Central Excise: Grasim Industries Ltd. - 2011 - SC

ICAI- Select Cases for Nov, 2012 Attempt
Important Cases and Gist Thereof/ Prof Dippak
CENTRAL EXCISE
GRASIM INDUSTRIES LTD. - 2011 -SC
Whether the metal scrap or waste generated during the repair of his worn out machineries/parts of cement manufacturing plant by a cement manufacturer amounts to manufacture? Iron scrap cannot be said to be a by-product of the final product. At the best, it is the product of the repairing process. ED can be demanded only on such waste/scrap which arises out of manufacturing process/activity.
GTC INDUSTRIES LTD. -2011 -BOM. HC

A roll of aluminum foil was cut horizontally to make separate pieces of he foil and world PULL was embossed on it. Thereafter fixed number cigarettes were wrapped in it. Aluminum foil, being a resistant to moisture, was used as a protector for the cigarettes and to keep them dry. Does the process of cutting and embossing aluminium foil for packing the cigarette amount to manufacture? Prior to 2012- HC held that Cutting and embossing did not transform aluminium foil into distinct and identifiable commodity and thus, this activity is not manufacture. But post 2012, this activity has been made deemed manufacture [FA, 2012]
MARUTI SUZUKI INDIA LTD. - 2010 -TRI. Larger Bench

The appellants were manufacturers of various types of MOTOR VEHICLES. Department observed that while selling the vehicles to the customers, the dealers added their own margin known as the dealers margin to the price at which the vehicles were made available to them by the appellants. This dealers margin contained provision for rendering predelivery inspection and three after sale services. Hence, the Department contended that the cost of post delivery inspection and after sale services were to form part of the assessable value of the automobile while discharging the duty liability. Whether the charges towards pre-delivery inspection and after-sale-service recovered by dealers from buyers of the cars would be included in the assessable value of cars? The charges towards Pre-Delivery Inspection (PDI) and After-Sale-Service recovered by dealers from buyers of the cars would be included in the assessable value of cars.
[Tutorial Note: Provisioning of these is primarily responsibility of Manufacturer, who has shifted it to dealer by increasing their margin. This was attempt of tax evasion.]
TATA ADVANCED MATERIALS LTD. -2011 -KAR. HC

The assessee claimed the CENVAT credit on the duty paid on capital goods which were later destroyed by fire. The Insurance Company reimbursed the amount inclusive of excise duty. Is the CENVAT credit availed by the assessee required to be reversed? Judgment is of no relevant at present. [So decision not printed] Presently, this situation is covered by Rule 3(5-A) of CCR, 2004 which provides for removal of capital goods after use, whether as capital goods or as waste/scrap. The amount equal to higher of following 2 is payable [a] Amount = Reduced CCr (calculated by applying prescribed % of reduction for each quarter of use) [b] Amount= ED leviable on TV
ECOF INDUSTRIES PVT. LTD. -2011 -KAR.

Head office distributed the cenvat credit of the service tax paid on the services received to its various units. Can the CENVAT credit be denied to a particular unit on the ground that input services were obtained by another unit belonging to the same manufacturer? Judgment is of no relevant at present. [So decision not printed] Presently, Rule 7 of CCR, 2004 provides that credit of service used exclusively in one unit shall be distributed to that unit only.
ICON INDUSTRIES - 2011 -(DEL.)
[Expected]
The petitioner got its units registered after few days of the search conducted in its units. Thereafter, it filed consolidated return with the Department for the period prior to search. After that, it filed a settlement application in respect of the proceedings issued by the Commissioner. The Settlement Commission opined that the units were registered only after the search was conducted and prior to that there was no registration and no returns as mandated by clause (a) of first proviso to section 32E(1) of the Central Excise Act, 1944 were filed. Consequently, the Commission rejected the settlement application on the ground that the application did not conform to the parameters as stipulated under section 32E(1) of the Act. In case of consolidated returns filed in the instant case, the applicant would not be able to indicate duty paid in the prescribed manner (or even in any manner) and question would continue to agitate about the details of production and clearance to be filled in such belated returns. Whether a consolidated return filed by the assessee after obtaining registration, but for the period prior to obtaining registration, could be treated as a return under section 32E(1) [clause (a) of first proviso]? Filing of consolidated return covering all the past periods would not serve the purpose. Rejection of Settlement Application is proper.
CUSTOMS
POONA HEALTH SERVICES - 2009 - (BOM.)
bound to pay the customs duty? The appellant contended that once the imported goods were confiscated under section 125 of the Customs act, 1982, and the option to release them was not exercised, no duty was payable. He placed reliance on section 23 which provides that if the owner of imported goods relinquishes his title to the goods, he shall not be liable to pay the duty thereon. The High Court elucidated the distinction between section 23 and section 125. Under section 23, the person who imports the goods, surrenders his title in the goods. By surrendering title in the goods, the person importing the goods or the owner of the goods ceases to have a right to claim the goods. On the other hand, the order of confiscation is passed in respect of the person who has claimed to import or export the goods. It implies that he claims title or right in the property. The fine under section 125 is payable by the person who seeks redemption of the goods. If the goods are not redeemed, then they vest in the State. The person however, who had imported the goods, does not cease to have liability for payment of duty because he continues to be the person who had imported the goods and claims title of the goods. In case the imported goods are confiscated, and goods are not redeemed by paying fine, the importer is bound to pay the customs duty.
[Tutorial Note: Sec 125 provides for release of goods on payment of redemption fine. It provides that in case imported opted for release of goods on payment of redemption fine, then he shall be liable to pay import duty additionally. Sec 125 does not speak about the situation where importer decides not to redeem the goods. Assessee has tried to argue (drawing analogy from Sec 125) that in that case, he shall not be liable to import duty (particualarly because he ceases to be owner in that case). However, HC has held importer will remain liable to import duty which has been attracted on account of act of importation. Further, HC has held that decision of non-redemption does not amount to relinquishment of title (and accordingly, he cannot save import duty liability under section 23)]
[Expected]
In case the imported goods are confiscated, and goods are not redeemed by paying fine, whether the importer is
SERVICE TAX
CHERTHALA MUNICIPALITY - 2011 - (KER.)
[Expected] RTP Question
Appellant has entered into rental-agreements with the Municipality and had taken rooms on rent from it. Under the agreement, there was no provision for payment of service tax. They were called upon to pay service tax by the service provider (Muncipality) despite the agreement being silent as to payment of service tax by the service recipient to the service provider.
Appellant argued that in absence of any provision as to payment of ST in rental agreement, the demand for payment of service tax by service provider was illegal. [Appellant further argued that service tax was payable by the Municipality (service provider) and there was no authority with which the Municipality could pass it on to it]. In case where service agreement is silent as to levy/recovery of ST on rooms rent, can it pass the burden of service tax to the service receivers i.e. tenants? As regards the contention that there was no mention of the service tax liability in the contract, the Court held that this is a statutory right of the service provider/Municipality by virtue of the provisions under law to pass it on to the tenants. It is another matter that they may decide not to pass it on fully or partly. It is not open to the appellant to challenge the validity of the demand for service tax, in view of the fact that service tax is an indirect tax and the law provides that it can be passed on to the beneficiary. Hence, the service tax can be passed on by the service provider i.e. Municipality. Hence, it was held that Municipality can pass on the burden of service tax to the tenants.
[Tutorial Note: Very pragmatic and rational decision favourable to Service provider. Many times, service contracts are entered into when service is non-taxable, hence contract does not contain any clause as to payment of Service tax. When such service is made taxable (for first time), then, if ST is not recovered from service recipient, then its burden will fall on the service provider (which can jeopardise the profit line of service provider). This case has upheld that in case service provider is not ready to absorb this burden, then he has right to recover service tax amount from service recipient in court of law]

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Central Excise: Grasim Industries Ltd. - 2011 - SC

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ICAI- Select Cases for Nov, 2012 Attempt

Important Cases and Gist Thereof/ Prof Dippak

GTC INDUSTRIES LTD. -2011 -BOM. HC

MARUTI SUZUKI INDIA LTD. - 2010 -TRI. Larger Bench

ICAI- Select Cases for Nov, 2012 Attempt

Important Cases and Gist Thereof/ Prof Dippak

TATA ADVANCED MATERIALS LTD. -2011 -KAR. HC

ECOF INDUSTRIES PVT. LTD. -2011 -KAR.

ICON INDUSTRIES - 2011 -(DEL.)

ICAI- Select Cases for Nov, 2012 Attempt

Important Cases and Gist Thereof/ Prof Dippak

ICAI- Select Cases for Nov, 2012 Attempt

Important Cases and Gist Thereof/ Prof Dippak

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