Pradeep Jain - Chartered Accountant

PJ/Case Laws/2009-10/23

Case Laws

Prepared by:-

CA Pradeep Jain,

Sukhvinder Kaur (LLB) and

Deepak Mohnot

Central Excise Section:

Case: - Jayantibhai J. Patel v/s Commissioner of C. Ex., Ahmedabad

Citation: - 2009 (244) E.L.T. 140 (Tri.-AHMD.)

Issue: - A separate penalty cannot be imposed on proprietary unit and proprietor but penalty can be imposed on the persons liable for maintaining records.

Brief Facts: - In the above case appellant Jayantibhai J. Patel is a proprietor of M/s Pragati Industries. Appellant has cleared the excisable goods from his premises without payment of duty. The same was recorded in the personal dairies which indicate that proprietor had mala fide intention to evade payment of duty. These diaries were recovered during search of the factory. On the basis of the same, the Adjudicating Authority has raised demand of duty and also imposed penalty on the proprietary unit, proprietor & persons liable for maintaining records.

Appellant’s Contentions: - The appellant argued that they were unable to make proper representation against the proposed action, as the department had not handed over the documents on the basis of which they issued show cause notice to us.

Respondent’s Contentions: - The appellant’s contention is not justified as all documents were handed over to them and number of personal hearings also being granted but there was no proper response given to them. Further, the reply of show cause notice is too compressive, to draw any conclusion on the same.

Reasoning of Judgment: - The Tribunal held that the proprietor, supervisor and clerk of the unit had accepted in their statements that clearances recorded in the dairies were made without payment of duty. These statements have not been retracted. There is enough corroborative evidence to prove that there was clandestine removal of goods without payment of duty. Therefore, demand of duty alongwith penalty imposed by the Lower Authorities under provision of Section 11 AC of Central Excise Act, 1944 is justifiable.

Further, The Tribunal held that it is not reasonable to impose separate penalty on the proprietor as the proprietary unit and proprietor are not differentiable as per settled law. However penalty imposed by Commissioner (Appeal) on the Supervisor and clerk is reduced to Rs. 10,000/- as it is found that they are employee of the unit and working on the instructions of the owner. Therefore it is not justifiable to impose such a huge penalty.

Decision: - Appeal disposed off.

*****

Case: - Shri Nakoda Ispat Ltd v/s Commissioner of Central Excise, Raipur

Citation: - 2009 (244) E.L.T. 97 (Tri.-Del.)

Issue: - Whether Cenvat credit can be availed on steel construction material used in structural fabrication of plant and machinery?

Brief Facts: - Appellant has filled petition against the order of the Commissioner (Appeals). In the said order, the Commissioner disallowed the availment of Cenvat credit on angels, channels and plates used by appellant in structural fabrication of plant and machinery on the basis that these items has not fall in the definition of capital goods or the inputs used in the manufacture of final product/capital goods. Credit is also denied on oxygen gas and welding electrodes as not being inputs. This is the application for stay and waiver of pre-deposit of duty demanded.

Appellant’s Contentions: - Appellants argued that Cenvat credit taken on these item is admissible as Apex Court in the Birla Corporation Ltd v/s CCE, Raipur [2003 (160) ELT 268 (Tri-Del)] decided that availment of credit in relation to spares and tyres meant for dumpers used within factory handling was qualified for Cenvat credit. Further it was argued that the major part of the claim is barred by law of limitation and the department was not entitled to invoke the extended period of limitation. Reliance was also placed on Birla Corporation Ltd v/s CCE [2005 (186) ELT 266 (SC)], Jayaswals Neco Ltd v/s CCE, Nagpur [2006 (195) ELT 142], Gopal Zarda Udyog v/s CCE, New Delhi [2005 (188) ELT 251 (SC)], Continental Foundation Jt. Venture v/s CCE, Chandigarh [2007 (216) ELT 177 (SC)] and in M/s Aarti Sponge and Power Ltd v/s CCE, Chandigrah [E/Stay/1209/09=Ex dated 18.06.09].

Respondent’s Contentions: - On the contention of appellant, respondent’s replies that goods used cannot be considered either as the capital goods or inputs which would go into manufacture of final product. In J.K. Cotton Spg & Wvg Mills Co.Ltd v/s Sales Tax Officer, Kanpur [1997 (91) ELT 34 (SC)] the Apex court decided what types of goods can be considered as the inputs for the purpose of enabling the manufacturer to avail the Cenvat credit. As these goods do not fall in the said category availment of the credit is not permissible. Further, it was argued that there was suppression of fact with intent to evade payment of duty by appellants thus the department was empowered to invoke the extended period of limitation as decided in M/s Ambuja Cements Ltd V/s CCE, Raipur’s case.

Reasoning of Judgment: - The Tribunal held that the appellant is required to establish that the impugned goods are essentially used in the manufacture of final product. Mere use of some goods in structural fabrication of plant does not proves that the goods were used in the manufacture of final products.

The Tribunal held that the Commissioner (A)’s order clearly shows that appellant had not voluntarily declared about the structure of plant and machinery in ER-1 return. This shows that assessee had intention to evade the duty. Therefore appellant’s contention relating to the bar of limitation is without any essence. It is further held that the fact of availment of service tax was noticed during the Audit done by the Revenue. The finding of the lower authority that the appellants had not voluntarily disclosed availment of credit on the said goods was not proved as incorrect. The Show cause notice was issued immediately after the audit, thus, the demand was issued within one year from the date of Audit. Therefore, extended period was correctly invoked.

The Tribunal also held that with regard to appellant’s contention regarding binding nature of the coordinate bench, the said observations in Jayaswals Neco Ltd’s case was to be understood as related to final order passed by Court or Tribunal. The Coordinate Bench should not pass contrary order and should refer the matter to the Larger Bench in case of disagreement. Such rule is not applicable to interim orders though divergent views should not be taken to maintain judicial discipline. Similar orders are not required when interim relief granted in another order containing some similar facts.

Further, The Tribunal held that there was no case made out for grant of waiver of demand of duty in the matter. Financial hardship was not established. Pre-deposit of excise duty demanded ordered. Pre-deposit of interest and penalty amount stayed.

Decision: - Pre-deposit partly waived.

Comments: - There is amendment in definition of “inputs” whereby the structural material used for plant and machinery has been excluded from the definition of “inputs”. However, this amendment is effective from this budget and as such it was allowed earlier. Hence, the credit should have been allowed on the same.

*****

Case: - International Tobacco Company Ltd v/s CCE, Ghaziabad

Citation: - 2009 (94) RLT 370 (CESTAT-Del)

Issue: - The credit on bill of entry is allowed even if it is not in name of manufacturer as it is procedural infraction.

Brief Facts: - The appellant are engaged in the manufacture of cut tobacco and cigarettes on job work basis for M/s Godfrey Phillips India Ltd (GPI) and taking credit of duty paid on inputs received by them and using them in the manufacture of final products and clearing the goods on payment of duty back to GPI using the credit. They received a consignment of “Hertz flavouring and casing additive” imported by GPI directly from the port, to the appellant’s premises alongwith Bill of Entry. The appellants took credit of CVD and education cess paid in respect of the said consignment.

It was later noticed that the said Bill of Entry did not contain the necessary endorsement by the Customs Officers as provided by the Board’s Circular No. 179/13/96-CX dated 29.02.96. Accordingly, the appellant reversed the credit. Department issued show cause notice to confirm the reversal and seeking payment of interest and proposing penalty. The Original Adjudicating Authority confirmed the credit, ordered recovery of interest and imposed penalty under Rule 15 of CCR, 2004 r/w Section 11AC. The Commissioner (A) in appeal upheld the order passed by the Adjudicating Authority. Appellant is before the Tribunal challenging the impugned order.

Appellant’s Contentions: - Appellant submitted that as a job worker they were paying excise duty of about Rs. 1 Crore per day. They have been receiving several consignments of inputs from M/s GPI. In a stray case, there was failure in getting the endorsement from the Customs officers while sending the material from the Port to appellant’s premises directly. It is submitted that there was no dispute that the material had suffered duty and that the appellants has received the materials in the factory and utilised the same in the manufacture. The denial of credit is not proper and legal. At any rate, penalty should not be imposed on them. Reliance was placed on the judgment given in M/s Twenty First Century Printers Ltd and others v/s CCE, Surat-II [Order No. A/2150-2152/WZB/Ahd/08 dated 19.09.08 in appeal no. 1055, 1056 & 1230/03] wherein in similar circumstances in respect of consignment imported by M/s GPI sent to a jobworker, the credit was allowed.

Respondent’s Contentions: - Revenue reiterated the findings of the Commissioner (A) and further contended that while the bill of entry is a relevant document for the purpose of allowing Cenvat credit but credit cannot be allowed when the bill of entry is not in the name of the appellant as envisaged in the Board’s Circular. It is also submitted that credit taken is irregular and only when interest was demanded, the appellant have agitated wrong reversal of credit.

Reasoning of Judgment: - The Tribunal held that there is apparently some procedural mistake in not getting it endorsed by the Customs officers at the Port of import. The appellants are major taxpayers and were receiving several consignments from M/s GPI and this is a stray case of procedural failure. Thus, the omission of this nature cannot lead to denial of credit.

Reliance has been placed on decision of M/s Twenty First Century Printers Ltd wherein in identical situation it was held that “it is well settled that in the absence of any doubt about the duty paid character of the inputs that received in the factory and their utilisation in the manufacture of final products, cleared on payment of duty, the denial of credit on the technical and procedural grounds is not called for. The Hon’ble High Court of Gujarat in the case of M/s Vimal Enterprises v/s UOI – 2006 (195) ELT 267 (Gujarat) had observed that the entire endeavor of the Revenue should be to make the scheme effective and not deny the beneficial provisions on the basis of technical breaches.”

Accordingly, the Tribunal held that denial of credit was not justified.

Decision: - Appeal allowed with consequential relief as per law.

*****

Case: - Ultratech Cement Ltd v/s CCE, Bhavnagar

Citation: - 2009 (94) RLT 379 (CESTAT-Ahmd)

Issue: - The conveyor belt used in jetty which is an integral part of factory and hence the credit is allowed.

Brief Facts: - Credit is denied to the appellant on ‘Belt-Yule Cord Conveyor Belting Cord’ installed and used in the conveyor belt machinery. The ground for denial was that the Capital goods have not been used in the factory premises of the appellant. In appeal before the Commissioner (A), the order denying credit was upheld by relying upon the judgments in M/s J.K. Udaipur Ltd [2004 (64) RLT 219 (SC)] wherein it was held that cenvat credit of duty paid on the explosives used in the mines for blasting purpose cannot be considered as input and the mines cannot be considered as a part of the factory. The Commissioner (A) had also relied upon the decision given in M/s Raj Cement v/s CCE, Jaipur [2003 (55) RLT 411 (CEGAT-Del)]. The appellant has come before the Tribunal against the said order.

Appellant’s Contention: - Appellant contended that the judgment of M/s J.K. Udaipur Ltd relied upon by the Commissioner (A) was overruled by the Larger Bench of the Apex Court in M/s Vikram Cement [2006 (72) RLT 609 (SC)] wherein it was held that if the mines are captive mines and constitute one integrated unit together with the concerned factory, Cenvat credit of duty paid on capital goods is available. It is further submitted that the judgment relied upon by the Commissioner (A) in M/s Raj Cement’s case has been overruled by the High Court of Rajasthan in the case of M/s Raj Cement [2006 (72) RLT 722 (Raj.)].

It is further submitted that in their own case, this Tribunal has rejected the appeal filed by the Revenue against the decision of the Commissioner (A) wherein he has held that Modvat credit is admissible on parts of jetty conveyor, counter weight parts and counter-weight for ship. It is submitted that jetty is a captive jetty used by the company and conveyor belt is used for moving raw material to the raw material storage point of the factory and therefore, the jetty is an integral part of the factory and he also produced an approved ground plan which shows jetty and the conveyor.

Respondent’s Contentions: - Revenue initially submitted that jetty is not a part of the factory and was also not in exclusive use of the appellant.

Reasoning of Judgment: - The Tribunal held that Revenue’s contention is countered by the production of approved ground plan which shows the jetty also in plan. It was found that the conveyor belt used for moving raw material from jetty to storage point is a captive jetty and is integrated within the factory. In view of the said circumstances and the judgments cited by the appellant, they are eligible for credit. It is noticed that the cited decisions were not available with the Commissioner (A) at the time of passing the impugned order. It is also noted that the Tribunal in appellant’s own case had rejected the appeal filed by Revenue. Impugned order set aside.

Decision: - Appeal allowed with consequential relief.

*****

Case: - CCE, Bangalore v/s Kamal Packers

Citation: - 2009 (94) RLT 380 (CESTAT-Ban.)

Issue: - Whether free samples will be assessed under MRP based valuation under Section 4A or under transaction value under Section 4 of Central Excise Act? Whether non filing of appeal against earlier order is binding on the department?

Brief Facts: - Respondents are manufacturers of talcum powder which is notified under Section 4A of the Central Excise Act, 1944. The respondents entered into a contract with M/s Henkel India Ltd, Chennai for supply of talcum powder which was to be used as free samples intended to be given while marketing their own product i.e. ‘Neem’ soap. Department objected that the respondents had cleared their manufactured goods during September’ 06 to November’ 06 without printing MRP as prescribed by Standards Weights and Measures (Packaged Commodities) Rules, 1977 on the said free samples and they failed to discharge duty valuing the goods under MRP. The respondents paid the differential duty under protest. Show cause notice was issued to them. The respondents contended that MRP was not required to be printed as the said goods were not meant for retail sale against any cash and the valuation was to be done under Section 4 and not under Section 4A.

The Adjudicating Authority relied upon the judgment in Nestle India Ltd v/s CCE, Goa [2004 (61) RLT 572 (CESTAT-Mum)] and held that MRP is to be printed even though the product is supplied as free gift with another item. It was also held that the respondents had failed to prove that unjust enrichment was not applicable to their refund claim. In appeal, the Commissioner (A) set aside the impugned order and allowed the appeal. Revenue has come up in appeal against the said decision.

Appellant’s Contentions: - Revenue contended that the valuation of goods cleared to M/s Henkel India Ltd is to be done under Section 4A and not under Section 4. Thereby, there is no scope for refund. The Commissioner (A) allowing grant of refund of excess paid duty was not correct as per law as it contradicts his own order on the valuation issue. The Commissioner (A) has not analysed the passing of duty to the final consumer i.e the general consumers who are utilizing the said product. The Chartered Accountant certifying that incidence of duty is borne by the assessee seems to be not correct.

Respondent’s Contentions: - Respondent-assessee contended that the Commissioner (A) had passed the order by relying upon its own OIA No. 4/2008-CE dated 23.01.08 in respect of the very same respondent.

Reasoning of Judgment: - The Tribunal considered the order passed by the Commissioner (A) wherein reliance was placed on judgment given in Jayanthi Foods case. The Commissioner (A) had considered the certificate issued by the Chartered Accountant to the effect that duty burden is not passed on to the customer. It was held by the Commissioner (A) that the clearance was as per the particular contract and value adopted was as per the contract only. It was also held therein that principle of unjust enrichment was not applicable to respondent’s case.

The Tribunal held that the Commissioner (A) was following its own earlier decision in respect of the very same assessee for the earlier period. No appeal was filed against the earlier cited decision. Thus, the issue was settled intra party and could not be agitated by the Revenue in respect of very same assessee. Impugned order is correct, legal and proper.

Decision: - Revenue’s appeal rejected.

*****

Service Tax Section:

Case: - Commissioner of Customs & C. Ex., Vapi v/s DNH Spinners

Citation: - 2009 (244) E.L.T. 65 (Tri.-Ahmd.)

Issue: - Whether the Service Tax Credit can be availed on the invoice issued in the name of head office? Whether it is necessary to follow the path of service tax distributor when only one factory is available?

Brief Facts: - Respondent took credit on invoices which were not in the name of factory but were in the name of their Head Office. The invoices were endorsed by the head office. The Department sought to deny the credit on the ground that the invoices did not bear the factory address. In appeal, the Commissioner (Appeal) allowed Cenvat credit of service tax on the said invoices by relying upon the Board Circular No, 211/45/96-CX, dt 14.05.96, as well as on the judgments given in the case of Eveready Inds India Ltd [2007 (219) ELT 333] and in Tata Iron & Steel Co. Ltd [2008 (228) ELT 224]. Revenue has come in appeal before the Tribunal against this decision.

Appellant’s Contentions: - Revenue has argued that the documents were not in the name of the respondent’s factory situated at Silvassa but the same were issued in the name of the head office of the respondent situated at Mumbai.

Reasoning of Judgment: - The Tribunal relied upon the findings of the Commissioner (Appeal) wherein it was held that credit was available to the respondent on the invoices which were in the name of head office and were endorsed by the head office in factory address. The Commissioner (A) further found that the respondent being the only manufacturing unit, therefore the head office could not fall in the category of input service distributor. The Tribunal further held that the Revenue has only raised technical grounds. Except for invoices being in the name of head office, there is otherwise no dispute about the input service received by the respondent. Thus, the substantive benefit cannot be denied on procedural grounds. Impugned order is upheld.

Decision: - Appeal rejected.

*****

Case: - M/s Vista Infotech, Bangalore v/s Commissioner of Service Tax, Bangalore

Citation: - 2009-TIOL-1962-CESTAT-BANG

Issue: - The service tax paid along with interest does not call for penal consequences.

Brief Facts: - For the period from January 2007 to June 2007 the appellant charged and collected the amount of service tax from their clients but did not deposit the same with the department. This was discovered during examination of records. The representative of appellant admitted that there was delay in discharging service tax liability due to severe financial crunch and due to non-release of payment from one of their major clients. The appellant accepted to pay the dues alongwith interest and paid the same on 05.07.07 and 19.07.07. Department issued show cause notice for confirmation of demand of service tax and for interest as well as for imposition of penalty under Section 76, 77 and 78 of the Finance Act. The appellant submitted that there was no intention to evade payment of service tax and there was sufficient cause for non-deposit of tax. They claimed remedies under Section 73 (3). The Adjudicating Authority confirmed the demand with interest and imposed penalty under Section 76, 77 and 78. Aggrieved by this order, the appellant is in appeal.

Appellant’s Contentions: - Appellant contended that the penalty imposed upon them was not justified. It is submitted that for the period from April 2004 to December 2006, the appellant had promptly discharged their service tax liability. The delay for impugned period was due to severe financial crunch. Reliance was placed on Board Circular 137/167/2006-CX 4, dated 03.10.07. It is submitted that the service tax due was deposited with interest before the issuance of show cause notice. Reliance was also placed on the judgments in Essar Steel Ltd v/s Commissioner of Central Excise & Customs, Surat-I [2009 (13) STR 579 (Tri-Ahmd)], Vee Aar Secure v/s Commissioner of Service Tax, Bangalore [2009 (14) STR 50 (Tri-Bang)] and V.S.T. Tillers v/s Commissioner of Central Excise, Mysore [2009 (14) STR 159 (Tri-Bang)].

Respondent’s Contentions: - Revenue contended that the appellant could have sought for loan or overdraft from the financial institution to overcome his financial hardship and could have deposited the service tax. Reliance was placed on the judgment given in Jaipur Sea & Air Services [2006 (3) STR 704 (Tri-Chennai)] which has given a view in similar circumstances. It is submitted that non payment of service tax and non filing of ST-3 returns attract penal provisions under the various sections of the Finance Act. It was submitted that subsequent payment of tax was only after the investigation undertaken by the department and it would prove that there is an existence of intention to evade payment of tax.

Reasoning of Judgment: - The Tribunal held that once an assessee accepts non-payment of service tax liability and pays the dues along with interest, then provisions of Section 73 (3) of the Act gets attracted. Reliance was placed on Board Circular cited by appellant wherein it was provided that no show cause notice will be served on the defaulter, provided the taxpayer discharged the service tax liability alongwith interest, and the proceedings remained concluded. The Tribunal also relied upon the judgment of Vee Aar Secure case. It was held that appellants have made out a prima facie case in their favour for non-imposition of penalty under Section 76, 77 and 78. Accordingly, penalties are set aside.

Decision: - Appeal allowed with consequential relief, if any.

*****

Case: - G.H.C.L. Ltd v/s CCE, Bhavnagar

Citation: - 2009 (94) RLT 432 (CESTAT-Ahmd)

Issue: - Whether the input service tax credit related to period prior to introduction of Cenvat scheme is available? Whether the whole credit will be allowed or proportionate credit related to period after 10.09.2004 will be allowed?

Brief Facts: - Appellants availed Cenvat credit of service tax paid on input services like repair and maintenance service, security agency service, C&F agents service, warehousing service and credit card service etc. The Commissioner (A) allowed Cenvat credit of service tax paid on the services utilised at the port for export of final products such as containers stuffing, C&F charges, storage charges, Weighment charges, stevedoring charges and commission charges. The Commissioner (A) disallowed the credit of service tax on credit card services and security services. Appellant has filed the appeal against the said decision.

Appellant’s Contentions: - It was contended that even though the Commissioner (A) disallowed the benefit of credit of service tax on services utilised prior to 10.09.04, he failed to take note of the fact that the Original Authority has also taken a similar stand but had disallowed the credit of service tax relatable to period subsequent to 10.09.2004 also. It is submitted that security agency service was provided not only for residential colony but also for plant area, mining area and residential colony and the service is covered among the 16 services specified under Rule 6 (5) of the CCR, 2004 for availment of full credit where the service is common for both ineligible and eligible purposes.

For management consultancy services, it was contended that this service was provided w.e.f. 12.09.04 but they are entitled to proportionate credit.

Respondent’s Contentions: - It was contended that the order of the Commissioner (A) could not be faulted with since the invoices did not show bifurcated amounts for the period prior to 10.09.04 and subsequent to 10.09.04. In respect of credit card services no details are available except the invoice which is in the name of the individual.

Reasoning of Judgment: - As regard the security agents services, the Tribunal held that it is a service covered among the category of services specified under Rule 6 (5) of the CCR, 2004 and therefore credit is admissible. It is clear from the invoices that service was provided for plant area, residential and mining area. It is also noticed that the said invoice covers the period from 10.09.2004 only. Appellants are entitled to credit on this service.

As regards repair and maintenance services, the Adjudicating Authority has not given any finding regarding the invoice but have simply stated that credit is only admissible after 10.09.04 and has disallowed the credit. The Tribunal examined the invoices of the appellant from which it is clear that the contract is for period from 01.09.04 to 31.08.05. Therefore, appellants are eligible for proportionate credit relatable to period from 10.09.04 to 31.08.05.

Similarly, in respect of management consultancy services also, as per the invoice the service was to be provided from 01.09.04 to 15.10.05. Therefore, in this case also the admissible credit would be proportionately relatable to the period from 10.09.04 to 15.10.05. The same principle will have to be followed in respect of storage services also. The Board’s Circular No. 65/14/2003-ST dated 05.11.03 also support appellant’s contention. It provides for calculation of service tax when advance received for services which become taxable subsequently. The Circular provides for pro rata collection of service tax.

As regards the credit card services, cenvat credit is disallowed.

For the remaining services, the Tribunal held that the proportionate inadmissible credit relatable to period prior to 10.09.04 will have to be worked out by the Adjudicating Authority and revised. For this limited purpose, matter is remanded back.

It was further held that as the issue involves mainly interpretation and admissibility and since the amount will have to be re-worked and inadmissible credit has to be arrived at, the penalty is also set aside. Direction given to the Adjudicating Authority to consider imposition of penalty afresh.

Decision: - Appeal disposed of accordingly.

*****

Case: - Ecof Industries (P) Ltd v/s Commissioner of Central Excise, Bangalore

Citation: - [2009] 23 STT 381 (BANG. - CESTAT)

Issue: - Whether the appellant is correct in distributing the credit of service tax in respect of their one Unit even though the service tax has been paid in respect of services used by their other Unit.

Brief Facts: - The head office of the appellant which is at Chennai distributed the credit of service tax in respect of their Malur Unit even though the service tax has been paid in respect of services used by their Cuttack Unit. The Lower authorities disallowed the distribution of credit as done by the appellant. Hence, appellant have come before the Tribunal.

Appellant’s Contentions: - The appellant contended that service tax credit has been distributed confirming to the conditions specified under Rule 7 of the CCR, 2004. It is also stated that Para 2.3 of the Circular dated 23.08.07 has been followed by the appellants. It is also argued that neither the circular nor the rule itself prohibits, distribution of service tax credit relating to one unit of a manufacturer to another unit of the same manufacturer or service provider. It is further contended that there are only two conditions, firstly the service tax credit to be distributed against the document should not exceed the service tax paid and secondly, the credit of service tax should not be in respect of exempted finished goods and exempted output services.

Respondent’s Contentions: - Revenue referred to Rule 3 of the CCR, 2004 to support the claim that Service Tax credit relating to one unit should not be distributed to another.

Reasoning of Judgment: - The Tribunal held that Rule 3 merely says that a manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit of any input services received by the manufacturer of such final product or provider of output services. The availability of credit therefore is related to the manufacturer of goods or provider of output services as a whole and not restricted to any particular unit of the manufacturer/service provider.

It was further held that a combined reading of the Rule 7 and the Circular dated 23.08.07 clearly shows that there are only two restrictions regarding the distribution of the credit. The first restriction is that the credit should not exceed the amount of service tax paid. The second restriction is that the credit should not be attributable to services used in manufacture of exempted goods or providing of exempted services. There are no other restrictions under the rules, the restrictions sought to be applied by the Revenue in this case in limiting the distribution of the service tax, credit made in respect of the Malur Unit on the ground that the services were used in respect of the Cuttack Unit finds no mention in the relevant rules.

As such, restricting the distribution of service tax credit in a manner as has been done by the impugned order of the lower appellate authority cannot be upheld. In case the Department wants to place such restriction as is sought to be placed in the case, the rule is required to be amended.

Decision: - Appeals allowed.

*****

Customs Section:

Case: - M/s Jai Jagdish Breakers Pvt Ltd v/s CC, Jamnagar

Citation: - 2009-TIOL-1400-CESTAT-AHM

Issue: - Whether the interest is payable from the date of passing of order-in-appeal or from the date of filing of consequential refund?

Brief Facts: - The appellant imported one vessel and filed bill of entry which was provisionally assessed in July 1999, on furnishing a bank guarantee. The provisional assessment order was converted into final assessment order, confirming the differential duty. The said duty was subsequently recovered by the Revenue by encashing the bank guarantee on 12.07.01. The final assessment order was challenged by the appellant before Commissioner (Appeals), who rejected the appeal vide its order dt. 12.03.04. In further appeal, the Tribunal allowed the appeal on 26.08.04 [reported in 2004 (137) ELT 928 (Tri-Delhi)].

Accordingly, the appellant approached their jurisdictional Assistant Commissioner on 01.11.04 for returning the amount of duty recovered by the Revenue by encashing the Bank Guarantee. However, Revenue issued SCN on the ground of unjust enrichment. Order dated 26.12.05 was passed for crediting the amount in Consumer Welfare Fund. In appeal, the Commissioner (A) remanded the matter vide its order dated 24.04.06 to examine whether the amount is deposited in terms of Board Circular dated 02.01.02 as also in the light of various High Court decisions.

In de-novo proceedings, refund was sanctioned but credited to Consumer Welfare Fund vide OIO dated 14.09.06. In appeal, The Commissioner (A) vide its order dated 24.01.07 set aside the OIO dated 14.09.06 and directed the appellant to file refund application and remanded the matter to the Adjudicating Authority for de-novo consideration with direction to examine as to how the disputed amount has been accounted for in Books of Accounts and to sanction refund as per Law. The Commissioner (A) order was challenged by the Revenue before the Tribunal. The Tribunal vide order dated 04.05.07 rejected Revenue’s appeal. Accordingly, the Assistant Commissioner passed an order sanctioning the refund to the Appellant.

The present appeal is for interest on refunded amount. The Assistant Commissioner while sanctioning the refund amount did not grant interest on the ground that refund application was filed on 13.03.07 in pursuance to Commissioner (A)’s order dated 24.01.07 and as the refund is granted within 3 months from the date of filing of refund claim, no interest is liable to be paid. In appeal before the Commissioner (A) in its order dated 25.10.07 allowed the appeal by way of remand to Assistant Commissioner to examine and decide the issue in view of various decisions of the Tribunal.

The Assistant Commissioner vide its order dated 19.02.08 held that no interest was payable. The said order was upheld by the Commissioner (A). Hence, Appellant is before the Tribunal.

Reasoning of Judgment: - The Tribunal relied upon the Board Circular No. 275/37/2K.CK-8A dated 01.01.02 wherein it is provided that amount of pre-deposit was required to be refunded within a period of 3 months from the date of passing the order. If this is not done, the appellants become eligible for interest. The Board Circular No, 802/35/2004-CX dated 08.12.04 reiterates the position and directs its field formations to return the amount within a period of 3 months from the date of the order passed by the Appellate Tribunal/Court or other final authorities unless there is stay on the order of the final authority.

The interest was denied to the Appellant only on the ground that the OIA dated 24.01.07 directing the appellant to file refund claim had attained finality and was not challenged by the appellant. In as much as the refund claim was filed on 13.03.07 and refund was given on 14.05.07, there was no question of interest.

The Tribunal found that the OIA dated 24.01.07 was challenged by Revenue and cross objections were also filed by the appellant. The Tribunal’s order dated 04.05.07 had rejected the Revenue’s appeal, thus, the said order can be safely held to have been merged with the order of the Tribunal, the basic dispute about assessment was finalized by the Tribunal vide its order dated 26.08.04 in appellant’s favour.

As a result, the refund of pre-deposit made by the assessee should have been allowed sou-moto by Revenue within a period of 3 months from the passing of the said order. There was no appeal, admittedly, against the Tribunal’s order and as such, the same was required to be implemented. Instead, litigation was again initiated by Revenue. Interest was ultimately allowed only on 14.05.07. The Commissioner (A)’s order was issued on 24.01.07 was with a basic purpose of verifying the accounts maintained by the appellant as recorded on Tribunal’s order and there was, in fact, no need for filing the refund claim. As such, the non-challenge of the said order which was favouring the appellant cannot be made the basis for holding against them.

Accordingly, impugned order set aside. Appeal allowed with direction to Revenue to calculate interest amount within a period of 3 months from the date of passing of Tribunal’s order dated 26.08.04 till the payment of refund.

Decision: - Appeal disposed off accordingly.

*****

Comments

PJ/Case Laws/09-10/23

Comments

Post a Comment

Query