Indirect Tax Weekly Flashback for the period 17 November 2024 to 23 November 2024.
Table of Contents
Supreme Court – Indirect Tax
Telecom Operators Now Entitled To Claim CENVAT Credit On Infrastructure: Supreme Court Affirms Delhi HC decision in Vodafone; Overrules Bombay HC Decision In Bharti Airtel
The Supreme Court has allowed the appeals by telecom operators as well as infrastructure companies and held that telecom operators now entitled to claim CENVAT credit on infrastructure.
The Apex Court has affirmed the Delhi High Court decision in Vodafone and overrules Bombay High Court decision in Bharti Airtel, on account of contrary opinions of Delhi High Court which allowed CENVAT credit and Bombay High Court which disallowed CENVAT credit.
Relief To Telecom Industry: Tower And Pre-Fabricated Buildings Are ‘Goods’ Qualifies For CENVAT Credit Benefits: Supreme Court
Case Title: M/S Bharti Airtel Ltd. Versus The Commissioner Of Central Excise, Pune
In a major relief to Telecom Industry, the Supreme Court in the case of M/S Bharti Airtel Ltd. Versus The Commissioner Of Central Excise, Pune has observed that the tower and pre-fabricated buildings (PFBs) are “goods” and not immovable property and since these goods are used for providing mobile telecommunication services, the inescapable conclusion is that they would also qualify as “inputs” under Rule 2(k) for the purpose of credit benefits under the CENVAT Rules.
The bench of Justice B.V. Nagarathna and Justice Nongmeikapam Kotiswar Singh have observed that tower being essential to rendering of output service of mobile telephony, these items certainly can be considered to be “inputs” akin to antenna. Without the towers and the PFBs, there cannot be proper service of mobile telecommunication. Hence, these certainly would come within the definition of “input” under Rule 2(k)(ii).
Kerala High Court – Indirect Tax
No Notice Prior To Adjusting Refund Amounts Towards Service Tax Dues Is Required: Kerala High Court
Case Title: Mr. Santhosh Eappen Versus Joint Commissioner Of Central Tax And Central Excise
The Kerala High Court in the the case of Mr. Santhosh Eappen Versus Joint Commissioner Of Central Tax And Central Excise held that no notice prior to adjusting refund amounts towards service tax dues is required as there is no such provision under Finance Act, 1994.
The bench of Justice A.K. Jayasankaran Nambiar and Justice K. V. Jayakumar upheld the decision of single bench in which it was held that the liability of the proprietary concern was actually the liability of the appellant and in the absence of any provision in the Finance Act, 1994 requiring the issuance of any notice prior to adjusting refund amounts, the action of the department in appropriating the refund amounts due to the appellant towards the outstanding dues of the proprietary concern could not be said to be illegal.
Bombay High Court – Indirect Tax
Bombay High Court Quashes Notice Issued To Mahindra & Mahindra For Non-Submission Of Export Obligation Discharge Certificate After Almost 26 Years
Case Title: Mahindra and Mahindra Ltd. Versus Union of India
The Bombay High Court has quashed the notice issued to Mahindra & Mahindra for non-submission of export obligation discharge certificate after almost 26 years.
The bench of Justice M. S. Sonak and Justice Jitendra Jain has observed that on a reading of the Customs Act, the reasonable period for initiating any proceedings for recovery of dues can certainly not be 26 years, even where a bond may have been executed. Section 28 of the Customs Act, and that too, in a case where suppression or fraud is alleged, provides a time limit of 5 years. This period gives a clue and could, therefore, provide guidance in determining a reasonable time when the legislature offers no specific time limit. In this case, there are no allegations of any fraud or suppression. Therefore, there is nothing reasonable in seeking to make recoveries after 26 years. Not even an attempt is made to explain this inordinate delay.
Jammu & Kashmir and Ladakh High Court – Indirect Tax
No Service Tax Payable On Shotgun Proof Testing Fee Paid By Manufacturers: Jammu & Kashmir And Ladakh High Court
Case Title: M/S Khair-ud-Din & Sons Co. Versus Union of India
The Jammu & Kashmir and Ladakh High Court has held that no service tax payable on shotgun proof testing fee paid by manufacturers.
The bench of Chief Justice Tashi Rabstan and Justice M.A. Chowdhary has observed that the petitioners/manufacturers having paid only testing fee for firearms, which is a statutory requirement under Rule 22 of the Arms Rules, 1962, no service tax can be levied on the petitioners who are granted license under Section 5 of the Arms Act, 1950 even if the service provider.
CESTAT
No Service Tax On Reverse Charge Basis Applicable To Salary Paid To Directors: CESTAT
Case Title: Falcon Pumps Pvt Ltd Versus Commissioner of C.E. & S.T.-Rajkot
The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax on reverse charge basis applicable to salary paid to directors.
The bench of Ramesh Nair Member (Judicial) and C L Mahar (Technical Member) has observed that the remuneration paid by the appellant company to the directors are clearly in the form of salary. Therefore, the relationship between the appellant and their directors are of employer and employee relationship. Hence, it is not taxable in terms of Section 66 (B) (44) of the Finance Act, 1994.
Cenvat Credit Available On Service Tax Paid On Outward Transportation Under Reverse Charge Mechanism: CESTAT
Case Title: Ambuja Cement Limited Versus Commissioner of C.E. & S.T.-Surat-i
The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Cenvat Credit in respect of service tax is paid on outward transportation under reverse charge mechanism.
The bench of Ramesh Nair (Judicial Member) and C L Mahar (Technical Member) has observed that the sale of excisable goods is on FOR basis and in respect of supply of such excisable goods the appellant have availed the service of transportation on which the appellant have paid the service tax which has been availed as Cenvat Credit.
Customs Dept. Failed To Establish Meat Was Exported Using Pre-Signed And Pre-Stamped Veterinary Certificates: CESTAT Quashes Penalty
Case Title: M/s Hind Agro Industries Ltd. Versus Commissioner of Customs (Preventive)
The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) while quashing the penalty against the exporter held that the customs department was unable to establish that the meat was exported using pre-signed and pre-stamped veterinary certificates.
The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that after extensive investigation spanning several years, the SCN was issued relying on as many as 22 documents including 14 statements of different persons recorded by the officers under section 108 of the Act. By not following the mandatory procedure under section 138B, the adjudicating authority brought to naught 14 of the 22 relied upon documents effectively destroying the case of the department.
Customs Duty Exemption Available On Pregnancy Test Kits Based On Agglutinating Sera: CESTAT
Case Title: Commissioner of Customs Versus M/s Rapid Diagnostics Pvt Ltd.
The Delhi Bench of Customs, Excise And Service Tax Appellate Tribunal (CESTAT) has held that customs duty exemption available on pregnancy test kits based on Agglutinating Sera.
The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that as agglutinating sera is the only active component and the rest of the components are passive, the pregnancy detection kits have their essential character defined by agglutinating sera only. Thus, the imported goods i.e. pregnancy test kits would be covered under the Exemption Notifications.
Rendering Customer Support Services To Parent Company Doesn’t Qualifies As ‘Intermediary Service’, No Service Tax Payable: CESTAT
Case Title: Commissioner of Central Tax Versus M/s. Informatica Business Solutions Pvt. Ltd
The Banglore Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that rendering customer support services to parent companies does not qualify as ‘intermediary service’ and service tax is not payable.
The bench of D.M. Misra (Judicial Member) and R Bhagya Devi (Technical Member) has observed that the basic requirement to be an intermediary is that there should be at least three parties; an intermediary is someone who arranges or facilitates the supply of goods or services or securities between two or more persons. In other words, there is a main supply and the role of the intermediary is to arrange or facilitate another supply between two or more other persons and, does not himself provide the main supply.
Salary Paid In Indian Currency By Nissan Motors To Secondees Will Be Liable To Service Tax: CESTAT’s 3rd Member Concurred With Technical Member’s Views
Case Title: Nissan Motor India Pvt Ltd vs Chennai-ii
The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that salary paid in indian currency by nissan motors to secondees will be liable to service tax.
The two member bench of CESTAT had delivered a split ruling on the issue of whether salary and other allowances paid directly in Indian currency by the appellant to secondees will be liable to service tax.
The judicial member has held that the allowances paid directly by the appellant to secondees cannot be included in the taxable value.
The technical member has held that such payments can be included in the taxable value.
The CESTAT has referred the case to the third member on resolution of the issue raised.
The third member concurred with Technical Member’s views and held that the part of salary / emoluments paid by appellant to secondees in India in Indian Rupees will form part of consideration as under Section 67 of Finance Act, 1994 for the services of MRSA provided by Nissan Japan to appellant.
The payments of part of salary to secondees in Indian currency will form part of ‘gross amount charged’ for arriving at the taxable value.
Diabetes Insulin Manufactured Using r-DNA Technology Would Qualify As A Mono Component Insulin, Eligible For Customs Duty Exemption: CESTAT
Case Title: Commissioner of Customs Versus M/s. Novo Nordisk India Pvt. Ltd.
The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that diabetes insulin manufactured using r-DNA Technology would qualify as a mono component insulin, eligible for customs duty exemption.
The bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that a mixture of biosynthetic human/analogue insulin and protamine could be treated as Mano component insulin. Therefore, Insulin would be classified under CTH 30043110. On the same basis, Insulin analogues would fall under CTH 30043110 as well.
