PJ/Case Laws/2010-11/13
Case Laws
Prepared By:
CA Pradeep Jain,
Parag Ghate, B.Com
Megha Jain and
Sukhvinder Kaur, LLB [FYIC]
Case: - Commr of Cus.,
Citation: - 2010 (255) E.L.T 34 (Kar.)
Issue: - The Judicial Authority is required to assign the reasons for order passed by it.
Brief Facts: - Respondent is a 100% EOU engaged in the manufacture of cotton yarn. They are exporting their product as well as clearing it to Domestic Tariff Area on the basis of the permission given by the Central Government. They were availing benefit of exemption of Notifications in respect of DTA clearances. Revenue alleged that in order to avail the said benefit respondent had suppressed the fact that the cotton used for manufacture was not entirely out of indigenous raw materials and therefore, they have erroneously availed the benefit under Notification dated 1-3-1997 and Notification dated 2-6-1998 while discharging duty on DTA clearances. Show cause notice was issued alleging suppression of facts and proposing to impose penalty under Section 11AC of the CEA, 1944. The Adjudicating Authority confirmed the demand made under Section 11A of the Act and imposed penalty. In appeal, the Commissioner (Appeal) reduced the penalty. Respondent filed further appeal before the Tribunal. The Tribunal set aside the levy of penalty and interest on the ground that the respondent had paid the duty before issuance of the show cause notice. Against this judgement the Revenue is in appeal before the High Court.
Reasoning of Judgment: - High Court held that the Tribunal had not given any reasons for setting aside the penalty and interest. The Tribunal has not discussed the factual aspects of the matter and merely because the respondent had admitted its fault and had paid the duty before issuance of the SCN, the said levy has been set aside without opining as to whether the same could be done under the provisions of the statute or any other provision of law or on the basis of a decision of the Apex court or any other Court. Thus, it was held that order of the Tribunal was vague in the sense that it does not refer to the decisions on which reliance has been placed to set aside the levy of penalty and interest nor any provision of law.
Under the circumstances, High Court remitted the matter to the Tribunal to reconsider the entire issue in the light of the relevant provisions of law and the judgments of the various courts and then come to a conclusion as to whether the respondent is entitled to waiver of penalty and interest. Impugned order set aside.
Decision: - Appeal allowed by way of remand.
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Case: - Commr. of C. Ex.,
Citation: - 2010 (255) ELT 152 (Tri. - Bang)
Issue: - Limitation - demand time barred - exempted goods clearly shown in ER-1 return.
Brief Facts: - Respondents are manufacturing Bulk Drugs and P or P Medicaments. They were availing Cenvat Credit on the inputs used in the manufacture of excisable goods. Department noticed that the respondents had taken Cenvat credit on an input which was used in the manufacture of exempted final product under Notification No. 6/2002-CE, dated 1-3-2002. It was alleged that availment of credit was irregular even though the respondents had reversed an amount equal to the 8% of the value of such exempted goods cleared. It was also noticed that the respondent had cleared spent solvents and chemicals under commercial invoice without payment of duty. Show cause notice was issued to the respondent demanding duty with interest and proposing to impose penalties. The Adjudicating Authority confirmed the demand with interest and also imposed penalties. In appeal, the Commissioner (Appeals) held that as regards the payment on irregularly availed Cenvat Credit, inputs which were used for exempted product, the respondents had no case on merits, but demand was set aside on the point of limitation. As regards the duty liability on the spent solvent, the Commissioner (Appeal) replied upon the decision of the Tribunal and concluded that such products were not manufactured products and they were not excisable and dutiable. Revenue has filed this appeal before the Tribunal.
Appellant’s Contentions: - Revenue submitted that as per provisions of Rule 6 of Cenvat Credit Rules, 2002, respondent was not liable to avail Cenvat Credit on the inputs which were used directly in the manufacture of a final product which was exempted. It is submitted that the Commissioner (Appeal) has not considered the basic fact that the reversal of 8% is only for the clearance of the final products and as such the said information was not found in their periodical returns.
As regards to the demand of duty on the spent solvents, it was submitted that this spent solvent would get covered under definition of ‘manufacture’ as per the Central Excise Rules, 1944.
Respondent’s Contentions: - Respondent submitted that the issue regarding spent solvent, is now settled by various decisions of this Bench and relied upon the recent case of CCE, Hyderabad-III v. Natco Pharma Ltd [2007 (208) E.L.T. 573 (Tribunal-Bang)] and CCE, Hyderabad v. Aurobindo Pharma Ltd. [2006 (200) E.L.T. 236 (Tribunal-Bang)].
As regards the demand of reversal of Cenvat credit, it is submitted that they have been submitting the returns with the Authorities along with detailed statement very clearly indicating that their final product was exempted. It was submitted that the reversal of 8% is indicated for the said final product against the credit availed on inputs as per statement attached to their ER-1.
Reasoning of Judgment: - The Tribunal noted that the findings of Commissioner (Appeals) were not challenged by the respondents. They have not filed any cross objections and the said findings have become final. On merits, the Commissioner (Appeals) has held against the respondent. But on the question of limitation, the impugned order that confirming the demand of reversal of the credit taken on the inputs which were exclusively used in the manufacture of exempted Products was set aside.
The Tribunal perused the copy of the ER-1 form submitted by the respondent and held that the same clearly indicated the description of the final product as exempted and had recorded reversal of 8% of the value of the final products cleared from them. It was for the Revenue to ask further question as to why they had availed credit, when ER-1 return indicates the reversal of 8% of the value of the exempted final products. Having not done, the finding reached by the learned Commissioner (Appeals) on the limitation, is correct and does not suffer from any infirmity.
On the issue that whether the respondents were liable to pay duty on the spent solvents and chemicals which arise during the course of manufacture of bulk drugs in their factory premises, the Tribunal held that there is force in the respondent’s contention that these products did not get manufactured in the factory premises of the respondents, but they arise during the course of manufacture of bulk drugs. The issue is squarely settled by various decisions of the Tribunal. Impugned order is upheld.
Decision: - Appeal rejected.
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Case: - Pawan Exports Pvt. Ltd. v/s Union of
Citation: - 2010 (255) ELT 192 (All.)
Issue: - Textile cess is not applicable on the textile made out of Handloom or power loom industries as per proviso to Section 5A (1) of the Textiles Committee Act, 1963.
Brief Facts: - Petitioner were doing the jobwork of bleaching and dyeing of textile. The Cess Committee Appellate Tribunal held that the petitioner were manufacturers and imposed cess on them. In this regard, reliance was placed on the judgment of the same committee in the case of M/s Chandhok Textiles Exporters (Pvt.) Limited versus The Assessing Officer, Textile Committee. Hence, Petitioner have filed writ petition against the order imposing cess on them.
Reasoning of Judgment: - The High Court considered the judgment of M/s Chandhok Textiles, wherein the Textile Committee Appellate Tribunal had relied upon judgment of M/s Nath Bros. Exim International Ltd. versus UOI & Ors. [AIR 1997
High Court held that petitioner was entitled to the benefit of the proviso to Section 5A(1).
It was further held that even after being subject to bleaching dyeing or any other process the gray cloth, which is finished by the petitioner would not cease to be the outcome of the power loom industry and, therefore, even if the assessee has considered to be a manufacturer of textile by virtue of the judgment of the Apex Court in the case of M/s Ujagar Printings and Others versus Union of India & others [1988 (38) ELT 535 (SC)] then too as a manufacturer of the Power loom Industry, they would be entitled to the benefit of the proviso at that stage of manufacture because there is no bar under the proviso with regard to the stage of manufacture. Impugned order passed by the Comm (A) is not justified in the facts and circumstances of the case and is set aside.
Decision: - Writ petition allowed.
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Case: - Commr. of Central Excise, Panchkula v/s Lekh Raj Narinder Kumar
Citation: - 2010 (19) S.T.R. 274 (Tri.-Del.)
Issue: - Section80 - invocation of – the order should clearly reveal the reason for such immunity.
Brief Facts: - The Adjudicating Authority had imposed penalty on the respondent-assessee under Section 76, 77 and 78 of the Finance Act. In appeal, the Commissioner (Appeal) invoked Section 80 and set aside the penalties imposed on the respondent. Hence, Revenue is in appeal against the impugned order.
Appellant’s Contentions: - Revenue submitted that there was no good reason to invoke Section 80 of the Finance Act, 1994 to waive the penalties imposed on the respondent. When the learned Adjudicating Authority examined the issue, they found that there were deliberate breach of law made by the Respondent for which he had levied penalty under Section 76, 77 and 78 of the Finance Act, 1994. On each count of penalty, appellate order should have been passed without a summary disposal.
Reasoning of Judgment: - The Tribunal examined the adjudication order wherein it was held that the respondent had pleaded that he acted on the wrong advice. It was held that the veracity of such statement was not examined by the Appellate Authority. The Commissioner (Appeal) had not gone into the breach of law made by the respondent under three different sections which are 76, 77 and 78 of the Finance Act, 1994. Every count of breach calls for examination under law. The Appellate order does not disclose the cause for exonerating penalty for each breach. Section 80 of the Finance Act, 1994 has two elements to satisfy before grant of relief under that section. The first elements are that there should be cause to invoke that section. Secondly the cause should be reasonable one. Unless a speaking order is passed to show that the cause stated if any, is baled by good reason, Section 80 does not operate.
In the instant case, it was held that the impugned order was cryptic without bringing out the reasons for invoking that section. If reason is not clearly brought out, that fails to meet the test of reasonableness. Unless the cause is reasonable, the Appellate order is bound to be set aside. Accordingly, the Tribunal remanded the matter to the Appellate Authority to give a reasoned order. Unless the elements of Section 80 is satisfied and also the ratio laid down in Union of
Decision: - Appeal allowed by way of remand.
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Case: - Orion Appliances Ltd v/s Commissioner of Service Tax, Ahmedabad
Citation: - 2010 (19) S.T.R. 205 (Tri.-Ahmd.)
Issue: - The following issues are involved in this case:
1. Whether trading activity can be called a service?
2. Whether Rule 6 of Cenvat Credit Rules, 2002 and Service Tax Credit Rules, 2002 would be applicable when input services are used in respect of trading activity as well as taxable services?
3. If Cenvat Credit Rules and Service Tax Credit Rules are not applicable, the procedure to be followed by the assessee for availing input service tax credit.
Brief Facts: - Appellant is engaged in providing maintenance and repair services and commissioning and installation service of “RO” systems. The appellants were taking credit on advertising, security, courier, telephone and banking services. These services were not entirely used in providing Maintenance and Repair services but also used in trading activity. The appellants were utilizing cenvat credit to discharge the service tax liability. Department alleged that the credit of input services which were used in trading activity also was not available to the appellants for payment of service tax as per Rule 6(3) of the Cenvat Credit Rules, 2004. It was alleged that appellants had wrongly availed/utilized the Cenvat credit. The Lower Authorities were of the view that in view of the provisions of Rule 3 and Rule 6 of Cenvat Credit Rules, the appellant should have maintained separate accounts in respect of respect of input services used for trading activity and other services which are liable to service tax. Demand of cenvat credit so irregularly availed was demanded from the appellant. Hence, appellant is in appeal before the Tribunal.
Appellant’s Contentions: - Appellants submitted that trading activity is not at all a service. According to Rule 6(2) of Cenvat Credit Rules, the appellant is required to maintain separate account only in respect of exempted service and dutiable service. Since trading activity cannot be considered a service at all, the question of maintenance of separate accounts does not arise. Further, it was submitted that services such as advertisement, security, courier, telephone, banking and professional charges are used commonly for trading activity as well as maintenance and repair, commissioning and installation services. It is not correct to say that these services were not required or had not been utilized for trading activity also. Appellants submit that entire credit has been disallowed without taking this aspect into account.
Respondent’s Contentions: - Respondent submitted that the Lower Authorities after verifying the records have come to the conclusion that these services have not been utilized for trading activity. Further, it was submitted that duty demand has been made as per Rule 3 of Service Tax Credit Rules, 2002.
Reasoning of Judgment: - As regards the first issue, The Tribunal held that it is quite clear that since trading activity is nothing but purchase and sales and is covered under Sales tax laws, it may not be appropriate to call it a service. Therefore, trading activity cannot be called a service and therefore it cannot be considered as an exempted service also.
On the second issued, the Tribunal held that sub-rule (3) of Rule 6 provides that where output service provider does not maintain separate account, they have to follow the procedure or avail the option available under that Rule. But this Rule is applicable only when the output service provider is providing services which are chargeable to service tax and as well as exempted services. Similar is the situation of Rule 3 of Service Tax Credit Rules, 2002. Both these rules clearly speak of exempted services. Rule 3 of Service Tax Credit Rules also covers non-taxable services. Since trading activity is not at all a service, it is not correct to apply these provisions.
With regard to third issue, the Tribunal the in such a situation the only correct legal position appears to be that it is for the appellant to choose and segregate the quantum of input service attributable to trading activity and exclude the same from the records maintained for availment of credit. Naturally this cannot be done in advance since it may not be possible to forecast what would be the quantum of trading activity and other activity which is liable to service tax. The only obvious solution which would be legally correct appears to be to ensure that once in a quarter or once in a six months, the quantum of input service tax credit attributed to trading activities according to standard accounting principles is deducted and the balance only is availed for the purpose of payment of service tax of output service. This proposition is not against the law in view of the fact that there are several decisions of various High Courts and also the Tribunal wherein a view has been taken that subsequent reversal of credit amounts to non-availment of credit.
The Tribunal remanded the matter to the Original Adjudicating Authority before whom the appellants are to present the details relating to service tax paid on input services attributable to trading activity and other services separately and after verification if felt necessary, the adjudicating authority shall quantify the amount to be reversed or payable by the appellant.
Decision: - Appeal disposed of accordingly.
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Case: - S.R. Agencies v/s Commissioner of Central Excise,
Citation: - 2010 (19) S.T.R 244 (Tri.-Chennai)
Issue: - Section 11B - Refund beyond one year - barred by limitation.
Brief Facts: - The Adjudicating Authority had held that the appellant were entitled to the benefit of exemption from payment of service tax during the year 2005-06. Accordingly, the appellant had filed refund claim of service tax. The Lower Authorities rejected the claim to be barred by limitation as the claim was preferred beyond the period of one year from the payment of the tax. Hence, appellant is in appeal before the Tribunal.
Reasoning of Judgment: - The Tribunal held that the refund claim is admittedly barred by limitation. It was held that the reliance placed on sub-clause (ec) of Explanation to Section 11B(5) was misplaced for the reason that as the above mentioned sub-clause provides the commencement of the period of limitation in cases where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellant authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction while the benefit of exemption to the assesses was extended by the Assistant Commissioner who is neither appellate authority nor Appellate Tribunal nor Court. Impugned order is upheld.
Decision: - Appeal rejected.
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Case: - M/s Nestle India Ltd v/s Commissioner of Customs, Chennai
Citation: - 2010-TIOL-942-CESTAT-MAD
Issue: - Whether the importer is under obligation to prove that the relationship with the foreign party has not influenced the price of the imported goods?
Brief Facts: - Appellants manufacture instant coffee, milk products, tea and other food preparations. They were importing "Peel Off Ends" (POE) from Nestle
The matter was referred by the Deputy Commissioner to the Special Valuation Branch (SVB). The Deputy Commissioner (SVB) passed Order-in-Original rejecting the appellant's request for assessment on the transaction value and determined the value for Customs purposes under Rule 8 of the Customs Valuation Rules holding that all imports by appellant from Nestle
In appeal, the Commissioner (Appeal) held that addition of 20% without any supporting evidence was not correct and ordered that the Customs value should be determined in accordance with Rule 7A of the Customs Valuation Rules.
Both Revenue and appellant had filed appeal before the Tribunal against the order of the Commissioner (Appeal). The Tribunal remanded the matter to the Commissioner (Appeals) for fresh decision. Appellants are in appeal against the order of the Tribunal.
Appellant’s Contentions: - Appellants contended that the Deputy Commissioner had given a finding of fact equating payment of licence fee to royalty and then holding that no addition on that account is required to be made to the invoice value. This finding was not challenged by them in appeal. But the Commissioner (Appeal) has held that the Original Authority was incorrect to give the said finding. It is contended by the appellant that the Commissioner (Appeals) has gone beyond the scope of the appeal.
It is further argued that although appellant are related to Nestle Brazil, Nestle France and Nestle Netherlands, yet the value at which Nestle Brazil has sold the impugned goods to Nestle India has to be accepted as 'Customs value since the price has not been influenced by the relationship.
It is contended that the price details at which Nestle Brazil is selling identical goods in other countries goes to show that the relationship has not influenced the price. It is also contended that the fees paid by the appellants to the Swiss company is related to coffee manufactured in
Appellant relied upon the following judgments in support of their contention that Rule 9(l)(d) is not attracted when royalty is payable on value of finished goods manufactured in
- Commissioner of Customs, Mumbai v. BASF Strenics Pvt. Ltd [2006 (195) E.L.T. 206 (Tri.-Mumbai)]
- Tata Yazaki Auto Corporation Ltd. v. Commissioner of Customs (Imports), Mumbai [2007 (208) E.L.T. 422 (Tri.-Mumbai)]
- Commissioner of Customs v. Ferodo India Pvt. Ltd [2002 (224) E.L.T. 23 (S.C.)]
- Commissioner of Customs (Port), Chennai v. Toyota Kirioskar Motor P. Ltd [2007(213) E.L.T. 4 (S.C)]
Respondent’s Contentions: - Revenue contended that the Lower Appellate Authority has made elaborate calculations to arrive at the finding that 2.7% is the proportion of the value of the POE in the value of coffee cans on which royalty/licence fee is being paid.
Reasoning of Judgment: - The High Court held that although sales are made by Nestle
The High Court held that appellants are related to Nestle
In appellant’s case, no information is available to indicate that the examination of the circumstances of the sale has been made nor is there any material evidence forth coming from either the appellants or from the department to indicate as to whether the relationship did or did not influence the price. The only evidence that is stated to have been produced by the appellants before the Authorities below is that Nestle Brazil is selling identical goods at similar prices to other Nestle companies in other countries. But since in those instances also the sale is between related persons it cannot be considered as a 'test' value under clause (b) of sub-rule (3) of Rule 4.
The High Court further held that a combined reading of clause (a) and clause (ii) of sub-rule (3) of Rule 4 indicates that the proof of "relationship has not influenced the price" has to be on the importer, otherwise clause (b) would become redundant. Clause (b) provides various ways in which the importer can demonstrate that the declared value closely approximates any of the 'test' values. The importer would be required to so demonstrate only when there is an obligation on him to prove that the relationship has not influenced the price.
It was noted that the appellant’s case was pending finalisation for over a decade or so. It was accordingly found that there is no evidence produced by the Customs Authorities putting the burden on the appellants to prove that the relationship has not influenced the price. It was also held that appellants have provided similar values for sale of identical goods though such sales were not to unrelated buyers but only amongst Nestle subsidiaries in other countries. Accordingly, the order passed by the Commissioner (Appeal) directing assessment under Rule 7A on the basis of 'deductive value' was held to be a more appropriate alternative to valuation on the basis of 'declared value'. The order of the Tribunal adding a portion of licence fee and royalty is not legally sound, as no part of the proceeds of the coffee cans in which the POE has been used has been shown to have accrued to the seller, namely, Nestle
Decision: - Appeal allowed.
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Case: - Commissioner of Central Excise v/s CMC (
Citation: - 2010-TIOL-71-HC-AHM-CX
Issue: - Shortage of goods- normal processing loss- no corroborative evidence or acceptance of clandestine removal- demand dropped.
Factual position - High Court not to entertain unless question of law is involved.
Brief Facts: - Shortage of goods was noticed by the Department on the basis of statutory records pertaining to the period of four years from 1988-89 to 1991-92. On the basis of the said records and on the basis that the difference had been arrived at between the quantity sent and quantity received, show cause notice was issued. The Deputy Commissioner confirmed the demand under proviso to sub-sec. 2 of sec. 11A of the Central Excise Act, 1944 read with Rule 9(2) of Central Excise Rules, 1944. Penalty under Rule 173(1) of the Central Excise Rules, 1944 was also imposed. In appeal, the Commissioner (A) observed that 'in any manufacturing process, losses are bound to occur. The quantum of loss is justified or not is the factor which can determine if there was any mis-declaration. Once it is settled that genuine processing losses will occur, then demand for that cannot be raised. It is only if it is established that losses were unreasonable or mis-declared then demand can be raised.' The Commissioner has further observed that there is no assertion that losses were unreasonable.
The Commissioner (Appeal) was impressed by the explanation tendered that shortage of 4% on receipt of goods is nominal and natural due to natural drying process from the wet condition and packing into small containers. In view of the above, the Commissioner (Appeals) held that though the extended period has been invoked, for calculation reliance has been placed on statutory records. Therefore, he concluded that if statutory records contain correct information, then issue of mis-declaration or intention to evade cannot be raised. Accordingly, impugned order was quashed and set aside.
Revenue filed appeal before the Tribunal. The Tribunal confirmed the order of the Commissioner (Appeals) and held that apart from the statement, there is no other evidence available with the Revenue to show that the goods have been cleared clandestinely. There is also denial of the fact of losses of the goods during the course of manufacture and there is no assertion that the losses claimed by the appellant were unreasonable or mis-declared. The Tribunal, therefore, held that the entire case of the Revenue is based upon the statutory records maintained by the assessee which may not amount to any mis-declaration or intention to evade payment of duty and dismissed the appeal.
Thus, Revenue is in appeal before the High Court raising the following substantial questions:
· Whether the Tribunal committed error in not considering the fact that there is voluntary confessional statement of the director of the company about clandestine removal of goods belonging to the assessee?
· Whether the Tribunal committed an error in ignoring the fact that director of the company in his voluntary confessional statement admitted clearance of goods without accounting for production is binding to the Assessee?
Appellant’s Contentions: - Revenue has relied on the decisions of the Apex Court given in the case of Asstt Collector of Central Excise, Rajamundry v/s Duncan Agro Industries Ltd [2000 (120) ELT 280 (SC)], in Commissioner of Central Excise, Madras v/s Systems & Components Pvt. Ltd [2004 (165) ELT 136 (SC)] and in the case of Commissioner of Customs (Preventive) v. Vijay Dasharath Patel [48(3) GLR 2672].
Reasoning of Judgment: - The High Court held that the judgments relied upon by the appellant were not applicable to the facts of the present case and the ratio laid down therein cannot be applied to the case on hands. Here, there is a concurrent finding of fact by both the Authorities and there is no finding by the Authorities to the effect that the loss occurred was unreasonable and both the Authorities have also verified that the loss claimed by the appellant was based on the records and it would not amount to clandestine removal of goods. Even otherwise, there was no clear admission that the goods were clandestinely removed. Since this being a finding of fact, we are of the view that no substantial question of law arises out of the order of the CESTAT.
Decision: - Appeal summarily dismissed.
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Case: - Dharamsi Morarji Chemical Co Ltd v/s Commissioner of Central Excise, Raigad
Citation: - 2010 (255) ELT 314 (Tri.–Mumbai)
Issue: - CT-3 certificate- Supply to 100% EOU- Goods cleared under bond- no need of Cenvat reversal.
Brief Facts: - Appellants are the manufacturer of Sulphuric Acid on which Basic Excise Duty @ 16% is levied. The said products are regularly supplied for various industrial uses and are cleared on payment of duty under cover of invoice and the monthly returns are also filed. The said sulphuric acid are also used for manufacturing of fertilizers and as a measure of relief to the fertilizer manufacturers, they were allowed to procure the said goods under bond without payment of duty by issuing appropriate CT-3 certificate to the sulphuric acid manufacturers under the provisions of Notification no. 4/2006 dated 1.3.2006. The appellants have supplied the said goods under CT-3 certificate.
Before 20.7.2006, appellants were reversing an amount of 10% of value as per rule 6 of Cenvat Credit Rules, 2004. They realized from the industry sources that the provisions of Rule 6 i.e. reversion of 10% was not required as the sulphuric acid was supplied under CT-3 certificate and cannot be considered at par with exempted goods. Accordingly, they discontinued reversing/paying 10% under rule 6 for supplies to fertilizers manufacturers.
Department issued show cause notice to appellants proposing to recover 10% of the value of sulphuric acid supplied to fertilizer manufacturers against CT-3 certificates. Demand was dropped by the Adjudicating Authority. But in appeal, the Commissioner (A) confirmed the demand and imposed equivalent amount of penalty following the decision of the Supreme Court in the case of Ballarpur Industries Ltd [2007 (215) ELT 489 (SC)]. Aggrieved from the same, appellant has filed appeal before the Tribunal.
Appellant’s Contentions: - Appellant contended that the provisions of Rule 6 of the Cenvat Credit Rules, 2004 is not applicable to the facts of their case as they are not manufacturing two separate products namely dutiable goods and exempted goods to attract the provisions of Rule 6(2) of CCR, 2004. It was further contended that the supply made to fertilizer manufacturers under bond/against CT-3 certificate cannot be considered as exempted goods. To support their contention, they placed reliance on various decisions as under:
· CCE,
· CCE, Mumbai vs. DCW Ltd. [2009 (234) ELT 163 (Tri-Chennai)]
· CCE, VApi vs. Advance Surfactants India Ltd [2008 (88) RLT 275 (CESTAT-Ahmd)]
· Kesoram Rayon vs. CCE, Kolkata-IV [2007 (83) RLT 397(CESTAT-Kol)]
· CE, Jaipur vs. Guljag Industries Ltd. [2008 (86) RLT 133(CESTAT-Del)]
· Aureola Chemicals Ltd. vs. CCE,
Respondent’s Contention: - Revenue contended that appellants were reversing 10% under Rule 6 prior to 20.07.2006 and now they have stopped reversing the 10%. The provisions of Rule 6 were applicable as the appellant had cleared the goods as duty paid as well as the exempted goods to the fertilizer manufacturer who ultimately was not paying any duty on the sulphuric acid and the fertilizer is also exempted goods.
Reasoning of Judgment: - The Tribunal considered the judgments relied upon by the appellant. It was noted that in the case of CCE, Vapi vs. Advance Surfactants India Ltd. [2008 (88) RLT 275 (CESTAT-Ahmd)] it was clearly held that “Sulphuric Acid cleared without payment of duty under Notification no. 4/2006-CE dt. 1.3.2006 is not under exempted goods and is not chargeable to nil rate of duty, 10% of the amount is not payable under Rule 6.
In the case of Kesoram Rayon vs. CCE, Kolkata-IV [2007 (83) RLT 397 (CESTAT-Kol)] wherein the appellants took credit of input for manufacture of Sulphuric Acid, part of which was supplied under Chapter X procedure without payment of duty and the appellant did not maintain separate account and hence the department had demanded 8% of the value of sulphuric Acid is not sustainable and credit on inputs is not tenable in respect of the sulphuric acid supplied duty free under Chapter X procedure.
In the case of CCE, Jaipur vs. Guljag Industries Limited [2008 (86) RLT 133 (CESTAT-Del)] again it was held that goods removed wherein it was held that the Rule 57CC of the said erstwhile Rules is not applicable in respect of clearance under Chapter X procedure, which is neither exempted goods nor chargeable to nil rate of duty.
The Tribunal also examined the judgment given in Ballarpur Industries Ltd on the basis of which the Lower Appellate Authority has passed its order. It was noticed that the Apex Court had held there in that the reversal of Cenvat credit of 10% under Rule 6 is applicable only where a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as any other final product which is exempted from payment of duty or chargeable to nil rate of duty. It was held that however, in the instant case is not same as the final product is the sulphuric acid only and the same is dutiable product it is not an exempted product and the same was cleared to the manufacture of fertilizers under CT-3 Certificate/bond. Thus, it was held that the facts of the Ballarpur Industries case were not applicable to this case. But the ratio laid down by the
Further, Tribunal found that the ratio of the case of Aureola Chemicals Ltd. vs. CCE, Indore [2004 (175) ELT 148 (Tri-Del)] is squarely applicable to this case wherein it was held that the appellants were clearing the Spent Sulphuric Acid under Chapter X procedure to various manufacturers of fertilizers against CT-2 certificates. The obligation is on the receiver of such goods to use the same in a specified industrial process. In case, the goods received under this procedure were not used for specified industrial process, the person who receives the goods is liable to pay the duty hence the goods cleared under Chapter X Procedure are neither exempted nor said to be chargeable to Nil duty, thus duty is not payable under rule 57CC. In this case also, the goods cleared by the appellants against CT-3 bond to the fertilizers manufacturers cannot be termed that the sulphuric acid is exempted product or chargeable to nil rate of duty. Hence the provisions of Rule 6 of CCR, 2004 were not applicable to this case. Accordingly, the appellant was not required to reverse 10% of the value of the goods cleared. Impugned order set aside.
Decision: - Appeal allowed with consequential relief, if any.
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Case: - Dewanchand Ramsaran Corporation v/s CCE & Cus, Dibrugarh
Citation: - 2010 (19) STR 269 (Tri.–Kolkatta)
Issue: - Whether service tax can be demanded on hiring of cranes prior to 16.05.2008 under Business Auxiliary Service?
Brief Facts: - Appellants entered into a contract with M/s ONGC for giving crane on hire. Department contended that the appellants had provided business auxiliary service and therefore, they were liable to pay service tax.
Appellant’s Contentions: - Appellant contended that service tax was levied from 16.05.2008 onwards and supply of tangible goods service had come under the scope of service tax, whereas the prior dispute is for the period 01.07.2003 to 30.04.2006 and hence the demand was not sustainable.
Reasoning of Judgment: - The Tribunal held that the contract was only for hiring of cranes. Prima facie, appellants had strong case in their favour. Accordingly, pre-deposit was waived and stay was granted against recovery of service tax and penalties imposed by Lower Authority.
Decision: - Stay petition allowed.
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