CESTAT Weekly Round-Up

This weekly round-up analytically summarises the key stories of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reported at taxscan. in, from January 22nd to January 29th, 2023. No Need to Rely on Website and Wikipedia When Test Report Available: CESTAT allows Customs Duty Exemption to Boron Ore(PRADIPKUMAR P PATEL vs C.C.-AHMEDABAD ,2023 TAXSCAN (CESTAT) 158) The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench, comprising of Ramesh Nair, the Judicial Member and Raju, the Technical Member, has recently in an appeal, allowed Customs Duty Exemption to Boron Ore , commenting that there is no need to rely on Website and Wikipedia when Test Report is available. The Coram noted that, from the perusal of the finding of the adjudicating authority, the test report of the product showed the goods to be ‘Boron Ore’, and that the same was obtained after the removal of impurities. However, the adjudicating authority had relied upon Wikipedia and Website for the meaning of ‘Ore’. “In our considered view, when the test reports are available on record, there is no need to go to the website and Wikipedia. Whether the goods will remain as Ore after removal of impurities has been considered in various judgments cited by the appellants” the Tribunal opined. Malafide Intention of Employee cannot be Attributed to Employer: CESTAT deletes Personal Penalty(SANOFI INDIA LIMITED Vs C.C.E. & S.T.- SURAT-II, 2023 TAXSCAN (CESTAT) 155) The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has recently in an appeal, deleted personal penalty and ruled that malafide intention of the employee cannot be attributed to the employer. With the appellant, Sanofi India Limited, submitting that the appellant had reversed the entire credit of common input services used in the manufacture of dutiable as well as exempted goods, and therefore that the demand of 10% of the value of the exempted goods in terms of Rule 6(3) will not sustain, the Coram consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed : “As regard, the personal penalty, firstly the appellant company has reversed the credit accordingly, the demand is not prima facie sustainable. Consequently, since the issue relates to the interpretation of Rule 6 of Cenvat Credit Rules, 2004, malafide intention of the present employee with the appellant cannot be attributed.” No Penalty on Customs Broker for Abatement If Due Diligence was Taken While Verifying KYC of Importer Based on Records Submitted (Shri Hari Prabhu vs Shri M. Thirumalai Thiyagarajan, 2023 TAXSCAN (CESTAT) 159) The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has recently in an appeal filed by Ms. J. Lakshmi and M/s. Southern Clearing & Forwarding Agencies Pvt. Ltd., ruled that, there can be no penalty on the Customs Broker for abatement, if due diligence was taken while verifying KYC of the Importer based on the records submitted. With the Counsel for the appellant contending that the appellant, who was a Customs Broker, did not have any knowledge as to the nature of the goods inside the container, and that the documents were filed on the basis of the information / document given by the importer, he added that when the KYC documents are proper, the penalty imposed on the appellant under sec. 112(a) alleging that appellant has abetted misdeclaration of goods, cannot sustain. Hearing the contentions of the appellant, the Tribunal of Sulekha Beevi CS, the Judicial Member observed: “After appreciating the facts, evidence and following the principle laid down in the above two decisions, I am of the view that the penalty imposed on the appellants alleging abetment, that they have rendered the goods liable for confiscation, is totally unwarranted. The penalty imposed on the appellants require to be set aside.” Notification Allowing Refund for CHA Services Not “Service Specific”: CESTAT grants Refund (LAVIOSA TRIMEX INDUSTRIES PVT LTD vs C.C.E. & S.T, 2023 TAXSCAN (CESTAT) 156) The Ahmedabad Bench of the Customs, Excise add Service Tax Appellate Tribunal (CESTAT), has recently in an appeal, granted refund and observed that notification allowing refund for Custom House Agency (CHA) Services is not “Service Specific”. The lower authorities, in the present case having denied the refund of service tax in terms of the notification No. 17/09-ST ,on the ground that the refund is admissible on CHA Service, whereas the appellant, Laviosa Trimex Industries Pvt Ltd, had received various other services which were other than CHA services, the Coram comprising Ramesh Nair, the Judicial Member and Raju, the Technical Member, observed : “Even if any other service provided by CHA, the refund claim is admissible as per the Notification No. 17/09-ST which allow the refund in respect of services provided by CHA that means even if any service which even does not fall under the CHA Service but the same is provided by CHA, the same will be admissible for refund. In the Notification, it is not service specific but it is a service provider specific, hence any service provided by CHA, the refund is admissible.” “Accordingly, we are of the view that the ground taken by the lower authorities for denying the refund is absolutely against the statutory provision under the Notification No. 17/09-ST, therefore, the appellant is rightly entitled for the refund” the Tribunal noted. Fraudulent Availment of Excise Rebate: CESTAT upholds Penalty (Riyaz Rafiq Padela vs Commissioner of Central Excise & ST, 2023 TAXSCAN (CESTAT) 157) The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has in the appeal of Riyaz Rafiq Padela and Mangaldas K. Patel,upheld the penalty on fraudulent availment of Excise Rebate. Expressing their opinion that “fraud vitiates everything”, the Coram comprising Sanjiv Srivastava, Member (Technical) and Dr. Suvendu Kumar Pati, Member (Judicial) observed : “From the facts as stated in the impugned order we are very clear in our mind that the appellants had conspired and perpetuated the alleged fraud by filing these rebate claims to defraud the exchequer of the amount claimed by them as rebate without payment of any central excise duty and without exporting any goods.” Substantive benefit cannot be denied on procedural grounds: CESTAT quashes time barred SCN (S.L. Polypack Private Limited vs Commissioner of CGST & CX, 2023 TAXSCAN (CESTAT) 154) The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) , has recently while quashing a time barred Show Cause Notice ( SCN ) , observed that substantive benefit cannot be denied on procedural grounds.The aforesaid observation was made by the tribunal in the appeal of ,M/s. S.L. Polypack Private Limited, wherein quashing the SCN ,the Tribunal of PK Choudhary, the Judicial Member observed that “The substantive benefit cannot be denied on procedural grounds and accordingly the impugned orders cannot be sustained.” Cenvat Credit on Inputs cannot be denied because Final Product Attracts ‘Nil’ Rate of Excise Duty (GUJARAT SULPHUR LIMITED vs C.C.E. & S.T, 2023 TAXSCAN (CESTAT) 150) The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), has observed that Cenvat Credit on Inputs cannot be denied because the Final Product attracts ‘Nil’ Rate of Excise Duty. The aforesaid observation was made in the case of Gujarat Sulphur Limited, wherein a Coram consisting of Ramesh Nair, the Judicial Member and Raju, the Technical Member of the Ahmedabad ITAT observed that the appellant had received the duty paid inputs, thereafter processed the same and cleared after processing on payment of duty on the transaction value and , was permitted in terms of Rule 16 of Central Excise Rules 2000, and therefore that the transaction in the present case is squarely covered by the Rule 16 of Rules. Thus,the Tribunal concluded that the cenvat credit on the input received by the appellant for the manufacture of Sulphur Powder, cannot be denied. Cenvat Credit cannot be Reversed when Dutiable Goods became Exempted at Interim Stage: CESTAT Allows Re-Credit (JINDAL PHOTO A DIVISION OF JINDAL POLYFILMS LTD vs C.C.E. & S.T.- VAPI, 2023 TAXSCAN (CESTAT) 149) The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has in an appeal filed by Jindal Photo,allowed re credit on the ground that Cenvat Credit cannot be reversed when Dutiable Goods became Exempted at the Interim Stage. With J. Surti, the Counsel appearing on behalf of the appellant submitting that though the appellant had reversed 5% immediately after the notification No. 33/2011-CE dated 25.06.2011 exempted the product namely ‘Colour Positive Unexposed Cinematographic Film’ ,they had mistakenly reversed 5% of the value of exempted clearances made on 27.06.2011 in terms of Rule 6(3)(i) of Cenvat Credit Rules. “The Circular relied upon by the Authorized Representative shall not be applicable in the facts of the present case as the appellant were required to reverse the cenvat credit in terms of Rule 11(3) of Cenvat Credit Rules, 2004. The Circular applicable only in a case where the assessee availed option of Rule 6(3)(i) at the time when the appellant are manufacturing both the category of goods i.e. dutiable and exempted.” the Tribunal observed. Taxing Statute shall be Strictly Interpreted: CESTAT (McKinsey & Co. vs Commissioner of CGST & Service Tax, 2023 TAXSCAN (CESTAT) 153) With the appellant McKinsey & Co., engaged in providing Management Consultant’s services, filing an appeal before it, the Mumbai Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), has held that the Taxing statutes should be interpreted strictly. The facts of the case being that the appellant had paid excess service tax during the period June, 2012 for the period April to June, 2012 and later on after more than two years adjusted the said excess payment for the period April to June, 2014 by disclosing it in their ST-3 return, the appellant was asked to pay the amount along with interest and penalty. With the Tribunal observing that “A perusal of the Rule 6(4A) would make it clear that the word used is succeeding month or quarter as the case may be”, the single Bench of Ajay Sharma Member (Judicial Member) ,held that the Taxing Statute must be interpreted in the light of what is clearly expressed, and that it could not imply anything which was not expressed nor can it merge provisions in the statute so as to supply any assumed deficiencies. Anti-dumping Duty cannot be Demanded on Propylene Glycol from USA Imported after 08.10.2009 (C.J.Shah & Co. vs C.C.Kandla , 2023 TAXSCAN (CESTAT) 148) The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), has ruled that anti-dumping duty cannot be Demanded on Propylene Glycol from USA Imported after 08.10.2009. With the Bench comprising Ramesh Nair, the Judicial Member and Raju, the Technical Member relying on the appellants own case wherein it was held that no antidumping duty can be levied in view of Notification No. 105/2004- Cus. which was extended vide Notification No. 117/2009-Cus. during the period after 8-9-2009, the Coram held “Accordingly, the demand is not sustainable.” Demand can be made under Undertaking only when DGCA finds that Use of Aircraft not in accordance with permit granted (Bharat Hotels vs Commissioner of Customs (Preventive, 2023 TAXSCAN (CESTAT) 146) The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal has recently in an appeal filed by Bharat Hotels, ruled that demand can be made under Undertaking only when Director General of Civil Aviation (DGCA) finds that the use of aircraft not in accordance with permit granted. With the department claiming that the appellant had used the aircraft for charter purposes only for fifty hours, out of the total 244.9 flown hours and, therefore, that the appellant had violated Condition No. 104 of the exemption notification,the Bench comprising Justice Dilip Gupta, the President and PV Subba Rao, the Technical Member observed that “ A demand can be made under the Undertaking only when DGCA finds that the use of the aircraft is not in accordance with the permit granted by the DGCA. In the present case, DGCA has not initiated any proceedings against the appellant and in fact has renewed the permit from time to time.” Treating Advance Amount as Security Deposit: CESTAT finds No intention to evade Service Tax Payment (Applied Solar Technologies (India) Pvt. Ltd vs The Commissioner, 2023 TAXSCAN (CESTAT) 147) The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has in the case of Applied Solar Technologies (India) Pvt. Ltd,found that there is no intention to evade service tax payment on treating advance amount as security deposit. “There is no error in the finding recorded by the Commissioner in this regard, as indeed the appellant did try to evade payment of service tax by treating the amount as a security deposit when in fact it was clearly an advance, which fact was very specifically mentioned in the Agreement. The intention to evade payment of service tax by suppression of material facts is writ large,” the coram comprising of Justice Dilip Gupta, the President and PV Subba Rao, the Technical Memberadded. No Service Tax on Lindstorm Services India for Leasing of Work-wear (LINDSTORM SERVICES INDIA PVT LTD vs C.C.E. & S.T, 2023 TAXSCAN (CESTAT) 151) The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench comprising Ramesh Nair, Judicial Member and Raju, Technical Member observed that no Service Tax on Lindstorm Services India for Leasing of Work-wear. Relying upon the decision of the Chandigarh Bench wherein it was observed that in terms of agreement, work-wear rented out always remains with the exclusive possession of their clients and nobody else can use those work wear at the same time and hence effective control to lie, with the user / clients, the Ahmedabad Bench observed : “ The appellant, therefore, does not have control over the use of the work-wear.Thus the activity is not in the nature of “service” under the Finance Act, in both during the period prior to negative list regime and thereafter as held in the impugned order”. ICFAI Not liable to Pay Service Tax under Commercial Training or Coaching Service (CFAI BRANCH vs C.C.E. & S.T, 2023 TAXSCAN (CESTAT) 152) The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench ,consisting of Ramesh Nair, the Judicial Member and Raju, the Technical Member, has held that Chartered Financial Analysis of India (ICFAI) is not liable to pay Service Tax under Commercial Training or Coaching Service. The Bench relying upon the appellant’s own branch of Vadodara, reported in 20182018 (8) TMI 556 – CESTAT observed that the provision authorises no grant retrospective exemption or to alter the scope of an extant exemption retrospectively. “Vocational Training Institute as defined by Notification No. 24/2004-S.T., dated 10-9-2004 contains no such restrictive definition which requires affiliation to National Council for Vocational Training or the requirement of offering courses in designated trades as notified under the Apprentices Act, 1961, by an Industrial Training Institute or an Industrial Training Centre,” it noted, thus drawing the conclusion that “the issue is no longer res-integra.” No Restriction under Cenvat Rule on not using prime quality material in Manufacture of Final Product, CENVAT credit cannot be denied (Shakambari Overseas Traders Private Limited vs Commissioner of CGST & CX, 2023 TAXSCAN (CESTAT) 144) The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT), has held that there is no restriction under the Cenvat Rule on not using prime quality material in the manufacture of a final product and hence that CENVAT credit cannot be denied. A Coram comprising of Shri P K Choudhary, Member(Judicial) observed that there is no restriction in the CENVAT Credit Rules that the Appellants should not use the prime quality materials for the manufacture of final products. “As long as there is no dispute regarding the receipt and consumption of the inputs, duty paid character thereof, the benefit of the CENVAT Credit cannot be denied to the Appellant. ” allowing the assessee’s appeal , while setting aside the impugned order, the Tribunal held. Corroborative Evidence to prove Cenvat Credit not taken on Goods: CESTAT invalidates Demand of Duty on Scrap from Maintenance of Plant & Machinery (SUN PHARMACEUTICALS INDUSTRIES LIMITED vs C.C.E. & S.T, 2023 TAXSCAN (CESTAT) 145) The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) , has invalidated the demand of duty on scrap from maintenance of plant & machinery, when corroborative evidence to prove that the Cenvat credit was not taken on goods. Setting aside the impugned order, the Tribunal held that “without any single evidence of taking credit in the SCN, the SCN is bald and the proceedings flowing from the said SCN liable to be quashed on this threshold point itself.” Penalty u/s. 114A imposable only for person who is liable to pay Duty or Interest under section 28 (Vinesh Naresh Chheda vs Commissioner of Customs Counsel ,2023 TAXSCAN (CESTAT) 143) The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), has held that the penalty under section 114A of the Income Tax Act, 1961 ,is imposable only for the person who is liable to pay duty or interest under section 28 of the Income Tax Act,1961. With the Tribunal holding that the imposition of penalty on the appellant under Section 114A of the Income Tax Act to be without the authority of law , and thereby allowing the appellant’s appeal , a Coram comprising of Mr Ajay Sharma, the Member (Judicial), observed that “ the appellant is not the importer but is alleged to be the claimant of the goods and the penalty under Section 114A is liable to be imposed on the person liable to pay duty or interest as determined under section 28 of the Income Tax Act, 1961.” Balance of credit does not lapse under rule 11(3) as it applies only on absolute Exemption notification (Ruia Rayon Pvt Ltd vs C.C.E & S.T, 2023 TAXSCAN (CESTAT) 142) The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), has held that the balance of credit does not lapse under rule 11(3) of the Cenvat Credit Rules, 2004 as it applies only on absolute Exemption notification. Setting aside the impugned order while allowing the assessee’s appeal the Tribunal’s coram, comprising of Mr Ramesh Nair, the Member (Judicial) and Mr Raju, the Member (Technical) observed: “ the notification No. 30/2004-CE is admittedly a conditional one. In terms of the strict provision of Rule 11(3) of Cenvat Credit Rules, 2004, the bar of lapsing of credit is applicable only when the assessee avails the absolute exemption notification. And as the exemption notification No. 30/2004-CE, is a conditional one, the bar of lapsing of credit shall not apply.” Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

CESTAT Weekly Round-Up

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