srd legal - tax update issue 4 - 20151016

A

TAX Update Newsletter on Indirect Taxes

GST Central Excise

Service Tax Customs

Foreign Trade

16th October, 2015

Issue 4

TAX Update – Issue 4, Oct 2015

2 SRD Legal, Advocates & Consultants

Dear Readers,

Greetings from Team SRD Legal.

The decision in Radhe Renewable Energy

Development Pvt. Ltd. directly affects some of

our clients. In spite of this, we should

carefully structure our transactions so that the

dispute does not arise. The best course is to

seggregate the contracts for service and supply

of goods.

Some clients have complained that TAX

Update is too lengthy. We assure you that we

are presenting only the distilled information

which we believe, is of use to most of our

clients. At the same time, we are concious that

the information is mainly addressed to our

clients and not to advocates or other

professionals. Therefore we are obliged to

loosen the language and also to add a little

explanation.

Just to remind, Service Tax Return for Apr to

Sept 2015 is due by 25th October, 2015.

We await for your suggestions at

[email protected].

Manoj Kasale

Advocate

16th October, 2015

In this issueIn this issueIn this issueIn this issue

• Show Cause Notice cannot be issued after

five years, even if no limitation is

prescribed in law

• Credit available on Welding Electrodes

used for repair and maintenance of

machinery

• Buyer of capital goods cannot be called

upon to pay an amount equal to credit on

its removal from factory

• Refund cannot be denied on the ground

that the amount was not debited on the

date of filing the claim

• Cenvat Credit can be availed by

manufacturer of machinery, of the tax

paid for erection commissioning at

customer’s site

• GTA - 70% abatement is available to

various ancillary services as well

• Commissioner (Appeal) has no power to

condone delay beyond thirty days

• Service Tax was not payable on quarters

constructed for employees of ‘New Parli

Thermal Power Station’

• Ore Concentrate is different from Ore

• Department must pay interest on

delayed refund of SAD.

• Customs – Penalty under Section 112 (a)

(ii) leviable only if the goods are dutiable

or prohibited



Central Excise

TAX Update 16/10/2015

C. Excise - Penalty – Show Cause

Notice cannot be issued after five

years, even if no limitation is

prescribed in law

There was a short payment of duty

during April 1998 to September 1999.

The department issued notice for

imposition of penalty after much beyond

five years period. The duty was payable

under compounded levy scheme and the

department contended that the

limitation prescribed under Section 11A

would not apply.

Hon'ble High Court, relying upon

previous decisions held that even where

the law did not prescribe any time limit,

the notice must be issued within a

reasonable period.

CCE, Chandigarh-I vs. Malwa Iron &

Steel Co. [2015 (320) ELT 0533 (P & H)]

Cenvat Credit – Welding Electrodes

used for repair and maintenance of

machinery – Credit available



The adjudicating authority as well as the

Commissioner (Appeals) both denied

Cenvat Credit to the appellant on

welding electrodes used for repair and

maintenance of machinery.

Before CESTAT both sides referred to

several judgments to press their

respective contentions. Hon'ble Tribunal

observed that much water has been

flown on the issue. The credit was

allowed by the High Court of Rajasthan

in case of Hindustan Zinc Ltd.1 The

judgment was also affirmed by Hon'ble

Supreme Court reported in [2007 (214)

ELT A 115 (SC)]. The court therefore

held that Cenvat Credit is legally

admissible.

Ultra-Tech Cement Ltd. vs. CCE, Pune

[2015-TIOL-1826-CESTAT-MUM]

Cenvat Credit - Capital Goods sold

along with other assets without

reversing any credit – Buyer cannot

be called upon to pay an amount

equal to credit on its removal from

factory

M/s. McCoy Bottling Co. Pvt. Ltd. were

engaged in manufacture of mineral

water and had availed Cenvat Credit on

various Capital Goods. Later they sold

their entire assets to M/s. Hindustan

Coca Cola Beverages Pvt. Ltd. (‘Coca

Cola’ for short). At the time of sale of

assets to Coca Cola, the balance of

CENVAT Credit was Rs. 830/-

Coca Cola did not avail any credit on the

capital goods purchased from McCoy.

Later, they transferred the capital goods

to their own sister concern. The

department contended that:

1 2008 (228) ELT 517 (Raj.)= 2007-TIOL-778-HC-RAJ-CX;

2007 (214) ELT 510 (Raj.)= 2008-TIOL-408-HC-RAJ-CX

a. Coca Cola was liable to pay an amount equal to the credit availed

by McCoy on the Capital Goods

removed as such from the factory;

and

b. The liability to pay excise duty dues will get transferred to the

successor (Coca Cola) on transfer

of industrial units.

Hon'ble Tribunal held that:

i. Coca Cola had not availed

Cenvat Credit on the capital

goods purchased from M/s.

McCoy. The department should

have demanded the amount

from M/s. McCoy, when they

sold the capital goods.

ii. Coca Cola had not availed

Cenvat Credit on the goods.

iii. Prior to 13/11/2007, the law

required reversal of credit

taken on capital goods only

when the capital goods were

removed ‘as such’ i.e. without

being used.

iv. There is no order confirming

excise dues against the seller

of the capital goods namely

M/s. McCoy. Therefore the

same cannot be recovered from

Coca Cola.

v. Coca Cola had only purchased

the assets and had not taken

over the running unit of M/s.

McCoy; there was no transfer

of business to the main

appellant from M/s. McCoy;

the main appellant had not

taken any responsibility

towards liability of M/s. McCoy

in any form.

Hindustan Coca Cola Beverages P. Ltd.

Vs. CCE, Thane I – 2015 – TIOL – 2147 –

CESTAT – MUM



Refund of accumulated credit – Rule

5 – Refund cannot be denied on the

ground that the amount was not

debited on the date of filing the

claim:

The appellants are manufacturers and

registered as EOU and they filed a

refund claim under rule 5 of CENVAT

credit rules for a refund of accumulated

credit. The conditions for filing refund

claim are notified under the Notification

No. 5/2006-CE (NT). One of the

conditions specified in the notification is

that the amount of refund should be

debited by the claimant from his

CENVAT account at the time of making

the claim.

The appellants filed a claim under rule 5

on 25.04.2013. However they did not

debit the amount claimed from the

CENVAT account at the time of filing

the refund claim. Later, they debited the

amount on 13.08.2013. The refund claim

was rejected solely for the reason that

the appellants did not debit the amount

in their CENVAT account at the time of

filing the claim. The Commissioner

(Appeals) also denied the refund claim

on the same grounds.

The Hon’ble Tribunal observed that

failure to debit on the date of filing the

refund claim is not such a lapse that it

would debar the appellants from the

refund and that on the day of debiting

the CENVAT account they have fulfilled

the conditions of the notification. In that

event they become entitled to refund on

that date.

Sandoz Pvt. Ltd. Vs. CCE, Belapur –

2015 – TIOL – 2076 – CESTAT – MUM

Cenvat Credit – Machinery

manufacturer engaged others to

carry out erection, commissioning

of machines at its customer’s site –

Duty paid on the entire value -

Credit available

Appellants are manufacturing and

installing “Gasifier Plants” at the site of

customers. The contract was a

composite contract for designing,

engineering, manufacture, supply,

erection, installation and commissioning

of “Gasifier Plants”. In terms of the

contract, the appellants were to depute

engineers for erections & commissioning

of the “Gasifier System” free of cost. For

such erection, commissioning,

installation, the appellants availed

services of others and took credit of tax

paid by service providers. They paid

Central Excise Duty on the entire

contract value including erection,

installation & commissioning charges.

The department sought to deny Credit of

the tax paid by persons engaged by the

appellant for providing erection,

commissioning service at the customer’s

premises. The department argued that

a. By definition ‘input service’ means

only for the services used ‘up to

the place of removal’. The services

in questions are availed beyond

the place of removal and cannot be

considered as services availed in

relation to manufacture as these

services availed has nothing to do

with the manufacturing activities.

b. Installation, Erection and

Commissioning charges for

equipment installed at customer’s



premises are not includable in the

assessable value of the

equipment for the purposes of

computing C. Excise duty.

c. Installation & Erection is not a

part of the manufacturing process

of the ‘Gasifier Plant’.

d. After installation the equipment

is getting fixed to the earth which

is not excisable and thus no credit

of services used for creating

immovable properties will be

admissible.

The Hon’ble Tribunal held that the

manufacturer is entitled to avail credit.

It observed that –

i) A lump sum amount, as

contracted is charged by the

appellants from the customers

including all the elements and

excise duty is paid on the

entire amount so recovered;

ii) There is a specific Clause in

the contract that it is the

responsibility of the appellants

to depute engineers for

Erection, Installation and

Commissioning of “Gasifier

Plant” free of cost;

iii) The appellants had not

recovered any extra amount for

erection, commissioning &

installation from their

customers;

iv) In a contract of composite

nature the activities of erection

and installation have to be

considered as an activity in

relation to manufacture;

v) The argument that erection

and commissioning is a post

removal/post manufacturing is

not determinative because

except for outward

transportation service, what is

to be examined is whether the

services were in or in relation

to manufacture directly or

indirectly. Once the whole

transaction of manufacture of

the machine, erection and

commissioning and supply is

treated as one transaction and

excise duty is charged on the

whole transaction value,

services rendered for the

purpose of completion of this

whole transaction has to be

treated to have been rendered

in or in relation to the

manufacture.

vi) This is not a case of

interpreting inclusive portion

of the definition of “input

service” but the case is covered

by the main body of the

definition.

vii) The judgment relied upon by

revenue are not relevant as

they were with reference to

determination of the

assessable value under Section

4 of the CEA, 1944 and not

with respect to eligibility of

CENVAT Credit on input

services.

Radhe Renewable Energy Development

Pvt. Ltd. Vs. CCE & ST, Rajkot

[2015(315) ELT 33 (Tri. Ahd)]



Service Tax

70% abatement is available to

various ancillary services provided

by a Goods Transport Agency in the

course of transportation of goods by

road.

In case of services of Goods Transport

Agency, the tax is payable only on 30%

of the gross amount. Abatement is

available of the balance 70% amount.

The services provided by GTA may

include various ancillary services such

as loading/ unloading,

packing/unpacking, transshipment,

temporary storage etc. that are provided

in the course of transportation of goods

by road. A question arose as to whether

the abatement of 70% would be available

on the value of such ancillary services as

well.

The Central Board of Excise & Customs

clarified that abatement of 70% is

admissible to various ancillary services

as well. It has been clarified that the

abatement would be admissible in both

the cases viz. when such ancillary

services are provided by GTA himself or

may be subcontracted by the GTA

subject to the condition that GTA issues

a consignment note and the invoice

issued by the GTA for providing the said

service includes the value of ancillary

services provided in the course of

transportation of goods by road. These

services are not provided as independent

activities but are the means for

successful provision of the principal

service, namely, the transportation of

goods by road. The CBEC has stated

that a single composite service need not

be broken into its components and

considered as constituting separate

services, if it is provided as such in the

ordinary course of business. Thus, a

composite service, even if it consists of

more than one service, should be treated

as a single service based on the main or

principal service.

CBEC Circular No.186/5/2015-ST

dated 05/10/2015

Appeal – Limitation – Commissioner

(Appeal) has no power to condone

delay beyond thirty days

It is of utmost importance to file appeals

within the prescribed period of

limitation. Even a meritorious appeal

would get dismissed if it is filed beyond

the limitation period. The present period

of limitation (for C. Excise as well as

Service Tax matters) is as under:

Appeal Before Appeal to be filed

within

Commissioner

(Appeals)

C. Excise matters -

60 days

Service Tax matters

– Two months

Tribunal

(CESTAT)

Three months

High Court 180 days

Supreme Court 60 days



While Tribunal, High Court and

Supreme Court have powers to condone

the delay for any duration if it is

satisfied with the reasons for delay, the

Commissioner (Appeals) does not have

such powers. Commissioner (Appeals)

can condone the delay of maximum 30

days. (Earlier the law authorized him to

condone delay up to three months).

In this case, the delay in filing appeal

before Commissioner (Appeals) was of 7

years, 7 months and 29 days (2799 days).

The Tribunal relied on the judgment of

Hon'ble Supreme Court in Singh

Enterprises Vs. CCE [2008 (221) E.L.T.

163 (S.C.) = 2007-TIOL-231-SC-CX]

wherein it had been held that the

Commissioner (Appeals) had no powers

to condone the delay after the expiry of

30 days period. Accordingly, the appeal

was dismissed.

Ravi Udyog vs. CCE & ST, BBSR-II

[2015-TIOL-2195-CESTAT-KOL]

Service Tax – Construction of

residential complex – Construction

for personal use was excluded from

the definition

M/s. Mall Enterprises had constructed

residential quarters for staff of ‘New

Parli Thermal Power Station’. The

department wanted to tax it under the

category Residential Complex Services.

The definition of residential complex

(existing prior to 01/07/2012) contained

the following exclusion clause:

“….but does not include a complex

which is constructed by a person

directly engaging any other person

for designing or planning of the

layout, and the construction of

such complex is intended for

personal use as residence by such

person.”

The definition also contained an

explanation that

"personal use" includes permitting the

complex for use as residence by another

person on rent or without consideration;

The matter had been decided in favour of

the assessee by the original authority as

well as by the Commissioner (Appeals).

Hon'ble Tribunal too rejected the

department’s appeal observing that it

was undisputed that the residential

buildings constructed by the appellants

were allotted by New Parli Thermal

Power Station Ltd. as quarters for

residential purposes to their employees.

Tribunal held that the concurrent

findings of both the lower authorities are

correct and in consonance of law.

We may note that the benefit of this

judgment would not be available to

constructions undertaken after

01/07/2012 as there is no equivalent

provision now.

CCE Vs Mall Enterprises 2015-TIOL-

2210-CESTAT-MUM



Customs

Customs - Exemption from CVD –

Concentrate is different from Ore

Notification 04/2006-CE exempted Ores

falling under Ch. H. 2601 to 2617. The

assessee imported ‘Roasted Molybdenum

Ore Concentrate’ falling under Ch. H.

2613 and claimed the said exemption

from CVD. Note 4 to the chapter 26

read:

4. In relation to products of this

Chapter, the process of converting

ores into concentrates shall

amount to “manufacture”

Hon'ble Supreme Court held that since

the process of converting ores into

concentrates has been deemed to be

manufacture, the two have to be treated

as different product. The exemption

available to ores cannot be extended to

ore concentrates.

It was held that the purpose of treating

concentrate as manufactured product

out of ores is to make concentrates as

liable for excise duty. Otherwise, there

was no reason to deem the process of

converting ores into concentrates as

manufacture.

Star Industries vs. CC (Imports) Raigad

[Judgment dated 07/10/2015 of



Supreme Court in Civil Appeal no. 6088

of 2013]

Refund – SAD - Interest on refund of

SAD – Department must pay interest

if refund is delayed beyond three

months – CBEC Circular held ultra

vires

Notification 102/2007-Cus allows refund

of SAD paid on the goods imported by

traders if these goods are subsequently

sold in India and VAT/ CST is paid on

such sale. (Off course in such a case the

trader would not pass on the credit of

SAD).

The question in the present case was

whether the department is required to

pay interest if the refund is delayed. The

Board had issued a circular (06/2008-

Cus) which clarified that in the

notification 102/2007-Cus there is no

specific provision for payment of

interest. Hence the question of paying

interest on delayed refund does not

arise.

A trader filed refund claim on 02nd

March 2010 which was rejected on 18th

June 2010. Commissioner (Appeal)

allowed the appeal of the trader and

later the Assistant Commissioner

granted refund. However vide order

dated 30th March 2012, he rejected the

demand for interest. The trader took the

matter to appellate level forum. It lost

the case before Commissioner (Appeal)

and took the matter to Tribunal.

Meanwhile another assessee filed a Writ

Petition before Madras High Court

challenging the circular 06/2008-Cus.

Hon'ble High Court held that even the

refund under notification 102/2007-Cus

is governed by Section 27 of the Customs

Act, 1962 and consequently interest

under Section 27A would be available.

The Circular was quashed “in so far as it

seeks to restrict or obliterate the claim of

interest on belated refunds” [KSJ Metal

Impex (P) Ltd. v. Under Secretary

(Customs), 2013 (294) E.L.T. 211 (Mad)].

In the present case, the Tribunal relied

upon the order of the Madras High Court

and ruled in favour of the trader.

However, as usual, the department was

not satisfied and filed appeal before

High Court Delhi. Examining the issue

afresh the Hon'ble Delhi High Court too

held that interest was payable on

delayed refunds and the Circular is

inconsistent with and ultra vires Section

27A of the Act.

We may add here that the unrelenting

department is already in appeal against

the order of the learned single judge of

Madras High Court in KSJ Metal. In all

probability the judgment of Delhi High

Court too would be appealed against.

Principal Commissioner of Customs vs.

Riso India Pvt. Ltd. [Judgment dated

07/10/2015 of High Court Delhi

(Division Bench) in CUSAA 20/2015]

Customs – Penalty under Section

112 (a) (ii) leviable only if the goods

are dutiable or prohibited

The assesse had exported certain goods.

However, the goods were rejected by the

foreign customer and were re-imported.

When the assessee filed bill of entry, the

department alleged that there was a

mis-declaration in the bill of entry viz.

the country of origin was incorrectly

declared. The department issued notice

for confiscation and penalty. The

assessee contended that in any case the

goods were exempted vide sr. 3 of the



notification 94/96-Cus. The

Commissioner did not agree and

confiscated the goods. He also imposed a

penalty of Rs. 5 lakh. In appeal the

Tribunal set aside the penalty, against

which the department approached the

Hon'ble High Court.

The Hon’ble High Court observed that,

under Section 112(a)(ii), a person who

does any act by which certain goods

become liable to confiscation under

Section 111, is liable to penalty. But the

penalty is leviable, only if the goods in

relation to which he is found liable for

confiscation, are dutiable goods other

than prohibited goods. However, as there

is no dispute about the fact that the

goods in question in the case on hand

were not dutiable goods, by virtue of the

exemption notification, the Hon’ble High

Court upheld the Tribunal’s order and

dismissed the appeal of the department.

CC, Chennai Vs. Jay Ar Enterprises &

Others – 2015 – TIOL – 2241 – HC –

MAD – CUS



About SRD LEGAL:

SRD LEGAL was established in 2007 by Sanjay Dwivedi, Advocate and has grown

into a team headed by four Advocates. The firm handles litigations on C. Excise,

Service Tax & Customs matters up to High Court. It also renders legal advisory

services.

Contact:

512, Business Park, Citi of Joy,

J. S. D. Road, Mulund (West),

Mumbai - 400 080.

Tel. : +91-22-25 6565 47/ 48

+91- 90048 25702/ 87676 61950

Fax : +91-22-25 6565 49

e-mail: [email protected]

Team SRD Legal

Mr. Sanjay Dwivedi, Advocate – 93204 56555

Mr. Manoj Kasale, Advocate – 96190 29095

Mr. Raymond George, Advocate – 98204 80597

Mrs. Savita Dwivedi, Advocate – 99873 70673

For private circulation only.

© SRD Legal

Disclaimer

The information contained in this publication is intended for informational purposes

only and does not constitute legal opinion or advice. The views & information

contained herein are of general nature and are not intended to address the

circumstances of any particular person or entity. The contents are not comprehensive

or sufficient for taking decisions. Please do not act on the information/ views

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assurance that the judicial/quasi judicial authorities may not take a position

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and timely information, there is no assurance or guarantee in this regard.

SRD LEGAL neither accepts nor assumes any responsibility or liability arising from

any decision or action taken or to be taken or refrained to be taken, by anyone on the

basis of this publication.

srd legal - tax update issue 4 - 20151016

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prohibited tax update

days service tax

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law credit available

claim cenvat credit

excise penalty

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