2019-TIOL-NEWS-191, Dated: Tuesday, August 13, 2019

ST - The petitioner is aggrieved by impugned order whereby their claim for refund of service tax under provisions of FA, 1994 has been rejected on merits as well as on grounds that the burden has been shifted by petitioner on the customers - The claim relates to the service tax deposited by petitioner for the period 2007-16 and the reason for such belated raising of grievance is that in view of provisions of Section 104 of 'the Act', the services provided or agreed to be provided for a long term lease of 30 years or more was not taxable but the observations of statutory authority in order impugned mentions that the petitioner did not submit documentary evidence to espouse his cause - The fact remains that the service tax for the period in question was deposited by petitioner but after realizing it from its customers - It is also not in dispute that no refund application was filed by these customers - As such, no infirmity found in the opinion recorded by statutory authority to hold that if the burden of the service tax has been shifted on customers in view of legal position settled by Supreme Court in case of Mafatlal 2002-TIOL-54-SC-CX-CB the petitioner can not be a beneficiary thereof as any refund to them would amount to unjust enrichment - No infirmity found in the impugned order of statutory authority: HC

ST - The assessee is a manufacturer of air conditioners and refrigeration products - They also undertake works contract service, erection commissioning and installation service, maintenance and repair service, business auxiliary services and goods transport agency services - It is alleged that assessee have irregularly availed CENVAT credit in violation of Rule 6(3) of CENVAT Credit Rules by using CENVAT availed input services in rendering an exempted service namely trading - It is undisputed that the assessee has been manufacturing air conditioners and providing services and that the input/input services on which CENVAT credit has been availed has been utilised for trading as well - It is also not in dispute that Rule 6(1) and 6(2) do not apply to the assessee because they have neither avoided taking credit on input services used in trading nor have they maintained separate accounts - The issue is no longer res integra and trading activity is an exempted service to which Rule 6(3) applies - This position has not changed with the introduction of explanation (3) to Rule 6(1) - Trading activity has always been an exempted service both prior to and after introduction of this explanation - Accordingly, the assessee is not entitled to CENVAT credit to that extent - The assessee's second point or argument is that even if reversal of credit is required, it is only with respect to the common credit to be reversed - The credit cannot be utilised in excess of 20% of the amount of service tax payable on taxable output services - Therefore, if service tax is paid utilising the CENVAT, it does not amount to paying service tax and service tax can be demanded - Extended period of limitation has been invoked by department on the ground that there is suppression by assessee and they did not intimate the department the fact that they were using credit on common input/input services which were used for providing both taxable and exempted services - All their records were available to the department - The allegation of suppression of facts does not stand - Extended period of limitation cannot be invoked in their case - On the question of penalty, assessee had a bonafide belief that they are entitled to the benefit of CENVAT credit even if it is decided against them in the current proceedings therefore the penalty imposed upon them under Sections 76 & 78 may be set aside - Assessee had a reasonable cause for their failure in over-using CENVAT credit in violation of Rule 6(3) and thereby not discharging full amount of service tax: CESTAT

ST - Acting on intelligence that assessee was providing "Cargo Handling Services" and evading Service Tax as they had not obtained any Service Registration nor paid any service tax due on the services provided, a SCN was issued to assessee - Assessee do not dispute with regards to levy of service tax in respect of taxable services rendered by them under taxable category of "Cargo Handling Services" for the import cargo - However the dispute is in manner of calculation of taxable value for such services - There is no breakup of charges towards transportation of goods and other services available as part of contract documents between assessee and M/s CWC - It is also evident that M/s CWC had not provided any breakup even afterwards - What assessee claims is that there were certain breakups agreed during the negotiations between them and M/s CWC - But it is found that what so ever assessee claim is not part of the agreement/ contract documents - Commissioner has called this breakup as only presumptive and no reason found to differ with the same - Tribunal donot agree with the submissions made by assessee in respect of liability of sub contractor to pay service tax when the service tax is paid by main contractor - This issue is no longer res integra and has been decided by CESTAT in case of Sunil Hi Tech Engineers -2014-TIOL-541-CESTAT-MUM - Assessee was charging service tax from their customer and not depositing the same with the government - They were also not filing the Service Tax returns even after knowing about their liability for the same - Thus, extended period of limitation is applicable - Since the demand of tax has been upheld the demand for interest will follow - Since assessee have failed to pay said Service Tax by due date, interest demanded cannot be faulted - The penalty under section 78 can be imposed only if the ingredients specified in said section are present - The ingredients specified for invoking the Section 78 are identical to those specified for invoking the extended period of limitation as provided by Section 73 - Since in respect of SCN, demand could have been made by invoking the extended period of limitation as provided by Section 73, the penalties imposed under Section 78 of FA, 1994 is upheld - Assessee have made themselves liable to penalty under Section 77 - Hence, the penalties imposed upon by the adjudicating authority under this section are also upheld: CESTAT

ST - The assessee have entered into an agreement with FLAG Atlantic and REACH for procuring bandwith on undersea cables, laid between several countries for rendering internet services - In lieu of these services, the assessee was paying monthly rentals for the period 2002-03 to 2006-07 - So far the first issue of levy of service tax on the monthly rentals charged by foreign internet service provider for procuring bandwith, under reverse charge mechanism, such foreign internet service provider are not Telegraph authority, which is a condition precedent for levy of service tax - Admittedly, the provider of such service is not a Telegraph authority under Indian Telegraph Act - Accordingly, no taxable service is rendered by foreign service provider and accordingly no amount of tax is payable - The next issue is regarding service tax on rental charge by assessee from its customers/subscribers towards rent of its wireless routers/radio - This activity qualify as deemed sale of goods as said activity tantamount to 'transfer of right to use these goods' - Admittedly, in the transaction, the goods in question were delivered by assessee and the effective possession and control of the goods have been given - Thus, the said activity amounts to sale, on which assessee have paid VAT/sale - Accordingly, no service tax is payable by assessee on the rental of wireless/router or radio - So far the demand based on rental/lease charges received by assessee from other ISP for providing use of its optical fiber cable is concerned, it is a service provided by one Telegraph authority to another - Service Tax under the provisions of lease circuit service or telecommunication service is exigible only when service is provided by a Telegraph authority to a subscriber - This has also been clarified by CBEC vide Circular B.11/1/2001-TRU and such view have also been taken by the Coordinate bench of this Tribunal in the case of Reliance Telecom - 2007-TIOL-414-CESTAT-AHM - So far the demand for sale of domain name is concerned, the issue stands decided in favour of assessee in the case of Tata Sons Limited wherein it has been held that transaction in domain name is a transaction in property in the goods and amounts to transaction of sale of goods - Domain name are akin to trade mark, making them the property of the person who owns it - Accordingly, the impugned order is set aside: CESTAT

2019-TIOL-2274-CESTAT-DEL

CCGST Vs Ashok Paper Products

CX - The assessee is engaged in manufacture of cleansing or facial tissues, handkerchiefs and towels of paper pulp, paper, cellulose wadding - They cuts the jumbo roll into small sizes and then packs the same as paper napkins and facial tissues in the unit containers - The assessee claims that it did not pay any Central Excise duty on the manufacture and clearance of paper napkin and facial tissues because of Supreme Court judgement in S R Tissues Pvt. Ltd. - 2005-TIOL-101-SC-CX wherein it has been held that slitting/cutting of jumbo roll of plain tissue paper into smaller size does not amount to manufacture as the basic nature of the goods does not undergo any change - The Department however, was of the view that after the judgement of Supreme Court in S R Tissues, a specific amendment was made in section 2(f)(iii) of Central Excise Tariff Act w.e.f. 01 March, 2003 - The type of activity undertaken by assessee would amount to manufacture and Central Excise duty was required to be paid on the clearance of paper napkin and paper towel manufactured by it from Jumbo roll after packing/repacking of the same in the consumer packs - This view was also taken by a Division Bench of Tribunal in M/s. S R Protus Hygiene P Ltd. - 2018-TIOL-2486-CESTAT-DEL - The Department merely by stating that the assessee had mis-declared, suppressed facts and had evaded Central Excise duty, issued the SCN - It cannot be said that the assessee had earlier suppressed and mis-declared facts with an intent to evade payment of duty - Thus, the extended time period under section 11A(4) of CETA, 1944 could not have been invoked - The issue whether the goods are infact supplied to the Institutional consumers in bulk packs or in retail packs is the subject matter of verification, which can only be done by the field formation for which purpose it needs to provide the necessary documents, like order of supply, invoices - It has also to be ascertained as to how much quantity out of the total quantity manufactured by assessee was supplied to the Institutional consumers and how much was supplied to the normal customers - The assessee will file a copy of the order before the adjudicating authority so that the matter is decided within three months thereafter: CESTAT

- Appeal allowed: DELHI CESTAT

2019-TIOL-2273-CESTAT-HYD

Little Star Foods Pvt Ltd Vs CCT

CX - Assessee manufactures 'Cadbury perk with glucose energy' and supplies them to Mondelez on job work basis - The products are, thereafter, sold by Mondelez from their depots through their marketing chain - Mondelez is the brand owner of products - The entire manufacture by assessee is as per the specifications and directions of Mondelez in their agreement - Assessee claimed the classification of their products under 1905 3290 of Central Excise tariff - Initially, a SCN was issued to assessee covering the period October 2009 to September 2010 proposing to classify the product under 1905 3211 and demanding appropriate amount of differential duty - It is not in dispute that assessee has manufactured coated wafers and cleared them - The goods were not described as "wafer biscuits" either to the department or in the invoices or on the wrappers of the product - Therefore, both the Revenue and everyone in the trade including the consumer understands them as wafers or coated wafers and not as wafer biscuits - The interpretation of exemption notification has to be done strictly giving the benefit of any ambiguity in exemption notification to the Revenue and against the assessee as has now been laid down by the Constitutional Bench of Apex Court in case of Dilip Kumar & Company and others - 2018-TIOL-302-SC-CUS-CB - Thus, Tribunal found nobody in the chain of trade from the manufacturer to the ultimate consumer know the products as 'wafer biscuits' but know them only called as coated wafers - It is not for this Tribunal to enlarge the scope of an exemption notification meant for 'wafer biscuits' to cover 'coated wafers' as well - In terms of ratio laid down by Apex Court in case of Dilip Kumar and Company & others, assessee is not entitled to the benefit of exemption notfn 03/2006 - Coming to the question of valuation, it is not in dispute that the assessee is manufacturing goods on job work basis and are therefore covered by Rule 10A of CEVR, 2000.

It is also not in dispute that the assessee paid duty based on the values declared by Mondelez - These values are reflected in the price list - The only point of dispute are the three elements which the Adjudicating Authority sought to include in assessable value i.e. the Dealer's margin, RD Markup and Post Manufacturing expenses - As far as the dealer's margin is concerned, the dealer's margin cannot be included in assessable value - In a commodity which costs Rs. 2/- per piece, it is inconceivable that M/s Mondelez was selling these goods directly to individual retailers across the country - Therefore, there is no room for disallowing dealer's margin as a deduction - As far as the RD Mark up is concerned, there is no evidence on record to show that this actually pertains to R&D expenses - Therefore, inclusion of R&D mark up in assessable value is not sustainable and it deserves to be set aside - As far as the PME is concerned, inclusion of these expenses depends upon the nature of the post manufacturing expenses - In case where these are expenses incurred upto the place of removal, the same have to be included in assessable value - However, if these represent other expenses such as cheque discounting charges, they cannot be included in assessable value, as has been held by Tribunal in their own case - This is a fact which can be verified by adjudicating authority based on any evidence that may be provided by assessee.

Once all facts were noted in department and the department has come to some tentative conclusion regarding classification and valuation under section 4A of the Central Excise Act and thereafter after a period of one year based on the same facts issued a different SCN, coming to a different set of conclusion, all that can be said, it was a question of interpretation which the department itself was not sure about it - Therefore, the demand of extended period of limitation cannot be sustained - The penalties imposed under Section 11AC are set aside - As far as penalty under Rule 26 upon Mondelez is concerned, no grounds found to uphold the penalties imposed upon Mondelez, as the elements of fraud, collusion, wilful misstatement, suppression of facts or violation of act of Rules with an intent to evade payment of duty, have not been established: CESTAT

- Appeals disposed of: HYDERABAD CESTAT

Cus - This application seeks exemption from paying the cost of Rs.50,000/-, imposed by this Court on Respondents by an order dated 2nd August, 2018 - On the Respondent's own showing in the present application, it is seen that the said additional affidavit was prepared only on 16th August, 2018 - A copy thereof was served on Petitioner only on 24th August, 2018 and the next date of hearing was 31st August, 2018 - It is clear, therefore that the Respondents did not comply even with the time limit imposed by order dated 2nd August, 2018 - Therefore, no case is made out for waiver of cost imposed - It is not possible to issue any direction for the release of firearms that have been confiscated - It would have to await the final orders passed in adjudication proceedings - The Court permits the petitioner to raise all the points urged in present petition, challenging the validity of seizure of the firearms, before the appellate authority in accordance with law: HC

Cus - The assessee is holder of Customs Broker Licence - Proceedings were initiated under CBLR, 2013 alleging that the assessee had neither collected the KYC of exporter nor ascertained the correctness of IEC and identity of the client, as prescribed in Regulations 11(a) and 11(n) of the CBLR, 2013 - The issue of order of revocation more than ninety days after the submission of the Inquiry Officer's report has been followed in the breach - The decision of CESTAT in case of M/s. Elite Shipping Services - 2019-TIOL-538-CESTAT-MAD relied upon by assessee will also apply on all fours to the facts of this case - The said Tribunal order had placed reliance on the judgements of High Court in M/s. Ind Air Carrier Ltd. - 2016-TIOL-1111-HC-DEL-CUS and M/s. Impexnet Logistic - 2016-TIOL-1069-HC-DEL-CUS - There are umpteen number of decisions which have consistently taken the view that mere discrepancy in obtaining authorization from a client is not sufficient to revoke the licence or that absence of physical verification of the importer is also not a sufficient ground for revocation of licence - The order of revocation cannot be sustained not only on merits, but also on the ground of transgression of mandatory time limit prescribed in the regulation - The impugned Order cannot survive: CESTAT

Cus - The assessee is a 100% EOU under STP scheme and holding in bond manufacturing sanction order and private bonded warehouse license to manufacture/develop and export of software - They imported various capital goods in terms of provisions of Notfn 25/2003-Cus and Notfn 22/2003-CE - The issue arises is; whether the warehousing period of capital goods gets automatically extended with renewal of warehousing license under Section 58 of Customs Act are of separate extension of the capital goods lying in warehouses has to be obtained - Tribunal has decided in Sun Microsystems India Pvt. Ltd. - 2008-TIOL-389-CESTAT-BANG and HCL Technologies - 2017-TIOL-2879-CESTAT-BANG that warehousing period of capital goods gets extended automatically till the date of expiry of warehousing license - The issue is squarely settled in favour of assessee - Whether inability to produce warehoused goods for verification at the time of visit of officers amounts to removal of goods from the warehouse, the Bench in the cases of Datex Ohmeda (India) Ltd. - 2010-TIOL-146-CESTAT-BANG and Wipro GE Medical Systems Pvt. Ltd. - 2010-TIOL-206-CESTAT-BANG has held that duty cannot be demanded on the goods just because of the assessee could not show the goods for physical visit of the officers - The Supreme Court was examining the issue of retention of goods beyond permissible period in the warehouses and therefore the facts of the case are distinguishable - Therefore, the ratio of the decision cannot be applied to the instant case - Consequently, the appeal is allowed: CESTAT