Pradeep Jain - Chartered Accountant

Prepared By:

CA Pradeep Jain

Megha Jain

Deepak Mohnot

Central Excise Section:

Case: - COMMISSIONER OF C. EX., GUNTUR v/BALAJI STEEL CORPORATION LTD.

Citation: - 2002 (150) E.L.T. (Tri.-Bang.)

Issue: - Whether duty liability will be determined on the basis of sales shown in RG-1 register or Balance sheet?

Brief Facts: -The sales figure as shown in RG-1 register were less as compared with those depicted in Balance sheet. The revenue demanded the duty on the sales figure shown in Balance sheet.

Appellant’s Contention:- The appellant contended that in view of the difference of figures as shown in RG-1 and in the balance sheet, the duty liability will be determined according to the assessable value shown in the balance sheet. Further the Hon’ble Tribunal also decided the same in the case of Usha Rectifiers Corp. Ltd. v. CCE reported in 2001 (130) E.L.T. 485.

Respondent’s Contention:- The respondents argued that the figures shown in the balance sheet is inclusive of the resale figures and same was also considered by the Commissioner. The significant Para of Commissioner (Appeal) decision is as follows for ready reference:

“According to the Chartered Accountant’s Certificate dt. 25-10-I994, the quantity cleared as per excise records is 26,968.312 MTs which included job works and clearances for captive consumption. The assessees also appear to have cleared re-rolled products purchased from outside and sold as such amounting to 2,283.235 MTs. Thus, the quantity shown in the excise records as well as the quantities purchased and cleared during trading activity add up to the balance sheet figure of 29,049.745 MTs. The purchase and sale invoices relating the aforesaid quantity of 2,283.235 MTs were got verified and found to be correct as stated by the assessee. Since, there is no duty liability on the goods purchased and sold as such; I find that the show cause notice is not sustainable.”

Hence the demand made by the Revenue is not sustainable.

Reasoning of Judgment:-The Hon’ble Tribunal said that the figures in the balance sheet were clarified by producing the purchase and sales invoices before the adjudicating authority. We also take note of the factual position that no substantial evidence has been placed on record by the Department to substantiate that the figures shown in the balance sheet is apart from resale value. We do not find any substance in the appeal filed by the Department. Therefore, Revenue appeal dismissed”

Decision:-The appeal dismissed

Case: - KIRLOSKAR OIL ENGINES LTD.V/s COMMISSIONER OF CENTRAL EXCISE, NASIK

Citation: - 2004 (178) E.L.T. 998 (Tri-Mum.)

Issue: -

Whether the extended period can be invokable on the ground that information of Balance sheet not disclosed to Revenue?

Appellant’s Contention:-

The appellant contented that they had written down the value in the books of account to show the present net value of the inputs. These inputs were lying in the factory at the time of issue of first show cause notice. Further they submitted that the inputs were cleared as such by reversing the credit on the same.

As regards the amount of Rs. 2,40,917/-, we submits that M/s. Prasant Khosla Pneumatic Ltd. was amalgamated with M/s. Kirloskar Oil Engines Ltd. (KOEL) w.e.f. 1-4-1998. This Prasant Khosla Pneumatic Ltd. had received certain components under Chapter X procedure without payment of duty and these components were to be used in the manufacture of ‘MAN’ diesel engine. Over a period of time, these components became obsolete and could not be utilized. Therefore we had written off the same in the books of accounts. Further we like to say that we applied for remission of duty on these obsolete components but no action was taken by the jurisdictional Commissioner, after waiting for a period of more than one year, we disposed of the components and paid duty under protest for the same. Further we like to draw your attention on the fact that the balance sheet is a publicly available document, therefore the allegation of suppression of information cannot be sustained and therefore, extended period under proviso (1) of Section 11A is not invokable and the penalty under Section 11C and interest under Section 11AB is also not sustainable.

Respondent’s Contention:-

The respondent argued that the assessee had discontinued production of ‘MAN’ diesel engine long back and they should have declared obsolete non-moving items to the department which came to the notice of the department at the time of scrutiny of the balance sheet for the year 1997-1998. This indicates that the assessee had written down the value of the goods as they had become obsolete. They have, therefore, suppressed this fact from the department, as they have not made any remark in the RT-11 returns regarding the components being obsolete especially when their balance sheet was showing the fact regarding written down value of the goods/inputs under Schedule 17.Therefore, submitted that the appeal of the appellants deserves to be rejected and the impugned order passed by the Commissioner (Appeals) deserves to be sustained.

Reasoning of Judgment:-

The Hon’ble Tribunal said that assessee has applied for remission of duty under Rule 196B read with Rule 173P of the Rules ibid and they waited for more than one year for the permission of the commissioner, after waiting for a considerable period, they disposed of components by paying duty under protest. Therefore, extended period cannot be invoked under proviso to Section 11A(1) of the Act ibid. In my considered opinion, the provisions of Section 11AC for imposition of penalty and the provision of Section 11AB for demanding duty are not applicable to the facts of this case. Further, the inputs were still lying in the factory when the show cause notice for demanding duty was issued to them, though the components were written off in the books of account. In such a situation, credit cannot be denied on the presumption that input cannot be used when there was no time limit for consumption. In this connection, the tribunal has respectfully followed the judgment rendered by the Bangalore Bench in the matter of Bharat Heavy Electricals Ltd. Hence appeal was allowed.

Decision:-

The appeal allowed.

Case: CCE, Hyderabad versus M/s Ampro Industries Pvt. Ltd.

Citation: 2010-TIOL-131-CESTAT-BANG

Issue:

The issue involved in this case is regarding the interest payable to the respondents on the finalization of the provisional assessments.

Brief Facts:

The respondents were manufacturing biscuits on job work basis for M/s. Ampro Products Ltd. During the period in question, the valuation of the goods was done on provisional assessment basis. The said provisional assessment was finalized by the authorities vide the adjudication order dated 14.8.96. Consequent to such a finalization, the refund claims were filed by the respondents within six months of the assessment. In the first round of litigation, the refund claims were rejected on the ground that they have not crossed the hurdle of unjust enrichment. On an appeal, Tribunal vide its Final Order No. 984-985/05 dated 21.6.05 = 2005-TIOL-731-CESTAT-BANG, held, that the assessments were provisional and hence refund which arises as a result of finalization cannot be considered as time barred and clause of unjust enrichment will not be attracted, and directed the lower authorities to refund the excess duty paid by the respondents. Consequent to the direction of the Hon'ble Tribunal, refund claim was sanctioned. But interest on such amount was not sanctioned by the tribunal so respondent have filed an appeal. Learned Commissioner (Appeals) after hearing the respondents and going through the case records, came to the conclusion that the respondents have to be paid interest as per the judicial pronouncements made by various benches. Hence, revenue is in appeal against such an Order.

Appellant’s Contention:

The relevant date for condition of interest for delayed payment has to be calculated from the expiry of three months from the date of receipt of the Final Order. It is their submission that in this case, Tribunal decided the issue finally on 21.6.05 and hence interest if any is payable from that date only. They would submit that the respondents have to file a fresh refund claim consequent to the Final Order of the Tribunal. The payment of interest if any would be subsequent to the filing of the refund claim and after the expiry of three months. As per the provisions of Section 11 B(3) of the Central Excise Act 1944 are very clear and also that the decision of the Hon'ble Supreme Court in the case of Mafatlal Industries which indicates that there has to be a necessary refund claim and has to be filed under Section 11B and should be disposed of only in accordance with relevant provisions relating to refund. It is also submitted that the case laws as discussed by the learned Commissioner (Appeals) are clearly distinguishable.

Respondent’s Contention:

Appropriate date for calculation of interest will be from the date of filing of the refund claim as has been decided by various judicial pronouncements. He would submit that the larger bench decision in the case of Jayanta Glass Ltd. Vs CCE Kolkata (2004 (165) ELT 516) and Rama Vision Ltd. Vs CCE Meerut (2004 (170) ELT 13 (Tri.-LB)) would squarely cover the issue in their favour.

Reasoning of the judgment:

Tribunal found from the records that respondent had filed refund claims well within six months of the finalization of the provisional assessment by the adjudicating authority. Moreover, find that such assessments were being challenged by both sides and it attained finality only on 21.6.05 in the hands of the Tribunal. During the intervening period, the respondents had been filing refund claims regularly and as soon as the quantification was done by the authorities. This would mean that the finalizations as done by the lower authorities was correct and nothing changed on that point and hence the refund claims filed by the respondents being within time, the revenue is required to pay interest after the expiry of three months from the date of filing of the refund claim. This ratio is clearly laid down by the larger bench decision of the Tribunal in the case of Jayanta Glass Ltd. and Rama Vision Ltd., (supra).

Decision:

The order of the learned Commissioner (Appeals) is correct and legal. Hence, the impugned order is upheld. Revenue's appeal is rejected as devoid of merits.

Case: - Pahwa Chemicals Private Limited Versus Commissioner of C. Ex., Delhi

Citation: - 2005 (189) E.L.T. 257 (S.C.)

Issue: -

Mere failure to declare some facts does not amount to mis-declaration or willful suppression.

Brief Facts:

The Appellants claimed that merely affixing the label of a foreign party, did not disentitle them from getting benefit of the Notification No. 1/93-C.E. All RT-12 returns regularly filed & invoices containing description of goods regularly approved by Department. The Respondent demanded extended period of limitation.

Reasoning of Judgment: -

It is settled law that mere failure to declare does not amount to wilful mis-declaration or wilful suppression. There must be some positive act on the part of the party to establish either wilful mis-declaration or wilful suppression. When all facts are before the Department and a party in the belief that affixing of a label makes no difference does not make a declaration, then there would be no wilful mis-declaration or wilful suppression. If the Department felt that the party was not entitled to the benefit of the Notification, it was for the Department to immediately take up the contention that the benefit of the Notification was lost.

Decision:

The Appeal is allowed. The impugned Judgment is set aside.

Case: M/s Ambika Industries versus CCE, Rajkot

Citation: - 2010-TIOL-156-CESTAT-AHM

Issue:-

Whether the one time credit is admissible to textile units on in-transit goods on 01.04.2003 as per provisions of Rule 9A of Cenvat credit Rules?

Brief facts:

The appellants are engaged in manufacture of cotton and man – made fabrics, are eligible for, deemed credit availed by them on the stock of grey fabrics declared by them as lying in the stock on 1.04.2003 in view of provisions of Rule 9A of the CENVAT Credit Rules, 2002.

Appellant’s Contention:

Appellant has relied upon the similar issue in the case of M/s Jaldarshan Textiles vs. CCE, Rajkot. In this case, it was held that the in respect of goods in transit also, credit is admissible.

Appellant also submitted that the matter may have to be remanded to the original adjudicating authority to consider the aspect mentioned in the above stated order of the tribunal were not considered by the lower authority.

Respondent’s Contention:

The revenue has rejected the claim on the ground that the goods on which the credit has been taken, has not been received by the appellant as on 31.03.2003 and the appellant has declared that the goods were lying in the factory. It has also been held that the appellants were eligible for deemed credit in respect of grey fabrics lying in the factory or elsewhere but not in respect of the goods in transit. They have also not indicated the place of storage of the grey fabrics and therefore they are not eligible.

Reasoning of the Judgment:

CESTAT has been relied upon the Elecon Fabrics versus Commissioner of Central Excise, Rajkot and CBEC Circular No. 703 – CX, Dated: 25.03.2003.

Board’s circular allows a manufacturer to file additional declarations declaring the stock of the above mentioned items and claim onetime credit thereon provided such declaration are made by 26.05.2003. As such it becomes clear that even the stock which has not actually reached the appellants premises but was lying somewhere else, the benefit of deemed credit is required to be extended as long as it can be extended as long as it can be established that the goods stands purchased by the manufacturer.

Only because the appellant made a mistake and claimed that the goods were in the factory whereas in reality, the same was in transit, if they are entitled to credit, the same should not be denied.

Decision

CESTAT set aside the impugned order and remand the matter to original authority for fresh consideration in the light of the above circulars of the board and the tribunal’s decision. Appeal is thus allowed by way of remand.

Case: CCE, Surat versus Mamta Silk Mills Pvt. Ltd.

Citation: 2009 (95) RLT 476 (CESTAT – AHMD.)

Issue:

Whether the respondents are liable to pay interest on the said MODVAT Credit, which remain unutilized?

Brief facts:

The respondent, through oversight, took Cenvat Credit of Rs. 7, 44,449 on LDO, which was ineligible input, during period 12.12.2009 to 28.06.2005. On being pointed out by the auditor, the entire amount was reversed on 13.06.2005, before the same could be utilised by the respondent.

The Comm. (A) has held in favour of the respondent on the ground that the rule invokes provision of Section 11AB for recovery of interest. The provision of Section 11AB are primarily meant for recovery of interest on duty not paid / short paid or recovery of erroneous refund and the section clearly provides for the commencement date determining the period for which interest would be payable in case of duties/refund. However, no clear provision exist as to the interest on recovery of credit wrongly availed. Here the appellant has wrongly avail credit, there are no allegations of mens rea. The error was rectified on being pointed out by way of debit. This is the question of equity. Question is Whether the appellant has gained any benefit by availing the credit. Opening and Closing balances of credit of credit avail is evident that the appellant has not gained any advantage from the wrong credit. Comm.(A) is of the view that interest shall be levied from the time of utilisation of wrong credit. Consequently no interest liability arises.

Reasoning of Judgment:

CESTAT relied upon the case of Hon’ble Punjab and Haryana High Court Judgment in the case of CCE, DELHI versus Maruti Udyog Limited [2007(81) RLT 804(P&H)] and also on the of Hon’ble High Court of Gujarat in the case of CCE verses Gupta Steel [2006 (205) ELT 24(GUJ)]. In these both judgments it is laid down that credit availed but not utilised and lying in the records is not required to pay interest as much as such credit was taken as an entry only in the Modvat records.

Judgment

No infirmity can be found in the view adopted by Comm. (A). The revenue’s appeal is rejected.

Case: K.P. Steel versus CCE, Bhavnagar.

Citation: 2009 (95) RLT 483 (Cestat – Ahmd.)

Issue:

Whether the credit of the debit entry already made would get lapsed along with the balance credit available or not?

Brief Facts:

Appellants have availed modvat credit during the period March 1995 to May 1995. A SCN was issued to them on 30.09.1995 seeking to disallow the said modvat credit. The notice was confirmed by the Deputy Commissioner vide his OIO Dated: 29.06.2004. Appeal against the above order was rejected by the Comm. (A) vide his OIO Dt: 14.12.2005. Thereafter, on appeal filed against the order of Comm. (A), tribunal allowed the same and set aside the impugned order vide its order dated 28.03.2008. As the appellant had debited the credit from their RG 23 A Part II in reference to order passed by the lower authorities, they sought refund of the same, on success of their appeal before tribunal. The said refund claim was denied by the authorities on the ground that the same was debited after 31.07.1997, when the appellant had opted for the payment of duty in terms of compounded levy scheme and as the entire credit balance lying in RG 23 A Part II lapsed in terms of various notifications and Circulars, the debit amount made after such lapsing cannot be held to be legal and proper.

Reasoning of Judgment

It is found that the appellants are insisting on the refund of the said pre deposit in cash. As observed by the authorities below the said debit was made from their RG 23 A Part II account. On 31.07.1997, the appellants were having a credit balance of amount 3.43 lakhs which was lapsed on account of the appellants opting for compounded levy scheme and such subsequent debit from the lapsed credit has been held not be in accordance with law.

Tribunal founds that such debit entry, is required to be reversed as the appellant has ultimately succeeded before the tribunal.

However, the appellant’s request on cash refund cannot be accepted in as much as the appellant has not been put to any prejudice situation on account of such debit of modvat credit.

LB in the case of Gauri Plasticulture (P) Ltd. Versus CCE, Indore has held that only when an assessee is compelled to pay duty out of PLA, on denial of credit by the revenue, the refund of the same would be admissible in cash to the extent of payment of duty in cash during that period. The appellant would not be in position to utilize the credit of Rs. 80998/- as debited by them from Modvat account. If the appellant would not have debited the above amount, the same would have also lapsed along with the other unutilized credit balance on 31.7.1997.

As such the refund of the above amount cannot be given to the appellant in cash. However, they are free to make a reverse entry in their records, which according to the tribunal is futile exercise.

Judgment:

The appeal is rejected.

Service Tax Section:

Case: - Cadila HealthCare Ltd V/s Comm Of C.EX., Ahmedabad

Citation: - 2010(17) S.T.R 134 (Tri-Ahmd)

Issue: -

Whether Cenvat credit is available on Technical and Analysis Services, Commission paid to the foreign agent, Courier services and C& F agent services?

Brief Facts: -

The aseessee has availed credit on technical and analysis Services, Commission paid to the foreign agent, Courier services and C& F agent services. The Revenue has disallowed the Cenvat credit on these services and passed impugned order to recover the same with interest. Penalty of Rs. 10,000/- also imposed.

Appellant’s Contention:-

The appellant argued that input service has been defined in Rule 2(1) of Cenvat credit Rule, 2004 and he specifically drew the attention to following portion in the definition “and includes services, used in relation to setting up, modernization, renovation or repair of a factory premises of provider of output service or an office relating to storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal ”

The above definition makes it clear that the service on which tax has been paid and credit has been taken are related to the business activity. Further Larger Bench in case of ABB Ltd case allowed the same.

Respondent’s Contention:-

The respondent argued that the technical testing and analysis service was rendered in respect of a product which was produced on the trial basis and has not been manufactured and sold at all. Therefore, the credit taken in respect of that product is clearly not admissible. As regard other service, the department contended that the same have to be considered in the light of the Larger Bench decision of the Tribunal.

Reasoning of Judgment: -

The Hon’ble Tribunal said that even the trial manufacture and R& D conducted in respect of such drugs which did not reach to market has to be considered as part of the manufacturing process and business activity. Therefore the contention of the revenue that the goods has not reached to commercial production stage is not eligible for Cenvat credit is not acceptable. Similarly, foreign commission Agent service is also admissible, since it is a sale promotion. The larger bench decision of ABB limited has held that the credit is admissible even if the services are rendered beyond the place of removal. Further, the credit on courier service is allowed in case of Deloitte Tax Services (India) Pvt. Limited [2008(11)STR266] and CCL products (I) ltd. [2009-TIOL-656-CESTAT-BANGALORE].

Decision:-

The appeal allowed.

Case: - Hanuman Cromocoates Ltd V/s Comm. Of C.Ex., Bhopal

Citation: - 2010(17) S.T.R 169 (Tri-Del.)

Issue: -

Whether input service credit eligible on the telephone/mobile charges, courier service, freight charges and security services charges?

Reasoning of Judgment:-

The Hon’ble Tribunal said that the appellant availed Cenvat credit on input services on the basis of the invoices were raised in favour of the appellant’s head office whereas the manufacturing unit is situated at different location. The input service credit was taken on the telephone/mobile charges, courier service, freight charges and security services charges. Prima Facie it appears that the input services are related to business activities and credit is admissible. In view of that pre-deposit of tax and penalty is waived till disposal of the appeal. Stay application granted.

Decision:

The Pre- Deposit waived.

Case: M/s Hindustan Coca-Cola Beverages Pvt. Ltd. versus CCE, Hyderabad

Citation: 2010-TIOL-160-CESTAT-BANG.

Issue:

The issue involved in this case is that the assessee is entitled to take credit of input services on the following services:

Ø Medi-claim Policy

Ø Security at depots

Ø Vehicle Insurance

Ø Car Rentals

Ø Pest Control Activities

Brief Facts:

The appellants are engaged in the manufacture of Coca-Cola beverages and had taken the credit on the above mentioned input services. The revenue has denied the credit of the input services to the appellant and also issued a SCN. Then revenue approached the Comm. (A). And Comm. (A) also held that none of the above mentioned services fulfill the criteria laid down in the decision of the JP Reva Plant Case [2003 (159) ELT 553 Tri-LB]. That criteria is that a service should have been taken in use directly or indirectly in or in relation to manufacturer of final product and clearance of final product from the place of removal

Appellant’s Contention:

The impugned order proceeds on a different ground from that of SCN. According to the SCN, the S.Tax was denied on the ground that the services were not received in the factory of the manufacturer or that they are not related to the business of the appellant. Whereas the order has been passed on the ground that these services has not been used in or in relation to the manufacture is not correct interpretation of law.

And also relied on the decision of the Larger Bench in the case of GTC Industries in which the principles for availing service tax credit had been clearly enunciated.

Respondent’s Contention:

These services are not received in the in the factory premises of the appellants who are engaged in the manufacture of Coca-Cola beverages. And the revenue denied the credit of the input services to the appellant.

And also reiterates the impugned order of the Commissioner (Appeals) and also that these services would not come into purview of the input services.

Reasoning of the Judgment:

Comm. (A) has gone beyond the scope of the SCN. And the finding of the commissioner that the services are not used in or in relation to the manufacture of final product cannot be accepted. And Bangalore CESTAT has also considered that in the case of GTC Industries, in which it was held that all services which are related to the business activity would be entitled for the credit. In view of the interpretation made by the larger bench, CESTAT is of the view that the medi-claim insurance, vehicle insurance car rental, pest control and security of depots are related to the business activity of the appellant.

Decision:

In view of the decision of Larger Bench, the Service tax credit is allowed. And therefore the impugned order has no merits. Hence, Appeal is allowed with consequential relief.

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