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 May 27^th to June 2^nd 2023.

Services Provided by Overseas Entity not to be Taxed under Business Support Service in absence of Outsourcing: CESTAT quashes Service Tax Demand M Suresh Company Pvt Ltd vs Commissioner of Service Tax-IV CITATION:   2023 TAXSCAN (CESTAT) 561

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed the service tax demand and observed that the services provided by the overseas entity not to be taxed under Business Support Service in the absence of outsourcing.

A Two-Member Bench of the Tribunal comprising S.K. Mohanty, Member (Judicial) and M.M Parthiban, Member (Technical) observed that “In the present case, since for provision of the value-added services, the appellant had not outsourced services to the overseas entity, it cannot be said that such services provided by the overseas entity should be taxed under the category of Business Support Service. Thus, we are of the considered view that confirmation of the service tax demand in the adjudication order on Business Support Service will not stand in judicial scrutiny.”

Customs Broker responsible for Act of Employee who is Misrepresenting CHB before Customs Authorities: CESTAT Shakelly Venkat Chand vs Commissioner of Customs CITATION:   2023 TAXSCAN (CESTAT) 563

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that the Customs Broker is responsible for the act of an employee who is misrepresenting Customs House Brokerage (CHB) before the Customs Authorities.

A Single-member Bench of the Tribunal comprising AK Jyotishi, Judicial Member observed that “The employee of the Customs Broker in the instant case has in fact noted and admitted that there was some kind of impersonation and that should have alerted him and he should have brought to the notice of the Customs Authority immediately, instead, he remained silent. He is responsible for the actions of his employee also who is misrepresenting the CHB before the Customs Authorities.”

Relief to Steel Authority of India: CESTAT quashes Excise Duty Demand on Differential Value of Stock of Finished or Semi-Finished Goods M/s. STEEL AUTHORITY OF INDIA LTD vs The Commissioner of Central Excise CITATION:   2023 TAXSCAN (CESTAT) 562

In a major relief to the Steel Authority of India, the Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed the excise duty demand on differential value of stock of finished or semi-finished goods.

The Two-Member Bench of the Tribunal comprising Dr DM Misra, Judicial Member and R Bhagya Devi, Technical Member observed that “In the present appeal also even if the shortages are to be accepted, there is no iota of evidence either in the show-cause notices or in the impugned order to prove that these goods were clandestinely removed. By following the ratio of the above judgment and based on the observations as recorded above, the demands are set aside and accordingly, penalty is also set aside.”

Cenvat Credit allowable on Input Services for providing Works Contract Service: CESTAT quashes Service Tax Demand M/s B.L. Kashyap & Sons Ltd vs Commissioner of Service Tax CITATION:   2023 TAXSCAN (CESTAT) 564

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashes service tax demand and observed that cenvat credit is allowable on input services for providing works contract service.

The Two-Judge Bench of the Tribunal comprising Justice Dilip Gupta, President and P Anjani Kumar, Technical Member observed that “We find that it is incorrect on the part of the Adjudicating authority to came to a conclusion that the appellant availed Cenvat credit on the basis of ST-3 returns which shows income under exempted services. It is not the case of the appellant that he has not provided any exempted services.”

CESTAT quashes SCN on Absence of Gist of Allegations for Raising Service Tax Demand on RCM basis M.P. Audyogik Kendra Vikas Nigam (Indore) Ltd. vs Principal Commissioner of Central Goods & Service Tax and Central Excise CITATION:   2023 TAXSCAN (CESTAT) 565

The New Delhi Bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT), quashed a show cause notice (SCN) on absence of gist of allegations for raising service tax demand on Reverse Charge Mechanism (RCM) basis.

“This court takes judicial notice that the demand under service tax on reverse charge mechanism, has to be worked out and calculated transaction wise-wise and invoice-wise. In absence of such exercise, I find that the show cause notice is vague and fit to be held misconceived and mis-directed” the Bench noted.

The Court of Justices Rajiv Shakdher and Girish Kathpalia observed that “In our view, the AO should revisit the issue, and in this regard, also offer a personal hearing to the petitioner and/or his authorised representative. Accordingly, the impugned order passed under Section 148A(d) of the Income Tax Act is set aside.”

No Service Tax leviable on Cost of Spares and Material used for Free Services during Warranty Period: CESTAT M/s. T.A.F.E Access Ltd vs Commissioner of GST & Central Excise CITATION:   2023 TAXSCAN (CESTAT) 567

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that no service tax is leviable on cost of spares and material used for free services during the warranty period.

The Two-Member Bench of the Tribunal comprising Vasa Seshagiri Rao, Technical Member and CS SulekhaBeevi, Judicial Member relied on the judgment in M/s. ABT Ltd. and others Vs. Commissioner of Central Excise, Coimbatore, wherein it was held that “The cost of spare parts cannot be included for purposes of levy of service tax. Such demand of service tax is not justified.”

Relief to Arihant Overseas: CESTAT quashes Demand of Customs Duty Draw Back M/s. Arihant Overseas vs Commissioner of Customs CITATION:   2023 TAXSCAN (CESTAT) 566

In a major relief to M/s. Arihant Overseas, the appellant, the New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed the demand of customs duty-draw back.

A Single Member Bench of the Tribunal comprising Anil Choudhary, Judicial Member observed that “Revenue have not brought on record any evidence of diversion of goods to any third country. I find that admittedly, the goods have been exported by air from India to Russia and thus, chances to diversion to third country is highly impossible, without the goods first reaching Russia.”

Purchase of Raw Materials and Usage of them for Manufacture as Independent Manufacturer: CESTAT quashes Excise Duty Demand M/s.Star Boxes India (P) Ltd. vs The Commissioner of GST & Central Excise CITATION:   2023 TAXSCAN (CESTAT) 569

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench quashed excise duty demand as there was purchase of raw materials and usage of them for manufacture as independent manufacturer.

The Two-Member Bench of the Tribunal comprising M Ajit Kumar, Technical Member and CS SulekhaBeevi, Judicial Member observed that “There is no evidence to support the case of the department. It clearly shows that the appellant has purchased raw materials and used them for manufacture of carton boxes as an independent manufacturer.”

No Exact Date of Receipt of Original Orders in Review Orders: CESTAT dismisses Appeal on being Barred by Limitation Commissioner of Customs (Exports) vs M/s. Sri Saraswathi Saw Mills CITATION:   2023 TAXSCAN (CESTAT) 568

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), dismissed an appeal on being barred by limitation as no exact date of receipt of the original orders was noted in the review orders.

The reviewing authorities at least could have lessened my burden by mentioning the exact date of receipt of the original orders in their review orders. Such an action by the reviewing authorities would have helped me to take a proper and just decision on merits instead of stumbling on the limitation aspect.” The Two-Member Bench of the Tribunal comprising M Ajit Kumar, Technical Member and CS Sulekha Beevi, Judicial Member sustained the order that was passed by the Commissioner.

Non Service Tax Registration Due to Bonafide Belief of Exemption: CESTAT reduces Penalty u/s 77(1)(a) of Finance Act Micro Chip Office Solutions vs Commissioner of Central Excise & ST CITATION:   2023 TAXSCAN (CESTAT) 570

The Chennai Bench of Customs, Excise And Service Tax Appellate Tribunal (CESTAT) held that the penalty imposed under section 77(1)(a) of the Finance Act 1994 for non registration of service tax due to bonafide belief of exemption was reduced to Rs 10,000/-.

The two member bench comprising of P. Dinesha (Judicial) And Vasa Seshagiri Rao (Accountant) held that the imposition of penalty and the amount computed was absolutely legal, for the ends of justice and considering all the facts, the penalty imposed under section 77(1) (a) of the Finance Act, 1994 was limited to Rs. 10,000/- while rejecting the appeal.

Reverse Charge Mechanism not applicable on Service Tax for Banking & other Financial Services: CESTAT Commissioner of GST & Central Excise vs M/s.Vedanta Limited CITATION:   2023 TAXSCAN (CESTAT) 571

The Chennai bench of Customs, Excise And Service Tax Appellate Tribunal(CESTAT) held that the service tax under the head ‘Banking and Other Financial Services’ on the fees paid to foreign banks for the External Commercial borrowings was not applicable under the reverse charge mechanism.

The two member bench comprising of Sulekha Bheevi C.S. (Judicial Member) And M. Ajit Kumar (Technical Member) held that the department had failed to adduce any evidence that the amount was subject to service tax and these banks and financial institutions do not have permanent establishment in India while dismissing the appeal.

Benefit of Refund Claim of Cenvat Credit cannot be Denied for Procedural Lapses: CESTAT Commissioner of Service Tax vs M/s. Ad2Pro Global Creative Solutions Pvt. Ltd CITATION:   2023 TAXSCAN (CESTAT) 572

The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that benefit of a refund claim of Cenvat credit cannot be denied for procedural lapses.

The two-member bench comprising Mr P Dinesha, (Judicial) and Mr Vasa Seshagiri Rao, (Technical) observed that for computation of Net CENVAT Credit, only these credit amounts are considered an actual sanction of refund claims will take some processing time and the assessee would have been found eligible to utilize these credits by that time even otherwise. The CESTAT upheld the order passed by the Commissioner (Appeals) and dismissed the appeal.

CENVAT Credit can be fully utilized for Payment of Service Tax Liability: CESTAT quashes Order against Vodafone M/s. Vodafone Mobile Services Limited vs The Commissioner of Service Tax CITATION:   2023 TAXSCAN (CESTAT) 573

The Chennai Bench of Customs, Excise And Service Tax Appellate Tribunal (CESTAT) held that the CENVAT credit of all the input services and capital goods under rule 6(5) of the CENVAT Credit Rules, 2004 can be fully utilized for the payment of service tax liability.

The two member tribunal bench comprising of Mr. P. Dinesha, Member (Judicial) And Mr. Vasa Seshagiri Rao, Member (Technical) held that the ceiling of 20% of the service tax payable on utilization of credit for payment of service tax should be compared to the utilization of credit other than capital goods credit and service tax credit in respect of input services. The appeal was allowed as the Revenue had not adduced any documentary evidence to justify its allegation of wilful suppression of facts.

Processes of converting Green Tea into Black Tea does not alter Basic Characteristic: CESTAT sets aside Service Tax Demand M/s. Glenworth Estate Limited vs The Commissioner of Central Excise and Service Tax CITATION:   Service Tax Appeal No. 40934 of 2013

The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the processes of converting green tea into black tea do not alter basic characteristics and set aside the Service Tax Demand.

A two-member bench comprising Mr P Dinesh,(Judicial) and Mr Vasa Seshagiri Rao, (Technical) observed that the said Notification does not distinguish between Tea or Green Tea or Black Tea, and it is also well understood that there is no alteration to the essential characteristic of other than, perhaps, making it marketable as either Green Tea or Black Tea. The CESTAT set aside the demand raised against the appellant.

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