Amendments

KS: The Tax-Age VIVEK SONI
1

RECENT AMENDMENTS TO INDIRECT TAXES
FOR CA FINAL
1. THIS AMENDMENT NOTES COVERS RELEVANT AMENDMENTS MADE BY THE FINANCE ACT,
2013 AND RELEVANT NOTIFICATIONS & CIRCULARS ISSUED BETWEEN 1.5.2013 TO 31.10.2013.

It must be carefully noted that for students appearing in May-14 Exam, the amendments made by the Finance Act,
2013 and the amendments made by the notifications, circulars and other legislations up to 31-10-2013 are relevant.

2. Reasonable efforts have been made in this notes to avoid errors and omissions. Inspite of this
errors/omissions may creep in. It is, therefore, notified that the author/ publisher does not take any
responsibility for any damage or Loss of action to any one, of any kind, in any manner. It is advised that
the readers should cross check the facts, Laws and contents of the publication with the original Govt.
publications and notifications.

3. Tax Laws are a subject matter of opinion and interpretations. Same provisions and case Laws may be
interpreted in different ways. It is advised that the readers/students should form their own opinion based
on class discussions, discussions contained in this book and original Govt. publications and notifications.

4. These notes should not be read in isolation. It has to be read along with class discussions and dictations.
This notes contains the discussions which, in the opinion of the author, are relevant for class discussions
and examinations. It should be supplemented with the ICAI study material provided to the students and
the original Govt. publications and notifications.

5. For good performance in examinations, students should solve past examination papers and practice
manual of ICAI.
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INDEX

TOPICS PAGE

AMENDMENTS MADE BY THE FINANCE ACT, 2013 02 - 13

AMENDMENTS MADE THROUGH NOTIFICATIONS& CIRCULARS
ISSUED BETWEEN 01.05.2013 TO 31.10.2013 14 - 21

REVISIONARY TEST PAPER [SERVICE TAX] 21 - 30

RELEVANT CASE LAWS 33 - 48

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2

AMENDMENT MADE BY THE FINANCE ACT, 2013 [W.E.F 10.05.2013]

CENTRAL EXCISE

Offences and Prosecutions [Section 9 & 9A, Section 20 & 21]

(1) Section 9: Imprisonment attract where duty evasion exceeds ` 50 lakhs instead of earlier ` 30 lakhs.
[similar amendments has also been made u/s. 135 of customs] [w.e.f 10.5.2013 by virtue of amendment made
by the Finance Act, 2013]

Section 9(1) Whoever commits any of the following offences, namely:-
Point (a) to (d): no change

(i) in the case of an offence relating to any excisable goods, the duty leviable thereon under this Act exceed `
30 lakhs 50 lakhs with imprisonment for a term which may extend to 7 years and with fine. However in the
absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court such
imprisonment shall not be for a term of less than 6 months;

(ii) in any other case, with imprisonment for a term which may extend to 3 years or with fine or with both.
[only relevant extracts, no charges in other provisions]
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(2) Section 9A has been substituted with a new section to nullify the case law of Om Prakash, where the Apex
Court was held that all offences under Central Excise are non-cognizable and bailable. [w.e.f 10.5.2013].
Now, only following offenses are cognizable and non-bailable if the duty liability exceeds ` 50 lakh
(i) evasion of payment of duty; or (ii) contravention of provision of Central Excise.

All other offenses are non-cognizable and bailable.

CERTAIN OFFENCES TO BE NON-COGNIZABLE [SECTION 9A]
1. Section 9A(1): in case offences are punishable under clause(b) or clause(bbbb) of section 9(1) and duty
liability exceeds ` 50 lakhs, they shall be cognizable and non-bailable. All other offences would be non-
cognizable.

2. cognizable offences to be non-bailable:
i) Every person arrested under Central Excise Act to be forwarded, without delay to- (i) the nearest Central
Excise Officer (empowered to send persons so arrested to a Magistrate); or (ii) to the officer in charge of the
nearest police station if there is no such Central Excise Officer within a reasonable distance. [section 19]

ii) Section 20 provides that a person can be admitted to bail by officer in charge of the police station only in
respect of offences which is non-cognizable.

iii) Section 21 provides that the provisions relating to release of arrested persons on bail or personal bond by
the nearest Central Excise Officer have been made applicable only to non-cognizable offences.

Note:
i) cognizable offences: is a criminal offence in which the police is empowered to register an FIR, investigate, and arrest
an accused without a court issued warrant.

ii) non-cognizable offences: is an offence in which police can neither register an FIR, investigate, nor effect arrest
without the express permission or directions from the court.
Note: No changes in section 9A(2): Compounding of offences
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3

SECTION 11/ SECTION 142: RECOVERY OF SUMS DUE TO THE GOVERNMENT

(3) Section 11(1): Power of recovery extends to a Central Excise officer/ proper officer authorized u/s. 142 of
customs:

Earlier, only an officer empowered by CBEC was authorized to recover the excise duty. However, with effect
from 10.05.2013, the officer empowered by the CBEC may also require the following two categories of
officers to recover excise duty:
(i) A Central Excise Officer; or
(ii) A proper officer authorized to recover the sums due from the Government under section 142 of the
Customs Act, 1962.

Section 11(1):
(1) The officer empowered by the CBEC to levy such duty or require the payment of such sums may deduct
the amount so payable from any money owing to the person, or may recover the amount
"may deduct or require any other Central Excise Officer or a proper officer referred to in section
142 of the Customs Act, 1962 to deduct the amount so payable from any money owing to the person
from whom such sums may be recoverable or due which may be in his hands or under his disposal
or control or may be in the hands or under disposal or control of such other officer, or may recover
the amount by attachment and sale of excisable goods belonging to such person; and
[No changes in all other provisions]
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(4) New sub section (2) has been inserted w.e.f 10.5.2013 to strengthened the recovery mechanism:
Money due to the Government may now be recovered from any person other than from whom money is due
after giving proper notice, if that other person holds money for/on account of the first person - Garnishee
Proceedings [Section 11(2) inserted]
Note: Similar amendments has also been made u/s. 142 of Customs]

Section 11(2):
Issue of Notice:
(i) The Central Excise Officer may, by a notice in writing against the following person, require to pay to the
credit of the Central Government so much of the money as is sufficient to pay the amount due from such
person or the whole of the money when it is equal to or less than that amount :

- any other person from whom money is due to such person, or may become due to such person, or
- who holds or may subsequently hold money for or on account of such person,

The money must be paid either forthwith upon the money becoming due or being held, or at or within the time
specified in the notice, not being before the money becomes due or is held.
(ii) every person to whom a notice is issued under this sub-section shall be bound to comply with such notice,
and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not
be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any
entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or
requirement to the contrary;
(iii) in a case where the person to whom a notice under this sub-section has been issued, fails to make the
payment in pursuance thereof to the Central Government, he shall be deemed to be a person from whom duty
and any other sums of any kind payable to the Central Government under any of the provisions of this Act or
the rules made thereunder have become due, in respect of the amount specified in the notice and all the
consequences under this Act shall follow.".
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4

RECOVERY OF DUTIES [SEC. 11A/ SEC. 28]

(5) Where any notice u/s. 11A has been issued, then subsequent to serve of such notice, the department can
serve a statement containing details of non/short payment, short/non levy or erroneous refund of duty etc. and
it should be deemed to be a service of show cause notice provided the grounds relied upon for the subsequent
period are the same as are mentioned in the earlier notice(s).
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(6) Section 28: under customs no recovery proceedings started if the amount of custom duty involved is less
than ` 100.
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PROVISIONAL ATTACHMENT TO PROTECT REVENUE IN CERTAIN CASES [SECTION 11DDA/
28BA]

(6) Earlier, provisional attachment of property can only be invoked against SCN served u/s. 11A(1) and
11D(2), now, Section 11DDA can be invoked for any notice serve u/s 11A [whether under sub-section (1) or
(2) or (3) or (4)].

[Customs: Similar amendments has been made u/s. 28BA i.e, now notice serve u/s. 28(4) shall also be liable
for provisional attachment along with notice served u/s. 28(1)]
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ADVANCE RULING

(7) Scope of application extended [Section 23A]: earlier only proposed activity can be covered. Now, existing
producer or manufacturer may seek advance ruling at the time of starting new line of business. [Similar
amendments have been made under customs i.e, existing importer/exporter can seek advance ruling at the time
of undertaking a new business of import or export]. [This amendment nullify the ruling of oracle India Pvt. Ltd

DEFINITIONS [SEC. 23A (Excise) /SEC. 28E (Customs)]
activity means production or manufacture of goods and includes any new business of production or
manufacture proposed to be undertaken by the existing producer or manufacturer, as the case may be;
[For excise]

"activity" means import or export and includes any new business of import or export proposed to be
undertaken by the existing importer or exporter, as the case may be;'. [For customs]

(8) advance ruling sought[Section 23C]: earlier, it was sought only in respect of CENVAT credit of inputs and
capital goods, now it can also sought w.r.t CENVAT credit of input service.
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CESTAT

(9) 3
rd
proviso to section 35C(2A)/129B(2A): CESTAT can extend further 185 days the period of stay. [total
stay 180 +185 days]

Only relevant extracts:
The Appellate Tribunal shall, where it is possible to do so, hear and decide every appeal within a period of 3
years from the date on which appeal was filed .

However where an order of stay is made in any proceeding relating to an appeal filed before the Appellate
Tribunal, then such an appeal is to be disposed by the Appellate Tribunal within 180 days from the date of
such stay order. If the appeal is not disposed off within the said period of 180 days then the stay order shall
stand vacated.


5

"Provided also that where such appeal is not disposed of within 180 days, the Appellate Tribunal may,
on an application made in this behalf by a party and on being satisfied that the delay in disposing of the
appeal is not attributable to such party, extend the period of stay to such further period, as it thinks fit,
not exceeding 185 days, and in case the appeal is not so disposed of within the total period of 365 days
from the date of initial stay order, then the stay order shall stand vacated on the expiry of the said
period. [ Section 35C(2A)/129B(2A) newly inserted by the Finance Act, 2013]
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(10) Section 35D(3)/129C(4): Monetary limit to hear and dispose of appeal by the single bench of CESTAT
has been increased from ` 10 lakh to ` 50 lakh.

Customs: Similar amendments under customs Section 129B(2A), 129C(4)
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Service of decision/order/summons etc. [Section 37C]
(11) A decision, order, summons or notice can be served by any of the following modes of delivery: -
a) by tendering [physical delivery]
b) by registered post with acknowledgment due or
c) by speed post with proof of delivery or by courier approved by the CBEC. [newly inserted]
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(12) person who has committed offence under the Finance Act, 1994 also disqualified to act as authorized
representative under customs [Section 146A(4)(b)]

CUSTOMS

(1) Section 29: Landing of vessels and aircraft may be at any place other than custom port/aircraft as permitted
by CBEC.

SECTION 29: ARRIVAL OF VESSELS AND AIRCRAFTS IN INDIA [only relevant extract]
(1) The person-in-charge of a vessel or an aircraft entering India from any place outside India shall not cause
or permit the vessel or aircraft to call or land -
(a) for the first time after arrival in India; or
(b) at any time while it is carrying passengers or cargo brought in that vessel or aircraft;
at any place other than a customs port or a customs airport, as the case may be, unless permitted by the Board.

Earlier, vessels or aircraft cannot be landed other than a custom port or a custom airport. Now, The Finance
Act, 2013 has amended section 29(1) to empower CBEC to permit landing of vessels and aircrafts at any place
other than customs port or customs airport.
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(2) Section 30: E- filing of import general manifest is mandatory except cases allowed by commissioner.

(3) Section 40: E- filing of Export general manifest is mandatory except cases allowed by commissioner.

e-filing of IGM/EGM: earlier, import/export manifest was submitted manually. Now, Section 30(1) and section
41(1) have been amended vide the Finance Act, 2013 to provide for the mandatory electronic filing of the import
manifest and export manifest respectively. However, in cases where it is not feasible to deliver import/export manifest by
presenting them electronically, the Commissioner of Customs may, allow the same to be delivered in any other manner.
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(4) Section 47: import duty must be paid within 5 days 2 days without interest.

Section 47(2) Where the importer fails to pay the import duty within 5 days 2 days excluding holidays from
the date on which the bill of entry is returned to him for payment of duty, he shall pay interest @ 15% p.a.
such duty till the date of payment of the said duty. [only relevant extracts]
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6

(5) Section 49: storage period of goods without warehousing is restricted to 30 days . further, extension given
30 days. [earlier there was no such restriction]

Earlier, no time-period had been specified under section 49 for which imported goods could be stored in a
warehouse.

Section 49 has been amended to introduce a time limit of 30 days for storage of goods in a warehouse in the
interest of accountability and early finalization of assessments. However, the Commissioner of Customs may
extend the period of storage for a further period not exceeding 30 days at a time.
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(6) Section 69: Warehouse goods cleared for exportation: Any warehoused goods may be exported to a place
outside India without payment of import duty if -

(a) a shipping bill or a bill of export in the prescribed form or a label/declaration accompanying the goods
as referred to in section 82 [postal export] has been presented in respect of such goods.".
[relevant extracts]
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(7) Section 27: Refund of import duty: No refund u/s. 27(1) shall be given if the amount is less than ` 100.
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(8) Section 135: Similar amendment as u/s. 9 of Excise: offences would be punishable with an imprisonment
upto 7 years and with fine, in case evasion of duty is more than ` 50 lakh, fraudulently availed duty drawback
or other export exemption of more than ` 50 lakh [ earlier the limit was ` 30 lakh]

Section 135 [only relevant extracts]
in the case of an offence relating to, -
any goods the market price of which exceeds ` 1 crore; or
the evasion or attempted evasion of duty exceeding ` 30 lakh ` 50 lakh; or
such categories of prohibited goods as the Central Government may, by notification in the Official gazette,
specify; or
fraudulently availing of or attempting to avail of drawback or any exemption from duty, if the amount of
drawback or exemption from duty exceeds ` 30 lakh ` 50 lakh,

shall be punishable, with imprisonment for a term which may extend to 7 years and with fine:

However, in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such
imprisonment shall not be for less than 1 year;
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(9) Section 104: power of arrest: certain offences under customs are non-bailable.

Only relevant extracts
Sub-section (6): Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the offences
under the Act shall be bailable.

The following offences are non-bailable and all others offences are bailable-

Sub section (6): [substituted]
Non-bailable offences: An offences punishable u/s. 135 w.r.t

(i) evasion or attempt evasion of duty exceeding ` 50 lakhs; or

(ii) prohibited goods notified u/s 11 which are also notified u/s. 135(1)(i)(c); or

(iii) import/export of any goods which have not been declared in accordance with the provisions of this Act
and the market price of which exceeds ` 1 crores; or

7

(iv) fraudulently availing of or attempt to avail of drawback or any exemption from duty provided under this
Act, if the amount of drawback or exemption from duty exceeds ` 50 lakh,
shall be non-bailable offences.

Sub section(7): newly inserted
Save as otherwise provided in sub-section (6), all other offences under this Act shall be bailable.".
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(10) Section 143A: Option for duty deferment for adjustment of duty payable against drawback has been deleted.
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(11) Section 144(3): There shall be no duty liability on a sample of goods consumed/destroyed during the
course of testing/examination.

Removal of duty liability on any sample of goods consumed/destroyed during the course of
testing/examination [Section 144(3)]
Earlier, section 144(3) stipulated that no duty shall be chargeable on any sample of goods taken under this
section which is consumed or destroyed during the course of any test or examination thereof, if such duty
amounts to ` 5 or more.
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(12) Section 146: Customs house agent has been renamed as custom broker under the Customs Act.
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(13) Section 147: liability of agents of the owner/importer/exporter has been enhanced.

Liability of principal and agent [Section 147]

(1) Where this Act requires anything to be done by the principal (i.e, owner, importer or exporter of any goods), it may
be done on this behalf by his agent.

(2) Any such thing done by an agent shall, unless the contrary is proved, be deemed to have been done with the
knowledge and consent of the principal, so that in any proceedings under this Act, the principal, of the goods shall also
be liable as if the things had been done by him.

(3) When any person is expressly or impliedly authorised by the principal to be his agent then such person shall,
without prejudice to the liability of the principal be deemed to be the principal.

However, where any duty is not levied or short-levied or erroneously refunded on account of any reason other than any
willful act, negligence or default of the agent, such duty shall not be recovered from the agent unless in the opinion of
Assistant/Deputy Commissioner of Customs the same cannot be recovered from the principal.

Note: Finance Act, 2013 has amended sub-section (3) of section 147 whereby now, an agent has equal
responsibility for making correct self-assessment.
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(14) Section 11: Power to prohibit importation or exportation of goods: The section has been amended to prohibit
import/export of goods in order to protect designs and geographical indications of goods also alonwith patents,
trademarks and copyrights.


8

SERVICE TAX

(1) New section 66BA, introduced to provide that reference of old chargeability section 66 in the Finance Act,
1994, must be read as reference to section 66B (new chargeability section) w.e.f 1.7.2012.
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(2) Negative List:

(i) Section 65B(11):Definition of approved vocational education courses amended to include courses offered
by ITI/ITC affiliated to State Council of Vocational Training in designated trades. Further, amendment has
been made to exclude courses run by an institute affiliated to NSDC from the definition of vocation education
courses.
[w.e.f 10.5.2013]

Consider the following:
1) Vocational training courses provided by ITI/ITC
affiliated to State Council of Vocation Training
Before 10.5.2013: Taxable.
From 10.5.2013: Not taxable (covered in Negative
List)
2) Courses run by institute affiliated to the National
Skill Development Corporation
Before 10.5.2013: Not taxable
From 10.5.2013: Taxable. However, w.e.f
10.9.2013, services provided by Nation Skill
Development Corporation shall be covered in the
Mega Exemption.

SECTION 65B(11) APPROVED VOCATIONAL EDUCATION COURSE MEANS,-
(i) a course run by an industrial training institute (ITI) or an industrial training centre (ITC) affiliated to the National
Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified
under the Apprentices Act, 1961; or
(ii) a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person
registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment;
(iii) a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of
India; [w.e.f 10.5.2013, by the Amendments made by the Finance Act, 2013]
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(ii) Section 65B(40): Definition of any process amounting to manufacture has been amended to include goods
manufactured under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955.

Any process amounting to manufacture or production of goods on which excise duty is leviable whether under Central
Excise Act, 1944; or the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 or under State Excise Act. (It is to
be noted that manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and
narcotics are subjected to State Excise duties)
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(iii) Services relating to agriculture or agricultural produce: includes
- agricultural operations directly related to production of any agricultural produce including cultivation, harvesting,
threshing, plant protection or seed testing. [Earlier only seed testing was not taxable, now all type of testing
relating to agriculture are not taxable]
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(3) Penalty & prosecutions
(i) Section 77: failure to obtain registration, amount of penalty amended to fix a maximum penalty of ` 10,000
[ Daily penalty of ` 200 has been withdrawn w.e.f 10.52013]


9

Section
77
(1) Failure to take
registration as per provisions
of section 69 or rules made
under this Chapter
Penalty which may extend to

Before 10.5.2013: (a) ` 200 for every day during which such
failure continues starting with the first day after the due date, till
the date of actual compliance, or, (b) `10,000, whichever is
higher.

On or after 10.5.2013: Maximum ` 10,000.

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(ii) Section 78A: new section inserted for levying personal penalty on directors upto ` 1,00,000 in case of
company in default.

Where a company has committed any of the following contraventions, namely:-
(a) evasion of service tax; or
(b) issuance of invoice in violation of the rules made under the provisions of this Chapter; or
(c) availment and utilisation of CENVAT wrongly or
(d) failure to pay any amount collected as service tax to the credit of the Central Government beyond a period of six
months from the date on which such payment becomes due,

then any director, manager, secretary or other officer of such company, who at the time of such contravention was in
charge of, and was responsible to, the company for the conduct of business of such company and was knowingly
concerned with such contravention, shall be liable to a penalty which may extend to one lakh rupees."; [Newly inserted
by the Finance Act, 2013]
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(4) Offences & prosecutions [Section 89,90,91]: newly inserted

SECTION 89: OFFENCES AND PENALTIES
OFFENCES Imprisonment
(a) knowingly evades the payment of service
tax under this Chapter; or
(b) avails and utilises credit of taxes or duty
without actual receipt of taxable service or
excisable goods either fully or partially in violation
of the rules made under the provisions of this
Chapter; or

(c) maintains false books of account or fails to
supply any information which he is required to
supply under this Chapter or the rules made
thereunder or supplies false information (unless
with a reasonable belief, the burden of proving
which shall be upon him, that the information
supplied by him is true); or
(i)For offence specified in clause (a),(b),(c)
where the amount exceeds ` 50 lakh -
imprisonment for a term which may extend to 3
years; Provided that in the absence of special and
adequate reasons to the contrary to be recorded in the
judgment of the court, such imprisonment shall not
be for a term of less than 6 months;

Further, for the second and every subsequent
offences, the imprisonment may extend to 3 years.
[Section 89(1)(i)]

(d) collects any amount as service tax but fails to
pay the amount so collected to the credit of the
Central Government beyond a period of 6 months
(ii)In the case of the offence specified in clause (d),
where the amount exceeds ` 50 lakh: imprisonment
for a term which may extend to 7 years. However, in

10

from the date on which such payment becomes due.

[This is a cognizable offence and all other offences
under service tax shall be non-cognizable and billable]

the absence of special and adequate reasons to the
contrary to be recorded in the judgment of the court,
such imprisonment shall not be for a term of less than
6 months; [The Finance Act, 2013, increased
maximum imprisonment from 3 years to 7 years]
[Section 89(1)(ii)]

In the case of any other offences [ For example in
all of the above cases, where the amount does not
exceeds ` 50 lakh]
(iii) Imprisonment for a term which may extend to 1
year.

[Section 89(1)(iii)]

(3) The following shall not be considered as special and adequate reasons for awarding a sentence of
imprisonment for a term of less than 6 months, namely: same as in Excise Section 9

(4) A person shall not be prosecuted for any offence under this section except with the previous sanction of the
Chief Commissioner of Central Excise.
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SECTION 90: COGNIZANCE OF OFFENCES
[Newly inserted by the Finance Act, 2013]

(1) An offence under clause (ii) of sub-section (l) of section 89 shall be cognizable.

(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences, except the
offences specified in sub-section (l), shall be non-cognizable and bailable.
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SECTION 91: POWER TO ARREST
[Newly inserted by the Finance Act, 2013]

(1) If the Commissioner of Central Excise has reason to believe that any person has committed an offence
specified in clause (i) or clause (ii) of sub-section (l) of section 89, he may, by general or special order,
authorise any officer of Central Excise, not below the rank of Superintendent of Central Excise, to arrest such
person.

(2) Where a person is arrested for any cognizable offence, every officer authorised to arrest a person shall,
inform such person of the grounds of arrest and produce him before a magistrate within twenty-four hours.

(3) In the case of a non-cognizable and bailable offence, the Assistant Commissioner, or the Deputy
Commissioner, as the case may be, shall, for the purpose of releasing an arrested person on bail or otherwise,
have the same powers and be subject to the same provisions as an officer in charge of a police station has, and
is subject to, under section 436 of the Code of Criminal Procedure, 1973.

(4) All arrests under this section shall be carried out in accordance with the provisions of the Code of Criminal
Procedure, 1973 relating to arrests.";
SUMMARY

OFFENCES Imprisonment Cognizable/non-
cognizable
Arrest

11

(i) Knowingly evade
payment of service Tax

(ii) Falsely claimed and
utilised CENVAT Credit
[without actual received
of Input/Capital
goods/input Service]

(iii) False Books of
Accounts or False
supply/Fails to supply
information

First time Offence:
(a)Amount upto ` 50
lakhs: Maximum 1 year

(b)Amount exceeding `
50 lakhs:
Minimum 6 months
Maximum 3 years

For the second and every
subsequent offences:

(c) upto ` 50 lakhs:
Maximum 3 years

(d) In excess of ` 50
lakhs: Maximum 3 years
All cases Non-
cognizable and
bailable
(a) No arrest

(b) Arrest order issued by
commissioner of Central
Excise. [bail given by the
AC/DC]

(c) No arrest

(d) same as point(b)

(iv) Collects but fails to
pay to Central
Government within 6
months form the due date
of payment
First time Offence:
(a) Amount upto ` 50
lakhs: Maximum 1 year

(b) Amount exceeding `
50 lakhs:
Minimum 6 months.
Maximum 7 years

For the second and every
subsequent offences:
(c)Amount upto ` 50
lakhs: Maximum 3 years.

(d) Amount in excess of `
50 lakhs: Maximum 7
years

(a) Non-
cognizable and
bailable

(b) Cognizable

(c) Non-
cognizable and
bailable

(d) Cognizable

(a) No arrest

(b) Arrest without arrest
warrant Forward to Magistrate
within 24 hrs]. Bail cannot be
given by the Excise
Department. Bail can be given
by Court.

(c)No arrest

(d)Same as point (b)
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5) SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME, 2013
The Finance Act, 2013 has introduced an amnesty scheme kwon as VCES (Voluntary Compliance
Encouragement Scheme) to encourage the service tax defaulter (who are either stop/non fillers or not-
registered or not disclosed true liability in return) to pay tax due without payment of interest and penalty.
The scheme has been summarized as under:-
(1) Eligible person: Any person who is liable to pay tax for the period from 1.10.2007 to

12

31.12.2012, but has not paid the same till 01.03.2013 shall be eligible to get
benefit of this scheme.
(2) Not Eligible
person:
(a) to whom any notice or order u/s. 72,73 or 73A has been issued before
1.3.2013.
(b) Person who has filed service tax return disclosing his true liability but
fails to pay entire service tax on the basis of his return.
(c) where a notice or an order of determination has been issued of any period
on any issue previously.
(d) against whom the following inquiry/investigation/ audit has been pending
on 1.3.2013:
(i) an inquiry or investigation in respect of a service tax not/short levied or
not/short paid has been initiated by way of
(a) search of premises under section 82 of the Chapter; or
(b) issuance of summons under section 14 of the Central Excise Act, 1944, as
made applicable to the Chapter under section 83 thereof: or
(c) requiring production of accounts, documents or other evidence under the
Chapter or the rules made thereunder; or
(ii) an audit has been initiated,
(3) Benefit: Immunity from interest and penalty and other proceedings for the period
from 1.10.2007 to 31.12.2012.

(4) Matter is
Conclusive:
The Proceedings under VCES is final and cannot be re-opened by any forum.
(5) Condition to
avail the benefit
(i) Truthful declaration on or before 31.12.2013:
The defaulter is required to make a truthful declaration of all his pending tax
dues from 1.10.2007 to 31.12.2012 on or before 31.12.2013.
However, where the Commissioner of Central Excise has reasons to believe
that the declaration made by a declarant under this Scheme was substantially
false, he may, within 1 year from the date of declaration, for reasons to be
recorded in writing, serve notice on the declarant in respect of such
declaration requiring him to show cause why he should not pay the tax dues
not paid or short-paid.
(ii) Pay tax due:
At least 50% of tax due: on or before 31.12.2013.
Balance tax due:
(i) on or before 30.06.2014; or

13

(ii) on or before 31.12.2014 with interest @ 18% from 1.7.2014 on wards
The amount paid shall not be refundable under any circumstances.
Where the declarant fails to pay the tax dues, either fully or in part, as
declared by him, such dues along with interest thereon shall be recovered
under the provisions of section 87 of the Chapter.
(iii) For the month of on or after January 2013, the assessee shall required to
clear their dues as per normal provisions of the Act.

"tax dues" means the service tax due or payable under the Chapter or any other amount due or payable under
section 73A thereof, for the period beginning from the 1st day of October, 2007 and ending on the 31st day of
December, 2012 including a cess leviable thereon under any other Act for the time being in force, but not paid
as on the 1st day of March, 2013.
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(6) Issue of Show-cause Notice
(i) Section 73(2A), newly inserted: where Show cause notice was issued by invoking extended period of
limitation but latter on the fraud etc. is not established, then it shall be deemed that the notice was issued for a
situation of no fraud [i.e, for 18 months] similar provision was already exist in section 11A of the Central
Excise.


14

RELEVANT NOTIFICATIONS AND CIRCULARS ISSUED BETWEEN
1.05.2013 to 31.10.2013

A. CENTRAL EXCISE

1. CENVAT CREDIT:

(i) Notification No. 12/2013, dated 27.9.2013: Rule 3(5A) has been substituted by a new rules to covered
levy of duty incase capital goods are removed as waste and scrap.

Rule 3(5A): W.E.F 27.9.2013:
(a) removed as good condition: If the capital goods, on which CENVAT credit has been taken, are
removed after being used, the manufacturer or service provider shall pay higher of (A) or (B):-

A. an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage
points calculated by straight line method as specified below for each quarter of a year or part thereof from
the date of taking the CENVAT Credit, namely:-

(i) for computers and computer peripherals:
for each quarter in the first year @ 10%
for each quarter in the second year @ 8%
for each quarter in the third year @ 5%
for each quarter in the fourth and fifth year @ 1%

(ii) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter:

B. The amount to be paid shall be equal to the duty leviable on transaction value.

(b) removed as waste and scrap: If the capital goods are cleared as waste and scrap, the manufacturer
shall pay an amount equal to the duty leviable on transaction value.
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(ii)Circular No. 973/07/2013-CX, dated 4.9.2013: Rule 6(3) of the CENVAT Credit shall not be
applicable in relation to goods cleared under the exemption notification No. 29,30,31,32/2012.

Central Government has issued notifications no 29/2012-CE, 30/2012-CE, 31/2012-CE, 32/2012-CE and
33/2012-CE all dated 9th July, 2012 to exempt certain manufactured goods when cleared against the
specified duty credit scrip issued to an exporter.

Issue: Whether such clearances are being treated as clearances of exempted goods and therefore, rule 6(3)
of the Cenvat Credit Rules, 2004, shall be applicable.

Clarified that: One of the conditions for availing of these exemptions is that duties leviable, but for these
exemptions, shall be debited in or on the reverse of said scrip. The scrip holder is also permitted to avail
of cenvat credit of the duties debited in the scrip.

In view of these provisions it has been decided that such debit of duty in these scrips shall be treated as
payment of duty for the purpose of determining the applicability of rule 6 of the Cenvat Credit Rules,
2004. Therefore, it is clarified that rule 6(3) of the Cenvat Credit Rules, 2004 is not applicable.

[Specified duty credit scrip: (i) Focus Product Scheme (FPS); (ii) Focus Market Scrip (FMS); (iii) Status
Holder Incentive Scheme; (iv) Agri Infrastructure Incentive Scheme; (v) VKGUY (Special Agricultural
& Village Industry Scheme)]

15

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2. REGISTRATION

(i) Exemption from central Excise registration: Notification No. 11 /2013, dated 2.8.2013

Unregistered premises used solely for affixing a sticker or re-printing or re-labeling or re-packing of
pharmaceutical products (falling under Chapter 30 of the First Schedule to CETA) with lower ceiling
price to comply with the notifications issued by the National Pharmaceutical Pricing Authority under
Drugs (Prices Control) Order, 2013, subject to satisfaction of prescribed condition. [Notification No.
11/2013, dated 2.8.2013]

Note: Notification No. 22/2013 The Central Govt. exempts the scheduled formulations as defined
under the Drugs Price Control Order (DPCO), 2013, falling under Chapter 30 of the First Schedule to the
Central Excise Tariff Act, 1985 and which are subjected to re-printing, re-labeling, re-packing or
stickering, in a premises which is not registered under the Central Excise Act, 1944 or the rules made
thereunder, in pursuance of the provisions contained in the said Drugs Price Control Order (DPCO),
2013, from whole of the duty of excise leviable thereon.
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3. WAREHOUSING

Rule 20(1) provides that, the Central Government may by notification, extend the facility of removal of
any excisable goods from the factory of production to a warehouse, or from one warehouse to another
warehouse without payment of duty.

(i) Notification No. 07/2013. Dated 23.5.2013: In exercise of powers conferred by rule 20(1) of the
Central Excise Rules, 2002, the Central Government hereby extends the facility of

removal of all excisable goods (falling under the First Schedule to the Central Excise Tariff Act, 1985)

- from the factory of production, intended for storage in a godown or retail outlet of a Duty Free
Shop in the Departure Hall/ the Arrival Hall of International Airport (appointed or licensed as
warehouse under Section 57/ 58 of the Customs Act, 1962, and

- for sale therefrom, against foreign exchange to passengers going out of India or to the passengers/
members of crew arriving from abroad,

subject to limitations, conditions and safeguards as may be specified by the Central Board of Excise and
Customs in terms of sub-rule (2) of rule 20 of Central Excise Rules, 2002. [For this Circular
No.970/04/2013, dated 23.5.2013 has been issued by the CBEC]

(ii) Notification No. 09/2013, dated 23.5.2013: where a godown or retail outlet of a Duty Free Shop is
appointed or licensed under the provisions of sections 57/ 58 of the Customs Act, 1962, such godown or
retail outlet shall be deemed to be registered as warehouse under rule 9 of the Central Excise Rules, 2002.

Note: Earlier only foreign goods were sold in Duty Free shop at International airport and passengers
leaving or coming to India were buying these goods without paying customs duty. Now, indigenous
goods can be sold without paying excise duty there.
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4. Circular No. 974/08/2013-CX, dated 17
th
September 2013: Guidelines for arrest and bail under
Central Excise
Non-bailable offences:

16

1. A person is liable to be arrested should be informed of the grounds of arrest and produced before a
magistrate without unnecessary delay and within 24 hours of arrest.
2. In relation to the following offences, decision to arrest may be taken by the commissioner
(a) clandestine removal of manufactured goods;
(b) removal of goods without declaring the correct assessable value and receiving a portion of sale
price in cash which is in excess of invoice price and not accounted for in the books of account;
(c) taking Cenvat Credit without the receiving the goods specified in the invoice;
(d) taking Cenvat Credit on fake invoices;
(e) issuing Cenvatable invoices without delivering the goods specified in the said invoice.

However, for all other offences (refer page 141), decision to arrest shall be taken by the Commissioner
only with the approval of the jurisdictional Chief Commissioner.

Bailable offence: Any person arrested for non-cognizable offence shall have to be released on bail, if he
offers bail, and in case of default of bail, he is to be forwarded to the custody of magistrate within 24
hours of arrest. An officer not below the rank of Superintendent of Central Excise can exercise powers to
grant bail.
Precautions to be taken by the departmental officers: Powers to arrest a person needs to be exercised
with utmost caution. Chief Commissioners/ Commissioners of Central Excise are required to ensure that
approval for arrest for non-bailable offence is granted only where the intent to evade duty is evident and
element of mens rea / guilty mind is palpable. Attention is also invited to the decision of the Honble
Supreme Court in case of D. K. Basu Vs State of West Bengal, wherein specific guidelines in respect of
arrest have been provided. These are required to be followed.

Decision to arrest needs to be taken on case-to-case basis considering various factors, such as, nature &
gravity of offence, quantum of duty evaded or credit wrongfully availed, nature & quality of evidence,
possibility of evidences being tampered with or witnesses being influenced, cooperation with the
investigation, etc. To summarize, power to arrest has to be exercised after careful consideration of the
facts of the case and the above factors.
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B. CUSTOMS
Duty Drawback:

(1) Rule 3 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 has been amended and
Corresponding amendments has been made in rule 6(4) and rule 7(5)-

Name of the product

Before 21.9.2013 On or after 21.9.2013
[Notification No. 97/2013]
Rice falling under heading 1006 Drawback not allowed. Drawback not allowed.
Wheat falling under heading
1001
Drawback allowed. Drawback not allowed.
Milk products falling under
heading 0401 to 0406.
Drawback not allowed. Drawback allowed
Casein, caseinates and other
casein derivates; casein glues
falling under heading 3501
Drawback not allowed. Drawback allowed
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Baggage
(2) Items of Annexure 1 for which general free allowances not allowed now includes- (e) Flat Panel
(LCD/LED/Plasma) Television (w.e.f 26.8.2013) [Notification No. 84/2013]

17

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Warehouse
Section 61: Interest charged after expiry of 90 days
(3) It has been clarified that the period of 90 days shall be calculated from the date of deposit of goods in
the warehouse. [Circular No. 39/2013, dated 1.10.2013]
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Classification

(4)
Name of the product
imported
Classified in the tariff heading
(1) Tablet computers Should be classified under the heading 8471 (Automatic data processing
machines, etc. no elsewhere specified or included) and not under the heading
8517 (Telephone sets..etc.) Circular 20/2013, dated 14.5.2013
(2) Bluetooth Wireless
Headsets for cell phones/
mobile phones
Must be classified under the heading 8517 (Telephone sets etc..or other
devise for the transmission of voice/data through wire or wireless
communication) and not under the heading 8518 (headphones and earphones,
whether or not combined with microphone)- Circular 36/2013, dated
5.9.2013
(3) Cockroach traps and
Mosquito repellent
Correctly classifiable under the heading 3808 and not under the head 3506 or
3822 or 3926 or 4823.
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(5) Circular No. 38/2013-Customs, dated 17
th
September 2013: Guidelines for arrest under Customs

The decision to arrest should be taken in cases which fulfil the requirement of the provisions of Section
104 (1) of Customs Act, 1962 and after considering the nature of offence, the role of the person involved
and evidence available
.
While the Act does not specify any value limits for exercising the powers of arrest, it is clarified that
arrest in respect of an offence, categorized as bailable offence, should be effected only in exceptional
situations which may include:
(a) Outright smuggling of high value goods such as precious metal, restricted items or prohibited items
or goods notified under section 123 of the Customs Act, 1962 or foreign currency where the value of
offending goods exceeds ` 20 lakh.

(b) In a case related to importation of trade goods (i.e. appraising cases) involving wilful mis-
declaration in description of goods/concealment of goods/goods covered under section 123 of Customs
Act, 1962 with a view to import restricted or prohibited items and where the CIF value of the offending
goods exceeds `50 lakh.

Further, in every case of arrest effected in accordance with the provisions of section 104 (1) of the
Customs Act, 1962, there should be immediate intimation to the jurisdictional Chief Commissioner or
DGRI, as the case may be.

A person arrested for a non-bailable offence should be produced before concerned Magistrate without
unnecessary delay in terms of provisions of Section 104 (2) of the Act. further, if a person is arrested for
bailable offence then the custom officer is bound to offer release on bail and accept bail bond.
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18

C. SERVICE TAX

(1) Restaurant Services:
(i) Mega Exemptions: Food served by Air conditioned canteen running within a factory under the
provisions of the Factories Act,1948, shall be exempted from service tax w.e.f 22.10.2013.

(ii) Adhoc- exemption [Exemption order 1/2013,dated 17.09.2013]: restaurant service provided from
17.9.2013 to 31.3.2014 in Uttarakhand shall be exempted.
Taxable Services provided between 17.9.2013 to 31.3.2014 in relation to serving of food or beverages by
a restaurant/eating joint/ mess to any person in the State of Uttarakhand shall be exempted.

(iii) Circular No. 173/8/2013, dated 7.10.2013:
Doubts Clarifications
1. In a complex where air conditioned as
well as non-air conditioned restaurants are
operational but food is sourced from the
common kitchen, will service tax arise in
the non-air conditioned restaurant?
In a complex, if there is more than one restaurant,
which are clearly demarcated and separately named
but food is sourced from a common kitchen, only the
service provided in the specified restaurant is liable
to service tax and service provided in a non air-
conditioned or non centrally air- heated restaurant
will not be liable to service tax. In such cases,
service provided in the non air-conditioned / non-
centrally air-heated restaurant will be treated as
exempted service and credit entitlement will be as
per the Cenvat Credit Rules.
2. In a hotel, if services are provided by a
specified restaurant in other areas e.g.
swimming pool or an open area attached
to the restaurant, will service tax arise?
Yes. Services provided by specified restaurant in
other areas of the hotel are liable to service tax.
3. Whether service tax is leviable on goods
sold on MRP basis across the counter as
part of the Bill/invoice.
If goods are sold on MRP basis (fixed under the
Legal Metrology Act) they have to be excluded from
total amount for the determination of value of service
portion.

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(2) Hotel Services:
(i) Adhoc- exemption [Exemption order 1/2013,dated 17.09.2013]: renting of room in a hotel, club etc.
from 17.9.2013 to 31.3.2014 in Uttarakhand shall be exempted.

Taxable Services provided between 17.9.2013 to 31.3.2014 in relation to Services by way of renting of a
room in a hotel, inn, guest house, club, campsite or other commercial place meant for residential or
lodging purposes; to any person in the State of Uttarakhand shall be exempted. [Order No. 1/1/2013]
-------------------------------------------------------------------------------------------------------------------------------
(3) Construction service:
(i) Abatement increased to 75 % instead of 70% if two condition cumulatively satisfied w.e.f 8.5.2013:
(a) for a residential unit satisfying both the following
conditions,:
(i) the carpet area of the unit is less than 2000 square
feet; or and
(ii) the amount charged for the unit is less than ` 1
crore;
75%
b) other case 70%
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19

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(4) Education Service:

(i) Mega Exemption: w.e.f 10.9.2013, services provided by NSDC exempted.

Any services provided by, _
(i) the National Skill Development Corporation set up by the Government of India;

(ii) a Sector Skill Council approved by the National Skill Development Corporation;

(iii) an assessment agency approved by the Sector Skill Council or the National Skill Development
Corporation;

(iv) a training partner approved by the National Skill Development Corporation or the Sector Skill
Council

in relation to (a) the National Skill Development Programme implemented by the National Skill
Development Corporation; or (b) a vocational skill development course under the National Skill
Certification and Monetary Reward Scheme; or (c) any other Scheme implemented by the National Skill
Development Corporation. [w.e.f 10.9.2013]

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(5) SEZ Unit/Developer:
(i) Manner service tax exemption to SEZ unit/Developer is revised notification no. 12/2013, dated
1.7.2013:

1. Services received by a unit located in a Special Economic Zone (SEZ) or Developer of SEZ and used
for the authorised operations shall be exempted from the whole of the service tax, education cess and
secondary and higher education cess leviable thereon.

Particulars Manner of Exemption
(1) Specified Services
consumed wholly within the
SEZ

(a) Do not pay tax at all. [Upfront exemption/ ab initio exemption]

(a) Pay tax and opt for refund route as prescribed in Rule 7 of the
CENVAT Credit;

(2) Specified services NOT
Consumed Wholly Within SEZ.
Pay tax full and claim proportionate refund as prescribed in Rule 7 of the
CENVAT Credit Rules.

Notes:
(1) For the purpose of distribution, the turnover of the SEZ Unit or the Developer shall be taken as the
turnover of authorised operation during the relevant period.

(2) No CENVAT credit of service tax paid on the specified services used for the authorised operations in
a SEZ has been taken under the CENVAT Credit Rules, 2004;

(3) The claim for refund shall be filed within one year from the end of the month in which actual payment
of service tax was made. Delay can be condone by the Assistant/Deputy Commissioner of Central Excise.

(4) Proper accounts of receipts and used of service for authorized operation has to be maintained.

(5) No refund shall be available on services consumed for operations in DTA.


20

(6) if there are more than one SEZ Unit registered under a common service tax registration, a common
refund may be filed at the option of the assessee.

(7) Where any sum of service tax paid on specified services is erroneously refunded for any reason
whatsoever, such service tax refunded shall be recoverable under the provisions of the said Act and the
rules made there under, as if it is recovery of service tax erroneously refunded;

(8) the SEZ Unit or the Developer shall furnish to the jurisdictional Superintendent of Central Excise a
quarterly statement, in Form A-3, furnishing the details of specified services received by it without
payment of service tax, by 30th of the month following the particular quarter:

Provided that for the quarter of July, 2013 to September, 2013, the said statement shall be furnished by
the 15th of December, 2013.

Important changes between earlier exemption Notification No. 40/2012 and new exemption
Notification No. 12/2013:

(1) As per Notification No. 40.2012, in order to get ab initio exemption, the specified services must wholly
consumed and provided within SEZ. However, Notification No, 12/2013, provides that specified services
received by the SEZ unit/ the developer must be exclusively used for authorized operation. Therefore, it is
not necessary that service must be provided within SEZ , it must be consumed by the authorized operation
of SEZ unit/developer.

(2) Manner of Refund of in case of services received is shared between DTA unit by the SEZ unit:
Service Tax shall be charged and refund must be claimed in the following manner -

Notification No. 40/2012:-Maximum refund = Service tax x (Export turnover/ Total Turnover)

Notification No. 12/2013: proportionate refund in the manner prescribed in Rule 7 of the CENVAT
Credit Rules, 2004.

(3) Option not to opt the exemption and claim CENVAT Credit:
Notification 40/2012: not expressly provided.
Notification 12/103: expressly provided.
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(6) Circular No. 171/6/2013-ST, dated 17.9.2013: Guidelines for post arrest procedures and Bail in
relation to offences punishable under the Finance Act, 1994

1. Post arrest procedure in case of non-cognizable and bailable offences:
(i) the Assistant Commissioner or Deputy Commissioner is bound to release a person on bail against a
bail bond. The bail conditions should be informed in writing to the arrested person and also informed on
telephone to the nominated person of the person (s) arrested .The arrested person should be also allowed
to talk to a nominated person. The conditions will relate to, inter alia, execution of a personal bail bond
and one surety of like amount given by a local person of repute, appearance before the investigating
officer when required and not leaving the country without informing the officer. The amount to be
indicated in the personal bail bond and security will depend, inter alia, on the amount of tax involved.

(ii) If the conditions of the bail are fulfilled by the arrested person, he shall be released by the officer
concerned on bail forthwith. However, only in cases where the conditions for granting bail are not
fulfilled, the arrested person shall be produced before the appropriate Magistrate without unnecessary
delay and within twenty-four (24) hours of arrest. The arrested person may be handed over to the nearest
police station for his safe custody, within 24 hours, during the night under a challan, before he is
produced before the Court.

21

2. Post arrest procedure in case of cognizable offences:
only in the event of circumstances preventing the production of the arrested person before a Magistrate
without unnecessary delay, the arrested person may be handed over to nearest Police Station for his safe
custody, within 24 hours, under a proper challan, and produced before the Magistrate on the next day, and
the nominated person of the arrested person may be also informed accordingly.
-------------------------------------------------------------------------------------------------------------------------------
Note: Firm of advocates are also covered under Reverse charge along with Individual advocates.
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REVISIONARY TEST PAPERS
[ SERVICE TAX]

Question 1: S Pvt. Ltd. provided or agreed to be provided the following services for the months of
December 2013.

i) Services rendered to poor people free of cost (value of the services computed on comparative basis `
40,000)
ii) Testing of samples from plant for pest detection ` 1,00,000
iii) Advanced received in December, 2012 from clients for which no service has been rendered so far `
50,000
iv) Leasing of vacant land to a stud farm ` 50,000
v) Renting of agro machinery for agricultural purpose ` 5,00,000
Compute the service tax payable by it in the month of December, 2013. The aforesaid amounts are
exclusive of service tax. Further, the assessee is not eligible to get Small Service Provider exemption.

Question 2: Compute Service tax payable for the Quarter ending 31.3.2014 from the following services
provided by Mr. X .
i) Amount received for the services rendered in October , 2013 (Bills for the same were issued on October
29, 2013) ` 1,00,000
ii) services rendered in relation to Supply of farm labour ` 1,00,000
iii) commission received in relation to sale of rice ` 2,00,000
iv) Amount received for warehousing of biscuits ` 50,000
v) Amount received on account of Training of farmers on use of new fertilizers ` 50,000
vi) Leasing of vacant land to a poultry farm ` 1,00,000
vii) Testing of soil of a farm land ` 50,000.
The aforesaid amounts are exclusive of service tax. Further, the assessee is not eligible to get Small
Service Provider exemption.

Question 3: A manufacturer of West Bengal provides the following information to compute service tax
liability. Both for the month of April 2013 and for July 2013.
(a) Manufacture of wine liable to excise duty under the West Bengal Excise Act. value of ` 10,00,000.
(b) Manufacture of Ayurvedic Medicine liable to excise duty under the Medicinal and Toilet Preparations
(Excise Duty) Act, 1955, value of ` 20,00,000.

22

(c) Manufacture of herbal cream liable for excise duty as per the provisions for Central Excise Duty but
fails to pay excise duty, value of ` 30,00,000.
(d) Processing of semi-finished goods which is not liable for excise duty, value of ` 10,00,000.
The assessee is not a SMALL SERVICE PROVIDER for the F.Y 2013-14.

Question 4: Discuss the taxability of the following vocational training courses provided by various
institutes:
(a) Courses run by ITI w.r.t approved trades notified under the Apprentices Act, 1961, affiliated to
National Council for Vocational Training
(b) Courses run by ITC w.r.t approved trades notified under the Apprentices Act, 1961, affiliated to
State Council for Vocational Training
(c) Modular Employable Skill Course, approved by the National Council for Vocational Training, run
by a person registered with the Directorate General of Employment and Training.
(d) Courses run by institute affiliated to the National Skill Development Corporation.

Question 5: Discuss consequences in relation to prosecution in case of following offences:
Particulars
(1) Intentionally evades payment of service tax of ` 60 lakhs
(2) Avails CENVAT Credit on input service before receipt of Invoice but not yet utilsed the
Credit.
(3) Fails to supply information as required by the Excise officer involving service tax amount of `
50 lakhs.
(4) Service Tax received from the client of ` 60 lakhs but not deposited in Government A/c.
(5) Service Tax received from the client of ` 60 lakhs and deposited ` 59 lakhs in Government
A/c.

Question 6: Education Cess is charged by virtue Finance Act (No.2), 2004 and Secondary Higher
Education Cess is charged by virtue of the Finance Act, 2007, in the both these Act, it has been
mentioned that EC and SHEC shall be charged on service Tax levied u/s. 66 of the Finance Act, 1994. An
assessee argues that w.e.f 1/7/2012, service tax is charged u/s 66B and therefore he is not required to pay
EC and SHEC on Service Tax from 1.7.2012 . Comment

Question 7: A Show Cause Notice u/s 73 has been issued to an assessee by invoking extended period of
limitation (i.e, 5 years) on ground of fraud, suppression, willful misstatement of facts etc. However, on
appeal, the Tribunal held that there no fraud is involved and therefore the application of extended period
of limitation is invalid. Now, the Excise Officer move to determine the service tax liability by applying
normal period of limitation of 18 months but the assessee is of the view that since the extended period of
limitation has not been sustained, therefore the entire proceeding has to be quashed. Comment.

Question 8: Central Excise Officer has issued a Show Cause Notice u/s. 73(1) regarding non/short levied
or non/short payment of service tax within the period of 18 months but fails to give details of service tax
not levied/paid or short levied/paid. After few days but within 18 months, the Excise officer send a
statement containing detail of service tax demand against the assessee. The assessee, is of the view that
since such statement does not amount to Notice, therefore legally he is not liable to pay the service tax
demand raised by the Central Excise officer. Comment

Question 9: A company fails to deposit service tax collected from its client. The Central Excise Officer
serve a notice for penalty against the company and against the director of the company. The Director of
the company taken the stand that since the company has paid the penalty, therefore he is not liable to pay
further penalty for the same default. What is your view ?

Question 10: Discuss the taxability of following food supply service:

23

i) Food supply service by a AC canteen maintained by a factory covered in the Factory Act, 1948.

ii) Food supply services provided by an AC restaurant without having license to serve alcoholic
beverages in the State of West Bengal.

iii) Food supply services provided by an AC restaurant without having license to serve alcoholic
beverages in the State of Utarakhand.

iv) Packed Food sold at the counter under MRP as per the Legal Metrology Act.

Question 11: Computer the taxable value of service from the following construction services provided
during the month of October 2013-

i) Construction of office building 1900 sq. ft. and entire amount received before issuance of completion
certificate ` 80 lakhs.

ii) Construction of residential unit 1900 sq. ft. and entire amount received after issuance of completion of

iii) Construction of residential unit 1900 sq. ft. and part of the amount received before issuance of
completion certificate ` 1 crores.

iv) Construction of residential unit 2000 sq. ft and entire amount received before issuance of completion

v) Construction of residential unit 1980 sq. ft and entire amount received before issuance of completion

vi) Construction of multi floor parking for Kolkata Municipal Corporation. Entire amount received before
issuance of completion certificate ` 5 crores.

Note: Amount collected includes value of land and CENVAT credit has not been availed.

Question 12: Answer the following in relation to the provisions of Service Tax:
(a) Prescribed fees for filling appeal to CESTAT.
(b) Can appeal relating to chargeability of service tax be filed in High Court ?
(c) What are the matter for which advance ruling can be sought ? Can advance ruling be sought only
for question of law?
(d) Matter relating to service tax cannot go the Settlement Commissioner. Comment
(e) The Central Government has the power to grant exemption from service tax in general but not in
relation to any specific service. Comment.

Question 13: The Commissioner of Service Tax has reason to believe that an assessee understated his
taxable value of service and accordingly directed for special audit but the assessee is of the view that his
accounts has already been audited u/s. 44AB of the Income Tax Act, therefore he is not liable for any
other audit. Comment.

Question 14: An assessee has paid service tax wrongly on services which are covered in the mega
exemption and when it comes to his knowledge he files a refund application after the prescribed time
limit under section 83 of the Finance Act, 1994 read with section 11B of the Central Excise Act, 1944.
The Central Excise Officer denied the refund claim on the ground that the application is barred by
limitation. Comment


24

Question 15: An assessee paid service tax and interest for delayed payment of service tax before the issue
of Show Cause Notice . The Department serve a SCN u/s. 73 and also started penalty proceedings u/s. 76
of the Act. Discuss, whether the action taken by the Department is correct in the eyes of the law ?

Question 16: (a) An Assessee has fails to pay service of ` 5,000 from 5.1.2013 to 15. 1. 2014. Compute
penalty payable u/s. 76.

(b) Mr. X paid its service tax of ` 50,000 for the quarter end 31.3.2014 on 15.4.2014. Compute the
amount of interest payable u/s. 75. In the Financial Year 2012-13, his taxable turnover was ` 20 lakhs.

Question 17: The Joint Commissioner of Central Excise has issued warrant to search the residence of the
assessee, where he has reason to believe that relevant documents has been secreted by the assessee. The
assessee is of the view that search can only be conducted in the registered premises and there is no power
to search the residence of the assessee under Service Tax. Comment.

Question 18: From following amounts received during the half year ended 31-3-2014. Compute Service
tax payable. The assessee became liable to pay service tax for the first time w.e.f 1.7.2013
i) Services performed before such service became taxable ` 10,00,000, where invoice and payment also
has been received before 1.7.2013.
ii) Services by way of renting of residential dwelling for use as residence ` 5,00,000
iii) Advance received in March 2014 for service to be rendered in July, 2014 ` 8,00,000 (The agreement
got terminated in April,2014. Hence, no services were rendered in July. However, a sum of ` 5,50,000
was refunded in June, 2014)
iv) For free services rendered to customers, amount reimbursed by the manufacturer of such product `
1,00,000 (for the period after the imposition of service tax)
v) Other Amounts realized and on which service tax is payable ` 6,00,000
Note: All the above figures are exclusive of service tax.

Question 19: Examine the following:
(a) Mr. X provides for the first time a taxable service under the unregistered brand name of another
person. During the financial year his taxable value is ` 5 lakh. Examine, whether he is eligible for Small
Service Provider Exemption under Notification No. 33/2012.

Question 20: Mr. X, an author of an Income Tax book (relevant for professional exams), transfers the
copyright of his Books to Tax Point (a reputed publishers) for a consideration of ` 100 per book sold on
1.12.2013. From the following information determine the point of taxation -
No of Books Sold 5,000
Date of Issue of Invoice by Mr. X 5.12.2013
Date of amount received by Mr. X 1.1.2014

Question 21: Suppose in Question 20, the consideration is fixed for ` 10,00,000 per annum irrespective
of no of books sold. What is the point of taxation ?

Question 22: X Ltd. owner of a coal mines in Odisha and also has obtained patent for the said mines from
the Government. X Ltd. transfers the right for commercial extraction of coal to Y Ltd. at agreed royalty of
` 1000 for each tones of coal extracted. The details of coal extracted as are under
Month Coal extracted (in tones) Date of invoice issued Date of receipt of payment

25

1
st
Jan 2014 1500 10
th
January 2014 ` 15 lakh on 02
nd
February
2014

1
th
Feb 2014 2000 15
th
March 2014 ` 20 lakh on 10
th
March 2014

1
st
March 2014 1000 25
th
March 2014 ` 10 lakh on 30
th
March 2014
Determine the Point of Taxation.
-------------------------------------------------------------------------------------------------------------------------------------------
SOLUTION TO RTP

Solution to Question 1: Computation of service tax payable for the months of December, 2013
`______
i) Services rendered to poor people free of cost NIL
[Since there is no Consideration, therefore no service tax shall be levied]

ii) Testing of samples from plant for pest detection NIL
[by virtue of amendments made by the Finance Act, 2013, now
all type of testing in relation to agriculture are covered under negative list]

iii) Advances received in December, 2013 from clients taxable on receipt
basis as per Rule 3 of Point of Taxation Rules] 50,000

iv) Leasing of vacant land to a stud farm 50,000
[Not covered under Negative List, since it is related to rearing of horses]
v) Renting agro machinery for agricultural purposes NIL
[Covered under Negative List]
Taxable Value 1,00,000
Service Tax @ 12.36% 12,360

Solution to Question 2: `_______
i) Amount received for the services rendered in October, 2013 NIL
[As per Rule 3 of Point of taxation, the point of taxation should be 29th Oct 2013.
Hence, receipts of ` 1,00,000 is not chargeable to service tax in March, 2013]

ii) services rendered in relation to Supply of farm labour NIL
[covered under Negative List]
viii) commission received in relation to sale of rice [covered under Negative List] NIL
iii) Amount received for warehousing of biscuits 50,000
[not covered under Negative List]

iv) Amount received on account of Training of farmers on use of new fertilizers NIL
[Covered under Negative list]
v) Leasing of vacant land to a poultry farm NIL
[Covered under Negative list]

vi) Testing of soil of a farm land [covered under Negative list] NIL____
Taxable value of service 50,000

26

Service Tax @ 12% 6,000
Education Cess @ 2% 120
Secondary and higher education Cess @ 1% 60
Service Tax Payable 6,180

Solution to Question 3:
Particulars April 2013 July 2013
(a) Manufacture of wine liable to excise duty under the West
Bengal Excise Act: not taxable covered in Negative list
NIL NIL
(b) Manufacture of Ayurvedic Medicine liable to excise duty
under the Medicinal and Toilet Preparations (Excise Duty) Act,
1955. W.e.f 10.5.2013 not taxable, since covered in Negative List
by the Finance Act, 2013.
20,00,000 Nil
(c) Manufacture of herbal cream liable for excise duty as per the
provisions for Central Excise Duty but fails to pay excise duty.
Covered in the Negative List actual payment of excise duty is not
relevant but it should be liable for excise duty.
NIL Nil
(d) Processing of semi-finished goods which is not liable for
excise duty. Taxable, since the process not liable for excise duty
10,00,000 10,00,000
Taxable Value 30,00,000 10,00,000
Service Tax @ 12.36% (including EC&SHEC @3%) 370800 123600

Solution to Question 4:

(a) Courses run by ITI w.r.t approved trades
notified under the Apprentices Act, 1961,
affiliated to National Council for Vocational
Training.
Not taxable. Covered in the Negative List
(b) Courses run by ITC w.r.t approved trades
notified under the Apprentices Act, 1961,
affiliated to State Council for Vocational
Training.

Before 10.5.2013: Taxable

On or after 10.5.2013: Not taxable. Covered in
the Negative List by virtue of Amendments
made by the Finance Act, 2013.
(c) Modular Employable Skill Course, approved
by the National Council for Vocational Training,
run by a person registered with the Directorate
General of Employment and Training.

Not taxable. Covered in the Negative List.
(d) Courses run by institute affiliated to the
National Skill Development Corporation.

Before 10.5.2013: Not taxable, covered in
Negative list

From 10.05.2013 to 09.09.2013: Taxable.

On or after 10.09.2013: Not taxable, covered in
the Mega exemption Notification No. 25/2012,
vide entry No. 9A.
Answer to Question 5:

Particulars No of time Imprisonment before Imprisonment on or after

27

of offences 10.5.2013
[Section 83 of the Finance
Act, 1994 read with section
9A of the Central Excise Act]
10.5.2013

[Section 89 of the Finance
Act, 1994]
(1) Intentionally
evade payment of
service tax of ` 60
lakhs

First time Minimum 6months (Note 1)
Maximum- 3 years

Non-cognizable and bailable.
Minimum 6months (Note 1).
Maximum- 3 years

Subsequent

Same as above Maximum- 3 years.
(2) Avail CENVAT
Credit on input
service before
received of Invoice
but not yet utilsed
the Credit.
First Time/
Subsequent
ly
No imprisonment No imprisonment
(3) Fails to supply
information as
required by the
Excise officer
involving service tax
amount of ` 50
lakhs.
First time Maximum 1 year

No arrest
Maximum 1 year.

No arrest.
Subsequent Minimum 6months (Note 1)
Maximum- 3 years

No arrest.
Maximum- 3 years.

No arrest.
(4) Service Tax
received from the
client of ` 60 lakhs
but not deposited in
Government A/c.
First Minimum 6months (Note 1)
Maximum- 3 years

Non-cognizable offences and
bailable.
Minimum 6months (Note 1)
Maximum- 7 years

Cognizable offences and non-
bailable [Bail can be given by
the court]

Subsequent Same as above Maximum 7 years.
Cognizable and non-bailable.
[Bail can be given by the
court]
(4) Service Tax
received from the
client of ` 60 lakhs
and deposited ` 59
lakhs in Government
A/c.
First Maximum 1 year

No arrest
Maximum 1 year.

NO arrest.
Subsequent Minimum 6months (Note 1)
Maximum- 3 years

No arrest
Maximum- 3 years.

No arrest


28

Note 1: In the absence of special and adequate reasons to the contrary to be recorded in the judgment of
the court, such imprisonment shall not be for a term of less than 6 months.

Answer to Question 6: Section 66BA has been newly inserted by the Finance Act, 2013 with
retrospective effective from 1.7.2012, which provides that reference to section 66 (old charging section)
of the Finance Act, 1994, in the said Finance Act or in any other Act, will be construed as reference to
section 66B (new charging Section).

Therefore, in view of the above provisions EC and SHEC shall continue to be charged in the new
charging section also. Hence, the contention of the assessee is not correct.

Answer to Question 7: In section 73, a new subsection (2A) has been inserted by the Finance Act, 2013
which provides that where the department has raised a demand invoking the extended period of limitation
and subsequently, the extended period of limitation has been quashed by the appellate authority or
Tribunal or Court because of non-establishment of fraud etc. then, the Central Excise officer can proceed
to determine the service tax liability for the normal period of limitation.

Thus, in view of the above provision, the view expressed by the assessee cannot be accepted.

Answer to Question 8: Section 73(1A) provides that, the Central Excise Officer may serve within 18
months, subsequent to any notice or notices served earlier, a statement, containing the details of service
tax not levied or paid or short levied or short paid or erroneously refunded for the subsequent period, on
the person chargeable to service tax, and service of such statement shall be deemed to be service of notice
on such person, subject to the condition that the grounds relied upon for the subsequent period are same
as are mentioned in the earlier notices.

From the above provision, it is concluded that, section 73(1A) gives such statement the status of deemed
notice, assuming ground relying on the statement is same as that of earlier notice.

Therefore, the action of the Excise officer is legally valid and the assessee shall required to pay the
service tax demand.

Answer to Question 9: The stand taken by the director of the company is not valid in the eyes of the law.
By virtue of newly inserted section 78A as given below, the defaulting director shall also be liable to pay
penalty upto `1 lakh even though the company has already paid penalty.
Section 78A provides that, where a company has committed any of the following contraventions,
namely:-
(a) evasion of service tax; or
(b) issuance of invoice in violation of the rules made under the provisions of this Chapter; or
(c) availment and utilisation of CENVAT wrongly or
(d) failure to pay any amount collected as service tax to the credit of the Central Government beyond a
period of six months from the date on which such payment becomes due,

then any director, manager, secretary or other officer of such company, who at the time of such
contravention was in charge of, and was responsible to, the company for the conduct of business of such
company and was knowingly concerned with such contravention, shall be liable to a penalty which may
extend to ` 1 lakh. [w.e.f 10.5.2013 Newly inserted by the Finance Act, 2013]

(i) Exempted from 22.10.2013, as newly inserted in the Mega Exemption Notification No. 25/2012.

(ii) Taxable from 1.4.2013. [Scope of service tax has been extended to all AC restaurants whether having
license to serve alcoholic beverages or not w.e.f 1.4.2013]

29

(iii) From 17.9.2013 to 31.3.2014, exemption provided on adhoc basis.

(iv) Not taxable under service tax. [amounts to sale of goods]- Refer Circular 173, dated 7.10.2013.

Particulars Taxable Value
On or after 8.5.2013
i) Construction of office building 1900 sq. ft. and entire amount
received before issuance of completion certificate ` 80 lakhs
30% of ` 80 lakhs.
ii) Construction of residential unit 1900 sq. ft. and entire
amount received after issuance of completion of certificate ` 70
lakhs.
Not taxable [amounts to sale]
iii) Construction of residential unit 1900 sq. ft. and part of the
amount received before issuance of completion certificate ` 1
crores.
30% of ` 1 crores.
iv) Construction of residential unit 2000 sq. ft and entire
amount received before issuance of completion certificate ` 90
lakhs.
30% of ` 90 lakhs
v) Construction of residential unit 1980 sq. ft and entire amount
received before issuance of completion certificate ` 90 lakhs.
25% of ` 90 lakhs
vi) Construction of multi floor parking for Kolkata Municipal
Corporation. Entire amount received before issuance of
completion certificate ` 5 crores.
30% of ` 5 crores

(a) The prescribed fees has been provided u/s. 86(6) the fees are similar to that we studied in Central
Excise- refer page 131 of Excise MAT.

(b) Appeal to the High Court relating to service tax matter shall be governed by the provisions of section
83 of the Finance Act, 1994 read with section 35G of the Central Excise, where is provided that matter
relating to rate or valuation cannot be filed to High Court. Therefore, matter relating to charge of service
tax cannot be appealed in High Court. The said matter directly appealed to the Supreme Court vide
section 83 read with section 35L of the Central Excise. The same view has been expressed in the case of
Volvo India Ltd (2011)(Kar.)

(c) Section 86C of the Finance Act, 1994 provides that in relation to the following matter advance ruling
can be sought-

i) valuation, Applicability of notifications, classification, determination of service tax liability and
ii) admissibility of credit of duty or tax in terms of the rules made in this regard

As per section 96A(a), "Advance ruling" means the determination, by Authority for Advance Rulings
(Central Excise, Customs and Service Tax), of a question of law or fact specified in the application,
regarding the liability to pay service tax in relation to a service proposed to be provided, by applicant.

Thus, as per the above definition advance ruling can be sought both for question of law and also for
question of fact.

(d) Service tax matter can be got the settlement commissioner vide section 83 of the Finance Act, 1994
read with section 31, 32, 32A to 32P of the Central Excise Act, 1944. i/e. in same manner as under
Central Excise.

30

(e) By virtue of section 93 of the Finance Act, 1994, the Central Government has the power to grant
exemption in general as well as for specific services also. The provision is discussed as under-

(1) General Exemption: If the Central Government is satisfied that it is necessary in the public interest
so to do, it may, by notification in the Official Gazette, exempt generally or subject to such conditions as
may be specified in the notification, taxable service of any specified description from the whole or any
part of the service tax leviable thereon.

(2) Service Specific Exemption: If the Central Government is satisfied that it is necessary in the public
interest so to do, it may, by special order in each case, exempt any taxable service of any specified
description from the payment of whole or any part of the service tax leviable thereon, under
circumstances of exceptional nature to be stated in such order.

Answer to Question 13: The provision relating to special audit has been governed vide section 72A of
the Finance Act, 1994, which provides that, where the Commissioner has reason to believe that the value
of services has been understated by the assessee, then he may direct such person to get his accounts
audited by a chartered accountant or cost accountant nominated by him, irrespective of the fact that the
accounts of the assessee has already been audited in any other law for the time being in force. Therefore,
the contention of the assessee is not valid.

Answer to Question 14: The fact of the case is similar to the case of KVR Construction 2012 (Kar.):
Where the assessee paid service tax mistakenly on exempted service, it was held that the said amount
must be refunded to the assessee even if the time limit of refund application u/s. 11B is barred by
limitation because the time limit of refund application is applicable for service tax and in the given case
the amount so paid was not considered as service tax.

Answer to Question 15: Section 73(3) of the Finance Act, 1994, provides that where an assessee
voluntarily paid its service tax along with interest for delayed payment before the issue of Show Cause
Notice, then the department shall not serve any notice of demand to the assessee. Hence, service of Show
Cause Notice in the given case is not valid.

Further, it was held in the case of Adecco Flexione Workforce Solutions Ltd. 2012 (Kar), that where the
assessee had paid both the service tax and interest before the issue of show cause notice, then the
Department has no power to issue SCN u/s. 73(3) and also penalty could not be levied u/s. 76.

If the notices were issued contrary to this section, the person who had issued notice should be punishable
and not the person to whom it was issued.

(a)
Penalty u/s. 76 shall be, (a) ` 100 per day of failure, or (b) 1% p.m. of service tax, whichever is higher,
starting with the first day after due date till the date of actual payment of outstanding amount of service
tax, Subject to, 50% of service tax not paid.

No of days of delay = 375 days
(a) ` 100 per day of failure (`100 x 375) = ` 3750
(b) 1% p.m of service tax(Note 1) = ` 616
Higher of (a) or (b) 3750
(c) Maximum 50% of 5,000 2500
Penalty u/s. 76 2500

Note 1:
For the month of Jan 13 = 5000 x 1% x 26/31 = 42

31

From Feb 13 to Dec 13 = 5000 x 1% x 11 months = 550
For Jan 2014 = 5000 x 1% x 15/31 = 24___
616
(b) Section 75 provides that, in case of delay in payment of service tax, interest shall be charged @ 18%
p.a. after the expiry of the due date till the date of payment of tax.

However, a concessional rate of 15% p.a is available for an assessee whose taxable value of turnover does
not exceed ` 60 lakhs during any of the year covered in the notice or the preceding financial year.
Accordingly interest payable shall be ` 308 i.e, (50,000 x 15% x 15/365).

Answer to Question 17: Section 82 of the Finance Act, 1994 provides that where, the Joint
Commissioner of Central Excise has reason to believe that any documents or book or things which in his
opinion will be any useful for or relevant to proceedings under this Chapter are secreted in any place, he
may authorize any Superintendent of Central Excise to search for and seize or may himself search for and
seize, such documents or books or things.

Thus, the word any place signifies that that search can be conducted in the residence of the assessee
subjected to satisfaction of other condition.

Hence, the view of the assessee is not correct.

Solution to Question 18: Computation of service tax payable for the half year ended 31.3.2014
Particulars Amount to (`)
i) Services performed before such service became taxable (Note 1) Nil
ii) Services by way of renting of residential dwelling for use as residence (Note 2) Nil

iii) Free services rendered to customers, amount reimbursed from manufacturer (Note 3) 1,00,000

iv) Advance received for service to be rendered in July, 2014 (Note 4) 8,00,000

v) Other taxable receipts 6,00,000_
Gross Value 15,00,000
Less: Exemption available to Small Service Providers (Note 5) 10,00,000
Value of taxable service 5,00,000
Service Tax @ 12% 60,000
Add: Education cess @ 2% 1,200
Add: Secondary and higher education cess @ 1% 600
Service tax payable 61,800
Note 1: As per Rule 5 of Point of Taxation Rules, where service is taxable for the first time and the
invoice and payment both has been issued/received before service became taxable, then service tax shall
not be payable.

Note 2: Services by way of renting of residential dwelling for use as residence are included in the
negative list of services. Hence, they are not subjected to service tax.

Note 3: Amount received from manufacturer for free services rendered to customers is liable for service
tax.


32

Note 4: Advance received for the services to be rendered in July, 2014 is liable for service tax on receipt
basis. However, excess service tax paid on account of refund of ` 5,50,000 in the next financial year i.e,
June 2014 would be adjusted against service tax liability of subsequent periods.

(a) As per Notification No. 33/2012, where the aggregate value of taxable services rendered by a service
provider from one or more premises, does not exceed ` 10 lakh in the preceding financial year, then in
the current financial year the provider shall be eligible to get small service provider exemption upto ` 10
lakhs.

However, the above exemption shall not be available where the service provided by using brand name of
another person, whether such brand name is registered or not.

Therefore, in the given case X Ltd. will not eligible to get Small service Provider exemptions.

Answer to Question 20: In the given case, since the amount of royalty is not determined at the time when
service is performed and subsequently on sale of books a right for payment has been established,
therefore the point of taxation as per Rule 8 of the Point of Taxation Rules, shall be earlier of the
following-
(i) Date of payment i.e, 1.1.2014
(ii) Date of issue of invoice i.e, 5.12.2013

Hence, the point of taxation shall be 5.12.2013.

Answer to Question 21: Since the given case the consideration is ascertain at the time of provision of
service, therefore Rule 8 of point of taxation shall not be applicable. Therefore, the point of taxation shall
be determined in accordance with Rule 3 of the Point of Taxation Rules.

Since the invoice is issued within 30 days from the date of completion of service, therefore, the point of
taxation shall be the date of invoice or date of payment; whichever is earlier.

Hence, the point of taxation shall be 5.12.2013.

Answer to Question 22: Rule 8 of the Point of Taxation Rules, 2011 provides that, in respect of royalties
and payments pertaining to copyrights, trademarks, designs or patents, where the whole amount of the
consideration for the provision of service is not ascertainable at the time when service was performed, and
subsequently the use or the benefit of these services by a person other than the provider gives rise to any
payment of consideration, then the point of taxation shall be date of payment or date of issue of invoice,
whichever is lower.

Since in the given case the consideration is ascertainable at the time of contract but it is based on
subsequently the quantum of coal extracted, therefore Rule 8 is applicable in the given case. Accordingly,
the point of taxation shall be as under-
Particulars Point of Taxation
1
st
Jan 2014 10
th
Jan 2014 [Date of invoice earlier]

1
th
Feb 2014 10
th
March 2014 [Date of payment earlier]

1
st
March 2014 25
th
March 2014 [Date of invoice earlier]


33

RELEVANT JUDICIAL PRONOUNCEMENTS
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Students are advised to put great stress on the following case laws discussed in the class.

A. CENTRAL EXCISE

I. BASIC CONCEPTS (MANUFACTURE/ MOVABILITY /MARKETABILITY)
1) Osnar Chemical Pvt. Ltd. (SC) (2012):
2) Steel Authority of India Ltd. 2012 (S.C.):
3) Rajendra Narayan 2012 (Del.):
4) Grasim Industries Ltd. 2011 (SC):
5) Larsen & Toubro Ltd. vs. UOI (2009) (Bom.)
6) Sony Music Entertainment (I) Pvt. Ltd. (2010) (Bom.):
7) Solid & Correct Engineering Works (2010) (SC):
8) Nicolas Piramal India Ltd. (20100(SC)
9) Medley Phamaceuticals Ltd. (2011)(SC)
10) Usha Rectifier Corp. (I) Ltd (2011)(SC)
11) GTC Industries Ltd. (2011) (Bom.)
12) Bata India Ltd. (2010)(SC)
13) Tarpaulin International (2010)(SC)

II. CLASSIFICATION
14) Keihin Penalfa Ltd. 2012 (S.C.):
15) Konkan Synthetic Fibres 2012 (S.C.):
16) Wockhardt Life Sciences Ltd. (SC) (2012
17) Minwool Rock Fibres Ltd. (SC) (2012)
18) Atherton Engineering Co. Pvt. Ltd. 2010 (Cal.)
19) Connaught Plaza Restaurant (Pvt) Ltd. 2012 (SC)
20) Salora International Ltd. (2012) (SC)

III. NATURE & SCOPE OF CBEC CIRCULARS

21) Madras Steel Re-rollers Association (SC) (2012)
22) Darshan Boardlam Ltd (2013)(Guj.)

IV. VALUATION
23) Fiat India Pvt. Ltd. 2012 (S.C.)
24) Maruti Suzuki India Ltd. (Tri-LB) (2010)
25) Essel Propack Ltd. (SC) (2011)
26)TATA Motors Ltd. (2012) UOI (Bom)

V. CENVAT CREDIT
27)Bhuwalka Steel Industries Ltd. (Tri-LB) 2010
28) Flex Engineering Ltd. (SC) (2012):
29) Tata Advanced Materials Ltd. (Kar.)(2011): Not relevant as rule 3(5) of CENVAT Credit shall be
applicable.
30) Prime Health Care Products (Guj.)(2011)
31) Ashok Kumar H. Fulwadhya (Bom)(2010)
32) Stelko Strips Ltd. (P&H)(2010)
33) Sintex Industries Ltd. (2013)(Guj)


34

VI. CENTRAL EXCISE RULES, 2002

34) Balaji Trading Co. (2013)(Del)

VII. SSI EXEMPTION

35) Elex Knitting Machinery Co. 2012 (S.C.)
36) Parle Bisleri Pvt. Ltd. [2011] 263 ELT 15 (SC)
37) Australian Foods India (P) Ltd (SC)(2013)

VII. SETTLEMENT COMMISSION

38) Maruthi Tex Print & Processors P. Ltd. 2012 (Mad.)
39) Ashwani Tobacco Co. Pvt. Ltd. (Del.) 2010
40) East and West Shipping Agency 2010 (352) ELT 12 (Bom.)
41) Sanghvi Reconditioners Pvt. Ltd. vs UOI (2010) 251 ELT 3 (SC)
42) Icon Industries v UOI 2011 (273) ELT 487 (Del)
43) K. Amish kumar Trading Pvt. Ltd. [2011] (Bom.)
44) J.R.B Engineering Works (2012)
45) CCEX Sett. Com(2010) Bom.

IX. INTEREST, DEMAND, REFUND, APPEALS & REVISIONS

46) Accrapac (India) Pvt. Ltd. 2010 (257) E.L.T. 84 (Guj.)
47) Tikitar Industries, 2012(S.C.)
48) Amidev Agro Care Pvt. Ltd. 2012 (Bom.)
49) Volvo India Ltd. (2011)
50) Raghunath International Ltd. 2012 (All.):
51) Kanyaka Parameshwari Engineering Ltd. 2012 (A.P)
52) Raja Mechanical Co. (P) Ltd. 2012 481 (S.C.)
53) Revision petition u/s. 129DD of Customs
54) Ranbaxy Laboratories Ltd. 2011 (SC):
55) Trilux Electronics 2010 (kar.):
56) Siddhartha Tubes Ltd. [2012] (SC):
57) Merchant Impex [2012] (Kar.):
58) Guwahati Carbon Ltd. [2012] (SC):
59) Imperial Granites (P) Ltd. [2012] (AP):
60) Hans Steel Rolling Mill 2011 (S.C.)
61) Techno Rubber Industries Pvt. Ltd. 2011 (Kar.)
62) Gem Properties (P) Ltd. 2010 (Kar.)
63) RDC Concrete (India) p. Ltd. [2011] (SC)
64) Gujchem Distillers 2011 (Bom)
65) BPL Ltd. 2010 (Mad.)
66) Gujarat Narmada Fertilizers Co. Ltd (2012)(Guj)
67) Uniworth Textiles Ltd. (2013)(SC):
68) Castrol India Ltd. (Bom.) (2012)
69) Jay Kumar Lohani (M.P)(2012)
70) Nanumal Glass Works (All)(2012)
71) Ankleshwar Taluka ONGC land Loosers Travellers Co.Op (2013)(Guj):
72) DBOI Global Service Pvt. Ltd (2013)(Bom)
73) Mihani Network (2012)(MP)
74) Thakker Shipping P. Ltd(SC)(2012)
75) Anita Grover (2013)(Del)
X. MISCELLANEOUS

35

76) Indian Oil Corporation Ltd. [2012] (SC)
77) Oracle India Pvt. Ltd [2012] (AAR): nullified by the Finance Act, 2013

B. CUSTOMS

1) Aggarwal Industries Ltd. 2011(S.C.)
2) Wringley India Pvt.Ltd. 2011 (Mad.)
3) Tirupati Udyog Ltd. 2011 (A.P)
4) Decorative Laminates (I) Pvt. Ltd. 2010 (Kar.)
5) M/s CPS Textiles P Ltd. 2010 (Mad.)
6) Aman Medical Products Ltd. (2010) (Del.):
7) Narayan Nambiar Meloths (Ker.) 2010:
8) Textoplast Industries (2011)(Bom.)
9) S.J Fabrics Pvt. Ltd. 2011 (Cal.)
10) Manish Lalit Kumar Bavishi 2011 (Bom.)
11) O.T Enasu 2011 (ker.):
12) Jaya Singh Vijaya Jhaveri Ker. (2010)
13) M. Ambal & Co.
14) Symphony Services Corporation India Pvt. Ltd. [2012] (Kar.)
15) Paras Fab International 2010 (Tri. LB)
16) Shreeji Overseas (India) Pvt. Ltd. (2013)(Guj.)

C. SERVICE TAX

17) Lincolin Helios (India) Ltd. 2011
18) Nahar Industrial Enterprises Ltd. (2010)
19) Infotech Software Dealers Association (ISODA) (2010)(Mad.)
20) Adecco Flexione Workforce Solutions Ltd. 2012 (Kar)
21) Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran 2012 (S.C.)
22) KVR Construction 2012 (Kar.)
23) Tirumala Tirupati Devasthanams, Tirupati (2012)(AP)
24) Kishore K.S. v. Cherthala Municipality 2011 (Ker.)
25) Essar Telecom Infrastructure Pvt. Ltd. [2012] (Kar.)
26) Bharati Airtel Ltd. [2012] (Kar.)
27) State Of Andhra Pradesh [2012] 25 STR 321 (AP)
28) Intercontinental Consultants & Technocrats Pvt. Ltd (2013)(Del.)
29) Mayo College general Council (2012)(Raj)
30) Wipro Ltd. (2013)(Del)
31) Graphite India Ltd. (2012) (Kar.)
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A. CENTRAL EXCISE

CENVAT CREDIT

(1) Flex Engineering Ltd. (SC) (2012):
All goods used in the factory for completion of final product shall be eligible for CENVAT Credit as
inputs. Manufacture of a product is complete only when it is marketable. Testing is a part of
manufacturing process as it determines whether the product is in accordance with customers
requirements or not. Therefore, goods used in the process of testing are necessary for completion of
manufactured product hence liable for CENVAT Credit as inputs.


36

(2) Bhuwalka Steel Industries Ltd. (Tri-LB) 2010

As per Rule 3(1) CENVAT Credit shall be allowed at the quantity received in the factory of manufacture.
However, In case the weight/ quantity of inputs as recorded in the purchase invoice differs from
weight/quantity of inputs as received in the factory due to volatile nature of certain goods or on account
of difference in weighing scales or other similar reasons termed as transit loss, then CENVAT credit
shall be allowed on the whole of the quantity as per the invoice if such difference is fall within the
tolerance/ normal limits or industry norms.

(3) KCP Ltd. (2013)(SC): CENVAT credit in relation to machines purchased for being used to setting up
a plant in outside India shall not be allowed, because no excise duty on manufacture of final product (i.e
plant) has been paid, as it is set up in outside India.

In the given case, the assessee manufactured certain machines in its own factory and purchased some
machines from other manufacturers and thereafter both the machines were transferred to Vietnam for
setting up the sugar plant. The assessee availed CENVAT credit on purchased machines as capital goods
but the revenue denied on the ground that the bought-out machines had not been used in the factory of the
assessee.

Held that,

The two basic condition for availing the CENVAT Credit are (i) Duty must be paid on inputs and such
inputs must be used in manufacture of final product in the factory of the manufacturer and, (ii) Excise
duty must be charged on final product.

If the duty is not levied on the final product, then the question of allowing CENVAT credit shall not be
arise. The object of the CENVAT credit is to mitigate the cascading effect of duty levied on the final
product. In a case, where no tax is levied on the final product, then there would not be any cascading
effect.

Therefore, in the given case since the sugar plant was set up in a place outside India, it could not be said
that the plant was manufactured in the factory of the assessee. Thus, no excise duty was paid on the final
product (setting up sugar plant in outside India). Hence, the question of availing CENVAT credit does not
arise.

Further, the bought-out machines were also not used in the process of manufacturing of the self-
manufactured machines, as the bought out machines were transported to Vietnam straight away along
with the machinery manufactured by the assessee without being unpacked, tested. In the given situation,
the assessee merely acted like trader or exporter in relation to bought out machines.

(4) Prag Bosmi Synthetics Ltd. (2013)(Gauhati High Court): NCCD can be paid by using CENVAT
Credit of basic excise duty also. It was held that, merely because CENVAT credit in respect of NCCD
can be utilized only for payment of NCCD, it does not lead to the conclusion that the credit of any other
duty cannot be utlised for payment of NCCD.

The High court further observed that, rule 3(7)(b) provides that CENVAT credit in respect of NCCD and
other duties shall be utilized for payment of excise duty chargeable under various statutes respectively.
The word respectively confines the utilization of CENVAT credit obtained under a particular statute for
payment of duty under that statute only. However, the reverse is not true in such cases considering the
provisions. Further, it is to be noted that in respect of NCCD paid in relation to mobile phones, credit of
other duties cannot be utilised for payment of NCCD as per specific provisions of rule 3(4). (if there is no Cenvat
Credit balance of NCCD, then NCCD of Mobile phone have to be paid in cash)
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37

SCOPE OF CIRCULAR

(5) S & S Power Switch Gear Ltd [Madras High Court] 2013: Where the board issue a circular u/s.
37B relating to classification issue then it can be imposed prospectively. The revenue cannot issue
demand notice u/s. 11A to the assessee on the reason of mis-classification prior to the date of circular.
View expressed as per the decision of Apex court in the case of H.M Bags Manufacturer.
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CLASSIFICATION

(6)Ciens Laboratories (SC)(2013): Medicament vis a vis cosmetic

Facts: The assessee engaged in the manufacture of a cream known as Moistrux which contents some
pharmaceuticals ingredients such as urea (10%), lactic acid (10%) and propylene glycol (10%). The
cream is prescribed by dermatologists for treating dry skin conditions. The cream is also sold without any
prescription in shops. The assessee classify the product as medicament under the heading 30.03 but the
department classified it as cosmetics under the heading 33.04.

Fundamental principles laid down by the Apex Court:

(a) If a product contains pharmaceutical ingredients which have therapeutic or prophylactic or curative
properties, then the product is classified as medicines and not cosmetic, irrespective of the proportion of
such ingredients and also such proportion cannot be consider as a decisive factor in classification.

(b) if a products primary function is CARE and not CURE then it is treated a cosmetic.

(c) However, if a product is used mainly in curing or treating ailments or diseases and contains curative
pharmaceutical ingredients, even in small qualities, is to be treated as a medicament, even though it is
sold without a prescription of a medical practitioner.

(d) The department cannot come to an immediate conclusion that all the products that are sold over the
counter without any prescription are cosmetic. The relevant factor is the curative attributes of such
ingredients that render the product a medicament and not a cosmetic. The proportion of such ingredients
is not invariably the decisive factor in classification.

Since in the given case, the cream (Moisturex) manufactured by the assessee was not primarily intended
to protect the skin but was meant for treating or curing dry skin conditions of the human skin. Therefore,
the same would be classified as a medicament and not a cosmetic.
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SSI EXEMPTION
(7) Deora Engineering Works 2010 (P & H): In the instant case, the partners of both the firms were
common and belonged to same family. They were manufacturing and clearing the goods by the common
brand name (Dominant), manufactured in the same factory premises, having common management and
accounts etc.
Therefore, High Court was of the considered view that the clearance of the common goods under the
same brand name manufactured by both the firms had been rightly clubbed.

(8)Bonanzo Engineering & Chemical Pvt. Ltd. [2012] (SC): In computing 150 lakhs value of clearance
for SSI exemption, clearances which are exempt from the whole of excise duty under any other
notification shall not be taken account.

It was held that, even if the assessee wrongly pay duty on exempted goods such value should not be
included in computing 150 lakhs of value of first clearance.

38

EXPORT PROCEDURES UNDER EXCISE

(9) UM Cables Limited (2013) (Bombay High Court): Export rebate under rule 18 cannot be denied
merely on the ground of non-submission of Form ARE-1, if the main conditions of granting rebate are
satisfied.

Facts: In order to claim rebate as per rule 18 of the central excise rules, 2002 read with Notification No.
19/2004, one of the procedures to be followed is to produce original copy of application Form ARE-1 for
verification by the rebate sanctioning officer. [For detail procedures refer page 155]

The question is, whether non-production of such copy leads to denial of rebate where all other procedures
were duly complied.

It was held that, conditions and limitations on which the underlying benefit is based are mandatory in
nature and matter relating to procedures are directory in nature. The procedures cannot be raised to the
level of a mandatory requirement.

Where the substantial and fundamental conditions underlying the grant of a benefit is satisfied then in that
case a benefit cannot be denied merely because of non-compliance of some procedures.

Rule 18 provides the conditions and limitations subject to which rebate can be granted and notification
No. 19/2004 provides the procedures. The objective of the said notification is to facilitate the processing
of a rebate claim and to enable the authority to be duly satisfied that the two fold requirement of goods is
fulfilled i.e, (i) having been exported and (ii) being duty paid

In the given case the assessee satisfies all the conditions and limitations as per Rule 18 but fails to
produce Form ARE-1, that does not ipso facto invalidate rebate claim. The assessee can demonstrate by
cogent evidence that the goods were exported and duty paid which is the main underlying conditions of
granting rebate under rule 18.
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COMMON TOPICS IN EXCISE, CUSTOMS AND SERVICE TAX

SHOW CAUSE NOTICE & DEMAND

(10) Infinity Infotech Parks Ltd. (2013)(Calcutta High Court): Extended period of limitation cannot
be invoked for mere violation of provisions without the intent to evade service tax.

First write the provision of section 73(1) in relation to fraud etc.

Mere contravention of the provisions of chapter V of the Finance Act, 1994 or rules made thereunder
does not itself sufficient for invoking extended period of limitation under proviso to section 73(1),
something more is required that is the intent to evade payment of service tax.

(11) Kemtech International Pvt. Ltd (2013)(SC): Held that the adjudicating authority is bound by the
principles of natural justice and required to supply to the assessee all such documents on which it
proposed to place reliance in relation to re-quantification of short-levy of customs duty. The assessee
must be given a chance to furnish their explanation thereon and to provide additional evidence in support
of their claim.

(12) Chitra Builders Private Ltd. (2013) (Madras High Court): The department is not justified by
recovering service tax during search without passing appropriate assessment order.

Facts:

39

(i) The department collected ` 2 crores from the branch office of the assessee during search operation.

(ii) The assessee filed a writ petition requesting the court to direct the Department to return ` 2 crores, on
the basis of the following grounds

(a) Since it was not liable to pay service tax, therefore the collection of said amount was arbitrary or
illegal;

(b) The assessee was neither carrying on its business nor was registered within the jurisdiction of the
Commissionerate who had issued search warrant, therefore the search was barred by jurisdiction
limitation of the Department;

(c) Although the record shows that ` 2 crores had been paid to the Department voluntarily, as part of the
arrears of service tax due, but it was recorded under coercion.

Held that, it is a established principle that no tax can be collected from the assessee, without an
appropriate assessment order being passed by the authority concerned and by following the procedures
established by law. Further, the department had failed to show that the assessee was actually liable to pay
service tax. The department in the given case had not followed the established principles and therefore,
the amount so collected by it was not valid in the eyes of the law. Hence, the department must return the
said sum to the assessee.
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PENALTY

(13) Delphi Automotive Systems Ltd. (Allahabad High Court) 2013: Penalty u/s. 11AC cannot be
charged where there exists different judicial decisions and the assessee has followed any one judgment.

It was observed that, mens rea is an essential part for levying penalty u/s. 11AC and in a case where the
provision of the statue is not clear and there exist divergent judicial judgment, it cannot be said that there
is mens rea on the part of the assessee if he accepts any one judgment.

(14) Case of Xenon (Jharkhand High Court) 2013: Penalty could not be invoked upon a company
who did not undertake any transaction.

The assessee (a company) had set up a another company (dubious company) to mis-utilise the benefits of
SSI exemption. All the activities were undertaken by the original company in the name of the dubious
company. It was held that, the transaction undertaken in the name of the dubious company would be
considered as transaction of the original company and clubbed with the transaction of original company.

Further, the department was of the view that, since there exist two companies having different
registrations and availed separate SSI exemptions, therefore the dubious company should also be liable to
penalty for taking SSI exemption erroneously.

The high Court held that, existence of the dubious company could not itself create any liability, the
liability could arise only when the transactions were actually undertaken by the dubious company and
merely because the dubious company was in existence, it could not be said that it undertook the
transactions. Since in the given case it was established that the dubious company did not undertake any
transactions, therefore penalty could not be invoked on the dubious company for the transactions
undertaken by the original company.

(15) V. Ratnamani Metals & Tubes Ltd (Gujarat High Court) 2013:

40

Tribunals or Courts can allow the assessee to pay penalty at reduced rate of 25% after the time provided
u/s. 11AC has been expired (i.e. after 30 days from the date of communication of order of Adjudicating
Authority) but if the entire dues, interest and penalty paid within 30 days from the order of the Tribunal.

Contrary ruling: Castrol India Ltd. (Bom.) (2012): Tribunals or Courts cannot allow the assessee to pay
penalty at reduced rate of 25% after the time provided u/s. 11AC has been expired (i.e. after 30 days from
the date of communication of order of Adjudicating Authority).

(16) Vandana Bidyut Chatterjee (Bombay High Court) (2013): Former directors shall not be held
liable for recovery of the excise dues of the company.
Same view was expressed in the case of Anita Grover, wherein it was held that custom duty due to the
company cannot be recovered from the former directors of such company in the absence of any specific
provisions.
Facts: In the given case, the department demanded that the assessee must pay arrears of excise duty and
penalty of a company of which her late father was a director and sought to attach the property belonging
to the assessee which was gifted by her late later father during his life time. Initially, the company was
jointly managed by the assessees father and Kapoor family and latter on Kapoor family transferred their
shares to assessees father with an agreement to discharge the excise duty liability of the company by the
assessees father.

Decision: By observing section 12 of the Central Excise Act read with section 142 of the Customs Act
and Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995, the
court opined that the Central Government can recover dues belonging only to the defaulter. There was
no provisions to recover the arrears of the company from its directors or shareholders under
Custom/Excise as like the provisions of section 179 of the Income Tax Act and section 18 of the Central
Sales Tax Act.

Since in the given case, the duty and penalty were arrears of the company because company was the
person engaged in the manufacture of goods and registered as manufacturer. Therefore, the recovery
proceedings can be undertaken only against the company, as the company alone is the defaulter and the
company is a separate person having distinct identity, independent from its directors and shareholders.
Thus, the attachment notices issued on the former directors and his daughters were without the
jurisdiction of department and could not be sustainable. The departments reliance on the agreement is alo
not sustainable.
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REFUND

(17) Swastik Sanitarywares Ltd (2013)(Gujarat High Court): Where excise duty was paid erroneously
twice on the same goods by the assessee and the burden of tax (paid second time) were not shifted to the
consumer, then the department cannot deny the refund application on the ground that the application was
time barred.

It was held that, amount paid mistakenly for the second time could not be considered as duty deposited or
paid, therefore the provisions of section 11B shall not get attracted. Further, the repayment of such
amount by the department cannot be considered as refund u/s. 11B.

[Same view was also expressed where service tax was mistakenly paid in the case of KVR Construction
(Karnataka High Court]

(18) Narayan Nambiar Meloths (251) (Ker.) 2010:

41

The assessee was filed refund application by attaching attested copy of TR 6 challan. The Department
has not entertained the application on the ground that the assessee had not produced original of the TR-6
Challan. According to the department, production of original of the TR-6 challan was a mandatory
requirement for processing the refund application.

The high court denied the contention of the department and ruled out that , as per the CBEC clarification
a simple letter from the person who made the deposit, requesting for return of the amount, along with the
appellate order and attested Xerox copy of the Challan in Form TR-6 would sufficient for processing the
refund application.

(19) BPL Ltd. Madras High Court) (2010): The doctrine of unjust enrichment cannot be ruled out for
granting refund to the assessee merely on the basis of Chartered Accountants Certificate acknowledging
certain facts. The certificate of CA was merely a piece of evidence and it would not entitled a person to
refund in the absence of any other evidence to prove that the burden of the duty has not been passed to
any other person.
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APPEAL & REVISIONS

(20) Whether the following can be valid ground of reason for condonation of delay?

(i) the authorised representative of the assessee went to a foreign trip and on his return, his mother
had expired.
Yes, held that the delay in filing of appeal to CESTAT can be condoned on the reasonable ground that,
the authorised representative of the assessee went to a foreign trip and on his return, his mother had
expired.
In the given case, appeal was filed after 45 days delay and which was not accepted by the Tribunal on the
ground that there was no sufficient reasonable cause. However, the High Court held that, there was no
intention latches or neglects on the part of the authorised representative to file the appeal and the above
mentioned reason can be accepted a reasonable ground to condone the delay. [Habib Agro Industries
(Karnataka High Court) 2013]

(ii) the delay is due to the mistake of the counsel of the assessee.

Yes, it was held in the case of Margara Industries Ltd. (2013)(Allahabad High Court), wherein the
condonation appeal was rejected by the CESTAT on ground of insufficient reason. However, the High
Court held, that the Tribunal should have taken a lenient view in this matter as the assessee was not
benefited by not filing the appeal and also the counsel had accepted his failure by submitting a personal
affidavit.

(21) Can the High Court interfere by virtue of writ petition where the appeal is not accepted before
Commissioner Appeal or CESTAT due to time barred ?

(i) Khanpur Taluka Co-op. Shipping Mills Ltd. (2013): Where an appeal against order-in-original of
the adjudicating authority has been dismissed by the appellate authorities as time barred, then the writ
petition filed by the assessee against the original order cannot be entertained by the High Court.

The Bombay High Court held that where the appeal filed against the original order was dismissed as time-
barred, then the High Court would neither direct the appellate authority to condone the delay nor interfere
with the order passed by the adjudicating authority. In the given case, the High Court refused to entertain
the writ petition.
Similar view was also expressed in the case of Raj Chemicals (Bom.)(2013).

42

(ii) Texcellence Overseas (Gujarat High Court)(2013): Contrary view expressed subject to certain
valid grounds.
The High Court can exercise its extra ordinary jurisdiction in a extremely good case on merit basis,
where non interference leads to gross injustice to the assessee. However, such powers are required
to be exercised very sparingly and in extraordinary circumstances in appropriate cases, where
otherwise the Court would fail in its duty if such powers are not invoked.

In the given case a refund was granted to the assessee in the original order of adjudicating authority and
the same was upheld by the CESTAT. Subsequently, the department issued a show a cause notice and
adjudicated that refund was erroneously granted. The assessee goes to the Commissioner (Appeals) after
5 months from the said order. Commissioner (Appeals) rejected the matter on the ground of limitation
(time barred). The tribunal also upheld the view expressed by the Commissioner (Appeals). Application
for condonation of delay also rejected.

The High Court observed that none of the appellate authority decided the questions on merit after the
second round of litigation began and therefore, the question of merger would not arise until the matter is
decided on merits. Further, the department did not dispute the fact that the assessee had a extremely good
case on merit and also the assessee had sought for condonation of delay with sufficient explanations from
the very beginning, though the appellate forums were bound by the law on the issue. Also, the total delay
in filing appeal was very small. Hence, the case had extremely good ground on merits to sustain.
Accordingly, in the given case the High Court by exercising its extraordinary jurisdiction quashed the
order of Adjudicating Authority & held that the refund was erroneously granted.

(22) Raja Mechanical Co. (P) Ltd. 2012 481 (S.C.): The Doctrine of merger is not applicable in case
where the appeal is dismissed on the ground of limitation [i.e, expiry of time limit for application] and not
on merits. Therefore, the said order is not merge with the order passed by the earlier authority.

In the given case, the Commissioner (Appeal) rejected the case of assessee on ground of limitation and
the assessee is of the opinion that this order is merged with the order of adjudicating authority and
therefore the case must be accepted by the CESTAT, High Court. The Apex court rejects the contention
of the assessee.

(23) Rishiroop Polymers Pvt. Ltd (Bombay High Court) 2013: Writ petition cannot be entertained
by the High Court in respect to an order passed by the CESTAT u/s. 9C of the Customs Tariff Act,
1975 and held that since an alternate remedy by way of appeal was available in accordance with
law, therefore it would not be appropriate for it to exercise the jurisdiction of Article 226 (writ
petition) of the Constitution.
Generally, writ petitions are heard more quickly than normal appeals, therefore some assessees prefer the
same. However, from the above ruling it is clear that, where there is scope for appeal under the relevant
statute then the assessee must take the benefit of same before coming for writ jurisdiction.
In the given case, the CESTAT u/s. 9C, decided the case against the assessee in respect to imposing of
antidumping duty. The assessee filed a writ petition under Article 226. However, the Department
contended that as per section 130 except the matter of rate of duty and valuation, all other order of
CESTAT can be appealable before High Court, therefore the assessee can go for normal appellate
procedures and not for writ petition.
The High Court observed that, Section 9A(8) of the Customs Tariff Act, 1975 specifically incorporates
all the provisions of the Customs Act, 1962 relating to appeal in relation to application of anti-dumping
duty. Therefore, the correct course of action is appeal as mentioned by the Department.


43

The assessee further stated that, section 130(2) provides that the appeal can be filed by the Commissioner
of Customs or the other party but in case of anti-dumping duty, there is no scope for commissioner of
customs to file appeal because the proceedings are against the designated authority. The Court again
clarified that, since appellate procedures of the Customs Act, 1962 have been incorporated in section
9A(8) of the Custom Tariff Act, 1975, they necessarily apply in a manner that would make the same
intelligible and workable, thus in the given case instead of the Commissioner of Customs it should be
read as the designated authority.

SETTLEMENT COMMISSION

(24) Ashok Kumar Jain (Del High Court) (2013): Settlement commission have jurisdiction over
baggage cases as well, since there is no such restriction provided in the section 127B. The department
cannot interpret the provisions of settlement commission narrowly. Further, there is no such intention of
the Parliament as well, otherwise it had been mentioned in provisions of section 127B(1) i.e., kind of
cases which could not be entertained by the settlement commission.

(25) Saurashtra Cement Ltd. (Gujarat High Court) 2013: Even though the order of the settlement
commission is final but the finality clause could not exclude for a writ petition under article 226 in the
High court or under article 32 in the Supreme Court or a special leave petition under article 136 to the
Supreme Court. It can be possible, if the settlement commission has acted (i) wrongfully or (ii) arbitrarily
or (iii) perverse or (iv) against the principles of natural justice or ultra virus to the Act. However, the
judicial review is very narrow and where the Courts shall consider the decision making process and not
the decision of the settlement commission.

(26) Sanghvi Reconditioners Pvt. Ltd. (2010) (SC):
An application u/s. 127B of Customs Act, 1962 for settlement of cases would be maintainable only if it
discloses duty liability, which had not been disclosed to the proper officer. Obviously, a disclosure
contemplated by the said section is in the nature of voluntary disclosure of the concealed additional
customs duty.

Thus, where the settlement commission, based on the report of the commissioner, finds that the applicant
has not made full and true disclosure of his duty liability before settlement commission, the application
for settlement is not maintainable. The assessee cannot dissect the Settlement commissions order to
accept what is favourable to it and reject what is not.

(27) Ashwani Tobacco Co. Pvt. Ltd. Del. (2010): Benefit under the proviso to section 11AC could
not be granted by the Settlement Commission in cases of settlement.

It was provided that the order of settlement made by the Settlement Commission is distinct from the
adjudication order made by the Central Excise Officer. The scheme of settlement is contained in Chapter
V of the Central Excise Act, 1944 while adjudication undertaken by a Central Excise Officer has no
power to accord immunity from prosecution while determining duty liability under the Excise Act.

Once the petitioner has adopted the course of settlement, he has to be governed by the provisions of
Chapter V. Therefore, the benefit under the proviso to section 11AC, which could have been availed
when the matter of determination of duty was before a Central Excise Officer was not attracted to the
cases of a settlement, undertaken under the provisions of Chapter V of the Act.
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44

B. CUSTOMS

BASIC CONCEPTS

(28) Tirupati Udyog Ltd. 2011: Customs duty can be levied only on goods imported into or exported
beyond the territorial waters of India. Since both the SEZ unit and the DTA unit are located within the
territorial waters of India. Hence, clearance of goods from DTA to SEZ shall not be considered as export
and hence not liable to export duty.

SEZ Act also does not contain any provision for levy and collection of export duty for goods supplied by
a DTA unit to a unit in a Special Economic Zone for its authorized operations. In the absence of specific
provisions in the SEZ Act export duty cannot be levied on the DTA supplier by implication.
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REFUND

(29) KSJ Metal Impex (P) Ltd. (Madras High Court) (2013): Where refund of Special counter
veiling duty(special additional duty) u/s. 3(5) arises due to exemption by notification u/s. 25, then in
case of delayed refund the department is liable to pay interest as per section 27A.

Fact of the case:
(i) As per the section 3(5) of the Customs Tariff Act, 1975, the assessee was required to pay special
additional duty to counterbalance the sale tax. However, as per the exemption Notification No. 102/2007,
issued u/s. 25(1), the assessee was required to pay the special additional duty first and thereafter will get
refund of the duty so paid.

(ii) Accordingly, the assessee had claimed the refund u/s. 27 along with interest on refund u/s 27A for
delay payment of refund. However, the department denied the interest on refund in view of the paragraph
4.3 of the circular No.6/2008, which provides that interest should not be granted since the Notification
No.102/2007, did not specifically provides for allowing of interest in such as case.

The High court pointed out that:
(i) The department is in misconception by stating that the notification issued u/s. 25 of the Customs Act,
1962 does not have any specific provisions for interest on delayed payment of refund.

(ii) The procedures of refund of duty paid u/s. 3(5) is governed in terms of section 3(8) of CTA.
Therefore, the provisions of section 27 of the Customs Act, 1962 shall be applicable in relation to refund
vide section 3(8). Further, a conjoint reading of section 25(1) and section 27 of the Customs Act, 1962
makes it clear that the refund application of duty paid u/s. 3(5) should only be filed in accordance with the
procedure specified u/s. 27 and there is no method prescribed u/s. 25 to file an application for refund of
duty or interest.

(iii) When there is section 27 for refund of duty and section 27A for paying interest in case of delayed
refund, then department cannot override the said provisions by issuing a circulars and deny the right
which is granted by the provisions of the Customs Act, 1962 and CTA. Therefore, Circular No 6/2008
(paragraph 4.3, denying the interest) being contrary to the statute has to be struck down as bad.

Thus it is clear from the above discussion that, the provisions of refund and interest on refund applicable
in normal cases shall also equally be applicable to the cases of refund by virtue of exemption notification.


45

(30) Vishnu M Harlalka (Bombay High Court) (2013): The Department is liable to pay interest on
delayed refund of sale proceeds of goods seized and auctioned after application thereof as prescribed in
the section 150(2).

Facts: In the given case, the Settlement Commission ordered to release the goods of the assessee seized
by the Department on payment of fine fixed by it. But. Since the department already auctioned the seized
goods, therefore, the settlement directed to the department to refund the remaining amount after the
adjustment of fixed fine and other expenses and charges as payable in terms of section 150 of the
Customs Act, 1962. However, irrespective of several representations, the department did not refunded the
remaining amount till the date of filing of writ petition. Subsequently during the pendency of case, the
department refunded the remaining balance but did not pay the interest on amount so refunded.

It was held that, the contention of the department that such refund is not covered u/s. 27 and therefore no
liability of interest u/s. 27A shall be arises, cannot be accepted because when the settlement commission
granted the refund there was no point for unreasonable delay in payment of balance sale proceed after
adjustment of due as per section 150(2). Although the settlement commission did not specified any time
limit for refund in its order but all statutory powers have to be exercised within a reasonable period when
no specific period is prescribed.

The high court directed the department to pay interest for delayed refund with the following comment that
if the contention of the department is accepted then it would mean that despite an order of the competent
authority directing the Department to grant a refund, the Department can wait for an inordinately long
period to give the refund amount to the assessee.

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INTEREST, PENALTY, & CONFISCATION

(31) Caravel Logistics Pvt. Ltd (2013)(Madras High Court): In case of short-landing of goods, if
penalty is to be imposed on person in charge of the vessel, then it can also be imposed on the agent
appointed by him (known as steamer agent who acted on behalf of the master of the vessels to
conduct all affairs in compliance with the Customs Act,1962).

In the given case, the assessee a steamer agent, appointed by the master of the vessel to conduct all the
compliance procedures in relation to import of goods on behalf of the master of the vessels. Accordingly,
the assessee dealt with the following compliance procedures on behalf of the master of the vessels:-

(i) Filed IGM, affixed the seal on the containers and took charge of the sealed containers.
(ii) Also dealt with the customs department for appropriate orders that had to be passed in terms of
section 42.

However, it was found that there was short-landing of goods at the place of destination and accordingly,
the department charged penalty u/s. 116 on the assessee (steamer agent).

Held, Section 116 provides that in case of default penalty shall be imposed on the person in charge of
the conveyance and section 2(31) provides that person in charge in relation to the vessel means master
of the vessel and section 148 provides that the agent appointed by the person-in-charge of the
conveyance and any person who represents himself as an agent of any such person-in-charge is held to be
liable for fulfillment in respect of all matters of customs including penalties and confiscation.

Thus, the conjoint reading of the sections 2(31), 116 and 148 of the Customs Act, 1962 makes it clear that
the assessee (steamer agent) stepped into shoes of the person-in-charge and hence liable for penalty.
However, if the assessee is innocent then it can take action against the shipper for short landing.


46

Further, U/s section 42 (which provides that no conveyance can leave without written order), there is an
automatic penalty for short-landing of goods as shown in IGM. Hence, there is no requirement of proving
criminal intent or mens rea for levying penalty u/s. 116 in such a case.

(32) Wringley India Pvt.Ltd. 2011 (Mad.): The assessee initially made a mis-declaration of value of the
imported machinery and latter on discharged its dues as per the findings of the Department. The assessee
paid import duty as per the actual value only after Department referred the matter to local chattered
engineer who found that actual value was higher.

It was held that, even if the liability has been discharged still the goods are liable for confiscation on the
ground of intentional mis-declaration of value by the assessee.

(33) M/s CPS Textiles P Ltd. 2010 (Mad.): The Court, while interpreting section 75A(2) of the Customs
Act, 1962, noted that when the claimant is liable to pay the excess amount of drawback, he is liable to pay
interest as well. The interest is automatic. No notice need to be issued separately for that.

(34) Jay Kumar Lohani (M.P)(2012): The Commissioner had issued a Show Cause Notice to the
assessee regarding confiscation of seized goods and imposition of penalty. While the adjudication in
relation to the first notice was not settled, the commissioner issued another show cause notice regarding
demand of excise duty and imposition of penalty by invoking extended period of limitation on the same
allegation.

The assessee is of the view that the second notice shall be void with the argument that since no decision
was taken against the first Show Cause Notice, therefore the commissioner could not prejudge the matter
and issue another SCN.

The High Court disagreed with the objection of the assessee and pronounced that in the absence of any
legal provision which restricts the commissioner to issue second SCN before the completion of
adjudication of first SCN and since the second notice only formed prima facie view in regard to
allegation, therefore it cannot be considered as issued after pre-judge the question involved in the matter.

(35) Jaya Singh Vijaya Jhaveri (Ker.)(2010):
Is the want of evidence from foreign supplier enough to cancel the confiscation order of goods
undervalued?

In the instant case, the High Court held that in a case of confiscation of goods because of their under
valuation, Tribunal could not cancel the confiscation order for the want of evidence from the foreign
supplier. The court considered it be illogical that a person who was a party to undervaluation would give
evidence to the Department to prove the case that the invoice raised by him on the respondent was a
bogus one and that they had received underhand payment of the differential price. Resultantly the Court
upheld the confiscation order.

(36) Hemal K. Shah (Order No. 102/2011-Cus., Dated 14-6-2011):- Before the Government of India,
Ministry Of Finance [Revision petition u/s. 129DD of Customs]

Smuggled goods once imported shall not be allowed to be re-exported unless duty, penalty, fine in
lieu of confiscation has been paid.
Facts:
1. The assessee imported various goods in his baggage without declaring it. The department seized the
said goods.

2. The department give ordered for recovery of dues, interest and also provide options to pay fine for
recovery of seized goods.

47

3. On appeal by the assessee, the appellate authority allowed re-export of the confiscated goods.

4. On revision petition filed by the Department, the Government noted that the passenger had grossly mis-
declared the goods with intention to evade duty and smuggled the goods into India.

Further, According to the provision of section 80 of the Customs Act, 1962 when the baggage of the
passenger contains article which is dutiable or prohibited and in respect of which the declaration is made
u/s. 77, the proper officer on request of passenger detain such article for the purpose of being returned to
him on his leaving India.

In the given case, since passenger neither made true declaration nor requested for detention of goods for
re-export, before customs at the time of his arrival at airport. Therefore, the re-export of said goods
cannot be allowed under section 80 of Customs Act.
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C. SERVICE TAX

BASIC CONCEPTS

(37) Rajasthan Urban Infrastructure 2013(Rajasthan High Court): NO TDS on Service Tax.

If as per the terms of the agreement service tax is charged separately and it is not included in the technical
or professional fees , then the provision of TDS shall not be applicable on service tax component. Hence,
TDS u/s. 194J cannot be applied on service tax.

[The above view has been accepted by the CBDT and issued circular No 1/2014, dated 13.01.2014 in this
behalf. The said circular is not applicable for MAY 2014 Exam]

(38) Delhi Chit Fund Association (Delhi High Court) (2013): Service Tax cannot be levied in
relation to services rendered in chit fund business and therefore, Notification No. 26/2012, dated
30.6.2012 granting abatement of 30% in relation to services of chit business is not valid.

Held that, the activities of chit fund is a transaction in money and therefore must be covered in the
exclusion clause of the definition of service. In case of chit fund business, the subscription is tendered in
any one forms of money as defined u/s. 65B(33). The High Court, elaborated that an activity cannot be
charged to service tax unless the following four aspects are present- (i) service provider; (ii) Service
receiver; (iii) service must be actually rendered; (iv) consideration. A mere transaction of money cannot
be considered as service as it lacks the four aspects. Further, at first even though mere transaction in
money is not a service but still it is excluded from the definition of service, which implies the intention
of the legislature to exclude it.

Further, as per explanation 2, only two activities of transaction of money is taxable if separate fees is
charged one is use of money and other is conversion of money and therefore, all other cases of transaction
of money shall be excluded from the charge of service tax, including the consideration charged for the
services of a foreman in a chit business.

Therefore, neither the activities of chit fund [Subscription of money] and nor the commission received by
the foremen [disbursing of chit fund to the member who is the highest bidder] is taxable under service
tax. The High Court also quashed, the serial No. 8 of the Notification No. 26/2012, in relation to
abatement given in relation to service of chit fund.

Note: Foreman: The person who organize the auction and its procedures for disbursing the chit amount
to the member who is the highest bidder and collect a fixed commission.

48

(39) Lincolin Helios (India) Ltd. 2011 (Kar.): In the given case, the assessee charged on customer for
the services rendered as well as the value of the manufactured products and pay excise duty on whole
value but did not pay service tax on the basis of a argument that there could not be levy of tax under two
parliamentary legistations.

It was held that, Excise duty and service tax are not mutually exclusive, there is no question of double
taxation as excise duty is charged on manufacture where as service tax is charged on providing service.
Therefore, the assessee must pay service tax on the value of services.
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CENVAT CREDIT ON INPUT SERVICE

(40) Cadila Healthcare Ltd (2013)(Guj):

(i) Technical testing and analysis services availed for testing of clinical samples prior to commencement
of commercial production (trial production), shall be allowed for CENVAT credit as input service, since
it was directly related to manufacture of the final product because unless trial production are tested and
approved from the regulatory authority the final product could not be manufactured. Further, such trial
productions were removed on payment of excise duty and thus, CENVAT credit on such input service
could not be denied.

(ii) Commission paid to foreign agents is directly related to sale and not related to sales promotion like
advertisements etc. to include in the definition of input service. Therefore, CENVAT credit shall not be
allowed on such commission.

Observation: i) There is a clear distinction between sales promotion and sale and a commission agent is
directly concerned with sales rather than sales promotion.

(iii) In the given case, the assessee could not prove that the foreign agents were actually involved in any
sales promotion activities like advertising which was covered in inclusive part of the definition of input
service. Further, neither it was used directly or indirectly in or in relation to manufacture of final products
or clearance of final products upto place of removal nor were covered under illustrative activities such as
accounting, auditing etc. provided under rule 2(I). Hence, the assessee was not eligible for CENVAT
credit on commission paid to foreign agents.
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