2019-TIOL-NEWS-044, Dated: Thursday, February 21, 2019

ST - The assessee was engaged in providing Civil Construction Service classifiable under "Works Contract" service and "Commercial or Industrial Construction" service - They were providing service to various clients including M/s. Keppel Land, M/s. Keppel Purvankara and M/s. SAP Lab Café Expansion - On conduct of audit, the department contended that assessee have not included the value of reinforcement steel and cement received free of cost from M/s. Keppel Land and from M/s. Keppel Purvankara in the taxable value of the service - The assessee relied upon the case of Bhayana Builders - 2018-TIOL-66-SC-ST wherein it is held that both prior to and after amendment to Section 67 of FA, 1994, the value on which service tax is payable has to satisfy some ingredients - It does not expand the meaning of term "gross amount charged" to enable the department to ignore the contract value or the amount actually charged by service provider to service recipient for service rendered - The value of items supplied by customers to service provider on FOC basis is not includable in taxable value of the service - Assessee is justified in not including the cost of reinforcement steel and cement supplied by their clients M/s. Keppel Land and M/s. Keppel Purvankara - Therefore, the confirmation of duty in this regard is set aside - When the demand itself does not survive, interest and penalty would consequentially go - Coming to the issue of levy of equal penalty in respect of RMC cleared by assessee to M/s. SAP Lab, assessee have paid service tax along with interest before the issuance of SCN - They have submitted that they have no mala fide intention to evade payment of duty and as such, penalty cannot be imposed - Assessees are big players in the field of construction - They cannot claim themselves to be at par with common man with average intelligence as claimed - Therefore, they have not made any case to show the absence of mala fide intention - They are liable to pay penalty equal to duty sought to be avoided/evaded - Assessee having paid service tax before the issuance of SCN are well within their right to exercise the option given the Commissioner - Appeal is allowed with regard to demand of service tax on items supplied by customers of assessee on FOC basis is set aside along with interest and penalty - As regards the issue of inclusion of value of RMC supplied by the customers to the assessee, the duty of Rs.32,76,030/- confirmed and restrict the penalty to Rs.8,19,008/-: CESTAT

ST - Miscellaneous Application has been filed by assessee for withdrawal - No objection was filed by the Revenue - The appeal is dismissed as withdrawn: CESTAT

ST - The common facts involved in both the cases pertain to demand of service tax on royalty charges paid to foreign collaborators of assessee for transfer of technical know how under "Intellectual Property Service" (IPR) - Assessee is correct in her assertion that technical know-how involved in both these cases are not covered under any Indian law - This being so, the ratio consistently reiterated in Tata Teleservices Ltd. - 2016-TIOL-2619-CESTAT-MUM, Tata Consultancy Services Ltd. - 2015-TIOL-2370-CESTAT-MUM and Catapro Technologies - 2017-TIOL-2729-CESTAT-MUM relied upon by assessee will apply on all fours to these appeals - The impugned orders with then not survive and will be set aside: CESTAT

CX - It is well settled law that Revenue has to discharge the burden of test of marketability of the product - Processing / printing of various registers, forms, books, letters etc. [Heading 4820.10] and supplying the same to the other establishments governed by the MCGM - no material on record that the printed stationery is marketable - as Revenue failed to discharge the burden of test of marketability, the demand of Central Excise duty cannot be sustained - impugned order set aside and appeal allowed: CESTAT [para 5]

2019-TIOL-542-CESTAT-MAD

ITC Ltd Vs Commissioner of GST & CE

CX - The assessee is a manufacturer of paper and paper products and they have other manufacturing units at Badrachalam, Bollaram and Tribeni - The Head Office of assessee at Secunderabad receives invoices towards input services and distributes the credit among various manufacturing units - For this purpose, Head Office is registered as an ISD - After audit, department was of the view that credit in respect of amount distributed through 7185 entries was ineligible - SCN was issued proposing to disallow the credit in respect of this amount - The rejection of credit is only for the reason of technical defects in invoices - There is no dispute with regard to services consumed - The argument of assessee that as per proviso to Rule 9(2), the AC / DC ought to have verified their accounts when there are technical defects in the invoices, is correct - The penalty imposed in this respect for wrongly availed credit is unjustified - The impugned order is modified to the extent of setting aside the penalty only without disturbing the disallowance of credit or the interest thereon: CESTAT

- Appeal partly allowed: CHENNAI CESTAT

2019-TIOL-541-CESTAT-KOL

Indian Oil Corporation Ltd Vs CCE

CX - The dispute is regarding valuation to be adopted for duty payment in the LOBs at the time of clearance of the same, for the manufacture of lubricating oils at the premises of Blending Plant itself - Since the LOBs have been transported under bond to the premises of Blending plant for LOBs duty is required to be paid at the time of such activity - They had discharged duty at the price circulated by Marketing Division of IOCL Ex-Kolkata - Revenue has proceeded to load the price with notional amount of freight towards transportation of the LOBs from Haldia to Paharpur - This has been strongly contest by assessee with the argument that the price list makes it clear that the prices Ex- Kolkata has been arrived by addition of freight amount - Further, it has been submitted that the situation is revenue neutral and there can be no allegation of supression and demand of duty under such circumstances - The dispute can be decided on the argument of Revenue Neutrality - The duty paid at the time clearance of LOBs was availed by assessee as Modvat Credit for payment of duty at the time of clearance of manufactured lubricating oil - Any differential duty paid on LOBs will be immediately available as Modvat Credit and hence this is clearly leading to a revenue neutral situation - The decision of Tribunal in case of Anglo French Textiles was upheld by Supreme Court - By following this decision, demand raised in impugned order is not maintainable: CESTAT

- Appeal allowed: KOLKATA CESTAT

2019-TIOL-540-CESTAT-BANG

Hindalco Industries Ltd Vs CCT & CE

CX - The assessee is engaged in manufacture of Inorganic Chemicals such as Calcimined Alumina Hydrate and also registered as Service Tax assessee for GTA, Manpower Services and other taxable services - During audit, it was noticed that assessee has availed cenvat credit on input services in respect of Special Alumina Expansion Project services inasmuch as said services do not fall within the ambit of Rule 2(l) of CCR, 2004 - Accordingly, a SCN was issued proposing to recover Service Tax credit availed on ineligible services along with interest and imposition of penalty - In view of Purchase Order and various invoices issued by DCPL, the service provided by them are not construction service and are not covered under exclusion clause of Rule 2(l) of Cenvat Credit Rules which only excluded specific services relating to construction service or works contract service when used in or in relation to construction of a building or a civil structure or a part thereof - Further, the services rendered by DCPL is only relating to Drawing or Design and Consulting Engineer's Services whereas the construction services have been rendered by some other person and the DCPL are not concerned with the construction activity at all - Further, the definition of ‘input service' is very wide and includes inputs used in or in relation to manufacturing activity - Further, DCPL have not undertaken any actual or physical construction activity for assessee and they were merely provided Design and Drawing in respect of civil structure and Plant and Machinery/equipment which were to be installed in factory and this service is not envisaged under exclusion Clause of Rule 2(l) of Cenvat Credit Rules - Further, in case of Idea Cellular Ltd. - 2016-TIOL-1198-CESTAT-MUM , the Tribunal has held that the services like Erection, Commissioning and Installation and Consulting Engineer Services are not excluded in amended definition of ‘input service' - The impugned order is not sustainable and therefore the same is set aside: CESTAT

- Appeal allowed: BANGALORE CESTAT

Cus - The assessee was issued with Customs Licence to function as a 100% EOU for manufacture of goods and export of polished granite slabs - They procured certain duty-free capital goods and installed the same in their EOU premises for manufacture of goods and during period 1986 to 1993 goods worth Rs.298.54 lakhs were exported but from 1993 onwards, the procurement of granite blocks from quarries became difficult owing to adverse law and order situation as a result of which the assessee was compelled to halt production resulting in short-fall of export obligation as stipulated in letter of permission - The capital goods were procured and installed in EOU in 1986 and the order of de-bonding was passed by Development Commissioner on 19/07/2002 - The assessee is entitled to depreciation from 1986 to 2002 which also works out to 156% as per the Notfn 52/2003 and Notfn 22/2003 - In fact the de-bonding of capital goods were allowed on 14/03/2008 and thereafter the duties were paid - This issue of depreciation has been settled by various decisions relied upon by assessee - The circular 14/2004-Cus also prescribe that depreciation is admissible till the date of payment of duty - Therefore the impugned order is not sustainable in law: CESTAT

Cus - Assessee is a licensed CHA issued under CHALR, 2004, wherein licence was issued in Tuticorin - The assessee also having a branch in Chennai - Pursuant to investigations conducted by DRI, it emerged that goods exported under a Shipping Bill declared as textiles and readymade garments, were found to have been used to smuggle out 51.23 kgs of goods alleged to be Ketamine - From the investigations conducted, it appeared that one Shri. D. Arulraj, partner of assessee and in charge of Chennai Branch of assessee was actively involved in facilitating the alleged smuggling - There is a delay of more than two years after receipt of offence report for completion of proceedings under CHALR, 2004 - The CBEC had issued a Circular 09/2010-Cus conveying a series of instructions with regard to various issues under CHALR - In paragraph 7.1 of the same, the Board has prescribed an overall time limit of nine months from the date of receipt of offence report and has also prescribed time limits at various stages of issue of SCN, submission of enquiry report, passing of Order by Commissioner of Customs - The non-adherence of time limit of nine months from date of issuance of offence report to passing of order by Commissioner will vitiate the impugned Order - The impugned Order ordering revocation of licence and forfeiture of security deposit cannot then be sustained and will have to be set aside: CESTAT