Pradeep Jain - Chartered Accountant

PJ/Case Laws/2010-11/18

CASE LAWS

Prepared by:

CA Pradeep Jain,

Parag Ghate, B. Com

Megha Jain and

Sukhvinder Kaur, LLB [FYIC]

Central Excise Section

Case: Commissioner of C. Ex., Chandigarh v/s Vimal Alloys Ltd.

Citation: 2010 (254) ELT 220 (P & H)

Issue: - Whether cenvat credit of oxygen/acetylene gas for the purpose of cutting larger pieces of scrap into smaller pieces used in the furnace for manufacture of steel ingots/steel castings is available?

Brief Facts: - The manufacturer was using oxygen/acetylene gas for the purpose of cutting larger pieces of scrap into smaller pieces. These pieces were used for feeding in the furnace for manufacture of steel ingots/steel castings. The question referred to the High Court was whether credit will be available on the oxygen/acetylene gas.

Reasoning of the Judgment: - The High Court perused the provisions of Rule 57A which said that the manufacturer is entitled to claim Modvat credit on such finished excisable goods as the Central Govt. may notify. The provisions stated in the rule also said that the credit of specified duty under this section shall be allowed on the inputs used in the manufacture of final products as well as on inputs used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not. According to Section 57B, the manufacturer of final products shall be allowed to take credit of the specified duty paid on the inputs used in or in relation to the manufacture of final products, whether directly or indirectly and whether contained in the final products or not, namely, (i) the inputs, which are manufactured and used within the factory of production, but according to section 57B (2), the manufacturer of the final products shall not be allowed to take credit of the duty paid on machines, machinery, equipment, apparatus, tools, appliances or capital goods.

The High Court held that it means that the assessee is entitled to avail the Modvat credit on the inputs/material used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not. The High Court relied upon the judgment given in Commissioner of Central Excise, Bangalore vs. Escorts Mahle Ltd. [2003 (154) ELT 321 (SC)] wherein it was held that the material used in the manufacture of final products would be eligible modvat credit being an input. Reliance was also placed on Collector of C. Ex. Chandigarh v. Bhushan Alloys & Steels Ltd. [2005 (180) E.L.T.23 (P&H)] wherein the question raised was whether Modvat credit in respect of mortar, castable powder, refractory, ramming mass, foundry flux and chemicals is available under Rule 57A of the Central Excise Rules, 1944. It was held that for this credit, the manufacturer can avail the Modvat credit.

On facts, the High Court held that the use of oxygen/acetylene gases in cutting of scrap of Iron & Steel into smaller pieces to be fed into a furnace was a part of integrated process connected with the ultimate production of final products namely steel ingots and other steel castings. It was held that the oxygen/acetylene gases used in cutting of scrap of iron and steel into smaller pieces to be fed into a Furnace cannot be a material, which is used in manufacturer of final products and hence respondent was entitled to claim Modvat credit.

Decision: - Decision was passed in favour of respondent and against the Revenue.

*********

Case: Sudhir Papers Limited v/s Commissioner of C. Ex, Bangalore

Citation: 2010 (18) STR 701 (Tri.–Chennai)

Issue: -Whether a fresh application filed for the old refund claim will be counted from the date of its original submission for considering the time limitation?

Brief Facts: - Appellant filed refund claim for the period from 1.11.2000 to 31.12.2001 and for the subsequent periods. The claim for the first period was originally filed on 29.11.2001 but the same was not accompanied by necessary documents. Upon being pointed out of the said defect, the appellants filed a fresh application, which was beyond the period of limitation prescribed under Section 11B of the Central Excise Act and hence rejected as time-barred. The refund claim for the subsequent period was rejected on the ground of unjust enrichment. The lower Authorities gave finding that the duty burden had been passed on by the appellant to their buyers at the time of clearance of the goods. The fact that the appellant had subsequently issued credit notes to the buyers did not have the effect of removing the bar of unjust enrichment. In this connection, the lower Appellate Authority relied on the Tribunal's Larger Bench decision in S. Kumar’s case [2003 (153) ELT 217 (Tri.–LB)]. Appellant have filed appeal against the order of the Commissioner (Appeal).

Appellant’s Contention: - Appellant contended that the order of Commissioner (Appeals) was prejudicial to the interests of the appellant and was bad and inoperative in law. The Commissioner (Appeal) erred in law and on facts holding that the appellant had collected the excise duty even though it had issued credit notes to the customers for the differential duty. The Commissioner (Appeals) erred in law and on facts in not admitting the ground regarding provisional assessment.

Appellants relied on the decision of the High Court in Addison & Co. Vs. Commissioner [2001 (129) ELT 44 (Mad.)]. It was submitted that in view of the High Court's decision, the Tribunal's Larger Bench decision in Grasim Industries case [2003 (153) ELT 694 (Tri.–LB)] was not binding on this Bench of the Tribunal.

Respondent’s Contention: Revenue submitted that civil appeal was filed against the High Court's judgment in Addison & Co. case and had been admitted by the Supreme Court. It was submitted that this fact was also noted by the Larger Bench in S. Kumar's case and in Grasim Industries case.

Reasoning of the Judgment: - The Tribunal found that the submission regarding filing of appeal before the Supreme Court against the judgment Addison & Co. case was factually correct. Accordingly it was held that in view of the Larger Bench decision, the appellants cannot be considered to have got over the bar of unjust enrichment on the strength of the credit notes issued by them to their buyers after clearance of the goods. The decision of the Lower Appellate Authority to reject their refund claim for the second period on the ground of unjust enrichment is upheld.

With regard to the claim for the period November 2000 to March 2001, the Tribunal noted that the claim was originally filed on 29.11.2001 but was withdrawn subsequently on 27.2.2002 by way of a letter addressed to the Deputy Commissioner. After such withdrawal, no refund claim for the said period was pending with the Department. A fresh claim was filed only on 7.3.2002 and this was clearly beyond the period of limitation prescribed under Section 11B of the Act. This claim cannot be treated as continuation of the original claim inasmuch as the latter was withdrawn. The Tribunal held that had the original application been pending with the Department on the date of filing of fresh claim, the position would have been different. Order of the Lower Appellate Authority is sustained on this first claim also.

Decision: - Appeal dismissed.

*********

Case: Shasun Chemicals & Drugs Ltd. v/s Commr. of C. Ex, Pondy

Citation: 2010 (254) ELT 346 (Tri.–Chennai)

Issue: Will the time limit of the supplementary claim considered from the date of filing the initial claim?

Brief Facts: - Appellants were being sanctioned about 98% rebate of the duty paid on the export of goods in cash and the balance amount was to be taken as credit in the Cenvat account. The claim pertaining to present appeal was filed but only a part of the rebate was given by cash and no credit was given of the balance amount. For the balance amount, the appellants filed supplementary refund claim as was advised by the department. However, the said claims were rejected as being time-barred. Against the rejection of the supplementary claim, appellant are in appeal before the Tribunal.

Reasoning of the Judgment: - The Tribunal held that since the initial claim was made within the time limit prescribed and since the department itself has chose to allow a part of the rebate, the supplementary claim filed by the appellants could not be held to be time barred. Impugned order set aside. The lower Authority directed to sanction refund of the balance amount, if otherwise due by way of credit in the Cenvat Credit account.

Decision: - Appeal allowed.

*********

Case: ESS Kay International v/s Commissioner of Customs, Amritsar

Citation: 2010 (254) E.L.T. 453 (P&H)

Issue: - Whether delay in filing the appeal can be condoned if the manager and the husband are the same person who has suffered from illness?

Brief Facts: - Appellant is a proprietor firm. The affairs of the firm were run by husband of the proprietor in his capacity as Manager. An order was passed against the appellant firm and was received by the appellant on 3-1-2009. An appeal was required to be filed within three months from the date of receipt of a copy of the order. Appeal was not filed on or before 2-4-2009 but was filed on 15-6-2009 after delay of 73 delays. The appellant also filed application for condonation of delay before the Tribunal. Delay in appeal was explained to be caused due to illness of the Manager of the firm, husband of the proprietor for two months from March 2009 to May 2009. It was submitted that the legal and other matters were looked after by Manager.

The Tribunal dismissed the application for condonation of 73 days of delay on the ground that manager was not the only person for filing of appeal. It was pointed out that there was no explanation as to how the appellant was dependent on the Manager wholly and exclusively. Appellant has filed appeal before the High Court.

Reasoning of Judgment: - The High Court held that in the absence of the husband of the proprietor who was looking after the firm, it might have been difficult for the proprietor to institute an appeal. Therefore, there was sufficient ground to condone the delay. In such matter even otherwise, a liberal approach has to be adopted and the matter deserves to be decided on merits. Delay condoned. Impugned order set aside.

Decision: - Appeal allowed.

*********

Case: Commissioner of Central Excise, Jaipur v/s Sesame Foods

Citation: 2010 (254) E.L.T 504 (Tri. Del)

Issue: - Whether the goods which are non-excisable are liable for duty if are cleared from 100% EOU to DTA?

Brief Facts: - The respondent is a 100% EOU and they sold goods in DTA. The goods did not attract any excise duty. Revenue objected to the same. The Adjudicating Authority imposed central excise duty holding that the goods manufactured by the respondent having been sold in DTA were liable to 30% duty. In appeal, the Commissioner (Appeal) set aside the impugned order and granted relief to the respondent. Revenue is therefore in appeal against the said order.

Appellants Contention: - Revenue submitted that when the goods were sold by 100% EOU in domestic area, charging provision under Section 3 of Central Excise Act 1944 is to be read in terms of proviso appearing in sub-clause (ii) of sub-section (1) of Section (3) for levy of duty on such goods. It was contended that if any rate of duty under excise law is not prescribed on such goods, the duty payable shall be equal to aggregate of the duties of Custom which would be leviable on goods produced or manufactured outside India if imported into India. In view of such mandate of the statute, not only the duty becomes payable according to the Tariff Entry of Customs law but also according to the provisions contained in any other law for the time being in force. It was also submitted that even if the goods are not appearing in Central Excise Tariff Act, 1985, those goods are liable to excise duty since manufactured in India.

Respondents Contention: - Respondent contended that when the goods are not liable to excise duty by specific provision of law, which shall not be made liable by any imagination.

Reasoning of Judgment: - The Tribunal examined the interpretation of statute in this case as to the charge of duty. Section 3 of the Central Excise Act, 1944 prescribes the incidence of duty in respect of the goods manufactured and that too, manufactured in India and such manufactured goods being marketable and finding place in the tariff list under Central Excise Tariff Act, 1985 for levy. Courts have tested excisability of goods by two important criteria. Those are manufacture and marketability. While holding so, Courts have also held that mere appearance of the goods manufactured in the Tariff list shall not ipso facto liable to excise duty if that fails to meet the test of marketability. In absence of any other meaning under section 3, the meaning of Section 2(d) is only to be imported to Section 3 for construction. According to Section 2(d), the term “excisable goods” has been defined to mean goods specified in the First Schedule and Second Schedule to the Central Excise Tariff Act, 1985. Once such a definition is imported to the provisio to Section 3(1), in absence of anything contrary, Revenue’s appeal fails. The goods in question not being finding place in Tariff Act, 1985 and nothing being brought to any of the entries therein, the order place in Tariff Act, 1985 and nothing being brought to any of the entries therein, the order passed by the lower Authority is to be upheld. Once the goods is not excisable, these is not question of any leviability taking shelter of Section 3(1)(ii) of the Central Excise Act, 1944.

Decision: - Appeal dismissed.

*********

Case: M/s Stella Rubber Works (Unit II) Vs The Commissioner of Central Excise (Appeals-II), Bangalore

Citation: 2007-TIOL-834-CESTAT-BANG

Issue: - Claim sanctioned to an assessee cannot be appropriated towards other dues which have not been adjudicated in terms of Section 35 of CEA, 1985.

Brief Facts: - Rebate claim sanctioned to the appellant was appropriated towards outstanding arrears of interest due from the appellant. The demand pertained to year 1982 when there was no provision of interest. No show cause notice was issued by the Department nor demands on which the interest amount was required to have been charged was confirmed. Therefore, the appellants contested the issue on the ground that there was no confirmed demand for adjustment of this interest amount in terms of Section 11AA of the Central Excise Act. The lower Authorities did not accept the plea of the appellant. Therefore the appellant is in appeal before the Tribunal.

Appellants Contention: Appellants submitted that an appropriation of amount due to them against pending demands can be done, only if the pending demands have been confirmed by an order under Section 35 of the Act. It was submitted that the Tribunal and higher Authorities have been clearly holding that appropriation of amounts in terms of Section 35F deposits, is also not justified as held in the case of Indian Aluminium Co. Ltd Vs CCE, Cochin [2006 (196) ELT 253 (Tri. Bang.)]. In the case of Executive Engineer, K.S.E.B v/s CCE, Cochin [2002 (139) ELT 364 (Tri.-Bang)], a similar view has been expressed and the adjustment of demands against interest liability was set aside, which had not been determined by any order. In the case of Jay Kay Synthetics Vs. CCE, Chandigarh [2002 (145) ELT 718 (Tri. Del.)], the Tribunal held that the amounts cannot be adjusted towards dues refundable to assessee, when such demands have not been adjudicated by issue of show cause notice. Similar views were expressed in the cases of VBC Industries Ltd. Vs. CCE, Visakhapatnam [2006 (73) RLT 265 (Cestat Bang.)], Sonarome Pvt. Ltd. Vs. CCE, Bangalore [2005 (67) RLT 66], Elgitrend India Ltd. Vs. CCE, Cochin [2001 (133) ELT 172], Madura Coats Pvt. Ltd. Vs CCE, Tirunelveli [2006 (193) ELT 470] and M/s. A. S. Mohammed Kutty Co. Vs. CCE, Cochin [Final Order No. 381/2005 dated 8.3.2005]

Reasoning of Judgment: The Tribunal held that the appellants preferred rebate claim which was sanctioned by the Department and there was no dispute about the appellant being eligible for the said amount. The Tribunal found that the amount of interest due with regard to the belated payment of duty pertaining to the period 1982-1984.The amount of duty was paid although belatedly but the Revenue had not issued any show cause notice demanding interest. Therefore, the rebate claim which is sanctioned cannot be adjusted to an amount which has not been adjudicated in terms of Section 35 of the Act. The reading of Section 11AA discloses that any amount which is due to the Government could be adjusted with amounts to be paid to the assessee, but amount should have been adjudicated and only adjudicated amounts can be adjusted with dues to the appellant. Impugned order set aside.

Decision: - Appeal was allowed with consequential relief.

*********

Service Tax Section

Case: CCE, Chennai v/s M/s Sundaram Clayton Ltd

Citation: 2010–TIOL–1075–CESTAT–MAD

Issue: - Whether Cenvat credit of service tax paid on Employee’s Medical Insurance & Employee’s Personal Accident Insurance admissible to the assessee?

Brief Facts: - The assessee availed Cenvat credit of service tax paid on Employee’s Medical Insurance & Employee’s Personal Accident Insurance. The Commissioner (Appeal) allowed the credit. The Revenue has filed appeal against the order of the commissioner (Appeal).

Reasoning of the Judgment: - The Tribunal relied on the final order no. 1396/2009 dated 07.10.2009 reported at 2010-TIOL-69-CESTAT-MAD passed by the Tribunal. The said order was passed relying on the judgment in the case of Millipore India Ltd. Versus CCE, Bangalore [2009 (13) STR 616] and in CCE, Aurangabad versus Endurance Systems India Pvt. Ltd. [2009 (237) ELT 204]. Accordingly, the impugned order extending the credit was upheld by the Tribunal.

Decision: - Revenue’s appeal rejected.

*********

Case: Mitsui & Co Ltd v/s Commr of C. Ex & ST, Jamshedpur

Citation: 2010 (18) STR 632 (Tri.–Kolkata)

Issue: - Designs and drawings once considered as goods, whether can be said to be service and can be held liable to service tax?

Brief Facts: - Appellant entered into a contract with M/s. Tata Iron & Steel Co. Ltd. (TISCO) for supply of imported designs and drawings, for providing of foreign technician's services for supervision of detailed engineering in India, for manufacture of indigenous equipment, erection, start-up, commissioning, for demonstration of performance guarantee tests and for training at supplier's works for Skin Pass Mill (SPM) for Cold Rolling Mill project for the period from April, 1999 to November, 2001. Revenue raised demand of service tax on the ground that appellant had provided service under the category of consulting engineering service. Demand with interest was confirmed and penalties were also imposed. Appellant has filed this appeal against the impugned order.

Appellant’s Contention: - Appellant submitted that they had entered into a contract for supply of imported designs and drawings, provision of foreign technician's services for supervision of detailed engineering in India, manufacture of indigenous equipment, erection, start-up, commissioning, demonstration of performance guarantee tests and training at supplier's works for Skin Pass Mill (SPM) for Cold Rolling Mill project. The contract price is for supply of imported designs and drawings was fixed. The value of supply of imported designs and drawings were also taken into consideration by calculating the service tax by treating the Appellants as provider of consulting engineering service. At the time of import, bill of entry was filed in respect of design & drawing in question which was duly assessed by the proper officer under the Customs Act. It was contented that as the Customs Authorities treated the import of designs and drawings as goods therefore the value of these cannot be taken into consideration for the purpose of Service Tax. Similarly it was contended that in respect of drawings and designs originating in India as the drawings and designs were goods as per the provisions of Central Excise Tariff and classifiable under Chapter 49.

In respect of Commissioning and Erection services, it was contended that the Commissioning and erection services came under the scope of Service Tax w.e.f. 01.07.2003 and the present period is from April, 1999 to November, 2001 therefore the demand of Service Tax in respect of erection and commissioning is not sustainable. Appellant relied upon the decisions given in CCE, Cochin vs. BPL Telecom Pvt.Ltd. [2007 (5) S.T.R. 349(Tri.-Bang.)], Rana Udyog Pvt.Ltd. vs. CCE-Kol-II [2007 (7) S.T.R. 526 (Tri.-Kolkata)] and Solitz Corporation vs. CCE, New Delhi [2009 (14) S.T.R. 642 (Tri.-Del.)].

Respondent’s Contention: - Revenue contended that the supply of designs and drawings was certainly a service liable for Service Tax under the category of consulting engineering service. It was also submitted that erection and commissioning service comes under the purview of Service Tax w.e.f. 2004. However, the same is to be treated as part of consulting engineering service. Revenue relied upon the decision of Authority of Advance Rulings (Income Tax), New Delhi in the case of G.M.P. International v. Direction of Income Tax [2010-TIOL-03-ARA-IT] and in the case of Nokia (I) Pvt. Ltd. v. CC, Delhi [2006 (1) S.T.R. 233(Tri.-Del.)]. It was contended that the consulting engineering service also includes not only advisory consultative assistance but also implementation of their advice and no distinction can be made between the two. It will also be training of personnel, software support, operation/maintenance etc.

Reasoning of the Judgment: - The Tribunal found that the major portion of the demand was in respect of supply of imported designs and drawings. As per the Appellant the same were considered at the time of import of goods and bill of entry was filed which was duly assessed under the Customs Act. The same pleas were made in respect of the engineering and designs originating in India. The Tribunal found that as the designs and drawings which are part of the contract were treated as goods by the Customs Authorities and were assessed under the Customs Act therefore the finding that the same are service is not sustainable and requires re-consideration. Matter remanded for de-novo adjudication. Impugned order set aside.

Decision: - Appeal allowed by way of remand.

*********

Case: Dina Mahabir Re-Rollers Pvt. Ltd v/s Commissioner of C. Ex., Patna

Citation: 2010 (19) S.T.R. 64 (Tri.-Kolkata)

Issue: - Whether on the basis of having the proof of payment of service tax credit can be taken when no credit availing documents available?

Brief Facts: Assessee was working under Cenvat credit scheme. During the period February, 2006 to September, 2006 appellant availed credit on the strength of RG 23 A Pt. II whereby the amount of service tax was entered vide a single entry. Revenue objected the same and issued show cause notice. The appellant pleaded that the credit was taken on the strength of the debit entry made in the RG 23 A Pt II of the statutory record showing payment of S. Tax. It was contended that the S. Tax was paid through Cenvat Credit register hence on the basis of the entry made in the register, the credit was availed. Cenvat credit so taken was denied on the ground that the same was availed on the strength of the register maintained by the appellant. Penalties were also imposed.

Appellants Contention: - Appellant submits that being a recipient of DTA service, they paid the service tax and the credit was availed on the strength of debit entry made in the statutory record regarding payment of the service tax hence credit was wrongly denied. It is also submitted that there is no dispute regarding payment of service tax and appellant were eligible for taking credit of the service tax paid.

Respondents Contention: - Revenue submitted that as per the provisions of Rule 9 of Cenvat Credit Rules, 2004 challan evidencing payment of service tax by the person liable to pay service tax is valid duty paying document for availing the credit. In the present case the appellant were unable to produce any challan showing payment of service tax through credit was rightly denied.

Reasoning of Judgment: - Tribunal held that as per provisions of Rule 9 CCR, 2004 a challan evidencing payment of service tax by the persons liable to pay S. Tax is a valid duty paying document. The Tribunal held that in the absence of any challan, no verification can be done regarding the service received by the appellant or where the S. Tax was paid regarding the service received by the assessee. In view of the provisions of Rule 9, there is no infirmity in the impugned order in respect of demand of duty.

In respect of the penalty, the contention raised was that provisions of Rule 15 of the Cenvat Credit Rules was invoked and as per sub-rule (3) of Rule 15 of the rules, if any person takes Cenvat Credit in respect of the goods or in contravention of any Provisions of Rule, such person shall be liable to penalty which may extend to an amount to Rs. 2000/-. In these circumstances as in the present case Cenvat Credit in respect to the inputs and service was wrongly availed by the appellant, the appellants were liable to penalty of Rs. 2000/- The penalty imposed in the impugned order is reduced to Rs. 2000/- only.

Decision: - Appeal disposed of accordingly.

*********

Case: The Lakshmi Vilas Bank Ltd v/s Commissioner of Central Excise, Trichy

Citation: 2010 (19) S.T.R. 40 (Tri.-Chennai)

Issue: - Whether cenvat credit of service tax paid on construction of staff quarter is available, treating the same as an input service?

Brief facts: - The appellant took services for construction of staff quarter at Karur. Service Tax paid for construction service was availed as cenvat credit. The department disallowed cenvat credit. The ground taken for such disallowance was that the staff residential quarters cannot be constructed as office relating to bank premises and, therefore, this service cannot be termed as “input service” in terms of Rule 2(l) of the Cenvat Credit Rules. The Appellant therefore filed an appeal before the Tribunal.

Reasoning of Judgment: - The Tribunal held that the definition of “input service” includes “services used in the premises of a provider of output service”. There is no dispute that the staff quarters are the premises of the bank. Therefore, they are covered by the definition of “input service” in Rule 2(l). Therefore, they are entitled to the Cenvat credit of the entire service tax paid. Impugned order set aside.

Decision: - Appeal allowed.

*********

Comments

PJ/Case Laws/2010-11/18

Post a Comment

Query