A

TAX Update
Newsletter on Indirect Taxes
October, 2015
Issue 3

GST

Central Excise

Service Tax

Customs

Foreign Trade

TAX Update Issue 3, October 2015

Dear Readers,
Greetings from Team SRD Legal.
The Service Tax Return (ST-3) for the period
April, 2015 to September, 2015 is due latest by
25th October, 2015. We advise that:

In this issue

a. File the return latest by 15th October

(instead of waiting till 25th).

Assessment

proceedings

cannot

be

b. Use the latest version of the excel

continued against legal heirs on death of

proprietor

utility (V1.4). Download it from the

Cenvat Credit available if exempted

ACES website.

goods are exported

Credit available if the job-worker pays

clarifications.

duty by mistake

Job-worker not required to reverse 6%,

Mr. Santosh Parab of Dalal Engineering Pvt.

7% etc. under rule 6 (3) (i).

Associated

Ltd. has suggested that we should start a series

Enterprise situated abroad Tax payable

of articles on the matters relating to the day-to-

even on provisional entries in account

day issues faced by excise executives in the

Service

received

from

books

factory. These may be small topics, but do

Credit available on services received by

manufacturer-exporter from CHA.

Services

received

prior

to

commencement of production Credit

allowed

We shall be available for assistance and

Credit available on the inputs inherently

lost during the manufacturing process

Several photographs in this issue have

been contributed by Bhavya Sharma
from Budapest, Hungary.

matter a lot.
We shall soon start the series. Do mail us your
suggestions to mail@srdlegal.in
Tomorrow we celebrate birthday of one of the
finest Advocate dear Gandhiji.
Manoj Kasale
Advocate
01st October, 2015

2 SRD Legal, Advocates & Consultants

TAX Update Issue 3, October 2015

CBEC Circular
CBEC instructs its officers - Board
Circulars contrary to the judgements
of Hon'ble Supreme Court should not
be followed:
Doesnt it look obvious? But obviously it
was not being followed by the officers.
Therefore, the Board has clarified that
Circulars contrary to the judgements of
Hon'ble Supreme Court become non-est
in law (i.e. legally they do not exist) and
should not be followed. All pending cases
decided after the date of the judgement
should, conform to the law laid by the
Hon'ble Supreme Court or High Court,
as the case may be, irrespective of
whether the circular has been rescinded
or not.

The Board further clarifies that the

above direction would also apply to the
judgements of Hon'ble High Court where
Board has decided that no appeal would
be filed on merit. However where appeal
has been filed by revenue against the
High Court's order, pending adjudication
should be transferred to the Call-Book
and such appeals should be kept alive.
This is indeed a welcome clarification
and would help in issuance of fair orders.
Circular no. 1006/13/2015-CX, Dated:
September 21, 2015

CASE LAWS
By this judgment dated 29th July 2015,
the Hon'ble Supreme Court has reversed
the judgment of Division Bench of the
High Court of Kerala.

When the proprietor dies - Can

Central Excise Duty be demanded
from his legal heirs? Supreme Court
says NO.

We may begin by saying that there is a

distinction between assessment and
recovery of tax. Assessment refers to the
process of determination as to whether
any tax is payable or not and if so, how
much. Recovery of tax is the next step.
The judgment concerns assessment and
not recovery. The Hon'ble Supreme
Court has held that assessment
proceedings cannot be continued against

3 SRD Legal, Advocates & Consultants

TAX Update Issue 3, October 2015

legal heirs after death of the sole
proprietor.

the legal representatives; and that the

proceedings abated on his death.

A show cause notice was issued to a

proprietary concern alleging that it had
manufactured and cleared goods without
payment of duty and had suppressed the
facts from the department. The
proprietor of the unit died before the
notice could be adjudicated. As a result,
the department issued another notice
asking his wife and four daughters as to
why the duty should not be demanded
from them. In reply they submitted that
there was no provision in the C. Excise
law to continue assessment proceeding
against a dead person in the hands of

Having lost the matter before Division

Bench of the High Court, the legal heirs
approached Supreme Court which after
analyzing the law and several case laws,
and comparing the position under Sales
Tax as well as Income Tax law concluded
that there is no provision under C.
Excise law to assess tax in hands of the
legal heirs.
Shabina Abraham & Ors. Vs.
Collector of Central Excise &
Customs (2015-TIOL-159-SC-CX)

4 SRD Legal, Advocates & Consultants

***

TAX Update Issue 3, October 2015

Export of exempted goods - CENVAT
Credit available Refund of
accumulated CENVAT credit also
admissible
under
Notification
No.5/2006-CE-(NT).

Inputs sent for job-work after

availing CENVAT Credit Jobworker paid duty on the processed
goods Credit available to the
principal Its not double benefit

Normally, Cenvat Credit is not available

if the final products are exempted.
However, there are certain exceptions to
this rule. Thus, for instance credit
remains available if the exempted goods
are exported or supplied to SEZ/ EOU
etc. Such exception is provided vide rule
6 (6) of Cenvat Credit Rules, 2004.

Assessee sent inputs for job-work after

availing CENVTA Credit. Instead of
returning the goods under a challan, the
job-worker returned the goods under
Central Excise invoices on payment of
duty. Assessee took credit of duty paid
by the job-worker. Department was of
the view that the job-worker was not
liable to pay duty and credit had been
claimed twice by the assessee.

Further,
if
Cenvat
Credit
gets
accumulated due to exports, then refund
of the same can be claimed under rule 5.
In the present case, when the appellant
sought
refund,
the
department
contended that the credit itself was not
available since the final products were
exempted. Honble Tribunal held that
the refund cannot be denied for this
reason. The Tribunal relied on the
decision of Honble Bombay High Court
in Repro India Limited wherein it had
been held that the petitioners are
entitled to avail Cenvat Credit in respect
of the inputs used in the manufacture of
the final products being exported
irrespective of the fact that the final
products are otherwise exempt.
Jolly Board Limited Vs.
Aurangabad.
2015(321)
(502)(Tri. Mum.)
***

CCE,
ELT

The Honble High Court vide order dated

27.08.15 rejected the contention of the
department and held that assessee did
not claim credit twice over. Since the jobworker had paid the duty and collected it
from the assessee, the credit was taken
only of that duty that had to be paid on
account of the mistake committed by the
job worker. This cannot be construed as
a double benefit by applying the theory
of unjust enrichment.
CCE, Chennai III Vs. Sundaram Auto
Components-2015-TIOL-2192- HC Mad-CX

***
Job-work Cenvat Credit Rule 6 Job-worker is not required to pay
6%, 7% etc. of the job-charges:
Job-workers are exempted from paying
duty on the goods manufactured on jobwork basis if the principal undertakes to
pay the duty. On the other hand, in

5 SRD Legal, Advocates & Consultants

TAX Update Issue 3, October 2015

terms of rule 6, Cenvat Credit is not
available on the inputs/ input services
used for manufacture of exempted goods
or for providing exempted services.
Combining
these
together,
the
department contended that the assessee
should have paid 6% of the job-charges
by way of reversal of credit of the inputs
& input services used for carrying out
the exempted job-work.
This issue had, in fact, already been
decided against the department and in
favour of the assessee by the larger
bench of Tribunal in Sterlite Industries
Ltd. vs. CCE [2005 (183) E.L.T. 353
(Tribunal - LB)]. The Hon'ble larger

bench held that in case of job-works, the

duty liability is just temporarily
deferred. Ultimately the duty is paid on
the goods by the principal. Hence it was
held that the credit would be available to
the job-worker and nothing is required to
be reversed on this account. The decision
has been followed in several cases.
Hon'ble Tribunal decided the matter in
favour of the job-worker relying on JBF
Industries vs. C.C.E, VAPI - [2014 (34)
S.T.R. 345 (Tri.-AHMD.)] = 2014-TIOL972-CESTAT-AHM.
S. B. Engineers v/s. CCE, C & ST,
Vadodara-II
[2015-TIOL-1984CESTAT-AHM]

6 SRD Legal, Advocates & Consultants

TAX Update Issue 3, October 2015

Service Tax Service received from
Associated
Enterprise
situated
abroad Tax payable even on
provisional entries in account books
In case of services received from
associated enterprises situated abroad
service tax is payable by the Indian
company
under
reverse
charge
mechanism. The rule requires payment
of service tax when the amount is
actually paid to the foreign company or
even when an entry is passed in the
account books.
The assessee in this case had received
technical know-how from its associated
enterprise abroad and was paying
royalty based the quarterly sales of the
goods manufactured by it. However for
the purposes of furnishing Management
Information System (MIS) reports to the
holding company, they used to pass
provisional entries every month. These
entries were reversed at the end of the
quarter and fresh entries were passed on
the basis of actual sales figures.
Hon'ble Tribunal held that tax is
payable with reference to the provisional
entries passed each month.
Thus, in effect, a delay has occurred in
payment of tax for the first two months
of each quarter. The assessee is liable to
pay interest on the same.
General Motors (I) Pvt Ltd. v/s. CCE,
Pune-I
[2015-TIOL-1993-CESTATMUM]
***

Cenvat Credit Credit available on

Services received from CHA
The department sought to deny credit of
the service tax paid on services of CHA
on the ground that the services are
rendered after clearance of goods from
the factory.
Hon'ble Tribunal allowed the credit
holding that the issue is already settled
in the favour of the appellant assessee
by the judgment of the Tribunal in the
case of Adani Pharma. P. Ltd. - 2008
(232) ELT 804 and Modern Petrofils 2010 (18) STR 625.
We may note that credit would not be
available in case of export through
merchant exporter.
M/s Lona Industries Ltd Vs CCE
2015-TIOL-1991-CESTAT-MUM
***

Cenvat Credit Services received

prior to commencement of
production Credit allowed
The credit was availed on services
relating to procurement of inputs. The
production in the appellants factory was
started on 4.2.2010 and the ISD
distributed the cenvat credit to the
appellant prior to the start of their
production.
Hon'ble Tribunal allowed the credit
holding that there is no restriction to the
effect that if any assessee avail cenvat
credit on procurement of inputs (prior to
start of manufacture), is not entitled to
take cenvat credit. Infact, without
procuring inputs, or some inputs service,

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TAX Update Issue 3, October 2015

assessee cannot start manufacturing
activity. Therefore, it cannot be said that
an assessee who is a manufacturer of
excisable goods is to be denied the cenvat
credit of duty paid on inputs or input
service availed prior to start of
manufacturing activity.

Appellant claimed that about 5% of the

quantity and value of yarn is lost while
making it into a fabric. Thus 100 kg of
yarn would result into 95 kg of fabric.
They claimed that against a stock of 95
kg of fabric they would be entitled to
credit of 100 kg of yarn.

Shree Cement Ltd. v/s. CCE, Jaipur

[2015-TIOL-1988-CESTAT-DEL]

Thus, the appellant made a claim for

CENVAT credit in respect of the total
quantity and value of goods that had
gone into the making of fabric. The
department, on the other hand, was of
the view that the appellant would be
entitled to avail credit only in respect of
the inputs physically contained in the
fabric.

***

Hon'ble High Court analysed meaning of

contained in finished product in the
following words:
13. To say that what is contained
in finished product is only a
quantity of all the inputs of the
Cenvat Credit Losses during
process Credit available on the
inputs inherently lost during the
manufacturing process:
Although this judgment relates to the
peculiar events occurring in the year
2003, the principal narrated in it is
useful. Hence we have chosen to present
it in the TAX Update.
Duty was freshly imposed on certain
textile goods in the year 2003. The
manufacturers were asked to declare
stock of goods held by them. A provision
was introduced (rule 9A) which allowed
the manufacturers Cenvat Credit equal
to the duty paid on inputs contained in
finished products lying in stock as on
31st day of March 2003. The assessee
declared the stock of fabric and availed
credit of the duty paid on the yarn used
to manufacture the fabric.

8 SRD Legal, Advocates & Consultants

same

weight as

finished

that of the

product

presuppose

would

that

all

manufacturing processes would

never have an inherent loss in the
process

of

expression

manufacture.
'inputs

of

The
such

finished product' contained in

finished

products'

cannot

be

looked at theoretically with its

semantics.

It

has

to

be

understood in the context of what

a manufacturing process is. If
there is no dispute about the fact
that every manufacturing process
would automatically

result

in

some kind of a loss such as

evaporation,

creation

of

by-

TAX Update Issue 3, October 2015

products, etc., the total quantity

never be equivalent to the

of inputs that went into the

sum total of the weight of

making of the finished product

all the inputs. Therefore,

represents the inputs of such

this

products in entirety.

understand Rule 9A.

is not the way to

14. If the purport of Rule 9A

is not understood in this
manner,

every

manufacturer will have to

pay

excise

quantity

duty

and

on

the

value

of

Rupa & Co. Limited Vs. CCE, decision

dated 13/08/2015 in Civil Miscellaneous
Appeal No.2350 of 2006 & M.P.No.1 of
2006.

inputs, which go to the

making

of

finished

product, whose weight will

9 SRD Legal, Advocates & Consultants

TAX Update Issue 3, October 2015

About SRD LEGAL:
SRD LEGAL was established in 2007 by Sanjay Dwivedi, Advocate and has grown
into a team headed by four Advocates. The firm handles litigations on C. Excise,
Service Tax & Customs matters up to High Court. It also renders legal advisory
services.

Contact:
512, Business Park, Citi of Joy,
J. S. D. Road, Mulund (West),
Mumbai - 400 080.

Tel. : +91-22-25 6565 47/ 48

+91- 90048 25702/ 87676 61950
Fax : +91-22-25 6565 49
e-mail: mail@srdlegal.in

Team SRD Legal

Mr. Sanjay Dwivedi, Advocate
Mr. Manoj Kasale, Advocate
Mr. Raymond George, Advocate
Mrs. Savita Dwivedi, Advocate

93204 56555
96190 29095
98204 80597
99873 70673

For private circulation only.

SRD Legal

Disclaimer
The information contained in this publication is intended for informational purposes
only and does not constitute legal opinion or advice. The views & information
contained herein are of general nature and are not intended to address the
circumstances of any particular person or entity. The contents are not comprehensive
or sufficient for taking decisions. Please do not act on the information/ views
provided in this newsletter without obtaining professional advice after a thorough
examination of the facts and circumstances of a particular situation. There can be no
assurance that the judicial/quasi judicial authorities may not take a position
contrary to the views mentioned herein. Although we endeavour to provide accurate
and timely information, there is no assurance or guarantee in this regard.
SRD LEGAL neither accepts nor assumes any responsibility or liability arising from
any decision or action taken or to be taken or refrained to be taken, by anyone on the
basis of this publication.

10 SRD Legal, Advocates & Consultants