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SERVICE TAX
2020-TIOL-416-HC-MAD-ST
Perundurai Common Effluent Treatment Plant Vs CC & CE
ST - Petitioner has challenged the Show Cause notice dated 03.10.2011 - In the show cause notice, it has been alleged that the petitioner was rendering services of a "Club or Association" as defined in Section 65(25a) of the Finance Act, 1994; that since the petitioner was an incorporated company, therefore, the services rendered by it cannot be said to be excluded from the definition of "club or association" in view of specific exclusion sub-clause (iii) to the above definition - Show Cause Notice justifies invocation of extended period of limitation and has called upon the petitioner to pay sum of Rs.3,08,58,519/- as service tax, primary education cess of Rs.6,00,659/- and secondary higher education cess of Rs.2,24,896/- for the period May 2005 to May 2010 and also imposition of penalties and interest - Counsel for the Revenue fairly submits that the issue is no longer res integra in light of the latest decision of the Supreme Court in State of West Bengal Vs. Calcutta Club Ltd., - 2019-TIOL-449-SC-ST-LB , however, the respondent submits that petitioner should be relegated show cause proceedings and in case the petitioner has a favourable case in terms of the above decision of the Supreme Court, appropriate order would be passed; that the writ petition is not maintainable in view of the apex court decision in Krishna Wax (P) Ltd - 2019-TIOL-496-SC-CX .
Held: Normally, writ against show cause notices ought not to have been entertained in the first place and the petitioner ought to have been directed to reply to the said show-cause notice - However, in the present writ petition, an interim injunction was ordered on 16.11.2011 and, therefore, the impugned Show Cause Notice has not been adjudicated till date - Meanwhile, the Supreme Court [ State of West Bengal Vs. Calcutta Club Ltd. - 2019-TIOL-449-SC-ST-LB ] has now given its verdict on 03.10.2019 - question of law has been settled - it is evident that the proposed demand in the impugned show cause notice can no longer be sustained in the light of the above decision of the Supreme Court; that from 2005 onwards, the Finance Act of 1994 does not purport to levy service tax on members' clubs in the incorporated form - Writ petition is allowed: High Court [para 8, 9]
- Petition allowed: MADRAS HIGH COURT
2020-TIOL-336-CESTAT-DEL
Mahanagar Telephone Nigam Ltd Vs Commissioner
ST - Appellant is engaged in the business of providing various kinds of telecommunication and IT related services including internet telecommunication service - department entertained a view that the appellant has entered into a bilateral domestic private 'peering arrangement' with other internet service providers for carrying internet traffic on each others' backbone - allegation of the department is that the appellant has not discharged service tax on the value of the service provided by them to other internet service providers for carrying their internet traffic on their own backbone - appellant had raised an invoice on M/s National Internet Exchange of India (NIXI) on 09.10.2013 for an amount of Rs.7,44,19,477/-, however, no service tax was paid - SCN was issued demanding service tax of Rs.70,93,529/- and imposition of penalties and interest - demand confirmed by the Commissioner, hence appeal before CESTAT.
Held: Member (Technical) supported the order of the adjudicating authority but the Member (Judicial) observed that the ‘peering arrangement' is between ISP's but the appellant-MTNL has raised an invoice on M/s NIXI which is not the service provider, nor an ISP, therefore, the demand of service tax on such bills raised by the appellant-ISP on M/s NIXI is totally misconceived, there being no relation of service provider and service receiver - As the SCN itself is wholly misconceived, the impugned order is set aside and appeal is allowed with consequential benefits in accordance with law - in view of the difference of opinion, matter is put up before the President for referring the same to the third Member for his opinion: CESTAT
- Matter referred: DELHI CESTAT
2020-TIOL-327-CESTAT-DEL
Mehrotra Buildcon Pvt Ltd Vs CCGST
ST - Upon audit being conducted in the relevant period, it was found that the assessee had debited in ledger account, some amount as legal expenses, but no service tax was paid thereon - SCN was issued raising duty demand with interest and also imposing penalty - On adjudication the demands were sustained - On appeal, the Commr.(A) too upheld them - Hence the present appeal.
Held: Considering the quantum of the duty demand raised, it is completely disproportionate in respect of the duty amount involved - Hence the order has been passed without application of mind - The same is not appreciable - The O-i-A also observes that the assessee paid a certain sum as service tax on legal expenses - No consideration was given for such deposit - The Commr.(A) was supposed to reduce the duty demand to the extent already paid by the assessee - Such gross negligence on part of the officers in adjudicating the cases can be avoided - The litigation work pending before the Tribunal can be reduced if the lower authorities apply mind when passing orders - Hence the matter is remanded to the adjudicating authority to work out the correct duty payable by the assessee: CESTAT
- Case remanded: DELHI CESTAT
CENTRAL EXCISE
2020-TIOL-332-CESTAT-MAD
Sunshine Plasmacrafts Vs CGST & CE
CX - Refund - Vide O-IN-O, the duty demand was confirmed along with interest and appropriation was also made of Rs.2 lakhs paid - Commissioner(A) allowed the appeal of the assessee, however, Revenue preferred an appeal before CESTAT which came to be dismissed on 23.10.2017 on the grounds of the appeal involving duty quantum below the monetary limits as prescribed in the National Litigation Policy - consequently, assessee filed an application for refund but the same was dismissed as being hit by limitation - appeal to CESTAT.
Held: Since upon the Revenue preferring an appeal against the Order-in-Appeal (with the assessee also filing its cross-objection), the matter was sub judice before the Tribunal and naturally, when the matter was lis pendens, no such application for refund could be filed - appellant's claim for refund is not hit by limitation - Revenue has otherwise not disputed the eligibility of the assessee for refund other than being hit by limitation - impugned order cannot survive, hence same is set aside - appeal is allowed with consequential benefits: CESTAT [para 5.2, 6]
- Appeal allowed: CHENNAI CESTAT
2020-TIOL-331-CESTAT-MAD
Sri Ganapathy Packaging Vs CGST & CE
CX - Appellants were purchasing machine dipped match splints from other match manufacturers on which excise duty was paid - The duty on the dipped match splints is determined on kilogram basis - The dipped match splints procured by the appellants are packed in boxes, of which the sides are painted with red phosphorous - These boxes are subsequently bundled and sold without payment of duty by claiming benefit of Notification 4/2006-CE dated 1.3.2006 (Sl. No. 72) and as per the said notification, when the process in relation to manufacture of matches is undertaken without the aid of power, the exemption is available - The appellants did not use power for packing or bundling and hence claimed that they are eligible for exemption of duty as per Notification - period involved is from September 2010 to August 2011 - Department was of the view that the appellants are not eligible for the benefit of Notification 4/2006-CX since the match splints purchased by them have been manufactured using the aid of power - demand confirmed by original authority and upheld by Commissioner(A) except for holding that cum-duty benefit needs to be extended - Assessee is in appeal before CESTAT.
Held: Whereas, Member(J) was of the view that the appeal needs to be allowed by extending the benefit of 4/2006-CX., Member (T) held that the benefit of the exemption notification no. 4/2006-CE is not available to the assessees and the demands confirmed by the impugned orders need to be upheld and the appeals are liable to rejected - Matter was, therefore, referred to the third Member for a Majority decision - Member (J) on reference viewed that the intention of the subordinate legislation was to prevent businessmen from artificially splitting up the manufacturing processes across multiple assessees to enable a larger than deserving claim for exemption; that while agreeing with the view of the Member (J) that the notification does not require that the processes listed therein are required to be carried out by a single/same manufacturer, the converse was not true - absence of such a requirement does not automatically entitle the assessee to the exemption - It is the case of the appellants that they have procured dipped match splints from other manufacturers who have removed such goods on payment of duty, however, this would not make any difference since the entitlement to exemption is to be determined separately in each assessee's case - The fact that duty has been paid on some intermediate/semi-finished goods is in no manner relevant to whether exemption is to be granted at a subsequent stage to the finished goods and in any event, the cascading effect is effectively mitigated by CENVAT credit - the exemption notification must be applied only to the goods it seeks to cover - exemption notification is is qua processes and not even qua manufacture or the manufacturer - Supreme Court decision in M/s. Standard Fireworks - 2002-TIOL-71-SC-CX squarely applies - appellants are not eligible for the benefit of exemption notification No.4 ibid and accordingly, third Member(J), on reference, concurs with the conclusions drawn by the Member (Technical) - Appeals dismissed: CESTAT by Majority [para 9.6, 10, 12, 14 to 16]
- Appeals dismissed: CHENNAI CESTAT
2020-TIOL-326-CESTAT-DEL
Shreya Life Sciences Pvt Ltd Vs CCGST
CX - The assessee is engaged in manufacture of pharmaceutical products such as Beneficiale Liquid and DSN capsules which were being cleared at nil rate of duty by availing exemption Notfn No 49/2003-CE - The Revenue received intelligence that the assessee mis-classified the manufactured products and claimed wrong benefit therein, the DGCEI officers initiated investigation - As per intelligence, the products were rightly classifiable under CETH 2106 instead of CETH 3406 inasmuch as they were of the nature of nutrition supplement/proprietory foods - Accordingly, SCNs were issued to the assessee & upon adjudication, duty demand was sustained along with interest and imposition of penalty - Such orders were sustained by the Commr.(A) - Hence the present appeals.
Held: The product in question has been tested by the CRCL - Though the report is not contested by the assessee, it is nonetheless claimed that a test report cannot be relied upon, on grounds that the chemical examiner is not required to decide upon classification of the product as other than medicament - Considering the entries in CETH 3004 and CETH 2106, it is clear that the subject goods will be classified under the former heading - The assessee canvassed that its product is covered under the definition of medicament on grounds that such products are used to cure or treat diseases and are regularly prescribed by medical practitioners - The assessee also produced affidavits from various medical practitioners to support its claims - The prescription indicates that the two products are prescribed to treat diseases and boost the immune system and for removal of condition of weakness - Hence the Revenue's contention that the subject items are dietary supplements is not correct, in light of the prescriptions issued by medical practitioners - Moreover, the CETH 2106 is a residuary entry - The product which is more appropriately classified under specific headings has to be preferred before resorting to classification of goods in the residuary entry - Besides, merely because the product can also be used otherwise, will not convert it into food supplement - Moreover, the classification is to be done on the basis of common parlance test, which is how the product is understood by the user, customer or medical practitioner - In the present case, the product in question is regularly prescribed by the medical practitioner to cure ailments even though the products are available over the counter - Besides, the Revenue also claimed that the assessee did not have drug license in the relevant period - However, the court agrees with the assessee's contention that the drug license is issued under a generic name and not in the trade name of the drugs manufactured - Such fact is evident from the drug license & also the composition of the products of the two licenses - Hence the products are classifiable under CETH 3004 and are also eligible for accompanying exemption: CESTAT
- Assessee's appeals allowed: DELHI CESTAT
CUSTOMS
2020-TIOL-335-CESTAT-DEL
East India Hotels Ltd Vs CC, CE & Central GST
Cus - Appellant imported a new aircraft, Hawker 850 XP with the declared value of Rs. 56.15 crores - The appellant availed an exemption from payment of customs duty under notification no. 21/2002-cus dated 1.3.2002 as amended (Sl. No. 347 C) - The importer/appellant had also obtained a no objection certificate from Director General of Civil Aviation (DGCA) on 20.06.2007 for using the said aircraft for the purpose of non scheduled air transport services, under passenger category - Department got intelligence that the said aircraft had been imported for private use by the appellant under the guise of non scheduled operator (passenger permit) herein after referred to as NSOP, with sole intention to evade the payment of customs duty - SCN was issued proposing confiscation of the aforesaid aircraft along with the recovery of total customs duty amounting to Rs.13.92 crores and imposition of penalty and interest - In adjudication, charges upheld, hence appellant is before the CESTAT.
Held: Usage of the impugned aircraft post import is not for non scheduled passenger/ charter air transport services but only for private use - restricted use of the imported aircraft under the impugned notification only for a particular category of the people takes the use of the said aircraft from the ambit of what is called as 'passenger services' which are otherwise meant to be open to public - The same amounts to violation of the undertaking based upon which the exemption was granted to the appellant from paying the customs duty - Consequent to the said violation, the appellant has made himself liable to pay the said customs duty - Since the benefit of exemption has been claimed by giving an undertaking and which conditions have not been fulfilled, intent of the appellant to evade Customs duty is evident - There is no ambiguity or infirmity in the order under challenge, hence the same is upheld and the appeal is dismissed: CESTAT [para 28, 29]
Cus - Notfn. 21/2002-Cus - Import of aircraft - Neither the Civil Aviation Rules nor Aircraft Rules empower DGCA to investigate about the compliance of the undertaking given in terms of the Customs notification - The undertaking is given in furtherance of the notification issued by the Customs Department in compliance of the Statutory Provisions of the Customs Act 1962 - The verification as to whether the benefit of exemption from payment of customs duty should continue or not is definitely lies with Customs Department only: CESTAT [para 25]
- Appeal dismissed: DELHI CESTAT
2020-TIOL-334-CESTAT-DEL
Badri Narayan Sharma Vs CC
Cus - Moot question is whether in view of the given facts and circumstances and the order of the Tribunal dated 04.08.2015, the appellant is entitled to receive the market value of the gold as prevalent for the year 2015 despite that the said gold was disposed of in the year 2001 for value of Rs. 4,84,585/-.
Held: It is observed that the gold was seized on 02.06.1999, the order of confiscation was pronounced on 23.03.2000 - The aforesaid provision permits the disposal of seized goods - In the present case, pursuant to the said seizure the original adjudicating authority had confirmed the confiscation where after only the department proceeded for disposal of goods, it being one of the specified goods, in terms of the notification as passed under Section 110(1A) of the Customs Act - disposal of goods was very much in compliance of the statutory procedure and there is no evidence produced by the Appellant to rebutt the said presumption - it is simultaneously not the case of the Appellant that the disposal of gold during pendency of appeal before Commissioner (Appeals) was ever objected by the Appellant - even in their appeal before the Tribunal, the appellant had failed to challenge the disposal of the seized gold - The order of return of seized gold has been announced 14 years later than the said disposal - What can be returned while complying with the directions of return of seized gold is the sale proceeds of the said gold received at the time of disposal thereof - Time taken till the order of Tribunal dated 24.07.2015 directing the return of the impugned gold is on account of mistaken identity of Badri Narayan the appellant himself - said Badri Narayan impersonated the actual Badri Narayan whose appeal was decided in his favour in the year 2015 does not reflect any mistake or even delay on part of Department - plea of Appellant of no notice being served before disposal is otherwise not acceptable in view of the admitted mistaken identity of the owner of the gold - Admittedly and apparently, two different persons representing them as Badri Narayan Sharma filed the appeal challenging the order of confiscation of the goods - department, rather has duly complied with the order of return of confiscated goods of the year 2015 by refunding the sale proceeds of the gold as was received in the year 2001 - said amount has duly been encashed by the Appellant that to more than a year prior to filing of the impugned appeal - appellant is not held entitled for the gold as such nor for its market value as prevalent in the year 2015 - appeal has no legal ground to succeed - no infirmity in the order under challenge - appeal dismissed: CESTAT [para 8 to 15]
- Appeal dismissed: DELHI CESTAT
2020-TIOL-333-CESTAT-MAD
Chakrapani Vyapar Pvt Ltd Vs CC
Cus - Refund of SAD - Notfn. 102/2007-Cus - Adjudicating Authority has given a categorical finding on the payment of Sales Tax/VAT as also the correlation of VAT/Sales Tax with goods sold, in the O-I-O, which is duly supported by the certificate of a qualified Chartered Accountant, which fact has not at all been disputed by the Revenue - Therefore, there is no strength in the First Appellate Authority's rejection of the refund for want of correlation, which exercise apparently has already been carried out to the satisfaction of the Adjudicating Authority - order of Commissioner(A) set aside and appeal allowed with consequential benefits: CESTAT [para 7, 8]
- Appeal allowed: CHENNAI CESTAT
2020-TIOL-325-CESTAT-BANG
Karachira Coir Manufactures Vs CC
Cus - The assessee-company filed BoE for clearance of goods described as PVC Laminated Sheets of different sizes, classifiable under CTH 3918 1090 - Such goods had been imported from Thailand - The Customs Broker failed to declare the complete required declaration including percentage of PVC content to ascertain the value and to compare with contemporary import price - On scrutiny, it was found that the supplier is a trader & not a manufacturer of goods - The self-assessed BoE was processed under RMS and such BoEs were selected for assessment and examination - Upon assessment, it was noticed that the declared value was lower than the contemporary import value of similar goods - The Customs Broker was issued an online query to produce documentary evidence to confirm the value as per Rule 12 of the Customs Valuation Rules - The Customs Broker did not produce any documents and sought first-check examination - The same was permitted for BoE and samples were directed to be drawn for testing and confirming PVC content - The test report by CIPET reported PVC content to be 51% - The Revenue opined that the assessee indulged in under-valuation and mis-declaration - SCN was issued proposing to confiscate the goods u/s 111(i) and 111(o) - Penalty was proposed to be imposed u/s 112(a) & 112(b) of the Customs Act - The declared value was proposed to be rejected and re-calculated - On adjudication, such proposals in the SCN were sustained - Hence the present appeal.
Held: In the reply to SCN, the assessee stated that the supplier of the goods is the biggest manufacturer of the subject goods, in the world - The goods were imported by the assessee under the ASEAN agreement between two sovereign states & if the Revenue has any cogent evidence to conclude that no such manufacturer exists, it should have made proper enquiry to blacklist such supplier - However, the same was not done - The Commr suo motu concluded that the raw material for the subject goods is LDPE and LLDPE and that the value is between USD 1180-1270 - Such findings are without any basis - In the test report obtained from CIPET, it is not mentioned that LDPE & LLDPE is raw material for the subject goods - The information relied on by the Commissioner is available in public domain & the same is inadmissible as evidence in law, when there is a specific test report available & which is issued by an authorised agency - The assessee also submitted a certificate from the manufacturer, stating that LLDPE and LDPE is not a raw material for the subject goods, but the same was not considered by the Commissioner - Moreover, whilst the assessee imported the goods from Thailand, the Commissioner relied upon contemporaneous imports from China PR - It is trite law, as held by the Apex Court in Sounds N Images vs. Collector of Customs that charge of under valuation must be established through proper method under law and that burden cannot be shifted to the importer whereas in the present case, the Department has failed to establish the charge of under valuation through proper methods known to the law of valuation under Customs - Hence the O-i-O in question is not sustainable & merits being quashed: CESTAT
- Assessee's appeal allowed: BANGALORE CESTAT
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