Daa-tax Alert Oct 2011

7/29/2019 Daa-tax Alert Oct 2011

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Indirect Tax AlertOctober 2011

D Arvind Associates &

Charted Accountants

99/1, 14th avenue Harrington,Road road, Chennai 31.

Indirect Tax Alert

Production capacity

based duty-Compounded levyscheme

Important Decisions

The assesse engaging in the processing of man made fabrics wascovered under the compounded levy scheme. They had two

stenters installed in their factory premises out of which thesecond stenter consisting of four chambers were closed and hadgot them sealed and acknowledged. As per rules abatement wasavailable only on closure of the factory and not on the closure ofhot air stenter and also annual capacity had to be determined.The assessee declared details of stenters installed on the factoryand also the second stenter that was closed and sealed whichwas later removed from the factory. However for thedetermination of duty liability the sealed stenter had to be takeninto account and the final order also confirmed it. The assesseecontended that, the Commissioner while passing the final order

relied upon rules 7(a) of the Central Excise Rules and stated thatabatement on the closure of stenter was available only duringcomplete closure of the factory and not on closure of any onestenters. The Commissioner had totally erred in considering therequest for omission of one stenter for the purpose ofdetermining annual capacity as per the rules and also attentionwas drawn to rule 5 which stated that hot air stenter which waspermanently closed could not be taken into account fordetermining the annual capacity. It was held that, the


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Refundclaim-Cenvat/Modvat-Deemed Creditaccumulatedremained unutilized

Cenvat Credit-Inputs

commissioner had not considered the assessees abatementrequest but was determining annual capacity of production

under the rules based on the assessee declaration and thepurpose of determining the annual capacity wasnt the closure ofthe second stenter. Thus the Order wasnt sustainable and theappeal was allowed. The matter was finally remanded to theoriginal adjudicating authority to decide on the annual capacity.

2011(272) E.L.T 379(Tri.-Mumbai)

Ujagar Prints VS CCE Mumbai

The assessee manufacturing/processing, of manmade fabricscleared their final product for home consumption as well asexports. A refund claim filed in respect of unutilized deemedcredit along with inputs used in the goods exported as perCenvat credit Rules. The commissioner had stated that theassessee had failed to produce evidence regarding their homeclearances and hardly had any clearance on duty payments forexport purpose and were unable to utilize the credit of deemedduty in respect of inputs cleared for export under bond. Thecredit of deemed duty could not be refunded to the assessee asthe conditions and limitations as per the notifications had not

been verified by them and also details regarding the shippingbills and proof of exports werent shown. The deemed creditregister filed before the lower authorities showed a balance ofunutilized credit lying in their Cenvat credit account. Thus afterconsidering both parties arguments the case was sent to theadjudicating authority to examine the documents produced bythe assessee in support of their refund claim and passed therefund order. The matter was to be disposed within a month.

2011(272) E.L.T.381 (Tri.-Mumbai)

Makharia Synthetics VS CCE Thane

The assessee manufacturing Sugar and Molasses availed andutilized Cenvat credit on paints/ red lead chemical/primer/ redoxide and M-seal as inputs. Show cause notice was issuedstating that the assessee was not eligible for Cenvat credit whichwas later dropped. Aggrieved by the order the commissionerreceived an appeal from the department who set aside theoriginal order and confirmed the demand rose in the show cause


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Cenvat credit Input andcapital goods.

notice. The assessee contended that they had availed Cenvatcredit on goods such as paints used for repair and maintenance

of various equipments, pipes and machines. But the DR statedthat these items for which credit was availed dint come underthe definition of inputs. After hearing the arguments of both theparties and the factual findings with respect to inputs used inthe assesses factory the impugned order wasnt sustainable andhad to be set aside allowing the appeal and also goods used aspaints within the factory of production were eligible for availingCenvat credit.

2011(272) E.L.T. 383(Tri.-Del)

UG Sugar & Indus Ltd VS CCE Meerut

The assesse utilizing Acetylene and Oxygen Gas for repair andmaintenance of plant and machinery were eligible for Cenvatcredit was the point of issue. The assesses engaging inmanufacturing non ferrous metals and their by products werechargeable to Central Excise Duty and had availed Cenvat crediton Excise Duty paid on the inputs used in manufacturingfinished products. The assistant commissioner confirmed theCenvat credit demand along with interest and penalty. The

assessee filed an appeal before the commissioner stating thatdissolved Acetylene and oxygen Gas used for welding purposesin repair and maintenance of plant and machinery were eligiblefor Cenvat credit as inputs and capital goods but thecommissioner denied credit. But studying the case in detail aftera further appeal in the tribunal and also looking into assesses anorder of Rajasthan high court in a similar case passed an order infavor of the assessee which the DR defended by reiterating thecommissioners findings that the dissolved Acetylene andOxygen Gas used for purpose of welding in repaid andmaintenance of plant and machinery cannot be treated as input.After considering both sides arguments and the arguments ofRajasthan high court which stated that Acetylene and OxygenGas used for welding in repair and maintenance of plant andmachinery were eligible for Cenvat credit and thecommissioners appeals werent sustainable and was set asideand the appeals of the assesse were allowed.

2011(272) E.L.T.393 (Tri.-Del)

Hindustan Zinc Ltd VS CCE Jaipur


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Battery scrap-Dutiability-Demand

Refund-UnjustEnrichment

The assesse manufacturing accumulators availed benefit ofCenvat credit of duty paid on raw materials and capital goods asper Cenvat credit rules. Batteries rejected by the customers werereceived under the warranty claims which were later sent to thesmelter job worker for separating plastic containers and leadmaterials and refining of lead contents under the cover of jobwork challans. A show cause notice was issued confirming dutydemand leviable in respect of lead scrap and plastic containersgenerated in the job workers factory and not returned to therespondent. Also duty demand with respect to lead scrapcleared by the respondent to the job worker was also confirmed.

The commissioner set aside the demand in respect of plasticcontainers scrap and led scrap. The revenue reiterated thatrejected batteries was an input and as such the entire goodsincluding the plastic scrap and lid scrap generation at the jobworkers factory should have been returned by them to therespondent. Thus hearing both the arguments the final judgmentwas that the order doesnt stand impugned and no groundrelatable to the same was found.

2011(272) E.L.T. 405 (Tri.-Ahmd.)

Tudor India Ltd VS CCE Ahmedabad

The assesse processing textiles on job work basis for variouscustomers for excisable goods faced a case of under valuationson the grounds that while computing the assessable value theyhad depressed the value of the fabrics. During investigationsassessee paid the amount under process and the loweradjudicating authority filed a case and dropped a demand. Arefund claim was filed by the assessee who was rejected by theauthority and also was upheld by the commissioner. The assessecontended that amount was paid during the investigation andafter the clearing of the goods and even before the issuance ofshow cause notice. The proceedings were also dropped and theamount werent appropriated by the department thus theamount deposited by them cannot be termed as duty and had tobe treated as deposit and the therefore doctrine of unjustenrichment wasnt applicable. The department contended thatthe refund is based on doctrine of equity and was accepted andapplied in several cases. Before the assessee claims refund he has


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Penalty-Duty paidwithout includingthe cost of packaging inthe assessable value

to show that he had paid the amount for which relief was soughtand did not pass on the burden on consumers and if such relief

wasnt granted losses would be suffered. After going throughthe records and submissions the assesses paid amount duringinvestigations and after the clearance and issuance of the showcause notice. The lower adjudicating authority set aside thedemand which wasnt challenged by the department and thedepartment could not produce any evidence regarding amountdeposited by the assesse was appropriated and therefore thesame wasnt treated as a duty. Also considering past cases theorder in appeal was set aside and appeal was allowed withconsequential relief.

2011(272) E.L.T. 408(Tri.-Mumbai)Jalan Dyeing & Bleaching Mills VS CCE Mumbai

The assesse manufacturing motor vehicles and parts thereof hadcleared certain consignment of motor vehicle parts on paymentof duty without including the cost of packing in the assessablevalue of the goods and had not paid duty on that part of thevalue. A show cause notice was issued proposing levy of intereston the duty under provisions and imposition of mandatory

penalty as per the Central Excise Act. The commissionerappropriated the duty paid towards full discharge of dutyliability, directed payment of interest on the duty and alsoimposed penalty equal to duty on the assesse. The tribunal setaside the order demanding interest and imposing of penalty onthe grounds that entire amount duty prior to issuing a showcause notice was paid. The revenue challenged the order whichwas adjourned for the purpose of production of proof ofpayment of interest on the duty amount and the duty amountwere paid by the assessee and contested the case regardingpenal action on the grounds that penalty imposition does notarise in the present case as per the rules. After hearing thearguments from both the sides the assessee did not evadepayment of differential duty on packaging charges and theingredients of section 11AC necessary to be established for penalaction under Section 11AC of the Central Excise Act wasntattracted against them. The liability of assesse to interest wasupheld and the appeal was partly allowed.

2011(272) E.L.T. 391(Tri.-Chennai)


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Refund claim-Unjustenrichment-Incidence ofduty passed on tocustomer

Bills of entry-Amendment/Correction

Ashok Leyland Ltd VS CCE Chennai.

The assesse filed a refund claim consequent to tribunals finalorder in their favor as regards classification of the sawn timber.The assessee filed a refund claim with the adjudicating authorityfor refund of customs duty, redemption fine and penalty paid bythem. The authority sanctioned the refund of amount paid as asredemption fine and penalty to the assesse. The assesse appealedbefore the commissioner along with a charted accountantscertificate but still the refund claim was rejected on the groundsof unjust enrichment. The charted accountants certificate statedthat the assesse had paid amount after rate of duty was

enhanced from 5% to 15% and the appellant collected theamount of duty as per bills of entry in the invoices and aftergoing through the submissions the commissioners orderrejecting refund claim did not require interference and theappeal of the assesse was rejected.

2011(272) E.L.T. 416(Tri.-Del.)

Vikas Woods Works VS CCE Jaipur

The assesse had filed bills of entry which were facilitated underRMS system and the goods were cleared without assessmentand examination on payment of customs duty. Later on therespondent claimed the goods which were cleared underdifferent invoices not meant for them. They had paid excess dutyand filed a refund claim. The lower authority contended thatrefund claim wasnt maintainable without assessment orderhaving been modified or reviewed. The commissioner in hisorder allowed for the assesse applying for amendment orcorrection of the bill of entry. The revenue aggrieved appealedthat the assesse had at no stage challenged the assessment ordertherefore the refund claim was rightly rejected by the loweradjudicating authority but the commissioner directed the loweradjudicating authority to examine the issue and also placed factsof a previous case. The assesse further contended that there wasa genuine mistake on the part of the supplier they have sentwrong invoice and then later filed the correct invoice before thecustoms authorities as per the commissioners advice. Afterhearing both the arguments the goods were cleared for homeconsumption and no case of clerical or arithmetical mistake


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Demand-Cenvat/Modvat

credit-Time limit fortaking credit

Rebate claim- Proceduraland technical lapses.

arose and the assessment order had to be challenged beforefiling the refund claim and finally the revenues appeal was

allowed setting aside the order-in-appeal.

2011(272) E.L.T. 418(Tri.-Mumbai)

Emerson Process Management India Pvt Ltd VS CCE Mumbai

The assesse received inputs namely HDPE bags and entereddetails of inputs so received. They had taken credit on the RG23A part 2 and utilized the same. A show because notice wasissued alleging that credit taken in February on inputs receivedwas not eligible as relevant documents were not dated prior to 6months in violation of conditions. Original authority confirmedthe demand and imposed penalties. The commissioner upheldthe order of the original authority. The advocate had contendedthat the board had issued a circular regarding procedure to befollowed in respect of availing credit on inputs when theeligibility for Modvat being disputed. He also submitted that

jurisdictional superintendent directed them not to take credit onHDPE bags but also ordered freezing of credits in their accounts.The matter was finally decided in favor of the assessee by the

tribunal who stated that restriction to take credit within sixmonths cannot be imposed on inputs received on a previousdate. The division bench submitted their arguments in thepresent case based on facts collected during the period of March1994 to March 1995 and also their RG 23 A and finally came upwith the verdict that the orders could not be sustained and itwas set assigned by allowing the appeal with consequentialrelief.

2011(272) E.L.T. 425(Tri.-Del)

Indica Chemical Industries Pvt Ltd VS CCE Meerut

The assesse manufacturing glass beads filed three rebate claimsagainst duty paid on sliding blister tray used for packaging ofthe glass beads exported by the respondent. The assistantcommissioner rejected the rebate claim on the grounds thatgoods were exported under ARE-1 instead exporting it underARE-2 application which was in contravention of the conditions


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Clandestine removal ofgoods admitted by EOU

before the tribunal butdisputed the rate of dutyand value of goods.

prescribed in the notification. Aggrieved by the said order theassessee filed an appeal before the commissioner who allowed

the same. The assesse filed an appeal before the finance ministryof the Government of India on the grounds that thecommissioner dint take into consideration the fact that theexport goods which were glass beads were exempted from duty.The government also observed that the assesse claimed rebate ofduty paid on inputs used in manufacturing export goods andnot on the duty paid on export goods. The government aftergoing through the facts carefully finally stated that goods wereexported under form ARE-1 instead of form ARE-2 hence therewasnt any infirmity with the order and it was uphold and alsothe revised application was rejected as being devoid of any

merit.

2011(272) E.L.T. 433(G.O.I.)

Banaras Breads Ltd VS Ministry of Finance, Government ofIndia

The assesse being an 100% EOU and manufacturing yarn had aninspection conducted by the preventive staff of the CentralExcise Division who found out that certain amount of goodswere removed in a clandestine manner and without showing inthe books of accounts were sold in the domestic tariff area inexcess of the permissible limit without getting sanction from theconcerned authorities. The assesse had also evaded duty. Twoshow cause notices were issued and the authority in originalpassed a detailed order confirming duty demand and imposed apenalty. The assesse aggrieved filed an appeal before thetribunal who set aside an order to the extent of reduction in dutyand penalty. The assesse dint support the tribunals order andrequested setting aside and remitting the case back to thetribunal for a fresh decision as per law. After going through thesubmissions the tribunals order was set aside and the case to beremitted back to the tribunal for fresh decision in accordancewith law and the civil appeals were disposed off.

2011(272) E.L.T. 343(S.C.)

Euro Cotspins Ltd VS CCE Chandigarh


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Disclaimer

The information contained herein is of a general nature and is notintended to address the circumstances of any particular individual orentity. Although we endeavour to provide accurate and timelyinformation, there can be no guarantee that such information isaccurate as of the date it is received or that it will continue to beaccurate in the future. No one should act on such information withoutappropriate professional advice after a thorough examination of the

particular situation.

Daa-tax Alert Oct 2011

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Transcript of Daa-tax Alert Oct 2011