CA Shishir Agrawal

About Notes: The case laws are summarized from supplementary study material issued by The Institute of Chartered Accountants Of India for the Final Examination to be held in May 2015. For detail case study, please visit http://220.227.161.86/35311scasesp7.pdf .The case laws in italics are fresh addition in current supplementary module.

Also Read- Income Tax cases relevant for CA Final Nov 2015 Exams 

 CA FINAL- Service Tax Case Law Relevant For Nov 2015 Exams
EXCISE DUTY

Sr No. Case law reference Judgment in exam style
Basic concept
1.         Balrampur chini Mills Ltd.(F) (Related to excise to duty on Bagasse)

Bagasse is an agriculture waste and also marketable goods. But, the duty can’t be levied on production of bagasse as the same is not produced from manufacturing activity.

2.         Osnar Chemicals Pvt. Ltd.(F) (Related to determination of activity being manufacturing of not)

The assesse carries a process of adding polymers and additive to bitumen to produce PMB and CRMB. The department contended that the process creates different products than bitumen which are also marketable and specified in the first schedule of tariff Act. The High Court held that since the process has resulted in the improvement of the product only and the end use of the both input and output is same i.e. to construct the road, the process can’t be called manufacturing activity u/s 2(f).

3.         Grasim Industries Ltd.(F) (Related to Excise Duty on generation of metal scrap on repair of capital good)

Where the metal scrap and waste is produced from the repair of plant & machinery, the excise duty can’t be levied on this process since it doesn’t satisfy the definition of manufacture. Manufacturing activity as per sec 2(f) includes any process which creates any change in raw material to bring it towards being final goods. Since the process of repair of plant & machinery doesn’t have relation with raw material and final goods, the process can’t be called manufacturing activity.

4.         Medley Pharmaceutical Ltd.(A) (Related to marketability of a good which is banned to sale)

Where the goods is statutory prohibited from being sold, it can’t be said that the same is not marketable. Salability doesn’t have any effect on marketability as the goods which are not sold are also subject to the excise duty. The High Court on aforesaid plea held that the goods which are prohibited from being sold by any law in India will be subject to excise duty.

5.         Usha Rectifier Corp.(A) (Relating to the levy of duty of assembling of Testing equipment)

The assesse has assembled testing equipment by importing the spare parts in order to save import duty. The same was evidenced by the board report also. On the issue of levy of the excise duty on such assembly, the apex court held that since the assembling has been done for saving of import duty, the assembling process is exposed to levy of excise duty.

6.         Nicholas Piramal India Ltd.(A) (Marketability of goods having short shelf life)

The goods having short shelf life are capable of being brought and sold in the market. Thus goods having short shelf life are marketable and hence considered as goods under Excise Duty.

7.         Solid & Correct Engineering works and ores(A) (Related to movability)

Where the plant has been assembled and fixed to the earth through nuts and bolts with the intent to not fix it permanently, the plant will said to be movable property. Hence the same is exposed to levy of Excise Duty.

8.         Tarpulin international(F) (Related to determination of manufacture)

The stitching of tarpaulin sheets and making eyelets does not change its basic character of raw material and end product. The process since doesn’t bring any new material in existence, there could be no levy of excise duty.

9.         GTC Industries(F) (Related to levy of excise on cutting of aluminum foil)

Where the aluminum foil is cut into horizontal pieces and fixed no of cigarettes has been wrapped into it to protect the same. The process of cutting of aluminum foil can’t be said to be manufacturing activity as the nature of aluminum foil has not been changed. Further the process has not led to the aluminum foil marketable but made it usable for packing.

10.     Sony Music Entertainment Pvt. Ltd.(F) (Related to levy of excise duty on repacking of the compact disc.)

The assesse has imported the compact disc audios and videos in pack of fifty noses and repacked the same into individual pieces. As per the High Court, the activity can’t be concluded as process of manufacturing as the disc was complete when imported.

 

Valuation of excisable goods
11.     Super Synotex India Ltd(A) (Related to inclusion of VAT collected but not paid to state exchequer into transaction value)

The assesse collected the sales tax from its customer and retained 75% of collection as per the scheme of state law. The assesse contended 100% deduction of sale tax from the transaction value for the payment of the excise duty. The department claimed that excise duty should be paid on the transaction value arrived by the deduction of sales tax actually paid by the assesse to the state revenue department. The Apex Court held that the assesse is required to pay the duty on the transaction value which includes the sales tax retained by the assesse since as per the definition of transaction value u/s 4 of central excise Act, the duty or taxes which are actually paid by the assesse is allowed as deduction from the gross amount received for arriving at transaction value.      

 

12.     Tata Motors Ltd.(F) (Related to determination of assessable value on sale of car by the manufacturer to the dealer)

The assesse manufacturer sales car to the dealer. As per the agreement between them, the dealer were required to provide pre delivery inspection and after sales service on the sales of car. The department contended that the expenses incurred on such inspection and after sales service should be included in the assessable value of the car when sold by the assesse manufacturer as per the circular dated 1st July 2002, further affirmed by circular dated 12th December, 2002. The High Court held that assessable value will not include the PDI charges and after sales service charges since the circular issued to this effect is not in conformity of provision of sec 4(1)(a) read with sec 4(3)(d). Further the same could be included only when they were charged by the assesse to the buyer.

 

CENVAT Credit
13.     Prag Bosimi Sythetics Ltd.(F) (Related to CENVAT credit of duty other than NCCD for the payment of NCCD)

The High Court in this case law held that if merely because of CENVAT Credit in respect of NCCD can be utilized for the payment of NCCD only, it can’t lead to the conclusion that the payment of NCCD can’t be made by the utilization of other duties.    

 

14.     KCP Ltd.(A) (Related to CENVAT credit on the purchase of machinery sold and transported along with the machinery manufactured by the assesse)

Where the assesse has purchased machinery with intention to sale and transport it along with the machinery manufactured by the assesse, the CENVAT credit on such bought out machinery shall not be allowed as the bought out machinery has not been used in assesse’s premises and has been sold as it is. The same shall be treated as trading activity. Thus Exempted from excise and non cenvatable.

15.     Satish Industries(F) (Related to the CENVAT credit on the capital goods)

Where the assesse has taken 100% CENVAT duty on capital goods in the first year itself but has utilized only 50% of the duty. i.e. 50% of the duty is still to be utilized in subsequent year, no prejudice is done by the assesses to the department since there is no leakage of the revenue.

16.     Flex Engineering Ltd.(F) (Related to CENVAT Credit on the testing material)

Where the testing process is pre condition to make the product saleable. Then it is to be construed as testing process is done to bring the product in the marketable condition so as to levy of excise. Thus the CENVAT credit on the testing material is available since the same is necessary to bring the product into saleable condition.

17.     Tata Advanced Materials Ltd.(F) (Related to reversal of CENVAT credit taken on capital goods)

Where the capital good had been destroyed by the fire and insurance company reimbursed the value of capital good inclusive of excise duty paid on the same, the CENVAT credit utilized by the assesse can’t said to be wrongly utilized. The department can’t demand the reversal of CENVAT credit on the basis of such fact.

18.     Ashok Kumar H. Fulwadhya(F) (Regarding imposition of penalty on director on wrong availment of CENVAT credit)

Where the wrong CENVAT credit has been availed by the assesse company manufacturer, the penalty can’t be imposed on the director of the company. As per rule 15(1) of the CENVAT Credit rules, 2004 the penalty can be imposed for wrong availment of CENVAT credit on the person who has taken the wrong CENVAT credit. Thus in this case the penalty should be levied on the company pnot on the director of the company.

19.     Stelko Strips Ltd.(F) (Availment of cenvat credit on the basis of private challan)

Where the payment of duty is not disputed, the CENVAT credit can be taken on the private challan provided the same is not fake and there is certification that duty has been paid properly.

20.     Cadila Healthcare Ltd.(F & A) (Related to CENVAT credit on the service tax paid on testing of medical equipment and on service provided by foreign selling agent)

The assesse had taken the testing service of clinical samples of the medicament which was required for the commercial production of such medicament. The High Court on the issue of CENVAT credit of service tax paid on testing service held that since the service availed is directly related to manufacture of the medicament, the same is eligible for CENVAT credit.

Further the assesse sold the medicament through the foreign selling agent, on such issue of CENVAT credit on such service the High Court held that since the agent are directly involved in sale rather than sale promotion, the service provided by them is not covered in the main or inclusive part of the definition of input service. Hence the input of service tax can’t be made on service of such agent.

21.     Sintex Industries Ltd.(A) (Cross CENVAT credit in 2 separate factory having common boundary wall)

The assesse had two factories for textile division and plastic division having separate excise registration no. but a common PAN No. The assesse installed a DG set in textile division factory to ensure the continuous supply of electricity. The DG set also used to transmit the electricity to plastic division factory on need. The issue on reversal of CENVAT credit on the input of electricity produced transmitted to plastic department the High Court held that the assesse has to reverse such duty irrespective of the fact that the PAN no. of the factories are same as the assesse has itself declared those factories as separate factories by taking the separate registration no. of the factories.

Export Procedure
22.     UM cables Ltd.(F) (Related to rebate on export on non-production of ARE 1)

The High Court in this issue held that the export condition and limitation for the claim of the rebate are mandatory but the procedure for claiming the same are directory in nature. If the assesse has not produced ARE 1 but can prove the authenticity of export by any cogent evidence, the rebate on such export can’t be denied.

23.     Rajasthan Textile Mills(A) (Related to the rebate on input material and finished goods)

The High Court in this issue opined that as per rule 18 of Central Excise rules, 2002 rebate on export can be granted either on raw material used on the production of the goods exported or on duty paid on the finished goods exported but can’t on both. 

 

Demand, Adjudication and offences
24.     Delphi Automotive system Ltd.(F) (Related to the penalty u/s 11AC)

Where there is divergent judicial pronouncements regarding any issue and the assesse choose to any of them, the penalty can’t be levied on the assesse since there in no mens- rea mind on the part of the assesse

25.     Hans Steel Rolling Mill(A) (Related to the time limit of notice u/s 11A for duty under compound levy scheme)

The Supreme Court held that the time limit as per sec 11A is not applicable for the duty assessed under compound levy scheme since the compound levy scheme is altogether different scheme.

26.     Jay Kumar Lohani(A) (Related to the issuance of another SCN after first SCN issued)

Where the SCN has been issued for the confiscation of seized goods, department can issue another SCN for recovery of dues and penalty.

27.     Castrol India Ltd.(A) (Related to the payment of reduced penalty beyond the time limit of 30 days)

The assesse didn’t pay the reduced penalty u/s 11AC(1)(c) and preferred to go into appeal against the levy of penalty u/s 11AC. The Tribunal affirmed the penalty u/s 11AC and directed that privilege of payment of reduced penalty u/s 11AC(1)(C) shall be available to assessee if it pays duty within 30 days from the order of the Tribunal. The same has been challenged by the Department and the High Court held that on proper read of 11AC The Tribunal can’t increase the time of payment to avail the privilege of reduced penalty.

28.     Balaji Trading co.(F) (Related to penalty as per rule 25)

Where the assesse has clandestinely cleared the excisable goods and stored in premises of another person for further sale, the penalty on such another person can’t be levied as per rule 25 since the person covered in rule 25 doesn’t include such another person.

29.     Nanumal Glass Works(A) (Related to analysis of service of the order)

Where the advocate of the assesse who is authorized agent of the assesse is present while order is pronounced by the open court, the order shall be deemed to be served to the assesse irrespective of where the written order has been sent to the assesse not.

Refunds
30.     ICMC Corporation Ltd.(F) (Related to correction of book entry)

Where the CENVAT credit is reversed by mistake, the availment of CENVAT credit to rectify such reversal does not require filing of refund u/s 11B.

31.     Superintendent Engineer TNEB(F) (Related to application of doctrine of unjust enrichment to state undertaking)

The High Court in this case held that the doctrine of unjust enrichment is not applicable to state undertaking as far as it is concerned to state because the state represents people of India and no one can state people are unjustly riched.

Appeals
32.     Khanpur Taluka co-op. shippin Mills Ltd.(A) (Related to the acceptance of writ petition by the High court)

Where the appeal against the adjudicating authority has not been accepted due to tie barred, the High Court can’t accept the writ petition for the correctness of order sought to be appealed earlier.

33.     Texcellence Overseas(F) (Related to condone of delay in appeal)

The High court in this case held that the where the total length of delay is small and the case has extremely good grounds of merit the appeal can be accepted in exceptional circumstances to avoid injustice to petitioner.  

34.     Habib Agro Industries (F) (Related to condone of delay in appeal)

The High court in this case quashed the rejection of the 45 days delayed filed appeal by the CESTAT on the reason that mother of authorized representative died while returning from one month foreign trip stating that the reason filed by the assesse can’t be considered unreasonable for the condonation of delay.

35.     Tikitar Industries(F) (Relating to raise of same issue in different period)

Where the department has not choose to further appeal on any issue and the issue has reached its finality, the department can’t raise the same issue for another period.

36.     RDC Concrete India Pvt.Ltd.(A) (Related to reconsideration of evidences/argument)

Where the CESTAT has rejected any argument and decided the appeal it can’t accept the same argument in any proceedings like rectification of mistake apparent from record.

Exemption Based on value of clearances (SSI)
37.     Xenon(F) (Related to the penalty on using dubious company to avail SSI exemption)

The assesse floated another company of the original company to avail SSI exemption. The same was established by the department that the transection carried in another company (dubious company) was carried out by original company. The department levied the penalty on both companies for wrong availment of SSI exemption benefit. On this issue the High Court held that department can’t levy the penalty on the dubious company as the transaction are not carried out by the dubious company but the original company.

38.     Elex Knitting machinery co.(F) (Related to using brand name of the firm in which assesse is partner)

The assesse used the brand name belonging to a firm in which assesse was partner. On the issue whether the clearance of goods bearing such brand will be eligible for SSI exemption or not, the Honorable High Court held that the brand of the firm in which assesse is partner also belong to the assesse partner as the assesse is co-owner of the firm. Thus the same is eligible for SSI exemption.

 

39.    

Doera Engineering Works(A) (Related to clearance from two firms having common brand names)

Where the two firms clear the goods bearing same brand and both the firms have common partners belonging to same family, the clearance made by both firm shall be clubbed for the purpose of SSI exemption.

40.     Australian Foods India Pvt. Ltd.(A) (Relating to SSI exemption on goods does not bear brand name physically)

The assesse sold the goods with the brand name cookie man. At the same time assesse also used to sale the loose cookies in the plates or tissue paper. The assesse claimed SSI exemption on cookies sold loosely. The revenue objected the same and the High court gave decision in favor of the department. The High Court gave the view that the whether the goods bear brand name or not is not dependent on the physical bearing of brand on it as it would result absurd result on the liquid or gases goods which are not capable of showing brand. Thus it is the environment which defines whether the good is branded or not. In the given case the goods are branded as the same are sold with the environment of cookies of “Cookie Man” and thus ineligible for SSI exemption.

Notification, department clarifications and trade notices
41.     S & S power Switch Gear ltd.(F) (Related to validity of demand notices issued for reclassification of excisable goods)

Where department has reclassified the excisable goods, the department can’t raise demand for the misclassification of goods before the date of the circular of reclassification.

Settlement commission
42.     Vadilal Gases Ltd.(F & A) (Related to acceptance of case in settlement commission submitted without payment of duty agreed along with the interest)

The SETCOMM can’t accept the case submitted without the payment of the duty along with the interest as it does not satisfies the technical requirement of section 32F. However the commission can accept the case one the defects are eliminated i.e. duty along with the interest has been paid.

43.     Icon Industries(A) (Related to acceptance of case where the return is filed for consolidated period)

Where the assesse has filed the consolidated return for past periods, it would not satisfy the conditions u/s 32E. The commission is right in rejecting the application for the case.    

Note: Apart from these, the very latest case laws are yet to be compiled and will soon be published. For any suggestions and feedback, mailto:shishir.lodha@gmail.com.

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