2020-TIOL-NEWS-212, Dated: Monday, September 07, 2020

ST - The issue is as to whether the activities of 'project and marketing service' undertaken by assessee in India on behalf of its overseas clients, who do not have their offices in India are covered under 'Business Auxiliary Service' and if so, whether the activities undertaken in India for their foreign clients can be terms as export of services under Export of Service Rules, 2005 - In view of various submissions made by assessee and in terms of 2005 Rules and also the various ruling by High Court and this Tribunal, the issue is no more res integra and settled in favour of the assessee - It has been held in these decisions that the services provided by assessee to their foreign principals, who have paid for such services in convertable foreign exchange and has satisfied both the conditions as contained under Rule 3 of Export of Services Rules, 2005 will be entitle for the benefit of export of services - Tribunal also drew its support in holding so from the decision of High Court of Rajasthan in assessee's own case, wherein it is held that promoting of the sales to the product of principal by the agent in India would not be liable to pay the service tax as the same would amount to export of services - Accordingly, the impugned order is set aside: CESTAT

ST - Valuation - It is clear that expenses which have been reimbursed by the principals to the appellant working as a pure agent, cannot be included in the assessable value for charging the service tax - However, such an exercise has not been done to determine how much amount was actually received as reimbursement of the expenses - It is settled by the Supreme Court in the case of M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. - 2018-TIOL-76-SC-ST that expenses which have been received as reimbursement of expenses made on behalf of service recipient by the appellant cannot form part of the assessable value - Adjudicating Authority has to verify the claims made by the appellant from the financial and other records and decide the issue as per the principles laid down by the apex court judgment (supra) - second issue pertains to the service tax demand on an amount of Rs.4,39,65,823/- received by the appellant for using its own truck for providing transportation service to the principal companies for which it was working as Clearing and Forwarding agent - records indicate that the service recipients such as M/s. Hindustan Unilever Ltd. have confirmed payment of service tax on the transportation of goods service provided by the appellant - However, this needs to be verified after detailed examination of the books of accounts and service tax return filed by the service recipient, therefore, the matter is remanded to the adjudicating authority for fresh adjudication: CESTAT [para 10 to 12]

ST - The assessee is a unit of M/s. Rajasthan Small Industries Corporation Ltd., which is a Government of Rajasthan Enterprise and which acts as nodal agency for promotion of global art and artisans of Rajasthan - During audit, it was found that the service tax on license fee income received from the parties and on commission income from Kashmir Government Emporium has not been paid for the said period - Accordingly, a SCN was issued proposing demand alongwith interest at appropriate rate and the proportionate penalties - It is observed as an admitted fact that an amount of Rs.9,07,073/- was deposited by assessee alongwith interest vide GAR 7 challan - The SCN was issued on 23rd October, 2013 and the payment thereof was made voluntarily by assessee even before the issuance of SCN - There appears no reason for imposition of penalty, hence, the penalty as has been confirmed under Section 78 is set aside - The amount of service tax since stands already deposited and the license fee as well as commission income as received by assessee being an amount received on account of discharging BAS, the same is held to be the liability of assessee, which stands already discharged - There is no infirmity in appropriating the said amount to the Government account: CESTAT

CX - The assessee is a manufacturer of Iron & Steel Ingot - The investigation against assessee was initiated on the basis of certain intelligence that a few manufacturers of Iron and steel were involved in clandestine removal of excisable products - Simultaneous search was conducted at the assessees's manufacturing premises besides others and certain documents were seized - It was alleged that though the documents available in computer tallied with the figures reflected in statutory records, hand written documents/papers seized during the search contained figures of unreported production and removal without payment of excise duty - The case of Revenue is that the private records contain details of consignee/consignor's name, vehicle number, weight of the goods and also quantity of goods manufactured in the factory - The entries in the loose sheet might have created doubt in the minds of Revenue, but it could not have been taken as a piece of evidence by itself - It would, at best, only create suspicion to further investigate the matter - Other evidence regarding procurement of raw material, manufacture of goods by engaging labour, usage of electricity, dispatch and transport of final goods, destination of final goods and receipt of sale proceeds could have probably substantiated the allegation even if not proved with arithmetical accuracy - No such evidence has been produced by revenue - The allegation/observation of suppression of production and clandestine removal is a serious allegation and it has to be established by investigation by affirmative and cogent evidence, which is absent in O-I-O except relying upon such documents and entries there in, which has been disputed by assessee - The Tribunal in case of Sober plastic Pvt. Ltd. has held that demand based on weighment slips and slips recovered from Dharamkanta relied upon for raising demand not verified with reference to transactions is not sustainable - This settled law is applicable to the case of assessee since demand has been confirmed without verifying with reference to transactions - Since the department has not adduced evidence to establish suppression of production, evidence of excess receipt of raw materials and clandestine removal of goods with reference to any enquiry made with the buyers, supplier of the raw materials, confessional statement of transporters about transport of goods, the demand is not sustainable - The impugned Order cannot be sustained and accordingly set aside: CESTAT

CX - The assessee is engaged in manufacture of Sponge Iron and Angle/ beams and have been availing cenvat credit of excise duty paid on inputs, input service, capital goods and service tax paid on input services as per the provision of CCR, 2004 - They have been purchasing coal from M/s. SECL which is a subsidiary company of Coal India Limited - The Department entertained a view that for payment of Central Excise duty, M/s. SECL should have included the cost element of royalty, stowing of Excise duty, clean energy cess and transit fee into the assessable value for payment of Central Excise duty - It is a matter of record that this issue of inclusion of certain cost elements into the assessable value of coal for payment of Central Excise duty is under litigation before the Apex Court - However, pending litigation, M/s. SECL paid the differential duty under protest on the cost of royalty, stowing of Excise duty, clean energy cess and transit fee and issued supplementary invoices to their buyers of coal which also included the assessee - The assessee on payment of value of supplementary invoices also availed the cenvat credit of extra Central Excise duty paid on such supplementary invoices - The Department views that since the element of suppression of facts, collusion or wilful mis-statement with an intent to evade payment of duty are involved, therefore, assessee is not entitled to take cenvat credit under Rule 9 of CER, 2004 and accordingly, a SCN came to be issued demanding reversal of cenvat credit for the period April-May, 2013 by invoking extended time proviso under section 11A(4) of Rule 14 of CCR, 2004 - The matter is no longer res integra as the issue has already been decided by Tribunal in case of M/s. Jaypee Bela Plant wherein it is held that the issue of wrong availment on part of M/s SECL is still a debatable issue - In such circumstances, the ascertainment on part of assessee as is required under Rule 9 (1) (b) of Cenvat Credit Rules cannot be held to have been an act of suppression - Since the facts of the present case are similar to the one decided in referred Final Order of this Tribunal, impugned order in appeal is without any merits, hence the same is set aside: CESTAT

CX - Issue relates to disallowance of cenvat credit on certain items of Iron Steel, G.I. Flat, MS Beam, MS channel, Flats, Joist, old and used plates, New MS Plates, PPGI profiles sheets etc. which have been admittedly used in erection of EOT crane (during the gestation period) for the new factory and on steel structures, nut and bolt, electrical items, 122 KV Gantry column, 132 KV Isolator, earthing wire, etc. utilised in fabrication of the power house station which controls the supply of power to various machineries in the factory of production - appeal to CESTAT.

Held: It is an admitted fact that the items have been utilised in the factory of production for erection of new machinery, of EOT crane, utilised in fabrication of the power house station, which are capital goods and are essential for setting up of the factory which manufactures dutiable goods - Although, the appellant has taken credit on these items as capital goods, but actually these are inputs which have been utilised in fabrication of capital goods, including the support structures for erection of machinery - issue has been settled in favour of the appellant-assessee by the decision of Madras High Court in the case of India Cements Ltd. - 2015-TIOL-650-HC-MAD-CX - impugned order is set aside and appeal is allowed: CESTAT [para 4, 5]

CX - CENVAT - Appellant informs that they have debited the cenvat credit under dispute under protest, at the time of investigation and the said fact is also witnessed in the order-in-original, that the credit was reversed amounting to Rs. 71,94,972/- - Therefore, the respondent -Department is directed to refund the amount of cenvat credit under dispute in cash, in terms of Section 142(5) of CGST Act, 2017: CESTAT [para 6]

Cus - Question that arises for consideration is whether the petitioners would be liable to pay increased rate of duty as per the Notification issued under Section 25(1) of the Customs Act on the same day on which the bills of entry were field by the petitioner, but the notification was made available in official gazette in electronic form subsequently, in view of the provisions of Section 25(4) of the Customs Act as amended by the Finance Act, 2016, and Secondly, Whether the provisions of Section 25(4) of the Customs Act, 1962 as amended by the Finance Act, 2016 is arbitrary, illegal, ultra vires and unconstitutional or not.

Held: Above questions came for the consideration before the Andhra Pradesh High Court in Writ Petition nos.4533 and 4534 of 2019 in case of M/s. Ruchi Soya Industries Ltd., the petitioner of SCA no.11063 of 2018 and the Andhra Pradesh High Court after considering the submissions canvassed by both the sides has struck down Section 25(4) of the Customs Act declaring the same as arbitrary and contrary to Section 25(1)(2A) of the Customs Act, 1962 - In view of above judgment and order of the Andhra Pradesh High Court dealing with the same issue, Bench is of the opinion that the same should also apply to the cause of action within the territorial jurisdiction of this Court also so as to maintain consistency for application of the provision of the Customs Act, 1962, which is a Central Act - As held by the Supreme Court in case of Kusum Ingots - 2004-TIOL-117-SC-CX-LB, the parliamentary legislation without receiving the consent of the President of India and published in a official gazette unless specifically excluded will apply to entire territory of India - If passing of the legislation gives rise to cause of action, the writ petition questioning the constitutionality thereof can be filed in any High Court of the country having requisite territorial jurisdiction and an order passed on writ petition questioning the constitutionality of Parliamentary Act, where interim or final keeping in view the provisions contained in clause (2) of Article 226 of the Constitution of India will effect throughout the territory of India, subject to applicability of the Act - Bench concurs with the judgment and order passed by the Andhra Pradesh High Court and the judgment of Calcutta High Court in case of Ruchi Soya Industries Ltd. is not applicable in the facts of the case, as the same pertains to the provisions of Section 25(4) prior to its amendment by Finance Act, 2016 and the said decision was rendered on the facts of the case relying upon the affidavit of the respondent with regard to the publication of the Notification of 17th September 2015 - As the contentions raised by the respondents are duly considered in the judgment and order passed by the Andhra Pradesh High Court, Bench does not reiterate the reasons to deal with the same - Provisions of Section 25(4) of the Customs Act, 1962 is declared as arbitrary and contrary to Section 25(1) & (2A) of the Customs Act, 1962 - The respondents are directed to refund the excess amount of custom duty and differential amount of IGST collected from the petitioners for clearance of imported goods for home consumption as per the Notification published subsequently to the date of filing of bills of entry with simple interest @ 6% p.a. from the date of deposit till the date of payment - Writ petitions are allowed: High Court [para 18 to 23]

Cus - Notification 102/2007-Cus - Refund claim came to be rejected through the impugned Order-in-Original dated 20.05.2014 on the ground that the model numbers in the import document are missing in the Sales Invoice and, therefore, held that the goods sold in India are not those goods, which were imported and hence, is in violation of the condition in Notification No.102/2007 - Petition filed against this order.

Held: Respondent had rejected the refund claim on the ground that the model numbers seen in the import document are missing in the Sales Invoice effected legally in India and, therefore, had jumped into the conclusion that the products imported and sold in India are not one and the same - When such an infirmity is noticed by the respondent, there was a duty cast on them to place reliance on the Statutory Auditor's certificate and the correlation statement, as required under Notification No. 102/2007 dated 14.09.2007 - Though the condition prescribed under the notification does not prescribe a different procedure and even assuming that the respondent was not satisfied with the certificate issued by the Statutory Auditor, such a decision should be based on certain incriminating and reliable documents before him and further, the reasons for disbelieving the certificate requires to be spelt out - Such a proposition has been laid down by a Division Bench of this Court in PP Products Ltd. - 2019-TIOL-1081-HC-MAD-CUS - impugned order of rejection of the refund application is totally opposed to the procedural regulation and hence the authority, exercising his powers, has exceeded his jurisdiction and, therefore, the impugned order itself is liable to be quashed - Order-in-Original dated 20.05.2014 is set aside and the respondent shall refund the claim made by the petitioner, which is the subject matter of the Order-in-Original, together with interest at the rate of 6% p.a. from the date of the refund application - The respondent shall endeavour to disburse the refund amount, atleast within a period of 4 weeks: High Court [para 11 to 13]

Cus - Maintainability of petition against order rejecting refund claim filed in terms of notification 102/2007-Cus - Reliance was placed by the respondent on the decision of this Court in M/s. King Overseas vs. Assistant Commissioner of Customs, Chennai [quoted in the counter affidavit dated 13.01.2016] and wherein the Single Judge viewed that the Writ Petition cannot be maintained when the alternate remedy has not been exhausted - It is noticed that the decision of the Single Judge in W.P.No.22321 of 2014 in the case of M/s. King Overseas was taken on appeal in W.A.No.1331 of 2015 and by an order dated 13.10.2015 - 2015-TIOL-2446-HC-MAD-CUS , the order of the Single Judge in W.P.No.22321 of 201 4 was set aside - It is rather unfortunate that the counter affidavit dated 13.01.2016, filed by the Deputy/Assistant Commissioner of Customs (Legal), has been carelessly sworn in, even without verifying the status of the further appeal made against this order, particularly, when the department was also a party in the Writ Appeal - Though it is a matter of serious concern that such counter affidavits are being placed before the High Courts, without due verification of the facts, this Court would only remark to indicate that such careless approach in drafting should be avoided in future - Having said so, this Court is of the view that though there is an alternate remedy of appeal as against the impugned order in the present case, the same shall not be a bar to maintain this Writ Petition under Article 226 of the Constitution of India, since there is a violation of the procedure prescribed under the statute and thereby, the order itself is wholly without jurisdiction - Apart from this aspect, admittedly, the impugned order has been made without issuance of a show cause notice, calling for the petitioner's objections and as such, is in violation of the Principles of Natural Justice - On this ground also, the petitioner may be entitled to invoke the writ jurisdiction without availing the alternate remedy, as held in a catena of decisions of the Apex Court and various High Courts: High Court [para 15 to 18]

2020-TIOL-1340-CESTAT-AHM

Shiroki Auto Components India Pvt Ltd Vs CCE & ST

Cus - The assessee have imported child parts from Japan which are then assembled to manufacture Round Recliner Assembly in India and then said Round Recliner Assembly is dispatched to factory at Haryana where the recliner welding assembly is completed and thereafter it is sent to Maruti factory where it is welded and fixed on the seat of motor vehicles - The limited issue to be decided is whether the child parts imported by assessee from Japan is classifiable under CTH 94019000 as parts of vehicle seats as declared by assessee or under CTH 87089900 as parts and accessories of motor vehicles - As per the affidavit given by assessee and also on perusal of invoices, it is seen that Round Recliner supplied by assessee to their sister unit/ STIPL Haryana and also the manufacturer of Recliner Assembly by STIPL Haryana and supplied to M/s. Krishna Maruti Limited, were classified under 9401 - On this fact, it is clear that the assessee have manufactured Round Recliner which is part of Recliner Assembly and Recliner Assembly is part of complete seat and classification of goods at both the stages is for parts of seats - This classification under CETH 9401 has not been disputed by department therefore, the classification of goods manufactured by assessee as well as subsequent manufacturers of Recliner Assembly and even manufacturer of seat i.e. Krishna Maruti Limited under heading 9401, has been accepted by department - It is also clear that Round Recliner manufactured by assessee is not used as parts or accessories of motor vehicle - It is undisputedly used as part of sub assembly of seats - Therefore, as per the assessee's stand that they are supplying the final product Round Recliner is parts of seat under CETH 9401, it cannot be imagined that the child parts which is used for manufacture of Round Recliner is classifiable under CETH 8708 as parts and accessories of motor vehicles - From the rival tariff entries, it is seen that in CTH 8708, there is general entry of parts and accessories of motor vehicles but there is no specific entry for seat or its parts - Whereas in tariff item 9401, there is entry specifically for seat, wherein under tariff sub-heading 9401 20 00 entry describes "Seats of a kind used for motor vehicles" and in tariff item 9401 9000 is for Parts of various seats and the said seats includes 'seats of kind used in motor vehicles' - Therefore, it is clear that the seat for motor vehicles is specifically included under heading 9401 - Captioned goods i.e. Child Parts imported by assessee is correctly classifiable under CETH 9401 90 00 of Customs Tariff Act - Accordingly, the impugned order is set-aside: CESTAT

- Appeal allowed: AHMEDABAD CESTAT