2019-TIOL-NEWS-234, Dated: Friday, October 04, 2019

CT - One person cannot sell goods to itself - provision of food and beverages by the incorporated clubs to its permanent members does not constitute sale – No Sales Tax: SC LB

ST - From 2005 onwards, the Finance Act of 1994 does not purport to levy service tax on members' clubs in the incorporated form: SC LB

ST - "body of persons" will not include an incorporated company, nor will it include any other form of incorporation including an incorporated co-operative society: SC LB

ST - Legislature has continued with the pre-2012 scheme of not taxing members' clubs when they are in the incorporated form: SC LB

Civil Appeal No. 4184 of 2009:

Background:

+ Assistant Commissioner of Commercial Taxes issued a notice to the respondent Club assessee apprising it that it had failed to make payment of sales tax on sale of food and drinks to the permanent members during the quarter ending 30-6-2002.

+ The Tribunal inter alia referred to Article 366(29-A) of the Constitution of India, Section 2(30) of the West Bengal Sales Tax Act , its earlier decision in Hindustan Club Ltd. v. CCT [Hindustan Club Ltd. v. CCT, (1995) 98 STC 347 (Tri)] , and, eventuallyopined that -

"…supplies of food, drinks and refreshments by the petitioner clubs to their permanent members cannot be treated as "deemed sales" within the meaning of Section 2(30) of the 1994 Act. We find that the payments made by the permanent members are not considerations and in the case of Members' Clubs the suppliers and the recipients (Permanent Members) are the same persons and there is no exchange of consideration."

+ In fine, the Tribunal accepted the contention of the respondent Club and opined that it is not eligible to tax under the Act.

+ In Revenue appeal, the High Courtnoted that the respondent is an incorporated entity under the Companies Act, 1956; that the respondent assessee charges and pays sales tax when it sells products to the non-members or guests who accompany the permanent members but when the invoices are raised in respect of supply made in favour of the permanent members, no sales tax is collected and opined that it was clear that supply of food, drinks and beverages had to be made upon payment of consideration, either in cash or otherwise, to make the same exigible to tax but in the case at hand, the drinks and beverages were purchased from the market by the Club as agent of the members; that the members collectively was the real life and the Club was a superstructure only and, therefore, mere fact of presentation of bills and non-payment thereof consequently, striking off membership of the Club, did not bring the Club within the net of sales tax; that in the obtaining factual matrix the element of mutuality was not obliterated.

+ The Supreme Court, Division Bench 2016-TIOL-79-SC-CT set out the following three questions to be answered by a larger Bench:

(i) Whether the doctrine of mutuality is still applicable to incorporated clubs or any club after the 46th Amendment to Article 366(29-A) of the Constitution of India?

(ii) Whether the judgment of this Court in Young Men's Indian Assn. [CTO v. Young Men's Indian Assn., (1970) 1 SCC 462] still holds the field even after the 46th Amendment of the Constitution of India; and whether the decisions in Cosmopolitan Club [Cosmopolitan Club v. State of T.N., (2017) 5 SCC 635 : (2009) 19 VST 456 (SC)] and Fateh Maidan Club [Fateh Maidan Club v. CTO, (2017) 5 SCC 638 : (2008) 12 VST 598 (SC)] which remitted the matter applying the doctrine of mutuality after the constitutional amendment can be treated to be stating the correct principle of law?

(iii) Whether the 46th Amendment to the Constitution, by deeming fiction provides that provision of food and beverages by the incorporated clubs to its permanent members constitute sale thereby holding the same to be liable to sales tax?"

Held:

++ The 61st Law Commission Report, which deliberated on the subject matter of Article 366(29-A), dealt with sales by associations to members under Chapter 1-D. of the Report.

++ The Law Commission was of the view that the Constitution ought not to be amended so as to bring within the tax net members' clubs. It gave three reasons for so doing. First, it stated that the number of such clubs and associations would not be very large; second, taxation of such transactions might discourage the cooperative movement; and third, no serious question of evasion of tax arises as a member of such clubs really takes his own goods.

++ However, despite the aforesaid, Article 366(29-A) included within it sub-clause (e).

++ Reference to the Statement of Objects and Reasons which led upto the 46th Amendment.

++ The observations made in the judgment [BSNL v. Union of India (2006) 3 SCC 1] on sub-clause (e) cannot possibly be said to form the ratio-decidendi of the judgment, as what came up for consideration in that case was whether electro-magnetic waves can be said to be 'goods', so as to be the subject matter of taxation within Article 366. This was answered in the negative.

++ In any case, paragraph 41 of the judgment, when it refers to subclause (e), cannot possibly refer to "incorporated" associations contrary to the plain language of sub-clause (e), which refers to "unincorporated" associations.

++ We have thus to discover for ourselves whether the doctrine of mutuality has been done away with by Article 366(29-A)(e) and whether the ratio of Young Men's Indian Association (supra) would continue to operate even after the 46th Amendment.

++ Young Men's Indian Association (supra) made no distinction between a club in the corporate form and a club by way of a registered society or incorporated by a deed of trust. What is the essence of the judgment is that the holding of property must be a holding for and on behalf of the members of the club, there being no transfer of property from one person to another. Proprietary clubs were distinguished, as there the owner of the club would not be the members themselves, but somebody else.

++ Given these observations, it is clear that if persons carry on a certain activity in such a way that there is a commonality between contributors of funds and participators in the activity, a complete identity between the two is then established. This identity is not snapped because the surplus that arises from the common fund is not distributed among the members - it is enough that there is a right of disposal over the surplus, and in exercise of that right they may agree that on winding up, the surplus will be transferred to a club or association with similar activities. Most importantly, the surplus that is made does not come back to the members of the club as shareholders of a company in the form of dividends upon their shares. Since the members perform the activities of the club for themselves, the fact that they incorporate a legal entity to do it for them makes no difference. What is of essence, therefore, in applying this doctrine is that there is no sale transaction between two persons, as one person cannot sell goods to itself.

++ What arises for deliberation now is whether the 46th Amendment has done away with the principles contained in Young Men's Indian Association (supra) and the other judgments on the doctrine of mutuality, as applied to members' clubs.

++ It can be seen that the 61st Law Commission Report had observed that there cannot be said to be any evasion of tax as a member of members' clubs "really takes his own goods" and, therefore, did not seek to tax such goods. The framers of the 46th Amendment thought otherwise, and made it plain that they sought to bring to tax, sales made by unincorporated clubs or an association of persons to their members, as it was thought that such transactions were not taxable, as such club or associations in law has no separate existence from that of the members.

++ Quite obviously, the Statement of Objects and Reasons has not read the case of Young Men's Indian Association (supra) in its correct perspective. As has been noticed hereinabove, Young Men's Indian Association (supra) had three separate appeals before it, in one of which a company was involved. To state, therefore, that under the law as it stood on the date of the 46th Amendment, a sale of goods by a club having a corporate status to members is taxable, is wholly incorrect.

++ Proceeding on this incorrect basis, what the 46th Amendment sought to do was to then bring to tax sales by clubs which have no separate existence from that of their members. In so doing, the 46th Amendment used the expression "any unincorporated association or body of persons". This expression, when read with the Statement of Objects and Reasons, makes it clear that it was only clubs which are not in corporate form that were sought to be brought within the tax net, as it was wrongly assumed that sale of goods by members' clubs in the corporate form were taxable. "Any" is the equivalent of "all". This word, therefore, also lends itself to the aforesaid interpretation, as the emphasis of the legislature is on all unincorporated associations or bodies being brought within subclause (e).

++ Article 366(29-A) does not use this expression, as "person" would then include corporate persons as well. On the other hand, "body of persons" is used to make it clear beyond doubt that corporate persons are not referred to.

++ The contrast in the language of the Income Tax Act, 1961 and Article 366(29-A)(e) again leads to the conclusion that "body of persons" would not refer to the corporate form unless "person" by itself is accompanied by the expression "whether incorporated or not".

++ Even otherwise, the "supply" of goods by an unincorporated association or body of persons has to be to a member for cash, deferred payment or other valuable consideration. As has been correctly argued, the definition of "consideration" in Section 2(d) of the Indian Contract Act, 1872 necessarily posits consideration passing from one person to another.

++ Looked at from another point of view, a members' club may supply goods which are not food or drink - for example, soap, cosmetics and other household items. These items would be "goods", but would not be within sub-clause (f) - not being food or drink, and cannot, therefore, be taxed under sub-clause (f), leading to the absurd situation of the supply of food and drink being taxable in members' clubs, and the supply of other goods in such clubs being outside the tax net. For this reason also, it is clear that the subject matter of sub-clause (f) is entirely different and distinct from that of sub-clause (e), and cannot possibly apply to members' clubs. In this view of the matter, the expression "in any manner whatsoever", being part and parcel of sub-clause (f) cannot be held to extend to a supply of all goods so as to bring such goods to tax when applied to members' clubs.

++ A reading of the provisions [Section 2(24)(vii), section 44 of the Income Tax Act, 1961] makes it clear that when profits and gains of a mutual insurance company are sought to be brought to tax, they are so done by express reference to the fact that the business of insurance is carried on by a mutual insurance company. The absence of any such language in sub clause (e) of Article 366(29-A) is also an important pointer to the fact that the doctrine of mutuality cannot be said to have been done away with by the said 46th Amendment.

++ It can be seen from this provision that profits or gains arising from a transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business, is by a deeming fiction brought to tax, despite the fact that there is no transfer in law by the owner of a capital asset to another person. Modalities such as these to bring to tax amounts that would do away with any doctrine of mutuality are conspicuous by their absence in the language of Article 366(29-A)(e).

Conclusion:

(1) The doctrine of mutuality continues to be applicable to incorporated and unincorporated members' clubs after the 46th Amendment adding Article 366(29-A) to the Constitution of India.

(2) Young Men's Indian Association (supra) and other judgments which applied this doctrine continue to hold the field even after the 46th Amendment.

(3) Sub-clause (f) of Article 366(29-A) has no application to members' clubs.

+++ No interference is called for in the findings of fact or declaration of law in this case. C.A. No. 4184 of 2009 stands dismissed.

C.A. No.7497 of 2012 and other connected matters

Background:

High Court of Jharkhand had held thus –

+ In view of the mutuality and in view of the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another in the light of the decisions referred above as foundational facts of existence of two legal entities in such transaction is missing. However, so far as services by the club to other than members, petitioner submitted that they are paying the tax.

+ Rendering of service by the petitioner- club to its members is not taxable service under the Finance Act, 1994 and the writ petition of the petitioner is allowed accordingly.

Likewise, the Gujarat High Court followed the above judgment of the High Court of Jharkhand and declared -

+ Petitions are allowed and it is hereby declared that Section 65(25a), Section 65(105) (zzze) and Section 66 of the Finance (No.2) Act, 1994 as incorporated/ amended by the Finance Act, 2005 to the extent that the said provisions purport to levy service tax in respect of services purportedly provided by the petitioner club to its members, to be ultra vires . Rule is made absolute with no order as to costs.

Supreme Court held -

Period 16th June, 2005 uptil 1st July, 2012:

++ The definition of "Club or Association" contained in Section 65(25a) makes it plain that any person or body of persons providing services for a subscription or any other amount to its members would be within the tax net. However, what is of importance is that anybody "established or constituted" by or under any law for the time being in force, is not included.

++ A Company incorporated under the Companies Act or a cooperative society registered as a cooperative society under a State Act can certainly be said to be "constituted" under any law for the time being in force.

++ It is, thus, clear that companies and cooperative societies which are registered under the respective Acts, can certainly be said to be constituted under those Acts. This being the case, Bench accepts the argument on behalf of the Respondents that incorporated clubs or associations or prior to 1st July, 2012 were not included in the service tax net.

Period post 1st July, 2012:

++ Definition of "service" contained in Section 65B(44) is very wide, as meaning any activity carried out by a person for another for consideration. "Person" is defined in Section 65B(37) as including, inter alia, a company, a society and every artificial juridical person not falling in any of the preceding sub-clauses, as also any association of persons or body of individuals whether incorporated or not.

++ What has been stated in the present judgment so far as sales tax is concerned applies on all fours to service tax; as, if the doctrine of agency, trust and mutuality is to be applied qua members' clubs, there has to be an activity carried out by one person for another for consideration. We have seen how in the judgment relating to sales tax, the fact is that in members' clubs there is no sale by one person to another for consideration, as one cannot sell something to oneself. This would apply on all fours when we are to construe the definition of "service" under Section 65B(44) as well.

++ However, Explanation 3 has now been incorporated, under sub-clause (a) of which unincorporated associations or body of persons and their members are statutorily to be treated as distinct persons.

++ It will be noticed that the aforesaid explanation is in substantially the same terms as Article 366(29-A)(e) of the Constitution of India. Earlier in this judgment qua sales tax, we have already held that the expression "body of persons" will not include an incorporated company, nor will it include any other form of incorporation including an incorporated co-operative society.

++ It will be noticed that "club or association" was earlier defined under Section 65(25a) and 65(25aa) to mean "any person" or "body of persons" providing service. In these definitions, the expression "body of persons" cannot possibly include persons who are incorporated entities, as such entities have been expressly excluded under Section 65(25a)(i) and 65(25aa)(i) as "anybody established or constituted by or under any law for the time being in force". "Body of persons", therefore, would not, within these definitions, include a body constituted under any law for the time being in force.

++ When the scheme of service tax changed so as to introduce a negative list for the first-time post 2012, services were now taxable if they were carried out by "one person" for "another person" for consideration. "Person" is very widely defined by Section 65B(37) as including individuals as well as all associations of persons or bodies of individuals, whether incorporated or not. Explanation 3 to Section 65B(44), instead of using the expression "person" or the expression "an association of persons or bodies of individuals, whether incorporated or not", uses the expression "a body of persons" when juxtaposed with "an unincorporated association".

++ We have already seen how the expression "body of persons" occurring in the explanation to Section 65 and occurring in Section 65(25a) and (25aa) does not refer to an incorporated company or an incorporated cooperative society. As the same expression has been used in Explanation 3 post-2012 (as opposed to the wide definition of "person" contained in Section 65B(37)), it may be assumed that the legislature has continued with the pre-2012 scheme of not taxing members' clubs when they are in the incorporated form. The expression "body of persons" may subsume within it persons who come together for a common purpose, but cannot possibly include a company or a registered cooperative society. Thus, Explanation 3(a) to Section 65B(44) does not apply to members' clubs which are incorporated.

++ The expression "unincorporated associations" would include persons who join together in some common purpose or common action - see ICT, Bombay North, Kutch and Saurashtra, Ahmedabad v. Indira Balkrishna (1960) 3 SCR 513 at page 519-520. The expression "as the case may be" would refer to different groups of individuals either bunched together in the form of an association also, or otherwise as a group of persons who come together with some common object in mind. Whichever way it is looked at, what is important is that the expression "body of persons" cannot possibly include within it bodies corporate.

++ Jharkhand High Court and the Gujarat High Court are correct in their view of the law in following Young Men's Indian Association (supra). Bench is also of the view that from 2005 onwards, the Finance Act of 1994 does not purport to levy service tax on members' clubs in the incorporated form.

++ Consequently, show-cause notices, demand notices and other action taken to levy and collect service tax from incorporated members' clubs are declared to be void and of no effect in law.

Conclusion:

++ Appeals of the Revenue are dismissed.

++ Writ Petition (Civil) No.321 of 2017 is allowed in terms of prayer (i) therein.

ST - Whether the appellant is entitled for the refund claimed by them on the specified services used in relation to the authorised operations in the Special Economic Zone under notification no.17/2011-ST dated 1.3.2011 which has been rejected only on the basis that CST/VAT has also been charged by the supplier and, therefore, it is the sale of goods and not service.

Held: It is not disputed that the refund claim of Rs.1.51 lakh has been rejected only on the ground that the invoices shows that the supplier charged 5% CST which, according to the department, is applicable only in case of goods and not service - both the authorities below failed to notice that in the invoices both CST as well as Service Tax has been charged by the supplier - the abovementioned submissions were raised by the appellant before the 1st Appellate Authority also and is recorded in paragraphs 3 and 6 respectively of the impugned order, but those were not dealt with by the said authority while passing the impugned order - in the impugned order, after extracting the findings recorded by the Adjudicating Authority, the 1st Appellate authority simply agreed with the findings of the lower authority without discussing or giving any findings on any of the submissions raised by the appellant before the 1st Appellate Authority - it is not disputed that the ST of the amount of Rs.1.51 lakh has also been charged by the supplier - it is true that if the supplier has charged ST and the assessee has paid the same, then the assessee is eligible for CENVAT credit - but this important aspect has also not been dealt with in the impugned order although as per the appellant the Invoice was produced before the 1st Appellate Authority - be that as it may, the impugned order is a non-speaking order – therefore, without going into the merits of the contentions raised herein, the impugned order is set aside only to the extent of rejection of the amount of Rs.1.51 lakh and the matter remanded back to the 1st Appellate Authority with a direction to decide the appeal after following principles of natural justice and also after dealing with all the contentions raised by the appellant - the appeal is, therefore, allowed by way of remand: CESTAT [para 6, 7]

ST - This appeal is against the impugned order and disputes the consequences of the finding that they had rendered 'rent-a-cab service' to M/s. Spanco Tele system & Solutions Ltd. for the period from November 2003 to September 2007.

Held: In all the decisions cited by the appellant, the consistent thread is that classification as 'rent-a-cab service' was contingent upon the purpose for which the vehicles are hired and the scheme of consideration taken together - it would appear that the recipient intended to pick up and drop employees between home and work place and, instead of maintaining its own fleet or sourcing a fleet belonging to another, entered into an agreement with the appellant for such pickup and drop - the recipient, instead of getting cabs outsourced, got the responsibility of picking up and dropping outsourced to the appellants - the distinction between the two is highlighted in the case of Bangalore Metropolitan Transport Corpn. [ 2015 (38) STR 976 (Tri-Bang) ]and approved of by the Supreme Court –similarly in re Rahul Travels - 2016-TIOL-3282-CESTAT-MUM , which has relied upon the decision in re R.S.Travels - 2008-TIOL-1311-CESTAT-DEL and in re Sachin Malhotra - 2014-TIOL-2039-HC-UKHAND-ST , the finding to the effect that "… vehicles contracted out in return for payment on actual usage is not taxable under Section 65(105)(o) of Finance Act, 1994…" distinguish the legislative intent to tax the activity of outsourced procurement of vehicles instead of the activity of procurement of rides–in the case of Anil Kumar Agnihotri - 2018-TIOL-670-HC-ALL-CX , the outsourcing agreement incorporated both fixed charge for the threshold distance and variable charge for usage beyond the threshold and the appellant therein, pleading for exclusion from classification as provider of 'rent-a-cab service, claimed that the control of the cab did not pass on to the customer as the agreement was for 'hiring' and not 'renting'; the High Court held that such distinction would not alter the nature of the agreement which was not sought to be decided upon on the basis of the determination of consideration - the facts and circumstances in which this decision materially differs from the issues agitated now before the Bench - as these facts and circumstances are similar to the ones adjudged in re R S Travels, in re Sachin Malhotra, in re Bangalore Metropolitan Transport Corpn and in re Rahul Travels, the Bench respectfully follows the same to set aside the impugned order and allow the appeal : CESTAT [para4, 5, 6, 7]

ST – Goods Transport Agency Service - The issue for determination is the appellant's claim that the activity sought to be taxed under section 65(105) (zzp) of Finance Act, 1994 [Act] has not been performed for their benefit and by persons referred to section 65 (50 b) of the Act – vide impugned order, the Commissioner has determined the tax liability by reference to the taxable service and definition of provider as fitting the relationship between the appellant and M/s.Satpuda Tapi Parisar Sarva Seva Bhavi Sangh, a Trust established by, and for, enhancement of agricultural productivity, and the culling out of that accounted as 'freight' in the balance sheet for the relevant years without corresponding evidence of having discharged tax liability.

ST - During audit, department noticed that the appellant had availed and utilised cenvat credit amounting to Rs.23.88 lakhs on input services such as which were exclusively provided for their employees at their residential quarters -as the services are primarily procured for personal consumption of employees, they are excluded from the definition of input service as per clause (C) of rule 2(l) of Cenvat Credit Rules, 2004 [CCR] -it was felt that cenvat credit had been wrongly availed and, therefore, the same is liable for recovery – demand raised to recover the cenvat credit wrongly availed – the SCN also alleged that the appellant had availed cenvat credit on the basis of debit notes which are not eligible documents for availing cenvat credit under rule 9 of CCR –demands confirmed, penalties imposed as proposed - on appeal, the lower appellate authority upheld the order of the lower authority, hence appeal to CESTAT.

Held: Appellant's argument is that they are obtaining the input services from the internet service provider, D2H operator etc., and are further selling these services to their employees for a consideration - therefore, as far as these services are concerned, the employees are their service recipients and they are the service providers - they are not in an employer-employee relationship as far as these services are concerned - for the services which they have rendered to their employees, they have collected amounts along with ST and paid the same to the exchequer and reflected these amounts in their ST-3 returns – strong force found in the argument of the appellant as far as these services are concerned - merely because a person happens to be their employee he does not cease to be a service recipient - if the employees were not a service recipient, no amounts would have been recovered from them and no ST would have been paid on the same - nevertheless, the fact remains that there are two kinds of relationships between appellant and their employees - first, they have a relationship as an employer and employee - as far as this relationship is concerned, any input service which is availed to provide benefits to their employees is excluded from rule 2(l) - secondly, they have a relationship as a service provider and a service recipient - as far as these services rendered with respect to this equation are concerned, the appellant is bound to pay ST on the services rendered to their employees for a consideration and is entitled to avail credit on input services on the relevant services - therefore, the appellant is entitled to the cenvat credit on the disputed amounts -regarding the second issue, debit notes were only raised by the appellant on their employees to recover amounts - they have not availed any cenvat credit on the basis of such debit notes - in view of the above, the demand is not sustainable and the impugned order is liable to be set aside - the impugned order is set aside and the appeal is allowed : CESTAT [para9, 10, 11]

CX - The Petition challenges the recovery notice dated 5th April, 2018 issued by Respondent No.2 and the consequent attachment of Petitioners' six bank accounts in Allahabad Bank, Kolhapur - This attachment of Petitioners' bank account is for dues payable by M/s. Sampark under FA, 1944 - The attachment of Petitioners' Bank Account in Allahabad Bank, Kolhapur, is consequent to demand confirmed by order dated 14th October, 2011 in the case of M/s. Sampark - M/s. Sampark has filed a further appeal to the Tribunal and also deposited 10% of the demand in appeal in terms of Section 35F of CE Act r/w Section 83 of the Act - It is undisputed that M/s. Sampark have deposited 10% of the outstanding demanded under Section 35F of Central Excise Act in respect of its pending appeal before the Tribunal from the order of Commissioner (A) - The CBDT Circulars 984 and 1053, which are binding upon the authorities, prohibit the authorities under the Act from adopting coercive proceedings where such deposits have been made and appeal is awaiting disposal - The continuance of the attachment of Petitioners' Bank Accounts in Allahabad Bank, Kolhapur is in the face of the above binding CBDT Circulars - Therefore, is bad in law - The attachment of petitioners' bank account in M/s. Allahabad Bank, Kolhapur by Respondent No.2, as communicated to the Petitioner by letter dated 21st May, 2018 is bad in law - Therefore, the Respondent, particularly the Respondent No.2 would vacate the attachment made of Petitioners' Bank Account in M/s. Allahabad Bank, Kolhapur, and inform the Bank forthwith: HC

CX - Whether the appellants are entitled to cenvat credit of Rs.6.33 lakhs on the input invoices for the period 2008-09 to 2011-12.

Held: Appellants, prima facie, produced communications with the Department from time to time indicating that all these documents have been filed with the Department - however, the Adjudicating authority recorded a finding otherwise - to resolve the issue, it is appropriate to remand the matter to the Adjudicating authority with the specific direction to consider the documents that were produced earlier and also the documents that would be produced during the course of de-novo proceedings including the Chartered Accountant's certificate that have been produced to ascertain the admissibility of the CENVAT credit - appeal is allowed by way of remand: CESTAT [para 5, 6]

Held: Supreme Court in the case of Ultra Tech Cement Ltd. - 2018-TIOL-42-SC-CX has held that credit is eligible from the place of removal upto the buyer's premises - however, in the case of Roofit Industries Ltd. - 2015-TIOL-87-SC-CX, the Apex Court has held that when the sale is on FOR basis, all the charges/cost have to be included in the assessable value for the payment of CE duty - thus, in such cases, when the sale takes place at buyer's premises, the place of removal is the buyer's premises - the Board has clarified in their circular dated 8.6.2018 that when the transaction/sale is on FOR basis, the place of removal would be the buyer's premises - therefore, it is necessary to determine the place of removal to consider the eligibility of credit of ST paid on freight charges up to the buyer's premises - for this purpose, it is deemed fit to remand the matter to the adjudicating authority who shall look into the issue of eligibility of credit on GTA service after determining the place of removal - in doing so, the adjudicating authority shall take into consideration the circular issued by the Board as well as the decision of this Tribunal vide Final Order No. A/10373/2019 dated 25.2.2019 in the case of Ultra Tech Cement Ltd. Vs. Commissioner of Central Excise - the impugned order is set aside and the appeal is allowed by way of remand to the adjudicating authority with the above direction: CESTAT [para 5]

CX - Appellant, a Kerala Government company manufacturing electric wires and cables, due to acute financial difficulties, could not pay the duty promptly on the goods cleared during the months of October 2009, December 2009 and January 2010 - however, they paid the dues after delays of 48 days, 47 days and 45 days respectively along with interest - SCN issued - demand confirmed along with interest, equivalent penalty imposed - appellant was issued another SCN dated 17.1.2012 proposing to demand Rs.5.17 lakhs ED including cess on the figures omitted which was intimated by the appellant and after following the due process, both the authorities have confirmed the demand- appeal to CESTAT.

Held: Demand has been confirmed only on account of the default in making the payment of excise duty on time - the appellant subsequently paid the duty by utilizing the cenvat credit along with interest which is not in dispute -rule 8(3A) of the Central Excise Rules, 2002 to the extent requiring payment of duty without utilizing the cenvat credit during the period of default is held to be unconstitutional by several High Courts -the Gujarat High Court in the case of Indsur Global Ltd. - 2014-TIOL-2115-HC-AHM-CX held the expression "without utilizing the cenvat credit" used in rule (3A) as ultra vires and unconstitutional -the said decision was concurred by various High Courts of Madras, Punjab & Haryana, Delhi and Allahabad and has been followed by the Tribunal in various decisions -the same issue was considered by the Division Bench of this Tribunal in the case of GEI Industrial Systems Ltd. - 2016-TIOL-3175-CESTAT-DEL wherein it was observed that" …….. to hold that the clearances subsequent to March, 2006 as non-duty paid clearance only on the ground that the cenvat credit has been used for payment of such liability, is not legally sustainable…….."- since the issue is squarely covered by the decision of the Tribunal as well as the High Courts, by following the ratio of the said decisions, the impugned order is set aside by allowing the appeal of the appellant : CESTAT [para 6.1, 6.2, 7]

CX - The assessee is engaged in manufacture of goods and has Petrochemical Plant at Vadodara and had taken insurance policies - They were issued SCN proposing denial of credit of service tax on said policies on the ground that the said services were not required either directly or indirectly in or in relation to the manufacture of final product in as much as the lack of insurance cover does not have any bearing on the manufacturing process and therefore the services cannot be considered as "Input Service"as defined in Rule 2 (l) of CCR, 2004 - The demand was confirmed vide impugned order holding that the various insurance coverage preferred by assessee are not essential in the day to day working and running of over all operations of assessee and are not integral to the running of petrochemical complex - The assessee has taken the general Insurance policies to safeguard its petroleum Complex - The services of insurance as found from the list are integral to the safety - The value of plant and machinery running into thousands of crores are required to be safeguarded against various risks - Without such insurance services in case of any mis -happening, the enterprise would be at great loss and can never re-start its operations - The cost of such services stands included in cost of production/ value of goods as certified by Cost Accountant - The services are integral part of cost of goods manufactured and would merit classification as "Input Service" - Unless and until a business is safeguarded against risk and losses it cannot work continuously - Moreover, in the assessee's own case, the Tribunal has allowed the credit on advertising agency service, insurance auxiliary service, air travel agent service, cable operator, clearing and forwarding agent services - In case of Anglo French Drugs & industries - 2017-TIOL-1307-CESTAT-BANG, the credit on impugned services were allowed by Tribunal - In assessee's own case, the Tribunal, on being satisfied that the cost of service is included in cost of production, has allowed the credit - The assessee is eligible to avail credit of service tax paid on Insurance Services as all are related to secure the plant and machinery and thus merit consideration as "Input Services" - Resultantly the impugned order is set aside: CESTAT

CX– (i) Whether the appellant-assessee is eligible to avail cenvat credit of ST paid on commission to Agents who sell the goods and undertake the guarantee of payment(ii) Whether the appellant-assessee has correctly availed cenvat credit on the input service invoices issued by their office as ISD prior to 1.3.2006, when the registered address was different.

Held: Scrutiny of the Agency agreement between the appellant and the agents reveals that the primary objective of the appellant in appointing the agents is sales promotion of the product and the secondary objective is to ensure that their payments are secured by way of a guarantee provided by the agent, which is called a del credere service -the commission paid to the said agent is a consolidated one, which comprises of the activities of causing sale and distribution, promotion of sale; including the guarantee of payment -the Del Credere Agent is the one who guarantees payment from the customer's for the sale and in the event of default in such payment, makes good of the same to the principal - in the present case, besides, the activity of sales promotion, the agents have also undertaken to act as a Del Credere Agent –therefore, merely because of the fact they were also act as Del Credere Agent, the activities/services provided by such agents in promotion of the sale of the product cannot in any manner be diluted -therefore, the activities/services rendered by the agents through the agency agreement clearly indicate that the services provided by them are in the nature of sales promotion activities in addition to the service as Del Credere Agent, hence, fall within the scope of definition of 'input service' as prescribed under rule 2(l) of the Cenvat Credit Rules, 2004 -the 'commission agent' also includes a Del Credere agent is clear from the definition of 'Business Auxiliary Service' under which ST is levied on commission agents –thus the amount of ST paid have been rightly held by the Commissioner as beingin the nature of sales promotion, accordingly, eligible to cenvat credit -regarding the second issue, no substance found in the observation of the Commissioner in denying credit on input invoices issued prior to 1.3.2006, in view of the principle of law laid down by the Gujarat High Court in the case of Dashion Ltd. - 2016-TIOL-111-HC-AHM-ST – the High Court, analyzing the issue, observed that for non registration as an ISD, credit cannot be denied - following the aforesaid judgment, therefore, the impugned order of the Commissioner to the extent of denying the credit of Rs.78.47 lakhs on the input invoices issued for the period prior to 1.3.2006 is hereby set aside and the appeal filed by the assessee is allowed to this extent - in the result, the Revenue's appeal is rejected and the assessee's appeal is allowed : CESTAT [para 12, 13, 14, 15, 13, 14]

Cus - The appeal relates to waiver of duty which is below the pecuniary limit fixed by CBEC for pursuing a departmental appeal before the High Court - However, it is submitted that this case falls within the exceptions contained in instruction issued by the CBEC, namely that this is a case where a circular has been held to be illegal or ultra vires - In this regard, a perusal of impugned order shows that the Tribunal has only found that Circular 4/2004 was taken note of by Tribunal in case of M/s. Kiran Pondy Chems Ltd. 2006-TIOL-1388-CESTAT-MAD and was held to be against the provisions of section 149 - The Tribunal, in the entire order, has nowhere commented on legality or vires of said order - It is not possible to accept the submission advanced by appellant that the case falls within the exception provided in clause (b) of paragraph 3 of the instruction dated 17.08.2011, for preferring departmental appeal where the monetary limit is less than that prescribed by the CBEC for preferring appeals before the High Court - The appeal is, therefore, dismissed as not maintainable: HC

Cus - The petitioner-company filed the present writ seeking waiver of the mandatory pre-deposit of 10% of the duty demand u/s 129E of the Customs Act, in respect of an appeal filed u/s 129A(1) of the Act - It earlier had filed a writ petition contesting an order passed by the jurisdictional Commissioner of Customs - It later withdrew the petition in favor of filing appeal to the Tribunal - The present petition was filed after the Tribunal served a notice in its pending appeal.

Held - The petitioner claimed to be unable to pay the pre-deposit amount on account of an order passed by the Apex Court freezing all the assets of the petitioner and its group - The petitioner was also prohibited from parting with any movable or immovable property pending further orders of the court - In such circumstances, it is not possible the High Court to interfere with the orders of the Supreme Court - Hence the present petition cannot be entertained - Consequently, a further request of the petitioner seeking directions enabling it to access an amount deposited in keeping with an order of the Single Judge, cannot be entertained: HC

Cus - During the relevant period, a person filed B/E for clearance of used BMW Mini One of 2001 model, seeking benefit of Transfer of Residence - Since the car of 2001 model was purchased by the importer only on 13.12.2003, imported on 29.04.2004, hence benefit of transfer of residence was inadmissible - Moreover, the car was proposed to be confiscated on charges of its misdeclaration - Later, the importer waived off the SCN - On adjudication, the car was confiscated and allowed to be redeemed against payment of redemption fine and penalty - Such order was complied with and the re-determined duty was paid with fine and penalty, whereupon the car was released to the importer - Thereafter, the importer sold the car to the assessee herein - It was alleged that the year of manufacture declared before RTO was 2003 whereas the year of manufacture declared before Customs was 2001 - An SCN was then issued to the assessee, proposing to re-determine the value, raise duty demand and impose penalty - On adjudication, redemption fine was imposed along with penalty u/s 112(b) of the Act - Hence the present appeal.

Held - Rule 22 of Customs Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 are referred to, which pertain to the continuance of proceedings after death or adjudication as an insolvent of a party to the appeal or application - In the present case, the appellant had expired & till date, no application was filed on his behalf for continuation of proceedings, by or on behalf of the successor in interest or legal representative of the assessee - Hence the appeal abates as per Rule 22: CESTAT

Cus - The assessee-company imported 48F Optical Fibre Cable & classified it under CTH 85447090 and claimed benefit under Notfn No 24/2006-Cus - On investigation by DGRI, it was alleged that the goods were correctly classifiable under CTH 90011000 - The assessee was held liable to pay 10% BCD as per Notfn No 21/2002-Cus - During investigation, the assessee deposited some amount of duty against the duty short paid by it against bills of entry for the relevant period - SCN was issued proposing to classify the goods under CTH 90011000 and to deny benefit under Notfn No 24/2005, to confiscate the imported items u/s 111(d) & 111(m) and to impose fine u/s 125 since the items were unvailable for confiscation, to raise demand for differential amount of duty in respect of the undue benefits availed, to appropriate an amount already deposited, to levy interest u/s 28AB of the Act and to impose penalty u/s 112(a), 114A & 114AA of the Act - On adjudication, the proposals in the SCN were partly sustained - Hence the Revenue's appeal and cross appeal by assessee. Held - Classification of Optical Fibre Cables - This issue stands settled by the Larger Bench of the Tribunal in Vodafone Essar Gujarat wherein such items were held to be classifiable under Chapter 90 - Following the findings of this judgment, the classification of the goods in the present case as favored by the Revenue is upheld: CESTAT

Held - Appropriation of duty paid u/s 28(2B) - In the proceedings initiated by the Revenue by invoking extended limitation, it cannot seek benefit of sub-section (2B) since it fails to establish its case under such proviso - Once the SCN has been issued in respect of any amount whether or not deposited by invoking extended limitation, the adjudicating authority must determine the issue as per the notice issued - If it is concluded that extended limitation is not invokable, then the adjudicating authority must drop the demand to the extent it is not maintainable, even if the amounts are deposited before issuing notice - Such view was also taken by the Apex Court in Al-Falah Exports - Hence by issuing an SCN, the Revenue itself chose to not settle the issue as per Section 28(2B) of the Act - Having done so, it cannot go back on failing in adjudication proceedings to seek settlement and appropriation of the amounts paid - Hence there are no merits in the Revenue's appeal: CESTAT