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Legal Round-up

Customs
Case Law

Manufacture/Dutiability

Repacking of goods from bulk to retail packs does not amount to manufacture.

The Apex Court has held that the activity of repacking of goods from bulk to retail packs, not
resulting into a new product, does not amount to manufacture.

CCE Vs. Aero Pack Products (2009 (92) RLT 817)

Repair of old transformers does not amount to manufacture.

The Tribunal has held that the activity of repair of old transformers, not resulting in the
emergence of a new product, does not amount to manufacture.

CCE Vs. Karnataka Vidyuth Karkhane Ltd. (2009 (239) ELT 165)

Valuation

Charges for installation of computers cannot be included in their assessable value and
consideration for an activity charged to service tax cannot be included in the value of
excisable goods.

The Tribunal has held that charges for installation of computers cannot be included in their
assessable value unless they are shown to be artificially manipulated. The Tribunal has also
held that consideration for an activity which is charged to service tax cannot be included in the
value of excisable goods.

HCL Infosystems Ltd Vs. CCE (2009 (166) ECR 50),

CENVAT/MODVAT
Refund of CENVAT Credits is permissible in case of closure of a manufacturing unit.

The Punjab & Haryana High Court has held that cash refund of CENVAT Credits is permissible in
case of closure of a manufacturing unit.

Rama Industries Ltd. Vs CCE [2009 (20) STT 525]

CENVAT credit cannot be denied on the ground that they have been availed 3 to 7
years after receipt of inputs.

The Tribunal has held that CENVAT credit cannot be denied on the ground that they have been
availed 3 to 7 years after receipt of inputs since the Credit Rules do not prescribe any time
limit for availment of credits.

Coromandel Fertilizers Ltd. Vs. CCE (2009 (239) ELT 99)


No CENVAT credit is required to be reversed on inputs which are rejected during the
assembly process.

The Tribunal has held that no CENVAT credit is required to be reversed on inputs which are
rejected during the assembly process and found not suitable for further use in the
manufacture.
CCE Vs. Kyungshin Industrial Motherson Ltd. (2009 (239) ELT 121)

No requirement to reverse credit attributable to inputs used for job work.

The Tribunal has held that where common inputs are used for job work as well as for
manufacture of dutiable final products, there is no requirement to reverse credit attributable
to inputs used for job work.

CCE Vs. Mahalaxmi Seamless Ltd. (2009-TIOL-1033-CESTAT)

Inputs used for maintenance of plant and machinery are eligible for CENVAT credit.

The Tribunal has held that inputs used for maintenance of plant and machinery are eligible for
CENVAT credit.

CCE Vs. Bharat Aluminium Co. Ltd. (2009 (166) ECR 140)

Refund of unutilized CENVAT credits under CENVAT Credit Rules is admissible to the
extent it is attributable to exported products.

The Tribunal has held that refund of unutilized CENVAT credits under Rule 5 of the CENVAT
Credit Rules, 2004 is admissible to the extent it is attributable to exported products and not
admissible in respect of inputs lying in stock, inputs contained in in-process, finished goods and
bought out inputs.

ACE Techniks Vs. CCE (2009 (239) ELT 92)

CENVAT credit attributable to inputs contained in semi finished goods is not denied
when such goods are destroyed in a fire accident.

The Tribunal has held that CENVAT credit attributable to inputs contained in semi finished
goods is not deniable when such goods are destroyed in a fire accident within the factory.

Kanchi Karpooram Ltd Vs. CCE (2009 (167) ECR 67)

Cash refunds of pre-deposits made from the CENVAT credit account are permissible.

The Tribunal has held that cash refunds of pre-deposits made from the CENVAT credit account
are permissible where the factory of the manufacturer was closed and there was no scope of
utilization of such pre-deposits.

CCE Vs. Talforge Pvt Ltd (2009 (239) ELT 172)

Others

Interest is not payable on suo moto reversals of excess credits availed

The Tribunal has held that interest is not payable on suo moto reversals of excess credits
availed where such credits had not been utilized for the payment of duty by the manufacturer.
United Telecoms Ltd. Vs. CCE (2009 (92) RLT 615)
CCE Vs. Mamta Silk Mills Pvt. Ltd. (2009 (167) ECR 35)

Interest is payable on account of differential duty payable

The Supreme Court has held that the interest is payable on account of differential duty payable
because of revision of prices subsequent to removal of goods.

CCE Vs. SKF India Ltd. (2009 (239) ELT 385)

Service Tax
News

Service tax on four new services effective from 1st September 09.

The Finance Minister has stated that service tax on four new services- legal advice and
consultancy, transport by rail, transport by inland waterways and cosmetic surgery proposed in
the Finance Bill 2009 will be effective from 1st September 09.

(Press Trust of India, New Delhi, July 27, 09)

Notification

Services provided for management, maintenance and repair of roads have been
exempted from service tax.

The services provided by any person in relation to management, maintenance and repair of
roads have been exempted from service tax. These were previously taxed under the category
of ‘management, maintenance and repair services’

(Notification No. 24/2009 dated 27 July 09)

Case Law

Constitutional validity for the levy of service tax on hire purchase and lease
transaction.

The Madras High Court has upheld the constitutional validity of the levy of service tax on hire
purchase and leasing transactions.

UOI Vs Madras Hire Purchase Association [2009-TIOL-338-HC]

Bottling and packaging activities are integral to manufacturing activities.

The Madhya Pradesh High Court has re-affirmed the position in the Som Distillers case that the
bottling and packaging activities are integral to manufacturing activities and cannot be viewed
in isolation and hence the benefit of exemption from service tax would apply to such activities
as well.

Maa Sharda Wine Traders Vs UOI [2009 (15) STR 3(MP)]


Transfer of technology is not subject to service tax.

The Tribunal has held that transfer of technology is not subject to service tax as consulting
engineer services.

CCE Vs Indore Composite Pvt. Ltd. [2009 (15) STR 91]

Powder coating, blending, drilling, etc. undertaken on job work not taxable as business
auxiliary services.

The Tribunal has held that powder coating, blending, drilling, etc. undertaken on job work
basis amounts to processing and hence not taxable as business auxiliary services prior to the
period 16.06.2005.

Auto Coats Vs CCE (ST) [2009 (92) RLT 932]

A manufacturer is entitled to credit of service tax paid on erection and commissioning


services rendered by another service provider

The Tribunal has held that a manufacturer is entitled to credit of service tax paid on erection
and commissioning services rendered by another service provider at the customer’s premises,
provided that the transaction value includes the cost of such services.

CCE Vs Alidhara Textool Engineers Pvt. Ltd. [2009 (92) RLT 807]

Sales Tax
Case Law

A transaction to qualify as sale in the course of import there must be an inextricable


link between the import and the sale/ purchase occasioning the import of such goods
into India.

The Kerala High Court has held that for a transaction to qualify as sale in the course of import
under Section 5(2) of the CST Act, there must be an inextricable link between the import and
the sale/ purchase occasioning the import of such goods into India. No privity of contract
between the Indian customer and foreign supplier is essential as long as this link can be
established from the underlying documents.

BPL Telecom Limited Vs. State of Kerala [(2009) 23 VST 264]

Supply of photo identity cards to the Chief Electoral Officer (“CEO”) is not eligible to
sales tax

The Orissa High Court has held that the supply of photo identity cards to the Chief Electoral
Officer (“CEO”) is not eligible to sales tax as there is no element of sale or transfer of property
in goods. The identity cards are not commercially saleable as they would not fetch any
commercial value in the open market.

Orissa Small Industries Corporation Limited Vs. State of Orissa [(2009) 23 VST 55]
Hire charges received on leasing of boards /hoardings is not subjected to sales tax.

The Andhra Pradesh High Court has held that boards / hoardings fixed to the earth constitute
immovable property. The fixed hire charges received on leasing of such boards /hoardings can
therefore, not be subjected to sales tax.

State of Andhra Pradesh Vs. Prakash Arts [(2009) 34PHT 34]

The mere use of a computer exclusively for a particular customer during a particular
time of the day, as part of a service contract is not liable to Sales tax.

The Bombay High Court has held that the mere use of a computer exclusively for a particular
customer during a particular time of the day, as part of a service contract, does not constitute
transfer of the right to use the said computer to the customer. Accordingly, the transaction is
not liable to sales tax.

Commissioner of Sales Tax Vs. Rolta Computer and Industries Private Limited [(2009) VIL 31 HC]

The interstate movement incidental to the implementation of the contract will qualify
as inter-State sales.

The Central Sales Tax Appellate Authority, New Delhi has held that in order to constitute an
inter-State sales within the meaning of section 3(a) of the CST Act, there need not be a express
covenant or stipulation under the contract regarding the interstate movement of goods. If the
interstate movement is incidental to the implementation of the contract, the transaction will
qualify as inter-State sales.

Commissioner of VAT, New Delhi Vs. State of Haryana and Another [(2009) 23 VST 10 (CSTAA)]

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