More Judgements

1. Home
2. More Judgements

Service Tax - Classification of voyage charter arrangements - Department proposing service tax demand under the category of "Supply of Tangible Goods for Use Service" invoking the extended period of limitation under the reverse charge mechanism - Whether the activity of chartering vessels under voyage charter agreements is classifiable as "Supply of Tangible Goods for Use Service" or as transportation of goods - HELD - The voyage charter arrangements constitute contracts of carriage of goods and not contracts for supply of tangible goods for use. The statutory provisions and administrative clarifications make it clear that... [Read more]

Service Tax - Classification of voyage charter arrangements - Department proposing service tax demand under the category of "Supply of Tangible Goods for Use Service" invoking the extended period of limitation under the reverse charge mechanism - Whether the activity of chartering vessels under voyage charter agreements is classifiable as "Supply of Tangible Goods for Use Service" or as transportation of goods - HELD - The voyage charter arrangements constitute contracts of carriage of goods and not contracts for supply of tangible goods for use. The statutory provisions and administrative clarifications make it clear that the decisive test is whether possession, effective control and the right to use are transferred to the recipient - In the present case, the vessels remained under the command and operational control of the owners who provided the crew and retained responsibility for navigation and overall management. The vessels were never placed at the disposal of the appellant with no independent right to use, deploy or commercially exploit them. The issuance of Bills of Lading, which are characteristic features of contracts of carriage, and the computation of consideration as freight on the basis of quantity of cargo transported further established that the essence of transaction was transportation of goods and not supply of vessels for use - The contractual clauses relating to demurrage, dead freight, war risk and port expenses are standard features of maritime contracts and do not confer any right of exclusive possession or control over the vessel. The consistent conduct of the Department in accepting the same activity as transportation of coastal goods for the subsequent period rendered the present classification inconsistent and unsustainable - The impugned order is set aside and the demand for service tax is held unsustainable both on merits and on limitation. The extended period of limitation is held non-invocable and consequently the penalties imposed are set aside – The appeal is allowed - Extended Period of Limitation - The demand raised by invoking the extended period is unsustainable as the appellant had not suppressed any facts. The transactions were formally recorded in books of accounts and were available for verification during repeated audits conducted by the office of the Accountant General and Departmental internal audit. The issue involved was one of classification and interpretation of statutory provisions on which the appellant had taken a bona fide view. Mere non-payment of tax or adoption of a particular classification without deliberate intent to evade tax does not amount to suppression of facts. When the normal period of limitation was computed backwards from the date of issuance of SCN, the entire demand fell beyond the normal period and was barred by limitation. [Read less]

GST – Gujarat AAR - Exemption for services under National Mental Health Mission – Applicant is a Charitable Trust providing training and awareness activities related to mental health and trauma counselling to physically and mentally abused persons through work orders issued by Government Health Departments - Whether services qualify for exemption as charitable activities – HELD - The services provided by an entity registered under Section 12AB of the Income Tax Act by way of advancement of educational programmes or skill development relating to physically or mentally abused and traumatized persons fall within the def... [Read more]

GST – Gujarat AAR - Exemption for services under National Mental Health Mission – Applicant is a Charitable Trust providing training and awareness activities related to mental health and trauma counselling to physically and mentally abused persons through work orders issued by Government Health Departments - Whether services qualify for exemption as charitable activities – HELD - The services provided by an entity registered under Section 12AB of the Income Tax Act by way of advancement of educational programmes or skill development relating to physically or mentally abused and traumatized persons fall within the definition of charitable activities under Entry No. 1 of Notification No. 12/2017-CT(Rate). The applicant providing mental health awareness, educational lectures, and training to community health workers under the National Mental Health Programme through a Government nodal agency satisfies the requirement of being registered under Section 12AB and the services constitute advancement of educational programmes relating to mentally traumatized persons. Therefore, the services are exempt from GST under Entry No. 1 of Notification No. 12/2017-Central Tax (Rate), provided the applicant maintains valid registration under Section 12AB of the Income Tax Act – Ordered accordingly - GST Exemption for Self-Defence Training Services – Applicant providing self-defence training to women and girl students pursuant to work orders issued by police authorities under Suraksha Setu Programme and by education department for government schools - Whether services qualify for exemption under Entry No. 72 of Central Tax Notification – HELD - The services provided to State Government, State Government departments and State Government-run institutions under any training programme for which seventy-five percent or more of the total expenditure is borne by the State Government fall within Entry No. 72 of Notification No. 12/2017-Central Tax (Rate). The applicant providing self-defence training including judo, karate and basic defence tactics to female students through work orders issued by various police departments under the Suraksha Setu initiative and by district project offices of the education department, with full funding by the respective government agencies, qualifies for exemption as the services are provided to State Government and State Government-run institutions with one hundred percent cost borne by the government. Therefore, the services are exempt from GST under Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) - Exemption for Training Services under Prime Minister Vishwakarma Scheme - Entity providing artisan mobilization and basic training for goldsmiths pursuant to work order issued by a government institute as implementing agency under a Central Government scheme - Whether services qualify for exemption under Entry No. 72 of Central Tax Notification – HELD - The Prime Minister Vishwakarma Scheme is a central sector scheme fully funded by the Government of India providing holistic support to artisans and craftspeople across eighteen designated trades. Services provided under this centrally-funded scheme by an entity designated as an agency for conducting artisan mobilization and training fall within Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) as the services are provided to a government agency implementing a Central Government training programme for which hundred percent of the expenditure is borne by the Central Government. Therefore, services provided for training goldsmiths under the Prime Minister Vishwakarma Scheme are exempt from GST under Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) - Exemption for Vocational Training Services - Entity providing vocational training including taekwondo and tailoring to girl students through work order issued by a government residential school scheme - Whether services qualify for exemption under Entry No. 72 of Central Tax Notification – HELD - The Kasturba Gandhi Balika Vidyalaya scheme established by the Government of India comprises residential schools operated with Government support for providing education and vocational training to girls from disadvantaged sections. Services provided to such Government-run schools for vocational training of students fall within Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) as the services are provided to a government-run institution with expenditure borne by the Government - The services provided for vocational training at Kasturba Gandhi Balika Vidyalayas are exempt from GST under Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) - Exemption for Yoga Camp Services - Whether services qualify for exemption as charitable activities – HELD - The services by an entity registered under Section 12AB of the Income Tax Act by way of advancement of spirituality or yoga constitute charitable activities under Entry No. 1 of Notification No. 12/2017-Central Tax (Rate). Yoga camps conducted by the applicant, as an entity registered under Section 12AB, fall within the definition of charitable activities relating to advancement of spirituality or yoga. Therefore, services provided by way of conducting yoga camps are exempt from GST under Entry No. 1 of Notification No. 12/2017-Central Tax (Rate), provided the applicant maintains valid registration under Section 12AB of the Income Tax Act - Exemption for De-addiction Seminars and Sanitation Training - Whether services qualify for exemption as charitable activities relating to preventive health – HELD - The preventive health encompasses proactive measures and public awareness aimed at preventing disease manifestation through provision of information on health risks and measures to reduce them. Conducting seminars for de-addiction providing information on health risks of tobacco and drug consumption and conducting training for cleaning and sanitation preventing disease transmission constitute public awareness of preventive health, which falls within the definition of charitable activities under Entry No. 1 of Notification No. 12/2017-Central Tax (Rate). The applicant registered under Section 12AB providing such services qualifies for exemption. Therefore, services comprising conducting seminars for de-addiction from tobacco and drugs and conducting training for cleaning and sanitation are exempt from GST under Entry No. 1 of Notification No. 12/2017-Central Tax (Rate), provided the applicant maintains valid registration under Section 12AB of the Income Tax Act - Exemption for Blood Donation Camp Services – Applicant conducting blood donation camps including mini health check-ups and blood screening - Whether services qualify for exemption as charitable activities relating to preventive health – HELD - The primary purpose of blood donation camps is to collect blood supply for medical emergencies and clinical use, with pathological examination conducted to prevent transmission of infections to recipients as per national blood transfusion guidelines and mini health check-ups conducted as ancillary safety protocols to protect donors. These ancillary check-ups cannot be stretched to constitute preventive health as defined under charitable activities, which encompasses proactive measures to prevent disease manifestation. Blood donation camps serve the purpose of blood collection and transfusion services rather than prevention of disease. Therefore, services comprising organization of blood donation camps do not fall within the ambit of charitable activities and are not exempt from GST under Entry No. 1 of Notification No. 12/2017-Central Tax (Rate) - Exemption for Road Safety Training Services - Whether services qualify for exemption as charitable activities relating to preventive health – HELD - The preventive health encompasses taking proactive measures, screenings and check-ups to prevent diseases and health conditions through disease prevention methodologies. Road safety traini [Read less]

Service Tax – Payment before issue of invoices, Availment of CENVAT Credit prior to issuance of Invoices – Respondent-assessee claimed credit of service tax paid on Deposit Insurance Services provided by Deposit Insurance and Credit Guarantee Corporation prior to issuance of invoices – SCN issued demanding CENVAT Credit along with interest and penalty. The adjudicating authority dropped the demand - Whether the assessee is entitled to avail CENVAT Credit when the Service Tax payment against invoices was made prior to the issuance of those invoices – HELD - The remittance for the invoice dated 11.04.2012 was made on... [Read more]

Service Tax – Payment before issue of invoices, Availment of CENVAT Credit prior to issuance of Invoices – Respondent-assessee claimed credit of service tax paid on Deposit Insurance Services provided by Deposit Insurance and Credit Guarantee Corporation prior to issuance of invoices – SCN issued demanding CENVAT Credit along with interest and penalty. The adjudicating authority dropped the demand - Whether the assessee is entitled to avail CENVAT Credit when the Service Tax payment against invoices was made prior to the issuance of those invoices – HELD - The remittance for the invoice dated 11.04.2012 was made on 28.11.2011, for the invoice dated 20.09.2012 the remittance was made on 28.05.2012, and for the invoice dated 06.12.2012 the remittance was made on 29.11.2012. This demonstrates that the assessee had paid the entire amount of Service Tax prior to issuance of the said invoices - Since the assessee paid the Service Tax and thereafter availed the CENVAT Credit thereon, the timing objection raised by the Revenue is not sustainable. The principle established is that CENVAT Credit can be legitimately availed when the Service Tax has been actually paid prior to or at the time of availing the credit, regardless of whether the invoice date is subsequent to the payment - The impugned order is upheld and Revenue appeal is dismissed [Read less]

Customs - Cost Recovery Charges versus Merchant Over Time basis for customs supervision services in special bonded warehouse operations - Whether the appellant is liable to pay supervision charges on Cost Recovery Charges basis or on Merchant Over Time basis when the services of customs officers have been availed only for less than a full day or better part thereof, in terms of Regulation 3(e) of the Special Warehouse Licensing Regulations, 2016 read with Paragraph 11 of CBEC Circular No. 32/2016-Cus dated 13.07.2016 – HELD - The Circular clearly provides that Cost Recovery Charges are applicable only in three specific s... [Read more]

Customs - Cost Recovery Charges versus Merchant Over Time basis for customs supervision services in special bonded warehouse operations - Whether the appellant is liable to pay supervision charges on Cost Recovery Charges basis or on Merchant Over Time basis when the services of customs officers have been availed only for less than a full day or better part thereof, in terms of Regulation 3(e) of the Special Warehouse Licensing Regulations, 2016 read with Paragraph 11 of CBEC Circular No. 32/2016-Cus dated 13.07.2016 – HELD - The Circular clearly provides that Cost Recovery Charges are applicable only in three specific situations: firstly, where the warehouse is at such distance from the customs office that the officer's absence from office is for an entire day or better part thereof; secondly, where services are required more than once in a day; and thirdly, where round-the-clock services are requested. The determination of which basis applies must be made by the Principal Commissioner of Customs taking into consideration the projected requirement, distance of the warehouse, business hours and frequency of operation as indicated by the licensee. In the present case, the evidence on record clearly demonstrates that the customs officers' services have been availed only for six hours or part of a day. There exists no corroborative evidence to establish that the services of Customs officers have been utilized for the entire day or for better part thereof as alleged by the revenue - Moreover, the fact that an identical matter pertaining to the company's operations at another airport has been decided by the Deputy Commissioner dropping a similar demand for Cost Recovery Charges on the ground that no exclusive officer was posted reinforces that Cost Recovery Charges cannot be imposed without substantive evidence of full-day services or dedicated posting of officers. The demand for Cost Recovery Charges imposed without such evidence is unsustainable in law - The impugned order is set aside and the appeal is allowed [Read less]

GST - Jurisdiction to issue Show-cause notice and assessment order against a deceased taxpayer – The petitioner is legal heir of a deceased proprietor of a business challenges the issuance of show-cause notice and assessment order in the name of the deceased taxpayer, passed approximately four years after his death - Whether the tax authorities possess the jurisdiction to issue SCN and assessment orders in the name of a deceased person – HELD - The show-cause notice as well as assessment order passed against a deceased person are required to be quashed and set aside as they are fundamentally defective and issued withou... [Read more]

GST - Jurisdiction to issue Show-cause notice and assessment order against a deceased taxpayer – The petitioner is legal heir of a deceased proprietor of a business challenges the issuance of show-cause notice and assessment order in the name of the deceased taxpayer, passed approximately four years after his death - Whether the tax authorities possess the jurisdiction to issue SCN and assessment orders in the name of a deceased person – HELD - The show-cause notice as well as assessment order passed against a deceased person are required to be quashed and set aside as they are fundamentally defective and issued without proper jurisdiction. The deceased person cannot be a party to any proceedings and the respondents' lack of knowledge regarding the death of the taxpayer does not cure this jurisdictional defect - The respondents remain entitled to initiate appropriate proceedings, if permissible under law, against the legal heirs or the estate of the deceased for the outstanding demand, but the impugned orders passed in the name of the deceased are quashed and set aside, and all subsequent coercive action including freezing of bank account is also quashed - The writ petition stands allowed [Read less]

GST - Jurisdiction to issue show cause notice for construction services executed outside India - Appellant engaged in construction business was awarded a contract for construction of building at Mauritius by NBCC - Whether the Respondent authorities had jurisdiction to issue a show cause notice demanding GST for a construction project whose situs was completely outside India and where all transactions were carried out in Mauritius – HELD - The lack of jurisdiction is not patent on the face of the SCN and the authorities are not without jurisdiction in issuing it. The applicability of GST Act depends upon examination of ... [Read more]

GST - Jurisdiction to issue show cause notice for construction services executed outside India - Appellant engaged in construction business was awarded a contract for construction of building at Mauritius by NBCC - Whether the Respondent authorities had jurisdiction to issue a show cause notice demanding GST for a construction project whose situs was completely outside India and where all transactions were carried out in Mauritius – HELD - The lack of jurisdiction is not patent on the face of the SCN and the authorities are not without jurisdiction in issuing it. The applicability of GST Act depends upon examination of facts including the manner in which revenue and expenditure relating to the overseas site office were consolidated and reported in the India company's financials. The interpretation of GST Act provisions cannot be determined merely on the basis of the geographical location of project execution but requires examination of the entire transaction structure. A show cause notice is only an initiating measure and does not infringe upon any right. It is only a final order imposing penalty or adversely affecting a party that can constitute actionable grievance. The show cause notice ex facie cannot be considered as without jurisdiction. The ld. Single Judge correctly dismissed the writ petition as premature since the challenge was directed against a show cause notice and not a final assessment order - The order of the learned judge dismissing the writ petition is upheld. The writ appeal is dismissed [Read less]

Tamil Nadu General Sales Tax Act, 1959 - Physical stock verification, Uniformity of assessment across commodities in tax proceedings - Assessing Officer, relying on the Inspection Officer's report without conducting personal physical verification, passed an assessment order determining tax liability based on the alleged stock suppression - Whether the Tribunal erred in endorsing the stock variations without questioning the feasibility of measuring approximately 97,000 square feet of stock through eye estimation and whether the authorities applied a different yardstick for different commodities by deleting suppression for c... [Read more]

Tamil Nadu General Sales Tax Act, 1959 - Physical stock verification, Uniformity of assessment across commodities in tax proceedings - Assessing Officer, relying on the Inspection Officer's report without conducting personal physical verification, passed an assessment order determining tax liability based on the alleged stock suppression - Whether the Tribunal erred in endorsing the stock variations without questioning the feasibility of measuring approximately 97,000 square feet of stock through eye estimation and whether the authorities applied a different yardstick for different commodities by deleting suppression for ceramic tiles while sustaining it for marbles, cuddapah and granites from the same inspection - HELD - The fact-finding authorities have correctly concluded that physical stock verification was conducted and the suppression was identified, not merely through visual estimation but through actual physical verification. The assessee's contention regarding the impossibility of measuring stocks through estimation is rejected as the records demonstrate physical stock verification to the extent of the amount mentioned in the Appellate Authority's order. The assessee has failed to produce any contra documentary evidence regarding stock and purchase. Regarding the apparent inconsistency in treating different commodities, no different yardstick has been applied rather, different commodities have been treated differently because different reasoning and evidence are available for each commodity. The deletion of suppression for ceramic tiles is supported by cogent reasoning and evidence, specifically the acceptance of the explanation provided through document D7 regarding freight charges being merely for commission purposes. Conversely, no such plausible explanation or supporting evidence exists for cuddapah stones and granites, therefore the outcome cannot be uniform for dissimilar facts and explanations. The principle that similar facts must receive similar treatment cannot be invoked when the facts, evidence and explanations are materially different - The Tax Case Revision is dismissed [Read less]

Service Tax liability on freight and transportation charges of hybrid seeds - Applicability of agricultural produce exemption – Appellant engaged in cultivation, processing and sale of hybrid seeds was assessed for service tax on freight-related expenses by invoking extended period of limitation - Department noticed differences between freight expenses shown in profit and loss account and figures declared in service tax returns, and presumed non-discharge of service tax liability - Whether hybrid seeds after processing continue to qualify as agricultural produce exempt from service tax and whether the SCN is legally sust... [Read more]

Service Tax liability on freight and transportation charges of hybrid seeds - Applicability of agricultural produce exemption – Appellant engaged in cultivation, processing and sale of hybrid seeds was assessed for service tax on freight-related expenses by invoking extended period of limitation - Department noticed differences between freight expenses shown in profit and loss account and figures declared in service tax returns, and presumed non-discharge of service tax liability - Whether hybrid seeds after processing continue to qualify as agricultural produce exempt from service tax and whether the SCN is legally sustainable based merely on accounting discrepancies – HELD - The SCN fails to clearly specify the precise taxable service, charging provision, classification of service and basis of computation. Mere numerical difference between accounting records and returns cannot establish taxable event without establishing the taxable activity itself. The burden to establish taxability squarely lies upon the revenue - Hybrid seeds, though processed, continue to remain agricultural produce as they are intended exclusively for sowing and agricultural cultivation, and not meant for consumer consumption like finished products. The processing undertaken is merely for preservation, grading, treatment and ensuring germination quality which does not transform seeds into a new commercial commodity distinct from agricultural produce - The Department has treated all freight-related expenses as taxable without proper segregation - Service Tax under RCM cannot arise merely because an expense is recorded under freight head as taxability depends on the nature of service provider and statutory liability. The extended period of limitation is wrongly invoked when the issue involves interpretation of exemption notification and service classification. The extended period cannot ordinarily be invoked with mere accounting difference being insufficient to establish suppression. Penalties under applicable sections cannot survive as the demand itself fails and no mala fide intent stands established - The impugned order is set aside and the appeal is allowed [Read less]

Service Tax - Renting of Immovable Property - Service Tax Liability on Leasing of Vacant Land - Appellant leased vacant land to various commercial users for storage of goods and industrial purposes during the period from June 2007 to March 2010 – Demand of service tax on the lease rent collected, alleging that renting of vacant land constitutes a taxable service under the definition of renting of immovable property - Commissioner confirmed the demand, observing that vacant land inside the security compound qualifies as land appurtenant to building and is used for furtherance of commerce or business, thereby attracting se... [Read more]

Service Tax - Renting of Immovable Property - Service Tax Liability on Leasing of Vacant Land - Appellant leased vacant land to various commercial users for storage of goods and industrial purposes during the period from June 2007 to March 2010 – Demand of service tax on the lease rent collected, alleging that renting of vacant land constitutes a taxable service under the definition of renting of immovable property - Commissioner confirmed the demand, observing that vacant land inside the security compound qualifies as land appurtenant to building and is used for furtherance of commerce or business, thereby attracting service tax - Whether renting of vacant land by a major port trust to commercial users for storage and industrial purposes during the period from June 2007 to March 2010 constitutes a taxable service liable to service tax under the definition of renting of immovable property – HELD - The demand for service tax for the period prior to 01.07.2010 cannot be sustained. During the disputed period, the definition of renting of immovable property under Section 65(105)(zzzz) of the Finance Act, 1994, contained an exclusion which clearly excluded vacant land whether or not having facilities incidental to the use of such vacant land. The amendment expanding the scope to cover vacant land given on lease or licence for construction of a building or temporary structure for use in furtherance of business or commerce came into effect only from 01.07.2010. The amendment was not merely clarificatory in nature but significantly altered and expanded the scope of the taxable service prospectively – Further, the decision of the High Court of Allahabad in Greater Noida Development Authority case, held that introduction of the new clause did not alter the taxable event and that renting of vacant land was not taxable prior to 01.07.2010. There is no liability to pay service tax prior to 01.07.2010 for renting of vacant land - The Tribunal upholds the appropriation of the amount collected and paid by the port trust against the demand and sets aside the balance demand for the period prior to 01.07.2010 along with all penalties – The appeal is partially allowed [Read less]

Service Tax - Composite works contracts, Taxability prior to 01.06.2007 - Appellant engaged in execution of contracts involving supply of machinery/equipment along with installation, erection, commissioning and allied services undertakes composite indivisible works contracts for consolidated consideration - Whether service tax was leviable on such composite works contracts prior to introduction of works contract service with effect from 01.06.2007 – HELD - Composite works contracts are not pure service contracts but clearly involve transfer of property in goods as well as service elements and thus squarely fall within th... [Read more]

Service Tax - Composite works contracts, Taxability prior to 01.06.2007 - Appellant engaged in execution of contracts involving supply of machinery/equipment along with installation, erection, commissioning and allied services undertakes composite indivisible works contracts for consolidated consideration - Whether service tax was leviable on such composite works contracts prior to introduction of works contract service with effect from 01.06.2007 – HELD - Composite works contracts are not pure service contracts but clearly involve transfer of property in goods as well as service elements and thus squarely fall within the ambit of works contract. The primary issue is no longer res-integra as the Supreme Court in Larsen & Toubro Ltd. held that prior to introduction of works contract service with effect from 01.06.2007, composite works contracts were not liable to service tax under existing taxable service categories such as Erection, Commissioning and Installation Services. The Apex Court held that in the absence of machinery provisions for segregating service portion from goods portion, levy could not sustain. Applying the ratio of above judgment, contracts executed during the relevant period being composite works contracts were not taxable under Erection, Commissioning and Installation Service. Therefore, the very foundation of demand becomes unsustainable. Consequently, invocation of extended period of limitation is also not sustainable as the issue involves bonafide interpretational dispute regarding taxability of composite works contracts. Mere non-payment of tax due to interpretation dispute cannot automatically amount to suppression. Penalties under Sections 77 and 78 cannot survive – The impugned order is set aside and the appeal is allowed [Read less]

Customs - Modification of Assessment of Shipping Bills after Exportation of Goods – Post export of goods, the Commissioner issued show cause notice alleging overvaluation of goods and sought to re-determine the value and reject the declared value under Rule 8 of the Customs Valuation Rules and deny the DEPB claims - Whether the assessment of shipping bills can be modified after the goods have already been exported – HELD - The assessment cannot be modified after exportation. Once the goods are exported, they cease to be export goods as defined under section 2(19) of the Customs Act, 1962, and therefore there cannot be ... [Read more]

Customs - Modification of Assessment of Shipping Bills after Exportation of Goods – Post export of goods, the Commissioner issued show cause notice alleging overvaluation of goods and sought to re-determine the value and reject the declared value under Rule 8 of the Customs Valuation Rules and deny the DEPB claims - Whether the assessment of shipping bills can be modified after the goods have already been exported – HELD - The assessment cannot be modified after exportation. Once the goods are exported, they cease to be export goods as defined under section 2(19) of the Customs Act, 1962, and therefore there cannot be any further assessment of the shipping bill. The process of assessment is completed the moment the proper officer issues an order allowing the goods to be exported. The assessment can only be modified through specific methods available under law - The Department did not file any appeal before the Commissioner (Appeals) within the prescribed time, which is the only proper method available to modify an assessment of already exported goods. The Commissioner had no power to modify the assessment through an order in an original proceeding after the goods were exported. Therefore, the entire order modifying the assessment of the shipping bills was without authority and deserved to be set aside - The impugned order is set aside and the appeal is allowed - Denial of DEPB Scrips based on Re-determined Value under Customs Valuation Rules - The exporter had declared goods at certain FOB values in the shipping bills and obtained DEPB scrips from the DGFT as a percentage of the declared FOB values. The Commissioner subsequently re-determined the value of exported goods under Rule 8 of the Customs Valuation Rules at a lower rate and denied the DEPB claim, ordering recovery of customs duty to the extent the DEPB scrips were utilized - Whether the denial of DEPB scrips and recovery of duty can be ordered based on re-determination of value under the Customs Valuation Rules – HELD – The DEPB scrips are issued by the DGFT as a percentage of the FOB value, which is the transaction value agreed between the exporter and the overseas buyer. The FOB value is not defined in the Customs Act but represents the price at which the exporter exported the goods to the importer. If a customs officer re-determines the value under the Customs Valuation Rules for the purpose of assessing duty, he is only determining the assessable value and not modifying the transaction value. The transaction value remains the FOB value as per the agreement regardless of what value the Customs officer determines for duty purposes. Since DEPB scrips are issued based on the FOB value and the exporter is required to bring remittance based on the transaction value, the re-determination of assessable value by the customs officer has no impact on the DEPB claim. The Customs officer has no locus standi to issue or deny DEPB scrips as these are issued by the DGFT. Therefore, the Commissioner erred in denying the DEPB claim and ordering recovery of duty paid using DEPB scrips - The impugned order denying DEPB scrips is set aside - Confiscation of Goods Already Exported - Whether goods which have already been exported can be confiscated under section 113 of the Customs Act, 1962 – HELD – The confiscation of already exported goods is not permissible under section 113. Export goods are defined under section 2(19) as goods which are to be taken out of India to a place outside India. Once the goods are taken out of India and exported, they are no longer export goods within the meaning of the Act. The jurisdiction of the Customs Act extends only to the whole of India and not beyond. Therefore, once the goods move out of India, they fall outside the jurisdiction of the Act and cannot be subjected to confiscation proceedings. Section 113 provides that certain export goods shall be liable to confiscation, but this applies only to goods which are still export goods and within the jurisdiction of the Act. The confiscation order confiscating goods which were already exported is outside the scope of the Act - The impugned order for confiscation of exported goods is set aside - Penalty under Section 114A based on Recovery of Duty – HELD - Section 114A provides for imposition of penalty if duty is not paid or short paid by reason of collusion or any willful statement or suppression of facts and if it is ordered to be recovered under section 28. Since the appeal is held against the Revenue on the question of recovery of duty, the essential foundation for imposing penalty under section 114A is absent. The penalty is consequential to the recovery order and if the recovery order itself is not sustainable, the penalty cannot be sustained - The penalty imposed under section 114A is set aside - Penalty under Section 114AA for False or Incorrect Declaration - Whether penalty under section 114AA can be imposed where the declared values represent the actual transaction values agreed with the overseas buyer – HELD - Penalty under section 114AA can be imposed for using false or incorrect materials in any declaration statement or document filed under the Act. In this case the appellant had declared certain goods and certain values. Thus, the values declared were it’s transaction values. According to the appellant it has also realized that the remittance as per these values and obtained bank realization certificates. If the proper officer decides to change the value, it does not mean that the exporter has mis-declared the value. Therefore, the penalty under section 114AA cannot be imposed on the appellant cannot be survive. [Read less]

Customs - Valuation of Imported Goods - Rejection of Transaction Value under Rule 10A and Re-determination under Valuation Rules – Appellant declared values for imported watch parts and movements, which were rejected by the Commissioner on the ground that the buyer and seller were related persons – The values were re-determined under Rule 8 (residual method) of the Customs Valuation Rules, 1988, by applying a uniform 60% undervaluation across different categories of goods - Whether the rejection of transaction values under Rule 10A of the Customs Valuation Rules, 1988 was justified, and whether the re-determination of ... [Read more]

Customs - Valuation of Imported Goods - Rejection of Transaction Value under Rule 10A and Re-determination under Valuation Rules – Appellant declared values for imported watch parts and movements, which were rejected by the Commissioner on the ground that the buyer and seller were related persons – The values were re-determined under Rule 8 (residual method) of the Customs Valuation Rules, 1988, by applying a uniform 60% undervaluation across different categories of goods - Whether the rejection of transaction values under Rule 10A of the Customs Valuation Rules, 1988 was justified, and whether the re-determination of values under Rule 8 by applying arbitrary undervaluation percentages across different categories of goods is legally sustainable – HELD - While the rejection of transaction values under Rule 10A was justified on the ground that the buyers and sellers were related persons, thereby creating reasonable doubt about the truth and accuracy of the declared values, the re-determination of values was fundamentally flawed as the Commissioner failed to follow the sequential method prescribed under the Valuation Rules and instead applied an arbitrary 60% undervaluation across multiple categories of goods. The Valuation Rules must be applied sequentially and Rule 8 (residual method) can be invoked only when value cannot be determined under preceding rules. The Commissioner's assertion that no identical or similar goods were imported, sold or manufactured in India during the relevant period is found to be unbelievable and contradicted by the very evidence relied upon in the impugned order itself - The use of an arbitrary 60% undervaluation percentage, particularly for items such as plastic straps, watch movements, abrasive wheels, and miscellaneous items, is explicitly prohibited under Rule 8(2)(vi). Further, the reliance on prices prevailing in the exporting country to determine value under Rule 8 violated the explicit prohibition under Rule 8(2)(iii) - The impugned order also failed to specify which Rule was applied to determine the value of which specific good under which B/E, rendering the re-determination process non-transparent and arbitrary - The impugned order is set aside and the appeals are allowed [Read less]

Central Excise - Leviability of duty on Royalty and Stowing Excise Duty collected from customers - Whether central excise duty is leviable on the elements of Royalty and Stowing excise duty collected by the assessee – Demand invoking period of limitation – HELD - The issue as regards central excise duty liability on the elements of ‘Royalty’ and ‘Stowing Excise Duty’ has already been settled in a catena of decisions - Following the ratio laid down in previous decisions of the Tribunal involving identical issues and similar facts regarding coal mining companies, excise duty is payable on the element of royalty o... [Read more]

Central Excise - Leviability of duty on Royalty and Stowing Excise Duty collected from customers - Whether central excise duty is leviable on the elements of Royalty and Stowing excise duty collected by the assessee – Demand invoking period of limitation – HELD - The issue as regards central excise duty liability on the elements of ‘Royalty’ and ‘Stowing Excise Duty’ has already been settled in a catena of decisions - Following the ratio laid down in previous decisions of the Tribunal involving identical issues and similar facts regarding coal mining companies, excise duty is payable on the element of royalty only for the normal period of limitation by setting aside the demand for the extended period, and no duty of excise is payable on the element of Stowing excise duty - Additionally, in terms of the judgment of the Apex Court in Mineral Area Development Authority case, the interest liability arising on the Central Excise Duty payable on the element of royalty for the normal period of limitation is waived - The demand of Central Excise Duty on the element of Royalty to the extent it pertains to the normal period of limitation is upheld, the demand of interest on the above duty is set aside, and the entire demand of on the element of Stowing excise duty is set aside – The appeal is partly allowed - Relevant Date for Computation of Limitation Period when the periodical Return is filed belatedly - Whether the relevant date for computing the period of limitation under section 73(6) of the Finance Act 1994 is the due date for filing the periodical return or the actual date on which such return is filed when the return is filed in a delayed manner – HELD - The statutory provision under Section 73(6) of the Finance Act 1994 provides that where a periodical return showing particulars of service tax paid is filed by an assessee, the relevant date is the date on which such return is so filed. The section does not provide for any distinction between returns filed by the due date and returns filed after the due date. The plain language of the statute clearly indicates that the actual date of filing of the return constitutes the relevant date for computation of limitation, not the due date - The Tribunal rejects the Appellant's reliance on the Right Resource Management Service decision, as this decision did not consider the earlier judgment of the Patna High Court in Indian PAC Consulting case, which held that when a Return is required to be filed as per the Rules, the actual date of filing such return is the relevant date for computation of the period of limitation. The statutory provision is unambiguous and must be applied according to its plain meaning without distorting its interpretation to accommodate the assessee's position, even though this may result in hardship to the assessee - The show cause notice is held to be well within the normal period of limitation. [Read less]

Central Excise - Duty exemption for Capital goods used in quarrying operations by EOU - Scope of 'manufacture' under EOU scheme – Appellant-EOU imported capital goods duty-free and utilizes them for excavating granite blocks at the quarry site, which are subsequently transported to the main unit for further processing, cutting, polishing and manufacturing into granite articles for export – Demand of duty on the imported capital goods and indigenous materials, contending that they were not used in manufacturing activities as contemplated under the exemption Notification No.13/81-Cus. dated 9th February 1981 - Whether ca... [Read more]

Central Excise - Duty exemption for Capital goods used in quarrying operations by EOU - Scope of 'manufacture' under EOU scheme – Appellant-EOU imported capital goods duty-free and utilizes them for excavating granite blocks at the quarry site, which are subsequently transported to the main unit for further processing, cutting, polishing and manufacturing into granite articles for export – Demand of duty on the imported capital goods and indigenous materials, contending that they were not used in manufacturing activities as contemplated under the exemption Notification No.13/81-Cus. dated 9th February 1981 - Whether capital goods imported by an EOU under duty exemption Notifications can be utilized for quarrying of granite blocks at a location included as an additional manufacturing center in the Letter of Permission – HELD – The quarrying activity is covered under the definition of 'manufacture' under the Export and Import Policy, 1997-2002, which specifically includes mining as part of manufacture. The Mines Act, 1952 defines mining to include excavation for obtaining minerals, which encompasses quarrying. The capital goods are integral to the manufacturing process as they are essential for obtaining the basic raw material, namely granite blocks, which form the foundational input for the final manufactured products to be exported - The materials required for the purpose of manufacture are not limited to those directly used in the manufacturing process but include materials required in order to manufacture the resultant products. Machinery playing an integral role in the process of manufacture without which the finished goods could not have been produced should be treated as machinery used in manufacture – Further, the unit has obtained all necessary approvals at every stage of removal, transport and dispatch of goods from one location to another, and all activities were undertaken with specific intimations to concerned authorities - The utilization of imported capital goods for quarrying to obtain basic raw materials necessary for manufacturing the exported products does not violate the exemption conditions, as the quarried granite blocks form an integral part of the manufactured articles subsequently exported - The impugned order demanding customs and excise duty is set aside and the appeal is allowed [Read less]

Customs - Applicability of Foreign Trade Policy 2023 - Para 2.31(I)(b) - Restriction on Import of Second-hand Electronics and IT Goods – Appellant imported consignments of old and used multi-function copying printer machines through regular channels without obtaining authorization from the DGFT. The goods were declared in Bills of Entry and subjected to first-check examination. The consignments comprised used MFDs of various makes and models - Whether imported old and used multi-function copying machines fall within the restricted category under Para 2.31(I)(b) of the Foreign Trade Policy, 2023 and require authorization ... [Read more]

Customs - Applicability of Foreign Trade Policy 2023 - Para 2.31(I)(b) - Restriction on Import of Second-hand Electronics and IT Goods – Appellant imported consignments of old and used multi-function copying printer machines through regular channels without obtaining authorization from the DGFT. The goods were declared in Bills of Entry and subjected to first-check examination. The consignments comprised used MFDs of various makes and models - Whether imported old and used multi-function copying machines fall within the restricted category under Para 2.31(I)(b) of the Foreign Trade Policy, 2023 and require authorization from the DGFT for lawful import – HELD - The old and used multi-function copying machines, being electronic and IT goods, fall squarely within the restricted category under Para 2.31(I)(b) of the Foreign Trade Policy, 2023. The statutory provision expressly covers second-hand capital goods other than re-manufactured capital goods which are covered under electronics and IT goods and categorizes them as restricted. Importation thereof is permissible only upon obtaining requisite authorization from the Director General of Foreign Trade. Where the legislature has prescribed a clear classification without ambiguity, effect must be given to the statutory language in its ordinary and natural sense. The provision does not create a residuary category that would render the restricted items freely importable. In the absence of the requisite authorization, the goods become liable to confiscation under Section 111(d) of the Customs Act, 1962 - The reliance on provisional release orders granted by higher Courts in similar matters is rejected as such orders expressly leave it open to the Customs authorities to proceed with adjudication in accordance with law. The issue being pending before the Supreme Court, the established course of law deserves to be followed - The goods are rightly held liable to confiscation under Section 111(d) of the Customs Act, 1962. However, considering the absence of any clandestine importation or mis-declaration regarding the description of goods, the redemption fine is reduced - The issue stands answered accordingly - Exemption as Highly Specialised Equipment under Electronics and Information Technology Goods (Requirements of Compulsory Registration) Order, 2021 - Appellant claimed exemption for the imported machines under Para 8 of the Compulsory Registration Order, 2021, contending that the equipment satisfies two of the four specified criteria for highly specialised equipment, namely, single phase power supply with current rating exceeding 16 Ampere and weight exceeding 80 kilograms. The adjudicating authority rejected this claim, interpreting the exemption to apply only to specialized equipment like high-end servers for nuclear reactors, space programmes and data centres - Whether multi-function copying machines qualify as highly specialised equipment entitled to exemption from compulsory BIS registration under Para 8 of the Compulsory Registration Order, 2021 when they satisfy the objective criteria prescribed therein - HELD – The Para 8 of the Compulsory Registration Order, 2021 prescribes four objective and quantifiable criteria for determining highly specialised equipment exemption, requiring fulfillment of any one criterion. The statutory provision employs plain and unambiguous language and does not restrict the benefit to any particular sector, industry or specialized domain. Where the language employed by the legislature is plain and unambiguous, effect must be given to the same in its ordinary sense, and no words can be added thereunder the guise of interpretation. The adjudicating authority has impermissibly traveled beyond the statutory text to import extraneous limitations unsupported by the legislation. The respondent's earlier conduct treating similar goods as highly specialised equipment for other importers and releasing machines up to 100 units per model demonstrates inconsistency and discrimination. The respondent's own prior orders in respect of similar goods imported by the same appellant had treated those goods as highly specialised equipment without insisting on BIS registration. The decision must rest upon consistent appreciation of evidence and cannot be founded upon contradictory assumptions. The equipment in question demonstrably satisfies at least two of the four prescribed criteria - The findings rejecting the claim of exemption as highly specialised equipment are unsustainable and set aside. The imported goods cannot be treated as liable to confiscation on account of alleged non-compliance with the Compulsory Registration Order, 2021 - Equipment Type Approval from Wireless Planning and Coordination Wing - Reliance on Hearsay Evidence - Requirement of Equipment Type Approval for wireless communication devices and evidentiary standards - Whether confiscation of imported multi-function devices can be sustained on the ground of non-compliance with Equipment Type Approval requirements from the Wireless Planning and Coordination Wing when the allegation rests solely on hearsay evidence derived from brochures without independent verification or opportunity for the importer to rebut – HELD - The findings regarding Equipment Type Approval requirement are founded upon material which is secondary and derivative in nature, procured from brochures and internet sources and never disclosed to the appellant. Reliance upon such hearsay material without disclosing underlying documents and without affording an opportunity to controvert the same violates the principles of natural justice. Material adverse to a party must ordinarily be disclosed to enable effective opportunity of rebuttal. The mere existence of optional wireless functionality in certain models cannot lead to the conclusion that the imported machines were equipped with such functionality. Suspicion, however grave, cannot substitute proof. The equipment must be established as a wireless communication device by design through cogent and affirmative evidence. A multi-function printer with an optional wireless LAN port does not automatically become a wireless communication device requiring mandatory approval. In the absence of positive material evidencing that the imported devices were in fact fitted with wireless modules, the allegation remains in the realm of conjecture and surmise - The findings regarding Equipment Type Approval requirement are not supported by satisfactory and affirmative evidence and are set aside. Non-compliance with WPC requirements cannot be regarded as furnishing an independent or additional ground for confiscation - Compliance with Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 - Whether an importer holding valid EPR authorization and submitting prescribed documentation including country-of-origin certificate can be found non-compliant with hazardous waste rules on grounds of allegedly absent certificates and annual returns when this constituted a first-time import transaction – HELD - The Extended Producer Responsibility Authorization is itself a substantive compliance requirement envisaged under the statutory framework governing e-waste management and not merely a documentary formality. Once obtained from the competent authority and placed on record, it cannot be lightly disregarded while evaluating compliance. The country-of-origin certificate was consistently maintained to have been submitted with the Bills of Lading and packaging. In any event, CBIC Circular No. 07/2020 expressly contemplates situations where exporting country certificate is unavailable and permits post-import inspection by approved Chartered Engineers. The 100 percent first-check examination by Chartered Engineers in India constitutes the alternative mechanism expressly recognized by the Board itself. Insistence upon the exporting country certificate despite this recognized alternative appears misplaced. The requir [Read less]

Central Excise - Time spent pursuing remedy before wrong forum under bona fide mistake – Excludability from period of limitation – Appellant received a refund order from the Deputy Commissioner which contained a short payment due to miscalculation of refund already paid. The assessee, believing the error could be rectified by the Deputy Commissioner, addressed letters seeking rectification but received no response. Subsequently, the assessee filed an appeal before the Commissioner (Appeals) approximately eight months after receiving the order - Whether the time period spent by the assessee in pursuing the remedy before... [Read more]

Central Excise - Time spent pursuing remedy before wrong forum under bona fide mistake – Excludability from period of limitation – Appellant received a refund order from the Deputy Commissioner which contained a short payment due to miscalculation of refund already paid. The assessee, believing the error could be rectified by the Deputy Commissioner, addressed letters seeking rectification but received no response. Subsequently, the assessee filed an appeal before the Commissioner (Appeals) approximately eight months after receiving the order - Whether the time period spent by the assessee in pursuing the remedy before the Deputy Commissioner (wrong forum) under a bona fide belief that rectification could be sought there should be excluded from the period of limitation for filing an appeal before the Commissioner (Appeals), thereby rendering the appeal as filed within the condonable period of ninety days – HELD - The mandatory requirement to enclose a preamble with the refund order was not complied with, thereby denying the assessee the opportunity to know the time limit and form for filing appeal. The assessee had genuinely pursued the matter with due diligence before the lower authorities by writing multiple letters, while the authorities failed to intimate that the assessee was pursuing the remedy before the wrong forum. Applying the ratio laid down in M.P. Steel Corporation v. Commissioner of Central Excise, when an assessee prosecutes its remedy before a wrong authority under a bona fide mistake, the time spent in such prosecution must be excluded from the period of limitation - The matter is remanded to the Commissioner (Appeals) for deciding the issue on merits after following the principles of natural justice. The delay in filing the appeal before the Commissioner (Appeals) is condoned – The appeal is allowed [Read less]

Central Excise - Industrial Promotion Subsidy under Package Scheme of Incentives - Assessable Value, Includability of Subsidy disbursed under the Package Scheme – Appellant received Industrial Promotion Subsidy (IPS) disbursed under the Package Scheme of Incentives 2001/2007 announced by the Government of Maharashtra - Whether Industrial Promotion Subsidy constitutes "additional consideration" and therefore forms part of the assessable value – HELD - The Section 4(3)(d) of the Central Excise Act defines transaction value as the price actually paid or payable by the buyer and expressly excludes sales tax and other taxes... [Read more]

Central Excise - Industrial Promotion Subsidy under Package Scheme of Incentives - Assessable Value, Includability of Subsidy disbursed under the Package Scheme – Appellant received Industrial Promotion Subsidy (IPS) disbursed under the Package Scheme of Incentives 2001/2007 announced by the Government of Maharashtra - Whether Industrial Promotion Subsidy constitutes "additional consideration" and therefore forms part of the assessable value – HELD - The Section 4(3)(d) of the Central Excise Act defines transaction value as the price actually paid or payable by the buyer and expressly excludes sales tax and other taxes actually paid or payable at the point of removal of goods from the factory. The excise duty liability crystallizes at the time of removal when the manufacturer has collected and remitted the tax amounts to the State exchequer, and subsequent receipt of State incentives cannot retroactively alter the transaction value already determined at the time of removal - Furthermore, IPS is a post-sale State subsidy linked to eligible capital investment and regional industrial development, not an amount flowing from the buyer in connection with a sale transaction. The computation mechanism of IPS takes into account VAT/CST paid as one component among several, but this does not transform the subsidy into consideration payable by the buyer. The statutory framework of Section 4 does not permit post-facto revision of transaction value on account of events occurring after removal. It does not flow directly or indirectly from the buyer. Consequently, it falls outside the scope of “transaction value” as defined under Section 4(3)(d) of CEA, 1944 r/w Rule 6 of the Valuation Rules, and cannot be included in the assessable value for the levy of Central Excise duty - The impugned order demanding Central Excise duty is set aside - The appeal is allowed [Read less]

Customs - Classification and applicable IGST Rate on Parts and Accessories of Medical Equipment – Appellant imports various parts and accessories of kidney dialysis machines including continuous renal replacement therapy (CRRT) machine and automated peritoneal dialysis (APD) machine classifying them under Customs Tariff Heading (CTH) 9018 and paying IGST at 12% rate as per serial no. 218 of Schedule-II of Notification no. 01/2017-IT (Rate) dated 28.06.2017 - Department issued a show cause notice contending that the goods should be reclassified under CTH 9033 and IGST is payable at 18% rate under serial no. 423 of the sam... [Read more]

Customs - Classification and applicable IGST Rate on Parts and Accessories of Medical Equipment – Appellant imports various parts and accessories of kidney dialysis machines including continuous renal replacement therapy (CRRT) machine and automated peritoneal dialysis (APD) machine classifying them under Customs Tariff Heading (CTH) 9018 and paying IGST at 12% rate as per serial no. 218 of Schedule-II of Notification no. 01/2017-IT (Rate) dated 28.06.2017 - Department issued a show cause notice contending that the goods should be reclassified under CTH 9033 and IGST is payable at 18% rate under serial no. 423 of the same Notification - Whether parts and accessories of medical devices, suitable for use solely or principally with kidney dialysis apparatus, are classifiable under CTH 9018 or CTH 9033, and whether IGST at 12% or 18% rate is applicable on such goods – HELD - The scope of CTH 9018 covers all types of instruments and appliances used in medical, surgical, dental or veterinary sciences along with their respective parts, while CTH 9033 is a residual entry for parts and accessories not specified or included elsewhere in chapter 90. This classification is supported by Chapter Note 2 to Chapter 90, which stipulates that parts and accessories suitable for use with a particular kind of apparatus are to be classified with the machines, instruments or apparatus of that kind – Further, the CBIC Circular dated 11.10.2019 clarifies that parts and accessories of kidney dialysis apparatus are classifiable along with such apparatus and are chargeable to 12% IGST under serial no. 218 of schedule-II of Notification No. 01/2017 (IT) dated 28.06.2017. The said Circular is binding on Departmental officers. Additionally, the coordinate bench of the Tribunal in the case of Aloka Trivitron Medical Technologies had held identically on the same issue, and the Hon'ble Supreme Court dismissed the Department's appeal against the Tribunal order. The matter is no longer res integra - The impugned order is set aside and the appeal is allowed in favour of the appellants [Read less]

Customs - Classification of Calcined Kaolin Clay - Chapter 25 versus Chapter 28 – Appellant filed B/E classifying imported 'Burgess Calcined Aluminium Silicate' (kaolin clay) under Customs Tariff Item 2507 0029 claiming duty exemption - Department's chemical test report indicates the goods are composed of aluminum silicate with trace amounts of titanium, calcium and iron in processed, calcined form. The original authority reclassifies the goods under Customs Tariff Item 2839 9090 (silicates) - Whether calcined kaolin clay composed of aluminum silicate is properly classifiable under Customs Tariff Item 2507 0029 (kaolin a... [Read more]

Customs - Classification of Calcined Kaolin Clay - Chapter 25 versus Chapter 28 – Appellant filed B/E classifying imported 'Burgess Calcined Aluminium Silicate' (kaolin clay) under Customs Tariff Item 2507 0029 claiming duty exemption - Department's chemical test report indicates the goods are composed of aluminum silicate with trace amounts of titanium, calcium and iron in processed, calcined form. The original authority reclassifies the goods under Customs Tariff Item 2839 9090 (silicates) - Whether calcined kaolin clay composed of aluminum silicate is properly classifiable under Customs Tariff Item 2507 0029 (kaolin and other kaolinic clays, whether or not calcined) falling under Chapter 25, or under Customs Tariff Item 2839 9090 (other silicates) falling under Chapter 28 – HELD - The Chapter Note 1 of Chapter 25 specifically provides that products covered under this chapter may include kaolin and other kaolinic clays that have been subjected to physical and mechanical processes including calcination, provided the structure of the product remains unchanged. The Chapter Heading 2507 explicitly states "kaolin and other kaolinic clays, whether or not calcined," indicating that calcination does not exclude the product from Chapter 25. In contrast, Chapter 28 applies only to separate chemical elements and separate chemically defined compounds, which is not the case here as the chemical test report does not indicate separate chemical compounds but rather a processed calcined clay with naturally occurring trace elements - The Supreme Court in the case of 20 Microns Limited established that calcined kaolin/china clay remains classifiable under Chapter 25 even after calcination because the context of Chapter Heading 2507 specifically contemplates calcined products. Merely because the product is calcined does not put it out of Chapter 25, and the trace elements present do not contribute to a significant factor in reclassifying the goods under Chapter 28 - The goods are classified under Customs Tariff Item 2507 0029. The impugned order is set aside and the appeal is allowed [Read less]

Service Tax - Transfer of Right to Use Goods Service – Hiring of diesel generator sets on rental basis - Supply of Tangible Goods for Use (STGU) service or deemed sale of goods - The appellant disputes the demand under STGU contending that the work orders demonstrate delivery of identified generator sets at customer premises with customer exercising effective control and right to use, the appellant's obligation being limited to attending breakdowns, maintenance and spares, and that payment of VAT was made indicating the true nature of arrangement as deemed sale of goods – HELD - Whether a transaction involves transfer ... [Read more]

Service Tax - Transfer of Right to Use Goods Service – Hiring of diesel generator sets on rental basis - Supply of Tangible Goods for Use (STGU) service or deemed sale of goods - The appellant disputes the demand under STGU contending that the work orders demonstrate delivery of identified generator sets at customer premises with customer exercising effective control and right to use, the appellant's obligation being limited to attending breakdowns, maintenance and spares, and that payment of VAT was made indicating the true nature of arrangement as deemed sale of goods – HELD - Whether a transaction involves transfer of possession and control is a question of fact to be decided based on terms of contract and material facts. Applying the test enunciated in BSNL to instant case, the generator sets were specifically identified as 380 KVA diesel generator sets, customer alone had effective right to use generator for business purposes during rental period, appellant's obligation was confined to attending breakdowns and providing maintenance and spares – The right to use could not be transferred by appellant to any other person during same period, ownership remained with appellant as appellant bore obligations consistent with ownership including maintenance and optional supply of operator. Mere permission to use goods does not constitute transfer of right to use as it may be merely a licence to use - On examination of the facts and applying the statutory test, the transaction evidences transfer of right to use diesel generator sets by customer without transferring ownership and satisfies the attributes laid down for deemed sale of goods under Article 366(29-A)(d) of the Constitution, and therefore does not fall within the taxable category of Supply of Tangible goods for use without transferring right of possession and effective control as stipulated under Section 65(105)(zzzzj) of the Finance Act, 1994 - The demand for service tax on hiring of diesel generator sets is unsustainable as the transaction constitutes transfer of right to use goods attracting sales tax/VAT and not service tax - The impugned order is set aside and the appeal is allowed [Read less]

Customs - Classification of blood glucose monitoring system – Respondent-SEZ imported blood glucose monitoring systems classified under Customs Tariff Item 90278090 as instruments for chemical analysis at Nil Basic Customs Duty - Revenue sought to reclassify them under CTI 90189099 as medical diagnostic instruments attracting 5% duty - Whether glucometers/blood glucose monitoring systems merit classification under CTH 9027 (instruments for physical or chemical analysis) or under CTH 9018 (instruments used in medical, surgical, dental or veterinary sciences) – HELD - Glucometers performs chemical analysis of blood gluco... [Read more]

Customs - Classification of blood glucose monitoring system – Respondent-SEZ imported blood glucose monitoring systems classified under Customs Tariff Item 90278090 as instruments for chemical analysis at Nil Basic Customs Duty - Revenue sought to reclassify them under CTI 90189099 as medical diagnostic instruments attracting 5% duty - Whether glucometers/blood glucose monitoring systems merit classification under CTH 9027 (instruments for physical or chemical analysis) or under CTH 9018 (instruments used in medical, surgical, dental or veterinary sciences) – HELD - Glucometers performs chemical analysis of blood glucose levels through electrochemical or enzymatic reactions occurring on the test strip, which constitutes its primary scientific function. The fact that an instrument is used in the field of medicine does not by itself place it under CTH 9018 where a heading describing its analytical function is available. The measurement of blood glucose level by a glucometer is itself the diagnostic step integral to clinical use and the analytical function of the device is not divorced from its medical purpose. Rule 3(a) of the General Rules for the Interpretation of the Customs Tariff applies with the more specific heading being CTH 9027 describing the analytical nature rather than CTH 9018 describing its field of application. This classification is supported by consistent precedents - The appeal filed by Revenue is dismissed and the Commissioner (Appeals) order is upheld [Read less]

Customs - Classification of Interactive Display Systems – Appellant engaged in importing interactive display systems (viewboards) containing automatic data processing units classified the goods under Chapter Tariff Item 8471.4190 as ADP machines. The adjudicating authority reclassified them under Chapter Tariff Item 8528.5200. The appellate authority allowed the importer's appeal by relying on an earlier tribunal decision that had classified identical goods under 8471.4190 - Whether the Department can reagitate the same issue of classification in a subsequent assessment order despite a settled Tribunal decision – HELD ... [Read more]

Customs - Classification of Interactive Display Systems – Appellant engaged in importing interactive display systems (viewboards) containing automatic data processing units classified the goods under Chapter Tariff Item 8471.4190 as ADP machines. The adjudicating authority reclassified them under Chapter Tariff Item 8528.5200. The appellate authority allowed the importer's appeal by relying on an earlier tribunal decision that had classified identical goods under 8471.4190 - Whether the Department can reagitate the same issue of classification in a subsequent assessment order despite a settled Tribunal decision – HELD - The issue of classification is no longer res integra as it has already been settled in favour of the Respondent-importer in its own case by the Tribunal. The earlier Tribunal decision is binding on the Department and the Department cannot reagitate the same dispute of classification. The principles of judicial discipline require that officers in quasi-judicial matters are bound by decisions of Appellate authorities - Officers cannot bypass appellate orders regarding the same issue merely because such orders are subject matter of further appeal unless their operation has been suspended by a competent Court. The Tribunal's decision in this matter has been relied upon in subsequent Tribunal decisions regarding similar goods and such decisions have been upheld by the Supreme Court, making the issue binding on all judicial and quasi-judicial authorities - The appeal filed by the Revenue is dismissed as being devoid of any merits [Read less]

GST - Procedural defect in Show Cause Notice – Levy of penalties for fraudulent Input Tax Credit - Petitioner challenges the impugned orders alleging that the Show Cause Notice consisted of only three pages and that relied upon documents were incorrectly included without proper specificity of the relevant period - Whether procedural defects in the Show Cause Notice, such as incomplete supply of documents and typographical errors regarding the period of investigation, vitiate the notice – HELD - The petitioner never raised objection regarding alleged incompleteness of the SCN during the proceedings, replies, or personal... [Read more]

GST - Procedural defect in Show Cause Notice – Levy of penalties for fraudulent Input Tax Credit - Petitioner challenges the impugned orders alleging that the Show Cause Notice consisted of only three pages and that relied upon documents were incorrectly included without proper specificity of the relevant period - Whether procedural defects in the Show Cause Notice, such as incomplete supply of documents and typographical errors regarding the period of investigation, vitiate the notice – HELD - The petitioner never raised objection regarding alleged incompleteness of the SCN during the proceedings, replies, or personal hearing despite having ample opportunity to do so - Respondent categorically denies supplying only three pages and asserts that complete physical copy was dispatched through email and post. Further, the typographical error in mentioning the year 2021 instead of the actual investigation period of October 2018 to November 2019 spanning financial years 2018-19 and 2019-20 does not vitiate the notice as the petitioner was evidently aware of the actual period under investigation and possessed all relied upon documents including GSTR-3B, GSTR-2B, GSTR-1M and e-way bills which were duly scrutinized and detailed in the Order in Original. Sufficient opportunity of hearing has been provided, hence, there is no violation of principles of natural justice or statutory provisions exists - The writ petition cannot be entertained as the appellate authority is competent to examine such factual issues - The SCN and Order-in-Original are sustained and the petition is dismissed [Read less]

Service Tax - Admissibility of Refund claim when Service Tax is deposited under Different Registration Codes of same entity - Whether a refund claim can be rejected on the technical ground that the amount was deposited under a different registration code than the one in which the refund application is filed, when the entire amount has been duly credited to the government account and both codes pertain to the same entity - HELD – The substantive refund benefits cannot be denied due to technical errors in registration codes or wrong accounting entries, provided the money has been deposited into and credited by the governme... [Read more]

Service Tax - Admissibility of Refund claim when Service Tax is deposited under Different Registration Codes of same entity - Whether a refund claim can be rejected on the technical ground that the amount was deposited under a different registration code than the one in which the refund application is filed, when the entire amount has been duly credited to the government account and both codes pertain to the same entity - HELD – The substantive refund benefits cannot be denied due to technical errors in registration codes or wrong accounting entries, provided the money has been deposited into and credited by the government exchequer. The principles laid down in Devang Papers Mills case establish that when Government dues are deposited, whether under a wrong accounting code or different registration code, the assessee is not required to pay the tax again. The Department itself issued a single consolidated demand notice and assessment order treating the entity as unified, and therefore cannot subsequently fragment the entity into separate units merely to deny refund. The split of deposits under two codes is merely an internal administrative arrangement for maintaining different units of the same residential complex and does not constitute dual liability or fraud. Where the tax amount due has been deposited with the Government exchequer, discrepancies in registration codes are matters of internal Departmental adjustment and can be remedied through accounting entries without imposing fresh demand. The technical bookkeeping errors cannot override the substantive statutory right of the assessee to claim refund of amounts wrongly held to be payable - The refund of the entire amount is allowed, and the rejection of the portion claimed under the different registration code is set aside – The appeal is allowed - Applicability of Bar of Unjust Enrichment to amounts deposited during Investigation - Amounts were deposited during investigation proceedings by the assessee, the underlying demand was subsequently set aside on merits by the Appellate Commissioner - Revenue invoked the doctrine of unjust enrichment to deny refund of the deposited amounts - Whether the principle of unjust enrichment under Section 11B of the Central Excise Act can be applied to bar refund of amounts deposited during investigation after the underlying demand has been set aside on merits - HELD - The principle of unjust enrichment cannot be mechanically applied to amounts deposited during investigation proceedings. Such deposits made to secure the revenue's interest during proceedings are in the nature of pre-deposits and do not possess the characteristics of self-assessed tax or duty passed on in commercial invoices. Once the underlying demand is set aside on merits, the retained money loses any character or colour of tax, and the State cannot retain money of the assessee without authority of law - The unjust enrichment bar applies only when tax or duty has been actually paid and the incidence thereof has been passed on to third parties. Where the service tax itself was not leviable due to the principle of mutuality, there is no question of the assessee passing on the tax incidence to members. The onus of maintaining seamless internal verification records lies with the department, and once payment is verified from the exchequer perspective, refund must follow as a necessary consequence - When no tax was leviable on the assessee, the bar of unjust enrichment is entirely inapplicable - The invocation of unjust enrichment principle to deny refund is rejected, and the full refund amount is ordered along with applicable interest. [Read less]

Service Tax – Commission on distributor sales in multi-level marketing – Service tax liability - Whether the activity of distributors in a multi-level marketing scheme who earn commissions from purchasing and sponsoring other distributors amounts to providing "Business Auxiliary Service" - HELD - Not all commission earned by distributors in a multi-level marketing structure attracts service tax. When a distributor purchases goods from the supplier and sells them in retail, the goods cease to belong to the supplier and become the property of the distributor. Therefore, the sale of such goods by the distributor does not ... [Read more]

Service Tax – Commission on distributor sales in multi-level marketing – Service tax liability - Whether the activity of distributors in a multi-level marketing scheme who earn commissions from purchasing and sponsoring other distributors amounts to providing "Business Auxiliary Service" - HELD - Not all commission earned by distributors in a multi-level marketing structure attracts service tax. When a distributor purchases goods from the supplier and sells them in retail, the goods cease to belong to the supplier and become the property of the distributor. Therefore, the sale of such goods by the distributor does not constitute a service to the supplier, and commissions earned on such purchases represent volume discounts rather than consideration for promotional services. However, when a distributor identifies and sponsors other persons as second-level distributors and earns commission based on the performance of these sponsored distributors, such activity amounts to marketing and sales promotion of the supplier's goods and constitutes BAS - The distinction lies between commission earned on personal volume of purchases versus commission earned on the performance of the sales group. Since the impugned order demands service tax on the gross amount of commission without making this distinction, the matter requires re-adjudication to quantify the service tax demand only on commission received for sales group performance - The impugned orders are set aside and the matter is remanded to the original adjudicating authority for fresh adjudication - The appeals are disposed of by way of remand [Read less]

Service Tax on Advance Payment for Capital Goods - Liability under Reverse Charge Mechanism when contract is cancelled and consideration is refunded by foreign supplier – Dept demanded service tax under RCM treating the entire amount as consideration for erection, commissioning and installation services. Subsequently, the contract was cancelled due to non-fulfillment of conditions and the advance was refunded by the foreign supplier - Whether service tax is payable under RCM on advance payment made towards procurement of capital goods when the contract is cancelled and the advance is refunded before any service is render... [Read more]

Service Tax on Advance Payment for Capital Goods - Liability under Reverse Charge Mechanism when contract is cancelled and consideration is refunded by foreign supplier – Dept demanded service tax under RCM treating the entire amount as consideration for erection, commissioning and installation services. Subsequently, the contract was cancelled due to non-fulfillment of conditions and the advance was refunded by the foreign supplier - Whether service tax is payable under RCM on advance payment made towards procurement of capital goods when the contract is cancelled and the advance is refunded before any service is rendered or consideration is retained – HELD - The advance was paid by the appellant towards receipt of capital goods and not towards services, which is evident from the contract documents. Further, since the contract has been cancelled and the advance has been refunded by the foreign supplier, no transaction has been completed between the appellant and the foreign supplier - The service tax becomes payable only when there is actual provision of service or receipt of consideration. In the absence of service rendered and with the consideration being returned, the levy of service tax is not backed by authority of law. Since no service tax is payable, penalty cannot be imposed - The impugned order is set aside and the appeal is allowed [Read less]

Service Tax - Cost Sharing of Common Expenses between Parent Company and Wholly Owned Subsidiary - Applicability of Service Tax under Business Support Service - Demand notice alleging that the parent company has provided BSS to the subsidiary and is liable to pay service tax on the amount recovered from the subsidiary under the head "Business Support Service" as specified in Section 65 of the Finance Act, 1994 - Whether cost sharing of common expenses between a parent company and its wholly owned subsidiary amounts to provision of service taxable under the category of business support service – HELD - The parent company ... [Read more]

Service Tax - Cost Sharing of Common Expenses between Parent Company and Wholly Owned Subsidiary - Applicability of Service Tax under Business Support Service - Demand notice alleging that the parent company has provided BSS to the subsidiary and is liable to pay service tax on the amount recovered from the subsidiary under the head "Business Support Service" as specified in Section 65 of the Finance Act, 1994 - Whether cost sharing of common expenses between a parent company and its wholly owned subsidiary amounts to provision of service taxable under the category of business support service – HELD - The parent company merely procures services from external vendors on behalf of both entities and does not itself provide any service to the subsidiary. The recovery of expenses represents mere reimbursement of actual costs incurred and not consideration for services rendered. Prior to the amendment dated 01.05.2011, the definition of BSS specifically enumerated activities such as evaluation of prospective customers, telemarketing, processing of purchase orders, managing distribution and logistics, customer relationship management, accounting and transaction processing, and operational assistance for marketing. The activities in the present case such as hospitality, insurance premium, rent, repair and maintenance, and telephone charges do not fall within any of these specified categories - The arrangement satisfies the criteria of a "pure agent" under the Valuation Rules as the parent company recovers only the exact amount paid to third-party vendors without any markup. Additionally, whatever service tax is paid by the appellant, the same is entitled as CENVAT Credit by their subsidiary companies. Therefore, it will be termed as “service has been provided to self” and it is a revenue neutral situation and no service tax is payable by the appellant - The demand of service tax is set aside and the appeal is allowed [Read less]

GST - Cancellation of GST Registration - Requirement of Speaking Order – Issue of Show Cause Notice for failure to furnish returns for a continuous period of six months but the SCN did not specify the exact period during which returns were not filed – The cancellation order was passed without petitioner furnishing any reply or appearing for personal hearing - Whether the cancellation of GST registration is valid when the cancellation order does not assign proper reasons – HELD – The statutory prescription to record reasons as mandated by Form GST REG-19 under Rule 22(3) of the CGST Rules, 2017 - The adjudicating au... [Read more]

GST - Cancellation of GST Registration - Requirement of Speaking Order – Issue of Show Cause Notice for failure to furnish returns for a continuous period of six months but the SCN did not specify the exact period during which returns were not filed – The cancellation order was passed without petitioner furnishing any reply or appearing for personal hearing - Whether the cancellation of GST registration is valid when the cancellation order does not assign proper reasons – HELD – The statutory prescription to record reasons as mandated by Form GST REG-19 under Rule 22(3) of the CGST Rules, 2017 - The adjudicating authority exercising statutory power of cancellation under the Act must record reasons for its decision as it is implicit in the principles of natural justice and fair play and forms part of fair procedure, particularly when the decision affects the rights of the person concerned. Recording of reasons is a check against arbitrary action and demonstrates conscious application of mind - The statute itself prescribes that reasons must be recorded in the decision through Form GST REG-19, and absence of reasons violates this statutory prescription and renders the order illegal. The fact that the assessee did not submit any reply or appear before the officer does not absolve the officer from the obligation of passing a speaking order, as any order bringing adverse consequences cannot be a mere paper formality - The impugned cancellation order is set aside and quashed and the matter is reverted to the stage of issuance of the show cause notice - The writ petition stands allowed [Read less]

GST - Refund claim - Bunching across tax periods - Whether bunching of refund claims across multiple tax periods is permissible under GST law – HELD - The CBIC Circular dated 31.03.2020 permits bunching of refund claims across tax periods. The said Circular was required to be taken into consideration while deciding the refund application. The respondent authority failed to consider the applicable Circular while issuing the impugned rejection order - The impugned order is set aside and the matter is remanded to the respondent for reconsideration – The writ petition is disposed of

GST - Validity of Summary of Show Cause Notice as substitute for Show Cause Notice - Whether a Summary of Show Cause Notice in Form DRC-01 can constitute a valid Show Cause Notice as required under Section 73(1) of the CGST Act, 2017 – HELD - The Rule 142(1)(a) of the CGST Rules, 2017 merely contemplates a summary to accompany the Show Cause Notice, but the actual Show Cause Notice must be issued separately by the Proper Officer. The statement provided under Section 73(3) is distinct and cannot be equated with the Show Cause Notice under Section 73(1) - The Order in Original is set aside and quashed. The Summary of Show ... [Read more]

GST - Validity of Summary of Show Cause Notice as substitute for Show Cause Notice - Whether a Summary of Show Cause Notice in Form DRC-01 can constitute a valid Show Cause Notice as required under Section 73(1) of the CGST Act, 2017 – HELD - The Rule 142(1)(a) of the CGST Rules, 2017 merely contemplates a summary to accompany the Show Cause Notice, but the actual Show Cause Notice must be issued separately by the Proper Officer. The statement provided under Section 73(3) is distinct and cannot be equated with the Show Cause Notice under Section 73(1) - The Order in Original is set aside and quashed. The Summary of Show Cause Notice is not set aside, but the Respondent is directed to issue a fresh Show Cause Notice in compliance with Section 73(1) of the Act, properly detailing the cause of action and authenticated by the Proper Officer. The fresh Show Cause Notice shall date back to the date of issuance of the Summary, and the period from the date of Summary till the date of service of the present order is excluded from the period of limitation under Section 73(10) of the Act for passing the final order – The writ petition stands disposed of [Read less]

GST – Scope of expression “wrongful availment and utilisation of Input Tax Credit” - Mismatch between GSTR-3B and GSTR-2A, Interest liability on wrongfully availed ITC – Demand of interest on the ground of discrepancy between the Input Tax Credit reflected in the GSTR-3B and the auto-populated GSTR-2A return. The petitioner discharged the resulting tax liability by debiting the electronic credit ledger - Whether a liability arising out of mismatch in GSTR-3B and GSTR-2A returns constitutes wrongful availment and utilisation of Input Tax Credit attracting the higher rate of interest prescribed under Section 50(3) of... [Read more]

GST – Scope of expression “wrongful availment and utilisation of Input Tax Credit” - Mismatch between GSTR-3B and GSTR-2A, Interest liability on wrongfully availed ITC – Demand of interest on the ground of discrepancy between the Input Tax Credit reflected in the GSTR-3B and the auto-populated GSTR-2A return. The petitioner discharged the resulting tax liability by debiting the electronic credit ledger - Whether a liability arising out of mismatch in GSTR-3B and GSTR-2A returns constitutes wrongful availment and utilisation of Input Tax Credit attracting the higher rate of interest prescribed under Section 50(3) of the Act, or whether interest is payable only on tax paid by debiting the Electronic Cash Ledger as prescribed under the proviso to Section 50(1) – HELD - In the absence of any statutory definition curtailing the scope of the expression “wrongful availment and utilisation of ITC” to fraudulent or bad faith availment or utilisation, any availment and utilisation of ITC while not eligible or entitled thereto would qualify as wrongful availment and utilisation. The liability arising from the discrepancy in Input Tax Credit between GSTR - 3B and GSTR - 2A constitutes wrongful availment and utilisation of Input Tax Credit, and therefore the higher interest rate prescribed under Section 50(3) is applicable - Any availment and utilisation of Input Tax Credit while not eligible or entitled thereto qualifies as wrongful availment and utilisation. This interpretation is reinforced by the fact that bad faith availment is separately dealt with under Section 74 with higher penalties, indicating that wrongful availment under Section 50(3) has a broader scope. The proviso to Section 50(1) pertains only to belated payment of tax by debiting the Electronic Cash Ledger and does not apply to cases of wrongful availment where utilisation occurs through debiting the Electronic Credit Ledger. The Rule 88B(3) specifically prescribes the methodology for calculating interest in cases of wrongful availment, calculating such interest from the date of utilisation until reversal. The assessing officer correctly applied Section 50(3) in computing the interest liability, and no infirmity is found warranting interference - The writ petition is dismissed [Read less]

GST – Levy of Penalty on Partners under Sections 122(1A) of the CGST Act, 2017 - Liability of partners for penalty in fraudulent Input Tax Credit - Partnership firm engaged in generating fake invoices and e-way bills without actual supply of goods. During investigation, both partners admitted their involvement and made incriminating statements - The adjudicating authority imposed penalties under Sections 122(1A) and 122(3) against the partnership firm and its partners - Whether Partners of a partnership firm can be held liable for penalty under Section 122(1A) of the CGST Act, 2017 when a penalty has already been imposed... [Read more]

GST – Levy of Penalty on Partners under Sections 122(1A) of the CGST Act, 2017 - Liability of partners for penalty in fraudulent Input Tax Credit - Partnership firm engaged in generating fake invoices and e-way bills without actual supply of goods. During investigation, both partners admitted their involvement and made incriminating statements - The adjudicating authority imposed penalties under Sections 122(1A) and 122(3) against the partnership firm and its partners - Whether Partners of a partnership firm can be held liable for penalty under Section 122(1A) of the CGST Act, 2017 when a penalty has already been imposed on the partnership firm – HELD – The Partners can be held individually liable for penalty under Section 122(1A) of the CGST Act, 2017 when they retain the benefit of fraudulent transactions and at whose instance such transactions are conducted. The adjudicating authority has recorded categorical findings establishing the full knowledge, consent and complicity of both Partners in conducting the affairs of the partnership firm, including their admission of involvement in generating fake invoices, admitting incorrect e-way bills were generated, and their active participation in hawala transactions - The WhatsApp chats, forensic examination of mobile phones, statements of the petitioners themselves, and documentary evidence established prior knowledge and habitual conduct of both partners. The impugned order is a detailed, reasoned order containing extensive findings based on investigation materials and does not violate principles of natural justice. The judgment of Supreme Court relied upon by petitioners pertains to passing of reasoned orders by quasi-judicial authorities and does not remotely apply where detailed findings have been recorded. The judgment of Bombay High Court cited by petitioners dealt with a different factual matrix without a widespread network of fraudulent transactions - The petitioners had an efficacious statutory remedy of appeal and all factual findings including the applicability of the provisions of Section 122(1A) of the CGST Act could have been examined by the appellate authority. However, since the petitioners have insisted for reasoned order, the Court is constrained to pass one. The writ petition is rejected [Read less]

Gujarat Value Added Tax Act, 2003 - Validity of notice under section 34(8A) of GVAT Act, 2003 - Requirement of pending proceedings - Following the search, notices were issued under section 34(8A) directing the dealer to produce books of accounts and other documents for verification of tax credits and claims, along with a show-cause notice proposing levy of penalty - Whether notices issued under section 34(8A) of the GVAT Act are valid when no assessment proceedings are pending against the dealer at the time of issuance of such notices – HELD - The statutory provision of Section 34(8A) contains a mandatory requirement tha... [Read more]

Gujarat Value Added Tax Act, 2003 - Validity of notice under section 34(8A) of GVAT Act, 2003 - Requirement of pending proceedings - Following the search, notices were issued under section 34(8A) directing the dealer to produce books of accounts and other documents for verification of tax credits and claims, along with a show-cause notice proposing levy of penalty - Whether notices issued under section 34(8A) of the GVAT Act are valid when no assessment proceedings are pending against the dealer at the time of issuance of such notices – HELD - The statutory provision of Section 34(8A) contains a mandatory requirement that notices can be issued only "during the course of any proceedings under this Act." The provision clearly stipulates that the prescribed authority can initiate assessment only if some proceedings are pending. The pendency of proceedings is a sine-qua-non for exercise of such powers - In the present case, no proceedings for assessment were pending against the petitioner when the notices were issued. The return filed for the relevant period was already assessed and closed long before. Mere internal scrutiny or examination of files cannot constitute pendency of proceedings as envisaged under section 34(8A). The respondent authority failed to record any satisfaction on the basis of material found during search proceedings before issuing the notices. The mere conduct of a search, without pending assessment proceedings, does not provide the authority with jurisdiction to invoke section 34(8A) - The impugned notices are quashed and set aside. The petition is allowed [Read less]

Central Excise - Remission of Central Excise Duty for Inevitable Manufacturing Losses – Appellant-manufacturer of pig iron discovered a shortage of pig iron during physical stock verification conducted after the blast furnace shut down, representing an accumulated loss of 0.55% against total production over eleven years – Appellant applied for remission of duty under Rule 21 of the Central Excise Rules, 2002, contending that the shortage resulted from inevitable and irrecoverable handling losses during the manufacturing process – Dept rejected the remission application, reasoning that the loss was not attributable to... [Read more]

Central Excise - Remission of Central Excise Duty for Inevitable Manufacturing Losses – Appellant-manufacturer of pig iron discovered a shortage of pig iron during physical stock verification conducted after the blast furnace shut down, representing an accumulated loss of 0.55% against total production over eleven years – Appellant applied for remission of duty under Rule 21 of the Central Excise Rules, 2002, contending that the shortage resulted from inevitable and irrecoverable handling losses during the manufacturing process – Dept rejected the remission application, reasoning that the loss was not attributable to natural causes and that the manufacturer ought to have undertaken timely stock-taking - Whether inevitable and irrecoverable handling and process losses occurring before removal of goods qualify for remission under Rule 21 of the Central Excise Rules, 2002 – HELD - The Rule 21 empowers remission where goods are lost or destroyed by natural causes or unavoidable accident before removal. The expressions "natural causes" and "unavoidable accident" must be given a reasonable and liberal meaning to include inevitable, irrecoverable handling and process losses inherent to manufacturing, not confined to catastrophic events alone. The generation of pig iron chips, dust and dross is an inevitable consequence of pig iron manufacturing, and the loss of 0.55% is well within the Board's prescribed condonable limit of 2%, which constitutes binding instructions that the Revenue authority cannot ignore – Further, the Commissioner erred in referring to the erstwhile Rule 223A of the Central Excise Rules, 1944, when the application was expressly made under Rule 21 of the Central Excise Rules, 2002, the operative provision. The Commissioner was bound to allow remission since the inevitability and irrecoverable character of the loss remained undisputed and the loss fell squarely within the remissory ambit of Rule 21 - The Commissioner's order rejecting the remission application is set aside, entitling the appellant to remission of central excise duty on the shortage – The appeal is allowed [Read less]

GST - Waiver of interest and penalty - Whether an applicant can be denied waiver of interest and penalty under Section 128-A of the CGST Act, 2017 on the ground that the applicant availed input tax credit from non-existing taxpayers, cancelled dealers, and return defaulters, when the assessment proceedings were initiated under Section 73 instead of Section 74 – HELD - Where the authority relies on grounds pertaining to wrongful availment of input tax credit, such proceedings should have been initiated under Section 74, which deals with circumstances where a person has received an ineligible refund or availed credit not p... [Read more]

GST - Waiver of interest and penalty - Whether an applicant can be denied waiver of interest and penalty under Section 128-A of the CGST Act, 2017 on the ground that the applicant availed input tax credit from non-existing taxpayers, cancelled dealers, and return defaulters, when the assessment proceedings were initiated under Section 73 instead of Section 74 – HELD - Where the authority relies on grounds pertaining to wrongful availment of input tax credit, such proceedings should have been initiated under Section 74, which deals with circumstances where a person has received an ineligible refund or availed credit not permissible. Since the record demonstrates that proceedings were initiated under Section 73, which pertains to discrepancies in returns and tax payable, the rejection order based on ineligibility grounds falls outside the permissible scope of Section 128-A. The application was filed within the prescribed temporal limits of the Act and meets the conditions for waiver eligibility - The impugned rejection order is set aside and the respondents are directed to reconsider and pass fresh orders on the waiver application – The writ petition is disposed of [Read less]

Service Tax - Applicability of limitation period on refund of erroneously paid service tax under Reverse Charge – Movement of goods partly by road through a transport contractor and partly by rail - The service provider raised invoices charging service tax on the transport contractor, which were endorsed in favor of appellant – The Appellant, under the mistaken belief that Reverse Charge mechanism was applicable to rail transportation services, paid service tax on the same transportation services for which the service provider had already discharged service tax liability - Whether the appellant is entitled to claim ref... [Read more]

Service Tax - Applicability of limitation period on refund of erroneously paid service tax under Reverse Charge – Movement of goods partly by road through a transport contractor and partly by rail - The service provider raised invoices charging service tax on the transport contractor, which were endorsed in favor of appellant – The Appellant, under the mistaken belief that Reverse Charge mechanism was applicable to rail transportation services, paid service tax on the same transportation services for which the service provider had already discharged service tax liability - Whether the appellant is entitled to claim refund of service tax paid by it on transportation of goods by the service provider when the service provider had already paid service tax on the same services and the appellant also paid service tax under RCM – HELD - The fundamental principle is that service tax cannot be levied twice on the same activity. If service tax has been discharged on the same transportation activity by both the service provider and the appellant under RCM by mistake, then the service tax paid by the appellant is required to be refunded. The matter requires examination by the adjudicating authority to ascertain whether service tax has indeed been paid twice on the same services - When service tax has been paid erroneously under the RCM on services that were not payable by the service recipient, the limitation period prescribed under Section 11B of the Central Excise Act, 1944 does not apply to refund claims - The period of limitation cannot be invoked when amounts have been paid under a mistake of law and the revenue had no jurisdiction to collect or retain. Such payments are in the nature of mere deposits and not duty or amount payable in law - The matter is sent back to the adjudicating authority to examine whether service tax has been paid twice on the same transportation services and to pass an appropriate order in accordance with law. The limitation period is held to be inapplicable to the refund claims in question - The appeals are disposed of by way of remand [Read less]

GST - Initiation of assessment proceedings against legal heirs of deceased taxable person - Whether assessment proceedings can be initiated from the start against the legal heirs of a deceased taxable person where the business is discontinued and no part of the proceedings whatsoever had been initiated during the lifetime of the taxable person – HELD - In terms of Section 93 of the CGST Act, 2017, even in a case where the business of the deceased taxable person has been discontinued and no show cause notice or assessment proceedings had been initiated during the lifetime of the taxable person, fresh proceedings may be in... [Read more]

GST - Initiation of assessment proceedings against legal heirs of deceased taxable person - Whether assessment proceedings can be initiated from the start against the legal heirs of a deceased taxable person where the business is discontinued and no part of the proceedings whatsoever had been initiated during the lifetime of the taxable person – HELD - In terms of Section 93 of the CGST Act, 2017, even in a case where the business of the deceased taxable person has been discontinued and no show cause notice or assessment proceedings had been initiated during the lifetime of the taxable person, fresh proceedings may be initiated against the legal heir under Sections 73, 74 or 74-A of the CGST Act, 2017. The expression "person chargeable with tax" occurring in Section 74 is not confined to a taxable person as defined under Section 2(107) of the CGST Act but encompasses any person upon whom the statute imposes the obligation to discharge the tax liability, including legal heirs - Section 93 expressly creates a statutory liability upon legal heirs and expressly contemplates situations where tax, interest or penalty is determined after the death of the taxable person. The Legislature has consciously employed the wider expression "person chargeable with tax" instead of the narrower expression "taxable person" - Once the statute authorises determination of liability after the death of the taxable person, the expression "determined after his death" must necessarily include the entire adjudicatory process contemplated under Sections 73, 74 or 74-A including the issuance of notices and all procedural steps preceding determination. However, in cases of discontinued businesses, the liability of the legal heir remains limited to the extent to which the estate inherited by the heir is capable of meeting the charge - The writ petition stands dismissed [Read less]

GST – Entitlement to Input tax credit despite belated return submission – Petitioner claimed input tax credit for April 2018 and March 2019, but the returns for these periods were filed in February 2021 – Respondents rejected the ITC claim on the ground of belated filing - Whether a taxpayer is entitled to claim input tax credit when the returns are submitted after the timeline specified in Section 16(4) but before the cut-off date under Section 16(5) of the CGST Act – HELD – The Section 16(5) contains a non-obstante clause that overrides Section 16(4), and therefore the time limit stipulated in Section 16(4) cea... [Read more]

GST – Entitlement to Input tax credit despite belated return submission – Petitioner claimed input tax credit for April 2018 and March 2019, but the returns for these periods were filed in February 2021 – Respondents rejected the ITC claim on the ground of belated filing - Whether a taxpayer is entitled to claim input tax credit when the returns are submitted after the timeline specified in Section 16(4) but before the cut-off date under Section 16(5) of the CGST Act – HELD – The Section 16(5) contains a non-obstante clause that overrides Section 16(4), and therefore the time limit stipulated in Section 16(4) ceases to have any significance once the taxpayer submits the return within the cut-off date prescribed under Section 16(5). The legislative intention behind Section 16(5) is to provide a retrospective opportunity to taxpayers to avail input tax credit even if they had failed to file returns within the prescribed period under Section 16(4), provided they do so before the specified cut-off date - The writ petition is disposed of by quashing the impugned order and directing the Respondent to reconsider the matter and grant the benefits of Section 16(5) of the CGST Act, if otherwise entitled – The petition is disposed of [Read less]

If the Govt is bound by GSTC recommendations while exercising Rule-making power u/s 164, it stands equally bound while issuing Notifications u/s 9 & 11. Both Notifications and Rules are subordinate legislation and must be laid before the Parliament.

GST - Denial of Input Tax Credit based on retrospective cancellation of supplier's registration – Whether input tax credit can be rejected merely on the basis of retrospective cancellation of supplier's registration without examining the authenticity and genuineness of the underlying transaction – HELD - The input tax credit cannot be rejected solely on the ground of retrospective cancellation of the supplier's registration. The assessing officer is required to conduct a substantive examination of whether the claimant has established the supply of goods through relevant documentary evidence before denying the credit - ... [Read more]

GST - Denial of Input Tax Credit based on retrospective cancellation of supplier's registration – Whether input tax credit can be rejected merely on the basis of retrospective cancellation of supplier's registration without examining the authenticity and genuineness of the underlying transaction – HELD - The input tax credit cannot be rejected solely on the ground of retrospective cancellation of the supplier's registration. The assessing officer is required to conduct a substantive examination of whether the claimant has established the supply of goods through relevant documentary evidence before denying the credit - When goods are purchased from a registered supplier at the time of transaction, the claimant may be required to produce evidence of the supplier's existence at the relevant point in time and to prove the genuineness of the transaction through supporting documents, but such claims cannot be summarily rejected without this examination merely because the supplier's registration was subsequently cancelled with retrospective effect. The orders denying ITC are set aside and the matter is remanded for fresh consideration by the assessing officer with directions to examine all relevant documents and to provide reasonable opportunity to the petitioner before issuing a fresh assessment order – The writ petitions are disposed of [Read less]

Service Tax – Levy of service tax on losses (excess expenditure over contract revenue) – Rendering of consulting engineer services, erection, commissioning and installation services – Dept issued SCN demanding service tax on losses (excess expenditure over contract revenue) by invoking Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, read with Rule 2(c) thereof - Whether a SCN issued for the period prior to May 14, 2015, can validly seek to levy service tax on losses incurred by a service provider by relying upon Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, when the said Rule h... [Read more]

Service Tax – Levy of service tax on losses (excess expenditure over contract revenue) – Rendering of consulting engineer services, erection, commissioning and installation services – Dept issued SCN demanding service tax on losses (excess expenditure over contract revenue) by invoking Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, read with Rule 2(c) thereof - Whether a SCN issued for the period prior to May 14, 2015, can validly seek to levy service tax on losses incurred by a service provider by relying upon Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, when the said Rule has been held to be ultra vires Section 67 of the Finance Act, 1994 and the statutory amendment to Section 67 to include reimbursable expenditure or cost is made effective only prospectively with effect from May 14, 2015 – HELD - The Supreme Court in Union of India vs. Intercontinental Consultants and Technocrats case has held that Section 67 mandates that service tax is to be charged only on the value of taxable services actually provided, which is the gross amount charged by the service provider for such service provided by him, and not on expenses or costs incurred by the service provider in rendering those services. The expression 'such' occurring in Section 67 assumes critical importance, and any amount calculated not for providing such taxable service cannot form part of that valuation - The Legislature itself recognized this limitation and accordingly amended Section 67 with effect from May 14, 2015, wherein Clause (a) dealing with 'consideration' was amended to include reimbursable expenditure or cost incurred by the service provider and charged in the course of providing or agreeing to provide a taxable service. This amendment is substantive in nature and not declaratory, and therefore operates prospectively only - Since the SCN pertains to the period prior to May 14, 2015, when no statutory authority existed to include expenses and losses in the valuation of taxable services, the reliance on Rule 5(1) is wholly misconceived and without legal foundation - The show cause notice is quashed and set aside. The petition is allowed [Read less]

GST – Proceedings against dead person – The Department had earlier been made aware that proceedings could not be continued against a dead person, and a stay of all further proceedings. Despite this, another order was issued against the same deceased person after an interval of nearly one year without giving notice to the legal representative – Whether an order made against a deceased proprietor of a proprietary firm, without notice to the legal representative, is valid and enforceable – HELD - In a proprietary concern, once the proprietor dies, the firm ceases to have legal capacity to be proceeded against without ... [Read more]

GST – Proceedings against dead person – The Department had earlier been made aware that proceedings could not be continued against a dead person, and a stay of all further proceedings. Despite this, another order was issued against the same deceased person after an interval of nearly one year without giving notice to the legal representative – Whether an order made against a deceased proprietor of a proprietary firm, without notice to the legal representative, is valid and enforceable – HELD - In a proprietary concern, once the proprietor dies, the firm ceases to have legal capacity to be proceeded against without giving notice to the legal representative. The Department cannot claim ignorance of the earlier order, which was made after hearing them and which specifically stayed proceedings on the ground that the order had been made against a dead person. The Department's failure to give notice to the legal representative before issuing another order after nearly a year demonstrates procedural irregularity and violation of principles of natural justice. The contention that the firm continues to exist is neither here nor there, as the legal framework requires notice to the representative before proceeding against a deceased proprietor – The order-in-original is quashed and set aside, leaving it open to the respondents to take such steps as they may be advised in accordance with law to pursue their claims against the petitioner - The petition is disposed of [Read less]

Andhra Pradesh General Sales Tax, 1957 - Works Contract - Double taxation through inclusion of amounts already assessed in prior and subsequent assessment years in turnover computation - Whether the orders confirming assessment of the entire amount received during the assessment year as turnover, without deducting amounts already subjected to tax in preceding and subsequent years, amounts to double taxation and violates the principle against undue enrichment – HELD - The turnover under Section 2(s) of the APGST Act, 1957 means the amount payable based on invoices raised for works executed during that specific assessment ... [Read more]

Andhra Pradesh General Sales Tax, 1957 - Works Contract - Double taxation through inclusion of amounts already assessed in prior and subsequent assessment years in turnover computation - Whether the orders confirming assessment of the entire amount received during the assessment year as turnover, without deducting amounts already subjected to tax in preceding and subsequent years, amounts to double taxation and violates the principle against undue enrichment – HELD - The turnover under Section 2(s) of the APGST Act, 1957 means the amount payable based on invoices raised for works executed during that specific assessment year - The authorities failed to properly verify and address the dealer's contention that amounts relating to work executed in other assessment years and already subjected to tax in those years should not be included in the turnover for the disputed assessment year. Including such amounts results in double taxation leading to undue enrichment which is impermissible - The expression "turnover" as defined in the statute, read with the provisions relating to works contracts, explicitly contemplates only amounts for works executed during the assessment year in question. The orders passed by the assessing authority, Appellate Commissioner, and Tribunal failed to specifically deal with this material contention despite categorical averments and supporting evidence produced by the dealer – The impugned orders are set aside and the matter is remitted to the assessing authority to verify the books of account and materials to determine whether the net turnover includes amounts already assessed in the previous year and subsequent year and pass a fresh order accordingly – The Tax Revision Case stands partly allowed [Read less]

GST - Works contracts - Retroactive application and waiver of statutory provisions – Respondents-Contractors having entered into works contracts with government agencies and departments prior to 01.07.2017 claimed that the rates quoted by them were inclusive of all taxes applicable at that time and did not include the element of GST. When the GST regime came into force on 01.07.2017, the works contracts became subject to GST at 18% and subsequently 12%, thereby increasing the tax burden of the contractors - Authorities issued notices demanding GST payment. The writ petitions filed by the contractors were allowed by the S... [Read more]

GST - Works contracts - Retroactive application and waiver of statutory provisions – Respondents-Contractors having entered into works contracts with government agencies and departments prior to 01.07.2017 claimed that the rates quoted by them were inclusive of all taxes applicable at that time and did not include the element of GST. When the GST regime came into force on 01.07.2017, the works contracts became subject to GST at 18% and subsequently 12%, thereby increasing the tax burden of the contractors - Authorities issued notices demanding GST payment. The writ petitions filed by the contractors were allowed by the Single Judge, who issued directions to the employers to reimburse the differential tax and to the GST authorities to waive interest, penalty, and limitation periods for filing amended returns - Whether directions issued by the trial court permitting contractors to file returns by calculating differential tax and directing tax authorities to waive interest, penalty, and limitation periods under the GST Acts are sustainable and whether the burden of incremental tax arising from the change in tax regime can be shifted to the employers through judicial directions to tax authorities – HELD - The controversy regarding incremental tax burden arising from the change in tax regime is essentially a matter between the contractors and the employers with whom they had entered into contracts, and not a matter for judicial intervention with respect to the statutory scheme for levy and collection of GST. The liability of contractors to pay GST is required to be determined strictly in accordance with the provisions of the relevant GST statutes. The levy of interest under the GST Acts is automatic and mandatory and admits of no discretion to waive or reduce it through judicial directions. No directions can be issued permitting the filing of revised returns contrary to the statutory provisions of the GST Acts, and plenary directions to waive penalty, interest, or the limitation for filing returns cannot be sustained as they are contrary to the statutory scheme - The dispute regarding differential tax reimbursement must be resolved between the contractors and employers through contractual remedies, and not through directions to tax authorities. The courts cannot issue directions to tax authorities regarding levy, assessment, and collection of tax, penalty, or interest in a private contractual dispute between contractors and employers. Judicial power cannot be exercised to override or modify the statutory scheme governing tax liability, which is a matter of statutory prescription - The impugned order, to the extent it issues directions to the tax authorities, stands set aside. The appeals are disposed of on the basis that directions to reimburse differential tax are construed as applicable only to the concerned employers and not to the tax authorities – The appeal is disposed of [Read less]

Service Tax - Refund of service tax collected under ultra vires provisions, Refund of service tax paid on the service provided by the club to its members – Applicability of Bar of limitation – Petitioner filed an application seeking refund of service tax collected for financial years 2009-10 to 2012-13. Respondent rejected the refund claim on the ground that the application was filed beyond the prescribed Limitation period - Whether a claim for refund of service tax collected under provisions declared ultra vires by the Apex Court can be rejected on the ground of limitation under section 11B of the Central Excise Act, ... [Read more]

Service Tax - Refund of service tax collected under ultra vires provisions, Refund of service tax paid on the service provided by the club to its members – Applicability of Bar of limitation – Petitioner filed an application seeking refund of service tax collected for financial years 2009-10 to 2012-13. Respondent rejected the refund claim on the ground that the application was filed beyond the prescribed Limitation period - Whether a claim for refund of service tax collected under provisions declared ultra vires by the Apex Court can be rejected on the ground of limitation under section 11B of the Central Excise Act, 1944, when the refund application is filed after such declaration of ultra vires – HELD - The action of the Department in levying and collecting service tax from members' clubs in incorporated form under sections 65(25a), 65(105)(zzze) and 66 of the Finance (No.2) Act, 1994 is declared ultra vires by the Apex Court. It is a settled legal principle that refund of amounts paid under mistake of law cannot be frustrated on the ground of limitation as it would contravene Article 265 of the Constitution of India - The petitioner, being similarly situated to the club whose case resulted in the ultra vires declaration, has precisely filed the refund application after the declaration of law and thus the claim stands on a better footing than ordinary limitation-barred claims - The impugned order rejecting the refund claim for the financial years 2009-10 to 2012-13 as time barred is quashed and set aside. The matter is remanded to the respondents to decide the application on merits in accordance with law, which would also include the interest on such claim – The petition is allowed by remand [Read less]

Customs – Eligibility to exemption from Social Welfare Surcharge on camera modules for mobile phones under Notification No. 11/2018-Cus - The imported camera modules could only function as digital cameras after being assembled with other mobile phone components and lacked independent features such as internal storage device, output terminals, optical viewfinder, or liquid crystal display in their imported condition - Whether the appellant is eligible to claim exemption from payment of Social Welfare Surcharge under entry no. 30 of Notification No. 11/2018-Cus dated 02.02.2018 while importing camera modules for mobile pho... [Read more]

Customs – Eligibility to exemption from Social Welfare Surcharge on camera modules for mobile phones under Notification No. 11/2018-Cus - The imported camera modules could only function as digital cameras after being assembled with other mobile phone components and lacked independent features such as internal storage device, output terminals, optical viewfinder, or liquid crystal display in their imported condition - Whether the appellant is eligible to claim exemption from payment of Social Welfare Surcharge under entry no. 30 of Notification No. 11/2018-Cus dated 02.02.2018 while importing camera modules for mobile phones – HELD - The Notification No. 11/2018-Cus dated 02.02.2018 explicitly requires that goods must satisfy two conditions i.e. classification under tariff item 85258020, and second, the goods must answer the description of a "Digital Still Image Video Camera." While the classification condition is satisfied, the second condition is not fulfilled because camera modules are distinct products from digital still image video cameras. Although both may be classified under the same tariff heading, camera modules cannot independently perform the functions of a digital camera at the time of import. A camera module requires assembly with other mobile phone components to function as a digital camera, whereas a digital still image video camera is a standalone product with built-in storage, output terminals, viewfinders, and display features in its imported condition – The functionality similarity at a post-import stage cannot establish that goods satisfy the notification's description requirement at the point of importation. The exemption notifications must be interpreted strictly and the assessee bears the burden of establishing that goods satisfy all conditions specified in the notification. The exclusion of camera modules from the basic customs duty exemption under Notification No. 37/2018 indicates legislative intent to distinguish camera modules from complete digital cameras - The camera modules, being parts of mobile phones that only acquire digital camera functionality after assembly, do not satisfy the description requirement of the notification - the Order-in-Original upholding the demand for Social Welfare Surcharge is upheld. The penalty imposed under section 112(b)(ii) of the Customs Act, 1962 and confiscation of goods are held to be justified – The appeal is dismissed [Read less]

GST - Inadvertent error in availing Input Tax Credit - Voluntary Reversal - Rectification of Assessment Order – Petitioner inadvertently availed excess Input Tax Credit amounting to a specified sum under the IGST column in December 2017. Upon noticing the mistake, the assessee voluntarily reversed the entire credit in July 2019 - Authorities passed an assessment order demanding recovery of the excess Input Tax Credit. The assessee's application for rectification was rejected by the authority on the ground that the request did not satisfy the conditions necessary to exercise rectification jurisdiction - Whether an assessm... [Read more]

GST - Inadvertent error in availing Input Tax Credit - Voluntary Reversal - Rectification of Assessment Order – Petitioner inadvertently availed excess Input Tax Credit amounting to a specified sum under the IGST column in December 2017. Upon noticing the mistake, the assessee voluntarily reversed the entire credit in July 2019 - Authorities passed an assessment order demanding recovery of the excess Input Tax Credit. The assessee's application for rectification was rejected by the authority on the ground that the request did not satisfy the conditions necessary to exercise rectification jurisdiction - Whether an assessment order demanding recovery of excess Input Tax Credit claimed inadvertently is valid when the assessee claims to have voluntarily reversed the entire credit without utilization, notwithstanding the assessee's failure to respond to the notice and show cause proceedings – HELD - Although the assessee failed to respond to the initial notices served under the GST procedure, the circumstances of the case warrant interference with the assessment order. The assessee's defense is premised on the claim that the excess availment was purely procedural and clerical in nature occurring at the nascent stage of GST implementation without any revenue implication or mala fide intent, and that the credit was voluntarily reversed without being utilized for any tax discharge or refund. The tax authority did not have an occasion to verify whether there was a bona fide error which was rectified voluntarily because the assessee did not respond to the statutory notices, but such verification could be undertaken if the assessee is given a fresh opportunity. If an opportunity as contemplated under Section 75(4) is extended, the assessee could demonstrate the inadvertent error and the voluntary reversal - The assessment order is quashed and the proceedings are restored to the tax authority with an opportunity to the assessee to file a detailed response with all supporting documents – The petition is disposed of [Read less]

Customs - Sampling procedure for imported coal - Applicability of IS 436 standard – Import of coking coal and claiming exemption under Notification No.21/2002-CUS dated 01.03.2002 and Notification No.20/2006-Cus. dated 01.03.2006 - Revenue authority denied the benefit after testing the imported goods. The testing samples are drawn without following the prescribed IS 436 standard procedure, and subsequently, the test results from the load port and the Central Institute of Mining and Fuel Research do not match. The company requests re-testing by an independent laboratory after receiving the test report with a delay of eigh... [Read more]

Customs - Sampling procedure for imported coal - Applicability of IS 436 standard – Import of coking coal and claiming exemption under Notification No.21/2002-CUS dated 01.03.2002 and Notification No.20/2006-Cus. dated 01.03.2006 - Revenue authority denied the benefit after testing the imported goods. The testing samples are drawn without following the prescribed IS 436 standard procedure, and subsequently, the test results from the load port and the Central Institute of Mining and Fuel Research do not match. The company requests re-testing by an independent laboratory after receiving the test report with a delay of eight months, and also objects to the sampling procedure retroactively - Whether the Revenue is justified in denying the benefit of the exemption notification when the samples drawn for testing do not comply with the IS 436 standard procedure – HELD - As established by the Supreme Court's decision in the case of Tata Chemicals Ltd., the samples must be drawn in accordance with the IS 436 standard. If the method of testing is not mentioned in the tariff, the Indian Standard Institution's method applies to both Excise and Customs matters. There can be no estoppel against law and the Customs authorities cannot be absolved from following the prescribed procedure merely because a representative was present or because the objection was raised subsequently - Where a variation exists between test reports from different laboratories, the request for re-testing cannot be ignored as an afterthought merely because it was made after eight months, particularly when the original test report itself was communicated after such a delay - The appeal filed by the Revenue is dismissed [Read less]

Service Tax – Majority Order - Classification of Site Formation Services as Works Contract - Classification of services rendered in relation to development of residential layouts - Appellant undertook conversion of agricultural land to residential use, obtained statutory approvals, and executed extensive civil infrastructure works prior to selling developed sites to housing societies and individual buyers. The assessee had also paid VAT under a composition scheme under State VAT Act and had voluntarily obtained service tax registration under works contract category - Whether the services rendered by the appellant as to b... [Read more]

Service Tax – Majority Order - Classification of Site Formation Services as Works Contract - Classification of services rendered in relation to development of residential layouts - Appellant undertook conversion of agricultural land to residential use, obtained statutory approvals, and executed extensive civil infrastructure works prior to selling developed sites to housing societies and individual buyers. The assessee had also paid VAT under a composition scheme under State VAT Act and had voluntarily obtained service tax registration under works contract category - Whether the services rendered by the appellant as to be classifiable under ‘Site Formation and Clearance, Excavation, Earth Moving and Demolition Service’ as held by the Member (Technical) or whether the services rendered by the appellant as to be classifiable under ‘Works Contract’ as held by the Member (Judicial) - HELD - The activities undertaken by the assessee involve transfer of property in goods in the execution of the contract, encompassing construction, erection, completion, fitting out and alteration of immovable property, which are hallmarks of works contract as defined under Section 65(54) of the Finance Act, 1994. The court applied the principle laid down by the Supreme Court in Larsen and Toubro that in composite contracts involving both goods and services, the most specific description must be preferred over general description, and that service tax cannot be imposed on a portion of the total consideration. The assessee had paid VAT on composition basis under State law, which triggers the Board's Circular clarification that contracts treated as works contract for VAT purposes shall be treated as works contract for service tax purposes – It is observed that approximately 70 per cent of the total value comprises cost of materials and infrastructure facilities, demonstrating a composite nature of the contract. The site formation service under Section 65(97a) refers to preparatory activities antecedent to construction, while the present activities involve comprehensive construction and installation services that extend beyond mere site formation and clearance – All the activities carried out in respect of movable or immovable property wherein transfer of property is involved and the supply of goods on payment of VAT is involved would fall under the category of ‘Works Contract’ only. Applying the cited case-laws, the statutory provisions and the Board’s clarification, it is held that the services provided by the appellant falls within the classification of ‘Works Contract service’ only – Ordered accordingly [Read less]

Central Excise - Non-application of Mind and Non-speaking Order - Whether an appellate order passed without independently examining the grounds of appeal, documentary evidence, and relevant statutory provisions, and merely adopting the view of the lower authority without recording reasoned findings, can be sustained in law – HELD - When a quasi-judicial authority exercises appellate jurisdiction, it is mandated to independently assess the matter before it and record its own findings rather than merely adopting the view of the authority below. The first appellate authority instead of examining the grounds of appeal indepe... [Read more]

Central Excise - Non-application of Mind and Non-speaking Order - Whether an appellate order passed without independently examining the grounds of appeal, documentary evidence, and relevant statutory provisions, and merely adopting the view of the lower authority without recording reasoned findings, can be sustained in law – HELD - When a quasi-judicial authority exercises appellate jurisdiction, it is mandated to independently assess the matter before it and record its own findings rather than merely adopting the view of the authority below. The first appellate authority instead of examining the grounds of appeal independently and applying its mind to the issues raised, restricted itself to reproducing the findings recorded in the orders below by making a blanket statement that no reason exists to interfere without any engagement with the appellant's submissions. Such an order constitutes a non-speaking order which fails to identify the specific grounds of appeal urged by the appellant, does not examine the evidence and documents filed before it, and does not engage with the relevant statutory provisions or record any independent conclusion on the merits - The requirement of passing a reasoned order is not a mere formality but forms part and parcel of the principle of natural justice and supervisory jurisdiction of superior courts, as an order without reasons lacks legal foundation. The failure to assign reasons renders an administrative or quasi-judicial order arbitrary and liable to be set aside on that ground alone - The orders-in-appeal are set aside and the matter is remanded to the Commissioner (Appeals) for fresh decision on merits with independent examination of all grounds of appeal, documentary evidence, and statutory provisions, with the direction to pass a speaking order – The appeal is allowed by remand [Read less]

Service Tax - Export of services, Refund of accumulated Cenvat credit – Rejection of refund claim on the ground that the services rendered do not qualify as export of services - Whether refund of accumulated Cenvat credit can be denied on the ground that services do not constitute export of services without issuing a specific notice under Rule 14 of the Cenvat Credit Rules, 2004 for recovery of the alleged irregular credit – HELD – The refund of Cenvat credit cannot be denied merely on the assertion that services are not export services without following the statutory procedure prescribed under Rule 14 of the CCR, 20... [Read more]

Service Tax - Export of services, Refund of accumulated Cenvat credit – Rejection of refund claim on the ground that the services rendered do not qualify as export of services - Whether refund of accumulated Cenvat credit can be denied on the ground that services do not constitute export of services without issuing a specific notice under Rule 14 of the Cenvat Credit Rules, 2004 for recovery of the alleged irregular credit – HELD – The refund of Cenvat credit cannot be denied merely on the assertion that services are not export services without following the statutory procedure prescribed under Rule 14 of the CCR, 2004. Rule 3 provides the enabling provision for taking Cenvat credit on inputs and input services with the objective of utilizing the same for payment of excise and service tax on output services. In case of exportation of output services, Rule 5 specifically provides for refund of accumulated Cenvat credit subject to compliance with procedures and guidelines laid down under notifications issued thereunder. Rule 14 mandates that in case of irregular availment of credit or its utilization, such credit can be recovered from the assessee through prescribed recovery provisions - The admitted fact that the Department has not invoked Rule 14 for effecting recovery of alleged irregular Cenvat credit is determinative. Rule 5 does not specify that Cenvat credit can be denied on the ground of irregular availment or utilization without first following the recovery procedure. The denial of refund benefit without questioning the eligibility of Cenvat credit through proper notice and without invoking the recovery provisions is purely outside the scope of the show-cause notice and cannot be sustained - The orders rejecting the refund claim are set aside and the appeals are allowed [Read less]

Service Tax - Banking services - Minimum Average Balance as Consideration – Petitioners-Banks provided various facilities and services to customers who maintained a Minimum Average Balance (MAB) in their accounts, without charging any monetary consideration for such services. When MAB was not maintained, Banks charged penalty/fees on which service tax was duly discharged - Authorities issued Show Cause Notices demanding service tax on the basis that the commitment of customers to maintain MAB constituted non-monetary consideration for the services provided by banks - Whether services provided by banks to customers mainta... [Read more]

Service Tax - Banking services - Minimum Average Balance as Consideration – Petitioners-Banks provided various facilities and services to customers who maintained a Minimum Average Balance (MAB) in their accounts, without charging any monetary consideration for such services. When MAB was not maintained, Banks charged penalty/fees on which service tax was duly discharged - Authorities issued Show Cause Notices demanding service tax on the basis that the commitment of customers to maintain MAB constituted non-monetary consideration for the services provided by banks - Whether services provided by banks to customers maintaining MAB, without any monetary or non-monetary consideration being charged, amount to taxable services under Section 65B(44) and Section 66E(e) of the Finance Act, 1994 and whether the customer's obligation to maintain MAB constitutes consideration for such services as defined under Section 67 of the Finance Act, 1994 – HELD - For a transaction to be taxable under service tax law, there must be an activity carried out by one person for another for consideration. The definition of consideration under both the Indian Contract Act, 1872 and the Finance Act, 1994 requires that consideration must necessarily accrue to and vest in the service provider. In the present case, the banks have not charged any consideration, monetary or non-monetary, and MAB maintenance is merely a contractual condition, not the consideration for the services. Applying the inversion test, when MAB is not maintained, the bank charges penalty but continues to provide the same services at the same rate, which demonstrates that MAB is merely a condition of contract and not a consideration for an independent service – The transaction comprises the maintenance of a deposit in a bank account and the levy of a penalty in the event of a breach, upon which the requisite Service Tax stands duly discharged. Consequently, the transaction does not give rise to any further taxable element or facet warranting examination through the prism of Service Tax - The Supreme Court judgments in Bhayana Builders (P) Ltd and in Edelweiss Financial Services Ltd cases establish that unless an amount is charged by the service provider to the service recipient, it does not enter into the equation for determining the value on which service tax is payable – Further, the CBIC Circular No.178/10/2022-GST dated 03.08.2022 explicitly states that there must be a necessary and sufficient nexus between the supply and the consideration, and an agreement to do or tolerate an act cannot be presumed to exist merely because there is a flow of money or commitment from one party to another. The respondents themselves had dropped identical proceedings against another bank by accepting substantially similar contentions. The impugned notices are contrary to the Circulars issued by the respondents themselves and the scheme and mandate of the Finance Act, 1994 provisions - The show cause notices demanding service tax and all further proceedings emanating therefrom are quashed. The writ petitions are allowed - Service Tax - Valuation of Services - Whether penal charges collected for non-maintenance of MAB can be treated as consideration for valuing services provided free of cost - HELD – The penal charges are distinct from consideration and are levied only to deter non-compliance with contractual terms, the penalty amount cannot be equated with the value of services as it represents compensation for breach and not quid pro quo for services provided when MAB is maintained, and the principle established by the Apex Court in Bhayana Builders case requires that consideration must be for the actual service provided with direct nexus between the supply and the consideration charged - Service Tax - Applicability of Board Circulars - Whether tax authorities are bound by circulars issued by the Board - HELD – The Circulars issued by the Board are binding on the Department and the Department cannot take a stand contrary to instructions issued by the Board, the Circulars dated 03.08.2022 and 28.02.2023 specifically clarify that an independent contract with express or implied agreement establishing necessary and sufficient nexus between supply and consideration is essential for taxability, and agreements cannot be presumed from mere flow of money, therefore show cause notices issued contrary to these circulars are without jurisdiction and authority of law - Service Tax - Jurisdiction of High Court under Article 226 - Whether writ petition is maintainable when alternative statutory remedy is available - HELD - when the respondents have acted beyond the scope of their jurisdiction by issuing show cause notices for services not falling within the taxable definition, the High Court can exercise writ jurisdiction as the issue involves a pure question of law without any disputed questions of fact, the pre-determined stand of the respondents makes alternative remedies futile, and the finding that the relevant jurisdictional facts are missing renders the proceedings ex facie illegal, therefore the High Court is entitled to entertain the petitions. [Read less]

Service Tax: Majority Order - Service of Order, Statutory Period for Filing Appeal – Rejection of appeal filed beyond the condonable limits - While the Hon’ble Member (Judicial) held that the impugned order passed by the Commissioner (Appeals) rejecting the appeal of the appellant on time-bar is held to be unsustainable, the Hon’ble Member (Technical) held that the Commissioner (Appeals) was right in rejecting the appeal as the appeal was filed beyond the condonable limits provided by the statute - Whether service of the Order-in-Original to an authorized representative who appeared in the personal hearing constitute... [Read more]

Service Tax: Majority Order - Service of Order, Statutory Period for Filing Appeal – Rejection of appeal filed beyond the condonable limits - While the Hon’ble Member (Judicial) held that the impugned order passed by the Commissioner (Appeals) rejecting the appeal of the appellant on time-bar is held to be unsustainable, the Hon’ble Member (Technical) held that the Commissioner (Appeals) was right in rejecting the appeal as the appeal was filed beyond the condonable limits provided by the statute - Whether service of the Order-in-Original to an authorized representative who appeared in the personal hearing constitutes valid service of the order for the purpose of computing the statutory period for filing appeal – HELD - An authorized representative who appears for and on behalf of the appellant before the adjudicating authority under Section 35Q of the Central Excise Act, 1944, which defines 'authorized representative' as a person authorized to appear including a relative or regular employee, is competent to receive the order in compliance with Section 37C of the Central Excise Act. Service of the Order-in-Original to such authorized representative (by tendering it on 02.01.2018) constitutes valid and effective service of the order for computing the statutory period. The statutory period of two months for filing appeal runs from 02.01.2018, with an additional condonable period of one month till 02.04.2018. Since the appeal was filed on 09.05.2018, it is barred by limitation. The principle established by the Supreme Court in Singh Enterprises requires that appeals must be filed within the prescribed statutory period and the legislature has expressly excluded the application of Section 5 of the Indian Limitation Act, 1963 to tax matters. No power exists to condone delay beyond the statutory condonable period of 30 days, and the Commissioner (Appeals) correctly upheld the time bar to the appeal - The order of the Commissioner (Appeals) is upheld and the appeal is dismissed [Read less]

GST – Proceedings for delayed or non-deposit of GST amount - BNS, 2023 vs. CGST/SGST Act, 2017 - Invocation of General Penal provisions under Bharatiya Nyaya Sanhita without resort to special statute providing exhaustive mechanism – The applicant was accused of delayed/non-deposit of GST/TDS amount deducted from payments made in relation to execution of Gram Sabha development works - Whether the authorities can legally initiate criminal prosecution by invoking the penal provisions of Bharatiya Nyaya Sanhita without invoking the penal provisions and mandatory statutory procedure prescribed under the GST Act, which is a ... [Read more]

GST – Proceedings for delayed or non-deposit of GST amount - BNS, 2023 vs. CGST/SGST Act, 2017 - Invocation of General Penal provisions under Bharatiya Nyaya Sanhita without resort to special statute providing exhaustive mechanism – The applicant was accused of delayed/non-deposit of GST/TDS amount deducted from payments made in relation to execution of Gram Sabha development works - Whether the authorities can legally initiate criminal prosecution by invoking the penal provisions of Bharatiya Nyaya Sanhita without invoking the penal provisions and mandatory statutory procedure prescribed under the GST Act, which is a special statute providing a complete mechanism for adjudication, penalty and prosecution – HELD – The CGST/SGST Act, 2017 is a complete and self-contained special statute providing comprehensive machinery relating to deduction of tax, assessment, adjudication, penalty and prosecution. Sections 50, 51, 122, 126 and 138 of the GST Act unmistakably demonstrate that the legislature has consciously created a complete code to deal with all contingencies arising out of non-deduction, short deduction, delayed deposit or non-deposit of GST amount, including determination of liability, imposition of interest, levy of penalty, prosecution and compounding of offences. Once the field is specifically occupied by a special statute providing an exhaustive mechanism, resort to the provisions of general penal law can be justified only where the allegations independently disclose essential ingredients of distinct criminal offences such as dishonest misappropriation, forgery, fabrication of records, cheating or wrongful gain - In the present case, the allegation against the applicant is confined only to delayed/non-deposit of GST/TDS amount, with no allegation of embezzlement, dishonest misappropriation, siphoning of money, fabrication or manipulation of records, fake transactions, forged documents or wrongful gain. The material brought on record indicates that the amount allegedly not deposited was subsequently deposited in the government account. Thus, the allegations squarely fall within the statutory framework of the GST Act and not within the ambit of general penal provisions - Initiation of criminal prosecution under general penal law, without resorting to the statutory mechanism prescribed under the GST Act is legally unsustainable - The impugned charge sheet and cognizance/summoning order and proceedings are quashed. However, the order does not preclude authorities concerned to proceed against the applicant under the UPGST Act, 2017 – The application is allowed [Read less]

GST - Validity of Show Cause Notice for Cancellation of Registration – The notice referred to supporting documents as being attached but none were actually appended, and the grounds mentioned were found to be absolutely vague – Whether a SCN that is vague in its allegations and lacks supporting documentation is sustainable – HELD - The impugned SCN does not serve the purpose for which it has been issued. The notice contains vague allegations without specific details or supporting evidence despite making reference to attached documents which were not actually provided, such a notice is in gross violation of the princi... [Read more]

GST - Validity of Show Cause Notice for Cancellation of Registration – The notice referred to supporting documents as being attached but none were actually appended, and the grounds mentioned were found to be absolutely vague – Whether a SCN that is vague in its allegations and lacks supporting documentation is sustainable – HELD - The impugned SCN does not serve the purpose for which it has been issued. The notice contains vague allegations without specific details or supporting evidence despite making reference to attached documents which were not actually provided, such a notice is in gross violation of the principles of natural justice as it fails to clearly apprise the petitioner of the exact accusations and the evidence against it, thereby denying the petitioner a fair opportunity to respond to definite charges – The show cause notice is set aside with liberty granted to the respondents to proceed afresh against the petitioner in accordance with law – The petition is disposed of [Read less]

Customs - Evidentiary value of retracted statement in valuation proceedings – Appellant imported high pressure laminate sheets and declared the value at USD 12,000 (C&F). The revenue redetermined the value at USD 43,500 (C&F) based on a statement made by the importer, which was later retracted, and also relied upon a proforma invoice of another company whose product specifications were different from the imported goods - Whether the entire proceedings based on a retracted statement, without any other corroborating evidence or contemporaneous import records, can form the basis for enhancement of the declared value of impo... [Read more]

Customs - Evidentiary value of retracted statement in valuation proceedings – Appellant imported high pressure laminate sheets and declared the value at USD 12,000 (C&F). The revenue redetermined the value at USD 43,500 (C&F) based on a statement made by the importer, which was later retracted, and also relied upon a proforma invoice of another company whose product specifications were different from the imported goods - Whether the entire proceedings based on a retracted statement, without any other corroborating evidence or contemporaneous import records, can form the basis for enhancement of the declared value of imported goods under the Customs Valuation Rules, 2007 – HELD - The entire proceedings are based on the retracted statement which lacks evidentiary value. There is no evidence on record nor any discussion of contemporary imports or invoices to substantiate the enhancement of the declared value. The invoice of another company relied upon by the revenue has products with different specifications as compared to the imported goods and therefore, they are not comparable. Without any other credible evidence on record except for the retracted statement, there is no reason to uphold the value redetermination - The impugned order set aside and the appeal is allowed [Read less]

Central Excise - Classification of animated films and television serials as software for Central Excise Duty purposes - Whether animated films and television serials in the form of CDs and Betacam SP Pal tapes, cleared in the DTA by a EOU constitute software liable to Central Excise duty or fall within the definition of information technology software exempt from such duty – HELD - The products constitute software under the statutory definition of information technology software, which encompasses any representation of instructions, data, sound or image recorded in machine-readable form and capable of being manipulated o... [Read more]

Central Excise - Classification of animated films and television serials as software for Central Excise Duty purposes - Whether animated films and television serials in the form of CDs and Betacam SP Pal tapes, cleared in the DTA by a EOU constitute software liable to Central Excise duty or fall within the definition of information technology software exempt from such duty – HELD - The products constitute software under the statutory definition of information technology software, which encompasses any representation of instructions, data, sound or image recorded in machine-readable form and capable of being manipulated or providing interactivity to a user by automatic data processing machine - The products cleared by the appellant in the form of CD are not a simple compact disc which when installed in the computer start functioning. On the other hand, they are CDs which can function only with the software which are supplied to the customers along with the CDs, therefore, they are rightly classifiable under CTH 8524.20 as ‘Software’ - The experts initially opined the products were not software but revised their opinion during cross-examination when considering the statutory definition, rendering the original basis of the show-cause notice invalid - The unit operates under the Software Technology Park scheme with a Letter of Permission for development and export of software, and since the exports are not disputed as software, the products cleared in the DTA must similarly be software as there is no evidence that domestic and export products differ - The Department itself demonstrated confusion by classifying the same goods under different tariff headings in successive show-cause notices, indicating failure to understand the product description in terms of the statutory definition. The animated advertisements, commercials, cartoons and serials in CD form, which function only with accompanying software tools such as Animo, US-Animation and 3D Studio Max, are rightly classifiable as software. The impugned order demanding central excise duty is set aside - The appeal is allowed [Read less]

Customs - Refund of Special Additional Duty of Customs when Sales Tax/VAT is Exempt – Import of goods under contract with Metro Rail Corporation – Appellant claimed refund of SAD of customs paid at the time of importation under Notification No. 102/2007 dated 14.09.2007. The importer contends that the goods were exempt from Sales Tax/VAT as the sale took place in the course of import under Section 5(2) of the CST, 1956 - Revenue rejected the refund claim on the ground that one of the mandatory conditions prescribed in the Notification, namely payment of appropriate Sales Tax/VAT on sale of imported goods, has not been ... [Read more]

Customs - Refund of Special Additional Duty of Customs when Sales Tax/VAT is Exempt – Import of goods under contract with Metro Rail Corporation – Appellant claimed refund of SAD of customs paid at the time of importation under Notification No. 102/2007 dated 14.09.2007. The importer contends that the goods were exempt from Sales Tax/VAT as the sale took place in the course of import under Section 5(2) of the CST, 1956 - Revenue rejected the refund claim on the ground that one of the mandatory conditions prescribed in the Notification, namely payment of appropriate Sales Tax/VAT on sale of imported goods, has not been fulfilled - Whether refund of SAD of customs is admissible under Notification No. 102/2007 dated 14.09.2007 when the imported goods are exempt from levy of Sales Tax/VAT – HELD - The Notification mandates that the importer shall pay "appropriate sales tax or value added tax as the case may be" on sale of imported goods. The term "appropriate" connotes the rate applicable to the transaction. When goods are legitimately exempt from Sales Tax or VAT under Constitutional provisions and statutory law, the appropriate rate of such tax becomes nil. Therefore, when the appropriate rate is nil, the appropriate Sales Tax or VAT paid is also nil, and this does not constitute non-compliance with the notification - So long as appropriate Sales Tax or VAT at the applicable rate is paid, refund of Special Additional Duty of customs is admissible, and where the appropriate rate is nil, the condition stands satisfied by payment of nil amount. The importer cannot be penalized for the goods being legitimately exempt from Sales Tax or VAT – The rejection of refund claim is set aside and the appeal is allowed [Read less]

Customs - Classification of Reformate – Appellant imported Reformate classifying it under tariff item 2707 50 00, claiming concessional Customs duty rates. The Commissioner of Customs rejects this classification and reclassifies the product under tariff item 2710 12 19, confirming differential duty demands with interest and imposing a redemption fine - Whether Reformate is classifiable under Tariff item 2707 50 00 as claimed by the appellant-importer or under Tariff item 2710 12 19 as claimed by the Revenue – HELD – Heading 2707 covers not only distillates of coal tar or mineral tar but also similar products obtained... [Read more]

Customs - Classification of Reformate – Appellant imported Reformate classifying it under tariff item 2707 50 00, claiming concessional Customs duty rates. The Commissioner of Customs rejects this classification and reclassifies the product under tariff item 2710 12 19, confirming differential duty demands with interest and imposing a redemption fine - Whether Reformate is classifiable under Tariff item 2707 50 00 as claimed by the appellant-importer or under Tariff item 2710 12 19 as claimed by the Revenue – HELD – Heading 2707 covers not only distillates of coal tar or mineral tar but also similar products obtained by processing of petroleum, as clarified in the HSN Explanatory Notes. The expression "at 250°C" in the tariff description should be interpreted as "by 250°C" to align with the fractional distillation process, wherein a product begins distilling as temperature rises and continues distilling until the specified temperature is reached. The Department itself had interpreted "at 210°C" as "by 210°C" in the Show Cause Notice while classifying under 2710, and therefore cannot be permitted to take a contrary stand. Reformate, containing 80% or more aromatic content, cannot be classified under 2710 as a preparation since all preparations under that heading must contain at least 70% of petroleum oils from specified categories, which would necessarily result in non-aromatic constituents exceeding aromatic constituents. The definition of motor spirit under Supplementary Note (a) requires cumulative satisfaction of two conditions: flash point below 25°C and suitability for use as fuel in spark ignition engines. The expression "admixture with any other substance" refers to substances other than mineral oil, and Reformate added as blend stock in large proportion to gasoline cannot be treated as an admixture - The Supreme Court's dismissal of the Revenue's appeal against the Tribunal's earlier decision in an identical case creates binding precedent by virtue of merger doctrine. Since the products and subject matter are identical, the Revenue cannot maintain two conflicting positions on identical products imported during the disputed periods - The goods are classified under Tariff Item 2707 50 00. The impugned order is set aside, and the appeal is allowed [Read less]

Service Tax - Commercial Training or Coaching Services - Exclusion under Section 65(27) of Finance Act, 1994 – Respondent conducts Maritime training academy imparting coaching and training in maritime courses and issues certificates recognized by the Director General of Shipping under the Merchant Shipping Act, 1958 - Whether services rendered by the academy fall under the category of 'Commercial Training or Coaching' Service or excluded from the definition under Section 65(27) of the Finance Act, 1994 – HELD - The services rendered by the respondent are excluded from the levy of service tax as the institute is approve... [Read more]

Service Tax - Commercial Training or Coaching Services - Exclusion under Section 65(27) of Finance Act, 1994 – Respondent conducts Maritime training academy imparting coaching and training in maritime courses and issues certificates recognized by the Director General of Shipping under the Merchant Shipping Act, 1958 - Whether services rendered by the academy fall under the category of 'Commercial Training or Coaching' Service or excluded from the definition under Section 65(27) of the Finance Act, 1994 – HELD - The services rendered by the respondent are excluded from the levy of service tax as the institute is approved by the Director General of Shipping for conduct of courses for aspiring seafarers, and the certificates issued are recognized by law through the Director General of Shipping who is the authority vested with the power to issue competency certificates under Section 78 of the Merchant Shipping Act, 1958. The Tribunal in Cochin Shipyard Ltd. case, held that courses conducted come within the excluded category of the definition of commercial training or coaching centres. The courses are conducted as per the syllabus prescribed by the Director General of Shipping in line with requirements of the STCW code and are not mere internal coaching classes, hence the Respondent is not liable to pay service tax under the category of commercial training or coaching services - There is no finding on the second issue regarding legal services, which has been fairly admitted by the respondent. The respondent has agreed to discharge the service tax along with interest. Penalties are set aside – The appeal is partially allowed [Read less]

Central Excise - CENVAT Credit on Erection and Commissioning Services – Appellant availed CENVAT credit on erection and commissioning charges paid to sub-contractors. The adjudicating authority disallowed the credit on the ground that erection and commissioning is a post-manufacturing activity and does not qualify as input service under Rule 2(l) of CENVAT Credit Rules, 2004 - Whether CENVAT credit on erection and commissioning charges paid to sub-contractors is allowable when the assessee itself is a registered output service provider separately charging and collecting service tax on such services – HELD - The assesse... [Read more]

Central Excise - CENVAT Credit on Erection and Commissioning Services – Appellant availed CENVAT credit on erection and commissioning charges paid to sub-contractors. The adjudicating authority disallowed the credit on the ground that erection and commissioning is a post-manufacturing activity and does not qualify as input service under Rule 2(l) of CENVAT Credit Rules, 2004 - Whether CENVAT credit on erection and commissioning charges paid to sub-contractors is allowable when the assessee itself is a registered output service provider separately charging and collecting service tax on such services – HELD - The assessee is an independent output service provider registered under the Service Tax Act and erection and commissioning is an independent service which the assessee provides separately with applicable output service tax charged on such services. For providing such output services, the assessee availed services of sub-contractors who raised invoices on the assessee. There exists direct nexus between the charges paid to sub-contractors and the assessee's business of providing erection and commissioning services. The eligibility for CENVAT credit under Rule 2(l) of CENVAT Credit Rules, 2004 is established - CENVAT credit on erection and commissioning services is allowed - Since the confirmation of demand is unsustainable the levy of interest and imposition of penalty are also unsustainable - The impugned order is set aside and the appeal is allowed - CENVAT Credit on Management Consultant Services availed for identification of key market trends and developing business plans. Although the agreement was common for multiple group companies, a fixed percentage of the total contract fee was allocated to the assessee and a separate invoice was raised on the assessee for its share – Disallowance of credit on the ground that such services had no connection with manufacturing activity. The appellate authority additionally held that since services were used by the group company as a whole, CENVAT credit was not allowable - Whether CENVAT credit on management consultant services is allowable when the services relate to business activities such as identifying market trends and developing business plans, even though they do not have direct nexus with manufacturing – HELD – The CENVAT credit on management consultant services is allowable. Rule 2(l) does not require any direct nexus between the services and the manufactured product. The relevant criterion is whether the services are availed towards activities relating to business. Identifying key market trends and developing business plans are activities crucial to the business of the assessee and clearly establish the nexus with business activities. Additionally, the services qualify as market research activities which are specifically included in the definition of input service under Rule 2(l) of CENVAT Credit Rules, 2004. The services also fall under Section 65(105)(r) of the Finance Act, 1994. – the CENVAT credit on management consultant services is allowed - CENVAT Credit on Manpower Supply Services - Whether CENVAT credit on manpower supply services is allowable when the assessee demonstrates that contract labourers were engaged solely in manufacturing dutiable products and similar credit was allowed in subsequent periods – HELD - The manpower supply agency raises separate invoices for labourers supplied for dutiable and exempt products. The contract labourers in question were engaged solely in manufacturing dutiable products and accordingly, the assessee is eligible for full credit of the amount paid to the manpower supply agency. The fact that CENVAT credit on manpower supplied from the same agency was allowed for subsequent periods with an average quantum corresponding to the monthly average during the period in question establishes the eligibility for credit. The absence of corroborating evidence at the adjudication stage does not preclude credit when supported by subsequent period adjudication orders and invoices – CENVAT credit on manpower supply services is allowed - CENVAT Credit on Mediclaim and Accidental Insurance Policy – Whether CENVAT credit on mediclaim and accidental insurance policies for employees qualifies as input service under Rule 2(l) of CENVAT Credit Rules, 2004 – HELD – The CENVAT credit on mediclaim and accidental insurance policies for employees qualifies as input service. A mediclaim policy for employees constitutes an input service under Rule 2(l) of CCR, 2004, both under the main limb and the inclusive limb of the definition. It is not necessary for the assessee to establish an integral connection between the service and business of manufacture for the service to be categorized as input service. The findings of the adjudicating authority based on the requirement of direct or indirect use in relation to manufacture are not sustainable – CENVAT credit on mediclaim and accidental insurance policies for employees is allowed. [Read less]

Customs - Classification of chocolate flavour - Appellant, engaged in manufacture and trading of flavours for the food industry, imported chocolate flavour and classified it under Customs Tariff Heading 3302 10 10. The goods were cleared on 03.06.2019. Subsequently, based on audit observation, SCN was issued on 01.06.2021 proposing reclassification under Customs Tariff Heading 1806 9090 with differential duty demand, interest and penalty - Whether the imported chocolate flavour is classifiable under Customs Tariff Heading 1806 9090 (chocolate and other food preparations containing cocoa) or under Customs Tariff Heading 330... [Read more]

Customs - Classification of chocolate flavour - Appellant, engaged in manufacture and trading of flavours for the food industry, imported chocolate flavour and classified it under Customs Tariff Heading 3302 10 10. The goods were cleared on 03.06.2019. Subsequently, based on audit observation, SCN was issued on 01.06.2021 proposing reclassification under Customs Tariff Heading 1806 9090 with differential duty demand, interest and penalty - Whether the imported chocolate flavour is classifiable under Customs Tariff Heading 1806 9090 (chocolate and other food preparations containing cocoa) or under Customs Tariff Heading 3302 10 10 (mixtures of odoriferous substances), and whether the demand is barred by limitation – HELD - A harmonious reading of the description under Customs Tariff Heading 1806 9090 and the relevant Chapter Notes reveals that for classification under this heading, the imported product must necessarily be a food preparation containing cocoa. The natural flavours and natural flavouring substances imported by the appellant are substances meant to be added to food and not substances for direct consumption as food. Therefore, they cannot be classified under the residuary heading 1806 9090 as chocolate and other preparations containing cocoa - The appellant produced entire details related to the imported goods while filing the B/E, and even though the goods were cleared under RMS, no allegation of suppression regarding classification could be made to invoke the extended period of limitation. Since the bill of entry was filed on 02.06.2019 and out of charge was issued on 03.06.2019, but the SCN was received on 07.06.2021 after expiry of two years from the out of charge order, the show cause notice is barred by limitation - The impugned order is set aside and the appeal is allowed [Read less]

Service Tax liability on international air transport services involving round-trip tickets - Whether service tax is liable on round-trip air transport services where the passenger embarks from outside India and returns to the same place without the aim of travelling from India to a place outside India – HELD - The Board's Circular No. 96/7/2007-ST dated 17.10.2006 clarifies that in case of round trips, where the journey is a single continuous one and the passenger's aim is not to travel from India to a place outside India, service tax is not leviable under Section 65(105)(zzzo) of the Finance Act, 2006. In the present ca... [Read more]

Service Tax liability on international air transport services involving round-trip tickets - Whether service tax is liable on round-trip air transport services where the passenger embarks from outside India and returns to the same place without the aim of travelling from India to a place outside India – HELD - The Board's Circular No. 96/7/2007-ST dated 17.10.2006 clarifies that in case of round trips, where the journey is a single continuous one and the passenger's aim is not to travel from India to a place outside India, service tax is not leviable under Section 65(105)(zzzo) of the Finance Act, 2006. In the present case, since the round trip was 'Maldives-Trivandrum-Maldives', the passenger embarked outside India and returned to the same place, making it a continuous round trip not attracting service tax liability. Further, the Commissioner (Appeals) had already dropped the demand for a subsequent period on the same ground that service tax is not payable on any sector of a trip when the passenger embarks outside India on a round-trip ticket or on a continuous trip terminating outside India. Accordingly, the impugned orders are set aside and the appeals are allowed [Read less]

GST - Violation of natural justice, ex parte assessment order – Validity of assessment order passed without granting an opportunity of personal hearing despite a written request from the assessee – HELD – The Section 75(4) of the BGST Act, 2017, mandates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or where any adverse decision is contemplated against such person. The petitioner had admittedly submitted a written request for personal hearing in the reply filed on the date stipulated. Section 75(5) of the Act permits an adjournment to be gra... [Read more]

GST - Violation of natural justice, ex parte assessment order – Validity of assessment order passed without granting an opportunity of personal hearing despite a written request from the assessee – HELD – The Section 75(4) of the BGST Act, 2017, mandates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or where any adverse decision is contemplated against such person. The petitioner had admittedly submitted a written request for personal hearing in the reply filed on the date stipulated. Section 75(5) of the Act permits an adjournment to be granted up to three times, but only two opportunities had been afforded to the petitioner. The proper officer was bound to grant the requested hearing prior to passing the assessment order. The omission to grant the hearing despite a specific written request constitutes a violation of the principles of natural justice and a failure to comply with the mandatory statutory procedure, resulting in miscarriage of justice - The assessment order is quashed and the matter is remanded to the concerned officer with a direction to grant a personal hearing on a fixed date, with a condition that failure to appear shall result in revival of the original order and liability to deposit the demanded amount – The petition is disposed of [Read less]

Service Tax – Initiation of proceedings based on data received from Income Tax Department - Validity of order-in-original passed on ex-parte basis without service of notice and opportunity of reply – HELD - The Department had already been directed to reconsider the matter following the Court's earlier order in a connected writ petition, but the Department proceeded to pass the order-in-original without ensuring proper service of notice on the petitioner, thereby depriving the petitioner of the opportunity to participate in the proceedings. The principles of natural justice mandate that a quasi-judicial authority must p... [Read more]

Service Tax – Initiation of proceedings based on data received from Income Tax Department - Validity of order-in-original passed on ex-parte basis without service of notice and opportunity of reply – HELD - The Department had already been directed to reconsider the matter following the Court's earlier order in a connected writ petition, but the Department proceeded to pass the order-in-original without ensuring proper service of notice on the petitioner, thereby depriving the petitioner of the opportunity to participate in the proceedings. The principles of natural justice mandate that a quasi-judicial authority must provide a fair hearing opportunity to the assessee before passing an adjudicatory order - The order-in-original is set aside and the matter is remitted to the stage of reply to the show cause notice. The authorities are directed to take note of the observations made in the earlier connected orders, particularly regarding whether the assessee qualifies under the definition of taxable service, whether services are covered under negative or exemption lists, and whether claims are barred by limitation – The petition is disposed of [Read less]