CESTAT Annual Case Digest 2023 [Part 3]

This yearly digest analyzes all the CESTAT stories published in the year 2023 at taxscan. in The Chennai of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in a recent case has held that operational surplus is subject to the levy of service tax and cannot be excluded in reimbursable expenses. It was observed that only the actual amounts which have been received by the appellant from the client for the expenses incurred have been included for raising the demand.

The appellant has mentioned “operational surplus” in their financial statements. This is the amount collected from the client over and above the actual expenses incurred by them. It was alleged that the said operational surplus is subject to the levy of Service Tax and cannot be excluded like reimbursable expenses.

However, the Counsel has been fair enough to submit that the said circular was superseded by Master Circular No. 96/7/2007-ST dated 23. 08.

2007 wherein it was clarified by the Department that services provided by sub-contractors are taxable even though the main contractor is discharging the tax liability. The Larger Bench had noted that before 2007, the Trade Notices / Instructions and Circulars had been issued exempting the sub-contracting CHA from payment of Service Tax on the bills raised on the main CHA. The period of dispute in the appeal was before 2007, a two-member bench of Ms Sulekha Beevi C S Member (Judicial) and Mr Vasa Seshagiri Rao, Member (Technical) observed that that based on the Trade Notice which is binding upon the Department, the demand raised cannot sustain and requires to be set aside.

The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) allowed interest for period after 3 months refund of 19 crores of cenvat credit. A two member bench of Mr P K Choudhary, Member (Judicial) and Mr Sanjiv Srivastava, Member (Technical) observed that The Appellants have claimed interest as per Section 11BB. As per Section 11BB interest is to be paid after expiry of three months from the date of filing the claim to the date of claim.

In the present case refund claim was filed on 27. 12. 2012 the period of three months will be over on 26.

03. 2013. They would be entitled to the interest for the period beyond 26 March, 2013 to the date of payment i.

e. 21. 05.

2013, which is about 55 days. To that extent appeal is allowed in favour of the appellant. The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the penalty imposed on the Customs House Agent (CHA) on the illegal export of prohibited red sander goods on the ground of absence of direct involvement of Customs Broker (CB).

The Bench observed that the Commissioner (Appeals) accepted that the assessee did not have direct involvement in the illegal export of prohibited good red sander and penalty imposed against the CHA cannot be sustained. The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) quashed the penalty imposed under Section 114 (i) and under Section 114 AA of the Customs Act against the CB while allowing the appeal filed by the assessee. The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the Special Additional Duty (SAD) cannot be levied on the clearance of sample of Compact Disc (CD) or Digital Video Disc (DVD) devices in Domestic Tariff Area (DTA) which was not subjected to Value Added Tax (VAT).

The Bench observed that the goods had been cleared in the DTA as sample that had not been sold and Sales Tax / VAT not payable and the SAD was not leviable on the goods cleared as sample by availing of exemption from payment of Sales Tax / VAT and in the present case the goods are not specified as exempt goods as defined under the VAT Act, but are not part of taxable turnover. The two-member bench comprising P K Choudhary (Judicial) and Sanjiv Srivastava (Technical) quashed the SAD demand against the assessee while The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed excise duty benefit to Kitex Garments on the manufacture of readymade garments by using snap fasteners or buttons which was entitled to benefit under exemption notification. The Bench observed that the benefit of the Notification for snap fasteners was to be allowed and the department had accepted these orders and allowed the benefit of the Notification no 21/2002.

The two- member bench comprising P A Augustian (Judicial) and Bhagya Devi (Technical) upheld the allowance of benefit to the assessee while dismissing the appeal filed by the revenue. The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that service tax cannot be levied on Tax Deducted at Source (TDS) amount which was paid by the assessee from its funds and was not deducted from the client’s accounts and does not form part of the consideration of service paid. The Bench observed that in the case of VSL India Pvt Ltd vs.

CST, the court held that when TDS was not received from the non-resident since it was not towards value/consideration, there was no merit in requiring such assessee to include even the TDS it paid in the value of services. The two-member bench comprising D M Misra (Judicial) and Pullela Nageshawara Rao (Technical) held that the TDS amount paid to the Income Tax department by the assessee from his account cannot form part of the consideration of the service charges paid to the overseas service provider, accordingly, service tax was not payable on the TDS amount paid by the assessee and quashed the service tax demand while allowing the appeal filed by the assessee. The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that service tax can be levied on the guarantee commission which was paid to the State Government of Karnataka for providing irrevocable guarantee in raising funds from the debt market.

The two-member bench comprising D M Misra (Judicial) and Pullela Nageswara Rao (Technical) held that raising of finance for day-to-day operations by the assessee was a ‘service’ in the ordinary course of business operation and squarely falls within the scope of the definition of ‘support service’ and thus the assessee was liable to discharge service tax on the Guarantee commission paid to Government of Karnataka. The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the excise duty demand on clearance of electrical goods using the wrong assessee code on the ground of small inadvertent mistakes. The Bench observed that in the case of Sahara India TV, the court held that in the absence of any malafide when the mistake was brought to the department by the assessee, there had not been any short or delayed payment of service tax and directed the revenue to rectify the mistake and set aside penalty and interest.

The two-member bench comprising Ramesh Nair (Judicial) and C L Mahar (Technical) held that the demand of duty which was already paid and corresponding interest and penalties were not sustainable and quashed the excise duty demand against the assessee. The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the royalty for technical know-how for the manufacture of pantographs was a post-import activity and therefore, it cannot be part of the transaction value for the imported goods. The Bench observed that in the case of Commissioner of Customs vs.

Ferodo India Private Limited, the court held that the royalty for technical know-how for the manufacture of pantographs was a post-import activity and could not be the part of the transaction value for the imported goods. The two-member bench comprising P A Augustian (Judicial) and Bhagya Devi (Technical) quashed the addition of royalty to the transaction value while allowing the appeal filed by the assessee. The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) granted relief to Redington (India) Limited by quashing the Customs Duty Demand on the import of Wireless Application Protocol (WAP) which works on technology and does not support Long Term Evolution (LTE) standards on the ground of exemption eligibility.

The Bench observed that in the case of Ingram Micro India, the court held that the classification of identical product (i. e. WAP) are eligible for the benefit and extended the benefit of the subsequent notification and once the benefit has been granted to Ingram Micro in the subsequent notification for an identical product, the benefit under the notification should also be extended to the assessee.

The two-member bench comprising Dilip Gupta (Judicial) and Rajeev Tandon (Technical) held that the WAP imported by the assessee works on technology and does not support LTE standard and justified in claiming exemption from the whole of the customs duty under Serial No. 13 (iv) of the notification. The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the data received from the pen drive cannot be admitted as evidence, and demand of excise duty cannot be raised from the date received from the pen drive.

The two-member bench comprising Ashok Jindal (Judicial) and Anpazhakan (Technical) held that no demand for excise duty can be raised from the data received from any pen drive and computer printouts. The Chandigarh bench of Customs Excise and Service Tax Appellate Tribunal (CESTAT) held that the demand of duty for clearing goods as per Rule 8 of Central Excise (Valuation) Rules, 2000 is not justifiable if the report of Deputy Director (Cost) is not provided and allowed the appeal by Avon Steel Industries Pvt. Ltd (The Appellant) against The Commissioner of Central Excise (CCE) (The Respondent).

The two-member bench consisting of S. S. Garg (Judicial Member) and P.

Anjani Kumar (Technical Member) after hearing both sides held that “we are of the considered opinion that the impugned order is not sustainable and is liable to be set aside. It is to make it clear that we are not going, at this juncture, into the issue of limitation or revenue neutrality as we find that the appeal survives on merits. In the result, the impugned order is set aside and appeal is allowed” and the appeal was allowed.

The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand on receiving incentives amount on the ground of non-inclusion of activity under ‘Business Auxiliary Service’ (BAS). The Bench observed that in the case of Sai Service Station Ltd, the court held that the incentives were paid in connection with the sale of excisable goods by the manufacturer to the dealer which were held as ‘trade discount’ and cannot be considered as any payment to any taxable services. The two-member bench comprising Suvendu Kumar Pati (Judicial) and Anil G.

Shakkarwar (Technical) quashed the while allowing the appeal filed by the assessee. The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the CENVAT Credit of Excise Duty is allowable even if the final products are destroyed during testing. The Bench observed that in the case of Flex Engineering Ltd, the court held that there was no provision under the CENVAT Credit Rules,2002 to deny CENVAT credit just because the final products were destroyed during testing and for the reason that no export proceeds had been realized for such exports of prototypes.

The two-member bench comprising S. S Garg (Judicial) and Anjani Kumar (Technical) held that the assessee was eligible for the availment of CENVAT Credit even if the final products were destroyed during testing. The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) granted relief to the Karnataka Golf Association by quashing the service tax demand on club or membership associations services on the ground of violation of section 65B of the Finance Act,1944.

The Bench observed that in the case of the State of West Bengal & Ors. Vs. Calcutta Club Association, the court held that the amount collected as an advance fee for membership of the club was not liable for service tax and the demand itself was not sustainable.

The two-member bench comprising D M Misra (Judicial) and Pullela Nageswara Rao (Technical) quashed the service tax demand while allowing the appeal filed by the assessee. The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the rejection of the refund claim of Special Additional Duty (SAD) on the import of shoes on the ground of non-inclusion of allegation in the show cause notice (SCN). The Bench observed that the rejection of the refund claim was not sustainable in the eyes of the law as the same had not been alleged in the show cause notice when it was issued after filing the refund applications by the assessee.

The two-member bench comprising Ashok Jindal (Judicial) and Rajeev Tandon (Technical) held that the refund claim could not be rejected as time-barred as there was no allegation in the show cause notice and quashed the rejection of the refund claim while allowing the appeal filed by the assessee. The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the Kronos 4500 touch ID terminal chips are classifiable under the category of electrical machines and apparatus. The two-member bench comprising A Augustian (Judicial) and Bhagya Devi (Technical) allowed the classification made by the revenue and rejected the classification made by the Commissioner (Appeals) while allowing the appeal filed by the revenue.

The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the excise duty demand on clearance of hydraulic excavators on the grounds of absence of evidence regarding the removal of goods. The Bench observed that there was no finding given by the Adjudication Authority and the demand was confirmed on the presumption that the machinery may be removed after the completion of the project. A single-member bench comprising P A Augustian (Judicial) held that due to the absence of any evidence regarding the removal of the goods before the completion of the project, the benefit of the notification could not be denied and the demand against the assessee was unsustainable.

The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that Salami or Premium received in respect of a lease of immovable property was not eligible for service tax. The two-member bench comprising Ashok Jindal (Judicial) and Anpazhakan (Technical) held that the assessee was not liable to pay the service tax on the salami or premium received by the assessee. The New Delhi bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the penalty under section 78 of the Finance Act 1994, was impossible as there was no evidence relating to evasion of tax and allowed the appeal by Bharat Aluminium Company Ltd (The Appellant) against The Commissioner of Central Excise, Customs, and Service Tax.

The two-member bench consisting of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) held that “We are not inclined to remand the matter as it is evident from the impugned order that the only reason the Principal Commissioner confirmed the demand on the payment made to Pual is that the employment contract and other evidence were not produced before him” The bench further held that “Having considered the rival submissions on this issue, we find that to impose penalty under section 78 of the Finance Act elements of fraud or collusion or willful mis-statement or suppression of facts or violation of Act or Rules made thereunder with an intent to evade payment of tax must be established.

In the absence of evidence of such an intent, no penalty under section 78 can be imposed. In this case, not only is there “no evidence” of such an intent but the entire payment is revenue neutral at the hands of the appellant” and the appeal was allowed. The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) granted relief to Lufthansa German Airlines by quashing the service tax demand of approximately 6 crores imposed on the Passenger Service Fee (PSF) and airport tax on the ground of non-violation of Rule 6 of the Service Tax Rules,2006.

The Bench observed that the Passenger Service Fee (PFS) and Airport Tax are not includible in the assessable value of the services provided by them. Therefore, the impugned order deserves no merit and is liable to be deleted. The two-member bench comprising S.

S Garg (Judicial) and Anjani Kumar (Technical) quashed the service tax demand while allowing the appeal filed by the assessee. The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the revocation of the Customs Broker (CB) license on illegal import of sodium benzoate on the ground of Non-violation of provisions of Customs House Agents Licensing Regulation (CHALR), 2004. The Bench observed that As there was no direct involvement of the CHA and for merely having filed the import documents as per the instructions of the importer, forfeiture of the security deposit was indeed too harsh a punishment that indeed was not called for in the given circumstances and the assessee cannot be subjected to penal liabilities at a drop of a hat without expressly bringing to fore their direct involvement/mens rea.

The two- member bench comprising Ashok Jindal (Judicial) and Rajeev Tandon (Technical) quashed the revocation of the license. The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the recovery of CENVAT credit of excise duty paid on the manufacture of forklift truck parts on the ground of non-violation of section 2(f) of the Central Excise Act,1944. Bhagya Devi (Technical) quashed the recovery of CENVAT Credit against the assessee.

The Bench observed that in the case of Flex Engineering Ltd, the court held that the processes carried by the assessee in their premises resulted in manufacture, and accordingly, CENVAT Credit availed on the duty paid on inputs received was admissible to the assessee. The two-member bench comprising D M Misra (Judicial) and The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the export services of basic grade pig iron are eligible for a refund of Swachh Bharat Cess (SBC) of service tax under section 119(5) of the Finance Act, 1994. The Bench observed that as per Notification No.

41/2012 of Service Tax grants refund of service tax paid on the taxable services used for the export of goods by an exporter and since SBC had been treated as service tax, they are eligible for the refund also. The two-member bench comprising Ashok Jindal (Judicial) and Anpazhakan (Technical) held that the assessee was eligible for the refund claim of SBC while allowing the appeal filed by the assessee. The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the Nutritional Supplements imported by the assessee which are used for preparations of substances such as Creatine, Nitrates, Glutamine, and Amino Acids attract 18% Integrated Goods and Service Tax (IGST) rate under Goods and Service Tax (GST) Notification.

The Bench observed that there was no dispute that the physical assessment of the bill of entry was made by the proper customs officer and the assessee had declared the goods correctly as per the documents and claimed the exemption of IGST rate in terms of Serial No. 23 and 453 of Schedule III of Notification 1/2017. The two- member bench comprising Ramesh Nair (Judicial) and Raju (Technical) held that the nutritional supplements would attract an 18% IGST rate.

The Bangalore bench of the Customs , Excise and Service Tax Appellate Tribunal (CESTAT) quashed the penalty imposed under section 112A of the Customs Act,1962 on the undervaluation of the import of artificial flowers and photo frames on the ground of the absence of corroborative evidence. The Bench observed that in the case of Gajraj Singh Baid V/s Commissioner of Customs, the court held that when there was nothing against the assessee to allege that he was doing any of the act of omission/commission about the goods under import to render the same liable for confiscation, the penalty imposed by the adjudication authority was unsustainable. A single-member bench comprising P A Augustian (Judicial) quashed the penalty imposed against the assessee while allowing the appeal filed by the assessee.

The Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) dismissed the appeal filed by the Customs Department against the order which rejected the time-barred appeal of the Customs Department. The Department failed to prove the delay in receiving an order from the review cell. A two-member bench of .

, Member (Judicial) and Shri M. Ajit Kumar, Member (Technical) observed that both review orders, the date of receiving the Order-in-Original by the Reviewing Cell is not mentioned. When Sub Section (3) of Section 129 D prescribes a time frame of three months from the date of receiving the order passed by the adjudicating authority, it is necessary and would be convenient to mention it in the review order.

“no evidence was placed before him as to the date on which the Orders-in-Original was received by the reviewing authority, despite repeated requests. Revenues actions should be beyond suspicion. Hence the strong inference that can be drawn is that there was no evidence available to establish the date on which the order-in-original was received by the Review Cell and there was a delay in passing the review order.

”, the Tribunal viewed. The CESTAT held that the appeal filed by the department was without merits and dismissed the appeal. The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) in the case of Hindustan Coca-Cola Beverages Pvt.

Ltd had allowed the refund claim as the provision of unjust enrichment will not apply when the assessee paid duty during the investigation on post clearance of goods. A single member bench of Mr Ajay Sharma, Member (Judicial) held that “Since the Chartered Accountant’s certificate (supra) has certified that the appellant has not recovered the duty amount of Rs. 6,02,000/- from their customers, the same is not hit by the bar of unjust enrichment.

The appellant is therefore entitled to refund claimed and the appeal filed by the appellant is accordingly allowed by setting aside the impugned order. ” The Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that the service utilized by a company situated outside India falls under export service under the Export of Service Rule,2005. In view of the facts and circumstances of the case and the judgments of the Tribunal, the two-member bench of Mr S S Garg, Member (Judicial) and Mr P Anjani Kumar, Member (Technical) held that “the services rendered by the respondents to M/s SB Plc, UK constitute export of service as the services are utilized by a company situated outside India and used outside India.

To that extent, we find that the Department has not made any case for intervening with the impugned order. We find that the impugned order is proper and legally sustainable. Accordingly, we dismiss the appeal filed by the Department.

” The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the Customs duty demand on the import of tractor parts on the grounds of non-suppression of the transaction value. The Bench observed that there was no evidence available on record to reject the transaction value declared by the assessee and hence the differential duty arrived by the adjudicating authority based on the value available on contemporaneous import of similar goods was not sustainable and since the demand was not sustainable, the penalty imposed on the assessee on this count was also not sustainable. The two-member bench comprising Muralidhar (Judicial) and Anpazhakan (Technical) quashed the customs duty demand and penalty imposed on the assessee.

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the supplier of rotogravure printing cylinders is eligible to avail of the CENVAT Credit of wrongly paid excise duty. The Bench observed that the jurisdictional officer of the assessee has no jurisdiction to question the assessment or correctness of the payment of duty and the assessee had correctly availed the CENVAT credit on the Rotogravure Printing Cylinder supplied by Accuprints System. Hence the demand was not sustainable.

The two- member bench comprising Ramesh Nair (Judicial) and Raju (Technical) quashed the demand of CENVAT Credit which was availed by the assessee on wrongly paid excise duty while allowing the appeal filed by the assessee. The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) granted relief to the Koch Chemical Technology Group by quashing the excise duty demand imposed on the extraction of petroleum fuel goods on the ground of the absence of a speaking order. The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) remanded the matter for re- adjudication after giving exact reasons along with evidence for reaching the conclusions arrived at therein and quashed the excise duty demand while allowing the appeal filed by the assessee.

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the dismissal of the appeal by the Commissioner (Appeals) on the ground of the limitation of the prescribed period defined under section 128 of the Customs Act,1962. The Bench observed that according the Section 128 of the Customs Act the aggrieved party can file an appeal before the Commissioner (Appeals) within sixty days and the assessee filed an appeal beyond the condonable period. A single-member bench comprising Ashok Jindal (Judicial) upheld the dismissal of the appeal by the Commissioner (Appeals) while dismissing the appeal filed by the assessee.

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