Pradeep Jain - Chartered Accountant

PJ/Case Laws/2009-10/14

Case Laws

Central Excise Section:

Case: - Bock India Pvt Ltd v/s Commissioner of C. Ex., Vadodara

Citation: - 2009 (241) ELT 251 (Tri.-Ahmd.)

Issue: - Whether the assessees can suo-motto take the credit of pre-deposit amount on favourable decision?

Brief Facts: - Appellants had deposited amount of Rs. 40, 000/- at the stage of stay before the Tribunal. The said appeal was decided in favour of the appellant. The appellants became entitled to refund of pre-deposited amount in terms of Section 35F of the Central Excise Act. They intimated the Department and took credit of the said amount in their PLA account. Department objected to suo-moto taking of credit by the appellant and initiated proceedings against them. The original Adjudicating Authority confirmed the demand of the said amount and also imposed penalty. Appeal before the Commissioner (A) was rejected. Therefore, appellants have come before the Tribunal.

Appellant’s Contentions: - It is contended that the decision of larger bench in the case of M/s BDH Industries Ltd, relied upon by the Department, was not strictly applicable to their case.

Respondent’s Contentions: - Department contended that the appellant instead of taking the refund suo moto should have applied for refund of the same with the Department. Reliance was placed on the judgment of M/s BDH Industries Ltd. [2008 (229) ELT 364 (Tri.-LB)].

Reasoning of Judgment: - Tribunal held that the refund of pre-deposit amount accrued to the appellants immediately on passing of the Tribunal’s order allowing their appeal. The credit of said amount was availed after giving intimation to the Department. Also, it is well settled that the provisions of unjust enrichment or limitation did not apply to such refund of such pre-deposited amount. It was held that the appellants had rightly contended that the decision given in M/s BDH Industries Ltd was not applicable to their case because the issue of refund of pre-deposit, on success of appeal, was not the issue under consideration before the Larger Bench. The Tribunal further held that there was no justification in confirming the said amount. Impugned orders set aside.

Decision: - Appeal allowed with consequential relief.

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Case: - Ace Refractories Ltd. v/s Commissioner of Central Excise, Bhopal

Citation: - 2009 (15) S.T.R. 705 (Tri.-Del)

Issue: - Whether the Cenvat credit on input services like insurance of residential colony, industrial cleaning services, and construction of road inside plant is available?

Brief Facts: - Appellant are manufacturers of Aluminium Bricks and Refractory material. They took cenvat credit in respect of input services of insurance for entire plant & machinery including the attached residential colony, industrial cleaning service, repair of pipes and construction of roads inside the plant. Certain services on which credit was taken were utilised in the Residential colony. The credit was taken during the period 2004-05 and from 2005 upto 2006. Department initiated proceedings by issuing SCN dated 01.05.07 denying the cenvat credit to the appellants on the ground that the said services did not fall under the category of input services. Demand was confirmed and penalty was also imposed by the Adjudicating Authority. The Commissioner (A) upheld the order of the Adjudicating Authority and therefore, appellants have come before the Tribunal. This is an application for waiver of pre-deposit of service tax demand and penalty confirmed against the appellant.

Appellant’s Contentions: - Appellant submitted that the part of the amount of service tax demanded which related to services used in the residential colony was already reversed. For the remaining services, it was contended that credit was admissible to them. The applicability of limitation to issuance of SCN was also pleaded. It was contended that they were regularly filing ST-3 returns and there was no suppression, therefore demand was time barred.

Respondent’s Contentions: - Department reiterated the findings of the order of the Commissioner (A) and contended that the insurance policy also included the residential colony for which credit was not available and the demand was not time-barred.

Reasoning of Judgment: - The Tribunal held that, prima facie, the services of insurance, civil construction inside the plant, repairing of pipes & industrial cleaning, appear to be input services. Moreover, the demand appeared to be time-barred as the appellant was regularly filing ST-3 returns. Also, part of the credit relating to residential colony was already reversed. Thus, appellants, prima facie, had a strong case and the amount already deposited is sufficient. Pre-deposit of the rest of the amount was waived.

Decision: - Stay application allowed.

Comment: - There is no doubt about the Cenvat credit on these items after High Court decision in case of Coco Cola which says that the definition of “Input Services” is very wide.

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Case: - CCE, Chandigarh v/s Swastik Steel Works

Citation: - 2009 (94) RLT 7 (P&H)

Issue: - Whether the clandestine removal can be alleged on the basis of Octori receipts which do not contain name or bill number of assessee?

Brief Facts: - Revenue alleged against the assessee that they had fraudulently taken cenvat credit on goods which were not received by them. They relied upon the octroi receipts issued by the State Revenue Authority. The Commissioner (A) held that no reliance could be placed on octroi receipts which did not contain any evidence that the material mentioned therein had been cleared/sold by the M/s Surbhi Gas Service (dealer). The receipts only depicted the description of goods and vehicle number but do not establish by any evidence that the said octroi receipts relate to M/s Surbhi Gas Service as it did not contain any reference to their name or their bill number. It was further held that no enquiry was made by the Revenue from the Octroi post Authorities as to how and on what basis Octroi receipts were issued and therefore, the charge against the dealer was not established by substantial evidence. The Tribunal also upheld the findings of the Commissioner (A). Revenue has filed this appeal in the High Court against the said order.

Reasoning of Judgment: - The High Court held that the findings of fact recorded by the Commissioner (A) and upheld by the Tribunal did not suffer from any legal infirmity warranting interference of this Court. It was also held that no question of law or substantive question of law arose for determination. The findings were pure findings of fact. There was no connecting evidence on record to show that the octroi receipts could be connected to M/s Surbhi Gas Service as the said octroi receipts did not mention the consignor’s name, address and his bill number.

Decision: - Appeal dismissed.

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Case: - CCE, Ahmedabad v/s Asarwa Mills

Citation: - 2009 (94) RLT 148 (CESTAT-Ahmd.)

Issue: - The reversal of Cenvat credit means not taking of Cenvat credit and as such the benefit of exemption can not be denied.

Brief Facts: - Appellants had taken cenvat credit in respect of manufacture of exempted goods but had reversed the input credit. They were availing the benefit of exemption Notification No. 29/2004-CE, which was available subject to availing benefit of credit. The appellants also were availing benefit of Notification No. 30/2004-CE, which provided that benefit would be available if credit of duty paid on inputs has not been taken. Revenue raised demand by contending that the benefit of Notification No. 30/2004-CE on the ground that they had taken cenvat credit. The Commissioner (A) vacated the SCN issued to the appellant for denial of the exemption in terms of Notification No. 30/2004-CE. Revenue has filed appeal against the order.

Reasoning of Judgment: - The Tribunal held that both sides agreed that the issue was squarely covered by decisions given in Forbes Gokak Mills Ltd v/s Commissioner of Central Excise, Belgaum [2006 (77) RLT 626 (CESTAT-Ban.)] in which it was held that once credit was reversed, it can be said that no input credit had been availed and benefit of exemption Notification No. 30/2004-CE is to be extended. It was noted that Revenue’s appeal on the said issue was rejected by the High Court in Commissioner of Central Excise v/s Ashima Dyecot Ltd [2008 (232) ELT 580 (Guj)]. Further, it was noted that the matter was clarified vide Board Circular No. 858/16/2007-CX dated 08.11.07. Accordingly, it was held that there was no infirmity in the view adopted by the Commissioner (A).

Decision: - Appeal rejected.

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Case: - Lok Nath Prasad Gupta v/s CCE, Delhi-II

Citation: - 2009 (94) RLT 161 (CESTAT-Del)

Issue: - Whether the wholesale package will be covered under MRP based valuation or normal transaction value based valuation?

Brief Facts: - Appellants were manufacturing chewing tobacco in multi location units. They were making pouches of 2.5, 5 and 9 gms of tobacco. They were then packing 26 units of 9 gms, 48 units of 5 gms in strip form in polythene packets. These were marked as wholesale packages. Revenue contended that the assessment of the said products was to be done in terms of Section 4A of the Central Excise Act, 1944 and raised demand of differential duty. The demand was confirmed by the Commissioner (A) and penalty was also imposed. Appellant have filed this appeal against the impugned order.

Appellant’s Contentions: - Appellant contended that the same issue was raised in respect of their unit at Calcutta before the Tribunal in which the Tribunal had held that such pouches were to be assessee in terms of Section 4 and not in terms of Section 4A. It was held in the judgment reported at 2006 (204) ELT 412 that “such polythene bags were wholesale packages under the meaning of the 1977 Rules and they did not satisfy the definition of multi piece packages under rule 2 (j) of the 1977 Rules. The pouches in the present case which did not give any indication of MRP or any other price were not intended for retail sale when packed into polythene packages.” It was submitted that an appeal against this judgment was pending in the Supreme Court. However, reliance was placed on the ratio of decision given in Commissioner of Central Excise, Vapi v/s M/s Kraftech Products [2008 (85) RLT 701 (SC)].

Reasoning of Judgment: - The Tribunal held that as the issue has already been decided by the Kolkata Tribunal in appellant’s own case, therefore, assessment was to be done under Section 4 instead of Section 4A.

Decision: - Appeal allowed with consequential relief.

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Service Tax Section:

Case: - Jay Ganesh Auto Centre v/s Commr. of C. Ex. & Cus., Rajkot

Citation: - 2009 (15) S.T.R. 710 (Tri.-Ahmd.)

Issue: - Whether the penalty can be imposed when the service tax is deposited suo-motto by the appellant? Whether the penalty is imposable when there is bonafide belief that the service tax is not payable?

Brief Facts: - Appellants were authorised dealers of Tata Motors Ltd. For promoting sales, the appellants helped their customers obtain auto finance from financial institutions. The personnel of the various financial institutions used to sit in appellant’s premises and in return they paid brokerage/commission to them which was termed as incentive. An offence case was registered against the appellants on the ground that they did not par service tax on the incentive received by them during the period from 01.07.03 to 31.12.05 as they were following under the Business Auxiliary Service. Appellants paid service tax demanded with interest without issuance of show cause notice. Demand was confirmed and penalties under various sections were imposed. In appeal, the Commissioner (A) set aside the penalties imposed under Section 76 and 77 of the Finance Act, 1944 but confirmed the penalty under Section 78 of Finance Act, 1994. Hence, appellant filed this appeal.

Appellant’s Contentions: - It was contended that there was lot of confusion regarding the liability of the authorised service station for payment of service tax on the amounts received by them as incentive from financial institutions. The issue had become clear after clarification given by the Board vide Circular No. 87/05/2006-ST, dated 06.11.06. Therefore, appellants were under bona fide belief that commission received by them was not subjected to service tax and as soon as they became aware of their liability, they have paid the service tax. Thus, in view of the fact that the appellants had voluntarily paid service tax with interest before issuance of SCN and in view of the fact that they were under bona fide belief that they were not liable to pay service tax, penalty under Section 78 may be set aside by extending benefit of Section 80 of the Finance Act, 1994.

Reasoning of Judgment: - The Tribunal held that the there was considerable force in the arguments advanced by the appellants and keeping in mind the facts & circumstances explained by appellants, their case deserved relief of penalty under section 78 by exercising powers of Section 80. Accordingly, penalty under Section 78 is set aside.

Decision: - Appeal allowed.

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Case: - General Precured Treads Pvt. Ltd. v/s Commissioner of Cus & C. Ex., Trichy

Citation: - 2009 (15) S.T.R. 724 (Tri.-Chennai)

Issue: - Whether the supply of excess heated oil to adjacent units will fall under “BAS”?

Brief Facts: - Appellants have a heating machine to heat “Hydraulic Oil” which was used for heating the hydraulic press used for pressing the design ‘mould’ at their factory. After using the oil they were supplying the heated thermic fluid to two adjacent units manufacturing “Pre-cured Tread Rubber” through a pipeline. The appellants were receiving heating charges on hourly basis. Revenue raised demand by treating the supply as a procurement of goods or service, which are inputs for the client and therefore was covered by the category if “Business Auxiliary service”. Demand for service tax was confirmed by the authorities below. Hence, this appeal was filed.

Reasoning of Judgment: - The Tribunal held that the said activity could not be treated as service rendered as it is only a supply of excess heated oil to other units after use thereof in their factory and such supply will not amount to procurement of goods or service which are inputs for the client for the reason that appellants were not procuring input in question through a third person and supply directly to the client but were heating the oil in their premises, using the same in their premises and supplying only excess heated oil through pipeline to the adjacent factories. The said activity did not amount to their rendering “Business Auxiliary service”. Impugned order set aside.

Decision: - Appeal allowed.

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Case: - M/s Academicians Classes v/s CCE, Jaipur

Citation: - 2009-TIOL-1302-CESTAT-DEL

Issue: - Whether the refund of taxable services amounts to non realization of amount and service tax is not payable on the same?

Brief Facts: - Appellant was providing coaching services. Appellant had refunded certain amount alongwith service tax. After refunding the said amount of fee, the net receipt of fees was less than Rs. 4 lakhs. Appellant claimed the benefit of exemption Notification No. 6/05-ST dated 01.03.05 for being a small taxpayer. The Authorities below held that appellant was in-eligible to the exemption granted by the afore-mentioned Notification. Appellant has therefore, approached the Tribunal.

Appellant’s Contentions: - It was contended that they were eligible for exemption granted to a small taxpayer and they could satisfy the authorities below that there was no realisation of fees and therefore, service tax relating to unrealized fees was not required to be deposited which was also refunded.

Respondent’s Contentions: - It was contended that when the materials were not before the authority to consider the averments of the appellant made before the Tribunal, the appellant had failed to succeed before both the authorities below.

Reasoning of Judgment: - The Tribunal held that appellant would be entitled to the benefit of exemption Notification if he could satisfy the conditions of the Notification. It is required to be ascertained whether the amount-in-question was recovered by the appellant towards the fees and it is required to be verified that whether the service tax was refunded by the appellant in respect of the refunds of fees made to the candidates. Accordingly, matter is remanded to the adjudicating authority to verify the factual aspects and pass appropriate order. Impugned order set aside.

Decision: - Appeal allowed by way of remand.

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Case: - M/s SMP Constructions Pvt Ltd v/s CCE, Vadodara-II

Citation: - 2009-TIOL-1298-CESTAT-AHM

Issue: - Whether the reversal of Cenvat credit amounts to non-taking of credit and as such the abatement under notification 1/2006-ST is available?

Brief Facts: - Appellants were engaged in providing the services under the category of “Construction services in respect of commercial or industrial buildings, and Civil structures”. The Department denied the benefit of abatement of 67% in terms of Notification No. 01/2006-ST, dated 01.03.06 on the ground that in respect of some of their contracts entered into with the buyer, they have availed cenvat credit on duty paid on raw material whereas as per proviso to Abatement Notification, abatement will not be available if cenvat credit is availed. The Adjudicating Authority rejected the appellant’s contentions and observed that if the service provider avails benefit of Abatement Notification in respect of one contract, he has to satisfy the condition of the same even in respect of other contracts. The Commissioner (A) confirmed the demand of service tax with interest and also impose penalty under Section 76. Hence, this appeal is filed by appellants.

Appellant’s Contentions: - It was contended that they were availing the benefit of abatement in respect of some contracts providing such services where no credit was being availed and in some other contracts with other buyers providing such services, cenvat credit was being availed but no claim of notification was being made. It was further contended that the tax was on the service being provided by the appellant and not on the person providing such services. As such, each and every contract has to be taken as independent service being provided by the appellant and if he satisfies all the conditions of that particular contract for providing Cenvat credit, the benefit can be extended to him.

Respondent’s Contentions: - Attention was drawn to the proviso of the abatement Notification which debarred extension of abatement where the credit of duty paid on the input has been availed.

Reasoning of Judgment: - The Tribunal held that prima facie the stand of the appellant is correct that it is the services which are liable to taxes and not the person providing such services. Each and every service of commercial or industrial construction provided by the assessee has to be examined for the purpose of extending the benefit of abatement.

Decision: - Unconditional stay granted.

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Customs Section:

Case: - Nagpur Steel Industries v/s CC, Kandla

Citation: - 2009 (94) RLT 194 (CESTAT-Ahmd)

Issue: - Whether the heavy melting scrap termed as re-rollable scrap on the basis of first examination report of custom officer? Whether the description in invoice as well pre-inspection report should be ignored when the custom officer has said that it is re-rollable material?

Brief Facts: - Appellants imported consignment of heavy melting scrap under claim of exemption in terms of Notification No. 06/2004-Cus and No. 69/2004-Cus, dated 09.07.04 as actual user condition. Goods were described in the commercial invoice, bill of lading and packing list as heavy melting scrap. Pre-shipment inspection certificate also certified the goods to be melting scrap and inter alia certified that the lot did not contain any re-rollable material. During first check examination, the Customs officers opined that part of the consignment was re-rollable scrap. At the request of appellant, to conclude adjudication proceedings, without issuance of show cause notice, the original authority passed an order confiscating the goods for mis-declaration with an option to the appellant to redeem the same by paying redemption fine. Penalty was also imposed. Commissioner (A) confirmed the said order. Hence, present appeal.

Appellant’s Contentions: - Appellant contended that the finding that part of the consignment was not heavy melting scrap but was re-rollable scrap, was only based upon the visual examination by the customs officers and was not substantiated by any test-report or expert’s opinion. It was further contended that the melting scrap was bound to contain different articles, which may not be strictly heavy melting scrap. When the foreign supplier had described the goods as melting scrap in all documents and the goods were imported by them for melting purpose as actual user, the fact that the some of them may be re-rollable scrap, will not invite confiscation of the goods or imposition of the penalty. Reliance was placed on many decisions.

Reasoning of Judgment: - The Tribunal relied upon the judgment given in the case of M/s A.R. Steel Re-rolling Mills Ltd v/s CC, Kochi [2005 (60) RLT 308 (CESTAT-Ban.)] in which it was held that where the importer is an actual user and imported goods in the shape of scrap, are not new goods usable as such, charge of mis-declaration on the ground that some of the goods were not heavy melting scrap, cannot be upheld. Reliance was also placed on the judgment in the case of M/s Lloyds Steel Industries Ltd. v/s CC, Kandla [2007 (207) ELT 431 (Tri-Mumbai)] in which it was held that heavy melting scrap, even though containing some re-rollable scrap, which is to be used for upholding charge of mis-declaration. Reliance was also placed on judgment given in the case of CCE, Kanpur v/s M/s Rimzim Ispat Ltd. [2005 (69) RLT 418 (CESTAT-Del.)]. Accordingly, the Tribunal held that there was no justification for confiscation of the goods or for imposition of penalty upon the appellants. Thus, both are set aside.

Decision: - Appeal allowed accordingly.

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