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 February 12^th to 19t^h, 2023.

No Excise Duty can be Charged on Scrap of Pipes Produced for Manufacture of Excisable Goods: CESTAT (M/s Cairn India Limited vs Assistant Commissioner, M/s Cairn India Limited vs Assistant Commissioner , 2023 TAXSCAN (CESTAT) 201)

The Delhi Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has recently held that no excise duty can be charged on scrap of pipes produced for the manufacture of excisable goods.

After considering the contentions of the both parties, the division bench of CESTAT compraising P.V. Subba Rao, Member (Technical) allowed the appeal filed by the appellant/assessee and observed that, pipes did not get consumed and did not get transformed into oil and it was used to manufacture/production of oil. These pipes are capital goods for the production of oil but which are not inputs.

“Moreover, when such pipes need repair or replacing and waste is generated in the process, it was a waste generated during the repair or maintenance of capital goods and not during the process of production of oil or any process incidental or ancillary to it. Hence no excise duty can be charged on the scrap of pipes produced in this manner’, the Bench held.

Relief to Delhi Metro Rail Corporation: CESTAT allows CENVAT Credit on Consulting Engineering Service (Delhi Metro Rail Corporation Ltd. vs Principal Commissioner, 2023 TAXSCAN (CESTAT) 200)

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT) has recently granted Delhi Metro Rail Corporation, a cenvat credit for consult.

With a coram comprising Mr Anil Choudhary, Member (Judicial) and Mr P V Subba Rao, Member (Technical) observed that the appellant has provided taxable output service of engineering consultancy service to other metro projects located in other cities like Hyderabad, Chennai, Pune, Kolkata etc., the Tribunal, while setting aside the demand of disallowance of Cenvat credit of Rs. 6,17,84,781/, held: “once credit has been rightly taken, there is no restriction in the use of such credit for payment of either central excise duty or service tax or any other specified tax liability.”

No Service Tax on Operational Charges provided to Owners of Power Plants: CESTAT (M/s. Operational Energy Group India Pvt. Ltd. vs Commissioner of GST & Central Excise ,2023 TAXSCAN (CESTAT) 194)

In a significant judgement, the Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has recently, held that no service tax on operational charges is provided to owners of power plants.

While the coram comprising of P. Dinesha, Member (Judicial) and Shri M. Ajit Kumar, Member (Technical) observed that the issue of whether service tax is required to be discharged on operational charges by the appellant has already been examined and decided in favour of the appellant in the appellant’s case,  allowing the appeal, the Tribunal held that the assessee is not liable to pay service tax on the operational charges provided by them to the owners of the power plants and the penalty does not arise.

Import of restricted Goods in violation of ITC(HS) Import Policy and Non-Declaration of Correct Value: CESTAT confirms Penalty ,( Aggarwal Traders vs Commissioner of Customs, 2023 TAXSCAN (CESTAT) 195)

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has recently ,confirmed penalty on the ground that there was import of restricted goods in violation of ITC(HS) Import Policy and non-declaration of correct value.
With the Counsel for the appellant submitted that the Commissioner (Appeals) was not justified in upholding the order passed by the Additional Commissioner and that it was not open to the Additional Commissioner to re-determine the assessable value at such a high rate even if the appellant had submitted the letter, the Bench comprising Justice Dilip Gupta, President and Hemambika R Priya, echnical Member observed , “The Additional Commissioner has noted that as the importer had tried to import the restricted goods in violation of the provisions of the ITC(HS) Import Policy and the value had not been correctly declared, the goods were liable to confiscation. There is, therefore, no error in the order.”

CESTAT allows Interest u/s 27(A) of Customs Act at applicable Rate upon Expiry of three months from date of Receipt of Refund application till date on which Refund actually Paid (Commissioner of Customs vs M/s Oswal Woolen Mills Ltd ,2023 TAXSCAN (CESTAT) 196)

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench, has allowed interest under Section 27(A) of the Customs Act, at applicable rate, upon the expiry of three months from date of receipt of refund application, till date on which refund actually paid.

With the Counsel for the Revenue submitting that the order passed by the Commissioner (Appeals), is wrong, in holding that the respondents/assessees are entitled to interest on the refund filed on the initial date of application as per Section 27(A) of the Customs Act, 1962, the Tribunal of SS Garg,  the Judicial Member observed :  “The respondents/assessees are entitled to interest as per Section 27(A) of the Customs Act, 1962 at the applicable rate of interest as prescribed vide notification issued under Section 27(A) from time to time after expiry of three months from the date of receipt of refund application till the date on which the refund has actually been paid.”

No Anti-Dumping Duty on Non-clad or Unclad Aluminium Coils: CESTAT (M/s Hanon Climate Systems India Private Limited vs Commissioner of Customs, 2023 TAXSCAN (CESTAT) 193)

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) of Delhi Bench, has held that no Anti-dumping duty on non-clad or unclad aluminium coils as per the Notification and that the demand of duty is not valid.

With M/s. Hanon Climate Systems India Pvt. Ltd, having  filed an appeal to assail the Order passed by the Commissioner of Customs (Appeals), New Delhi , thereby rejecting the appellant’s appeal and upholding the Assessment Order passed by the Deputy Commissioner,  a Bench comprising of Mr P V Subba Rao, the Member (Technical) and Ms Binu Tamta, the Member (Judicial), while allowing the appeal and holding that the impugned order cannot be sustained, thus  observed: ” The composition of the disputed goods is not in question that they were an alloy of aluminium and so, it cannot be presumed that the alloy had a different composition and clause (vii) nowhere specifies that it excludes alloys of a particular composition.”

No Discrepancy Regarding Stock of Raw Material, Allegation of Availing Irregular CENVAT Credit is not Valid: CESTAT (M/s Sahney Commutators Pvt Ltd vs Commissioner Of Central Tax, 2023 TAXSCAN (CESTAT) 197)

In a significant judgement, the Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT ) has held that the allegation of availing irregular CENVAT Credit is not valid since no discrepancy regarding the stock of raw material.

With Sahney Commutators Pvt Ltd, the appellant submitting that  the material in question ,was returned and that the supplier had charged Rs.46,656/- towards Job charges, a Coram comprising of Shri  P A Augustian, Member (Judicial) observed that there was a slight discrepancy in the description of invoices.

“During the investigation, there is no discrepancy pointed out regarding the stock of raw material maintained by the appellant and the return submitted for the relevant period shows proper transaction of said material as claimed by the appellant. The Tribunal finds no reason to allege that the appellant had availed ineligible CENVAT credit”, allowing the appellant’s appeal, the Tribunal commented.

Extended Period can’t be invoked when Department itself was confused about classification of Activities under various Services: CESTAT (Messrs Darcy Reservoir Consultancy Services P Ltd. vs C.S.T.-Service Tax ,2023 TAXSCAN (CESTAT) 199)

The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has recently, in an appeal filed before it, held that an extended period can’t be invoked when the department itself was confused about classification of activities under various services.

A Coram comprising of Mr Raju, the Member (Technical)  and Mr Somesh Arora,  the Member (Judicial) observed that the department itself had issued Show Cause Notices for the same type of services under various service classifications, while the Tribunal held that the extended period with intent to evade cannot be invoked , since there is confusion in the mind of the Department itself.

CESTAT quashes Penalty under Customs Act on absence of Independent Corroborative Evidence (Shri Amit Ghosh vs Commissioner of Customs (Preventive) ,2023 TAXSCAN (CESTAT) 198)

A Single Member Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench , has recently ,quashed the penalty under Customs Act, on absence of independent corroborative evidence.

With the Tribunal of P K Choudhary,  the Judicial Member , having observed that in the absence of any independent corroborative evidence against the fourth Appellant, a penalty upon him is not imposable, and further that a single penalty under both the clauses (a) & (b) of Section 112 of Customs Act, 1962, is erroneous in law, in as much as both such clauses operates at separate domain altogether, the Tribunal held:

““In view of the above discussions and findings, I set aside the respective penalties as imposed upon the four Appellants herein under Section 112(b) and/or 112(a) & (b) of Customs Act, 1962, under the impugned Order-in-Original as confirmed by the impugned Order-in Appeal”.

Activity of Take away of Food Item not Involve Element of Service, No Service Tax: CESTAT (Haldiram Marketing Pvt. Ltd. vs Commissioner, 2023 TAXSCAN (CESTAT) 192)

The Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) , has in its recent ruling held that the activity of taking away food items does not involve an element of Service and no service tax at all.

With the appellant, Haldiram Marketing Pvt. Ltd, contending that it sells the takeaway food items over the counter whereas, in dining services provided to the customers, food is served on the tables and a host of services have to be provided, a Coram comprising of Justice Dilip Gupta, the President and Mr P V Subba Rao, the Member (Technical) observed that services such as dining facility, washing area, and clearing of the tables after the food has been eaten are, therefore, not involved, and further that the activities of preparation of food and packing thereof by the appellant in the case of takeaway items, are conditions of sale of such food, wherein the customer intends to merely buy such packaged product from the appellant, and not to avail of any restaurant services. 

Thus, relying upon the decision in the case of M/s. Historic Resort Hotels (Pvt.) Ltd. vs. CCE and thereby allowing the appeal of the assessee, the Tribunal finally set aside the order passed by the Commissioner.

Supplying Raw Material as Job Worker does not amount to Manufacture u/s 2(f)(ii) of Excise Act, no Penalty under Excise Rules: CESTAT ( M/s 3M India Ltd. vs Commissioner of Central Excise , 2023 TAXSCAN (CESTAT) 191)

The Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT)has held, that no penalty under Excise Rules since the supplying of raw material as a job worker does not amount to manufacture under section 2(f)(ii) of Excise Act, 1944.

With a Coram comprising of Justice Dilip Gupta, the President, along with Mr C.J Mathew, the Member (Technical) observing that the activity undertaken by the job worker would not amount to manufacture even under the third limb of the Chapter note, and that the process undertaken by the job worker would not amount to manufacture in terms of section 2(f)(ii) of the Excise Act read with note 6 of Chapter 34 or note 10 of Chapter 38 of the Central Excise Tariff, allowing the assessee’s appeal, the Tribunal held :

“The penalties could not have been imposed either upon the employees of the appellant or the employee of the job worker and set aside the impugned order.”

No Excise Duty on Manual Separation of Plastic Scrap: CESTAT (The Commissioner vs M/s R.P. Industries, 2023 TAXSCAN (CESTAT) 189)

The Customs, Excise & Service Tax Appellate Tribunal New Delhi ( CESTAT ), has recently held that no excise duty on Manual separation of Plastic scrap.

The aforesaid decision was made in the case of M/s R.P. Industries, wherein
the coram comprising of the judicial member Mrs Binu Tamta and the technical member Mr P.V.Subba Rao observed that the respondent is neither manufacturing nor is it producing plastic scrap.

“The plastic scrap already exists and the respondent is only separating it manually from the rest of the scrap. Therefore, even if this circular is considered, no central excise duty can be charged and the impugned order is upheld “, dismissing the Revenue’s appeal they held.

Refund Claim wholly Consumed within SEZ cannot be Denied once Service Tax is paid: CESTAT (Vishay Semiconductor India Pvt. Ltd. vs Commissioner of CGST & Central Excise, 2023 TAXSCAN (CESTAT) 188)

The Mumbai Bench of Customs Excise and Service Tax ( CESTAT ) Appellate Tribunal has held that the refund claim wholly consumed within SEZ could not be denied once the service tax had been paid.

With the  single Bench of Ajay Sharma , the Judicial Member, setting aside the impugned order and allowing the appeal , the Bench  observed :

 “I have gone through the SEZ Act, 2005 and its section 26 (i)(e) specifically provides that all services imported into the SEZ to carry out authorised operation in SEZ shall be exempted. Further in terms of section 51 of the SEZ Act, the provisions of the SEZ Act shall have overriding effect over all provisions of any other law for the time being in force and it is settled legal principle that any rule or notification cannot override the Act.”

Department cannot be permitted to take advantage of its own wrong: CESTAT directs Refund of Amount Deposited during Investigation (M/s. B.L. Goel & Company vs Commissioner of Central Excise & Central Goods & Service Tax, 2023 TAXSCAN (CESTAT) 186)

The Delhi Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has directed a refund of the amount deposited during the investigation, holding that the department could not be permitted to take advantage of its own wrong.

With a single Bench of Anil Choudhary, the Judicial Member, setting aside the impugned order and thereby allowing the appeal, while directing to refund the amount along with interest, the Tribunal observed, “The amount remained unadjusted due to the fault of the Department as well as the Designated Committee under the Sabka Vishwas Scheme, who have refused the adjustment of the amount of pre-deposit, stating that the amount is not verifiable. In these circumstances, I hold that this amount remained as the Revenue deposit with the Department and was never adjusted. Further, this amount is not a part of the admitted tax.”

Negligence of CHA resulted in attempt of Fraudulent Export: CESTAT reduces Penalty u/s 114AA to Rs. 2 Lakhs, (PARTHIV V DAVE vs C.C ,2023 TAXSCAN (CESTAT) 187)

The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), has reduced the penalty under section 114AA of the Income Tax Act, 1961, to Rs. 2 Lakh, for the negligence of CHA, resulting in the attempt of fraudulent export.

A Coram comprising of Mr Ramesh Nair, Member (Judicial) observed that though the appellant has acted as CHA ,  it does not show the direct involvement of the appellant in the fraud of export goods when against one invoice,  the exporter asked the appellant CHA to split the consignment and make 8 shipping Bills.

“ That itself is a reason that the appellant should have acted diligently and inquired about the reason for this abnormal act of splitting the consignment into 8 shipping Bills.”, they commented.

“The negligence of the CHA resulted in an attempted fraudulent export by his client. The penaltyof Rs. 5,00,000/- in each section is very harsh and therefore, the same is reduced from 5 lakhs each under Section 114(iii) and Section 114AA of the Income Tax Act, to Rs. 2 Lakhs in each section. “, the Tribunal concluded.

Steamer Agent Assumes full Responsibility on behalf of Person-in charge of Conveyance for Compliance u/s 148 Customs Act: CESTAT (Forbes and Company Limited vs Commissioner of Customs, 2023 TAXSCAN (CESTAT) 185)

The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT),  has observed that Steamer Agent assumes full responsibility on behalf of the person-in charge of conveyance, for compliance under Section 148 of the Customs Act.

“There is no doubt that, in accordance with section 148 of the Customs Act, 1962, the steamer agent, as the appellant herein is, assumes full responsibility on behalf of person-in charge of conveyance for compliance with chapter VI of Customs Act, 1962.”, the Bench comprising Justice Dilip Gupta, President and CJ Mathew, Technical Member observed.

“In such circumstances, the related act of wrong-doing urged by the Learned Authorised Representative has ceased to be and consequently there is no scope for imposition of penalty under section 112 of Customs Act, 1962 on the representative of person-in-charge of conveyance” the Tribunal said.

Relief to Idex India: CESTAT recognises Services to Overseas are Export, eligible for Refund of Cenvat Credit (Idex India Pvt. Ltd. vs Commissioner of CGST, 2023 TAXSCAN (CESTAT) 181)

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT ) has,  while granting relief to Index India, recognised that the services to overseas are export, thus being eligible for a refund of cenvat credit .

The Tribunal of Ajay Sharma, the Judicial Member observed:

 “As a result in the facts of the present case, the Place of Provision has to be determined in terms of Rule 3 of POPS Rules, 2012 and are not covered under Rule 4(a), therefore the services provided by the appellant to its overseas entities clearly qualify to be export and they are eligible for a refund.”

No Penalty u/s 78 when Service Tax Demand was for a period within Limitation: CESTAT (Deep Construction Company vs C.C.E. & S.T.-Rajkot ,2023 TAXSCAN (CESTAT) 182)

In a recent ruling, the Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that penalty under section 78 of the Finance Act, 1994 when Service Tax Demand was for a period within the limitation.

With the  Tribunal partly allowing the appeal, while setting aside the impugned order and remanding the matter to the adjudicating authority to pass a fresh adjudication, a coram comprising of Mr Ramesh Nair, the Member (Judicial) and Mr Raju, the Member (Technical) observed :

“Merely because a penalty under Section 78 has been imposed for the earlier period, no penalty can be imposed for any subsequent period, is a misplaced notion.”

Payment of Excise Duty on Clearances for which demand was raised: CESTAT deletes demand under Rule 6(3)(i) of CCR (Posco Poggenamp Electrical Steel Pvt Limited vs Commissioner of Central Excise & ST, 2023 TAXSCAN (CESTAT) 180)

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has recently, in an appeal filed before it, deleted the demand under Rule 6(3)(i) of Cenvat Credit Rules(CCR), 2004.

Hearing the submissions of the appellant’s counsel, the Tribunal of Ramesh Nair, the Judicial Member observed: “The appellant has paid the excise duty/ Cenvat on the clearances on which the demand was raised in the present case. With these details, there was no difficulty to the Adjudicating Authority as well as the appellate authority to arrive at the conclusion that there is no case of demand under Rule 6(3)(i) of Cenvat Credit Rules, 2004.”

Triumph India Software failed to pay Service Tax demand due to Financial Difficulties: CESTAT Reduces Penalty (M/s. Triumph India Software Services Pvt Ltd vs Commissioner of Central Tax, 2023 TAXSCAN (CESTAT) 190)

The Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), has recently in an appeal filed before it, reduced the penalty of Triumph India Software, since it failed to pay service tax demand due to financial difficulties.

With the appellant submitting that it no longer exists and that the Resolution Professional Mr Venkata Subbarao Kalva was appointed as Official Liquidator, the Coram comprising of Mr P A Augustian, the Member Judicial, after considering the records and submissions, reduced the penalty imposed on the appellant Smt. Usha Mohan, Managing Director of Triumph India Software Services Pvt. Ltd, from Rs. 50,000/- to Rs.10,000/.

No Penalty u/s 76 & 78 of the Finance Act When Assessee paid the entire Service Tax along with Interest: CESTAT (Sos Finance vs C.S.T.-Service Tax, 2023 TAXSCAN (CESTAT) 183)

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) of the Ahmedabad bench, has, in a recent judgement, held that there can be no penalty under sections 76 & 78 of the Finance Act, 1994, when the assessee has paid the entire service tax along with interest.

In light of various judgments, while hearing the contentions of the appellant, the CESTAT coram observed that a penalty under Section 76 cannot be imposed when a penalty under Section 78 is imposed, and that the adjudicating authority, though, had invoked the extended period, but by invoking Section 80, has set aside the penalty because the appellant had admittedly paid the entire service tax along with interest before the issuance of show cause notice.

Thus, allowing the appeal, the Tribunal held:

 “The adjudicating authority has rightly set aside the penalty under Sections 76 & 78 of the Finance Act, 1994 and set aside the impugned order of the Commissioner (Appeals) being not correct.”

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