This weekly round-up analytically summarises the key stories of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reported at taxscan. in, from December 30 2023 to January 6 2024.
The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) recently addressed a case involving M/s Indian Acrylics Ltd. This company, engaged in the manufacturing of Acrylic Fibre, Tow & Tops, had its matter remanded to the Commissioner (Appeal) for further consideration.
The intricacies of the case revolved around a show cause notice issued to M/s Indian Acrylics Ltd. The notice sought to recover an amount equivalent to 10% of the electricity sold to Punjab State Electricity Board (PSEB) and consumed in the appellant’s residential colony. This recovery was proposed under Rule 6 of the Cenvat Credit Rules. The contention was that electricity, being an excisable good, merited such action.
Initially, the appellant had reversed a proportionate amount of Cenvat credit, but the show cause notice aimed to recover a significantly higher sum. Despite the appellant’s plea that the entire Cenvat credit for electricity generation had already been reversed, the original authority dropped only a part of the demand, imposing interest on the remaining amount. The Commissioner (Appeals) subsequently rejected the appeal, leading to the case reaching CESTAT.
During the proceedings, the appellant argued that electricity was not an excisable item, thus making Rule 6 inapplicable. They contended that the rule only applied when common inputs or input services were used for both dutiable and exempted products, which, in the case of electricity, was not relevant.
The Tribunal, in its decision, noted that the main ground raised by the appellant regarding the non-applicability of Rule 6 had not been adequately considered in the impugned order. Consequently, the matter was remanded back to the Commissioner (Appeals) for a fresh evaluation, taking into account all the pleas and grounds presented by the appellant. The CESTAT ultimately allowed the appeal of the appellant through this remand process.
The Allahabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside the order demanding service tax based on an earlier show cause notice(SCN) which was already Adjudicated.
M/S ICRA Management Consulting Services Ltd, the appellant challenged the order passed by adjudicating authority. The adjudicating authority confirmed the demand only in respect of services provided by the appellant to the IFC as the same was not a part of the World Bank per se but a member of the World Bank Group. The Central Government declared the IFC as a specified international organization under Section 3 of the UN Act vides Notification No.S.O.2448(E) dated 13.07.2016 issued vides F. No. D-II/451/12(21)/2009 in the Ministry of External Affairs.
In the case of Coastal Gujarat Power Ltd. Vs. Commissioner of Service Tax, Mumbai-I (Tri. Mumbai) wherein the CESTAT, Mumbai set aside the confirmation of demands of tax, interest thereon and imposition of penalties and allowed the appeal with consequential relief. But the Department did not accept the said judgment and filed an appeal against it in the Apex Court, hence the case is sub-judice and has not attained finality.
The adjudicating authority imposed the penalty of 3,00,974/- (Rs. Three Lakh nine hundred seventy-four only) upon M / s ICRA Management Consulting Services Ltd., Noida under the provisions of Section 76 of the Finance Act, 1994. If the amount of Service Tax Rs. 30,09,742/- confirmed at Sl. No. (i) above and interest payable thereon is deposited by the party within thirty days of the date of receipt of this order, the penalty shall be twenty-five per cent of the service tax amount confirmed if such reduced penalty is also paid within such period.
A two-member bench comprising Mr P K Choudhary, Member (Judicial) and Mr Sanjiv Srivastava, Member (Technical) observed that the show cause notice also does not give any ground except that it was a statement of demand based on earlier show cause notice. While allowing the appeal the CESTAT set aside the impugned order.
The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), in its ruling, showcased a keen understanding of the intricacies involved in the case.
One of the pivotal arguments that tilted the decision in favor of the Maharashtra State Power Generation Company was the tribunal’s emphasis on the fallacy of demanding the original document as proof of duty discharge.
The two-member bench of the tribunal, comprising C J Mathew (Member Technical) and Aajay Sharma (Member Judicial), underscored the importance of adhering to the documentation requirements stipulated under Section 11B of the Central Excise Act, 1944.
The counsel for M/s Maharashtra State Power Generation Company Ltd argued that the denial of their refund claim of ₹36,70,325 was unjust, emphasizing the precedent set in Maharashtra State Electricity Board v. Commissioner of Central Excise, Nagpur.
The counsel asserted that departmental correspondence and records effectively demonstrated the payment of duty, negating the need for the original TR-6 challan. They contended that it was inappropriate for the lower authorities to insist on the original document when sufficient evidence was available with the central excise authorities. The counsel sought a fresh determination of the refund application in light of the judicial recognition of the non-excisability of the claimed amount.
The appeal’s success, framed as a remand, signifies a decisive and favorable outcome for the Maharashtra State Power Generation Company Ltd in this protracted tax refund dispute.
The Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal has held that procedures of Refund under Rule 5 of Cenvat Credit Rules (CCR) and Procedure for Disallowance of Credit under Rule 14 are Similar in Nature
HSBC Electronic Data Processing India Pvt Ltd, the appellant challenged the Impugned Orders and submitted that a similar issue was also involved in the refund proceedings under Rule 5 of CCR read with Notification No.26/2012. He further urged that it has been held by High Courts that the procedure of refund under Rule 5 of CCR and the procedure for disallowance of credit
Considering the nature of the activity and relevancy and also considering various judicial rulings, the Commissioner (Appeals) was pleased to hold that the Appellant normally uses the services under dispute to provide output services rendering IT & ITES and accordingly, allowed the benefit of credit to them. It was stated that under the Order of the Commissioner (Appeals), the refunds of unutilised Cenvat credit which were earlier disallowed in part have been now granted to them and there is no further dispute in the matter.
A two-member bench comprising Mr Anil Choudhary (Judicial) and Mr A K Jyotishi, Member (Technical) viewed that proceedings under Rule 14 and Rule 5 of CCR are similar. The CESTAT set aside the Impugned Orders.
The Delhi Bench of the Customs, Excise and Service tax Appellate Tribunal (CESTAT) observed that Non-taking of inputs, capital goods, credits, or benefit of notification number suffices for service tax exemption. The issue to be decided was whether the denial of the benefit of the exemption notification to the appellant was considered unjustified.
The counsel for the appellant Pawan Arora contested the denial of benefits under exemption notification no. 32/2004-ST dated 3.12.2004. The dispute arose from the appellant’s submission of a photocopy of declarations from three service providers on their letterhead, resulting in the rejection of the 25% service tax levy on the gross amount charged by the Goods Transport Agency (GTA).
The appellant’s counsel cited precedent cases, including Paliwal Home Furnishing and Alok Leasing Pvt. Ltd., emphasizing that the notification lacked a prescribed format for the certificate, asserting that GTA-issued certificates on letterheads sufficed, challenging the department’s insistence on consignment note-specific certificates.
The single bench of the Tribunal comprising Binu Tamta Member (Judicial) observed that in favor of the appellant on merits, the issue of levying interest or penalty does not survive.
The bench thus held that, “The invocation of the extended period is also not sustainable. The impugned order deserves to be set aside. The appeal stands allowed with consequential benefit.”
The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) observing the Delay in Export Obligation Discharge Certificate (EODC) issuance by the Directorate General of Foreign Trade (DGFT), deleted the Penalty imported on exporter.
The issue to be decided was whether the appellant is required to fulfill the export obligation within the time prescribed under the notification or the same is subject to the EODC Certificate issued by the DGFT.
The appellant, who exported goods from JNPT, Nava Sheva, promptly submitted export details to the DGFT on 01.10.2011, within the eight-year window for an Export Obligation Discharge Certificate (EODC). The document, crucial to the case, was submitted alongside written responses on 08.06.2023. Despite this, the Customs Department issued a show cause notice on 04.06.2014, allegedly overlooked by the appellant. The Adjudicating Authority hastily confirmed the notice, citing missing documents. The subsequent call for dues payment, dated 25.05.2015, and a lack of response fueled an ongoing legal battle. The appellant, challenging the Order-in-original, claimed non-receipt of crucial notices, emphasizing EODC receipt on 26.05.2015. The case then rested with the Commissioner of Customs (Appeals).
The appellant’s counsel Mukteshwar Nath Dubey asserted that the export obligation timeframe, expiring on 10.01.2013, was met with due diligence. The submission of Form ANF5B to the DGFT on 01.10.2011, as evidence of compliance, was highlighted, challenging any allegations of delay. Emphasizing the violation of natural justice, the appellant argued that the elusive show cause notice was never served, an issue overlooked by the Commissioner (Appeals). Citing legal precedents, the defense built a case on adherence to notification conditions.
The Counsel for the Respondent Rakesh Kumar presented a strong case, deeming it straightforward. They argued that the appellant failed to timely submit the Export Obligation Discharge Certificate (EODC), a crucial document in the dispute. According to the representative, the EODC issued by the DGFT exceeded the stipulated period, leading to non- fulfillment of conditions necessary to claim the notification benefits. Citing a series of legal decisions, the representative emphasized the strict interpretation of notification conditions, asserting that any ambiguity should favor the State. As the legal battle intensified, the Revenue remained resolute in holding the appellant accountable for customs duties.
The two member bench of the tribunal comprising Binu Tamta Member (Judicial) and Hemambika R. Priya Member (Technical) concluded that the appellant demonstrated compliance with export obligations, submitting requisite documents to the Directorate General of Foreign Trade (DGFT) for the Export Obligation Discharge Certificate (EODC).
Notably, any delay in EODC issuance squarely rested with DGFT, absolving the appellant from penalization. The Commissioner (Appeals) was criticized for not considering this crucial aspect in alignment with established legal principles. Consequently, the impugned order was set aside, granting the appellant a favorable outcome with consequential relief.
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal(CESTAT) held that no service tax is leviable on transfer of transit mixer. It was observed that the hiring of Transit Mixer is covered under “right to use” and not under the service of “Supply of Tangible Goods” and the sale of RMC is not liable to service tax as it is a simple sale of transaction and there is no element of service in it.
The order passed by the Commissioner confirming the demand for service tax and also the penalty as proposed in the show cause notice was challenged by the appellant M/s R. V. Infrastructural Pvt. Ltd.
The Commissioner analysed the clauses of the agreement between the appellant and M/s L&T Limited and on that basis concluded that the final effective control and right of possession of the transit mixer remained with the appellant and hence they were liable for service tax under the category of “Supply of Tangible Goods Service‟, relying on the decision of the Tribunal in the case of Greatship (India) Ltd., vs. Commissioner of Service Tax, which considered all the earlier case law on the subject.
The appellant submitted that hiring of Transit Mixer is covered under “right to use” and not under the service of “Supply of Tangible Goods” and the sale of RMC is not liable to service tax as it is a simple sale of transaction and there is no element of service in it and therefore they have been paying VAT thereon.
A two-member bench comprising M S Binu Tamta, Member (Judicial) and P V Subba Rao, Member (Technical) observed that there is not even a whisper in the show cause notice about the provisions of section 65(105)(zzzzj) defining “Supply of Tangible Goods for use Service” and its applicability to the services rendered by the appellant yet the Commissioner in the impugned order has levied service tax holding that services provided by the appellant falls in the category of “Supply of Tangible Goods for use Service”.
The CESTAT set aside the order and held that the demand of service tax proposed in the show cause notice under commercial or industrial construction services as per section 65 (105) (zzq) defined as per section 65 (25b) and Works Contract Services as per section 65 (105) (zzzza) of the Act nor are they chargeable to service tax under “Supply of Tangible Goods Use of Goods”.
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the imposition of redemption fine and held that the bonafide of Usha International cannot be suspected just because vendor chose to affix different price tag.
A Two-Member Bench comprising M Ajit Kumar, Technical Member and P Dinesha, Judicial Member observed that “Clearly there was an understanding as regards the value is concerned, in support of which documents in the form of e-mails have been placed on record, which are not disputed by the Revenue. The value affixed on the label did not clearly show the price agreed upon in the purchase order dated 27.05.2013. Further, the said price tag was sought to be revised for the reason of fluctuation in the value of the Indian Rupee as against the U.S. Dollar, which fact was also not disputed, but however, the same apparently was not implemented by the foreign vendor / supplier.”
“Hence, we are of the view that the bona fides of the appellant cannot be suspected just because the vendor / supplier chose to affix a different price tag and therefore, there is no case for the Revenue to order confiscation of the goods in question” the Tribunal held.
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) restricted penalty to pre-deposit as there was role and knowledge of the appellants in clandestine activity designed to misuse CENVAT credit established.
The department was of the opinion that central excise duty was being evaded by way of illegal availment of CENVAT credit of CVD paid on the imported goods by the manufacturers of aluminium products without physically receiving the goods i.e. imported aluminium scrap allegedly purchased from the traders on high sea sales basis into their factory.
On the basis of the investigation conducted, Show Cause Notice dated 6.11.2009 was issued to the appellants proposing to demand Rs.3,14,24,906/- being the wrongly availed inadmissible CENVAT credit by VAPL Coimbatore.
The counsel for the appellants submitted that benefit of nominal penalty should be given to the appellant. For the application of Rule-26 of the Central Excise Rules, 2002, the condition precedent is that the person who in any manner deals with, any excisable goods, which he knows or reason to believe are liable for confiscation. In the present case, there is no evidence that the appellants were aware of the goods being liable for confiscation.
A Single Bench of M Ajit Kumar, Technical Member observed that “The discussion in the impugned order has established the role and knowledge of the appellants in the clandestine activity designed to misuse CENVAT credit.”
“I find that the involvement of the Appellants has been established mainly on the basis of collaborative statements, perhaps due to the clandestine nature of the activity and the lack of proper documentation in such cases, as discussed above. However, the imposition of stiff penalties requires stronger evidence. Hence to that extent the penalties imposed on the Appellants are disproportionate and needs to be modified” the Tribunal concluded.
The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the non-imposition of redemption fine and penalty as there was compliance of the customs notification.
The revenue is in appeal against the impugned order wherein the adjudicating authority did not impose any redemption fine and penalty on the respondent.
The adjudicating authority after recording the fact that on pointing out, the respondent paid duty and interest and refrained from imposing redemption fine and penalty on the respondent. Against the said order, revenue is before the Tribunal.
A Two-Member Bench comprising Ashok Jindal, Judicial Member and Rajeev Tandon, Technical Member observed that “We find that in this case no doubt the respondent in terms of Notification, has failed to fulfil the export obligation within a block of 4 years, the respondent is required to pay 50% of duty along with interest @ 15% within 30 days from the expiry of each block, but the respondent was not aware of this condition as they were under an impression that they were required to fulfil the export obligation within a period of 6 years.”
“But, as and when investigation started the respondent immediately paid duty and interest. Further, as per the condition of the Notification, the appellant is required to pay duty along with interest. In that circumstances, the adjudicating authority has rightly refrained from imposing redemption fine and penalty on the respondent. As the respondent has complied with the condition of the Notification, therefore, we do not find any infirmity in the impugned order” the Tribunal noted.
The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed excise duty demand as there was receipt of SS waste and scrap supplied through dealers, which are defective and subsequent availment of cenvat credit.
The prime reason to deny credit is on the basis that the Appellant melts its inputs and produces SS Billets/Wires/rods/bars etc. and there is no proof that the Appellant uses SS Patta/Patti, SS Circle, SS Flat, SS Sheet (assuming it to be virgin material) whereas the claim of the Appellant all along before lower authority was that what they had received was off cuts pieces/defective/seconds/waste SS articles, and very much used by them in manufacturing process.
The present investigation has not identified a single supplier of SS scrap to the Appellant so as to make up for the quantity of goods as replacement. There is no evidence regarding flow back of funds by the Appellant/dealer to the suppliers or flow of fund between the utensil manufacturers to the suppliers for the clandestine nature of transaction alleged.
A Two-Member Bench comprising Ramesh Nair, Judicial Member and Raju, Technical Member observed that “In light of the above, in the facts and circumstances of the present case, it must be held that the Appellant had in fact received SS waste and scrap supplied to them through dealers, on documents, which otherwise show that it was seconds/defective etc. and had correctly availed Cenvat Credit thereon, in absence of any cogent evidence regarding either diversion of such goods by suppliers or replacement thereof by the Appellant from any other local source.”
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that no service tax is leviable on Goods Transport Agency (GTA) services availed outside to special economic (SEZ) zone.
On verification of accounts, it was noted that the appellant had not discharged Service Tax under GTA Services which was payable by them. The Show Cause Notice was issued proposing to demand the Service Tax under GTA Services along with interest and for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalties. On appeal the Commissioner (Appeals) upheld the same. Hence the appeal.
The Tribunal in the case of M/s. Vision Pro Event Management had also considered the issue whether exemption from Service Tax is eligible when the services are availed outside to the SEZ zone. It was held that “Our view is supported by the fact that the notification which superseded Notification No. 4/2004 has categorically stated that whether or not the taxable services are provided inside the SEZ the exemption is available.”
A Two-Member Bench comprising Vasa Seshagiri Rao, Technical Member and CS Sulekha Beevi, Judicial Member observed that “After considering the facts and evidences placed before us and following the ratio laid in the decisions, we are of considered opinion that the demand cannot sustain and requires to be set aside. Ordered accordingly”.
The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) remanded matter in the case regarding ostensible eligibility for benefit of customs notification.
The sole issue appears to be the denial of entitlement to benefit of alternative notification which, in accordance with the decision of the Supreme Court in re Share Medical Care, should have been considered in proceedings emanating from denial of notification originally sought for even if not claimed in bill of entry.
A Two-Member Bench comprising CJ Mathew, Technical Member and Ajay Sharma, Judicial Member observed that “The ostensible eligibility of the appellant for benefit of notification no. 25/2005-Cus dated 1st March 2005 has been set out in the impugned order, and, in such circumstances, should have been left to the competent authority to dispose off such plea considering it to be exercise of such option available in section 149 of Customs Act, 1962. It is for the original authority to take a decision on the eligibility for such claim and, to decide the matter afresh, we set aside the impugned order directing that duty liability, and other attendant consequence, if any, be determined by the original authority.”
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal(CESTAT) held that service tax is not leviable by subcontractors merely because of the main contractor providing work contact service. The order passed by the Commissioner confirming the demand for service tax and also the penalty as proposed in the show cause notice was challenged by the appellant M/s R. V. Infrastructural Pvt. Ltd. The appellant has been issued demand-cum-show cause notice dated 23.10.2012, inter-alia stating that it was noticed that M/s R. V. Infrastructural Pvt. Ltd., (“Service Provider/ Party/ Assessee‟)working as sub-contractor has provided taxable services in respect of construction activities undertaken on behalf of M/s Larsen & Toubro Limited which may be classified as “Commercial or Industrial Construction” Services as per Section 65(105)(zzq) defined as per Section 65(25b) and “Works Contract Services” as per Section 65(105)(zzzza) of the Finance Act, 1994 ibid depending upon subcontract awarded by M/s Larsen & Toubro Limited and are getting amount instead of providing the taxable services but not paying service tax on the amount received from M/s Larsen & Toubro Limited.
As per the charges in the show cause notice, the services rendered by the appellant to M/s L&T Limited were proposed to be classifiable as “Commercial or Industrial Construction Services” as per Section 65 (105)(zzq) and “Works Contract Services” as per Section 65(105)(zzzza) of the Finance Act, however, they have not paid service tax on the amount received from M/s L&T Limited.
On the other hand, the Authorised Representative for the Revenue reiterated the findings of the Commissioner in the impugned order The appellant is working under a self-assessment system and therefore they were duty bound to correctly assess the service tax liability and filed the return accordingly but they never disclose the correct facts to the Department.
A two-member bench comprising of M S Binu Tamta, Member (Judicial) and P V Subba Rao, Member (Technical) observed that the services rendered by them cannot be classified under the activity of Construction just because the main Contractor M/s L&T was engaged in providing the construction services. Reliance placed by the appellant on the Circular No. 147/16/2011 dated 21.10.2011 is rightly applicable, as it clarified that just because the main contractor is providing the WCS service in respect of projects involving construction of roads, airports, railways, transport, terminals, bridges, tunnels, dams, etc., it would not automatically lead to the classification of services being provided by the sub-contractor.
The Tribunal held that the appellant is not liable to pay service tax on the supply of RMC to M/s L&T and hence the demand for service tax in that regard is not sustainable.
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