| SERVICE TAX 2019-TIOL-3533-CESTAT-ALL
C Raja And Company Vs CCE & ST
ST - The assessee is engaged in providing various services primarily catering to needs of clients in the port areas - The services provided by them are broadly classifiable in four categories i.e. Freight on barges, Salary of floating crane operator, Management and allied services and Salary paid to Foreman/Khalasi - In the case of first three services, the primary defense of assessee is that the said service cannot be considered as port service - As per FA, 1994 only the service authorized by port can be covered under the head of Port Service - They have primarily relied on the decision of Tribunal in case of Velji P & Sons (Agencies) P. Ltd. - 2007-TIOL-1452-CESTAT-AHM - On the other hand, the primary defense of Revenue is based on the decision of Tribunal in case of Western Agencies (P) Ltd. - 2008-TIOL-1888-CESTAT-MAD which has been passed after disagreeing with the decision of Tribunal in case of Velji P & Sons (Agencies) P. Ltd. - However, later the decision of Tribunal in case of Velji P Sons was approved by Apex Court as 2008-TIOL-68-SC-ST - Only the services authorized by port, or other ports, were chargeable to service tax in terms of definition of 'Port Service' - This expression was examined by Tribunal in case of Velji P & Sons (Agencies) P. Ltd. - Unless revenue is able to produce specific authorization in favour of assessee from the port for such operations the demand cannot be upheld - The demands under Port Services, therefore, set aside - In so far as the demand of service due on temporary manpower supplied to Essar Steel is concerned, assessee have relied on the decision in case of Arvind Mills - The decision in the said case is not applicable as the transaction in said case was within different divisions of one legal person - In the instant case, there exist two different legal entities - In view of clear supply of manpower by assessee, they are liable to tax - Moreover, it is seen that there is no ambiguity in law and thus failure to pay can be clearly attributed to intention to evade - Extended period has been rightly invoked - Demand on this count is confirmed: CESTAT
- Appeal partly allowed: ALLAHABAD CESTAT
2019-TIOL-3532-CESTAT-AHM
Chitra Publicity Company Pvt Ltd Vs CST
ST - The assessee-company is engaged in providing taxable service of Advertising Service as per Section 65(105)(e) of the Finance Act 1994 - The service of advertising agency is taxable w.e.f. 01.11.1996 - For advertising purposes, the assessee fabricate and erect hoardings for displaying the advertisement - For such purpose, the assessee used MS Angles, Channels, GP Coils & Beams on which they availed cenvat credit - The Revenue's case is that the assessee is not entitled for Cenvat credit in respect of the Steel goods - On adjudication, the credit was denied on grounds that the Steel items were neither capital goods nor were inputs for providing output service - The adjudicating authority relied on the decision of this Tribunal in Mundra Port & Special Economic Zone Limited vs. CCE, Rajkot and partly confirmed the duty demand with interest u/r 14 of CCR 2004 along with equivalent penalty - Hence the present appeals by both the assessee and the Revenue.
Held - The issue at hand is whether the assessee is entitled to avail the Cenvat credit on Steel items used for fabrication/erection of structures on which hoarding boards are installed - It is seen that much water has flown since passing of the O-i-O, in respect of admissibility for Cenvat credit on such items - While the Adjudicating Authority relied on the decision in Mundra Port & Special Economic Zone Limited vs. CCE, Rajkot such judgment was reversed by the High Court of Gujarat - On the same issue, the High Court of Bombay sustained the demand raised for reversal of credit in respect of erection & installation of telecommunication towers in the case of Vodafone India Limited vs. CCE, Mumbai-II - However, in the case of Vodafone Mobile Services Limited vs. CST, Delhi the High Court of Delhi rendered a contrary decision - Hence, it is seen that contrary judgments were delivered subsequent to the O-i-O - The issue of admissibility of credit is a mixed question of fact and law which can be decided based only on the use of goods - As there are so many developments after passing the O-i-O, the adjudicating authority must reconsider the entire case after considering the facts and relevant judgments: CESTAT
Held - The adjudicating authority had dropped part of the demand on grounds that the same is time barred and that there is no suppression of facts - It is clear that the CERA audit conducted audit of records of the assessee and no objection was raised - There is absolutely no suppression on part of the assessee - Hence the duty demands were rightly set aside: CESTAT
- Case remanded: AHMEDABAD CESTAT
CENTRAL EXCISE
2019-TIOL-533-SC-CX-LB
CCE Vs Gujarat Narmada Valley Fertilizers Company Ltd
CX - The issue at hand in this case is whether cenvat credit can be allowed on duty paid Low Sulphur Heavy Stock (LSHS) used as input in manufacture of fertilizer exempted from duty - As there was conflicting view between two benches, the matter was referred to the Larger Bench - In the case of Gujarat State Fertiliser Corporation Limited , it was held that Modvat credit can be taken on LSHS used in manufacture of fertiliser exempt from duty - Though this decision is rendered in the context of availing modvat credit under the Central Excise Rules, 1944 as they existed prior to the promulgation of the Cenvat Credit Rules, 2002 the principle of law laid down is general and not specific to the CER 1944 - It was observed that as the judgment in Gujarat State Fertiliser Corporation Limited did not lay down a general principle of law, there is no option but to refer the issue to a larger bench to resolve the conflict between Gujarat State Fertiliser Corporation Limited and Gujarat Narmada Limited.
Held: The Apex Court in CCE vs. Gujarat Narmada Fertilizers Co. Ltd. restated an important principle under the CCR and which is inbuilt in the structure of the Cenvat credit scheme, which is that cenvat credit for duty paid on inputs used in manufacture of exempted final products cannot be allowed - It is only a reflection of this larger principle which is contained in Rule 6 - When Rule 6(1) states that the CENVAT Credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, it relies upon the definition of inputs contained in these Rules which certainly include LSHS and steam and electricity that are produced in the manufacturing process utilizing LSHS - The exception contained in Rule 6(2) refers to all inputs except those intended to be used as fuel which then results in the manufacture of final products which are both taxable as well as exempted - The exeception to Rule 6(1) contained in Rule 6(2) contains an exception, namely inputs intended to be used as fuel - In such case, if it is found that inputs are intended to be used as fuel, such inputs go outside the ken of Rule 6(2) - When this happens, the exception in Rule 6(2) does not come into effect at all, owing to which Rule 6(1) is to be applied on its own terms - Thus, there is no conflict between the judgment in Commissioner of Central Excise, Vadodara vs. Gujarat State Fertilizers and Chemicals Ltd. and CCE vs. Gujarat Narmada Fertilizers Co. Ltd. - Besides, even after independently applying mind on Rule 6 as it stood, the interpretation of this court in CCE v. Gujarat Narmada Fertilizers Co. Ltd. is correct - Hence the order being challenged merits being set aside: SC Larger Bench
- Revenue's SLP disposed of: SUPREME COURT OF INDIA
2019-TIOL-532-SC-CX-LB
Bhuwalka Steel Industries Ltd Vs UoI
CX - The issues at hand in this case pertain to Annual Production Capacity, actual production vs deemed production, legal fiction vs presumption - Matter had been referred to the the Chief Justice to constitute a Larger Bench - It was held that there is clear distinction in law between a legal fiction and presumption - A distinction commonly taken between the fiction and legal presumption is that a fiction assumes something which is known to be false; a presumption (whether conclusive or rebuttable) assumes something which may possibly be true - Presumptions are closely related to legal fictions but they operate differently - Fictions always conflict with reality, whereas presumptions may prove to be true - Besides, Legal fictions create an artificial state of affairs by a mandate of the legislature - It was also held that when a fiction is created by law, it is not open to anybody to plead or argue that the artificial state of facts created by law is not true, barring the only possible course if at all available is to question the constitutionality of the fiction - It is also settled law that only sovereign legislative bodies can create legal fictions but not a subordinate law making body - It was also observed that presumptions are rules of evidence for determining the existence or otherwise of certain facts in issue in a litigation - Presumptions were inferences which the judges were directed to draw from certain states of facts in certain cases, and these presumptions were allowed a certain amount of weight in the scale of proof; such a presumption and such evidence amounted to full proof, such another to half full, and so on - Section 114 of the Evidence Act embodies some of the basic principles of the law of presumptions and the limitations thereon - Technically, the Evidence Act may or may not be applicable to every body charged with the responsibility of collecting evidence - But the principles underlying the provisions do constitute valuable guides.
Held: The counsel for the assessee stated that the challenge was to the vires of Rule 5 of the 1997 Rules, but instead a completely different question had been referred to the Larger Bench - The assessee's counsel submitted there was no challenging the fact that an assessee could be compelled to pay duty as per Rule 96ZP(3) of the CER without regard to actual production laod down in Section 3A(4) of the CEA - Hence the question posed before this bench did not arise at all on facts and the the question which has been referred is not one which the assessee disputes - Hence the matter is sent back to the Division Bench to settle the issues other than those raised: SC Larger Bench
- Assessee's appeal disposed of: SUPREME COURT OF INDIA
2019-TIOL-3531-CESTAT-AHM
Jayant Agro Organics Ltd Vs CCE & ST
CX - The issue at hand is whether the assessee-company is entitled for Cenvat credit in respect of GTA service used for removal of goods wherein the sale is on FOR basis - The original authority as well as the appellate authority proceeded to deny credit to the assessee.
Held - The assessee's counsel submitted that the sale is on FOR basis, freight is included in the assessable value on which the excise duty was discharged, therefore, the place of removal is customer's place - Such fact is not in dispute and all documents related to such fact were submitted before the original authority and were taken into consideration - Under such set of facts, the Tribunal in Ultratech Cement vs CCE Kutch considered the decision of the Apex Court in Ultratech Cement and allowed the credit - In such case, the Tribunal held that the assessee's CA had certified that the goods were sold on FOR basis and that the freight/damages in transit was the responsibility of the assessee till the goods reached the customers' doorstep - It was also held that consignment notes raised were raised on the assessee therein, who did not charge any amount except the price of the goods from the customers - It was then observed that the ownership over the goods remained with the assessee till the goods reached the customer's doorstep and freight/damage charges were borne by the assessee, it was eligible for credit of service tax paid on outward freight - As such findings are squarely applicable to the facts of the present case, the O-i-A in challenge merits being quashed: CESTAT
- Assessee's appeal allowed: AHMEDABAD CESTAT
2019-TIOL-3530-CESTAT-AHM
Zest Packers Pvt Ltd Vs CCE
CX - The assessee is engaged in manufacture of Chewing Tobacco and Zarda Scented Tobacco on pouch packing machines - During impugned period viz. May 2010 to February 2011, they were discharging duty in terms of Section 3A of Central Excise Act read with Chewing Tobacco & Unmanufactured Tobacco Packing Machines Rules, 2010 - They were also filing the declaration in Form-I and Form-II as required under Rule 6 of Chewing Tobacco Rules and depositing duty in cash as well as from cenvat credit account - Since the final products viz Zarda Scented Tobacco packed in pouches was liable for duty, they were availing cenvat credit of duty paid on same and was utilising the said credit for duty paid on Zarda scented tobacco cleared by them in pouches which was also disclosed by them in Form-II - Initially the capacity determination rules were applicable to Branded/ unbranded tobacco packed in pouches and w.e.f. 13.04.2010 by virtue of notfn 17/2010 - CE (NT) the same was made applicable to Zarda Scented Tobacco - The assessee were informed by Range Superintendent vide letter that Rule 16 do not provide for taking cenvat credit in case of scented Zarda Tobacco - The assessee made representation to the Commissioner for amending the Rule 16 of Chewing Tobacco rules, 2010 for allowing the cenvat credit of duty paid on Zarda scented tobacco in bulk used in manufacture of Zarda Scented Tobacco pouches - The Chewing Tobacco Rules were amended by Notfn 10/2012 - CE (NT) allowing the credit on Zarda scented Tobacco in Bulk - Meanwhile the assessee came to be issued five SCNs wherein Cenvat demand was made; also central excise duty paid by utilising the said credit was demanded; penalty was also sought to be imposed - The substitution of Rule 16 was intended and to be understood as being retrospective in effect i.e when the Zarda Scented Tobacco was brought into the ambit of Chewing Tobacco and Unmanufactured Tobacco Packaging Machines Rules - These views are also fortified by judgments in case of WPIL ltd. 2005-TIOL-51-SC-CX-LB , Ralson India Ltd. 2015-TIOL-32-SC-CX , Sujana Metal products Ltd. - 2011-TIOL-1173-CESTAT-BANG , Forsoc Chemicals (India) Pvt. Ltd - 2014-TIOL-1609-HC-KAR-CX and Development Engineers Pvt. Ltd. - 2016-TIOL-1765-HC-P&H-CX - Thus, the demands made against the assessee are not sustainable - Nevertheless, it is also found that vide the impugned order for period May to August 2010, on the one hand the cenvat credit availed by assessee is sought to be reversed and on the other hand the central excise duty paid from such cenvat is also ordered to be recovered - The moment cenvat credit stands reversed by an assessee, the duty paid from such cenvat amount also stands legalised - The demands made in this manner is absolutely illegal and not sustainable - Further, some amount of cenvat credit viz. 27,06,992/- stands paid or reversed by assessee - Hence even otherwise there is no reason to demand cenvat or central excise duty to the said extent - From the facts, it is apparent that the assessee was under bonafide belief that being their goods at par with the chewing tobacco, the cenvat credit is available to them - They even made representation with the department and ultimately the goods become eligible for cenvat credit - Therefore, there is no reason to hold the assessee responsible of any deliberate act to evade duty or avail ineligible cenvat credit - Further, they have disclosed availment of cenvat credit in their monthly excise return and did not hide anything - In view of such position, even if it was assumed that the assessee is not eligible for credit than too, there was no reason to impose penalty upon them - These views are also based upon judgment in case of Primella Sanitary Products Pvt. Ltd. - 2005-TIOL-83-SC-CX-LB and Bell Granito Ceramica Ltd. 2006-TIOL-45-SC-CX - Thus, the impugned orders are not sustainable: CESTAT
- Appeals allowed: AHMEDABAD CESTAT
CUSTOMS
2019-TIOL-3529-CESTAT-MAD
Vas Noorullah And Company Vs CC
Cus - The assessee exported leather describing it as "Sheep Nubuck (Snuffed) Finished Leather" - The officers of customs doubted the description of goods, however, the export was allowed without waiting for test report based on an undertaking given by exporter - Sample of export consignment was sent by Customs officers to Central Leather Research Institute (CLRI) for testing who confirmed that the consignment does not conform to the description - Accordingly, the goods held liable for confiscation under Section 113 (i) & (ii) of Customs Act, 1962 and a redemption fine under Section 125 was imposed as the goods have already been exported - A penalty upon the exporter was also imposed - In the first test report, it was tested on specifications for "Nubuck Leather of cows or buffaloes" while the description of goods by assessee was "Sheep Nubuck leather" - The second sample was ordered to be tested which was tested and it was again confirmed that it is not Nubuck Leather at all as the process of snuffing essential for making nubuck leather has not been undertaken - It is clear that there was misdeclaration of goods in shipping bill by assessee - Therefore, they have been confiscated under Section 113 (i) and (ii) of the Customs Act, 1962 - There is no confiscation under Section 113 (d) for export or attempted export in violation of prohibitions under Foreign Trade Policy or any other law - The second test report confirms that the goods were not which were described in the shipping bill - For this reason, confiscation of the goods under Section 113 and imposition of redemption fine under Section 125 in lieu of confiscation calls for no interference - Consequently, the imposition of penalty under Section 114 is upheld - The applicable export duty and recovery of drawback, if any, availed also call for no interference: CESTAT
- Appeal rejected: CHENNAI CESTAT |
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