A

TAX Update
Newsletter on Indirect Taxes

16th October, 2015

Issue 4

GST

Central Excise

Service Tax

Customs

Foreign Trade

TAX Update Issue 4, Oct 2015

Dear Readers,

In this issue

Greetings from Team SRD Legal.

Show Cause Notice cannot be issued after

five years, even if no limitation is

The decision in Radhe Renewable Energy

prescribed in law

Development Pvt. Ltd. directly affects some of

Credit available on Welding Electrodes

our clients. In spite of this, we should

used for repair and maintenance of

machinery

Buyer of capital goods cannot be called

seggregate the contracts for service and supply

its removal from factory

of goods.

Refund cannot be denied on the ground

that the amount was not debited on the

Some clients have complained that TAX

date of filing the claim

Update is too lengthy. We assure you that we

Cenvat

Credit

can

be

availed

by

paid for erection commissioning at

dispute does not arise. The best course is to

upon to pay an amount equal to credit on

manufacturer of machinery, of the tax

carefully structure our transactions so that the

are presenting only the distilled information

which we believe, is of use to most of our

customers site

clients. At the same time, we are concious that

GTA - 70% abatement is available to

the information is mainly addressed to our

various ancillary services as well

clients

Commissioner (Appeal) has no power to

professionals. Therefore we are obliged to

condone delay beyond thirty days

loosen the language and also to add a little

Service Tax was not payable on quarters

and

not

to

advocates

or other

explanation.

constructed for employees of New Parli

Thermal Power Station

Just to remind, Service Tax Return for Apr to

Ore Concentrate is different from Ore

Department

must

pay

interest

on

Sept 2015 is due by 25th October, 2015.

delayed refund of SAD.

Customs Penalty under Section 112 (a)

(ii) leviable only if the goods are dutiable

We

await

for

or prohibited

mail@srdlegal.in.
Manoj Kasale
Advocate
16th October, 2015

2 SRD Legal, Advocates & Consultants

your

suggestions

at

TAX Update Issue 4, Oct 2015

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

3 SRD Legal, Advocates & Consultants

TAX Update Issue 4, Oct 2015

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.

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.

ii.

Ultra-Tech Cement Ltd. vs. CCE, Pune

[2015-TIOL-1826-CESTAT-MUM]

iii.

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

iv.

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

v.

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.
Coca Cola had not availed
Cenvat Credit on the goods.
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.
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.
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

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

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

4 SRD Legal, Advocates & Consultants

TAX Update Issue 4, Oct 2015

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 Honble 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.

Cenvat
Credit

Machinery
manufacturer engaged others to
carry out erection, commissioning
of machines at its customers 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 customers
premises. The department argued that

Sandoz Pvt. Ltd. Vs. CCE, Belapur

2015 TIOL 2076 CESTAT MUM

5 SRD Legal, Advocates & Consultants

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 customers

TAX Update Issue 4, Oct 2015

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 Honble Tribunal held that the
manufacturer is entitled to avail credit.
It observed that

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.
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.
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.

vi)
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;
vii)
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
Radhe Renewable Energy Development
erection, commissioning &
Pvt. Ltd. Vs. CCE & ST, Rajkot
installation
from
their
customers;
[2015(315) ELT 33 (Tri. Ahd)]
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
6 SRD Legal, Advocates & Consultants

i)

TAX Update Issue 4, Oct 2015

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.

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
dated 05/10/2015

No.186/5/2015-ST

Appeal Limitation Commissioner

(Appeal) has no power to condone
delay beyond thirty days

It is of utmost importance to file appeals

The Central Board of Excise & Customs
within the prescribed period of
clarified that abatement of 70% is
limitation. Even a meritorious appeal
admissible to various ancillary services
would get dismissed if it is filed beyond
as well. It has been clarified that the
the limitation period. The present period
abatement would be admissible in both
of limitation (for C. Excise as well as
the cases viz. when such ancillary
Service Tax matters) is as under:
services are provided by GTA himself or
may be subcontracted by the GTA
Appeal Before
Appeal to be filed
subject to the condition that GTA issues
within
a consignment note and the invoice
Commissioner
C. Excise matters issued by the GTA for providing the said
(Appeals)
60 days
service includes the value of ancillary
Service Tax matters
services provided in the course of
Two months
Tribunal
Three months
transportation of goods by road. These
(CESTAT)
services are not provided as independent
High Court
180 days
activities but are the means for
Supreme Court
60 days
successful provision of the principal
7 SRD Legal, Advocates & Consultants

TAX Update Issue 4, Oct 2015

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
explanation that

also

contained

an

"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
departments 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-TIOL2210-CESTAT-MUM

8 SRD Legal, Advocates & Consultants

TAX Update Issue 4, Oct 2015

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

9 SRD Legal, Advocates & Consultants

TAX Update Issue 4, Oct 2015

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 (06/2008Cus) 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

10 SRD Legal, Advocates & Consultants

TAX Update Issue 4, Oct 2015

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 Honble 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 Honble High
Court upheld the Tribunals order and
dismissed the appeal of the department.
CC, Chennai Vs. Jay Ar Enterprises &
Others 2015 TIOL 2241 HC
MAD CUS

11 SRD Legal, Advocates & Consultants

TAX Update Issue 4, Oct 2015

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: mail@srdlegal.in

Team SRD Legal

Mr. Sanjay Dwivedi, Advocate
Mr. Manoj Kasale, Advocate
Mr. Raymond George, Advocate
Mrs. Savita Dwivedi, Advocate

93204 56555
96190 29095
98204 80597
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
provided in this newsletter without obtaining professional advice after a thorough
examination of the facts and circumstances of a particular situation. There can be no
assurance that the judicial/quasi judicial authorities may not take a position
contrary to the views mentioned herein. Although we endeavour to provide accurate
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
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12 SRD Legal, Advocates & Consultants