1. Whether samples of imported coal, not drawn in accordance with the Indian Standards are valid in law?

1) Facts

The assessee imported coking coal for the manufacture of coke. The customs department drew samples from the consignments without the presence of the agent of the assessee. The Department however alleged that the agent of the assessee was present when the samples were drawn, though they were drawn contrary to IS436. However, as the ash content was more than 12% as per the reports carried out by the Department, due to which the assessee could not avail of the exemption notification, SCNs were issued to the assessee for demanding differential duty. The Asst. Commissioner confirmed the duty and the Commissioner (Appeals) set aside the order of the Asst. Commissioner. The department approached the CESTAT and the CESTAT held that even though the samples were drawn contrary to IS 436, since the representative of the assessee was present, the assessee was estopped from turning around at a later stage inasmuch as they did not immediately object to the drawing of samples contrary to law.

2) Issue

Whether samples of imported coal, not drawn in accordance with the Indian Standards are valid in law?

3) Held

The Supreme Court held that since the samples were drawn contrary to law (IS 436), the tests report of the Department could not be looked at. As regards the Tribunal’s finding that even though the samples were drawn contrary to law, the assessee was estopped because their representative was present and did not object to such drawing of samples was perverse inasmuch as there is no estoppel against law. If the law required that something be done in a particular manner, it must be done in that manner, and if not done in that manner has no existence in the eye of law at all. The SC held that the Department was not absolved from following the law depending upon the acts of a particular assessee. Something that is illegal cannot convert itself into something legal by the act of a third person.

[Tata Chemicals v. CC, 2015-TIOL-120-SC-CUS]

2. Whether recovery proceedings can be initiated without show cause notice under section 11A of the Excise Act, which is mandatory?
   

1) Facts

The Union of India, in 1997, unveiled an industrial policy for the North Eastern region giving tax incentives to such industries for 10 years. Pursuant to this, another Notification dated 8-7-1999 was issued granting new industrial units that had commercial production on or after December 24, 1997 and certain types of industrial units that increased their installed capacity after that date, certain exemptions. However, in 1999, another Notification was issued whereby exemption of Central Excise was withdrawn in respect of pan masala and tobacco products, which was challenged by various assessees. In the meantime,
vide Section 154 of the Finance Act, 2003, withdrawal of the benefit was effected from retrospective effect. Section 154 was however held to be constitutionally valid by the SC in R.C. Tobacco Private Ltd. v. Union of India & Anr. (2005) 7 SCC 725. Relying on section 154, the Department passed a recovery order demanding the duties with retrospective effect. The question that came up before the SC was whether recovery orders could be passed dispensing with the condition of SCN as required under section 11A of the Act even though the constitutional validity of section 154 was upheld in the R.C. Tobacco decision?

2) Issue

Whether recovery proceedings can be initiated without show cause notice under section 11A of the Excise Act, which is mandatory?

3) Held

The Supreme Court, after relying on its on various decisions, held that even when the duty was to be recovered from the assessee in view of the decision in R.C. Tobacco, it was held that the principles of natural justice could not be dispensed with. It further held that such recovery notices could not be issued without issuing a show cause notice to the assessee under section 11A of the Central Excise Act, 1944 as is mandatory in law.

[Dharampal Satyapal v. Dy. CCE, 2015-TIOL-121-SC-CX]

3. Whether permission under Rule 16C of the Central Excise Rules can be denied to an assessee in view of the beneficial nature of the Rule?
   

1) Facts

The appellant is a manufacturer and got permission of the jurisdictional Commissioner of Central Excise, Pune, to remove the goods from its factory at Pune to the Bengaluru unit without payment of excise duty from Pune unit to Bengaluru unit from the financial year 2011-12 till 2014-15. However, the said permission was refused by the Commissioner for the financial year 2015-16 on the ground that that the appellant’s case cannot be considered to be falling under the category of “deserving case” as is prescribed under the Board’s Circular No. 844/02/2007-CX dated 31-1-2007.

2) Issue

Whether permission under Rule 16C of the Central Excise Rules can be denied to an assessee in view of the beneficial nature of the Rule?

3) Held

The Tribunal held that Rule 16C is a beneficial piece of legislation and is benevolent in nature, which permits a manufacturer to remove excisable goods manufactured in his factory without payment of duty for carrying out test or any other process not amounting to manufacture. The said discretion must be exercised by the department to benefit the assessee and facilitate trade and manufacturer of goods, more so when there was no allegation of violation of the procedures under the Act. In other words, when exercising a discretion, the Department has to take into account the commercial necessity of the assessee.

[Avery Dennison India Pvt. Ltd. v. CCE, 2015-TIOL-1556-CESTAT-Mum.]

4. Whether refund can be granted under section 27 of the Customs Act without filing an application?

1) Facts

The assessee RDB palmolein and paid extra duty deposit (EDD) for the purpose of provisional assessment of the goods, pending survey report. After finalisation of assessment, the file of the assessee was forwarded to the refund section for refund of EDD. However, the Assistant Commissioner held that since no refund application was filed as required under Explanation II of section 27 of the Customs Act, the same is liable to be rejected. The assessee preferred an appeal and the Commissioner (Appeals) and the Tribunal held in favour of the assessee on the ground that since the EDD was only a deposit as a protection to safeguard the interests of the Department, and it was not a deposit of difference in terms of section 27, the EDD was to be refunded. It is against this that the Department filed an appeal before the Madras HC.

2) Issue

Whether refund can be granted under section 27 of the Customs Act without filing an application?

3) Held

The Madras High Court, after relying upon the decision of the Delhi HC in
CC v. Indian Oil Corporation, 2012 (282) ELT 368 (Del.) held that Explanation II to section 27 would only apply in a case where after the final assessment and the adjustment, the assessee was not satisfied with the adjustment and claimed excess amount of refund. Further, it held that the said explanation will have no application in cases where admittedly after final adjustment, refund is due to the assessee.

[CC v. Sayonara Exports Pvt. Ltd., 2015 (321) ELT 583 (Mad.)]

5. Whether credit can be availed on outward transportation services post the amendment to the definition of input services w.e.f. 10-4-2008?

1) Facts

The assessee dealt in the manufacture and sale of cement. The sale of cement was made at the destination of the buyer and the assessee was be entitled to CENVAT credit on input service on transportation of the cement sold by the assessee. Initially, the period in dispute was from August, 2006 to October, 2007 and from November-2007 to July- 2008. In view of the change in definition of input service provided in Rule 2(l) of the CENVAT Credit Rules, 2004 w.e.f. 1-4-2008, the adjudicating authority as well as the First Appellate Authority had denied the benefit to the assessee for the entire period but the Tribunal granted the benefit of CENVAT credit to the appellant-assessee for the period up to 31-3-2008 but denied the same from 1-4-2008 to 31-7-2008, on the ground of a change in the definition of input services.

2) Issue

Whether credit can be availed on outward transportation services post the amendment to the definition of input services w.e.f. 1-4-2008?

3) Held

Since the sale was completed only after delivery was made to the buyer on ‘FOR basis’, the sale of the goods was finalized at the destination, which is at the doorstep of the buyer and the change in definition of ‘input service’ which came into effect from 1-4-2008 would not make any difference. The title of the goods had passed on from seller to buyer only at the place of destination, i.e. the place of removal, which is the address of the buyer. As such, the buyer had no right over the goods till delivered to it. Further, since the place of removal was the doorstep of the buyer, the assessee was entitled to the credit paid on outward transportation services.

[Madras Cements v. Asst. CCE, 2015-TIOL-1682-KAR-HC-CX]

Vipinkumar Jain