Construction of BMTC’s Traffic and Transit Management Centres Not Taxable as Works Contract: CESTAT Dismisses Revenue's Appeal

Commissioner of GST and Central Excise vs M/s. ConsolidatedConstruction Consortium Ltd

CITATION : 2025 TAXSCAN (CESTAT) 1319

The Chennai CESTAT upheld the adjudicating authority’s decision that the construction of BMTC’s Traffic and Transit Management Centres (TTMCs) is not liable to service tax, as such projects fall within the statutory exclusion for “transport terminals” under Section 65(105)(zzzza) of the Finance Act, 1994. Rejecting the ₹9.7-crore demand, the Tribunal held that the essential character of the TTMCs remained that of public transport hubs under the JNNURM scheme, and the presence of commercial areas did not convert them into taxable commercial complexes. It relied on the Mumbai Tribunal’s decision in B.G. Shirke Construction Technology Pvt. Ltd., which held that TTMCs cannot be dissected for tax purposes merely because parts are leased out.

The Bench also found that the Revenue’s arguments repeated the show cause notice and failed to counter the detailed reasoning of the original authority. Allegations of suppression were rejected in view of CCCL’s disclosures, prior audits and the public nature of the project, with statements obtained under threat of prosecution weakening the Department’s case. The Tribunal cautioned the Departmental Representative against presenting arguments beyond the show cause notice and dismissed the appeal, reaffirming that TTMC construction for BMTC is fully exempt as a transport terminal.

Clearing Inputs as Such Is Not Trading: CESTAT Sets Aside ₹1 Crore CENVAT Demand on Exide Industries

Exide Industries Ltd vs Commissioner of CGST

CITATION : 2025 TAXSCAN (CESTAT) 1320

The Mumbai CESTAT set aside a demand of over ₹1 crore against Exide Industries, holding that the company’s clearance of Polypropylene Co-Polymer (PPCP) to mould manufacturers was a removal of inputs as such under Rule 3(5) of the CENVAT Credit Rules, not a “trading activity”. Since the moulders used the PPCP exclusively to manufacture battery containers and lids for Exide and returned the finished goods on payment of duty, the Tribunal ruled that Rule 6(3)—which applies only when exempted goods or services are provided—had no application. The Bench noted that PPCP had consistently been treated as an input in Exide’s earlier adjudications accepted by the Revenue.

The Tribunal criticised the Department’s case as speculative, based on assumptions without evidence of any sale of PPCP to third parties or any profit-oriented trading. It held that once Exide reversed the credit under Rule 3(5), the credit liability stood exhausted and could not again trigger Rule 6(3). Observing contradictions in the Commissioner’s findings and relying on multiple precedents, including Exide’s own earlier cases, the Tribunal found the demand, interest, and penalty unsustainable and allowed the appeal in full.

Penalty Based on Call Records Unsustainable: CESTAT Rejects Customs Case in Gold Smuggling Dispute

VASU HASMUKHBHAI VASOYA vs C.C.-AHMEDABAD

CITATION : 2025 TAXSCAN (CESTAT) 1322

The Ahmedabad CESTAT set aside a ₹3,00,000 penalty imposed on Vasu Hasmukhbhai Vasoya under Section 112(a) of the Customs Act, holding that call-detail records and circumstantial inferences alone cannot establish abetment in an alleged gold smuggling case. The Tribunal noted that all calls between the appellant and the intercepted passenger occurred after the latter was already in Customs custody, no incriminating material was recovered from the appellant, and there was no culpatory statement or evidence linking him to the smuggled gold.

Finding that the Department’s case was built on assumptions without substantive corroboration, and that the appellant’s request for cross-examination was unjustifiably denied, the Bench held that the essential elements of knowledge or involvement required for penalty under Section 112(a) were not established. The appeal was accordingly allowed, and the penalty quashed.

Concrete Mix Produced at Metro Site not Excisable as RMC: CESTAT Sets Aside Duty and Penalties

Ahluwalia Contracts India Limited vs Commissioner of CentralExcise, Bangalore-II

CITATION : 2025 TAXSCAN (CESTAT) 1323

The Bengaluru CESTAT set aside excise duty demands against M/s Ahluwalia Contracts India Ltd., holding that the concrete produced at the BMRCL project site did not meet the standards of Ready Mix Concrete (RMC) under the Central Excise Tariff. The Tribunal found that the Department had provided no technical evidence—no sampling, inspection, or expert verification—to show that the product conformed to IS 4926, which defines RMC. Instead, the concrete was manufactured as per IS 456, making it conventional site-mixed concrete. The Tribunal also noted that reliance on the statement of a finance officer, who lacked technical knowledge, could not justify the classification as RMC.

Relying on CBEC Circular No. 368/1/98-CX and relevant excise notifications, the Bench held that concrete produced at the construction site for use in the project was not only non-excisable as RMC but was in any case exempt under Notification No. 4/2006-CE (till 16.03.2012) and Notification No. 12/2012-CE thereafter. Finding the duty, interest, and penalties unsustainable, the Tribunal set aside both orders-in-appeal and allowed the appeals with consequential relief.

Department Cannot Retain RCM Service Tax Without Authority of Law: CESTAT Allows Refund Claim u/s 142(3)

Avaya India Private Limited vs Commissioner of Central GST

CITATION : 2025 TAXSCAN (CESTAT) 1324

The Mumbai CESTAT allowed the appeal and held that Avaya India Pvt. Ltd. is entitled to a cash refund of service tax paid under the Reverse Charge Mechanism (RCM) that could not be transitioned into GST. The Tribunal ruled that Section 142(3) of the CGST Act, 2017 overrides limitations under the earlier law and mandates that any amount found refundable—whether claimed before, on, or after the appointed day—must be paid in cash, except where Section 11B(2) of the Central Excise Act applies. Since the unutilised RCM-paid tax could not be carried forward into GST, it remained refundable in cash.

Setting aside the Commissioner (Appeals)’ order, the Tribunal emphasised that the refund claim had to be evaluated under existing law, but the mode of refund—cash—was dictated by Section 142(3). It found no legal bar on refunding RCM-paid service tax when the credit had not been transitioned and had not lapsed. The appeal was thus allowed, and the company was held entitled to full cash refund of the amount.

Dept Relied Only on Third-Party Material to Allege Clandestine Sponge Iron Clearance: CESTAT Quashes Excise Duty Demand

M/s. Amiya Steel Pvt. Ltd. vs Commissioner of CGST & CentralExcise, Bolpur

CITATION : 2025 TAXSCAN (CESTAT) 1327

The Kolkata CESTAT set aside excise duty, interest, and penalties levied on Amiya Steel Pvt. Ltd. and its officers, ruling that the allegation of clandestine removal of 1,733.02 MT of sponge iron was based entirely on third-party documents, untested statements, and uncertified electronic data seized from another company’s premises. The Tribunal noted that the Department never searched the assessee’s premises, found no stock discrepancy, vehicle movements, money trail, or any corroborative evidence, and failed to follow mandatory procedures under Section 9D for admitting statements or Section 36B for relying on electronic records.

Relying on precedents such as G-Tech Industries and Ramgarh Sponge Iron, the Bench held that statements recorded behind the assessee’s back—some even two years after the initial search—had no evidentiary value, and the denial of cross-examination further violated principles of natural justice. With no transport records, driver statements, raw-material discrepancies, or buyer confirmations to support claims of over 90 truckloads of alleged removals, the Tribunal found the demand entirely assumption-based. It accordingly struck down the entire duty demand and annulled all penalties on the company, its Director, and its Accountant.

Input-Output Ratio Insufficient to Prove Clandestine Removal of Pig Iron: CESTAT Quashes Excise Duty Demand and Penalties

M/s. Neo Metaliks Limited vs Commissioner of Central Goods andService Tax

CITATION : 2025 TAXSCAN (CESTAT) 1330

The Kolkata CESTAT set aside a duty demand of over ₹5.10 crore against Neo Metaliks Ltd., holding that the allegation of clandestine clearance of pig iron was based solely on theoretical input–output ratios declared in the ER-5 return, without any corroborative evidence as required under Section 11A of the Central Excise Act. The Tribunal noted that clandestine removal cannot be established through mathematical assumptions or audit-based computations alone, especially when no discrepancies were found in raw material procurement, electricity consumption, production records, dispatch activity, or stock levels.

The Bench further held that the extended limitation under Section 11A(4) was wrongly invoked, as the case relied entirely on data already disclosed in statutory returns, with no evidence of suppression or intent to evade duty. With no transport records, buyer statements, unaccounted sales, or other corroboration typically expected in such cases, the Tribunal found the computation mechanical and unsubstantiated. It accordingly set aside the entire duty, interest, and penalties, granting full relief to the appellant.

Testing and Technical Support Not Intermediary Services: CESTAT Grants Relief to Wacker Chemie on Refund Denial

Wacker Chemie India Private Limited vs Commissioner of ServiceTax-VI

CITATION : 2025 TAXSCAN (CESTAT) 1331

The Mumbai CESTAT held that services rendered by Wacker Chemie India Pvt. Ltd. to its German group company constituted export of services and could not be treated as intermediary activity. The Tribunal found that the technical testing, evaluation, and marketing support services were provided directly to the foreign recipient, with the benefits accruing outside India and payments received in convertible foreign exchange. Examining the service agreements, the Bench concluded that the arrangement reflected a principal–service provider relationship, not facilitation between two parties, and therefore did not fit the definition of “intermediary” under Rule 2(f) of the POPS Rules, 2012.

Since the service recipient was located outside India, the place of provision under Rule 3 of the POPS Rules was also outside the taxable territory, satisfying the conditions for export. The Tribunal held that accumulated CENVAT credit was eligible for refund under Rule 5, and that the lower authorities’ characterization of the services as intermediary activity contradicted established jurisprudence. It accordingly set aside the orders of the Commissioner (Appeals) and the adjudicating authority and directed that the refund be sanctioned in accordance with law.

Freight Enhancement Unsustainable: CESTAT Follows Earlier Ruling, Deletes Penalties on Co-Noticees

Chem Trader Tankers Co. Ltd vs Commissioner of Customs, Import-II

CITATION : 2025 TAXSCAN (CESTAT) 1332

The Mumbai CESTAT set aside penalties imposed on Chem Trader Tankers Co. Ltd. and another co-noticee, holding that the foundational Order-in-Original against the main importers had already been quashed in an earlier common decision dated 11 May 2023. In that ruling, the Tribunal found no evidence of covert loading at Iranian ports, freight suppression, or misdeclaration of origin, and held that additions to value under Rule 10 of the Customs Valuation Rules could not rest on mathematical reconstruction without proof of actual higher freight. As the differential duty, confiscation, and penalties against the importers were entirely annulled, the basis for penalising the co-noticees no longer existed.

Applying judicial discipline, the Bench noted that the Revenue had produced no stay or contrary order from a higher court. Since the primary allegations had already been found to be assumption-based and unsupported by evidence, the Tribunal held that penalties under Sections 112(a) and 114AA—relating to abetment of improper import and alleged use of false documents—were unsustainable. The impugned order was accordingly set aside, and the appeals were allowed with consequential relief.

Extended Limitation Cannot Be Invoked Based on Discrepancies b/w ST-3 returns and Form 26AS Data Mismatch Alone: CESTAT

M/s Uttarakhand Tent and Light House vs Commissioner of CentralExcise & CGST "

CITATION : 2025 TAXSCAN (CESTAT) 1335

The CESTAT Allahabad ruled that a service tax demand cannot be sustained—or the extended limitation period invoked—when based solely on a mismatch between ST-3 returns and Form 26AS data. The Tribunal noted that M/s Uttarakhand Tent and Light House had regularly filed returns, and the alleged differential amount of ₹3,55,934 was merely reimbursement of labour charges, duly reflected on both the credit and debit sides of the Profit & Loss Account. No independent verification was conducted by the department, and the demand rested entirely on third-party data without any evidence of suppression.

Relying on the Supreme Court ruling in Pushpam Pharmaceuticals and the Tribunal’s decision in G.D. Goenka Pvt. Ltd., the Bench held that extended limitation under Section 73 requires proof of intent to evade tax, which was absent in this case. As no fraud or wilful suppression was established, the CESTAT set aside the demand of ₹53,390 along with penalties under Sections 77 and 78 in full.

Reverse Charge Demand Sets Aside: CESTAT Says Tax Beyond Scope of SCN Unsustainable

Orbit Bearing India Pvt Limited vs Commissioner of CentralExcise & ST, Rajkot

CITATION : 2025 TAXSCAN (CESTAT) 1336

The Ahmedabad Bench of the CESTAT set aside the reverse charge service tax demand against Orbit Bearing India Pvt. Ltd., holding that the authorities had travelled beyond the scope of the Show Cause Notice (SCN). While the SCN proposed tax under one service category, the Commissioner (Appeals) reclassified certain services under “Management or Business Consultant Service,” which was never alleged in the notice. The Tribunal ruled that confirmation of tax under an unalleged service category is legally unsustainable, especially when the adjudicating authority itself had accepted that the services were not classifiable as proposed in the SCN.

The Tribunal further held that invocation of the extended limitation period was impermissible, as there was no finding of fraud, suppression, or intent to evade tax. All transactions were duly recorded in the appellant’s books and came to light only during audit, negating any suppression. Consequently, the demand beyond the normal limitation period, along with interest and penalties, was quashed, and the impugned orders were set aside to that extent.

Finalization of Provisional Assessment after 5 Years Invalid: CESTAT Quashes Differential Duty Demand issued Without S. 28 SCN

M/s S K Petrochem vs Commissioner of Customs, Ludhiana

CITATION : 2025 TAXSCAN (CESTAT) 1337

The Chandigarh Bench of the CESTAT set aside a differential customs duty demand against S K Petrochem, holding that provisional assessments cannot be finalized after an inordinate and unreasonable delay of over five years. Although Section 18 of the Customs Act, 1962 does not prescribe a specific time limit, the Tribunal observed that authorities are required to act within a reasonable period, noting CBEC instructions that provisional assessments should ordinarily be finalized within six months. The delay of 5–6 years in finalizing the assessments was held to be arbitrary and impermissible.

The Tribunal further held that a valid finalization of provisional assessment is a sine qua non for raising a demand under Section 28, and that no differential duty could be confirmed without issuing a proper Show Cause Notice after such finalization. Relying on the Supreme Court’s ruling in ITC Ltd., the Bench ruled that, in the absence of timely finalization and a separate SCN, the demand was unsustainable. Accordingly, the impugned orders were set aside and the appeal was allowed.

'Relevant Date' for Limitation u/s 28 of Customs Act for Provisional Assessment is Date of Adjustment of Duty after final assessment: CESTAT

M/s S K Petrochem vs Commissioner of Customs, Ludhiana

CITATION : 2025 TAXSCAN (CESTAT) 1337

The Chandigarh Bench of the CESTAT held that for provisionally assessed imports, the “relevant date” for limitation under Section 28 of the Customs Act, 1962 is the date of adjustment of duty after final assessment. In the case of S K Petrochem, the Tribunal noted that the provisional assessments of Rubber Processing Oil imports made during 2011–12 were finalized after an inordinate delay of over five years. Relying on the Supreme Court’s ruling in ITC Ltd., the Bench emphasized that finalization of provisional assessment under Section 18 is a sine qua non for initiating recovery proceedings under Section 28.

The Tribunal rejected the Revenue’s contention that a demand under Section 28 could be raised without a separate Show Cause Notice, holding that such an interpretation would render the statutory definition of “relevant date” otiose. Since the assessment was not finalized within a reasonable time and no valid SCN under Section 28 was issued after such finalization, the differential duty demand of ₹45 lakh was held to be unsustainable. Accordingly, the impugned orders were set aside and the appeal was allowed.

Face-Recognition Systems Classify as Automatic Data Processing Machines Under Tariff Heading 8471: CESTAT

M/s.Face IT Systems LLP vs Commissioner of Customs

CITATION : 2025 TAXSCAN (CESTAT) 1338

The Kolkata Bench of the CESTAT held that face-recognition access control systems qualify as Automatic Data Processing (ADP) Machines under Tariff Heading 8471, and not as electrical machinery under Heading 8543. The Tribunal accepted the appellant’s classification, noting that the devices had independent memory, processing capability, embedded Linux OS, facial data conversion, and automatic authentication functions, satisfying all four conditions of Chapter Note 6(A) to Chapter 84. Reliance was placed on expert technical reports from STQC and Jadavpur University, as well as earlier rulings in STJ Electronics and Invixim Access, which recognized biometric devices as ADP machines.

Accordingly, the Tribunal set aside the customs duty demands, confiscation, and penalties imposed on M/s Face IT Systems LLP and connected parties. It held that the dispute was purely one of classification, making invocation of the extended limitation period impermissible, and quashed the demands relating to 48 past consignments as time-barred. All appeals were allowed with consequential relief.

Internal Material Handling by HSCL Not Cargo Handling and Extended Period Not Invocable: CESTAT Sets Aside Service Tax Demand

M/s Hindustan Steelworks Construction Ltd vs Commissioner ofCentral Excise & Service Tax, Visakhapatnam - I

CITATION : 2025 TAXSCAN (CESTAT) 1339

The Hyderabad Bench of the CESTAT held that internal shifting and handling of steel materials within the Visakhapatnam Steel Plant did not constitute Cargo Handling Service (CHS) prior to the 16.05.2008 amendment, which first expanded the definition to include “goods.” The Tribunal noted that the activities—such as unloading, stacking, cutting, bending, and internal transportation—were confined to movement within the factory premises and did not involve “cargo” as understood under the statute. Relying on earlier decisions, the Bench rejected the department’s attempt to tax such internal material handling as CHS and set aside the related demands against both HSCL and its sub-contractor, Visakha Constructions.

On other service categories, the Tribunal partly sustained demands against HSCL under Management, Maintenance or Repair Service (MMRS) and Commercial or Industrial Construction Service (CICS), but quashed the demand under Manpower Recruitment or Supply Agency Service (MRSAS) as the services were rendered prior to the levy’s introduction on 16.06.2005. In Visakha’s case, the entire demand was set aside, with the Tribunal holding that the extended limitation period was not invocable due to bona fide belief and legal ambiguity. Consequently, Visakha’s appeal was fully allowed, while HSCL’s appeal was partly allowed.

Job Worked Coach Pillars Not Marketable and Liability Lies on Raw Material Supplier: CESTAT Sets Aside Excise Duty Demand

M/s Polmor Steels Pvt Ltd. vs Commissioner Of Central TaxMedchal - GST

CITATION : 2025 TAXSCAN (CESTAT) 1341

The Hyderabad Bench of the CESTAT allowed the appeal of Polmor Steels Pvt. Ltd., holding that door pillars and side pillars manufactured on job work for Delhi Metro coaches were not marketable goods and therefore not excisable. The Tribunal found that the pillars were produced strictly as per Bombardier’s drawings and specifications, had no independent marketability, and were never bought or sold in the market. Since the appellant merely undertook job work and received job-work charges, ownership of both raw materials and processed goods remained with Bombardier.

The Tribunal further held that even if the process amounted to manufacture, the duty liability rested on the raw material supplier, not the job worker, in terms of Notification No. 214/86-CE, as Bombardier had furnished the required undertaking. Relying on earlier precedents, the Bench ruled that any breach of the notification conditions could only be attributed to the principal manufacturer. Finding no suppression of facts, the extended limitation was held inapplicable, and the duty demand and penalties were set aside.

Absence of Time Limit in Notification allows Exemption Claim “At Any Stage” under Finance Act: CESTAT Rules in Favour of Mars International

M/s Mars International India Pvt Ltd. vs Commissioner Of CentralTax Hyderabad - II

CITATION : 2025 TAXSCAN (CESTAT) 1343

The Hyderabad Bench of the CESTAT granted major relief to Mars International India Pvt. Ltd., holding that where an exemption notification under the Finance Act, 1994 does not prescribe any time limit or procedural restriction, the benefit can be claimed at any stage of the proceedings, including during adjudication or appeal. The Tribunal rejected the department’s contention that exemption under Notification No. 34/2004-ST could be denied merely because it was not claimed in the ST-3 returns, particularly in respect of freight amounts where the consignment value was below ₹1,500.

Relying on the Supreme Court’s ruling in Share Medical Care, the Tribunal reiterated that in the absence of a statutory time bar, exemption benefits cannot be denied on procedural grounds. It held that failure to claim the exemption at the return stage does not disentitle an assessee from availing it later. Consequently, the Tribunal set aside the entire demand of service tax along with interest and penalties, allowing the appeal in full.

Consultancy for Pet Products Must Be Provided by Scientist or Institution: CESTAT Quashes Service Tax Demand Against Mars International

M/s Mars International India Pvt Ltd. vs Commissioner Of CentralTax Hyderabad - II

CITATION : 2025 TAXSCAN (CESTAT) 1343

The Hyderabad Bench of CESTAT granted significant relief to Mars International India Pvt. Ltd., setting aside multiple Service Tax demands arising from an audit covering 2006–2011. The Tribunal held that freight reimbursements did not attract GTA services as no consignment note was issued and the appellant did not directly pay for the transport. Similarly, seconded expatriate employees did not constitute taxable management or business consultancy, as the arrangement was employment-based and did not fall under manpower supply, in line with Supreme Court rulings on such secondment models.

Regarding R&D expenditures shared with foreign group entities, the Tribunal ruled that the recipients were not recognized scientists, technocrats, or scientific institutions under the Finance Act, and mere cost allocation without an actual service could not trigger taxability. Consequently, the Tribunal held the Service Tax demands, interest, and penalties—including those under Section 78 and extended period invocation—unsustainable, and allowed the appeal in full.

No Consignment Note, No GTA Tax: CESTAT Sets Aside Service Tax Demands on Indian Tobacco Traders

Indian Tobacco Traders vs Commissioner Of Central Tax Guntur -GST

CITATION : 2025 TAXSCAN (CESTAT) 1344

The Hyderabad Bench of the CESTAT set aside the Service Tax demands against Indian Tobacco Traders, holding that Goods Transport Agency (GTA) service cannot be levied in the absence of a consignment note. The Tribunal noted that the appellant had engaged individual truck owners for transportation of tobacco leaves and processed products, who merely collected freight charges and did not issue any consignment notes. Since issuance of a consignment note is a mandatory statutory requirement under Section 65B(26) of the Finance Act, 1994 read with Rule 4B of the Service Tax Rules, 1994, the essential condition for treating the service as GTA was not satisfied.

Rejecting the Department’s contention that informal slips or oral arrangements could substitute a consignment note, the Tribunal held that without such a document, no GTA service arises and consequently no Service Tax liability can be fastened. As the Department failed to establish the existence of a valid consignment note for the relevant periods, the Tribunal set aside the demands of tax, interest, and penalties, allowing all three appeals with consequential relief.

‘Knowledge’ is Mandatory Element for Imposing Penalty u/s 114 and 114AA of Customs Act: CESTAT

Nachiket Satishbhai Mavalankar vs C.C. – Ahmedabad

CITATION : 2025 TAXSCAN (CESTAT) 1350

The Ahmedabad Bench of the CESTAT set aside penalties imposed on Nachiket Satishbhai Mavalankar under Sections 114(3) and 114AA of the Customs Act, 1962, holding that penalties cannot be sustained in the absence of proven knowledge of mis-declaration. The Tribunal noted that the Order-in-Original itself recorded that statements of key persons did not attribute any knowledge of mis-declaration to the appellant, despite suspicion arising from an allegedly erroneous valuation certificate linked to an intercepted export consignment.

The Tribunal found that the Commissioner (Appeals) had taken a factually inconsistent view by concluding that the appellant knowingly signed a false valuation certificate, contrary to the findings of the original authority. Relying on settled judicial precedents, the Bench held that knowledge and intent are mandatory ingredients for invoking Sections 114 and 114AA. As these elements were not established, the penalties of ₹10 lakh were held to be unsustainable and were accordingly set aside.

Diversion of Export Goods to Domestic Market Not Proven: CESTAT sets aside Excise & Customs Demands against SEZ Manufacturer

Bhavin R Shah vs C.C.E. & S.T.-RAJKOT

CITATION : 2025 TAXSCAN (CESTAT) 1352

The Ahmedabad Bench of the CESTAT set aside excise duty, customs duty, interest, and penalties imposed on Western Impex, a 100% Export Oriented Unit in the Kandla SEZ, holding that the department failed to prove diversion of export goods into the domestic market. The Tribunal noted that the appellant had produced credible documentary evidence, including a lorry receipt for return of the goods and an officially acknowledged cancellation of the ARE-1 by the jurisdictional Superintendent. In the absence of any verification or rebuttal of these documents by the department, the allegation of diversion was held to be unsubstantiated.

The Tribunal further observed that there was no evidence of stock discrepancy, no identification of any buyer of the alleged diverted goods, and no independent corroboration of clandestine removal. Terming the investigation “half-hearted and haphazard,” the Bench held that once the assessee discharges its initial burden by producing official records, the onus shifts to the department to prove diversion with concrete evidence. As this burden was not met, all duty demands and penalties were quashed and the appeals were allowed with consequential relief.

Right to Interest Affirmed: CESTAT Grants 12% Interest on ₹5 Cr Investigation Deposit to KLJ Plasticizers

KLJ Plasticizers Ltd vs C.C. – Kandla

CITATION : 2025 TAXSCAN (CESTAT) 1353

The Ahmedabad Bench of the CESTAT held that interest at 12% per annum is payable on investigation deposits retained by the customs department, even in the absence of an express statutory provision. In the case of KLJ Plasticizers Ltd., the Tribunal noted that the ₹5 crore amount deposited during investigation was a revenue deposit, not “duty,” and therefore was not governed by Sections 27 or 27A of the Customs Act, 1962. Consequently, rejection of the interest claim on the ground that the refund was granted within three months was held to be legally unsustainable.

Relying on consistent judicial precedents, the Tribunal ruled that when the revenue retains a taxpayer’s money without authority beyond the required period, the assessee is entitled to compensatory interest, and 12% per annum has been recognized as a fair rate. The Bench accordingly directed the customs department to pay interest at 12% per annum from the date of deposit till the date of refund, and allowed the appeal.

Revenue Sharing with Doctors and Diagnostic Partners Not Taxable as BSS: CESTAT Sets Aside Service Tax Demand

Om Savitri Jindal Charitable Society vs Commissioner of CentralExcise, Goods &Service Tax, Rohtak

CITATION : 2025 TAXSCAN (CESTAT) 1357

The Chandigarh Bench of the CESTAT held that revenue-sharing arrangements between a hospital and Diagnostic Service Providers (DSPs) or Doctors/Consultants do not constitute taxable Business Support Services (BSS). In the case of Om Savitri Jindal Charitable Society, the Tribunal noted that the agreements were on a principal-to-principal basis, involving sharing of patient receipts, with no stipulation for payment of any service charges for infrastructural or administrative support. The provision of space and basic amenities like water and electricity was held to be incidental and did not amount to providing support services for running a business.

The Tribunal further observed that diagnostic services were an integral part of healthcare provided by the hospital, and doctors were engaged in a medical profession, which is distinct from business or commerce. It also noted that the department had accepted similar Tribunal orders in the appellant’s own case for other periods and was therefore barred from taking a contrary stand. Holding the demands to be legally unsustainable, the CESTAT set aside the service tax, interest, and penalties, and allowed the appeal.

Customs cannot Re-Confiscate Mercedes Car citing Import Misdeclaration when Subsequent Buyer is Unaware of Allegation: CESTAT

Watermark Systems (India) Private Limited vs Principal Commissioner ofCustoms

CITATION : 2025 TAXSCAN (CESTAT) 1358The Hyderabad Bench of the CESTAT held that customs authorities cannot re-confiscate a vehicle or impose penalties on a subsequent purchaser based on misdeclaration by the original importer, in the absence of evidence showing the purchaser’s knowledge of such violation. In the case involving Watermark Systems (India) Pvt. Ltd., the Tribunal noted that the Mercedes-Benz car had already been confiscated once under Section 111(m) and released on payment of redemption fine and penalty, and those proceedings had attained finality. Relying on the Supreme Court’s ruling in Suchita Agarwal, the Bench held that a second round of confiscation on the same facts is legally impermissible.The Tribunal further held that penalties under Sections 112(a) and 112(b) require proof that the person had knowledge or reason to believe that the goods were liable to confiscation. As the department failed to establish that Watermark Systems or the subsequent buyer had any such knowledge, the mere purchase of a used vehicle could not raise a presumption of awareness of past customs violations. Accordingly, the re-confiscation and penalties were quashed and the appeals were allowed.

Failure of Due Diligence Not Enough to Invoke Extended Period for CENVAT Demand: CESTAT Gives Relief to Krishna Art Silk

Krishna Art Silk Cloth Pvt Limited vs Commissioner of CentralExcise & Service Tax, Surat

CITATION : 2025 TAXSCAN (CESTAT) 1361

The Ahmedabad Bench of the CESTAT held that the extended period under Section 11A(1) of the Central Excise Act, 1944 cannot be invoked merely due to failure of due diligence under the Cenvat Credit Rules, 2004, in the absence of evidence showing the assessee’s involvement in supplier-side fraud. In the case of Krishna Art Silk Cloth Pvt. Ltd., the Tribunal noted that the appellant acted only as a job worker, received grey fabrics through traders on endorsed invoices, and had no direct dealings with the manufacturers later found to be fictitious. Relying on the Gujarat High Court’s ruling in Prayagraj Dyeing and Printing Mills, the Bench reiterated that extended limitation requires positive evidence of suppression or collusion.

The Tribunal observed that invoices issued by subsequently untraceable manufacturers are voidable, not forged, and may still afford protection to a bona fide holder in due course. Since there was no material to show that the appellants or their Director had knowledge of or participation in the alleged fraud, the invocation of the extended period was held to be invalid. Consequently, the demand of Cenvat credit along with interest and penalties was set aside in entirety, and the appeals were allowed.

Mobilization Advances Not Taxable Prior to POT Rules, 2011: CESTAT sets aside Service Tax Demand

M/s NCC Ltd vs Commissioner Of Central Tax Rangareddy - GST

CITATION : 2025 TAXSCAN (CESTAT) 1362

The Hyderabad Bench of the CESTAT allowed the appeal filed by NCC Ltd., holding that mobilization advances received during 2009–2010 were not taxable, as the levy on advances was introduced only with the Point of Taxation Rules, 2011. The Tribunal noted that the advances were released to meet initial mobilization expenses, backed by bank guarantees and subject to interest, and were not paid against the provision of any taxable service. Since no legal provision existed prior to 01.03.2011 treating advances as consideration for services, the demand raised for the pre-2011 period was held to be unsustainable.

Relying on precedents such as Gammon India Ltd. and Thermax Instrumentation Ltd., the Tribunal held that mobilization advances are merely financial arrangements or deposits to facilitate execution of contracts and cannot form part of the taxable value prior to the Point of Taxation Rules. Observing that Explanation 1 to Rule 3 of the 2011 Rules first brought advances into the tax net, the CESTAT set aside the impugned order and allowed the appeal with consequential relief.

Relief for Godrej Consumer: CESTAT Rules Sending Imported Goods to Job Worker is Not Violation of Target Plus Scheme Condition

M/s. Godrej Consumer Products Ltd. vs Commissioner of Customs(Air)

CITATION : 2025 TAXSCAN (CESTAT) 1365

The Chennai Bench of the CESTAT held that sending imported goods to job workers does not violate the conditions of the Target Plus Scheme and granted relief to Godrej Consumer Products Ltd. The Tribunal found that Notification No. 73/2006-Cus merely prohibited transfer or sale of imported goods and did not bar a manufacturer-exporter from utilizing job workers for processing the goods. Relying on Public Notice No. 113 (RE-2007)/2004-09, the Bench noted that the policy itself permitted use of job workers for converting imported inputs into resultant products, and violation would arise only if the goods were sold to the job worker.

Following the coordinate Bench decision in Silver Line Plastpack Pvt. Ltd., the Tribunal held that “own use” includes use through job workers and that job work does not amount to transfer or sale. As the Show Cause Notice did not allege any sale of imported goods to the job worker, no contravention of the exemption notification was established. Accordingly, the Tribunal set aside the duty demand, interest, redemption fine, and penalty, and allowed the appeal.

Customs Valuation Rejected for Timber Import: CESTAT Quashes Customs Duty Demand for Non-Compliance with Rule 12

M/s. Fine Wood Products Pvt. Ltd vs Commissioner of Customs

CITATION : 2025 TAXSCAN (CESTAT) 1366

The Chennai Bench of CESTAT set aside the enhanced customs valuation on timber imports by M/s. Fine Wood Products Pvt. Ltd., holding that the department failed to comply with Rule 12 of the Customs Valuation Rules, 2007. The Tribunal noted that the revenue relied on a single unrelated Bill of Entry and NIDB data without sharing reference documents with the importer, denying them an opportunity to respond on parameters like quality, grade, quantity, or origin. The Tribunal emphasized that valuation under Rule 9 cannot bypass the sequential procedure mandated by law, and that contemporaneous transaction values should have been considered under Rule 5, adopting the lowest value when multiple values exist.

Relying on the Supreme Court judgment in Century Metal Recycling Pvt. Ltd. (2019), the Tribunal held that the department failed to communicate in writing the reasons for doubting the declared value or provide a hearing, violating due process. Observing that reliance on a single invoice was insufficient (“one swallow does not make a summer”), the Bench found the valuation procedure fundamentally flawed. Consequently, the Tribunal quashed the customs duty demand, set aside the impugned orders, and allowed the appeals with consequential relief.

Insurance Company's CENVAT Credit Appeal Allowed: CESTAT Rules Services Received Before Restrictive Definition Applied

M/s. Royal Sundaram Alliance Insurance Company Limited vsCommissioner of GST and Central Excise

CITATION : 2025 TAXSCAN (CESTAT) 1367

The Chennai Bench of the CESTAT allowed the appeal filed by M/s Royal Sundaram Alliance Insurance Company Ltd., holding that CENVAT credit cannot be denied on grounds not raised in the Show Cause Notice. The Tribunal ruled that vehicle repair services received prior to 01.04.2011 remained eligible for credit and that the amended, restrictive definition of “input service” under Rule 2(l) of the CENVAT Credit Rules, 2004 applies only prospectively. It further held that the adjudicating authorities exceeded the scope of the Show Cause Notice by introducing new objections, thereby violating principles of natural justice.

The Tribunal also noted that the issue of invoices being in the name of insured vehicle owners stood settled in favour of insurance companies by earlier decisions. Since the services were available to discharge contractual insurance obligations and were rendered before the amendment came into force, denial of credit, interest, and penalty was unsustainable. Accordingly, the impugned Order-in-Appeal dated 01.06.2015 was set aside and the appeal was allowed with consequential relief.

Clandestine Removal Charge Fails: CESTAT Drops ₹97.9 Lakh Excise Demand over Non-Compliance with S.9D and S. 36B

M/s. Vikromatic Steels Pvt.Ltd VS Commissioner, CGST & CX,Ranchi

CITATION : 2025 TAXSCAN (CESTAT) 1369

The Kolkata Bench of the CESTAT set aside a demand of ₹97.9 lakh against M/s Vikromatic Steels Pvt. Ltd., holding that the allegation of clandestine removal was unsustainable due to non-compliance with mandatory statutory requirements governing evidence. The Tribunal found that the case, arising from a DGCEI search and based on loose sheets, pen-drive data and statements, failed to meet the admissibility standards under the Central Excise Act, 1944, as the procedures prescribed under Sections 9D and 36B were not followed.

The Tribunal held that statements relied upon by the Department were inadmissible since the makers were not examined before the adjudicating authority as required under Section 9D, and the electronic records lacked the mandatory certification under Section 36B. In the absence of independent corroborative evidence, loose papers and unverified electronic data could not establish clandestine manufacture or clearance. Consequently, the Tribunal held that the Revenue had failed to discharge its burden of proof and set aside the demand of ₹97,97,194 along with interest and penalties on both the company and its Director.

Excise Duty Cannot Rest on Assumptions: CESTAT Rules Clandestine Clearance Allegation Fails for Lack of Cogent Evidence

The Commissioner, Central Excise & Service Tax vs ChandukaHi-Tech Steels Pvt. Ltd

CITATION : 2025 TAXSCAN (CESTAT) 1370

The Kolkata Bench of the CESTAT dismissed the Revenue’s appeals and upheld the dropping of a ₹2.49 crore excise duty demand, reiterating that allegations of clandestine manufacture and clearance cannot be sustained on assumptions, presumptions, or preponderance of probabilities. The case arose from an investigation alleging that M/s Chanduka Hi-Tech Steels Pvt. Ltd. (CHPL) clandestinely manufactured and cleared goods from its own premises and from units of M/s KYS Manufacturers & Exporters Pvt. Ltd. and M/s Ratangarva Industries (RI). While the Department relied on seized documents, a pen drive, and statements to allege unaccounted clearances, the Adjudicating Authority found no evidence linking CHPL to manufacture or clearance from RI’s premises and dropped the demand.

The Tribunal held that CHPL, KYS, and RI were independent, separately registered manufacturers and that the Revenue’s case rested solely on uncorroborated third-party statements and inadmissible electronic records, as the requirements of Section 36B of the Central Excise Act, 1944 were not met. It further noted the absence of essential corroborative evidence such as excess raw materials, power consumption, transport records, buyer statements, or flow-back of funds. Emphasising that clandestine removal is a serious charge requiring cogent proof, the Tribunal found no infirmity in the Commissioner’s order and rejected the Revenue’s appeals, confirming that no duty demand or penalty was sustainable.

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