CESTAT Weekly Round-Up

CESTAT Weekly Round-Up This round-up analytically summarises the key stories related to the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reported at Taxscan.in during December 10 to December 21, 2023

CESTAT Weekly Round-Up This round-up analytically summarises the key stories related to the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reported at Taxscan.in during December 10 to December 21, 2023

Grant of refund benefit not subjected to compliance of provisions of Rule 2(l) of CCR: CESTAT Allows Service Tax Refund Claim M/s Western Union Services India Pvt. Ltd. vs commissioner of GST & Central Excise, Mumbai 2023 TAXSCAN (CESTAT) 1591

The Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) granted the service tax refund claim, affirming that the eligibility for refund benefits was not contingent upon compliance with the provisions of Rule 2(l) of CCR.

The appellant, Western Union Services India Pvt. Ltd., operates in the provision of output services categorized as ‘management or business consultant service,’ ‘business support service,’ and ‘information technology software service.’ These services fall under clauses (r), (zzzq), and (ze) of Section 65(105) of the Finance Act, 1994.

The assessee contested the decision made by the adjudicating authority, which denied the benefit of Rs. 41,93,540 for the period from January 2014 to March 2014. He argued that challenging the refund claim for the credited amount due to the exportation of output services is not permissible, citing Rule 5 of CCR.

The department contended that the complete refund claim was declined because the assessee failed to provide details of Foreign Inward Remittance Certificates (FIRCs).

The two-member bench, consisting of S K Mohanty (Judicial) and Parthiban (Technical), approved the refund claim submitted by the appellant.

Nexus Aspect cannot be Questioned while dealing with Refund Applications filed u/r 5 of CCR: CESTAT M/s Western Union Services India Pvt. Ltd. vs commissioner of GST & Central Excise, Mumbai 2023 TAXSCAN (CESTAT) 1591

The Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) stated that the linkage aspect cannot be challenged when addressing the refund application submitted under Rule 5 of the CENVAT Credit Rules (CCR), 2004.

The appellant, Western Union Services India Pvt. Ltd., operates in the provision of output services falling within the taxable categories of ‘management or business consultant service,’ ‘business support service,’ and ‘information technology software service’ as defined in clauses (r), (zzzq), and (ze) of Section 65(105) of the Finance Act, 1994. The appellant contested the decision of the adjudicating authority, which denied a benefit of Rs. 41,93,540 for the period from January 2014 to March 2014.

The Bench noted that as the utilization of CENVAT credit by the assessee was not contested, the assertion of refund for this credit related to the exportation of output services cannot be challenged, as Rule 5 of CCR does not explicitly mandate the establishment of a nexus or any other requirement for the approval of the refund benefit.

The two-member bench comprising S K Mohanty (Judicial) and M M Parthiban (Technical) held that the nexus aspect cannot be questioned while dealing with the refund applications filed under Rule 5 of CCR.

No bar on taking CENVAT credit of Service Tax Accumulated for period when the Premises was not Registered: CESTAT M/s. Zyfin Capital Private Limited vs Commissioner of CGST & Central Excise 2023 TAXSCAN (CESTAT) 1592

 The Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that there is no restriction on availing the CENVAT Credit of Service Tax accumulated during the period when the premises were not registered.

Zyfin Capital Private Limited, the appellant, engaged in exporting services such as market research analysis and data support, among others, without duty payment. The company has been receiving convertible foreign currency since its initial export in December 2013. The appellant, Zyfin Capital Private Limited, contested the decision of the Commissioner of CGST & Central Excise, who rejected a portion of the assessee’s refund claim.

The Bench observed that the refund of unutilized CENVAT credit in export of services having a purpose to encourage/promote export and earn foreign exchange, a minor procedural infraction would not stand in the way of grant of refund and the assessee was therefore, entitled to get the entire amount of refund claim.

The two-member bench comprising Suvenda Kumar Pati (Judicial) and Anil G Shakkarwar (Technical) held that the assessee was entitled to get the refund with interest applicable as per law and the Department was directed to pay the same within three months of receipt of the order.

Anti-Dumping Duty Imposed Based on Lapsed Excise Notification: Bombay HC Directs to Appeal Before CESTAT Sarla Performance Fibres Ltd vs Union of India 2023 TAXSCAN (HC) 1938

 The Bombay High Court instructed to file an appeal before the Customs Excise Service Tax Appellate Tribunal (CESTAT) challenging the imposition of anti-dumping duty relying on an expired excise notification.

The petitioner argued that the court should invalidate the notifications, a power not vested in the Tribunal. It was asserted that a well-established legal principle is that amendments cannot be made to a lapsed primary notification, as confirmed by the Supreme Court in line with the Delhi High Court’s decision in the case of Kumho Petrochemicals Co. Ltd. vs. Union of India.

A division bench consisting of Justice G S Kulkarni & Justice Jitendra Jain noted that the CESTAT has already taken up the matter. Acknowledging all contentions raised by the petitioner in the challenge, the Court dismissed the petition, granting the petitioner the freedom to present these contentions before the CESTAT or initiate suitable proceedings if necessary.

A division bench of Justice G S Kulkarni & Justice Jitendra Jain observed that the CESTAT has already seized the matter.The Court concluded the case, granting the petitioner the freedom to present these contentions before the CESTAT or file suitable proceedings if necessary.

Salary Secondment/Expat Salary: Chennai CESTAT Bench delivers Split Verdict

M/s.Nissan Motors India Private Limited vs The Commissioner of GST& Central Excise 2023 TAXSCAN (CESTAT) 1593

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) recently issued a divided decision in a case concerning various aspects of salaries paid to expatriates by Indian subsidiaries of multinational corporations (MNCs)


Top of Form

The division bench comprising Sulaikha Beevi and Accountant Member M Ajit Kumar gave a split decision. The point of difference was related to

(1) whether the portion of salary/emoluments disbursed by the appellant to secondees in India in Indian Rupees constitute consideration under Section 67 of the Finance Act, 1994 for the services of MRSA provided by Nissan Japan to the appellant? (2) Will payments of a portion of the salary to secondees in Indian currency be included in the ‘gross amount charged’ for determining the taxable value?

The case, centered around Nissan Motors India, presented a unique scenario where a portion of the emoluments was paid by the foreign company, while the remainder was directly disbursed by the Indian entity to overseas employees on deputation to India. The judicial member asserted that salaries and allowances paid directly by the Indian taxpayer to secondees should not be subject to taxation. Conversely, the technical member argued that such payments should be included in the taxable value.

However, the recent Chennai CESTAT case differs from NOS, as it involves a division of emoluments between the foreign and Indian companies. The tribunal’s focus was on valuation and determining the taxable value, not the overall taxability of the transaction. In response to the escalating situation, the Central Board of Indirect Taxes and Customs (CBIC) has urged field officers not to uniformly treat expatriate salaries from Indian subsidiaries of MNCs, differentiating them from the NOS case. This directive aims to temper the enforcement measures taken by authorities.

Companies affected by these developments, such as BMW India, Mitsubishi Electric India, Metal One Corporation, Alstom Transport India, United Breweries, and Kanematsu India, have sought relief from high courts and obtained interim protection against coercive actions by tax authorities.

Sub Contractor is Liable to Pay Service Tax Even If Main Contractor Has Discharged Service Tax on Contract Value: CESTAT Akash Engineering Services vs Commissioner of Central Tax Visakhapatnam 2023 TAXSCAN (CESTAT) 1595

 The Hyderabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) noted that the subcontractor is responsible for paying service tax, even if the main contractor has already settled the service tax on the contract value.

The appellant, Akash Engineering Services argued that once the tax has been already levied by the main contractor, it should not be subjected to taxation again in the hands of the subcontractor. This is because the services provided, whether related to the work assigned to the subcontractor or carried out by the Principal Contractor, constitute a single transaction.

Revenue contended that in a Works Contract Services transaction, the transfer of property in goods occurs directly to the customer through the theory of accretion, as recognized in the mentioned judgment. The property in the goods does not transfer to the main contractor at any point during the execution of work by the subcontractor. The subcontractor acts merely as an agent of the main contractor, and the property in the goods directly passes from the subcontractor to the customer. Therefore, there can only be one sale, which is a deemed sale.

A Single Bench of CS Sulekha Beevi, Judicial Member agreed with the view taken by Member (Technical) and held that the Appellant is liable to pay service tax on the value of sub-contract/work done in spite of the fact that the main contractor has discharged the service tax on the whole contract value.

CESTAT upholds Refund Sanction Order as Order for Amendment in Bills of Entry had Attained Finality Principal Commissioner of Customs VS M/s Lava International Limited 2023 TAXSCAN (CESTAT) 1594

The Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) affirmed the decision that approved a refund when the order for amending bills of entry had become final.

M/s Lava International Limited imported mobile phones with accessories and filed 447 Bills of Entry from May to July 2014. The goods were self-assessed under Section 17, classified under CTH 85171290, and Additional Customs Duty (CVD) at 6%/12.50% was duly paid. However, the importer did not claim exemption under Sl. No. 263A.

The respondent, M/s Lava International Ltd, referred to the SRF Ltd. case, where the Supreme Court ruled in favor of importers. Following this judgment, the respondent requested the re-assessment of Bills of Entry, a process that concluded in 2018 and was accepted by Customs authorities. Four refund applications were subsequently approved. The counsel stressed the resolution of a similar issue in favor of the respondent, asserting the rightful refund claim in accordance with Customs Act provisions and the ITC Limited decision. Emphasis was placed on the significance of self-assessment and the applicable provisions for modification and refund.

Revenue raised objections to the re-assessment of self-assessed Bills of Entry from 2014, conducted in 2018. The officer later termed it an “amendment under Section 149,” contradicting refund sanctions. The representative argued that the manual re-assessment lacked proper approval and violated Board instructions.

The two member bench of the tribunal comprising Binu Tamta (Judicial) Member and Hemambika R. Priya (Technical) Member concluded that the aforementioned order of the tribunal had reached its conclusive stage and in result, the appeals filed by the revenue were dismissed.

CESTAT has no Jurisdiction on appeals against Orders of Commissioner(Appeals) on Duty Drawback: Delhi HC quashes Refund Order and remands matter COMMISSIONER OF CUSTOMS vs M/S SANS FRONTIERS 2023 TAXSCAN (HC) 1982

 The Delhi High Court has ruled that the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) do not have jurisdiction to entertain cases challenging orders of the Commissioner of Appeals regarding the payment of Duty Drawback.

The appellant, M’s Sans Frontiers challenged the notice dated 06.07.2021 (hereinafter referred to as ‘the impugned notice’) issued under Section 128A(3) of the Customs Act, 1962 (hereinafter referred to as ‘the Customs Act’). The notice called upon the Firm to provide reasons why the refund order dated 10.02.2020, issued by the Deputy Commissioner (Drawback), ACC Export Commissionerate, should not be annulled, or any other suitable order be passed by the Appellate Authority. The refund of the Duty Drawback was granted based on the order dated 02.11.2018 issued by the Customs Excise and Service Tax Appellate Tribunal (hereinafter referred to as ‘the CESTAT’).

Revenue asserted that this action was conducted erroneously, contending that the CESTAT lacked jurisdiction to entertain any appeal related to Duty Drawback. According to Revenue, the CESTAT’s order is non-existent, and consequently, the funds refunded to the Firm need to be recovered.

The Commissioner (Appeals) noted that Duty Drawback was not permissible on goods exported by the Firm, being a 100% EOU, as per proviso 2 to Rule 3 of the Drawback Rules. The Firm challenged the order dated 14.05.2018 passed by the Commissioner (Appeals) before the CESTAT, specifically contesting the penalty imposed. The Firm argued that the Commissioner (Appeals) had acknowledged the voluntary deposit of the wrongly availed Duty Drawback, leading to a reduction in the penalty from ₹15,00,000/- to ₹5,00,000/-.

Additionally, Revenue contended that issuing a second show cause notice on the same subject matter contradicts a well-established principle. Before the impugned show cause notice, the concerned authority had issued a Demand-cum-Recovery letter dated 12.03.2014 on the same issue.

In response, the Division Bench of Justice Amit Mahajan and Justice Vibhu Bakhru concluded that the appeal filed by the Firm before the CESTAT was not maintainable, rendering the Tribunal’s order void ab initio.

Relief to Hero Cycle: CESTAT rules No Automobile Cess to be Paid on E-Bike when already paid at Time of Import Hero Cycle Ltd vs Commissioner of CGST, Ludhiana

2023 TAXSCAN (CESTAT) 1597

 A decision by a Single Member Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), presided over by SS Garg, Judicial Member, clarified that if automobile cess has already been paid at the time of import, no additional payment is required for e-bikes.

The current appeal challenges the contested decision issued by the Commissioner (Appeals), wherein the demand for Automobile Cess was upheld based on the grounds of value addition. However, it was acknowledged that a reevaluation of the Automobile Cess on value addition is necessary, prompting a requirement for a fresh computation. Notably, no penalties or interest were imposed on the appellant.

The accusation against the appellant revolves around their alleged failure to submit the mandatory return in the specified format under the Automobile Cess Rules, 1984. Additionally, it is claimed that the appellant intentionally concealed information regarding the production, clearance, and value of E-Bikes from the department to evade the payment of automobile cess.

The E-Bikes were chargeable to duty as per section 4 of Central Excise Act and E-Bike parts on MRP basis as per section 4A of Central Excise Act. A show cause notice dated 19.11.2010 was issued to the appellant alleging that appellant imported E-Bike parts and E-Bikes in CKD condition. The E-Bike were granted full exemption from payment of duty

The  appellant argued that the appellant at the time of import of E-bike in CKD condition paid the automobile cess and there is no need to pay the automobile cess again because E-bike imported in CKD condition after assembling cleared without payment of Central Excise duty as goods imported and cleared from the factory premises falling under same sub-heading and the processes undertaken does not amount to manufacture as per Section 2(f) of Central Excise Act being no new/distinct product came into existence.

Brand Promotion Services: CESTAT quashes Service Tax Demand against Cricketer R. Ashwin R. Ashwin vs The Commissioner of GST & Central Excise 2023 TAXSCAN (CESTAT) 1598

 The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) dismissed the service tax demand related to brand promotion services.

The appellant was entitled to receive the player fee and various benefits as outlined in Schedule I of the Agreement. Alongside the player fees, an additional 10% of the player fee was allocated to the appellant for engaging in promotional activities on behalf of M/s.ICL and its affiliates, sponsors, etc. Despite the payment being categorized into player fee and promotional activity compensation, the entire remuneration appeared to be of a composite nature.

Revenue asserted that the amount paid to the appellant constituted consideration for the brand promotion services provided to M/s.ICL. According to the department’s perspective, this activity falls within the definition of service under Section 65B (44) of the Finance Act, 1994, effective from July 1, 2012. A show cause notice was issued covering the period from July 2012 to March 2014, proposing the imposition of service tax on the amounts received by the appellant from M/s.ICL, along with interest and penalties.

A Two-Member Bench of the Tribunal comprising Vasa Seshagiri Rao, Technical Member and CS Sulekha Beevi, Judicial Member held that “The Tribunal held that the relationship between the cricket player and the franchisee is that of an employer-employee relationship.

No Mens Rea in Tax matters as Non-compliance with Statutory Provisions is Sufficient: CESTAT confirms Seizure of Unaccounted Gutka M/s. Shreeraj Panmasala Pvt. Ltd. vs Commissioner of Central Goods & Service Tax and Central Excise CITATION:   2023 TAXSCAN (CESTAT) 1599

 The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) upheld the seizure of unaccounted gutka, stating that in tax matters, mens rea is not necessary as non-compliance with statutory provisions is adequate.

The main contention of the appellant is violation of the provisions of section 9D of the Central Excise Act, 1944, leading to non-compliance of the principles of natural justice. He relied on the Circular No. 1053/2/2017 – CX, dated 10.3.2017 to say that where a statement is relied upon in the adjudication proceedings, it would be required to be established through the process of cross examination, if the noticee makes a request for cross examination of the person whose statement is relied upon in the show cause notice.

The Revenue on the other hand has supported the findings arrived at by the authorities below and relied on several judgements to say that if the party alleges absence of cross examination of the statements, they need to show what prejudice has been caused and there is no absolute right of cross examination.

A Single Member Bench of the Tribunal comprising Binu Tamta, Judicial Member observed that the impugned order holding that the excise duty amounting to Rs. 21,48,030/ is recoverable in terms of proviso to section 11A(1) along with interest under section 11AB and penalty under section 11AC of the Act.

Availment of Cenvat Credit of Service Tax paid on Charges of Freight for transportation on Gas: CESTAT orders Fresh Adjudication Gujarat Gas Ltd vs C.C.E. & S.T.-Ahmedabad-iii 2023 TAXSCAN (CESTAT) 1600

 The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) directed a new adjudication concerning the utilization of cenvat credit for service tax paid on transportation charges for gas.

The issue involved in the present case is that whether the appellant is eligible to avail the Cenvat Credit of Service Tax paid on the charges of Freight for transportation on Gas from their mother station to daughter station from where the sale takes place.

The appellant at the outset pointed out that the Tribunal had remanded the matter to the Adjudicating Authority to re-examine the matter in the light of the Board Circular No. F/116/23/2018-CX-3 dated 08.06.2018. Ashok Thanvi, Assistant Commissioner (AR) who appeared on behalf of the Revenue reiterated the findings of the impugned order.

A Two-Member Bench of the Authority comprising Ramesh Nair, Judicial Member and Raju, Technical Member set aside the impugned order.

Software Supplied as Loaded on Medium is to be Treated as Sale Not Service: CESTAT Edukite Software Pvt Ltd VS C.C.E. & S.T.-Vadodara-I 2023 TAXSCAN (CESTAT) 1601

 The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has determined that software provided in a loaded state on a medium should be considered a sale, not a service.

Legal proceedings were instigated against Edukite Software Pvt Ltd, the appellant, for the omission to remit Service Tax categorized as “Information Technology Software Service.” The revenue department issued a notice, contending that the appellant fulfilled their Service Tax obligations in certain instances but failed to do so in others. The notice specifically highlighted the appellant’s non-compliance with Service Tax payments related to services provided to M/s. Attano Media and Education.

 The content delivered by the appellant comprised a software product named ‘Edukite Interactive Curriculum Software,’ featuring educational content in Science and Mathematics tailored for students in Classes 10, 11, and 12 following the Central Board of Secondary Education (CBSE) curriculum. Although the original adjudicating authority had initially granted the Small Scale Exemption, both the original adjudicating authority and the first appellate authority later confirmed the remaining demand. The appellant argued that the software sold by them qualifies as goods and is, therefore, not subject to Service Tax. They highlighted that the agreement with M/s. HCL Info Systems Limited pertains to the permanent transfer of intellectual property rights, falling outside the purview of Service Tax liability. Moreover, the appellant emphasized that the entire software is encoded on a CD, categorizing it as goods and thereby exempt from Service Tax.

A two-member bench of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) held that if the software is supplied loaded on a medium then the same is to be treated as sale and not a service.

Mineral/Dressing of ore not Important to Formation of Concentrate: CESTAT upholds Taxability of Ore under Excise Tariff Act Commissioner of Customs (Port), Kolkata vs M/s. BDG Metal & Power Ltd

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in Kolkata has affirmed that the significance of ore dressing in the formation of concentrate is not crucial. It has upheld the taxation of ore under the Excise Act of 1985.

M/s. BDG Metal & Power Ltd, the assessee in question, imported manganese ore lumps, which were subsequently crushed, screened, and washed, possessing an approximate manganese content of 43%/45%. This import took place through seven and three Bills of Entry from July to October 2011. The relevant authorities conclusively assessed these Bills of Entry at a Nil rate of Countervailing Duty (CVD) under Notification No. 4/2006–CE dated 01.03.2006, and subsequently, the imported goods were cleared for home consumption.

The department argued that, as per the Harmonised System of Nomenclature (HSN), processes for ore concentration under chapter headings 2601 to 2617 should involve physical and physio-chemical operations normal to ore preparation for metal extraction. These operations must not alter the chemical composition of the basic compound.

The Commissioner (Appeals) determined that the appellant qualified for the benefits of Notification No. 4/2006-CE dated 01.03.2006, specifically under serial number 4. Consequently, the Commissioner directed the lower authority to reassess the contested goods, allowing the duty exemption under the notification.

The respondent, M/s BDG Metal & Power Ltd, contended that the imported goods were concentrates rather than ore, as they had undergone processes to make them marketable. These processes amounted to manufacturing, transforming the ore into concentrate, as per explanatory notes and Board’s Circular No. 9/2012 dated 23 March 2012.

A two-member bench, comprising Mr. Ashok Jindal, Member (Judicial), and Mr. Rajeev Tandon, Member (Technical), found no fault in the Commissioner (Appeals)’s order. In dismissing the appeal, the CESTAT upheld the Commissioner (Appeals)’s decision.

Duty u/s 11A(2) of Central Excise Act Not Imposable as Duty has Paid before Issuance of SCN: CESTAT M/s. BPL Limited vs The Commissioner of Central Excise 2023 TAXSCAN (CESTAT) 1604

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in Bangalore has ruled that the duty under section 11A(2) of the Central Excise Act, 1944, cannot be imposed since the duty was paid before the issuance of the Show Cause Notice (SCN).

The appellant, M/s. BPL Ltd., is involved in the manufacturing of color TV sets and molded components for TV sets. During the audit, it was noted that the assessee did not include the amortization cost of molds provided by M/s. Sanyo BPL for manufacturing TV parts. In response to audit objections, the appellant voluntarily paid duty amounting to Rs.30,72,696/- along with interest of Rs.3,43,918/-. The appellant informed the department and requested the waiver of a show-cause notice under Section 11A (2B) of the Central Excise Act, 1944.

Subsequently, a show-cause notice was issued proposing a penalty under Section 11AC of the Central Excise Act, 1944, and Rule 25 of the Central Excise Rules, 2002. The Original Authority adjudicated the show-cause notice, rejecting the request for the waiver of a show-cause notice under Section 11A(2B). The explanation stated that the waiver of a show-cause notice is not applicable in cases where short levy is due to fraud, collusion, willful misstatement, suppression, or any contravention of the act and rules made thereunder to evade payment of duty. The Commissioner (A) upheld the same in the impugned order.

A single-member bench of R Bhagya Devi, Member (Technical) held that penalty is not imposable as the duty has been paid before the issuance of show-cause notice and there is no determination of duty thereafter.

Sub-Contract Service is Taxable: CESTAT upholds Service Tax on sub-contract work  for Map Making undertaken for the Main contractor between Period October 2007 to March 2008 M/s. C. E. Testing Company Pvt. Ltd vs Commr. of Service Tax, Kolkata 2023 TAXSCAN (CESTAT) 1605

M/s C E Testing Company Pvt. Ltd, the Assessee, has been registered with Service Tax since October 2003. They provided various services under the category of ‘Technical Testing and Analysis Service’, ‘Survey and Map Making Service,’ etc. A Show Cause Notice demanding service tax was issued because the turnover shown by them in the ST-3 Returns was lower than the turnover shown in their Income Tax and Balance Sheet.

The Adjudicating Authority dropped the demand to the extent of Rs. 73,07,023/-. He confirmed the demand of Rs. 25,70,758. The Appellant, aggrieved by the confirmed demand, is before the Tribunal. Simultaneously, the Revenue, aggrieved by the dropped demand of Rs. 73,07,023/-, has approached the Tribunal with their appeal.

M/s C E Testing Company Pvt. Ltd, the Appellant, argued that they had provided all the documentary evidence, such as their P & L Account, Balance Sheet, ST Returns, CA Certificate, etc., along with a complete Reconciliation Statement to the Adjudicating Authority.

The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) upheld the Service Tax on sub-contract work for Map Making undertaken for the main contractor between the Period October 2007 to March 2008 only.

A two-member bench of Mr R Muralidhar, Member (Judicial) and Mr K Anpazhakan, Member (Technical) held that the Appellant is required to pay the Service Tax on sub-contract work (map making) undertaken by them for the main contractor between the period October 2007 to March 2008 only.

Duty Exemption is Allowable u/s 5(1A) of Excise Act for First Clearance of 3500 MTs: CESTAT Cella Space Limited vs The Commissioner of Central Tax & Central Excise 2023 TAXSCAN (CESTAT) 1606

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in Bangalore has affirmed that duty exemption is permissible for the initial clearance of 3500 metric tons under section 5(1A) of the Excise Act, 1944.

M/s. Cella Space Limited, the appellants, are involved in the manufacture and clearance of paper and paperboards falling under Chapter Subheading 4804 of the Central Excise Tariff Act, 1985. The appellant had availed exemption under Notification No.4/2006-CE dated 1.3.2006 as amended by Notification No.4/2008-CE dated 1.3.2008, effective from 1.4.2008, for clearances made for home consumption from 1.4.2008 to 7.8.2008. Following scrutiny of ER1 returns, a show-cause notice dated 26.03.2009 was issued, alleging that the appellant had availed the benefit of exemption Notification No.4/2006-CE dated 1.3.2006 during the said period, and also cleared the same goods on payment of duty. Hence, they were not eligible for the benefit of the said exemption Notification. Accordingly, it was proposed to recover duty of Rs.47,76,725/- with interest and penalty, and to appropriate Rs.7,12,642/- paid by them. Upon adjudication, the demand was confirmed with interest, and a penalty of Rs.5,00,000/- was imposed under Rule 25 of the Central Excise Rules, 2002.

The appellant argued that during the disputed period, they had cleared paper and paperboards for home consumption as well as for exports. They submitted that 3499.971 MTs were cleared for home consumption and 3464.222 MTs were cleared for exports. The appellant was eligible for the benefit of the exemption on the clearances for home consumption, up to the limit of 3500 MTs as prescribed under the said Notification No.4/2006-CE dated 1.3.2006 as amended. It was stated that the maximum quantity allowed in a financial year for the first clearance is 3500 MTs. In the appellant’s case, including clearances on payment of duty during the said period, they did not exceed the maximum permissible limit of 3500 MTs. Furthermore, they claimed that as of the date of opting for the exemption with effect from 1.4.2008, the balance CENVAT credit available on the books of accounts had been reversed by the appellant.

It was argued that Rule 11(2) of the CENVAT Credit Rules, 2004 prescribed the reversal of CENVAT credit on inputs lying in stock as of the date of exercising the option for value-based or quantity-based exemption. The said Rule does not include credit on input services. The Revenue denied the benefit of the said Notification on the ground that even though the appellant’s total first clearances remained within the exemption limit of 3500 MTs, they had paid duty on the clearance of 441.478 MTs, which is contrary to the provisions contained in Section 5A(1A) of the Central Excise Act, 1944.

A Single bench of Dr D M Misra, Member (Judicial)  viewed that Section 5A(1A) is neither applicable to the present scenario since Notification No.4/2006-CE dated 1.3.2006 is a conditional, quantity-based exemption; and admissibility to ‘Nil’ rate of duty is only to the first clearances of 3500 MTs; there is no other condition stipulated in the said Notification.

Allegation of Failure to Follow Examination of Norms Prescribed under CBEC Circular While Allowing Conversion of Shipping Bill: CESTAT Dismisses Appeal The Principal Commissioner of Customs vs M/s.Contemporary Leather Pvt. Ltd.  2023 TAXSCAN (CESTAT) 1607

 The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in Chennai rejected the appeal brought forth by the revenue department, contending that the commissioner did not adhere to the examination norms outlined in the CBEC circular for approving the conversion of the shipping bill.

M/s. Contemporary Leather Private Limited, the respondent, had sought the conversion of Free Shipping Bills to Drawback Shipping Bills for their exports from the fiscal years 2013-14 to 2016-17. The initial request for conversion was denied, prompting the respondent to file an appeal before the Tribunal.

In the Final Order, the Tribunal granted the appeal, noting that the request for converting the shipping bills within a three-year period, calculated from the application date (i.e., 23.11.2021), should be allowed. The adjudicating authority was instructed to verify whether any shipping bill had been filed beyond the three-year limitation, as stipulated in the Tribunal’s decision in the case of M/s. Autotech Industries (India) Pvt. Ltd. The Principal Commissioner of Customs addressed the matter, leading to the current challenged order, where the conversion of 342 free shipping bills to drawback shipping bills within three years from the application date was permitted.

The Tribunal, in allowing the appeal and issuing directions for verification, failed to consider that, in accordance with Section 149 of the Customs Act, 1962, read with CBEC Circular No.36/2010 dated 23.09.2010, the conversion of shipping bills from schemes involving more rigorous examination or within schemes involving the same level of examination is not permissible. The respondent contended that the Principal Commissioner issued the order in compliance with the Tribunal’s Final Order dated 30.09.2021, and the Department did not file any appeal against the said Final Order.

A single bench of Ms Sulekha Beevi C S, Member (Judicial) observed that the Review Committee has put forward grounds challenging the Final order passed by the Tribunal dt. 30.09.2021 directing the adjudicating authority to verify and allow the conversion of shipping bills.

Claim of Excise Duty Exemption; No demand Valid on Turnover of Direct Exports and Export Through Merchant: CESTAT directs Denova Adjudication Dragon Star Leather Co. (P) Ltd vs Commr. of Central Excise, Kolkata-VII 2023 TAXSCAN (CESTAT) 1602

 The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Kolkata has ordered a fresh adjudication on the claim for excise duty exemption. This directive is based on the finding that the demand is not valid concerning the turnover related to direct exports and exports through merchants.

M/s Dragon Star Leather Co (P) Ltd, the appellant, involved in the production and export of leather goods, faced a Show Cause Notice issued on 22/3/2000. Following due process, the Adjudicating Authority confirmed the demand. The appellant filed an appeal before the Tribunal, which, in turn, remanded the matter to the Adjudicating Authority. Dissatisfied with the Denovo Adjudication, the appellant once again appealed to the Tribunal, but the Tribunal dismissed the appeal. The Kolkata High Court directed the Tribunal to review the case on its merits. Subsequently, the Tribunal remanded the matter once again to the Adjudicating Authority.

Upon resuming the denovo proceedings, the Adjudicating Authority issued the impugned Order-in-Original (OIO) No. 08 dated 16/12/2008, confirming the entire demand as originally made under the Show Cause Notice. The appellant contended that, after receiving the Final Order, the Adjudicating Authority sought various documents to complete the adjudication proceedings. The appellant submitted detailed documentary evidence demonstrating that the turnovers resulted from direct exports, exports through merchant exporters, and local sales of both manufactured and traded goods.

A two-member bench of Mr R Muralidhar, Member (Judicial) And Mr K Anpazhakan, Member (Technical) observed that the matter pertains to 1996-97 and 1997-98 and denovo adjudication was to be taken up in 2008, much better and larger efforts should have been made by the Adjudicating Authority to follow the principles of natural justice and to get proper verification done, which has not been done in this case

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates