Legal Roundup - August 09 Detailed

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)]