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2021-TIOL-104-SC-ST
CCE & ST Vs Rackitt Benckiser India Ltd
ST - Appellant is engaged in the manufacture and sale of various formulations (fast moving consumer goods) - Appellant discharged Service Tax liability on the royalty paid by the Appellant to the licensors under the category of IPR Service under reverse charge mechanism - The Appellant also paid R & D cess @5% and availed the benefit of Notification 17/2004-ST dated 10 September, 2004 – Revenue view is that the services are correctly classifiable under the category of "franchise service" and consequently the benefit of the aforesaid exemption notification is unavailable – SCN issued demanding the service tax differential for the period 2005-2006 to 2009-2010 - Commissioner confirmed the demand of Service Tax with interest and penalty, but dropped the demand for the period prior to 18 April, 2006 – The Tribunal held that There is nothing in the agreement which may indicate that the "franchisee" has lost its individual identity and is representing the identity of the franchisor to the outside world - The arrangement is clearly a typical case of a licensing transaction and is in no way similar to a 'franchisee' agreement as understood in the commercial world - In a 'franchisee' agreement, the franchisor owns IPR and allows the franchisee to set up and run the business in the name of the franchisor - The customers coming to the outlets of the franchisor believe that they are directly dealing with the franchisor - The terms of the agreements, therefore, leave no manner of doubt that the agreement is not a 'franchisee' agreement - The agreement executed between the parties in the instant Appeal clearly shows that the licensor does not have any significant control over the manner in which the Appellant conducts its operation - The Appellant is free to procure the raw materials as per its will and it has a right to fix the selling price of the final product - It is also free to run its business, marketing, distribution, sourcing and other activities as per its own choice without any inference by the licensors - It also makes its own marketing strategy - The only right which the licensor has is to supervise whether the products manufactured by the Appellant are in conformity with the quality, since the brand name of the licensor is being used by the Appellant - This singular right under the agreement will not constitute any control, much less significant control over the operations of the Appellant – Consequently, the arrangement between the Appellant and the licensors will not constitute a franchisee agreement, since the licensor does not have any significant control over the operations of the Appellant - It is, therefore, clear that the services have been correctly classified by the Appellant as IPR - Order dated 16 October, 2012 passed by the Commissioner confirming the demand of service tax and imposing penalty was set aside.
Held - Matter be listed for hearing on Feb 15, 2021: SC LB
- Case deferred :SUPREME COURT OF INDIA
2021-TIOL-103-SC-ST
CCE & ST Vs Nabha Power Ltd
ST - The assessee, a wholly owned subsidiary of Larsen and Toubro Limited has set up a Thermal Power Plant in Rajpura and the power generated in plant is to be sold to the Punjab State Power Corporation Limited - To generate power, the main input required by assessee is coal and the same being transported through network of railways - So the assessee entered into an agreement for procurement of coal from South East Central Coalfields Limited, Chhattisgarh - An enquiry was conducted by Revenue with regard to various payments made to Indian Railways in relation to mandatory supervision of Railways - On the basis of details provided by assessee, the Revenue was of the view that assessee was required to pay service tax on services received from Railways for construction of siding from Sarai Banjara railway station to Thermal Power Plant - The assessee themselves have constructed siding under supervision of Railways - Therefore, they are required to make payment of mandatory departmental chares, cost of OHE work and D&G charges - It is not disputed that all these charges have been paid by assessee for various approvals and supervisions by Railways for construction of siding by assessee - The said execution of such work cannot be done without mandatory approvals and supervisions by railways - In that circumstances, in terms of CBEC Education guide 2012, TRU Circular dated 20.06.2012, the services in question cannot be termed as Support Services under Section 65B of FA, 1994 - Admittedly, the supervision services and various approvals given by Railways cannot be done by assessee - Moreover, on a specific query made to the revenue that, whether the various approvals taken by the railways and supervision done by the railways can be done by assessee or any other agency, the revenue answered in negative - It is to be seen that whether said activities are under Support service or not - Admittedly, as per Section 65B (49) of FA, 1994, the approvals and supervision done by Railways cannot be done by any other party or the assessee - As per Notfn 25/2012-ST, the services by way of construction, erection, commissioning or installation of original works pertaining to railways are exempt from payment of service tax - The term railway includes siding and yard - Therefore, the granting of approvals and supervision are in relation to Railways which is exempted from payment of service tax under said Notfn - Thus, assessee was held not liable to pay service tax.
Held - Delay of 808 days in filing appeal by the Revenue - No reasonable explanation is provided for the same - Hence, decline to condone delay - SLP dismissed on limitation: SC
- Revenue's SLP dismissed :SUPREME COURT OF INDIA
2021-TIOL-102-SC-CX
CCE Vs Glovis India Pvt Ltd
CX - Assessee engaged in export of parts / components of motor vehicles and for the purpose of export of goods they procured inputs as well as input services and availed facility of CENVAT credit on such inputs and input services - Assessee also claimed rebate under Rule 18 of CER, 2002 in respect of duties paid on goods exported by them - A SCN was issued alleging that activity undertaken by assessee do not amount to manufacture in terms of Section 2(f)(iii) of CEA, 1944 and proposed to recover CENVAT credit availed along with interest and also proposing to impose penalty under Rule 15(2) of CCR, 2004 r/w Section 11AC of CEA, 1944 - Undisputedly, parts / components and assemblies of vehicles exported by assessee fall under Chapter Heading 8712, 8713, 8715 and 8716 and are covered under Third Schedule of CETA, 1985 - Therefore, First ingredient in sub-clause (iii) of Section 2(f) is satisfied - Process of labeling and packing explained by assessee would satisfy the ingredients of deemed manufacture under Section 2(f)(iii) - As per sub-clause (iii) of said definition, packing / repacking or labeling or re-labelling would amount to process of manufacture and assesseee have been able to successfully establish that such activities have been undertaken by them after purchase of goods from various vendors till the goods are exported - For these reasons, activities undertaken by assessee amounts to manufacture and they are liable to avail CENVAT credit on inputs / input services used in export of goods - The order demanding to recover/reversal of credit was held to be unjustified and was set aside.
Held - Two weeks' time granted to Revenue to file affidavit - Matter be listed for hearing thereafter: SC
- Case deferred :SUPREME COURT OF INDIA
2021-TIOL-91-CESTAT-AHM
Alembic Ltd Vs CCE & ST
CX - M/s Nirayu Pvt. Ltd. had paid Excise duty /reversed cenvat credit pursuant to Final order of Tribunal dated 12.07.2005 wherein the tribunal held that since goods were cleared by appellant on loan basis to various group entities and there was no proof of the same being returned, the credit/ duty liability was required to be confirmed - However, since the said transaction was recorded in private records, a token penalty was imposed on them - The appellant had availed such cenvat credit which was paid by M/s Nirayu Pvt Ltd. - The department however denied such credit on the ground that since such credit was to be allowed in accordance with law, however, there was intention to evade duty the credit is not eligible to the appellant under Rule 9(1) (b) of CENVAT Credit Rules, 2004 - There is merit in the submission made by appellant that in case where goods are not sold and supplementary invoice is raised, Rule 9 (1) (b) of Cenvat Credit Rules, 2004 cannot be invoked in such circumstances - In the decision in case of Karnataka Soaps & Detergents Ltd as well as Jai Raj Ispat Ltd, it was held that even if differential duty was paid on account of intention to evade duty the credit cannot be denied to recipients when the goods were not sold to them but only stock transferred - There is no allegation or finding in the impugned order that such goods were sold to the appellant by M/s Nirayu Pvt Ltd on which the disputed credit was availed - Such view is also approved by High Court - The impugned order is set aside: CESTAT
- Appeal allowed: AHMEDABAD CESTAT
2021-TIOL-90-CESTAT-DEL
JPG Construction Pvt Ltd Vs CGST
ST - The issue arises for consideration is as to whether the appellant had submitted the application for refund of service tax within the stipulated time since the application filed for refund has been rejected for the sole reason that it was not submitted within the time prescribed - Initially by Notfn dated June 20, 2012 the services provided by appellant to Governmental authority or local authority for construction, erection and commissioning were declared as exempted service - This exemption was subsequently withdrawn by Notfn dated March 01, 2015 that was made effective from April 01, 2015 - The appellant claims that after the withdrawal of exemption, they started paying service tax - However, in view of the provisions of section 102 of Finance Act that was inserted by Finance Act 2016, no service tax was to be levied or collected during the period April 01, 2015 to February 29, 2016 on the aforesaid services and under sub-section (2) refund was to be made of all such service tax which was collected but which would not have been so collected had sub-section (1) been in force at all relevant times - Sub-section (3) provides that an application for the claim of refund of service tax shall be made within a period of six months from the date on which the Finance Bill receives the assent of President - Stipulation in section 83 of Finance Act that the certain sections of Excise Act shall apply so far as may be, in relation to service tax as they apply in relation to duties of excise have not been examined - Though section 102 or section 104 of Finance Act do not prescribe any format but a procedure for filing an application for refund of service tax has been prescribed in Trade Notice and the Circular - It is also not the case of appellant that they were not aware of the procedure since it is the appellant that had placed the Trade Notice and the Circular - Such being the position, it is not possible to hold that the limitation for making an application for refund of service tax would be that as provided in section 11B of the Excise Act - The Application for refund of service tax has to be made within the period stipulated in sub-section (3) of section 102 of the Finance Act - It is clear that though an attempt was made by appellant to submit the application online but the process that was required to be undertaken for making an application online was not complied with as even the regulation was not done - The application cannot be treated to have been filed on time - If there was any difficulty in submission the application, the appellant could have sought the help of help desk but the appellant has not stated that he made an attempt to seek help - The appellant, therefore, cannot contend that the online application was actually made on October 13, 2016 as there is nothing on record to substantiate that such an application was actually filed - The appellant filed a hard copy of application only on December 20, 2016 in the office of Assistant Commissioner and the records do indicate that correspondence did take place between the Department and the appellant in connection with this application - This Application was filed beyond the period prescribed in sub-section (3) of section 102 of Finance Act - In the absence of any provision for condoning the delay in filing the application, Commissioner (A), committed no illegality in upholding the order passed by Assistant Commissioner rejecting the application filed by appellant for refund of service tax on the ground that it was not filed within the time stipulated: CESTAT
- Appeal dismissed: DELHI CESTAT
2021-TIOL-89-CESTAT-CHD
Gursam International Vs CC
Cus - The appellants are importers of bicycle parts - An intelligence was gathered that the appellants were engaged in evasion of customs duty by loading bicycles parts from China routing the same through Malaysia and availing wrongly benefit of Notfn 46/2011-Cus issued under Preferential Trade Agreement between the Governments of Member States of ASEAN and the Republic of India by way of misdeclaring the country of origin, therefore, the investigation was conducted - A SCN was issued and adjudicated on the basis of documents recovered and statements recorded during investigation - Demand confirmed along with interest - A redemption fine was also imposed on provisionally released goods - In view of confiscation, penalties were imposed on both the appellants - As per Member (J), after amendment to the explanation 4 to Section 28 of Customs Act, the Revenue sought clarification from High Court in the case of M/s Prabhat Fertilizers & Chemical Works and the High Court has clarified the same - As per amended explanation, Revenue wants to save the SCNs issued prior to 28.03.2018 to say that these SCNs have no binding of explanation 4 to Section 28 of Customs Act, 1962, but the High Court has explained that explanation 4 to Section 28 of the Act is not retrospective but same is retroactive which means all the SCNs issued prior to 28.03.2018, are to be adjudicated within one year from 28.03.2018 - Admittedly, the SCNs issued prior to 28.03.2018 and the same have not been adjudicated within one year and no time limit for adjudication has been extended - Therefore, in the light of said decision, the impugned SCNs stand vacated, therefore, the impugned order deserves to be set aside. As per Member (T), a dmittedly in the case of appellants, the SCN has been issued on 07.10.2016 and adjudicated on 28.05.2019 pursuant to appointment of Principal Commissioner/ Commissioner Customs Ludhiana as common adjudicating authority on 26.10.2018 and filing of final reply by appellant on 09.04.2019 - The present case cannot be said to be the case on unreasonable delay as the matter was taken up for adjudication by the common adjudicating authority as soon as he was appointed - Further, it is also observed that the appellants had deliberately delayed the adjudication process, by not filing the reply to SCN within time - It is not even the case of appellant that they have done what was expected of them for the early disposal of SCN issued to them - Reasonable time for exercise of power vested in authority are concepts which flow from the principles of equity and good conscience and cannot be the defence in the case where the person claiming such equity has deliberately delayed the proceedings - Can a person charged with fraud and who deliberately avoids the proceedings claim equity and rule of good conscience - As far as it is understood, first and foremost principle of equity as propounded lays down that, those who claim equity should come out with clean hands - Thus, the decision of High Court in case of GPI Textiles 2018-TIOL-1686-HC-P&H-CX , do not support the case of appellant for the reasons that there has been no inordinate delay in completion of adjudication proceedings and in case if any delay is there it is for the reason of non submission of the reply by the appellants in time to the SCN, making it impossible for the adjudicating authority to complete the adjudication proceedings - In the present case the Appellant, himself has vide his letter dated 09.04.2019, closed the arguments in the matter, and have requested the adjudicating authority to adjudicate the matter - Even at the time when this correspondence was made by appellant, the date was much beyond the 29.03.2018 - In case the adjudicating authority would have proceeded without taking closure of submissions which were being made by appellant, the order would have been considered as bad in law for the violation of principle of natural justice - Any interpretation of statue which makes it a dead letter in law, and allow the parties to take benefit of their own misdoing and delays, cannot be a fair interpretation of law - Since undoubtedly appellants have committed the fraud to avail the inadmissible benefit under Notfn 46/2011-Cus issued under Preferential Trade Agreement between Governments of Member States of the ASEAN and the Republic of India by way of mis-declaring the country of origin, the penalties imposed on appellants are justified - Adjudicating Authority has in impugned order clearly brought out the role of both the appellant in commission of fraud - Hence the penalties imposed on appellant cannot be disputed - No merits found in the appeals and dismiss the same. In view of the difference in opinion expressed by Members hearing these appeals, the following question is referred to the President for referring the same to third member for his consideration: Whether these appeals should be allowed following the decision of Punjab & Haryana High Court in case of M/s Prabhat Fertilizers & Chemical Works as held by Member (J) or these appeals should be dismissed as the said decision is not applicable as has been held by Member (T): CESTAT
- Case deferred: CHANDIGARH CESTAT
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