SERVICE TAX

2019-TIOL-684-CESTAT-HYD + Case Story

ITC Ltd Vs CC, CE & ST

ST - Activity of threshing and drying of raw tobacco leaves would not come under category of 'Business Auxiliary Service' and is not a taxable activity: CESTAT [para 5]

ST - Commission paid to foreign commission agent, under reverse charge mechanism, in relation to sale or purchase of agricultural produce is exempted from service tax in terms of notification 13/2003-ST - Orders set aside and appeals allowed: CESTAT [para 6, 7]

- Appeals allowed: HYDERABAD CESTAT

2019-TIOL-666-CESTAT-HYD

AP Trade Promotion Corporation Ltd Vs CCE

ST - The assessee is a State Government undertaking engaged in helping Government employees procure consumer durables and vehicles - A SCN was issued to assessee demanding service tax on three sources of their income - Insofar as first element of service tax on the hire purchase is concerned, the issue reached finality at the hands of Apex Court in case of Bajaj Auto Finance Ltd., - 2008-TIOL-120-SC-ST and the difference between hire purchase and hire purchase finance is based on whether the ownership of goods gets transferred to consumer at the beginning or at the hand of hire period after all the installments are paid - The former is hire purchase finance and latter is hire purchase - In this case, as it is evident from the arrangement with government employees and their offices, the ownership of goods lies with assessee and gets transferred to employee only after he pays all the hire charges and thereafter pays a transfer fee of rupee one - Therefore, the activity undertaken by assessee is clearly hire purchase and not hire purchase finance and is exigible to service tax during the relevant period - As far as element of interest on value of services is concerned, the ratio laid down by Supreme Court in Association of Leasing & Financial Service Companies - 2010-TIOL-87-SC-ST-LB that the entire amount is chargeable to service tax including the interest subject to any exemption notification - However, for part of the relevant period in this case, Section 67 excluded from the value of taxable service 'interest on loans' vide Section 90(c) of FA of 2004 w.e.f. 10.09.2004 by introducing explanation (1) (viii) - The service tax can be levied only on the hire purchase charges excluding the interest element for the period post 10.09.2004 - For the period prior to 10.09.2004, the service tax is payable including the interest element.

INSOFAR as the demand of interest on commission received from the insurance companies is concerned, assessee received commission from insurance companies for promoting their products and thus acted as their agent - Therefore this falls under category of 'insurance auxiliary service' which was chargeable under reverse charge mechanism during the relevant period and the service tax has to be collected on it from the insurance company and not from the agent - Therefore, the demands on this count need to be dropped - As far as demand of service tax on commission received from various vendors is concerned, such commissions were exempted vide Notfn 13/2003-ST until 09.07.2004 and service tax is chargeable thereafter along with interest - As far as the question of limitation is concerned, assessee have not declared the value of the services to the department in their returns - Therefore they suppressed the value of taxable services from the department - Extended period of limitation can be invoked - As far as the penalties imposed are concerned, considering that assessee is public sector undertaking, they may not have had a malafide intention of evade service tax - Hence invoking Section 80, the penalties imposed on assessee are set aside: CESTAT

- Appeal disposed of: HYDERABAD CESTAT

2019-TIOL-665-CESTAT-MAD

Artemis HR Services Cbe Pvt Ltd Vs CCE

ST - A SCN was issed upon the assessee aganist short-payment of service tax under the head of Business Suppoer Service - After assessment, the Adjudication authority accepted such demad and imposed interest and penalties.

Held: the assessee has discharged the service tax along with interest - SCN issued invoking sections 73 and 73A - However, such sections does not provide for imposition of penalty for non-failure to comply with such provision - There were no grounds to impose penalty u/s 78 - In O-i-O, the adjudicating authority imposed penalty and no penalty was imposed u/s 78. In appeal filed by Revenue, penalty u/s 78 was also imposed - Further, it held that there were no ingredients to impose penalty - It held that the assessees has established that the delay in payment of service tax was due to the default of one of the clients and consequent financial hardships - Thus, there was a reasonable cause for failure and therefore the Court held that it being a fit case for invocation to set aside the penalties - Thus, the penalty imposed u/s 76 and 78 in these appeals cannot sustain and requires to be set aside without disturbing the demand or interest and do not interfere with the penalty imposed u/s 77: CESTAT ( paras 2, 8, 9, 10 )

- Assessee's appeal partly allowed: CHENNAI CESTAT

CENTRAL EXCISE

2019-TIOL-669-CESTAT-KOL

Amit Metaliks Ltd Vs CCE & ST

CX - During stock verification the quantity in respect of finished goods as well as key inputs were found to be not tallying as per the record maintained by the Appellant No. 1 and also ER-I, ER-5 and ER-6 returns submitted to the department – allegations levelled of clandestine manufacture and removal of finished goods – Revenue contends that as the noticee have accepted the shortage and also made voluntary payment the clandestine removal is accepted by them, no further proof is required to that effect – demand of CE duty confirmed, therefore, assessee in appeal before CESTAT.

Held:Assessee has never accepted the shortage as claimed by the Revenue but paid the Central Excise duty to avoid further litigation and coercion - department has not conducted any verification at the buyer/supplier's end in spite of having complete address with them - Revenue has failed to conduct the investigation in a full proof manner so as to sustain charge against appellant – in view of the settled case laws on the subject matter, impugned order set aside and appeal allowed with consequential relief: CESTAT [para 23 to 25]

- Appeals allowed: KOLKATA CESTAST

2019-TIOL-668-CESTAT-KOL

Amit Metaliks Ltd Vs CCE & ST

CX - Clandestine removal of manufactured goods - Revenue has made the case without properly corroborating evidences on record -Entire SCN is based on the stock taking report and the various statements recorded from the Authorised Representative, Transporter and Director of the appellant company - Authorised Representative has accepted the shortage of the goods found in the factory but not the clandestine removal of goods without payment of duty, therefore, his statement is not conclusive to prove clandestine removal - In the show cause notice as well as in the impugned order, there is no concrete and tangible evidence in support of such a huge quantity of finished goods presumed to have been cleared without payment of duty from the appellant factory during the relevant period - For receiving such a huge quantity of raw material and for sending out such a huge quantity of finished goods and raw materials, number of transporters are required to be engaged - There is no evidence regarding any movement of goods by trucks or any other means to and from the factory of the appellant - No adequate enquiry or investigation from the transporter was carried out by the department - It is also on record that the department has got the complete address of most of the buyers of the appellant who are well known established concerns, however, there was no investigation regarding receipt of the said quantity which were alleged to be cleared by the appellant -No evidence was brought during the investigation regarding any evidence of receipt of money by the appellant as there was no seizure of cash at all - It is well settled that the charge of clandestine removal is a serious charge and the demand cannot be made on the basis of mere surmises and conjectures and assumption and presumption - Non-accountal of the receipt of raw material or clandestine removal of the goods cannot be on the basis of presumption [ Continental Cement Company - 2014-TIOL-1527-HC-ALL-CX Relied upon.]: CESTAT [para 11, 12]

CX - Alleged clandestine removal of 19352.552 MT of final product is based upon the show cause notice issued to SSSIL alleging the manufacture and clearance of 18501.04 MT of sponge iron to the appellant - reliance placed on another show cause notice without further corroboration is of no use in the present case - document on which the clandestine removal and manufacture is fastened on the appellant has been recovered from the guest house of the employee of M/s SSSIL which is at the best a 3rd party evidence and the reliance on which cannot be made without further corroboration as held in the case of Bhandary Industrial Metals Pvt. Ltd. - 2009-TIOL-2272-CESTAT-MUM : CESTAT [para 13]

CX - Cross examination - It is on record that the adjudicating authority has denied the cross-examination of various persons as asked by the appellant although their statements have been relied upon by the adjudicating authority while confirming the demand - without following the procedure established under Section 9(D)(i) of the Act, such statements are not admissible as a evidence - moreover, raw material for the manufacture of the ingot by the appellant has come from the State of Orissa but no evidence whatsoever has been gathered by the Revenue about the transport of the goods from the one state to another state which is well documented at the check post of two states - impugned order is, therefore, not sustainable and is liable to be set aside -Order set aside and appeals allowed with consequential benefit: CESTAT [para 14, 15]

- Appeals allowed: KOLKATA CESTAST

2019-TIOL-664-CESTAT-MAD

ARS And Company Vs CGST & ST

CX - The issue at hand pertains to the assessment of scented supari u/s 4 or Section 4A of the CEA 1944.

Held: An identical issue was settled in the assessee's own case for a previous period, wherein the Tribunal further relied on the decision of the Apex Court involving the very same assessee, in which it was held that the process of crushing of betel nuts into smaller pieces and sweetening the same with essential/non-essential oils, menthol, sweetening agents, did not amount to manufacture - Thus the Tribunal noted that the issue of valuation u/s 4 or u/s 4A has no relevance - Following such findings, the issue in the present case stands settled in favor of the assessee, considering that the Revenue could not cite any facts or law necessitating taking of a different view: CESTAT

- Assessee's appeal allowed: CHENNAI CESTAT

2019-TIOL-663-CESTAT-MAD

Brakes India Pvt Ltd Vs CGST & CE

CX - CENVAT - Appellants had EOU and DTA units and were availing Input service on Renting of Immovable property service - Prior to July 2014, as per the provisions of law, the assessees under LTU can avail input service tax credit on renting of immovable property for both the units together and the EOU unit was availing the credit in respect of both the units - However, from July 2014, the law got amended whereby the transfer of credit by EOU was barred, nonetheless, EOU continued to avail credit in respect of DTA also for renting of immovable property service - Audit detected the said wrong availment and SCN was issued for recovery of irregularly availed of Rs.14,82,351/- along with interest and also for imposing penalties - demand confirmed along with interest and penalty and Commissioner(A) upheld the same - appeal to CESTAT.

Held: It is very much clear that the situation is a revenue neutral one as EOU and DTA units being of the same assessee, even if the service tax as paid is confirmed, the other DTA would be eligible for the credit - demand set aside and appeal allowed with consequential relief: CESTAT [para 5, 6]

- Appeal allowed: CHENNAI CESTAT

2019-TIOL-662-CESTAT-AHM

Divine Laboratories Pvt Ltd Vs CCE & ST

CX - The appellant company cleared physician samples amongst doctors, free of charge - It also cleared physician samples at transaction value to the loan licensee, who further distributed the same to the doctors - During the relevant period, the Revenue raised duty demand on the value proportionate to the value arrived at u/s 4A based on the MRP prices - On appeal, such demands were confirmed.

Held: There are two situations - In the first, the appellant manufactures physician samples on behalf of loan licensee & sells the same to loan licensee, which further distributes the same free of cost to physicians - In such case, the decision of the Apex Court in M/s Sun Pharmaceuticals Industries Ltd is applicable, wherein it was held that what the distributors ultimately did with these goods is extraneous & could not be the relevant consideration to determine the valuation of goods - Following such findings, the valuation in the present case is to be done based on transaction value of sale of physician samples from the appellant to the loan licensee - Regarding physician samples manufactured by the appellant on its own behalf and distributed free of cost to the physicians, the decision of the Bombay High Court in M/s India Drugs Manufacturers Association is applicable, wherein it was held that valuation of physician's free samples had to be done under Rule 4 - Following the same, the valuation for these samples is to be done based on the value ascertained for the identical medicine cleared in the open market and assessed u/s 4A of the CEA - As the two categories have not been quantified separately, the matter warrants remand for conducting such exercise: CESTAT (Para 3,5,6,7)

- Case remanded: AHMEDABAD CESTAT

CUSTOMS

2019-TIOL-661-CESTAT-ALL

Hindustan Coca Cola Beverages Pvt Ltd Vs CC, CE & ST

Cus - The assessee has imported machine described by them as "Beverage Cooler SC-80" under Customs Tariff 8418 50 00 - Revenue sought to classify the same under Heading 8418 69 30 - As per catalogue produced by assessee, the machines in question have a very small storage facility and the same are not designed for display of the articles stored therein - There is no feature shown in said catalogue indicating any display of products stored inside - The same is capable of storing a few number of bottles out of which two bottles stand fixed upside down with a tap outside, so as to dispense with a fixed quantity of beverage - The fact that the machine has capacity to dispense with fixed quantity of beverage itself shows that the same is a vending machine - The contention of assessee that heading 8418 69 30 only covers the automatic vending machine, without any human intervention, cannot be accepted inasmuch as the said heading includes vending machines, other than automatic vending machines - This indicates that automatic vending machines are not covered by the said heading which relate to only vending machines - Tribunal fully agrees with the reasoning of lower authorities - Otherwise also, in terms of Rules of Interpretation, the entry which is more appropriate and specifically covers the goods in question has to be adopted as against the general entry - Vending machines stand covered by heading 8418 69 30 specifically includes the vending machines and the goods in question admittedly being vending machines have to be held as covered by the said heading - Further reference to the Section Notes as also Chapter Notes by the original adjudicating authority are also appropriate - No infirmity found in impugned order: CESTAT

- Appeals rejected: ALLAHABAD CESTAT