Tuesday, 29 September 2015

Supreme Court Round Up - Recent Cases

Customs - shoddy and slipshod investigation.
THE Supreme Court observed, "It appears that the allegations were very serious but no cogent material was collected to substantiate these allegations and that is the result of shoddy and slip shod investigation. In normal course, we would have remitted the case back for further investigation. However, it is a matter of the year 1997 and it seems that such an exercise may be futile. Moreover, we may record at this stage that during these proceedings the respondent herein had paid certain amounts to the Department."
Revenue Appeal was dismissed.
Please see Commissioner of Customs Vs Wings Electronics - 2015-TIOL-221-SC-CUS
Customs - No appeal on pure findings of fact .
The Supreme Court observed, " Only pure findings of facts are recorded in the impugned order dated 03.02.2006 passed by the Customs, Excise & Service Tax Appellate Tribunal, and we are of the opinion that there is no question of law which needs to be determined in the instant appeal ."
Assessee's Appeal was allowed.
Please see Kedia Overseas Ltd Vs CCE and Customs, Visakhapatnam. - 2015-TIOL-220-SC-CUS
Central Excise -suppression when the unit was audited several times? .
The Supreme Court observed, "The Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as 'CESTAT') has held that the demand for the aforesaid period was time barred as the Department had not taken any action for more than five years. It is also found as a matter of fact, that the unit of the respondent was audited during this period several times and there were physical inspections by the Department as well. Therefore, there could not be any case of suppression. We are in agreement with the aforesaid view taken by the CESTAT."
Revenue Appeal was dismissed.
Please see Commissioner of Central Excise, Bangalore Vs Pragathi Concrete Products (P) Ltd - 2015-TIOL-223-SC-CX
Customs - Valuation -consideration paid for the technical know-how.
The Supreme Court observed, "the technical information which was to be provided by the Japanese company to the respondent was for the manufacture of the contract products by the respondent herein, naturally, after the setting up of the plant. This cost is, thus, incurred after the importation of the goods. The matter is squarely covered by the judgment of the Court in the case of 'Commissioner of Customs, Ahmedabad v. M/s.EssarSteel Limited ' reported in 2015-TIOL-63-SC-CUS ."
Revenue Appeal was dismissed.
Please see Commissioner of Customs Vs Denso Kirloskar Industries Ltd - 2015-TIOL-222-SC-CUS
Central Excise - Valuation - Amount paid by the assessee to the buyer is not includible in the assessable value.
The additional consideration which flows directly or indirectly from buyer to the assessee can be added to the price which is charged by the seller from the buyer. On the contrary, in the present case, the royalty, which is treated as additional consideration is paid by the seller to the buyer. The very basis of the show cause notice, in fact, was untenable and when the assessee is paying the royalty to the buyer and that too for using the brand name 'NOVINO' which belongs to the buyer, the question of treating the same as "additional consideration" within the meaning of Rule 5 and adding to the price charged from the LNL for sale of the aforesaid product could not arise.
Assessee's Appeal Allowed.
Please see Lakhanpal Ltd vs Commissioner of Central Excise and Customs, Vadodara - 2015-TIOL-224-SC-CX
Central Excise - Valuation - Related Person- where two companies/firms belong to the same group, then the test of mutuality is established and satisfied.
The Supreme Court had in Commissioner of Central Excise, Hyderabad v. Detergents India Limited - 2015-TIOL-56-SC-CX formulated the test in the following manner:
"12. When we come to the definition of "related person" the legislature has used a well-known technique. It first employs the expression "means" and states that persons who are associated with the assessee so that they have a direct or indirect interest in the business of each other would get covered. The definition then goes on to use the expression "and includes" thereby indicating that the legislature intends to extend the definition to also include various persons that would not otherwise have so been included. These include a holding company, a subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor. The necessity for including holding and subsidiary companies as defined under the Companies Act, 1956 is to lift the corporate veil in order to get to the economic realities of the transaction."
In the present case, the Supreme Court observed, "We are of the opinion that the aforesaid judgment squarely applies to the facts of the present case as it holds that where the two companies/firms etc., belong to the same group then the test of mutuality is established and satisfied. In a sense, the Court has torn the corporate veil thereby pointing out that such family concerns would be beneficiaries in the affairs of each other."
Revenue Appeal Allowed.
Please see Commissioner of Central Excise, Mumbai-V vs J Foundation - 2015-TIOL-215-SC-CX
Commissioner drops the case on limitation - Revenue takes the matter to Supreme Court.
It is very rarely that you find a Commissioner dropping a case and that too on limitation. But such legal temerity is not easily tolerated.
The Commissioner in his order had observed,
When all this material was made available to the department and the classification list have been approved and RT -12 returns assessed down the years, it is difficult to find any justification for upholding the allegation of misstatement or suppression of facts. I have to accordingly hold that the proviso to Section 11A cannot be applied to the present case and, therefore, the demand for duty is time barred.
Revenue took the matter right up to the Supreme Court. The Supreme Court did not find any error in the order of the Commissioner on this aspect.
Revenue Appeal Dismissed.
Please see Commissioner of Central Excise, Mumbai-III vs EsselPropack Ltd - 2015-TIOL-212-SC-CX
Central Excise - Valuation - jobwork - loan to jobworker has not influenced the price - Pure findings of facts not to be interfered with:
In this case also, the Commissioner had dropped the proceedings and the CESTAT found,
Nestle India Ltd. was supplying the raw material. They had given loan for purchase of machinery but it had not influenced the pricing and the assessable value of the goods manufactured by the assessee as an independent job worker. The value of the job worker alone is required to be adopted in terms of the Apex Court judgment rendered in the case of M/s. Pawan Biscuits Ltd. (cited supra) which has followed the earlier judgment of the Apex Court rendered in the case of M/s. Ujagar Prints (cited supra). There is no flow back of funds and the assessee herein does not have interest in M/s. Nestle India Ltd.'s profits. There is no mutuality of interest and the relationship was on principal-to-principal basis.
But Revenue took the matter to the Supreme Court.
The Supreme Court observed that these are pure findings of facts after analysing the documents on record and does not call for any interference.
Revenue Appeal Dismissed.
Please see Commissioner of Central Excise, Bangalore vs Campco - 2015-TIOL-211-SC-CX

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