CENTRAL EXCISE

CX - The limited issue in these appeals relates to identification as 'person liable to pay duty' in respect of the manufactured goods bearing the brand name 'PAG'.

Held: It is not in dispute that certain products emerge in the hands of the appellant [M/s. Electroclad] which is excisable - the only ground on which the liability to duty therefrom can be escaped is by resort to notification no.8/2003-CE dated 1.3.2003 or if the claim of the appellant to be a 'job-worker' is correct concurrent with assumption of the responsibility by M/s. Shakti Udyog for discharge of duty liability - there is no such assumption of responsibility to discharge duty liability and, in the light of the allegation, not controverted except by a general submission that branded goods had been manufactured only for a limited period, the eligibility to the benefits extended to small-scale units is also not available - the privileges as job-worker, claimed by the appellant, are available only as procedural consequences of such assumption of responsibility - hence, under law, notwithstanding the claims of the appellant of not being in possession of the premises, of not procuring any of the raw materials or inputs or not being in control of manufacturing facility, and of merely having been a provider of labour, their liability to duty is not erased - transfer of materials from M/s. Shakti Udyog has also not taken place in accordance with the procedure prescribed for such job-worker - in these circumstances, the appellant must necessarily be considered as the 'manufacturer' - the rental agreement with M/s. Shakti Udyog is of no relevance in these circumstances - the appellant is unable to bring on record any evidence to substantiate that the production of branded goods was only for a limited period - the liability to duty, therefore, devolves on the appellant - accordingly, no merit found in the appeal of the appellant - insofar as penalty imposed on Pradeep Kainya is concerned, it is seen that he is the proprietor of the principal manufacturer which had merely utilized the facilities of the appellant to undertake manufacturing on their behalf - it has been held that the liability, as manufacturer, vests with the appellant and not upon the principal manufacturer to whom goods were supplied - further, with the uncontested compliance with the tax liability under Finance Act, 1994, there is no ground to attribute any motives to Pradeep Kainya - accordingly, penalty imposed on him is set aside : CESTAT [para 3, 4, 5]

- Appeals disposed of: MUMBAI CESTAT

2019-TIOL-3334-CESTAT-MAD

JK Fenner India Ltd Vs CGST & CE

CX- Whether the 'Courier Service' used by the appellant for goods transportation up to the customer's place is an allowable Input Service Tax Credit.

Held: Earlier order of this Bench in the appellant's own case [ Final Order Nos. 41790-41791 of 2015 ], was passed on 31.12.2015 and, thereafter, the decision of the Apex Court in the case of Ultra Tech Cement Ltd. - 2018-TIOL-42-SC-CX has now settled the issue - further, the other decision of this Bench in the case of Genau Extrusions Ltd. [ Final Order No.40924 of 2019 dated 12.7.2019 ] is also not applicable since the removal therein was on 'FOR' destination basis, which is not so in the case on hand - therefore, the Bench is of the view that the removal up to the customer's premises is covered by the decision in the case of Ultra Tech Cement Ltd., according to which the appellant is not entitled to any cenvat credit - with regard to the other destinations as given in the table at page 19 of the Appeal Memorandum, the narration of destination is only 'Manufacturer' and 'Depot', which appears to be vague - hence, the Bench is of the view that the Adjudicating Authority has to verify the actual destination i.e., he shall verify the actual destination and if it is not again a customer's place, then allow the credit as per law - in view of the above, this issue is remanded to the file of the Adjudicating Authority - in the light of the above, the appeal is partly remanded and partly dismissed on the above terms : CESTAT [para 8.3, 9, 10, 11]

CX - The main dispute is regarding valuation to be adopted for payment of duty on the sponge iron transferred to Unit-II - Department is of the view that since the clearances are made to the appellant's own Unit-II, there is no sale and hence, the assessable value is required to be determined in terms of rule 8 of the Central Excise Valuation Rules, 2000 - differential duty was demanded vide SCN dated 16.8.2005, on the basis of the cost of production determined by the department - the other issue involved is regarding the goods found short at the time of stock verification - the SCN demanded CE duty on the quantity of sponge iron found short by alleging that this quantity of the sponge iron was cleared clandestinely without payment of duty - the Original Authority ordered payment of duty on the goods found short - he also ordered payment of differential duty in respect of the valuation issue after carrying out necessary correction in the duty demanded in the SCN - the Commissioner (Appeals) upheld the findings of the Original Authority, therefore, assessee in appeal before CESTAT.

Held: Valuation - Issue has been considered by the Larger Bench of the Tribunal in the case of Ispat Industries Ltd. - 2007-TIOL-245-CESTAT-MUM-LB - the ratio emerging from the said Larger Bench decision is that the provisions of rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to the independent buyers - the appellant has made clearances to independent buyers in addition to the Burdwan Unit [Unit-II] - the values for clearances to Burdwan Unit are in line with the values adopted for independent buyers - in view of the above, by following the decision of the Larger Bench of the Tribunal, no justification found for demand of differential duty - hence, the demand on the issue of valuation is set aside: CESTAT

Shortage of sponge iron - Shortage of 139.205 MT was recorded at the time of visit of the departmental officers - in the statement recorded, Shri Tapan Kumar Biswas, Manager has also expressed satisfaction of the stock taking procedure as well as admitted the shortages in the finished goods - but he has retracted such admission by filing affidavit before the Notary Public in Asansol - the demand due on shortage has been strongly resisted by the appellant - it is further argued that no proper weighment of finished goods were done during the course of stock verification - further, looking at the nature of the finished products i.e. sponge iron, which is in loose granule form, carrying out weighment physically is also impractical - in any case, no evidence has been brought on record to allege that the goods recorded as shortage were cleared clandestinely - as such, no justification found for demand of duty on such recorded shortage, so the demand is set aside - in the result, the impugned order is set aside and the appeal is allowed: CESTAT [para 6, 7, 10, 11, 12, 13]

CX - During CERA audit, it was observed that the appellant has paid Royalty Charges for technical knowhow during the period 2012-13 to 2014-15 but has not included these Royalty Charges in assessable value of finished goods as is evident from cost audit report furnished by the appellant whereas technical knowhow (Royalty Charges) are to be included in the assessable value, even if the goods are captively consumed, as per the guidelines issued by the ICWAI on "Cost of production for Captive Consumption" under Cost Accounting Standard 4 (CAS-4) - this has resulted in short payment of CE - on this observation, SCN was issued to the appellant - the Adjudicating Authority confirmed demand of CE duty of Rs.14.58 crores along with interest and equivalent penalty - appeal to CESTAT.

Held: The consumption of excisable goods is not for captive consumption but for home consumption and on principal to principal sale basis - therefore, the guidelines relied upon by the department has no relevance in the present case - the appellant, time and again, maintained that the Royalty Charges is clearly included as Sales and Distribution Overheads - therefore, there is no doubt that the Royalty Charges is included in the overall value of the excisable goods - after the amended valuation provisions, from 2000 onwards, the duty is chargeable on the actual transaction value at which the goods are sold and, therefore, any overhead charges cost of manufacture or selling expenses, everything stands included in the transaction value of the finished goods - therefore, only expenses on account of Royalty Charges not shown in the cost of manufacture of the product will not make any difference as the same is admittedly stand included as Selling and Distribution expenses in the overall transaction value- it is evident from the Chartered Accountant's Certificate that Royalty Charges paid to foreign company stands included in the transaction value - it is also noteworthy that the SCN also admits that the Royalty Charges is shown as Sales & Distribution overhead in the appellant's books of account - this itself proves that the Royalty Charges is indeed included in the transaction value - the judgment cited by the Revenue is relevant only in case where the Royalty Charges are not included in assessable value, which is not the case here - therefore, since the Royalty Charges is included in the transaction value on which the excise duty is discharged correctly, no duty can be demanded - accordingly, the impugned order is set aside and the appeal allowed : CESTAT [para 5, 6]

CX - After carrying out searches at various premises and resuming incriminating documents/records, recording statements of various persons, the officers were of the belief that the appellant indulged in clandestine removal of excisable goods manufactured - accordingly, a SCN dated 19.9.2006 was issued and vide impugned order, CE duty of Rs.2.55 crore was determined as not paid and recoverable, equivalent penalty imposed, penalties imposed on other appellants - the duty was confirmed by reducing the demand raised in SCN due to consideration of the submission of the appellant on account of cum duty price - appellants before CESTAT - the revenue also filed five appeals only on the ground that the adjudicating authority has wrongly extended the benefit of cum duty price as the issue involved in the present case is of clandestine removal of excisable goods and in such case cum duty benefit cannot be given.

Held: It is found that the appellant has raised very important issues related to principles of natural justice inasmuch as to whether compliance of section 36B(2) of the CEA was made for taking computer printout - the appellant also pointed out that the hard disk from where the computer printout was taken needs to be examined, which will show whether the data is relevant or it is for the purpose of training as claimed by them - the issue of production capacity vis-à-vis Electricity consumption is also to be examined properly - the Bench is, therefore, of the view that matter on the above issues needs reconsideration - thus the matter related to assessees' appeals, are remanded to the adjudicating authority for passing a fresh order - as regards Revenue's appeals, it is only on the issue as to whether the Adjudicating authority is right in extending the benefit of cum duty price - this issue is no longer Res-Integra in view of the judgment in Maruti Udyog Ltd. - 2002-TIOL-34-SC-CX-LB - the Revenue's proposal for denial of the benefit of cum duty is on the ground that this is a case of clandestine removal - therefore, the assessee is not entitled for cum duty benefit - the Bench is of the view that the benefit of cum duty is governed by Statutory Provision with regard to valuation of excisable goods in terms of section 4 of Central Excise Act, 1944 - merely because the goods were allegedly cleared clandestinely, section 4 cannot be applied differently - as regard the doubt raised on the valuation of the goods, it is found that the SCN has conclusively arrived at transaction value which is final - thereafter, no question can be raised by the Revenue on the value ascertained and duty computed on such values in the SCN - therefore, the Adjudicating authority has rightly and legally extended the benefit of cum duty price which is upheld - as a result, Revenue's appeals are dismissed, parties' appeals are remanded to the Adjudicating Authority : CESTAT [para 10, 11, 12]

CUSTOMS

Sri Amman Chemicals Vs Additional Secretary And Appellate Authority

Cus - Petitioner is aggrieved against the order of the first respondent wherein and whereby the appeal preferred by the petitioner challenging the order of the second respondent in refusing to grant P5 license under Ammonium Nitrate Rules, 2012 was rejected.

Held: Petitioner has earlier imported huge quantity of Ammonium Nitrate and sold it to various third parties, who are not possessing P3 license and the usage by such third parties was also not for agricultural purpose - under Article 19(1)(g) of the Constitution of India, right to trade is a fundamental right, however such right is not an unfettered right and on the other hand, it is always subject to reasonable restriction - Therefore, right to trade in Ammonium Nitrate and import the same is always subject to the statutory prescriptions and restrictions as provided under the Explosives Act, 1884 and Ammonium Nitrate Rules, 2012 - Ammonium Nitrate is declared as explosive and, therefore, any explosive material sought to be imported by the petitioner by obtaining P5 license cannot be permitted as a matter of routine and, therefore, it is the bounden duty and responsibility of the Authorities concerned to look into all perspectives and decide as to whether such license is to be granted or not - If the Authorities found that, in the interest of national security, such import license cannot be granted to a non-user, scope for this Court to interfere with such policy decision is very limited - In the present case, the very act of the petitioner in disposing the earlier imported Ammonium Nitrate to various third parties, who are not possessing valid P3 license, would clearly indicate that the petitioner is undoubtedly not the user of Ammonium Nitrate and on the other hand, it is only interested in trading the same, that too, by selling it to several individuals, who are stated to be the persons without P3 license - The counter affidavit filed by the Customs also states that dealers of explosives purchased Ammonium Nitrate from the petitioner and used the same in their blasting operations at the quarries and they also sold small quantities to individuals and that the end users of the same is not known - Therefore, it is seen that end users of the small quantities of the Ammonium Nitrate is unidentifiable - Needless to say that accumulating small quantities of Ammonium Nitrate periodically would result in gathering larger quantity in the hands of unknown and unidentifiable persons and hence allowing such trade to go on will not be in the interest of national security, therefore, the Authorities have rightly rejected the claim of the petitioner for P5 license, with which, this Court finds no reasons or grounds to interfere, more particularly, while exercising its discretionary jurisdiction under Article 226 of the Constitution of India - Accordingly, the writ petition fails and the same is dismissed: High Court [para 21 to 23]

- Petition dismissed : MADRAS HIGH COURT

Tube Investments Of India Ltd Vs UoI

Cus - Petitioner is aggrieved against the order of the second respondent, wherein and whereby, the request of the petitioner to extend the benefit of Notification No.104/2009-Cus, in respect of goods already cleared vide five Bills of entry through ICD - Arakkonam during the period from February, 2013 to July, 2013, was rejected.

Held: Second respondent has chosen to pass the present impugned order and rejected the benefit only by stating that port ICD - Arakkonam was not included in the Notification at the relevant point of time - It is not in dispute that the ICD - Arakkonam is subsequently included in the exemption Notification, by issuing Notification No.5 of 2015 dated 20.02.2015 - It is also not in dispute that the petitioner is permitted to import goods through ICD - Arakkonam thereafter, by availing the exemption Notification No.104/2009-Cus - Listing of ports in Notification No.104/2009-Cus is not an exhaustive list and on the other hand, it is only inclusive in view of the fact that the authorities included other ports by amending the said Notification periodically - Even otherwise, the Commissioner is empowered to grant such permission in respect of other ports as well - As regards Revenue submission that power conferred on the Commissioner is only prospective and not retrospective, Bench is of the view that the said contention of the Revenue is liable to be rejected by the reason of the observation made by the Apex Court in = 2005-TIOL-109-SC-CUS and whereunder it is concluded that the statute need not be given retrospective effect by express words but the intent and object of the legislature in relation thereto can be culled out from the background facts: High Court [para 11, 13]

Cus - When the Court had specifically directed the second respondent to consider the case of the petitioner favorably, unless and until the said observation is set aside or modified, the second respondent is not justified in passing an adverse order once again, stating the very same reason, as stated in the previous order which was put to challenge in this Court in W.P.Nos.17177 & 17178 of 2014 - writ petition is allowed and the impugned order is set aside: High Court [para 14, 15]

- Petition allowed : MADRAS HIGH COURT