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Service Tax liability on uninvoiced allocations made by parent company to subsidiary - Absence of contractual agreement and service provision - Parent company allocates certain expenses to its subsidiary group entities through both invoiced and uninvoiced allocations. The invoiced allocations are properly charged with markup as per transfer pricing policy and service tax is paid under Reverse Charge Mechanism. However, uninvoiced allocations representing expenses for the parent company's own consumption are reflected only in the parent company's books of accounts and not in the subsidiary's accounts – Demand of service t... [Read more]

Service Tax liability on uninvoiced allocations made by parent company to subsidiary - Absence of contractual agreement and service provision - Parent company allocates certain expenses to its subsidiary group entities through both invoiced and uninvoiced allocations. The invoiced allocations are properly charged with markup as per transfer pricing policy and service tax is paid under Reverse Charge Mechanism. However, uninvoiced allocations representing expenses for the parent company's own consumption are reflected only in the parent company's books of accounts and not in the subsidiary's accounts – Demand of service tax on uninvoiced allocations contending that since debit entries were made in the system maintained by the parent company for the subsidiary, service tax liability arises – HELD - Service tax is a contractual levy premised on an understanding between service provider and service recipient, and absent any contractual agreement for provision of services between the parent company and subsidiary with respect to uninvoiced allocations, no service tax demand can be raised - The statutory provisions of Section 67 and Rule 7 of the Point of Taxation Rules require that the debit entry must be reflected in the books of accounts of the person receiving services, and since uninvoiced allocations are not reflected in the subsidiary's accounts but only in the parent company's accounts, the subsidiary cannot be attributed with service tax liability. The uninvoiced allocations represent cost sharing or reimbursement of expenses meant for the parent company's own consumption and not services provided to or consumed by the subsidiary, therefore such allocations cannot be subjected to service tax - The appellate authority's order dropping the entire demand of service tax and penalties is confirmed and the Revenue appeal is dismissed [Read less]

Service Tax - Export Transportation Services - Procedural Delay in Filing Exemption Forms – Appellant filed applications for service tax exemption on transportation charges for export cargo under the Notification No. 18/2009-S.T. dated 07th July, 2009 prescribing a specific form and timeline. The forms were filed with delay beyond the prescribed period, though all substantive conditions for exemption were satisfied and the forms were subsequently acknowledged by the authority - Whether service tax exemption can be denied solely on the ground of procedural delay in filing the prescribed forms when all substantive conditio... [Read more]

Service Tax - Export Transportation Services - Procedural Delay in Filing Exemption Forms – Appellant filed applications for service tax exemption on transportation charges for export cargo under the Notification No. 18/2009-S.T. dated 07th July, 2009 prescribing a specific form and timeline. The forms were filed with delay beyond the prescribed period, though all substantive conditions for exemption were satisfied and the forms were subsequently acknowledged by the authority - Whether service tax exemption can be denied solely on the ground of procedural delay in filing the prescribed forms when all substantive conditions for exemption have been fulfilled – HELD - The procedural requirements should not frustrate substantive rights. The procedural provisions are directory in nature, intended only to facilitate verification and not to deny legitimate benefits. Relying on the precedent that substantive benefits cannot be denied on technical grounds, since there was no dispute regarding the rendering of transportation services in relation to exports and all substantive conditions were met, the procedural violation is condoned and the exemption benefit is allowed – Further, the denial of exemption solely on procedural grounds would be contrary to settled legal principles and judicial precedents consistently affirming that procedural lapses cannot override substantive entitlements - The service tax demand on transportation charges for export cargo is set aside and the exemption benefit is allowed despite the procedural delay in filing the prescribed Forms - Erroneous Computation of Gross Transportation Charges - Service Tax Component Already Included in Charged Amount - Department computed taxable transportation charges based on the gross amount reflected in the profit and loss account without deducting the service tax and interest components already paid and included in that gross figure. The assessee submitted statutory returns showing the service tax paid for the relevant period - Whether service tax liability can be demanded on transportation charges when the charged amount already includes the service tax component previously paid by the assessee – HELD - The gross amount in the profit and loss account included both the service tax paid on transportation charges and interest on late payment. Revenue erroneously computed the taxable value without deducting these components, resulting in a demand for service tax on amounts already discharged. The assessee had provided copies of statutory returns filed with the department clearly showing the service tax paid, which were available on record but not considered during investigation - The service tax demand is set aside holding that the computation was erroneous and not legally sustainable, as it sought to impose tax liability on amounts already paid and included in the gross charges - Partially Accepted Exemption Claims - Arbitrary Rejection of Balance Amount Without Justification - Whether partial acceptance of exemption claims coupled with unexplained rejection of the remaining claimed amount constitutes valid adjudication – HELD - The adjudicating authority had specifically recorded the submission of exemption forms for the total claimed amount but thereafter granted relief only for a portion without providing any justifiable reasons or grounds for denying relief on the balance amount. Such selective acceptance followed by unexplained rejection is legally untenable and arbitrary. Once an authority acknowledges submission of all required documentation for the full claimed amount, it cannot arbitrarily accept part of the claim and reject the remainder without articulating cogent reasons supported by law and facts on record - The service tax demand on the balance amount that was rejected without justification is set aside - Penalty under Section 78 – HELD - The entire demand had been raised on the basis of records and documents submitted by the assessee itself. No evidence has been adduced by the Revenue to demonstrate mala fide intent to evade payment of service tax, nor any corroborative evidence brought on record showing that the assessee had indulged in suppression or wilful misstatement. The imposition of penalty requires proof of fraudulent intent or deliberate evasion, which are absent in the facts of the case. The bona fides are evident from the assessee's subsequent compliance through voluntary disclosure schemes and submission of required documentation - The penalty under Section 78 is set aside in its entirety as being unsustainable both in law and on facts - Abatement in Transportation Service Tax - Whether confirmed service tax liability on transportation services should be calculated with or without the benefit of statutory abatement – HELD - For service tax liability arising on transportation services, the assessee is eligible for abatement of seventy-five percent from the taxable value as a statutory benefit applicable to the transportation service category. The abatement is a valuation principle specifically provided in the service tax regulations for transportation services and cannot be withheld from assesses even when the underlying claim for exemption is rejected, as abatement operates as a separate benefit from exemption – The service tax liability on confirmed transportation charges must be calculated after allowing the benefit of seventy-five percent abatement from the taxable value. [Read less]

Customs – Classification of relays, feeder management intelligent electronic devices (FMIEDs), Principal function test - Appellant imported four types of electrical relays namely Midos relays, relays for tap changer control and transformer monitoring, K-range relays, and MICOM claiming classification under Customs Tariff Item 8536 49 00 and exemption under Serial Number 376 of Notification No. 12/2012 - Dept issued a show cause notice disputing the classification and claiming the goods were feeder management intelligent electronic devices classifiable under tariff item 8536 90 90 with contact ratings exceeding 7 amperes ... [Read more]

Customs – Classification of relays, feeder management intelligent electronic devices (FMIEDs), Principal function test - Appellant imported four types of electrical relays namely Midos relays, relays for tap changer control and transformer monitoring, K-range relays, and MICOM claiming classification under Customs Tariff Item 8536 49 00 and exemption under Serial Number 376 of Notification No. 12/2012 - Dept issued a show cause notice disputing the classification and claiming the goods were feeder management intelligent electronic devices classifiable under tariff item 8536 90 90 with contact ratings exceeding 7 amperes - Whether the imported goods are relays classifiable under CTI 8536 49 00 or feeder management intelligent electronic devices classifiable under CTI 8536 90 90, and whether they are eligible for exemption under the notification for relays with contact rating up to 7 amperes – HELD - The primary function test enunciated in Section Note 3 to Section XVI of the tariff schedule and affirmed in the Circular dated 19.04.2007 regarding classification of multi-functional products requires that when a composite machine performs multiple complementary functions, classification shall be determined by the machine or component which performs the principal function - The relays are devices used for control, protection and supervision of electrical systems from overcurrent and voltage, and that additional features resulting from technological advancements such as digital displays, data recording and alarm functions are merely ancillary to the primary protective function and cannot alter the core function for which the goods are purchased - The technical brochures identify the goods as relays and that in trade parlance customers specifically placed orders for relays by mentioning specifications and standards - Three of the four products namely Midos relays, relays for tap changer control and transformer monitoring, and K-range relays all had contact ratings of 5 amperes, whereas the Commissioner had erroneously assumed all four products had contact ratings above 7 amperes solely based on the specification of MICOM relays - The appellant had voluntarily paid the differential duty amount for MICOM relays prior to issuance of the SCN - The confirmation of differential duty for the three products other than MICOM along with interest and penalties are set aside. All four products are held to be classifiable under CTI 8536 49 00 as relays. The products except MICOM were declared entitled to exemption under the notification. The imposition of penalties under sections 112 and 114AA of the Customs Act is set aside - The appeals are partly allowed [Read less]

Customs - Classification - Rule 2(a) of General Rules for Interpretation - Appellant, engaged in manufacturing and assembling mobile phones, imported certain goods declaring them as 'parts of mobile phones' – Dept reclassified the imported goods as complete mobile phones in CKD/SKD condition under the tariff item applicable to mobile phones attracting a higher rate of basic customs duty, by invoking rule 2(a) of the General Rules for Interpretation of the Customs Tariff Act, 1975, confirmed differential duty with interest, confiscated the goods with an option to redeem on payment of redemption fine, and imposed penalty f... [Read more]

Customs - Classification - Rule 2(a) of General Rules for Interpretation - Appellant, engaged in manufacturing and assembling mobile phones, imported certain goods declaring them as 'parts of mobile phones' – Dept reclassified the imported goods as complete mobile phones in CKD/SKD condition under the tariff item applicable to mobile phones attracting a higher rate of basic customs duty, by invoking rule 2(a) of the General Rules for Interpretation of the Customs Tariff Act, 1975, confirmed differential duty with interest, confiscated the goods with an option to redeem on payment of redemption fine, and imposed penalty for improper importation - Whether the imported goods, being parts of mobile phones accompanied by locally procured components, could be treated as complete or finished mobile phones by invoking rule 2(a) of the General Rules for Interpretation so as to attract reclassification and consequent differential duty liability – HELD – The Rule 2(a) of the General Rules for Interpretation stipulates that incomplete or unfinished goods must possess the essential character of the complete or finished goods for them to be classified as such. The burden to establish reclassification lies squarely upon the department and not upon the assessee - Further, the Chartered Engineer engaged by the Department himself categorically opined that the unassembled parts imported by the appellant form an incomplete mobile phone and the goods were without battery essential for power backup and without camera, they required fitment of additional parts along with some basic manufacturing process - Since the expert report of the Chartered Engineer did not conclusively establish that the imported parts possessed the essential character of a complete or finished mobile phone, it is the department that bears the burden of proving reclassification by adducing proper evidence - The impugned order erred in placing the burden upon the appellant to demonstrate that the goods were not complete mobile phones. The view taken by the Principal Commissioner that the goods were complete mobile sets by virtue of rule 2(a) of the General Rules for Interpretation cannot be sustained – The impugned order is set aside and the appeal is allowed [Read less]

Service Tax - Rebate on Export of Services - Eligibility of credit availed prior to service tax registration - Whether Cenvat Credit availed prior to obtaining service tax registration is admissible for the purpose of claiming rebate on export of services – HELD - A plain reading of the relevant provisions of the Finance Act and the Cenvat Credit Rules does not reveal any statutory condition making service tax registration a pre-condition for availment of Cenvat Credit. The obligation to register under the Finance Act is applicable only to persons liable to pay service tax, whereas the appellant, being exclusively engage... [Read more]

Service Tax - Rebate on Export of Services - Eligibility of credit availed prior to service tax registration - Whether Cenvat Credit availed prior to obtaining service tax registration is admissible for the purpose of claiming rebate on export of services – HELD - A plain reading of the relevant provisions of the Finance Act and the Cenvat Credit Rules does not reveal any statutory condition making service tax registration a pre-condition for availment of Cenvat Credit. The obligation to register under the Finance Act is applicable only to persons liable to pay service tax, whereas the appellant, being exclusively engaged in export of services during the disputed period, was not liable to pay any service tax, and therefore was not required to obtain registration during that period. The credit availed on input services, though accumulated prior to registration, could lawfully be taken upon obtaining registration, subject to compliance with other applicable provisions of the Cenvat Credit Rules including nexus with output services and availability of proper documents - Multiple High Courts and co-ordinate benches have consistently held that there is no statutory provision disentitling a person from taking credit merely on account of non-registration during a period when registration itself was not required – The denial of credit solely on the ground of non-registration is not legally sustainable and set aside - The matter requires re-examination of the factual matrix including supporting documents by the original authority to verify eligibility of the credit under the provisions prevailing during the relevant period - Appeal allowed by way of remand - Cenvat Credit - Nexus between input services and output services - Eligibility of credit on certain input services such as life insurance for employees, rent-a-cab, hotel bills, air travel, medical check-up, annual maintenance contracts and vehicle maintenance - Whether credit on such input services can be denied on the ground that they lack a direct nexus with the provision of output services exported – HELD - The period in question falls prior to the amendment effected by the Finance Act of a later year, and that under the unamended definition of input service in the Cenvat Credit Rules, any service used in relation to business activities was eligible for credit, which carried a wider scope than what was introduced by the subsequent amendment. The Tribunal has consistently held that various categories of input services including those pertaining to management, maintenance or repair, air travel, outdoor catering, insurance for employees and entertainment expenses are eligible as input services in the context of provision of output services during this period, and that the original adjudicating authority failed to consider these binding decisions while denying credit on account of absence of nexus - Each denied input service requires fresh examination in the factual context of the appellant by applying the ratios laid down by the co-ordinate benches on the eligibility of such input services - Appeal allowed by way of remand [Read less]

Service Tax - Refund – Time Limit for Filing Claim – One Year Period Computation - Appellant filed a refund claim for a quarterly period (July to September 2016) on 27.07.2017 for services exported in convertible foreign exchange – Rejection of refund claim on the ground that remittances were received beyond one year from the date of receipt and therefore time-barred under Notification No. 27/2012 read with Rule 5 of Cenvat Credit Rules, 2004 - Appellant contended that the one year period should be computed from the last date of the quarter for which refund was filed and not from the actual date of receipt of each re... [Read more]

Service Tax - Refund – Time Limit for Filing Claim – One Year Period Computation - Appellant filed a refund claim for a quarterly period (July to September 2016) on 27.07.2017 for services exported in convertible foreign exchange – Rejection of refund claim on the ground that remittances were received beyond one year from the date of receipt and therefore time-barred under Notification No. 27/2012 read with Rule 5 of Cenvat Credit Rules, 2004 - Appellant contended that the one year period should be computed from the last date of the quarter for which refund was filed and not from the actual date of receipt of each remittance – HELD - The Notification No. 14/2016 dated 01.03.2016 amended the earlier Notification No. 27/2012 and provided a specific time limit for service providers, requiring refund claims to be filed before expiry of one year from the date of receipt of payment in convertible foreign exchange - A plain reading of the notification clearly requires filing of refund claim within one year from the date of receipt of convertible foreign exchange. The case laws relied upon the appellant are distinguished on the ground that they dealt with provisions under Notification No. 27/2012 and not the amended provisions applicable post 01.03.2016. Accordingly, the limitation has to be counted from the date of receipt of remittances and not from the last date of the quarter - The matter is remanded back to the original Refund Sanctioning Authority to decide the refund claim – The appeal is allowed by way of remand - Refund – Evidence of Receipt of Foreign Exchange – Acceptance of FIRC and BRC - The appellant submitted Form FIRC as evidence of receipt of foreign exchange instead of Bank Realisation Certificate, contending that Circular dated 12.03.2009 permits acceptance of FIRC in lieu of BRC. Department rejected the refund claim on the ground that strict compliance with Notification No. 27/2012 required production of BRC and not FIRC for the relevant period 2016-17 – HELD - What is crucial is that the document should categorically indicate that foreign exchange has been received in respect of the invoices under the cover of which export of service has taken place. The evidence of receipt of foreign exchange can be in the form of FIRC or BRC or both, provided there is corroboration with invoices in respect of which refund has been claimed. Accordingly, the matter is remanded to the original Refund Sanctioning Authority with direction to examine whether remittances have been received in respect of the invoices under the cover of which export of service has taken place, based on documents to be submitted by the appellant. [Read less]

Service Tax – Payments towards for technology transfer, technical assistance under Inter-Governmental Agreement – Demand under Scientific and Technical Consultancy Service - Appellant, an aircraft manufacturer, entered into an agreement with a foreign state-owned entity for transfer of licence and technological documentation for production of aircraft in India under an Inter-Governmental Agreement - The appellant made payments for technology transfer, technical assistance, supply of parts, training and related services - Whether payments made by the appellant for services rendered by a foreign government organization i... [Read more]

Service Tax – Payments towards for technology transfer, technical assistance under Inter-Governmental Agreement – Demand under Scientific and Technical Consultancy Service - Appellant, an aircraft manufacturer, entered into an agreement with a foreign state-owned entity for transfer of licence and technological documentation for production of aircraft in India under an Inter-Governmental Agreement - The appellant made payments for technology transfer, technical assistance, supply of parts, training and related services - Whether payments made by the appellant for services rendered by a foreign government organization in connection with technology transfer and technical assistance constitute "Scientific or Technical Consultancy Service" liable to service tax under RCM – HELD - The definition of Scientific or Technical Consultancy Service under Section 65 of the Finance Act, 1994 requires that the service must be rendered by a scientist, a technocrat, or a science or technology institution or organization. The foreign state entity in question is a governmental organization responsible for export of defence and dual use technology, acting as an exclusive state intermediary agency, and therefore cannot be classified as a science or technology institution or organization - The Tribunal relied on its earlier coordinate bench decisions involving the same appellant and the same foreign entity under identical factual matrices where it was conclusively established that the entity is a government organization and not a scientific or technical institution. Even the Department did not press this aspect when it filed an appeal before the Supreme Court against the coordinate bench's earlier order, thereby accepting the position. No evidence was placed on record to establish that the appellant received services from any individual scientist or technocrat in their individual capacity - The demand of Service Tax under Scientific or Technical Consultancy Service is set aside. However, confirmation of demand of Service Tax on MMR and penalty thereon is sustained - The appeals filed by assessee are allowed partly and the appeal filed by the Department is dismissed [Read less]

Service Tax - Taxability of Compensation/Liquidity Damages for non-fulfillment of contractual obligations - Appellant, a testing service provider, received compensation from its client at a fixed rate per unit when the client failed to meet the guaranteed minimum number of units for testing as per the contract - Adjudicating authority treated this compensation as part of the gross amount received for the testing service and levied service tax under the Determination of Value Rules - Whether compensation or liquidity damages paid by the client due to its inability to honor its contractual commitment to send the agreed-upon ... [Read more]

Service Tax - Taxability of Compensation/Liquidity Damages for non-fulfillment of contractual obligations - Appellant, a testing service provider, received compensation from its client at a fixed rate per unit when the client failed to meet the guaranteed minimum number of units for testing as per the contract - Adjudicating authority treated this compensation as part of the gross amount received for the testing service and levied service tax under the Determination of Value Rules - Whether compensation or liquidity damages paid by the client due to its inability to honor its contractual commitment to send the agreed-upon number of units is liable to service tax as part of the consideration for testing services – HELD - The payment was in the nature of liquidity damage paid solely because the client could not send the agreed-upon quantity of units, and not for any service actually provided by the appellant - The adjudicating authority had treated the payment as a reimbursable expense while invoking the Rule 5(1) of Service Tax (Determination of Value) Rules, 2006, which has been held ultra vires by the High Court and upheld by the Supreme Court – The payment is more in the nature of liquidity damage and it is paid only because of the inability of the client to send the guaranteed minimum number of units for testing. Service tax cannot be levied on liquidity damages or compensation received due to non-performance by the other party - The demand for service tax on compensation charges is set aside - Taxability of Renting of Immovable Property Service - Whether the demand for service tax on renting of immovable property can be reopened for classification when the appellant has already paid the tax and received the benefit of penalty waiver – HELD – The demand is upheld as the appellant had not disputed the taxability before the adjudicating authority. Once the adjudicating authority had already extended the benefit of penalty waiver as a matter of statutory obligation and the appellant had paid the outstanding tax with interest, the classification issue cannot be reopened at the appellate stage. [Read less]

Service Tax on Delayed Payment Charges in Stock Broking Services – Appellant collected penalties from clients for delayed payment of settlement amounts to the stock exchange, treating such charges as delayed payment charges rather than service tax consideration - Department sought to levy service tax on these amounts as declared service under section 66E(e) of the Finance Act, 1994, contending that tolerating delayed payment constituted a taxable service – HELD - The delayed payment charges collected by stock brokers for amounts advanced on behalf of clients towards purchase of securities are relatable to interest on f... [Read more]

Service Tax on Delayed Payment Charges in Stock Broking Services – Appellant collected penalties from clients for delayed payment of settlement amounts to the stock exchange, treating such charges as delayed payment charges rather than service tax consideration - Department sought to levy service tax on these amounts as declared service under section 66E(e) of the Finance Act, 1994, contending that tolerating delayed payment constituted a taxable service – HELD - The delayed payment charges collected by stock brokers for amounts advanced on behalf of clients towards purchase of securities are relatable to interest on funds deployed and thus fall within the negative list under section 66D(n) of the Finance Act, 1994, covering deposits, loans or advances where consideration is by way of interest or discount - Although the Board's earlier Circular dated 03.08.2011 became inapplicable post-01.07.2012 due to material changes in law including introduction of the negative list and declared service provisions, the delayed payment charges pertaining to stock broking services represent time value of money and constitute interest on advances extended to clients, thereby exempting them from service tax liability under the negative list rather than treating them as declared service - The demand of service tax on delayed payment charges towards stock broking services is set aside. However, the demand of service tax on delayed payment charges towards DEMAT account services is upheld - The appeal is partly allowed - Service Tax on Delayed Payment Charges in DEMAT Account Services - The delayed payment charges collected for failure to pay account maintenance fees cannot be equated to interest and therefore does not qualify for exemption under the negative list. Such charges represent consideration received for tolerating the act of default in payment by the account holder and thus constitute declared service under section 66E(e), making them liable to service tax as integral components of the DEMAT account service. The demand of service tax on delayed payment charges towards DEMAT account services is upheld. [Read less]

Service Tax - Eligibility for abatement under conditional Notification No.01/2006-ST dt.01.03.2006, as amended vide Notification No.34/2011-ST dt.01.05.2011 – Appellant availed Cenvat credit on input services (maintenance and repair, internet, and courier services) during the period prior to 30.06.2012 while claiming abatement benefit under Notification No.01/2006-ST as amended by Notification No.34/2011-ST - Whether the appellant was eligible for abatement when the conditions of the notifications clearly prohibited taking Cenvat credit on inputs, capital goods or input services – HELD – The exemption notifications i... [Read more]

Service Tax - Eligibility for abatement under conditional Notification No.01/2006-ST dt.01.03.2006, as amended vide Notification No.34/2011-ST dt.01.05.2011 – Appellant availed Cenvat credit on input services (maintenance and repair, internet, and courier services) during the period prior to 30.06.2012 while claiming abatement benefit under Notification No.01/2006-ST as amended by Notification No.34/2011-ST - Whether the appellant was eligible for abatement when the conditions of the notifications clearly prohibited taking Cenvat credit on inputs, capital goods or input services – HELD – The exemption notifications issued under Section 93 must be construed strictly and it is incumbent upon the appellant to justify that the services in question were not used for providing the taxable services. The maintenance and repair services, internet services and courier services have direct nexus with hotel operations and the provision of accommodation and restaurant services, making it inconceivable that such services were not utilized for the taxable services - The invoices pertained to the period prior to 30.06.2012 and the appellant had availed credit on these input services, thereby clearly violating the condition of non-availment of Cenvat credit prescribed by the notifications. In the absence of any cogent and substantive evidence demonstrating that these services were not used, either partly or exclusively, for providing the taxable services, the benefit of the Notifications cannot be extended - The impugned order is upheld and the appeal is dismissed [Read less]

Central Sales Tax Act, 1956 - Inter-State Sale of Natural Gas - Jurisdiction of State to Levy VAT - Constitutional Competence – Delivery Point and Transfer of Title – Respondents operating under a Production Sharing Contract with the Government of India for an offshore deep-water block, entered into Gas Sales and Purchase Agreements with buyers in various States – The natural gas extracted from the offshore basin was delivered at a designated onshore processing terminal in one State ("delivery point"), with title, risk, and possession passing to the buyers at that point, following which the buyers independently arran... [Read more]

Central Sales Tax Act, 1956 - Inter-State Sale of Natural Gas - Jurisdiction of State to Levy VAT - Constitutional Competence – Delivery Point and Transfer of Title – Respondents operating under a Production Sharing Contract with the Government of India for an offshore deep-water block, entered into Gas Sales and Purchase Agreements with buyers in various States – The natural gas extracted from the offshore basin was delivered at a designated onshore processing terminal in one State ("delivery point"), with title, risk, and possession passing to the buyers at that point, following which the buyers independently arranged transportation of the gas through common carrier pipelines across multiple States to their facilities in another State - Assessing authority of the destination State levied VAT on the transaction, treating the same as an intra-State sale on the ground that the gas, being fungible and co-mingled in the common carrier pipeline, constituted unascertained goods that were appropriated only upon receipt at the buyers' factories within that State, and that the sale was therefore completed within its territory — HELD – The Section 3 of the CST Act, enacted pursuant to Article 269(3) to formulate principles for determining when a sale takes place in the course of inter-State trade or commerce, operates as the primary and overriding provision, and Section 4 of the CST Act, which fixes the territorial situs of a sale for the purpose of identifying the appropriate State, is expressly made subject to Section 3 and cannot be invoked to override an established inter-State character of a transaction – In the present case, the delivery point was unambiguously fixed at the onshore processing terminal in the originating State and the transportation thereafter was effected solely under separate carriage agreements between the buyers and the pipeline operators, who acquired no title to the gas and acted merely as carriers – The co-mingling and fungibility of gas in the common carrier pipeline was a statutory compulsion arising from the open access common carrier regime mandated by the applicable Regulations. The physical intermixing of gas in the pipeline after the sale was concluded at the delivery point was a mere incident of transportation that could neither alter nor relocate the character of an already completed inter-State sale; the subsequent re-metering at the destination point is held to be legally irrelevant to the determination of the taxable event - The nature of goods, whether ascertained or unascertained, is irrelevant for the purposes of Section 3(a) of the CST Act, once it is established that a contract of sale occasions the movement of goods from one State to another - The Explanation 3 inserted into Section 3 of the CST Act by the Finance Act, 2016, was clarificatory and not substantive in nature and did not alter the pre-existing legal position but merely gave explicit statutory expression to what was already implicit in Section 3; accordingly, the argument that the Explanation was applicable only prospectively is rejected - The destination State had itself recognised the inter-State character of the transaction by issuing statutory declaration forms to the buyers under the CST Rules. Having approbated the inter-State nature of the transaction in that manner, it was not open to the State to reprobate by simultaneously asserting jurisdiction to levy VAT on the same transaction - The judgment of the High Court quashing the assessment order and directing refund of the tax realised, is confirmed – The Revenue appeals are dismissed [Read less]

Customs - Classification of Agricultural Products containing Plant Alkaloids – Appellant declared imported products as bio-fertilizers under Chapter Heading 3101 0099 - Department reclassified them as insecticides under Chapter Heading 3808 9199 on the basis of laboratory reports showing presence of naturally occurring plant alkaloids such as Matrin, Oxymatrin, Dehydromatrin and Dehydrooxymatrin, and initiated confiscation proceedings under Section 111(d) and 111(m) of the Customs Act, 1962 with penalties under Section 112(a) and 114AA - Whether the imported goods could be classified as insecticides liable for confiscati... [Read more]

Customs - Classification of Agricultural Products containing Plant Alkaloids – Appellant declared imported products as bio-fertilizers under Chapter Heading 3101 0099 - Department reclassified them as insecticides under Chapter Heading 3808 9199 on the basis of laboratory reports showing presence of naturally occurring plant alkaloids such as Matrin, Oxymatrin, Dehydromatrin and Dehydrooxymatrin, and initiated confiscation proceedings under Section 111(d) and 111(m) of the Customs Act, 1962 with penalties under Section 112(a) and 114AA - Whether the imported goods could be classified as insecticides liable for confiscation without registration under the Insecticides Act, 1968 – HELD - The tariff classification cannot be determined on assumptions or isolated chemical presence and must consider composition, primary use, marketed identity and commercial understanding of the product. The laboratory reports merely identified presence of certain constituents without categorically certifying that the goods were insecticides within the meaning of Chapter 38 or the Insecticides Act, 1968. Significantly, one report expressly recorded absence of pesticides peaks, thereby undermining the department's allegation. The denial of cross-examination opportunity to the laboratory report authors violated principles of natural justice, rendering reliance on such technical reports legally unsustainable, particularly where such reports constitute the primary substantive evidence rather than mere corroborative evidence - Department failed to establish deliberate suppression or wilful mis-statement as the goods were imported through proper B/E with declared descriptions and supporting literature, demonstrating an interpretational dispute rather than clandestine misdeclaration. No evidence was produced that the imported goods were prohibited under law, banned for import, or caused any hazard - Reclassification of goods, confiscation under Section 111(d) and 111(m), Customs duty demands, and penalties under Section 112(a) and 114AA are unsustainable and set aside - The impugned orders are set aside and the appeal is allowed [Read less]

Customs - Confiscation of goods based solely on Classification change - An importer imported canvas shoes and declared them under CTH 6402 9990, which the revenue authorities sought to change to CTH 6404 1910. Although both tariff headings attracted the same rate of duty at 35% ad valorem, the adjudicating authority confiscated the majority of the imported goods under Section 111(m) of the Customs Act, 1962, without providing any reasoning or legal basis for such confiscation - Whether a mere change in tariff classification, which results in no change in the duty quantum, can constitute a valid ground for confiscation of g... [Read more]

Customs - Confiscation of goods based solely on Classification change - An importer imported canvas shoes and declared them under CTH 6402 9990, which the revenue authorities sought to change to CTH 6404 1910. Although both tariff headings attracted the same rate of duty at 35% ad valorem, the adjudicating authority confiscated the majority of the imported goods under Section 111(m) of the Customs Act, 1962, without providing any reasoning or legal basis for such confiscation - Whether a mere change in tariff classification, which results in no change in the duty quantum, can constitute a valid ground for confiscation of goods under Section 111(m) of the Customs Act – HELD - Confiscation cannot be justified merely on the basis of change in classification when there is no material impact on the duty leviable, as such action would be arbitrary and violate principles of natural justice. The adjudicating authority's order was completely silent on reasons for confiscating these non-counterfeit goods and that the fact of physical shortage of goods in the shipment demonstrated the importer's lack of mala fides in the transaction. Accordingly, the confiscation of non-counterfeit goods was set aside and their release was ordered on payment of a redemption fine – The confiscation of non-counterfeit goods is set aside and goods are ordered to be released – The appeal is partly allowed - Confiscation of goods on account of Intellectual Property Rights Violation – Appellant received imported shoes, certain pairs of which were identified by right holders as counterfeit or infringing goods (branded shoes) based on a technical report obtained by the Revenue authorities from the right holders - Whether confiscation of goods on grounds of intellectual property rights infringement could be sustained when the determination of counterfeit nature was made without affording the importer an opportunity to participate in the verification process and without sharing the technical evidence – HELD - Although the appellant failed to formally dispute the violation of intellectual property rights and the supplier's admission of error established the infringement, procedural fairness required that the technical reports obtained from right holders should have been shared with the importer in compliance with the doctrine of natural justice, even if the importer may not have formally sought a written show cause notice. However, since the supplier himself admitted the mistake and the facts clearly established that counterfeit goods were mixed in the shipment without the importer's mala fides, the confiscation of counterfeit goods could be sustained - The absolute confiscation of counterfeit branded goods is maintained - Reduction in Penalty - The adjudicating authority imposed a penalty under Section 112(a)(i) and 112(a)(ii) of the Customs Act. However, the importer suffered significant financial losses due to delays in the clearance process, including ground rent and container rent extending over a prolonged period, caused by lapses on the part of the revenue authorities, particularly a delay of forty-nine days between the examination of goods and issuance of the seizure notice and further delays at various adjudication stages - Whether the penalty imposed on the importer should be reduced considering the severe financial hardship caused by the department's own procedural lapses and delays – HELD - While the importer's conduct in importing counterfeit goods warranted some penalty, the exceptional circumstances of departmental delays and procedural lapses that caused substantial financial loss to the importer were relevant considerations in determining the appropriate quantum of penalty. The appellant had suffered severely due to the department's negligence and that a substantial reduction in penalty would meet the ends of justice. The penalty is reduced from Rs. 75,000/- to Rs. 5000/-. [Read less]

Customs - Classification of Blood Glucose Meters and Related Medical Diagnostic Instruments – Appellant imported blood glucose meters, urine analyzers, and blood gas analyzers during the specified period and classified them under Customs Tariff Item 9027 80 90 (instruments for physical or chemical analysis) at nil basic Customs duty under Notification No. 24/2005-Cus. - Revenue issued notice reclassifying the goods under Customs Tariff Item 90189099 (medical instruments) and demanding differential duty with penalty, contending that glucose meters are medical diagnostic instruments rather than laboratory analytic instrume... [Read more]

Customs - Classification of Blood Glucose Meters and Related Medical Diagnostic Instruments – Appellant imported blood glucose meters, urine analyzers, and blood gas analyzers during the specified period and classified them under Customs Tariff Item 9027 80 90 (instruments for physical or chemical analysis) at nil basic Customs duty under Notification No. 24/2005-Cus. - Revenue issued notice reclassifying the goods under Customs Tariff Item 90189099 (medical instruments) and demanding differential duty with penalty, contending that glucose meters are medical diagnostic instruments rather than laboratory analytic instruments – Whether blood glucose meters should be classified under heading 9027 (instruments for chemical analysis) or heading 9018 (medical, surgical instruments) – HELD – The Heading 9027 is more specific than heading 9018 as it directly covers instruments for chemical analysis. The HSN Explanatory Note to heading 9018 expressly excludes instruments and appliances in laboratories to test blood, directing such items to heading 9027 - Further, glucose meters are primarily used by individuals at home and in workplaces rather than exclusively in professional medical practice, thereby falling outside the scope of heading 9018 - The consistent precedent established in the cases of Bayer Pharmaceuticals and Abbott Healthcare, which had been affirmed by the Apex Court, is that glucose meters are classifiable under heading 9027 – The Glucose meters merit classification under CTI 90278090 and entitled the benefit of Notification No.24/2005-cus dated 01.03.2005 - The impugned order is set aside and the appeal is allowed [Read less]

Central Excise – Transfer/Sale of manufacturing unit – Backward integration between sister concerns – Demand of duty on goods manufactured and captively consumed at the acquired unit during the interregnum between the date of acquisition and the date of grant of amended registration, when the final products manufactured therefrom have already suffered duty on clearance - Whether the transfer of the unit could be disregarded merely because the amendment of registration was granted at a later date – HELD – The documentary evidence on record, including the Deed of Sale and the Central Excise Registration Certificate... [Read more]

Central Excise – Transfer/Sale of manufacturing unit – Backward integration between sister concerns – Demand of duty on goods manufactured and captively consumed at the acquired unit during the interregnum between the date of acquisition and the date of grant of amended registration, when the final products manufactured therefrom have already suffered duty on clearance - Whether the transfer of the unit could be disregarded merely because the amendment of registration was granted at a later date – HELD – The documentary evidence on record, including the Deed of Sale and the Central Excise Registration Certificate subsequently obtained, conclusively establishes that there was a genuine sale of the manufacturing unit by Respondent No.1 to Respondent No.2 - The substantive right of possession arising from the sale agreement cannot be defeated by the procedural delay in filing the surrender/amendment application, since such filing necessarily depends on prior compliances such as cancellation/amendment of factory licence, ground plan certification, and clearance of dues, which are beyond the immediate control of the parties. The ingots manufactured at the acquired unit were captively consumed by the purchaser for manufacture of TMT Bars and Miss Roll, which were cleared on payment of appropriate duty, and therefore demanding duty again on the intermediate ingots would amount to double taxation on the same goods in a wholly revenue-neutral situation - While the purchaser ought to have awaited grant of amended registration before commencing production, for such procedural lapse, imposition of penalty under Rule 25 of the Central Excise Rules, 2002 for violation of Rule 9(1) read with Notification No.35/2001 (N.T.) is upheld - The penalties imposed by the Commissioner (Appeals), not being contested and already paid to give a quietus to litigation – The order of the Commissioner (Appeals) setting aside the duty demand is upheld and the appeal filed by the Revenue is dismissed [Read less]

Customs - Extra Duty Deposit - Refund and Interest on Delayed Refund – Respondents-assessee imported coal in bulk from a related party supplier and the B/E were provisionally assessed pending Special Valuation Branch investigation – Respondent deposited Extra Duty Deposit at one percent of the declared assessable value as per Board Circular - Upon completion of SVB investigation, the proper officer accepted the declared transaction value and directed finalization of all pending provisionally assessed bills of entry - Whether Extra Duty Deposit collected under Board circular in SVB cases constitutes duty within the mean... [Read more]

Customs - Extra Duty Deposit - Refund and Interest on Delayed Refund – Respondents-assessee imported coal in bulk from a related party supplier and the B/E were provisionally assessed pending Special Valuation Branch investigation – Respondent deposited Extra Duty Deposit at one percent of the declared assessable value as per Board Circular - Upon completion of SVB investigation, the proper officer accepted the declared transaction value and directed finalization of all pending provisionally assessed bills of entry - Whether Extra Duty Deposit collected under Board circular in SVB cases constitutes duty within the meaning of the Customs Act or is merely a deposit, and whether the importer is entitled to interest on delayed refund of such deposit and if so, from what date – HELD – The Extra Duty Deposit is not a duty of customs as defined under the Customs Act but is in the nature of a deposit collected for the specific purpose of ensuring timely submission of information by the importer during SVB investigation so as to enable expeditious finalization of provisional assessment. Though its quantum is measured on the basis of declared assessable value, that measure does not convert its character into duty, since the obligation to pay it arises not from a charge under the taxing statute but from a Board Circular prescribing a security mechanism - Further, since Extra Duty Deposit is collected in the context of provisional assessment proceedings under Section 18 of the Customs Act, the mechanism for its refund and for payment of interest on delayed refund is governed by the provisions of Section 18 read mutatis mutandis with Section 27A. The self-contained machinery of Section 18 providing for adjustment and refund of excess amounts paid at the provisional assessment stage, along with interest for delay beyond three months from the date of final assessment, overrides the general refund provisions of Section 27 by virtue of the non obstante clause in Section 18 - The proper officer was not justified in treating the refund application as disposed of merely on account of non-finalization of provisional assessments. The delay in finalization of provisional assessments is entirely attributable to the Department and not to the importer, who had furnished all requisite documents and information. Since the SVB order accepting the declared transaction value had attained finality without being challenged by either side, there was no outstanding purpose for which the EDD could have been retained by the department, as it was not required to cover any deficiency in finally assessed duty - Interest is payable on the Extra Duty Deposit refund amount from the date of expiry of three months from the date of receipt of the refund application as originally submitted and acknowledged by the custom house, until the date of actual payment of the refund - The impugned order of the Commissioners (Appeals) granting such interest is upheld – The appeal filed by Revenue is dismissed [Read less]

Customs - Valuation of imported plant and machinery with bundled technical services - The importer imported key components of lime kiln machinery valued at a separate consideration under a contract that also included engineering package, license fee and technical assistance valued at a separate consideration - Department sought to include the value of technical services, license fees and engineering charges in the assessable value of imported goods, contending that the supply of such services was a condition of sale of the plant and machinery and that the importer had split a single invoice into two invoices merely to evad... [Read more]

Customs - Valuation of imported plant and machinery with bundled technical services - The importer imported key components of lime kiln machinery valued at a separate consideration under a contract that also included engineering package, license fee and technical assistance valued at a separate consideration - Department sought to include the value of technical services, license fees and engineering charges in the assessable value of imported goods, contending that the supply of such services was a condition of sale of the plant and machinery and that the importer had split a single invoice into two invoices merely to evade customs duty - Whether the separately contracted and invoiced technical services, engineering package and license fees could be included in the assessable value of imported plant and machinery under section 14 of the Customs Act, 1962 read with rule 10(1)(c) of the Customs Valuation Rules, 2007 – HELD - Where a single contract involves importation of dutiable equipment and services for post-importation activities, and these two sets of items are segregable with separate invoices and separate contractual obligations, the consideration for services cannot be added to the assessable value of imported goods. The contract clearly bifurcated the obligations into two parts: technical assistance and licensing for one part, and supply of key components for the other part. The buyer was separately responsible for procuring additional machinery and undertaking local construction. There was no binding obligation in the contract to purchase services as a prerequisite for purchasing equipment - Royalties and license fees are includible in transaction value only when they are required to be paid as a condition of sale of the imported goods itself, which was not the case here as the services were relatable to post-importation activities of setting up and operating the plant. The intention to split invoices could not be inferred from the contract terms, which expressly provided for separate considerations - payment under the technical services agreement is not a payment as a condition of sale of the imported plant and therefore, is not includible in the transaction value under Rule 10 (1)(e) of CVR - The decision of the authorities below requiring inclusion of technical services charges in the assessable value is set aside and the appeal is allowed [Read less]

GST - Detention and Release of goods in transit - Demand under Section 129 of the CGST Act, 2017, disputing the ownership, quality, quantity, and authenticity of the accompanying tax invoices and e-way bills - Petitioner sought release of the perishable consignment under Section 129(1)(a) by paying the lesser penalty applicable where the owner comes forward - Revenue contended that since ownership was disputed, the higher penalty under Section 129(1)(b) applicable where the owner does not come forward ought to apply - Whether, when the revenue merely raises a dispute as to ownership in the SCN without producing any concret... [Read more]

GST - Detention and Release of goods in transit - Demand under Section 129 of the CGST Act, 2017, disputing the ownership, quality, quantity, and authenticity of the accompanying tax invoices and e-way bills - Petitioner sought release of the perishable consignment under Section 129(1)(a) by paying the lesser penalty applicable where the owner comes forward - Revenue contended that since ownership was disputed, the higher penalty under Section 129(1)(b) applicable where the owner does not come forward ought to apply - Whether, when the revenue merely raises a dispute as to ownership in the SCN without producing any concrete contrary material to disprove the petitioner's claim of ownership, the consignment ought to be released under Section 129(1)(a) upon payment of penalty equal to two hundred percent of the tax payable, or whether the higher liability under Section 129(1)(b) is attracted – HELD - The provisions of Section 129 of the 2017 Act must be interpreted strictly. On a meaningful and harmonious reading thereof, the legislative intent is to release detained goods subject to fulfillment of conditions, without creating any charge or lien over the goods, since recovery of any crystallized demand is separately provided for under the statute - Where the petitioner is named as consignor and the consignee is named in the very show-cause notice and the revenue has not produced, identified, or discussed any concrete or unimpeachable material in its order raising demand to suggest that the petitioner is not the owner of the consignment, a mere assertion of dispute as to ownership in the SCN is insufficient to deny the petitioner the benefit of Section 129(1)(a) – The adjudication on ownership at this stage is of no relevance since the matter will be examined in a statutory appeal and if the demand is ultimately crystallized, the petitioner will be liable to pay regardless of ownership - The goods being perishable in nature, the consignment deserves to be released expeditiously. The petitioner is entitled to release of the consignment under Section 129(1)(a) upon payment of the applicable penalty. Subject to compliance of the provisions laid down under Section 129(1)(a) of the CGST Act, the consignment shall be released in favour of the petitioner in accordance with law. The writ petition is disposed of [Read less]

Central Excise - Excise duty on Ready Mix Concrete (RMC) manufactured at construction site - Whether RMC manufactured at construction site is dutiable under Central Excise Act – HELD - The manufacturing process and composition of RMC is different from the conventional concrete mix. RMC is an excisable product classifiable under CTH 38245010 under Miscellaneous Chemical Products under the Central Excise Tariff Act, 1985 and attracts duty at the applicable rate. However, as per the rulings of the Supreme Court and the Board Circular, the exemption from levy of Central Excise duty is available only to 'concrete mix' and not... [Read more]

Central Excise - Excise duty on Ready Mix Concrete (RMC) manufactured at construction site - Whether RMC manufactured at construction site is dutiable under Central Excise Act – HELD - The manufacturing process and composition of RMC is different from the conventional concrete mix. RMC is an excisable product classifiable under CTH 38245010 under Miscellaneous Chemical Products under the Central Excise Tariff Act, 1985 and attracts duty at the applicable rate. However, as per the rulings of the Supreme Court and the Board Circular, the exemption from levy of Central Excise duty is available only to 'concrete mix' and not to 'RMC' - The goods manufactured by the Appellant at the batching plant at the construction site was 'concrete mix' and not 'RMC', and thus the Appellant is entitled to the exemption from Central Excise duty - The impugned orders are set aside and the appeals filed by the appellant are allowed [Read less]

Central Excise - Penalty under Rule 26 of Central Excise Rules, 2002 on a body corporate - Appellant, a body corporate, was imposed penalty under Rule 26 of the Central Excise Rules, 2002 for goods cleared by a related party which were found to be undervalued, resulting in short payment of excise duty - Whether penalty under Rule 26 can be imposed on a body corporate – HELD – The expression "person" used in Rule 26 includes body corporates and not just natural persons. The definition of "person" under the General Clauses Act, 1897 which includes body corporates, would apply to the provisions of the Central Excise Act a... [Read more]

Central Excise - Penalty under Rule 26 of Central Excise Rules, 2002 on a body corporate - Appellant, a body corporate, was imposed penalty under Rule 26 of the Central Excise Rules, 2002 for goods cleared by a related party which were found to be undervalued, resulting in short payment of excise duty - Whether penalty under Rule 26 can be imposed on a body corporate – HELD – The expression "person" used in Rule 26 includes body corporates and not just natural persons. The definition of "person" under the General Clauses Act, 1897 which includes body corporates, would apply to the provisions of the Central Excise Act and Rules. Under Section 4(3)(b) of the Central Excise Act, the term "person" is used in a wide sense to include both natural and juristic persons - Further, the goods cleared by related party are liable for confiscation under Rule 25 of the Central Excise Rules, 2002 due to the established undervaluation, which is an essential ingredient for invoking the penalty provisions under Rule 26. The appellant was aware of the undervaluation and the consequent tax evasion, and therefore, had the requisite knowledge that the goods were liable for confiscation - The imposition of penalty under Rule 26 on the appellant, a body corporate, is upheld and the appeal is dismissed [Read less]

Service Tax - Taxability of cash incentives provided by banks to credit card users - Department sought to levy service tax on the cash incentives accruing to the Respondent-Assessee on usage of the commercial credit card provided by the banks, contending that the activity undertaken by the respondent assessee amounts to a taxable service in terms of Section 65(E)(e) of the Finance Act, 1994 - The respondent assessee submitted that there is no service involved and they are merely a recipient of the credit card service from the bank, using the card for their business transactions, and the cash back incentives are not a consi... [Read more]

Service Tax - Taxability of cash incentives provided by banks to credit card users - Department sought to levy service tax on the cash incentives accruing to the Respondent-Assessee on usage of the commercial credit card provided by the banks, contending that the activity undertaken by the respondent assessee amounts to a taxable service in terms of Section 65(E)(e) of the Finance Act, 1994 - The respondent assessee submitted that there is no service involved and they are merely a recipient of the credit card service from the bank, using the card for their business transactions, and the cash back incentives are not a consideration for any service – HELD - The use of the commercial credit card by the respondent assessee is merely for promoting their own business and not the business of the banks. No service is being rendered by the respondent assessee to the banks - As per the Circular No. 214/1/2023-S.T. dated 28.02.2023, the activities contemplated under Section 66E(e) require an agreement between the parties with a flow of consideration, which is not present in this case. The appellant revenue department had invoked Section 66E(e) for the first time in the grounds of appeal, which was not part of the show cause notice. An order or appeal cannot travel beyond the scope of the show cause notice - The service tax is payable only if the conditions mentioned in Section 67 are satisfied, i.e., the amount charged should be for the service provided and have a nexus with the taxable service. Accordingly, the impugned order is sustained and the Revenue appeal is dismissed [Read less]

Service Tax – Supply of crude oil from Refinery through pipeline - Crude oil transportation chain involving pipeline, storage, and further transportation - Taxability of Terminal Facilities/Warehousing - Whether terminal facilities / warehousing services are incidental to pipeline service or independent service liable to service tax – HELD - The terminal facilities/warehousing services provided by the respondent-refinery are not incidental or integral to the pipeline service, but constitute an independent service liable to service tax - Without having any storage or warehousing facilities, crude oil not be transhipped ... [Read more]

Service Tax – Supply of crude oil from Refinery through pipeline - Crude oil transportation chain involving pipeline, storage, and further transportation - Taxability of Terminal Facilities/Warehousing - Whether terminal facilities / warehousing services are incidental to pipeline service or independent service liable to service tax – HELD - The terminal facilities/warehousing services provided by the respondent-refinery are not incidental or integral to the pipeline service, but constitute an independent service liable to service tax - Without having any storage or warehousing facilities, crude oil not be transhipped from pipeline to other mode of transport. Therefore, the terminal facilities or discharge facilities is nothing but store and warehousing of the crude oil before entering into third step of transportation for final destination of supply of crude oil - As per the MoU, the respondent charged separately for the "discharge facility" or "terminal facilities" or "storing of crude oil" before the next phase of transportation, which cannot be considered as an integral part of the pipeline transportation. The definition of "storage and warehousing" under the Finance Act, 1994 and the legal precedents establish that the storage of crude oil at refinery before further transportation to the final destination is a distinct service and not merely incidental to the pipeline service. The respondent is liable to pay service tax on the terminal facilities/warehousing services provided to the recipient - The appeal filed by the Department is allowed, and the order of the CESTAT is set aside, restoring the order of the Commissioner - Maintainability of Department’s appeal - Pecuniary jurisdiction – HELD – The present appeal has been filed for total tax evasion of less than 1 Crore, which is not a permissible limit for adjudication in terms of Notifications dated 22.08.2019 and 06.08.2024 before this Court – However, on the certain material factual aspects, appellate Tribunal failed to touch core issue and, thus, the Court is convinced enough that the substantial questions of law is involved in the matter, as the finding of the Tribunal is directly and substantially affecting the right of the appellant/department - The present appeal is maintainable before this Court, as the substantial questions of law appears involved irrespective of the financial limitations. [Read less]

GST - Arrest - Petitioner was arrested under CGST Act but grounds of arrest not annexed to arrest memo, neither furnished to petitioner nor his nominated person - Violation of Supreme Court rulings on mandatory requirement of furnishing grounds of arrest - Remand order passed mechanically without examining legality of arrest – HELD – The arrest and remand order is illegal and unconstitutional. Apex Court rulings in Radhika Agarwal, Vihaan Kumar, and Gautam Navlakha mandate strict compliance with procedural safeguards for arrest, including furnishing grounds of arrest to the arrested person and their nominated represent... [Read more]

GST - Arrest - Petitioner was arrested under CGST Act but grounds of arrest not annexed to arrest memo, neither furnished to petitioner nor his nominated person - Violation of Supreme Court rulings on mandatory requirement of furnishing grounds of arrest - Remand order passed mechanically without examining legality of arrest – HELD – The arrest and remand order is illegal and unconstitutional. Apex Court rulings in Radhika Agarwal, Vihaan Kumar, and Gautam Navlakha mandate strict compliance with procedural safeguards for arrest, including furnishing grounds of arrest to the arrested person and their nominated representative - In the present case, the respondents failed to comply with these safeguards, rendering the arrest and remand illegal. Mere recital of alleged offense amount and status of "mastermind" does not satisfy requirement of recording necessity of arrest. Remand order passed without application of mind by Magistrate is also illegal – the impugned arrest, detention and remand order are quashed, and the petitioner is directed to be released from custody forthwith – The petition is allowed [Read less]

Customs - Payment of Education Cess, Secondary & Higher Education Cess through MEIS scrips - whether payments of Education Cess and Secondary & Higher Education Cess made by importers through debit in Merchandise Exports from India Scheme (MEIS) duty credit scrips constituted valid discharge of duty liability – HELD - In light of CBIC Circular No. 02/2020-Customs dated 10.01.2020 and binding judicial precedents, payments made by importers through MEIS scrips towards EC and SHEC for past periods constitute valid discharge of duty liability. It is not in dispute that the imports in question pertain to a period prior to iss... [Read more]

Customs - Payment of Education Cess, Secondary & Higher Education Cess through MEIS scrips - whether payments of Education Cess and Secondary & Higher Education Cess made by importers through debit in Merchandise Exports from India Scheme (MEIS) duty credit scrips constituted valid discharge of duty liability – HELD - In light of CBIC Circular No. 02/2020-Customs dated 10.01.2020 and binding judicial precedents, payments made by importers through MEIS scrips towards EC and SHEC for past periods constitute valid discharge of duty liability. It is not in dispute that the imports in question pertain to a period prior to issuance of the Circular dated 10.01.2020 and the importers had actually discharged the duty liability, including Education Cess and Secondary & Higher Education Cess, albeit through MEIS scrips. There is no allegation of suppression, fraud, or mis-declaration on part of the importers - The Adjudicating Authority has correctly applied the CBIC Circular dated 10.01.2020 and the payments made by the importers through debit in MEIS duty credit scrips towards EC and SHEC, for the relevant past period, constitute valid discharge of duty liability. The attempt by Revenue to recover the same in cash would lead to double recovery, which is impermissible in law - The appeals filed by the Revenue are dismissed [Read less]

Customs - Mis-declaration resulting in suppression of value of goods at the time of import with a view to evade payment of customs duty - Penalty under Section 112(a) of Customs Act - Appellant implicated as co-noticee along with importer, allegations of under-valuation – HELD - The penalty imposed on the appellant is liable to be set aside as the Tribunal has already set aside the penalties imposed on the importer and another co-noticee on the same set of facts. Further, the appellant's role was limited to sale of goods after clearance for home consumption and there is no evidence to show his involvement in under-valuat... [Read more]

Customs - Mis-declaration resulting in suppression of value of goods at the time of import with a view to evade payment of customs duty - Penalty under Section 112(a) of Customs Act - Appellant implicated as co-noticee along with importer, allegations of under-valuation – HELD - The penalty imposed on the appellant is liable to be set aside as the Tribunal has already set aside the penalties imposed on the importer and another co-noticee on the same set of facts. Further, the appellant's role was limited to sale of goods after clearance for home consumption and there is no evidence to show his involvement in under-valuation of goods. The allegation of under-valuation was made on the basis of comparison with the price of goods imported by another entity which was not appropriate as the price was lower due to a SAARC agreement, and no other evidence was brought on record to show under-valuation by the importer. Therefore, the allegation of under-valuation against the appellant is not sustained, and consequently, the penalty imposed under Section 112(a) of the Customs Act is not sustainable and is set aside - The penalty imposed is set aside and the appeal is allowed [Read less]

Service Tax - Defective Show Cause Notice – Show Cause Notice for non-payment of service tax on "Data Processing Fees" without specify the particular sub-clause of Section 65(19) of the Finance Act, 1994 under which the appellant's activities were proposed to be classified - Whether the non-specification of the sub-clause in the Show Cause Notice renders it defective and violates the principles of natural justice - HELD - The Show Cause Notice is fundamentally defective as it failed to specify the particular sub-clause of Section 65(19) under which the appellant's activities were proposed to be classified. Where a statut... [Read more]

Service Tax - Defective Show Cause Notice – Show Cause Notice for non-payment of service tax on "Data Processing Fees" without specify the particular sub-clause of Section 65(19) of the Finance Act, 1994 under which the appellant's activities were proposed to be classified - Whether the non-specification of the sub-clause in the Show Cause Notice renders it defective and violates the principles of natural justice - HELD - The Show Cause Notice is fundamentally defective as it failed to specify the particular sub-clause of Section 65(19) under which the appellant's activities were proposed to be classified. Where a statutory provision contains several distinct sub-clauses, each describing a separate species of taxable activity, the Show Cause Notice must identify the specific sub-clause or sub-clauses alleged to be attracted. This requirement is not merely a matter of form, but of substance, as it enables the assessee to comprehend the exact allegation and formulate an effective reply - The deficiency or vagueness of a SCN cannot be cured by the adjudicating or appellate authority, as the Show Cause Notice is the source from which the adjudicating authority derives its jurisdiction. Allowing the adjudicating authority to specify the sub-clauses at the adjudication stage would be impermissible as it would improve the Revenue's case at the expense of the assessee's right of defence - The impugned order is set aside and the appeal is allowed on the ground that the Show Cause Notice was defective and violated the principles of natural justice [Read less]

GST – Anti-profiteering - Profiteering allegation against real estate developer - DGAP investigated a complaint against Respondent-real estate developer alleging profiteering by not passing on the benefit of Input Tax Credit to the home buyers – It is the complainant’s case that the Respondent retained his money for a longer period of more than 10 years. Therefore, entitled to Interest on his deposited money from the Respondent - HELD - The developer had voluntarily accepted the DGAP's report and its conclusions. The developer had contravened the provisions of Section 171 of the CGST Act, 2017 and had indulged in pro... [Read more]

GST – Anti-profiteering - Profiteering allegation against real estate developer - DGAP investigated a complaint against Respondent-real estate developer alleging profiteering by not passing on the benefit of Input Tax Credit to the home buyers – It is the complainant’s case that the Respondent retained his money for a longer period of more than 10 years. Therefore, entitled to Interest on his deposited money from the Respondent - HELD - The developer had voluntarily accepted the DGAP's report and its conclusions. The developer had contravened the provisions of Section 171 of the CGST Act, 2017 and had indulged in profiteering. The Tribunal accepted the DGAP's report and directed the developer to pay interest at the rate of 18% on the profiteered amount from the date of collection of the higher amount till the date of return of such amount, as provided under Rule 133(3)(b) of the CGST Rules, 2017 - The arguments raised by the home buyers regarding the retention of their money by the developer and the cancellation of their allotment did not fall within the purview of Section 171 of the CGST Act, 2017, and they could approach the appropriate forum to address their grievances – Ordered accordingly [Read less]

Customs - Rejection of transaction value - The Customs authorities sought to reject the declared transaction value and re-determine the value under Customs Valuation Rules based on statements recorded under Section 108 of the Customs Act and documents retrieved from the laptop of the importer – HELD - The statements recorded under section 108 of the Customs Act cannot be relied upon to reject the declared transaction value under rule 10 of the Customs Valuation Rules as the mandatory procedure under section 138B of the Customs Act was not followed. Section 138B requires that the person who made the statement must be exam... [Read more]

Customs - Rejection of transaction value - The Customs authorities sought to reject the declared transaction value and re-determine the value under Customs Valuation Rules based on statements recorded under Section 108 of the Customs Act and documents retrieved from the laptop of the importer – HELD - The statements recorded under section 108 of the Customs Act cannot be relied upon to reject the declared transaction value under rule 10 of the Customs Valuation Rules as the mandatory procedure under section 138B of the Customs Act was not followed. Section 138B requires that the person who made the statement must be examined as a witness before the adjudicating authority and the authority must form an opinion that the statement should be admitted in evidence. This procedure was not followed in the present case, hence the statements cannot be used as evidence to reject the transaction value. The Commissioner's reliance on the statements to support the plea of under-valuation is not justified - The print-outs retrieved from the laptop cannot be relied upon as the retrieval was not done in his presence. Further, the procedure under section 138C of the Customs Act, which requires a certificate, was also not followed. Hence, the documents retrieved from the laptop cannot be used as evidence against the appellants - The impugned order is set aside and the appeals are allowed - Rejection of transaction value and re-determination - No evidence of mis-declaration of thickness - Contemporaneous import data rejected incorrectly – HELD - The charge of mis-declaration of thickness of the goods is not established as there is no physical examination or laboratory report to support it. The Commissioner rejected the contemporaneous import data obtained by the appellants under RTI incorrectly, merely on the ground that the appellants may have selectively asked for information. This data should have been considered, especially when even one import of identical/similar goods with value similar to the declared value was available. In the absence of any evidence of over-invoicing or mis-declaration, the rejection of the transaction value under rule 10 and re-determination under rules 5/6 is not justified. [Read less]

Central Excise - Bail application in criminal case related to evasion of central excise duty and cess - The applicant was arrested in connection with a case registered under Sections 9(1)(B) of the Central Excise Act, 1944 and Rule 22 of the Chewing Tobacco Zarda, Sentenced Tobacco and Gutkha Packing Machines (Determination and Collection of Duty) Rules, 2006 - The applicant was alleged to have been engaged in illegal manufacture and packing of chewing tobacco, zarda and scented tobacco pouches through packing machines installed in his premises, without payment of the requisite central excise duty - Whether the applicant s... [Read more]

Central Excise - Bail application in criminal case related to evasion of central excise duty and cess - The applicant was arrested in connection with a case registered under Sections 9(1)(B) of the Central Excise Act, 1944 and Rule 22 of the Chewing Tobacco Zarda, Sentenced Tobacco and Gutkha Packing Machines (Determination and Collection of Duty) Rules, 2006 - The applicant was alleged to have been engaged in illegal manufacture and packing of chewing tobacco, zarda and scented tobacco pouches through packing machines installed in his premises, without payment of the requisite central excise duty - Whether the applicant should be granted bail in the present case – HELD - The offences alleged are economic offences involving substantial evasion of Government revenue, and such offences constitute a class apart and need to be visited with a different approach in the matter of bail. The prosecution has made out a prima facie case against the applicant, with material including statements, seizure of machines, raw materials and finished products, supporting the prosecution allegations. There is substance in the prosecution's argument that under the amended statutory regime and newly introduced Chewing Tobacco, Zarda, Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, the liability extends to notified stock and installed packing machinery, and the material collected during the investigation indicates deliberate non-disclosure of packing machines and evasion of statutory obligations – There is possibility of the applicant tampering with evidence and influencing witnesses, as the investigation is still in progress regarding procurement of machinery, supply chain, purchasers, suppliers and involvement of other persons. Given the gravity and nature of the allegations, the huge alleged tax evasion, the statutory scheme under the Rules of 2026 and Notification dated 31.12.2025, and the non-bailable nature of the offence under Section 9A(1A) of the Central Excise Act, the Court is not inclined to extend the benefit of bail to the applicant at this stage - The bail application filed by the applicant stands dismissed [Read less]

GST - Show Cause Notice - Omission of Proposed Interest and Penalty Amounts - Whether the show cause notice issued under the CGST Act, 2017 is valid and legally tenable despite the omission of the proposed amounts of interest and penalty – HELD - While the show cause notice must mention the proposed interest and penalty amounts as per the statutory mandate under Sections 75(6) and 75(7) of the CGST Act, 2017, the mere omission of these specific amounts does not render the show cause notice illegal - The remedy available to the petitioner is to prefer a statutory appeal, which cannot be dismissed on the ground of limitati... [Read more]

GST - Show Cause Notice - Omission of Proposed Interest and Penalty Amounts - Whether the show cause notice issued under the CGST Act, 2017 is valid and legally tenable despite the omission of the proposed amounts of interest and penalty – HELD - While the show cause notice must mention the proposed interest and penalty amounts as per the statutory mandate under Sections 75(6) and 75(7) of the CGST Act, 2017, the mere omission of these specific amounts does not render the show cause notice illegal - The remedy available to the petitioner is to prefer a statutory appeal, which cannot be dismissed on the ground of limitation, provided the petitioner deposits 10% of the liability. The respondent is directed to ensure that the show cause notice clearly proposes the interest amount to be recovered, the rate at which such interest shall be levied, and the proposed penalty, in compliance with the statutory requirements – The writ petition is disposed of [Read less]

GST – Gujarat AAR - Eligibility of Input Tax Credit on inputs and input services used for construction of concrete tower to support and erect the Vertical Continuous Vulcanization (VCV) lines for manufacture of Extra High Voltage (EHV) cables - The applicant is setting up a new manufacturing plant for making EHV cables using the Vertical Continuous Vulcanization (VCV) process. The VCV manufacturing line is required to be supported by a concrete structure in the form of a multi-storied VCV tower. The applicant has procured inputs and input services for the construction of this concrete tower and is seeking eligibility of ... [Read more]

GST – Gujarat AAR - Eligibility of Input Tax Credit on inputs and input services used for construction of concrete tower to support and erect the Vertical Continuous Vulcanization (VCV) lines for manufacture of Extra High Voltage (EHV) cables - The applicant is setting up a new manufacturing plant for making EHV cables using the Vertical Continuous Vulcanization (VCV) process. The VCV manufacturing line is required to be supported by a concrete structure in the form of a multi-storied VCV tower. The applicant has procured inputs and input services for the construction of this concrete tower and is seeking eligibility of input tax credit on the same - Whether the applicant is eligible to avail ITC on inputs and input services used for construction of concrete tower to support and erect the VCV lines at the factory of the applicant, for manufacture of EHV cables, in terms of Section 17(5)(c) and (d) of the CGST Act, 2017 – HELD - The concrete structure in the form of VCV tower serves as a critical and essential structural support system to the entire VCV machine line for manufacture of EHV cables while maintaining the structural integrity, stability, precision and overall efficiency. The plant and machinery in terms of the explanation to Section 17 specifically includes foundation and structural support, and the exclusions from plant and machinery are land, building or any other civil structures, telecommunication towers, and pipelines laid outside the factory premises - The CBIC Circular No. 219/13/2024-GST clarified that input tax credit is not restricted in respect of ducts and manholes used in network of optical fiber cables as they are considered as plant and machinery. Similarly, the ITC on inputs and input services used for construction of concrete VCV tower to support and erect the VCV lines cannot be restricted - The applicant is eligible to avail ITC on inputs and input services used for construction of concrete tower to support and erect the VCV lines at the factory of the applicant, for manufacture of EHV cables, in terms of Section 17(5)(c) and (d) of the CGST Act, 2017 – Ordered accordingly [Read less]

Customs - Imposition of penalty on partner and firm – Appellant-partner of the firm was imposed penalties under Sections 112(a) and 114AA of the Customs Act, 1962 in relation to the import of goods containing concealed SD memory cards - Whether the imposition of penalties on both the firm and the partner is legally valid – HELD - Once a penalty is levied on the firm, no separate penalty can be imposed on the partners, as the firm and the partners are not separate legal entities. The firm had already been penalized, and hence, imposing a separate penalty on the Appellant, as a partner, was not permissible in law - Howev... [Read more]

Customs - Imposition of penalty on partner and firm – Appellant-partner of the firm was imposed penalties under Sections 112(a) and 114AA of the Customs Act, 1962 in relation to the import of goods containing concealed SD memory cards - Whether the imposition of penalties on both the firm and the partner is legally valid – HELD - Once a penalty is levied on the firm, no separate penalty can be imposed on the partners, as the firm and the partners are not separate legal entities. The firm had already been penalized, and hence, imposing a separate penalty on the Appellant, as a partner, was not permissible in law - However, with respect to the penalty imposed under Section 114AA of the Customs Act, 1962, the same is upheld - The appellant had admitted to his involvement in the concealment of the SD memory cards and his role in the transaction, and therefore, the imposition of penalty under Section 114AA was justified. However, the penalty is reduced from Rs. 25 Lakhs to Rs. 2 Lakhs, as the appellant's admitted benefit from the transaction was only Rs. 1 Lakh, and the higher penalty is disproportionate - The appeal is partly allowed, with the penalty under Section 112(a) being set aside and the penalty under Section 114AA being reduced to Rs. 2 Lakhs - The appeal is partly allowed [Read less]

GST - Ex-parte assessment proceedings – Petitioner contended that it could not participate in the proceedings due to reasons beyond its control and that it received only one Show Cause Notice with merely time of one day to submit its reply - Whether an ex-parte assessment order passed without affording adequate opportunity and reasonable time to the assessee to submit its reply to the SCN can be sustained – HELD – The procedural fairness and natural justice require that sufficient time must be granted to the assessee to respond to show cause notices. Where the material on record demonstrates that inadequate time was ... [Read more]

GST - Ex-parte assessment proceedings – Petitioner contended that it could not participate in the proceedings due to reasons beyond its control and that it received only one Show Cause Notice with merely time of one day to submit its reply - Whether an ex-parte assessment order passed without affording adequate opportunity and reasonable time to the assessee to submit its reply to the SCN can be sustained – HELD – The procedural fairness and natural justice require that sufficient time must be granted to the assessee to respond to show cause notices. Where the material on record demonstrates that inadequate time was provided to the assessee to file its reply, the assessment order becomes vitiated. The matter is remitted to the competent authority to reconsider the case afresh from the stage of issuing a show cause notice with a proper opportunity for the assessee to file its reply - The ex-parte assessment order is quashed and the petition is allowed by remand [Read less]

GST - Anti-Profiteering, Real Estate – Methodology for Calculating Profiteering Amount – Respondent-builder claimed that full and commensurate input tax credit benefit had been passed on to all eligible homebuyers and that the DGAP methodology for calculating profiteering was fundamentally flawed - DGAP had computed profiteering amount by adopting a methodology based on the difference between the ratio of input tax credit to turnover under the pre-goods and services tax and post-goods and services tax periods – HELD - The principles laid down by the Delhi High Court in a similar matter, is that in the real estate sec... [Read more]

GST - Anti-Profiteering, Real Estate – Methodology for Calculating Profiteering Amount – Respondent-builder claimed that full and commensurate input tax credit benefit had been passed on to all eligible homebuyers and that the DGAP methodology for calculating profiteering was fundamentally flawed - DGAP had computed profiteering amount by adopting a methodology based on the difference between the ratio of input tax credit to turnover under the pre-goods and services tax and post-goods and services tax periods – HELD - The principles laid down by the Delhi High Court in a similar matter, is that in the real estate sector there is no direct correlation between turnover and ITC availed for a particular period, as expenses in real estate projects are not uniform throughout the life cycle of the project and the accrual of input tax credit is not related to the amount collected from buyers. The proper methodology requires calculating the total savings on account of introduction of goods and services tax for each project and then dividing the same by total area to arrive at the per square feet benefit to be passed on to each flat buyer - The respondent's submissions regarding comparison of goods and services tax availed on actual goods and services purchased in the post-GST period with the input tax credit available on such goods and services by applying applicable rates in the pre-GST period carry weight. The DGAP report is set aside and the matter is remanded for re-investigation. The DGAP shall grant proper and adequate opportunity to the Respondent regarding production of documents for a comparison and such comparison shall be given adequate consideration while re-calculating the amount of profiteering – Ordered accordingly [Read less]

Service Tax - Demand based on the figures in Form 26AS – Dept considered entire turnover received by the appellant, as per the Form 26AS, chargeable to Service Tax - Whether the Department was correct in treating the entire amount reflected in the ITR/Form 26AS as being chargeable to Service Tax – HELD - The entire case of demand was built solely on the basis of the figures shown in the ITR and Form 26AS statement, which may not be accurate and conclusive evidence to levy Service Tax. It is further seen that the figures shown in Form-26AS statement differs with turnover declared in the Profit & Loss Account. The Depart... [Read more]

Service Tax - Demand based on the figures in Form 26AS – Dept considered entire turnover received by the appellant, as per the Form 26AS, chargeable to Service Tax - Whether the Department was correct in treating the entire amount reflected in the ITR/Form 26AS as being chargeable to Service Tax – HELD - The entire case of demand was built solely on the basis of the figures shown in the ITR and Form 26AS statement, which may not be accurate and conclusive evidence to levy Service Tax. It is further seen that the figures shown in Form-26AS statement differs with turnover declared in the Profit & Loss Account. The Department did not make any inquiry to ascertain the reason for the difference between the figures shown in the P&L Account and the Form 26AS statement - The demand raised by invoking the longer period of limitation is solely based upon the Profit & Loss Account and Form-26AS statement submitted with the Income Tax Authorities is not sustainable - The demand of Service Tax based on the figures in Form 26AS is set aside as the Department failed to judiciously ascertain whether the amounts were actually received for provision of service or for any other purpose – The appeal is allowed [Read less]

Central Excise - Duty liability on manufacture of mineral concentrates through physical and mechanical processes – Whether process of converting ores into concentrates amounts to manufacture - HELD - When imported or indigenously sourced titanium ores are subjected to physical and mechanical processes of mineral separation, without any chemical treatment or roasting, resulting in the removal of foreign matter and emergence of concentrated mineral sands, the process amounts to manufacture of concentrates liable to excise duty under the Chapter Note inserted in the tariff with effect from 01.03.2011 - The HSN Explanatory N... [Read more]

Central Excise - Duty liability on manufacture of mineral concentrates through physical and mechanical processes – Whether process of converting ores into concentrates amounts to manufacture - HELD - When imported or indigenously sourced titanium ores are subjected to physical and mechanical processes of mineral separation, without any chemical treatment or roasting, resulting in the removal of foreign matter and emergence of concentrated mineral sands, the process amounts to manufacture of concentrates liable to excise duty under the Chapter Note inserted in the tariff with effect from 01.03.2011 - The HSN Explanatory Notes define concentrates as ores which have had part or all of the foreign matter removed by special treatments, either because such foreign matter might hamper subsequent metallurgical operations or with a view to economical transport. The processes undertaken result in separation of valuable rare mineral sands from ordinary sand and facilitate further metallurgical operations and economical transport, thereby meeting the definition of concentrates and attracting duty liability, notwithstanding the absence of any chemical treatment or upgradation of the purity of mineral content – The statutory fiction created by Chapter note 4 inserted with effect from 01.03.2011 in the Customs and Excise Tariff, declaring that the process of converting ores into concentrates amounts to manufacture renders the absence of chemical treatment or roasting irrelevant to the question of manufacture. The appeal challenging the confirmation of demand for Central excise duty on concentrated ores manufactured and cleared during the relevant period is partly allowed by setting aside the demand as barred by limitation of time - Non-compliance with procedural requirements for duty-free clearances to EoUs – Whether non-compliance with prescribed procedures results in denial of substantive exemption benefit – HELD - When goods are cleared to 100% Export Oriented Units without following the prescribed procedural requirements like furnishing Form CT-3, such procedural non-compliance does not deprive the assessee of duty-free benefits if the goods were genuinely received and utilized by the Export Oriented Units for the intended purpose. Where the assessee entertains a bona fide belief that the goods are non-dutiable due to unawareness of statutory amendments in the tariff and consequently fails to follow the procedural formalities applicable to dutiable goods, the assessee cannot be compelled to comply with procedures which are impossible to comply with given the belief that no duty liability exists. The maxim Lex non cogit ad impossibilia applies, and procedural lapses cannot override substantive exemptions available to Export Oriented Unit clearances - The assessee is entitled to duty-free benefit for clearances to EOUs despite procedural non-compliance - As-such clearances of unprocessed mineral sands - Whether clearances claimed as traded goods without processing should be excluded from dutiable turnover – HELD - When goods are cleared in their natural or unprocessed form as raw materials without subjecting them to any manufacturing process, such clearances merit exclusion from the turnover for quantification of excise duty demand. The onus lies on the Revenue to discharge by adducing proof that the goods cleared were processed or concentrated products rather than unprocessed or as-such removals, and mere allegations without evidence cannot substitute for proof. Where the Revenue makes assumptions and presumptions regarding the nature of goods cleared and the use for which they were intended, such assumptions cannot form the basis for denying the assessee's claim for exclusion of as-such sales - The assessee's plea to exclude as-such clearances from the turnover is accepted - Applicability of extended period of limitation – HELD - An extended period of limitation under Section 11A(4) of the Central Excise Act cannot be invoked for demanding duty when the issue involved is interpretational in nature and the assessee entertains a bona fide belief that no duty liability arises. Where prior to the statutory amendment defining a particular process as manufacture, coordinate benches of the Tribunal had held that similar processes do not amount to manufacture, and Government undertakings engaged in identical activities do not charge duty until the amendment takes effect, the assessee's non-payment of duty reflects genuine uncertainty regarding liability rather than suppression or evasion. The fact that audit discovers the non-payment of duty does not by itself justify invocation of the extended period, particularly when the assessee had amended its registration to declare the manufacturing activity and commenced payment of duty upon becoming aware of the liability. The charge of clandestine removal is unsustainable where goods are fully recorded in books of accounts and removal documents exist. The demand confirmed under the extended period of limitation is unsustainable and the entire demand is barred by limitation of time. [Read less]

Central Sales Tax Act, 1956 – Branch Transfer – Mandatory Production of Form F Declaration – Petitioner claimed inter-State transfer of goods to its branch located and produced consignment challans duly stamped at border checkgates, transfer invoices, transport receipts, way bills etc but failed to furnish the statutory declaration in Form F - Assessing authority levied tax treating the transaction as an inter-State sale due to non-production of Form F. The first appellate authority allows the claim for branch transfer relying on other documentary evidence. The Tribunal reversed the order, holding that production of ... [Read more]

Central Sales Tax Act, 1956 – Branch Transfer – Mandatory Production of Form F Declaration – Petitioner claimed inter-State transfer of goods to its branch located and produced consignment challans duly stamped at border checkgates, transfer invoices, transport receipts, way bills etc but failed to furnish the statutory declaration in Form F - Assessing authority levied tax treating the transaction as an inter-State sale due to non-production of Form F. The first appellate authority allows the claim for branch transfer relying on other documentary evidence. The Tribunal reversed the order, holding that production of Form F is mandatory to claim exemption under Section 6A of the Central Sales Tax Act - Whether the production of declaration in Form F as proof of inter-branch transfer is mandatory notwithstanding the precedent holding that branch transfer can be proved by alternative evidence – HELD - During the assessment year 1999-2000, the production of Form F declaration was not mandatory to claim exemption from payment of Central Sales Tax under Section 6A. The Section 6A provides an enabling provision offering one mode of discharge of the burden to prove that movement of goods was occasioned otherwise than by way of sale, but it does not estop the dealer from proving such claim through other relevant evidence including books of accounts, invoices, transport receipts, and border checkgate stamps. The deeming fiction introduced by the Finance Act, 2002 amending Section 6A applies prospectively and cannot be applied retrospectively to assessment year 1999-2000 - When the Appellate authority has meticulously examined documentary evidence and recorded findings that goods moved to the branch across State borders with taxes paid thereat, the Tribunal cannot reverse such findings without reference to the assessment records. The principle established in prior decisions clearly indicates that filing of Form F is an easier mode but not the only mode to discharge the burden of proving branch transfer. The Tribunal erred by placing the burden on the dealer to prove inter-State sale rather than examining whether the dealer had discharged the burden through alternative evidence - The order passed by the Tax Tribunal is set aside and the order passed by the first appellate authority is restored - The question of law is answered in favour of the dealer and against the Revenue [Read less]

GST - Demand Order and Recovery - Petitioner challenge the demand order raised under Section 74-A(1) read with Section 74-A(5)(ii) of the CGST Act, 2017 and the recovery proceedings initiated pursuant to the said demand order – HELD - The demand order is found to be illegal as no valid show cause notice was issued to the petitioner prior to raising the demand, as required under Section 74A of the GST Act. Additionally, the recovery made by debiting the input tax credit lying in the petitioner's Electronic Cash Ledger, is illegal as it was made on the same day as the passing of the demand order, in violation of Section 78... [Read more]

GST - Demand Order and Recovery - Petitioner challenge the demand order raised under Section 74-A(1) read with Section 74-A(5)(ii) of the CGST Act, 2017 and the recovery proceedings initiated pursuant to the said demand order – HELD - The demand order is found to be illegal as no valid show cause notice was issued to the petitioner prior to raising the demand, as required under Section 74A of the GST Act. Additionally, the recovery made by debiting the input tax credit lying in the petitioner's Electronic Cash Ledger, is illegal as it was made on the same day as the passing of the demand order, in violation of Section 78 of the Act, which grants the assessee a period of three months to deposit the demanded tax. The proviso to Section 78 allows the proper officer to require the assessee to make the payment within a period less than three months, but only after recording reasons in writing, which was not done in the present case. Accordingly, the recovery made was also held to be illegal - The impugned demand order and the recovery made from the petitioner are set aside – The petition is disposed of - Show Cause Notice - Proper Service - The High Court held that the show cause notice was not validly served upon the petitioner as the mode of service through affixation was resorted to without first exhausting the other valid modes of service under Section 169 of the CGST Act, 2017. As per Section 74A of the Act, before any demand can be raised against an assessee, he is required to be served with a valid show cause notice, which is in line with the principles of natural justice. Since the notice was not validly served, the impugned demand order is declared to be illegal. [Read less]

GST – Kerala AAR - Exemption on Healthcare Services - Composite Supply by Ayurvedic Clinical Establishment – Applicant is Ayurvedic hospital providing both inpatient and outpatient healthcare services - Whether the services provided by the applicant to inpatients, comprising medicines, consumables, room accommodation, and other ancillary supplies, constitute a composite supply of healthcare services eligible for exemption under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate) – HELD - The applicant, being an Ayurvedic clinical establishment providing diagnosis, treatment, and care under qualified medical p... [Read more]

GST – Kerala AAR - Exemption on Healthcare Services - Composite Supply by Ayurvedic Clinical Establishment – Applicant is Ayurvedic hospital providing both inpatient and outpatient healthcare services - Whether the services provided by the applicant to inpatients, comprising medicines, consumables, room accommodation, and other ancillary supplies, constitute a composite supply of healthcare services eligible for exemption under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate) – HELD - The applicant, being an Ayurvedic clinical establishment providing diagnosis, treatment, and care under qualified medical practitioners, falls within the definition of "health care services" as defined under clause 2(zg) of the Notification - In the case of inpatients, medicines, consumables, dietary food, room accommodation, and other ancillary services are intrinsically and naturally bundled with the provision of medical treatment under continuous supervision of the clinical establishment, thereby constituting a composite supply as defined under Section 2(30) of the CGST Act, 2017 wherein the principal supply is healthcare service, and consequently the entire bundle qualifies for exemption under Entry No. 74 of the Notification No. 12/2017-Central Tax (Rate). However, notwithstanding the composite and exempt nature of inpatient healthcare services, the exemption does not extend to room rent exceeding Rs. 5,000 per day as amended by notification no. 04/2022-Central Tax (Rate) dated 13.07.2022 – Ordered accordingly - Whether the services provided by the applicant to outpatients, comprising medicines, consumables etc. constitute a Composite Supply of healthcare services eligible for exemption – HELD - In the case of outpatients, since the hospital primarily provides consultation and the patient is not admitted, there is no continuous or naturally bundled course of treatment under the supervision or control of the hospital, the patient remains at liberty to procure prescribed medicines from any source, and accordingly, the supply of medicines to outpatients cannot be regarded as naturally bundled with healthcare services, making such supplies independent taxable supplies liable to GST at applicable rates. [Read less]

GST – Kerala AAR - Classification od used Gunny Bags - Whether used gunny bags without plastic coating, arising after use in packing of raw materials are classifiable as reusable packing bags under Heading 6305 of the Customs Tariff Act, 1975 attracting GST at 5%, or as waste or scrap under other headings attracting GST at 18% - HELD – The classification must be determined based on the common parlance, commercial identity, essential character, condition at the time of supply, and intended use of the goods. The goods do not become waste or scrap merely on account of prior use so long as they retain their identity and fu... [Read more]

GST – Kerala AAR - Classification od used Gunny Bags - Whether used gunny bags without plastic coating, arising after use in packing of raw materials are classifiable as reusable packing bags under Heading 6305 of the Customs Tariff Act, 1975 attracting GST at 5%, or as waste or scrap under other headings attracting GST at 18% - HELD – The classification must be determined based on the common parlance, commercial identity, essential character, condition at the time of supply, and intended use of the goods. The goods do not become waste or scrap merely on account of prior use so long as they retain their identity and functional utility, since waste and scrap arise only when goods lose their original utility and are fit solely for recovery of constituent material - The impugned goods were intact, bundled and capable of reuse without further processing as evidenced by photographic material and sale invoices describing them as old gunny bags supplied as identifiable packing material, such goods clearly retained their form, structure and commercial identity as packing sacks - The Heading 6309 expressly excludes sacks and bags showing signs of wear from its ambit and directs their classification under their respective headings, while Heading 6310 applies only to worn-out textile materials reduced to cuttings or fragments fit solely for recovery, conditions which the impugned goods did not satisfy - Applying the GST rate notification, it is held that goods falling under Heading 6305 attract GST at 5% where the sale value does not exceed rupees two thousand five hundred per piece, and 18% where the sale value exceeds rupees two thousand five hundred per piece, with the clarification that where such bags are worn out, torn or reduced to waste rendering them unfit for reuse, the classification may differ and would require independent examination - The used gunny bags without plastic coating are classifiable under Heading 6305 as reusable packing bags and attract GST at 5% where sale value does not exceed rupees two thousand five hundred per piece and 18% where it exceeds that threshold – Ordered accordingly [Read less]

Karnataka Sales Tax Act, 1957 - Rectification of assessment order and entitlement to interest on delayed refund in view of deemed rectification – Levy of tax at the rate of 20% on the sale of coconut oil under a brand name. The petitioner had challenged the amendment imposing the higher tax rate, which was initially struck down by the High Court but later upheld by the Division Bench - The petitioner filed a rectification application seeking modification of the assessment orders, which was not rejected within 60 days and hence deemed to have been allowed - Whether the petitioner is entitled to interest on the delayed ref... [Read more]

Karnataka Sales Tax Act, 1957 - Rectification of assessment order and entitlement to interest on delayed refund in view of deemed rectification – Levy of tax at the rate of 20% on the sale of coconut oil under a brand name. The petitioner had challenged the amendment imposing the higher tax rate, which was initially struck down by the High Court but later upheld by the Division Bench - The petitioner filed a rectification application seeking modification of the assessment orders, which was not rejected within 60 days and hence deemed to have been allowed - Whether the petitioner is entitled to interest on the delayed refund and whether the subsequent proceedings are valid in light of the deemed rectification – HELD – The rectification application stood deemed to have been allowed upon expiry of 60 days as per the second proviso to Section 25-A(1) of the KST Act - Though it may be open to the Assessing Authority to pass more than one rectification order, the same must be in conformity with the statutory provisions. Once the rectification application stood allowed by virtue of the legal fiction, and the deemed rectification had come into force, the Assessing Authority could not have passed another rectification order. Consequently, the rectification order and all subsequent proceedings, including the revisional order, fresh assessment order, refund notice and appellate order, are without jurisdiction and non-est in the eye of law. The petitioner's right to interest under Section 13-A of the KST Act for the delay in granting the refund, i.e., from 22.06.2010 to 09.01.2012, could not be defeated by the subsequent invalid proceedings - The respondents are directed to pay interest at the rate of 6% per annum for the period of delay - The order of the Tribunal is set aside and the Sales Tax Revision Petition is allowed [Read less]

GST – Expiry of E-way Bill, Imposition of Penalty - During transportation the vehicle was intercepted at the location approximately ten kilometres away from the destination, at which point the e-way bill had expired – Levy of penalty equivalent to two hundred percent of the tax payable on the goods - Whether imposition of a penalty at the rate of two hundred percent of the tax payable was justified in the absence of any intention to evade payment of tax, where the only irregularity was the expiry of the e-way bill and the delay in seeking extension was approximately fifty minutes beyond the eight-hour grace period perm... [Read more]

GST – Expiry of E-way Bill, Imposition of Penalty - During transportation the vehicle was intercepted at the location approximately ten kilometres away from the destination, at which point the e-way bill had expired – Levy of penalty equivalent to two hundred percent of the tax payable on the goods - Whether imposition of a penalty at the rate of two hundred percent of the tax payable was justified in the absence of any intention to evade payment of tax, where the only irregularity was the expiry of the e-way bill and the delay in seeking extension was approximately fifty minutes beyond the eight-hour grace period permitted under the rules – HELD – The sub-rule 10 of Rule 138 of the CGST Rules, 2017 provides a validity period for e-way bills and its proviso permits extension of the validity period within eight hours from the time of its expiry in circumstances of exceptional nature, thereby granting latitude to the transporter - The vehicle was intercepted approximately fifty minutes after the expiry of the permissible eight-hour window for seeking extension and no allegation of an intention to evade payment of tax was made by the department - The imposition of two hundred percent penalty is not warranted in cases involving failure to renew the e-way bill within the stipulated time. Though the statute empowers imposition of a rigid and high penalty of two hundred percent, whether or not such penalty is justified depends upon whether there existed any intention to evade payment of tax. Finding no such allegation in the present case and considering that the delay was merely fifty minutes beyond the permissible extension window, the imposition of the maximum penalty is harsh and would cause grave prejudice to the petitioners - The impugned order is set aside and the petitioner is directed to pay a nominal token fine of Rs. 10,000/-, the respondents are directed to refund the balance amount after adjusting the token fine from the amount already deposited – The petition stands disposed of [Read less]

GST – Kerala AAR - Grant of Rights through Auction - Taxability of consideration received by a statutory religious board for auctioning the right to collect remnant rice offerings at a temple – HELD - The transaction does not involve the supply of pre-ascertained or identified quantities of rice as goods at the time of contract, but rather the conferment of an exclusive commercial licence or right upon the successful bidder to collect and appropriate offering remnants arising during temple operations for a specified period, the quantity and nature of which are uncertain at the time of contracting. The use of a competit... [Read more]

GST – Kerala AAR - Grant of Rights through Auction - Taxability of consideration received by a statutory religious board for auctioning the right to collect remnant rice offerings at a temple – HELD - The transaction does not involve the supply of pre-ascertained or identified quantities of rice as goods at the time of contract, but rather the conferment of an exclusive commercial licence or right upon the successful bidder to collect and appropriate offering remnants arising during temple operations for a specified period, the quantity and nature of which are uncertain at the time of contracting. The use of a competitive auction mechanism evidences that the activity is undertaken in the course or furtherance of business with the objective of maximising consideration. The religious origin of the offerings does not alter the essential legal character of the contractual arrangement, which is the grant of a right for consideration. Once an article is offered by a devotee, it ceases to retain the character of agricultural produce and becomes an asset of the temple - Although the Applicant is a statutory religious board, it is a body corporate engaged in “business” within the meaning of Section 2(17) of the CGST Act, 2017. Accordingly, the assignment of rights and licences for consideration constitutes “supply” under Section 7(1) of the CGST Act, 2017. The transaction therefore falls squarely within the ambit of a licence or grant of rights constituting a supply of services, and is accordingly taxable under the relevant provision of the Act – Ordered accordingly - Taxability of consideration received by a statutory religious board for auctioning the right to collect coconuts and broken coconuts offered by devotees at temples under its administration - Whether the assignment of collection rights for coconuts constitutes a sale of nil-rated goods or a taxable supply of services – HELD - The subject matter of the auction is not the coconuts as goods but the exclusive commercial right or licence granted to the successful bidder to collect and appropriate such offerings during a specified period. The adoption of a competitive tendering mechanism indicates that the activity is undertaken in the course or furtherance of business. The exemption or nil-rating applicable to coconuts as goods is not attracted since the applicant does not supply the coconuts as commodities but confers a right to collect them. The consideration flows from the contractor to the applicant in exchange for the conferment of this exclusive right, and the underlying nature of the transaction is therefore a supply of services and not a sale of goods - Taxability of consideration received for auctioning the right to collect clothing abandoned by pilgrims in a river - Whether such transaction constitutes a supply of goods or a taxable supply of services – HELD - There is no transfer of identified or ascertained goods at the time of the contract, and the quantity and nature of the clothing to be collected remains uncertain and dependent on future events, with the successful bidder bearing the associated commercial risk. The grant of an exclusive commercial privilege to collect and deal with such materials for a lump-sum auction amount constitutes the conferment of a right or licence, which is a supply of services. The hygienic and religious objective underlying the arrangement does not alter the contractual and commercial character of the transaction. The exemption applicable to sanitation services supplied to Governmental authorities is not attracted since the supply made by the applicant is not the sanitation activity itself but the grant of a right to the contractor to carry out such activity. The activity falls within the scope of business and constitutes a taxable supply of services - Taxability of consideration received for auctioning the right to harvest coconuts from coconut palms situated on temple lands - Whether the assignment of such agricultural rights constitutes a taxable supply or is exempt under the relevant notification – HELD – Coconuts on the tree constitute agricultural produce in their primary form. The assignment of the right to collect and manage such standing crops through auction is intrinsically linked to the activity of harvesting and cannot be viewed in isolation from agricultural operations. The relevant exemption notification exempts services relating to agricultural operations directly related to production of agricultural produce, including harvesting. The grant of the right to collect and manage such produce falls squarely within the scope of this exemption as it is directly related to harvesting operations. The applicant does not derive revenue from a commercial licence unconnected to agricultural activity but assigns the right to carry out harvesting of crops attached to temple lands, which is a service directly related to agricultural operations - Taxability of honorarium and sitting fees paid by a statutory religious board to its president and members - Whether such payments attract reverse charge liability as services supplied by a director to a body corporate – HELD - The Notification No. 13/2017-Central Tax (Rate) prescribing reverse charge liability is restricted to services supplied by a director of a company or a body corporate, and does not extend to services rendered by members of a statutory board or governing body, unless such persons hold the legal status of directors in law. The president and members of the board are statutory functionaries appointed under the governing legislation and do not constitute a board of directors, nor are they appointed as directors under any corporate law. Merely being members of the board of a body corporate does not render them directors for the purposes of the said notification. The services rendered by such persons therefore do not fall within the prescribed category, and the reverse charge provisions are accordingly not attracted - Tax is not payable under reverse charge - Taxability of advocate fees and legal expenses paid by a statutory religious board to unregistered advocates - Whether reverse charge is attracted on legal services received by the applicant – HELD - The Notification No. 13/2017-Central Tax (Rate) mandates reverse charge on legal services provided by an individual advocate or firm of advocates to a business entity located in the taxable territory. The definition of business under the relevant provision is wide and inclusive, covering all activities undertaken for consideration, including activities incidental or ancillary thereto, irrespective of profit motive. The applicant, being engaged in revenue-generating activities such as auctioning of rights and generating consideration from temple assets, qualifies as a business entity. Legal services provided by advocates to the applicant therefore attract reverse charge, and the applicant, as recipient of such services, is liable to discharge the tax - Tax is payable under reverse charge - Taxability of consideration received for auctioning the right to perform religious rituals such as specific ceremonies within temple premises - Whether such transaction is exempt as the conduct of a religious ceremony or constitutes a taxable supply of services – HELD - The exemption for conduct of religious ceremonies is applicable to the person who actually performs the ceremony and not to a transaction by which the right to perform such ceremonies is granted to a third party for consideration. The applicant does not itself conduct the religious ceremony but grants an exclusive licence or right to a qualified priest or acharyan through a competitive auction process. Such a transaction is a commercial supply undertaken in the course or furtherance of business and is distinct from the actual conduct of a religious ceremony. The religious nature of the underlying ritual does not alter the contractual character of the arrangement between the applicant and the suc [Read less]

GST - Classification of Solar Inverters as parts of Solar Power Generating System or as general Electrical Devices – Petitioner supplies solar inverters to various customers engaged in solar power projects. Authorities classified solar inverters as general electrical devices under Chapter Heading 8504 and raised demand GST at the rate of 18% - Petitioner contends that the solar inverters are parts of solar power generating systems covered under Entry 234 of Notification No. 1/2017-CT(R) dated 28.06.2017, which prescribe a concessional GST rate of 5% - Whether solar inverters supplied for use as integral components of sol... [Read more]

GST - Classification of Solar Inverters as parts of Solar Power Generating System or as general Electrical Devices – Petitioner supplies solar inverters to various customers engaged in solar power projects. Authorities classified solar inverters as general electrical devices under Chapter Heading 8504 and raised demand GST at the rate of 18% - Petitioner contends that the solar inverters are parts of solar power generating systems covered under Entry 234 of Notification No. 1/2017-CT(R) dated 28.06.2017, which prescribe a concessional GST rate of 5% - Whether solar inverters supplied for use as integral components of solar power generating systems are eligible for the concessional GST rate of 5% or whether they attract GST at the standard rate of 18% as general electrical devices – HELD - The solar inverters are integral parts of solar power generating systems and therefore eligible for the concessional GST rate of 5%. The solar power generating system comprises four essential components: solar panels, inverters, controllers, and batteries, which function together to produce the desired output. Following the principle established in CCE vs. Hewlett Packard India Sales Pvt. Ltd., a combination of elements or parts which function together to render a desired output constitutes a system. The solar inverter, by converting direct current produced by solar panels into alternating current, is indispensable to the functioning of the entire solar power generating system – Further, the Notification extends benefits to parts used in the manufacture of renewable energy devices and is not restricted only to suppliers of entire systems. The expression "for use" in the notifications means "intended for use" and not actual use. The documentary evidence, including purchase orders and invoices, clearly establishes the intention that the solar inverters are meant to be used as parts of solar power generating systems. Therefore, the petitioner satisfies the conditions of the exemption notification without requiring further proof of actual usage – The subject solar inverters supplied by the petitioner are intended to be parts of the solar power generating system and therefore, eligible for exemption - The impugned orders-in-appeal and orders-in-original are quashed – The writ petition is allowed [Read less]