PJ/Case Laws/2010-11/33
CASE LAWS
Prepared By:
CA Pradeep Jain
Sukhvinder Kaur, LLB [FYIC]
Parag Ghate and Megha Jain
Excise Section
Case: Commissioner of Central Excise v/s Reliance Industries Ltd
Citation: 2010 (259) E.L.T. 356 (Guj.)
Issue: - Whether the interest under Section 11BB of the Act is payable in case of delay in sanctioning refund under Rule 5 of the Cenvat Credit Rules, 2002/2004?
Brief Facts: - Respondent is engaged in the manufacture of Polyester Texturised Yarn and was availing Cenvat credit of the duty paid on inputs used in the manufacture of Polyester Texturised Yarn. During the period April 2003 to September 2005, respondent cleared various consignments of Polyester Texturised Yarn for export under bond. Due to such exports, the respondents was neither able to utilize the Cenvat credit of duty paid on the inputs used in the manufacture of Polyester Texturised Yarn so exported, nor was able to adjust such credit towards payment of duty on the final products cleared for home consumption. Accordingly, respondent filed refund claims under Rule 5 of Cenvat Credit Rules, 2002/2004 claiming refund of the unutilised Cenvat credit of duty paid on inputs. Refund claims were sanctioned under Rule 5 read with Notification No. 11/2002-CE(NT) dated 1.3.2002 as amended by Notification No. 49/2003 C.E. (N.T.), dated 17th May, 2003.
However, refunds so sanctioned were paid after the expiry of a period of three months from the date of making the refund applications. Therefore respondents filed applications claiming interest on delayed sanctioning of the refund in terms of Section 11BB of the Act. Applications were rejected by the Adjudicating Authority. In appeal, the Commissioner (Appeals) confirmed the orders made by the Adjudicating Authority. Against the orders made by Commissioner (Appeals), the respondent preferred further appeals before the Tribunal.
The Tribunal allowed the appeals by holding that in view of the provisions of Clause (c) of the proviso to Section 11-B, the provisions of Section 11B of the Act, and consequently the provisions of Section 11-BB of the Act are clearly applicable to the facts of the present case and therefore, the assessee is entitled to interest. The Tribunal had also taken note that C.B.E. & C. Circular No. 130/41/95-CX., dated 30-5-95 included receipt of credit of duty paid on excisable goods used as input in accordance with Rule 57F also amongst the type of claims wherein interest under Section 11BB may be payable.
Aggrieved by the said order, Revenue is in appeal before the High Court.
Appellant’s Contentions: - Revenue submitted that the refund claim filed by respondent had been sanctioned under Rule 5 of the Rules read with Notification No. 11/2002-CE (NT), dated 1-3-2002 as amended by Notification No. 49/2003-C.E. (N.T.), dated 17th May, 2003. That, under the CENVAT Credit Rules, 2002/2004 as well as the aforesaid notification, there is no provision for payment of interest on delayed sanction of refund of accumulated Cenvat Credit. That even otherwise, this is not a case where duty was deposited with the exchequer and refunded at a later stage. The refund was granted towards accumulated Cenvat Credit on account of exports and where the assessee was not able to utilize the same for the clearance of goods on payment of duty for home consumption. The credit was all along lying with the respondent who was always free to utilize the same. Therefore, there cannot be any provision under the statute for payment of interest on the amount which was never deposited with the exchequer.
It was further submitted that the provisions contained in Section 11B and 11BB of the Act are general in nature, whereas the Scheme of Cenvat is specific being a special beneficial scheme, with self contained procedure providing for the manner and method of its implementation, hence, any refund claimed under the Rules would be governed only by the provisions of the Scheme and the general provisions of Section 11BB of the Act cannot be resorted to in relation to refund under the Rules. Hence, the Tribunal was not justified in holding that the assessee was entitled to interest under the provisions of Section 11-BB of the Act.
Reasoning of Judgment: - The High Court considered the provisions of Section 11B and Section 11BB of the Central Excise Act as well as Rule 5 of CCR and held that neither the Cenvat Credit Rules, 2002/2004 nor the above referred notification, provide for payment/non-payment of interest in case of delay in sanctioning the refund.
It was further held that the provision for claiming refund of duty under the principal statute, viz., the Central Excise Act, 1944 is under Section 11-B. Under subsection (2) thereof, if the officer concerned, on receipt of any application for refund, is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he is required to make an order accordingly and the amount so determined is required to be credited to the fund. However, the proviso to sub-section (2) of Section 11-B provides for the categories of case where instead of being credited to the fund, the amount is to be paid to the applicant. One of the categories provided thereunder as specified under clause (c) to the proviso, is in case where such amount is relatable to refund of credit of duty paid on excisable goods used as inputs in accordance with rules made, or any notification issued, under the Act.
It was further held that Section 37 the Act empowers the Central Government to frame rules to carry into effect the purposes of the Act. The Cenvat Credit Rules, 2002/2004 have been framed in exercise of powers under Section 37 of the Act and make provision for refund of credit of duty paid on excisable goods used as inputs. Thus, under clause (c) of the proviso to sub-section (2) of Section 11B of the Act, in case an application is made for refund relatable to refund of credit of duty paid on excisable goods used as inputs in accordance with the Cenvat Credit Rules, 2002/2004, and the concerned officer is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he is required to pay the same to the applicant instead of crediting such amount to the Fund. Any refund ordered under Rule 5 of the Rules would therefore, be a refund made under sub-section (2) of Section 11B of the Act.
It was further held that Section 11-BB of the Act makes provision for payment of interest from the date immediately after expiry of three months from the date of receipt of the application under sub-section (1) of that section, till the date of refund of such duty at such rate as may be fixed by the Central Government by notification in the Official Gazette subject to the minimum and maximum limits specified thereunder, if any duty ordered to be refunded under sub-section (2) of Section 11-B to any applicant is not refunded within three months from the date of receipt of such application. Thus, section 11BB of the Act would be attracted in case where there is delay in refunding the amount of duty ordered to be refunded under sub-section (2) of section 11B of the Act. Refund under Rule 5 of the Rules also being a refund under sub-section (2) of Section 11B of the Act would therefore, squarely fall within the ambit of Section 11BB of the Act and interest would be payable under Section 11BB of the Act in case of delay in sanctioning refund under Rule 5 of the Rules.
There is a basis fallacy in the premise on which the contention of Revenue is based. Cenvat credit is nothing else but credit for duty paid by the supplier of inputs, which are dutiable goods manufactured by the supplier or dutiable services rendered by the service provider. In principle such goods/services when utilized for further manufacture or providing service which are dutiable already carry the duty paid component as a part of its price/value, and hence the duty payable on the ultimately manufactured goods/services rendered stands reduced to the extent of duty already paid on the inputs. Thus the duty paid on inputs by the supplier has already been actually received by the exchequer. Therefore, this contention is misconceived.
On the facts and circumstances of the present case, the High Court held that admittedly there was a delay in sanctioning the refund filed under Rule 5 of the Rules. In the circumstances, the provisions of Section 11BB would clearly be attracted and as such the Tribunal was justified in holding that the provisions of clause (c) of the proviso to sub-section (2) of Section 11B and consequently Section 11BB are clearly applicable to the present case and as such the respondent is entitled to interest on delayed refund of Cenvat Credit as claimed by it.
It was further held that another aspect of the matter is that when Section 11BB of the Act had newly been inserted by the Finance Act, 1995, the Government of India, Ministry of Finance (Department of Revenue) has issued Circular No. 130/41/95-CX., dated 30th May, 1995 issuing instructions regarding refunds claimed under Section 11BB of the Act. The Annexure thereto provides for the Checklist of documents which are required to be filed with refund claims. Item No. 3 thereunder relates to “Refund of credit of duty paid on excisable goods used as input in accordance with Rule 57FD”. Thus, as per the instructions issued by the Central Government refunds under Rule 57F of the erstwhile Central Excise Rules, 1944 would be governed by the provisions of Section 11BB of the Act. Rule 57F of the said Rules made provision for the manner of utilization of inputs and credit allowed in respect of duty paid thereon. Sub-rule (13) of rule 57F made provision for refund of accumulated credit in case where for any reason it was not possible to adjust the same in the manner provided under the said sub-rule. Sub-rule (13) of Rule 57F of the said Rules is more or less in pari material to provisions of Rule 5 of the Cenvat Credit Rules, 2002/2004. Thus, the instructions issued by the Central Government under the aforesaid Circular would also be applicable to refunds under rule 5 of the Rules, which instructions are binding on the revenue.
Decision: - Appeals dismissed.
Comments: - This is very good and detailed decision. As a consequence, the department will not delay the refund of unutilized credit under Rule 5 of CCR, 2004.
********
Case: Commissioner of Central Excise,
Citation: 2010-TIOL-72-SC-CX
Issue – cum - Brief Facts: - Whether a package containing about 100 or more individual pieces of an article of less than 10 gram would attract assessment under Section 4A of the Central Excise Act, 1944?
Reasoning of Judgment: - The
Accordingly, in the present case, it was held that as the appeal against the order of the Tribunal in the above case has been dismissed, the issue is no longer res-integra. No merits in appeal.
Decision: - Appeals dismissed.
********
Case: Escorts JCB Ltd v/s Commissioner of Central Excise, Delhi-II
Citation: 2002 (146) ELT 31 (S.C.)
Issue: - The insurance by manufacturer does not mean that the goods are sold FOR destination instead of factory gate. To include these charges in assessable value, it should be shown that the goods are sold at buyer’s place.
Brief Facts: - Appellant manufactures Excavators Loaders at its factory at Ballabgarh,
Hence, show cause notice was issued to the appellant saying that an open policy for transit risks in their name and their bankers appeared in the column for the name of Assured but there is no mention of the buyer or its name in the column for “insured”. Notice also indicates that ‘freight’ and “transit insurance” were charged from the buyers but no central excise duty was paid on these two elements, and by not including above noted elements in the normal price as per Section 4 of the Central Excise Act, 1944 and by mis-declaring the place of removal as factory gate instead of buyer’s place where the goods were to be sold after their clearance from the factory as described.
Appellant replied that the sale is affected at the factory gate at Ballabgarh in the State of
The Adjudicating Authority confirmed the demand holding that the factum of “transit insurance” by the manufacturer shows that the transaction of sale is complete only on delivery of goods to the buyer otherwise there was no good reason for the manufacturer taking responsibility of the risk involved in transportation of the goods to the buyer’s place. It was held that case of the appellant that sale takes place and it is completed at the factory gate was not accepted and held to be contrary to Section 2(h) of the Central Excise Act.
In appeal, the Tribunal held that upheld the order of the Lower Authority but reduced the penalty under Section 11AC to Rs. 10 lakhs.
Appellant is therefore, before the
Appellant’s Contentions: - Appellant contended that all sales were made at the factory gate. Some buyers arranged for the transportation of the goods as well as for transit insurance themselves but some required the appellant to arrange for transportation and transit insurance, in latter case they recovered the freight charges and “insurance charges” from the buyers separately. Copies of agreements were submitted in support of this contention.
It is submitted that the fact that the assessee arranged for the transit insurance would in no way lead to an inference that the ownership in the goods was retained by the assessee during the period of the transit until the delivery of the goods at the place of the buyer. The terms and conditions of the sale are clear that the sale is Ex-works at Ballabgarh, Haryana. The payment is to be made before despatch of the goods from the factory premises. The machinery, handed over to the carrier/transporter is as good as delivery to the buyer in terms of Section 39 of the Sale of Goods Act apart from terms and conditions of sale.
It was submitted that the possession of the sold goods is handed over to the buyer at the factory gate. The transaction is full and complete and nothing remains to be done after the goods leave the factory premises.
In connection with the proposition that insurance can be taken by a third person on behalf of another, reliance has been placed on “Chitty on Contracts” Twenty-Eight Edition Vol. 2 Special Contracts P. 978 Chap. 41 Note 007 under the heading “Insurance of Another’s interest”. It is indicated that in varied facts and circumstances and subject to the statutory provisions of contract, it is possible to ensure the interest of another. Referring to a decision Prudential Staff Union v. Hall {[1947] K.B. 685}, it is observed that a seller in possession of the goods when the property and risks have passed may insure his buyer’s interest.
Referring to decision in Hepburn v. A. Tomlinson (Hauliers) Ltd. [H.L. (E) 1966 451], it has been submitted that a bailee apart from its interest may also insure the interest of the owner of the property. There may be floating insurance policy covering not only the limited interest but the whole interest of the ownership of the customers in the normal course.
Reliance was also placed on Para 5-012 at Page 184 of Benjamin’s
Reliance was placed on Union of India and others etc. etc. v. Bombay Tyre International Ltd. etc. [1983 (014) ELT 1896 (S.C)] wherein the question involved was regarding deduction of transportation charges along with cost of insurance. Reliance was also placed on Associated Strips Ltd. & Anr. v. CCE,
Reasoning of Judgment: - The Apex Court perused the provisions of Section 39 of the Sale of Goods Act and considered the facts in the light of the same and held that the place of removal of goods is factory premises since the transaction of sale, payment of price and handing over possession of the goods to the carrier after clearance is at the factory at Ballabgarh.
The
In connection with the proposition that insurance can be taken by a third person on behalf of another, the Apex Court considered the material relied upon by the appellant, and held that the Commissioner of Central Excise and the Tribunal erred in drawing an inference that the ownership in the property continued to be retained by the assessee till it was delivered to the buyer for the reason that the assessee had arranged for the transport and the transit insurance. Such a conclusion was not sustainable.
Considering the various judgments and Benjamin’s Sale of Goods Fourth Edition, the
Impugned orders set aside.
Decision: - Appeals by appellant-assessee allowed. Appeals by Revenue dismissed as being in fructuous.
Comments: - This is very important decision. Taking of insurance policy does not mean that the goods are sold at buyer’s premises. It has to be established from agreement of each case. Even this decision takes importance in current situation also when the credit is allowed on outward transportation when the agreement is FOR destination, damages during transit is on manufacturer and price includes the transportation charges. This is as per Master circular issued by the Board which is upheld by
********
Case: M/s Roys Industries Ltd v/s The Commissioner of Central Excise, Hyderbad
Citation: 2010-TIOL-1251-CESTAT-BANG-LB
Issue: - Valuation of pet jars/poly bags containing individual pieces of Eclairs weighing less thatn 5.5 gms - Whether the same are to be considered as wholesale packages or as multi-piece packages?
Whether the exemption under Rule 34(b) of Standards of Weights & Measures (Packaged Commodities) Rules, 1977 available for individual pieces is relevant for deciding if the assessment has to be done under section 4 or 4A of the Central Excise Act?
Whether the assessment of the impugned products should be done under Section 4 or 4A of the Central Excise Act?
Brief Facts: - Appellants manufacture Caram Eclairs and Choco Eclairs for M/s ITC Limited. Each piece weighs approximately 5.5 gms. Both the goods are notified under Section 4A of the Central Excise Act, 1944 and under the Standards of Weights and Measures Act, 1976.
The Tribunal did not agree with the appellant’s contention that the Pet Jars and Poly Bags are wholesale package. The Tribunal found that 150 pieces of Eclairs were put in each Pet Jars. In any departmental store, the Pet Jars/ Poly Bags are available for the purchase of retailers. It is not necessary that the ultimate consumer would purchase only one piece. There does not appear to be any bar for selling the Pet Jars/ Poly Bags to ultimate consumers. Normally one purchases one jar or Poly Bag for consumption of a family. By no stretch of imagination, it can be held that the purchase of a Pet Jar or a Poly Bag by an individual constitutes a wholesale purchase.
The Tribunal further found that the Poly Bag or the Pet Jar answers correctly to the description of ‘multi-piece package’ as defined by Rule 2(1) of the Rules at the relevant point of time. According to this Rule, “multi-piece package” means a package containing two or more individually packaged or labeled pieces of the same commodities of identical quantity, intended for retail sale, wither in individual pieces or the package as a whole”. Accordingly, it was held by the Tribunal that purchases of a Poly Bag or a Pet Jar to be retail purchase and hence the transaction constitutes retail sale.
The Tribunal found that Poly Bag or Pet Jar is sold in retail and the weight of the commodity in Poly Bag/ Pet Jar was more than twenty grams. Therefore, the exemption would not be applicable to the Poly Bag or Pet Jar. Hence there was a requirements of printing the MRP on the Pet Jars or Poly Bag. On such premises, the assessment has to be necessarily done u/s 4A of the Act as held by the Lower Authorities.
It was also the finding of the Tribunal that the appellants have confused the issue saying that the cartons containing Pet Jars are not meant for ultimate consumers and hence, there is no requirement for printing the MRP. This amounts to obfuscation of the issue. No manufacturer clears the goods directly to the ultimate consumers. The form in which the goods are cleared by the manufacturer is not a relevant factory for deciding whether the impugned goods should be assessed u/s 4 or 4A of the Act. Such a view of the Bench was supported by the findings of the Tribunal in the case of BPL Telecom (P) Ltd. Vs. CCE, Cochin [2004 (168) ELT 251 (Tri.– Bang)].
The Tribunal denied the benefit of the Rule 34(b) of the Rules by holding that the packages are actually “multi-piece package” and once this position is accepted, there was requirement to print the MRP.
However, in an identical issue, the Tribunal in the case of M/s Swan Sweets Pvt Ltd v/s CCE, Rajkot [2006 (198) ELT 565 (Tri-Mumbai)] it was held that the packages in which the products impugned were sold by the appellants clearly fell within the exemption provided under Rule 34(b) of the PC Rules, as each individual piece weighed less than ten grams.
Due to conflicting views, the Tribunal referred the matter to the Larger Bench.
Reasoning of Judgment: - Majority Members of the Larger Bench held as under:
- Reference was made to Part IV of the 1976 Act which makes provision for goods which are, or intended to be, sold, distributed, delivered or otherwise transferred by weight, measure or number in the course of inter-state trade or commerce. Rule 1 (3) clearly states that the Rules were made to deal with the “Commodities in the packaged form” which are or are intended or likely to be-
o Sold, distributed or delivered or offered or displayed for sale, distribution or delivery, or
o Stored for sale, or for distribution or delivery, in the course of inter-state trade and commerce.
- The expression “Commodity in packaged form” has been defined by Section 2(b) of the 1976 Act which means commodity packaged, whether in any bottle, tin wrapper or otherwise, in units suitable for sale, whether wholesale or retail. Chapter IV appearing under Part IV of the 1976 Act in terms of section 39 (1) (iv) provides that label of the packaged commodity should disclose the unit sale price of the commodity in the package. In exercise of the power conferred u/s 83 of 1976 Act and most particularly under clauses (r), (s), (t) and (u) of sub-section (2) of the said section, Central Government made the Rules. Rule 2(p) of the Rules at the relevant point of time prior to 13.01.2007 has defined the “retail-package” and Rule 2(x) of the Rules has defined the term “Wholesale Package”.
- Rule 2A appearing under Chapter II of the Rules has made provisions in respect of packages intended for retail sale. Rule 12 appearing under this chapter prescribes the manner in which declaration of quantity shall be made in terms of such unit of weight, measure or number as would give accurate and adequate information to the consumer with regard to the quantity of the commodity contained in the package.
- The Fifth Schedule appeared to rule 12 (2) contains a list of commodities in packaged form which may be sold by ”weight”, “measure” or “number” as mentioned in that schedule against the corresponding commodity. The impugned commodity does not appear in 5th schedule.
- Chapter V of the Rules has made express provisions by Rule 34 to exempt any package containing a commodity from applicability of the rules through its clause (b) if “the net weight of the commodity at the relevant point of time was twenty milliliters or less or less if sold by weight or measure”.
- Whether a particular package is a retail package or a wholesale package is a question of fact to be decided in each case applying the relevant definition. In the case of Swan Sweets, the Mumbai Bench held that case to be wholesale packages. One of the considerations that weighted with the Bench was that the price was not written on the package. One of the other considerations was that the numbers were not definite which could vary. The larger Bench cannot sit in judgment over the findings of the fact by that bench. Having determined that the packages in that case were wholesale packages, the bench held that the requirement of MRP based valuation was not applicable in that case.
- As stated above, in this case, the referring Bench has come to a finding of fact that the packages in this case are retail packages and that the impugned poly packs and pet jars are sold in retail. There is evidence that the weight, MRP and number of pieces are printed on the labels of the poly packs and pet jars. The Rules apply to packages commodity – (1) which are sold…, or (2) which are intended to be sold …., or (3) which are likely to be sold ….. The findings of the referral bench that the impugned package in this case are sold in retail is, therefore, sounds as also the finding that the poly packs and pet jars are multi – piece packages.
- The larger bench in CCE, Mumbai Vs. Urison Cosmetics Ltd [2006 (198) ELT (Tr.–LB)] and subsequently, the Hon’ble Supreme court in Kraftech Products affirming the view of the larger bench have held that if the total weight of all the pieces in the case of multi-piece package does not exceed that limits prescribed such packages will be exempt from the requirement of the MRP based valuation rejecting the contentions of the department that weight limits do not apply to multi – piece packages. Applying the ratio of these decisions to a case where the weight of multi – piece package is above the exempted weight limit of 20 gms, the MRP based valuation would apply.
-
- Thus while the ratio of Swan Sweet is applicable to sale of wholesale package, the ratio of Kraftech Products and Urison would apply to sale of multi –piece retail packages. If the total weight of a multi –piece retail package is more than 20 gms as in this case, the exemption under Rule 34 would be applicable and consequently, MRP based valuation under section 4A would apply.
Minority View of Larger Bench held as under:
- It was held that in the Swan Sweets (P) Ltd. Case, the Tribunal had held that the pet jars/ plastic bags containing individual pieces of chocolate weighing less than 5.5 gms were retail packages excluded from assessment under section 4A. These packages containing 72/140 pieces were wholesale packages. The Chennai Bench of the Tribunal in Central Arecanut & Cocoa Marketing & Processing Co-op Limited v. CCE, Mangalore [2008 (226) ELT 369 (Tri.–Chennai)] followed the decision in the Swan Sweets (P) Ltd.
- It was noted that the Revenue appeal to the
- In view of the above judgment, it was held that the dispute stood settled in favour of the appellants. The pet jars/ poly bags containing more than 10 individual pieces are held as wholesale packages. The individual pieces each weighing less than 10 gms are excluded from MRP based assessment in terms of Rule 34 (a) of the PC Rules.
Decision: - Questions referred to the Larger Bench answered as under:
(i) The finding of fact by the referral Division Bench that the impugned poly packs and pet jars are multi-piece retail packages, based on facts of this case and evidence available in this case, is sound.
(ii) The exemption under Rule 34 (b) of the rules will be available in respect of a multi-piece retail package if the total weight of all the pieces in the package does not exceed the prescribed limit as held by Kraftech Products and Urison case.
(iii) In view of the finding of fact that the impugned poly packs and pet jars are multi-piece retail packages and the total weight of the pieces in such packages exceed 20 gms, the exemption under Rule 34 (b) is not applicable and consequently, the assessment is required to done applying provisions of Section 4A.
Comments: - This decision has been given by the Larger bench contrary to decision of
********
Service Tax Section
Case: Commissioner of Central Excise & Customs, Vadodara-II v/s Schott Glass India Pvt. Ltd
Citation: 2009 (014) STR 0146 (Guj.)
Issue: - Whether in Service Tax the taxable event is realization of payment for taxable services rendered and not the time of rendering of the taxable service? Whether at the time of realization of payment for the taxable service provided, the provisions of Rule 2(l)(d)(iv) had come into force, making the service receiver liable for payment of service tax in respect of taxable services provided by a non-resident or a person who is from outside India and who does not have any office/establishment in India?
Brief Facts: - Respondent-assessee received services from sister company located in
The Tribunal held that it is an accepted position that at the point of time when the services were rendered by the service provider and received by the respondent the liability was not cast on the recipient of the services. The liability to pay Service Tax has been cast on the recipient of the service only w.e.f. 16-8-2002.
The Tribunal further held that the Service Tax, which has been imposed by way of Finance Act, 1994 levies Service Tax as provided in Section 64(3) of the Act to all taxable services provided on or after commencement of Chapter V of the Act. Thus, the taxable event is providing all taxable services which has been defined by Section 65(105) of the Act. Similarly, the Rules, which have been incorporated as Chapter V define "person liable for paying the service tax" under Rule 2(d) to mean in clause(iv), in relation to any taxable services provided by a person who is a non-resident or is from outside India, does not have any office in India, the person receiving taxable service in India. The taxable event in relation to Service Tax is admittedly the rendering of taxable service. The said taxable services were rendered between November, 2001 and March, 2002. In the circumstances, merely because the invoice is raised and payment made subsequently viz. after 16-5-2002 the liability cannot be fastened on the recipient of the services as the taxable event had already occurred in the past and raising of invoices and/or making of payment cannot be considered to be a taxable event. Nor is it possible to hold that the provision of Rule 2(l)(d)(iv) of the Rules is respectively applicable to services rendered prior to 16-8-2002. Thus, neither the Section nor the Rule even suggests that the taxable event is the raising of an invoice for making of payment. It is well settled in law that a taxing statute has to be read and plain meaning assigned to the provisions without importing any extraneous consideration on a presumption.
Against this, Revenue is in appeal before the High Court.
Appellants Contention: - Revenue submitted that the Tribunal overlooked the fact that by virtue of amendment of relevant Rule of the Service Tax Rules, 1994, the liability to pay Service Tax has been shifted to the recipient of the service w.e.f. 16-8-2002 by virtue of Rule 2(l)(d)(iv) of the Rules. Now in the circumstances, the respondent-assessee was required to pay the Service Tax on the services received from the sister company located in
Reasoning of Judgment: - The High Court held that the Tribunal had decided the matter in accordance with law and based on the facts and material available on record. In absence of any legal infirmity in the impugned order of the Tribunal, no interference is called for.
Judgment: - Appeal dismissed.
Comments: - It is crystal clear from the above decision that the service tax is linked neither with the raising of bill and nor with the receipt of the service. The taxable event is when the service is provided. The rate applicable at the time of providing of service will be taxable.
********
Case: CCE, Mumbai-V versus M/s Golden Tobacco Ltd
Citation: 2010-TIOL-777-HC-MUM-ST
Issue - cum – Brief facts: - Whether service tax paid on canteen services is input service in manufacture of final product?
Reasoning of Judgment: - The High Court held that both the parties stated that the question raised in this appeal is covered by the judgment of this court in the case of The Commissioner of Central Excise, Nagpur versus Ultratech Cement Ltd [2010–TIOL–745–HC–Mum–ST].
The Larger bench decision in the case of GTC Industries [2008–TIOL–1634–CESTAT–MUM– LB] had held that credit of service tax would be allowable to a manufacturer even in cases where the cost of food is borne by the worker. This decision was not upheld in the case of Ultratech Cement Ltd.
In the light of the decision in Ultratech Cement Ltd, in the present case the impugned order of the Tribunal is quashed and set aside. Matter is restored and the Tribunal will decide the question raised in this appeal in accordance with the decision of this court in the case of Ultratech Cement Ltd.
Decision: - Appeal allowed.
Comments: - It is very important decision. The credit of the service tax paid on canteen service will be allowed when the amount is paid by the manufacturer himself. If the amount is recovered from its employees then the credit will not be allowed. If the part is taken from employees then the credit of service tax paid on that part of the services will not be allowed.
********
Case: Commissioner of Service Tax,
Citation: 2010-TIOL-771-HC-P&H-ST
Issue: - Whether respondent-assessee was providing the services which were covered under "Technical Assistance" and "Consulting Engineering Services"?
Brief Facts: - Respondent was a non-resident Indian (NRI) who entered into a Joint Venture with M/s AVI Oil India Pvt. Ltd., District Faridabad. M/s AVI Oil India Pvt. Ltd., District Faridabad is engaged in the in manufacture of oils, fluid etc. It entered into an agreement dated 03.12.1993 with Respondent.
Department alleged that the technical advice of M/s NYCO, Paris was provided to M/s AVI Oil India Pvt. Ltd., District Faridabad and the said technical advice amounted to service eligible to tax under Section 65(105) read with Section 65(21) of the Finance Act, 1994. It was alleged that as per Notification dated 2.7.1997, services rendered by the Consulting Engineer were taxable. Accordingly, demand for service tax was raised and confirmed by the Lower Authorities.
On appeal, the Tribunal set aside the demand with a finding that no service was provided which may attract levy of service tax. It was held that what was done was sharing of knowledge and not amounting to rendering of service.
Against the said order of the Tribunal, Revenue has filed appeal before the Tribunal but belatedly for which application for condonation of delay is filed.
Respondent’s Contention: - Respondent submitted that in view of Circular of the Central Board of Excise and Customs dated June 30, 2010, service tax was not leviable on service provided by a non-resident and received in
Reasoning of Judgment: - The High Court considered the order passed by the Tribunal wherein it was held that the primary object appeared to be sharing of know how to participate in a joint venture to enjoy the fruit thereof by both the parties.
It was further noted that Revenue did not dispute the applicability of the Circular relied upon by the assessee and also applicability of the judgments referred by the respondent. It was held that it could not be disputed that the service in question prior to 18.4.2006 received outside
Decision: - Appeals dismissed.
********
Case: Balasore Alloys Ltd v/s CCE, C & ST, BBSR-I
Citation: 2010 (102) RLTONLINE 174 (CESTAT-KOL.)
Issue: - Whether refund of education cess is allowed under Notification No. 41/2007-ST?
Brief Facts: - Appellant were claiming refund under Notification No. 41/2007-ST, dated 06.10.2007. The lower authorities allowed the refund of amount of Service Tax but disallowed the refund in respect of education cess. Hence, appellant is before the Tribunal.
Appellant’s Contentions: - The contention of appellant is that education cess is on the Service Tax which is paid and the same has been collected as a part of Service Tax therefore the rejection of refund of education cess was not sustainable. Appellant relied upon the decisions of Banswara Syntex Ltd. Vs. Union of
Respondent’s Contention: - Revenue contended that in respect of similarly worded Notification No. 56/2002 dated 14.11.2002 which is applicable in respect of Jammu & Kashmir, the Tribunal in the case of CCE Vs. M/s. Jindal Drugs and others [2010 (97) RLTONLINE 13 (CESTAT-Del.)] held that in absence of any Notification which provides exemption by way of refund in respect of education cess, the refund of education cess is not admissible to the assessee.
Reliance was placed upon decision given in Gitanjali Industries Vs. Commr. of C.E.,
Revenue also pointed out that where the intention of Government was to grant exemption from payment of education cess, there are specific notifications such as Notification No. 18/07 dated 1.3.2007 and the Notification was issued under sub section 1 of Section 5A of Central Excise Act, 1944 read with Sections 91 and 93 of Finance Act, 2004 under which the education cess was imposed.
Reasoning of Judgment: - The Tribunal held that there is no notification exempting the education cess by way of Refund under the Finance Act under which the education cess was levied. Similar issue has come before the tribunal for numerous appeals for e.g. C. C. Ex. Vs. Jindal Drugs Ltd. & Others [2010 (97) RLTONLINE 13 (CESTAT-Del.)] where the contention of appellant was that Notification No. 56/02 dated 14.11.2002 provides exemption by way of refund of Central Excise Duty and the education cess is also a Central Excise Duty and is covered under the Notification No. 56/02-CE. This contention was rejected and it is held that in absence of any Notification granting exemption of the education cess, the refund in respect of education cess is not admissible. It was noted that the Tribunal had relied upon the decision of Supreme Court in the case of Union of India and Others Vs. Modi Rubber Ltd. and Others and the decisions now relied upon by the appellant.
Thus, the Tribunal held that in view of the earlier decision of the Tribunal wherein it is held that in absence of Notification granting exemption to the education cess, the same is not admissible. No infirmity in the impugned orders.
Decision: - Appeals dismissed.
********
Customs Section
Case: Essar Oil Ltd v/s Commissioner of Customs,
Citation: 2010 (259) ELT 295 (Tri-Ahmd)
Issue: - Whether the Commissioner has power to convert the free shipping bill into drawback shipping bill?
Brief Facts: - Appellants applied for conversion of free shipping bill into drawback shipping bills. The Commissioner rejected the appellant’s request. Appellants therefore approached the Tribunal. The Tribunal allowed the appeal. Against this, Revenue went in appeal before the High Court and High Court restored the appeal for passing of speaking order.
Hence, the matter is again before the Tribunal.
Appellant’s Contentions: - Appellant contended that the Commissioner has placed reliance on Board Circular no. 4/2004-Cus, dated 16.01.2004. Para 3.1 of the same states that power of Commissioner to grant exemption from observance of the provisions of Rule 12 (1) (a) for the purpose of availment of drawback shall apply only in respect of drawback claims pertaining to all industry rates of drawback and it would not apply to brand rate of duty drawback where rate is claimed in terms of Rule 6 or Rule 7 of Customs and Central Excise Duties Drawback Rules. It is submitted that the rule does not have any such restriction and therefore the reliance of the Commissioner on circular was misplaced.
It was submitted further that appellants had claimed drawback under all industry rates vide SL. No. 271002 but this was not allowed on the ground that the said entry is applicable only to supplies made by the DTA units to units under SEZ, thinking that no drawback is available, they filed free shipping bills but on approaching the directorate of drawback they were advised to go for brand rate procedure. It was submitted that the item exported was furnace oil which is a bulk cargo and therefore the Weighment is done in the presence of customs officers only. Thus, there cannot be any issue with regard to the quantum of export.
Respondent’s Contentions: - Revenue contended that there is no provision in law for conversion of shipping bills. The Board Circular only clarified the legal position according to which the Commissioner can consider a free shipping bill as a drawback shipping bill. It was submitted that under Rule 12 of Drawback Rules, Commissioner is not converting the shipping bill but only exempting observance of certain procedures and thereafter giving direction to allow drawback. It was submitted that the Assistant Commissioner of Customs sanctioned drawback in respect of free ‘shipping bills’. Unlike all industry rates, the brand rate is not fixed by the Commissioner and therefore the clarification given by the Board that Commissioner cannot convert the shipping bill is correct.
Reasoning of Judgment: - The Tribunal held that the discussion in the Board Circular is entirely related to provisions of Rule 12 of Drawback Rules. As per the Circular Rule 12 empowers the Commissioner to condone non-observance of provisions of Rule 12 and allow drawback. It was held that the distinction made by Board between all industry rate shipping bills and brand rate shipping bills was not supported by provisions of Rule 12. The Commissioner is empowered to condone non-observance of procedure under Rule 12 irrespective of the claim for drawback on the basis of brand rate or all industry rates. The artificial distinction has been made only by the Board in the Circular and is not supported by law.
It was held that in the case of Gokuldas Images Pvt Ltd v/s CC,
The Tribunal held that it cannot be said that the Commissioner has no power to convert a free shipping bill into drawback shipping bill. It was observed that Rule 12 (1) (a) required the exporter to mention details like the description, quantity and such other particulars in the shipping bill which are necessary for deciding whether the goods are entitled to drawback and if so at what rate or rates and makes a declaration on the relevant shipping bill that a claim for drawback is being made and in respect of duties paid on containers packing materials service etc no separate claim for duty has been made.
And the Board Circular provided that relaxation can be given by the Commissioner to the exporter from mentioning the details as prescribed by Rule 12. The Tribunal accordingly, held that this is nothing but an amendment of the shipping bill filed or conversion. Therefore, the observation of the Commissioner that he has no powers to convert a free shipping bill into drawback shipping bill was supported by the rule at all. The Circular of the Board goes beyond the rules.
The Tribunal further observed that Section 149 of Customs Act, 1962 clearly permitted amendment of shipping bill. And the amendment was permitted even after the goods had left the country if the basis for amendment is documentary evidence.
It was held that the Commissioner should have considered the application under Section 149. Accordingly, the matter remanded with direction to the Commissioner to consider the documentary evidence to be produced by the appellant in support of their application. No reason to differ with the judgment given in Hero Cycles Ltd.
Decision: - Appeal allowed accordingly.
********
Case: Rajesh Kumar Sharma versus
Citation: 2007 (209) ELT 0003 (SC)
Issue: - Whether the compounding amount will be 20% of market value only? Whether it will be 20% of market value or Rs. 10,00,000/- whichever is higher?
Brief Facts: - Petitioner had applied for compounding of an offence committed by him under Section 135 (1) (a) of the Customs Act, 1962. The Compounding Authority allowed the application and imposed compounding amount of Rs. 10,00,000/-. Against the imposition of compounding amount, petitioner filed writ petition wherein stand was taken by the petitioner that the compounding amount as fixed is beyond the permissible limit. This plea was rejected by the High Court. Hence, the petitioner is before the
Petitioner’s Contentions: - Petitioner contended that the extent of compounding amount as fixed by the Compounding Authority was beyond the permissible limit. It was submitted that market value of the goods which had not been declared was Rs. 8,45,176/- and therefore it should have been 20% of the said market value.
It was further stated that since the purpose of compounding is to prevent unnecessary litigation, if the interpretation given by the High Court that the quantum has to be upto 20% of the market value of the goods or upto Rs.10,00,000/- whichever is higher is accepted same would be counterproductive.
Reasoning of Judgment: - The
The
Decision: - Appeal dismissed.
********
M.RAM KUMAR on 18 December, 2010 wrote: