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Indirect Tax Alert

October 2011 D Arvind Associates &
Charted Accountants Road 99/1, 14th avenue Harrington, road, Chennai 31.

Indirect Tax Alert
Important Decisions

Production capacity based dutyCompounded levy scheme

The assesse engaging in the processing of man made fabrics was covered under the compounded levy scheme. They had two stenters installed in their factory premises out of which the second stenter consisting of four chambers were closed and had got them sealed and acknowledged. As per rules abatement was available only on closure of the factory and not on the closure of hot air stenter and also annual capacity had to be determined. The assessee declared details of stenters installed on the factory and also the second stenter that was closed and sealed which was later removed from the factory. However for the determination of duty liability the sealed stenter had to be taken into account and the final order also confirmed it. The assessee contended that, the Commissioner while passing the final order relied upon rules 7(a) of the Central Excise Rules and stated that abatement on the closure of stenter was available only during complete closure of the factory and not on closure of any one stenters. The Commissioner had totally erred in considering the request for omission of one stenter for the purpose of determining annual capacity as per the rules and also attention was drawn to rule 5 which stated that hot air stenter which was permanently closed could not be taken into account for determining the annual capacity. It was held that, the

The commissioner had stated that the assessee had failed to produce evidence regarding their home clearances and hardly had any clearance on duty payments for export purpose and were unable to utilize the credit of deemed duty in respect of inputs cleared for export under bond. Show cause notice was issued stating that the assessee was not eligible for Cenvat credit which was later dropped. Thus the Order wasn’t sustainable and the appeal was allowed. The matter was to be disposed within a month.Indirect Tax Alert October 2011 commissioner had not considered the assessee’s abatement request but was determining annual capacity of production under the rules based on the assessee declaration and the purpose of determining the annual capacity wasn’t the closure of the second stenter. 2011(272) E.381 (Tri.T. of manmade fabrics cleared their final product for home consumption as well as exports. The deemed credit register filed before the lower authorities showed a balance of unutilized credit lying in their Cenvat credit account.-Mumbai) Ujagar Prints VS CCE Mumbai Refund claim-Cenvat/ModvatDeemed Credit accumulated remained unutilized The assessee manufacturing/processing. The credit of deemed duty could not be refunded to the assessee as the conditions and limitations as per the notifications had not been verified by them and also details regarding the shipping bills and proof of exports weren’t shown.-Mumbai) Makharia Synthetics VS CCE Thane Cenvat Credit-Inputs The assessee manufacturing Sugar and Molasses availed and utilized Cenvat credit on paints/ red lead chemical/primer/ red oxide and M-seal as inputs. 2011(272) E.L. The matter was finally remanded to the original adjudicating authority to decide on the annual capacity. Thus after considering both parties arguments the case was sent to the adjudicating authority to examine the documents produced by the assessee in support of their refund claim and passed the refund order.T 379(Tri. A refund claim filed in respect of unutilized deemed credit along with inputs used in the goods exported as per Cenvat credit Rules.L. Aggrieved by the order the commissioner received an appeal from the department who set aside the original order and confirmed the demand rose in the show cause .

Indirect Tax Alert October 2011 notice.-Del) UG Sugar & Indus Ltd VS CCE Meerut Cenvat credit –Input and capital goods.393 (Tri. The assesse utilizing Acetylene and Oxygen Gas for repair and maintenance of plant and machinery were eligible for Cenvat credit was the point of issue. The assistant commissioner confirmed the Cenvat credit demand along with interest and penalty.L. After considering both sides arguments and the arguments of Rajasthan high court which stated that Acetylene and Oxygen Gas used for welding in repair and maintenance of plant and machinery were eligible for Cenvat credit and the commissioner’s appeals weren’t sustainable and was set aside and the appeals of the assesse were allowed.-Del) Hindustan Zinc Ltd VS CCE Jaipur . 2011(272) E. The assessee filed an appeal before the commissioner stating that dissolved Acetylene and oxygen Gas used for welding purposes in repair and maintenance of plant and machinery were eligible for Cenvat credit as inputs and capital goods but the commissioner denied credit. 2011(272) E. After hearing the arguments of both the parties and the factual findings with respect to inputs used in the assesses factory the impugned order wasn’t sustainable and had to be set aside allowing the appeal and also goods used as paints within the factory of production were eligible for availing Cenvat credit. pipes and machines. The assesses engaging in manufacturing non ferrous metals and their by products were chargeable to Central Excise Duty and had availed Cenvat credit on Excise Duty paid on the inputs used in manufacturing finished products.T. But studying the case in detail after a further appeal in the tribunal and also looking into assesses an order of Rajasthan high court in a similar case passed an order in favor of the assessee which the DR defended by reiterating the commissioners findings that the dissolved Acetylene and Oxygen Gas used for purpose of welding in repaid and maintenance of plant and machinery cannot be treated as input.T. The assessee contended that they had availed Cenvat credit on goods such as paints used for repair and maintenance of various equipments. 383(Tri.L. But the DR stated that these items for which credit was availed dint come under the definition of inputs.

The commissioner set aside the demand in respect of plastic containers scrap and led scrap. A refund claim was filed by the assessee who was rejected by the authority and also was upheld by the commissioner.L.T. The revenue reiterated that rejected batteries was an input and as such the entire goods including the plastic scrap and lid scrap generation at the job workers factory should have been returned by them to the respondent. Before the assessee claims refund he has . Batteries rejected by the customers were received under the warranty claims which were later sent to the smelter job worker for separating plastic containers and lead materials and refining of lead contents under the cover of job work challans. 2011(272) E. 405 (Tri.-Ahmd. The proceedings were also dropped and the amount weren’t appropriated by the department thus the amount deposited by them cannot be termed as duty and had to be treated as deposit and the therefore doctrine of unjust enrichment wasn’t applicable. The department contended that the refund is based on doctrine of equity and was accepted and applied in several cases. Also duty demand with respect to lead scrap cleared by the respondent to the job worker was also confirmed.) Tudor India Ltd VS CCE Ahmedabad Refund-Unjust Enrichment The assesse processing textiles on job work basis for various customers for excisable goods faced a case of under valuations on the grounds that while computing the assessable value they had depressed the value of the fabrics. During investigations assessee paid the amount under process and the lower adjudicating authority filed a case and dropped a demand. A show cause notice was issued confirming duty demand leviable in respect of lead scrap and plastic containers generated in the job workers factory and not returned to the respondent.Indirect Tax Alert October 2011 Battery scrapDutiability-Demand The assesse manufacturing accumulator’s availed benefit of Cenvat credit of duty paid on raw materials and capital goods as per Cenvat credit rules. The assesse contended that amount was paid during the investigation and after the clearing of the goods and even before the issuance of show cause notice. Thus hearing both the arguments the final judgment was that the order doesn’t stand impugned and no ground relatable to the same was found.

2011(272) E. A show cause notice was issued proposing levy of interest on the duty under provisions and imposition of mandatory penalty as per the Central Excise Act. The liability of assesse to interest was upheld and the appeal was partly allowed. After going through the records and submissions the assesses paid amount during investigations and after the clearance and issuance of the show cause notice. directed payment of interest on the duty and also imposed penalty equal to duty on the assesse.L. The lower adjudicating authority set aside the demand which wasn’t challenged by the department and the department could not produce any evidence regarding amount deposited by the assesse was appropriated and therefore the same wasn’t treated as a duty. 408(Tri. Also considering past cases the order in appeal was set aside and appeal was allowed with consequential relief. The commissioner appropriated the duty paid towards full discharge of duty liability. The revenue challenged the order which was adjourned for the purpose of production of proof of payment of interest on the duty amount and the duty amount were paid by the assessee and contested the case regarding penal action on the grounds that penalty imposition does not arise in the present case as per the rules.Indirect Tax Alert October 2011 to show that he had paid the amount for which relief was sought and did not pass on the burden on consumers and if such relief wasn’t granted losses would be suffered. 391(Tri.-Mumbai) Jalan Dyeing & Bleaching Mills VS CCE Mumbai Penalty-Duty paid without including the cost of packaging in the assessable value The assesse manufacturing motor vehicles and parts thereof had cleared certain consignment of motor vehicle parts on payment of duty without including the cost of packing in the assessable value of the goods and had not paid duty on that part of the value. After hearing the arguments from both the sides the assessee did not evade payment of differential duty on packaging charges and the ingredients of section 11AC necessary to be established for penal action under Section 11AC of the Central Excise Act wasn’t attracted against them. 2011(272) E.T.T.L.-Chennai) . The tribunal set aside the order demanding interest and imposing of penalty on the grounds that entire amount duty prior to issuing a show cause notice was paid.

The assessee filed a refund claim with the adjudicating authority for refund of customs duty. The commissioner in his order allowed for the assesse applying for amendment or correction of the bill of entry. Refund claim-Unjust enrichment-Incidence of duty passed on to customer The assesse filed a refund claim consequent to tribunal’s final order in their favor as regards classification of the sawn timber. The authority sanctioned the refund of amount paid as as redemption fine and penalty to the assesse.T. 2011(272) E. redemption fine and penalty paid by them.Indirect Tax Alert October 2011 Ashok Leyland Ltd VS CCE Chennai.-Del.) Vikas Woods Works VS CCE Jaipur Bills of entryAmendment/Correction The assesse had filed bills of entry which were facilitated under RMS system and the goods were cleared without assessment and examination on payment of customs duty. After hearing both the arguments the goods were cleared for home consumption and no case of clerical or arithmetical mistake . The assesse further contended that there was a genuine mistake on the part of the supplier they have sent wrong invoice and then later filed the correct invoice before the customs authorities as per the commissioner’s advice.L. The assesse appealed before the commissioner along with a charted accountant’s certificate but still the refund claim was rejected on the grounds of unjust enrichment. The revenue aggrieved appealed that the assesse had at no stage challenged the assessment order therefore the refund claim was rightly rejected by the lower adjudicating authority but the commissioner directed the lower adjudicating authority to examine the issue and also placed facts of a previous case. They had paid excess duty and filed a refund claim. Later on the respondent claimed the goods which were cleared under different invoices not meant for them. The lower authority contended that refund claim wasn’t maintainable without assessment order having been modified or reviewed. 416(Tri. The charted accountants certificate stated that the assesse had paid amount after rate of duty was enhanced from 5% to 15% and the appellant collected the amount of duty as per bills of entry in the invoices and after going through the submissions the commissioners order rejecting refund claim did not require interference and the appeal of the assesse was rejected.

2011(272) E.Indirect Tax Alert October 2011 arose and the assessment order had to be challenged before filing the refund claim and finally the revenues appeal was allowed setting aside the order-in-appeal. The commissioner upheld the order of the original authority. 418(Tri.-Del) Indica Chemical Industries Pvt Ltd VS CCE Meerut Rebate claim.Procedural and technical lapses. Original authority confirmed the demand and imposed penalties.L. The assistant commissioner rejected the rebate claim on the grounds that goods were exported under ARE-1 instead exporting it under ARE-2 application which was in contravention of the conditions . The advocate had contended that the board had issued a circular regarding procedure to be followed in respect of availing credit on inputs when the eligibility for Modvat being disputed. The assesse manufacturing glass beads filed three rebate claims against duty paid on sliding blister tray used for packaging of the glass beads exported by the respondent.T.L. The matter was finally decided in favor of the assessee by the tribunal who stated that restriction to take credit within six months cannot be imposed on inputs received on a previous date. They had taken credit on the RG23 A part 2 and utilized the same. The division bench submitted their arguments in the present case based on facts collected during the period of March 1994 to March 1995 and also their RG 23 A and finally came up with the verdict that the orders could not be sustained and it was set assigned by allowing the appeal with consequential relief. 425(Tri.-Mumbai) Emerson Process Management India Pvt Ltd VS CCE Mumbai Demand-Cenvat/Modvat credit-Time limit for taking credit The assesse received inputs namely HDPE bags and entered details of inputs so received. He also submitted that jurisdictional superintendent directed them not to take credit on HDPE bags but also ordered freezing of credits in their accounts. 2011(272) E.T. A show because notice was issued alleging that credit taken in February on inputs received was not eligible as relevant documents were not dated prior to 6 months in violation of conditions.

L.I.T. Aggrieved by the said order the assessee filed an appeal before the commissioner who allowed the same. 343(S. 433(G.T. 2011(272) E.) Euro Cotspins Ltd VS CCE Chandigarh . Two show cause notices were issued and the authority in original passed a detailed order confirming duty demand and imposed a penalty. The assesse dint support the tribunals order and requested setting aside and remitting the case back to the tribunal for a fresh decision as per law.O. The assesse aggrieved filed an appeal before the tribunal who set aside an order to the extent of reduction in duty and penalty. Government of India Clandestine removal of goods admitted by EOU before the tribunal but disputed the rate of duty and value of goods.Indirect Tax Alert October 2011 prescribed in the notification. The assesse had also evaded duty.C.L. The assesse filed an appeal before the finance ministry of the Government of India on the grounds that the commissioner dint take into consideration the fact that the export goods which were glass beads were exempted from duty. The government after going through the facts carefully finally stated that goods were exported under form ARE-1 instead of form ARE-2 hence there wasn’t any infirmity with the order and it was uphold and also the revised application was rejected as being devoid of any merit.) Banaras Breads Ltd VS Ministry of Finance. The assesse being an 100% EOU and manufacturing yarn had an inspection conducted by the preventive staff of the Central Excise Division who found out that certain amount of goods were removed in a clandestine manner and without showing in the books of accounts were sold in the domestic tariff area in excess of the permissible limit without getting sanction from the concerned authorities. The government also observed that the assesse claimed rebate of duty paid on inputs used in manufacturing export goods and not on the duty paid on export goods. After going through the submissions the tribunals order was set aside and the case to be remitted back to the tribunal for fresh decision in accordance with law and the civil appeals were disposed off. 2011(272) E.

. Although we endeavour to provide accurate and timely information.Indirect Tax Alert October 2011 Disclaimer The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.