Pradeep Jain - Chartered Accountant

PJ/Case Laws/08-09/03

CASE LAWS

1. Appellants, Excel Cropcare Ltd., filed Bill of Entry in respect of the imported goods and paid duty @ 15% in December, 2004. After two years they came to know that the correct rate of duty was 10% and not 15%. They sought rectification of the said mistake in Bill of Entry, in terms of provisions of Section 154 of the Customs Act, 1962. CESTAT held that the issue was decided by the Apex Court in the case of ‘Priya Blue Industries’ wherein it was held that refund claim contrary to assessment order is not maintainable without modification of the assessment order in appeal. Apparently, no appeal challenging the said Bill of Entry was filed by the appellant. CESTAT further held that Section 154 of the Customs Act, 1962 relied upon and referred to by appellants only permitted rectification in clerical or mathematical arena. Order of Revenue denying the request for rectification upheld. Appeal rejected.

[2008 (85) RLT 874 (CESTAT- Ahbad.]

2. Respondents, Guljag Industries Ltd., used ‘asbestos gasket sheets’ for connecting the various equipments through which process of gas and steam was manufactured in their plant. Respondent’s availed Cenvat credit of duty paid on such sheets by treating it as necessary accessories of the principal plant and therefore a capital good in terms of Clause (ii) of Rule 2 of Cenvat Credit Rules, 2001. The Adjudicating Authority disallowed respondent’s claim on the ground that the said sheets were not included in the scheme enumerated in capital goods described in clause (a) of Rule 2 of Cenvat Credit Rules. The Tribunal allowed the claim of respondent to claim Cenvat credit of Duties paid in respect of said sheets. The High Court of Rajasthan by relying upon the judgments of ‘ Union of India vs. M/s Grasim Industries Ltd.’ and ‘Union of India vs. M/s Aditya Cement’ held that the said Sheets is essential and adjunct to the main plant and must fall in the same domain of accessories necessary for smooth running of the plant. Decision of the Tribunal confirmed. Appeal dismissed.

[2008 (85) RLT 821 (Raj.)]

3. The appellants, Oudh Sugar Mills Ltd., were using H.R.E.C. Sheet, G.P. Sheet and their Plates in their factory for manufacture of Cane Sugar, Molasses and DEA. The question involved in this appeal is whether Cenvat credit is admissible on H.R.E.C. Sheet, G.P. Sheet and their Plates (all falling under Chapter 72) as “capital goods” under Rule 2(b) of the Cenvat Credit Rules, 2002. CESTAT held that the specific functional use of impugned goods would indicate that these are used as components, spares or accessories for repair and maintenance or manufacture and fabrication of the machineries (falling under chapter heading 84.38) which in turn are used for the manufacture of sugar and molasses. Therefore, the impugned goods are eligible to Cenvat credit in terms of Rule 2(b)(iii) of the Cenvat Credit Rules, 2002. Cenvat credit is admissible to the appellants. Appeal allowed.

[2008 (85) RLT 855 (CESTAT-Del.)]

4. The issue referred to Larger Bench of CESTAT is “Whether Rs. 5000/- is a minimum penalty that is required to be imposed in terms of Rule 25 of the Central Excise Rules, 2002.” There are two conflicting decisions of the Single Member Bench in ‘CCE, Lucknow vs. Kisan Sahkari Chini Mills Ltd.’ it was held that no minimum amount of penalty has been prescribed in Rule 173Q of the Central Excise Rules, 1944 and in ‘CCE, Lucknow vs. Sarjoo Sahkari Chinni Mills in which it was held that penalty of Rs. 5000/- is minimum penalty which is required to be imposed under the rule. The larger bench held that the amount mentioned in Rule 173Q of the Central Excise Rules, 1944 or Rule 25 of the Central Excise Rules, 2002 is the maximum and not the minimum. The amount of penalty shall not exceed the duty determined; if it is more than rupees five thousand, or rupees five hundred if the duty determined is less than rupees five thousand.

It was further held that even where a minimum penalty is prescribed, the authority as discretion to impose a lesser penalty depending on the facts and circumstances, nature and gravity of the offence, defence of the person and the extent of evasion among other things.

[2008 (85) RLT 827 (CESTAT-LB)]

5. The appellant, Lafarge India Pvt. Ltd., had taken Cenvat credit on welding electrodes which were used for repair and maintenance. The Adjudicating Authority disallowed the credit taken on welding electrodes and imposed penalty of Rs. 1, 00,000/- under Rule 13 of Cenvat Credit Rules, 2002 along with interest. The Commissioner (Appeals) set aside the order of penalty but upheld the denial of interest and recovery of interest. CESTAT held that in view of decision of Larger Bench of CESTAT in ‘Jaypee Rewa Plant vs. CCE, Raipur’ and ‘J.K. Cement Works vs. CCE, Jaipur’, Cenvat credit was not admissible on welding electrodes used for repair and maintenance purpose. The denial of credit on welding electrodes was upheld.

CESTAT further held that since the appellant had merely taken credit but had not utilised such credit or taken any advantage of the credit, payment of interest is not sustainable. Recovery of interest is set aside. Order of Commissioner (Appeals) modified accordingly.

[2008 (85) RLT 832 (CESTAT-Del.)]

6. The appellants, Hindustan Engineering & Industries Ltd., manufacture railway wagons which are fully exempted from payment of duty. Appellants sent the goods for Jobwork without taking credit of the duty on the same. The jobworker returned the goods to the appellants after processing the said goods. The appellants used the processed goods in the manufacture of exempted wagons. The Adjudicating Commissioner passed an order against appellants stating that they (appellants) had contravened the provision of Notification No. 214/86-CE dated 25.03.86 and therefore were liable to pay duty amounting to Rs. 73, 43, 923/- on the goods processed by the jobworker and received back. CESTAT held that Notification No. 214/86-CE dated 25.03.86 is not applicable to the appellant’s case as the said Notification is applicable only when the finished goods are leviable to duty either in whole or in part. It was further held that duty on such goods is payable by the job worker and not by the principal manufacturer. Appeal allowed by setting aside the impugned order.

[2008 (85) RLT 841 (CESTAT-Kol.)]

7. The appellant, Style Cell, were purchasing goods from M/s ITC Ltd. and selling them at the price fixed by ITC Ltd. Demands were issued to the appellant for payment of service tax which was not paid by them nor they have taken registration under the category of consignment agent. Appellant contended that the essential requisites of clearing and forwarding agent were not present in their case. M/s ITC Ltd. was in the position of a seller of goods and appellant were in the category of purchasers of goods and the Sale of Goods Act would apply and as such sales tax was being collected on that account. They relied upon the decision in ‘CCE vs Parekh Apparels. CESTAT held that appellant have being covered under Sale of Goods Act for the purpose of levy of sales tax. They have sold the good on behalf of the principal as an agent and their activity involved selling the goods to the purchasers and they were not handing the goods to come with in the category of clearing and forwarding agent or as a consignment agent. Appeal allowed.

[2008 (85) RLT 884 (CESTAT-Ban.)]

8. The appellant, M/s Supercoat Industries manufactured and cleared paints in cartons. They affixed their own product name and address on the cartons and affixed the brand name “SHEENLAC” on two sides of the cartons. The brand name “SHEENLAC” did not belong to the appellant. The original authority demanded duty for the financial year 1997-98 on the ground that the appellant were not entitled to claim SSI exemption as SSI Notification No. 1/93 and No. 16/97 did not allow SSI exemption if the brand name of another person was affixed on the goods. CESTAT held that the container (tins) in which the goods were presented for assessment does not carry the brand name of another person. The brand name “SHEENLAC” belonging to the appellants marketing agency was affixed only on the secondary packing. The secondary packing was used only for transportation of goods and is not reckoned for the purpose of determining the assessable value for levy of duty under the Central Excise Act, 1994. Appeal allowed.

[2008 (85) RLT 848 (CESTAT-Che.)]

9. The appellant, Sandeep Metal Craft Pvt. Ltd., cleared goods to the Ordnance Factories under the Ministry of Defence under a contract. The price at which the appellant was required to supply the goods was inclusive of the excise duty. Appellant erroneously deducted the excise duty payable @ 24% adval. and paid excess duty. Upon realizing their mistake the appellants filed for refund which was allowed by the Adjudicating Authority. Thereafter, Revenue issued show cause notice for recovery of the erroneously refunded claim of duty to the appellant. The revenue contended that the appellant has not proved the non-passing of the incidence to the buyers. CESTAT held that the appellants had cleared goods on payment of excess excise duty which is not due to the government. That the appellants had not received any amount over and above the contracted price. The question of unjust enrichment in respect of the rate contracts supplies stands squarely settled in favour of appellant. Moreover, it was proved that the appellants had not passed on incidence of duty for which they have claimed refund. CESTAT while following the decision in Industrial Cables (India) Ltd. vs. CCE allowed the appeal.

[2008 (85) RLT 845 (CESTAT-Mum.)]

10. Demand of service tax was raised from the appellants, Market Chase Advertising, by treating them as “advertising agency” as defined under Section 65(3) of the Finance Act, 1994. The appellants were engaged in preparation and erection of banners, traffic sign boards, centre median grills and barricades as required by traffic police. CESTAT held that appellants cannot be held to have satisfied the requirements of ‘advertising agency’ as the person to fall under this category should have made or prepared advertisements.

Further, the statement given in the reply to the show cause notice which is supported by documentary evidence available on record has more evidential value than the statement given earlier.

[2008 (85) RLT 888 (CESTAT-Che.)]

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PJ/Case Laws/08-09/03

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