Refund of Special Additional Duty of Customs (SAD) leviable under section 3(5) of the Customs Tariff Act, 1975 - discrepancies on the description of the goods and the brand name not being mentioned in the invoice - non-submission of certain documents - HELD THAT:- The issue relating to the rejection of the Special Additional Duty of Customs (SAD) refund claim alleging that there is mismatch with regard to the description of goods etc. in the sales invoices when compared to the Bills of Entry and other minor discrepancies is no longer res integra. The fact remains that the appellant has produced a Chartered Accountant’s Certificate along with the reconciliation statement as required by Boards Circular. In such a case the decision to discard the certificate should be based on certain incriminating and reliable documents and the reasons for disbelieving the certificate should be clearly spelt out. In the absence of such action the claim cannot be rejected.
In CHOWGULE & COMPANY PVT LTD VERSUS COMMISSIONER OF CUSTOMS & CENTRAL EXCISE [2014 (8) TMI 214 - CESTAT MUMBAI (LB)], a Larger Bench of this Tribunal examined a reference of a related matter as to ‘whether to avail the benefit of Notification No. 102/2007, the condition 2(b) of the Notification is mandatory for compliance being a trader who cleared the goods on the strength of commercial invoices.’ The judgment went on to examine the genesis and object of the levy and the role of the exemption notification, which is very useful in understanding the issue - it was held in the case that 'non-declaration/ non-specification of the duty element as to its nature and quantum in the invoice issued would itself be a satisfaction of the condition prescribed under clause (b) of para 2 of the Notification 102/2007.'
The Hon’ble Madras High Court in its judgment in PP PRODUCTS LTD. VERSUS COMMISSIONER OF CUSTOMS, CHENNAI SEAPORT COMMISSIONERATE-IV [2019 (5) TMI 830 - MADRAS HIGH COURT], examined whether the Tribunal, in the face of documentary evidence produced by the appellant, was correct in setting aside the order of the Appellate Authority, holding that there was no correction between the imports and subsequent sales? It held that 'The lower authority has not issued any DM or PH to the appellants for making the deficiencies good or to make any submissions. The department has not proved that the goods sold are different from the goods imported. The lower authority has not disputed the fulfillment of the other substantive conditions of the notification by the appellants. Rejection of partial amount of refund on this flimsy ground is not sustainable.'
The impugned order rejecting the refund claims is not proper. The same is hence set aside - Appeal allowed.
Valuation - Inclusion of royalty to determine the value of the imported MSG, involving related parties - rejection of transaction value but the addition of certain charges to the price actually paid or payable - Rule 10(1)(c) & (e) of the Customs Valuation Rules, 2007 (CVR 2007) - HELD THAT:- It is made clear that the royalties and licence fees should relate to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods. Hence the fact that the trademark belongs to a group company (Ajinomoto Japan) will not matter so long as there is no evidence adduced to establish that royalty is paid as a condition of sale of the impugned goods. Moreover as per the order of the Ld. Original Authority the value declared by the importer is acceptable under rule 3(3)(a) of CVR 2007. The appellant states that the payment of royalty by them is purely for the license to use trademark and is paid to Ajinomoto Japan. It is not a condition of sale by Ajinomoto Thailand.
The Hon’ble Supreme Court in Commissioner Of Customs vs M/S Ferodo India Pvt. Ltd. [2008 (2) TMI 12 - SUPREME COURT], examined a similar issue involving Rule 9 of CVR 1988 which is in pari materia with Rule 10 of CVR 2007. The Hon’ble Court held 'In such cases the principle of attribution of royalty/licence fees to the price of imported goods would apply. This is because every importer/buyer is obliged to pay not only the price for the imported goods but he also incurs the cost of technical know- how which is paid to the foreign supplier. Therefore, such adjustments would certainly attract rule 9(1))(c).'
Prima facie the reasoning of the Ld. Commissioner is not valid as he does not have the jurisdiction to determine whether the process amounts to manufacture or not under the Central Excise Act - postponing the collection of duty to the time of domestic sale of the goods after being repacked under a trademark, amounting to manufacture, appears far too remote to retain the character of a Customs impost. The nexus between the imported goods and those being sold cannot be said to exist. As per the impugned order, the royalty is ordered to be paid for activities post customs clearance after the goods no longer retain the identity of the imported goods and are worked upon for sale domestically containing the trademark.
Payment of royalty is not a condition of sale. Even the royalty paid to Ajinomoto Japan is not to be paid on the process of packing/ manufacture but only on the use of trademark. In such a situation Ajinomoto India is free to sell the goods domestically after it crosses the Customs barrier. If the domestic buyer of the goods has an independent agreement with Ajinomoto Japan to pay royalty on use of trademark on repacked goods for domestic sale, surely Ajinomoto India would not have been saddled with the additional cost of the royalty to its transaction value.
There is nothing to show the appellant had adjusted the price of the imported goods in guise of enhanced royalty. Royalty is not paid to Ajinomoto Thailand from whom the appellant procures its goods. Revenue has not been able to establish the payment of royalty is a ‘condition of sale' of the imported goods nor has any flow back or direct / indirect payment from Ajinomoto India to Japan or Thailand been established. In such circumstances postponing the collection of duty on the imported goods, on an uncertain quantity, to the time of domestic sale after being repacked under a trademark, appears far too remote to retain the character of a Customs impost.
The question Revenue should have addressed / investigated is whether the import would have taken place from Ajinomoto Thailand if the appellant declined to pay royalty to Ajinomoto Japan or whether it would only lead to a denial of repacking of goods using the trademark. However, as it stands Revenue has failed to establish its allegations and hence the impugned order merits to be set aside.
Rectification of mistake in value declared at the time of filing of bill of entry - amendment of the value mis-declared due to omission on the part of supplier/appellant at the time of import - Section 154 Customs Act, 1962 - HELD THAT:- Though there was considerable delay in seeking amendment of Bill of entries, since the goods were cleared provisionally, records will be available with the respondent to verify the facts for final assessment. Moreover, the amendment on the very same issue of value is directly connected with the investigation conducted by DRI and in such cases, the Department would have awaited the outcome of the DRI investigation before rejecting the request for correction/ amendment of the declared value. Considering the above, it is just and reasonable to set aside the impugned orders and remand the matter to the Adjudication Authority.
The Adjudication Authority shall consider the outcome of the DRI investigation and if there is no allegation regarding misdeclaration of the value and no SCN is issued so far, considering the fact that the remedy of amendment under Section 154 was sought during the pendency of provisional assessment, the amendment as sought by the appellant shall be considered based on the outcome of the DRI investigation regarding unit price of the impugned imported goods and the provisional assessment should be finalised, accordingly, within a period of 3(three) months after the receipt of this final order, and appropriate order be passed in accordance with law after giving an opportunity of hearing to the appellant.
Revocation of Customs Broker Licence - forfeiture of whole of security deposit - levy of penalty - contravention of Regulations 10(a), 10(b), 10(d), 10(e), 10(f), 10(k) & 10(n) of the CBLR, 2018 - dittoing of the findings recorded in the inquiry report without any application of judicial mind or thinking to regulation contravened and the facts in hand - violation of principles of natural justice - HELD THAT:- It is found that the a bill of entry has been filed using the login id and password of the Appellant. Subsequently the consignment covered by the said bill of entry is found to be mis-declared and has been confiscated, allowed to be redeemed against payment of redemption fine, for re-export.
Except for the few statements, whose excerpts are reproduced in the impugned order no other evidence has been adduced in the entire proceedings to hold the Appellant guilty of contravention of various provisions of Regulations 10 (a), (b), (d),(e),(f),(k) & (n) of the CBLR, 2018 - From the excerpts as recorded in impugned order it is not found that even an iota of evidence as per which it can be concluded that Appellant was responsible for filing of the said bill of entry. Proprietor of importer Mr Archit Sharma specifically states that he never had contacted or met the Appellant or was even under impression that bill of entry for clearance of his consignments were to filed by the Appellant.
When Appellant has denied about having signed or issued any such authorization letter the signatures on the letter have not been subjected to any forensic examination by a hand writing expert. Except for statement of the Shri Awadhendra Kumar that he was working as per agreement letter dated 16.07.2018 in partnership with Appellant there is nothing to implicate the Appellant in the entire proceedings. Even copy this agreement letter submitted by Shri Awadhendra Kumar has not been subjected to any forensic examination. On the contrary this letter goes on to establish the case that Appellant has stated in his statement to effect that his login id and password has been compromised and used for filing this bill of entry.
The case of mis-declaration has been adjudicated without issuance of show cause notice on the basis of waiver of show cause notice by the importer implicating the Appellant and imposing penalty of Rs 1,00,000/- on him under Section 114AA of the Customs Act, 1962, and without holding him liable for penal action under Section 112 (a) or 112 (b) of the Customs Act,1962. Only importer has been held liable under Section 112 (a) of the Customs Act, 1962 for contravention making the goods liable for confiscation under Section 111 (d) and (o) of the Customs Act, 1962.
The impugned order holding that Appellant have contravenened the provisions of regulation 10 (a), (b), (d),(e),(f),(k) & (n) of the CBLR, 2018 is without any basis in law or on cogent examination of the facts in hand. Thus there are no merits in the impugned order.
Refund of the interest - interest paid on the IGST imported goods which they paid with delay - taxable event.
Taxable event - HELD THAT:- The taxable event for levy of IGST is the inter-state supply of goods and services which definition also includes supply in the course of importation. The charging section for collection of IGST on the imported goods is section 4 of the IGST Act read with section 3(8) of the Customs Tariff Act. The Constitutional mandate for collection of IGST is clause (2) of 246A. IGST is credited to Major Budget head 0008 and it has to be apportioned between the Centre and States as decided by Parliament on the recommendations of GST Council. Therefore, the IGST collected when goods are imported is not a duty of customs.
Interest is payable on IGST which is paid late or not - HELD THAT:- Unlike in the case of customs duties, no rate of IGST is prescribed either in the schedules to the Customs Tariff Act or under any notification issued under the Customs Tariff Act. Section 3 of the Customs Tariff Act refers to the IGST payable under section 5 of the IGST Act. In other words, whatever is payable under the IGST Act on inter-state supplies within India is payable under section 3 of the Customs Tariff Act read with section 5 of the IGST Act if the supplies are in the course of importation.
When interest is payable on delayed payment of IGST on inter-state supplies within India, the same bill also apply to delayed payment of IGST on imports. This is especially so since section 3 of the Customs Tariff Act makes IGST payable under IGST Act. There are no legal basis or reason to hold that the interest payable on delayed payment of IGST does not apply if such delayed payment is on supply in the course of imports.
Revocation of the appellant’s CB license - imposition of penalty and forfeiture of security deposit - violation of Regulations 10(a), 10(b), 10(d), 10(e), 10(m) and 10(n) of CBLR, 2018 or not - whether the appellant Customs Broker has fulfilled all his obligations as required under CBLR, 2018 or not? - HELD THAT:- In both the B/Es filed by the appellants CB on behalf of the importer, had declared the proper description of the imported goods and its value has been indicated as per the documents given to them by the importer. In fact, the various query raised by the customs officer raising any doubt in compliance, value of the goods has been satisfactorily explained and the goods have been assessed to customs duty. It is not the case of Revenue, that the description, value particulars of imported goods indicated in the B/Es were different from the one indicated in the commercial invoices submitted to the Customs at the time of filing of B/Es. The facts indicate that Shri Laxmi Narayan Mishra, who had fabricated the description of the invoice in this case was actually involved in preparation of parallel fabricated invoice with incorrect description and connected violations in respect of imported goods.
There are no strong grounds to hold that the appellant CB has violated the Regulation 10(a) ibid, only on the ground that they had accepted the documents indirectly from the importer through the logistics service provider. However, as the mis-declaration is apparent in the documents relating to import submitted along with the Letter of Authority given to the appellants, to the extent of mis-match in the description of the goods in MAWB and invoices, the appellants CB should have been more careful in scrutiny of the authority letter dated 28-8-2019 given to them along with import documents particularly when these were received from person other than importer who is in logistic trade, in the light of above DGFT’s policy circular dated 16-9-2013.
The appellants CB had declared the description of the imported goods and other details in both the B/Es for aforesaid imports as given in the invoices supplied by the importer. Further, the appellants were not aware of the mis-declaraton of the imported goods as there was no evidence to the claim of the department that the appellants knew about mis-declaration and further all incriminating documents were recovered only from Shri Naseer Amir Khan, who is claimed to be the beneficial owner of imported goods - the declaration made in the Bills of Entry is the same as that is provided in the Commercial invoices, and the description declared as per invoices were fabricated by Shri Laxmi Narayan Mishra by preparing parallel set of invoices, which could not be detected even by the customs authorities at the time of assessment or at the time of clearance of the goods. In the absence of any document to prove the claim of mis-declaration of goods, it is difficult to fasten such liability on the appellants CB.
It is found that the appellants CB could have been proactive in fulfilling their obligation as Customs Broker for exercising due diligence, particularly when the import documents were obtained from the importers through an intermediary in ensuring that all documents relating to imports are genuine and that these are not fake or fabricated - the appellants CB are found to have not complied with the requirement of sub-regulation 10(a) ibid and thus imposition of penalty to this extent, for failure in not being proactive for fulfilling of Regulation 10(a) of CBLR, 2013 alone, is appropriate and justifiable.
There are no merits in the impugned order passed by the Learned Principal Commissioner of Customs (General), Mumbai in revoking the license of the appellants; for forfeiture of security deposit and imposition of penalty, inasmuch as there is no violation of Regulations 10(b), 10(d), 10(e), 10(m) and 10(n) ibid, and the findings in the impugned order is contrary to the facts on record - appeal allowed.
CIRP - VAT / Sales Tax dues - Treatment of claims as Secured claims vis-a -vis Unsecured claims - Rejection of application of appellant to treat its claim as Secured Creditor during the liquidation under waterfall arrangement as stipulated in Section 53 of IBC - it was held by NCLAT that 'the Respondent classified remaining admissible outstanding dues as Unsecured debts. The Adjudicating Authority, therefore, also passed the Impugned Order accordingly based on Resolution Plan put up for approval by CoC through the Respondent' - HELD THAT:- There are no error in the view taken by the National Company Law Appellate Tribunal.
Seeking protection under Section 218 of the Companies Act, 2013 - as interim relief it is prayed for re-appointment as Secretary of the Club - submission which was advanced before the NCLT by the Appellant was that the termination was in violation of Section 218(1)(b) of the Companies Act and no employee could be removed from the Club without prior approval of the Tribunal - HELD THAT:- It is clear that only intent and object of the Appellant is to seek protection under Section 218 of the Companies Act and get reappointed as Secretary. The said issue of protection under Section 2018 having already been pronounced by the NCLT, which order has not been interfered with by this Tribunal or the Hon’ble Supreme Court, subsequent applications CA-88/2023 and CA-34/2024 are nothing but re- agitation of the issues which has already been raised by the Appellant and rejected. Appellant has given much emphasis on non-decision of CA-88/2023 and CA-34/2024 inspite of order of this Tribunal passed on 10.08.2023 and 11.01.2024. As noticed above, on 10.08.2023, this Tribunal has observed that in view of the fact that application has been filed under Section 218 of the Companies Act, the Tribunal shall endeavour to dispose of the application at an early date. Subsequently, another IA was filed being IA No.194 of 2024, which was disposed of by this Tribunal by order dated 11.01.2024.
The Court who is in control of the proceedings has right to conduct the proceedings in orderly manner and resist attempt of the litigants who tend to raise repeatedly unconnected issues. In the present case it is noticed that the Appellant has been making submissions time and again with regard to CA-88/2023 and CA-34/2024 with regard to entitlement of protection under Section 218 of the Companies Act. Appellant very conveniently in entire appeal has not referred to earlier order of the NCLT dated 25.03.2021 where application under Section 218 was filed and in which no relief was granted of setting aside his termination or permitting his continuance.
Thus, no grounds have been made to interfere with the order dated 05.04.2024 passed by the NCLT. Appeal is dismissed.
Applicability of FERA - Suit filed seeking recovery by the plaintiff against the defendant bank - defendant bank unauthorizedly and without permission of the plaintiffs misappropriated an amount of Rs. 2 crores towards the liability of M/s Asian Wire Ropes Ltd. - plaintiffs are Non-Resident Indians (‘NRIs’) carrying the business of Import and Export who came to India for exploring business opportunities. The plaintiff no. 2 is the wife of plaintiff no. 1, who subsequently is said to have obtained a status of Resident Indian - plaintiffs opened a Savings Bank Account with the defendant bank/NRE Account -
As stated that in the absence of plaintiff No. 1 from Delhi, plaintiff no. 2 on 23.04.1990 received a note from the then Branch Manager of defendant no. 2 requesting a blank cheque (only bearing signature of plaintiff no. 2) on urgent basis.On the return of the plaintiff no. 1, the plaintiff no. 1 learnt that a sum of Rs. 2,00,00,000/- has been transferred from his NRE Account to the defendant’s Hyderabad Branch - as alleged officials of defendant no. 2 had obtained a blank cheque from the plaintiff no. 2 and in a clandestine manner, filled entries in the cheque and added detailed instructions on the back of the cheque without any such directions by the plaintiffs
Whether the suit is within time? - Admittedly, the suit is based on the fact that on 23.04.1990 money was illegally transferred from plaintiffs account by the defendant bank. The suit was filed on 22.04.1993, i.e. within three years from the date of cause of action. Therefore, the suit as filed was within the limitation period of three years.
The Court fees of Rs. 2,70,000/- was filed along with the suit and since the court fee of Rs. 3,672 was not available on the said date, it was purchased and deposited on 07.05.1993. All objections were duly removed and the matter was re-filed on 17.05.1993. It is settled proposition that the deficiency in court fee is not fatal and the payment of deficit court fee is a curable defect.
Under section 149 of CPC, the courts have been granted the discretion to permit receiving the deficit court fee at any stage, even in the absence of an application praying for the same, subject to the said discretion being exercised equitably.
The plaintiff has cured the defect of deficit court fee within 30 days of the objections. A minor delay in payment of balance court fee cannot act as an impediment in entertaining the suit filed by the plaintiff.Hence, the present suit is held maintainable and within the period of limitation.
When did plaintiff No. 2 change her status from non-resident Indian to resident Indian and whether an intimation thereof was given to the bank? If so, on which date? - There is no evidence on record to prove that on 17.04.1990, the plaintiff No. 2 ceased to be an NRI. There is no evidence on record to show that the defendant bank was duly informed by the plaintiff no. 2.The NRE Account Opening Form, i.e. PW1/D44, clearly casts an obligation upon the plaintiffs the duty to inform the defendant bank a change in their residential status.
Even if it is assumed that there had been a change, the plaintiff no. 2 continued to issue cheques from the same account, i.e. (Ex. PW1/D58) cheque dated 07.05.1990 for Rs. 1,00,00,000/- issued from NRE Account No. 6523 to create a Fixed Deposit with the Defence colony branch, i.e.(Ex PW1/D68). The said transaction shows that the plaintiff no. 2 continued to issue cheques in the capacity of a joint account holder and continued to sign from the NRE account.
Therefore, in the absence of any material evidence being on record to show that there was a change in residential status of plaintiff No. 2 and that the same was duly informed to defendant bank, the Issue no. III is decided against the plaintiff and in favour of the defendant bank.
Discharge the onus of proof on the plaintiffs - There is no doubt that a bank cannot be callous or deal with its customers in a causal manner. The defendant bank does not have a Specimen Signature Card for Saving Bank Account bearing No. 6524, wherein as per the plaintiff no. 2 she signed as “R Murti”. The defendant bank has two Specimen Signature Cards for NRE Account No. 6523 alongwith multiple photocopies of the Specimen Signature Card NRE Account no. 6523 for absolutely no reason or explanation. The defendant bank may have personal equations with clients but they are bound to follow the procedure and mandate of law. If a Specimen Signature Card is missing (which is a mandatory requirement for clearing of cheques and bank operations) the bank is required to take action, including but not limited to conducting an inquiry and registering of an FIR. The defendant bank cannot be accepted to say that a Specimen Signature Card of an individual is lost and the defendant bank did nothing about it.
The party which comes to the court and seeks the courts adjudication on issues in its favour has to discharge the onus of proof.
The plaintiffs have failed to prove that the instructions written on the reverse side of the cheque were not given by the plaintiff no. 2 but written by the defendant bank. The plaintiffs have failed to prove that the act of encashing the cheque in question, i.e. Ex. PW1/D31, is improper especially since the defendant bank has sufficiently proved that the plaintiff no. 2 would continually sign cheques both signed as “R. Murti” and “R. Shandilya” in the NRE Account no. 6523. Thus the plaintiffs have not been able to discharge the onus of proof.
Whether, the transfer of Rs. 2 crores is hit by the provisions of Foreign Exchange Regulation Act? If so, to what extent? - FERA is a special legislation, containing exhaustive provisions of investigation, inquiry, trial and appeal. It is a self-contained code, including statutory functionaries specifically and specially constituted to inquire and adjudicate upon any contraventions, as alleged. The provisions under FERA empowers the Directorate of Enforcement and its officers to search, recover, arrest, hold trial for offences and impose punishment for offence under the Act.
The proceedings under FERA are quasi-criminal in nature. The courts have held that the power to adjudge any contravention alleged under the act would lie with Directorate of Enforcement in the first instance.
As no complaint has been filed to FERA. The plaintiffs have also failed to show how the provisions under FERA will be applicable against the defendant bank. Plaintiffs are not entitled for recovery of any amount.
Directing the Petitioner Bank to keep the account frozen of a particular customer - direction to Petitioner Bank to make a demand draft of the frozen amount along with the interest accrued thereon in favour of the Joint Director, Enforcement Directorate - HELD THAT:- It is seen from a perusal of Section 8 (3) and 8 (4) of the Act of 2002 that after an order is passed by the Adjudicating Authority and the provisional order of attachment is confirmed, the Director or any other Officer authorized by him shall forthwith take possession of the property attached under Section 5 or frozen under Sub-Section 1 (A) of Section 17 of the Act of 2002 in such manner as may be prescribed.
As the Respondent Nos. 1 and 2 had expressed their no objection in transferring the amount lying in the account in question and the statutory mandate contained in Section 8 (4) of the Act of 2002, this Court is of the opinion that the direction so given in the communication dated the 12.04.2024 which was received by the Petitioner on 19.04.2024 is required to be complied with.
This Court therefore grants 7 (seven) days time to the Petitioner Bank to comply in terms with the directions so contained in the communication dated 12.04.2024 - Petition disposed off.
Classification and taxability of services related to patent application provided by various foreign companies all located outside India - Service Tax liability in terms of Notification No.36/2004-ST dated 31.12.2004 issued under Section 68(2) of the Finance Act, 1994, read with Rule 2(l)(d)(iv) of the Service Tax Rules, 1994 and in terms of Section 66A of the Finance Act, 1994 - invocation of extended period of demand and penalties for contraventions of various Sections of Finance Act, 1994.
Classification and taxability of services related to patent application provided by various foreign companies all located outside India - HELD THAT:- As rightly claimed by the Counsel, the services which are purely in the form of professional and patent related services cannot be classified under ‘Business Support Service’ for operational assistance for marketing. Reliance placed by the Commissioner on the amended version also is not applicable since it cannot be retrospectively applied for the period under dispute. The “legal consultancy services” was brought to taxable net with effect from 01.09.2009 by amending the Finance Act under Section 65 (105) (zzzzm) which is defined as “To a business entity, by any other business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner and there is no dispute of the fact that this classification has been accepted by the department from 01.09.2009 - there are no reason to classify the above services under BSS and also taking into consideration the fact that the payment of Service Tax under Legal Consultancy Service for the above services from 1.9.2009 not being disputed, we set aside the impugned order.
Since the services received by the appellant are aptly covered under the Legal Services, the question of classifying them under the Business Support Services does not arise. The learned counsel submission that (successor to Service Tax regime), the ‘Legal services’ specifically includes ‘Legal documentation and certification services concerning patents, copyrights and other intellectual property’ as a separate sub-heading emphasises the point that the impugned services clearly fall under the ambit of legal services.
Service Tax liability in terms of Notification No.36/2004-ST dated 31.12.2004 issued under Section 68(2) of the Finance Act, 1994, read with Rule 2(l)(d)(iv) of the Service Tax Rules, 1994 and in terms of Section 66A of the Finance Act, 1994 - HELD THAT:- The appellant is not liable to service tax during the disputed period under BSS, whether they are liable to pay Service Tax under reverse charge mechanism or not is only academic as there is no denial of the fact that they are liable for payment of Service Tax under Reverse charge mechanism.
Invocation of extended period of demand and penalties for contraventions of various Sections of Finance Act, 1994 - HELD THAT:- The appellant herein has been rendering various services such as ‘Scientific or Technical Consultancy’ Service, Technical Testing and Analysis’ Service, ‘Renting of Immovable Property’ Service, ‘Business Auxiliary Service’ etc; on which service tax is discharged regularly. Appellant has also been filing ST-3 Returns regularly and there is nothing on record to show that there is wilful suppression of misstatement of facts. No grounds have been alleged in the impugned order for invocation of suppression and as rightly claimed by the appellant in view of the Hon’ble Supreme Court’s decision in the case of M/S. UNIWORTH TEXTILES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE. RAIPUR [2013 (1) TMI 616 - SUPREME COURT], the question of invoking suppression without any mala fide intention is proved on the part of the appellant.
The demand is set aside for the period from March 2006 to 31.08.2009 along with interest and all other penalties. The demand of service tax from 01.09.2009 under Legal Consultancy service is upheld - Appeal disposed off.
Taxability - revenue-sharing arrangements between theatre owners and distributors - principal contention of the appellant is that the agreements have been misconstrued for contriving a new entity birthed therefrom and that the circular of 2011 has been inappropriately relied upon by disregard of the clear instructions in that of 2009 inasmuch as the former has not disowned the exhortation that each arrangement must be scrutinized for ascertaining the elements of service, as set out in Finance Act, 1994, as prelude to tax.
HELD THAT:- ‘Parallel’ is an expression deployed in context of the film industry but here we find two parallel lines - of constitutional restriction disbarring levy on screening of films and fictional conception of an entity excoriating the flesh and blood of the charging provision - sought to be converged for bringing the ‘box office’, or part thereof, within the tax net of Finance Act, 1994. The implication is that the ‘box office’ manifests the joint venture between the exhibitor and distributor and, though not liable to tax of itself, had incurred costs of procuring ‘service’ from the two collaborators of which provision of ‘support service of business or commerce’, enabling the venture to screen films, was sought to be fastened on the exhibitor -
Once again, and with the additional benefit of subsequent developments in the above dispute, the Tribunal had cause to look at another controversy, and with substitution of the distributor by ‘association of persons’ as recipient, identical to the one now here in M/S. INOX LEISURE LTD. VERSUS COMMISSIONER OF SERVICE TAX-V, MUMBAI [2022 (3) TMI 1256 - CESTAT MUMBAI]. It was noted therein that the earlier decision was applicable even in the changed circumstances of ‘negative list’ and any contrary stand on taxability was doubtlessly unacceptable.
Thus, the demand and penalty in the impugned order have no basis in law and must be set aside - appeal allowed.
Benefit of input service tax credit - short payment of Service Tax by arriving at the demand on the net receipt basis - Extended period of limitation - whether there is any infirmity in the Order of the Commissioner (Appeals) who has partly upheld the Order of the Original Authority or otherwise?
Benefit of input service tax credit for the year 2015-16, which was to be adjusted against the demand for the same period - HELD THAT:- It is found that when the Commissioner (Appeals) has allowed the deduction to the extent of Service Tax paid by their vendor from the gross value for working out differential demand, which has not been disputed by the Revenue nor appealed against, the same principle will have to be applied for the remaining years i.e., 2014-15, 2016-17 & 2017-18 (up to June, 2017). Commissioner (Appeals) has only stated that as the Appellant failed to submit any Cenvat Credit account showing that they had taken the credit in their books of accounts, credit cannot be allowed particularly in view of the restriction that Cenvat Credit has to be taken within one year from the date of issue of invoice - Commissioner (Appeals) should have given a detailed speaking order as regards denying the Appellant’s claim for said deductions also. Therefore, this issue needs to be re-determined by the Commissioner (Appeals) where the Appellants will be at liberty to produce all supporting documents for seeking such adjustment/deduction.
Short payment of Service Tax by arriving at the demand on the net receipt basis, without giving them the benefit of cum-tax value - HELD THAT:- The Commissioner (Appeals) has already extended this benefit to the Appellant and recalculated the Service Tax paid as Rs.6,71,569/- (Para 14). Therefore, there is also no reason to interfere with this finding of the Commissioner (Appeals) on this ground.
With regard to Service Tax of Rs.47,683/- confirmed after abatement of 67% as against applicable 60%, the Commissioner (Appeals) has in terms of Rule 2A(ii)(a) of the Service Tax (Determination of Value) Rules, 2006 held that abatement admissible will be 60% and not 67% and therefore, upheld the demand of Rs.47,683/-. However, with regard to Service Tax demand of Rs.77,002/- confirmed on account of short payment of Service Tax for the period 2017-18 (up to June, 2017), since there was no dispute about the short payment nor Appellant has made any specific submission, confirmed demand was upheld as such. Therefore, on this issue also there appears no infirmity in Impugned Order - barring the issue of confirmation of demand of Rs.47,683/- by resorting to Rule 2A(ii)(a) of Service Tax Rules and not allowing certain adjustments against Service Tax paid to vendors/sub-contractors for remaining years, the rest of the Order does not need any interference as there is no ground substantiated by the learned Advocate to suggest that there was any gross error in arriving at such calculation or in denying any legal rights of the Appellant in the facts of the case or evidence on record.
The rules relied upon by the Commissioner (Appeals), was not invoked in the SCN, as admitted by the Adjudicating Authority also and therefore, the same could not become the basis for confirming the demand when the grounds on which demand is proposed to be confirmed was not disclosed in the SCN, in view of settled legal position in this regard - the demand upheld by the Commissioner (Appeals) is not tenable and requires to be set aside. Similarly, the contention of the Appellant regarding eligibility for adjustment for remaining years also needs to be reexamined in view of lack of detailed reasons given for denial.
Extended period of limitation - HELD THAT:- In the facts of the case, it is obvious that the Appellants were following certain method of calculation for discharge of Service Tax which was not proper or in accordance with the applicable laws, Rules, etc. The whole discrepancy was noticed only on detailed verification and plausible submissions made by the Appellants. Some of the submissions like deduction of Service Tax paid to the vendors, though accepted by the Commissioner (Appeals), and not disputed by Revenue, are debatable on the fair reading of applicable legal provisions which require service provider to discharge Service Tax and the service recipient is required to pay the Service Tax. The recipient of service on which service tax has been paid is also entitled to take credit and utilize against his further liability subject to provisions of Cenvat Credit Rules - Since the Commissioner (Appeals) has already given the benefit in this regard and this aspect is not being disputed by the Revenue, this issue is not being examined. However, the fact remains that though the Appellants have claimed bonafide belief of the practice that was being followed by them regarding deductions from the gross value, it could not be said that following wrong practice or inconsistent practice which is not permissible under the law, would tantamount to their disclosure of facts to the Department and in turn prevent the Department from invoking the extended period.
In the facts of the case, the grounds on which the Commissioner (Appeals) has upheld the decision of the Adjudicating Authority for invoking extended period are correct and therefore, there is no need to interfere with the findings of the Commissioner (Appeals) on this issue. In other words, the extended period will be applicable in the facts of the case.
The Order of the Commissioner (Appeals) does not need any interference, except to the extent of its confirming the demand of Rs.47,683/- which cannot be sustained and denial of adjustment for the years 2014-15, 2016-17 & 2017-18 (up to June, 2017) without giving adequate reasons for its denial. This issue therefore requires to be re-determined by the Appellant Authority on the basis of documents submitted including any other relevant documents which Appellants may adduce in support of their claim. Penalty proposed under Section 78 will also has to be re-determined in view of final confirmed demand liable to be paid by the Appellants.
The Appeal is therefore partly allowed by way of setting aside the Order of confirmation of Rs.47,683/- by Commissioner (Appeals) and remanding the issue of eligibility and extent for adjustment against demand for the years 2014-15, 2016-17 & 2017-18 (up to June, 2017).
The Supreme Court disposed of the appeal due to low tax effect, as the impact of taxation was less than Rs.2 Crores. Any legal questions arising from the appeal can be raised in another case.
CENVAT Credit - input service - place of removal - services received for the purposes of export of the finished goods - HELD THAT:- The issue has been examined by this Tribunal in the respondent’s own case COMMR. OF CENTRAL EXCISE, CUS. & SERVICE TAX, BHUBANESHWAR-I M/S. NALCO LTD. [2024 (8) TMI 593 - CESTAT KOLKATA] for the another unit, wherein this Tribunal has observed 'Since the fact of taking the Cenvat Credit on a monthly basis on account of such ISD invoices was very much reflected in the ER-1, the Department cannot take the stand that Respondent has suppressed any fact.'
The respondent is entitled to the Cenvat Credit of the service in question as “input service” in terms of Rule 2 (l) of the Cenvat Credit Rules, 2004 - there are no infirmity in the impugned order - appeal dismissed.
Levy of interest on the duty calculated to be short-paid and appropriated against their payment - finalisation of provisional assessment - Rule 7(4) of the CER, 2002 - HELD THAT:- The principle laid down in in Steel Authority of India Ltd. [2019 (5) TMI 657 - SUPREME COURT] is loud and clear that on finalization of provisional assessment, the interest is to be calculated of the duty short-paid from the succeeding month on which the said duty was payable. This principle has been subsequently endorsed by the Hon’ble Supreme Court in Bharat Heavy Electricals Ltd.’s case. The judgment cited by the learned advocate for the appellant in the appellant’s own case is in a different context and set of facts.
In the present case the Appellant has voluntarily discharged the differential duty short paid and chose not to claim refund of the excess duty paid indue course of clearance to their other related interconnected undertaking, obviously for the reason that the said Unit has already availed credit on the excess amount paid. Therefore, to ascertain the interest payable on the differential short paid on finalization of the provisional assessment for the Financial years 2008-09 & 2009-10, in the light of the judgments of Hon’ble Supreme Court in Steel Authority of India Ltd., the matter needs to be remanded to the adjudicating authority for calculation of interest.
The impugned orders are modified and the appeals are disposed of by way of remand to the adjudicating authority.
Prosecution for the offences punishable under the Narcotic Drugs and Psychotropic Substances Act, 1985 - illegal transport of pentazocine, a psychotropic substance, from Hajipur to Lucknow by train for being sold in the market as an intoxicating item - HELD THAT:- In the facts of the case, the consignment was booked by accused no.1, and therefore, he was found to be transporting the psychotropic substance in contravention of Section 8(c) of the NDPS Act. There is no allegation against the appellant of transporting the contraband. The consignment was booked in the name of the accused no.1 as per the prosecution case. Therefore, unless it is proved that the appellant had supplied the consignment to accused no.1 or was a part of a criminal conspiracy to commit an offence under Section 22(c), the appellant cannot be punished.
Perusal of the evidence of accused no.3, who was examined as a defence witness, shows that he was carrying on the business of M/s Maheshwari Medical in his wife's name. He stated that he issued invoices for sending Fortwin injections to the appellant. However, there is no evidence on record to show that accused no.3 procured the contraband that is the subject matter of the prosecution and handed it over to the appellant or accused no.1.
There is no recovery from the appellant of any incriminating material. There is no evidence to show that the contraband tried to be transported by accused no.1 by railway parcel was delivered by or on behalf of the appellant to accused no.1. There is no evidence of any conspiracy against the appellant. Therefore, the respondent has not established the offences punishable under Sections 22(c) and 29 of the NDPS Act against the appellant beyond a reasonable doubt - In the charge, there is no reference to the allegation of commission of an offence under Section 29 of the NDPS Act.
However, it is not necessary to go into the question of whether non-framing of charge under Section 29 of the NDPS Act has resulted in the failure of justice. The reason is that there is absolutely no legal evidence on record to show that the contraband attempted to be transported by accused no.1 by a railway parcel was supplied to him by the appellant. There is no evidence of the appellant's participation in any conspiracy.
The conviction of the appellant cannot be sustained - the impugned judgments set aside and the appellant is acquited of all charges against him - appeal allowed.
Detention order - smuggling - contraband gold - baggage - Non-supply of relevant documents (WhatsApp chats) - right of the detenus under Article 22(5) of the Constitution of India - HELD THAT:- In the present case, the detenue had sought the copies of the said WhatsApp chats. However, the Division Bench of the High Court in the present case, while rejecting the case of the detenue, observed that the detaining authority had arrived at a subjective satisfaction on the basis of various documents and that non-supply of the WhatsApp chats would not vitiate the detention order. It, therefore, held that the findings of the Coordinate Bench of the same High Court in the cases of Nushath Koyamu [2022 (6) TMI 326 - KERALA HIGH COURT] and other connected matters in respect of other detenus could not be followed in the present case.
The Division Bench of the High Court while passing the impugned judgment and order should have followed the view taken by another Division Bench of the same High Court specifically when the grounds of detention and the grounds of challenge were identical in both the cases. In the event, the Division Bench of the High Court was of the view that the earlier decision of the Coordinate Bench of the same High Court was not correct in law, the only option available to it was to refer the matter to a larger Bench.
Order of detention is quashed and set aside - Appeal allowed.
Dishonour of Cheque - burden of proof to rebut the presumption - presumption under Sections 118(a) and 139, NI Act - Section 313 of CrPC - HELD THAT:- When presumption under Section 139 was raised, Trial Court ought to have conducted proceedings basis that the cheque was issued in discharge of a debt or liability towards the complainant. At this juncture, the onus was on the accused to rebut the presumption under Section 139. Had the accused been successful in rebutting said presumption, the onus would have then shifted onto the complainant/appellant. The fundamental flaw on part of Trial Court was failing to note effect of the presumption under Section 139 NI Act. As a result, Trial Court erroneously proceeded to deliberate upon want of evidence on part of appellant/complainant i.e. no interest was charged, friendly relations between the parties were not proved, financial capacity not established, and most importantly, guilt of the accused was not proved beyond reasonable doubt.
Supreme Court in Sumeti Vij v. Paramount Tech Fab Industries [2021 (3) TMI 383 - SUPREME COURT] observed that statement under Section 313 CrPC is not substantive evidence of defence by accused, and hence, same is insufficient for the purpose of rebuttal of presumption under Section 139 NI Act. Much like the present case, in Sumeti Vij accused had not replied to legal notices sent, nor had made any payments thereafter. Furthermore, while accused gave a statement under Section 313 CrPC, defence evidence was not led therein even though accused pleaded not guilty and claimed trial.
Presumption under Section 139 read with Section 118 of the NI Act is essentially based on pure common sense. Instead of having the accused prove to the contrary, the accused is acquitted, as in this case, without having led any defence evidence and purely relying upon the inconsistencies in the affirmative proof provided by the complainant. The law and its application, is therefore turned on its head.
This Court is of the view that there was a fundamental error in the approach taken by the Trial Court whereby it went on to dissect the case put up by the appellant, instead of first examining whether the respondents had rebutted the presumption under Section 139 of NI Act.
Seeking grant of bail - involvement in business of prohibited drugs and for recovery of 3600 tablets of Lomotil and 298 tablets of Alprax 0.5 - HELD THAT:- Taking into consideration the entire facts and circumstances, but without commenting on merits thereon it is required to be considered at the time of adjudication of bail application, it is opined that petitioner may be enlarged on bail in present case at this stage.
The petitioner is ordered to be enlarged on bail, subject to fulfilment of conditions imposed - petition allowed.
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