PJ/Case Laws/2010-11/12
Case Laws
Prepared By:
CA Pradeep Jain,
Megha Jain and
Parag Ghate, B. Com
Sukhvinder Kaur, LLB [FYIC]
Case: - C. S. T.,
Citation: - 2010 (18) STR 545 (Kar.)
Issue: - Whether the service rendered fell under 'Consulting Engineer' prior or works contract?
Whether the assessee is liable to pay tax even before imposition of tax under “works contract” service?
Brief Facts: - Respondent-company was rendering services like, design development, design review, installation and commissioning and technology transfer for study and design of oil free compressor systems for the period from 1997 to 2001. Department contended that the service provided by the respondent fell within the scope of "Consulting Engineer" service. Accordingly, Show cause notice was issued demanding service tax alongwith interest and proposing to impose penalty under different provisions of the Act. Demand was confirmed by the Deputy Commissioner. The appeal to the Commissioner (Appeal) was also rejected. In further appeal before the Tribunal, considering the different provisions of law of the Finance Act, the Tribunal came to be conclusion that the respondent is not liable to pay either service tax or the interest or the penalty levied by the Lower Authorities. Accordingly, Revenue is in appeal before the High Court.
Reasoning of Judgment: - The High Court examined the definition of ‘Consulting Engineer’ before it amendment in 2006 and after it was amended and held that the service rendered by the Company had not been included under the definition of consulting engineer prior to 2006 as it stood under Section 65(13). This was decided in CEA 12/2007 on 01.04.2010 stating that prior to the Amendment Act, 2006 the Companies were not included under the definition of consulting engineer. When such a view is taken, considering the relevant assessment year in the present case HC held that the service rendered by respondent-company during relevant period cannot be brought under the category of consulting engineer. If the service rendered by the assessee cannot be considered as a consulting engineer, then no question arises to pay service tax under the Finance Act. The question answered against the revenue and in favour of the respondent-assessee.
Further, with regard to execution of works contract by the respondent, the High Court considered the definition of works contract and noticed that the said service had become taxable from 01.06.2007. The High Court considered the contract entered between the respondent and its employer and held that the respondent’s case fell under Section 65(105) (zzzza) i.e. under is the definition of works Contract Explanation (a) and (e).
Further, it was held that even though the respondent’s case fell under the definition of works contract, but no service tax can be collected from him as the provisions of law had come into force with effect from 1-6-2007, while in the present case; contract is for the period 1997 to 2001. Therefore, the second question is also answered in favour of the assessee against the revenue.
Decision: - Appeal is dismissed.
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Case: - B. A. Research India Ltd. v/s Commissioner of Service Tax, Ahmedabad
Citation: - 2010 (18) STR 604 (Tri.–Ahmd)
Issue: - Whether the Explanation introduced in Section 65(106) by way of amendment with effect from 1-5-2006 has retrospective effect?
Whether the services rendered by the appellants can be considered to be export of service would be required to be examined, only if it is held that amendment has retrospective effect?
Brief Facts: - All the three appellants are engaged in the activity of Clinical Research/Testing and Analysis for various pharmaceutical companies. Technical testing and analysis service was made taxable from 1-7-2003 under Section 65(106)/65(107), with effect from 1-7-2003. On 1-5-2006 an Explanation was added to Section 65(106) of the Finance Act, 1994. After the introduction of the Explanation, investigation was taken-up by the Department and show cause notices were issued to the appellants demanding Service tax for the services rendered during the period from 1-7-2003 to 30-4-2006.
In appeal, the Commissioner (A) held that the Explanation added on 1.05.2006 to the definition of technical testing and Analysis service did not have any expanding effect on Section 65(106). The definition means that the material which is tested (i.e. the specimen) should not be a human being or an animal is not included in the definition. But it would certainly include all types of tests, whether clinical trials or otherwise, conducted on the drugs themselves. This position continues unchanged even after the introduction of explanation. It was further held that there was some ambiguity in the interpretation of Section 65(106) as it stood earlier and for this reason, the explanation was introduced to this section.
Thus, the appellants are in appeal before the Tribunal.
Appellant’s Contentions: - Appellant contended that amendment cannot have retrospective effect. The explanation starts with sentence "For removal of doubts, it is hereby declared", therefore, Department has taken a stand that the notification would have retrospective effect. Just because of such declaration, amendment cannot have retrospective effect. For this purpose they relied upon following cases:-
· Sedco Forex International Drill Inc. v. Commissioner of Income Tax – [(2005) 12 Supreme Court Cases 717].
· Commissioner of Income Tax v. I.T.D.C. - Income Tax, [Vol-211, page No. 400]
· Gothi Thermoforming Inds. v. CCE, Chennai & Pondicherry [2007 (211) ELT 0097 (Tri.-Chennai)]
· Commissioner of Customs (Airport) Chennai v. Skycell Communications Limited [ 2008 (232) ELT 0434 (Tri. - LB)]
Appellant also contended that M/s. B.A. Research India Limited, one of the appellants had written a letter to the Deputy Commissioner, Service Tax, in which they had informed them that activities described by the appellants may not be covered under the Service tax net. In view of the precedent decisions stated above and also interpretation of the Departmental officers and also the fact that the Department had not taken any action to demand service tax prior to 1-5-2006 shows that the amendment cannot have retrospective effect.
Respondent’s Contentions: - Respondent contended that starting sentence of the Explanation makes it very clear that the amendment is retrospective. If the intention was to give only prospective effect, the explanation would not have started with this sentence.
Respondent also relies to the decision of the Tribunal in the case of Epcos India Pvt. Limited [ 2008 (084) RLT 0428 (CESTAT- Mum.)] with regard to interpretation of explanation introduced in the Notification No.25/99-Customs, dated 28-2-1999. In that case, it was held that explanation introduced in the notification would have retrospective effect.
Respondent relied upon decision of this Tribunal in the case of M/s. Yogi Metalised Products Pvt. Limited and others wherein it was held that amendment to Notification No. 20/2001-Cus., dated 1-3-2001 clarifying that plain film would include BOPP film also is clarificatory in nature and therefore effective retrospectively.
Further respondent has also relied on the decision of the Hon'ble Supreme Court in the case of WPIL Limited v. CCE, Meerut (UP) [2005 (181) ELT 0359 (S.C.)] wherein it was held that parts used in manufacture of power driven pumps on which exemption was withdrawn because of omission from Notification No.46/94-Central Excise, dated 1-3-1994 and re-instated by Notification No. 95/94-Central Excise, dated 25-4-1994 shows that notifications could have retrospective effect.
Respondent also relied upon the decision of the Hon'ble Supreme Court in the case of GOI v. Indian Tobacco Association [2005 (187) ELT 0162 (S.C.)] in support of his contention that exemption notification would have retrospective effect.
Reasoning of Judgment: - The Tribunal noticed that there is no dispute with regard to the liability of the appellants to pay Service tax after 1-5-2006. The Tribunal considered the findings of the Commissioner (A) and held that the Tribunal does not agree with observation of the Commissioner that the Notification has retrospective effect. The explanation introduced by amendment gives an impression that the purpose is to make it clear that the definition does not include testing and analysis for the purpose of determination of nature of diseased condition, identification of disease, prevention of any disease and disorder in human beings or in animals.
However, it is found that the original definition clearly excluded all these services from the definition since the expression, any service provided in relation to human beings and animals is very wide and therefore was no need for exclusive definition. On the other hand the definition prior to amendment would give an impression that technical testing and analysis can be definitely said to be in relation to human beings or animals was excluded. To make it includable in the definition, the amendment was necessary. Therefore, as contended by the appellants, the amendment in reality expounded the scope of the definition and therefore, it cannot be clarificatory in nature.
The Tribunal relied upon the judgments cited by the appellant in the cases of Skycell Communications Limited, Gothi Thermoforming Inds and in Commissioner of Income Tax v. Rajasthan Mercantile I Co. Limited and others. The Delhi High Court had observed that only because a provision attached to a section bears the nomenclature "Explanation", it cannot always be considered as conveying the true and natural meaning of the words or the provisions of the Act. The meaning attributable to the relevant provisions of the Act without the Explanations shall have to be considered first, to find out whether it created an artificial situation, or created ambiguity, and if so, the Explanation may be considered as having injected the true and real meaning to those provisions from the very inception of the provisions to which the Explanation is added.
Reliance was also placed on the case of Sedco Fbrex International Drill Inc., wherein the Supreme Court had observed if it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main Provision came into force. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are "it is declared" or "for the removal of doubts”.
Accordingly, the Tribunal held that the analysis of the decisions cited by appellants shows that whenever the explanation restricts the scope of exclusion or enhances the scope of inclusion, it cannot be held to be retrospective unless there are other evidence and circumstances which would take one to such conclusion. In the normal course, irrespective of the way explanation is added, it would not be retrospective. It has to be examined with reference to the scope and in the light of Hon'ble Supreme Court's observations in Sedco Forex case.
Further, the service tax Commissionerate, Ahmedabad also had clarified that services rendered by the appellant is not liable to service tax, supports the view that there was no doubt to be clarified with retrospective effect.
As regards the decision by the respondent, the Tribunal held that the said decisions were clarificatory in nature and did not apply to the facts of appellant’s case.
Thus, the Tribunal concluded that this explanation cannot have retrospective effect. On this ground alone, appellants succeed. Therefore, there is no need to going to the other grounds relating to export of services and consider the question as to whether the services rendered by appellants in respect of foreign company would amount to export of services or not.
Decision: - Appeal allowed.
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Case: - Nelsun Paper Mills Ltd. v/s Commissioner of Central Excise, Trichy
Citation: -2010 (18) STR. 648 (Tri. - Chennai)
Issue: - The CHA service used for bringing the imported inputs to factory will be an input service.
Brief Facts: - Appellants have brought imported inputs for use in the manufacture of finished goods which are dutiable. They have used CHA services for clearance of the imported inputs and are claiming credit. The credit was denied by the Lower Authorities. Hence, this appeal is filed before the Tribunal.
Appellant’s Contentions: - Appellant relied upon the decision given in the case of CCE, Rajkot v. Roles Rings P. Ltd. [2008 (230) ELT 569] in which credit on similar input services has been allowed.
Reasoning of Judgment: - The Tribunal held that in view of the fact that the impugned service has been utilised for clearing the imported inputs and bringing the same to the appellant's factory for manufacture of finished goods which are dutiable, the credit in respect of such service is admissible to the appellants. Impugned order is set aside.
Decision: - Appeal allowed.
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Case: - Sukrut Exports versus CCE, Pune-II
Citation: -2010 (254) ELT 127 (Tri. – Mumbai)
Issue: - Cenvat credit cannot be disallowed on technical lapse of keeping the capital goods in godown due to constraint of space. Penalty cannot be imposed in absence of malafide intention.
Brief Facts: - Appellants availed Cenvat credit on capital goods which were not available in their factory premises at the time of visit of Audit party and were never brought to the factory premises. On pointing out the mistake by the Audit party appellants reversed the credit along with interest. Show cause notices were issued alleging contravention of Rules 3 and 4 of the Cenvat Credit Rules, 2004. It was also proposed to recover the credit under Rule 14 of Cenvat Credit Rules r/w the proviso to Section 11A of the Central Excise Act, 1944 and further with proposal of appropriating inadmissible duty paid along with the interest and penalties under Rule 15 of the Cenvat Credit Rules read with Section 11AC of the Act. The Adjudicating Authority confirmed the demand along with interest and imposed equivalent amount of penalty. On appeal, the lower Appellate Authority confirmed the penalty with an option to pay 25% of the duty as penalty as per the first proviso to Section 11 AC of the Act. Aggrieved by the same, the appellants are before the Tribunal.
Appellant’s Contentions: - Appellant contended that they have purchased the machineries and as they were not having sufficient space to install the same in their factory, the machineries were kept in their godown. During the time of visit of Departmental Officers, 50% credit of duty was claimed on these capital goods which were kept in the godown. On pointing out by the Departmental officers, they immediately reversed the credit along with the interest and informed the Department not to initiate any proceedings against the appellants. They had later on installed the same machineries in their factory and availed credit. Appellant also contended that there was no mala fide intention on their part to avail Cenvat credit intentionally. Hence, the provisions of Section 11 AC were not attracted in this case.
Respondent’s Contentions: - Revenue contended that the appellants were entitled to avail Cenvat credit only when the goods were received in their factory as per Rule 4 of the Cenvat Credit Rules, 2004. But the goods were not received in their factory and the appellants have availed the credit in contravention of Rules which amounts to suppression and provisions of Section 11 AC were applicable in this case.
Reasoning of Judgment: - The Tribunal held that the appellants had availed Cenvat credit on the capital goods which were not received in their factory but kept in their go-down but later on these were shifted into their factory to manufacture final products. On careful examination of the impugned order, Tribunal held that there was no mala fide intention of the appellants to avail unlawful Cenvat credit. The only lapse on their part was that they have failed to install the machinery in the factory premises. It is not a case that the appellants had not purchased the capital goods without any Central Excise invoice and availed the Cenvat credit but the capital goods were available in the godown of the appellants and as there was no extra space in the factory premises they could not be brought to the factory premises but later on the same are installed. The Lower Authorities have failed to arrive at any decision that the appellants have availed the unlawful credit with an intention to evade payment of duty.
Accordingly, the Tribunal held that there was no mala fide intention of the appellant to avail wrong Cenvat credit. In the absence of the ingredients of Section 11 AC like fraud, collusion or any willful mis-statement or suppression of facts with intention to evade duty, the provisions of Section 11 AC were not applicable in this case.
It was held that there was a procedural lapse by the appellant as they have not informed the department that they have availed the Cenvat credit on the capital goods which are lying in their godown, thus they were liable to pay penalty. Penalty reduced to Rs. 5,000/- under Rule 15 on each of the appellants.
Decision: - Appeal disposed off.
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Case: - Commr. of C. Ex.,
Citation: -2010 (254) ELT 37 (P & H)
Issue: - Whether Modvat credit is admissible only on the set of documents referred to Rule 57-G (3) of the Central Excise Rules? Whether the assessee was entitled to claim Modvat credit on the basis of the application for import in form number 89?
Brief Facts: - Respondents claimed cenvat credit on the basis of the application for import in the form number 89. Department sought to deny the credit on the ground that the said document was not prescribed as a valid document in the set of documents referred to in Rule 57-G (3) of the Central Excise Rules.
Reasoning of Judgment: - The High Court held that as per Section 46 of the Customs Act, Bill of Entry is to be presented for clearance for home consumption of goods imported (by sea /air). As the Bill of Entry was a valid duty paying document as prescribed under Rule 57G of the Central Excise Rules, 1944 for the purpose of availing modvat credit under Rule 57G hence, the respondent would be entitled to modvat credit on the application for import which has been issued on the basis of Bill of Entry.
Reliance was placed on the decision in Commissioner Central Excise, Ludhiana v/s Ralson India Ltd. [2006 (202) ELT 759], wherein it has been held that Rule 57A and Rule 57G of the Central Excise Rules being a beneficial legislation, its object of input duty relief to a manufacturer should not be defeated on a technical and strict interpretation of the Rule governing modvat. It is not the case of the Revenue that modvat credit was being claimed on the basis of any fraudulent documents. Reference answered in favour of respondent.
Decision: - Appeal is rejected.
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Case: - Bannari Amman Sugars Ltd v/s Commissioner of Central Excise,
Citation: - 2010 (254) ELT 98 (Tri-Chennai)
Issue: - When CHA service is used for transporting imported inputs to factory premises, the said service will be an input service on which cenvat credit will be available.
Brief Facts: - Appellants are a 100% EOU. They imported impugned blades for use in the machines for cutting granite logs which were exported after such cutting. The imports were affected under the provisions of Notification No. 53/97-Cus, dated 03.06.97. After use for some time, the impugned blades were becoming unusable and were sold outside in the DTA as scrap. Duty was paid on the transaction value. Department objected to the same and issued show cause notice asking for duty. The stand taken by the Department was that the duty should have been paid on depreciated value of the blades. The appellant have paid the additional amount to the department but later on have claimed refund of the additional amount deposited.
Respondent’s Contentions: - Revenue contended that the Notification No. 53/97-Cus, dated 03.06.97 under which the initial imports were made should govern the issue.
Reasoning of Judgment: - The Tribunal examined the Condition No. 7 of the Notification No. No. 53/97-Cus, which provided for the clearance of rejects, waste and scrap material arising in the course of manufacture in an EOU. This condition provided that the duty is payable under Section 3 of the Central Excise Act, 1944. Such payment is obviously to be made with reference to the transaction value and have only recovered that amount from their customers and paid the same to the Department, they were eligible for the refund of the additional amount they have paid subsequently at the insistence of the departmental authorities. Impugned orders set aside.
Decision: - Appeal allowed with consequential benefit.
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Case: - Indian Aluminium Company Ltd. v/s Thane Municipal Corporation
Citation: -1991 (55) E.L.T. 454 (S.C.)
Issue: - The exemption will be denied if the procedural condition precedent for such exemption is not fulfilled when it is likely to facilitate commission of fraud.
Brief Facts: - Petitioner was engaged in the manufacturing of aluminium products in the factory situated at Kalwa in Thane. Petitioners were obtaining aluminium as raw materials for consumption from another factory of theirs situated in a different State. With effect from 1-10-1982 Kalwa was included in the municipal jurisdiction of Thane. Prior to that, the petitioner was not required to pay any octroi on the raw materials brought into their factory at Kalwa. Schedule I to the said Rules contained description of various goods and articles which were liable to octroi and minimum and maximum rates were prescribed. Item No. 77 in the said Schedule I covered non-ferrous metals, including aluminium and the Entry provided for the levy of octroi duty on the aluminium and other goods mentioned therein at the minimum rate of 0.5% and at the maximum of 4%. The respondent-Corporation was levying octroi duty on the imports of aluminium raw materials made by the petitioner-Company into Kalwa at the rate of 1.3% from 1-10-1982 to 14-4-1987. Then with effect from 15-4-1987 the respondent- Corporation was levying octroi at the rate of 2%.
On 18-5-1987 the Thane Manufacturers’ Association made a representation to the respondent Corporation about the increase in octroi rates pointing out that the increase was having a disastrous effect on their industrial units located within the limits of the Corporation. In reply to the said representation, the respondent Corporation addressed a letter dated 20-11-1987 in which it was clarified inter alia that goods specified in Entry 77 in Schedule I to the said Rules, when raw material is imported for use in the manufacture of finished goods it would be subject to the levy of octroi not exceeding 1.25% and not less.
On receipt of this letter the petitioner Company made detailed enquiries and was informed that under Rule 4 of the said Rules the goods mentioned in Part IA of that Schedule which were imported by certain industrial undertakings are liable to be subjected to octroi at a lower rate. The Company also noticed further that Part IA of the Rules provided that the goods specified in Entry 77 when imported by an industrial undertaking for use as a raw material for processing within that undertaking and if a declaration in Form 14 is filed, the levy of octroi in such cases would not exceed 1.25% and would not be less than 0.25%.
The petitioner, however, did not file any such Form 14 duly filled in and according to them they acted under a mistake of law and under the bona fide impression that the octroi levied on and recovered by the Corporation at the rate of 1.3% in respect of the period from 1-10-1982 to 14-4-1987 and at the rate of 2% from 15-4-1987 onwards, represented the correct rate. The petitioner however having later realised by going through the records and the financial accounts and other documents which are duly audited claimed refund of the excess of octroi duty which has been paid by them.
On 8-3-1988 the petitioner-company addressed a letter to the respondent Corporation pointing out that under mistake of law they paid excess amount and therefore the excess amount so paid should be refunded. The respondent Corporation in their reply dated 16-5-1988 stated that the petitioner-company had not complied with the procedure specified in Part IA of the Schedule II to the said Rules for availing such concessional rates therefore the refund cannot be sanctioned.
However, the petitioner Company by their letter dated 19-4-1989 claimed a refund of total amount of Rs. 13,54,101.79. The respondent again rejected the claim reiterating that the procedure specified in Part IA of Schedule II to the Rules was not complied with.
Being aggrieved the Company filed a Writ of mandamus seeking refund. A Division Bench of the High Court dismissed the same holding that the concessional rate of octroi duty was available only if the declaration in Form 14 was filed with the octroi authorities. Thus, Special Leave Petition has been filed.
Appellant’s Contentions: - Petitioner submitted that a procedural failure should not disentitle them provided if otherwise the Company could have legitimately claimed. They relied on the judgment of this Court in Kirpal Singh Duggal v. Municipal Board,
Relying on these observations, Appellant contended that in the instant case though the procedural requirement is not fulfilled by filing a declaration in Form 14, still the same is not a bar to invoke the jurisdiction of the Civil Court or the High Court by way of a writ and seek a refund.
Respondent’s Contentions: - Respondent submitted that the concessional rate would be available only if the raw material was utilised by the Company for manufacturing goods within the industrial undertaking. If a declaration had been filed in proper Form 14 there could have been a scope for verification and in the absence of such a declaration the question of refunding at this distance of time does not arise.
Respondent further submitted that the concession should have been availed at the time when it was available. Having failed to avail the question of claiming the same later does not arise and consequently no refund can be claimed.
Reasoning of Judgment: - The
Admittedly the aluminium raw material was imported by the petitioner Company and octroi duty at the normal rate was paid and no declaration in Form 14 was filed. It is only after the lapse of long time that the petitioner Company has made a claim for refund.
The verification at the time when the raw material was still there is entirely different from verification at a belated stage after it has ceased to be there. May be that the raw material was used in the industrial undertaking as claimed by the petitioner Company or it may not be. In any event the failure to file the necessary declaration has necessarily prevented the authorities to have a proper verification.
The Apex Court held that the Duggal’s case [(1968) 3 SCR 551] relied upon by the petitioner was not applicable as in that case the appellant had obtained certificate but failed to make the application for refund within time. It is in that context this Court observed that the Municipality was under a statutory obligation once the procedure followed is fulfilled and if it is not fulfilled the Municipality may decline. The granting of a certificate that the appellant used the goods for Government work made all the difference. But, in the instant case, the non-fulfilment of the requirement even though procedural, has disentitled the petitioner Company because there was no way to verify whether it was entitled for such concession.
In HMM Limited and Another v. Administrator, Bangalore City Corporation and Another no doubt the view taken in Duggal’s case was confirmed but it does not made any difference so far as the present case is concerned for the reasons stated above. In that case the question was whether the goods namely Horlicks was consumed within the city or not and there was no dispute as to the quantum which was credited pursuant to the directions of the High Court. Hence no further verification was necessary. Therefore these two cases are distinguishable.
It was further held that a concession has to be availed at the time when it was available and in the manner prescribed. In this regard reliance was placed on the common dictionary meaning of the word “concession”. It was held that the expressions “rebate” and “concession” in the commercial parlance have the same concept.
The
It was further held that in any event the petitioner Company cannot claim concession at this distance as a matter of right. In this regard, reliance was placed on the decision given in Orissa Cement Ltd. v. State of
The octroi duty paid by the petitioner Company would naturally have been passed on to the consumers. Therefore there is no justification to claim the same at this distance of time.
Decision: - Special leave petition dismissed.
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Case: - M/s Plus Tech Engineering Pvt. Ltd v/s CCE,
Citation: - 2010-TIOL-899-CESTAT-AHM
Issue: - Where the activity of fabrication of Structures amounts to manufacture of excisable goods, then service tax cannot be applied on the said activity by classifying the same as falling under Erection, Commissioning and installation service.
Brief Facts: - Appellants were engaged in fabrication of Structures at site for their clients. The Department demanded payment of service tax on the ground that the appellant were providing the service of erection commissioning and installation service to their clients. Demand was confirmed against the appellants. The Commissioner (A) rejected the appeal on the ground that the fabrication of various goods at site does not amount to manufacture as has been held in various decisions like in the case of M/s Dodsal Ltd. [2006 (193) ELT 518 (Tri. Mum)]. Hence they are before the Tribunal.
Appellant’s Contentions: - Appellants contended that they were engaged in fabrication of Structures at site for their clients, which amounted to manufacture resulting in emergence of excisable items. But no excise duty was being paid on the same as the same was exempted in terms of Notification No. 67/1995-CE. Thus, it was contended that as their activity was manufacturing of excisable goods, the said activity could not be considered to be a service being provided to their clients so as to make them liable to service tax payment.
Appellant has drawn attention to a recent order passed by the Tribunal in the case of M/s Neo Structo Construction Ltd. being Order No. A/338-339/WZB/AHD/2010, dt. 18.3.10. The Bench, taking note of the Larger Bench decision in the case of M/s Mahindra and Mahindra [2005 (190) ELT 301 (Tri. LB)] has held that the fabrication of structures by the appellant at the site for their principles amounts to emergence of excisable goods.
Respondent’s Contentions: - The fabrication of various goods at site does not amount to manufacture as has been held in various decisions of the Tribunal like in this case of M/s Dodsal Ltd. 2006 (193) ELT 518 (Tri. Mum) = (2005-TIOL-1372-CESTAT-MUM) and others
Reasoning of Judgment: - The Tribunal relied upon the judgment given in the case of M/s Neo Structo Construction Ltd wherein the applicability of the judgment in the case of M/s Dodsal Ltd. was not accepted. Accordingly, it was held therein that as the activity undertaken by the appellant amounts to manufacture in terms of provisions of Section 2(f) of Central Excise Act, no service tax can be levied and demanded on the same. Revenue has also agreed to the ratio of the law declared in the said decision. It was held that the judgment in M/s Neo Structo Pvt. Ltd. fully applies to the facts of the present case. Impugned order set aside.
Decision: - Appeal allowed with consequential relief.
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Case: - Paramount Steel Ltd v/s Commissioner of Customs,
Citation: - 2008 (223) E.L.T. 593 (Tri.
Issue: - When the DEPB licence itself is genuine but has been obtained on fraudulent basis, then the bona fide purchaser of such licence will be entitled to avail the benefits of the licence.
Brief Facts: - M/s. Tiwari Brothers were engaged in export of auto parts, namely, ‘Crank Shafts for High Speed Compressor’. They fraudulently substituted/declared the export item as ‘Timing Shafts for Mercedes Truck’ to avail higher export incentive under the Duty Entitlement Pass Book Scheme. Investigation revealed that the export items have been mis-declared and that appellant has obtained DEPB scrips by making fraudulent representation of shipping bills in order to avail higher DEPB benefit. M/s. Tiwari Brothers has sold the DEPB scrips, so obtained, to various importers to utilize the same for paying the Customs duty against their imports and to avail exemption from Special Additional Duty of Customs. Show cause notice was issued on this basis to the M/s. Tiwari Brothers proposing for recovery of duty and for confiscation as well as for imposition of penalty. Notices were also issued to the purchasers of DEPB licenses proposing imposition of penalty. The Adjudicating Authority held that the goods imported by the DEPB purchasers were liable to confiscation. Recovery of duty from the DEPB purchasers interest due under Section 28AB of the Customs Act, 1962 was ordered. Penalty was also imposed on the DEPB purchasers. However, the Adjudicating Authority refrained from imposing any penalty on DEPB purchasers on the ground that there is nothing on the record to infer that the DEPB purchasers who has purchased the freely transferable DEPB scrips otherwise in a bona fide manner and utilized the same towards debit/exemption from duty, have not colluded with the exporter who obtained the DEPB scrips by fraudulent means. In appeal, the Commissioner (Appeals) upheld the duty demand against the appellants but set aside the redemption fine imposed on the ground that since the goods were cleared for home consumption, the same were not available for confiscation. DEPB purchasers have filed the appeal against the confiscation and levy of duty. Revenue is in appeal against the setting aside of the redemption fine in lieu of confiscation.
Appellant’s Contentions: - Appellant relied upon the judgment of the Punjab and Haryana High Court in the case of CC, Amritsar v. Leader Valves Ltd. [2007 (218) E.L.T. 349 (P&H)], which has been followed in the case of Commissioner of Customs, Amritsar v. Vallabh Design Products [2007 (219) E.L.T. 73 (P&H)]. The Punjab and Haryana High Court has held that if DEPB scrip is issued on the basis of a forged document and is, therefore, cancelled, but the assessee is not a party to the fraud and had purchased the DEPB scrip from the open market in the bona fide belief of its being genuine, then even if at a later stage the DEPB scrip has been found to be fabricated and obtained on the basis of a forged document, the assessee could not be deprived of the benefits legitimately available to them. Accordingly, it was contended that in M/s. ICI India Ltd. v. Commissioner of Customs (Port),
Reasoning of Judgment: - Tribunal held that there is no dispute that M/s. Tiwari Brothers obtained DEPB scrips by fraudulent means, but there is also no dispute that DEPB scrips were not forged documents. The Lower Authorities had held that since DEPB scrips were obtained by fraud, they were void ab initio and no benefit, therefore, could have been availed of by DEPB purchasers. For this purpose, the authorities below had relied upon the decision of the Calcutta High Court in the case of M/s. ICI India Ltd. v. Commissioner of Customs (Port), Calcutta [2005 (184) E.L.T. 339 (Cal.)], wherein it was held that credit is available on the strength of a valid DEPB only, and if the same is forged, it is non est and, therefore, there is no valid DEPB and no credit of duty can be derived thereunder. This judgment has been upheld by the
The Tribunal noted that in the case of CC, Amritsar v. Leader Valves Ltd. and in Commissioner of Customs,
Moreover, Tribunal found that in the present case the situation is akin to the facts in the case of CC, Amritsar v. Leader Valves Ltd. and Commissioner of Customs, Amritsar v. Vallabh Design Products, namely, that the basic document i.e. DEPB itself is not a forged document, but has been obtained by fraud/forgery. In these circumstances, Tribunal held that the decision of the Calcutta High Court in the case of M/s ICI India Ltd. v. Commissioner of Customs (Port), Calcutta, is distinguishable on facts and that the judgments of the Punjab and Haryana High Court in the case of CC, Amritsar v. Leader Valves Ltd. and Commissioner of Customs, Amritsar v. Vallabh Design Products, were squarely applicable to the facts of the present case. Impugned order set aside.
Decision: - Appeal allowed.
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SOY P ITTY on 21 Apr, 2016 wrote:
hitesh on 03 Apr, 2016 wrote:
hitesh on 20 Mar, 2016 wrote:
visuiyer on 09 Mar, 2016 wrote:
hitesh on 06 Mar, 2016 wrote:
hitesh on 29 Feb, 2016 wrote:
Abhimanyu Singh on 08 Feb, 2016 wrote:
CA R P Vijay on 04 Jan, 2016 wrote:
Rahul Singhvi on 04 Jan, 2016 wrote:
O V Srinivasan on 04 Jan, 2016 wrote: