Pradeep Jain - Chartered Accountant

PJ/Case Laws/07-08/01

1. To claim the refund of duty, one has to show that he has not passed on the burden of duty. This concept is known as “Doctrine of unjust enrichment”. There was dispute whether this doctrine is applicable when the duty was payable under protest. This was held by the Apex Court in case of Sinkhai Synthetics and Chemicals (P) Ltd. that this is not applicable when the duty is paid under protest. But later on three member bench in case of Allied Photographics India Limited has overruled the same. This has been reconfirmed by the Supreme Court in this decision that the Bar of Unjustenrichment is applicable to claim for refund in cases where original payments of duty were made even under protest [2007 (208) E.L.T. 481(S.C.)]

2. Value of licence and technical know-how is not includible in the assessable value of imported goods for charging custom duty if the same is charged separately by the supplier. [2007 (208) E.L.T. 485(S.C.)]

3. The department takes the action as soon as the order is passed by the authority. Whereas the law permits the assessee to file an appeal along with stay application in a stipulated time. Thus the quick action before the expiry of time limit of filing of appeal takes away the right available to the assessee. Such an action has been viewed adversely by the Honourable Delhi High Court. It was said that the officers must be vigilant in collecting dues but they should not take steps, which will nullify remedy, which are otherwise available under statue. [2007 (208) E.L.T. 490 (Bomb.)]

4. There is well settled principle that mere failure to declare does not amount to willful suppression of facts. The department cannot invoke extended period of five years on this basis. The Punjab and Haryana High Court has confirmed the view. It was also directed to the department that once a composite order is passed by Tribunal, it was obligatory on Revenue, while filing one appeal, to mention its stand about other cases, to avoid conflict of orders and also to maintain consistency. In this case, the tribunal has passed the order for three assessees. The department has filed the appeal for one assessee but did not tell anything about the other assessees. [2007 (208) E.L.T. 492 (P &H)]

5. There is requirement in the law that the decision passed by the authorities should be communicated to the party. The High Court of Delhi has held that the provisions are also applicable to the orders passed by the tribunal. Initial burden of proof of tender or delivery of such decision by post is on authority dispatching such notice. Postal receipt or acknowledgement card should be produced. Mere covering letter of department will not serve the purpose. [2007 (208) E.L.T. 494 (Del.]

6. The tribunal has directed the assessee to deposit Rs. 5 crores in case of Rs. 19.7 crores. The assessee did not pay the amount and the appeal was dismissed for non-compliance. Coercive steps were taken by the department. Interim order was given by the Court against such coercive action. The Court has asked to file counter affidavit but it was not filed. The Court observed that the department is not serious. The Delhi High Court held that Interim order favouring petitioner being operative for four years and amount involved being extremely high, Tribunal directed to hear appeal without pre-deposit [2007 (208) E.L.T. 499 (Del.]

7. Department’s contention that refunds application was not accompanied by evidence of payment not accepted. There was order of Court and refund is to be granted to the assessee. But the order itself contained the version that the duty has been paid by the party. As such the Court held that department retained the amount without authority of law – Interest @ 9% allowed [2007 (208) E.L.T. 501 (P&H)]

8. There was a lot of dispute on the issue that an assessee can opt for payment of duty and forgo the benefit of exemption notification. The contention behind the same is that the exemption is a benefit extended by the Board to an assessee. The assessee should have right either to opt for the same or forgo the same. He should decide the course which is more beneficial to him. The department contention is that the exemption notification has statutory force and it is binding on the assessee. In case of Everest Convetors, even the opinion of the Attorney General was taken and he has opined in favour of the assessee. Thereafter there was number of decisions in favour of the assessee. But the department has come out with the amendment in Rules and it was made binding on the manufacturer to opt for the exemption. Thus the legally won battle was taken away by the department by amendment in the Rules. Normally, a unit manufacturing industrial product opts for this exemption. Sometimes the Government does a lot of exercise on making of Cenvat chain. We have seen the same in textile industry in year 2003. But where the assessee tires to build the same, there is provisions for breaking the same. Thus, only the Government can make the chain and not the assessee. In this case, the authority has decided that the assessee cannot opt for payment of duty. He cannot disclaim its benefit, pay duty and thereafter claim credit of duty or rebate [2007 (208) E.L.T. 505 (Tri. - Ahmd.]

9. Earlier there was no Rule in Cenvat credit Rules that waste and scrap of Capital goods should be cleared on payment of duty. Even there was provision of clearance of capital goods as such but there was no provision for the used capital goods. In case of Madura Coats it was decided that the duty is not payable on used capital goods. But the provision has been introduced for payment of duty on waste and scrap of capital goods. It was introduced on Rule 3(5A) of Cenvat Credit Rules, 2002 effective from 16.05.2005. In the instant case, the tribunal held that the duty is payable on such Waste and scrap arising out of cenvatable capital goods i.e. worn out parts of machinery w.e.f. 16-5-2005. No demand stands before such amendment. [2007 (208) E.L.T. 510 (Tri. – Bang)]

10. The Cenvat credit was reversed on the pursuance of the department. But it was legally due to the assessee. It was held that Amount is ultimately due to assessee but was collected by authorities without any authority of law. Assessee entitled to refund, in terms of Supreme Court’s decision in case of Mafatlal Industires. [2007 (208) E.L.T. 513 (Tri. – Del.]

11. Invoices issued by registered dealer who took over the business form another person and not permitted by authorities for transfer of credit lying unutilized in RG 23D registers. Inputs as indicated in invoices were in fact received by assessee and consumed in factory, not disputed – Credit not to be denied [2007 (208) E.L.T. 516 (Tri. – Del.]

12. There are two exemption notifications available to the textile industry. They can avail the Cenvat credit and pay duty under Notification no.29/2004-C.E. DT. 09.07.2004. Alternatively they can opt for the exemption provided they do not claim Cenvat credit under Notification 30/2004-C.E. DT. 09.07.2004. They can also claim the exemption simultaneously under both the notifications. For one lot of goods they can opt for the exemption and for the other lot they can claim Cenvat credit and pay duty. But there is always about dispute about the consumables. In the instant case, the assessee has taken the credit on the inputs and paid the duty on clearance of dutiable product. He has reversed the Cenvat Credit on clearance of exempted products. This practice is upheld by the tribunal. This verdict is very important. This is due to the fact that latest circular no. issued by the Central Board of Excise and Customs says that the assessee should not take the credit on consumables. He should take the credit only on that part of inputs which are used in the manufacture of dutiable finished goods. Although taking credit and reversal of the same also reaches to same conclusion that the assessee should take the credit only on inputs used in the manufacture of dutiable finished goods. But credit can be taken on the invoice. Firstly an assessee should maintain the consumption of each type of inputs invoice wise. Thereafter, he has to work out the goods manufactured from these inputs cleared on payment of duty. Then he can calculate the Cenvat due to him. But this process is very cumbersome and assessee forgoes to take the credit. The path of reversal of Cenvat credit is very easy. But it is not acceptable to the Board. However, the tribunal has sorted out the problems. In the instant case, it has upheld the practice of reversal of Cenvat credit on clearance of exempted goods. It has held that once the credit is reversed, it can be said that no Cenvat credit is availed. [2007 (208) E.L.T. 521 (Tri. – Bang.]

13. Normally, for the job work is received from another manufacturer under alternative job work procedure contained in Rule 4(5) (a) of Cenvat credit Rules, Notification 214/86-C.E. DT. 25.03.1986, Notification 83/94-C.E. and 84/94-C.E. The job worker needs not to pay duty on return of material to principal manufacturer. But job worker uses his own consumables on which credit is taken by him. The department demands that the credit is to be reversed as it is used in manufacture of exempted goods. Moreover, the department demands reversal of duty @ 10% of value of exempted goods under Rule 6(3) of Cenvat credit Rules. This Rule says relates to use of common inputs in manufacture of dutiable and exempted product. If the assessee is not able to keep the separate record for both types of inputs then he should reverse the Cenvat credit @ 10% on value of exempted product. The department has applied this rule to goods cleared on job work. Thus, it has created havoc to the job workers as the reversal is demanded not only on the value of job work but on the complete value of goods. That too when the goods used are only consumables (For example, lubricating oil etc.). But the larger bench of tribunal has decided in case of Sterlite Industries Limited that the goods processed on job work cannot be treated as exempted goods. Following the same, the tribunal has given relief to assessee in the instant case also. [2007 (208) E.L.T. 526 (Tri. - Mumbai]

14. The retest of sample is right of assessee. In the instant case, Test reports of samples showed higher copper content than the one declared by the assessee. He demanded for the retest of the samples. But Retest of samples was disallowed ignoring equity principles of adjudication. Thus the tribunal held that misdeclaration in the Bill of Entry cannot be upheld on basis of doubtful results [2007 (208) E.L.T. (Tri. – Mumbai)]

15. The stay was granted to assessee wherein he has to deposit certain amount. He has deposited the amount “Under protest”. The tribunal took a serious view of such remarks on the TR-6 challan. He directed the assessee to get a certificate from the department for removal of the words “Under Protest” from the department. The assessee applied to the department but the department did not give any certificate despite reminders. Strictures against Department – Certificate of withdrawal of ‘under protest’ mark – Required by assessee for filing before Tribunal, but not issued [2007 (208) E.L.T. 540 (Tri. – Chennai)]

16. The manufacturer of Laminated Rolls and Laminated Plastic pouches require the printing process. This is done on the printing machine with the help of engraved rollers. The department contends that the cost of such rollers should be added to the value of finished goods. But it is very difficult to add the same. Say, an engraved roller can print 5,00,000 meters and client has ordered only 5000 pouches to be printed. Now the complete cost of roller can not be loaded to the cost of fabrics. The issue was settled in case of Mutual Industries by larger bench wherein it is held that the amortized costs to be added. This means that cost of roller divided by meters that can be produced by a roller. It was held that full loading cannot be upheld [2007 (208) E.L.T. 544 (Tri. – Mumbai)]

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PJ/Case Laws/07-08/01

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