2020-TIOL-NEWS-186, Dated: Thursday, August 06, 2020

Bhawna Malhotra Vs CBIC

ST - SVLDRS, 2019 - Petition has been filed seeking a direction to the respondent no.2 to consider the petitioner's representations dated 29th January, 2020, 31st January, 2020 and the email dated 24th June, 2020 by which she sought amendment/modification of the categorization of her application as "litigation" instead of "voluntary" in the statement filed under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Petitioner states that they became aware of the error in the initial declaration filed by her and wrote a letter to the Assistant Commissioner, SVLDRS seeking rectification of the error as well as claimed relief of 70% to which she is entitled to in terms of Section 124(1)(a)(i) of the Scheme; that if the petitioner's representations for modification/rectification are not allowed, the petitioner would be deprived of a relief to which she is legitimately entitled to.

Held: Petition is disposed of with a direction to the respondent no.2 to decide the petitioner's representations dated 29th January, 2020, 31st January, 2020 and the email dated 24th June, 2020, after giving an opportunity of hearing to the petitioner, within three weeks in accordance with law - petitioner is directed to appear before the respondent no.2 on 17th August, 2020 at 11.00 A.M - Petition is disposed of: High Court [para 7, 8]

- Petition disposed of: DELHI HIGH COURT

2020-TIOL-1314-HC-DEL-ST

Vaishali Sharma Vs UoI

ST - SVLDRS, 2019 - Petitioner is aggrieved with the Respondents order rejecting the declaration dated 29th December, 2019 filed by the petitioner in Form SVLDRS-1 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Petitioner had pursuant to summons dated 14th May, 2018 admitted her liability in the context of services rendered in lieu of commission earned from M/s. Herbalife India Private limited on 18th May, 2018 itself - declaration dated 29th December, 2019 filed under the SVLDRS was rejected on the sole ground that the demand was neither quantified nor communicated to the petitioner on or before 30th June, 2019 - Petitioner submits that paras 4(a) and 10 (g) of the CBIC Circular dated 27th August, 2019 provides for relief under the Scheme for cases under investigation and audit where the duty involved had been admitted by the assessee/declarant in a statement on or before 30th June, 2019 - Petitioner also submits that the order is passed in violation of principles of natural justice as no opportunity of hearing was given to them before the rejection order was passed - Counsel for Respondent Revenue submitted that the amount quantified by the petitioner in the statement had not been accepted by the Department and the investigation on the said date was still pending.

Held: Court is of the opinion that a liberal interpretation has to be given to the Scheme as its intent is to unload the baggage relating to legacy disputes under the Central Excise and Service Tax and to allow the businesses to make a fresh beginning - Since it is the petitioner's case that she had admitted her liability to pay service tax on 18th May, 2018 itself, this Court is of the view that the respondents should have given an opportunity of hearing to the petitioner before rejecting the SVLDRS, 2019 declaration dated 29th December, 2019 - impugned order dated 26th February, 2020 is set aside and the designated committee is directed to decide the petitioner's application after giving an opportunity of hearing to the petitioner - Matter is to be listed before the designated committee on 13th August, 2020 at 11.00 A.M and a reasoned order, after giving an opportunity of hearing, shall be passed by the designated committee on or before 31st August, 2020 - writ petition stands disposed of: High Court [para 9 to 12]

- Petition disposed of: DELHI HIGH COURT

2020-TIOL-1175-CESTAT-DEL

State Bank of Bikaner and Jaipur Vs CCE & ST

ST - Commissioner confirmed the tax demand of Rs.110 ,84,38,781 /- and imposed penalties and interest - In an export transaction from India, the exporter submits the export documents to the Appellant Bank and informs the name and address of buyer's bank for sending the export documents against acceptance and payment of Bill of Exchange - The Appellant Bank forwards these documents to the Foreign Bank or the Foreign Intermediary Bank for collection of payment from the importer - Appellant Bank charges commission/fees for the provision of such services to the exporters/importers and pays service tax on such services - If the exporter decides to bear all the bank charges, then the foreign bank charges its fees from the exporter for handling of export documents and collection of export proceeds - The foreign bank charges are then recovered from the exporter by deducting the foreign bank charges from the amount collected from the importer - Audit team of the Department raised an objection that the Appellant Bank had not paid service tax on foreign bank charges under the reverse charge mechanism and sought details of such charges paid for the period from July 2012 to March 2015 - Appellant Bank submitted that it did not maintain such data and despite its best efforts could also not collect the details of foreign bank charges, as it was not recorded in its system - The Appellant Bank, however, provided the aggregate of the amount short realized on behalf of customers, which could be due to various reasons, like discrepancy charges, short shipment, discount allowed, early pay in, as agreed between exporter and importer - Contending that foreign banks have provided Banking & Other Financial Services as defined under clause (12) of Section 65 of the Finance Act, 1994 and taxable under sub-clause ( zm ) of clause (105) of Section 65 of the Finance Act, 1994 to the assessee, and which services are not entitled for any exemption, the assessee, being recipient of service in the taxable territory, is liable to pay service tax thereon in terms of Notification No. 30/2012-ST, dated 20.06.2012 - demand notice dated February 08, 2016 was issued for the period October 2010 to March 2015 on the foreign bank charges and the same was confirmed as mentioned - assessee is, therefore, in appeal before CESTAT.

Held: [ para 34, 36, 40, 41, 44, 48 to 51]

+ The Appellant Bank provides service to the exporters by sending the export documents to the bank of the importer abroad and collects payment. Thus, the role of the Appellant Bank is to settle the payment relating to export/import of trade. For performance of such activity, the Appellant Bank charges service tax to the exporters and there is no dispute about the said charges in this Appeal. The Appellant Bank cannot be said to be the recipient of service for the activities undertaken by the Foreign Banks situated outside India, the charges for which are deducted at source on the export bill. The Appellant Bank merely acts on behalf of the Indian exporter and facilitates the service. The Appellant Bank, therefore, would not be liable to pay service tax under the reverse charge mechanism.

+ It is clear from the definition of "consideration" [Explanation to sub-section (1) of section 67] that only an amount that is payable for the taxable service will be considered as "consideration".

+ What follows from the aforesaid decisions [in Bhayana Builders 2013-TIOL-1331-CESTAT-DEL-LB ; 2018-TIOL-66-SC-ST & Intercontinental Consultants and Technocrafts = 2018-TIOL-76-SC-ST ] is that "consideration" must flow from the service recipient to the service provider and should accrue to the benefit of the service provider and that the amount charged has necessarily to be a consideration for the taxable service provided under the Act. It should also be remembered that there is marked distinction between "conditions to a contract" and "considerations for the contract". A service recipient may be required to fulfill certain conditions contained in the contract but that would not necessarily mean that this value would form part of the value of taxable services that are provided.

+ The Appellant Bank has not paid any consideration to the Foreign Bank as is clear from the factual position emerging out of the export trade and, therefore, also the Appellant Bank cannot be said to be the recipient of any service by the Foreign Bank.

+ Trade Notice dated February 10, 2014 relied upon by the AR places reliance upon prima facie view expressed by Tribunal in the two interim orders but it is also not clear whether the Appeals have been decided or not.

+ It also needs to be noticed that the Department itself, in regard to a demand made against the Appellant Bank in a show cause notice dated October 18, 2011 on the same grounds for the period commencing April 01, 2006 to March 31, 2011, was dropped by the Additional Commissioner, Central Excise & Service Tax, Jaipur, by order dated January 31, 2013.

+ It would be seen from the aforesaid order of the Additional Commissioner that two reasons have been assigned for dropping the demand made in the show cause notice. The first is that the Foreign Bank does not transact business of banking in India and, therefore, would not fall within the definition of a "banking company", which is a pre-requisite for a service to be covered under 'banking & other financial services'. The second reason assigned by the Additional Commissioner is that the Indian Bank does not pay any amount to the Foreign Bank and, in fact, the Indian Bank only plays a role of a mediator between the Indian exporter and the foreign banker representing the foreign importer. This is a general practice that the exporters are required to follow by routing the export documents through a banking channel. Thus, the Indian bank did not receive any service from the Foreign Bank. ARs have not stated that the aforesaid order of the Additional Commissioner has been set aside.

+ The inevitable conclusion that follows is that Indian Bank is not the recipient of any service rendered by the Foreign Bank and, therefore, there is no liability to pay service tax on a reverse charge mechanism.

+ It is not possible to sustain the order dated March 30, 2017 passed by the Commissioner. It is, accordingly, set aside and the Appeal is allowed.

- Appeal allowed : DELHI CESTAT

2020-TIOL-1159-CESTAT-DEL

Johri Cable Network Vs CCGST

ST - Appeal has been preferred against the OIA vide which the appeal of the appellant against the OIO has been dismissed on the ground of limitation - appeal was filed before Commissioner(A) after a delay of 6 years and there is no cogent reason apparent on record, which may be considered as reasonable for the said delay of 6 years, therefore, the appeal was rightly rejected is the submission of the AR, who also submits that the present appeal also deserves to be dismissed.

Held: It is appellant's own case that the knowledge of the demand came to his notice from Newspaper "Dainikbhaskar" dated 28 January, 2012 whereafter he made the deposit of the amount of service tax of 65,827/- - The absence of any effort to enquire about the orders in furtherance whereof the recovery proceedings as mentioned in the said Newspaper except a letter dated 13.02.2012 is not opined sufficient for condoning delay of almost 6 years - It is apparent that reminder to said application dated 13.02.2012 was given on 23.02.2016 i.e. after a gap of 3 years, same rather amounts to be highly negligent act - there is no sufficient cause shown by the appellant even for delay in obtaining the copy of the order - On the other hand, Department has tendered documentary proof of the service of the order at the place of the appellant, the acknowledgement due thereof and above all, the admission that on behalf of the appellant the said order was received by the wife of the appellant - no infirmity in the order under challenge - Otherwise also, no reasonable or sufficient cause of delay of 6 years is observed – Appeal dismissed: CESTAT [para 7, 10]

- Appeal dismissed: DELHI CESTAT

2020-TIOL-1158-CESTAT-DEL

Chhattisgarh Civil Supplies Corporation Ltd Vs CCE & ST

ST - Appellant availed transportation services for transportation of rice and paid the service tax under reverse charge mechanism - Later, they realized that transportation of rice is exempt from payment of service tax [Notification 25/2012-ST] and, therefore, filed refund claim - claim was rejected on the ground of time bar by the lower authorities, hence the appeal.

Held: In view of the Tribunal decision in Hitachi Metals (I) Pvt. Ltd. holding that time limit prescribed under Section 11B of the Central Excise Act, 1944 is not applicable to the facts of this case (wherein appellant is not liable to pay tax) and the refund claim is filed in time, impugned order is set aside appeal is allowed with consequential relief: CESTAT [para 5]

- Appeal allowed: DELHI CESTAT

2020-TIOL-1157-CESTAT-MAD

Universal Dredging & Reclamation Corporation Ltd Vs CCGST & CE

ST - The assessee was awarded dredging activity in the dock basin of Tuticorin Port by M/s.VOC Port Trust, Tuticorin - To carry out such dredging activity, they entered into agreement with M/s. Codralux S.A., Luxemberg on 17.07.2015 and hired the charter vessel i.e. Cutter Suction Dredger for dredging activity - Referring to various clauses in the agreement, the department was of the view that the assessee is liable to pay service tax under reverse charge mechanism on the consideration paid to foreign company for hiring the vessel, being a 'declared service' under Section 66E (f) of FA, 1994 w.e.f. 1.7.2012 - SCN was issued proposing to demand service tax along with interest and penalties - The period involved is from November 2015 to January 2016 - For the period prior to 1.7.2012 when the classification of services were in existence, similar issue has been decided by Tribunal in the case of International Seaport Dredging Ltd. 2018-TIOL-3181-CESTAT-MAD and Petronet LNG Ltd. 2013-TIOL-1700-CESTAT-DEL - There has been sweeping amendment to the Finance Act, 1994 w.e.f. 1.7.2012 - Thus, the endeavour would be to examine whether the legal analysis of 'transfer of right to use goods' made in the decisions cited would be applicable post 2012 after the introduction of definition of 'service' and also 66E mentioning the 'declared services' - The question is whether the transfer of goods is by way of hiring of the vessel simplicitor or whether it involves transfer of right to use the vessel - For a transaction to be transfer of right to use the goods, there should be transfer of possession as well as transfer of effective control - The department has mainly relied upon clause (6) of agreement, to contend that there is no transfer of possession as well as effective control - The above clause which relates to maintenance and operation states that, it is the responsibility of assessee to maintain the vessel in proper condition - Undisputedly, the operations are fully under the control of assessee - The assessee has obtained necessary license to use the vessel for dredging - During the charter period, the vessel can be used only in this location (port) - The entire crew and staff is of the assessee - All this would go to show that the assessee has entire control for operating the vessel during charter period - Except for a mere condition that the lessor would be able to withdraw the vessel in case of breach of agreement to do necessary repairs and maintenance, there is nothing to show in the agreement that the lessor retains the control over the vessel - The assessee has absolute discretion to use the vessel for dredging during the charter period - If there is breach on the side of the assessee to do periodical maintenance which may give rise to a right to the lessor to withdraw the vessel, then lessor has to abide by Clause 16 to put an end to agreement and then withdraw the vessel - During the period, neither the owner can use the vessel nor can the owner transfer the right to use of the vessel to another person - Assessee enjoys right to use the vessel to the exclusion of the owner - The transaction in the present case is identical to the transaction analysed by Tribunal in the case of International Seaport Dredging 2018-TIOL-3181-CESTAT-MAD as well as Petronet LNG Ltd. 2013-TIOL-1700-CESTAT-DEL - The transaction is nothing but transfer of right to use the goods and does not fall within the 'declared services' as alleged by department - The Demand therefore cannot sustain - The issue on merits is found in favour of assessee - Undisputedly, the demand has been raised on reverse charge basis and the assessee would be eligible for credit, if they paid the service tax - Thus it is a revenue-neutral situation - The Larger Bench of Tribunal in the case of Jay Yuhshin Ltd. 2002-TIOL-126-CESTAT-DEL-LB has held that extended period cannot be invoked when the situation is of revenue-neutral one - Further the issue is also interpretational one - Moreover, the department has not been able to establish any positive act on the part of assessee that they have suppressed facts with intention to evade payment of service tax - Impugned order is set aside: CESTAT

- Appeal allowed: CHENNAI CESTAT

CX - The assessee is a manufacturer of M.S.Ingots - For the purpose of such manufacture, they used ingot moulds to cast the molten metal emanating from the induction furnace - Ingot moulds are purchased from outside and the Excise duty paid on such moulds is availed as cenvat credit on capital goods in terms of CCR, 2004 - Such Ingot Moulds are repeatedly used in manufacture and after they become unusable, they are cleared from the factory - The Department noticed that such Ingot Moulds were cleared by issue of trade invoices describing them as "Rejected/Defected Ingot Moulds" without reversal of cenvat credit availed on such capital goods - The legal provision dealing with the clearance of capital goods, after availing the cenvat credit, is covered by Rule 3(5) ibid - It is seen the above sub-rule was further amended by Notfn 39/2007-CE (NT) , by which, a proviso was inserted to specify that in respect of clearance of capital goods, after being used, the manufacturer was required to reverse the amount equal to the cenvat credit taken, reduced by 2.5% for each quarter of year or part thereof - Further, it is noticed that the period of dispute is prior to insertion of proviso - The identical issue stands decided by Karnataka High Court in case of Solectron Centum Electronics Ltd. 2014-TIOL-1652-HC-KAR-CX wherein it is held that there is no need for reversal of cenvat credit availed on capital goods, if cleared after use - By respectfully following the said decision, the impugned order is set aside - Since the demand itself is set aside, there is no justification for imposition of any penalty on the Director, Shri Ashok Kr. Agarwal - Hence, penalty is also set aside: CESTAT

CX - The assessee is manufacturer of excisable goods and were making use of the facility of cenvat credit - During months of October, 2013 to January, 2014, the duty liability was discharged partly making use of cenvat credit - The balance amount which was required to be paid in cash, was not paid by due date - Revenue was of the view that during the default period, assessee was required to make payment of Central Excise duty on goods cleared on consignment to consignment basis only in cash, without making use of the credit accumulated in cenvat credit account - The Jurisdictional High Court at Calcutta in the case of Goyal MG Gases Pvt. Ltd , while taking note of the fact that the decision in Indsur Global 2014-TIOL-2115-HC-AHM-CX has been stayed, observed that the Revenue cannot take a stand contrary to that taken in other High Courts and accordingly declared the rule to be invalid - The Tribunal also take note of the observations made by Bombay High Court in HDFC Bank Ltd 2016-TIOL-408-HC-MUM-IT , that once there is a binding decision of High Court, the same continues to be binding on all the authorities within the State till such time as it has been stayed or set aside by the Apex Court - The Bombay High Court also observed that it is not open to the Tribunal to sit in appeal from the orders of the High Court and not follow it - Tribunal is inclined to follow the decision of jurisdictional High Court of Calcutta which has not been stayed and has a binding force as on date - Accordingly, there is no bar in making use of the accumulated Cenvat Credit in making payment of Central Excise Duty even during default period - The impugned order is set aside: CESTAT

CX - The revenue had taken up investigation in respect of one M/s Sandeep Manufacturing Strips who were manufacturing Copper Wires and Strips - During said investigation revenue came to know that M/s Sandeep Manufacturing Strips was getting supply of Copper Ingots from the present three assessees - In the case of M/s Shivam Metal and M/s Vasudev Udyog and in case of Mayank Metal goods were removed from the factory and they were en-route to M/s Sandeep Manufacturing Strips - The goods which were removed by M/s Mayank Metal were seized and the goods which were within the factory in respect of M/s Shivam Metal and Vasudev Udyog were also seized - Thereafter, SCN was issued for confiscation of said seized goods - In case of M/s Mayank Meatal, it was stated that duty of Rs.84,046/- was paid on said goods and the said amount was proposed to be appropriated - Said duty was paid by assessee during the normal course of business and the goods were also reflected in their ER-1 return - The said return was also filed before the issuance of SCN - Once the goods are reflected in ER-1 return and duty liability on the same has been accepted then even if the duty is not paid on the due date the recourse available with revenue is to resort to provision of Section 11 of CEA, 1944 and recover duty with interest and such goods do not become contravening goods and there is no provision in Central Excise Law to confiscate the goods which are not contravening goods - The impugned order is set aside - In so far as the goods confiscated and duty demanded in respect of M/s Shivam Metal and M/s Vasudev Udyog, all the goods which were confiscated were still within the factory and they had not been cleared from the factory - When the goods have not been removed from the factory without payment of duty they do not become contravening goods and the same are not liable for confiscation - In case of M/s Vasudev Udyog, raw materials were also confiscated - Central Excise Act deals with the manufacture and so long as the goods are not manufactured the Central Excise duty is not due on the same - The authorities under Central Excise Act do not have power to seize and confiscate the raw material - Therefore, confiscation of raw material belonging to M/s Vasudev Udyog is also set aside - The impugned order is set aside: CESTAT

NDPS - Appellant assails his conviction under the Narcotics Drugs and Psychotropic Substances Act, 1985 for recovery of 48 Kgs 200 gms. cannabis (ganja) [on 11.08.2009] and sentencing him to 10 years of rigorous imprisonment with a default stipulation - appellant was held to be the owner of the House in question from which the ganja was recovered, relying upon the voters list of 2008 and rejecting his defence that he had sold the house to co-accused Gokul Dangi on 12.06.2009, who has been acquitted in trial.

+ The appellant was acknowledged not to be living in the house from where the contraband was recovered, but was alleged to be using it as a store room on basis of no evidence whatsoever - The presumption against the accused of culpability under Section 35, and under Section 54 of the Act to explain possession satisfactorily, are rebuttable - It does not dispense with the obligation of the prosecution to prove the charge beyond all reasonable doubt - The presumptive provision with reverse burden of proof, does not sanction conviction on basis of preponderance of probability - Section 35(2) provides that a fact can be said to have been proved if it is established beyond reasonable doubt and not on preponderance of probability - The stringent provisions of the NDPS Act, such as Section 37, the minimum sentence of 10 years, absence of any provision for remission do not dispense with the requirements of prosecution to establish a prima facie case beyond reasonable doubt after investigation, only where after which the burden of proof shall shift to the accused - It is apparent that the police being in a quandary with regard to the ownership and possession of the house in question due to a flawed, defective and incomplete investigation found it convenient to implicate the appellant also, sanguine that at least one of the two would be convicted - The appellant was held guilty and convicted in view of his name being recorded as the owner of the house in the voters list 2008, ignoring the fact that sale agreement was subsequent to the same on 12.06.2009 - The appellant had produced the sale agreement with promptness the very next day but it was never investigated for its genuineness by the police and neither were the panchayat records verified - The panchayat records are public documents and would have been the best evidence to establish the ownership and possession of the house - The appellant was held guilty and convicted in view of his name being recorded as the owner of the house in the voters list 2008, ignoring the fact that sale agreement was subsequent to the same on 12.06.2009 - No appeal has been preferred by the prosecution against the acquittal of the co accused - In view of the nature of evidence available it is not possible to hold that the prosecution had established conscious possession of the house with the appellant so as to attribute the presumption under the NDPS Act against him with regard to recovery of the contraband - The police investigation was very extremely casual, perfunctory and shoddy in nature - The appellant has been denied the right to a fair investigation - The consideration of evidence by the Trial Court, affirmed by the High Court, borders on perversity to arrive at conclusions for which there was no evidence - Gross misappreciation of evidence by two courts, let alone poor investigation by the police, has resulted in the appellant having to suffer incarceration for an offence he had never committed - conviction of the appellant is held to be unsustainable and is set aside - The appellant is acquitted – Appeal is allowed: Supreme Court [para 6, 9 to 15, 17, 18]

+ Normally this Court in exercise of its jurisdiction under Article 136 of the Constitution does not interfere with concurrent findings of facts delving into appreciation of evidence - But in a given case, concerning the liberty of the individual, if the Court is satisfied that the prosecution had failed to establish a prima facie case, the evidence led was wholly insufficient and there has been gross misappreciation of evidence by the courts below bordering on perversity, this Court shall not be inhibited in protecting the liberty of the individual: Supreme Court [para 16]

Cus - Appellants imported Squalene 80% - Central Institute of Fisheries Technology (CIFT) vide their Test Certificate dated 6/4/2018, opined that the Consignment has to be classified under HS code 1504 2090 as against declared classification of 2901 2990 - In de novo proceedings, the Commissioner confirmed the classification of imported goods under CTH 1504 2090, therefore, appeal before CESTAT.

Held: Appellants have taken the plea that they have been importing the impugned products over the years and the classification of the same was being accepted by the Customs authorities - Bench observes that there is no estoppel in revenue matters and Customs are not bound by any contradiction taken in the past owing to different set of circumstances and facts of the case - Neither can the precedence of the past justify the continuance of a statutorily criminalized deed - Bench, however, notes that based on the submissions of established practice, penalty cannot be imposed just because Customs authorities have taken steps to correct the classification - Appellants have requested that in case it is held that the goods are not permissible to be imported, the same may be allowed to be re-exported - Bench finds that such a request needs to be made before the proper authority who will take a decision in accordance with law and facts of the case - Going by the principles of 'ejusdem generis' or 'Noscitur a sociis', the impugned goods being of animal origin are rightly classifiable under Chapter 1504 - CIFT and Customs Laboratories have reported that the impugned product is fish oil, therefore, Bench finds that it cannot be classified under Chapter 2901 as saturated or unsaturated acyclic hydrocarbons along with ethylene, propene, butene, acetylene, heptene etc. - appeal is allowed to the extent of setting aside the penalty and the impugned order is upheld in all other respects: CESTAT [para 15.2, 16, 18, 19]