PJ/Case Laws/2010-11/29
CASE LAWS
Prepared By:
CA Pradeep Jain and
Sukhvinder Kaur, LLB [FYIC]
Central Excise Section:
Case: Amar Remedies v/s Commissioner of Central Excise,
Citation: 2010 (257) ELT 552 (Tri-Ahmd)
Issue: - Can credit be taken before registration? Is registration a procedural or mandatory requirement?
Brief Facts: - Appellants are engaged in the manufacture of Tooth paste/Powder (Ayurvedic), Balm and Gateup. They took cenvat credit on the strength of invoices issued in the name of their unit in
Against this order, appellant filed appeal before the Commissioner (Appeal). The Commissioner (A) upheld the demand but set aside the penalty imposed. Appellant is in appeal before the Tribunal against the said order. Revenue is in appeal against the setting aside of penalty. Appellant has also filed cross-objection in Revenue appeal.
Appellant’s Contentions: - Appellant contended that they had shifted their unit from
It was contended that credit is being denied on the procedural aspect of taking registration late. It was submitted that there are many decisions wherein it was held that the substantive right cannot be denied on technical infirmities.
It was also contended that they were not given the opportunity to submit the evidence to show that the goods were received in the factory. The said evidence is produced before the Tribunal.
Respondent’s Contentions: - Revenue contended that the condition of registration is mandatory and they have availed credit in contravention of Cenvat Credit Rules, 2004. Therefore, appellants were liable to penalty.
Reasoning of the Judgment: - The Tribunal held that it was not the case of Revenue that the appellant were not eligible for registration or registration was denied to them on any stage. The only contention raised by Revenue is that appellant has taken credit before the taking registration. In this regard, it was held that there are plethora of judgments wherein it has been held that substantive right cannot be denied on technical infirmities. Therefore, credit cannot be denied to the appellants.
Further with regard to the claim of the appellants that the inputs were duty paid and were actually received in the factory, the Tribunal observed that this aspect was not examined by the Lower Authorities as credit was denied at the threshold. Therefore, benefit of credit cannot be denied without verifying the genuineness or correctness of their claim and credit cannot be denied only on the ground that they have availed credit prior to obtaining registration. Therefore, the case is remanded for limited purpose of verification of appellant’s claim. Imposition of penalty will also arise on verification of the said claim.
Decision: - Revenue’s appeal disposed off. Appellant’s appeal allowed by way of remand. Cross Objections also disposed off.
Comment: - This is very good decision where the Cenvat credit is allowed before registration. In practical, we come across such a situation many times. Hence, this is very useful decision.
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Case: Golden Tobacco Ltd. v/s Commissioner of C. Ex., Vadodara-II
Citation: 2010 (259) E.L.T. 269 (Tri. – Ahmd.)
Issue: - Rule 6 is not applicable for exempted by-product.
Brief Facts: - Appellants are engaged in the manufacturing of Cigarettes and Cut Tobacco. A by product “Tobacco refuse” which is exempted from payment of duties by Notification no. 3/2005-C.E. dated 24-2-2005 emerged during the manufacturing process. Revenue issued show cause notice demanding that the appellant is required to pay duty @10% of value of exempted goods in terms of Rule 6 of CCR. It was alleged that the appellant were not maintaining separate account of inputs used in the dutiable as well as exempted final product. The Original Adjudicating Authority confirmed the demand of duty along with interest and imposed penalty. The appellant filed appeal before the Commissioner (Appeal).
The Commissioner (Appeals) relied upon the judgment of High Court of Mumbai in the case of Rallis India Ltd. V/s UOI [2009 (233) E.L.T. 301 (Bom.)] vide which the Larger Bench decision holding that the assessee is required to pay 10% amount of the value of exempted product, in terms of Rule 6 even though the product in question may be by-product.
The Commissioner (Appeals) observed that the High Court had allowed the appeal as by-product in that case i.e. Mother Liquor was held not to be a final product. It was observed that in the present case, “Tobacco refuse” was a final product, which is charged to duty but exempted from payment of duties by virtue of Notification no. 3/2005-C.E., therefore, the judgment of the Mumbai High Court was not applicable. The appeal was rejected.
Hence, appellant is before the Tribunal.
Reasoning of the Judgment: - The Tribunal held that the show cause notice in appellant’s case clearly showed that the Revenue was treating the “Tobacco refuse” as a by product. And the Adjudicating Authority had also confirmed the demand by considering the “Tobacco refuse” as a by product. Thus, it was held that the Appellants were not manufacturer of “Tobacco refuse” and the same was a by product arising during the course of manufacture of their final product. “Tobacco refuse” is a specified item against Central Excise Tariff and has been exempted by virtue of Notification, will not change of “Tobacco refuse” from by product to final product. But “Mother Liquor” was specified item and exempted by way of issuance of particular Notification. The High court held that as Mother Liquor was a by product which came into existence during manufacturing of final product the assessee was not liable to pay amount 8%/10% in term of Rule 6.
Thus, the Tribunal held that the Tobacco refuse was a by-product as stated by the Revenue in show cause notice and therefore the ratio of the judgment of Mumbai High Court was squarely applicable to the appellant’s case. Impugned order set aside.
Decision: - Appeal Allowed with consequential relief.
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Case: Venus Metal Works v/s Collector of C. Ex.,
Citation: 1998 (98) ELT 257 (Tribunal)
Issue: - The benefit of alternate exemption notification is available to assessee if the first claimed notification is denied. The benefit of credit is also allowed if the demand of earlier period is confirmed.
Brief Facts: - Appellants claimed the classification of the goods castings and cast article under Chapter heading 7325.10 together with the benefit of Notification No. 275/88. The Adjudicating Authority rejected their claim by holding that the goods were to be classified under Chapter 84 or 85 depending upon end use. It was however, held that benefit of the Notification No. 223/88, dated 23-6-1988 would be admissible to them. The First Appellate Authority upheld the impugned order. Hence, appellant is before the Tribunal.
Appellant’s Contention: - Appellant referred to the manufacturing processes carried out by them. Appellant made an alternative claim that these processes did not take the products beyond the stage of casting and accordingly the benefit of Notification No. 233/88, dated 23-6-1988 applicable to sub-heading No. 7325.10 or 7320.00, as the case may be, would be admissible in their case. Appellant contended that the alternative claim would be covered by the judgment given in Shivaji Works Limited v. Collector of Central Excise, Aurangabad [1994 (69) E.L.T. 674] which had been followed subsequently in Paramount Centrispun Castings Limited v. Collector of Central Excise, Nagpur [1995 (77) E.L.T. 705] and other cases.
It was contended that the appellant had originally claimed duty free clearance of the goods under Notification No. 277/88 they had not made a specific claim for the benefit of Notification No. 175/86 as a small scale industry. They had, however, disclosed the fact in the classification list that they were registered with the Director of Industries as a small scale unit. After the Adjudicating Authority had turned down their case for complete exemption under Notification No. 277/88 they had raised this plea for eligibility for benefit of Notification No. 175/86 in their appeal before the First Appellate Authority. But this was accepted by the First Appellate Authority. It was accordingly submitted that in any event this exemption should be available to them and even if they are held liable to pay duty with the benefit of partial exemption under Notification No. 223/88, the benefit of Modvat credit may be granted to them and the fact that they had not filed a declaration under Rule 57G at the appropriate time should not be held out against them.
Respondent’s Contentions: - Revenue pointed out that the Adjudicating Authority had while rejecting the claim for exemption under Rule 175/86, nevertheless allowed the benefit under another Notification No. 277/88. It was emphasized that the processes carried out by the appellant which had been referred to in the adjudication order are of a type which will clearly take the goods beyond the stage of mere castings. They are machined castings.
In this regard, reliance was placed on the judgment given in Eastern Die Casting Industry Pvt. Limited v. CCE, Calcutta [1997 (94) E.L.T. 437 (S.C.)] where the goods under consideration were held to be classifiable under erstwhile Tariff Item 68 and not castings under 1A or 27A(ii). It was submitted that though this judgment related to a case under the old Tariff Item 68 and the competing entries in the present tariff are more specific. The ratio of the aforesaid decision treating such product as not casting would be equally applicable in the appellant’s case also.
Reasoning of the Judgment: - The Tribunal held that judgment of the
The Tribunal further held that the disputed goods while not being mere casting, have nevertheless only undergone the processes therefore they still fell within the scope of Notification 223/88 however this Notification was equally applicable to castings falling under Chapter 73 as also products falling under 84 and 85.
The Tribunal held that the judgments cited by the appellant squarely covered their case and held that the disputed goods would qualify for the benefit of Notification No. 223/88.
Further it was held that while assessing the goods in terms of this classification read with this Notification, the claim for grant of modvat benefit would be required to be considered by the jurisdictional officer without disqualifying them on the ground that declaration under 57G had not been filed by them at the assessment stage. The said declaration was not filed at the assessment stage because their claim then was for the benefit of Notification 277/88 which granted complete exemption from duty subject to the condition that no credit had been availed of in respect of the inputs. Since this classification had been rejected and the need for payment of duty arose only after the classification under a different tariff heading came to be decided, the requirement under 57G should not be a factor for denying the credit once duty is demanded consequent to rejection of the classification claimed and applying a different classification.
Accordingly, the Tribunal held that the appellant would be eligible for the benefit of Notification 223/88 as applicable to castings and cast articles of iron under Chapter 73. The benefit of Modvat credit as admissible is to be considered on merits notwithstanding the non-filing of the declaration under Rule 57G at the original stage. The Tribunal remanded the matter for considering the plea for the benefit of Notification 175/86 made by the appellant before the First Appellate Authority. Impugned order set aside.
Decision: - Appeal partly allowed.
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Case: CCE,
Citation: 2010 (102) RLTONLINE 40 (ALL)
Issue: - The charge of clandestine removal cannot be based on single factor of excess consumption of electricity.
Brief Facts: - Respondent No. 1 and No. 2 are engaged in the manufacture of MS ingots. They were maintaining books of account as provided under Central Excise Rules, were furnishing the returns and paying central excise duties. For the period from 2001-02 to 2004-05, Revenue issued show cause notice to the respondents on the ground that there was excess production of goods. This allegation was based on the consumption of higher electricity in respondent’s factory. Revenue invoked the proviso to Section 11A(1) of the Act and sought to impose penalty under Rule 25 (1) of the Central Excise Rules, 2002 read with Section 11AC of the Act.
The Adjudicating Authority confirmed the demand and impose penalty on respondent no. 1 and no. 2. Aggrieved by this order, Respondent went in appeal before the Tribunal. The Tribunal set aside the impugned order. Against the order of the Tribunal, Revenue is in appeal before the High Court.
Reasoning of the Judgment: - The High Court perused the order passed by the Tribunal. In its order the Tribunal had observed that it is settled principle of law that the electricity consumption can not be the only factor or basis for determining the duty liability, that too on imaginary basis, especially when Rules 173E mandatorily requires the Commissioner to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances.
The Tribunal further observed that no experiments had been conducted in the factories of the respondent no. 1 and no. 2 for devising the consumption norms of electricity for producing one MT of steel ingots. The Tribunal also observed that the electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. Therefore, no universal and uniformly acceptable standard of electricity consumption could be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations.
The Tribunal has also considered the report of Dr. Batra, which has been relied upon for making the allegations that there was higher electricity consumption. It appeared that Dr. Batra in his report had observed that for the production of 1 MT of steel ingots, 1046 units electricity required.
With regard to various other allegations relating to the fictitious firms and the income from the share trading, the Tribunal recorded the finding that since the incriminating statements of share brokers etc. have been relied upon in the proceedings, it was incumbent upon the Revenue to produce them as well as the investigating officer for cross examination by the respondents, as was repeatedly requested by them. In the absence of the same, the statements of the share brokers etc. cannot be relied upon. The Tribunal further observed that even if, for the sake of argument, it is accepted that the income shown in the balance sheets is not the income derived from the sources declared by the appellants, there is nothing on record to link it with the so called clandestine removal of the goods.
The High Court accordingly held that the findings of the Tribunal were based on the material on record and the said findings could not be said to be without any material and perverse.
It was further held that Revenue had invoked the proviso to Section 11A (1) of the Act but no case was made out in the show cause notices or in the adjudication order that there were any mis-statement, suppression of fact or fraud on the part of the respondents. No substantial question of law arises from the order of the Tribunal.
Decision: - Appeal dismissed.
Comments: - It is very good decision. The department normally raises the demand on the basis of consumption of one factor but it has to be corroborated by other factors.
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Case: Union of
Citation: 2010-TIOL-744-HC-CHHATTISGARH-CX
Issue: - Cenvat credit cannot be denied on the basis of procedural infractions. When the duty payment, receipt of inputs in factory and its utilization is not in dispute, the cenvat credit cannot be denied.
Brief Facts: - Respondent availed cenvat credit on the strength of the invoices issued by their supplier during the moths of November, 1995, September, 1995 and January, 1996. Revenue issued show cause notices proposing to disallow credit on the ground that the invoices were not proper. The Adjudicating Authority passed the order disallowing credit taken on impugned invoices and imposed penalty of Rs. 1 lakh and of Rs. 15, 000/- respectively. The respondent filed appeal before the Commissioner (Appeal) which was dismissed. The respondent filed further appeal before the Tribunal.
The Tribunal allowed the appeal of the respondent by observing that there was no dispute as to the payment of duty and the use of the goods in the final product. Therefore, in view of the amendment made in Rule 57G of the Rules and in view of the Board’s circular dated 22.03.1999, set aside the impugned order.
Against this order, Revenue is in appeal before the High Court.
Appellant’s Contentions: - Revenue contended that the provisions relied upon by the Tribunal also stipulated that “wherever the Assistant Commissioner, after making due enquiry, is satisfied that the Modvat credit taken by the assessee is incorrect, adjudication proceedings in the normal course should be initiated”.
It was contended that verification of the invoices submitted by the respondent, it was found that the supplier did not submit the subject invoices alongwith their monthly return and the details of the goods received and sold were not entered in RG 23 D Register. This fact was informed by the Department of the supplier to the respondent vide letter dated 09.08.1999 which was not countered by the respondent. Thus, it was held that the documents furnished by the respondent-assessee were improper and not valid documents for availing duty of credit under the Modvat scheme.
Reliance was placed on the judgments given in the case of Mangalore Chemicals & Fertiizers Ltd v/s Dy. Commissioner [1991 (55) ELT 437 (SC)] and in Tide Water Oil Co. (India) v/s Commissioner of Central Excise, Ghaziabad [2003 (156) ELT 861 (Tri-Del)].
Respondent’s Contention: - Respondent contended that Cenvat credit was held inadmissible only on the ground of procedural lapses on the part of input supplier. But there was no dispute regarding payment of duty on the inputs and its utilization in the manufacture of their final product. This fact has also not been controverted in the show cause notices.
It was contended that Notification dated 09.02.999 had amended Rule 57G of the Rules and inserted sub-rule (11) which provided that the duty should not be denied to an assessee on the ground that any documents referred to in sub-rule (3) does not contain the particulars required to be contained therein. If the documents contain the details of payment of duty, description of goods, assessable value, name and address of the factory or the warehouse and if the inputs received were duty paid and they have been actually used in the manufacture if final products by the recipient, credit of duty should not be denied. It was submitted that after the amendment of Rule 11, Board had issued Circular dated 23.02.1999 and directed the department to allow Modvat credit of the duty paid on inputs/capital goods ignoring the minor procedural lapses in filing declaration or in the invoice or document, based on which credit is to be availed, after ensuring that inputs or capital goods have suffered duty and the same are being used or are to be used in the process of manufacture by the recipient. The said Circular further clarified that the pending cases were also to be disposed of in accordance with the said Circular by applying the amendment dated 09.02.199 made to Rule 57G.
It was contended that in the show cause notices the only allegation made was that “transporter’s copy” was handwritten/printed in the invoice at the place of “extra copy/octroi”. But in the impugned order, credit has been disallowed and penalty imposed on the ground that the jurisdictional excise officer of the supplier had reported that the supplier had not entered the details of goods sold to respondent in its RG 23D Register as required under Rule 57GG of the Rules. Thus, the allegation on which the impugned order was passed was not part of the show cause notice issued to the assessee.
It was contended that it is not the case of the Revenue that the invoices, on which Modvat credit has been availed, do not contain details of payment of duty, description of goods, assessable value, name and address of the factory or the warehouse. It was contended that the Lower Authorities had not followed the Circular dated 23.02.1999.
It was contended that the lapses as alleged in the show cause notice were on the part of the supplier for not complying with the provisions of Rule 57GG and the same cannot be a ground for denial of Modvat credit to the respondent. Moreover, no proceedings were initiated against the supplier for lapses allegedly made and therefore, proceedings against the respondent were not tenable.
It was alleged that the judgment given in Mangalore Chemicals & Fertiizers Ltd v/s Dy. Commissioner was not applicable to the facts of the present case. It was contended that in the said judgment the Supreme Court had held that while interpreting an exemption notification, non-compliance of substantive conditions of mandatory nature will render the availment of exemption nugatory but in the respondent’s case, they had complied with the substantial condition and breach alleged in the show cause notice was only in respect to procedural condition. It was held that the decision in Tide Water Oil Co. (
Reasoning of the Judgment: - The High Court held that the ground taken in the show cause notice for denying the credit was that the documents were improper as they were tampered with as there was handwritten corrections made. It was only after the issuance of show cause notices that it was found that the supplier had not submitted the subject invoices alongwith their monthly return and details of the goods received and sold were not entered in their RG 23 D Register.
The High Court held that in the present case there was no allegation in the show cause notice that necessary particulars, as required under Rule 57G were not available in the invoice or that the supplier had not paid duty on the product and that the respondent received the product in its premises in the mentioned quantity and the same was not used or was not to be used for manufacture of final dutiable product.
The High Court held that the sub-rule (11) of Rule 57G inserted by amending Rule 57G manifestly provided that credit is not to be denied under sub-rule (2) on the ground that any of the documents mentioned in sub-rule (3) does not contain all the particulars required to be contained therein under this rule. If such document contains details of payment of duty, description of goods, assessable value, name and address of the factory or the warehouse, and the Assistant Commissioner having jurisdiction over the factory of manufacture intending to take credit, is satisfied that duty on the duty on the input has been paid and such input has actually been used or are to be used in the manufacture of final product, credit of duty cannot be denied to the assessee.
Reference was made to the Circular dated 23.02.1999. It was held that denial of credit was on the basis of information given by jurisdictional superintendent that the supplier had not submitted the impugned invoices with their monthly return and details of the goods received and sold were not entered in RG 23D Register. The said procedural lapse was attributable to the supplier and not to the respondent.
It was held that the judgment given in Mangalore Chemicals & Fertiizers Ltd v/s Dy. Commissioner was not applicable to the facts of the present case. It was held that the Tribunal had rightly allowed the appeal in view of the amendment made in Rule 57G and the Board’s Circular issued in the light of the amended rules. No infirmity in the impugned order of the Tribunal. Substantial question answered in favour of respondent-assessee.
Decision: - Appeal dismissed accordingly.
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Service Tax Section
Case: FIIT Jee Ltd v/s Commissioner of Service Tax,
Citation: 2006 (4) STR 143 (Tri-Del)
Issue: - Penalty under Section 76 of Service tax cannot be imposed without malafide intention.
Brief Facts: - Appellants were registered as Commercial Training and Coaching Centre and were paying service tax for providing the said service. Department observed that for the period from July 2003 to September 2003, the appellants had short paid service tax. Accordingly, show cause notice was issued demanding the short payment and also irregular availment of service tax credit.
During the pendency of the proceedings, appellant paid the service tax short paid and also deposited the amount of service tax irregularly availed alongwith interest. The Adjudicating Authority confirmed the demand and appropriated the amount debited by the appellants and also appropriated the amount paid by the appellants as interest. Equal penalty under Section 76 was also imposed.
Appellant are challenging the imposition of penalty on them.
Appellant’s Contentions: - Appellant contended that the Adjudicating Authority had given finding that due to bona fide error the appellants had short paid the service tax and therefore, no penalty was required to be imposed on them.
Reasoning of the Judgment: - The Tribunal perused the order of the Adjudicating Authority wherein it was found that the lapse on the part of appellant was due to the fact that service tax was newly levied on the said service on 06.07.2003 and there was some confusion. It was also found that the appellant had rectified the mistake and there was no mala fide intention on their part. The Adjudicating Authority had invoked Section 80 and restrained from imposing penalty for the said mistake.
The Tribunal held that the Adjudicating Authority had given the above reasoning but in the operative part of the order had imposed penalty under Section 76. It was held that there was some confusion on the face of the order itself, as having come to the conclusion that the appellants have no mala fide intention imposition of penalty on the appellants seems to be an error on the part of the Adjudicating Authority.
Accordingly, the Tribunal set aside the part of the impugned order imposing equal penalty under Section 76.
Decision: - Appeal allowed accordingly.
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Case: Sports Club of Gujarat Ltd v/s Union of
Citation: 2010 (20) STR 17 (Guj)
Issue: - The service tax on Mandap keeper cannot be imposed on club or association.
Brief Facts: - Petitioners are companies registered under Companies Act, 1956. Their main object is to promote different games and sports in the State of
Thereafter vide various letters, Revenue has taken the stand that provisions of Section 66 were applicable to the petitioners and they were liable to pay service tax. Consequently, show cause notices were issued to the petitioners under Section 70 and 77 of the Finance Act, 1994 demanding service tax for providing the service of mandap keeper. Aggrieved by the said action of Revenue Department, petitioners have filed the petitions before the High Court.
Petitioner’s Contention: - Petitioners contended that the services offered by them were only as a matter of convenience for the use of its members and the invites which is one of the objects of the clubs. The facilities extended by them cannot be classified as a trading activity.
It was submitted that there was no element of transfer of property from one to the other when the Clubs arrange for the supply of services to member/s since the property continued to be of its members. When the club provided its facilities to its members for official, social or business functions, there was no letting-out of its immovable property for any consideration. Hence, the ingredients of clauses (19) or (20) of Section 65 of the Finance Act get attracted. It was submitted that there was no elements of transfer between the member and the club when the club provides its members the facility to use its property for any function. Therefore, the petitioners can in no way be classified as Mandap Keepers.
Reliance was placed on the judgments given in the case of Dalhousie Institute v/s Assistant Commissioner, Service Tax cell [2006 (3) STR 311 (Cal)] and in Saturday Club Ltd v/s Asst. Commissioner, Service Tax Cell, Calcutta [2006 (3) STR 305 (Cal)]. Accordingly, it was contended that in view of the ratio laid down in these judgments, the Union Government had also amended the Finance Act, 1994 in 2005 which became effective from 16.06.2005. It was contended that the Union Government had indirectly endorsed to their contentions.
Respondent’s Contentions: - Revenue contended that Memorandum of Association of the petitioners include the leasing or hiring of any moveable or immovable property as one of its object. The kind and scope of services, which attract service tax levy, have been well-defined in the service tax legislation. The petitioners are providing the services in relation to the use of its banquet halls, lawns, etc to its members and therefore it were covered by the scope of “taxable service” provided by a “Mandap Keeper” within the meaning of Section 65 (20).
It was contended that as per the definition of Mandap and Mandap Keeper in Finance Act, 1994 which describe the nature of levy, the taxable event and the person who is liable to pay tax, the levy covers not only establishments having regular business but also, the conference rooms, halls etc which are let out for conducting official, social or business functions. It was submitted that the services rendered by the clubs in the form of temporary occupation of its premises, viz the banquet halls, lawns etc to its members, their families and guests, are charged for a consideration and that the same are being paid by the members. Hence, the services rendered by the clubs of allowing its members temporary occupation of its premises will attract the levy of service tax. The tax on the services rendered by the clubs is in pith and substance a tax on the services. The clubs are already exempted from the levy of income tax and therefore, it would not be proper to grant them exemption even under the Service Tax Act.
Reliance was placed on the judgment given in Tamil Nadu Kalyana Mandapam Assn. v/s Union of
Reasoning of the Judgment: - The High Court perused the definitions of “mandap”, “mandap keeper” and of “taxable service” under the Finance Act, 1994. IT was held that a conjoint reading of the said provisions of law showed that the services provided to a client, including the facilities provided in relation to its use and also the services, if any, rendered as a caterer, by a person who allows the temporary occupation of any immovable property, as defined in Section 3 of the Transfer of Property Act, 1882 and which also includes any furniture, fixtures, light fittings and floor coverings therein, let out for consideration, for organizing any official, social or business function, in any manner, falls under the category of taxable service.
The High Court, while interpreting the definitions, held that the first criteria is to be decided whether the service is provided to a client. While seeing the definition of word “client” in various dictionaries, it has held that an element of agency is implicit between a person and the agency providing service to him. It was held that the member of a club is not a client of the club. Thus, it is well settled law that in between the principal and agent when there is no transfer of property available, the question of payment of service tax does not arise.
Secondly, the authority cannot impose the service tax twice i.e. once upon the person carrying “mandap keeper” and then on member club.
Further, it was held that for applicability of service tax, there should be two sides.”Members” and “club” both are same entity.
The court further held that members are exclusively allowed to participate the services rendered by club and no third party is allowed. Only guests of members are allowed. This cannot be termed as “lease” or “hire”.
The principle of “mutuality” is squarely applicable in this case.
Moreover, the
Decision: - Petitions allowed.
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Case: CCE,
Citation: 2010 (102) RLTONLINE 42 (P&H)
Issue: - Whether the credit of input service availed at the time of receipt of inputs is required to be reversed at the time of clearance of inputs as such when the said service tax credit is in respect of or related to such inputs?
Brief Facts: - Respondent are engaged in manufacture of non-alloy steel ingots. Show cause notice was issued to them on the ground that they had not reversed the input credit taken on service tax paid on transportation of goods by road while clearing inputs as such. It was alleged that they had contravened the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004. The Adjudicating Authority confirmed the demand and also imposed equal penalty. In appeal, the Commissioner (Appeal) confirmed the impugned order.
In further appeal, the Tribunal relied upon the judgment given in Chitrakoot Steel & Power Ltd. Vs. CCE, Chennai wherein it was held that when the Cenvat availed inputs or capital goods are removed from the factory of the assessee as such, sub rule 3(5) provides for recovery of the amount of the Cenvat credit availed in respect of such inputs or capital goods and there is no provision to reverse the credit of service tax availed in respect of such goods or capital goods. Thus, the Tribunal set aside the impugned order.
Against this, Revenue is in appeal before the High Court.
Appellant’s Contention: - Revenue contended that once the assessee had reversed the cenvat credit availed of on the goods purchased by him, which were brought in the factory but were disposed of without use or consumption, he was duty bound to reverse even the input credit availed of on account of service tax in respect of the transportation of goods. Referring to the provisions of Rule 3(5) it was contended that once the inputs or capital goods, on which cenvat credit had been taken are removed as such from the factory, he is required to reverse the credit availed of to that extent even of service tax paid for availing transport services.
Further, relying upon Rule 5, it was stated that when an assessee is entitled to refund of the tax paid on inputs or input service, it is even bound to reverse the credit taken with respect to both things and cannot retain the benefit with regard to the input service while reversing the same with regard to excise duty of inputs.
Respondent’s Contention: - Respondent contended that there is material difference in the language used by the rule-making authority in Rule 3(5) and Rule 5 of the Rules. Rule 3(5) only talks about reversal of cenvat credit on inputs or capital goods, whereas Rule 5 talks about cenvat credit on input or input service.
Referring to Rule 2 (k) and (l), it was contended that these definitions showed that ‘input’ and ‘input service’ have been separately defined under the Rules, where the ‘input’ means certain materials, whereas the ‘input service’ means the services availed of. Once there is no provision in the Rules for reversal of the credit taken on account of input service merely on analogy, the revenue cannot direct the assessee to reverse the credit.
Reasoning of the Judgment: - The High Court held that the terms ‘input’ and ‘input services’ have been independently defined under the Cenvat Credit Rules, 2004. It was further held that Rule 3 (5) only talks about cenvat taken on inputs or capital goods. It does not refer to the cenvat on input service, whereas Rule 5, on which reliance is sought to be placed by the Revenue, specifically talks about the cenvat credit on any input or input service used in the manufacture of final product. This rule pertains to refund in case of exports, which stands altogether on different footings.
The High Court further held that once the rule-making authority has defined the terms specifically and used the same in different provisions consciously, the argument of Revenue that merely by analogy even if in one provision both the terms have been used, the same should be read in the other provision as well, where it has not been specifically mentioned, has no legs to stand, as the tax cannot be levied merely by inference or presumption. It was held that it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. Words cannot be added or substituted so as to give a particular meaning. In this regard, reference was made to the judgment in Mathuram Agarwal v. State of Madhya Pradesh [(1999) 8 SCC 667] wherein it was held that in a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It was further held therein that Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter.
Decision: - Appeals dismissed.
Comment: - This is landmark judgement as the various audit parties are continuously raising this point. With this decision, we hope that no further demands will be raised by the department on this point.
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Case: Surya Roshni Ltd v/s Commissioner of Central Excise,
Citation: 2010 (19) STR 719 (Tri-Del)
Issue: - Cenvat credit is admissible on service tax paid on insurance of cars used by employees of company.
Brief Facts: - Applicant is a manufacturer of excisable goods and have purchased cars for use by their executives and the officers of the company and the cars have been insured. Applicant availed credit of service tax paid on insurance charges. The Lower Authorities held that the credit was inadmissible to the applicant. Applicant have filed appeal before the Tribunal and application for waiver of pre-deposit and stay have been filed.
Appellant’s Contentions: - Applicant contended that the definition of input services was wide enough to cover any service used in activities relating to business and the cars are used in relation to business activity only and that insurance is a necessity before used of the cars.
Respondent’s Contentions: - Revenue submitted that the cars are not used in relation to the business activity. The cars were being used as a measure of facility for the administrative staff and has no direct or indirect relation to the manufacture or clearance of excisable products.
Reasoning of the Judgment: - The Tribunal held that prima facie, the applicants have a case for waiver of the dues as per the impugned order as insurance on vehicle used for business activity can be considered as input service.
Decision: - Pre-deposit waived. Stay granted.
Comment: - Good decision. The Mumbai High Court second decision of Ultratech Cement after Coca Cola has clearly held that the credit is admissible on all business expenditure. Whether the department will accept the same?
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Customs Section
Case: M/s Veekay Prints Pvt Ltd v/s Commissioner of Customs, Mumbai-II
Citation: 2010-TIOL-1432-CESTAT-MUM
Issue: - Section 27 is applicable only to refund of Basic custom duty
Brief Facts: - Appellant imported machine under EPCG scheme. They filed Bill of entry dated 17.05.2006 relating to the said import and paid duty accordingly. Thereafter, they realized that as they had imported machine under EPCG scheme the 4% additional duty was not chargeable to them. Accordingly, they filed refund claim on 18.10.2010.
The Adjudicating Authority rejected the refund claim on the ground that as per Section 27 (1) (b) of the Customs Act, 1962 the refund claim was required to be filed within a period of 6 months. The said order was upheld in appeal before the Commissioner (Appeal). Hence, appellant are before the Tribunal.
Appellant’s Contention: - Appellant contended that the duty had been paid by them which was not payable by them and therefore, the Department should not have accepted that the duty was leviable on them. It was contended that therefore the provisions of time-bar were not applicable to their case. Reliance was placed on the judgment given in the case of Hind Agro Industries Ltd v/s CC [2008 (221) ELT 336 (Del)] wherein on similar facts, the High Court had observed that “there can be no doubt that the provision of Section 27 applied to a claim for refund of ‘any duty’ within the meaning of the Customs Act, 1962. A word ‘duty’ has been defined under Section 2 (15) of the Act meaning ‘a duty of customs leviable under this Act.’ Therefore, the entire Section 27 will apply only if the refund sought is of customs duty otherwise leviable under the Act.”
Reasoning of the Judgment: - The Tribunal relied upon the judgment of Delhi High Court that the provisions of Section 27 applied only when the refund that is being sought is of customs duty otherwise leviable under the Act.
The Tribunal held that from facts it is clear that the appellant were claiming refund of 4% Addl. Duty paid which was not leviable on them. Thus, the provision of Section 27 which bound the appellant to file refund claim within 6 months of the assessment of Bill of Entry were not applicable in appellant’s case. Impugned order set aside.
The Tribunal remanded the matter as no finding was given on merit and as the claim was rejected on the ground of limitation.
Decision: - Appeal allowed by way of remand.
Comment: - This is far reaching judgement. Whether it will have applicability to SAD refund by traders under Notification No. 102/2007-Cus?
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S.L.Bansal on 14 November, 2010 wrote:
S.L.Bansal on 14 November, 2010 wrote: