2020-TIOL-NEWS-066 Part 2 , Dated: Thursday, March 19, 2020

ST - The assessee provides consulting engineer services and provides such services to clients such as Madhya Pradesh Rural road Development Authority & Bhopal Municipal Corporation Ltd - It is registered with the Service Tax Department and maintained regular books of accounts and also filed ST-3 returns regularly - The details of work done by the assessee are preparing Draft Project Report or DPR, supervision and quality control for the construction of the roads and feasibility report and other consultation for other projects - Upon audit, the Revenue objected to non-payment of service tax on the TDS amount deducted by the principal from the amount approved or passed on their bills - The assessee accepted the Revenue's objections and deposited the service tax with interest - SCN was issued demanding service tax on the amount of penalty deducted by the principal from the bills - Such penalty is towards deployment of less personnel or material for the work of the principal - Duty demand was also raised on the construction of road - On adjudication, it was held that the activity of road construction awarded by four parties were not liable for service tax - Reduced amount of duty was confirmed - Penalties u/s 76 & 78 were also imposed - Such findings were sustained by the Commr.(A) - Hence the present appeal.

Held: Considering that the assessee was subjected to regular audits, demanding duty on extended period of limitation is bad in law and so merits being set aside - Regarding the demand raised under normal limitation, if the penalty has been deducted as per the contract between the parties and the assessee is not entitled to receive the same at any further point of time, the amount of consideration u/s 67 of the Act is also reduced - Hence on such penalty, no service tax is leviable - The demand raised on this count is set aside - Regarding construction done for another entity, the demand was confirmed for want of sufficient evidence - This demand is quashed and the matter is remanded for re-consideration - Besides, as there is no suppression of facts or deliberate default by the assessee, the penalty u/s 76 and 78 of the Act are set aside - Hence the appeal is allowed in part and remanded in part: CESTAT

CX- The appellant [M/s.Unimed Technologies Limited] entered into separate agreements with M/s.Sun Pharmaceuticals Industry Limited (SPIL) and M/s.Sun Pharma Advance Research Company Limited (SPARC) for carrying out research and development and transfer of developed technology/Know-How for manufacture of various pharmaceuticals products -accordingly, SPIL & SPARC developed certain technologies for manufacturing of various pharmaceuticals products and sold/transferred such technology to the appellant under five different invoices after payment of ST thereon under the head of Scientific and Technical Consultancy Service -the appellant availed the CENVAT credit of this ST paid by SPIL & SPARC -the appellant exported the said service on the same day on which they had availed the credit of the service received from SPIL & SPARC - the revenue argued that the service received from SPIL & SPARC was never used by the appellant for manufacture of any goods or for provision of any service but was exported as such, and therefore, the appellant was not entitled to avail cenvat credit of the said amount-demand confirmed, hence appeal.

Held: It is seen that the services have been exported by the appellant and logically there should not be any tax liability on such exports and any tax paid on development of such service should be refunded to the appellants -availability of credit is also a kind of refund -the service was not provided in one day but was provided in a particular time duration and the service provided was being simultaneously used by the appellant by Supervising and Monitoring the activity in the entire duration -thus, it would be correct to say that the service provided by SPIL was not used by the appellant -the revenue's argument that the entire service was provided on the date of invoice is totally fallacious and illogical -thus, it is held that the appellants received and consumed the service while they were participating in the development of technology by supervising and monitoring the same -in view of above, no merit found in the argument of the revenue that the services provided by SPIL was not used by the appellant and were exported as such - the agreement in respect of SPARC is also the same and, therefore, the arguments above are equally applicable to the services provided by SPARC -in view of the above, no merit found in the arguments of the revenue that services were exported without use by the appellant and, therefore, no credit is admissible -appealsare consequently allowed: CESTAT [para 8, 10, 11, 12, 13]

CUSTOMS

2020-TIOL-603-HC-MUM-CUS

CC Vs Omprakash Parasrampuria

Cus - Issue is as to whether impugned order passed by the Tribunal is required to be set aside and the proceedings be relegated for reconsideration of the Tribunal on the ground that the order is non-speaking order?

Held: The Commissioner, after considering all the circumstances, had imposed penalty of Rs.10 crores - if it has to be brought down to Rs.1 lakh, the Tribunal was under obligation to give detailed reasoning thereof - that the Appeals against the Company and Directors have abated was one of the factors for the use of discretion, but in absence of statutory provisions mandating reduction in penalty on this ground, other factors for the use of discretion also had to be considered - there were various other parameters which should have been taken into consideration while fixing the amount of penalty - since there is an absence of consideration of all the parameters, the question of law as reframed will have to be answered in favour of the Appellant Revenue - accordingly the Appeals are allowed - the impugned order to the extent it reduces the penalty from Rs.10 crores to Rs.1 lakh is quashed and set aside - the Appeals No. C/919 and 921/2009 stand restored to the file of the Tribunal, only on the aspect of fixation of the quantum of penalty - the Court is not interfering with the findings of the Tribunal that the Respondents are liable for penalty under section 112A of the Customs Act - the Court has not commented on the merits of the matter as it will be within the domain of the Tribunal to fix the penalty after giving the reasons for the same - keeping all the contentions of the parties on this aspect open, the Appeals are disposed of as above: High Court [para 6, 7, 8, 9]

- Appeals disposed of: BOMBAY HIGH COURT

2020-TIOL-479-CESTAT-AHM

Mulchand M Zaveri Vs CC

Cus - The appellants had imported certain goods declaring the same as 'Natural Gold Ore Concentrate' - after fifteen consignments of the said product having been cleared by Customs, the 16th consignment was stopped - the bill of entry for the 16th consignment was submitted to Ahmedabad Customs for assessment - the goods were sought to be classified under CTH 2616 9010 claiming basic Customs duty (BCD) at the rate 2.5% and nil CVD by virtue of notification no.12/2012-CE dated 17.3.2012 (Serial No.56) - the said consignment was seized by DRI on the basis of intelligence to the effect that the appellants were importing by mis-declaring the goods as 'Natural Gold Ore Concentrate' and wrongly claiming the benefit of notification - the goods were examined under Panchanama - during investigations, certain WhatsApp messages were recovered from the mobile phone of Shri Sanjay Patel - certain other incriminating documents were also recovered from the premises of appellant - statements of various persons were recorded - based on these evidences, a SCN was issued alleging that the appellants had not imported the 'Natural Gold Ore Concentrate' but had artificially mixed gold and various materials like mud, cement etc to artificially create something that could be camouflaged as 'Natural Gold Ore Concentrate' - the demand of duty, confiscation and penalties were confirmed against the appellants, hence appeal before CESTAT.

Held: The dispute essentially relates to admissibility of benefit of notification no.12/2012-CE dated 17.3.2012 which exempts from Central Excise duty "Ores" falling under Chapter 2601 to 2617 from whole of excise duty - from the reading of definition of "Ores" appearing in Note-2 of Chapter 26 and definition of the term 'minerals' in various dictionaries, it is seen that only Naturally occurring substances are termed as 'minerals' and, therefore, "Ores" - as per chapter notes and HSN, only the naturally occurring material can qualify as 'ore' - the artificially made substances cannot, therefore, be called as "Ore" in terms of the definition of the term 'Ore' appearing in the Chapter notes and explanations in HSN - the goods imported by the appellant were produced in a workshop by mixing sand and gold and various materials which cannot be called concentrate - as per HSN explanatory notes, the term 'concentrate' applies only to 'ores which have had part or all of the foreign matter removed……..' - thus only goods derived from 'ores' can be called concentrate - in any case, the goods do not fall under chapter heading 2601 to 2617 even under description of 'Concentrate' - only the naturally occurring materials can qualify as ore and artificially produced material cannot qualify as ores even if they correspond to the the physical/chemical parameters of 'ores' - investigations have revealed that there were frequent exchange of messages between the appellant's partner Shri Sanjay Patel and foreign supplier Shri Sachin - the said WhatsApp messages indicated that Shri Sanjay Patel was directing Shri Sachin to mix gold with various substances and create a product roughly answering to the physical/chemical description of "Ore" - the impugned order corroborates the said messages with other evidence and documents - the Bench finds that the WhatsApp messages are sufficiently corroborated and, therefore, relevant and admissible - the analysis of the messages shows that the messages were not only exchanged but the instructions were also executed - the messages are further corroborated by the recovery of a cost sheet during search of the appellant's premises - the said cost sheet shows the various materials that go into preparation of the fake gold ore - it was recovered from the appellant's premises - this sheet clearly shows that fake gold ore was being manufactured - thus the said cost sheet also corroborates the facts detailed in the WhatsApp messages - it is not denied that the mobile phone and the WhatsApp messages were recovered under a Panchnama - the appellants have not challenged the Panchnama at any stage nor have sought any cross examination of Panch witnesses - in these circumstances, their challenge to the recovery of mobile phone and the WhatsApp messages is dismissed - the term 'Mineral' covers gold ores also - gold is a metal and gold ore is a mineral - it needs to be appreciated that Professor at IIT is the expert in minerals and can be expected to know the characteristics by which the minerals are generally described - it is seen that the report of IIT Professor clearly states that Sharp pointed features are never observed in Natural Gold Nuggets - he also observed that the tear and bulbed shaped nuggets clearly shows sharp pointed features indicating extracted out from melted concentrate as high specific gravity of gold develops into tear drop with sharp pointed end on opposite side - this observation of the IIT Professor has not been challenged in the cross-examination by any question - it is seen that there is no use of word usually in the said observation and the word used is 'never' - this in fact corroborates the allegation that the goods were not of natural origin - the confiscation has been ordered under section 111(d) and (m) of the Customs Act 1962 - the same is upheld - redemption fine of Rs.60 lakhs has been imposed on the goods of declared value of Rs.1.32 crores - considering the facts and circumstances of the case, and the fact that duty evaded in this consignment is approximately Rs.18 lakhs, the said fine is reduced to Rs.15 lakhs - the penalty of Rs.10 lakhs, imposed under 112(a) in respect of the confiscated consignment is also upheld - it is found that the WhatsApp messages clearly show that the previous consignments were produced in the workshop - it has been corroborated by the detailed analysis in the impugned order - it has also been corroborated by the recovery of document from appellant's premises and also from the sample tested - in view of the fact that an elaborate mechanism for hoodwinking Customs was devised by the appellant, the intention to evade the customs duty cannot be doubted - this is a case involving fraudulent intentions and actions - in view of the above, the demand of duty and interest on past consignments is also upheld - the penalty under section 114A, of the Customs Act 1962, in respect of past consignments is also upheld - a separate penalty of Rs.50 lakhs under section 114A of the Customs Act 1962, has been imposed on Shri Sanjay Patel - the High Court of Gujarat, in the case of Jai Prakash Motwani - 2009-TIOL-121-HC-AHM-CUS has held that when penalty has been imposed on the firm, separate penalty on partner cannot be imposed - respectfully following the decision of the High Court, the appeal of Shri Sanjay Patel is allowed - the appeal of M/s. Mulchand M Zaveri is partly allowed - the appeal of Sanjay Patel is allowed : CESTAT [para 4, 4.1, 4.3, 4.4, 5.1, 5.3, 5.5, 5.6, 5.7, 6.2, 6.6, 6.7, 7, 8.1, 9, 10]

- Appeals disposed of: AHMEDABAD CESTAT