Legal Round-up

Customs

Notifications/Circulars

Clarification in relation to the Handling of Cargo in Customs Areas Regulations, 2009

The CBEC has issued a clarification in relation to the Handling of Cargo in Customs Areas
Regulations, 2009, which was notified earlier in March 2009.

(Customs Circular No. 13/2009 dated 23.03.2009)

Case Law

Valuation
Aggregate TV cannot be rejected in case of excess imports

The Tribunal, in the above case has held that in the absence of any proof of receipt of excess
quantities of imported goods and of any additional payments for such imports, the aggregate
declared transaction value (TV) cannot be rejected.
.
CC Vs Kodak India Ltd. (2009 (235) ELT 650)

Valuation of second hand goods by two or more Chartered Engineers, lowest value will
be taken

The Tribunal, in the above case has held that where two or more Chartered Engineers, to
whom the valuation of second hand goods have been referred to by the customs authorities,
certify different values, the lowest of the available values would be taken into account for
customs valuation.
Tarunvir International Vs. CC (2009 (235) ELT 756)

Royalty paid to a foreign supplier is includible in the TV

The Tribunal, in the case of, has held that where the royalty paid by an importer to a foreign
supplier is a condition of sale of the imported goods, it is includible in the TV thereof under
customs law.

Universal Music India Private Ltd. Vs CC (2009 (235) ELT 829)

Price reduction by way of an addendum to the “Memorandum of Agreement” (MoA),

without giving any reasons cannot form the basis of reduction in value of imported
vessels
The issue before the Supreme Court was whether a subsequent reduction in the price of
imported vessels by inserting an addendum to the MoA can be treated as valid. It was held by
the Court that in the absence of the date of execution/ incorporation of addendum in the MoA
and reasons for the reduction in the price, the reduced price cannot constitute the value of the
imported vessel.

Atam Manohar Ship Breakers Ltd v Commissioner of Customs 2009 (233) ELT 145 (Supreme Court)

Classification

Incorrect classification by an importer does not attract penalty u/s 112

The Tribunal in the above case has held that classification of imported goods under the First
Schedule to the Customs Tariff Act, 1975 involves a meticulous interpretation of the various
tariff entries and an incorrect classification on the part of an importer of goods cannot be
considered an offence attracting penalty under Section 112 of the Customs Act, 1962.

Vodafone Essar South Ltd. Vs. CC (2009 (ELT) 466)

Others
Interpretation of exemption notification

The Supreme Court, in has held that the conditions of an exemption notification are required
to be strictly interpreted in order to ascertain eligibility there under and once an importer
satisfies such eligibility criteria, a liberal interpretation of the notification is then required to
be adopted.
CC Vs. Malwa Industries Ltd. (2009 (91) RLT 467),

Refund claim only after challenging assessment order

The Mumbai High Court in the above case has held that an assessee cannot file a refund claim
directly without challenging the assessment order on the ground that such an order was not a
speaking one.

Karan Associates Vs. CC (2009 (236) ELT 23)

Central Excise

Case Law

Trade discount allowed as deduction from the excisable value of goods

The issue before the Supreme Court was whether a trade discount will be allowed as deduction
from the value of goods for charging excise duty. Held, if there is no flow back/return of the
trade discount the assessee is entitled to claim deduction for the same from the value of the
goods for levying excise duty.

CCE v Pepsico India Holdings (P) Ltd 2009 (234) ELT 385 (SC)
Foreign Trade Policy (FTP)
Notifications/ Circulars

Change of authorities for accepting applications by DTA and 100% EOU

The Central Government has clarified that applications for deemed export benefits should be
submitted by DTA units to the concerned regional DGFT offices and by 100% Export Oriented
Units (100% EOU) to the office of the Development Commissioner.

(DGFT Policy Circular No. 75 (RE-2008)/2004-09 dated 27/03/2009)

Case laws

Payment of merchant OT charges during working hours is justified

The Tribunal in the above case has held that examination of export cargo by excise officers at
the factory of a 100% EOU is an optional service and hence the levy of merchant overtime
charges for such examination even during normal working hours is justified.

CC Vs. Reliance Industries Ltd. (2009 (236) ELT 313),

Officer in charge of warehouse is the proper adjudicating authority

In the above case the Tribunal has held that in case of warehoused goods, the officer in charge
of the warehouse and not the officer having jurisdiction over the port of importation is the
proper adjudicating authority

Paras Fab International Vs. CC (2009 (91) RLT 727)

Negotiable Instruments Act

A director’s liability for a dishonored cheque

The Hon’ble Supreme Court of India has, by its order dated April 15, 2009, reiterated that
when the person committing an offence of dishonor of cheque under Section 138 of the
Negotiable Instruments Act, 1881 is a company, merely being a director of the accused
company is not sufficient to make a person liable for the said offence under Section 141 of the
Act. To prosecute a director or an officer of the accused company under Section 141 of the
Act, it is necessary for the complainant to make specific averments against the said director or
officer, as the case may be, and show the court as to how such person was involved in the
transaction and responsible for the conduct of the business of the accused company.

CENVAT

Notifications/ Circulars

An elaborate procedure for e-payment of Central Excise duties and Service Tax has been
notified by the Director General of Systems and Data Management.
(DOC No. IV(24)/1/2009-Systems/450,dated 10-2-2009)
Case Law

Cenvat credit can be availed even after 3 to 7 years from the date of receipt of inputs.

The issue before the Tribunal was regarding availability of Cenvat credit to the appellant after
a lapse of 3 to 7 years from the date on which inputs were procured. The revenue authorities
objected to availing such credit on the ground that the same, having not been availed within a
reasonable time, cannot be availed after a lapse of 3 to 7 years. The Tribunal, while observing
that there is no outer limit prescribed under the Cenvat Credit Rules, 2004 to avail the credit,
allowed the appellant to avail the credit even after 3 to 7 years of receiving the inputs.

Coromandel Fertilizers Limited v CCE (Appeals) 2009 (90) RLT 392 (CESTAT – Bangalore)

Utilization of Cenvat credit of service tax for payment of service tax on intellectual
property service received from abroad

The appellants have received ”intellectual property service” from abroad and paid service tax
in the capacity of a service recipient by utilizing Cenvat credit availed on such Intellectual
Property Service. The demand was raised for the period 10.09.04 to 30.09.05. Held that during
the relevant period when a person receives a service and is liable to pay service tax on the
service so received, the same service by a deeming fiction will be deemed to be an output
service. Service tax on such deemed output service can definitely be paid by utilizing Cenvat
credit on input services.

CST, Bangalore v. Arvind Fashions Ltd. [2009] 13 STR 544 (CESTAT-Bangalore)

Cenvat credit legally taken and utilized on the dutiable goods need not be reversed on
account of subsequent duty exemption on the final product

The appellant was engaged in the manufacture of tractors, which subsequently, got exempted
from payment of excise duty. The Tribunal held that once it is clear that the asessee had
legally taken and utilized credit on inputs and capital goods, credit need not be reversed on
the final product becoming exempt subsequently.

HMT v. Commissioner of Central Excise, Panchkula [2009] 18 STT 8 (CESTAT- New Delhi)

Service Tax
Notifications/ Circulars

Certain services provided to goods transport agency exempted from payment of service
tax under

Certain input services provided to goods transporting agency for its use in providing its services
to customers have been exempt from the levy of service tax subject to certain conditions.
Following services are covered for the purpose of this notification: Clearing and forwarding
services, Manpower recruitment services, Cargo handling services, Storage and warehousing
service, Business auxiliary services, Packaging services, Business support services and
Supply of tangible goods services

Service Tax Notification No. 1/2009-ST dated 5th January 2009

Clarification regarding Service Tax Refund under Notification No. 33/2008-ST, dated 7
December 2008 (“Notification”)

Clause 2(c) of the Policy Circular no. 1, dated 1 April 2008, provided that ”Clearing and
Forwarding (C&F) Agency Services” are not applicable to service tax. The Department of
Revenue vide notification allowed refund of service tax paid on the services provided by a
Clearing and Forwarding Agent in relation to export goods therefore, the Policy Circular no. 1
dated 1 April 2008 stands withdrawn.

Policy Circular no. 47 (RE-2008)/2004-2009, dated 8th December 2008

Case Law

Services provided by club to its members would be taxable

The issue under consideration was whether services by a club to its own members are liable to
service tax or not. The appellant had placed reliance on the decision of Saturday Club v.
Assistant Commissioner, Service Tax Cell, Calcutta, wherein it was held that services provided
to own members are not liable to service tax. The Tribunal held that once it is established that
the appellant would come within a taxable category any service rendered to its members would
be liable to tax.

Century Club v CST, Bangalore [2009] 16 STJ 82 (CESTAT- Bangalore)

Applicable rate of service tax payable for general insurance services would be the rate
prevailing on the date of receipt of insurance premium on the policy

The Tribunal held that in a general insurance service, the taxable event occurs on the date of
receipt of the premium amount by the insurance company. Therefore, the applicable service
tax rate is the one prevailing on the date of receipt of such payment and any hike in the rate of
service tax, thereafter, will not be applicable to policies issued prior to the rate enhancement

Bajaj Allianz General Insurance Co Ltd v CCE, Pune [2009] 13 STR 259 (CESTAT- Mumbai)

Sales Tax

Case Law

An assessee cannot be treated as a casual trader for a single transaction

The Rajasthan High Court has held that the plurality of the transactions is a must for treating
anybody as a casual trader. In case of a single transaction, an assessee cannot be treated as a
casual trader. A casual trader envisages occasional transaction of a business nature involving
buying and selling of the goods.

CTO (Nimbahera) v. Shri Mirbahadur 2009-VIL-06-HC-JDPR dated 5 January 2009

Sales tax levied on the steel structures made out of the purchases used in the
execution of works contract

Applicant was engaged in the business of designing, fabricating, erecting and commissioning of
steel structures including TV towers. For this they made intra-state purchase of iron and steel,
which was converted to steel structures to execute works contract. The assessing authority
levied tax on the value of steel structures used in the execution of the works contract. It was
observed that the items used in the execution of the works contract were not same as ones
purchased by the applicant. Hence, the benefit of deduction of tax paid on raw material used
in the manufacturing of structures can be claimed by the company.

Triveni Structural’s Limited v. Commissioner, Trade Tax, UP Lucknow [2009]20 VST 760 (All.)

Use of goods for the manufacturing activity would be eligible for concessional rate of
tax

Respondent applied for registration of high speed diesel oil (used in the manufacturing process
of jaggery) under the Central Sales tax Act for payment of duty at concessional rate. The
assessing authority contended that diesel would be used to operate the generator for
generation of electricity and hence not directly used in the manufacturing activity. It was held
by the Tribunal that the high speed diesel oil would be used for generation of electricity, which
would further the process of manufacture of jagerry. Hence, high speed diesel used by the
respondent would be eligible for concessional rate of tax.

Commissioner of Trade Tax, UP Lucknow v. Shubham Cane Crusher [2009]20 VST 104(All.)