CESTAT Annual Digest (Part-13)

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 the imported goods are used in the manufacture of the final product, the CENVAT credit cannot be denied or reversed under rule 3(5B) of the CENVAT Credit Rules (CCR),2004 before the period of 01. 03.

2013. The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) held that the recovery provisions for the amount recoverable under Rule 3(5B) of CCR was introduced only with effect from 01. 03.

2013 and the present case was not involved in the date and quashed the demand for reversal of CENVAT credit while allowing the appeal filed by the assessee. The Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) Customs Exemption Benefit on Wind Operated Electricity Generator not allowable in absence of Certificate from Ministry of New and Renewable Energy (M. N.

R. E). A two-member bench of Sulekha Beevi C S Member (Judicial) and Vasa Seshagiri Rao, Member (Technical) observed that one of the conditions for availing the benefit of the exemption from S.

A. D at the time of import of the impugned goods is that the importer has to produce a certificate from the Ministry of New and Renewable Energy, Govt. of India.

The respondent has not furnished the certificate while filing the Bills of Entry. There is nothing stated in the notification that the said condition can be condoned even if the respondent does not have the required certificate and has furnished only an office memorandum issued by the M. N.

R. E. The CESTAT held that the order passed by the Commissioner (Appeals) was not legal and proper.

Further held that the direction to remand the matter to recall and reassess the bills of entry cannot therefore sustained. The Tribunal set aside the impugned order and restored the order passed by the original authority. The Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that Cenvat Credit on Input or Capital Goods cannot be denied merely for showing tubes and flaps separately in invoices.

A two-member bench of Mr S S Garg, Member (Judicial) and Mr P Anjani Kumar, Member (Technical) held that “the appellants are eligible to avail CENVAT credit on flaps and tubes cleared in a set packing along with the tyres manufactured by them. We further find that the Department’s objection that the assessable value of tubes and flaps is separately shown in the invoices and therefore, CENVAT credit is not available, is not acceptable in view of the various decisions. ” The CESTAT set aside the impugned order and allowed the appeal.

The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the sale of the carburetors that fall under the category of input of service are eligible to avail of CENVAT Credit of Excise duty. The Bench observed that the Construction Services which was availed by the assessee before December 2008 for modifying the facilities related to production are covered in the definition of “Input Service” as provided under Rule 2(l) of the CENVAT Credit Rules, 2004. A single-member bench comprising S.

S Garg (Judicial) quashed the denial of CENVAT credit of excise duty which was filed by the assessee. The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that the order confirming the issue beyond the scope of show cause notice is invalid and set aside the order rejecting the CENVAT credit. A single member bench of Mr Ajay Sharma, Member (Judicial) viewed that show cause notice is the foundation on which the department has to build up its case and the allegations in the show cause notice have to be specific as opposed to vague or lacking details.

The CENVAT credit has been denied by the Commissioner merely based on assumption and presumption which is arbitrary and not as per law. It was settled that the authorities under the Act cannot travel beyond the show cause notice. Since the impugned order has travelled beyond the show cause notice and has been passed on new ground, the same is not sustainable.

While allowing the appeal, the Tribunal set aside the impugned order. In the case of Hindustan Petroleum Corporation Ltd about the irregularities in reversal of Cenvat Credit, the Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) remanded the matter for computation of interest liability for premature availment of credit on capital goods. A two-member bench of Mr C J Mathew, Member (Technical) and Mr Ajay Sharma, Member (Judicial) observed that “Nonetheless, owing to premature availment of credit, interest liability may arise by the decisions cited supra.

Furthermore, it is on record that the original authority, while confirming the recoveries proposed in the show cause notice, had also made it a point to note that the reversal of credit has not been verified. “ The Tribunal viewed that ascertainment of the reversal of CENVAT credit as well as computation of interest liability for premature availment of credit on capital goods that were procured need to be verified. The CESTAT set aside the impugned order and remanded the matter to the original authority for those limited purposes.

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the penalty imposed under section 11AC of the Act,1944 for utilizing the CENVAT Credit of Excise duty of defaulted period without any wilful avoidance. The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) held that penalties under Section 11AC of the Act, Rule 25 of Central Excise Rules, and Rule 15(2) of CENVAT Credit Rules are not sustainable and liable to be deleted while allowing the appeal filed by the assessee. The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service tax was not leviable to the transfer of technical know-how which falls under the category of ‘Intellectual Property Service’.

The Bench observed that in the case of Munjal Showa Ltd, the court held that to qualify as an Intellectual Property Right, the said right should be protected by some law for the time being in force within India and it was seen that Revenue had not pointed out any law under which the said technical knowhow being transferred to Sicgen Singapore was protected and in absence of any clear evidence of the said knowhow being protected by any law, the same cannot qualify as an ‘Intellectual Property Right ’ and is not liable to pay service tax. The two- The Kolkata bench of Customs, Excise and Service Tax Appellate Tribunal (CSTAT) held that the rejection of refund claim for importing Anhydrous Ammonia of Malaysian Origin just because the certificate was not according to the format prescribed in the exemption notification was not justifiable and allowed the appeal by Paradeep Phosphates Limited (The Appellant) against The Commissioner of Central Excise, Customs & Service Tax (The Respondent). The two-member bench consisting of Ashok Jindal (Judicial Member) and Rajeev Tandon (Technical Member) after hearing both sides held that “In view of the circumstances, the benefit of Notification No.

53/2011-Cus dated 01. 07. 2011, cannot be denied to the appellant as the appellant has complied the subsequent condition of the Notification” and the appeal was allowed.

The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) directed re-adjudication to the adjudicating authority for the imposition of service tax demand on fabrication works for Indian Railway without any corroborative evidence. The Bench observed that there was no evidence brought to the effect that the assessee had acted deliberately to evade payment of Service Tax. The two-member bench comprising Muralidhar (Judicial) and Anpazhakan (Technical) remanded the matter back to the adjudicating authority to determine net Service tax payable during the period 01/04/2008 to 31/12/2008.

The Kolkata bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the statutory functions of Orissa Industrial Infrastructure Development Corporation (The Appellant), a statutory corporation established under IDCO Act, 1980 are under various heads namely, Real Estate Agent’s Service, Consulting Engineer’s Service, Technical Testing and Analysis Service etc. and dismissed the appeal against The Commissioner of Central Excise, Customs & Service Tax. The two-member bench consisting of Ashok Jindal (Judicial Member) and K.

Anpazhakan (Technical Member) after hearing both sides held that “the appellant is liable to pay the service tax on income from Ekama Hat under heading “Mandap Keeper Service”, the charges under the category of “Maintenance”. In a ruling in favour of DLF Home Developers, the Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that mere non-registration, non-payment of service tax cannot be a reason to allege suppression and set aside the penalty on Preferential Location Services. It was held that “Courts and Tribunals have been consistently holding that mere non-obtaining registration, nonpayment of service tax and non-filing of ST-3 Returns cannot be a reason to allege suppression etc.

and that a positive act on the part of the assessee with intent to evade payment of tax has to be established. ” The extended period is not invocable and hence, the penalty cannot be imposed on the service tax which stands paid before the issuance of show-cause notice. ”, the Tribunal held.

The CESTAT set aside the penalty and allowed the appeal. The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT)has held that the Tribunal is not competent to condone delay in filing of appeal before the first appellate authority beyond 30 days. A two-member bench of Mr P K Choudhary, Member (Judicial) and Mr Sanjiv Srivastava, Member (Technical) observed that from the application for condonation of delay, it appears that the appellant has categorically accepted that on receipt of the order, the same was immediately handed over to the consultant for filing an appeal.

If that is so, the plea that because of lack of experience in business, there was delay does not stand to be reason. The CESTAT held that the Tribunal is not competent to condone the delay in filing the appeal before the first Appellate Authority beyond the condonable period, and dismissed the appeal. The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) in the case of Reliance Industries Limited held that ship demurrage charges cannot be included in the transaction value of imported goods.

A two-member bench of Mr. Ramesh Nair, Member (Judicial) and Mr. Raju, Member (Technical) observed that the demurrage charges cannot be included in the transaction value of imported goods.

Further found that as per the order in original, the entire case of the Revenue is that as per the explanation added to Rule 10 of Custom Valuation Rules, 2002, the cost of transportation of imported goods should be included in the transaction value. This Provision was not provided in the Customs Act, 1962 about the Valuation of goods. However the same was brought under the rule by way of explanation.

The CESTAT viewed that the explanation to Rule 10 to Customs Valuation Rules was held ultra virus, the entire basis of the Revenue case falls. The Tribunal held that the impugned order passed by the Commissioner is just and proper and the same does not suffer from any infirmity. The Revenue’s appeal was dismissed.

The Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT)while upholding the order of the Commissioner of Customs held that delay in the drawal of the sample changes the level of carotene in vegetable oil, test report of customs revenue laboratory cannot be relied on. A two-member bench of Dr D M Misra, Member (Judicial) and R Bhagya Devi, Member (Technical) observed that “since there was inordinate delay in drawal of samples and receiving the test reports, the carotene level of vegetable oils reduces with time, hence, the test reports of the Customs Revenue Laboratory cannot rely and accordingly, he has confirmed acceptance of the test report of the goods at the load port by the adjudicating authority. ” The Bench upheld the order of the adjudicating authority and dismissed the Revenue’s appeal.

The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) set aside the Penalty imposed under the Customs Act, 1962 in the absence of misdeclaration as there was no Change in the Classification of Denim Fabric as per the Central Revenues Control Laboratory (CRCL) Report. Since the fabric is classifiable under the CTH 52113190, the demand for differential duty of customs in the impugned order is not sustainable. Since there is no misclassification of the goods imported, the confiscation of the goods is not warranted.

The CESTAT set aside the penalty imposed on the Appellant and the impugned order. The Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT)has held that the market survey report based on contemporaneous import data is not valid and set aside the penalty under the Customs Act for A two-member bench of Dr Ms Rachna Gupta, Member (Judicial) and Ms Hemambika R Priya, Member (Technical) viewed that “Authority is sufficient for us to hold that the Department has not followed the statutory procedure nor has produced cogent evidence while confirming the allegations of under-valuation and while confirming the differential duty. ” The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) Rule 6(3) of CCR not applicable on attributable to non-excisable goods not availed at the initial stage.

The CESTAT held that “the demand confirmed in the impugned order is not sustainable and hence we set aside the same. Since the demand itself is not sustainable there is no question of demanding interest or imposing penalty. ” The Tribunal set aside the impugned order and allowed the appeal filed by the Appellant.

In a significant ruling in favour of Reliance Industries Ltd, the Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) held that CENVAT Credit allowable on tax paid towards utilization of Goods Transport Agency (GTA) service on the period before amendment on Rule 2(I) OF CENVAT Credit Rules, 2004 (CCR). A two-member bench of Mr C J Mathew, Member (Technical) and Mr Ajay Sharma, Member (Judicial) held that “It is not open to the show cause notice issuing authority or the adjudicating authority to level an allegation without evidence in support of ineligibility for shifting the onus of establishing fulfilment of the conditions on the assessee. “ The CESTAT held that the appeal of Revenue lacks merits and was dismissed.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), granted exemption on investment in plant and machinery and observed that the excise notification has to be interpreted in language written. The Bench further noted that the Commissioner (Appeals) seems to have imported condition of serial no. (ii) in serial No.

(i) of notification No. 01/10- CE dated 06. 02.

2010 which is not legally permissible. The appellant’s case is covered vide Sr. No.

(i) of the Notification. “In view of these facts and circumstances, we are of the considered opinion that the appellant is entitled to the benefit of exemption Notification No. 01/10-CE and denial of the same by the Commissioner (Appeals) is set aside by allowing the appeal of the appellant with consequential relief, if any” the Bench concluded.

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), upheld the penalty under Rule 26 of the Central Excise Rules, 2002 on the proof that sufficient evidences adduced to allege clandestine removal. A Two Member Bench comprising PK Choudhary, Judicial Member and Sanjiv Srivastava, Technical Member observed that “the appellant has in his statement recorded under section 14 while giving the details of working of the unit have admitted that he was actively involved in the working of the unit the grounds taken in the appeal which are in nature of alibi do not merit any consideration. ” “His active involvement in the clandestine activities is an admitted fact and penalty imposed on him under Rule 26 is total justified” the Bench concluded.

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed confiscation under Customs Act and observed that documentary evidences on legitimate ownership of seized gold and cash. A Two-Member Bench comprising PK Choudhary, Judicial Member and Sanjiv Srivastava, Technical Member observed that “Since documentary evidence has been presented in favour of the gold showing the Appellant’s legal ownership and acquisition, we hold that tenets of Section 123 Customs Act are satisfied and the Appellant has discharged the burden of proof. The Appellant’s statement also reiterates the same.

On the other hand, the Department has not been able to provide any iota of evidence to show that the seized gold bar was smuggled. ” “There can be no confiscation of the seized gold bar and currency under the Customs Act, 1962 and it is accordingly quashed. Imposition of penalty on the Appellant is also untenable and is set aside.

Since the impugned order qua the Appellant cannot be sustained, it is set aside. Accordingly, the appeal is allowed with consequential benefits as per law” the Bench noted. In a major relief to M/s.

Schindler India Pvt. Ltd, the Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand on supply of equipment. A Two-Member Bench comprising Dr.

Suvendu Kumar Pati, Member (Judicial) and Anil G. Shakkarwar, Member (Technical) observed that “we are of the considered view that the sole basis of conformation of demand made in these three appeals was that in the de novo proceeding the demand in its entity was conformed with interest and penalties but having regard to the fact that the said de novo adjudication order has been set aside by this Tribunal and the subsequent demands raised through Section 73(1A) as well as its conformation having based on the previous conformation orders, the same is liable to be set aside and we do so. ” The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), upheld the penalty under the Rule 26 of the Central Excise Rules, 2002 and observed that illegal manufacture and clearance of unmanufactured tobacco.

A Two-Member Bench comprising R Muralidhar, Judicial Member and K Anpazhakan, Technical Member observed that “Suresh Prasad Sah, Appellant 2 has admitted that he is involved in the illegal manufacture and clearance of unmanufactured tobacco. Since he has changed his statement so many times, we observe that his statement has no evidentiary value. However, we find that there is no demand in the notice against Shri Suresh Prasad Sah.

” “We observe that his involvement in the clandestine manufacture and clearance is very well established by his own admission. He is also involved in introducing a non-existence person Shri Mahesh Prasad before the Notary for executing the lease agreement. Accordingly, we hold that he is liable for penalty under section 26 of the Central Excise Rules 2002.

Accordingly, we uphold the penalty imposed on Shri Suresh Prasad Sah” the Tribunal noted. The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) granted relief to Tata Motors India by quashing the excise duty demand of approximately 21 crores on the manufacture of a commercial motor vehicle on the ground of the absence of an actual manufacturer. The two-member bench comprising Ashok Jindal (Judicial) and Anpazhakan (Technical) quashed the excise duty demand against the assessee while allowing the appeal filed by the assessee.

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), granted benefit of Small Scale Industry (SSI) exemption as the turnover was less than 4 lakhs in the relevant Financial Year (FY). A Two-Member Bench comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “we find that the appellant is entitled to SSI exemption for the period 2005-2006 because their turnover was less than 4. 00 lacs in that financial year which entitles them for SSI exemption in terms of Notification No.

06/2005-ST dated 01. 03. 2005.

” The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) granted relied to Volkswagen India by quashing the excise duty demand of approximately 24 crores on the amount recovered as liquidated damages on the ground of non-violation of Rule 6 of the Central Excise Rules,2002. The Bench observed that in the case of Skoda Auto Volkswagen India Pvt. Ltd.

cs. CCE, the court held that as per section 4 of the Central Excise Act, 1944 any deviation from any of the elements enumerated therein would require treatment prescribed in Central Excise (Determination of Price of Excisable Goods) Rules, 2000. These several rules commence with the declaration that there was no option for determination of value other than by recourse to in Central Excise Rules.

Also observed that in the event of rejection of the invoice value as transaction value, it was not open to the adjudicating authority to re-determine value without recourse to Rule 6 of Central Excise Rules. While allowing the appeal, the two-member bench comprising Ajay Sharma (Judicial) and C J Mathew (Technical) quashed the excise duty demand against the assessee. The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that no reversal of CENVAT Credit of service tax can be done on already paid duty or tax which was not payable, and even if the activity does not amount to manufacture.

The Bench observed that in the case of CCE, Pune vs. Ajinkya Enterprises, the court held that central excise duty which was not required to be paid on the final product was paid by the assessee and the assessee had availed CENVAT credit of duty paid on the inputs and the assessment of final product was not reversed by revenue and the assessee before they were not paid the refund of the duty which was not required to be paid, availing of CENVAT credit of duty paid on inputs was regular. A single-member bench comprising Anil G.

Shakkarwar (Judicial) quashed the demand for the recovery of the availed CENVAT Credit while allowing the appeal filed by the assessee. The Mumbai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that no excise duty was leviable under section 11A of the Central Excise Act, 1944 on the allegation of illicit clearing in the absence of evidence relating to the inflow of cash and allowed the appeal by Parvati Steel Rolling Mills Pvt. Ltd (The The two-member bench consisting of Ajay Sharma (Judicial Member) and C J Mathew (Technical Member) after hearing both sides held that “In view of the discussions made hereinabove, we are of the considered view that the department has miserably failed to substantiate the allegation of clandestine manufacture and clearance by any tangible or corroborative evidence and the diaries or pen-drive from a third party cannot be said to be sufficient proof of such allegation and the department has failed to make out a case beyond any doubt” and the appeal was allowed.

The Mumbai bench of Customs Excise and Service Tax Appellate Tribunal (CESTAT) held that the rejection of the refund claim was not justified as the ground of rejection was premature as per Section 11B of the Central Excise Act 1944 and remanded the matter for fresh adjudication in the appeal by Global Wool Alliance Pvt Ltd (The Appellant) against the Commissioner of Central Excise (CCE) (The Respondent). The two-member bench consisting of Ajay Sharma (Judicial Member) and C. J.

Mathew (Technical Member) after hearing both sides held that “We find that the factual aspects of eligibility – both by reversal of CENVAT credit as well as the existence of facility for the manufacture of ‘staple fiber’ in the light of decisions of the Tribunal – have not been examined by the lower authorities. With the claim for refund restored to the original authority and with these two aspects having to be examined afresh, the issues would have to go back for re- adjudication. Accordingly, the impugned order is set aside and all the disputes restored to the original authority for a fresh determination “and the appeal was remanded The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the rejection of a customs duty refund claim of approximately 4 crores on the clearance of crude petroleum oil on the grounds of short payment of Customs duty.

The Bench observed that in the case of Mangalore Refinery and Petrochemicals Limited, the court held that a demand or duty on transaction value would be leviable despite “ocean loss”, it flies in the face of Section 23 of the Customs Act, 1962 in particular, the general statutory scheme and Rules 4 and 9 of the Customs Valuation Rules, 2007. The two-member bench comprising Somesh Arora (Judicial) and C L Mahar (Technical) upheld the order passed by the Commissioner (Appeals) while dismissing the appeal filed by the assessee. The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) upheld the penalty imposed on clearance of excisable goods without payment of duty by the manufacturer of the chhakkdo rickshaw.

he Bench observed that the assessee was conscientious by providing his Automotive Research Association of India registration to the manufacturer or buyers of non-duty Rickshaws for getting the same registered with the Regional Transport Officer (RTO), and the assessee facilitated the clearance of excisable goods without the payment of duty, which ultimately resulted in the evasion of the Central Excise Duty by the manufacturer of the “Chhakkdo Rickshaw”. A single-member bench comprising C. L.

Mahar (technical) upheld the penalty imposed against the assessee under Rule 26 of the Central Excise Rules while dismissing the appeal filed by the assessee. In a significant ruling, the bench of Vasa Seshagiri Rao (Technical Member) and Sulekha Beevi C. S.

(Judicial Member) of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has declared that the demand for service tax on composite contracts for Commercial or Industrial Construction Services (CICS) is not sustainable, The central issue at hand was whether the demand for service tax under ‘Commercial or Industrial Construction Services’ was sustainable. The Tribunal noted that the definition of “Commercial or Industrial Construction Service” referred to a simple contract that did not involve the supply of goods or materials. However, after the introduction of ‘Works Contracts Service’ (WCS) on 01.

06. 2007, the definition incorporated the value of goods used in composite contracts. The Tribunal relied on a previous decision by the Supreme Court, which held that the demand for WCS on composite contracts, such as construction of residential complexes, commercial or industrial construction services, erection, commissioning, and installation services, could not be sustained.

This was especially applicable when the composite contract included both the supply of goods or materials and the rendering of services. The decision in M/s. Real Value Promoters Pvt.

Ltd. was cited as a precedent, and the Tribunal reiterated its stance that the demand under CICS was untenable. In light of the above analysis and legal precedents, the Tribunal concluded that the demand for service tax under ‘Commercial or Industrial Construction Services’ (CICS) is not sustainable.

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