Black Money (Searches & Surveys)

Concerted & co-ordinated actions of Law Enforcement Agencies (LEAs) under the Department of Revenue have achieved phenomenal success in fighting the menace of black money during the last three years. 

The period has witnessed unprecedented enforcement actions in direct & indirect taxes. While 23064 searches / surveys have been conducted (Income Tax 17525; Customs 2509; Central Excise 1913; Service Tax 1120); more than Rs. 1.37 lakh crore of tax evasion has been detected (Income Tax 69434; Customs 11405; Central Excise 13952; Service Tax 42727). Simultaneously, criminal prosecutions were launched in 2814 cases (Income Tax 1966; Customs 526; Central Excise 293; Service Tax 29) and 3893 persons were placed under arrest. (Customs 3782; Central Excise 47; Service Tax 64) 

The Enforcement Directorate intensified its anti money laundering actions by registering 519 cases and conducting 396 searches. Arrests were made in 79 cases and properties worth Rs.14,933 crore were attached. 

The Benami prohibition law which remained in-operative for last 28 years was made operational through a comprehensive amendment with effect from November, 2016. More than 245 benami transactions have already been identified. Provisional attachments of properties worth Rs.55 crore have already been made in 124 cases. 

Relevant laws and rules have been streamlined & tightened, plugging the loopholes and strengthening the penal provisions. Effective steps were taken to track & curb cash transactions through various means like penalising cash transaction of more than Rs.2 lakh; limiting allowable cash expense up-to Rs.10000 only; making Aadhaar mandatory for obtaining PAN & filing of income tax returns; making PAN mandatory for cash deposits above Rs.50,000; compulsory linking of PAN with bank accounts; prohibiting cash of Rs.20,000 or more in transfer of immovable property by imposition of a penalty of an equal amount and mandatory reporting of cash deposits above Rs.2.5 lakh in savings accounts and Rs.12.5 lakh in current account during 9 November to 30 December 2016. 

Crackdown against thousands of shell companies engaged in nefarious activities was effected through enforcement actions (searches, surveys, arrests, prosecutions) by the LEAs (IT/ED/MCA/SFIO/CBI). During the last three financial years (2013-14 to 2015-16), Income Tax investigations led to detection of more than 1155 shell companies / entities used as conduits by over 22,000 beneficiaries. The amount involved in non-genuine transactions of such beneficiaries was more than Rs. 13,300 crore. The Ministry of Corporate Affairs has issued more than a lakh notices for striking off names of defunct / non-compliant companies. A High powered group has been set-up for co-ordinating and monitoring the actions taken by departments concerned with the objective of eliminating the conduits of black money generation and application. 

The relentless crusade against black money will get further intensified in the coming days making the tax evaders & money launderers realise that they have to pay a heavy cost for their deviant behaviour.

Tax collections up to March 2017

The total tax revenue targets of the revised estimates for 2016-17 for both Direct and Indirect Taxes was Rs.16.97 lakh crore of which 8.47 lakh crore was for Direct Tax and Rs.8.5 lakh crore from Indirect Tax. It may be recalled that the Revised Estimate figures of 2016-17 was Rs.16.97 lakh crore compared to the Budget Estimates figures of Rs.16.25 lakh crore in 2016-17. As against the Revised Estimate, the provisional figure of tax collection is Rs 17.10 lakh crore, which is a growth of around 18% compared to last year.

Direct Taxes

The provisional figures for Direct Tax collections up to March, 2017 show that net collections are at Rs. 8.47 lakh crore which is 14.2% more than the net collections for the corresponding period last year, which is a major increase compared to the growth rate of the previous FY. Net direct tax collections stand at Rs 8.47 lakh crore which shows 100% achievementfor F.Y 2016-17.

As regards the growth rates for Corporate Income Tax (CIT) and Personal Income Tax (PIT), in terms of gross revenue collections, the growth rate under CIT is 13.1% while that under PIT (including STT) is 18.4%. However, after adjusting for refunds, the net growth in CIT collections is 6.7% while that in PIT collections is 21.0%. Refunds amounting to Rs.1.62 lakh crore have been issued during April 2016-March 2017, which is 32.6% higher than the refunds issued during FY 2015-16.

Indirect Taxes

The figures for indirect tax collections (Central Excise, Service Tax and Customs) in FY 2016-17are at Rs 8.63 lakh crore, which is 22.0%higher than the actual revenue receipts in FY 2015-16. Till March 2017, about 101.35% of the Revised Estimates (RE) of indirect taxes for Financial Year 2016-17 has been achieved.

As regards Central Excise, net tax collections stood at Rs. 3.83 lakh crore during FY 2016-17 as compared to Rs.2.86 lakh crore in the previous Financial Year, thereby registering a growth of 33.9%.

Net Tax collections on account of Service Tax during FY 2016-17 stood at Rs. 2.54 lakh crore as compared to Rs.2.11 lakh crore in the previous Financial Year, thereby registering a growth of 20.2%.

Net Tax collections on account of Customs during FY 2016-17 stood at Rs. 2.26 lakh crore as compared to Rs. 2.10 lakh crore in the previous Financial Year, thereby registering a growth of 7.4%.

Net Indirect Tax collection upto February 2017 stood at Rs 7.72 lakh crore, 22.2% more than the corresponding period last year

The figures for indirect tax collections (Central Excise, Service Tax and Customs) up to February 2017 show that net revenue collections are at Rs 7.72 lakh crore, which is 22.2% more than the net collections for the corresponding period last year. Till February 2017, about 90.9% of the Revised Estimates (RE) of indirect taxes for Financial Year 2016-17 has been achieved.

As regards Central Excise, net tax collections stood at Rs. 3.45 lakh crore during April-February, 2016-17 as compared to Rs.2.53 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 36.2%.

Net Tax collections on account of Service Tax during April-February, 2016-17 stood at Rs. 2.21 lakh crore as compared to Rs.1.83 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 20.8%.

Net Tax collections on account of Customs during April-February 2016-17 stood at Rs. 2.05 lakh crore as compared to Rs. 1.94 lakh crore during the same period in the previous Financial Year, thereby registering a growth of 5.2%.

During February 2017, the net indirect tax grew at the rate of 8.4% compared to corresponding month last year. The growth rate in net collection for Customs, Central Excise and Service Tax was 10.9%, 7.4% and 7.6% respectively during the month of February 2017, compared to the corresponding month last year.

Central Board of Excise & Customs (CBEC) has initiated the process of migration of its existing Central Excise/Service Tax assessees to GST

Central Board of Excise & Customs (CBEC) has initiated the process of migration of its existing CENTRAL EXCISE/SERVICE TAX assessees to GST with effect from 9th January, 2017.

As part of its efforts to ensure implementation of GST by 1st April, 2017, CBEC has taken steps to ensure that its existing taxpayers are migrated to GST in a simple, user-friendly and smooth manner. Once the existing registered Taxpayers (both Central Excise as well as Service Tax) login to CBEC’s Web Portal www.aces.gov.in, a facility will be given in a secure manner to access the provisional login ID and password given by Goods and Services Tax Network (GSTN). Thereafter, using the same, they can log in to GST Portal (www.gst.gov.in) to fill the required fields and submit scanned documents.

However, if they have already initiated the process of migration to GST as a VAT asssessee under STATE COMMERCIAL TAX department, no further action is necessary. PAN is mandatory for migration to GST. Hence, if the existing Central Excise/Service Tax Registration Code does not have PAN, then PAN has to be obtained from Income Tax Department and the Registration details have to be updated in the ACES Portal www.aces.gov.in

CBEC has made available a 24x7 HELPDESK (TOLL-FREE NO 1800-1200-232, EMAIL:cbecmitra.helpdesk@icegate.gov.in) for the purpose of assisting existing CENTRAL EXCISE/SERVICE TAX assessees. GSTN also has a HELP DESK number: 0124-4688999 and GSTN email address is: help@gst.gov.in A Step-by-Step Taxpayers User guide for Migration is available at www.aces.gov.in and at www.cbec.gov.in

CBEC is also sending Emails/recorded telephonic messages to all registered CENTRAL EXCISE / SERVICE TAX assessees requesting them to migrate to GST. Outreach programmes such as Awareness Workshops/ Training for CENTRAL EXCISE/SERVICE TAX assessees are being organized all over India at the Commissionerates and Divisional offices of CBEC.

All existing CENTRAL EXCISE/SERVICE TAX assessees are requested to migrate as early as possible, latest by 31st January, 2017.

Valuation of DTA clearances of 'tea' by EOU to be valued as per Excise law

Commissioner of Central Excise v. Nestle India Ltd. [2015] 63 taxmann.com 312 (Supreme Court)

Central Excise: Where, as per exemption notification, DTA clearances by EOU are liable to excise duty equal to duty on clearances by non-EOUs, said DTA clearances are to be valued as per Central Excise Valuation rules.

Facts:

• Assessee was a 100% EOU engaged in manufacture of instant tea. It cleared tea manufactured wholly out of indigenous raw materials, to its sister concerns in EOU.
• Since, as per Notifications 8/97 and 23/2003, said clearance of tea was liable duty equal to ‘excise duty’ and any excess was exempted, assessee valued said tea as per rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
• Department argued that since DTA clearances by EOU are liable to excise duty equal to ‘customs duty leviable’, tea was to be valued as per customs law.
• Tribunal decided in favour of assessee and aggrieved department filed civil appeal in Apex Court.

Apex Court decided in favour of Assessee as under:

• There is no doubt that the duty of excise leviable under Section 3 would be on the basis of the value of like goods produced or manufactured outside India as determinable in accordance with the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975. However, the notification states that duty calculated on the said basis would only be payable to the extent of like goods manufactured in India by persons other than 100% EOUs.
• It is clear that in the absence of actual sales in the wholesale market, when goods are captively consumed and not sold, Rule 8 of the Central Excise Rules would have to be followed to determine what would be the amount equal to the duty of excise leviable on like goods.
• It is also clear that the said notification has been framed by the Central Government, in its wisdom, to levy only what is levied by way of excise duty on similar goods manufactured in India, on goods produced and sold by 100% EOUs in the domestic tariff area if they are produced from indigenous raw materials.
• Therefore, DTA clearances by assessee are rightly valued as per Central Excise Valuation rules. Appeal is, accordingly, dismissed.

Indirect Tax Collections up to September, 2016 show an increase of 25.9%

The figures for indirect tax collections (Central Excise, Service Tax and Customs) up to September 2016 in the current Financial Year 2016-17 show that net revenue collections are at Rs 4.08 lakh crore which is 25.9% more than the net collections for the corresponding period last year i.e. 2015-16. Till September 2016, 52.5% of the Budget Estimates of indirect taxes for Financial Year 2016-17 has been achieved.

As regards Central Excise, net tax collections stood at Rs.1.83 lakh crore during April-September, 2016 as compared to Rs.1.25 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 46.3%.

Net Tax collections on account of Service Tax during April-September, 2016 stood at Rs. 1,16,975 crore as compared to Rs. 95,780 crore during the corresponding period in the previous Financial Year, thereby registering a growth of 22.1%.

Net Tax collections on account of Customs during April-September 2016 stood at Rs. 1.08 lakh crore as compared to Rs. 1.03 lakh crore during the same period in the previous Financial Year, thereby registering a growth of 4.8%.

Indirect Tax Revenue (Provisional) Collections Increase from Rs. 44,475 Crore in November 2014 to Rs. 55,297 Crore During November 2015

An Increase of 24.3% Registered During November 2015 over the Corresponding Period in the Previous Year; Central Excise Collections Increase by 58.3%, Service Tax Collections Increase by 16.1 % While Customs Collections Increase by 1.7 % During the Same Period 

Indirect Tax Revenue (Provisional) collections have increased from Rs 44,475 crore in November 2014 to Rs. 55,297 crore during November - 2015. Thus an increase of 24.3 % has been registered during November - 2015 over the corresponding period in the previous year. This is an achievement of 67.8% of the target fixed for BE 2015-16.

Central Excise collections have increased from Rs. 14,551 crore in November - 2014 to Rs. 23,033 crore during November - 2015 registering an increase of 58.3%. This is an achievement of 74.8% of the target fixed at BE 2015-16.

Service Tax collections have increased from Rs. 12,739 crore in November, 2014 to Rs. 14,789 crore during November, 2015 registering an increase of 16.1%. This is an achievement of 60.9% of the target fixed at BE 2015-16.

Customs collections have increased from Rs.17, 185 crore during November 2014 to Rs. 17,475 crore during November 2015 registering an increase of 1.7%. This is an achievement of 67.2% of the target fixed for BE 2015-16.

Details of Indirect Tax revenue (provisional) collections during the month November 2015, along with growth rate compared to the corresponding period in the previous year.

For the month November 2015

                                                                                                                                     (Rs. in crores)

Tax Head		For November			Upto November			% of BE achievement
	B.E. 2015-16	2014-15	2015-16	% Growth	2014-15	2015-16	% Growth
Customs	2,08,336	17,185	17,475	1.7	1,22,016	1,39,923	14.7	67.2
Central Excise*	2,28,157	14,551	23,033	58.3	1,02,139	1,70,693	67.1	74.8
Service Tax	2,09,774	12,739	14,789	16.1	1,02,118	1,27,675	25.0	60.9
Total	6,46,267	44,475	55,297	24.3	3,26,273	4,38,291	34.3	67.8

*Exclusive of cess administered by other departments.

Even un-availed cash discount is deductible if it is known prior to clearance of goods

Purolator India Ltd. v. Commissioner of Central Excise, Delhi-III [2015] 60 taxmann.com 471 (Supreme Court)

Cash discount known at or prior to clearance of goods is to be deducted from sale price in order to arrive at value of excisable goods even if discount is not actually availed.


Facts:

• As per agreement buyers were eligible for 'cash discount'.
• Assessee claimed deduction of 'cash discount' in arriving at 'assessable value' even in cases where same was not actually availed of by buyers.
• Department argued that cash discount could be allowed only if it was actually allowed in price actually paid and not in cases where buyer did not avail of cash discount.

 

Supreme Court held in favour of assessee as under:

• On each removal of excisable goods, transaction value of such goods must be determined. Transaction value means the price actually paid or payable for the goods, when sold.
• Transaction value has to be read along with expression "for delivery at time and place of removal". Therefore, value of excisable goods on basis of transaction value has only to be at time of removal, that is, time of clearance of goods from assessee's factory or depot.
• Expression actually paid or payable for the goods, when sold means whatever is agreed to as price for goods forms basis of value, whether such price has been paid, has been paid in part, or has not been paid at all. Basis of transaction value is therefore agreed contractual price.
• Expression when sold is not meant to indicate time at which such goods are sold, but is meant to indicate that goods are subject matter of an agreement of sale. Hence, cash discount which is known at or prior to clearance of goods, being contained in agreement of sale between assessee and its buyers, must therefore be deducted from sale price in order to arrive at value of excisable goods at time of removal.
• Hence, cash discount was deductible for arriving assessable value of goods.

Interpretation of word ‘or’

Spentex Industries Ltd. vs. CCE [2015] 62 taxmann.com 101 (Supreme Court)

The assessee has claimed rebate under certain notifications issued by Board under Rule 18 of Central Excise Rules, 2002. It was held that the word ‘OR’ occurring in Rule 18 cannot be given literal interpretation as that leads to various disastrous results pointed out in the preceding discussion and, therefore, this word has to be read as ‘and’ as that is what was intended by the rule maker in the scheme of things and to carry out the objectives of the Rule 18 and also to bring it at par with Rule 19. The principle that the word ‘or’ is normally disjunctive and ‘and’ is normally conjunctive. However, there may be circumstances where these words are to be read as vice versa to give effect to manifest intention of the Legislature as disclosed from the context

Violations of Principles of Natural Justice

Andaman Timber Industries – CCE [2015] 62 taxmann.com 3 (Supreme Court)

Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.

Government decides to provide further Indirect Tax Incentives to Domestic Shipbuilding Industry

The Government has decided to provide further indirect tax incentives for domestic shipbuilding industry. Accordingly, the Central Government has issued Notification Nos. 44/2015-Central Excise, 45/2015-Central Excise, 54/2015-Customs and 55/2015-Customs all dated 24.11.2015 so as to provide the following indirect tax incentives to the aforesaid industry: 

1. Exemption from customs and central excise duties on all raw material and parts for use in the manufacture of ships/vessels/tugs and pusher crafts etc.
2. Presently, certain specified ships/vessels are exempt from basic customs duty and Central Excise duty (CVD). Consequently, for such ships/vessels manufactured in Export Oriented Units (EOUs) and cleared to domestic tariff area (DTA), the EOUs are not eligible for exemption on raw materials/parts of such ships/vessels etc. Suitable amendment is being made to the relevant notifications so as to provide that EOUs will be eligible for duty exemption on raw materials/parts consumed in manufacture of such ships/vessels etc which are cleared to DTA, even if such ships/vessels are exempt from basic customs duty and Central Excise/CV duty.
3. Simultaneously, the requirement of manufacturing of ships/vessels/ tugs and pusher craft etc in a custom bounded warehouse under the provisions of Section 65 of the Customs Act, 1962, for availing the customs and excise duty exemptions has also been done away with. Instead, these exemptions will now be subject to actual user conditions. 

At present, the following indirect tax incentives are available to the shipbuilding industry. 

a) Exemption from basic customs duty and additional duty of customs (CVD) on all raw material and parts for manufacturing of ships/vessels/tugs and pusher craft etc, subject to the condition that such manufacturing takes place in a custom bounded warehouse under the provisions of Section 65 of the Customs Act, 1962. 

b) Exemption from central excise duty on steel procured domestically for manufacturing of ships/vessels/tugs and pusher craft etc in a custom bounded warehouse under the provisions of Section 65 of the Customs Act, 1962.

Clearances of intermediate parts by job-worker to its principal has to be valued as per general rule of valuation

Commissioner of Central Excise, Pune v. Mahindra Ugine Steel Co. Ltd. (2015) 57 taxmann.com 299 (Supreme Court)

Clearances of 'motor vehicles parts' manufactured by job-worker for use in manufacture of 'motor vehicles' by principals, would be valued as per rule 11 and valuation rules 8 and 9 cannot apply thereto.

• Assessee, a job-worker, was manufacturing motor vehicle parts for use by principal in manufacture of motor vehicles
• Assessee and principal were related in terms of section 4(3)(b)(i) viz. interconnected undertaking.
• Department sought valuation of 'parts' under rule 8 or proviso to rule 9 as captively consumed goods.
• Assessee claimed valuation as per rule 11 at 'cost of materials plus job-work charges' treating assessee/job-worker's premises as deemed factory gate.

Supreme Court held in favour of assessee as under:

• Since parts were not captively consumed by assessee-jobworker or on his behalf in production or manufacture of other articles, hence, rule 8 was inapplicable.
• Rule 9 and consequently, proviso to rule 9, was inapplicable Since assessee and principal were interconnected undertaking related in terms of section 4(3)(b)(i). This is because rule 9 mentions relationship that is visualised in sub-clauses (ii) to (iv) only and excludes clause (i). Further, since main rule 9 is not attracted, question of applicability or proviso thereto does not arise.
• Once it was concluded that above rules is not applicable in the case of the assessee, it is rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule.

Assessee can be prosecuted anytime when exonerated in penalty proceedings on ground of limitation and not on merits

Superintendent (Prosecution) Central Excise & Customs Department v. Ashok Leyland Ltd. (2015) 56 taxmann.com 309 (Rajasthan High Court)

Where exoneration in adjudication/penalty proceedings is not on merits but on ground of limitation, assessee-accused cannot take shelter thereof to avoid prosecution proceedings; since there is no time-limit for launching prosecution, same can be launched despite recovery/penalty becoming time-barred.

Facts:

• Department initiated prosecution proceedings for wrongful credit.
• Revisional court discharged assessee on ground that penalty proceedings were decided in its favour and department's appeal thereagainst before High Court was dismissed.
• Department argued that penalty was dropped on ground of limitation and not on merits and appeal before High Court was dismissed for non-appearance; hence, same cannot be relied upon in criminal matters, where there is no time-limitation.

High Court held in favour of revenue as under:

• Proceedings for recovery of duty with penalty and prosecution/ punishment are separate proceedings. For recovery, there is time-limit of 1 year/5 years in section 11A, but, for prosecution there is no time-limit in section 9.
• In this case, despite arguments on merits, adjudication/recovery/penalty was dropped on ground of limitation and not on merits and appeal thereagainst was dismissed on ground of non-appearance and not on merits.
• Since exoneration in adjudication/penalty proceedings is not on merits, assessee-accused cannot take shelter thereof to avoid prosecution proceedings. Since there is no time-limit in section 9, prosecution proceedings can be launched despite recovery/penalty becoming time-barred. Hence, prosecution was valid.

Clearances of intermediate parts by job-worker to its principal has to be valued as per general rule of valuation

Commissioner of Central Excise, Pune v. Mahindra Ugine Steel Co. Ltd. (2015) 57 taxmann.com 299 (Supreme Court)

Clearances of 'motor vehicles parts' manufactured by job-worker for use in manufacture of 'motor vehicles' by principals, would be valued as per rule 11 and valuation rules 8 and 9 cannot apply thereto.

• Assessee, a job-worker, was manufacturing motor vehicle parts for use by principal in manufacture of motor vehicles

• Assessee and principal were related in terms of section 4(3)(b)(i) viz. interconnected undertaking.

• Department sought valuation of 'parts' under rule 8 or proviso to rule 9 as captively consumed goods.

• Assessee claimed valuation as per rule 11 at 'cost of materials plus job-work charges' treating assessee/job-worker's premises as deemed factory gate.

Supreme Court held in favour of assessee as under:

• Since parts were not captively consumed by assessee-jobworker or on his behalf in production or manufacture of other articles, hence, rule 8 was inapplicable.

• Rule 9 and consequently, proviso to rule 9, was inapplicable Since assessee and principal were interconnected undertaking related in terms of section 4(3)(b)(i). This is because rule 9 mentions relationship that is visualised in sub-clauses (ii) to (iv) only and excludes clause (i). Further, since main rule 9 is not attracted, question of applicability or proviso thereto does not arise.

• Once it was concluded that above rules is not applicable in the case of the assessee, it is rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule.

Department couldn't allege suppression against assessee while issuing subsequent notices on same issues

Commissioner of Central Excise & Customs v. Rivaa Textiles Inds. Ltd.(2015) 54 taxmann.com 239 (Gujarat High Court)

Where all relevant facts were in knowledge of authorities when first show-cause notice was issued, while issuing second and third show-cause notices on similar facts, department couldn't allege suppression of facts by assessee. 

• Department carried out inspection on 16-9-1996 and issued notices on 14-3-1997 and 20-4-1998 alleging clandestine removal of goods.
• Later, department issued third notice dated 27-3-2001 invoking extended period alleging suppression of facts. 
• Assessee challenged third notice as time-barred, as all facts were within knowledge of department since 16-9-1996. 
• Department argued that if any suppression of material facts of fraud was detected, then extended period of limitation of five years was available to the department,therefore, the entire proceedings were legal and within the time-limit prescribed by the Act as the third notice was issued within 5 years from 16-9-1996.

High Court held in favour of assessee as under:

• Show-cause notices were issued with regard to part of transactions for different periods, but on basis of same inspection made on 16-9-1996. Once earlier show-cause notices were issued with regard to same inspection, then department could not claim having discovered suppression, fraud, etc., subsequently, as everything was within its knowledge since 16-9-1996. Hence, extended period of five years was not available to department.
• The High Court took note of the judgment of Supreme Court in Nizam Sugar Factory v. Collector of Central Excise 2006 (197) ELT 465 in which it was held that where all relevant facts were not in the knowledge of the authorities when the first show-cause notice was issued, while issuing second and third show-cause notices to the assessee on similar facts,it could not be taken as suppression of facts on the part of the assessee as the facts were already within the knowledge of the authorities.

Bajaj Auto Ltd. v. Union of India (2015) 54 taxmann.com 202 (Uttarakhand High Court)

An area-based exemption from basic excise duty or special excise duty leviable under Central Excise Tariff Act, 1985 does not extend to education cesses and National Calamity Contingent Duty leviable under various Finance Acts.

• Assessee, a unit in specified area at Uttarakhand, was eligible for area-based exemption. However, department argued that in absence of reference to National Calamity Contingent Duty (NCCD) and Education Cesses (EC/SHEC) in exemption Notification No. 50/2003-CE, said duty was payable by assessee.
• Assessee argued that said duty should be treated as exempted in view of Industrial Policy envisaging 100 per cent outright exemption from excise duty.

The High Court held in favour of revenue as under: 

• Main submission of learned Senior Advocate for the petitioner is on the concept of liberal interpretation. It is vehemently contended by him that implementing notification has to be interpreted liberally and general principle of strict interpretation of an exemption notification in taxation, is not applicable.
• In addition, he submitted that in interpretation of an implementing notification, the industrial policy would prevail. This submission of learned Senior Advocate for the petitioner is not acceptable to this Court, as exemption from paying NCCD cannot be read into the notification no. 50 of 2003 by simply applying the principles of liberal interpretation. Notification is to be read in plain and simple manner. 
• Therefore, exemption granted by a notification must be read limited to duty of excise as mentioned in notification, and by simple interpretation, it cannot be extended to cover any other kind of excise duty. 
• Moreover, assessee : (a) was getting and availing benefit of exemption notification, (b) was not aggrieved by any condition contained in notification (c) had not challenged notification, hence, present writ petition was dismissed. Thus, assessee was liable to pay NCCD, EC and SHEC as demanded.

Aluminium dross and skimmings aren't manufactured goods; decision of larger bench of CESTAT reversed

Hindalco Industries Ltd. v. Union of India (2015) 53 taxmann.com 156 (Bombay High Court)

Aluminium dross and skimmings and similar non-ferrous metal drosses and skimmings which arise as by-products in process of manufacture of aluminium/non-ferrous metal products are "not manufactured goods" and, hence, not liable to excise duty.

Facts:

• The assessee was a manufacturer of aluminium sheets and coils falling under heading 7607 1190 of the Central Excise Tariff Act using major raw material 'aluminium ingots'. 
• In the course of manufacture of aluminium sheets/coils, aluminium dross/skimmings emerge as by products. The assessee sold these by products on a regular basis.
• The department raised demand of duty on "aluminium dross/skimmings" on ground that it was a manufactured product and liable to excise duty in view of Explanation to section 2(d) of the Central Excise Act, 1944. The Tribunal's Larger Bench held in favour of revenue.
• Assessee argued that 'aluminium dross/skimmings' were not 'manufactured goods' and were not, therefore, liable to duty. It further argued that the Explanation was inserted in section 2(d) in order to clarify that the goods which could be bought and sold in the market were deemed to be marketable. The explanation deals only with the marketability aspect of the question and does not say that even non-manufactured goods are deemed to be manufactured goods.

The High Court held in favour of assessee as under:

• In case of Indian Aluminium Co. Ltd. v. A. K. Bandyopadhyay 1980 (6) ELT 146 (Bom.), it was held that dross and skimmings are not manufactured goods. 
• In Union of India v. Indian Aluminium Co. Ltd. 1995 (77) ELT 268 (SC), the Supreme Court agreed with the reasons and conclusions of the Single Judge and confirmed the view taken in case of A.K. Bandyopadhyay (supra).
• Further, the Supreme Court has held in Grasim Industries Ltd. v. Union of India 2011 (273) ELT 10(SC) that the conditions contemplated under section 2(d) and section 2(f) have to be satisfied conjunctively in order to entail imposition of excise duty under section 3 of the Act, therefore the impugned judgment of the Tribunal could not be agreed with. The larger Bench's decision did not take into account the fact that the authoritative pronouncement by the Supreme Court was binding on it.
• Merely because the goods satisfying the test of being maerketable and saleable, it does not mean that the test of being manufactured in India has been satisfied. The Supreme Court had in aforesaid cases rejected argument of addition of dross, cinder, skimmings, etc. in the list of the items to the Schedule to the Central Excise Tariff and also held 'that is not safe to make it excisable as it has to pass further test of manufactured or produced in India.'
• Fact that the revenue did not wish to abide by them would not mean that the Tribunal was justified in not following them. The issue stood completely covered by the Judgments of the Supreme Court and which had been totally disregarded by the Tribunal. 
• All Circulars impugned in this Writ Petition brought to the notice of this Court would not survive after the legal position had been set out as above.

Excise duty exemption cannot be denied merely because the certificates were in the name of intermediary through whom the material was supplied for approved projects

Commissioner of Central Excise, Jaipur Vs. KamdhenuIspat Ltd. (2014) 51 taxmann.com 227 (New Delhi – CESTAT)

KamdhenuIspat Ltd.(the Assessee)is a manufacturer of mild stone CTD Bars. For the period from April 2003 to June 2004, the Assessee supplied the CTD Bars for use in certain Projects financed by Asian Development Bank (ADB) and being implemented by Rajasthan Urban Infrastructure Development Project, Jaipur (RUIDP).

The Assessee also submitted certificates issued by project Director, RUIDP, Jaipur, countersigned by Additional Chief Secretary (Finance) Govt. of Rajasthan, certifying that the material mentioned in the certificate is required for use of the projects, and that the project have been financed by ADB through loan, duly approved by Govt. of India for urban infrastructure development of six major cities of the state of Rajasthan.

Accordingly, the Assessee availed exemption from Excise duty under Notification No. 108/95-CE dated August 28, 1995 (“the Exemption Notification”).

However, the Adjudicating Authority denied the benefit of the Exemption Notification on the premise that the Assessee’s name is not mentioned as supplier of the material in the certificates and the goods have not been supplied directly to the ADB financed Projects. Thus, demand was confirmed against the Assessee along with interest and penalty.

Being aggrieved, the Appellant preferred an appeal before the Commissioner (Appeals) where the matter was decided in favour of the Assessee. Thereafter, aggrieved by the Order of the Commissioner (Appeals), the Revenue preferred an appeal before the Hon’ble CESTAT, Delhi.

The Hon’ble CESTAT, Delhi relying upon the decision of the Hon’ble High Court of Madras in case of CCE Vs. Caterpillar India (P.) Ltd.[2013(297) ELT 8],held that since it is not denied that the Assessee have supplied the material to the persons mentioned in the certificates and there is no allegation of diversion of the material supplied for any other purpose, the benefit of the Exemption Notification cannot be denied on supply of products to projects funded by ADB even if routed via intermediary..

Cenvat credit available for fuel used by one unit to generate power for consumption by two manufacturing units

Commissioner of Customs & Central Excise, Noida, U.P v. Jindal Polyester [2014] 41 taxmann.com 173 (Allahabad)

Fuel used for generation of electricity, a part of which is also supplied to another unit of same  manufacturer, is eligible for credit as input; assessee is not required to have two separate power facilities for two different units.

Facts:

• The Assessee was availing of Cenvat credit of duty paid on Furnace Oil used as fuel in DG sets for generation of electricity. A part of electricity so generated was supplied to another unit engaged in manufacture of Polymer Chips, which was main input of the assessee; 
• The Department denied proportionate credit on Furnace Oil used in generation of electricity consumed by the other unit.

The High Court held in favour of assessee as under:

• Tax law should be interpreted in conformity with normal commercial practice. Therefore, the manner of 'use' , should be accepted as to economical, efficient and convenient manner of 'use' because a contrary interpretation would lead to frustrating purpose of law in granting credit; 
• Generation of electricity in one unit for use in all neighbouring units of a manufacturer is more efficient and economical than setting-up generating facility at each and every factory; 
• So long as factory and manufacturer are one, credit cannot be denied merely because of separate registration and/or different line of production as there is no such statutory regulation or rule; 
• It is logical that if two units are being run at one place, producing two different items and electricity is supplied to both of them by a common generator; credit benefit shall be available in respect of both the manufacturing units, unless statutorily provided otherwise; and 
• It was neither expedient nor desirable unless provided otherwise statutorily to have separate electricity generating sets for different manufacturing units. Accordingly, credit was to be allowed.

Principle of res judicata can override contrary ruling of Supreme Court; CESTAT rules in assessee's favour

Commissioner of Central Excise v. Raptakos Brett & Co. Ltd. (2013) 39 taxmann.com 63 (Mumbai - CESTAT)

Where earlier judgment of Tribunal in case of very same assessee had been accepted by Department, principle of res judicata is applicable and judgment of Tribunal will govern case despite contrary Supreme Court judgment

The Assessee claimed a deduction from value of excisable goods, which was allowed by the Commissioner (Appeals).In case of other assessees, said deduction was held not allowable by Supreme Court . The Department applied Supreme Court judgment and held that assessee was not eligible for said deduction.

The Tribunal allowed Assessee’s claim with following observation:-

• In assessee's own case, for earlier period, the Tribunal had allowed assessee's claim and said order had attained finality being not challenged by Department 
• Though decision of Apex Court has retrospective effect, but, since earlier judgment in case of very same the assessee had been accepted by Department, principle of res judicata was applicable. 
• Therefore, impugned order allowing deduction was to be upheld.