Year: 2015

Facts:
Assessee was a provider of port services and availed credit of duty paid on capital goods during the period F.Y. 2006-07 and 2007-08. Department denied CENVAT credit on the grounds that capital goods were not installed. Department also disputed CENVAT credit of service tax paid by assessee under reverse charge on the ground that service tax paid u/s. 66A of the Act is not specified under Rule 3 of CCR,2004. Adjudicating Authority decided in favour of the assessee. Aggrieved department filed the appeal before the Tribunal.

Held:
The Tribunal held that as per para 8 of CBEC Circular No. B-4/7/2000 TRU dated 03/04/2000 in the case of capital goods, the CENVAT rules do not provide installation of capital goods as a pre-requisite for taking CENVAT credit. The credit can be taken as and when the capital goods are received in the factory. The Tribunal also observed that, in terms of CBEC Circular No. 267/26/2006-CX-8 dated 28-04-2006, condition of installation for availing CENVAT credit on capital goods was effective till 09- 09-2004 and not thereafter. Relying upon the decision of the Bombay High Court in the case of CCE vs. Ispat Industries Ltd. 2012 (275) ELT 79 (Bom) which held that, when the capital goods are lying in the factory for installation and process of erection is being carried out, the requirement that the goods were in the possession and use of the manufacturer in the year in which the balance credit was availed of can be said to have been fulfilled. Thus the credit on capital goods was allowed in the financial year of receipt and balance in subsequent financial year. As regards dispute on CENVAT credit of service tax paid under reverse charge, it was held that due to retrospective amendment under sub rule (1) of Rule 3 of the Finance Act, 2011 service tax paid u/s. 66A was eligible for credit from 18/04/2006. Revenue’s appeal was dismissed accordingly.

Facts:
During the hearing of stay application, the learned counsel for the appellant was not present and adjournment was requested. However, the Tribunal proceeded with the hearing and passed a stay order with the condition of payment of entire service tax with interest along with 50% penalty. Subsequently, the modification application of the appellant also was rejected. Therefore, the present appeal is filed.

Held:
Since the Counsel for the appellant did not remain present, the order was passed without hearing the appellant. Further, while the order rejecting modification application, the Tribunal focused on its limit on jurisdiction in review applications. Therefore, both the orders were passed without having regard to the merits of the case. Accordingly, in view of the above and having regard to the huge quantum of service tax demand ordered to be deposited, the matter was remanded for fresh hearing and stay order.

Facts:
The appellant undertook job work activities in the nature of mixing of soap bits provided by the supplier company and returning the same in 50 kg. or bigger bags as per company’s instruction and multi-piece packing for which they received consideration. The department contended and confirmed the demand considering the activities as business auxiliary service.

Held:
The Tribunal observed that as per section 2(f)(iii) of the CE Act, 1944 ‘manufacture’ includes any process which in relation to the goods specified in the 3rd Schedule involves packing or re-packing of such goods in a unit container or labeling or re-labeling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment to the goods to render the products marketable to the consumer and soaps were covered under Serial No. 40 of the said 3rd Schedule. Therefore, multi-piece packaging would fall under the category of “packing or re-packing of goods” and would be an activity of ‘manufacture’. The department’s contention that soap is already in packed condition and hence manufacture is said to be completed was not accepted by the Tribunal on the ground that, multi-piece packaging is done on the soaps already packed and therefore, it would amount to repacking and accordingly the activity would be covered under the definition of ‘manufacture’ u/s. 2(f)(iii). It was further held that if the soap noodles are sold as such after mixing and packing/re-packing, then the activity undertaken by the appellant would amount to ‘manufacture’. On the other hand, if they are not sold as such, but are subject to further processes, since the goods are moved under Rule 4(5)(a) of the CENVAT Credit Rules, 2004 it will be an intermediary process in the course of manufacture of soaps and since such movements are permitted without payment of excise duty, the question of levy of service tax would not arise at all in terms of Notification No.8/2005-ST dated 01/03/2005. However, since there was no finding in the order except that the appellant did not contest the duty, the matter was remitted back to give specific finding as to why the activity of the appellant did not amount to manufacture and if it does not amount to manufacture, why benefit of Notification No. 8/2005-S.T. cannot be extended.

Facts:
The Appellant received commission from manufacturer of goods for rendering assistance in the marketing of goods, by obtaining orders and also ensuring that the goods are sold at the terms and discounts specified by the manufacturer. The Appellant contended that the activities are taxable under Clearing and Forwarding services.

Held:
The Tribunal observed that in terms of agreement between the parties, the Appellant has to only procure the orders from the stockists and forward them to manufacturers and ensure that the goods are sold at the terms and discounts specified in writing by the manufacturer. For the services so rendered, commission at prescribed percentage on the net sale value was receivable. Therefore, having regard to the terms of agreement and relying upon various cases including Larsen & Toubro Ltd. [2006] 4 STT 231 (New Delhi) the Tribunal held that the Appellant did not deal with the goods at all as is expected in the case of clearing & forwarding Agent and he was liable for service tax as commission agent.

Facts:
The Appellant purchased goods from vendor in India and sold the same to its principal foreign entity abroad at a markup of 3% of the purchase price. The goods were shipped abroad directly by the vendor, however invoices for the same were made on Indian entity and VAT was discharged on the same. The Appellant raised export invoice on the foreign entity and received the export proceeds from their foreign principal as evidenced from the bank realisation certificate and the proceeds were credited to the Appellant’s accounts. However, in the books of accounts the markup in the transaction was reflected as ”commission income”. Department contended that markup of 3% shown as commission is liable to service tax under Business Auxiliary Services provided to Indian vendor.

Held:
After going through the purchase order and sales invoice issued by the Indian vendor and observing that VAT liability was discharged and also noting that the Appellant has issued export invoice to foreign entity and also realised proceeds, the Tribunal held that transaction is that of purchase and sale of goods on principal-to-principal basis and not as agent of anybody else.

Facts:
The appellant regularly filed refund claims under Rule 5 of CENVAT Credit Rules in terms of unutilised credit on input services, used in the output services which were exported. For the disputed period, it did not claim the refund but filed a rebate claim in terms of Notification No.12/2005-ST dated 19/04/2005. A declaration required in terms of the said notification was filed much after the date of export along with condonation of delay for late filing. The rebate claim was rejected on the ground that the declaration was to be filed prior to expiry of one year from the date of export of services.

Held:
The Tribunal held that it is undisputed that conditions prescribed in the said notification have been followed in the present case. However, the procedure was not followed to the extent that declaration was filed after the export of service. It was noted that the contents of the declaration are not such, as cannot be verified from the records maintained. Further, records such as invoice on which input tax credit is availed and records indicating export of services will not reveal any information which is not verifiable later. Having regard to the same and after satisfying itself that the assessee has not claimed CENVAT credit under Rule 5 and the said notification simultaneously, held that the contravention of not following the procedure of filing the declaration is indeed a procedural formality, for contravention of which substantial justice cannot be denied. Accordingly rebate was sanctioned and appeal was allowed.

Facts:
Assessee manufactured capital goods wherein the MS pipes, channels, angles, grinders and bars were used. The Assessee took CENVAT credit on the said items on the premise that certain goods are “capital goods” and certain goods are used as ‘inputs’ for capital goods. Department denied the credit on the ground that these goods are not capital goods and cannot be regarded as inputs as the same were used for construction of the structures and fixtures. The Commissioner (Appeals) decided in favour of the Assessee, aggrieved by which the revenue filed the appeal.

Held:
The Tribunal affirming the Commissioner (Appeals) Order held that it is not disputed that items hereinabove were used by the Assessee in manufacturing of capital goods and hence CENVAT credit cannot be denied. Relying upon CCE vs. India Cements Ltd. 2014 (305) ELT 558 (Mad HC), it was also observed that the Commissioner (Appeals) has given a finding regarding actual use of the impugned goods in the factory premises of the appellant in technical structures of machines/machinery which are capital goods, based on details of their description and actual photographs submitted by the Assessee. Thus, Revenue’s appeal was dismissed.

[Note: In Rajasthan Spinning & Weaving Mills Ltd. 2010 (255) ELT 481 (SC), applying the “user test” the Court held that, CENVAT credit of items used for manufacture of product which is used as integral part (i.e. component) of the capital goods are also regarded as capital goods. However in Vandana Global Ltd. 2010 (253) ELT 440 (Tri-LB) it was held that the foundations and supporting structures can neither be considered as capital goods nor as part or accessory to capital goods. Hence, the items used in fabrication of such supporting structures cannot be regarded as inputs used for manufacture of capital goods. Further relying upon Maruti Suzuki Ltd. 2009 (240) ELT 641 (SC), the Tribunal held that, in the absence of nexus such items cannot be regarded as inputs for final product. However subsequently, the Madras High Court in the case of India Cements Ltd. 2012 (285) ELT 341 held that CENVAT credit is available. Relying on this judgment, the Tribunal in the case of A.P.P. Mills Ltd. case 2013 (291) ELT 585 (Tri-Bang) disapproved Vandana Global (supra). Recently, the Calcutta High Court in stay matter in the case of Suryla Alloy Industries Ltd. vs. UOI 2014(305) ELT 47 (Cal) taking note of the same has granted waiver of pre-deposit to the Assessee. However, with effect from 07/07/2009, ‘inputs’ does not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated Bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods and with effect from 01/03/2011 any goods used for laying of foundation or making of structures for support of capital goods have been excluded from definition of input].

Facts:
Appellant, a registered ser Stay – In the absence of any indication, mere use of the expression,
“inclusive of taxes” in the contract does not mean that tax is
collected from customer.vice provider of Management, Maintenance or Repair Service and Erection, Commissioning and Installation service discharged service tax on service portion of contract. The department demanded service tax on the entire contracted value including value of material, as the rates collected as per the contract were inclusive of all taxes. During adjudication Appellant relied upon Notification No. 45/2010 ST and Notification No.12/2003-ST to contend that, service of distribution of electricity was exempt upto 21-06-2010 and that value of material is not to be added in computation of service tax. Copies of VAT paid documents were duly submitted to justify that service tax is not applicable on the value of material. However, on the single ground of non-disclosure of material value in the ST-3 returns the authority contended that service tax is to be paid on the entire contracted value.

Held:
The Tribunal observed that the rates collected in the contract were inclusive of all taxes and there was nothing in the said contract to suggest that service tax was separately charged by the appellant from their customers. It was held that, the expression “inclusive of taxes” only means that there would be no further rise in the value of the contracts in case any demand stands raised against the service provider by the Revenue. In absence of any indication that service tax stands collected by the appellant from their customers, the above observation of the adjudicating authority cannot be appreciated. As regards, non-inclusion of value of material in discharging service tax, the Tribunal observed that Contract Value clearly reflected value of material and service separately and that copies of the VAT documents showing that VAT stands paid by them in respect of such materials is also on record. It was further held that mere non-mention of the Notification in the ST-3 Returns, does not give a reason to deny the benefit of the same, without otherwise examining the applicability of Notification in question. Since the Notification was applicable, unconditional stay granted.

Facts:
Employees of Appellant incurred travel expenses while providing output service. Invoices issued separately indicated service charges and actual charges for travelling and due service tax was discharged on the service charges. Show Cause Notices were issued demanding service tax on the travelling expenses on the ground that as per section 67 of the Finance Act, 1994, gross amount which is charged for rendering of services which includes travelling expenses should be the value for the purpose of service tax.

Held:
Relying on the decision of the co-ordinate bench of the Tribunal in the case of Reliance Industries Ltd. vs. Commissioner of Central Excises, Rajkot [2008-TIOL- 1106-CESTAT-AHM] which is upheld by the apex Court held that the reimbursable expenditure shall not form part of the value of the taxable service.

Facts:
Inquiries were conducted at the end of various manufacturers and dealers, who submitted that they had issued invoices without delivery of goods. Show Cause Notices were issued denying CENVAT credit as merely invoices were issued. The Appellant contended that they had received the goods through tractor trolley along with invoices which were used in the manufacture of final products and payments were made through account payee cheques. It was submitted that no cross examination was granted and the statements did not name the Appellant.

Held:
It is impractical to require the Appellant to go behind the records maintained by the dealer/manufacturer. No investigation has been conducted, moreover there is no discrepancy in the invoices issued and all payments are made through account payee cheques and therefore the appeal is allowed.

Facts:
The Appeals have been filed after 06-08-2014 against the orders passed prior to the amendment to section 35F of the Central Excise Act, 1944 without making any pre-deposit.

Held:
In terms of the amended provisions of section 35F, the Tribunal is barred from entertaining any appeal unless pre-deposit as mentioned in section 35F is complied with accordingly the appeals are not maintainable and are dismissed.

Note: Readers may note a recent CONTRARY decision of the Kerala High Court in the case of M/s. Muthoot Finance Ltd. [2015-TIOL-632-HC-Kerala-ST] reported in BCAJ-April 2015 issue and the decision of the Andhra Pradesh High Court in the case of M/s. K. Rama Mohanarao & Co [2015-TIOL-511-HC-APCX].

Facts:
Appellant is a 100% export oriented unit (EOU) engaged in export of computer software and Information Technology enabled services. The refund claims filed were rejected by the lower authorities on the ground that the relevant date for calculating the time limit for grant of refund was the date of rendering services and thus the claims were time barred. However, the learned CESTAT accepted the refund claim and the revenue is in appeal.

Held:
The Hon’ble High Court relying on the decision of the Mumbai Tribunal in the case of CCE Pune-I vs. Eaton Industries P. Ltd 2011(22) S.T.R. 223 [2011-TIOL-166- CESTAT-MUM] held that the relevant date for calculating the time limit for grant of refund would be the date of receipt of consideration and not the date of services provided.

Facts:
The appellant paid full pre-deposit belatedly because of fault of former advocate and complied with payment of pre-deposit order belatedly and approached the Tribunal for restoration of appeals. Relying on various judicial pronouncements, the Tribunal dismissed the application on the grounds that it did not have power to entertain appeal in absence of compliance of pre-deposit order. In order to observe substantial justice, the High Court considered the present appeal.

Held:
Hon’ble High Court observed that the reason for non-compliance of order was attributable to the fault of the former advocate and the appellant was pursuing matter diligently from adjudication stage. Therefore, in view of appellant’s bonafides, though order of pre-deposit was complied belatedly, the appeal was allowed and the original appeal was restored before Tribunal to decide the case on merits.

Facts:
The petitioners filed appeal before CESTAT with an application for condonation of delay of 175 days mentioning the reason for delay. The Tribunal rejected the application on the ground that they had not replied to Show Cause Notice nor did the petitioner’s representative participate in adjudication proceedings. When first appeal was filed, there was a delay of 15 days which showed that they had taken issue lightly. In second appeal, there was a delay of 175 days and the affidavit filed with application for condonation of delay was not sworn by the Director or authorised representative and therefore, the application for condonation of delay was rejected. Accordingly, present petition is filed.

Held:
The petitioners had shown sufficient cause for belated filing of appeal and should have been granted an opportunity to present their case on merits before CESTAT . Therefore, it was held that the Tribunal had committed an error. Accordingly, the present petition was allowed along with direction to CESTAT to decide the matter in accordance with law and on merits.

Facts:
The petitioner, a Government of India undertaking made payment of service tax on a non-taxable service inadvertently. Refund claim filed was partly disallowed as it was time barred and partly allowed on the condition of submission of proof to the effect that the liability was not passed on to the consumer.

It was contended that since it is a Government undertaking, the provisions of time limit u/s. 11B of the Central Excise Act, 1944 need not be applied.

The respondents contended that though the activity was not covered under service tax net, vide Circular dated 18- 12-2002, the activity was leviable to service tax. Further, since requisite documentary proof was not submitted and the claim was barred by limitation, the petitioner was not entitled to refund.

Held:
The departmental officials shall differentiate between the ordinary assessee and Government of India undertaking and not pass orders mechanically. When it was asserted that the liability was not passed on to the customer, department could have verified the said fact.

The Circular relied upon by the respondents was already withdrawn by CBEC vide Circular dated 13-05-2004 and they did not act bonafide to the extent that no reference of such withdrawal was made.

Accordingly, the writ petition was allowed and the respondents were directed to refund the amount with interest within four weeks from the date of this decision failing which, the official shall be personally held responsible for contempt of Court.