CESTAT Weekly Round-up

The two-member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that the adjudicating authority’s findings were not supported by evidence. It explained that for an intellectual property service to be taxable under Section 65(55a), the right must be recognized under Indian law.

The tribunal pointed out that the authority had made a bald statement that the IPRs were covered under Indian statutes without any proof of registration or inquiry.

The tribunal held that there was no evidence to show that the DTS technology and trademarks were registered in India but the services could not be treated as intellectual property services. It explained that without registration under Indian law, such rights do not qualify as taxable IPR under the Finance Act. The tribunal set aside the demand, interest, and penalties.

Penalty for Delayed Excise Duty Payment to Be Calculated Only for Actual Days of Delay, Not Entire Month: CESTAT

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that penalties for delayed excise duty payments must be calculated only for the actual number of days of delay and not for the entire month.

The single-member bench comprising Dr. Rachna Gupta (Judicial Member) observed that Rule 8(3A) requires the penalty to be computed at 1% per month or part thereof, meaning it can be calculated even for part of a month on a proportionate basis.

The tribunal explained that the expression “part thereof” refers to the actual number of days of delay and cannot be stretched to cover an entire month. The tribunal pointed out that various High Courts, including the Madras and Gujarat High Courts, had already interpreted the rule to mean the penalty should apply only for the exact period of default.

Proforma Invoices Cannot Replace Commercial Invoices Prepared After Negotiation and Accepted by Customs: CESTAT

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that proforma invoices cannot replace commercial invoices that were prepared after negotiation and accepted by customs authorities.

The two-member bench comprising Justice DilipGupta (President) and Hemambika R. Priya (Technical Member) observed that the department failed to establish any connection between the alleged proforma invoices and the actual imports.

The tribunal explained that the statement recorded under Section 108 could not be relied upon because the mandatory procedure under Section 138B was not followed. It also observed that the proforma invoices did not have evidentiary value in the absence of supporting proof.

Permanent Assignment of Commercial Space with Right on Leasehold Land Not ‘Lease’: CESTAT Rejects Service Tax Demand

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that the permanent assignment of commercial space together with proportionate rights on leasehold land does not amount to a “lease” for the purposes of assessing levy of service tax.

The two-member Bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) observed that the terms of transfer demonstrated permanent assignment of ownership rights rather than a continuing lease arrangement. Accordingly, the Bench emphasised that the nature of the transaction was one of outright transfer of property and that the appellant retained no further interest after the transfer.

Customs Wrongly Encashed Bank Guarantee during Appeal Pendency: CESTAT Directs Refund, Rejects Limitation Claim

The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) recently directed the Customs department to refund a bank guarantee that was encashed by them during the pendency of an appeal which was eventually answered against the customs.

The Bench relied on the Supreme Court decision in Mafatlal Industries Ltd. v. Union of India (1997) where it was laid down that ‘Section 27 cannot be construed as a device enabling the state to unjustly retain an amount not legally due’.

The Apex Court had in similar fashion observed in Oswal Agro Mills Ltd. v. Asstt. Collector of Central Excise, Division Ludhiana (1995) that the Customs had displayed improper behaviour and that bank guarantees were furnished to secure the interest of the parties till determination of matters pending before the Court and it could not be encashed till the decision of the Court.

Electricity Charges Collected by Maintenance Firm Not Taxable Under Service Tax: CESTAT

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that electricity charges collected by a maintenance firm from residents cannot be included in the taxable value for service tax.

The two-member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that electricity charges represented payments for goods and not services and could not be taxed.

The tribunal explained that there was no legal basis to treat reimbursement of electricity as part of the taxable value. It also observed that issuing multiple show cause notices for the same period and activity was not legally sustainable.

CESTAT Finds Factual Error in Denial of Duty Exemption on Imported Clinical Trial Drugs, Remands Matter

Lambda Therapeutic Research Limited vs C.C.-Ahmedabad

CITATION : 2025 TAXSCAN (CESTAT) 1207

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) remanded the case of Lambda Therapeutic Research Limited after finding a factual error in the denial of a customs duty exemption on imported clinical trial drugs.

Lambda Therapeutic Research Limited, the appellant, engaged in conducting clinical research, imported various bioequivalence drugs for clinical trials during the years 2007–2008 to 2011–2012.

The single-member bench comprising Somesh Arora (Judicial Member) observed that both parties agreed on the existence of a factual error regarding the filing of “Form 44.” It explained that the issue required a fresh examination of documents and that a fair opportunity should be given to the appellants to present additional material.

No Customs Penalty for Misdeclaring Goods in Airway Bills: CESTAT sets aside ₹2L Penalty on Ajanta Pharma

The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) recently allowed an appeal filed by Ajanta Pharma Ltd. and set aside a penalty of ₹2,00,000 imposed under Section 117 of the Customs Act, 1962, holding that no contravention of the Customs Act was alleged or established where the purported mis-declaration appeared only in airway bills.

The Department, represented by Deputy Commissioner Dinesh Nanal, raised a case that the airway bills were mandatory export documents under paragraph 2.06(a) of Chapter 2 of the Foreign Trade Policy 2015-20 and any discrepancy of the goods with the description in the airway bills amounted to mis-declaration and warranted penal action.