2020-TIOL-NEWS-019 Part 2, Dated: Wednesday, January 22, 2020

2020-TIOL-146-CESTAT-AHM

VV Brothers Vs CCE & ST

ST - The assessee-company is engaged in providing services to M/s Gujarat Gas - It entered into an agreement with M/s Gujarat Gas, in terms of which the they were being paid an amount of fixed charges and reimbursement for the electricity charges paid by them to the electricity company - In terms of the contract, a separate electric meter has also been installed at their premises - The assessee claimed that it was paying service tax for the fixed charges received by it for provision of service, but was not including the value of electricity charges recovered as reimbursement from Gujarat Gas for purpose of payment of service tax - Duty demand had been raised against the assessee and was subsequently sustained by the Commr.(A) - Hence the present appeal.

Held - The issue at hand is whether the assessee is liable to pay service tax on the on the electricity charges on actual basis paid by it as per its contract with M/s Gujarat Gas - It is seen that the contract puts the liability of expenditure of service tax on Gujarat Gas and it has also placed a separate meter for assessment of the actual electricity consumed - It is seen that the issue is squarely covered by the decision of the Tribunal in Kiran Gems Pvt. Ltd where after relying on the decision of the Tribunal in ICC Reality (India) Pvt. Ltd. vs Commr. , Hotel Lake view Ashok vs. CGST and S.B. Developers Ltd. vs. Commissioner it was held that electricity charges reimbursed to the service provider by the service recipient are not includable in gross value of renting of immovable property service - Such principle is equally applicable in the instant case - Hence the demand merits being quashed: CESTAT

- Assessee's appeal allowed: AHMEDABAD CESTAT

CX- Appellant is working as a 100% EOU for the manufacture and export of fruit and vegetables - during October 2004 to October 2006, the appellant had procured insecticide 'Neemazol TS 1%' falling under CH 3808.10 of CETA without payment of duty in terms of exemption provided under notification no.22/2003-CE dated 1.3.2003 [Sr. No.26 of Annexure I] - later on, it appeared to the Department that the appellants were not entitled to procure the item in question in terms of the said notification since the same had been sent to farmers located outside the EOU and was not used in connection with manufacturing process in the EOU - SCN issued demanding duty of Rs.3.90 lakhs - proceedings dropped by original authority - on appeal by Revenue, the Commissioner (Appeals) allowed the appeal, therefore, assessee is before CESTAT.

Held: As per Clause (a) of the Notification, items falling under Sl. No. 14 to 26 of Annexure-I were permitted to be taken out of EOU to fields and farms of contract farmers of the EOU for production and bring back the produce to the unit for export subject to fulfillment of certain conditions - further, the insecticides procured by the appellant was sent to the farmers and the produce viz. gherkins [vegetables] were brought back to the EOU and later exported after undertaking further processing - further, the Commissioner (Appeals) has wrongly held that the appellant is required to take the permission of the Development Commissioner for procurement of the item in question - the original authority has rightly held that the items procured by the appellant were covered by Sl. No. 26 appearing in Annexure-I to the said notification read with Clause (a) (i) read with Clause 5 of the said notification - further, the item procured by the appellant in terms of the notification was ultimately used for export of goods and, therefore, the appellants are clearly entitled to the exemption - in view of the above, the impugned order is not sustainable in law and, therefore, the same is set aside by allowing the appeal: CESTAT [para 6, 6.1, 7]

2020-TIOL-147-CESTAT-MUM

Air India Ltd Vs CC

Cus- Imports made by the appellants were self assessed by them under section 17(1) of the Customs Act, 1962 [Act], they being the ACP Clients - they had imported various parts of Aircraft classifiable under heading 8802, and cleared them by availing the benefit of exemption under notification no.1/2002-Cus dated 1.3.2002 (at S No 346D) as amended by notification no.37/2007-Cus dated 7.3.2007 - the exemption availed is subject to condition 102, prescribed by the notification - as per the Audit Report of M/s.Pee Dee Kapur and Co. (the Chartered Accountant appointed by the appellant for internal audit purpose) for the period 2010-12, the value of short found parts was Rs.4.36 crore and excess found parts was Rs.3.08 crore - on the basis of the Audit Report and recommendations made during the Onsite Post Clearance Audit (OSPCA), investigations were undertaken - SCN issued - demand of customs duty of Rs.1.47 crore confirmed along with interest, excess goods found valued at Rs.3.08 crore confiscated, however, option was given to redeem the same on payment of redemption fine of Rs.50 lakhs, penalty of Rs.25 lakhs imposed on the appellant

Held: In view of the fact that these excesses and shortages were determined by the auditors/ chartered accountants appointed by the appellants themselves after undertaking physical verification of the inventory, no reasons found to differ with the conclusions arrived at by the Commissioner -appellants have relied upon various case laws to argue that the discrepancies noticed were miniscule 0.0133% of total inventory of Rs.1120 crores hence should have been ignored - the Bench is not in agreement with said submissions as the decision of Maruti Udyog - 2004-TIOL-632-CESTAT-DEL , relied upon by the appellants have not been approved by the Bombay High Court which is the jurisdictional High Court -thus the demand of duty is upheld as the appellants have not been able to satisfy the post importation conditions in respect of the shortages determined -in respect of the excesses noticed, appellant has not been able to offer any justifiable reason for the excesses -these goods have been imported without following the procedure for clearance of the imported goods as per the Act -since these goods have been imported without following the procedure as prescribed they have been held liable for confiscation and have been confiscated by the Commissioner -however, though these goods are liable for confiscation, but were never seized and released provisionally to the appellants against Bond and Bank Guarantee -in view of the decision of the larger Bench of Tribunal in the case of Shiv Kripa Ispat Pvt. Ltd. - 2009-TIOL-388-CESTAT-MUM-LB affirmed by the Bombay High Court, the Bench is not in a position to uphold the order of confiscation of goods and the fine imposed-thus, while upholding the demand of duty made in respect of the excesses as these goods were cleared without filing proper import declaration as required under the Act, the Bench sets aside the order of confiscation of goods and redemption fine imposed -by the impugned order, interest under section 28AB of the Act on the amount short paid has also been demanded -appellants have contested the demand of interest too -the interest as provided by the statute is for the delay in the payment of duty from the due date -since the demand has been upheld, demand for interest too is upheld - same is the view expressed by the Courts and Tribunal in various decisions -the Bench agrees with the appellants that looking into the enormity of the inventory managed and handled by them and the fact that appellant is a Public Sector Undertaking, the Bench is not inclined to uphold the order imposing penalty under section 112(a) of the Act - while holding so, the Bench takes note of the fact that the entire case is made on the basis of report prepared by the external auditors (M/s.Pee Dee Kapur& Co., Chartered Accountant) as part of internal assessment and control mechanism adopted by the appellants to verify and manage the inventory of imported goods-in view of this, the Bench is not in a position to discern any deliberate act on the part of the appellant to evade the duty -hence, following the decision of the Apex Court in the case of Hindustan Steel - 2002-TIOL-148-SC-CT-LB, the penalty imposed under section 112(a) of the Act is set aside -in view of the above, (i) the impugned order demanding duty of Rs.1.47 crore on the excesses and shortages of the imported goods is upheld (ii) the demand of interest on the duty demanded under section 28AB of the Act is upheld (iii) the order confiscating the excesses determined and also the redemption fine imposed is set aside (iv) the penalty imposed under section 112(a) of the Act is set aside - thus the appeal is partly allowed as indicated above : CESTAT [para4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 5.1, 5.2]

- Appeal partly allowed: MUMBAI CESTAT