CESTAT Annual Digest 2023 (Part-10)

This analyzes all the CESTAT stories published in the year 2023 at taxscan. in The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that demurrage charges were not includable in the custom valuation of imported goods to charge customs duty. The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) quashed the demand raised by the revenue while allowing the appeal filed by the assessee.

While considering a bunch of appeals, the Chennai Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the retrospective effect of two years does not apply to export obligation extension as the Export Promotion Capital Goods (EPCG) committee has not stated any period. A two-member bench comprising of Ms Sulekha Beevi C S, Member (Judicial) and Mr Vasa Seshagiri Rao, Member (Technical) set aside the penalty imposed by the adjudicating authority on the supporting manufacturers viz. M/s.

Renault Nissan, M/s. Gestamp Automotive Chennai, M/s. Myoung Shin India Automotive, M/s.

Daejoo Automotive, M/s. Global India Automotive, M/s. Magna Automotive, M/s.

Caparo Engineering India on the ground of installation of imported capital goods in other premises. The CESTAT remanded the matter to the adjudicating authority to consider the decisions passed by the Committees, the compliances made by the appellants and the fulfilment of export obligations and pass a fresh order preferably within 3 months. The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that biscuits qualify as food stuff and hence are eligible for service tax refund.

A Two-Member Bench comprising R Muralidhar, Judicial Member and K Anpazhakan, Technical Member observed that “From the Order, it is clear that the only ground on which the refund claim has been rejected is on account of application of Section 11B i. e. time bar.

The Commissioner (Appeals) has also upheld the OIO. Therefore, it has to be concluded that upto the OIA stage, the only ground on which the refund claim has been rejected is on account of Section 11B provisions. Therefore, there is no necessity for us to go into the aspect as to whether the biscuits can qualify as food stuff so as to be eligible for the exemption.

” The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand on management, maintenance, and repair services on the grounds of limitation. The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) deleted the demand raised under Management, Maintenance & Repair Services on the ground of limitation. The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the warranty and Annual Maintenance Contract (AMC) service provided by a common service provider as common input service for both manufacturing unit and corporate offices are entitled to CENVAT credit of excise duty.

The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) quashed the CENVAT credit demand while allowing the appeal filed by the assessee. The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) abated the service tax appeal as per Rule 22 of CESTAT procedure rules,1982 on the grounds of non-filing of application by the liquidator. A single-member bench comprising Pullela Nageswara Rao (Technical) held that where no application for continuance of the proceeding before this Tribunal was filed by the liquidator and the appeal abated as per Rule 22 of CESTAT Procedure Rules.

The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) granted relief to LG Electronics by allowing a refund of (SAD) on the import of goods on the grounds of service tax exemption eligibility. The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) held that the rejection of the refund claim was not justified and allowed the appeal filed by the assessee. The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed service tax demand and ruled that the income from sale of tender forms, xeroxing, printing, digital software, certificates not (BAS).

A Two-Member Bench comprising Anil Choudhary, Judicial Member and AK Jyotishi, Technical Member observed that “A perusal of the said categorisation of services would clearly reveal that, the Appellant would only assist the Government Departments/Organisation for availing/procuring various IT related hardware/services, and for such assistance, they collect certain administrative charges. Therefore, the services of the Appellant do not satisfy the definition of ‘commission agent’ so as to bring them under the category of ‘Business Auxiliary Services’. ” “Further, with respect to exemption claim rejected on income such as, sale of tender forms, xeroxing and printing and digital software and certificates, which are not covered under business The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the rejection of CENVAT credit of excise duty demand on the manufacture of drugs on the ground of limitation.

The two-member bench comprising S S Garg (Judicial) and Anjani Kumar (Technical) upheld the rejection of recovery of CENVAT credit availed by the assessee. The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the CENVAT credit of excise duty is allowable on the raw materials used for the manufacture of finished goods. The two-member bench comprising (Judicial) Sulekha Beevi and Vasa Seshagiri Rao (Technical) held that the assessee was eligible for the refund claim while allowing the appeal filed by the assessee.

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service tax cannot be levied on the activity of laying pipelines provided to the Government under ‘Works Contract Service’. The Bench observed that in the case of Lanco Infratech Ltd. Vs CC, the court held that the activity of laying of pipelines as stated in clause (b) of the definition of Works Contract Services as well as turnkey projects involving laying of the pipelines and other connected activities when provided to Government would be exempt from levy of service tax.

The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) held that the laying of pipelines was outside the purview of levy of service tax, under works contract service. The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the amount received for renting fit-outs or movable properties would not fall under the category of renting immovable property services. The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) quashed the demand raised by the revenue while allowing the appeal filed by the assessee.

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the interest liability cannot be raised on merely availed CENVAT credit and reversed before the utilization for remittance of excise duty. The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) upheld the wrongly availed CENVAT credit demand and quashed the demand of recovery of interest on such ineligible CENVAT Credit by the assessee. The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the excise duty demand on the clearance of TOR steel on the grounds of the absence of corroborative evidence.

The Bench observed that the revenue had not collected the details of raw material suppliers nor any attempt was made to investigate raw material suppliers from either questioning the partner. Also, not an iota of evidence was placed on record indicating clearance of the manufactured goods clandestinely by bringing on record the evidence of Transporters or the purchasers of finished goods. The two-member bench comprising D M Misra (Judicial) and Pullela Nageshwara Rao (Technical) quashed the excise duty demand imposed on the assessee while allowing the appeal filed by the assessee.

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed re-credit of cenvat credit as capital goods are used in manufacture of final products, thereby granting relief to M/s. MRF Limited. A Single Member Bench comprising Vasa Seshagiri Rao, Technical Member observed that “In view of the above, we have to hold that the appellant is eligible to retake the credit which was initially provisionally written off.

The provisions of Rule 3(5B) of erstwhile Cenvat Credit Rules, 2004 are very clear which states that when said inputs or capital goods are subsequently used in the manufacture of their products, the manufacturer is entitled to take the credit of the amount equivalent to the Cenvat Credit paid earlier. ” The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the vajra vahan which was considered as specially constructed and fitted vehicle enabled to perform specified functions was eligible for excise duty exemption. The two-member bench comprising S S Garg (Judicial) and Anjani Kumar (Technical) held that the vajra vahan can be classified as a special vehicle used for specific functions.

The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the National Calamity Contingent Duty (NCCD) cannot be levied on the clearance of excisable goods to 100% Export Oriented Units (EOU) for captive consumption. The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) held that the NCCD was not leviable in respect of goods cleared availing the benefit of Notification No. 108/95-CE while allowing the appeal filed by the assessee.

The Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) granted the service tax refund claim, affirming that the eligibility for refund benefits was not contingent upon compliance with the provisions of Rule 2(l) of CCR. The appellant, Western Union Services India Pvt. Ltd.

, operates in the provision of output services categorized as ‘management or business consultant service,’ ‘business support service,’ and ‘information technology software service. ’ These services fall under clauses (r), (zzzq), and (ze) of Section 65(105) of the Finance Act, 1994. The assessee contested the decision made by the adjudicating authority, which denied the benefit of Rs.

41,93,540 for the period from January 2014 to March 2014. He argued that challenging the refund claim for the credited amount due to the exportation of output services is not permissible, citing Rule 5 of CCR. The department contended that the complete refund claim was declined because the assessee failed to provide details of Foreign Inward Remittance Certificates (FIRCs).

The two-member bench, consisting of S K Mohanty (Judicial) and Parthiban (Technical), approved the refund claim submitted by the appellant. The Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) stated that the linkage aspect cannot be challenged when addressing the refund application submitted under Rule 5 of the CENVAT Credit Rules (CCR), 2004. The appellant, Western Union Services India Pvt.

Ltd. , operates in the provision of output services falling within the taxable categories of ‘management or business consultant service,’ ‘business support service,’ and ‘information technology software service’ as defined in clauses (r), (zzzq), and (ze) of Section 65(105) of the Finance Act, 1994. The appellant contested the decision of the adjudicating authority, which denied a benefit of Rs.

41,93,540 for the period from January 2014 to March 2014. The Bench noted that as the utilization of CENVAT credit by the assessee was not contested, the assertion of refund for this credit related to the exportation of output services cannot be challenged, as Rule 5 of CCR does not explicitly mandate the establishment of a nexus or any other requirement for the approval of the refund benefit. The two-member bench comprising S K Mohanty (Judicial) and M M Parthiban (Technical) held that the nexus aspect cannot be questioned while dealing with the refund applications filed under Rule 5 of CCR.

The Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that there is no restriction on availing the CENVAT Credit of Service Tax accumulated during the period when the premises were not registered. Zyfin Capital Private Limited, the appellant, engaged in exporting services such as market research analysis and data support, among others, without duty payment. The company has been receiving convertible foreign currency since its initial export in December 2013.

The appellant, Zyfin Capital Private Limited, contested the decision of the Commissioner of CGST & Central Excise, who rejected a portion of the assessee’s refund claim. The Bench observed that the refund of unutilized CENVAT credit in export of services having a purpose to encourage/promote export and earn foreign exchange, a minor procedural infraction would not stand in the way of grant of refund and the assessee was therefore, entitled to get the entire amount of refund claim. The two-member bench comprising Suvenda Kumar Pati (Judicial) and Anil G Shakkarwar (Technical) held that the assessee was entitled to get the refund with interest applicable as per law and the Department was directed to pay the same within three months of receipt of the order.

The Bombay High Court instructed to file an appeal before the Customs Excise Service Tax Appellate Tribunal (CESTAT) challenging the imposition of anti-dumping duty relying on an expired excise notification. The petitioner argued that the court should invalidate the notifications, a power not vested in the Tribunal. It was asserted that a well-established legal principle is that amendments cannot be made to a lapsed primary notification, as confirmed by the Supreme Court in line with the Delhi High Court’s decision in the case of Kumho Petrochemicals Co.

Ltd. vs. Union of India.

A division bench consisting of Justice G S Kulkarni & Justice Jitendra Jain noted that the CESTAT has already taken up the matter. Acknowledging all contentions raised by the petitioner in the challenge, the Court dismissed the petition, granting the petitioner the freedom to present these contentions before the CESTAT or initiate suitable proceedings if necessary. A division bench of Justice G S Kulkarni & Justice Jitendra Jain observed that the CESTAT has already seized the matter.

The Court concluded the case, granting the petitioner the freedom to present these contentions before the CESTAT or file suitable proceedings if necessary. The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) recently issued a divided decision in a case concerning various aspects of salaries paid to expatriates by Indian subsidiaries of multinational corporations (MNCs) The division bench comprising Sulaikha Beevi and Accountant Member M Ajit Kumar gave a split decision. The point of difference was related to(1) whether the portion of salary/emoluments disbursed by the appellant to secondees in India in Indian Rupees constitute consideration under Section 67 of the Finance Act, 1994 for the services of MRSA provided by Nissan Japan to the appellant? (2) Will payments of a portion of the salary to secondees in Indian currency be included in the ‘gross amount charged’ for determining the taxable value.

The case, centered around Nissan Motors India, presented a unique scenario where a portion of the emoluments was paid by the foreign company, while the remainder was directly disbursed by the Indian entity to overseas employees on deputation to India. The judicial member asserted that salaries and allowances paid directly by the Indian taxpayer to secondees should not be subject to taxation. Conversely, the technical member argued that such payments should be included in the taxable value.

However, the recent Chennai CESTAT case differs from NOS, as it involves a division of emoluments between the foreign and Indian companies. The tribunal’s focus was on valuation and determining the taxable value, not the overall taxability of the transaction. In response to the escalating situation, the Central Board of Indirect Taxes and Customs (CBIC) has urged field officers not to uniformly treat expatriate salaries from Indian subsidiaries of MNCs, differentiating them from the NOS case.

This directive aims to temper the enforcement measures taken by authorities. Companies affected by these developments, such as BMW India, Mitsubishi Electric India, Metal One Corporation, Alstom Transport India, United Breweries, and Kanematsu India, have sought relief from high courts and obtained interim protection against coercive actions by tax authorities. The Hyderabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) noted that the subcontractor is responsible for paying service tax, even if the main contractor has already settled the service tax on the contract value.

The appellant, Akash Engineering Services argued that once the tax has been already levied by the main contractor, it should not be subjected to taxation again in the hands of the subcontractor. This is because the services provided, whether related to the work assigned to the subcontractor or carried out by the Principal Contractor, constitute a single transaction. Revenue contended that in a Works Contract Services transaction, the transfer of property in goods occurs directly to the customer through the theory of accretion, as recognized in the mentioned judgment.

The property in the goods does not transfer to the main contractor at any point during the execution of work by the subcontractor. The subcontractor acts merely as an agent of the main contractor, and the property in the goods directly passes from the subcontractor to the customer. Therefore, there can only be one sale, which is a deemed sale.

A Single Bench of CS Sulekha Beevi, Judicial Member agreed with the view taken by Member (Technical) and held that the Appellant is liable to pay service tax on the value of sub-contract/work done in spite of the fact that the main contractor has discharged the service tax on the whole contract value. The Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) affirmed the decision that approved a refund when the order for amending bills of entry had become final. M/s Lava International Limited imported mobile phones with accessories and filed 447 Bills of Entry from May to July 2014.

The goods were self-assessed under Section 17, classified under CTH 85171290, and Additional Customs Duty (CVD) at 6%/12. 50% was duly paid. However, the importer did not claim exemption under Sl.

No. 263A. The respondent, M/s Lava International Ltd, referred to the SRF Ltd.

case, where the Supreme Court ruled in favor of importers. Following this judgment, the respondent requested the re-assessment of Bills of Entry, a process that concluded in 2018 and was accepted by Customs authorities. Four refund applications were subsequently approved.

The counsel stressed the resolution of a similar issue in favor of the respondent, asserting the rightful refund claim in accordance with Customs Act provisions and the ITC Limited decision. Emphasis was placed on the significance of self-assessment and the applicable provisions for modification and refund. Revenue raised objections to the re-assessment of self-assessed Bills of Entry from 2014, conducted in 2018.

The officer later termed it an “amendment under Section 149,” contradicting refund sanctions. The two member bench of the tribunal comprising Binu Tamta (Judicial) Member and Hemambika R. Priya (Technical) Member concluded that the aforementioned order of the tribunal had reached its conclusive stage and in result, the appeals filed by the revenue were dismissed.

The Delhi High Court has ruled that the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) do not have jurisdiction to entertain cases challenging orders of the Commissioner of Appeals regarding the payment of Duty Drawback. The appellant, M’s Sans Frontiers challenged the notice dated 06. 07.

2021 (hereinafter referred to as ‘the impugned notice’) issued under Section 128A(3) of the Customs Act, 1962 (hereinafter referred to as ‘the Customs Act’). The notice called upon the Firm to provide reasons why the refund order dated 10. 02.

2020, issued by the Deputy Commissioner (Drawback), ACC Export Commissionerate, should not be annulled, or any other suitable order be passed by the Appellate Authority. The refund of the Duty Drawback was granted based on the order dated 02. 11.

2018 issued by the Customs Excise and Service Tax Appellate Tribunal (hereinafter referred to as ‘the CESTAT’). Revenue asserted that this action was conducted erroneously, contending that the CESTAT lacked jurisdiction to entertain any appeal related to Duty Drawback. According to Revenue, the CESTAT’s order is non-existent, and consequently, the funds refunded to the Firm need to be recovered.

The Commissioner (Appeals) noted that Duty Drawback was not permissible on goods exported by the Firm, being a 100% EOU, as per proviso 2 to Rule 3 of the Drawback Rules. The Firm challenged the order dated 14. 05.

2018 passed by the Commissioner (Appeals) before the CESTAT, specifically contesting the penalty imposed. The Firm argued that the Commissioner (Appeals) had acknowledged the voluntary deposit of the wrongly availed Duty Drawback, leading to a reduction in the penalty from ₹15,00,000/- to ₹5,00,000/-. Additionally, Revenue contended that issuing a second show cause notice on the same subject matter contradicts a well-established principle.

Before the impugned show cause notice, the concerned authority had issued a Demand-cum-Recovery letter dated 12. 03. 2014 on the same issue.

In response, the Division Bench of Justice Amit Mahajan and Justice Vibhu Bakhru concluded that the appeal filed by the Firm before the CESTAT was not maintainable, rendering the Tribunal’s order void ab initio. A decision by a Single Member Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), presided over by SS Garg, Judicial Member, clarified that if automobile cess has already been paid at the time of import, no additional payment is required for e-bikes. The current appeal challenges the contested decision issued by the Commissioner (Appeals), wherein the demand for Automobile Cess was upheld based on the grounds of value addition.

However, it was acknowledged that a reevaluation of the Automobile Cess on value addition is necessary, prompting a requirement for a fresh computation. Notably, no penalties or interest were imposed on the appellant. The accusation against the appellant revolves around their alleged failure to submit the mandatory return in the specified format under the Automobile Cess Rules, 1984.

Additionally, it is claimed that the appellant intentionally concealed information regarding the production, clearance, and value of E-Bikes from the department to evade the payment of automobile cess. The E-Bikes were chargeable to duty as per section 4 of Central Excise Act and E-Bike parts on MRP basis as per section 4A of Central Excise Act. A show cause notice dated 19.

11. 2010 was issued to the appellant alleging that appellant imported E-Bike parts and E-Bikes in CKD condition. The E-Bike were granted full exemption from payment of duty The appellant argued that the appellant at the time of import of E-bike in CKD condition paid the automobile cess and there is no need to pay the automobile cess again because E-bike imported in CKD condition after assembling cleared without payment of Central Excise duty as goods imported and cleared from the factory premises falling under same sub-heading and the processes undertaken does not amount to manufacture as per Section 2(f) of Central Excise Act being no new/distinct product came into existence.

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) dismissed the service tax demand related to brand promotion services. The appellant was entitled to receive the player fee and various benefits as outlined in Schedule I of the Agreement. Alongside the player fees, an additional 10% of the player fee was allocated to the appellant for engaging in promotional activities on behalf of M/s.

ICL and its affiliates, sponsors, etc. Despite the payment being categorized into player fee and promotional activity compensation, the entire remuneration appeared to be of a composite nature. Revenue asserted that the amount paid to the appellant constituted consideration for the brand promotion services provided to M/s.

ICL. According to the department’s perspective, this activity falls within the definition of service under Section 65B (44) of the Finance Act, 1994, effective from July 1, 2012. A show cause notice was issued covering the period from July 2012 to March 2014, proposing the imposition of service tax on the amounts received by the appellant from M/s.

ICL, along with interest and penalties. A Two-Member Bench of the Tribunal comprising Vasa Seshagiri Rao, Technical Member and CS Sulekha Beevi, Judicial Member held that “The Tribunal held that the relationship between the cricket player and the franchisee is that of an employer-employee relationship. The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) upheld the seizure of unaccounted gutka, stating that in tax matters, mens rea is not necessary as non-compliance with statutory provisions is adequate.

The main contention of the appellant is violation of the provisions of section 9D of the Central Excise Act, 1944, leading to non-compliance of the principles of natural justice. He relied on the Circular No. 1053/2/2017 – CX, dated 10.

3. 2017 to say that where a statement is relied upon in the adjudication proceedings, it would be required to be established through the process of cross examination, if the noticee makes a request for cross The Revenue on the other hand has supported the findings arrived at by the authorities below and relied on several judgements to say that if the party alleges absence of cross examination of the statements, they need to show what prejudice has been caused and there is no absolute right of cross examination. A Single Member Bench of the Tribunal comprising Binu Tamta, Judicial Member observed that the impugned order holding that the excise duty amounting to Rs.

21,48,030/ is recoverable in terms of proviso to section 11A(1) along with interest under section 11AB and penalty under section 11AC of the Act. The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the permission to allow the destruction of duty-free textile machinery plant without authority to arbitrary abatement of leviable customs duty. The two-member bench comprising Ramesh Nair (Judicial) and C L Mahar (Technical) held that all the charges invoked in the show cause notice against the assessee are upheld on merits.

The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that Excise Duty is not leviable on Valuation under Section 4 A of Central Excise Act , 1944 on the physician sample of medicaments sold to dealers for free distribution to doctors. The appellant have manufactured and cleared the goods i. e.

Physician sample mentioning clearly on the pack that it is not for sale. Since the goods is not for sale and no MRP is affixed on the product, the goods cannot be valued under Section 4A as the same is not for retail sale. Accordingly, the correct provision for valuation of physician sample is section 4, where the Excise duty is payable on the transaction value.

In view of the Supreme Court judgment in the appellant’s own case issue is finally settled in favour of the appellant. A two member bench Mr. Ramesh Nair, Member (Judicial) and Mr.

C L Mahar, Member (Technical) set aside the impugned orders and allowed the appeal. © 2020 Taxscan © 2020 Taxscan.