2020-TIOL-NEWS-213, Dated: Tuesday, September 08, 2020

ST - Short facts are that the petitioner who is stated to be an illiterate person is carrying the activities of "manpower supplies" to various companies including companies located in the Special Economic Zone area - The petitioner was issued a SCN dated 20th October, 2015 by the respondent no.1 demanding service tax to the tune of Rs. 31,84,804/- in respect of the taxable amount received by the petitioner in consideration of his services rendered to his clients during the period between 2010-2011 to 2014-2015 - It is the case of the petitioner that the impugned order dated 27th September, 2016 came to be passed by the respondent no.1 in absence of any reply or any evidence being produced by the petitioner - It is the case of the petitioner that due to prolonged illness since 2015 and due to hospitalization during the period between 2016 to 2017, the appeal could not be filed by the petitioner within the prescribed time limit as per the relevant statutory provisions - It is the case of the petitioner that the impugned order was passed on 27th September, 2016 and there was a delay of 405 days up to 30th April, 2018 in filing the appeal - It is the case of the petitioner that they received letters dated 15th February, 2018 and 15th March, 2018 from Range Superintendent confirming the payment of service tax demand and the petitioner thereafter, after getting appropriate advice from the legal consultant has approached this Court invoking writ jurisdiction under Articles 226 and 227 of the Constitution of India.

Held: With regard to the contention raised by the petitioner about his illness, it appears on perusal of the medical papers filed along with the additional affidavit that the petitioner was not that much sick during the year 2014-2017 and he could have taken appropriate action through some assistance as notices issued by respondent were duly served upon the petitioner - In such circumstances, only conclusion which can be arrived at is that the petitioner was negligent and was not vigilant to take appropriate action to challenge the impugned order - Reliance placed by the petitioner on the Full Bench decision in case of Panoli Intermediates (India) Pvt ltd (2015-TIOL-1556-HC-AHM-CX-LB) in support of his contention that the writ petition is maintainable, is also not tenable in law because the impugned order cannot be said to be passed in excess of jurisdiction or by crossing the limits of jurisdiction by the adjudicating authority - In view of the facts available on record, Bench is of the opinion that the writ petition is not maintainable in view of stipulations made by Full Bench and even on merits, the petitioner having not complied with the provisions of the Service Tax Act at any point of time, is not entitled to claim any relief - as the petitioner has failed to file return of income and failed to deposit the service tax collected by it, there was clear intention to evade the tax on behalf of the petitioner – Petition dismissed: High Court [para 11, 12, 14, 15]

ST - The applications have been preferred by the Commissioner with a request to take up the tax appeals for final hearing on a particular date - It is not in dispute that the original appellant has deposited 25% of amount of demand with interest with the department - It is also not in dispute that the larger issue involved in these appeals is being looked into by the Supreme Court and the Supreme Court is yet to decide the same - The decision of Supreme Court should be awaited for the better adjudication of the substantial questions of law involved in the present Tax Appeals - It would not be appropriate to fix the Tax Appeals for final hearing: HC

2020-TIOL-1348-CESTAT-ALL

Om Prakash Yadav Vs CC, Ce & ST

ST - The assessee is providing works contract services to M/s U.P. Power Transmission Corporation Ltd. - Demand of service tax was raised against them by way of SCN raising demand for the period 2009-10 to 2013-14 - However, during adjudication the major part of the demand was dropped by observing that services were in connection with construction of roads which were not taxable - The Commissioner vide his impugned order confirmed the demand to the extent of Rs.13,84,723/- in respect of the construction of various civil structure at the site of sub-station along with confirmation of demand and interest - Penalties under various sections were also imposed upon assessee - As regards limitation, the services were being provided to Uttar Pradesh State Corporation and there can be a bona fide belief on the part of assessee that inasmuch as the services are being provided to a Government organization they cannot be held to be taxable - There has been no evidences indicating any mala fide intention on the part of assessee to evade payment of service tax, the major part of the demand would be hit by bar of limitation - However, a small portion would still lie within the normal period - The works contracts are in respect of various jobs to be done by assessee at the sub-stations - The assessee is required to establish that such work was primarily and basically linked with transmission of electricity - Each and every contract has to be examined for the said purpose - Accordingly, matter is remanded to Original Adjudicating Authority to re-decide the said issue in the light of Tribunal's judgment in 2014-TIOL-2138-CESTAT-MUM - Said exercise would be done by Adjudicating Authority for the period falling within the limitation - Inasmuch the demand beyond the normal period of limitation, no justifiable reasons found to impose penalties upon the assessee, same are set aside: CESTAT

- Appeal disposed of: ALLAHABAD CESTAT

2020-TIOL-1347-CESTAT-BANG

Metlife India Insurance Company Ltd Vs CCE

ST - Appellant was availing CENVAT credit of service tax paid on commission paid to agents through whom the Policies were being booked - Service tax on said commission was being paid by appellant under the category of Insurance Auxiliary Services under Reverse Charge Mechanism considering them to be eligible 'input service' used for providing output service i.e. insurance services incl. ULIP - Revenue entertained a view that since output service tax in respect of ULIP were being paid only on the premium portion charged for risk coverage and not the investment portion, the appellant was not eligible to avail CENVAT credit of service tax paid on commission expense amount - SCN issued - in adjudication, Commissioner concluded that CENVAT credit on insurance auxiliary service received by the appellant cannot be availed as the same was exclusively used in exempted services - demand confirmed and penalty imposed, hence assessee is in appeal.

Held: Credit has been denied solely on the premise that the insurance service (for sale of ULIP policies) is exempted service, since no service tax is paid on the premium pertaining to the investment component - Commissioner committed a fundamental error in assuming that the sale of ULIP policy by the appellant results into provision of exempted service - Bench is of the considered view that the appellant is only engaged in rendering the insurance services and merely for the reason that portion of the premium amount charged in respect of ULIP policies is not liable to tax, it cannot be said that the said service is exempted output service when tax is duly paid on the portion of premium collected on risk coverage - Merely for the reason that the break-up of premium amount is shown in the policy, the fact remains that the policy is one and single with the feature of both risk coverage and investment opportunity simultaneously - It cannot be said that the 'insured' i.e. the subscriber to the policy has availed two separate policies - Neither there can be a question of extending the facility for subscribing to ULIP policy with only the investment portion, excluding the risk coverage and vice versa - Merely for the reason that a portion of the total premium amount is taxable, which may be referred to as assessable value for tax purpose, would not render the other portion of premium as 'exempt service', which at best, can be said to have been excluded from the assessable value - Bench is, therefore, of the considered view that no exempt service has been rendered by the appellant so as to deny credit of service tax paid on insurance agents' services - Delhi Bench of the Tribunal in the case of Max New York Life Insurance Co) - 2018-TIOL-1144-CESTAT-DEL has observed that when premium amount is collected for investment portion on which tax is not paid, there is no separate identifiable service attributable to the investment portion - no question of applying rule 6 of CCR, 2004 - impugned order is set aside and appeal is allowed with consequential relief: CESTAT [para 10, 11, 13, 14]

- Appeal allowed: BANGALORE CESTAT

CX - CAG audit team observed that in respect of goods cleared ex-works, the freight charges incurred by them at the behest of customers in transferring the goods from their factory to the railway stockyards (closest to the customer and from where the customer collected the goods), were collected separately in the sales invoices but not included in the value for payment of duty - CAG was of the opinion that such freight charges were required to be included for payment of duty – demand notice issued and confirmed along with imposition of penalty and interest – appeal to CESTAT.

Held: Upon perusal of the impugned order, Bench notices that the adjudicating authority (AA) has proceeded to decide the issue by considering the dispute as if it pertains to clearances made through stockyards - AA has concluded that freight charges are required to be included since goods are removed from the stockyards - AA has considered the stockyards as the place of removal - Bench finds that the case decided by the adjudicating authority is entirely different from the case made out in the show cause notice issued on the basis of the C&AG objection - Since the adjudicating authority has discussed and decided an issue which was not the subject matter of show cause notice, the impugned order cannot be sustained – same is set aside and the issue is remanded back to the adjudicating authority: CESTAT

CX - The assessee is a manufacturer of alloy and non alloy Steel Ingots - During manufacture of their finished goods, they had availed Modvat Credit of duty paid on raw materials during the year 1995-1996 on the basis of alleged fake duty paying document fraudulently prepared and supplied by a number of registered dealers without actually supplying the corresponding input materials mentioned in said duty paying documents and utilized the said credit availed on an irregular manner towards payment of Central Excise duty on removal of their final product and therefore evaded payment of Central Excise Duty equivalent to the amount of credit irregularly taken to the extent of Rs. 78,91,213/- - The Adjudicating Authority, in respect of specific direction from this Tribunal, failed to adhere to the remand direction regarding consideration of submission made by assessee and also the legal provisions - The Tribunal in case of M/s. Vindhya Steel , who happened to be one of the supplier of the input material, has set aside the order - An appeal against that order was also sustained by High Court of Kolkata - In the circumstances, no charge against the assessee would sustain - The assessee had been submitting the document such as RG23A part (1) and RG23 part (2) alongwith the invoices on which modvat credits had been taken alongwith monthly RT-12 reports - The duty paying documents has also been defaced by departmental officers while assessing RT-12 return of assessee - In such a circumstance, there is no scope of invocation of extended period of limitation, which has been done in this case - The SCN has been issued on 02.05.2000 for the period 01.04.1995 to 28.01.1996 - The demand is therefore time bared and not sustainable at all - The statement of Shri Hardhan Dutta, on which the investigation relied upon heavily, has been retracted at the time of cross examination before the Adjudicating Authority - On this ground also the proceeding gets vitiated and the demand is thus not sustainable and so is the impugned order - In this regard we find that the appellant had been obtaining raw materials/inputs from the registered dealer after due verification and on payment of appropriate central excise duty and has availed credit thereon under modvat scheme - It is up to the manufacturer to use the goods as input or raw material in the process of manufacture and the department cannot force them to use a particular kind of input / raw material for the manufacture of finished product considering their economic viability, technical feasibility and infrastructural requirement - The department has also accepted the payment of duty on the goods sold by these dealers and hence it cannot deny the availment of modvat credit by the buyer of these goods, if put to use in the manufacturing - In this regard, the decision of Allahabad High Court in case of Juhi Alloys Limited 2014-TIOL-2693-HC-ALL-CX is squarely applicable to the facts of the present case - This decision has been referred in case of CCR, 2004, however, the same would be equally applicable in case of modvat as well - The impugned order is set aside: CESTAT

Cus - Kandla Free Trade Zone - Petitioners had made an application in the year 2019 for further extension and renewal of the permission to manufacture and export the goods - The application of the petitioners was forwarded by the office of the Development Commissioner to the Board of Approval at New Delhi - The Board of Approval considered the application of the petitioners in its 89th Meeting held on 22nd April 2019 and rejected the application of the petitioners for extension / renewal of the letter of approval in terms of Rule 18(4)(d) of the Special Economic Zones Rules, 2006 (communicated to the petitioners by the office of the Development Commissioner by letter dated 27th May 2019) - aggrieved by the aforesaid rejection by Board of Approval, petitioner has preferred this petition.

Held: A bare reading of minutes recorded by the Board of Approval rejecting the application of the petitioners would go to mean that the letter of approval dated 2nd April 2014 is cancelled, having consequences as those provided under Section 16 of the SEZ Act, 2005 - Section 16 of the SEZ Act, 2005 also refers to affording reasonable opportunity of being heard prior to cancellation of the letter of approval granted in favour of an entrepreneur - On perusal of the facts of the case, it is not in dispute that no opportunity of being heard was afforded to the petitioners before taking decision in the 89th Meeting of the Board of Approval held on 22nd April 2019 - Bench is, therefore, of the view that the decision on the renewal / extension of the letter of approval, which has a consequential effect of cancelling letter of approval, is in breach of the Section 16 of the SEZ Act, 2005 - In such circumstances, the petition is required to be allowed only on this ground, without expressing any opinion on merits, by quashing and setting aside the decision taken by the Board of Approval in the 89th Meeting held on 22nd April 2019 qua the petitioners with a direction to reconsider the case of the petitioners after giving reasonable opportunity of hearing so as to adhere to the principles of natural justice - Board of Approval is expected to carry out such exercise within a period of three months - Petition succeeds and is accordingly allowed - Matter remanded: High Court [para 7 to 10]

Cus - Petitioner is an Export Promotion and Capital Goods licence holder, who had imported various capital goods on concessional rate of 5% of customs duty - The goods were utilised by the petitioner for the manufacture of various export items - After fulfillment of the export obligation, the petitioner applied for the redemption of EPCG licence and in view of the fulfillment obligation, the second respondent had granted the Export Obligation Discharge Certificate (EOD) on various dates between 02.03.2006 and 27.08.2008 for each of the eight applications - After lapse of many years from the EOD certificate, the present impugned notices have been sent, seeking to regularise the case and recover the customs duty along with interest - Petitioner, predominantly raised two grounds challenging the impugned notices - Firstly, the second respondent herein has no jurisdiction to review his own order, in the absence of any explicit provision under the statute - Even otherwise, Section 16 of the Foreign Trade (Development and Regulation) Act, 1992 empowers the Director General of Foreign Trade to review the orders made by the Joint Director General of Foreign Trade and as such, the impugned notices by the second respondent is without any authority of law.

Held: As rightly pointed out by the petitioner, Section 16 of the FTDR Act empowers the Director General to review any decision or order made by the Joint Director of Foreign Trade - The power of review of any decision or order is only under Section 16 - As and when the second respondent had issued the EPCG licence and the Export Obligation Discharge Certificate, he becomes "functus officio" and if at all, such an order of the second respondent is to be reviewed, the same can be done only by the Director General, as provided under Section 16 - Apparently, the impugned notice issued by the second respondent itself is without any jurisdiction and contrary to the statutory provisions - respondents have not come forward with any counter arguments and thus, the impugned notices itself is liable to be strucked down on this ground - impugned notices dated 26.02.2016 passed by the second respondent are hereby quashed: High Court [para 7, 8, 11, 14]

Limitation - Section 16 empowers the Director General to review the order, within a period of two years from the date of the decision or the order passed - Apparently, all the impugned notices in the aforesaid Writ Petitions are beyond the period of two years - As a matter of fact, the notices are after a long delay between 8 to 10 years and there is absolutely no explanation for this inordinate delay in the proposal to review the order - The only ground raised by the learned Additional Solicitor General, is that, the two years period prescribed under Section 16 would commence from the date of the demand notices - Bench is unable to contemplate as to how such date of reckoning could be construed from the proviso to Section 16, when it is unambiguously provided that two years period will commence from the date of decision or order which is sought to be reviewed - It is a settled proposition of law, that when a notice is issued without jurisdiction and against the authority of law, this Court may be justified in exercising its powers under Article 226 of the constitution of India and interfere with such a notice - Even otherwise, a mere option expressed to raise objections to the impugned notices will not disentitle or be a bar to the petitioner to avail the powers under Article 226 of the Constitution of India - Thus the petitioner would be entitled to succeed on the second ground of limitation also: High Court [para 12, 13]

Cus - Supreme Court has held that though there is no period of limitation prescribed for filing a Writ Petition under Article 226 of the Constitution of India, a Writ Petition ordinarily should be filed within a reasonable time - The fact that the petitioner has challenged the SCN dated 22.12.2011 only now, in 2020, only indicates that the petitioner fully intended to comply with and respond to notices and participate in adjudication proceedings only repeatedly requesting for relied upon and other materials - It is unnecessary to state that an assessee is entitled to all documents, both relied upon as well as unrelied including those that were seized in the course of search, in order to enable it to respond to the show cause notice - This is not an unreasonable request - Thus the elapse of time from 2013 till January, 2020 when the show cause notice was challenged does not, indicate delay and there is no laches on the part of the petitioner to have filed the present Writ Petition challenging the show cause notice - The proposition advanced by the Counsel for the Customs Department that the prescription for limitation is only directory and not mandatory is superfluous - The use of the phrase 'where it is possible to do so' by itself extends some elasticity or flexibility to the Department in the matter of completion of proceedings - Thus an argument on whether the time limit prescribed is mandatory or directory is misconceived, since such argument would be relevant only where the timeline was fixed to begin with - The petitioner has, no doubt, been making repeated requests for documents, approaching this Court, four times in all, seeking intervention in the matter - In the narration of facts and circumstances as above, Bench finds nothing amiss in the conduct of the petitioner - This is a matter where the Customs Department has clearly been remiss in not proceeding with the enquiry and completing the adjudication in time, missing the bus altogether - The impugned show cause notice dated 22.12.2011 is quashed and this Writ Petition allowed: High Court [para 30 to 35]

Cus - Petitioner impugns the arrest memo dated 17.08.2020 and seeks further direction that he be released forthwith - It is alleged in the said memo that the petitioner had imported goods including the current consignment of an aggregate value of Rs.7,40,39,051/- involving customs duty for Rs.1,33,27,031/ - It is further mentioned that the petitioner's statement u/s 108 of the Customs Act, 1962 was recorded and the test reports of the goods imported by the petitioner indicated that they were old and used goods; that the same constitutes an offence under Sections 135(i)(a), 135(1)(b), 135(1)(i)(A) and 135(1)(i)(C) of the Customs Act, 1962 - The allegation against the petitioner is that he had imported hard disks from overseas declaring them to be new but the test reports indicate that the said goods are used goods - Revenue counsel submits that a transit remand was taken and the petitioner was produced before the CMM, Mumbai and an order was passed remanding the petitioner to judicial custody; that in the given facts the courts at Mumbai would be the appropriate courts to consider any relief - Petitioner countered the aforesaid submissions and submitted that since the petitioner was arrested in Delhi, this Court would have the jurisdiction to entertain the present petition.

Held: Considering that the Customs authorities have commenced proceedings against the petitioner in Mumbai and an order remanding the petitioner to custody has been passed by the CMM, Mumbai, Court is of the view that even assuming that this court has jurisdiction to entertain the present petition, it would not be apposite to do so - The petition is, accordingly, disposed of leaving it open for the petitioner to avail of remedies before the courts concerned at Mumbai: High Court [para 7]

Cus - It is an undisputed fact that prior to the notification No.84/2017- Customs dated 08.11.2017, the import of yellow peas was not liable for payment of duty - According to the respondent/importer, the notification No.84/2017-Customs dated 08.11.2017, came to be published at 22.15 Hrs., whereas, the formalities regarding assessment of Bills of Entry have completed much earlier at 12.50 Hrs., on 08.11.2017 - Tribunal has taken into consideration the said important factual aspect and also found that there was no malafide intention on the part of the appellant in clearing the consignment without payment of duty - Tribunal further held that the requirement of making pre-deposit to the extent of 7.5% of Rs.30 Crore under Section 129E of the Customs Act, 1962 and would be a tall order upon the respondent/importer and in the light of the above facts and circumstances and taking note of the surrounding facts and circumstances, thought fit to reduce the Bank guarantee from 60% equal to 7.5% of the duty liability and also directed the Commissioner of Customs, to finalise the case as expeditiously as possible - Tribunal in the peculiar facts and circumstances of the case, especially, with regard to the time of the notification No.84/2017-Customs, dated 08.11.2017, as well as, in prior to the said notification, there was no requirement to pay the duty, had exercised the discretion - In the considered opinion of this Court, the discretion came to be exercised by the CESTAT in the facts and circumstances of the said case and that apart, the Commissioner of Customs has also disposed of the matter vide order No.12/2018 dated 15.10.2018 and nothing remains for further adjudication in this matter for the reason that the present appeal technically has become infructuous - Civil Miscellaneous Appeal is dismissed: High Court [para 14 to 17]

Cus - CBLR - Appeal filed against an order passed by Commissioner for continuation of suspension of Custom Broker license.

Held: It is seen that Regulations 16 mandates that the hearing will be granted within 15 days of the order of suspension and Regulation 17 prescribes that the notice will be issued within 90 days of the receipt - In the instant case, while the suspension order was issued on 26/04/2019, the personal hearing was granted on 16/05/2019 - The time limit prescribed in Regulation 16 was not followed - Similarly, while the offence report was received on 10.04.2019 but no SCN has been issued till 19.02.2020 and consequently, regulation 17(1) was also violated - In view of above, Bench is unable to uphold the continuation of suspension order - The said order is set aside and appeal is allowed: CESTAT [para 4]

Cus - These five appeals of appellants require the Tribunal to determine the legality of import of 'wheat gluten amygluten 160' claiming exemption under notfn 40/2006-Cus or of notfn 98/2009-Cus by production of 'duty-free import authorization (DFIA)' licenses, permitting import of 'flour' for manufacture of 'biscuits', that had been procured by appellant from original holders of licences and endorsed for transfer after fulfilling their export obligations - Duty liability was confirmed for recovery under section 28(4) of Customs Act, 1962, along with interest from the importer while imposing penalty under section 114A of Customs Act, 1962 on the importer and under both section 114A and section 114AA of Customs Act, 1962 on the director - According to the original authority, the critical mass was attained by distinguishment of ITC HS code, appropriate to the permissible item of import, from the goods actually imported but, nevertheless, proceeded to determine recovery on the basis of ineligibility of declared classification for benefit of notification that was claimed in the bill of entry - The denial of eligibility, it must be noted, rests on the conditions of notification as applied to the declared classification which was not only accepted at the time of import but also remains undisputed in the impugned order - With the removal of starch from dough made of 'flour', the resultant product is wheat gluten - Hard 'wheat flour' is hydrated to activate the gluten within it, processed for removal of inherent starch by washing which, after dehydrating, is then powdered - Thus, the composition of wheat, in a depleted form, in the flour does not appear to be an alteration of essence of product - With the threshold eligibility thus settled, the allegation pertaining to ineligibility arising from import by an entity other than 'actual user' and of ineligibility arising from utilization of a different ingredient in exports effected by original license holder remain to be evaluated - The DFIA procured by appellant had been made transferable in accordance with provisions of FTP and there is no whiff of allegation that the said endorsements had been procured unlawfully - The prescription of 'actual user' condition in Foreign Trade Policy and reflected in corresponding notification issued under section 25 of Customs Act, 1962, cannot be said to be extended to transferees of such licences unless particularly specified, either in policy prescriptions or in notification, for that would be tantamount to imposing a condition that was not intended by Central Government - Neither the adjudicating authority nor the revenue have been able to establish that 'post-export, endorsed for transfer' license continued to be entailed with such actual user condition - In any case, the ultimate usage of such goods by an actual user renders the logic of Revenue to be unacceptable - It has been contended by appellant that circular 46/2007-Cus of CBEC, the standing instructions issued thereto and policy circular 50/2008 of DGFT have all clarified that correlation for technical specification or quality characteristics of inputs between that utilized in manufacture of export product and the item of import is not mandated except for the few specified in paragraph 4.55.3 of Handbook of Procedures appended to the FTP - Tribunal is also constrained to note that the original holder of license had not indicated such details in relevant shipping bills - There is no evidence on record that the appellants were aware of composition of exported goods - Hence, the appellant cannot be expected to conform to such imports as they are not cognizant of - The Tribunal is unable to conclude if any of the inputs permitted for import to enable manufacture of biscuits are enumerated among the goods specified for conformity in the Handbook of Procedures - In the light of findings on inadequacy of credible evidence of ingredients used in exported goods, the essential nature of impugned goods, the apparent conformity with the conditions of Foreign Trade Policy and the precedent decision in dispute of appellant herein, the impugned order cannot be sustained: CESTAT

Cus - Assessee had imported 75 containers and availed the benefit of exemption Notfn 104/94 - The assessee, admittedly, failed to re-export the containers within the stipulated time period and also failed to exercise the liberty to file for extension of time, granted to him under the said notification - On perusal of Survey Report, it is found that the containers have been declared unfit for export and the depreciated value has been calculated - The first adjudicating authority had valued the containers at Rs.28,24,034/- (36 containers) and Rs.30,79,820/- (39 containers) and accordingly, duties of Rs.9,50,316/- and Rs.10,36,390/- respectively had been demanded - The demand of duty is upheld along with interest which the assessee has already paid and has been appropriated in the impugned order - Further, the order of confiscation of 36 containers and other 39 containers is upheld and the redemption fine is reduced to Rs.2,00,000/- and Rs.2,20,000/- - Same was already paid by assesee and has been appropriated in the impugned order - In the interest of justice, the penalty imposed under Section 112 of Customs Act be reduced to Rs.1,50,000/- and Rs.1,60,000/- respectively which was already paid and has been appropriated in the impugned order: CESTAT