Pradeep Jain - Chartered Accountant

PJ/Case Laws/2010-11/07

Case Laws

Prepared By:

CA Pradeep Jain,

Megha Jain, and

Parag Ghate

Central Excise Section:

Case: Commissioner of Central Excise, Chennai v/s Popular Carbonic Pvt. Ltd.

Citation: 2010 (253) ELT 628 (Tri.–Chennai)

Issue: The deemed definition of “manufacture” contained in chapter note is to be considered for ascertaining whether a particular process amounts to manufacture or not.

Brief Facts: The appellants received carbon–di–oxide gas from M/s Madras Fertilizers, through pipelines which stored and compressed and subsequently filled in cylinders carry the buyers name “PILLAY” apart from the particulars of gross weight and net weight. The lower Appellate Authority took note of the Chapter Note 10 to Chapter 28 which required that at the time of labeling or re-labeling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable, to satisfy the requirement of manufacture and therefore the decision in the case of Ammonia Supply Company v. CCE, New Delhi, [2001 (131) ELT 626 (Tri-Del)] was followed in which the Tribunal had decided in favour of the respondents that the process undertaken by them did not amount to manufacture.

Reasoning of the Judgment: The Tribunal held that the view taken by the Tribunal order was also approved by the Apex Court in the case of CCE, Mumbai v. BOC (I) Ltd [2008 (226) ELT 323 (SC)]. The Tribunal noted that for the subsequent period, the word ‘and’ in relevant chapter note had been replaced by the word ‘or’. But, at the material time i.e. April 2002 to March 2004, the chapter note contained the word ‘and’ and hence, the relied upon judgments squarely apply to the present case. No interference required with the order of the lower Authority.

Decision: Appeal dismissed.

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Case: Commissioner of Central Excise, Mumbai v/s Tikitar Industries

Citation: 2010 (253) ELT 513 (SC)

Issue: The following issues have been raised in this appeal:

1) Whether the conversion of ‘Straight Grade Bitumen’ into ‘Blown Grade Bitumen’ amount to manufacture or not? and

2) Whether ‘Roof Felt’ is classifiable under chapter sub–heading 5903 90 or 5907 90?

Reasoning of the Judgment: With regard to the first question, it is found that a similar issue came up for consideration before this court in the case of the present assessee in Commissioner of Central Excise and Customs v/s Tikatar Industries [2006 (202) ELT 215 (SC)]. In this judgment relying on the circular issued by the Board on 01.07.1988, it was held that the process of converting straight grade bitumen into blown grade bitumen through oxidation, known as blowing process, did not amount to manufacture and therefore, was exempted from payment of excise duty. Thus, it was observed that the Revenue cannot be permitted to take a stand contrary to its own stand in the said Circular and the view taken by the Tribunal was affirmed.

The second issue was considered by this court in C.C.E., Navi Mumbai v/s Amar Bitumen & Allied Products Pvt. Ltd [2006 (202) ELT 213 (SC)] and it was held that that ‘Bitumenised Hessian based flet’ was classifiable under heading 59.09 and the assessee would be entitled to exemption from payment of excise duty under Notification No. 53/65-C.E. and 52/94-C.E. dated 20.03.1965 and 25.04.94 respectively.

Accordingly, the Apex Court affirmed the findings recorded by the Tribunal and answered both the question in favour of the assessee and against the revenue.

Decision: Appeals, being devoid of any merit, dismissed accordingly.

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Service Tax Section:

Case: Andhra Bank v/s Commissioner of C. Ex., Hyderabad

Citation: 2010 (18) S.T.R. 475 (Tri.–Bang.)

Issue: When already 4 adjournments have been given, then another adjournment cannot be given in the normal circumstances. Penalty under Section 76 and Section 78 cannot be imposed simultaneously as they are mutually exclusive.

Brief Facts: For suppression of material facts, demand of service tax was ordered against the appellant-bank. Penalty was imposed on them under Section 76 and under Section 78 of the Finance Act, 1994. Appellant have filed appeal against the imposition of simultaneous penalties under Section 76 and under Section 78. The appeal was filed alongwith condonation of delay application. The appellants have already sought 4 adjournments. Now, the appellants are seeking adjournment again.

Respondent’s Contention: The appellant has obtained a COD clearance to pursue appeal against the penalty imposed on them and not in respect of the tax. Therefore, demand of tax with interest against appellant must be sustained.

Reasoning of the Judgment: With regard to grant of adjournment, the Tribunal held that the appellant have already been given adjournment earlier four times. Under the law, no appellants can be given more than three adjournments whereas the appellants have already taken four adjournments. No one is present on behalf of the appellant on this appeal also despite notice is taken by them. As such, the request for the further adjournment is not reasonable and the same is rejected.

Further, the Tribunal sustained the demand of tax made against the appellants along with interest.

As regards to the penalty imposed, the Tribunal held that the penalty has been imposed on appellants both under Section 76 and 78 of the Finance Act, 1994. Amendment is made under the law making these penalties mutually exclusive. Keeping in view the above fact, Tribunal sustained the penalty imposed under Section 78 and set aside the penalty imposed under Section 76 of the Act.

Decision: Appeal otherwise rejected except setting aside the penalty imposed under Section 76 of the Finance Act, 1994.

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Case: Crimpson Electronics v/s Commissioner of Central Excise, Kanpur

Citation: 2010 (18) S.T.R. 450 (Tri. Del.)

Issue: In the absence of any documentary evidence, the assessee cannot be said to be providing a particular service and held liable for paying service tax.

Brief Facts: The appellant performed certain activities on behalf of its customers. The lower Appellate Authority held that the appellant had provided repair and maintenance service to its customers. Appellant is challenging the said order before the Tribunal.

Appellant’s Contention: The appellant contended that he had done jobwork for its customers and the consideration received by him was related to jobwork and the same has been shown in the Profit and Loss Account for the relevant period. It is submitted that there is no document showing repair and maintenance carried out by the appellant and nothing has brought on record to make such allegation against the appellant. In absence of the contract for repair and maintenance, the appellant is entitled to the benefit of the decision in the case of CCE, Jaipur v/s Bhiwadi Cylinders Pvt. Ltd. [2008 (11) STR 37 (Tri-Del)] and also in the case of Elite Detectives Pvt. Ltd. v. CST, Bangalore [2006 (4) STR 583 (Tri-Bang)].

Respondent’s Contention: Revenue contended that in the guise of job work charges, repair and maintenance was carried out by the appellant and consideration received by the appellant was against this activity. It was submitted that the Commissioner (A) has clearly brought out that attention of the Revenue was diverted by the appellant claiming that job work was done and charges for the same was received. Also, it was submitted that the concurrent findings of both the authorities go against the appellant for which adjudication need not be interfered with.

Reasoning of the Judgment: The Tribunal held that there is nothing on record to show the manner how activities were carried out by the appellant to conclude that repair and maintenance charges were received instead of job work charges. Also there is no contract document available on record to explain the nature of repair and maintenance carried out. In absence of any documentary evidence, the appellant is entitled to the benefit of decision cited. Impugned order set aside.

Decision: Appeal allowed.

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Case: ETA Constructions (India) Ltd. v/s CST, Chennai

Citation: 2010 (18) S.T.R. 420 (Tri. - Chennai)

Issue: Pre-deposit waived as the assessee was working under Works Contract Service which became taxable from 01.06.07. Further, pre-deposit ordered as assessee prima facie could not establish that they were engaged in providing the construction of residential complex service for personal use.

Brief Facts: Demand was confirmed against the appellant for the period 10.09.2004 to 13.09.2007 by holding that they had provided the service of commercial construction service. Appellant has filed appeal before the Tribunal. Presently, application has been filed for waiver of pre–deposit of service tax and interest during the period 10-9-04 to 1-6-07 under the category of “Commercial or Industrial Construction Services”.

Appellant’s Contention: The appellant submit that they had entered into works contract which became leviable to tax only w.e.f. 1-6-07 for the subsequent period, it was submitted that they were providing the service of construction of residential complex which is intended for personal use as “residence” by Central Government and Defence department.

Respondent’s Contention: Revenue submitted that the demand for the period post – 1-6-2007 will be about 28 lakhs.

Reasoning of the Judgment: The Tribunal waived the pre-deposit for the period 10-9-04 to 1-6-07 as prima facie case is made out that they had entered works contract on which service tax was levied from 01.06.2007 onwards. Reliance was placed on the decisions given in Build Craft Interior Pvt Ltd. & two others v/s Commissioner of Service Tax, Chennai [2009 (16) STR 489 (Tribunal)]. For the subsequent period, the Tribunal held that the appellants had not made out prima facie case for waiver on the ground that they are not engaged in constructing residential complex consisting of more than 12 residential units and on the ground that even if they are held to have engaged in construction of residential complex, since such complex is intended for personal use as ‘residence’ by central government and defense department, such construction is excluded from the definition of “residential Complex”. Pre-deposit of Rs. 28 lakhs ordered.

Decision: Pre-deposit partly waived

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Case: Sarla Polyester Ltd. v/s Commissioner of Central Excise, Vapi

Citation: 2010 (18) STR 538 (Tri.–Vapi)

Issue: Whether Education Cess is payable by 100% EOU on DTA clearances?

Brief Facts: The appellant had filed an appeal before the Tribunal for deciding the above issue. In this miscellaneous application, the appellant submitted that the earlier order of the Tribunal holding against them has been set aside by the Hon’ble High Court of Bombay and the matter was remanded to the Tribunal for the fresh decision. Accordingly, appellant has prayed for listing the matter.

Reasoning of the Judgment: The Tribunal observed that the Hon’ble High Court had observed that “the Tribunal shall, before deciding the appeal, consider the question whether in view of importance and likely far reaching effect of their decision, it will be appropriate to issue a general notice enabling any person, who may be adversely affected, being given an opportunity of being heard.”

Accordingly, the Tribunal has fixed the hearing on 19.02.2009. The hearing notice directed to be also put on the Notice Board inviting public at large to assist the Tribunal.

Decision: Miscellaneous application disposed off accordingly.

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Case: British Scaffolding International Ltd. v/s Commr. of C. Ex., Nashik

Citation: 2010 (18) STR 423 (Tri.- Mumbai)

Issue: The claim filed after 60 days under Notification No. 41/2007-ST was admissible in view of revised limitation period in terms of Circular No. 112/2009-ST.

Brief Facts: The appellant had filed a refund claim in respect of Service Tax paid during the quarter April to June 2008. The claim was filed on 11-9-2008 under Notification No. 41/2007-ST, dated 06.10.2007. The Notification prescribed that the refund claim had to be filed within 60 days from the date of expiry of the quarter for which the tax was paid. The claim was to be filed within 60 days from 30.06.2008. The lower Authorities held that the refund claim was filed beyond this period and rejected the claim as being time-barred. Appellant has therefore filed this appeal before the Tribunal.

Appellant’s Contention: Appellant contended that the refund claim was filed within prescribed time–limit as per Circular No 112/2009-ST dated 13.03.2009. The Circular had clarified that, consequent upon revision of limitation period any refund claim filed within such revised limitation period would be admissible if it is otherwise in order. So the filling of return could be done till 31-12-2008.

Reasoning of the Judgment: The Tribunal held that the above Circular was issued after the order-in-original and order-in-appeal were passed in this case. So the appellant could not have claimed under the Circular before the lower Authorities. Accordingly, impugned orders set aside. Matter remanded for fresh decision on the refund claim. Direction is given to examine the limitation issue again.

Decision: Appeal allowed by way of remand.

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Case: Commissioner of C. Ex., Goa Vs Sona Tapes Pvt. Ltd

Citation: 2009 (16) S.T.R. 667 (Bom.)

Issue: The words ‘bad in law’ are interchangeable with the words “not legal or proper”.

Brief Facts: The Commissioner (Appeals), Mumbai allowed Modvat credit to the respondent. The Appellant perused the order and found that the Commissioner (Appeals) has allowed Modvat credit on certain items which were not included in the list of capital goods described in the explanation below Rule 57Q of Central Excise Rules, 1944. He came to the conclusion that the retrospective application of the Notification and giving benefit of Modvat credit on inadmissible capital goods was ‘bad in law’. Therefore, the appellant directed the Assistant Commissioner to file an appeal with the Tribunal. The Tribunal dismissed the appeal on the ground that Section 35 B (2) authorizes the Commissioner to appeal against the judgment of the Commissioner (Appeals) only if they are of view that ‘the judgment in appeal is not legal or proper’ and not if they are of the opinion that ‘the judgment is bad in law’.

Petitioner’s Contention: It was contended that the Section provides that if the Commissioner of Central Excise is of the opinion that an order passed by Appeal Commissioner of Central Excise is not legal or proper, appellant may direct a Central Excise Officer to file an appeal to the Appellate Tribunal. According to appellant the purpose of the provision is absolutely clear and the purpose it to require the Commissioner of appeal to form an opinion that the order is not legal or proper and only thereupon to direct the filing of such an appeal. In the present case, such an opinion was formed that the order was ‘bad in law’ and, therefore, he had directed that an appeal to be filed. The Tribunal seems to have insisted on a psittacine incantation of the words of the statute. The learned counsel for the petitioner referred to the Oxford Dictionary which states that the meaning of the ‘bad in law’ is one that cannot be sustained or held to be valid. They also referred to law lexicon which described the word ‘bad’ as false.

Reasoning of the Judgment: The High Court referred to the said dictionary and held that the phrase ‘bad in law’ really means something which cannot be sustained or held to be valid. It was held that this term is interchangeable with the words of the statute ‘not legal or proper’.

It was further held that it would have been an entirely different matter if the order of the Commissioner directing an appeal to be filed would have been passed without any application of mind and had merely said that the order is bad in law or for that matter not legal or proper. But the Commissioner has clearly given his reasons for directing that an appeal be filed. Thus, it is held that the Commissioner (Appeals) has wrongly allowed the benefit of Modvat credit on inadmissible items by applying a notification retrospectively.

There is no fault in the Commissioner’s order for describing the findings of the Commissioner (Appeals) as bad in law for the purpose of Section 35B (2) of the Central.

Moreover, it appears that the Tribunal has relied on the judgment of the Supreme Court in the case of Collector of Central Excise, Vadodara v. Rohit Pulp Paper Mills [1998 (101) E.L.T. 5] where the Supreme Court had held that the formation of the opinion by the Collector that the order appealed against ‘is not legal or proper’ is a pre-requisite. In that case, their Lordships observed that the order proposed to be appealed was not legal and proper. In the circumstances, their Lordships upheld the order dismissing the appeal as not maintainable since mind. The circumstances of the case before the High court are different. The order directing the appeal to be filed clearly discloses the reasons why the Commissioner formed an opinion that an appeal should be filed. Impugned order set aside. Direction is given to the Tribunal to decide the appeal on merits.

Decision: Matter remanded back.

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Case: Elegant Packaging Industries Vs Commr. of C. Ex., Hyderabad-II

Citation: 2009 (16) S.T.R. 626 (Tri. – Bang.)

Issue: Where delay has been explained with affidavit and seems to be convincing, it should be condoned.

Brief Facts: Appeal against the order-in-original was filed after 49 days beyond the period of 90 days in terms of the proviso to Section 85 of the Finance Act, 1994. Appellant had also filed an affidavit explaining the delay. However, the Commissioner (A) did not accept the same and rejected the appeal on the ground that delay was not justified. Thus, the appellant has filed this appeal before the Tribunal.

Appellant’s Contention: Appellant submits that they have filed an affidavit before the learned Commissioner (Appeals) explaining the delay in filing appeal after 49 days beyond the period of 90 days.

Respondent’s Contention: Revenue submitted that there is a delay of 49 days and it has not been properly explained.

Reasoning of the Judgment: The Tribunal considered the affidavit wherein it was stated that the affidavit was filed by the employee of the appellant indicating clearly that it was due to some urgent personal work, that he had not attended office. He has also averred on oath that during the re-arrangement of the files, he had found that the above OIO was not attended by him. Considering the entire facts, the Tribunal held that the Commissioner (Appeals) ought to have condoned the delay of 49 days in filing the appeal before them and disposed off the appeal on merits, as the reasons given in an affidavits seems to be convincing. Delay is condonable. Matter remitted to the Commissioner (A).

Decision: Stay application is given and appeal is disposed off accordingly.

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Case: Jagdamba Polymers Ltd. v/s Commissioner of C. Ex, Ahmedabad

Citation: 2010 (253) E.L.T. 626 (Tri.–Ahmd)

Issue: Whether Cenvat Credit of service tax can be denied if there is omission to reflect the same in ER 1 and when there is no dispute about the eligibility?

Brief Facts: Cenvat Credit of service tax paid on various services was denied on the ground that in the ER 1 return the service tax credit was not shown. A SCN was issued to the appellant. The Adjudicating Authority confirmed the demand of Cenvat Credit and imposed equal amount as penalty. In appeal, the Commissioner (Appeal) took a totally new stand that the Cenvat credit register was not properly maintained during Sept. 2004 to August 2006 and the same appeared to be prepared in the month of September 2006 by single person using one pen and bearing signature without date. Thus, the Comm. (A) rejected the appeal on a totally new ground which was neither before the original Adjudicating Authority and nor raised was in the SCN. Appellant have thus come up in appeal before the Tribunal.

Appellant’s Contention: Appellants contended that they were maintaining Cenvat Credit account regularly but failed to reflect the credit of service tax taken in the ER-1 returns. As soon as they found their mistake, they started showing it in the return of Sept. 2006 and hence there was imbalance in the opening and closing balance of the two months. After the reply of SCN was furnished, the department has undertaken verification of the submission made by them which were coming out from correspondence between the Range Superintendent and appellant. The copies of invoices and copy of the concerned Cenvat credit account to show that the appellants regularly maintained the Cenvat credit account. It was also submitted that even though Comm. (A) has put the new ground that all the handwriting are same in view of the fact that record is maintained by the same person and this person has been with company for more than 10 years. Even in case, it is assumed that all the credits taken earlier was not eligible, the appellant is still eligible for taking Cenvat Credit in month of August or September 2006 based on the decision of Tribunal in the case of M/s Pierlite India Pvt. Ltd.[2010 (250) ELT 49 (Tribunal)] and in Coromandal Fertilizers Ltd. v/s CCE [2009 (239) ELT 99 (Tri-Bang)] that credit can be taken at any time and it is not necessary that credit should be taken immediately.

Respondent’s Contention: Revenue contended that the fact that the Cenvat credit taken in the register was not reflected in the return earlier, there is nothing wrong in the stand taken by them that credit is treated to have been taken only in August or September 2006. It is also submitted that credit has to be immediately taken and for this claim he relies on the decision of the Tribunal in the case of Mold–Tek Technologies Ltd. v/s CCE, Hyderabad [2006 (205) ELT 415 (Tri-Bang)] and J.V. Strips Ltd v/s CCE, Rohtak [2007 (218) ELT 252 (Tri-Del). Therefore, it is submitted that appellants are not eligible for the credit.

Reasoning of the Judgment: The Tribunal agreed with the stand of appellant that failure to reflect the Cenvat credit balance in the ER 1 Return is only a procedural omission and in the normal course credit cannot be denied and should not have been denied on this ground. The Tribunal also found that it is not the case of Revenue that appellant is not eligible for the Cenvat credit. Further, even assuming that appellant is not eligible for the credit because they failed to show it in the ER 1 return, yet in view of the decision cited by the appellant which provide that credit can be taken at any time and it is not necessary that it should be taken immediately on the receipt of inputs or on payment of service tax to the service tax provider, credit would be admissible. Tribunal also found that the decisions cited by the Appellant are squarely applicable to the facts of this case. Further, the Tribunal held that while rendering the decision in the case of M/s Pierlite India Pvt. Ltd, the decisions cited by the Revenue were considered. Therefore, both the decisions cited by the respondents are not applicable.

Decision: Stay application allowed. Pre-deposit waived. Appeal allowed.

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