2020-TIOL-NEWS-217, Dated: Saturday, September 12, 2020

ST - The assessee is engaged in providing various services including mining service and therefore, utilized Cenvat credit on input services used for providing such output services - SCNs were issued to assessee proposing recovery of inadmissible CENVAT Credit on Short term accommodation in hotels, Rent-acab and on Outdoor catering/Cleaning service along with interest - As regards to Short term accommodation in hotels, the assessee's personnel necessarily had to undergo the required training to obtain necessary permissions and approvals for service recipient to avail the services of assessee - Had such training not been completed before such personnel were deployed at the rig, the service recipient would have deducted a certain amount at the time of payment to assessee - In any case, assessee could not afford to deploy people without the required police clearance certificate and Safety training - Therefore, assessee had no choice but to accommodate its personnel for the time impending the said approvals and permissions - The said service extended to its personnel by assessee would not qualify as a service availed for personal consumption - Therefore, said service is in relation to and in pursuance of service being provided by assessee and therefore, Cenvat credit availed on the same is admissible - As regards to Rent-a-cab service, assessee submitted that they have registered themselves in mining services for charter hire of rig to ONGC - As an operational requirement, they are required to send surveyors, naval officers for surveys and naval security clearance on their rigs - In this regard, they are required to hire vehicles for transporting such officers - Further, assessee is also required to provide conveyance for inspection agencies for various inspections such as Fire safety, underwater inspection, tubular inspection and thickness gauging inspection - The Tribunal in Marvel Vinyls Ltd. 2016-TIOL-3071-CESTAT-DEL while considering the amended definition of input service has already decided the matter in favour of assessee and held that the definition does not provides for total exclusion but only restricts those cases where the vehicles do not qualify as capital goods - No reason found to take a contrary view and hence, applying the ratio of said decision, CENVAT Credit on rent a cab is allowed - With regard to outdoor catering/Cleaning service, as the personnel working at the rig have been deployed by assessee, it is their responsibility to ensure healthy working conditions for such personnel - Therefore, assessee had availed the said service to prevent food from getting spoilt - It is common sense that if the assessee's personnel fall ill on account of stale/spoilt food, the operation being carried out by assessee would be adversely impacted and consequently, the output service being provided by them - The Rajasthan High Court in Mangalam Cement Ltd. for a period post the amendment of definition of input service (w.e.f. 01.04.2011) and has held that 'Outdoor Catering' services are required to be carried out for the process of manufacture and delivery and hence eligible for credit - Therefore, the service availed by assessee is in relation to the output service being provided by assessee and is therefore, admissible for Cenvat credit : CESTAT

ST - Appellant is a proprietary concern of vehicle hiring business - issue herein is as to whether the appellant has provided Rent-a-cab service.

Held: It cannot be disputed that both in "renting" and "licensing", de facto possession of the thing is enjoyed - Difference is well carved out under the law wherein both, de jure possession and control is given, but in "renting", it is right-in-rem whereas in "licensing", it is right-in-persona - When rent-a-cab scheme operator gives the car on rent, de facto possession is, of course, there, but it is not acceptable to uphold that wherever de jure control and possession of the vehicle stands transferred in law from the owner to the person on renting/hiring the service that the service tax is leviable and this is, of course, not different than services rendered on a contractual basis, providing transport service for fixed amount of periodical return or fare - appellant is providing several numbers of vehicles to BSNL etc. on monthly basis against considerations which otherwise are on yearly basis - keeping in view the appellant is admittedly registered as rent-a-cab service provider, Bench answers the question so framed in affirmative i.e. in favour of revenue - no infirmity in the order, same is upheld and the appeal is dismissed: CESTAT [para 5, 6, 9, 10]

CX - The assessee is rendering taxable services under head Banking and Financial Services, Business Auxiliary Services and Stock Broking Services - They are also rendering services as an agent of the Mutual Fund, wherein they provide the services of collection of deposits/subscription on behalf of Mutual Fund for which they receive commission - These services are classifiable as "taxable output services" under "Reverse Charge Mechanism" - Pursuant to Audit, SCN was issued for 2011-12 to 2013-14 as it appeared to Revenue that services provided by assessee to the Mutual Fund is an exempt service under the provisions of Rule 2(p) of Cenvat Credit Rules, as substituted w.e.f. 1.7.2012 - Rule 2 (p) of Cenvat Credit Rules in sofar as it declares a taxable service, is not an output service, where service tax is payable under Reverse Charge Mechanism, by the recipient of service, is in direct conflict with the provisions of FA, 1994 - The established principle of law is that rules are framed to facilitate the implementation of the Act - The Rules cannot override the provisions of the Act - Accordingly, said sub-clause (2) of Rule 2(p) of Cenvat Credit Rules to be ultra vires of provisions of FA, 1994 - Accordingly, SCN is not maintainable - The impugned order is set aside: CESTAT

CX - The assessee is engaged in manufacture of sponge iron and generation of electricity and were availing the cenvat credit paid on input service, inputs and capital goods in terms of CCR, 2004 - While verifying the ER-1 Returns of assessee for the period April 2014 or January, 2016, the Department observed that the assessee have discharged their duty liability on their final product i.e. sponge iron and billet, but their returns had no mention of any amount of duty paid on iron ore fines manufactured and removed during the said period - The Department views that the assessee was liable to discharge liability on clearance of iron ore fines as well, issued SCN proposing the recovery of an amount as being equal to 6% of total price of exempted finished goods under Rule 11A of Central Excise Rules - These fines cannot be considered as the result of manufacturing activity of assessee, since no manufacturing activity is involved for emergence of same out of iron ore by the assessee - The Apex Court in case of Parle Products Ltd. 2002-TIOL-15-SC-CX and also in Ujagar Prints 2002-TIOL-02-SC-CX-CB has held that a process which simply changes the form or size of the same article or substance would not ordinarily amount to manufacture and no excise duty would be payable, unless in a particular case by Section Note of the Tariff or by wording of the relevant heading or sub-heading, the said process has been specified as amounting to manufacture - The fine iron ore (input) is inevitably generated in the process of segregation, is admittedly not usable in the klin for the purpose of manufacture of final product i.e. the sponge iron - However, it is still the part of input - The iron ore fines are therefore, held not to be the excisable commodity - Further, the Department has brought nothing on record to show that the iron ore fines can be considered as exempted goods - Admittedly, there is no Notification of the Revenue granting exemption to this product - Thus, embargo created in Rule 6 (3) (b) of CCR will not apply for removal of iron ore fines from the assessee's factory - Confirmation of demand by Commissioner (A) is therefore, held to be not proper and unjustified - The Tribunal while relying upon previous decision in case of Real Ispat & Power Ltd. and also of Rallys India Ltd. has held that the assessee is engaged in manufacture of sponge iron for which purpose they undertake the process of crushing and screening of iron ores - The iron ore fines emerging during the said process being cleared by the respondent, cannot be held to be the manufacturing activity, and as such, the iron ore fines as cleared, without payment of duty, would not call upon the assessee to pay the duty in terms of Rule 6 of CCR - The order under challenge is hereby set aside: CESTAT

CX - The appellants are engaged in manufacture of ball or roller bearing - These bearings are ultimately used by railways or in generation of wind energy or for other purposes - The entire goods are sold through SKF India Limited - As regards to the bearings used for wind energy, the appellants have availed the benefit of exemption provided under Notfn 6/2006-CE - After investigation, the department has alleged that the appellants and M/s. SKF India Ltd. are related persons - Hence, the price at which the goods are sold by the appellant to M/s. SKF India Ltd. is sought to be rejected - It is also alleged that the appellant is not entitled to the benefit of said Notfn - There are two issues which are needed to be decided - Firstly, if M/s SKF India Ltd. and M/s SKF Technologies India Pvt. Ltd. are related persons in terms of CEA, 1944 - Secondly, to see if the benefit of said notfn can be extended to the bearings manufactured by SKFTIL and supplied for use in the wind operated electricity generators - It has been asserted by Revenue that M/s SKFIL and M/s SKFTIL are related as both of them are controlled by their holding company, namely M/s AB SKF, Sweden and there is a loan agreement between M/s SKFIL and M/s SKFTIL under which M/s SKFIL has extended significant amount of loan to M/s SKFTIL - So far as loan granted by M/S SKFIL to M/s SKFTIL is concerned, interest at the rate of 9% has been fixed - It has also been specified that the rate of interest would be revised regularly at half yearly basis and shall not be less than the prevailing bank rate under section 49 of RBI Act, 1934 - It is apparent that this a purely business transaction and not a transaction creating interest in the business of each other - The mere fact that the entire production of M/S SKFTIL is sold through M/s SKFIL is not sufficient to make them related parties - There has to be positive evidence of them having interest in the business of each other - The mere fact that M/s SKFTL are reporting transactions with M/s SKFIL as "related party transaction" in their balance sheet is irrelevant - The criteria for treating two parties as related is very well defined in Central Excise Act and treatment given by appellant in their balance sheet has no relevance in the facts of this case - No such evidence has been produced by Revenue and in these circumstances they cannot be treated as related parties - Since the two cannot be treated as related parties, the transaction value between SKFIL and SKFTIL has to be accepted for the purpose of assessment - The next issue related to admissibility of notfn 06/2006 to the bearings manufactured by M/s SKFTL and ultimately sold for use in wind operated electricity generators as parts - It has been argued that only parts of 'generators' are exempted and not parts of wind mill - The crux of the argument being that only the generator used in the wind mill is windmill generators and balance, that is, blades and the towers are not parts of the generators - It is clear that the CBIC circular 1008/15/2015- CX treats the entire 'wind mill' as the 'wind operated electricity generators' - The generator fixed in the 'wind operated electricity generator is merely a sub system - Appellants have contended that the bearings are used at various places in the wind mill like rotor shaft, gearbox, generator and yaw gearbox - The term wind operated electricity generator appeared in notfn 06/2006-CE includes the entire setup i.e. the tower, the generator, the blades which are used to generate electricity from wind - The term 'wind operated electricity generator' in the notification does not refer to solely to the generator which is just one of the parts of wind operated electricity generator - No merit found in the argument of Revenue and the demand on that is set aside: CESTAT

2020-TIOL-1530-HC-DEL-COFEPOSA

Mohd Nashruddin Khan Vs UoI

COFEPOSA - Reliefs sought by each of the petitioners is to seek quashing of the respective Detention Orders issued by respondent No.2 against each of them dated 21.01.2020 under Section 3(1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA Act), and all consequential proceedings arising therefrom - petitioners have challenged the aforesaid Detention Orders at the pre-execution stage.

Held: Bench is of the view that there is no merit in the petitioners' submissions that neither of the three petitioners was not absconding - The respondents are not obliged to serve the Detention Order, the Grounds of Detention, or the Relied Upon Documents on a third party - If this submission of the petitioner MNK were to be accepted, it would render the law of preventive detention completely ineffective and not workable - The petitioner MNK, however, failed to provide his actual address where he could be served the Detention Order - If the petitioner MNK was not to be found at his ancestral address, there was no point of furnishing the same - Bench also finds it very hard to believe that neither the petitioner APS's wife, nor his father was aware of his whereabouts; Clearly, APS was in hiding and his wife and his father also feigned ignorance, which would be the case only if the petitioner APS were to instruct them not to disclose his whereabouts - Bench is, therefore, of the view that the petitioner APS is equally guilty of abscondence - Bench also finds it rather unusual that a wife would not know where her husband has gone and would not even know when he would arrive - In today's day and age - when mobile communication is common place, Bench finds the statement made by the petitioner Gopal Gupta's wife Smt. Smita to be unacceptable and clearly the idea was to suppress the information with regard to the whereabouts of Gopal Gupta - Abscondence is not only a matter of physical disappearance, but also carries with it the intent to hide, disappear, or evade the concerned person, or authority - It is the act of deliberate abscondence which disentitles the proposed detenue to seek quashing of the Detention Order at the pre-execution stage, because a petitioner - when he approaches the High Court under Article 226 of the Constitution of India to seek the quashing of the Detention Order at the pre-execution stage, invokes the extraordinary discretionary jurisdiction of the Court - The High Court would not exercise such discretionary jurisdiction in favour of a person who is evading the law - The formation of the belief that the three petitioners, in respect of whom Detention Orders had been made have absconded, or that they were concealing themselves so that the order could not be executed is supported by cogent material, therefore, Bench finds that there is no illegality about the notification issued under Section 7(1)(b) of the COFEPOSA Act qua each of these petitioners - For the aforesaid reasons, firstly, the petitioners are not entitled to maintain these petitions in view of their conduct of abscondence and in view of the decision of the Supreme Court in Subhash Popatlal Dave2 (2013-TIOL-33-SC-COFEPOSA-LB), and even otherwise, Bench does not find any merit in any of the grounds taken by the petitioners to assail the Detention Orders issued in respect of each of them under Section 3 of the COFEPOSA Act at the pre-execution/ detention stage - Petitions dismissed: High Court [para 82 to 87, 89, 90]

- Petitions dismissed: DELHI HIGH COURT

2020-TIOL-1529-HC-MAD-CUS

Geethanjali Exports Vs ACC

Cus - Based on the information from the Reserve Bank of India, the first respondent had caused a notice dated 01.10.2002 to the petitioner, calling upon to show cause, as to why the drawback paid should not be recovered on account of non-realisation of sale proceeds, within the period allowed under FERA - proposed recovery was confirmed by the first respondent on 17.04.2003 - further appeal/revision was also rejected, hence present petition.

Held: Issue as to whether the extension is granted by the Reserve Bank of India or whether the petitioner is entitled for the relief otherwise, being factual issues, could be determined by the Revisional Authority himself, in line with the decision relied upon by the learned Standing Counsel for the respondents in ZAZ and ZAZ Pvt. Ltd. - 2014-TIOL-829-HC-ALL-CUS , wherein the Division Bench of the Allahabad High Court was also of the view that factual aspects requires to be verified by the Authorities and accordingly remanded back the matter - Further, if the petitioner's entitlement for the relief is made subject to the prevailing rules and circulars in general and Rule 16A of the Drawback Rules, as well as the Circulars dated 09.09.2000 and 28.01.2002 of the Reserve Bank of India, in particular, are left open, no prejudice could be caused to the Revenue - Since this Court intends to remand the matter back to the third respondent, the merits of the claim made by both the parties are not answered - matter is remanded back to the third respondent for expeditious disposal: High Court [para 5, 6]

- Petition disposed of: MADRAS HIGH COURT

2020-TIOL-1528-HC-MUM-CUS

Sai Enterprise Vs UoI

Cus - Petitioner seeks a direction to the respondents to unfreeze its bank account [Current Account] with State Bank of India, Chowk Bazar Branch, Surat - Petitioner states that they are engaged in cheque discounting business only and are not engaged in any export or export related business directly or indirectly and for no apparent reason the bank account was frozen - Respondent Nos.2 and 3 have stated that investigations revealed that an amount of Rs.19,96,600/- representing illegally availed Integrated Goods and Services Tax (IGST) refund of an exporter was deposited in the bank account of the petitioner and, therefore, the bank authority was requested to freeze the bank account of the petitioner in exercise of powers under section 110(5) of the Customs Act, 1962 in order to safeguard government revenue.

Held: It is evident that stand taken by the respondents was that the bank account was frozen in exercise of powers under section 110(5) of the Customs Act, 1962 - Bench finds that this provision was inserted in the Customs Act by the Finance (No.2) Act, 2019 with effect from 01.08.2019 - Evidently, the action of freezing the bank account i.e., on 07.12.2018 was undertaken prior to insertion of the aforesaid provision w.e.f. 01.08.2019 - Prima-facie this provision may not be applicable to the case of the petitioner - Additionally, as per the condition mentioned in sub-section (5) of section 110, the initial period of freezing the bank account i.e., not exceeding six months has expired long back - That apart, even if as per the proviso such period was extended by the Principal Commissioner of Customs or Commissioner of Customs for a further period not exceeding six months, that extended period has also elapsed - In such circumstances, continuing with the freezing of the bank account of the petitioner would be oppressive and without any sanction of law - Consequently, Bench directs the respondents, more particularly respondent Nos.2 and 3, to forthwith unfreeze the seized bank account of the petitioner - Writ petition allowed: High Court [para 7 to 9]

- Petition allowed: BOMBAY HIGH COURT

2020-TIOL-1372-CESTAT-KOL

Mahavir Tools Corporation Vs CC

Cus - This appeal has been filed against the impugned order who conveyed the order of Commissioner (Port), in respect of seizure of impugned goods as per Annexure 'A' of seizure memo - The issue pertained to import of various items by assessee during the aforesaid period - It is the contention of assessee, which has not been refuted by revenue regarding that the price declared by the assessee for similar imports, the Custom House is assessing the goods on declared price even now belonging to the other importers - It is also submitted that the consignment has been finally assessed by assessing officer in terms of provision of section 17 of Customs Act, 1962 and the consignments have been released - The department has not given any data on the alleged enhancement of declared price to the assessee - The basis for arriving the bank guarantee or for the provisional release of seized goods have not at all been discussed in the order - In the circumstances, no merit found in the impugned order for release of seized goods - In absence of contemporary import price of any higher value, the department cannot insist on assessee to give bank guarantee - But to be fair with the assessee as well as with the Revenue, assessee is directed to furnish bond for the provisional release of seized goods as per the value indicated by Commissioner backed by the bank guarantee of Rs.15,00,000/-: CESTAT

- Appeal allowed: KOLKATA CESTAT