2021-TIOL-1010-HC-MAD-CUS
Ruchi Soya Industries Ltd Vs UoI
Cus - Petitioner had filed Bill of Entry in advance to clear the consignment of crude palm oil of edible grade in bulk - In the Bill of Entry, the petitioner had proposed to pay Basic Customs Duty (BCD) at 7.5% as per Serial No.55 to Notification No. 12/2012-Customs dated 16.3.2012 as it stood on 15.09.2015 -However, after the import and at the time when the said Bill of Entry was taken up for assessment, Serial No.55 to Notification No.12/2012-Customs dated 17.3.2012 was amended vide Notification No.46/2015-Customs dated 17.9.2015 –Inasmuch as Serial No.55 to Notification No.12/2012-Customs increased the rate of Basic Customs Duty (BCD) to 12.5% from 7.5% - It is submitted that although the notification had been published in the official Gazette on 17.9.2015, the second condition that it was offered for sale on the date of its issue by the Directorate of Publicity And Public Relations of the Board, New Delhi had not been satisfied and, therefore, the respondents were not justified in imposing the increased rate of duty on the petitioner as per the amended notification – that from the reply dated 12.10.2015 received from the CPIO, GOI, Department of Publication it is evident that the copy of the Gazette of India containing Notification No.46/2015-Customs dated 17.9.2015 was received on 21.9.2015 at 3:30 PM at the Kitab Mahal, Sale Counter of the said Department from the Government of India Press, Mayapuri, Ring Road, New Delhi and was put up to sale to the general public on 21.9.2015; that, therefore, the notification cannot be said to have come into force on the date of its publication in the official gazette on 17.09.2015; that the petitioner fairly conceded that for a similar imports in West Bengal, the issue has been answered against the petitioner in Ruchi Soya Industries Ltd. = 2018-TIOL-638-HC-KAR-CUS ; that the petitioner's appeal in SLP No. 7077 of 2016 has been admitted and that the petitioner has been directed to keep the bank guarantee alive pending disposal of the appeal; that, therefore, since the issue has not attained finality, therefore, this Court can come to an independent conclusion based on the available material regarding the correctness of the re-assessment and imposition of the higher rate of Customs Duty on the petitioner in the impugned Bill of Entry - Alternatively, it is submitted that the petitioner was under the provisions of the Insolvency and Bankruptcy Code, 2016 during the pendency of the present writ petition.
Held:
++ The petitioner has an alternate remedy to file an appeal against the assessment before an Appellate Commissioner under Section 128 of the Customs Act, 1962 against the reassessment in the impugned Bill of Entry. [para 21]
++ Considering the fact that the writ petition has been admitted in the year 2015, Bench sees no point in relegating the petitioner to work out the remedy before the Commissioner of Customs (Appeals) at this distant point of time straight away without examining the case on merits. [para 22]
++ The use of the information technology has changed by leaps and bound since 2001. By 2015, all information was available at the click of the button of the computer in the website of the Central Board of Excise and Customs which were also physically published in the official Gazette. [para 25]
++ The answers obtained under the RTI Act also do not dispute that the fact that the amended notification had been published in the Gazette on 17.9.2015. [para 26]
++ In this case, not only the notification was posted in the website of the Central Board of Excise and Customs on 17.9.2015 but was also published in the official Gazette of Government of India on 17.9.2015. Therefore, the petitioner cannot complain that it was unaware of the change in the rate of duty merely because the sale of official Gazette was purportedly made only on 21.9.2015. [para 27]
++ After all, the publication of any information in the official Gazette not only signifies its authenticity but also its dissemination to the public. The practice of purchasing printed copies of Gazette publication has been done away over a period of time as the information were made available to the citizens in the official website of the Central Board of Excise and Customs. [para 28]
++ Thus, the second limb of section 25(4) of the Customs Act, 1962 requiring publication and offer for sale on the date of receipt issued by the Directorate of Publicity and Public Relation of the Board, New Delhi had been rendered vestigial over a period of time having no useful purpose in the light of the publication of such information in the website. [para 29]
++ Decision of the Supreme Court in Union of India versus Param Industries Ltd = 2015-TIOL-140-SC-CUS has not examined the issue from the perspective of section 4 of the Information Technology Act, 2000. If such information was brought to the notice of the Supreme Court, the Honourable Supreme Court would have certainly given different verdict.
++ By 2015, an assessee was no longer required to wait to buy the printed copy of the official Gazette from the bazaar or the official sales counter of the Government to find out the change in the rate of duty tax after the information were hosted in the official website. [para 34]
++ In fact, a reading of unamended section 25(4) of the Customs Act, 1962 would also indicate that every notification issued under sub- section (1) or sub- section (2A) shall unless otherwise provided, come into force on the date of the issue by the Central Government for publication in the official Gazette. [para 35]
++ Sub-clause (4) of Section 25 of the Customs Act, 1962 as it stood prior to its amendment in 2016 merely enjoined the Central Government also to offer it for sale by the Directorate of Publicity and Public Relations of the Board, New Delhi simultaneously. [para 36]
++ In the view of the Bench, in 2015, the necessity of offering for sale such publication as in the second limb of Sub-clause (4) of section 25 of the Customs Act, 1962 had become redundant and the Parliament has rightly taken note of the same and deleted it, though somewhat belatedly. [para 37]
++ In the result, Bench holds that the amended notification came into force on the date of its publication in the official Gazette on 17.9.2015 and its publication in the website of the Central Board of Indirect Taxes on the said date. [para 40]
Insolvency and Bankruptcy Code, 2016
++ It is the case of the petitioner that the respondent Customs Department has lost all its rights over the differential duty demanded in view of the corporate resolution plan approved by the National Company Law Board, Mumbai under the provisions of the Insolvency and Bankruptcy Code, 2016. [para 42]
++ Question to be answered is, whether the "customs duty" payable under the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975 is "an operational debt" of the petitioner within the meaning of Section 5 (21) of the IBC Code, 2016 and whether the respondent Customs Department is an "operational creditor" within the meaning of Section 5 (20) of the IBC Code, 2016? [para 43]
++ Tax, though a crown debt, is not a "operational debt” as it is not arising out of "claim" in respect of the provision of goods or services including employment. [para 67]
++ The entire tax administration of the country is now in a pell-mell. All the tax authorities will have to make a beeline before the National Company Law Tribunal every time to recover tax dues if, under any circumstances, proceedings are initiated against corporate debtor under the IBC, 2016. This was not the intention when the Act was enacted. [para 70]
++ Though the definition of "Operational Debt" in Section 5(21) of the IBC, 2016 is not intended to include "crown debt" such as taxes and duties payable to the Government and is distinct from the "claim" and "debt" as defined in Section 3(6) and 3(11) of the IBC,2016, this Court is bound by the interpretation placed in the above decision of the Hon'ble Supreme Court in Ghanashym Mishra and Sons Vs. Edelweiss Asset Construction, and the reasons given therein and in the light of the amendment to the IBC, 2016 in 2019 and in the light of the clarification of the Finance Minister when the 2019 bill was put to discussion in the parliament. [para 75]
++ This Court, therefore, partly accepts the contention of the petitioner insofar as issue relating to extinguishment of the rights of the respondent customs department to claim the customs duty in the light of the decision of the Hon'ble Supreme Court in Ghanashym Mishra and Sons Vs. Edelweiss Asset Construction referred to supra. [para 76]
++ The case is, therefore, remitted back to the respondent to await clarification to be obtained by the Petitioner from the National Company Law Board as to whether the Corporate Resolution Plan filed by the Corporate Applicant included the "customs duty" to be paid by the Petitioner on the import under the subject bill of entry. [para 77]
++ The petitioner shall, therefore, file an appropriate application before the National Company Law Board and get the issue clarified from the National Company Law Board that the indeed crown debts like the differential "customs duty" payable to the respondent under the subject bill of entry which is the subject matter of the present writ petition were treated as "operational debt" before it by the "corporate applicant". [para 80]
++ The petitioner is given another 150 days to obtain such clarification from the said National Company Law Board. Therefore, during the period of next 180 days from the date of the receipt of this Order, the respective parties are to maintain status quo as on date as far as demand of duty confirmed under the subject bill of entry is concerned. [para 83]
++ The respondents shall proceed to recover and/or remit the duty, as the case may be, at the expiry of 180th day from the date of receipt of this Order. [para 84]
++ On the other hand, if the petitioner fails to get any clarification from the National Company Law Board within such time, the respondents shall proceed to recover the amount of duty short paid under the subject bill of entry together with interest from the petitioner in accordance with law. [para 85]
- Petition disposed of :MADRAS HIGH COURT
2021-TIOL-257-CESTAT-AHM
Cadila Healthcare Ltd Vs CST
ST - The genesis of the issue is whether the appellant (Cadila Healthcare Ltd.) is a service provider and the recipient M/s Zydus Healthcare is a service recipient having relationship of partner and partnership firm can be categorised as service provider and service recipient - The appellant has 96% share in profit and two other partners i.e., M/s Cadila Healthcare staff trust and M/s German Remedies have 2% each shares in the profit - All the three partners entered into a partnership deed dated 01/03/2007 and the said partnership deed was amended vide addendum dated 01/07/2007 - As per the amended partnership deed, the appellant is a partner who undertook the activities related to marketing and distribution of the products of the partnership firm to enable the partnership firm to expand market's share and improve overall sales and earnings -Issue to be considered is whether the appellant is liable to pay the Service Tax when the appellant is a partner and the service recipient is a partnership firm - If the appellant is not liable to pay the Service Tax, whether the Service Tax so paid by the appellant along with interest, is refundable, even when the assessment of payment of service tax was not challenged.
Held:
++ From the terms of the partnership deed, the appellant in its capacity as partner of the partnership firm was obliged to carry out certain activities such as distribution of goods manufactured, marketing of the goods manufactured by the partnership firm, functioning as consignee and sales agent of the partnership firm, etc.
++ These activities were not undertaken pursuant to a separate and independent contract for provision of services between the appellant of the partnership firm. Therefore, the activities carried out by the appellant for its partnership firm is part of its duties as a partner. In this arrangement, it cannot be said that the partner is a service provider and partnership firm is service recipient.
++ It is also observed that the remuneration received by the appellant from the partnership firm has been accounted for as "Remuneration received from partnership firm". Any activity can be brought under the Service tax ambit under the Finance Act, but the important aspect is that there should be existence of service provider and the service recipient and the service provider and the service recipient should be two different persons. [para 4]
++ It is clear from the definition of partnership provided in the section 4 of the Partnership Act, 1944, that partners and partnership firm cannot be treated as two distinct persons.
++ First time the term 'Person' in the Finance Act, 1944 was defined with effect from 01/07/012 vide section 65B(37) of the Finance Act, 1994 which included the firm. Therefore, prior to 01/07/2012, that is the period involved in the present case, the definition of 'Person' provided under section 65b(37) was not existing. Therefore, same cannot be made applicable retrospectively.
++ Even as per the definition of General Clauses Act, 'Person' does not include the partnership firm. Therefore, the service is taxable if it is provided to a distinct person. Such person does not include firms when the service is provided by a partner to the said partnership firm.
++ It has been settled that the firm is not a different entity or person in law than its partners. [DulichandLakshminarayan ( 2002-TIOL-1258-SC-IT-LB ); Commissioner of Income Tax vs R.M. Chidambaram Pillai ( 2002-TIOL-2675-SC-IT ] It is merely an association of individuals and a firm name is only a collective of those individuals who constitute a firm. With this law laid down by the Apex Court, it cannot be said that the appellant being the partner and M/s Zydus Healthcare being a partnership firm have relationship of service provider and service recipient. [para 4.1]
++ In the judgments [Commissioner of Income Tax vs R.M. Chidambaram Pillai 2002-TIOL-2675-SC-IT & Bhagwant Singh vs Commissioner of Income Tax 1959 PH Air 59 ], it is categorically held that any amount received by the partner from the partnership firm as per the obligation of the partnership deed would be treated as profit share in the partnership business. Applying the same ratio in the present case also, the appellant received remuneration from its partnership firm towards certain activities performance in terms of the partnership deed is nothing but profit in partnership sharing and the same cannot be treated as consideration towards provision of service under Finance Act, 1994. [para 4.4]
++ It is also observed that the impugned activities of the appellant are undisputedly its obligation as a partner as per partnership deed. There is no separate contract of services between the appellant and the partnership firm. Therefore, the remuneration received by the appellant is merely a special share of profits in terms of the partnership deed. Therefore, such remuneration cannot be considered as consideration towards any services between two persons, and, hence, not liable to Service Tax. [para 4.5]
Refund:
++ Insofar as refund is concerned, in the present case, there is no order of final assessment by the Service Tax authorities.Unlike Customs, there is no express provision to file appeal against the self-assessment of service tax by filing ST-3 return. Therefore, on the ground that appeal against the self-assessment was not filed, the refund claim cannot be rejected. [para 4.7, 5]
++ Adjudicating Authority as well as Commissioner (Appeals) also contended in their orders that the appellant have not satisfied the aspect of unjust enrichment as they have not filed any documents in this regard.
++ In the refund application, appellant have clearly declared that they have not recovered the amount of Service Tax from Zydus Health Care and the burden of Service Tax was not passed on to the Zydus Health Care. It shows that both the authorities have ignored this declaration made by the appellant. Therefore, the contention made by them that the appellant has not satisfied that the incidence of Service Tax, for which refund claim was made, has not been passed on is apparently erroneous. [para 6]
++ Appellants are entitled for the refund - impugned orders are set aside and appeals are allowed with consequential relief. [para 7]
- Appeals allowed : AHMEDABAD CESTAT
2021-TIOL-252-CESTAT-MAD
Hari Babu Vs CC
Cus - The appellant is in appeal against impugned order whereby the Commissioner (A) dismissed the appeal on the ground of being time-barred - The Commissioner (A) has computed the period of limitation from the date of dispatch of O-I-O - As per section 128 Clause (1) of Customs Act, 1962, the person aggrieved by decision/order has to file the appeal within 60 days from the date of communication to him of such decision or order - The word used is "communication" - It implies that the O-I-O has to be put to the knowledge of aggrieved person - Mere dispatch of the order cannot be communication of the decision/order - Further, section 153 speaks about service of order/decision - The word used is 'service' of the order/decision and not dispatch of the order/decision - The words "service" as well as "communication" has to be construed to mean that such order is served or put to the knowledge of the aggrieved person - Further, even if the date of dispatch is reckoned for computing 60 days, the delay is less than 30 days and within the condonable period prescribed in the statute - When there is a defect in filing the appeal which can be rectified, the same has to be pointed out to the appellant before the appeal is heard on merits - The appellant cannot be deprived of remedy of appeal in a hyper-technical manner - The disposal of appeal on the ground of time bar cannot sustain - Matter remanded to the Commissioner (A), who shall give an opportunity to the appellant to file an application for condonation of delay - After considering such application, the appeal should be heard on merits: CESTAT
- Matter remanded: CHENNAI CESTAT
2021-TIOL-251-CESTAT-MAD
Agni Steels Pvt Ltd Vs CGST & CE
CX - The appellant, aggrieved by the rejection of refund in its first appeal, has filed the present appeal - The O-I-O has been passed undoubtedly without the issuance of SCN - The Commissioner (A) in the impugned Order has also observed that one Shri P. Veera Kumar appeared before the Adjudicating Authority, but however, both the authorities below are silent as to whether the said person, who is alleged to have been heard, was well-versed with the law and the change in law and whether the said person was authorized by appellant-company to argue before the authorities - It is the basic tenet of our Constitution that “justice should not only be done, but should manifestly and undoubtedly be seen to be done”. The above fundamental principle has to be followed along with the principles of audi alteram partem and any Order which creates a doubt as to the manner in which it was passed, has to be held as having passed without adhering to the above principles, which view is also supported by various decisions relied upon by the appellant - The Orders have been passed without affording proper and reasonable opportunities to the appellant - Accordingly, the impugned order is set aside and the matter is remanded to the file of the Adjudicating Authority to pass a fresh order: CESTAT
- Matter remanded: CHENNAI CESTAT
2021-TIOL-250-CESTAT-DEL
Ecr Builders Vs CCE & CGST
ST - The appellant is engaged in providing construction of commercial/industrial building, civil structure & residential complex under works contract - It is noticed that appellant had not paid service tax during the period from 01.04.2014 to 31.03.2015 nor have filed the service tax returns - It is observed that the demand as raised by Department against the appellant, the entire amount alongwith the interest stands paid by appellant over a period of four months starting from the date even prior to the search was conducted in appellant's premises and the entire aforesaid amount stand paid till May, 2015 i.e. much prior before the issuance of SCN - It is apparent that the SCN has been issued after a period of almost 1½ years from the date of the payment of entire demand - Where the entire payment has been paid even prior the order of assessment is being communicated to the appellant, the decision of Apex Court in M/s Lark Chemicals Pvt. Limited is not applicable to the present case - As far as the imposition of penalty is concerned, Tribunal relies upon the decision in 2015-TIOL-1385-CESTAT-AHM , wherein it has been held that when the service tax stands paid alongwith interest after being pointed out but before the issuance of SCN, the penalty under Section 78 of Finance Act, 1994 is not imposable - However, the appellant did not discharge his liability at the appropriate time as was otherwise required by the law and also fail to inform the issue of financial crunch as mentioned in the impugned appeal to the notice of the Department - The possibility of intentional suppression as is alleged against him cannot be ruled out - No infirmity found in the order where the demand of service tax, though it stands already paid, is hereby confirmed - However, the order with respect to imposition of penalty is set aside: CESTAT
- Appeal partly allowed: DELHI CESTAT |
