CESTAT Weekly Round-up

The single bench of Mr. C J Mathew (Member, Technical), after perusing the records, found that this particular bill of entry was not provisionally assessed under Section 18 of the Customs Act, 1962. Instead, it was a regular assessment under Section 17. The bench held that the purported date of 'finalization' was, in fact, the date of the regular assessment.

The Tribunal reasoned that since the assessment was regular and not provisional, the provisions for extending the limitation period based on the pendency of a provisional assessment's finalization could not apply. The limitation period for filing a refund claim against a regular assessment under Section 17 commences from the date of payment of the duty.

Spa Company Collected Service Tax but fails to Deposit: CESTAT Confirms ₹17.28 Lakh Tax Demand and Penalty

The Allahabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) upheld a service tax demand and penalty against a Noida-based spa company for collecting service tax from customers but failing to deposit it with the government.

The single-member bench comprising Sanjiv Srivastava (Technical Member) observed that the proprietor had admitted ownership of the recovered documents and the suppression of receipts. The tribunal explained that the appellant’s plea of ignorance was not credible since the proprietor was also a company director.

It pointed out that the firm had issued bills showing service tax collection but failed to deposit it and even filed nil or incomplete returns. The tribunal found no merit in the appeal and held that the extended period of limitation was rightly invoked due to deliberate suppression of facts.

Once Ex-Factory Price List Is Approved, Dept Barred from Reassessing Valuation for Same Period: CESTAT

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that once the Assistant Collector has approved the ex-factory price list, the department cannot reopen valuation for the same period.

The two-member bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that the Assistant Collector had already examined the same issue in 1991 and approved the price lists based on ex-factory prices after verifying supporting documents, including the Chartered Accountant’s certification of transportation and depot expenses.

It explained that the ex-factory prices were found genuine and no evidence was produced by the department to prove otherwise. The tribunal pointed out that since the Assistant Collector’s order had attained finality, the department had no authority to reopen valuation or raise fresh demands for the same period.

SCN Issued Without Mandatory Pre-Consultation Under CBEC Guidelines Is Invalid: CESTAT

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that a show cause notice issued without mandatory pre-consultation under CBEC guidelines is invalid.

The bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that the 2017 circular made pre-consultation mandatory for all demands above Rs. 50 lakh, without any exception for suppression.

It explained that the 2021 circular introduced this exception for the first time and applied prospectively. The tribunal pointed out that since the notice was issued in 2019, the procedure should have been followed. It further observed that most of the demand was dropped and the remaining amount lacked proper investigation, as the data came from disclosed records.

Appellate Authority Cannot Decide Time-Barred Appeal on Merits: CESTAT Remands Customs Classification of Toyota Kriloskar

In a ruling in case of Toyota Kriloskar, the Chennai Regional Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that an appellate authority cannot decide the merits of an appeal without first determining if the appeal is time-barred, and remanded the matter back to the First Appellate Authority.

The bench comprising Mr. P. Dinesha (Member-Judicial) and Mr. M. Ajit Kumar (Member-Technical) held that the issue of whether the appeal was time-barred was a threshold question that the First Appellate Authority ought to have decided first.

Relying on judgments from the Supreme Court and High Courts, the Tribunal stated that an appellate authority commits an illegality by deciding the merits of a case without first addressing the preliminary issue of limitation. The Tribunal observed that the proper function of an appellate court is to correct errors of the court below, not to usurp its jurisdiction.

Win for ITC Limited: CESTAT sets aside Departmental Order on rule 16(2) of Central Excise Rules demand

The Chennai Regional Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the revenue failed to establish willful suppression to invoke the extended limitation period. It allowed the appeal of ITC Ltd by setting aside the demand order passed under Rule 16 (2) of the Central Excise Rules, 2002.

The two member bench comprising Mr. P. Dinesha (Member-Judicial) and Mr. M. Ajit Kumar (Member-Technical) observed that the Revenue's own Show Cause Notice acknowledged that the appellant had sold the paper products as scrap on payment of appropriate duty. The tribunal noted that the process of dismantling, retrieving, and identifying usable parts is invariably the first step in further manufacturing and constitutes part of the manufacturing process.

Based on this finding on limitation, the tribunal set aside the impugned order and allowed the appeal in favor of M/s ITC Limited with consequential benefits as per law.

Revenue cannot Retain Illegally recovered Tax without Interest: CESTAT allows Service Tax Appeal

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) service tax appeal filed holding that revenue cannot retain illegally recovered tax without interest. The Adjudicating Authority was directed to grant a refund of the illegally recovered amount along with interest at the rate of 6% per annum for the period from the date of recovery till the date of the refund.

While initially considering precedents for a 12% interest rate, the Tribunal noted a recent judgment of the Orissa High Court in the case of Vedanta Ltd., which had modified the interest rate to 6% per annum.

Accordingly, the Tribunal allowed the appeal, holding that the Revenue is liable to pay interest. The Adjudicating Authority was directed to grant a refund of the illegally recovered amount along with interest at the rate of 6% per annum for the period from the date of recovery till the date of the refund.

Time Barred SCN Beyond Statutory One-Year Period: CESTAT allows Cum-Duty Benefit and sets aside Time-Barred Excise Demand

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore Regional Bench, has ruled that one of the two excise duty demands was time-barred and that the assessee is entitled to cum-duty benefit on the other.

The two-member Bench comprising Mr. P.A. Augustian (Judicial Member) and Mr. Pullela Nageswara Rao (Technical Member) observed that the assessee’s omission to pay the enhanced rate of duty was an admitted fact. However, since the department issued the SCN after the limitation period, the demand for May 2010 was held to be time-barred.

However, in respect of the second period, the Tribunal held that Poorna Graphics was liable to pay the duty but was entitled to the benefit of cum-duty price as per the Shri Chakra Tyres Ltd. decision.

Interest Payable on Differential Duty Even if Paid Before Finalisation of Provisional Assessment: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore Bench, comprising P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member), has ruled that interest under Section 11AB of the Central Excise Act, 1944 is payable on differential duty even if such duty is paid before finalisation of provisional assessment under Rule 7(4) of the Central Excise Rules, 2002.

The CESTAT Bench examined Rule 7(4) of the Central Excise Rules, 2002, and noted that interest on differential duty is compensatory in nature, payable for the period between removal of goods and actual payment of duty. Relying on Bharat Heavy Electricals Ltd. (supra), the Tribunal held that the statutory scheme requires payment of interest on differential duty irrespective of whether it was paid before or after the finalisation of assessment.

Following the ratio of the Supreme Court decision in Bharat Heavy Electricals Ltd., the Tribunal dismissed the appeal filed by ITI Ltd., affirming that interest is payable even when differential duty is paid prior to finalisation of provisional assessment.

CENVAT Credit on Inputs from 100% Export-Oriented-Unit Allowable: CESTAT

M/s. Aditya Auto Products& Engineering (I) Pvt. Ltd. vs Commissioner of Central Excise

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore Bench, has held that M/s Aditya Auto Products & Engineering (I) Pvt. Ltd. is entitled to avail CENVAT credit on inputs procured from its 100% Export Oriented Unit (EOU). The Tribunal allowed the appeal, setting aside the order of the Commissioner (Appeals), which had earlier upheld the denial of credit.

The Tribunal Bench comprising Mr. P.A. Augustian (Judicial Member) and Mr. Pullela Nageswara Rao (Technical Member) observed that the payment of proper duty by the EOU was undisputed. Referring to earlier rulings, including Shreya Pets Pvt. Ltd., the Bench reiterated that full credit of education cess paid by an EOU is admissible.

Quoting the earlier decision in Emcure Pharmaceuticals Ltd., the Tribunal emphasized that Rule 3(7)(a) restricts credit only on the duty levied under Section 3 of the Central Excise Act and does not extend to levies such as education cess under the Finance Act.

CESTAT upholds Valuation of Physician Samples Based on Transaction Value under Section 4 of Central Excise Act

M/s. SrushtiPharmaceuticals Pvt. Ltd. vs The Commissioner of Central Excise

CITATION : 2025 TAXSCAN (CESTAT) 1145

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore Bench, has ruled in favour of M/s Srushti Pharmaceuticals Pvt. Ltd., holding that the valuation of physician samples sold on a principal-to-principal basis must be determined under Section 4 of the Central Excise Act, 1944, and not under Section 4A.

Rejecting the Department’s stand, the Bench held that the show cause notices were based on an incorrect premise and that the extended period of limitation could not be invoked in absence of any suppression or fraud.

The Division Bench comprising Mr. P.A. Augustian (Judicial Member) and Mr. Pullela Nageswara Rao (Technical Member) allowed three connected appeals filed by the appellant challenging the orders of the Commissioner (Appeals), Bangalore, which had upheld demands of excise duty, interest, and penalties for various periods between July 2005 and November 2011.

Trade, Cash, Turnover, and Other Discounts Actually Passed on to Buyers are Permissible Deductions in Excise Valuation: CESTAT

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that trade, cash, turnover, and other discounts known to buyers and actually passed on are permissible deductions while determining excise valuation.

It explained that valuation under Section 4(1)(b) of the Central Excise Act, read with Rule 7 of the Valuation Rules, allows exclusion of trade discounts actually passed on to buyers. The tribunal pointed out that the invoices on record reflected several discounts and that a Chartered Accountant’s certificate confirmed they were genuinely allowed.

The tribunal found that the disallowance of discounts was contrary to Section 4, departmental circulars, and judicial precedents. It held that all discounts actually passed to buyers, whether shown on invoices or through credit notes, were legitimate deductions.

Commercial Invoices Without SAD Endorsement Still Eligible for Refund under Notification: CESTAT

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that refund of Special Additional Duty (SAD) cannot be denied merely because commercial invoices did not carry the endorsement required under Notification No. 102/2007-Customs, when all other conditions were satisfied.

The single-member bench comprising Vasa Seshagiri Rao (Technical Member) relied on the Larger Bench decision in Chowgule & Company Pvt. Ltd. v. Commissioner of Customs & Central Excise [2014 (8) TMI 214 – CESTAT Mumbai (LB)]. The Larger Bench had held that a trader-importer who paid SAD and subsequently discharged VAT or sales tax on resale would be eligible for refund under Notification No. 102/2007-Customs, even if the commercial invoices did not carry the endorsement, provided all other conditions were met.

Relief for Dell India: CESTAT Rules Marketing and Support Services to Foreign Affiliates Constitute Export of Services

The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the marketing and support services provided by Dell India Pvt. Ltd. to its foreign affiliates qualify as export of services.

The two-member bench comprising P.A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) observed that the issue was already settled in Arcelor Mittal Stainless (I) Pvt. Ltd.

The tribunal explained that services rendered to a foreign entity for which payment is received in foreign exchange qualify as exports. It pointed out that the Commissioner (Appeals) exceeded the show cause notice by questioning credit eligibility.

The tribunal held that Dell’s services were exports and allowed the appeal, remanding the matter only for verification of supporting documents.

Relief for Indian Acrylic Ltd: CESTAT Rules Subscription and Membership Fees Paid to Foreign Associations Not OIDAR Services

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that subscription and membership fees paid by Indian Acrylic Limited to foreign associations did not qualify as Online Information and Database Access or Retrieval (OIDAR) services.

The two-member bench comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that there was no evidence showing the appellant accessed any online database.

It explained that payments made through normal banking channels indicated no OIDAR service was used. The tribunal also observed that the case was revenue-neutral and that invoking the extended limitation period was not justified.

Trading is Not a Service under Cenvat Credit Rules: CESTAT Remands Appeal for Recalculation of Recoverable Credit and Penalty

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) at Hyderabad allowed an appeal by way of remand to the Original Authority for the purpose of computation of the amount of credit required to be recovered, along with interest and applicable penalty.

The bench, comprising of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) noted that the issue to be decided is whether the department was right on demanding irregular availment of certain Cenvat credit taken on common inputs or otherwise.

Relying on the observation of Hon’ble High Court of Delhi in the case of Lally Automobiles Pvt Ltd, which was further upheld by the Hon’ble Supreme Court, the bench found that the appellants were required to reverse the amount proportionate to their trading turnover and in fact, they have apparently done so along with interest.

To sum up, the Bench held that demand of an amount of Rs.6,88,567/- for the period prior to April 1, 2004 is not sustainable and therefore, set it aside. Further, demand of an amount of Rs.2,14,24,389/- and penalty under section 58 was modified.

Service Tax Demand Cannot be Held as Bad in Law merely due to Payment made in Advance: CESTAT Remands Appeal for Redetermination

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Bench at Hyderabad partly allowed an appeal against the demand for Rs.2,44,22,912/- raised by department under four different categories namely - inadmissible Cenvat credit, service tax paid using the alleged wrong credit, service tax on IPR services, and service tax on technical inspection & certification services.

The Bench, comprising of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member), found that the appellants were otherwise registered under service tax and the only ground taken in the SCN was that they were not registered for BAS during the time they took credit. In pursuance of this, despite not having registration during the relevant period for any output service, demands no. 1 and 2 for denial or utilization would not sustain and the impugned order is set aside to that extent.

Testing and Analysis Services provided to Foreign Clients Qualify as 'Export of Services' under the FTDR Act: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Bench at Hyderabad allowed appeals by assessee against Order-in-Original dated 29.10.2012 October 29, 2012. They have appealed against the demand of excise duty under section 11AC of Central Excise Act, 1944 and against demand of customs duty with penalty.

It was noted that there is no definition of ‘export of service’ under the Customs Act or Central Excise Act, and in the absence of any specific provision in both the notifications as to how the term export of service is to be construed, the term has to be understood with respect to the FTDR Act, 1992 and not Finance Act, 1994 or Rules.

The bench ruled that because “these services have been exported or supplied to a recipient, who is located outside India, and consumed there and that remittance has been received in convertible foreign exchange by the Indian exporter i.e., 100% EOU” would make them eligible for the benefit of these notifications.

Network Company Collected Service Tax on Broadcasting Services but Failed to Deposit: CESTAT Upholds Penalty

The Hyderabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a network company that collected service tax on broadcasting services but failed to deposit the amount with the government is liable for penalty.

The two-member bench comprising A.K. Jyotishi (Technical Member) and Angad Prasad (Judicial Member) observed that the appellant had collected service tax but intentionally failed to remit it for a long period.

The tribunal pointed out that the appellant neither filed returns nor disclosed the liability despite being registered under the Finance Act and being aware of their obligation to pay service tax. It observed that such conduct demonstrated a clear mens rea to evade tax.

The tribunal explained that the plea of financial hardship was not sufficient to justify non-payment of service tax and could not be treated as a reasonable cause under Section 80. It observed that once the intention to evade is established, the penalty under Section 78 automatically follows.

Semi Conductor Laboratory Not a Business Entity, Not Liable to Pay Service Tax on CISF Security Services: CESTAT

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Semi Conductor Laboratory (SCL) is not a business entity and is not liable to pay service tax on security services provided by the Central Industrial Security Force (CISF).

The two-member bench comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that SCL is an autonomous government organization wholly owned and controlled by the Union Government. It pointed out that the laboratory carries out research and development activities without any profit motive and is not involved in industry, commerce, or any business.

The tribunal explained that services provided by one department of the government to another cannot be considered taxable under the Finance Act. It also observed that the protection of strategic government installations by CISF is a sovereign duty.

Entity Recognized as Exporter in Customs Documents Alone Eligible to Claim Service Tax Refund Under Notification: CESTAT

The Hyderabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that only the entity recognized as the exporter in customs documents is eligible to claim a service tax refund under Notification No. 41/2012-ST.

The Tribunal explained that NMDC delivered the goods to MMTC at the port, and MMTC, being the authorized State Trading Enterprise, exported them under its name. The tribunal pointed out that the ownership and risk passed to MMTC before shipment and that all export documentation, including the shipping bills and realization of proceeds, were in MMTC’s name.

The tribunal held that NMDC was not the exporter under Notification No. 41/2012-ST and could not claim a refund of service tax paid on input services. The tribunal stated that the right to claim rebate or refund vests only with the entity recognized as the exporter in customs documents. Since MMTC was the exporter, NMDC’s appeals were dismissed.

Discovery During Audit Alone Does Not Justify Extended Limitation u/s11A: CESTAT Sets Aside Cenvat Credit Demand and Penalty of Rs. 1.81 Crore

The Principal bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi held that mere discovery of wrongly availed Cenvat credit during audit does not justify invoking the extended period of limitation under Section 11A(4) of the Central Excise Act.

The Tribunal observed that if the assessing officer had scrutinised the returns adequately, the alleged irregularity would have been noticed without invoking the extended limitation. In the absence of evidence demonstrating willful misstatement, fraud, or suppression of facts, the invocation of extended limitation and the penalty could not be sustained.

The two-member bench of Dilip Gupta(President) and P.V. Subba Rao (Technical Member) held that the demand and penalty cannot be sustained on the ground of limitation itself and set aside the impugned order, granting consequential relief to the appellant.

No Evidence of Wilful Misstatement in SCN to Invoke Extended Limitation u/s 11A: CESTAT Set Aside Rs. 4.84 Lakh Duty Demand

The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi recently set aside a Rs. 4.84 lakh central excise duty demand, holding that the department could not invoke the extended period of limitation in the absence of evidence of willful misstatement or misrepresentation.

The Tribunal reviewed the SCN and the orders below and observed that the extended limitation can only be invoked if one of the following elements is established: fraud, collusion, willful misstatement, suppression of facts, or violation of the Act or Rules with intent to evade duty. The tribunal found that the SCN did not provide any evidence to substantiate willful misstatement or misrepresentation by the appellant.

Given the absence of evidence, the tribunal concluded that the invocation of the extended period of limitation was unjustified. As a result, the demand covering the period from June 2010 to October 2010 was time-barred under normal limitation rules.

Transaction Value Rejected on Accuracy, Duty on Copper Scrap Re-assessed Based on Similar Imports: CESTAT Upholds Customs Valuation

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that transaction values can be rejected if a reasonable doubt exists, and the duty on copper scrap was reassessed based on similar imports.

After a detailed review, the tribunal concluded the Deputy Commissioner correctly rejected the declared transaction value under Rule 12 due to reasonable doubt about its accuracy. Also the reassessment based on contemporaneous imports of similar goods under Rule 5 was lawful and procedurally proper, and the Commissioner (Appeals) was correct in upholding the Deputy Commissioner’s speaking order.

Accordingly, the two-member bench of Dilip Gupta (president) and P.V. Subba Rao (Technical Member) upheld the Customs valuation and dismissed the appeal filed by M/s Mittal Appliances Ltd.

Notional Cost of Specifications Provided by Maruti Suzuki Deemed “Buyer’s Assist”: CESTAT Quashes Excise Duty Demand on Vendor

The Principal bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi held that specifications provided free of cost by Maruti Suzuki to its vendor are merely “buyer’s assist” and do not constitute additional consideration for sale.

The Tribunal distinguished between mere specifications and detailed engineering drawings. Mere specifications are “buyer’s assist,” which help the manufacturer understand requirements but are not necessary for production. Only detailed drawings or designs, prepared for actual manufacture, may be included in assessable value.

Based on these findings, the two-member bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) concluded that the impugned order was not justified. The notional cost of specifications supplied by MSIL cannot be included in the assessable value of the goods manufactured by the appellant. Consequently, the Tribunal set aside the excise duty demand, along with interest and penalty.