Also refer Posts for SERVICE TAX and CUSTOMS LAW Case laws
1. Case law : Nicholas Piramal India Ltd. v. CCEx, Mumbai 2010 (SC)
Issue: Does a product with short-life satisfy the test of marketability?
Facts: Product had a shelf life of only 2-3 days. Assessee contented, this does not satisfy test of marketability.
Analysis: 1. Shelf life of 2-3 days cannot be equated with no shelf life.
2. This can be commercially marketed.
3. Shelf life is not relevant for testing marketability unless it is not capable of being brought and sold during that shelf life.
Conclusion: On the basis of above Hon: SC held that the excisable goods with shelf life of 2-3 days is marketable and hence, excisable.
2. Case law: Medley Pharmaceuticals Ltd. v. CCE&C., Daman 2011 (SC)
Issue: Whether Physician samples are excisable goods since it is statutorily prohibited from being sold ?
Facts: Physician’s Sample cannot be sold statutorily and hence asessee contended that the same cannot be considered as marketable.
Analysis: The restrictions imposed under Drugs Act could not lead to non levy of excise duty under central excise act, since it does not lead to failure of test of marketability under Central excise Act 1944.
Conclusion: On the basis of above Hon: Sc held that the physician samples were excisable goods and were liable to Excise duty.
3.Case law: Usha Rectifier Corpn.(I) Ltd v. CCEx., New Delhi 2011 (SC)
Issue: Whether assembling of testing equipments for testing the final product in the factory amount to manufacture?
Facts: 1. Assessee manufactured various electronic and semiconductor devices and also testing equipment to test these devices.
2. However Assessee contended that the testing equipment was for purely R& D purposes assembled in the factory itself. Being the research became unsuccessful, the same testing machine was dismantled.
3. Assessee further in its directors report stated that project (development of testing machines) was undertaken only to avoid importing such equipment, so that foreign exchange can be saved.
Analysis: 1. Assessee has themselves admitted in the directors report about development of testing equipment, so it could not make contrary submissions later.
2. Assesee stand on savings on foreign exchange itself confirm that such equipments were saleable and marketable.
Conclusion: On the basis of above Hon: Sc held that the Excise duty was payable on such testing equipments.
4. Case law: UOI v. Ind-Swift laboratories Ltd .2011 (SC)
Facts: Whether interest on irregular credit under rule 14 of the CENVAT Credit Rules 2004 arises from date of availing such credit or date of utilisation of the credit.
Analysis: Rule 14 of CENVAT Credit Rules 2004 is clear and unambiguous i.e., interest to be levied in the event of any of the three specified circumstances, namely
1. CENVAT credit wrongly taken
2. CENVAT credit wrongly utilized.
3. CENVAT credit erroneously refunded.
Conclusion: On the basis of above Hon: SC held that Rule 14 of CENVAT Credit Rules 2004, cannot be interpreted to mean that interest is payable from date of utilisation of irregular credit and not from the date of availing such credit.
5. Case law: CCE v. GTC Industries Ltd 2011 ( Bom. HC)
Facts: 1. Assessee cut separate pieces form roll of aluminium foil and embossed word ‘PULL‘ on it.
2. The cut foils were used to wrap cigarettes to keep them dry.
3. Revenue contented this process of cutting and embossing aluminium foil amounted to manufacture.
Analysis: 1. Cutting and embossing did not transform foil into a distinct and identifiable commodity.
2. The process did not render any marketable value but only made it usable for packing.
3. No records were submitted by revenue to prove that cut and embossed foils were distinct marketable commodity.
Conclusion: On the basis of above the Hon. HC held that only the process which produces distinct and identifiable commodity with marketable value can be called manufacture. And this test fails in this case and hence the process does not amount to manufacture.
6. Case Laws : CCE v. RDC Concrete ( India) Pvt Ltd (SC)
Issue: Whether re-appreciation of evidence by CESTAT be considered to be rectification of mistake apparent on record under Sec 35C(2) of CE Act 1944.
Facts: CESTAT accepted arguments at time of rectification of mistake which were not accepted at an earlier point, resulting into a different conclusion as compared to the original one.
Analysis: 1. Re-appreciation of evidence on a debatable point cannot be said to be rectification of mistake apparent on record.
2. Mistake apparent on record must be an obvious and patent mistake and the mistake should not be such which can be established by along drawn process of reasoning.
3. In this case the CESTAT has reconsidered its legal view, as it concluded differently by accepting the arguments which it had rejected earlier., which clearly exceed the powers u/s 35C(2).
Conclusion: On the basis of above the Hon: SC held that in pursuance of rectification application U/s 35C(2) CESTAT cannot re-appreciate the evidence and reconsider its own legal view taken earlier.
7. Case Laws : CCE v. Gujchem Distillers 2011 (Bom. HC)
Issues: Whether the CESTAT order disposing appeal on a totally new ground legally sustainable?
Facts: CESTAT disposed an appeal on a new ground which was not urged by the respondents before the adjudicating authority.
Analysis: 1. CESTAT cannot assume to itself the jurisdiction to decide the appeal on a ground which had not been urged before the lower authorities.
2. However if CESTAT is not satisfied with the approach of adjudicating authority, it should have remanded the matter back to the adjudicating authority, which is within its powers.
Conclusion: On the basis of above Hon. HC held that CESTAT has no power to order disposal on an appeal on a totally new ground.
8. Case Law : CCE v. Tata Advanced Materials Ltd 2011 ( Kar. HC)
Issue: Whether CENVAT Credit to be reversed when the excise duty is reimbursed by Insurance company on damaged / destroyed capital goods.
Facts: 1. Capital asset purchased by assessee (on which excise duty paid and CENVAT Credit taken ) destroyed after 3 years on purchase.
2. Insurance company reimbursed an amount inclusive of Excise duty.
3. Excise department demanded reversal of CENVAT credit on the ground that assessee availed double benefit.
Analysis: 1. As per CENVAT Credit Rules 2004, CENVAT Credit taken irregularly stands cancelled and CENVAT Credit utilised irregularly has to be paid for.
2. Merely because The Insurance Company has reimbursed the assessee the value inclusive of excise duty, will not make the availment of CENVAT credit wrong or irregular.
3. There cannot be deemed as a double benefit as contended by the Department.
Conclusion: On the basis of above the Hon. HC held that reimbursement of Excise duty by the insurance company on damage or destruction of goods does not render to automatic reversal of CENVAT Credit availed.
9. Case law: CCE V Ecof Industries Pvt. Ltd. 2011 (Kar.HC)
Issue: Whether CENVAT Credit of a particular unit be denied on the ground that input service were obtained by another unit belonging to the same manufacturer, in case of a ‘Input Service Distributor’
Facts: 1. Assessee was engaged in manufacture of excisable goods in Malur unit.
2. Head office at Chennai was registered as ‘Input Service Distributor’
3. Head office paid service tax for services received by HO and its units (including Cuttak unit) from various service providers.
4. Thereafter HO distributed the credit of Service tax to various units including Malur unit.
5. Assessee availed and utilized the said credit for payment of Central Excise duty on their final products.
6. Revenue contented that service tax paid in respect of services obtained by Cuttack unit, the credit of the said service tax paid could not be utilized by Malur unit.
Analysis: 1. A conjoint reading of CENVAT Credit Rules 2004, elucidates that availment of credit of service tax paid on the input services at a particular unit by another unit is not prohibited by law.
2. Since HO is registered as an ‘Input Service Distributor’ it is entitled to distribute credit of input services as prescribed by the law.
Conclusion: On the basis of above the Hon. HC held that Malur unit had rightly availed the CENVAT credit of the service tax paid by its head office.
10. Case law: CCus.v. Prime Health Care Products 2011 (Guj.HC)
Issue: In case of Combo pack items sold, Whether each bought out item(s) is eligible as input under the CEVAT Credit Rules 2004.
Facts: 1. Assessee was engaged in manufacturing of tooth paste, but sold combo pack of tooth paste with bought out tooth brush.
2. Revenue contended tooth brush was not an input to manufacture tooth paste.
Analysis: 1. Packing and repacking the input in a unit container would fall within the ambit of “Manufacture” U/s 2(f)(iii) of CE Act 1944.
2. Input Under rule 2(k) of CENVAT Credit Rules 2004 includes accessories of the final products cleared along with final product.
Conclusion: On the basis of above the Hon. HC held that the tooth brush shall be treated as an input and credit was admissible to the assessee.
11. Case law: CCE v. Techno Rubber Industries Pvt. Ltd. 2011 (Kar. HC)
Issue: Can the excess duty paid the seller be refunded on the basis of the debit note issued by the buyer.
Facts: 1. Assesee paid higher rate of duty in month of March by mistake and cleared goods and sold without knowing the rate change in the budget.
2. Buyer refused to pay the excess duty and raised a debit note in the month of June.
3. Revenue refused on the ground that the debit note raised in June does not demonstrates that his customer has not paid the excess duty to him. And could not be the basis for refund.
Analysis: 1.Once the department admits of excess receipt of duty it is bound to refund the excess duty subject to the concept of Unjust enrichment.
2. When the buyer has raised the debit note refusing to pay excess duty claimed, the only inference to be drawn was that the assessee has not received the excess duty which he has paid to department.
Conclusion: On the basis of above the Hon. HC held that department was bound to refund the excess duty paid, to the assessee.
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