Legal Round-up

Customs
Notifications/Circulars

Government has notified concessional rates of basic customs duty (BCD) for goods
falling under 450 tariff lines

The Central Government has notified concessional rates of basic customs duty (BCD) for goods
falling under 450 tariff lines, when imported from Paraguay, Uruguay, Argentina and Brazil,
under the India – MERCOSUR Preferential Trade Agreement. The concessions are in the range of
10% to 20% of the applicable rates of BCD. Besides, goods falling under 21 tariff lines have been
completely exempted from payment of BCD. The relevant Rules of Origin in this regard have
also been notified.
Customs Notification Nos. 56/2009 (NT) and 57/2009 dated 30/05/2009

Case Law

Valuation

Declared transaction value of imported goods cannot be rejected.

The Tribunal has held that the declared transaction value of imported goods cannot be
rejected on the basis of a comparison with imports from a different country of origin and\
where the goods were not of comparable quality.

Samar Polytex Ltd. Vs. CC (2009 (238) ELT 621

The onus to prove the inaccuracy of the declared TV lies with the customs authorities.

The Tribunal has held as follows: - the fundamental concept of TV has not undergone any
change on account of the amendment of Section 14 of the Customs Act, 1962 (CA) w.e.f
10/10/2007; - the onus to prove the inaccuracy of the declared TV lies with the customs
authorities and such onus may be discharged through a comparison of the declared TV with
contemporaneous imports at higher prices; - the values to be considered by the customs
authorities as contemporaneous imports should be the declared TV and not the enhanced
values which may be subject to further adjudication.

Pushpanjali Silks Pvt. Ltd. Vs. CC (2009 (238) ELT 135)

Others

Appellate forum cannot suo moto take a decision based on any ground not taken up by
the assessee in the appeal.

The Tribunal has held that an appellate forum deciding on an assessment order is required to
determine the availability of the relief sought by the appellant and cannot suo moto take a
decision based on any ground not taken up by the assessee in the appeal.

Oriental Container Ltd. Vs. CC, (2009 (238) ELT 301)

Delay in submission of a claim for refund of duty cannot be condoned.

The Tribunal has held that in the absence of a specific provision under the CA, a delay in
submission of a claim for refund of duty cannot be condoned. The Tribunal has also held that
where the benefit of an exemption notification is rendered inapplicable on account of non-
compliance by the assessee of the procedural conditions attached to the exemption, the plea
of provisional assessment, and, consequently, the inapplicability of the limitation provision
with regard to delayed filing of the claim, as prescribed under Section 27, cannot be
entertained.

Trichy Steel Rolling Mills Ltd. Vs. CC (2009 (238) ELT 686)

Unjust enrichment is ruled out assessee provides a certificate from a Cost Accountant
certifying that the incidence of duty was not passed on to the ultimate consumer.

The Tribunal has held that where the assessee provides a certificate from a Cost Accountant
certifying that the incidence of duty was not passed on to the ultimate consumer and relevant
accounting entries are passed in the books of the company, unjust enrichment is ruled out
unless evidence to the contrary is made available.

South India Paper Mills Limited Vs. CC (2009 (238) ELT 651)

Application for amendment to the Bill of Entry filed by an importer cannot be denied
solely on the ground that such amendment would result in a re- quantification of duty.

The Tribunal has held that an application for amendment to the Bill of Entry filed by an
importer under Section 149 of the CA cannot be denied solely on the ground that such
amendment would result in a re- quantification of duty.

Thiru Aroonan Sugars Limited and Shree Ambika Sugars Limited Vs. CC (2009 (165) ECR 204)

Bill of Entry assessed provisionally can be corrected under Section 154 of the Customs
Act, 1962

The Tribunal has held that an error in a Bill of Entry assessed provisionally can be corrected
under Section 154 of the Customs Act, 1962 (CA) pertaining to correction of clerical/
arithmetical errors.

Volvo India Pvt. Ltd. Vs. CC(2009 (92) RLT 396)

Foreign Trade Policy (FTP)

Notifications/Circulars

All requests/applications/ forwarding letters to be submitted with the DGFT should

mention the name and designation of the authorized signatories.

The Central Government has mandated that all requests/applications/ forwarding letters to be
submitted with the Director General of Foreign Trade (DGFT) should mention the name and
designation of the authorized signatories. In case, the authorized signatory is not the
Proprietor/ Director/ Partner of the firm, a copy of the power of attorney executed in favour
of the signatory should also be submitted.

(Zonal Jt. DGFT, Mumbai, Trade Notice No. 3/AM.10 dated 21/05/2009)
Letters of Approval (LOA) issued to the developers of SEZs shall remain valid until they
are suspended/ revoked.

The Central Government has clarified that Letters of Approval (LOA) issued to the developers
of SEZs shall remain valid beyond the date prescribed therein for implementation of the
project, until they are suspended/ revoked.

(M. C. & I. (D.C.), SEZ Instruction No. 16, dated 11/06/2009)

SEZ developers are eligible to remove used packing materials to the DTA without
payment of duty.

The Central Government has clarified that SEZ developers are eligible to remove used packing
materials to the DTA without payment of duty under Rule 49 (4) (b) read with Rule 14 of the
SEZ Rules, 2006.

(M. C. & I. (D.C.), SEZ Instruction No. 10, dated 25/05/2009)

Detailed procedures have been prescribed for obtaining approvals in respect of

procurement of used capital goods by SEZ units.

The Central Government has prescribed the detailed procedures for obtaining approvals in
respect of procurement of used capital goods by SEZ units from the DTA.

M. C. & I. (D.C.), SEZ Instruction No. 11, dated 25/05/2009

Ban on import of mobile phones without a valid IMEI number.

The Central Government has imposed a ban on import of mobile phones without a valid
International Mobile Equipment Identity (IMEI) number.

DGFT Notification No. 112 (RE-2008)/ 2004-09 dated 16/06/2009

Antidumping Duty
Notifications

Provisional anti-dumping duty has been imposed on front axle beams and steering
knuckles.

Provisional anti-dumping duty has been imposed on front axle beams and steering knuckles
meant for heavy and medium commercial vehicles originating in, or exported from the People’s
Republic of China.

Customs Notification No. 65/2009 dated 15/06/2009

Anti-dumping duty has been imposed on the following products:

- compact discs – recordable (CD-R) originating in, or exported from, Iran, Malaysia, Thailand,
South Korea, United Arab Emirates and Vietnam;
- potassium carbonate originating in, or exported from, the People’s Republic of China, South
Korea, Taiwan and European Union.

Customs Notification Nos. 44/2009 dated 30/04/2009, and 50/2009 dated 15/05/2009
CENVAT
Case Law

Manufacture/Dutiability

Process of dilution of concentrate, not resulting in a new product, does not amount to
manufacture under excise law.

The Himachal Pradesh High Court has held that the process of dilution of concentrate, not
resulting in a new product, does not amount to manufacture under excise law.

CCE Vs. Karamchand Appliance (2009 (92) RLT 341)

Process of mere cutting and slitting of jumbo rolls into smaller rolls does not amount to
manufacture under excise law.

The Tribunal has held that the process of mere cutting and slitting of jumbo rolls into smaller
rolls does not amount to manufacture under excise law.

CCE Vs. Knowell Converters (2009 (238) ELT 156)

The process of plating of jewellery, not resulting in a new product, does not amount to
manufacture under excise law.

The Tribunal has held that the process of plating of jewellery, not resulting in a new product,
does not amount to manufacture under excise law.

CCE Vs. Midas Techniques Pvt Ltd (2009 (92) RLT 487)

Valuation
In Otis Elevator Co (India) Ltd. Vs. CCE (2009-TIOL-910), the Tribunal has held that in case of
manufactured goods cleared from the factory under indivisible/composite works contracts
where the price of goods supplied is not separately ascertainable, valuation is required to be
done on the basis of the cost construction method in terms of Rule 8 of the Valuation Rules.

CENVAT/MODVAT
CENVAT credit to the extent of 50% of the excise duty paid on capital goods in the year
of receipt is also applicable to education cess paid on such goods.

The Tribunal has held that the restriction regarding availment of CENVAT credit to the extent
of 50% of the excise duty paid on capital goods in the year of receipt is also applicable in
relation to the credit of education cess paid on such goods.

DCW Ltd Vs. CCE (2009-TIOL-942)

Others

Job worker is not liable to pay duty merely for the reason of late filing of undertakings
by the supplier of inputs.
The Kerala High Court has held that a job worker is not liable to pay duty merely for the reason
of late filing of undertakings by the supplier of inputs as required under Notification 214/86-CE
dated 25.3.86.

CCE Vs Excel Corrugated Boxes Pvt Ltd (2009 (92) RLT 462)

No interest is payable on account of erroneous availment of credit.

The Tribunal has held that no interest is payable on account of erroneous availment of credit if
such credit has been reversed prior to utilization.

Sweet Industries Vs CCE (2009 (238) ELT 522]

If packaged goods are sold on MRP basis, in the absence of any contrary evidence, it
would be deemed that the duty burden has been passed on to the customer.

The Tribunal has held that where packaged goods are sold on MRP basis, in the absence of any
contrary evidence, it would be deemed that the duty burden has been passed on to the
customer and refund of such duty would be barred by the principle of unjust enrichment.

Shri Baidyanath Ayurved Bhavan Ltd. Vs. CCE (2009 (238) ELT 680)

Service Tax
Case Law

Service tax for manufacturing activities would apply regardless of whether the
products in question were covered within the ambit of the Central Excise Tariff.

The Larger Bench of the Madhya Pradesh High Court has held that the exclusion from service
tax for manufacturing activities would apply regardless of whether the products in question
were covered within the ambit of the Central Excise Tariff. The High Court has also held that
bottling and packaging activities are integral to manufacturing activity and cannot be viewed in
isolation and hence the benefit of exemption from the tax would apply to such activities as
well.

Som Distilleries Pvt. Ltd. Vs UOI [2009 (92) RLT 413]

The bar of unjust enrichment would not apply to refund in the case of issuance of
credit notes.

The Karnataka High Court has held that where the service tax collected from the recipients was
returned to them by issuance of credit notes, the bar of unjust enrichment would not apply to
the refund of such tax.

CST Vs Shiva Analyticals (I) Ltd. [2009 (92) RLT 664]

Rendering of both clearing and forwarding activities is essential to be classified as

Clearing and forwarding activities.

The Punjab & Haryana High Court has held that for a service to be classified as ‘clearing and
forwarding agent’ services, rendering of both clearing and forwarding activities is essential.

CCE Vs Kulcip Medicines (P) Ltd. [2009 (14) STR 608]

Payment of service tax on imports of services would only arise from 18.04.2006.

The Delhi High Court relying on the judgment of the Mumbai High Court in the case of Indian
National Shipowners Association, has held that the liability for payment of service tax on
imports of services would only arise from 18.04.2006 i.e from the date of introduction of
Section 66A of the Finance Act 1994.

Unitech Limited Vs CST [2009-TOIL-293-HCDEL- ST]

“Input service” as per the relevant rules would extend to both direct and indirect
service.

The Tribunal has held that the definition of “input service” as per the relevant rules would
extend to both direct and indirect service. Consequently, the Tribunal has held that repair and
maintenance of office motor vehicles photography services relating to capital equipment and
rent-a-cab services for transportation of people are all eligible input services.

CCE Vs J.K.Cement Works [2009 (20) STT 254]

Benefit of refunds / rebates cannot be denied on procedural grounds.

The Tribunal has held that the substantive benefit of refunds / rebates cannot be denied on
procedural grounds. Further, it has held that input services used for procurement of other
eligible input services would also qualify as eligible input services.

CST, Delhi Vs M/s Convergys India Pvt Ltd. [2009-TOIL-888-CESTAT-DEL]

“Banking and other financial services” cannot be classified under the category of
“Business Auxiliary Services” prior to June 2007.

The Tribunal has held that since cash management services were made taxable under the
category of “Banking and other financial services” w.e.f June 2007, they could not be classified
under the category of “Business Auxiliary Services” prior to that date.

Federal Bank Ltd. Vs CCE [(2009) 20 STT 261]

Activity of transporting employees from various points in the city to the factory and
back is not liable to service tax.

The Tribunal has held that the activity of transporting employees from various points in the
city to the factory and back is not liable to service tax under the category of “tour operator
service” even after 10.09.04.

Tamil Nadu State Transport Corporation (Kumbakonam) Vs CCE [2009 (92) RLT 434]

IT software is not covered under the ambit of technical testing and certification
service.

The Tribunal has held that testing and analysis of IT software is not covered under the ambit of
technical testing and certification service and is only chargeable to tax as ‘information
technology software services’ with effect from 16th May, 2008.

RELQ Software Pvt. Ltd. Vs CST [2009 (92) RLT 535]

Deputation of staff to other group companies for conducting day to day activities would
be taxable as “Manpower Recruitment or Supply Services”

The Tribunal has held that deputation of staff to other group companies for conducting day to
day activities in those group companies would be taxable as “Manpower Recruitment or Supply
Services” and not as Management Consultancy Services.

Daurala Organics Vs CCE [2009 (14) STR 620]

Subsequent import of goods through courier after purchase is not chargable to service
tax.

The Tribunal has held that the purchase of designs and drawings from outside India and its
subsequent import into the country through courier is a transaction related to goods and hence
is not chargeable to service tax.

Solitz Corporation Vs CST [2009 (14) STR 642]

Sales Tax
Case Law

Movement of goods from one State to another is occasioned as a result of a covenant in

the contract of sale can only be treated as an inter- State sale

The Karnataka High Court has held that where movement of goods from one State to another is
occasioned as a result of a covenant in the contract of sale or is incidental thereto, the
transaction can only be treated as an inter- State sale. This position will not change even if the
goods were to be inspected by the dealer’s representative in the Destination State prior to
ultimate delivery to the buyer.

NCR Corporation India Private Ltd Vs. Deputy Commissioner of Commercial Taxes [(2009) 22 VST
371]

STC undertaken physically to ship the goods abroad, the transaction is not of Inter –
State Sales.

In Liberty Footwear Company Vs. State of Haryana [(2009) 33 PHT 645], the Punjab and
Haryana High Court has held that where goods were exported through the State Trading
Corporation (STC) and where the STC had only undertaken to physically ship the goods abroad,
the transaction was one of the direct export of goods from the country and not one of inter-
State sales or supplies to the STC.

VAT
Case Law

Revised circular issued to nullify the impact of an existing beneficial circular will only
have prospective effect and not retrospective effect

The Karnataka High Court has held that a revised circular issued to nullify the impact of an
existing beneficial circular will only have prospective effect and not retrospective effect. Thus,
the dealer would be allowed the benefit accruing under the earlier circular until the date of
issuance of the revised circular.

R. K. Corporation v/s Govt. of Karnataka [VSTI 2009 B-441]

Karnataka

Notifications:

Exemption from payment of entry tax

Exemption from payment of entry tax\ available on imports of specified goods from outside the
State by new industrial units located in specified zones,100% EOUs Also, time periods and
procedures have been prescribed for availing the above benefit.

Notification No. FD 05 CET 2009 dated June 3, 2009

Exemption from payment of entry tax on import of specified goods from outside the
State by a developer / co-developer

Exemption from payment of entry tax on import of specified goods (excluding petroleum
products) from outside the State by a developer / co-developer of a Special Economic Zone /
unit in Special Economic Zone, subject to prescribed conditions, has been granted.

Notification No. FD 67 CSL 2009 dated May 26, 2009

Input tax credit of more than Rs 5 lakhs need to upload information related to local
purchases and sales

Dealers who are exporters or who claim input tax credit of more than Rs 5 lakhs need to upload
information related to local purchases and sales, including exports, on the website before the
20th of each month.
Notification No. KSA CR. 155/2007-08 dated June 8, 2009