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SERVICE TAX
2019-TIOL-1495-HC-AHM-ST
Principal Commissioner Vs Alembic Ltd
ST - Assessee(s) availed credit of service tax paid on various input services used to construct residential complex - The residential projects received completion certificates and on the said date about 32% & 35% of the property remained unsold & for which no bookings were made - If such properties were sold in future, no service tax was payable - The assessees had given intimation that they would avail proportionate credit on input services after obtaining completion certificate & on square feet area basis - Appellants were made to reverse/pay credit amounting to Rs. 1,17,68,904/-(in case of M/s. Alembic) and Rs.65,30,867/-(in case of M/s. Shreno), towards the proportionate Cenvat credit availed by them during for the period 2010-2011 till obtaining Completion Certificate, at which time their output service activity was wholly taxable, on the ground that after receipt of completion certificate, the property had become immovable property and in case of future sale thereof, no service tax would have been payable and credit in proportion to "area which did not attract Service Tax" compared to the entire property area - such amounts were reversed Under Protest and since no SCN was issued, they filed applications for refund - subsequently revenue authorities issued separate SCNs, demanding 6%/8%/10% amount of sale of immovable property after obtaining Completion certificate where no Service Tax was paid by the Appellant, on the ground that they had availed Cenvat Credit and provided taxable as well as exempt services (sale of immovable property), and they had not maintained separate accounts - amounts paid were appropriated and the demands were confirmed - in appeal, CESTAT held that in the light of Rule 3 of CCR 2004, the assessees cannot avail full credit on input services received after obtaining completion certificate, however, they also cannot be expected to reverse 8%/10% of the sale price of immovable property after obtaining such Completion Certificate where no Service Tax is paid, as if it is sale of immovable property since Rule 6 per se does not apply to the present case; that Post 01.04.2016, as the assessees availed proportionate credit only, therefore, they cannot be asked to reverse such amount u/r 6(3) as they can be said to have maintained separate accounts as required u/r 6(2) - Insofar as the issue as to whether the assessees were required to reverse proportionate credit, apex court in Dai Ichi Karkaria has held that Modvat/Cenvat credit is a vested right & cannot be denied or recovered unless specific provisions for the same exist; that it is a settled principle that entitlement for credit is on the date of receipt of inputs when the output activity was taxable and merely because some finished goods become exempt later, the credit availed on inputs contained in semi-finished/finished goods cannot be denied - Also, a harmonious reading of Rule 3 of CCR r/w Rules 6 & 11 suggest that eligibility for credit must be examined only upon receipt of input service & if found to be availed at time when output service is taxable, then such credit is legitimately availed & cannot be denied without there being any specific provision in this regard, therefore, assessees need not reverse any credit availed by them till obtaining completion certificate; that consequently, if no credit is to be reversed, then the amount paid under protest cannot be retained by the Revenue & must be refunded to the assessees - revenue in appeal before High Court.
Held: CENVAT - With effect from 13.4.2016, Explanation 3 in rule 6(1) was amended specifically to deal with a situation as in the present case, where a deeming fiction was created that for the purposes of Rule 6 of the Rules, exempted services as defined in clause (e) of rule 2 shall include an activity, which is not a service as defined in section 65B(44) of the Finance Act, 1994 provided that such activity has used inputs or input services - However, there was no such stipulation prior to 13.4.2016 in law and prima facie , such situation was not to be treated as ‘exempted service' and did not attract the mischief created under rule 6 of the Rules - Therefore, for the period prior to 13.4.2016, the situation would be governed by rule 3 of the Rules for availing Cenvat Credit till such time i.e. till the time rule 6 was specifically made applicable by virtue of the deeming fiction created - In the facts of present case, it is evident that the respondent has started taking only proportionate credit after receipt of completion certificate which was after due intimation to the revenue department and also certified by independent CA - Therefore, rule 6 of the Rules in toto cannot apply prior to 13.4.2016 to the facts of the case since sale of immovable property is not exempt service at all - Therefore, in the light of the provisions of Rule 3 of the Rules, respondent cannot avail full Cenvat credit on input services received after obtaining completion certificate - Hence, the respondent cannot be expected to pay an amount equal to 8%/10% of sale price of immovable property after obtaining such completion certificate where no service tax is paid as if it is sale of immovable property since Rule 6 of the Rules perse does not apply to the present case until 13.4.2016 at all - Even after 13.4.2016, since the respondent had availed only proportionate credit, the respondent was not legally required to pay 8%/10% amount under rule 6(3) of the Rules, since it can be said to have maintained separate accounts as required under rule 6(2) of the Rules - As respondent has taken only proportionate credit on input services after receipt of completion certificate, duly backed by CA certificate and certified work sheets for the proportionate credits availed after completion certificate, it has fulfilled its obligation under Rule 3 of the Rules read with Rule 6 thereof and, therefore, no liability to pay any amount equal to 8%/10% of the sale price of immovable property can be fastened after receipt of completion certificate under Rule 6 of the Rules: High Court [para 13, 14, 15]
ST - While the law does not intend to allow any undue benefit to a service provider in terms of Cenvat credit of service tax paid on input services used in providing non-taxable output activity, however, once it is legally and validly availed, the same cannot be denied and/or recovered unless specific provisions exist for the same: High Court [para 15]
ST- CENVAT - Credit entitlement is on the date of receipt of inputs when the output activity was wholly dutiable and merely because the finished goods eventually became exempt later on, the credit availed on inputs which were contained in semi finished/ finished goods is not deniable: High Court [para 15]
ST - CENVAT - Sub-rule (7) of Rule 4 of the Rules lays down that the assessee is not required to wait till output service is sold to the service recipient and the assessee can take the credit immediately after the day on bill/challan of input service is received - there is no dispute that the respondent availed the credit after receipt of bill/challan in respect of input service and, therefore, it was legally entitled to take the credit on the date after the receipt of service bills/challans - Therefore, the availment of Cenvat credit by the respondent is absolutely legal and correct and in accordance with Rule 4(7) of the Rules - As at the time of taking credit, there was no existence of any exempted service, therefore, there is no application of Rule 6 - respondent did not avail the Cenvat credit in respect of the services received after obtaining the completion certificate in respect of exempted service or avail proportionate credit attributed to the taxable output service, therefore, Rule 6 has application for the period after obtaining the completion certificate: High Court [para 16]
ST - CENVAT - Rule 11(1)(2) and (3) of the CCR are applicable for manufactured goods whereas rule 11(4) applies to services - From sub-rule (4), it is clear that even if an output service provider avails the credit and output service becomes exempted, in such case the credit only in respect of inputs lying in stock or is contained in taxable service is required to be paid whereas there is no provision for payment of Cenvat credit equivalent to the input services used in respect of exempted service - Therefore, Cenvat credit availed in respect of input service is not required to be paid back under any circumstances and therefore, the respondent was not legally required to reverse any credit which was availed by them during the period 2010 till obtaining completion certificate i.e. during the period when output service was wholly taxable in their hands, merely because later on, some portion of the property was converted into immovable property on account of receipt of completion certificate and on which no service tax would be paid in future - Tribunal, therefore, rightly held that once the respondent are not required to reverse any credit availed by them on valid input services availed during the period 2010 till obtaining of completion certificate, the said amounts reversed by them under protest cannot be retained by the revenue authorities and have to be refunded to the respondent - it is not possible to state that the Tribunal has committed any legal error so as to warrant interference - Revenue appeal is dismissed: High Court [para 16 to 18]
- Appeal dismissed: GUJARAT HIGH COURT
2019-TIOL-2025-CESTAT-DEL
Rajendra Kumar Saini Vs CST
ST - The service tax stands confirmed against the assessee under category of "supply of tangible goods for use" service - The lower authorities have recorded that assessee has already paid an amount of Rs. 4,57,151/- - The Commissioner (A) has further observed that he is entitled to benefit of Cenvat credit and the balance amount required to be paid by him is Rs. 27,888/- - The lower authorities have also held that the assessee is liable to pay the interest - Further, penalty of 15% stands imposed on assessee under Section 78 of Finance Act and of Rs. 5000/- under Section 77 of FA, 1994 - Right from the beginning, assessee had taken a stand that he had received total amount from the Delhi Traffic Police, to whom he was supplying the cranes, inclusive of tax and as such the benefit of cum tax duty has to be extended to him - The law on the extendibility of benefit of cum duty tax is no longer res integra - The total consideration received by a service provider from service recipient has to be treated as inclusive of duty and the duty liability has to be calculated by treating the entire consideration as cum duty - As such, the demand to the extent of Rs. 27,888/- is set aside on the said ground - As regards the interest, assessee have deposited the entire amount before the adjudication - As such, no interest liability would arise against him - There were RTI queries by assessee written to the department seeking their guidance on his tax liabilities, which do not stand replied by Revenue - In such a scenario, no mala fide can be attributed to the assessee so as to impose penalty upon him - The duty which stands deposited by assessee is not being disputed by him - Accordingly, confirmation of the same is upheld: CESTAT
-Appeal allowed : DELHI CESTAT
2019-TIOL-2024-CESTAT-DEL
Preet Financial Services Pvt Ltd Vs CST
ST - The assessee was acting as a car loan marketing agent for several banks and thus was engaged in business of car finance - The Department noticed that during the period w.e.f. July 2003 to December 2004, assessee has rendered the above services to ICICI Bank and Standard Chartered Bank but they neither were registered with Service Tax Commissionerate nor did they make payment of service tax which was due on them on the amount received from both the said banks as commission - It is an admitted and apparent fact that since 01.07.2003, assessee has not discharged the liability - They only got themselves registered under BAS on 25.10.2004 but the simultaneous fact remains that during period since 01.07.2003 to 10.09.2004, there was a prevalent confusion about the nature of impugned activities - The demand is for the period w.e.f. July 2003 to December 2004 - The SCN was issued on 31.07.2007 - Once there was an apparent acknowledged confusion about the impugned activity, non discharge of liability thereof cannot be alleged as an act of suppression of fact with an intent to evade tax - Resultantly, the Department was not entitled to invoke the extended period of limitation - The demand in question therefore is hit being barred by time - Irrespective of the liability of assessee for rendering BAS but due to the discussion for impugned demand to be hit by the period of limitation, it is held that the impugned demand is not sustainable - The Adjudicating Authorities are observed to have failed to appreciate the various decisions on this issue as in the case of Modern Machinery Store - 2008-TIOL-1240-CESTAT-DEL , Raj Auto Centre - 2008-TIOL-1720-CESTAT-AHM and Vipul Motors (P) Ltd. - 2007-TIOL-1764-CESTAT-DEL - The Order under challenge is set aside: CESTAT
-Appeal allowed : DELHI CESTAT
2019-TIOL-2023-CESTAT-MUM
Walton Street India Real Estate Advisors Pvt Ltd Vs CC & GST
ST - The assessee-company is a 100% EoU registered for providing Banking & Other Financial Services & Real Estate Agent services - Since the services were exported, the assessee is unable to utilize Cenvat credit taken on input services - The assessee claimed refund of unutilized Cenvat credit - SCNs were issued, proposing to reject the refund on grounds that the services of identification and evaluation of potential investment opportunities in Indian real estate companies were used to invest the funds in India by foreign affiliates - Hence the Revenue opined that this did not constitute export of service - It was also alleged that there is no detailed description of the services given in the invoices - Moreover, the period of input service documents based on which credit has been taken and refund claim do not match the period of export documents - On adjudication, it was held that the assessee did not provide the details of actual description of services & manner of providing services said to have been exported so as to decide that the services provided have been actually exported in accordance with Rule 6A of Service Tax Rules, 1994 - On appeal, the Commr.(A) upheld rejection of refund on the ground of tabulation of export turnover being improper - Hence the assessee's appeal.
Held: It has already been held by the court that the assessee exported the services - There is no requirement of one-to-one co-relation of the input service or input credit with export of service - Hence the reasons for rejection of refund are erroneous and merit being quashed - Hence the assessee is entitled for the refund & the same be granted within 45 days of receipt of copy of this order: CESTAT
-Assessee's appeal allowed : MUMBAI CESTAT
CENTRAL EXCISE
2019-TIOL-2028-CESTAT-HYD
Sarvaraya Sugars Ltd Vs CCT
CX - The assessee is a manufacture of sugar - Sugar industry is generally, largely, independent of outside source of power because the biomass in the sugarcane itself is sufficient to run the plant - Briefly, manufacture of sugar involves crushing of sugarcane and processing the sugarcane juice into sugar - A by-product of such processing is a dark, viscous, substance called the molasses which is usually sold by sugar factories to distilleries for manufacture of alcohol - Another by-product of sugar industry is the fibrous material left after crushing the sugarcane known as bagasse - This bagasse is burnt in a captive power plant in the sugar factory and the electricity so generated is used for running the sugar factory - The department seeks to deny entire credit on the ground that the 'input services' were used in or in relation to production of electricity and not in or in relation to manufacture of final product, namely, sugar - The term 'manufacture' is not defined in Cenvat Credit Rules, 2004 and therefore should be interpreted as per the definition of the term in Section 2(f) of CEA, 1944 according to which manufacture "includes any process incidental or ancilliary to the completion of the manufactured product" - It is not in dispute that the final products in this case is the sugar and that the electricity from the captive power plant and the steam generated from it were used for manufacture of the sugar - The input services in question were, in turn, used for running the captive power plant, in relation to coal and transporting Bagasse - Therefore, these input services which were used in captive power plant were indirectly used in manufacture of sugar or in relation to such manufacture - The related question is whether electricity so generated is used within the factory only or is also sold outside - It is used partly in the factory, and partly sold to grid - If the 'input services' were divisible, credit could be denied to the extent the input services were used in relation to generation of electricity sold to the grid - However, the nature of services is such that they cannot be divided - As far as the inputs are concerned, there is provision for reversal of proportionate amount of cenvat credit under Rule 6 - This however does not extend to the input services - The assessee is entitled to cenvat credit on the disputed input services and the impugned order is set aside: CESTAT
-Appeal allowed : HYDERABAD CESTAT
2019-TIOL-2027-CESTAT-ALL
Usha Filters Pvt Ltd Vs CCE & ST
CX - The allegations were that during the relevant period from 2001 to 2005-06 assessee evaded Central Excise duty to the tune of around Rs.6 lakhs - The Commissioner (A) has held that Department has proved and established the charge of clandestine removal with support of direct physical evidences - On going through the records of the case, Tribunal do not find any seizer being made of allegedly clandestinely removed goods nor any purchaser has been identified who has alleged to have purchased the goods from the sales agent on payment of cash where goods were removed without payment of duty - The impugned Order is presumptive and not sustainable: CESTAT
-Appeals allowed : ALLAHABAD CESTAT
2019-TIOL-2026-CESTAT-DEL
Shilphy Steels Pvt Ltd Vs CCE & ST
CX - Case of Revenue is mainly on the basis of procurement of unaccounted raw materials Iron Ore etc. and its use in the manufacture of unaccounted finished goods viz. sponge iron, steel ingots, alleged to have been cleared clandestinely - demand of duty of Rs. 3,78,77,400/- has been confirmed with equal amount of penalty - amount of Rs. 31,09,162/- deposited by the appellant during investigation is appropriated - Penalty is imposed on the director of Rs. 76 lakhs u/r 26 of CER 2002 - appeal to CESTAT.
Held: In the search proceedings, no unaccounted cash was found - Further, iron ore is a controlled commodity and no iron ore can be dispatched or received by the appellant assessee, without permit issued by the competent authority of the mines department of the State Government - No supplier of alleged quantity of iron ore have been identified - Neither there is evidence of any transportation for receipt of unaccounted iron ore - Similarly, there is no evidence of receipt of other raw materials like dolomite and coal - Allegations by Revenue are mainly based on the unsubstantiated data retrieved from laptop/ pen drive which is not reliable, as the same does not have evidentiary value as provided under Section 36B of the Act, as the condition precedent for placing reliance in respect of data obtained from computer/pen drive, etc have not been established, like whether the paper print out containing data was produced by the computer during the period over which the computer was regularly being used during the relevant period by the person having lawful control over use of the said computer - Further the information contained in the statement reproduced or derived from information supplied to the computer was in the ordinary course of the said activities - No such facts have been established by the Revenue, not even the persons have been identified who maintained or entered the data on the computer and/or obtained the copy of any data on pen drive - documents seized from the guest-house cum residential premises of Nitin Agarwal also lack evidentiary value - Said premises have been used by many persons - Further, no suppliers of raw material of the alleged quantity have been identified or recorded in the books of accounts - Director Nitin Agarwal and also excise clerk J.M. Rao have categorically denied that any of the records as alleged by the Revenue to be of clandestine activity on the part of the appellants, have been maintained under their instructions or their instance - It is evident from the records that stock verification have been done by way of eye estimation on the date of search, as no calculation sheet is admittedly available on record - Opening stock taken for stock verification is also erroneous leading to erroneous calculation on the part of the Revenue - No unaccounted raw materials were found in the course of search either in the premises of the appellant or in the course of transportation to the factory premises of the appellant - no reliance can be placed on the statements of the Director and the Excise Assistant as such statements are not primary evidence and the same have been retracted by both of them, either in the course of cross examination or in the reply to the show cause notice - There is no corroborative evidence of clandestine activity by way of unexplained consumption of electricity, excess utilisation of labour, evidence of clandestine transportation nor there is evidence of any clandestine cash flow found - allegations in the show cause notice are presumptive and are not based on the actual state of affairs and/or corroborative evidence - impugned order is, therefore, not maintainable - Appeals allowed on merits: CESTAT [para 6, 7]
-Appeals allowed : DELHI CESTAT
CUSTOMS
NOTIFICATIONS
30/2019-Cus (NT/CAA/DRI)
Appointment of CAA by Pr. DGRI
29/2019-Cus (NT/CAA/DRI)
Appointment of CAA by Pr. DGRI
dgft19pn019
Allocation of additional quantity of 1239 MTRV for export of sugar to USA under Tariff Rate Quota (TRQ)
CASE LAWS
2019-TIOL-1510-HC-MUM-CUS
Purple Products Pvt Ltd Vs UoI
Cus - The petitioner had imported ingots from Malaysia and claimed concessional duty benefit under Notfn 46 of 2011 - The SCN alleges that the petitioner had fraudulently obtained a country of origin certificate for import of Tin Ingots from Malaysia Smelting Corporation so as to avail of concessional duty benefit under said Notfn - The adjudicating Authority would consider the petitioner's submissions and adjudicate upon the SCN without in any manner being influenced by or controlled by the view taken by Central Board of Indirect Taxes and Customs while communicating with the Malaysian Authorities - There is no reason at this stage to suspect that the adjudicating Authority would not grant a fair and reasonable hearing to the petitioner and also decide upon the SCN fairly taking into account the petitioner's contentions - The various communications which have been referred to by the CBIC which create an apprehension in the mind of petitioner that the adjudication proceedings would be an empty formalities as the CBIC has already taken a view against the petition may not be entirely justified - It is the SCN which has been issued to petitioner and it is the response of party to the SCN which would determine the faith of SCN and the prima facie view taken by CBIC as communicated by the Government of India to Malaysian Authority or in its communication to the DRI would not govern the adjudication proceedings before the Commissioner: HC
- Petition dismissed: BOMBAY HIGH COURT
2019-TIOL-2022-CESTAT-MUM
Balbir Metals And Power Pvt Ltd Vs CC
Cus - Redetermination of value of imported goods allegedly misdeclared as "Heavy Melting Scrap" along with order of confiscation under Section 111(m) of Customs Act, 1962 with redemption of some upon payment of fine and imposition of penalty under Section 112(a) of Customs Act, 1962 by Commissioner is assailed by assessee in this appeal - It is admitted by assessee that goods were scanned at the port of import and it was found to be primarily steel plates of prime quality and those were camouflaged - Such finding was also confirmed by officers of SIIB - The only ground on which assessee tried to plead innocence regarding such mis-declaration about the description of goods was that it purchased the same on high sea sale and filed Bill of Entry on the basis of invoice raised by exporter but there was no bar on assessee for personal inspection before finalisation of purchase - Further, assessee disputed the valuation made under Rule 9 of CVR, 2007 on the ground that no single document of import was relied upon while proposing loading of value on the imported goods but going by Commissioner's order it is very much clear that he himself had noted in his order that though Rs. 40/kg cannot be taken as the value of identical/similar goods but the same can surely indicate the price of such goods in international market and it had been noticed that such goods were imported at a declared unit price of Rs. 40/kg at various ports and the same was accepted by department that forms the basis of valuation under Rule 9 which provides residual method for determination of value of imported goods using reasonable means consistent with the principle and general provision of the Rules, on the basis of data available in India and the same should not exceed price at which ordinarily it is sold in the course of international trade - This being the guiding force of Rule 9, no irregularity can be noticed in order passed by Commissioner when assessee itself admitted the examination report concerning the quality of goods imported - Assessee had contended that no act or omission was proved against assessee that would result in confiscation under Section 111(m) and Section 119 of Customs Act and imposition of penalty under Section 112(a) of Customs Act, 1962 - No plausible explanation was offered by assessee to refute those findings for which assessee was also imposed with penal action under Section 112(a) of Customs Act - No illegal or irrationality found in order of Commissioner that would require interference by Tribunal: CESTAT
-Appeal dismissed : MUMBAI CESTAT |
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