Pradeep Jain - Chartered Accountant

PJ/Case Laws/08-09/04

CASE LAWS

1.Appellant, M/s Parason Machinery (India) Pvt. Ltd., have contended that they are availing services of repairs and maintenance of Xerox Machines installed in the factory. They are manufacturing engineering equipments as per the requirement of customers. They design and draw as per customer requirement without which they cannot design and manufacture the product. The Commissioner (Appeals), while granting certain relief’s to the applicants disallowed the input service tax credit totaling Rs.22, 078/- in relation to Xerox Machine Maintenance, Air Travel Agent Service, Tourist Taxi Service and Photography Service, and impose a penalty of Rs.5000.The credit was disallowed on the ground that applicant have not been able to provide evidence that above services have a bearing in the production or on manufacture. With regard to Photography services, they contended that on the basis of photography they develop slides and CDs which they take to the customer and show them in view of marketing and selling of their goods. With regard to Travel Agent Service and tours and travel services, the applicant contended they avail services for marketing tours and attend marketing meetings to market their manufactured goods. The CESTAT waived the pre-deposit of service tax demanded and penalty imposed and stays recovery.

[M/s Parason Machinery(India) Pvt Ltd v/s Commissioner of Central Excise,Aurangabad 2008-TIOL-811-CESTAT-MUM]

2. Appellant M/s Kumar cotton Mills (P)Ltd is engaged in processing of cotton and man-made fabrics. The central excise officers visited and recovered certain records maintained by the appellant under the cover of Panchnama and in the presence of appellant’s representative and independent witnesses. As per one lot register it was seen that the details of fabrics entered therein, were not recorded in statutory records. On being questioned Director of the Company admitted having cleared the said goods without payment of duty and deposed that the said register was maintained by an employee who left the company two weeks ago. The advocate appearing for the appellant contended that the lot register recovered from the premises bear letter “W” which is not their lot number. They use letter “K” for goods processed by them. The Revenue officers did not find any goods, either raw material or finished goods, with the lot number “W”.The register does not belong to them and no further investigation stand conducted by the department. It was also contended that no excess or shortage was found at time of search of factory. The CESTAT held that neither of the buyers, whose names and addresses were available in the said register were contacted by the Revenue and no efforts have been made to find out and ascertain correct position from the said buyers. it also held that sufficient evidence doesn’t exist in the case. It upholds the finding clandestine activity against the appellant.

[M/s Kumar Cotton Mills(P) Ltd.& ANR. v/s CCE,Ahmedabad 2008(87) RLT 232 (CESTAT-Ahbad)]

3.M/s V.R. Foundries,Coimbatore ,manufacturer of rough of rough castings meant for use in the production of PD Pumps and also for other application maintained separate accounts of receipt, consumption and inventory of common input scraps, used in production of exempted goods and dutiable goods as required under sub-rule 2 of rule 57AD of the then Central Excise Rules,1944 but the accounts were not according to correct procedure as required under the Central Excise Rules,1944.The demand affirmed was 8% of sale price of exempted goods, cleared by V.R. Foundries during the material period and a penalty of Rs. 50, 000. CESTAT on careful consideration of the case found that the appellant satisfied the requirement of sub-rule 2 of rule 57AD of the then Central Excise Rules. The Honorable tribunal found that the assessee was not liable to pay 8%of sale price of exempted final product demanded and imposing penalty on the appellant was not sustainable. The order was set aside.

4.M/s B M S Projects Pvt. Ltd. is engaged in construction business mainly for Gujarat Water Supply and Sewerage Board (GWSSB) and majority of construction are for water distribution pipelines network, water treatment plants etc.A show cause notice was issued by the department treating construction of pipelines as a service liable to service tax and proposing a demand of Service Tax of Rs.80 ,45, 420/-.The appellants submitted that their activity is not liable to service tax at all since GWSSB is not a commercial concern and therefore their activity is not liable to service tax at all. The financial position of the company is not very sound and they had only a marginal profit in the previous year. The appellants were ordered to deposit an amount of Rs.25 lakhs as deposit and recovery of balance amount of duty is stayed during the pendency of appeal.

[M/s BMS Projects Pvt Ltd v/s Commissioner of Cebtarl Excise & Customs,Surat-I 2008-TIOL-1489-CESTAT-AHM]

5.M/s JSW Steel Limited receives inputs under rule 4(5)(a) of CCR, 2004 for doing job work & clearing goods to supplier under exemption notfn. 214/86-CE who after processing clears the goods on payment of duty. The case was settled in favor of the applicants. The question involved in the case was whether the applicant, who is a job worker ,received goods under rule4(5)(a) of Cenvat Credit Rules,2004 for carrying of the process on job wok basis and returned the processed goods to raw material supplier ,is required to pay duty 8/10%of the price of exempted goods. The pre-deposit of duty and penalty pending in the appeal was waived.

[M/s JSW Steel Limited v/s Commissioner of Central Excise,Thane-I 2008-TIOL-917-CESTAT-MUM]

6.M/s Market Chase Advertising is an Advertising Agency. The lower authorities demanded service tax of Rs.3, 85,373/- for material period of 3.5 years and imposed penalty on the party under various provisions of the said Act. The activities in respect of which service tax was demanded include preparation, erection of banners, traffic sign boards, centre median grills and barricades as required by traffic police. A part of demand of service tax related to fabrication and erection of hoardings for display of advertisements of their private clients. Section 65(3) of the Finance Act, 1994 defines Advertising Agency as below:-

“Advertising agency means any commercial concern engaged in the providing of any service connected with the making, preparation, and display or exhibition of advertisement and includes an advertising consultant.”

The CESTAT, Chennai noted that the appellant did not design, visualize or conceptualize any advertisement to be displayed/exhibited on the banners, traffic sign board, traffic barricade or hoarding, they cannot be said to have made or prepared any advertisement and, therefore they did not fall within the scope of advertising agency.

7.M/s Firepro Systems private Ltd. in business of undertaking “Turnkey Projects” involving designing, supply, installation and commissioning of fire safety and protection systems and building access/management systems. The Commissioner Service Tax proceeded against the appellant on the ground that they did not discharge Service Tax liability under the category of “Erection, Commissioning or Installation” services for the material period i.e. from July 2003 to October,2005. In reply to this appellant urged that the ‘composite turnkey works contract ‘involving fire proofing is taxable only w.e.f.. 01-06-2007 whereas according to the Commissioner Service tax they are liable to pay service tax under category of “ Erection, Commissioning or Installation” services w.e.f. 01-07-2003 onwards. The Adjucating Authority gave decision that Service rendered by the appellant is taxable w.e.f. from 01-07-2003,and appellant had any doubt they could have approached the department but they themselves could not have assumed whether they are eligible for Service Tax. It was decided that the appellants are liable to pay service tax only w.e.f. 16-06-2005 and should be given benefit of Notification No.12/2003-ST and be allowed input credit. The date was changed because The Finance Act,2005 substituted the definition of ‘Erection, Commissioning or Installation’ in section 65(39a) providing relief to services in relation to fire proofing .

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PJ/Case Laws/08-09/04

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