PJ/Case Laws/2010-11/28
CASE LAWS
Prepared By:
Sukhvinder Kaur, LLB [FYIC],
CA Rajani Thanvi And
Ghanshyam
Central Excise Section:
Case: Commissioner of Central Excise,
Citation: 2010 (258) E.L.T. 539 (Tri. -
Issue: - Admissibility of credit on MS Angles, Channels etc used in fabrication of Bio-gas plant adjacent to factory premises.
Brief Facts: - Respondent constructed a bio gas plant adjoining to the factory premises. They used MS angles, MS channels, hooks, HDPE pipe lines, SS pipes etc. and availed Cenvat credit as inputs for fabrication of the plant. Department issued show cause notice proposing disallowance of Cenvat credit taken on above item up to March 2003. The Original Authority passed the order disallowing Cenvat credit and demanded the same with interest and imposed Rs. 20000 as penalty. Respondent filed appeal before the Commissioner (Appeals). The Commissioner allowed the appeal on limitation as well as on merit. Revenue is in appeal against this order. It was held that no reasons were given for invoking extended period of limitation. It was noted that the respondents had declared to the Department vide letter dated 27.05.2002 about setting up of pollution control equipment using various inputs. Therefore, there was no suppression of facts. It was also noted that the details have been taken from the balance sheet which was a public documents and therefore, the demand was time barred.
Appellant’s Contentions: - Revenue contended that the bio gas plant was not part of the approved plan of factory. They were not knowing about the use of the impugned items in the fabrication of bio-gas plant. They relied upon the decision of the Larger Bench in Vandana Global Ltd. V/s CCE,
Respondent’s Contentions: - Respondent submitted that the issue relating to eligibility of credit on impugned goods was subject to different interpretations by the Tribunal. It was submitted that there was no suppression of relevant facts and the demand was clearly time barred.
Reasoning of the Judgment: - The Tribunal held that on merits, respondents were not eligible for the credit as the said items were used in setting up bio-gas plant. It was held that considering the nature of use of the said items could not be held as capital goods eligible for cenvat credit.
On limitation, The Tribunal perused the findings of the Commissioner (Appeal) and held that there was no ground to set aside the said findings. It was noticed that during the relevant period, the issue of admissibility of Cenvat Credit on the said items was subject to different interpretations and the belief of the respondents that they were eligible for the credit has to be held as bona fide. There was no suppression involved. No justification for invocation of extended period of limitation.
Decision: - Appeal rejected. Cross Objections and Condonation of Delay application dismissed as withdrawn.
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Case: Wood Polymer Limited v/s Union of
Citation: 2010 (257) ELT 503 (Guj)
Issue: - Once classification list is filed and not challenged, refund claim by claiming classification under another heading not allowable.
Brief Facts: - Petitioner was manufacturing decorative laminate sheets. They classified their product under Tariff items no. 15A(2) and paid duty of excise on the same. Thereafter, an order was passed by the Collector of Central Excise (Appeals) in the case of M/s Viral Laminates Pvt Ltd holding that the product was classifiable under Tariff item no. 68 and not under Tariff item no. 15(A)2. In accordance with this order, petitioner filed for refund of duty paid by them. The said refund claims were rejected by the Adjudicating Authority on the ground that that the order passed in the case of M/s. Viral Laminates Pvt. Ltd., is a specific order in favour of the said party only and it is not a final order as laid down in Section-35C(4) of the Central Excise and Salt Act, 1944 and also on the ground that the claim was barred by limitation prescribed under Section 11B of the Central Excise. Against this order, petitioner has filed writ petitions before the High Court.
Petitioner’s Contention: - Petitioner relied upon the order passed in the case of M/s Viral Laminates Pvt Ltd. It was contended that central excise levy has to be levied and collected uniformly through out the country and once the Collector of Central Excise (Appeals) had held that classification of identical product under Tariff item no. 68, the Assistant Collector ought to have followed the same, as the judicial propriety demands that the lower authority must follow the pronouncement of higher Tribunal and then only judicial system works. It was contended that the Assistant Collector of Central Excise and Customs was under an obligation to entertain the refund application and grant the refund of excise duty collected without authority of law and under the garb of tax, though not payable and such collection of amount is not permissible under Article 265 of the Constitution of India. It was contended that the refund claim should not have been rejected by resorting to the technical ground of limitation.
Respondent’s Contention: - Revenue contended that the petitions were premature and not maintainable as the order passed in M/s Viral Laminates was appealable order and an appeal was to be filed before the Collector of Central Excise (Appeals). It was contended that the petitioner was voluntarily paying the duty and was filing classification list which was approved from the Department for time to time. No objection was raised by the petitioner at the time of filing of the classification. Moreover, the petitioner had passed on the burden of duty on customers. The petitioner had not preferred any appeal against the classification list and had cleared the goods by paying duty. Petitioner was estopped from filing any such refund claim. Refund claim was barred by limitation. They had not suffered any loss and therefore they were not required to be compensated.
With regard to the order passed in the case of M/s Viral Laminates, Revenue contended that an appeal against the said order was pending before the higher forum and the said order was not the final order. In that case, the assessee had filed revised classification list which was not preferred by the petitioner herein. The facts of the said case were different from the case of petitioner. Further grounds relating to non-maintainability of the writ petition were raised.
Reasoning of the Judgment: - The High Court held that for the purpose of claiming refund the petitioner couldn’t rely upon the order passed by the Collector of Central Excise and Customs (Appeals) when the facts were totally different. The petitioner had voluntarily paid the duty voluntarily and cleared the goods at the relevant time. By adopting particular classification the petitioner had also passed on the burden to the consumers. The petitioner had never applied for revision of classification and once the classification is finalized and duty is paid accordingly, unless and until such classification is challenged and/or disturbed, it is not possible for the petitioner to make refund claim based on some order passed by the Appellate Authority. Such order cannot be universally applied without going into the facts of the case. It was held that the issue on merits was covered by the judgment of
Decision: - Petitions dismissed.
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Case: CCE,
Citation: 2010 (101) RLTONLINE 55 (P&H)
Issue: - Whether merely sending the order at correct address of the assessee by registered post is a sufficient compliance of Section 37C of the 1944 Act.
Brief Facts: - Respondent is engaged in the manufacture of aerated water. Show cause notice was issued to the respondent on the allegation that they had failed to include the transportation charges and notional interest on deposits in the assessable value of aerated waters cleared during the period 01.03.1994 to 31.08.1997 in contravention of Section 4 of the Central Excise Act, 1944. The Adjudicating Authority confirmed the demand with interest and imposed penalty by order dated 01.02.1999.
The said order was dispatched to the respondent by registered post. Respondent went in appeal before the Tribunal. Revenue raised preliminary objection that the appeal was time barred. Respondent submitted before the Tribunal that limitation for filing the appeal would commence from the date order is actually/physically served. The question then arose as to whether as per Section 37C of the Act, order is to be physically served or sending the order through registered post at the correct address of the assessee is sufficient compliance. Reference was made to the Larger Bench of the Tribunal.
The Larger Bench of the Tribunal vide impugned order dated 28-8-2006 replied the reference on the ground that despatch of adjudication order by speed post/registered post would not amount to a valid service in the absence of proof of actual delivery of speed post. Order of the Appellate Tribunal is challenged by Revenue before the High Court.
Petitioner’s Contention: - Revenue contended that as per Section 37C of the 1944 Act, despatching decision, order, summon or notice by registered post with Acknowledge Due, is sufficient compliance without actual proof of delivery. Order was despatched by registered post and envelop containing the order was properly addressed.
Reasoning of the Judgment: - The High Court relied upon the judgment of the Apex Court in M.A. Mohammed Ismail v. State of Tamil Nadu [1999 (10) JT 372] wherein it was held that delivery of the letters sent by registered post is to be assumed to be delivered to the addressee if the address is correct in view of provisions of Section 114 of the Indian Evidence Act as well as of Section 27 of the General Clauses Act, 1897.
Further reliance was placed on the judgment of
Accordingly, the High Court held that it can safely be said that sending the order at correct address by registered post is a sufficient compliance of Section 37C of the 1944 Act. It is for the assessee to rebut the presumption of service by cogent evidence that in fact order was never served upon him. In the present matter, the respondent-assessee failed to discharge his burden and sending the order by registered post at the correct address is sufficient compliance. Impugned order set aside.
Decision: - Writ petition is allowed.
Comment: If the assessee proves that the order is actually not served by way of convincing evidence than the order even sending at correct address by post will not be presumed as order properly served and complying the provisions of section 37C of the 1944 Act.
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Case: Triveni Engineering & Indus. Ltd v/s Commissioner of Central Excise
Citation: 2000 (120) ELT 273 (SC)
Issue: - Whether installation or erection of turbo alternator on the concrete base specially constructed on the land will make it an immovable property which is not the excisable goods.
Brief Facts: - Appellants deal in turbo alternators which have 2 components – steam turbine and complete alternator. They were manufacturing the steam turbine in their factory on which excise duty was paid. They were purchasing the complete alternators and delivering the same at the customer’s site. Revenue issued show cause notices to the appellant alleging that they had failed to pay duty of turbo alternators. Revenue contended that turbo alternators are liable to excise duty under Heading 85.02 of the Central Excise Tariff Act, 1985. Appellant contended before the Adjudicating Authority that a turbo alternator set came into existence on its being fixed permanently on the land as such it is not an excisable good but an immovable property and that by the combination of 'steam turbine' and alternator, a turbo alternator emerges at the site of the customers which does not involve any process of manufacturing, therefore, they are not liable to excise duty.
The Adjudicating Authority confirmed the demand. Appellant filed appeal before the Tribunal. The Tribunal held that the turbo alternators were liable to excise duty.
Against this order, Appellant filed appeal before the
Appellate Contention: - Appellant contended that in combining steam turbine and alternator, no manufacturing process was involved. The process consisted of combining and fixing of the two components permanently on platform raised at the premises of the customers and thus what emerged was not goods but an immovable property. It was contended that in view of the Circular No. 17/89 dated 21.04.1989 issued by CBEC the said goods did not fall under Entry 85.02 of the CET Act.
Respondent’s Contention: - Revenue contended that combining steam turbine and alternator amounted to manufacturing process and that merely because the two components were fixed to the platform for efficient functioning of a turbo alternator, it could not be said that it was an immovable property. With regard to Circular No. 17/89, it was submitted that it did not relate to electric generator and it was not issued under Section 37-B of the Act. It was also contended that this point was not taken before the Tribunal.
Reasoning of the Judgment: - The
Accordingly, the
Reliance was placed on judgment given in State of
Further the judgment given in Narne Tulaman Manufacturers Pvt. Ltd., Hyderabad v. Collector of Central Excise, Hyderabad [1988 (38) E.L.T. 566 (S.C.)] on the facts of that case it was held that the activity of fitting and assembling the three components resulted in bringing into being complete weighbridge which has a distinctive name, character or use. Therefore, it would amount to manufacture of that product which is liable to excise duty.
Thus, the
Accordingly, in the appellant’s case, the
Next, the
It was further held that if an article is an immovable property, it cannot be termed as “excisable goods” for purposes of the Act. Definition of ‘immovable property’ in Section 3 of the Transfer of Property Act, Section 3(25) of the General Clauses Act was perused and it was observed that it is evident that in an immovable property there is neither mobility nor marketability as understood in the Excise Law. Whether an article is permanently fastened to anything attached to the earth require determination of both the intentions as well as the factum of fastening to anything attached to the earth. And this has to be ascertained from the facts and circumstances of each case.
The judgments given in the cases of Municipal Corporation of Greater Bombay & Ors. v. Indian Oil Corporation Ltd. [1991 Suppl. (2) SCC 18], Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, U.P. [1995 (75) E.L.T. 17 (S.C.)], Mittal Engineering Works (P) Ltd. v. Collector of Central Excise,
Further, it was held that it is a common ground that a turbo alternator comes into existence only when a steam turbine and alternator with all their accessories are fixed at the site and only then it is known by a name different from the names of its components in the market. Reliance was placed on the finding of the Tribunal that fixing of steam turbine and the alternator is necessitated by the need to make them functionally effective to reduce vibration and to minimize disturbance to the coupling arrangements and other connections with the related equipments. It was also noted that removal of the machinery does not involve any dismantling of the turbine and alternator in the sense of pulling them down or taking them to pieces but only undoing the foundation bolts arrangement by which they are fixed to the platform and uncoupling of the two units and, therefore, the turbo alternator did not answer the test of permanency laid down by the Apex Court in the case of Municipal Corporation of Greater Bombay. Thus, it was held that the findings recorded do not justify the conclusion of the Tribunal inasmuch as on removal a turbo alternator gets dismantled into its components - steam turbine and alternator. It appears that the Tribunal did not keep in mind the distinction between a turbo alternator and its components. Thus, the test of permanency fails.
The Apex Court held that marketability test requires that the goods as such should be in a position to be taken to the market and sold and from the above findings it follows that to take it to the market the turbo alternator has to be separated into its components - turbine and the other alternator - but then it would not remain turbo alternator, therefore, the test is incorrectly applied. Though, there is no finding that without fixing to the platform such turbo alternator would not be functional, it is obvious that when without fixing, it does not come into being, it can hardly be functional.
The
The Apex Court perused the Explanatory Notes issued by the Harmonized System of Nomenclature (HSN) and concluded that when generating sets consisting of the generator and its prime base mover are mounted together as one unit on a common base they are classified under the Heading 85.02; in this connection floors, concrete bases, walls, partitions, ceilings etc., even if specially fitted out to accommodate machines or appliances, cannot be regarded as a common base joining such machines or appliances to form a whole. On a combined reading of the Explanatory Notes, it can be inferred that installation or erection of turbo alternator on the concrete base specially constructed on the land cannot be treated as a common base and, therefore, the installation or erection of turbo alternator on the platform constructed on the land would be immovable property, as such it cannot be 'excisable goods' falling within the meaning of Heading 85.02.
Thus, it was held that the Tribunal is not correct in coming to the conclusion that the turbo alternator is excisable goods. Impugned order set aside.
Decision: - Appeals allowed.
Comment: It is correctly held by the Hon’ble apex court that something which is installed or erected on the concrete base specially constructed on the land makes it fixed permanently on the land. When it is permanently fixed on the land it becomes immovable property which is not excisable.
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Case: Collector of C. Ex. v/s Castrol Ltd
Citation: 1991 (56) ELT 485 (Tribunal)
Issue: - Whether Revenue can be allowed to raise the point that the duty paid by the assessee was leviable in accordance with law which was not raised in the show cause notice? Whether the application for refund was in time?
Brief Facts: - Respondent-assessee were manufacturing exempted goods Blended and Compounded Lubricating Oils and Greases falling under Item No. 11B. These goods were manufactured out of duty paid inputs falling under the same item 11B. For the payments made during the period from March 1974 to April 1974, respondent filed refund claim on 10.12.1975 on the ground that as the finished goods were made out of duty paid inputs falling under same item they were not liable for further duty. Show cause notice was issued proposing to reject the claim as being filed beyond period of limitation provided under Rule 11 read with Rule 173 of Central Excise Rules, 1994. The Original Authority rejected the claim as being time barred. Appeal was filed before the Collector (Appeals) of Central Excise by the Respondent. The appeal was allowed.
Against this the Revenue is in appeal before the Tribunal.
Appellant’s Contentions: - Revenue contended that the goods (Blended and Compounded Lubricating Oils and Greases) on which duty has been paid during the material period for which refund claims were submitted on 10-11-1975 were manufactured out of materials falling under Item No. 11B of the said Schedule and such manufactured excisable goods were also classifiable under the same Tariff Item No. 11B of the said Schedule. Central Excise duty is, therefore, correctly leviable on the said goods and the collection of duty on the said goods is authorised under the law. Reliance was placed on judgment given in M/s. Tide Water Oil Co. (
Revenue further stated that the claim is barred by limitation. It was contended that duty was correctly levied and the collection of duty on the said goods is authorised under law.
Respondent’s Contention: - Respondent contended that the ground that duty was leviable in accordance with law was not mentioned in the show cause notice or in the order-in-original passed by the Assistant Collector. It was also contended that the order-in-original passed by the Assistant Collector was based only on the ground that it was barred by limitation. Therefore, the only question which should be determined in this appeal is whether the claim is in time. Reliance was placed on the judgment given in M/s. Castrol Ltd.,
Reasoning of the Judgment: - The Tribunal perused the show cause notice and concluded that the only ground mentioned in the show cause notice for the rejection of the claim was that it was barred by limitation. On this ground the learned Assistant Collector passed the original order. Therefore, the question whether the duty was levied in accordance with law, which does not find a place in the show cause notice, cannot be agitated by the appellant for the first time in appeal.
It was held that a point of law no doubt can be agitated, which does not require any investigation into the facts. Though this is a point of law this cannot be agitated for the first time in view of the fact that this ground was not taken up in the show cause notice and therefore, the Revenue cannot go beyond the scope of the show cause notice and make a new case which was not stated in the show cause notice.
With regard to the issue of refund claim being time-barred, the Tribunal firstly held that the old Rule 11 was applicable and it is to be read with old Rule 173 wherein the period of 3 months was extended to One year. On the facts it was found that though the application was made on 10-12-1975 the assessment was finalized on 5-3-1980. It is, therefore, clear that the adjustment was made only on 5-3-1980 on which date the final assessment was made by the competent authorities. Thus, the claim was not barred by limitation as the application was filed before the date of finalization of the provisional assessment the old Rule 11 which was operative from 6-8-1977 to 16-11-1980 was in force.
It was held that under the explanation to that rule it is clearly stated that where any duty is paid provisionally under that rule on the basis of the value or the rate of duty, the period of six months shall be computed from the date on which the duty is adjusted after final determination of the value or the rate of duty as the case may be.
In the end it was held that no interference required with the impugned order.
Decision: - Appeal dismissed.
Comment: - It is again cleared from this decision that if a show cause is issued than revenue cannot go beyond the scope of the show cause notice and also cannot make a new case which was not mentioned in earlier show cause notice for the same period.
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Case: Silvassa Industries Pvt. Ltd. v/s Textiles Committee
Citation: 2010 (256) E.L.T. 773 (Tri.)
Issue: - If supplier has paid the textile cess then whether the job worker will be liable to pay the said textile cess also?
Brief Facts: - Appellate-company are processing units and were processing the yarn supplied to them by suppliers on job work basis. Thereafter the goods were returned to supplier. Textile Committee issued a show cause notice to appellant for paying Cess on textile goods. Thereafter, Demand notice was issued under Rule 7 demanding the payment of cess. Appellants are challenging the Demand notice issued for the period April 2003 to March, 2004.
Appellant’s Contentions: - Appellate contended that they were only processing units. After the processing, the material was sent back to the concerned supplier. It was contended that since they were not manufacturing any textile goods, they were not required to pay the cess.
It was further contended that Circular dated 14-11-1984 if the textile cess was already paid by the supplier of raw material then the processing factory was not required to pay any cess. Appellant submitted demand drafts for the relevant period as proof that the cess was paid by the supplier. It was further contended that the show cause notice issued earlier to the Demand notice, they were not given an opportunity of personal hearing even when they had requested for the same. It was further contended that the demand notice issued dehors the Rule 8 and was therefore not sustainable.
With regard to Letter dated 15.11.2000 issued by Textile Committee which the Revenue contended that it superseded the Circular, it was submitted that the said letter was an individual letter addressed to M/s Radhika Prints,
Respondent’s Contentions: - Revenue contended that law required the appellants to pay the cess. It was contended that opportunity of hearing was given to the appellants but they did not avail the same. It was submitted that in view of judgment given in the case of M/s Ujagar Prints & Ors. V/s
Reasoning of the Judgment: - The Tribunal held that Revenue had not controverted the evidence submitted by appellants about the payment of cess by the supplier. It was held that the letter dated 15.11.2000 issued by Textile Committee was not a Circular but a letter. In this regard reliance was placed on the judgment given in the case of Ranadey Micronutrients v/s Collector of Central Excise [1996 (87) ELT 19 (SC)] and Paper Products Ltd v/s Commissioner of Central Excise [1999 (112) ELT 765 (SC)]. Thus it was held that the said letter can neither override nor supersede the Circular dated 14.11.1984 and the said Circular was valid and binding on the department.
The Tribunal found that the fact of personal hearing not given to the appellants in the show cause notice issued was not denied by the Revenue. Thus, the Demand notice under Rule 8 was issued without hearing the appellant therefore it was dehors the Rule.
Nothing has been brought on record to show that processors are required to pay the cess even when the same has been paid by the suppliers. It was held that once appellants discharge the burden of payment they absolve themselves from the liability of paying the cess. From the facts, it is clear that the appellants are not liable to pay the cess hence, the Demand notice issued by the Revenue was contrary to law and not sustainable. Impugned Demand notice set aside.
Decision: - Appeal Allowed.
Comment: - If the cess is paid by the principal manufacturer than there is no need to pay the same by job worker as same duty cannot be recovered from two persons and demand notice given without hearing the appellant is not justifiable in the eyes of law.
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Service Tax Section
Case: Polycab Industries v/s Commissioner of C. Ex.,
Citation: 2010 (19) STR 585 (Tri-Ahmd)
Issue: - Credit admissible to jobworker of service tax paid on input services used for making goods on jobwork basis.
Brief Facts: - Appellant doing jobwork on behalf of principal manufacturer under Notification No. 214/86-CE. Appellant has availed credit of various input services utilised by them in manufacturing goods on job work basis. Department contended that credit of said input services is not admissible to the appellant. Matter before the Tribunal.
Reasoning of the Judgment: - The Tribunal held that the issue was no longer res integra and has been settled by Larger Bench in the decision of Sterlite Industries (I) Ltd [2005 (183) ELT 353 (Tri-LB)]. The said judgment was followed in appellant’s own case wherein order No. A/302/WZB/AHD/2009 dated 22.01.1999 was passed. The Tribunal noted that in the case of Laakoonaa Reactions in order dated A/497-498/WZB/AHD/2010 dated 13.05.2010, the Tribunal had held that the duty paid on input services is admissible to the jobworker clearing the goods to principal manufacturer under Notification No. 214/86-CE. Accordingly, impugned order was set aside.
Decision: - Appeals allowed with consequential relief.
Comment: - The judgment clears that cenvat credit of inputs is allowed if these are used in the manufacture of final product which is cleared without payment of duty for further utilization in the manufacture of final product which are cleared by the principal manufacturer on payment of duty.
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Case: Commr of C. Ex.,
Citation: 2010 (19) STR 567 (Tri-Ahmd)
Issue: - If penalty under section 76 is invoked than whether it can be reduced.
Brief Facts: - Demand of service was confirmed against the appellant in Adjudication proceedings and penalty of Rs. 46, 217/- was imposed under Section 76. In appeal before the Commissioner (Appeal), it was held that respondent had violated the provisions of the Finance Act, 1994 and he was liable to pay the service tax demanded from him. However, in view of provisions of Section 80, the penalty imposed under Section 76 was reduced to Rs. 10, 000. Against this part of the order reducing the penalty imposed under Section 76, Revenue has come in appeal before the Tribunal.
Reasoning of the Judgment: - The Tribunal held that if the provisions of Section 80 are applied then the penalties have to be set aside in toto. Once the provisions of Section 76 stand invoked against the assessee, the penalties have to be imposed in terms of the said section and cannot be lowered. Part of the order challenged before the Tribunal set aside. Order of Adjudicating Authority in respect of penalty under Section 76 restored.
Decision: - Appeal allowed.
Comment: - If the section 76 is evoked than penalty can not be reduced or leviable in partial as it will be leviable in terms of the provision of this section but if the aforementioned section is not evoked than penalty will not be leviable in total.
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Case: M/s Sayaji Hotel Limited v/s CCE,
Citation: 2010-TIOL-1357-CESTAT-DEL
Issue: - Whether the notification no. 12/2003-ST can be availed for the food and drink services provided in the Mandap whereas the abatement for the same is granted under notification no. 1/2006-ST.
Brief Facts: - Appellant are hotel functioning since 1996 providing the service of Mandap Keeper and other services. They were paying service tax availing the abatement of 40% in terms of Notification No. 21/1997-ST dated 26.06.97 as amended. After issue of Notification No. 12/2003-ST dated 20.06.2003, appellant started availing benefit of the this notification from March, 2005 and split the bills relating to services rendered for the use of Mandap Keeper and Catering of food and beverages served in the Mandap. Department issued show cause notice for the period from March 2005 to September, 2006 alleging that the benefit of Notification No. 12/2003-St was not available to the appellant. It was contended by Department that appellant were governed by Notification No. 1/2006-ST for concessional taxation in respect of Mandap Keeper service.
The Adjudicating Authority confirmed the demand. Appellant has challenged the impugned order. Stay application is filed before the Tribunal.
Appellate Contention: - Appellant contended that catering services provided is sale of goods on which VAT was paid by them as a registered dealer under VAT law for which value received towards catering is not taxable according to Notification No. 12/2003-ST, It was conteded that Food bills were issued separately for the food supplied and mandap keeper services were billed differently without clubbing both receipts together in view of applicability of said Notification. It was submitted that both the contracts were separate and such factual position was intimated to the Department. Reliance was placed on the judgment given in CCE,
Appellant relied on the decision in Daspalla Hotel Case [2010-TIOL-219-CESTAT-BANG]. Reliance was also placed on CCE v/s Vahoo Colour Lab & others [2010-TIOL-494-HC-P&H] and submitted that catering being works contract and involving sale, service tax is not leviable on such sale. Reliance was also placed on CCE
For grant of stay and waiver of pre-deposit, appellant relied upon the order granted in their own earlier case by the Tribunal reported at 2009 (14) STR 390 (Tri-Del). Reliance was also placed on
Respondent’s Contention: - Revenue contended that in view of law laid down in Tamil Nadu Kalyan Mandap Assn Case [2004 (167) ELT 3 (SC)] on the subject of taxing mandap keeper service, there was no scope for the appellant to argue that service element of catering service cannot be taxed while abatement in terms of Notification No. 1/2006-ST dated 01.03.2006 has been granted by law. It was contended that appellant had deliberately suppressed the material facts in their returns. Reliance was also placed on Saj Flight Services Pvt Ltd v/s Superintendent of Central Excise [2006 (4) STR 429 (Ker)]. In this judgment it was held that payment of sales tax treating the transaction partly as sale of goods does not exonerate the petitioner from liability for service tax under Central legislation which is upheld by the
Reasoning of the Judgment: - The Tribunal noticed that case after case, this appellant has come before the Tribunal for third time to seek waiver of pre-deposit on the same plea that no service tax shall be levied if Sales Tax or VAT is paid. Nearly two years are going to expire from the date of passing of the stay order firstly on 06/8/2008 in Appeal Case No.374 /2008. The Tribunal noted the concern and anxiety of Apex Court in the judgment in Dunlop India Ltd's case [2002-TIOL-156-SC- CX] in which the Supreme Court had observed, "The Court has therefore to strike a delicate balance after considering the pros and cons of the matter lest larger public interest is not jeopardized and institutional embarrassment is eschewed."
On merits of the case, the Tribunal relied upon the judgment given in Tamil Nadu Kalyan Mandap Assn v/s Union of India [2006 (3) STR 260 (SC)] wherein it was held that nature and range of service provided by Mandap Keeper were essentially that of providing variety of services and facilities in any manner including provision of service of catering in relation to the use of the mandap and established the fact that the transaction between a mandap keeper and service recipient is not in the nature of a sale or purchase of goods and held the levy constitutional. For the tax on services rendered by mandap keeper it was held that they were in pith and substance, a tax on services and not a tax on sale of goods and because of the fact that tax on the sale of the goods involved in the said service can be levied does not mean that a service tax cannot be levied on the service aspect of catering.
The Tribunal noted that the legislature in its wisdom covered wide amplitude of service involved in mandap keeper service to tax such service under Finance Act, 1994 granting suitable abatement, leaving value of food catered in the premises of mandap to be taxed by State legislature. Though the Service Tax is levied on the gross amount charged by the mandap-keeper for services in relation to the use of a mandap and also on the service of catering, the Government has yet decided to charge the same only on 60% of the gross amount charged by the mandap -keeper. Accordingly levy of sales tax or VAT on the value of food catered by a mandap keeper under State legislation does not alter or affect the levy of service tax under Finance Act, 1994 on the aspect of catering service provided by mandap keeper through the above abatement formula since legislature has great latitude in the matters of taxation. This view was fortified by the judgment passed in the case of Saj Flight Services Pvt Ltd v/s Superintendent of Central Excise.
The Tribunal considered the interpretation of phrases “in relation to”, “including” and “include” by the Apex Court in the judgments given in M/s Doypack Systems Pvt Ltd v/s Union of India and Others [1988 (36) ELT 201 (SC)], Renusagar Power Co Ltd v/s General Electric Company and Another [(1984) 4 SCC 679], Thyssen Stahlunion GMBH v/s Steel Authority of India Ltd [(1999) 9 SCC 334] and Regional Director, Employees’ State Insurance Corporation v/s High Land Coffee Works of P.F.X, Saldanha and Sons & Anr [(1991) 3 SCC 617] wherein it was held that wide amplitude is to be given to these phrases.
The Tribunal held, "Taxable services u/s 65 (105)(m) of the Finance Act, 1994, therefore not only includes providing of mandap premises on a temporary basis for organizing any official, social or business functions, but also includes other facilities and services provided in relation thereto including catering".
The Tribunal examined the provisions of Notification No. 12/2003-ST dated 20/06/2003 relied upon by the appellant. The notification stated that value of goods and materials sold by the service provider to a recipient of service while providing service, shall not be liable to service tax subject to the condition that there is documentary proof specifically indicating the value of the said goods and materials sold and cenvat credit on input was not availed.
In the present case, the Tribunal held that when the appellant pleads that catering and mandap keeper services were separated splitting the bills, prima facie it was noticed that service element of catering has escaped taxation while that service was provided by the appellant to the recipient of services of mandap keeper.
It was held that prima facie, Revenue's plea of applicability of Notification No.01/2006-ST dated 01/03/2006 to the case of the Appellant appears to be sound when law is clear to immune goods and materials from levy of service tax.
The Tribunal held that decision in Sky Gourmet Pvt. Ltd. does not say that service element involved in catering is not liable to service tax. That too when Apex Court's Constitutional Bench decision in the case of Tamil Nadu Kalyan Mandap Assn. Vs. Union of India [2004-TIOL-36-SC-ST] is directly on the point, it appears that attention of the Bench was not invited to such decision while deciding Daspalla Hotel's case which has been relied upon by the appellant. Neither Finance Act, 1994 nor the Notification No.12 /2003 dated 20/06/2003 nor the Notification No.01 /2006 dated 01/03/2006 intend to tax the value of goods involved in providing taxable service. Therefore appellant's reliance on Daspalla Hotel's case is of no help to them.
Tribunal further held that Appellant's reliance on the judgment in Vahoo Colour Lab & others and on the case of CCE Meerut -I Vs. M/s Technica Color Lab is of no help to them since decision in those cases were rendered on a different taxable entry under Finance Act, 1994.
Tribunal further observed, "Law being well settled by Constitutional Bench of Apex Court in the case of Tamil Nadu Kalyan Mandap Assn. Vs. Union of India to impose service tax on the gross value of mandap keeper service including catering service, there appears no ambiguity in taxation of service aspect of catering along with service of mandap keeper according to the abatement formula provided by legislature. Prima facie it appears that the modus operandi followed by the appellant segregating gross receipt of catering service from the gross value of mandap keeper service has made its modus operandi questionable and it appears that such practice has caused loss of revenue."
Tribunal held "Appellant's argument that because Sales Tax/VAT has been imposed on catering is illogical since service aspect of catering activity has been intended to be taxed by the taxing entry of section 65 (105) (m) of the Finance Act, 1994. The pleading of the appellant that catering service is not to be included in mandap keeper service due to involvement of goods in catering service is untenable for the reason that legislature did not intend to tax value of the goods under the taxable entry of sec.65 (105) (m) of the Finance Act, 1994. There is no disguised commodity taxation made by this law. Only service aspect of catering is intended to be taxed by this entry with appropriate abatement which is permissible to the legislature and has been done in a compounding manner in terms of Notification No.01 /2006-ST dated: 01/03/2006.
The counsel's argument that because Bangalore Bench of Tribunal has held in favour of assessee in the case cited by the appellant, pre deposit should be waived in the present case did not appeal to the Tribunal when Apex Court in the case of Vishnu Traders Vs. State of Haryana And Others cited by appellant has laid down the law that factual difference require a different treatment.
The Member (Technical) in separate agreed with the above judgment given by Member (J) and relied upon the judgment given in the case of Federation of Hotels & Restaurants Association v/s Union of
It was held that the contention of appellant that the word ‘sale’ in Notification No. 12/03-ST would include “deemed sale” under Article 366 (29A) (f) also and therefore, the amount charged for service food and drinks in the course of providing service in relation to use of Mandap would be exempt from service tax under Notification No. 12/2003-ST was not acceptable prima facie in view of judgment given in State of Maharashtra v/s Laljit Rishi Shah [(2000) 2 – SCC-699] and Imagic Creative Pvt Ltd v/s Commissioner of Commercial Tax [2008-TIOL-04-SC-VAT].
It was held that appellant had not established prima facie case in their favour. In view of Benera Valve [2006 (204) ELT 513 (SC)] it was held that total waiver of pre-deposit was not warranted. The Tribunal directed the appellant to make pre deposit of Rs.60.00 lakhs within four weeks of pronouncement of this order and report compliance 08.11.2010. Subject to such compliance, realization of penalty imposed u/s 78 of Finance Act, 1994 and other penalty levied u/s 76 of the said Act as well as interest levied on the demand shall be stayed during pendency of appeal.
Decision: - Pre-deposit ordered.
Comment: -If the documentary proof which is separating the value of the foods and drinks sold is there and cenvat credit on input was not availed than the service tax will not leviable on the same.
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Customs Section
Case: M/s Agarwalla Timbers Pvt Ltd & Ors v/s CC Kandla
Citation: 2010-TIOL-1378-CESTAT-AHM
Issue: - Whether refund claim of 4% SAD is admissible in the case where imported goods were round logs and the goods sold were sawn timber and were classifiable under different Tariff Headings.
Brief facts: - Appellants were paying the 4% Special Countervailing duty (SAD) in terms of Notification No. 19/2006-Cus dated 01.03.06 on import of round logs falling under heading 44039929. They claimed refund of 4% SAD paid in terms of Notification No. 102/2007-Cus dated 14.09.2007. The Department while scrutinizing the refund claims found that the imported goods were round logs whereas the goods sold were in the form of sawn timber and therefore, the identity of the goods sold and the ones imported were different and no co-relation between the imported goods and goods sold could be established. Thus, show cause notices were issued proposing to reject the refund claims. After adjudication, the refund claims were rejected.
The impugned order was upheld by the Commissioner (Appeal) in appeal. It was held on examination of the HSN explanatory notes of heading 4403 and 4407, that the imported round logs falling under heading 4403 when subjected to sawing in different sizes and length completely changed the identity as round logs and when such round logs after being subjected to sawing were sold as sawn timber in different sizes and length attained a distinct or separate identity other than the identity at the time of importation as round logs. It was further observed that to be eligible for refund, the imported goods should have been sold as such without any modification and the moment further processing was undertaken and the imported logs were converted to sawn timber, refund became inadmissible. The Commissioner (A) had further held that even though the process did not amount to manufacture, the goods have not been sold in the form in which they were imported thereby rendering the appellants ineligible for the refund.
Hence, the appellant are before the Tribunal.
Appellant’s Contention: - Appellant contended that sawn timber cannot be classified under heading 4407 and is classifiable under heading 4403. It was contended that by processing of the timber which results in conversion of logs into sawn timber, no manufacturing took place and classification of the imported item remained the same. Reliance was placed on CCE,
Appellants narrated the history of introduction of special additional duty and also relied upon the Budget speeches given by the Finance Minister for the year 2005-06. Appellant further relied upon the judgments given in the case of Vijoram Chem Pvt Ltd v/s CC, Bangalore [2006 (199) ELT 751 (Tri-Bang)]. It was contended that the Tribunal had taken a similar view in CC, Mangalore v/s HPCL Ltd [2006 (202) ELT 335 (Tri-Bang)].
It was contended that use of the words as such is very important and in the absence of use of such words, the appellants do not become ineligible by undertaking processing. It was contended that there is no such chapter note regarding deemed manufacture in the articles under consideration and words as such have also been taken out of the notification. It was contend that sawn timber and timber are the same goods. In this regard, reliance was placed on State of Orissa & Others v/s Titaghur Paper Mills Company Ltd and Another [1985 (Supp) SCC (280)] wherein the Supreme Court had held that timber and sawn/dressed logs are same goods within the meaning of proviso to Section 8 of Orissa Sales Tax Act.
Reliance was placed on the judgment given in
Appellant relied upon State of Maharashtra v/s Shiv Datt and Sons and Others [1993 Supp (1) Supreme Court Cases 222] where there was a sale of recharged batteries by the dealer who purchased them as dry batteries from the manufacturer, it was held that there was no manufacture involved in re-introducing the electric light and re-charging the batteries for sale and the dealer was entitled for concession under Section 8 of deduction from turnover of goods sold on which purchase tax had already been paid.
Respondent’s Contention: - Revenue contended that refund could only be paid when the same imported goods were sold subsequently in view of the clause that when imported into
Revenue relied upon the Circular No. 15/2010-Cus dated 29.06.2010 wherein it was stated that refund of SAD is available only in case of imported goods are subsequently sold on payment of VAT without carrying out any process.
Reliance was placed on Novopan India Ltd v/s CCE & Cus,
Reasoning of the Judgment: - The Tribunal held that if the timber had been classified under heading 4407, the department would be required to show that the process amounted to manufacture and new commodity with distinct character, name and use had emerged.
The decisions relied upon by the appellant related to manufacture in respect of timber related to the period prior to introduction of the Tariff based on HSN and the decisions were rendered holding that sawn timber cannot be levied to duty under item 68 of the Erstwhile Tariff. Accordingly, it was observed that if the process did not amount to manufacture and was not liable to duty under erstwhile Tariff, the same principle would apply today also due to the fact that the definition of manufacture has not changed. It was held that contention of the appellant that sawn timber remains under heading 4403 was not rebutted effectively.
Further it was observed that it is settled law that whether a process amounts to manufacture or not has to be established by the department and not by the assessee. In the instant case, Department has not established that a new commodity had emerged which was classifiable under heading 4407.
Further, the Tribunal held that from the Budget speeches it was clear that the rationale for imposition of special CVD (SAD) and refund was that when sales tax is paid at the time of sale in India after import, the importer would be paying sales tax again and therefore to counter balance the sales tax payable refund of SAD has been provided for.
The Tribunal further held that even when the words as such were used, the Tribunal had taken a view that re-packing would not render the appellants ineligible for exemption, that too even when such process amounted to manufacture.
In view of the judgment given in
With regard to Circular No. 15/2010-Cus, the Tribunal held that the said circular further stated that importers have manipulated the facts while claiming refund. It was held that the Board circular gives an impression that when the goods sold are having a different classification, SAD refund would not be available. The Tribunal accordingly held that department had not proved or shown any evidence that goods have undergone manufacture and therefore SAD benefit is not available. No evidence has been put forth to show that sawn timber fell under heading 4407. Therefore, reliance on this circular would not help Revenue. In any case, it is settled law that judicial precedents would prevail over the circulars issued by the Board.
With regard to strict interpretation of Exemption Notification, the Tribunal held that it should be strictly construed but the Revenue in this case has not shown that the judgment given in Vijoram case was set aside.
Thus, it was held that Revenue has not made out a case that the process undertaken by the appellants resulted in different products thereby rendering them ineligible for refund of SAD paid by them.
Decision: - Appeals allowed.
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