28. What is the taxable event in case of Hire Purchase contracts liable to tax under Banking and Financial Services? What rate of tax will be applicable when there is increase in the rate of tax?

Held: (i)  Taxable event when contract entered in to

(ii) Rate will be the rate prevailing at the time of entering in to the contract

The appellant provided Hire Purchase Service under Banking and other Financial services. The rate of tax prevailing at that point of time was 5%.

The rate of tax increased from 5% to 8%. The appellant dealer continued to pay @ 5%. The revenue proceeded against the appellants on the ground that 8% should have been collected and paid.

The Commissioner (A) upheld the order of the lower authorities.

The appellants argued before the tribunal that when this service was brought in to net on 16-7-2001, CBEC issued a clarification to the effect that hire purchase contracts entered prior to 16-7-2001 there is no service tax liability.

Applying the similar logic the taxable event occurs when contract is entered in to and therefore the instalment payments are only obligation of the hirer.

The rate of Service Tax will be the rate prevailing on the date on which contact is entered in to consequently the demand raised on account of differential rate was set aside and the appellants appeal was allowed.

Art Leasing vs CCE Kochi 8 STR 162 (Tri-Bang)

29. Whether civil and Plumbing work carried out by an Interior Decorator would be considered as taxable service under Interior Decorator head.

Held: No in a Stay matter

The Hon'ble Tribunal in a Stay matter held that prima facie the appellant cannot be considered Interior Decorator as they carry out Civil & Plumbing work and also manufacture wooden furniture. They are not rendering any advice or services relating to planning design of spaces.

The predeposit was therefore waived.

Space Decorators vs. CCE Pune 8 STR 180 (Tri-Mum)

30. Whether retainer fees is liable to Service Tax

Held on Facts – No.

The department demanded Service Tax on the amount received by the appellants from M/s. Nagamal Mills Ltd. during the period April, 2004 to March 2005. They wanted to tax the said amount under Consulting Engineers.

It was the argument of the appellant dealer that he does not fall within ambit of definition Consulting Engineers as he only is diploma holder. His relationship with company during the period was in the nature of employment. He was kept for supervising electrical work. The amount paid to him was accounted by the company as retainer allowance.

The Tribunal held that the transaction between service provider and service recipient must be on principle to principle basis as this basic requirement doest not appear to have been satisfied in this case, therefore without answering as to whether a diploma holder is Consulting engineer. They held that the demand of Service Tax was invalid and set aside the order.

S. Maruthopan vs. CCE, Exe. Tirunelveli 8 STR 228 (Tri- Chennai)

31. Whether Cenvat Credit is allowable on the Supplementary Invoices raised and duty paid

Held : Yes

The facts of the case are that appellants who are engaged in the manufacture of tractor, I.C. engine were availing the facility of Cenvat credit. They were also supplying CRCA sheets free of cost to their job workers M/s. Maharashtra Engineering for manufacturing of fenders (part of tractor). Such manufactured fenders were being cleared by the job worker on payment of duty of Excise by adopting the assessable value inclusive of the value sheets supplied by the appellants. It is that the cost of CRCA sheets was revised and enhanced vide purchase order dt. 20-6-2003 effective from 31-7-2002. As such, the assessable value of the fenders manufactured by the job workers was required to be revised and enhanced, which, they failed to do. However, such lapse was accepted by the job worker subsequently who paid the amount of Rs. 16,57,380/- along with interest of Rs. 1,58,947/-. Simultaneously supplementary invoices were raised by them, on the basis of which appellant took Modvat Credit. The dispute relates to such quantum of credit availed by the appellant.

The lower authorities have held that in terms of the provisions of Rule 7(1) (b) of Cenvat Credit Rules, 2002, the appellant is not entitled to avail the credit on the strength of supplementary invoices issued by the job workers. On the other hand, it is the appellant’s contention that the said rules debarred taking of credit only where the duty was short levied by reason of fraud, collusion or any wilful misstatement or suppression of facts. All the above situations are missing in their case and as such, the provisions of said Rule are not applicable.

The Tribunal held that there is no categorical finding recorded by the authorities below that duty was not paid by the job workers on account of any of the reasons enumerated in the provisions of Rule 7(1) (b) of Cenvat Credit Rules, 2002. On the contrary, reading of the orders show that the short levy was detected by the job workers on his own and duty was paid. The Additional Commissioner’s orders is to the effect that the case was also booked against the job workers for appreciation of paid amount and demanding interest and imposing penalty. This leads us to believe that the amount was paid prior to issuance of the show cause notice. The appellants have also strongly contended that M/s. Maharashtra Engineering have themselves calculated the differential value and paid differential duty without being pointed out by the department and thus there is no suppression either at their end or at the job workers end. Even during the course of hearing, DR. has not placed any order passed by the Jurisdictional Central Excise authorities of the job workers arriving at finding of any fraud, collusion, wilful misstatement or suppression of fact etc. on the part of the job worker. The Tribunal in the case of M/s. Essel Propack vs. CCE reported in 2004 (167) ELT 547 (T) has held that the burden of proving that differential duty covered by supplementary invoices become recoverable on account of suppression, wilful misstatement, fraud, or collusion etc. lies on the Revenue and such allegations cannot be made subsequent to payment of duty. The original order was set aside and credits on supplementary bills were allowed.

Mahindra & Mahindra Ltd. vs. CCE, Mumbai. 202 ELT 509 (Tri-Mumbai)

32. Whether the burden of proof is on the department to prove that a non-notified item u/s 123 of Customs Act is a smuggled item?

Held : Yes

The facts are that acting on specific information acting that huge quantity of silk fabrics of Chinese origin had been stored at the factory-cum-godown premises of M/s. Ritika Limited, the respondent herein, the Officers of P & I Branch, West Bengal, Kolkata searched the premises. The search yielded in recovery of 2907.67 metres of silk fabric of Chinese origin in roll form as well as in cut-piece form. After departmental investigation, a notice to show cause was issued of 5th February, 1998. The Joint Commissioner of Customs after hearing the parties ordered absolute confiscation of the seized goods and imposed personal penalty of Rs. 7,00,000/- upon each of the three Directors of the M/s. Ritika Limited under section 112(B) of the Act. The said Joint Commissioner while passing such order, came to the conclusion that the purported supplier namely, M/s. Nav Bharat Textile on investigation having been found to be a non-existing concern, the department had discharged their initial burden of proof. It is further recorded that correspondence with the Bank could not disclose who had actually encashed the cheques purportedly issued for payment of the goods.

The Commissioner of Customs (Appeal) allowed the appeal of the appellants. The revenue went before the Tribunal.

The Tribunal after going through the material on recorded and hearing both sides concluded that admittedly the goods in question are non-notified items in terms of section 123 of the Act. Such being the position, the burden is upon the revenue to prove that those were smuggled goods. In this case, it appears that no specific evidence has been produced showing that the goods in question were smuggled to India without complying with the formalities contained in the statutes. Therefore, the initial burden that the goods were smuggled was not discharged. Moreover, in this case, the respondents have definitely asserted that they purchased the goods in question from Nav Bharat Taxtile in 1995 by account payee cheque and that those were encashed. It appears from the order of Joint Commissioner that he merely recorded that it did not reveal from the correspondence with the Bank as to the identity of the person who encashed the cheque.

The Tribunal further held that it is now a settled law that burden in a criminal prosecution in the absence of any special protection given in any statute is always upon the prosecution. The goods in question being non-notified one, the burden is upon the revenue. Onus of proof is different from the burden of proof and we should not confuse the terms "onus" with "burden". Burden of proof lies upon the person who has to prove a fact and it never shifts but the onus is shifted at every stage in the process of evaluation of evidence. (See A. Raghavamma vs. Chenchmma reported in A.I.R. 1964 SC 136)

Further Tribunal noted that it was impressed upon them that Nav Bharat was not in existence and/or a fictitious person. The held "we are not impressed by such contention. The respondents purchased goods in 1995 and the investigation started in the year 1997. if by that time, the Nav Bharat had really removed their business, for that reason the respondents could not be blamed.

Department’s appeal was dismissed.

CCE West Bengal vs. Ritukumar (202 ELT 754, Tri-Calcutta)