LATEST INCOME TAX, CENTRAL EXCISE COURT CASES (By.JAV & Associates, Chartered Accountants)

NAVIN KUMAR AGARWAL 

V/s

COMMISSIONER OF INCOME TAX

(Calcutta HC)

A search u/s 132 of the Act was conducted on 8th December, 1999. The restraint order imposed on 8th December, 1999 was vacated on 31st January, 2000. The search party drew the panchnama dated 31st January, 2000 stating that the search commenced at 15:20 hours and was closed at 15:30 hours. The assessee claimed that the search was concluded on 8th December, 1999 and that the search dated 31st January, 2000 was only for the purpose of revocation of the restraint order dated 8th December, 1999 passed under Section 132 (3) of the Income-tax Act. The assessee contended that the period of limitation has to be reckoned from the search dated 8th December, 1999 and the period of limitation expired on 31st December, 2001, whereas the assessment order was passed on 31st January, 2002 which is out of the prescribed period of limitation.

COMMENTS: In the above case, the Hon’ble Calcutta High Court held that the search ends and the period of limitation begins only on the drawing up of the formal panchnama to record the ending of the search. The argument by the assessee that the search is concluded on the date of the search itself if nothing is seized thereafter is not acceptable. [Decided against assessee]

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DELHI TRANSPORT CORPORATION 

V/s

COMMISSIONER SERVICE TAX 

(Delhi HC)

The assessee had entered into contracts with seven agencies (contractors/advertisers) to provide taxable service by providing space to such parties for display of advertisements on its buses, bus queue shelters, time keeping booths and other properties. In the contract it was provided that the responsibility to pay advertisement tax or any other taxes imposed by any authority will be of the Advertisers.

Two advertisers however failed to abide by the legal obligations as per the contractual terms and did not deposit the service tax in spite of contractual obligation. As a result, the assessee also did not pay the service tax on the services rendered. SCNs were issued to the assessee wherein interest and tax along with several penalties u/s 76, 77 and 78 were imposed.

COMMENTS: In the above case, the Hon’ble Delhi High Court held it is clear that the liability was avoided but not with intent to defraud or on account of collusion or wilful misstatement or suppression of facts. It was also held that since the services provided were taxable, the appellant was liable to discharge the service tax liability. However there is no malafide intent to suppress value of taxable services. Hence as per provisions of section 80, penalty u/s 78 cannot be levied. [Decided partly in favour of assessee]

COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, AURANGABAD 

V/s

ENDURANCE TECHNOLOGY PVT LTD 

(Bombay HC)

The main question that arises is whether the assessee is entitled to avail the Cenvat credit on "management, maintenance or repair services" provided on services provided to Windmills installed and situated away from factory and factory premises which is used for generation of electricity for manufacture of final product.

COMMENTS: In the above case, the Hon’ble Bombay High Court held that management, maintenance and repair of windmills installed by the respondents is input service as defined by Rule 2(l). Rule 3 and 4 provide that any input or capital goods received in the factory or any input service received by manufacture of final product would be susceptible to CENVAT credit. The rule does not say that input service received by a manufacturer must be received at the factory premises. Following the decision of Hon’ble Bombay High Court in the case of CCE V/s Ultratech Cement Ltd (2010). Thus, the services used by the assessee were in relation to manufacture of the final product and Cenvat credit could not be denied. [Decided against Revenue]

SUN-AREA REAL ESTATE PVT LTD 

V/s

COMMISSIONER OF SERVICE TAX, MUMBAI-I 

(CESTAT Mumbai)

The appellant against export of service, received payment for the services in Indian rupees from Deutsche Bank and FIRCs issued by the bank has been produced before the lower authorities, whether in respect of such remittance refund is admissible under Export of Service Rules, 2005. The second issue is whether the security services and air travel services used by the appellant is an input service for providing output service which were exported. The learned Commissioner (Appeals) held that since the appellant has not received the service charges from overseas entity in convertible foreign exchange whereas the payment was received in Indian rupees, the condition of Rule 3(2) of Export of Service Rules, 2005 was not complied with and accordingly the services will not be treated as export of services. Therefore, the appellant is not entitled for the refund.

In the above case, the Hon’ble CESTAT Mumbai held that FIRCs were issued and there is a specific certification that the payment has not been received in non-convertible rupees. In other words it means that the payment is in convertible foreign exchange. - out of the total payment to be made by the insurance broker in India to the foreign insurer was reduced to the extent of his brokerage and remaining amount was remitted to foreign insurer in the foreign exchange - when a foreign bank is maintaining Indian rupees in their account obviously, such Indian rupees was obtained in lieu of foreign exchange. Issue of admissibility as input service credit in respect of security services was not raised in the show cause notice. Therefore, denial of refund of Rs.7,747/- and Rs.1,051/- respectively is not correct. - impugned order deserves to be modified inasmuch as the impugned order in respect of Rs.1,64,081/- is upheld and the order rejecting refund of an amount of Rs.10,98,077/- is set aside. [Decided in favour of assessee]

SHRI NEERAJ SHARMA, CENCEPT ENGINEERS 

V/s

COMMISSIONER OF CENTRAL EXCISE, MEERUT-I 

(CESTAT New Delhi)

The appellant has contended that "vaastu advice does not fall in the category of consulting engineer service as that is mythological in nature and that vaastu concept is only a belief in Hinduism and some people who have allegiance to the astrology like advice with regard to vaastu" and that preparation of blue print is no where relating to consultation as blue print of house is work of tracer and not of an engineer. Preparation of project report, typing and binding also does not fall in the consulting engineer. The Dept. argued that vaastu advice falls under Consulting Engineer Service as it is related to engineering.

COMMENTS: In the above case, the Hon’ble CESTAT Mumbai held that it is nowhere brought out in the order in appeal or in the order in original that Shri Neeraj Sharma is a professionally qualified engineer. Further it is also not brought out as to in which discipline(s) of engineering the service has been rendered. Thus the Revenue has not been able to discharge its obligation/onus to show that the

appellant was professionally qualified engineer and also rendered any advice in relation to any particular branch of engineering. [Decided in favour of assessee]

COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, NAGPUR 

V/s

NOBLE GRAINS INDIA PVT LTD 

(CESTAT MUMBAI)

The respondents are manufacturers of soya extraction meal holding Central Excise registration and are also having service tax registration. The respondent filed refund claims of service tax as per the conditions of Notification No. 41/2007-ST dated 06/10/2007. The refund claims which had been preferred by the assessee is in respect of the service tax paid by the respondent assessee to service providers like CHA, Cargo Handling Services, Port services, etc. which are in respect of export of goods. The said refund claims were rejected by the adjudicating authority.

COMMENTS: In the above case, the Hon’ble CESTAT Mumbai held that the jurisdiction for claiming the refund of service tax paid on such services which are in connection with the export of goods cannot be shifted to their Indore Commissionerate as the registered office of the respondent-assessee being at Indore cannot be a reason for shifting the jurisdiction to Indore. Since, the respondent is a manufacturer-exporter; the refund claims have been correctly filed. [Decided against Revenue]

CCE, BANGALORE

 V/s

M/S. VETCARE ORGANICS PVT LTD 

(Supreme Court)

The issue relates to using of the brand name 'VETCARE' by the respondent which, otherwise stands registered in the name of M/s Tetragon Chemie (P) Ltd., Bangalore. The respondent claims itself to be a Small Scale Industrial Unit (SSI) and is manufacturing organic chemicals, disinfectants and other products. It claimed the benefit of Notification No. 175/86 dated 01.03.1986 and 1/93 dated 01.03.1993 as amended from time to time which provides for exemption from payment of excise duty to the SSI unit.
 

COMMENTS: In the above case the Hon’ble Supreme Court held that even if the goods are different, so long as brand name or trade name of some other Company is used, benefit of Notification 1/93 dated 01.03.1993 as amended would not be available. The assessee cannot plead innocence merely on the fact that the permission to use the brand name was granted by Tetragon. The permission does not make the respondent owner of the brand name. It is irrelevant whether the brand name is used in relation to the same goods. The act of the assessee is therefore covered by the mischief of Explanation VIII to the Notification No. 175/86 dated 1.3.1986. Thus, the assessee was denied SSI Exemption. Following the decision by Hon’ble Supreme Court in the case of Commissioner of Central Excise, Chandigarh-I Vs. Mahaan Dairies (2004). [Decided in favour of Revenue]
 

KALI AERATED WATER WORK, SALEM 

V/s

COMMNR. OF CENTRAL EXCISE, MADURAI 

(Supreme Court)

The appellant herein is a SSI Unit and is manufacturing Aerated Water under various brand names using the trade mark with the “Kalimark” / M/s.Kali Aerated Water Works”. It sought exemption from payment of duty in terms of Notification 1/93-CE dated 28.2.1993 (as amended vide Notification No.59/94-CE dated 1.3.1994). This exemption has however been denied by the Dept. on the fact that the brand name belongs to a third party.

COMMENTS: It was found that the business was started by a HUF which fell apart at some time and this was later converted to a family business. It was very much contained in the mutual agreement at the time of falling apart from the family business that the trade name 'Kalimark Aerated Water Works' and trade mark mentioned in the said agreement would remain vested in all the parties including the appellant and that the appellant was also allowed to use the same. The agreement also provides that no payment of royalty or any other remuneration has to be made to any third party. The Hon’ble Supreme Court therefore held that the appellant had been correctly using its own brand name. Following the decision of Hon’ble Supreme Court in the case of CCE, Hyderabad IV vs. Stangen Immuno Diagnostics (2015) [Decided in favour of assessee]

COMMISSIONER OF CENTRAL EXCISE 

V/s

M/S. AMRITLAL CHEMAUX LTD. 

(Supreme Court)

The assessee is involved in repacking and / or labeling of various dyes & dye bases, napthols & fast bases, and chrome pigments. The question is as to whether the process undertaken by the assessee in these products amounted to manufacture or not.

COMMENTS: In the above case the Hon’ble Supreme Court held that as far as the process of label or relabeling of containers is concerned, it would amount to manufacture only if the other condition, viz., repacking from bulk to retail pack is also satisfied. Here, it is clear that there was repacking and even relabeling but the repacking of bulk was not into retail packing as the goods after repacking were supplied to industrial consumers on wholesale basis. Thus, the condition for repacking from bulk to retail pack for the purpose of fulfilling the conditions for manufacture is not
satisfied. [Decided against Revenue]

M/S. JITENDRA SYNTHETICS 

V/S 

COMMISSIONER OF CENTRAL EXCISE & CUSTOMS 

(Gujarat HC)

The appellant was engaged in the business of manufacturing goods like synthetic filament yarn which are excisable goods. The appellant brought and installed in its factory capital goods in the nature of texturing machine on which excise duties to the tune of Rs.4,52,500/- were paid, and therefore, the appellant took credit of the above amount of duty paid on the texturizing machine under Rule 57Q of the Central Excise Rules, 1944 which allowed the credit of duties paid on capital goods while paying duties on the final products in relation to manufacture of which the capital goods were used. The above machine was purchased and brought in the factory during financial year 1994-95 and this transaction was also reflected in the appellant’s statutory records. A SCN was issued denying the modvat credit of Rs.4,52,500/- with penalty of an equal amount.