CESTAT Weekly Round-up

The bench comprising P.V. Subba Rao (Technical Member) and Binu Tamta (Judicial Member) accepted the appellant’s submissions. The tribunal observed that freight and incidental charges related to trading activity and not service provision.

The tribunal pointed out that discounts were not consideration for any service and reimbursements as a pure agent were outside the taxable value. It also explained that services rendered to overseas clients were exported services, as recipients were located abroad and payments were received in foreign currency.

Clandestine Removal Must Be Established with Clear and Corroborated Evidence: CESTAT Rules Private Records, Unverified Shortages Insufficient

The KolkataBench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that allegations of clandestine removal must be supported by clear and corroborated evidence, and that private records, unverified shortages, and untested statements cannot be the sole basis for confirming duty demands.

The two-member bench comprising R. Muralidhar(JudicialMember) and K. Anpazhakan (Technical Member) observed that clandestine removal is a serious charge that must be proved with tangible and corroborated evidence. It explained that the department failed to produce any supporting evidence such as details of unaccounted raw material, transportation of goods, buyers, or flow of funds.

Relief for Eastern Coalfields: CESTAT Rules Recovery of Liquidated Damages from Suppliers for Breach of Contract Not Declared Service

The KolkataBench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the recovery of liquidated damages from suppliers for breach of contract is not a declared service under Section 66E(e) of the Finance Act, 1994, and is not liable to service tax.

The tribunal explained that for an activity to be taxable under Section 66E(e), there must be an express agreement to tolerate an act for consideration. In the present case, the deduction represented compensation for breach, not payment for any service.

The tribunal set aside the demand and held that liquidated damages are not taxable as declared services under Section 66E(e). The appeal was allowed with consequential relief to the appellant.

Relief for Suzuki Motors: CESTAT Rules Expenses on Pre-Delivery Inspection and After-Sale Services Not Part of Assessable Value for Excise Duty

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that expenses incurred on pre-delivery inspection (PDI) and after-sale services (ASS), whether reimbursed to dealers or included in dealer margins, are not part of the assessable value for the purpose of levying excise duty.

The two-member bench comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the issue was already settled in the appellant’s favor in earlier decisions and there was no evidence that any additional amount collected by dealers had flowed back to the manufacturer.

Telecom Operators Entitled to CENVAT Credit on Towers and Shelters as Capital Goods/Inputs: CESTAT in Bharti Airtel Case

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that telecom operators are entitled to avail CENVAT credit on towers and prefabricated shelters as capital goods or inputs used for providing telecommunication services.

The two-member bench comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the issue is no longer open to dispute, as the Supreme Court has already held that towers and prefabricated shelters are accessories to antennas and Base Transceiver Stations and fall within the definitions of capital goods and inputs under the CENVAT Credit Rules.

CESTAT Remands Service Tax Dispute on Construction Services for Fresh Computation of Demand

The benchof the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad, has remanded a service tax dispute concerning alleged non-payment of tax on construction-related services for fresh consideration by the adjudicating authority.

The Bench held that the appellant’s argument of revenue neutrality and reliance on main contractor’s liability was untenable, as subcontractors are independently responsible for service tax compliance. On classification, the Tribunal referred to the appellant’s own admission of having provided residential complex services, making him liable under that category.

Lease Rentals Not Taxable as Port Services Prior to June 2007: CESTAT Sets Aside Service Tax Demand on Kolkata Port Trust

The bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, has ruled that lease rentals collected by a port authority for temporary use of land and sheds do not fall under the ambit of “Port Services” as defined under Section 65(82) of the Finance Act, 1994, for the period prior to June 1, 2007.

The Bench comprising of Judicial Member, R. Muralidhar and Technical Member, Rajeev Tandon observed that the activity in question was merely renting of immovable property and not the provision of storage or cargo handling services.

The bench held that the extended limitation period could not be invoked, as there was no evidence of suppression or misstatement on the part of the appellant, particularly when the CBIC itself had clarified the non-taxability of such income.

Penalty Quantum u/s 114A for Misdeclared Fabric Consignment: CESTAT directs Reassessment in Customs Duty Dispute

The bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, remanded a dispute concerning penalty quantum under the Customs Act, 1962. The Tribunal held that the Adjudicating Authority had imposed a combined penalty without proper application of statutory provisions and directed reconsideration of penalty in accordance with law.

The Bench comprising Judicial Member, Ajayan T.V. and Technical Member, Vasa Seshagiri Rao, observed that the imposition of a combined penalty under Sections 112(a)(v), 114A, and 114AA by the Adjudicating Authority reflected non-application of mind, especially in view of the statutory bar on overlapping penalties.

The Bench held that penalties under these provisions are distinct and must be imposed with due regard to the facts and relevant judicial precedents.

CESTAT Upholds Service Tax Demand on Manpower Supply Services

The bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, has dismissed two appeals challenging levy of service tax on manpower supply services provided to M/s. ONGC, holding that the gross amount received for such services is liable to tax under the Finance Act, 1994.

The Bench comprising of A.K. Jyotishi, Technical Member and Angad Prasad, Judicial Member held that the activities of the appellant clearly fell under manpower supply services and that the payments made by ONGC constituted the gross amount chargeable to service tax under Section 67(105)(k) of the Finance Act, 1994.

CESTAT Restores Licence with Reduced Penalty in GST-linked Export Fraud

The Customs,Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, examined whether revocation of a customs broker licence for alleged fraudulent exports to Bhutan was justified under the Customs Broker Licensing Regulations, 2018. The bench ruled that while the broker had failed in its obligations under customs law, complete revocation of licence was disproportionate given the circumstances, and directed its restoration with a reduced penalty.

The bench comprising Judicial Member, R. Muralidhar and Technical Member, Rajeev Tandon held that Shuvam Enterprises had failed to meet its statutory obligations under Regulation 10(d) and Regulation 10(e) of the Customs Broker Licensing Regulations, 2018.

The Tribunal also observed that the case involved breach of Section 50(2) and Section 50(3) of the CustomsAct, 1962, since fraudulent declarations were made in shipping bills. These findings corroborated the department’s case that the broker violated obligations under Regulation 10.

Confiscation of 22,120 Kgs of Smuggled Black Pepper Upheld: CESTAT Reduces Penalty under Customs Law

The benchof the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, has upheld the confiscation of 22,120 kilograms of smuggled black pepper of foreign origin while reducing the penalty imposed on the appellant from ₹10,00,000 to ₹1,00,000. The matter pertains to liability under the Customs Act, 1962.

The Bench comprising of R. Muralidhar, Judicial Member and Rajeev Tandon, Technical Member, held that the smuggled nature of the black pepper was conclusively established. The bench observed that the appellant’s claim of dealing with an untraceable broker was a “clever ploy” and demonstrated mens rea, especially since he voluntarily approached Customs about the seized consignment without being formally informed of it.

Refund of Unutilized Cenvat Credit on Closure of Factory Not Permissible: CESTAT Rejects Motonic India Automotive’s Appeal in Excise Dispute

The bench of the Customs, Excise and Service Tax Appellate Tribunal, Chennai, has ruled that refund of unutilized Cenvat credit is not permissible under the Central Excise Act, 1944 or the Cenvat Credit Rules, 2004 on account of closure of manufacturing operations. The Tribunal dismissed the appeal and upheld the rejection of the refund claim amounting to ₹18,74,68,939.

The Tribunal, comprising Ajayan T.V., Judicial Member and M. Ajit Kumar, Technical Member, held that neither clause (c) nor clause (d) of the proviso to Section 11B(2) of the Central Excise Act, 1944, permits refund of unutilized Cenvat credit on account of closure of manufacturing operations. It ruled that Rule 5 of the Cenvat Credit Rules, 2004 allows cash refund only in cases of export of goods or services and does not extend to closure situations.

Service Tax Paid by Mistake on Residential Construction Treated as Revenue Deposit: CESTAT Orders 12% Interest on Refund

The bench of the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, held that where service tax was deposited by mistake on exempt construction services, the amount was in the nature of a revenue deposit and not “service tax” payable in law. Accordingly, the Tribunal directed that interest on delayed refund be paid at 12% per annum instead of 6%.

The Bench comprising of Judicial Member, Ashok Jindal observed that since the service tax was paid by mistake on exempt activities, the amount was not “tax” but a revenue deposit. Therefore, Sections 11B and 11BB of the Central Excise Act, 1944, had no application.

Service Tax Demand of ₹87.76 Lakh on Mutual Fund Investments Quashed: CESTAT Rules Activity Not “Trading of Goods” under Finance Act

The bench of the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, set aside a service tax demand raised on the ground that investment in mutual funds amounted to “trading of goods.” The Tribunal ruled that such activity does not qualify as “exempted service” under Section 66D(e) of the Finance Act, 1994, thereby quashing the demand of CENVAT credit reversal and penalties.

The Bench comprising Judicial Member, Binu Tamta and Technical Member, Hemambika R. Priya held that the activity of subscription and redemption of mutual funds does not amount to trading of goods and cannot be considered an “exempted service” under Section 66D(e) of the Finance Act, 1994.

The Tribunal emphasized that for an activity to fall within “exempted service,” it must first qualify as a “service” as defined under Section 65B(44) of the Finance Act. Since investment in mutual funds does not involve the rendering of a service for consideration, it does not fall within the statutory definition.

Liquidated Damages Not Taxable as Declared Service: CESTAT Allows Gujarat Industries’s Appeal on Service Tax Demand

No Service Tax Applicable on “Cleaning Service” Provided to Railway Prior to 01.07.2012: CESTAT sets aside Demand

The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Kolkata has held that cleaning and sanitation services provided to the Indian Railways prior to 1st July 2012 do not fall within the ambit of taxable “cleaning services” under the Finance Act, 1994.

The Tribunal, comprising Mr. R. Muralidhar (Judicial Member) and Mr. K. Anpazhakan (Technical Member), after examining the statutory definition and precedents including R.K. Refreshments & Enterprises Pvt. Ltd. v. CCE, Raipur and P. Siva Prasad v. CCE, Hyderabad-III, held that railway stations, coaches, and platforms cannot be regarded as “commercial or industrial buildings.”

Freight Forwarder Not Liable for Service Tax When Acting as Principal for Goods Exported Outside India: CESTAT

The Allahabad Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT) ruled that a freight forwarder arranging transport of goods abroad is not liable for Service Tax when acting as a principal.

The appellate tribunal held that the appellant was not providing “Cargo Handling Service” and relied on Central Board of Excise and Customs (CBEC) Circular No. 197/7/2016, which clarified that a freight forwarder acting as a principal is not liable for Service Tax when transporting goods from India to a foreign destination, as they bear all legal responsibility and risks.

Electronic Download of Software Not Liable to Customs Duty: CESTAT Rules in HCL Technologies Case

The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that software delivered through electronic download is not liable to customs duty as it does not constitute the import of goods under the Customs Act.

The two-member bench comprising Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) agreed with the appellant’s position. The tribunal observed that customs duty is chargeable only on goods brought into India in a tangible form. Since electronic downloads are intangible and not covered under the definition of imported goods, they cannot be subjected to customs duty.

Sand Lime Bricks is Type of Fly Ash Bricks, Eligible for Excise Exemption: CESTAT Quashes Excise Duty Demand of Rs. 2.6 crores

The Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), Kolkata has set aside a central excise duty demand of ₹2.67 crore along with penalties against bricks manufacturer and its directors, holding that sand lime bricks are a type of fly ash bricks and hence eligible for exemption under Notification No. 1/2011-CE dated March 1, 2011.

The bench of R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical member) observed that “the appellant-company manufactures sand lime bricks, which is a type of fly ash bricks. It is seen that both sand lime bricks and fly ash bricks are classifiable under the Chapter 68 only. We find that there is no other tariff sub-heading available in the Central Excise Tariff which provides classification of sand lime bricks.”

“Accordingly, we hold that the demand of central excise duty of Rs. 2,67,83,024/- confirmed in the impugned order is not sustainable”, ruled the bench.

OTN Cards and Modules Incapable of Independent Operation Classifiable as Parts, Not Apparatus: CESTAT Upholds Classification under ‘Parts’ Heading

The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Optical Transport Network (OTN) cards and modules incapable of independent operation are classifiable as parts and not as complete apparatus. The tribunal upheld the classification under the ‘Parts’ heading and set aside the department’s reclassification.

Based on these findings, the tribunal held that the imported OTN cards and modules were correctly classifiable as parts under the relevant heading. The reclassification made by the department was set aside, and the demand, interest, and penalties were quashed. The appeal was allowed in favor of Fiberhome India Private Limited.

Old Lead Acid Batteries Recovered from Ship Breaking Not Excisable: CESTAT Holds Removal Does Not Amount to Manufacture

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that old Lead Acid Batteries recovered from ship breaking are not excisable as their removal does not amount to manufacture under the Central Excise Act.

The two-member bench comprising Dr. Ajaya Krishna Vishvesha (Judicial Member) and Satendra Vikram Singh (Technical Member) observed that Lead Acid Batteries fall under Chapter 85.07 and are not covered by Section XV. It explained that Note 9 of Section XV applies only to goods of Chapters 72 to 83 and cannot extend to goods falling under Chapter 85.

The tribunal pointed out that the appellant merely removed the batteries from ships without any further processing. It explained that such removal cannot be considered manufacture under the Central Excise Act. The tribunal also observed that goods must be classified in the form in which they are cleared and not based on their future use.

Notice Pay Recovered from Employees Who Leave Without Completing Notice Period Not Liable to Service Tax: CESTAT

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that notice pay recovered from employees who leave without completing the stipulated notice period is not liable to service tax, as such recovery is not consideration for any service but compensation for breach of contract.

The two-member bench comprising Dr. Ajaya Krishna Vishvesha (Judicial Member) and Satendra Vikram Singh (Technical Member) observed that the issue was no longer res integra and had been settled in earlier tribunal decisions.

The tribunal further observed that the CBIC’s circulars under both service tax and GST regimes clarified that such recoveries are not taxable, as they are not payments for any service rendered or agreed to be rendered. The tribunal set aside the impugned order, holding that notice pay recovered from employees is not liable to service tax, and allowed the appeal.

Excise Dues Extinguished Under Approved Resolution Plan: CESTAT Rejects Revenue’s Recovery Appeal Against Bhatia Coke Energy Limited

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that excise dues not included in an approved insolvency resolution plan stand extinguished and no recovery proceedings can be continued against the corporate debtor.

The two-member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that in Ghanashyam Mishra case, the Supreme Court had clearly held that once a resolution plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code, all claims not included in the plan stand extinguished and no recovery proceedings can be initiated or continued.

Service Tax Demand Based Solely on ITR and Form 26AS Without Independent Verification Unsustainable: CESTAT Quashes Demand

The Allahabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a service tax demand raised solely on the basis of figures from the Income Tax Return (ITR) and Form 26AS, without independent verification, is unsustainable in law.

The single-member bench comprising P.K. Choudhary (Judicial Member) observed that the entire demand had been raised merely on the basis of the ITR and Form 26AS figures, without any enquiry or evidence to show that the receipts were for taxable services.

The tribunal pointed out that relying solely on income tax data without independent investigation cannot justify a service tax demand. The tribunal explained that various judicial precedents such as Madras High Court decision in Firm Foundation and Housing Pvt. Ltd. v. Principal Commissioner of Service Tax, Chennai and the CESTAT ruling in Sigma Trade Wings v. Commissioner of Central Excise, Lucknow, had held that such demands are not sustainable.

Weight-Based Formula to Compute Value Not Legally Valid for Furniture: CESTAT Restores Declared Transaction Value in Nilkamal Ltd Case

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that applying a weight-based formula to determine the value of imported furniture is not legally valid and directed that the declared transaction value be accepted for assessment.

The bench comprising Justice Dilip Gupta (President) and C.J. Mathew (Technical Member) observed that the valuation method adopted by the authorities was inconsistent with the law. The tribunal explained that Rule 5 requires the value to be determined based on the transaction value of similar goods, with adjustments as permitted under the rules, and not by applying a weight-based formula.

The tribunal pointed out that the use of “kilogram” as a unit in the tariff schedule is meant only for statistical purposes and cannot be used as a basis for valuation. The tribunal also observed that standing orders or valuation alerts cannot substitute statutory methods prescribed under Section 14 of the Customs Act and the Valuation Rules.

12% IGST Applies To All “Diagnostic Kits And Reagents” Under Heading 3822: CESTAT

The bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), CESTAT Mumbai, has held that laboratory reagents imported under Heading 3822 are eligible for the concessional rate of Integrated Goods and Services Tax (IGST) at 12% as clarified by the Goods and Services Tax (GST) Council and the Ministry of Finance. Therefore, setting aside the order.

The Tribunal held that the intention of Entry 80 of Schedule II of Notification No. 1/2017-Integrated Tax (Rate) dated 28 June 2017 was to extend the benefit of 12% IGST to all reagents falling under heading 3822, whether diagnostic or laboratory reagents.

Accordingly, the demand for differential IGST, interest, and penalty confirmed in the impugned order was set aside to that extent.

BIS Certification Not Required Where Shipment Predated Quality Control: CESTAT quashes Penalty On Import of Stainless Steel Coils

The bench of the Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad, set aside the order of confiscation and penalty relating to the import of stainless steel coils, holding that Bureau of Indian Standards (BIS) certification was not mandatory when the goods were shipped before the enforcement date of the Stainless Steel Products (Quality Control Order), 2016.

The Bench comprising of Dr. Ajaya Krishna Vishvesha, Judicial Member held that the date of shipment was 30 January 2017, when the Stainless Steel Products (Quality Control Order), 2016 had not yet come into force.

Loan Prepayment Charges Not Admissible for CENVAT Credit: CESTAT

The bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, has ruled that service tax paid on foreclosure or prepayment charges of business loans cannot be availed as CENVAT credit under the CENVAT Credit Rules, 2004.

The Bench of Member Technical, M.M. Parthiban held that foreclosure charges or prepayment premiums are not in the nature of services relating to financing but are instead in the nature of compensation or damages for premature termination of loan agreements.

Referring to Repco Home Finance Ltd. (2020), the Tribunal noted that foreclosure charges cannot be treated as taxable under “Banking and Other Financial Services” as defined under Section 65(12) of the Finance Act, 1994. Since no service tax is leviable on foreclosure charges, there can be no question of availing CENVAT credit on such amounts.

Refund Cannot Be Denied for Lack of BRC/FIRC: CESTAT Sets Aside Rejection in Service Tax Case

The bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, set aside the order of the Commissioner (Appeals) and allowed the refund claim of accumulated Cenvat Credit under the service tax regime.

The Bench of Anil G. Shakkarwar, Technical Member, held that the appellant’s contentions carried merit. The Tribunal observed that the attempt to include the premises in the registration was evident from the application made on 2 February 2016, and the pendency at the department’s end could not be used against the appellant.

Service Tax Cannot be Levied on TDS on Foreign Remittances Paid under Income Tax Act: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has held that service tax cannot be levied on the Tax Deducted at Source (TDS) portion of foreign currency remittances made under the provisions of the Income Tax Act, 1961.

The bench of M. Ajit Kumar (Technical member) and P. Dinesha (Judicial member) upheld the appellant’s contention, ruling that TDS is merely a statutory obligation under the Income Tax Act and cannot be treated as consideration for services rendered.

It observed that the value of taxable services is confined to the amount invoiced by the foreign service provider, whereas TDS is determined by statutory rates and has no nexus with the agreed service charges.

Declared Value of Black Pepper Imports Valid: CESTAT quashes ₹55 Crore Customs Penalty

The bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, has held that the declared transaction value of imported Black Pepper did not warrant any interference, setting aside the Commissioner’s order that had rejected the declared value, and imposed heavy penalties.

The Bench comprising P. Dinesha, Judicial Member and M. Ajit Kumar, Technical Member held that the Commissioner was not justified in rejecting the declared assessable value and treating the goods as “prohibited.” It ruled that the prohibition under the DGFT Notification was conditional and not absolute, since imports were permissible above the MIP threshold.

The Tribunal found no basis for rejecting transaction value solely on the ground of relationship between importer and exporter, particularly when the issue was of overvaluation rather than undervaluation. Import duties and GST had been duly paid, and no loss to the exchequer was established.

Classification of ATM Rolls as Printing Industry Products: CESTAT sets aside Excise Duty Demands

The benchof the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, held that thermal paper rolls pre-printed with logos and other marks are classifiable under Chapter 49 as products of the printing industry, thereby setting aside the excise duty demands raised by the Department.

The Tribunal relied on the Supreme Court’s rulings CCE v. Gopsons Papers Ltd. (supra), holding that the ratio applied squarely to the present case. The bench clarified that its 2019 order against the appellant was per incuriam as it had not considered the Supreme Court’s binding decision.

Railway Locomotive Parts Classifies Under Chapter Heading 8607: CESTAT upholds Concessional Excise Duty

The Chennaibench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), dismissed an appeal by the Department in an excise duty classification dispute, holding that locomotive parts manufactured by the assessee were rightly classifiable under Chapter Heading 8607 of the Central Excise Tariff Act, 1985, thereby affirming the concessional excise duty rate applicable to parts of railway locomotives.

The Bench comprising Ajayan T.V., Judicial Member, and Mr. Vasa Seshagiri Rao, Technical Member held that the goods manufactured by Craftsman Automation Ltd. were rightly classifiable under Chapter Heading 8607 as parts of railway locomotives.

The bench noted that the products had no independent marketability and were used exclusively in locomotives, satisfying the “sole or principal use” test under Note 3 of Section XVII of the Tariff.

Higher Import Duty applicable at 7.5% Upon Import of Aluminium Foils as per Date of Crystallization: CESTAT rejects Jil Pack’s Refund Claim

The bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) , Ahmedabad, has dismissed an appeal concerning the applicable rate of customs duty on imported aluminium foils, upholding that the relevant date for determining duty liability of 7.5% is the “entry inwards” at the port of unloading, not the vessel’s earlier arrival at another Indian port.

The Bench of Judicial Member, Somesh Arora upheld the order of the Commissioner (Appeals), reiterating that Section 15 of the Customs Act, 1962 is a machinery provision prescribing the relevant date for determination of the rate of duty.

While goods assume the character of imported goods upon entry into territorial waters, assessment must follow the statutory scheme, which specifies that the rate applicable is the one prevailing on the date of entry inwards when the bill of entry is filed in advance. The Tribunal further observed that entry inwards is port-specific under Section 31 and must be granted at each port by the proper officer.

Extended Limitation Cannot Be Invoked When all Details Disclosed in Returns: CESTAT Quashes Service Tax Demand on Reimbursed Diesel Costs for DG Set Rentals

The Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), Allahabad, has set aside service tax demands raised in connection with diesel costs reimbursed by their customers for hiring generator sets.

The Tribunal held that reimbursable diesel costs cannot be included in the taxable value of services under “supply of tangible goods,” and further ruled that the invocation of the extended period of limitation was unjustified since all relevant details had been disclosed in statutory returns and income tax records.

Mere non-reporting of reimbursed diesel costs in service tax returns could not be equated with suppression or wilful misstatement with an intent to evade tax, said the tribunal.

According to the bench, the extended limitation under Section 73(1) could only be invoked when suppression was deliberate and with intent to evade duty, conditions absent in the present case.

Credit Availed Beyond One Year from Date of Invoice Inadmissible Under Rule 4(1) of Cenvat Credit Rules: CESTAT

TheAllahabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Cenvat credit availed beyond one year from the date of the invoice is inadmissible under Rule 4(1) of the Cenvat Credit Rules, 2004.

The single-member bench comprising SanjivSrivastava (Technical Member) observed that Rule 4(1) of the Cenvat Credit Rules, 2004 clearly restricts the availment of credit to within six months or one year from the date of the invoice.

The tribunal explained that the limitation period is mandatory and does not admit any exception. It pointed out that the benefit of Cenvat credit cannot be extended merely because the invoices are genuine or the services are used for taxable output; the statutory condition of time-bound availment must be satisfied.

Compensation for Surrendering Tenancy Rights is a Capital Receipt, Not a Service: CESTAT

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that compensation received for surrendering tenancy and occupancy rights constitutes a capital receipt arising from transfer of immovable property and is not liable to service tax.

The two-member bench comprising Somesh Arora (Judicial Member) and Satendra Vikram Singh (Technical Member) observed that tenancy rights are benefits arising out of land and thus qualify as immovable property. The tribunal referred to Section 65B(44) of the Finance Act, 1994, which excludes transfer of title in immovable property from the definition of service.

It relied on precedents holding that surrender of tenancy rights amounts to transfer of an interest in immovable property and cannot be treated as a taxable service. The tribunal also observed that the consideration received was in the nature of compensation for surrender of a capital asset and was subject to capital gains under the Income Tax Act, not service tax.

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