SERVICE TAX

2019-TIOL-2166-CESTAT-HYD

UNI Ads Ltd Vs CC, CE & ST

ST - Issue is whether the assessee who renders advertisement services is entitled to CENVAT credit on angles, shapes, sections and channels etc. used for erection of Unipoles/hoardings which are fixed to the earth and on which the appellant/assessee displays advertisement - Revenue contention is that these goods are not inputs used for rendering output services and further the hoardings and unipoles are fixed firmly to the foundations in the earth with nuts and bolts and, therefore, they cease to be goods.

Held:  The issue is no longer res integra -  Jurisdictional High Court in the case of Sai Samhita Storages P Ltd. [ 2011-TIOL-863-HC-AP-CX ] has held that Steel and Cement used in erecting structures which in turn were used for rendering services are eligible inputs for availing CENVAT credit - it is only from 07.07.2009 that Cement, Angles, Channels, CTD bars and TMT bars etc. have been excluded from the definition of inputs under rule 2(k) of CCR - Assessee's appeal is, therefore, allowed with consequential relief and Department's appeal seeking imposition of penalty is rejected: CESTAT [para 7, 8]

- Assessee appeal allowed/Revenue appeal rejected : HYDERABAD CESTAT

2019-TIOL-2160-CESTAT-MUM

Aditya Birla Minacs Worldwide Ltd Vs CCE

ST - The dispute arises from various payments made to overseas entities and for that reason, held to be liable to tax, under section 66A of FA, 1994, from them as 'recipient of services' that were utilised for rendering 'call centre services' - The consideration that was to be subject to tax were attributed to different activities - The assessee is a 'call centre' operator and that their clients are situated outside the country - In order to undertake the contractual obligation, the assessee necessarily has to deploy human resources for interface, as a surrogate for the client, with existing customers or potential customers of clients - The seating of personnel is governed by norms prevailing in industry and interface is enabled through a telecommunication network that includes servers and connectivity as 'call centres' are generally situated at locations that are the most economically feasible - It is also apparent from the records that assessee has adopted a model wherein some part of system functions from India and in the transaction with M/s Monster Inc from locations outside India; in either situation, the output service is not consumed in India - There can be no doubt that services procured domestically or imported for carrying on of business or commerce is taxable; to the extent of taxability of output or output service, the tax liability, borne or paid, is adjusted through CCR, 2004 and, to the extent that the output or output service is exported, refund under CCR, 2004 is an inalienable entitlement - Such refund is undeniable even if the legal fiction of recipient being the provider burdens the assessee with tax - Hence, the question of legislative intent as framed above; the answer has been provided by Tribunal in re Genom Biotech Pvt Ltd. - 2016-TIOL-529-CESTAT-MUM - Procurement of services for use in business or commerce outside India is, unlike the claim of neutrality in other situations to evince lack of motive for evasion of tax, is revenue neutrality, unalloyed and unadulterated - Here, it is not mere off-set - Here, it is not refund of tax whose incidence was borne - Here it is tax that has to be refunded to the person who paid the tax - Therefore, in accordance with the decision in re Genom Biotech Pvt Ltd , the payment made to 'service providers outside the country' does not qualify for being subject to tax under section 66A of FA, 1994 - As the first plea of exclusion from the said Rules has been found acceptable, do not see any reason to examine the other submissions made on behalf of assessee: CESTAT

- Appeal allowed : MUMBAI CESTAT

2019-TIOL-2159-CESTAT-HYD

Premier Coach And Synthetic Products Pvt Ltd Vs CCE, C & ST

ST - The assessee is engaged in clearing and forwarding agents and have been paying the service tax - The issue to be decided is whether in cases where the assessee providing Clearing & Forwarding Agent services enters into two agreements – one for renting the godown/warehouse and another for rendering the Clearing & Forwarding Agent services, the rental amount is includable in the value of taxable services rendered or otherwise - It is the case of Revenue that the split of contract into two agreements is an artificial one as storage is an integral part of the C&F services, the rent collected on storage of goods must be included in the value of taxable services rendered - On the other hand, it is the case of assessee that renting of immovable property was not a taxable service during the period - There was no artificial division - They had entered into two different contracts with M/s LG Electronics Limited - The agreement which they have entered into with respect to rent with M/s LG Electronics Limited is similar to the agreement which they have entered into with other clients to whim they were not rendering the Clearing & Forwarding Agent services - In respect of other clients, the Commissioner has already dropped the demands in the impugned order - Simply because they are also rendering warehousing service also to M/s LG Electronics Limited, the rent collected from them does not stand on a different legal footing and cannot be included as taxable services rendered - Section 67 of Finance Act provides for charging service tax on "being gross amount charged for such services" - In this case, for the service of Clearing & Forwarding Agency, they are charging an amount on which they are already discharging the service tax - There is no specific provision under which the rent on immovable property leased out to the companies providing C & F services can also be charged to service tax - In the absence of any legal provision, the liability cannot be passed on the assessee - On an identical case, in the case of Swamy Sons (Agencies) , this Bench held that rental income earned by the assessee cannot be included in the value of Clearing & Forwarding Agent services and the judgment of Apex Court in case of Intercontinental Consultants & Technocrats Private Limited - 2018-TIOL-76-SC-ST applies - No reason found to deviate from decision in this case - Accordingly, the impugned order is set aside: CESTAT

- Appeal allowed : HYDERABAD CESTAT

CENTRAL EXCISE

2019-TIOL-2167-CESTAT-HYD

Toshali Cements Pvt Ltd Vs CE, ST & C

CX - Appellants are manufacturers of Slag Cement and Ground Granulated Blast Furnace Slag (GGBS) - GGBS is produced by grinding Granulated Blast Furnace Slag (GBFS) which they procure from the Steel industry for whom this is a byproduct - appellant pays excise duty on Cement but do not pay any duty on GGBS in view of the decision of Tribunal in Andhra Cements [ 2005-TIOL-934-CESTAT-BANG ] that grinding of GBFS into GBBS does not amount to ‘ anufacture' -  to the extent GGBS is sold in the domestic market, the assessee reverses CENVAT credit at the time of clearance and in respect of GGBS which is exported, the assessee claims refund in terms of rule 5 of CCR, 2004 - Revenue contention is that assessee is not entitled to the credit of CENVAT on GBFS at all -  Demand notices issued for recovery of CENVAT credit availed on GBFS - demands confirmed by Commissioner along with imposition of penalties and interest, therefore, appeal before CESTAT.

Held:  In the assessee's own case the Tribunal by relying on the Bombay High Court decision in Repro India Limited [ 2007-TIOL-795-HC-MUM-CX ] has held in its orders dated 07.01.2009 and 19.02.2018 that appellant was entitled to CENVAT credit under rule 5 of CCR in respect of inputs which have gone into the manufacture of exempted GGBS which was exported - no reason to deviate from this decision already taken - appeal allowed with consequential relief by setting aside the impugned order: CESTAT [para 7]

- Appeal allowed : HYDERABAD CESTAT

2019-TIOL-2158-CESTAT-AHM

Shiv Textiles Vs CCE & ST

CX - M/s. PPL, 100% EOU procured duty free yarn as well as imported yarn and sold in the open market without using in manufacture of export goods - It was shown that yarn was subject to job work and the job worker manufacture the grey fabric and thereafter the goods were supplied to other 100% EOUs - SCN was issued and demand of differential duty of duty free yarn was confirmed against M/s. PPL, 100% EOU who has not filed any appeal before this Tribunal - The present appellants are job workers for job work of the goods on behalf of M/s. PPL, on whom penalties under Rule 26 were imposed - As regards the clandestine removal of duty free yarn procured domestically as well as imported, the case has been established beyond any doubt against M/s. PPL, 100% EOU - M/s. PPL is not in the appeal with the present appellants - The limited issue to be decided is that whether the present appellants are liable for penalty under Rule 26 of CER, 2002 and Rule 209A of erstwhile CER, 1944 for abetting evasion of duty committed by M/s. PPL - The premises of job workers were used to show supply of duty free yarn and manufacture there from in that job worker's premises but in the investigation, it is established that the job workers had no manufacturing facility - Therefore, the job work premises were used only to mislead the department by showing fake job work and consequently cleared the duty free yarn in the open market - In the process of duty evasion, the job workers have actively contributed in duty evasion inasmuch as the premises of job worker were shown to have rented out to M/s. PPL - Moreover, the job work challans were also signed by those job workers - Despite the fact known to them that there is only paper transaction is being done, the job workers have signed the blank challans which were used by M/s. PPL for showing the job work - Therefore, the appellants (job workers) were actively involved in facilitating M/s. PPL for clandestine removal of duty free yarn - Accordingly, they are rightly liable for penalties under Rule 26 / 209A - As regards the other appellants, M/s. Regent Overseas Pvt. Limited and M/s. Pooja Tex Prints Pvt. Limited to whom M/s. PPL had shown clearance, had also actively and knowingly connived with M/s. PPL in diversion of duty free raw materials inasmuch as manipulating the documents to show the receipt of grey fabrics of heavier GSM whereas in fact they had received the grey fabrics of lighter GSM - Thus, they have facilitated M/s. PPL by showing receipt of goods from M/s. PPL and are correctly liable for penalty under Rule 209A of erstwhile CER, 1944 / Rule 26 of CER, 2001/2002 - It is not coming out from the record that the appellant have communicated with the department regarding the change of their address - Secondly, from the entire case, it is established that on the basis of evidences, assessee was actively involved in manipulating records for facilitating M/s. PPL in evasion of duty - The Adjudicating Authority has rightly imposed penalties upon all the appellants - No infirmity found in the findings of the Adjudicating Authority: CESTAT

- Appeals dismissed : AHMEDABAD CESTAT

2019-TIOL-2157-CESTAT-MUM

Sika India Pvt Ltd Vs CCE

CX - The short issue involved is whether the addition of water to the raw materials namely, "STYROFAN D 623 AP" and "APCOTEX TSN 100" is resulted into 'manufacture' of 'Sika Latex' and 'Sika Latex Power' within the definition of manufacture under Section 2(f) of CEA, 1944 and chargeable to duty - The mutual compatibility of components of formulation, the curing characteristics of the hydraulic binders, the wetting and adhesion on various substrates, these tests should include storage trials at 50°C to determine whether viscosity remains stable - Further, from the statement of Shri Aditya, the Commissioner (A) analyzing the same concluded that the product 'Sika Latex' and 'Sika Latex Power' had resulted by process of manufacture carried out on the raw material "STYROFAN D 623 AP" and "APCOTEX TSN 100" - Assailing the observation of Commissioner (A), assessee referring to the ratio laid down in Delhi Cloth & General Mills ' - 2002-TIOL-12-SC-CX-CB argued that by dilution of raw materials namely "STYROFAN D 623 AP" and "APCOTEX TSN 100", the characteristics, composition, use continued to remain the same and no new product different from the raw material emerged by said process of dilution of raw material - Hence, the resultant product cannot be considered as manufactured out of the raw materials even though while clearing the same, assessee affixed their brand name on the same - Applying the ratio of Servo Med Industries - 2015-TIOL-103-SC-CX to the facts of the present case, it can safely be inferred that the present issue is covered under the second category of four categories inasmuch as the assessee could able to demonstrate that characteristics and chemical composition of raw material namely, "STYROFAN D 623 AP" and "APCOTEX TSN 100" continued to remain same even after addition of water to the said raw materials as it has not lost its original character, chemical composition, use after application of process of dilution with water - The process of dilution of raw materials "STYROFAN D 623 AP" and "APCOTEX TSN 100" cannot be called as a process of manufacture - Consequently, the product Sika Latex and Sika Latex Power also not chargeable to excise duty - Similar view has been expressed by co-ordinate Bench at Kolkata analyzing the test reports of National Test House - No merit found in the impugned order - Consequently, the same is set aside: CESTAT

- Appeals allowed : MUMBAI CESTAT

2019-TIOL-2156-CESTAT-MUM

Vidyut Metallics Pvt Ltd Vs CCE

CX - In this third round of litigation, after matter has been remanded back twice to lower authorities for a decision on remission application against finished and capital goods destroyed due to fire incidence, assessee has assailed the Commissioner order confirming such rejection of remission application - Incidence of fire has not been disputed in SCN nor in the order passed by Commissioner as in his order, he had mentioned that occurrence took place on 02.06.1998 - The dispute therefore is confined to the loss and the extent of damage which varies between Rs 2,50,000/- to Rs 50,00,000/- as per assessment of police station head, Municipality and the Police superior officer but insurance had settled the damage claim at Rs 31,56,076/- including other losses - Proviso to Rule 39 of Corresponding Central Excise Rules provides for making demand for payment of duty leviable on any goods which are not shown to satisfaction of proper officer to have been lost or destroyed by any natural calamity or by unavoidable event during handling or storage - Admittedly proper officer could not have got the particulars to assess the destruction as reporting was done about 2 ½ years of occurrence but going by SCN, one can very well infer that duty demand has been made on the basis of damage assessed by insurance authorities - This being so, it can be said that assessment had been made by department concerning the exact damage on which duty demand has been raised but remission was refused for the reason that application for remission was put after an unreasonable delay - Unreasonable delay is, of course, a question of fact and the same varies from case to case - There was no strict adherence to the internal manual of department noted in O-I-O and O-I-A which prescribes that if the matter was not reported within 24 hours, no such remission is admissible - On the other hand, as found from evidence and record, reporting was done within 24 hours to Fire Brigade and at Police Station respectively but it was not done to the proper officer of the excise authority for determination of the extent of damage - Further, any prudent man can make out from the factual sequence of case that assessee was unaware of such requirement of reporting and it did so after being pointed out by the Audit Officer - I am, therefore, of the considered view that when damage due to fire had caused loss to the appellant, imposition of duty liability on the damage goods would further cause hardship to the appellant who has been struggling to get justice for over the last two years - In respect of reversal of CENVAT credit on damage of capital goods like plastic moulds and other machinery, finding of Commissioner appears to be very peculiar - Referring to Rule 57 of the MODVAT Rules, the Commissioner had observed that the goods on which assessee had availed MODVAT credit cannot have attained the character of inputs since assessee claimed that they had been destroyed in fire for which there was no possibility of those goods being used (further) in relation to manufacture of final products and they were not fit for the intended use in the factory - If this is the observation of Commissioner then in the normal circumstances, he would have treated those as unusable scrap having nil value and would not have ordered for reversal of credit availed on it - Impugned order is set aside: CESTAT

- Appeal allowed : MUMBAI CESTAT

CUSTOMS

2019-TIOL-2155-CESTAT-MUM

J K International Vs CC

Cus - M/s. Billiards Tulsa Inc. USA had participated in two exhibitions at Delhi and Mumbai in 1997-98 and 1998- 99 and displayed various machines imported by them under international ATA Carnet - However, after completion of exhibitions, instead of re-exporting the amusement machines, they diverted the same for home consumption and sold the same to M/s. J. K. International Mumbai without discharging the custom duty liability and have further sold them to M/s. Galaxy fun world Pvt. Ltd. - Some goods were seized at the premises of M/s. Galaxy fun world - The SCN mentions that M/s. Billiards Tulsa Inc. USA have applied for permission to sell the goods in domestic market - The SCN seeks to confiscate 5 Nos. of amusement games and tables from M/s. Galaxy fun world Pvt. Ltd; while demanding duty on the basis of alleged under valuation in respect of Bills of Entry alongwith penalties - Neither the SCN nor the initial OIO have given reasoning as to why M/s JK International were treated to be importers - While the SCN asked M/s Galaxy Fun World to show cause as to why 20 Nos. of amusement games and tables, should not be confiscated, the OIO does not specify as to who is liable to pay the redemption fine - Even though the assessee have not contested the fact in the initial proceedings, it being a question of Law, same is acceptable - Any action beyond the scope of provisions of Law is to be treated as having no mandate of Law - It is clear that M/s Billiards Tulsa Inc USA have the Carnets; a Guarantee was given by FICCI for the importation of same in terms of Notfn 157/90-Cus and agreeably M/s Billiards Tulsa Inc USA have applied to Ministry of Finance, seeking permission to sell the goods in domestic market on finding unable to export - If M/s J.K. International have sold the goods in domestic market and realized Customs duty, Revenue could invoke suitable provisions of Law to recover that amount from M/s J.K. International - It is not open to department to recover the duty from M/s JK International in terms of proviso to Section 28 of Customs, Act, 1962 - Therefore, to that extent, the SCN and the order is not maintainable - Demand made on M/s J.K. International is not sustainable under Section 28 of Customs Act, 1962, Tribunal is not going in to the merits of valuation of the goods - Both M/s J.K. International and Shri Jeetendra H Shah have rendered themselves liable for penalty under Section 112 of the Customs, Act, 1962 - However, looking in to fact that the case is very old and mired in litigation and the circumstances of the case, the penalties are reduced - However, duty cannot be recovered from M/s J. K. International under the provisions of Section 28 of Customs Act, 1962, consequentially question of penalty under Section 114 A doesn't arise - Moreover, even though the penalty under Section 112 and 114A are mutually exclusive, the SCN seeks to recover penalty under both the sections - This is not tenable under the Law: CESTAT

- Appeals disposed of : MUMBAI CESTAT

2019-TIOL-2154-CESTAT-ALL

GT Cargo Fittings India Pvt Ltd Vs CCE

Cus - The assessee-company is a 100% EoU which exports final products as per Notfn No 52/2003-Cus - It is entitled to import duty-free raw material required to be further used in the manufacture of exported articles - Such Notfn permits clearance of part manufactured goods to DTA with the permission of the Development Commissioner - As per the conditions in the notfn, the importer must obtain authorization from the Development Commissioner to establish unit for export purposes - The assessee imported Polyester webbings fabric buckles for manufacturing ratchet lashing system - The latter goods were exported and part of the same were cleared to DTA unit with due permission of the Development Commissioner - The Revenue sought to deny benefit of Notfn on grounds that as per the LOP, the permission was granted only to parts used in motor vehicles - As the latching system cannot be considered part of motor vehicle, the condition of Notfn regarding authorization by Development Commissioner was unsatisfied - SCN was issued proposing duty demand & the same was confirmed upon adjudication.

Held: Considering the letter issued by the Development Commissioner, it is seen that it is not a fresh LOP issued by the Development Commissioner & it is to the effect that the item lashing belts system stands included in the earlier LOP which is modified to such extent - Since it is a modification of earlier LOP, the same must be treated as a clarificatory amendment by the Development Commissioner - This would effectively over-rule the Revenue's objections - Moreover, the issue at hand involves bona fide interpretation of provisions of Notfn - Without there being any evidence of mala fide intent on part of the assessee, extended limitation is not invokable - Hence the O-i-A merits being quashed: CESTAT

- Assessee's appeal allowed : ALLAHABAD CESTAT