Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

Comments

Print   |    |  Comment

PJ/Case Law/2016-17/3441

Two issues have been addressed: 1. Mere simultaneous emergence of two products from the same process would make them joint products? 2. Can the anti-dumping duty be imposed in terms of USD instead of ₹?
Case:-DR. REDDY’S LABORATORIES LTD.VERSUS DESIGNATED AUTHORITY, DGAD, MOF
 
Citation:- 2016 (342) E.L.T. 561 (Tri. - Del.)
 
Issue:- Two issues have been addressed:
1.    Mere simultaneous emergence of two products from the same process would make them joint products?
2.    Can the anti-dumping duty be imposed in terms of USD instead of ₹?
Brief facts:- The appeal had been filed against final finding of the Designated Authority (DA), Directorate of Anti-Dumping and Allied Duties, Ministry of Commerce and Industry and Ministry of Finance. Through these proceedings, Anti-Dumping Duty (AD duty) was imposed on Methylene Chloride (subject goods) originating in or exported from E.U., USA and Korea RP.
 
Appellant’s contention:- Ld. Counsel for the appellant submitted that the appellant is a domestic user of the subject goods suffering AD duty. They mainly contested the imposition of AD duty on the following grounds:
 
(a)   The domestic demand was more than the full production capacity of the Domestic Industry (DI) even when operating with full capacity.
(b)  During the manufacture of subject goods other two products, namely, Chloroform and Carbon Tetrachloride (CTC) also emerged. While constructing the cost of the subject goods the DA failed to recognize the importance of CTC as a co-product. Erroneous calculation was made on cost allocation between various final products.
(c)   The AD duty should not have been imposed in terms of US $. Subsequent to the levy the dollar had strengthened resulting in much higher incidence of AD duty. Also different rates should have been fixed for loose and packed form of subject goods.
 
Respondent’s contention:- Ld. Counsel for the Domestic Industry (DI) submitted that in spite of specific request, the user industry did not provide the data regarding impact of downstream product on AD duty investigation. No detailed comments were also given regarding treatment of various products simultaneously emerging during the production of subject goods.
Ld. Counsel submitted that methylene chloride, chloroform and CTC emerged during the manufacture. Based on sales realisation the economic importance of these products are at the ratio of 50:45:5. It is apparent that CTC can never be considered as a joint or co-product for cost analysis. Further, CTC is an ozone depleting substance which is controlled for use in agrochemical industry. The said product is governed by Montreal Protocol. It was further submitted that “production value ratio” method of cost analysis has been challenged by the appellant. It was clear that the said analysis was based on sales realisation of various products emerging during the manufacture of subject goods. She further submitted that the costing of subject goods and subsequent determination of non-injurious price were all done as per the accepted standards of accounting.
Regarding imposition of duty in terms of US $ it was submitted that the same is an accepted practice and the injury margin is calculated covering POI. The subject goods are considered for injury analysis. The manner of packing is not directly relevant in such investigation.
Also, Ld. Counsel for the DA supported the findings of the DA. He submitted that after careful consideration, the DA concluded that even though the performance of DI had improved in various parameters, there had been a decline in profits, return on investment and cash flows. The DA noted that low priced imports had caused injury to the DI who could sell its product only when the same was done at the price comparable to that of import price.
 
Reasoning of judgement:- The appellants challenged the imposition of AD duty only on the ground that the costing of subject product in the DI had not been properly made. This allegation was on the ground that the CTC which was co-produced along with the subject goods should have been treated as a co-product and not as a by-product. It was noted that it was not correct to assume that all products co-produced (simultaneously emerging during process) should be considered as co-products for accounting purposes. In other words, simultaneous emergence of a product does not make it a joint product or a co-product for cost accounting purposes. For this, one has to consider the economic importance of various co-produced products. In the present case, it is clear that CTC contributes only 5% of sales realisation when compared to the other two main products which contribute 50% and 45% in sales realisation. When asked specifically as to how a product of such least economic importance can be considered as a joint product, the ld. Counsel for the appellant only reiterated that since this product is co-produced and accordingly should be considered as a co-product. Such argument was found as misleading and wrong. Ld. Counsel could not point out any legal provision or specific cost accounting standards applying to the relevant time to treat the CTC as a joint product. No merits were found in the appellant’s arguments challenging the costing of subject goods on these grounds.
 
Also, merits were found in submissions made by the ld. Counsels for the DI and DA regarding other issues raised in the appeal like fixing of AD duty in US $ term and treatment of subject goods without reference to manner of packing. The comparison during analysis had been made with like goods only and hence no merit was found in the appeal on these grounds.
Decision:- Appeal rejected.
 
Comment:- Products emerging from the same process can’t be treated as co-products merely because of the fact that they emerge from the same process. Their economic importance in terms of monetary value is an important factor to determine their classification as co-products or by-products.
Also, objection cannot be raised in context of levying duty in terms of USD instead of INR, if the same is in accordance with the accepted practice and the injury margin is calculated covering POI.
 
Prepared By:- Sharad Bang
Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com