2019-TIOL-NEWS-109, Dated: Thursday, May 09, 2019

2019-TIOL-1320-CESTAT-HYD

Bayer Bioscience Pvt Ltd Vs CC, CE & ST

ST - Appellant has an agreement with M/s Aventis Crop Science GmbH located in Germany under which they provide services to their client - appellant has a plant breeding team which looks for specific traits from the germplasm and then they cross pollinate such plants with existing parental lines - After cross pollination, they test the varieties so produced continuously for 7 to 9 years across the country in different agro climatic zones to check their performance and stability - After evaluation, they send their reports to their client M/s Aventis who files a patent application and obtains Intellectual Property Rights (IPR) for hybrid seeds so produced - The first element of the demand is to charge the amount which the appellant received from M/s Aventis under 'scientific and technical consultancy service' - demands confirmed with interest and penalties - appeal to CESTAT.

Held: Scientific research is not confined to fundamental research but can also be applied research - Contention of appellant that plant breeding is not science is without any merits inasmuch as if plant breeding is not a science, then nothing in modern agriculture which resulted in green revolution is science - appellant, under the first agreement, rendered scientific and technical consultancy services to their overseas client and received consideration in foreign exchange - For the period 01.04.2004 to 14.03.2005, appellants are not liable to pay service tax as they were covered by the exemption notification 21/2003-ST - post introduction of the Export of Services Rules, 2005, in terms of Rule 3(1), where the taxable services are performed partly outside India and partly in India, it shall be treated as an export of taxable service - In this case, the entire research including cross pollination and testing of the germplasm and testing the variety so developed is done within the country but the reports were delivered to Germany - The service is complete only when the reports are also sent to their client, as per the agreement, in Germany - Until the report is delivered, the service is not complete and the appellant is not entitled to the consideration for the service, therefore, since the service by the appellant is rendered partly outside India and partly in India, such services should be treated as export of services: CESTAT [para 5]

ST - Appellant is providing guidance to farmers in cultivating crops to multiply the seeds of the variety so developed - The appellant himself buys the seeds so multiplied by the farmers and pays a price for that - Such guidance, in the field of agriculture is known as extension-education which is a branch of agricultural science which deals with transferring the knowhow to farmers - As this does not involve any scientific or technical research but only in passing on knowhow to the farmers about the agronomic practices to be followed and guiding them from time to time if there are any pest infestations, diseases etc., these services cannot be termed as scientific or technical consultancy services - demand on this element also fails - appellant is not liable to pay service tax on both the services rendered by them and the demands, interest as well as the penalties are liable to be set aside: CESTAT [para 6, 7]

- Appeals allowed : HYDERABAD CESTAT

2019-TIOL-1319-CESTAT-HYD

Gland Pharma Ltd Vs CCT

ST - The assessee-company manufactures Excisable goods & also provides output services - It has a centralized registration for service tax - It paid service tax on services rendered as well as on services received, under Reverse Charge Mechanism - While verifying the Cenvat credit availed during the relevant period, the Revenue noted that the assessee availed credit on input services used in dutiable goods as well as on common input services used in both dutiable & exempted goods -Credit was not availed on input services used solely in manufacturing exempted goods - Duty demands were raised for recovery of credit availed on the common input services - Meanwhile, the Revenue also opined that the assessee's activities were classifiable as Technical Testing & Analysis Service and so duty demands were raised in this regard - Hence the present appeal by the assessee contesting the demands raised on both counts.

Held: The nature of the assessee's activities is indeed much more than mere testing & analysis - The assessee's activities are of a wide range, including the development of the product suitable for the market based on API to conducting tests and turnover information to their clients for further use - Such services instead classify as Scientific & Technical Consultancy Service - Hence the duty demands raised under Technical Testing & Analysis Service with interest & penalty warrant being quashed - Regarding reversal of credit u/r 6(3A)(iii) of CCR, 2004, the formula is E/F x G - The 'G' denotes total Cenvat credit taken on input services during the month and not merely Cenvat credit taken on common input services during the month - A large pharmaceutical entity cannot fail to understand the meaning and ambit of Cenvat Credit on common input services during the month - Hence the wrong availment of Cenvat credit warrants being reversed by the appellant - The demand raised on this count is sustained - Though the assessee regularly filed returns, it is also expected to not violate any provisions of the Act, Rules or orders passed thereunder so as to avail excess Cenvat credit & evade payment of duty - The ST-3 returns do not require the details of the calculation made as it is expected that the assessee does the calculation on their own correctly - Where there is no ambiguity in the rule itself, the appellant has clearly contravened the rules & availed ineligible credit which has to be reversed: CESTAT (Para 3,5,10,11)

- Assessee's appeal partly allowed : HYDERABAD CESTAT

CX - CENVAT credit of service tax paid in respect of Outward transportation denied along with imposition of interest and penalty - appeal to CESTAT.

Held: In view of the judgments in M/s. Ultra Tech Cements Ltd. - 2018-TIOL-42-SC-CX , M/s. Roofit Industries Ltd. - 2015-TIOL-87-SC-CX and Board's Circular 1065 dated 08.06.2018, matter remanded - adjudicating authority shall ascertain with documentary evidences as to whether the contract is FOR sale or not since there is a finding by FAA and then pass adjudication order as per law - appeal allowed by way of remand: CESTAT [para 4, 5]

CX - Assessee submitted that the company is under liquidation and Official Liquidator has been appointed by NCLT, New Delhi - When the matter came up, the very same representation was made and adjournment was granted to this date as a last chance - The non-appearance of Official Liquidator is causing the delay in disposing of appeal - The matter is therefore adjourned to 06.06.2019 as a last chance since the matter is of the year 2011 and the Tribunal is now mainly dealing with matters of year 2012-13 - Registry is directed to issue notice to the Official Liquidator as per the address furnished by assessee: CESTAT

CX - Refund - Immunity to Service Tax provided under Section 7 or 26 of the 2005 Act cannot be so interpreted as to be eclipsed by the procedural prescriptions of Notification No. 9/2009-ST or 15/2009-ST - substituted provisions of clause/sub-paragraph 'c' of Notification No. 15/2009-ST cannot be inferred to have imposed any disability on the recipient of services consumed wholly within the SEZ, from seeking refund of Service Tax remitted on such transactions by the providers of such services - Impugned orders set aside and appeals allowed: CESTAT [para 4, 5]

Cus - It is alleged that gold bars weighting approximately 7k.g. worth Rs. 2 crores and odd were seized from one person Rajat Soni - He, as per statement recorded under section 108 Custom Act, specifically stated that he being a carrier works for applicant who runs M/s Bhagwati Jewellers - The applicant claims the ownership of the recovered gold bars and has moved release application - The Union of India/ Custom Department has claimed that at the time of recovery and preparation of 'Panchnama' of commodity in question, no doubt, recovered by lawful authority and possession was shown, which was mandatory under section 137 of Custom and Excise Act - In absence of any valid paper at the time of seizure of the gold bars, it becomes smuggled commodity and proved as such under the law - Since the issues involved are contentious and legal it has been brought to the notice of the court and after recording the statement under section 108 of Custom Act, notices were sent to the applicant thrice, which the applicant fails to respond to and he failed to raise any plea before the authority concerned - The applicant is given reasonable opportunity to appear before the authority/ court concerned to set up his defence to the best of his ability, for which six weeks time is given to the applicant to move proper application in response to the notice and to put in his physical presence before the authority concerned - For six weeks, no coercive action shall be taken against the applicant: HC

Cus - Request for cross-examination was denied to the appellant on the ground that such could be allowed only after examination-in-chief and that the denial of permission for cross-examination does not violate the principles of natural justice - In the absence of credibility assignable to the statements which are not substantiated by facts and circumstances, validation through cross examination is essential - Mere filing of documentation that may contain wrong details, unless established as deliberate act on the part of the Customs House Agent cannot be held against them - Appellants were undisputedly concerned with the import of goods to the extent of filing the necessary documentation - There is no evidence on record that the appellants were aware of the quality and the value of the goods - evidence against the appellants are insufficient to establish that any act of theirs has rendered the goods liable for confiscation and, therefore, liable to penalty - appeals allowed: CESTAT [para 6, 7]

Cus - Assessee imported eight consignments of Gold jewelry vide eight bills of entry, declared value at unfixed prices (provisional price) and sold to local customers under various invoices - After final price of gold jewelry was fixed based on agreed price with the exporter, remittance was paid through banking channels - A SCN was issued for the demand of differential customs duty, interest thereof and also for imposition of penalties under Section 114A and 114AA of Customs Act, 1962 - The demand of differential duty is also the same as is the amount paid by assessee along with the interest - There is no dispute on differential duty and interest thereof and has been paid of, there being challenge by assessee in the appeal that portion of the impugned order is upheld - Coming to the penalty imposed on assessee under Section 114A of Customs Act, 1962, the provision of said Section presupposes that there was a short levy, non-levy by reason of collusion or any willful mis-statement or suppression of facts and has been determined under Section 28 of Customs Act, 1962, and has to be imposed by an equivalent amount of penalty - In the case in hand, there is no dispute as to the fact that assessee themselves have come forward and informed the Department that there was a mis-declaration of value on the gold jewelry imported and paid of differential duty along with interest - The explanation put forth on behalf of assessee that they were confused by master circular of RBI is acceptable and the penalty under Section 114A of Customs Act, 1962, and there seems to be no suppression of facts with intent to evade tax is unwarranted and needs to be set aside - As regards penalty imposed under Section 114AA of Customs Act, 1962, assessee in this case has not declared the relationship between him and the exporter in declaration which supposed to be filed that the authorities with importing the consignment may be due to oversight - Definitely there is a lapse on the part of assessee and penalty under Section 114AA gets attracted, however, assessee came forward on his own and discharged of duty liability with interest, accordingly penalty under Section 114AA is reduced the same to Rs. 5 lakhs: CESTAT