CESTAT Weekly Round Up

This weekly round-up analytically summarizes the key stories of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reported at taxscan.in, from August 16, 2024 to August 24, 2024.

Customs Penalty not Applicable on CHA’s Employees on Charge of Wrong Availment of Drawback by Exporter: CESTAT PRATIK BHANSALI vs Commissioner of Customs-Kandla CITATION:   2024 TAXSCAN (CESTAT) 674

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has held that penalty under Customs Act, 1962 cannot be imposed on employees of Customs House Agent (CHA) on charge of wrong availability of drawback by the exporter.

The two member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that the appellants are neither the exporter of the goods nor the CHA. The entire case of overvaluation is attributed to exporters and CHA. As far as the allegation of fraudulent claim of duty drawback by overvaluing the goods, the beneficiaries are the exporter. All three appellants have no locus standi to either claim the drawback or receive the drawback.

Service Tax not Payable on Clinical Trial on Drugs Supplied by Foreign Service Recipient: CESTAT Veeda Clinical Research P Limited vs Commissioner of Central Excise & ST CITATION:   2024 TAXSCAN (CESTAT) 675

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has observed that no service tax is payable on the activity of clinical trials on the drugs supplied by the foreign service recipient.

The two member bench of Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member) has observed that the activity of clinical trials on the drugs supplied by the foreign service recipient to the appellant amounts to export of service.

The Bench held that the activity of clinical trial on the drugs supplied by the foreign service recipient to the appellant amounts to export of service, hence, same is not liable to service tax. Further set aside the impugned order and allowed the Appeal. Vipul Khandar appeared on behalf of the appellant and Rajesh R. Kurup appeared on behalf of the appellant.

Transitional Issues: CESTAT allows CENVAT Credit to Rajasthan Housing Board w.r.t. Service Tax Payment M/s Rajasthan Housing Board Appellant Division – 2 vs Commissioner (Appeals) CITATION:   2024 TAXSCAN (CESTAT) 676

The Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has ruled that the Rajasthan Housing Board is entitled to CENVAT credit in relation to transitional issues concerning the payment of service tax.

The tribunal concluded that the Commissioner (Appeals) had completely disregarded the Circular cited by the appellant. While the tribunal acknowledged that the issue appeared to be covered by the Circular, it determined that a more thorough examination of the relevant invoices was necessary. Consequently, the case was remanded back to the original adjudicating authority for a fresh review of the issue in light of the Circular.

Excise Duty not Payable on Manufacturing Goods Produced in SEZ Unit: CESTAT rules in Favour of Reliance Industries Commissioner Appeals – CGST & Central Excise Rajkot vs M/S. RELIANCE INDUSTRIES LTD, UNIT OF RSEZ JAMNAGAR CITATION:   2024 TAXSCAN (CESTAT) 677

In a ruling in favour of Reliance Industries Ltd, the Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has held that Excise Duty is not payable on manufacturing goods produced in the Special Economic Zones (SEZ) unit.

The two member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that since the SEZ unit has been excluded from the levy of the duty of excise, the same exclusion shall apply in respect of the levy of SAED and AED. Since there is no specific mention of the SEZ unit in Sections 147 and 112 of the Finance Act, 2002 and 2018, respectively, and SEZ is excluded from the levy of duty. The tribunal held that the assessee was not liable for payment of SAED, and AED is an SEZ unit. The duties paid are refundable to the respondent along with interest, in accordance with the law.

Difference of Opinion: Judicial Member’s View prevails over that of Technical Member, rules CESTAT M/s. Royal Sundaram General Insurance Company Ltd vs The Commissioner of GST & Central Excise CITATION:   2024 TAXSCAN (CESTAT) 678

The Division Bench of the South Zonal Bench, Chennai, of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) was faced with a unusual scenario wherein the Judicial Member and Technical Member held contradicting opinions in two appeals pertaining to the capacity of the Appellant to avail CENVAT credit.

The High Court of Madras proceeded to set aside the difference of opinion between both members and referred the case back to the Division bench of CESTAT. Taking into account  the guidelines provided by the Hon’ble High Court of Madras, the Division Bench of CESTAT proceeded to set aside the Impugned Orders passed by the Respondent Commissioner while confirming that the order passed by the Judicial Member supersedes that of the Technical Member.

Industrial Imports to be Valued at Transaction Value: CESTAT quashes CVD Demand Citing Lack of MRP Declaration Requirement M/s. Amar Radio Corporation vs Commissioner of Customs CITATION:   2024 TAXSCAN (CESTAT) 679

The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has quashed the demand for Countervailing Duty ( CVD ) on industrial imports, emphasising that such imports should be valued at Transaction Value under Section 4 of the Central Excise Act, rather than at the Maximum Retail Price (MRP).

In result, the two-member bench comprising Mr. P.A. Augustian (Judicial Member) and Mr. Pullela Nageswara Rao (Technical Member) effectively quashed the CVD demand that was based on the erroneous application of Section 4A, providing relief to the importer. The bench brought clarity to the interpretation of excise law concerning the valuation of goods in situations where MRP is not applicable. The bench set aside the CVD demand based on MRP valuation and highlighted the correct application of valuation principles under the Central Excise Act. It ensures that industrial imports, which do not fall within the purview of retail sales, are not unfairly burdened with additional duties based on an incorrect valuation method.

Kopiko Classifiable as Sugar Confectionary: CESTAT INBISCO INDIA PVT LTD vs C.C.E.-Ahmedabad-ii CITATION:   2024 TAXSCAN (CESTAT) 680

In a significant ruling , the Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that ‘Kopiko (cappuccino and espresso varieties)’ contains more than 74% sugar and glucose and is classifiable under heading 1704 which defines sugar confectionery.

The two member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that the product ‘Kopiko’ is described in heading 1704 and the description given in 2101 is more general for the reason that the sugar confectionery is a specific product, whereas the preparations with the basis of extracts, essences, concentrates, or coffee are a more general description that may apply to many products, whereas the sugar confectionery is the description that is for only one product. It was viewed that the description under 1704 is more specific, and the description given in 2101 is more general. The tribunal allowed the assessee’s appeal and held Kopiko is correctly classifiable under 1704 9090 and not under 2101 1200.

No Service Tax Payable on Revenue Sharing Arrangement between Exhibitors & Distributors of Films: CESTAT Meghraj Cinema vs Commissioner of Service Tax CITATION:   2024 TAXSCAN (CESTAT) 681

The Mumbai Bench of Customs, Excise, and Service Tax ( CESTAT ) has held that service Tax is not payable on revenue sharing arrangements between exhibitors and distributors of films.

The two member bench of Justice Dilip Gupta (President) and C. J. Mathew (Technical Member) has observed that the theatre owner screens or exhibits a movie that has been provided by the distributor. Such an exhibition is not a support or assistance activity but is an activity of its own accord. The activity cannot fall under ‘Business Support Service’.

Customs Duty Exemption Allowable on Import Of Floodlight For World Cup and One Day International Matches: CESTAT M/s.Tamilnadu Cricket Association vs The Commissioner of Customs CITATION:   2024 TAXSCAN (CESTAT) 682

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the customs duty exemption is allowable on import of flood lights installed in the stadium for all matches, including the conduct of one-day international matches. It was found that the ad hoc exemption order does not make any distinction between the fact that the World Cup international match is for non-commercial purposes and the conduct of one-day international matches is for commercial purposes.

The two member bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the ad hoc exemption order was issued with certain conditions. The second condition of the order states that the goods shall not be used for commercial purposes. In the present case, the appellant has used the flood light during the conduct of three one-day matches in 1996, 1997, and 1998. The tribunal has held that the department has erroneously assumed that the conduct of one-day international matches is for commercial purposes. The bench viewed that the ad hoc exemption order does not make any distinction between the fact that the World Cup international match is for non-commercial purposes and the conduct of one-day international matches is for commercial purposes. The entire Show Cause Notice has been issued on assumptions and presumptions, which are liable to be quashed and set aside.

FTA Benefit applicable on Import of Clear Float Glass from Malaysia: CESTAT allows BCD Exemption Swastik Glass Traders vs Commissioner of Customs CITATION:   2024 TAXSCAN (CESTAT) 684

In a ruling, the Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the Free Trade Area ( FTA ) benefit is applicable on the import of clear float glass (CFG) from Malaysia, and allowed the Basic Custom Duty (BCD) exemption.

The two member bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the CFG is rightly classifiable under CTH 70051090 as identical imports of CFG were initially assessed provisionally in terms of Section 17 of the Customs Act, 1962. While allowing the appeal, the Tribunal held that Clear Float Glass is more appropriately classifiable under Customs Tariff Heading 7005-1090 of the Customs Tariff Act, 1975, and thus is eligible for exemption of the benefit of the exemption notification.

Interest not Payable for Intervening Period when Sufficient Balance is Maintained in CENVAT Credit Account: CESTAT M/s. TIL Limited vs Commissioner of Service Tax CITATION:   2024 TAXSCAN (CESTAT) 686

The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that interest not payable for intervening period when sufficient balance is maintained in CENVAT Credit Account.

The two member bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) has observed that the appellant had sufficient balance in their CENVAT credit account during the intervening period when they had taken the excess credit. While allowing the appeal, the Tribunal held that since no demand is confirmed against the appellant, penalty is not imposable on the appellant.

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