Pradeep Jain - Chartered Accountant

Case: - Rohit Surfactants Pvt. Ltd. vs. Comm. Of C. Ex., Bhopal

Citation: - 2009(15) S.T.R. 169 (Tri.-Del.)

Issue: - Availability of Service Tax credit in respect of telephone/mobile service, Banking Service, general insurance service and courier service.

Brief Facts: - The Appellants manufactured soap and detergent powder etc. falling under Chapter 34 of the Central Excise Tariff in their factory and above mentioned services are used by the appellants. The service tax credit was denied by the lower adjudicating authority. Demand was raised and penalty imposed on the appellants. The Commissioner in further appeal confirmed the demand and penalty. Appellants have approached the Tribunal. This is an application for waiver of pre-deposit of service tax and penalty.

Appellant’s Contention: The Appellants pleaded that the services of telephone-mobile as well as landline, Banking services, Insurance services and courier services are used by them in relation to manufacture of their finished products, that the expression “directly or indirectly or in relation to manufacture” ,used in the definition of “input service” is very wide and would cover all the services which are used whether directly or indirectly in or in relation to the manufacture of the finished goods, even if the same are not specifically mentioned in the definition of ‘input services’. Reliance was placed on Keltech Energies Ltd. vs. CCE, Mangalore [2008 (10) S.T.R. 280 (Tri.-Bang.)].

Respondent’s Contention: The Respondents pleaded that none of these services are specified in the definition of input services as given in Rule 2(1) of Cenvat Credit Rules, 2004 and that all these services are used in post-manufacturing activities and not in relation to the manufacture of the finished goods. For this reason the Cenvat Credit has been rightly denied in respect of these services.

Reasoning of Judgment: - The Tribunal has followed the judgment given in the case Keltech Energies Ltd. vs. CCE, Mangalore in which it was held that telephone services are to be treated as input services and are eligible for the benefit of Cenvat Credit. Insurance services, banking services and courier services would be covered by the expression “services used directly or indirectly in or in relation to the manufacture of finished goods”. The words “directly or indirectly in or in relation to the manufacture of finished products” in the definition of input service have to be given very wide meaning and would cover the said services. Since the inclusive part of the definition of ‘input service’ also covers – services used in relation to ………..activities relating to business, such as accounting, auditing, financing, ………” and since the words- ‘such as” after “services used in relation to activities relating to business’ indicates that the list of services of this category is not exhaustive, the ‘banking services’ would also be covered by the definition of ‘input service’. Tribunal held that the appellant have a strong prima facie case. The requirement of pre-deposit of service tax credit and penalty was waived.

Decision: - Stay petition allowed.

Case: - Rangammal Steel & Malleables vs. Commr. Of C. Ex., Coimbatore

Citation: -2009(15) S.T.R. 197 (Tri.-Chennai)

Issue: - Admissibility of Cenvat Credit of service tax discharged for maintaining a Windmill located away from the factory which generated electricity used by the assessee in the manufacture of their final products.

Brief Facts: -

Appellants owned a Windmill which was located away from the factory. The power generated in the Windmill is fed to the Tamil Nadu Electricity Board grid and the same was drawn by the factory for running its operations. They were taking credit of service tax paid during the period 01.06.06 to 31.03.07 under the head Annual Maintenance Charges in respect of the Windmill. Lower authorities initiated proceedings against appellants on the ground that Cenvat credit was not admissible because windmill was situated far away from factory and that the electricity generated was a non-excisable item. The appellants have filed an appeal in the Tribunal against the order of lower authorities. This is the stay application.

Appellant’s Contention: The Appellants have taken the ground that electricity generated by the windmill is used in the manufacture of their excisable goods by the assessee. Though the Windmill is situated away from the factory, the impugned credit was comparable to the capital goods credit extended to the assessee if it uses a generating set within the factory.

The Appellant have relied upon the judgment of Apex Court in Vikram Cement v. CCE, Indore [2006 (194) ELT 3 (SC)] in which it is held that credit of duty paid on explosive (inputs) used in the captive mine of the appellants therein was admissible as Cenvat Credit. It is further submitted that the impugned credit was legitimately available to the assessee.

Respondent’s Contention: Respondents contended that the Tribunal in Rajhans Metals (P) Ltd. v. CCE, Rajkot [2007 (8) S.T.R. 498 (Tri.-Ahmd.)] had decided that similar credit relating to a Windmill situated away from the factory of the Appellants therein was not available as Cenvat Credit.

Reasoning of Judgment: - It was held that the electricity generated in the Windmill is fed to the Electricity Board grid and then drawn from the power grid by the assessee for using in its factory. Prima facie the impugned credit is admissible to the assessee as the power generated by the Windmill is used in the factory of the assessee. Indirectly maintenance of the Windmills aids the manufacturing operations of the assessee. The Tribunal found that the appellants have made out a prima facie case against demand and penalty in the impugned order.

Decision: -Waiver of pre-deposit and stay of recovery in respect of the demand and penalty till final disposal of Appeal.

Case: - Jubilant Organosys Ltd. vs. Commissioner of C. Ex., Meerut-II

Citation: -2009(15) S.T.R. 187(Tri.-Del)

Issue: -Whether excess amount of Service Tax deposited is eligible for adjustment against the service tax liability of subsequent month is permissible in the Finance Act, 1994 and Rules thereunder.

Brief Facts: - Appellants adjusted the excess amount of Service Tax deposited in the previous month in the next month. Department demanded Tax for the period 01.03.06 to September, 2006 on the ground that adjustment was without giving intimation to jurisdictional officer within 15 days of adjustment. Adjudicating Authority confirmed the demand of tax. Said decision was upheld by Commissioner (Appeals) by observing that the appellant had failed to intimate jurisdictional Superintendent of Central Excise, within a period of 15 days of adjustment. Appeal filed in the Tribunal. Present application is for waiver of pre-deposit.

Appellant’s Contention:- The appellants had submitted ST-3 return within the stipulated period which may be treated as intimation of adjustment of service tax.

Reasoning of Judgment: - The Tribunal found that Rule 6(4A) of Service Tax Rules provides adjustment of excess payment. It was found that it was case of revenue neutrality. The Appellant has made out a prima facie case for waiver of pre-deposit of tax. Pre-deposit of tax waived till disposal of Appeal.

Decision: - Stay application allowed.

Case: - Aero Products vs. Commissioner of Service Tax, Bangalore

Citation: -2009(15) S.T.R. 2225(Tri.-Bang.)

Issue:- Revision of refund of service tax when there is export of service-justifiability

Brief Facts: -Appellants rendered “Consulting Engineer” service to two parties situated in France. The orders were procured through Indian companies and the consideration was received in Foreign exchange. The Appellants inadvertently paid the service tax. On realizing that they were not liable to pay service tax on services exported, they applied for refund and refund claim was sanctioned. Later they received SCN which invoked Section 11A of the Central Excise Act, 1944. That show cause notice is still pending in which the appellant have raised contention that Section 11A cannot be applied to service tax matters. The Revision authority again issued a show cause notice in exercise of his powers under Section 84 of the Finance Act, 1994 seeking to revise the refund order granted in favour of appellants. The order-in-revision was passed ordering recovery of refund granted to appellant. Appellant have filed appeal before the Tribunal.

Appellant’s Contention: The appellants contended that the grounds taken in show cause notice of the Revisional Authority are entirely different from the original grounds. Certain legal issues have also been raised.

Respondent’s Contention: The learned Departmental Representative stated that the Revisionary Authority was within his rights to receive the order passed by Assistant Commissioner. He reiterated the impugned order.

Reasoning of Judgment: - Tribunal has found that it is clear from the show cause notice that the appellants have in actuality rendered services to parties in France and have received the payment in Foreign Exchange. If the service would have been provided to an Indian Party it would not have made the payment in foreign exchanges. Prima facie there is no merit found in department’s stand.

Tribunal further held that the issue is squarely covered by judgment in Blue Star Ltd. v/s CCE, Bangalore [2008 (11) STR 23 (Tri.-Bang.).

Decision: -Stay application granting waiver of pre-deposit of the amount demanded in order is allowed.

Case: -Punjab Steels vs. Commissioner Of C. Ex., Chandigarh

Citation: -2009(15) S.T.R. 175(Tri.-Del.)

Issue: - Whether Cenvat credit of service tax on GTA is also reversible if the cenvatable inputs are removed as such and credit of excise duty has been reversed?

Brief Facts:-The Appellant manufactured Steel Ingots for which they received some inputs. They have taken credit of excise duty paid on the input and capital goods. They have also taken service tax paid on Goods Transport Agency Service received by them in respect of inputs goods. The appellant removed some inputs, for which Cenvat credit was taken, as such and in terms of the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004 reversed only the Central Excise Duty credit but did not reverse Cenvat Credit of service Tax on Goods Transport Agency’s service which has been used for receipt of those inputs. Appellants reversed the service tax credit in respect of GTA service along with interest. Thereafter, Department issued a show cause notice for confirmation of demand of allegedly wrongly taken service tax credit along with interest and also for imposition of penalty. Assistant Commissioner confirmed the demand with interest and appropriated the amount deposited by appellants towards service tax and interest and imposed penalty of equal amount under Rules 15 of Cenvat Credit Rules. Further appeal before the Commissioner was dismissed. Appellant have therefore come in appeal before the Tribunal. Present is the application for stay and waiver of pre-deposit.

Appellant’s Contention: Advocate for Appellant pleaded that Rule 3(5) provides reversal of credit of duty paid on the inputs when some cenvated inputs or capital goods are cleared as such and that at the time of removal of any Cenvated inputs as such, it is only Excise duty credit which is required to be reversed and not the Service Tax credit of the service tax paid on the GTA service in connection with the receipt of those inputs.

Respondent’s Contention: DR for respondents pleaded that when the inputs in respect of Cenvat credit has been taken, are removed as such, not only the Cenvat Credit of excise duty on the inputs is required to be reversed, but also Cenvat Credit of service tax on Goods Transport Agency Services used in connection with the receipt of the inputs is also to be reversed. The Appellant did not service tax credit and did so only when pointed by the Deptt. Demand of Service tax alongwith the interest and penalty has been rightly imposed.

Reasoning of Judgment:- Tribunal held that the goods and services are two different things. When any duty paid inputs are received by a manufacturer, he is entitled to take Cenvat credit not only of Central Excise Duty paid on those inputs but also of the service tax paid on GTA service used for transportation of inputs up to the factory. The inputs goods and inputs services are 2 different inputs.

The Tribunal was prima facie of the opinion that when such cenvated inputs are removed as such as per the requirement of Rules 3 (5) of Cenvat Credit Rules only, it is only the Central Excise duty credit which is to be reversed. Prima facie appellants have strong case.

Moreover, they have already reversed the entire amount of service tax credit in dispute along with interest before the issue of show cause notice. Requirement of pre-deposit of penalty waived for hearing of Appeal.

Decision: - Stay petition allowed.

Case: -M.P. Water & Power Management Institute vs. Comm. Of C. Ex., Bhopal

Citation: -2009(15) S.T.R. 164 (Tri.-Del.)

Issue: - Demand of service tax on providing Scientific or Technical Consultancy Service, Technical Testing or Analysis Service for extended period whether sustainable, when there is no suppression of facts?

Brief Facts:-The Appellant is an institute constituted by the Government of Madhya Pradesh and registered under the Societies Registration Act. The Appellant is undertaking activities of field studies, evaluation studies and collection of data under the project assigned by Government agencies. Demand of service tax was raised against appellant for providing scientific or technical consultancy and technical testing and analysis as well as for commercial training or coaching. Commissioner (Appeals) set aside the demand of service tax on commercial training or coaching. Appellant has filed appeal for demand of service tax on other 2 categories of services.

Appellant’s Contention: Appellant has contested the demand of tax on merit as well as on limitation. He submitted that vide Board’s letter F.No. B-II/I/2000-TRU, dated 9-7-2001 it was clarified that many public funded institutes receive grants or aid from the government for conducting research/project work and no service is rendered to anyone. Hence the question of payment of service tax does not arise. It was contended that the activities undertaken by appellants are in nature of research/project work. It was also submitted that demand of tax is barred by limitation and was further submitted that Commissioner (Appeals) set aside the penalties as there was no suppression of facts with intent to evade payment of tax under Sec 80 of the Finance Act, 1994.

Respondent’s Contention: Counsel for respondent reiterated the reasoning and finding contained in the impugned order.

Reasoning of Judgment:- The Tribunal held that there is force in the submissions of appellant with regard to limitation. It was seen that the Appellant is a registered society having no profit motive. They were undertaking the job to help Government bodies. The Commissioner (Appeals) set aside the penalties imposed under Sec 80 of the Act considering the facts and circumstances of the case. Demand of tax on scientific or technical consultancy and technical testing and analysis for extended period is not sustainable. Demand set aside as being barred by limitation.

Decision: - Appeal allowed.

Case: - BASF India Ltd. & Ors. v/s CCE, Vapi

Citation: - 2009 (92) RLT 728 (CESTAT-Ahmd.)

Issue: - Whether Cenvat Credit is available on the activity of re-labelling which amounts to manufacturing activity in view of Chapter notes and when revenue neutrality is there?

Brief Facts: - Appellant-company is manufacturer of excisable products like insecticides, fungicides, weedicides, pesticides, herbicides etc. Appellants were doing re-labelling of five products and treating the said process as manufacturing activity taking Cenvat credit in respect of these products. Department issued show cause notice contending that the said activity did not amount to manufacture and Cenvat credit was not admissible. Seized goods were confiscated and redemption fine imposed. Cenvat credit taken was demanded with equal amount of penalty. Penalty was also imposed on authorised signatory and manager of appellant-company. Appellant have filed appeal against the said demand.

Appellant’s Contention: The processes undertaken by the appellants definitely amount to manufacture. According to Chapter notes of Chapter 29, Chapter 38, labeling, relabeling of containers and re-packing from bulk boxes to retail packs or adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture. The appellants contended that in respect of the products manufactured by them it is absolutely necessary to re-label the packs received by them so that products are acceptable in the international market.

Appellants have relied upon the decisions in which it is held that when final product is exported, the duties on final products as well as duty on inputs are eligible to be reimbursed. Therefore, even if the final product is not dutiable or even if the process does not amount to manufacture, Cenvat credit taken is admissible since the whole exercise would be re-neutral and exporter would not have availed any double or triple benefits.

Appellant has cited the decisions in the cases of Alembic Ltd v/s CCE, Vadodara [2007 (218) ELT 607 (Tri.-Ahd), GT Exports v/s CCE [2008 (223) ELT 100] and NRB Bearings v/s CCE [2008 (84) RLT 842 (CESTAT-Che) to support its contention that Cenvat credit taken by them is not irregular.

Respondent’s Contention: Mere labelling does not amount to manufacture. The main contention of the Commissioner was that the products were already marketable and therefore the activities carried out by the appellant did not come in the definition of deemed manufacture. But it is fairly admitted by them that the case laws cited by the appellant are applicable to the facts of the case.

Reasoning of Judgment: - Tribunal found that it is clear that the re-labelling is the process undertaken by the appellants in respect of 5 products in dispute amount to manufacture in view of definition of deemed manufacture in the Chapter notes and statutory requirements.

The Tribunal has held that as observed in Alembic Ltd case even if the process does not amount to manufacture, the whole exercise is revenue neutral and therefore, appellants are eligible for Cenvat credit.

Moreover, the Commissioner has admitted that the appellant was carrying out many processes in their factory in respect of the products under dispute. The main contention of the Commissioner is not acceptable as it is a very narrow interpretation of the definition of manufacture and the safety label, affixing of a new label with other details etc. would amount to manufacture in terms of the definition of deemed manufacture in the Chapter notes. Conclusion of Commissioner is not acceptable. Stand of revenue on both counts processes not amounting to manufacture or revenue neutrality is not acceptable.

Decision: - Appeal allowed with consequential relief.

Case: - CCE, Coimbatore v/s Chola Spinning Mills (P) Ltd

Citation: - 2009 (92) RLT 731 (CESTAT-Che.)

Issue: - Whether clandestine removal is proved on the basis of third party’s records which are not corroborated by any other evidence?

Brief Facts: - Records were found from the premises of M/s KTC which was a trader in cloth and yarn, and also a broker for purchase/ sale of yarn to M/s RSM and to Respondent during investigation. Evasion of excise duty by respondent was noticed from the documents seized at M/s KTC premises. Stocks and accounts of respondent were verified in the presence of its directors and it was revealed that respondent were adopting lesser value for the purpose of calculation of central excise duty than the actual sale value, resulting in short payment of excise duty. Statement of director was that commission was given to sale of yarn through broker of M/s KTC.

The Department was of the view that respondent had suppressed the actual sale value as they received additional consideration from their customers over and above the invoice amount for the yarn manufactured and sold. Show cause notice was issued for recovery of duty short paid during 1997-98 and for imposing penalty. Lower adjudicating authority confirmed the demand and imposed penalty. However, Commissioner (Appeals) set aside the impugned order on the ground that demand of duty was based on third party records and therefore, was not sustainable. Department has come in appeal against the Commissioner’s Order.

Appellant’s Contention: The Department has relied upon the loose sheets seized during the investigation of M/s KTC. It has been contended that the sheets indicate the actual price of yarn sold to respondent and it matched exactly the price in seized records of respondent.

Respondent’s Contention: Respondent-assessee has contended that they have no knowledge about the loose sheets and that they have not instructed anyone to maintain such sheets.

Reasoning of Judgment: - The Department has not taken the statement of the person who has prepared the loose sheets. There is no worksheet to show how the quantity for which the demand was raised has been arrived at. There is no basis for conclusion that these figures represent the rate at which each bag of yarn was sold to M/s KTC. Statement of person in charge of M/s KTC does not implicate the respondent and nowhere it is stated by him that he had handed over any amount in excess of the invoice value to the respondents who have also stated that they did not receive any amount in excess of the invoice value. There is not charge that respondents had clandestinely removed any goods. The total quantity cleared is less than the quantity for which demand has been raised. Entire demand is based on records of M/s KTC. Order of Lower appellate authority upheld.

Decision: - Appeal rejected.

Case: - TTP Technologies Pvt. Ltd & Ors. v/s CCE, Bangalore-II

Citation: - 2009 (92) RLT 757 (CESTAT-Ban.)

Issue: - Whether rebate of duty granted for export under DFIA scheme can be withdrawn for using Cenvat inputs not procured against DFIA Scrips?

Brief Facts: - Appellants obtained certain inputs, took Cenvat credit and manufactured final products. The final products were cleared on payment of duty by utilizing the Cenvat credit and they were exported under DFIA. Later, appellants claimed rebate of duty under Rule 18 of the Central Excise Rules, 2002. Rebate was sanctioned under Notification 19/2004-CE (NT). The said exports were taken into account for discharge of export obligation under DFIA Scheme. Department initiated proceedings against appellant on the ground that rebate sanctioned was erroneous.

Adjudicating Authority gave finding that condition of Notification No. 40/2006-Cus, dated 01.05.06 was violated because appellants took Cenvat credit on inputs used in exported goods.

Appellant’s Contention: The appellants have raised various contentions which are as following:

1. Notification No. 40/2006-Cus prohibits (a) taking Cenvat credit on inputs procured or imported against DFIA and (b) claim of rebate of duty paid on inputs used in exported goods. But in their case appellants had not imported any inputs under DFIA scrips and no question of taking credit in respect of inputs imported against DFIA arises.

2. Exports were made using Cenvat inputs procured in the normal course of business.

3. There was no prohibition to use ordinary Cenvat inputs for DFIA exports under Rule 18 or under DFIA scheme.

4. As rebate was sanctioned against order-in-original, the Department ought to have exercised power of review under Section 35E (2) and directed filing of appeal. The SCN issued under Section 11A is without jurisdiction. Power under Section 11A can be exercised only by the refunding authority or any authority below the Commissioner of Central Excise. Also the appellants had not used any imported inputs at all.

Reasoning of Judgment: - The Tribunal observed that a careful reading of provisions of FTP 2004-09 and Notification No. 40/2006-Cus show that rebate on inputs procured indigenously against authorisation should not be taken. But in the present case, the inputs have not been procured against the authorisation but have been obtained in the normal course on payment of duty. Therefore, the Notification No. 40/2006-Cus has not been violated.

Moreover, the authority sanctioning the refund had not issued the show cause notice and no review under Section 35E has been done. Therefore, there is no merit in the impugned orders and are set aside.

Decision: - Appeals allowed with consequential relief.

Case: - CCE, Ludhiana v/s Freeman Measure Pvt. Ltd.

Citation: - 2009 (92) RLT 719 (CESTAT-Del.)

Issue: - In case of default in monthly payment of duty, whether the forfeiture period of two months for each instance of default would run concurrently or would run continuously?

Brief Facts: - Respondent defaulted in payment of duty in monthly installments for the months of July 2005, August 2005, January 2006, February 2006 and March 2006 and in respect of each of these periods, there was delay of more than 30 days from the due date in discharging the full duty liability. As per the provisions of sub-rule 3A of Rule 8 of Central Excise Rules, as it then existed during the period of dispute, 5 SCNs were issued to respondent asking him to show cause as to why the facility to pay duty in monthly installments should not be withdrawn for period of 2 months or till the date of payment of duty alongwith interest, whichever is later.

The Assistant Commissioner by common order forfeited the facility to pay duty in monthly installments for a period of 10 months from the date of communication of order i.e. 2 months for each instance of default in discharge of monthly duty liability even during the grace period of 30 days from the due date, as per Sub-rule 3A.

In appeal, the Commissioner (Appeals) reduced the forfeiture period to 2 months on the ground that under Rule 8 (3A), the facility to pay duty in monthly installments can be denied for 2 months and also that respondent had already paid all the dues alongwith interest, though after the period of 30 days from the due date. He relied upon judgments in cases of Calcom Vision Ltd v/s CCE, Meerut-I [2002 (50) RLT 640 (CEGAT-Del.) and In re: Arun Smelters Ltd. [20003 (153) ELT 475 (Commr. Appl.).

Revenue has filed appeal against this order.

Appellant’s Contention: The respondent must suffer forfeiture period of 2 months for each instance of default and the Assistant Commissioner had rightfully denied the facility to pay duty in monthly installments for 10 months.

Respondent’s Contention: When in case of several instances of default in respect of monthly duty liability, a common order at a later date is passed by the Assistant Commissioner ordering forfeiture of the facility, the period of forfeiture for each period of default would run concurrently and not continuously.

Reasoning of Judgment: - The Tribunal is of the view that there is nothing in the language of Sub-rule 3A of Rule 8 from which it can be concluded that the forfeiture period of 2 months is to be imposed for each instance of default or that when more than one instances of default in discharge of monthly duty liability are adjudicated at a later date, the forfeiture period of different periods of default would run continuously. From Rule 3A it is clear that the period of default shall be 2 months from the date on which the entire duty alongwith interest is paid.

In the instant case, as the duty has been paid alongwith interest though after period of 30 days from the due date. The Commissioner (A) has rightly reduced period of default to 2 months. No infirmity in the order.

Decision: - Appeal dismissed.

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