CESTAT Weekly Round-Up [Feb 15 to Feb 22, 2025]

This weekly round-up analytically summarizes the key stories related to the Customs Excise and Service Tax Appellate Tribunal (CESTAT) reported at Taxscan from 15 February 2025 to   February 22 2025.

CESTAT Sets Aside Demand and Penalty, Confirms 23.03.2004 as Date of Commercial Production for EOU De-bonding

M/s. Manaksia Aluminium Company Limited vs Commissioner of Central Excise CITATION:   2025 TAXSCAN (CESTAT) 218

The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside the demand and penalty against the assessee, confirming 23.03.2004 as the date of commercial production for the purpose of de-bonding the unit from the Export-Oriented Unit (EOU) scheme.

However, in February 2012, the Customs Audit Department raised concerns regarding the assessee’s claim for excess depreciation on imported capital goods. The Customs department issued an audit query, which led to the issuance of a show-cause notice demanding a duty of Rs.58,68,773/- along with interest, along with penalties for the excess claim of depreciation. The matter was adjudicated, and the proposed demand along with interest was affirmed, and a penalty was imposed on the assessee.

CESTAT Upholds Rs. 9.56 Crore Excise Demand due to Fraudulent Refund Claims and Cenvat Credit Misuse

M/s. Kaizen Organics Pvt. Ltd vs M/s. Commissioner of Central Excise & Service Tax CITATION:   2025 TAXSCAN (CESTAT) 220

The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has upheld an excise duty demand of Rs. 9.56 crore against M/s. Koolmint Manufacturing Company and M/s. Kaizen Organics Pvt. Ltd., along with penalties, due to fraudulent refund claims and misuse of Cenvat credit.

The adjudicating authority imposed a duty liability of Rs. 9.56 crore on Koolmint under Section 11D of the Central Excise Act, along with an equal penalty under Section 11AC. Kaizen Organics was also held liable for recovering Cenvat credit of Rs. 95.57 lakh, along with interest and penalties. The authority found that the entire scheme was orchestrated by the proprietors of Koolmint and Kaizen, who were father and son, to defraud the government by claiming undue refunds and passing on ineligible Cenvat credit.

CESTAT Grants Refund of Reversed Cenvat Credit as Exported Exempted Goods Qualify Under Rule 6(6)(v) of Cenvat Credit Rules

MACLEODS PHARMACEUTICALS LTD vs C.C.E. & S.T.-DAMAN CITATION:   2025 TAXSCAN (CESTAT) 221

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ),granted a refund of reversed Cenvat credit, ruling that exported exempted goods qualified under Rule 6(6)(v) of the Cenvat Credit Rules,2004.

The appellate tribunal concluded that since the appellant had paid an amount that was not due, they were entitled to a refund. It disagreed with the authorities’ argument that the reversal was not excise duty and therefore not eligible for refund under Section 11B. It also stated that the reversal was essentially a request for re-credit, which could be allowed if the reversal was not due.

Service Tax Demand not valid when Tax and Interest Paid much before Issuing SCN: CESTAT

Nimmi Buildtech Pvt. Ltd vs Commissioner of Central Excise & CGST, Kanpur CITATION:   2025 TAXSCAN (CESTAT) 222

In a recent case, the Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) observed that service tax demand not valid when tax and interest paid much before issuing show cause notice (SCN). It was observed that since the said amount has already been deposited by the party alongwith applicable interest the same should not be confirmed and appropriated against the said amount demanded from them.

In the case of Venu Enterprises, the following has been held that, ”Admittedly, the tax as well as the interest has been paid much before the issuance of SCN; even the SCN does not point out to suppression of fact, fraud or misstatement etc., the alleged activity was observed by the Audit Party from the appellant’s ST-3 returns only and it is not the case of the Revenue that there was gross violation by act of suppression, etc. In this background and on the above factual position, I am of the opinion that the bonafides of the appellant could not be doubted and hence, it is a fit case to invoke Section 80 of the Finance Act.”

Assessment of Two or More Bills of Entry or Shipping Bills Together is not Permissible: CESTAT

M/S DISHA REALCON PVT LTD vs COMMISSIONER OF CUSTOMS ADJUDICATION CITATION:   2025 TAXSCAN (CESTAT) 224

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has stated that two or more bills of entry or shipping bills cannot be taken together and assessed. The bench viewed that the exporter cannot claim an exemption for all of the shipping bills after combining the products exported under several shipping bills and taking a sample.

While allowing the appeal, the bench added that “The fact that the goods under both Shipping Bills were loaded in the same vessel or even in the same hatchet of the vessel or exported to the same party would make no difference. It does not give the department the power to re-determine the duty. Conversely, if after mixing the goods exported under different Shipping Bills and drawing a sample, the Fe content falls below the threshold, the exporter cannot claim exemption for all the Shipping Bills. Each Shipping Bill must be assessed individually,”.

Failure to maintain record of goods received on subcontracting: CESTAT upholds Confiscation u/s 111 of Customs Act

M/s Encee International NSEZ vs Commissioner of Customs, Noida CITATION:   2025 TAXSCAN (CESTAT) 223

The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) upheld the confiscation under section 111 of the Cutoms Act, 1962 as asseessee failed to maintain record of goods received on subcontracting.

Further, as per Rule 42 (4) of the SEZ Rules, 2006 unit may sub-contract a part of production or production process in another unit within the same SEZ if the movement of goods has been recorded under serially numbered challans and the record of movement has been maintained. In the present matter, Appellant No.3 is maintaining records of movement of goods sub-contracting under serially numbered vouchers and have also maintained job work register showing inward and outward movement of goods. Therefore, as far as Appellant No.3 is concerned, it has maintained complete record as per the requirement of the law.

CESTAT Chandigarh Rules IT and Business Support Services are not Intermediary Services

M/s Saxo India Private Limited vs Commissioner of Central Excise and Service Tax CITATION:   2025 TAXSCAN (CESTAT) 227

The Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) Chandigarh has ruled that Information Technology Software Services ( ITSS ) and Business Support Services ( BSS ) provided to foreign clients qualify as export services and do not fall under intermediary services. The tribunal directed the refund of unutilized CENVAT credit, rejecting the Revenue Department’s claim that the services were intermediary in nature.

In conclusion, the CESTAT Chandigarh Coram composed of S S Garg ( Judicial Member ) and P Anjani Kumar ( Technical Member ) ruled in favor of the appellant, holding that the IT and Business Support Services provided to foreign clients do not fall under intermediary services. The tribunal directed the refund of unutilized CENVAT credit, rejecting the Revenue’s claim that the company acted as an intermediary. The ruling emphasized that direct service providers, without a facilitation role between two parties, cannot be classified as intermediaries under Rule 9 of the Place of Provision of Services Rules, 2012.

Reversal of Cenvat Credit on Trading of Exempted Goods: CESTAT Remands matter for Verification

M/s Supreme & Company Private Limited vs Commissioner of Central Excise CITATION:   2025 TAXSCAN (CESTAT) 229

The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) remanded the file for verification of Cenvat Credit on Trading Activities.

The CESTAT held that the assessee is responsible for paying the appropriate CENVAT credit related to the exempted products or trade activities, together with interest if it hasn’t been paid yet, and if it is paid, the adjudicating body will confirm whether the assessee is liable for the whole amount due to the reversal of the CENVAT credit.

Penalty on Co-Noticee not Sustainable when Main Case Settled under SVLDRS: CESTAT

Murari Lal Agarwal vs Commissioner of C.E. & S.T.- Surat-I CITATION:   2025 TAXSCAN (CESTAT) 226

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that penalties on co-noticees are not sustainable when the main case is settled under Sabkha Viswas ( Legacy Dispute Resolution ) Scheme, 2019 (SVLDRS-2019).

The appellate tribunal cited the Division Bench judgment in Prakash Steeladge Ltd, which confirmed that penalties on co-noticees should not continue if the main party’s case was settled under the scheme. Several other judgments were also referred to, which supported this position.

Mistaken Service Tax Payment not Subject to Refund Limitation u/s 11B of the Central Excise Act: CESTAT

M/s. National Buildings Construction Corporation Ltd vs Commissioner of Central Excise and Service Tax CITATION:   2025 TAXSCAN (CESTAT) 230

The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a mistaken Service Tax payment is not subject to the refund limitation under Section 11B of the Central Excise Act, 1944.

The appellate tribunal relied on rulings in M/s. OIL India Ltd. v. CCE (2023), Venkatraman Guhaprasad v. Commissioner of G.S.T. (2020), and Commissioner v. KVR Construction (2018), which held that mistaken tax payments were refundable without time limits. The Supreme Court also upheld this view in KVR Construction.

Following these precedents, the bench ruled that the refund claim was valid and not subject to Section 11B. The case was sent back to the adjudicating authority for reconsideration, with a directive to decide within three months.

CESTAT Allows SSI exemption to Sabari Kitchen Service as per CBEC Circular

M/s. Sabari Kitchen Services (P) Ltd. vs Commissioner of GST and Central Excise CITATION:   2025 TAXSCAN (CESTAT) 231

In a recent case, the Chennai bench of the Customs, Excise And Service Tax Appellate Tribunal (CESTAT) allowed the SSI exemption to Sabari Kitchen Service as per CBEC Circular. The bench found that the Appellant using the brand name of others did not own that particular brand name during investigation which according to the Revenue itself was the brand name registered for other different products.

The use of brand name “SaBARI” in the instant case can be termed as fortuitous, there being no intention on the part of the appellant to use the said brand name to show a connection with the Assessee’s goods and such other person. Moreover, it was submitted that the Appellants are the owners of the brand name as their brand is reflected in all their invoices and products since 2004 as the unique red flame differentiated their brand name from others and moreover there were no objections to the usage of this brand name.  Others who have registered the brand name for different products cannot entertain any objection, if the same is used for different products.

Discrpency in Excise Duty Computaion:  CESTAT Directs to recompute after Deducting Value of Bought out items, value of clearances to SEZ units etc

Sabari Kitchen Services (P) Ltd vs Commissioner of GST and Central Excise CITATION:   2025 TAXSCAN (CESTAT) 231

In a recent case related to allegation of Discripencies in Computation of excise duty, the Chennai bench of the Customs, Excise And Service Tax Appellate Tribunal (CESTAT) has directed to recompute the duty after deducting the value of Bought out items, value of clearances to SEZ units and other post manufacturing expenses.

On the issue of quantification of duty payable, it is evident that the value of sales by the Appellants was ascertained on the basis of IT Returns filed and its financial statements for the financial years from 2009-2010 to 20132014.  The Counsel for the Appellants Shri S. Durairaj has stated in his written submissions and also during the hearing before the Tribunal that the total turnover reflected in the balance sheets and the financial statements included the sale of manufactured items to units situated in a SEZ, the sale of bought out items (trading) and erection charges i.e., post manufacturing expenses and if these were excluded, the annual value of clearances of the manufactured goods under SaBari brand was always less than the threshold exemption limit of Rs.1.5 crores for all the years except for 2013-2014 and 2014-2015.

CESTAT allows Cenvat Credit on Capital Goods Used for Both Dutiable and Exempted Products

Commissioner of GST & Central Excise, Bhubaneswar Commissionerate vs M/s. Paradeep Phosphates Ltd.

CITATION:   2025 TAXSCAN (CESTAT) 235

The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) upheld the eligibility of Cenvat Credit on capital goods used for the manufacture of both dutiable and exempted products.

The bench found no merit in the Revenue’s appeal. The Tribunal noted that it was undisputed that the capital goods in question were used to produce phospho-gypsum, a dutiable product. Therefore, the denial of Cenvat Credit on these capital goods was unjustified, and the provisions of Rule 6(4) were not applicable in this case.

CESTAT Sets Aside Service Tax Demand, Remands Case for Re-Evaluation Over Form 26AS Reliance

M/s Paragon Power Systems vs Pr. Commissioner of Central Tax & Customs CITATION:   2025 TAXSCAN (CESTAT) 233

The Hyderabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside a service tax demand against and remanded the case back to the original adjudicating authority for re-evaluation.

The bench noted that the appellant had stated several reasons, including the COVID-19 pandemic and a fire accident in their office, for their inability to provide the necessary documents and explanations during the adjudication process. In the interest of fairness and justice, the bench decided to remand the case back to the original adjudicating authority for a fresh hearing. The appellant was allowed to produce all possible evidence to support their claim that the income in question did not arise from taxable services or was otherwise exempt.

‘Even on the Strength of endorsed bill of entry, CENVAT Credit is admissible’: CESTAT

The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that even on the strength of the endorsed bill of entry, CENVAT credit is admissible.

The bench relied on the judgment of CESTAT Ahmedabad in the case of Khushboo beauty care 2021 (7) TMI 1231 in which the CESTAT held that “if the Bill of Entry supported with declaration given by the importer is a valid document for availing the credit by the job worker, therefore, in view of my above observation coupled with the judgment in the case of Trichem Lab (Bombay) Pvt. Ltd.(supra), I am of the clear view that the appellant is entitled for Cenvat credit on the strength of Bill of Entry even though the same is in the name of M/s Marico Limited but with a declaration in favour of the appellant. Accordingly, the impugned order is set aside. The appeal is allowed.”

Co-Owners not an Association of Persons: CESTAT Quashes Service Tax Demand on Rent Receipts

KRISHNAKANT DIPAKBHAI PATEL vs COMMISSIONER OF SERVICE TAX-SERVICE CITATION:   2025 TAXSCAN (CESTAT) 236

The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that co-owners of a property cannot be treated as an “Association of Persons” (AOP) and  quashed a service tax demand on rent receipts.

The bench, after going through various judgements, reached the conclusion that “there is no entity like an association of persons in the present case therefore the receipt of rent by individual cannot be clubbed together and demanded the service tax therefore the demand of service tax is not sustainable.

Extended Limitation cannot be Invoked Twice for the Same Issue: CESTAT M/s. Neo Metaliks Limited vs Commissioner of Central Excise and Service Tax

CITATION:   2025 TAXSCAN (CESTAT) 237

The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) rules that the extended period of limitation cannot be invoked twice for the same issue.

Neo Metaliks Limited,appellant-assessee,challenged the Order-in-Appeal, where the Commissioner (Appeals) upheld the Deputy Commissioner’s decision confirming a demand of Rs. 58,938, including cess, along with interest and an equal penalty. The dispute involved the denial of CENVAT credit for services availed by the Head Office in 2008-09, including courier, rent, retainership fees, air tickets, commission, bus rental, labor charges, telephone, and car hire.

Citing the Supreme Court’s ruling in Nizam Sugar Factory v. CCE, the tribunal held that once a demand was raised using the extended period, another demand could not be issued for the same issue in a later period. Therefore, it concluded that the demands in the subsequent notices were not sustainable.

Clandestine Removal of Fatty Acid as RPO: CESTAT Sets Aside Rs. 53.38 Lakh Duty Demand Due to Lack of Evidence Sri Deepak Keshan M/s. Budge Budge Refineries Ltd vs Commissioner of Central Excise Kolkata-VII Commissionerate

CITATION:   2025 TAXSCAN (CESTAT) 238

The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT)  sets aside Rs. 53.38 Lakh duty demand in the case of clandestine removal of Fatty Acid as Refined Palm Oil (RPO) due to lack of evidence.

The two member bench comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) found that the demand of Rs. 53,38,184/- for the alleged clandestine removal of Fatty Acid as RPO was based on assumptions, not solid evidence. The department relied on lab records showing a Free Fatty Acid (FFA) content of 4.8% to 5.6%, while only 2% to 4% was shown as recovered. However, the statement from N.K. Giri, GM (Technical), explained that the FFA percentage could vary due to several factors, which the department had ignored.

CESTAT Sets Aside ₹10 Lakh Penalty under Rule 26(1) Due to Lack of Goods Confiscation Shri Ramesh Garg, Chairman of M/s K.S. Oil Ltd vs Commissioner, CGST, Customs & Central Excise

CITATION:   2025 TAXSCAN (CESTAT) 240

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT)set aside a ₹10 lakh penalty imposed under Rule 26(1) of the Central Excise Rules, 2002, due to the absence of goods confiscation.

Rule 26 of the Central Excise Rules, 2002,(1)] Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or ten thousand rupees, whichever is greater.

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