2020-TIOL-NEWS-025 Part 2, Dated: Wednesday, January 29, 2020

ST - Petitioner seeks issuance of a Writ of Prohibition, to Prohibit the First Respondent from proceeding further with communication dated 16.03.2010 in C.No.V/BAS/15/49/2009-S.Adjn., as it is allegedly without jurisdiction - petitioners have challenged the Show Cause Notices issued by the First and Third Respondents under Finance Act, 1994 seeking to recover the service Tax on service sim cards sold by the Petitioner for BSNL - It is the plea of the Petitioners that BSNL being the ultimate service provider has collected the service tax from the customers and paid service tax and, therefore, there cannot be any demand of tax for the Petitioner - Petitioners submits that the issue is covered by several decisions of the Tribunal, the appellate commissioners and original authority - Respondents also submits that there are no other contra decisions of the Tribunal or High Court as of now.

Held: Since the Petitioners have cases in their favour, Bench is of the view that the Petitioners should approach the First and Third Respondents for Adjudication of Show Cause Notice under the Finance Act by citing these decisions - First and Third Respondents are directed to pass appropriate order within a period of three months from the date of receipt of a copy of this order - needless to state that before passing such order, the Petitioners shall be give an opportunity to file reply and also being heard - Petitions disposed of: High Court [para 6, 7]

ST - The issue at hand in these appeas is whether construction of railway lines for private parties and construction of private roads are taxable under Works Contract Service or under Commercial or Industrial Construction Services - Duty demands were raised in respect of such activity, along with demand for interest - Penalties were imposed as well - Hence the present appeals.

Held - In respect of one of the appeals, the Bench in Final Order No. 30695/2019 dt.19.06.2019 decided that the charging section of Works Contract u/s 65(105)(zzzza) of the Finance Act excludes railways - Since it does not qualify the term by railways for public carriage or railways by the Government, it was held that the term railways includes any form of railways in the absence of any stipulation to the contrary in the charging section - The charging section under CICS is identicallt worded and there is no reason to take a differing view - Since the bench has already decided that railways include private railways for purpose of the charging section, is one of the assessee's own cases, as well as in the case of KVR Rail Infra, there is no reason to deviate from the view already taken, considering that such findings were not over-turned by a superior court - Hence in both CICS and WCS, the exclusions from railways, roads & dams extends to all forms of railways, roads and damns in the absence of any term restricting them to public railways, public roads or public damns - Hence the demands raised are unsustainable - Consequently, the interest or penalty merit being set aside as well: CESTAT

CX- The issues in the present appeals relate to availability of benefit under exemption notification no. 32/99-CE dated 8.7.1999 (as amended and in force during the period March 2002 to November 2004) and correctness or otherwise of availment of cenvat credit and issues connected therewith by M/s. Ishaan Technologies Pvt. Ltd. [Ishaan], including the validity of the proceedings initiated by the SCN dated 28.2.2006.

Held: In the present case, since according to the SCN and the impugned order themselves, there was no manufacture of the subject goods, there can be no levy and hence no requirement to make payment of any duty of central excise payable in respect of subject machineries under the Central Excise Act, 1944 [Act] - consequently, the question of any recovery of "duties of excise" not levied or not paid or short levied or short paid or erroneously refunded in terms of section 11A(1) of the Act also does not arise - in the premises, respectfully following the decisions of the Supreme Court in the cases of Hyderabad Industries Ltd. [1995 (78) ELT 641 (SC)], Moti Laminates Pvt. Ltd. - 2002-TIOL-24-SC-CX-LB , Ahmedabad Electricity Co. Ltd. - 2003-TIOL-17-SC-CX , Grasim Industries Ltd. - 2011-TIOL-100-SC-CX and the Gauhati High Court in the case of Jellalpore Tea Estate [ 2011 (268) ELT 14 (Gau)] , it is held that the proceedings initiated and the impugned order passed against M/s.Ishaan by invoking the provisions of section 11A of the Act is contrary to law and, therefore, unsustainable in so far as the demand of Rs.8.92 crores confirmed by the impugned order against Ishaan - in so far as the demand of Rs.53.05 lakhs against Ishaan as wrongly availed and utilised cenvat credit, the said notification does not allow refund of the cenvat credit utilized - therefore, the act of utilisation of the subject cenvat credit by Ishaan for payment of part of the total excise duty paid on the subject goods effectively reversed the cenvat credit of Rs.53.05 lakhs and hence there is no wrongful or irregular cenvat credit being availed by Ishaan, as held by this Bench itself in the case of Manaksia Ltd. & Spark Exports Ltd. Vs. CCE, Bolpur, Order No.FO/A/75027-75028/2019 dated 7.1.2019 passed in Appeal Nos. E/278/2009 & E/412/2006 - as such, this demand is also unsustainable - in the view taken and conclusion arrived at as above, the Bench is not required to considered the contentions of the parties on the disputed issues of fact involved - in the premises, the demands of duty, interest and penalties against Ishaan and the other appellants in Appeal Nos. E/76156-76160/2014 imposed by the impugned order are unsustainable - as regards the appeal of Manaksia Ltd., Anjar against appropriation of the sum of Rs.2.37 crore deposited by it towards the duty confirmed by the impugned order against Ishaan, the Bench accepts the contention of Manaksia, Anjar that there is no sanction under section 11 of the Act for recovery of a sum of money due from a person from another person, a separate legal entity, unless the said sum in the hand of the said other person is owed or due to or on account of or payable to the person against whom the duty has been confirmed - the finding of the Commissioner is contrary to section 11 of the Act and hence untenable - consequently, the appropriation of the said sum of Rs.2.37 crore belonging to Manaksia, Anjar, which sum of money is neither owed to or due to nor is on account of or belonging to Ishaan, but is its exclusive property, is unsustainable - in any event, since the demand against Ishaan is unsustainable for the reasons stated above, even otherwise this appropriation is invalid and untenable - the appeals filed by the Department are against the impugned order of the Commissioner insofar as it has dropped the proceedings against the 6 units of Manaksia Ltd., which were initiated by different SCNs - in all the said 6 cases, the unit concerned of Manaksia Ltd. from time to time, purchased various machinery from several suppliers in the country, including Ishaan - they purchased several machinery, e.g., High Speed Automatic Coil Making Machine, Automatic Crown Lining Machine, Shearing Machine, Parts for Continuous Galvanising Line and its accessories, manufactured by Ishaan - on receipt of the said machinery in their factories, in accordance with the provisions of the Cenvat Credit Rules, the said units of Manaksia availed cenvat credit of the duty paid on the said machinery - however, pursuant to searches and seizures carried out by the DGCEI authorities and investigation proceedings thereafter, the said units received the SCNs requiring them to show cause as to why the specified cenvat credits in respect of the duty involving the said machinery procured from Ishaan, wrongly availed should not be recovered from them under rule 12/rule 14 of the Cenvat Credit Rules, 2002/2004 read with section 11A of the Act, along with interest thereon - similar SCN issued to the Kutch unit of Manaksia Ltd. on 2.9.2005, based on same/similar investigation by the DGCEI authorities and adjudication order passed thereon was set aside by the order [ 2008 (232) ELT 497 ] of the Tribunal's Ahmedabad Bench, which decision was affirmed by the Gujarat High Court - 2010-TIOL-852-HC-AHM-CX - the Revenue having accepted the said judgment of the Gujarat High Court, the issue involved is no more res integra - in the premises, no merit found in the appeals filed by the Department against the impugned order - in view of the aforesaid, the following order is passed : (i) the appeals filed by the appellants in Excise Appeal Nos. 76154 of 2014, 76156-76160 of 2014 & 76174-76175 of 2014 are allowed and the impugned order of the Commissioner confirming duty demands against Ishaan Technologies Pvt. Ltd. and appropriating Rs.1.70 crore deposited and interest are set aside, with consequential relief - the penalties imposed upon all the appellants are also set aside (ii) the appeal filed by Manaksia Ltd., Anjar, Kutch, being Excise Appeal No. 76155 of 2014, is allowed and the impugned order appropriating the sum of Rs.2,37,57,760/- is set aside, with consequential relief to the appellant (iii) the appeals filed by the Revenue, being Excise Appeal Nos. 76094 of 2014 to 76099 of 2014 are rejected : CESTAT [para 11.5, 11.8, 11.9, 11.10, 11.11, 11.12, 11.13, 12]

CX - Appellants are engaged in manufacture of Heat Exchangers, Pressure Vessels and Boilers etc. - appellants have taken credit in respect of various input services - since these input services are common for manufacture of both exempted as well as dutiable goods, and they had not opted for the scheme provided by rule 6(3)(ii) of the Cenvat Credit Rules, 2004 [CCR] they were required to pay the amounts attributable to the exempted goods cleared by them - SCN dated 3.5.2011 was issued to them demanding an amount of Rs.32.39 crores payable in terms of rule 6(3(b) of CCR prior to 1.4.2008 and rule 6(3)(i) of CCR w.e.f. 1.4.2008 - demand confirmed along with interest, equivalent penalty imposed - aggrieved, assessee is before CESTAT.

Held: Courts and Tribunals have time and again while interpreting the scope of rule 6 of CCR, concluded to state that in no circumstances the said rule should be used as a measure to extract illegal amounts from the assessee - the scope of rule 6 is limited to the extent that assessee do not get the undue benefit by availing the cenvat credits in respect of the exempted goods manufactured by him or the exempted services provided by him - the issues which are in dispute have been considered by the Tribunal in the case of Mercedes Benz - 2015-TIOL-1550-CESTAT-MUM and following was held…………." at the most amount which is to be recovered shall not be in any case more than cenvat credit attributed to the input or input services used in the exempted goods……………" - similar view has been expressed by the CESTAT in following decisions : (i) Tata Technologies Ltd. - 2016-TIOL-272-CESTAT-MUM , Sahyadri Starch & Industrial Pvt. Ltd. - 2016-TIOL-615-CESTAT-MUM and Aster Pvt. Ltd. - 2016-TIOL-1035-CESTAT-HYD - in the case of Reliance Life Insurance Co. Ltd. - 2017-TIOL-3839 -CESTAT-MUM , Mumbai Bench held as follows "…………… the appellant is entitled for reversal of credit attributable to the exempted service and the demand of 6% is not sustainable against them……………" - thus in view of the decisions as above and also taking note of the fact that appellants had reversed the entire amount proportionate credit along with interest due in respect in respect of the period 1.4.2008 to 31.12.2010 even prior to issuance of SCN, no merits found in the demands made post 1st April 2008 and the same is set aside - for the period prior to 1st April 2008, it is found that as per the law as it existed during the relevant period, appellant was required to pay 10% of the value of exempted goods, if he was not in position to maintain separate account in respect of the inputs/input services used for manufacturing both exempted and dutiable goods - however, in order to mitigate the difficulties faced by the trade by strict application of the said rule, rule 6 was amended retrospectively by Finance Act, 2010 - thus the benefit of proportionate reversal has been extended from retrospective effect, in cases where common inputs/input services were used for manufacture of dutiable and exempt products - the intention behind the amendment made, is quite obvious - the assessees have been allowed to proportionately reverse the credit attributable to inputs/ input services used for manufacture of exempted goods, in cases where common inputs/ input services are used or manufacture of both dutiable and exempted goods - the case of appellants for the periods, 2006-07 and 2007-08 is covered by the amendments made by way of insertion of sub-rule (7) in rule 6 of the CCR - taking note of the submission made by the appellant that subsequently they have paid/reversed the entire amount of proportionate credit for the period 2006-07 and 2007-08 along with interest at rate of 24%, and the amendments made by the Finance Act, 2010, no merits found in the demand made for this period also - thus in view of the above, subject to the appropriation of the amounts deposited by the appellants toward proportionate credit attributable to input services used in manufacture exempted goods and the interest due, the impugned order is set aside - appeal allowed as stated above: CESTAT [para 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 5.1]

CX- Appellant, engaged in manufacture of bulk concentrate, were clearing/transferring their products to their sister units situated all over India at estimated prices but the correct prices of concentrates were not known to them at the time of clearance -since no factory gate sale price was available with the appellant, they were determining the assessable value in terms of Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 [Valuation Rules] - accordingly, vide letter dated 27.6.2017, the appellant applied for provisional assessment under Rule 7 of Central Excise Rules, 2002 [CER] - the Department, however, observed that during the period April, 2016 to June, 2016 and September, 2016 to March 2017 the concentrate has been cleared by the appellant at the rate of Rs.54,100/- per MT - however, during the period July and August, 2016, the concentrate has been cleared at the rate of Rs.46,100/- per MT - Department, vide O-I-O dated 17.11.2017, while finalising the provisional assessment for the year 2016-17 ordered that since the appellant has cleared goods during July and August, 2016 at lower rate, as such, he has short paid the Central Excise duty of Rs.1.20 crore - the same was held recoverable under Rule 7(3) of CER alongwith interest under Rule 7(4) thereof - on appeal, the Commissioner (Appeals) rejected the appeal, hence assessee is before CESTAT.

Held: In the present case, it is an admitted fact that duty of Rs.4.42 crores has been paid by the appellant in excess for the period from April 2016 to June, 2016 and September 2016 to March, 2016 - however, there is short payment of duty of Rs.1.20 crore during July and August, 2016 - in view of Rule 7 of the CER, the appellant was entitled for refund of Rs.4.42 crores -this is also an admitted fact that the sister concerns (smelter units of the appellants) to whom the goods were supplied have already filed the cenvat credit in respect of the duty paid on the said goods -the refund has rightly not been claimed by the appellant -in view of these admissions where the goods are supplied to the sister concerns for captive consumption, the adjustments of excess duty towards short payment in the subsequent period should not have been denied -this has already been held by this Tribunal in appellant's own case - 2015-TIOL-2427-CESTAT-DEL The Larger Bench of this Tribunal in the case of Excel Rubber - 2011-TIOL-536-CESTAT-DEL-LB held that if the assessee has paid excess duty he is entitled to the refund thereof subject to the satisfaction of principles of unjust enrichment -the Larger Bench has clarified that such excess amount can certainly be adjusted towards any other duty liability of such assessee under the CEA and the rules made thereunder, however, subject to the applicability of principles of unjust enrichment -the excess duty paid by the assessee during the continuation of provisional assessment for a particular financial year would result in additional burden to the assessee and, therefore, need to be neutralised against any shortfalls during another period of same financial year during which the provisional assessments were in operation -sub-rule 5 of Rule 7 itself talks about the assessee's such right -in the present case, the net duty for the financial year 2016-17 was paid on provisional assessment basis -the short payment for two months of the same year is, therefore, to be adjusted against the excess paid during the another period of the same financial year -the argument of the Department that sister concern has already availed the credit does not extend any benefit to the Department, in view of the acknowledgment on part of the appellant to forgo his right of claiming refund of the said excess duty paid by him -the situation, therefore, is nothing but revenue neutral situation - in view of these findings, the Bench is of the opinion that when CAS-4 is formed basis for arriving at transaction value, the overall duty liability/short payment should have been arrived at after considering duty already paid during that financial year on such goods and the adjustments, if any -accordingly the findings of the authority below denying the adjustment of excess duty paid towards the short payment of same financial year are held to be untenable -order, accordingly, is set aside and appeal stands allowed : CESTAT [para 8, 9, 10, 11, 12]

CUSTOMS

2020-TIOL-190-HC-AHM-CUS

Shakti Shipping International Vs CC

Cus - Appellant seeks to challenge the legality and validity of the order passed by the Tribunal dated 08.12.2015, dismissing the appeal on the ground of delay - Incidentally, ROM application was filed but the same was withdrawn and allowed accordingly - later, an application for restoration of appeal was filed but the same came to be rejected by the Tribunal vide order dated 30th October 2018, said order too is under challenge.

Held: Identical proceedings were instituted before the Tribunal by the sister concern of the appellant and in the said proceedings, the Tribunal thought fit to condone the delay vide order dated 04.06.2018 by imposing costs of Rs.10,000/- - Bench, therefore, views that although sufficient cause assigned may not be quite convincing, yet having regard to the merits of the main matter and also with a view to give one opportunity to the appellant to make good his case in appeal before the Tribunal, it is inclined to exercise its discretion in favour of the appellant - impugned orders issued by the Tribunal are quashed and set aside - delay in preferring the appeal before the Tribunal is condoned subject to payment of cost of Rs.10,000/- - to be deposited with the Appellate Tribunal within a period of 15 days - tax appeal is allowed: High Court [para 11 to 13]

- Appeal allowed: GUJARAT HIGH COURT

2020-TIOL-210-CESTAT-MUM

CC Vs Reliance Jio Infocom Ltd

Cus - Whether the antenna for Base Transmission Station [BTS] would be considered as a 'machine' and, accordingly, classifiable under CSH 8517 6290 as claimed by the Revenue or as "parts" classifiable under CSH 8517 7090, as claimed by the Respondent.

Held: It is the contention of the department that since the antenna can generate electro-magnetic waves from current and voltages and which can convert electromagnetic wave to current and voltages with these waves impinge on it, therefore, it can be considered as a machine, which independently receives and transmits electro-magnetic waves - the Respondent's contention, on the other hand, is that the antenna is a passive element - it cannot function on its own unless connected to the base station, therefore, the same does not fall within the scope and meaning of 'machine' prescribed at Note 5 under Section XVI - in the present case, the manufacturer of Antenna as well as the chartered engineer's certificate, in clear terms clarified that the Antenna in question transmits and receives only signals and not performing any other function like conversion or regeneration of voice, images or other data signals and switching/routing of signals - therefore, the Antenna stand alone cannot be considered as a 'machine', attracting classification under Heading 8517.62 - consequently, the observation of the Department in the circular dated 15.1.2018 that the Antenna itself is a complete device and has capability of functioning on its own of conversion of electrical signals into electro-magnetic waves and vice versa in a wireless communication system cannot be applied to the present goods as it would be complete only when connected to a base station - the Revenue's contention to classify the 'Antenna' for base station under sub heading 851762 rests on the ground that as per note 2(a) of section XVI, parts which in themselves constitute an article covered by a heading of this section, in all cases are to be classified in their own appropriate heading even if specially designed to work as part of a specific machine - further it is contended that Antenna is a part of a machine classifiable under heading 8517, only in the situation when it is not covered by any other headings of the section - as per Department, since it is classifiable under 851762, hence, not to be considered under 851770 as 'parts' - a simple analysis of clause (a) of the above note 2 of section XVI reveals that parts which are 'goods' are required to be classified in the respective headings; in the present case, 'Antenna' being a part of the BTS, hence applying the said Rule, classifiable under Chapter Heading 8517 - Revenue's interpretation of the said clause(a) in the present case is that in the event if the goods are not falling under any of the sub heading of heading 8517, then only it will be classifiable as 'parts', is incorrect - Clause 'b' of the said Note 2 indicates that "other parts", by implication which are not goods, if suitable for use solely or principally with a particular kind of machine of the same heading are to be classified with the machines of that kind or the headings mentioned under the said clause 'b' as appropriate - further, it is mentioned that parts which are equally suitable for use principally with the goods of heading 85.17 and headings of 8517 and 8525 to 8528 are to be classified as headings of 8517 - Antennas since parts of BTS, as held by Supreme Court in the case of Hutchison Essar South Ltd. - 2015-TIOL-210-SC-CUS , therefore, be classified as "parts" under 8517.7090 - to resolve the issue about classification of Antenna for base station between the competing entries of 851762 and 851770 which arose before the member countries, the HS Committee in 62nd session, after deliberation, recorded the specifications and held that the product is classifiable under entry 851770 - the invoices and the specification of antenna imported submitted during the course of the proceeding conforms to the specification mentioned by the HS Committee - Revenue vehemently opposed to the said opinion of HS Committee stating that it is not binding on the department - no merit found in the argument of the Revenue in view of the principle of law laid down by the Delhi High Court in the case of Manisha Pharma Plasto Pvt. Ltd. [1999 (112) ELT 22], where under it is held that the opinion of Harmonized Systems Committee has lot of weight and should ordinarily be taken as binding - similar view has been expressed by the Tribunal in the case of Telco Ltd. [2002 (143) ELT 548 (Tri-Mum.)], later upheld by the Supreme Court [2003 (152) ELT A259] - also, the literature relating to the classification of the Antenna of different countries placed by the Respondent indicates that the Antenna is classified as part of base station under subheading 851770 - in the result, the correct classification of the Antenna for base station is under sub-heading 85177090 as "parts" - since, the main issue of classification has been addressed, the other ancillary/alternative submission/issues on the eligibility of various exemption notifications issued in support of the classification of the said goods, becomes more of academic, hence not analysed - consequently, the Revenue's Appeals, being devoid of merit, are accordingly rejected : CESTAT [para 42, 43, 45, 46, 47, 48, 49, 50, 51]

- Appeals rejected: MUMBAI CESTAT

2020-TIOL-199-CESTAT-ALL

Sunil Taneja Associates Vs CC

Cus - The assessee have imported goods and declared them as 'low Aromatic White Spirit' in case of two appeals and 'Industrial Composite Mixture' in case of third appeal and filed Bills of Entry - The test report indicated that samples were meeting the requirement of Kerosine as per I.S. 1459:2018 - It appeared to revenue that the said goods were eligible to be imported only by STE i.e. State Trading Enterprise of Government of India - Revenue has submitted that since the assessee did not have authorization from DGFT, the Original Adjudicating Authority has ordered for re-export of the same - The Original Adjudicating Authority has ordered to redeem the goods and re-export the same - Further, the goods were confiscated for voilation of provisions of Customs Act read with Foreign Trade Policy - The Foreign Trade Policy has not provided for restriction by any other importers than State Trading Enterprises to import the same - As per the policy, after getting an authorization from DGFT persons other than State Trade Enterprises can import the impugned goods - Therefore, the order to re-export the same is not sustainable - In result, clearance of the impugned goods for home consumption is allowed on the payment of redemption fine ordered through the impugned orders along with customs duties required to be paid - All the personal penalties imposed are set aside: CESTAT

- Appeals partly allowed: ALLAHABAD CESTAT