2020-TIOL-NEWS-069, Dated: Monday, March 23, 2020

ST - The issue is with regard to the disallowance of credit of ST paid on rent as well as maintenance charges towards premises rented by the appellant for the purpose of use of office - the department has disallowed the credit for the reason that the premises is situated outside the factory - appeal to CESTAT.

Held: On perusal of the definition of inputs as well as input services, it can be seen that the restriction that credit can be availed for materials that has been brought into the factory is applicable only in the case of inputs and not that of input services - in regard to input services, it is immaterial whether the services are availed within the factory or outside the factory - it is only necessary that the manufacturer has to avail it in relation to the manufacture of the final product - in the present case, the department does not dispute that the said premises is used by the appellant as office for their manufacturing factory - for these reasons, the disallowance of credit is unjustified - further, in the case of Nitcon Industries P. Ltd. , the Tribunal has analyzed the very same issue and held that it is immaterial whether the rented premises is within the factory or outside but the same should be availed in the course of manufacture of final product - the impugned order is set aside and the appeal is allowed: CESTAT [para 5, 6]

ST - GST Regime came into being w.e.f. 01.07.2017 and subsequently between September and November, the appellant raised Credit Notes and another four invoices and paid GST on the same - After paying GST, appellants are seeking refund of the Service Tax of Rs.17,84,952/- which was paid during the period April to June 2017 on the ground that they have paid Service Tax and GST on the same four transactions - When Service Tax was paid on the basis of self-assessment and declaration in their ST 3 Returns for the period April to June 2017, the Service Tax was paid correctly for the services which were provided during the period April to June 2017 as per Section 68 of the Act - Further, Bench finds that the appellant issued the GST invoices subsequently in the month of September and November 2017 simply at the instances of their clients - When the Service Tax was paid for the services rendered during the relevant period was liable to be paid - Commissioner (A) has given cogent reasoning for denial of the refund claim viz. that the appellant has issued subsequent four invoices on 30.9.2017, 8.11.2017, 8.11.2017 & 31.12.2017 without any supplies under the GST regime which in itself is violation warranting rejection of refund; that the appellant has violated the provisions of the GST law by issuing an invoice without supply of goods; that the tax paid during April to June 2017 against the service tax invoices was the legitimate tax that was due to the Government as per the prevailing Finance Act, 1994 and hence, the service tax paid by the appellant is in order and correct and there are NO provisions u/s 11B of the CEA for the refund of duty/tax that was liable to be paid legitimately - no infirmity in the impugned order - appeal dismissed: CESTAT [para 6, 7]

SVLDRS - The present petition assails an order rejecting the declaration filed by the petitioner under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 on grounds that the investigation authority concerned did not quantify nor communicate the same to the assessee till June 30, 2019.

Held: Since the petitioner pleased that it was eligible to file a declaration despite the demand having been neither quantified nor communicated to the petitioner till June 30, 2019, it deserves an opportunity of personal hearing before any adverse order is passed - Hence the petitioner is directed to appear before the authority concerned at the time and date specified: HC

CX - The assessee-company manufactured TMT Bars & mild bright steel bars falling under Chapter 72 of the CETA 1985 - It availed benefit of Cenvat credit as per the CCR 2004 - During the relevant period, the Department found that the assessee procured TMT bars from other manufacturers and sold them under its brand name to customers on payment of duty - It also availed credit of Excise duties paid by the other manufacturer on TMT Bars and used the same for payment of Excise duty on the final products - SCN was issued proposing to deny Cenvat credit on TMT bars on which the assessee availed credit - It was alleged that the TMT bars were not inputs or capital goods but were final products which were purchased and further traded - Hence such credit was proposed to be recovered u/r 14 of CCR r/w Section 11A of CEA 1944 along with interest u/s 11AA - Penalty u/r 15(1) was also imposed - On adjudication, the demands were confirmed and were sustained by the Commr.(A) - Hence the present appeal.

Held: There are no provisions in the CCR which permit a manufacturer to avail credit on the final products purchased by them from one party and sold to another - The CCR 2004 provide for credit on input goods and services and capital goods - TMT bars fall under none of these categories - Hence in absence of any explicit legal provision for availment of credit, the assessee is not entitled to Cenvat credit on TMT bars - Besides, provisions of Rule 16 of CER 2002 are inapplicable to cases where goods are brought into factory for re-sale - This rule applies only to cases where the goods are used for repairing, re-conditioning - Regarding the assessee's claim of the entire exercise being revenue-neutral, the same does not mean that the assessee can design own scheme of operation and claim there to be no net effect to the Revenue and claim to be free to operate in such fashion - Fiscal statutes must be interpreted strictly as they are drafted without an intendment as has been held by the Apex Court in the case of M/s Dilip Kumar & Co. - Hence the O-i-A in question does not suffer from any infirmity: CESTAT

CX - Based on the reference received from the Central Excise Commissionerate Thane-II vide letter darted 22.07.2005 to the effect that Appellant 1 unit at Mira Road Thane, was generating bogus ARE-1s by showing itself as supporting manufacture for the manufacture of "dyed and/ or printed fabrics" and the said bogus ARE-1s were issued to various Merchant Exporters for claiming the fraudulent rebate, proceedings were initiated for denial of CENVAT credit and rejection of rebate claims, confiscation of goods, imposition of fine, penalty, interest etc. - demand confirmed and hence appeals filed.

Held: Fact that even the so called payments made by the Appellant to the supplier of the raw material have been found to be bogus - Bench also does not find the submissions made by the Appellant in respect of the goods cleared for export as having any merits because of the time lag between the date of clearance of the goods from the premises of the Appellant and the date of "let export order" indicated on the ARE-1 inasmuch as it is also not understood as to why the goods which were exported were transported from Thane, Mumbai to Delhi for exportation from ICD Tughlakabad and IGI Airport New Delhi, when the gateway port for ICD Tughlakabad is Jahawar Custom House, Nhava Sheva - moreover, the act of incurring the expense on transportation of goods from Thane Mumbai to New Delhi and then back to Nhava Sheva, could not be explained by the Appellants or the merchant exporters - Appellants have also not produced copies of any documents evidencing the payment of toll/octroi at any of toll/ octroi naka that would have been crossed in course of transporting the goods from Thane to Delhi - facts about non receipt of the inputs/ goods against which the Appellant 1 have availed the CENVAT Credit of Rs.82,95,790/- has been admitted by the Shri Dinesh Agarwal (Appellant 2) Director of Appellant in various statements recorded - since the Appellant 1 has not received any goods the clearance of the same by him for exportation or any other purpose also was fraudulent, so that they could have converted the fraudulent credit to cash by claiming the rebate of the duty paid by them by debiting from the fraudulent credit availed by them - In view of above Bench is of the view that the CENVAT Credit availed by the appellants fraudulently without receiving the corresponding inputs covered by the duty paying documents/ invoices needs to be denied to the Appellant 1 by invoking extended period of limitation as per Rule 14 of CENVAT Credit Rules, 2004 read with proviso to Section 11A(1) of the Central Excise Act, 1944 - Since no inputs were received by the Appellant 1, the clearance of the goods by him by debiting the duty against such fraudulent clearances from the CENVAT Account is also not sustainable - In fact, as no goods were received they have also not been cleared and hence the debits made from the CENVAT accounts which is subject matter of thirteen rebate claims filed by the Appellant after taking no objection from the merchant exporters is also not sustainable and, therefore, all the rebate claims filed by the Appellant 1 and subject matter of these proceedings need to be disallowed as have been done by the Commissioner by withholding the same - However since the Bench holds the credit itself as fraudulent, the debits made from the CENVAT account too are fraudulent - Thus in absence of the clearance of the goods by the appellant, if the duty is sought to be demanded from appellant 1 against the goods which were never cleared by them for export would amount to double jeopardy - In case of the goods cleared by the appellants to their sister concerned by debiting the fraudulent CENVAT Credit availed by them, the appellants have fraudulently transferred this CENVAT Credit to their sister concern who would have utilized the same, hence these amounts need to be recovered from the Appellant 1, whereas in case of exports under the claim of rebate, the denial of rebate claim will amount to recovery of the fraudulent CENVAT Credit Remaining amount which is not covered by these claims needs to be recovered in cash from appellant 1 - Interest on the CENVAT Credit taken fraudulently is demandable under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944 - Penalty under Section 11AC imposed on Appellant 1 is justified and penalties imposed on other appellants under Rule 26 are also justified.: CESTAT [para 4.11, 4.12, 4.13, 4.14, 4.17, 4.18, 4.20, 5.1]

CUSTOMS

2020-TIOL-624-HC-KOL-CUS

Magnum Export Vs CC

Cus - The assessee-company exported a consignment of 1500 cartons of 'Raw block fresh frozen A" Grade black Tiger PD Shrimps belly to Sharjah - The same was returned by foreign buyers since the packing & labelling were not as per their norms - The consignment was reimported without payment of duty under Notfn No 158/95-Cus, which lays down stringent conditions to prevent mis-use of facility of re-export of re-imported goods - The assessee produced certificate from Preventive Officer to the effect that the goods were escorted from CFS to factory where the container was de-stuffed and unloaded in his presence - It was also stated that the old cartons were destroyed and fresh ones were used for packing the goods, which were re-stuffed in container with party seal - Later the Tribunal found that the certificate also confirmed that the Preventive Unit officer did not escort the container from the factory to the CFS - The Tribunal further held that the final finding of Commissioner, that goods should have been examined in presence of proper officer for identification of re-export and that Deputy Commissioner/Assistant Commissioner was the proper officer, such finding of Commissioner was correct as it is a mandatory condition in the notification - It was held that examination of such consignment in the presence of an officer of lower rank defeated the purpose of the notification and also nullified the requirement of satisfaction of Assistant Commissioner as regards identity of re-export goods - It was observed that the examination at higher level has been mandated by notification to thwart the misuse of notification and non-compliance with the same is bound to result in denial of benefit of notfn - Hence the Tribunal sustained the order passed by the Commissioner and dismissed the assessee's appeal.

Held: The Tribunal observed that the initial cartons were destroyed and for changing the cartons, the assessee should have brought this fact to the notice of the Department during the re-processing - The changing of cartons took place in presence of the Preventive Officer - The assessee complied with this part as Preventive Unit officer was present - Hence this finding of the Commissioner are not supported by facts - The final finding of the Commissioner that the goods should have been examined in the presence of a proper officer for identification of the re-export and that the Deputy Commissioner/Assistant Commissioner was the proper officer, such finding of the Commr is correct, since it is mandatory condition stipulated in the notification - Examination of such a consignment done in the presence of officer of lower rank not only defeats the purpose of this notification but also renders the requirement of satisfaction of Assistant Commissioner as regards identity of re-export goods as redundant - The examination at the higher level was mandated by the notification to thwart the misuse of the notification and non compliance with the same is bound to result in denial of benefit under the notification - As per the Tribunal, the preventive officer had certified compliance when it ought to have been done by the Dy Commr./Asst Commr - Hence this alleged compliance with the condition was suspect before the Tribunal and the same indicates foul play - Hence this court is not empowered to re-appraise facts in this jurisdiction - Hence there is no perversity in such findings: HC

- Assessee's appeal dismissed: CALCUTTA HIGH COURT

2020-TIOL-496-CESTAT-MAD

G Kathiravan Vs CC

Cus - Appellant seeks an out-of-turn hearing of their appeal against the order of the Commissioner of Customs by which their licence has been revoked under regulation 17 of the CBLR besides ordering forfeiture of security deposit and imposing penalty - considering the implication on the livelihood of individuals employed by the appellant, early hearing application is allowed: CESTAT [para 2]

Cus - Appellant submits that the present controversy is limited to the narrow compass of denial of the procedural right of the licensee in enquiry proceedings and seeks relief by directing a fresh proceedings - appellant informs that their request for cross-examination of logistics agent, exporters and representatives of liners was not allowed although regulation 17(4) permits the same - AR submitted that the enquiry authority has taken note of the request for cross-examination and, having disposed off the same, there is no merit to entertain a plea to revisit the issue afresh.

Held: The manner in which the enquiry report has discarded the request of cross-examination received from the noticee is not in conformity with regulation 17 of CBLR - It was incorrect on the part of the officer to have come to the conclusion that the statements recorded therein, which is perceptible as the foundation of the show-cause notice, did not merit being subjected to the test of cross-examination - This breach of responsibility by the disciplinary authority who was obliged to ensure compliance with the Regulations appears to have been further compounded by failure to dispose off the representation - such contravention of the principles of natural justice and the prescriptions in the statute renders the final decision to be unacceptable and inconsistent with law - Accordingly, the impugned order is set aside, as well as the proceedings following the issue of show-cause notice, and matter is remanded to the original authority to order fresh enquiry proceedings under regulation 17: CESTAT [para 5, 6]

- Matter remanded: CHENNAI CESTAT

2020-TIOL-491-CESTAT-MUM

Sushil Kumar Agarwal Vs CC

Cus - Proceedings were initiated by the department against M/s Sunland Alloys on the premise that they had resorted to undervaluation of Zinc and aluminium scrap imported by them during the period between August' 2004 to July' 2005, with the intent to evade payment of customs duty - On the basis of investigation, the value of above scrap items declared by the importer-appellant for the purpose of assessment was rejected and re-determined under Rule 8 of the Customs Valuation Rules, 1988 - The basic contention of department for re-determination of the value of scrap items was based on the fact that the import price of the said items were much lower than the prevailing prices contained in the bulletin published by the London Metal Exchange (LME) - According to the department, the transaction of metallic scrap is dependent upon prevailing prices of prime metal declared in the LME and are arrived at after deducting certain percentage of discount for the impurities found in the scrap - In this case, the department has considered the Scrap specification circulars issued by the Institute of Scrap Recycling Industries Inc. (ISRI) and parameters of valuation of Aluminium Scrap fixed by the Director General of Valuation in the Alert Circular No. 14/2005 dated 16.12.2005 for arriving at the discount band for the disputed scrap items - department has also relied upon the e-mails and letters issued by the High Commission of U.K. to conclude that the appellant M/s Sunland Alloys had suppressed the actual transaction value by resorting to under-valuation of the imported scrap items and that the differential price was paid to the overseas supplier through Hawala route - Commissioner confirmed the differential duty demanded against M/s Sunland Alloys; confiscated the seized goods and allowed the same to be redeemed on payment of fine; imposed penalty equal to the duty demanded on M/s Sunland Alloys and imposed penalties on various persons involved in the case under Section 112(a) of the Customs Act, 1962 - appeal to CESTAT.

Held: In the case in hand, the appellant M/s Sunland Alloys had entered into contract with the overseas suppliers for importation of the scrap items in question - Pursuant to the contractual norms, the goods were supplied by the overseas entities under the cover of commercial invoices, bearing the reference of description of goods, quantity, price etc. - On the basis of the import documents, the appellant had filed the Bills of Entry before the jurisdictional Customs Authorities for duty assessment and for clearance of the imported consignments for home consumption - It is not the case of Revenue that over and above the contractual amount, the appellant had paid any other amount either to the overseas supplier or any other person in context with importation of the subject goods - Further, Revenue has also not alleged that the appellant had any interest in the business of the overseas suppliers and vice-versa - Therefore, the department has not made any valid case for rejection of the declared transaction value - It is also evident from the Panchnama that the seizure of the Laptop was not in terms of Section 138C of the Customs Act, 1962 - Moreover, such evidence was declared to be not admissible by the Tribunal in the case of Tele brands India Ltd - 2015-TIOL-2809-CESTAT-MUM - E-mails relied upon by the department are inadmissible for consideration as evidence inasmuch as the same were seized by the officers of DRI from the laptop belonging to Shri Tarun Zingon and the mandatory requirements provided under Section 138C ibid have not been complied with - law is well settled in the case of Harsinghar Gutka Pvt. Ltd that computer print-outs based on reconstructed or retrieved data is not admissible as evidence - entire case appears to have been made taking in to account a couple of e-mails and based on the statements of the concerned that the prices of scrap are dependent on LME prices - Bench also finds that the invoices mentioned in the e-mail correspondence are not linked to any particular Bill of Entry - Also, the Department has already issued a show-cause notice to M/s Sunland Metal Recycling Industries a sister concern of the appellants i.e. M/s. Sunland Alloys on the basis of the printouts taken from the Laptop of Shri Jhingon and this case travelled up to the Tribunal and the co-ordinate Bench at Ahmedabad has not appreciated the evidence and set aside the duties confirmed therein vide Final Order No. A/11871-11874/2019 dated 01/10/2019 - There is no order either overturning or staying the above decision, therefore, Bench finds that judicial discipline requires that be followed - moreover, evidence which is not accepted as proof enough by one coordinate bench in one case cannot be held to be acceptable in another case by a different Bench - in both the reports of Second Secretary (Trade) of Indian High Commission, U.K, there is no direct reference in the reports to the appellants and importantly both the reports suffer from the infirmity that the reports are not signed by the respective Customs authorities either at U.K or Greece - Thus, the reports may at best throw some light on the value of the aluminium scrap traded but cannot be held to be a conclusive proof to show that the appellants have undervalued their imports - reports received from High Commission UK do not fortify the allegation made by the department. Rather, on a close analysis they create contradictions, wherein one will be constrained to take a view that they cannot be relied upon as evidence to support the allegation of under valuation - Commissioner does not give any satisfactory reasoning for rejection of the values declared by the appellants - Bench finds that the investigation has made a sweeping generalization on the basis of stray third party evidences and have reworked the prices declared by the appellants with reference to LME prices - In view of the above discussion, Bench is of the view that such a generalization cannot be held to be a piece of evidence - Moreover, other than vague statements to the effect that the differential amounts were sent to the foreign suppliers, no piece of evidence has been brought in that the appellants have paid money to the foreign suppliers over and above the invoiced price - allegation of undervaluation is not sustained - Consequentially, the seizure, demand of differential duty, fine and penalty on M/s. Sunland Alloys do not survive - penalties on other persons also does not survive - all the appeals are allowed with consequential relief: CESTAT [para 8.2, 9, 9.1, 9.2, 9.3, 10, 10.2, 11.6, 13, 14, 16]

- Appeals allowed: MUMBAI CESTAT