty - Hence the demand raised on this count is sustainable - Regarding the reversal of proportionate credit on LPG & consumables used to manufacture the final products for two entities on job work basis, it is seen that the assessee did not apply the correct formula while reversing credit - Such an anomaly arises due to incorrect application of the relevant formula which came into effect before and after 01.04.2008 - It is also noted that the assessee used funded machinery for dutiable goods & paid royalty for such use - All these aspects must be considered when determining value of exempted clearances - Hence the matter warrants remand in this regard - Moreover, the assessee reversed major portion of the credit during the investigation and much before the SCN was issued - Besides the issues involved were interpretational in nature & arose from mistakes & inadvertent errors in calculating amounts to be reversed - Hence the penalties imposed merit being set aside - Thus the appeal be disposed off on such terms: CESTAT (Para 1,2,6.4,6.5,7)

- Assessee's appeal partly allowed: CHENNAI CESTAT

2019-TIOL-487-CESTAT-MAD

Sundram Fasteners Ltd Vs Commissioner of GST & CE

CX - During the relevant period, the assessee availed cenvat credit on various input services - It was served SCN alleging that such credit was wrongly availed since the input services were not eligible for credit u/r 2(l) of CCR 2004 - Duty demand was raised for recovery of the same, with interest & penalty was imposed u/r 15(1) of CCR, whereas some amount of the credit claimed was allowed - On appeal, the Commr.(A) sustained such findings.

Held: The issue regarding credit eligibility for Electrical services is no longer res integra and credit has been allowed by the Tribunal on input services such as construction, erection, installation and maintenance and repairs - Hence denial of credit on electrical services is not sustainable - Regarding credit availed on renting of immovable property service, it is seen that the rent is paid for a place located outside the factory premises - Hence no credit can be allowed on the same - Thus disallowance of credit on this service is upheld - Disallowance of Air travel agent service and Boarding & Lodging service is upheld as they have not been contested by the assessee - Regarding denial of credit on Manpower Supply Service, the issue is settled by the Tribunal's decision in M/s. Coastal Rubber Equipment Pvt. Ltd. Vs. C.C.E. wherein it was held that credit could not be denied on any input service, where service tax had been paid even if it was not payable - Following such findings, credit cannot be denied for Manpower supply service in the present case - Hence the assessee's appeal is partly allowed: CESTAT (Para 2,7-10.1)

- Assessee's appeal partly allowed: CHENNAI CESTAT

CUSTOMS

2019-TIOL-486-CESTAT-MAD

CC Vs Sterlite Industries India Ltd

Cus - The assessee had imported goods declared as Off Grade Copper Cathode under Advance Authorization for Annual requirement claiming benefit of Notfn 99/2009-Cus - The Department took the view that imported product namely Copper Cathodes being the output/export product/end product does not figure in FTP Vol. 2 Input-Output Norms for duty exemption schemes - Hence, the benefit of said Notification would not be available to assessee - he first issue in dispute concerning eligibility to import Off Grade Copper Cathode has been more than clarified by DGFT vide their letter dated 07.05.2013 which inter alia gratifies the import of the Off Grade Copper Cathode - Both the conditions namely 1(iii) of Notfn 99/2009-Cus. as well as paragraph 4.24 A(a)(iv) of HBP v.1 require the authorization holder to submit an application in "Aayat Niryat Form along with prescribed documents before making the shipment" - The phrase "before making the shipment" is only to be interpreted as before making the first export shipment and surely not before the receipt of the first import of raw material from overseas - The premises on which the ground of appeal has been filed by the Revenue is flawed - No merit is therefore found in the appeal, for which reason it is dismissed: CESTAT

- Appeal dismissed: CHENNAI CESTAT

2019-TIOL-485-CESTAT-AHM

Welspun Corporation Ltd Vs CC

Cus - The assessee had imported the goods described as “Prime HR steel Plates of Alloy and Non Alloy Steel" and sought duty free clearance thereof by way of filing different Bills of Entry against the advance authorization by claiming exemption Notfn 96/2009 - A SCN was issued to assessee proposing confiscation of goods involving excess weight and to demand customs duty on undeclared weight of HR Plates - It is not in dispute that the transaction value as determined in terms of Section 14 of the Act, is required to be taken as the basis for computing the assessable value on which the duty is to be assessed - The extent of permissible variation between the declared and actual weight has to be with reference to the type of commodity qua which the said difference is being evaluated - It is not in dispute that difference between theoretical weight that has been declared on bill of entry vis-a-vis the weight that has been physically computed worked out to 3.57% and is well within the 5% tolerance provided for, in the Indian Standard specifications - As long as the variation is within the permissible limits prescribed in relevant standards the same cannot result in any customs proceedings for alleged mis-declaration of particulars - When there is no dispute as to the correctness of transaction value, there was no cause for initiation of any adjudication proceedings either for enhancement of value and/or imposition of fine and penalty: CESTAT

- Appeal allowed: AHMEDABAD CESTAT