Case BriefsHigh Courts

Gujarat High Court:  A Division Bench of Harsha Devani and Bhargav D. Karia, JJ. partially allowed a stay order for the release of diamonds confiscated by the Customs Department after imposing fine and some subsequent conditions. 

Custom Department seized rough diamonds valued at Rs 1,05,58,474 from the respondent herein for importing the same without Kimberley Processing Certificate (KPC), which is necessary for importing diamonds in India. The Adjudicatory Authority ordered absolute confiscation of the diamonds. Later, Customs, Excise and Service Tax Appellate Tribunal (CESTAT) reversed the order passed by the Adjudicatory Authority and ordered the release of the diamonds. The present application was filed by the Customs Department requesting a stay on the order of CESTAT.

Learned Counsel for the appellant, Dhaval D. Vyas, contended that an immediate stay should be put on the order passed by CESTAT because the respondent had failed to show lawful possession of diamonds. Furthermore, he had failed to show that the diamond had been imported after obtaining the KPC certificate, and in absence of the same, the Customs Department had discretionary authority in confiscating the diamonds. He further contended that the release of diamonds would put them into and irreversible situation.

Opposing the application, Paresh Dave, learned advocate for the respondent, submitted that the seized goods, namely, rough diamonds were not harmful goods and have no impact on the society. Moreover, rough diamonds are freely importable and are not dutiable. Thus, the violation committed was not so grave that the respondent should be deprived of his property and, therefore, redemption may be allowed subject to conditions. He relied on the judgment of the High Court in Commr. of GST v. Dharmesh Pansuriya, Tax Appeal No. 62 of 2018, dated 22-2-2018, wherein the Court had  permitted the gold bars valued at Rs 6.75 crores to be released upon payment of redemption fine of Rs 40 lakhs [5.92 per cent of the value of goods] and penalty of Rs 6 lakhs [1 per cent of the value of goods] and bank guarantee of Rs 1 crore.

The Court after hearing both the sides observed that to protect the interest of the revenue, the goods may be permitted to be released subject to certain conditions. Such conditions would be in line with the earlier orders. The Court finally ordered the release of the diamonds after paying 10 per cent as redemption fee and 1 per cent as fine. The Court further added that the respondent shall also file an undertaking before this Court that in the event, the applicant succeeds in the appeal and if absolute confiscation of the goods is ordered or the respondent is held liable to pay an amount more than the amount paid under this order, the respondent shall pay the differential amount that he may become liable to pay under such order.[Commr. of Custom v. Pravin R. Ajudiya, 2019 SCC OnLine Guj 808, decided on 08-05-2019 ]

Case BriefsHigh Courts

Bombay High Court: S.C. Dharmadhikari and M.S. Karnik, JJ., allowed an appeal filed by the Commissioner of GST against the order of the Customs, Excise and Service Tax Appellate Tribunal, Mumbai.

Rashtriya Chemicals and Fertilizers Ltd. (assessee) was registered with the Central Excise Department. In 2009, the assessee entered into an agreement with the Central Railway for leasing out 416 wagons for 20 years. The Commissioner of Central Excise raised a service tax demand on the said activity. This was appealed against by the assessee and the CESTAT set aside the demand raised by the CCE and disposed of the entire appeal by a ‘single sentence order’ stating that there was no foundation in the show cause notice issued to the assessee in bringing out whether any service element is involved while renting the wagons to the Railways.

Not impressed by the manner in which the CESTAT dealt with the appeal, the High Court said: “It is by now well settled that in Appeal field before the CESTAT, it is required to refer to all the materials before the Commissioner (Appeals). The order passed by CESTAT is devoid of any reasons. It has only recorded an abrupt finding without discussing the issue raised before it and without mentioning any reason for the conclusion.”

It was next observed: “CESTAT while deciding the Appeal has to exercise its jurisdiction as a fact-finding authority. We find that the CESTAT has recorded only an abrupt finding without discussing the issue and without mentioning any reason for their conclusion.”

Holding that the ‘cryptic order’ was not sustainable, the Court remitted the matter back to CESTAT for such fresh consideration in accordance with law. [Commissioner (GST) v. Rashtriya Chemicals and Fertilizers Ltd., 2019 SCC OnLine Bom 666, dated 18-04-2019]

Case BriefsHigh Courts

Bombay High Court: S.C. Dharamadhikari and M.S. Karnik, JJ., dismissed an appeal filed against the order passed by Central Excise and Service Tax Appellate Tribunal, Mumbai (West Zone Bench) whereby it had allowed the respondent’s appeal against the order of the Commissioner of Central Excise and Service Tax confirming the demand of service tax of Rs 10,21,11,359.

The respondent had provided services for construction and upgradation of facilities at Shiv Chatrapati Sports Complex, Pune. According to the appellant, the services were covered under the category of “commercial or industrial services” defined under Section 65 (20 b) of the Finance Act, 1994 (prior to amendment vide Act 14 of 2010) as the said stadium was used for commercial purposes. A demand for payment of service tax was raised on the respondent but no payment was made. Representations were exchanged, and by order dated 15-9-2011, the demand of service tax was confirmed. As against this, the respondent approached CESTAT and the said order dated 15-9-2011 was set aside. Aggrieved thereby, the appellant filed the present appeal.

It was not even the case of the appellant that the stadium was exclusively used for commercial purpose. The relevant agreement itself permitted the Committee to use 1/3rd of the total area for commercial purpose. The question before the High Court was whether the user of stadium area to the extent of 1/3rd of the total area for a commercial purpose would tantamount to “commercial or industrial construction service”?

Perusing Section 65 (25-b), the Court observed, “The language employed in the definition clause is clear and unambiguous. The plain meaning as can be understood from the definition clause, more particularly, the clarification contained in clauses (i), (ii), (iii) is that the construction ipso facto is not leviable to service tax, but it is only when it is used, or to be used, primarily for “commerce” or “industry” or work intended for “commerce” or “industry” that service tax can be levied. Thus, it is only that construction which is to be used or primarily to be used for commerce that is subject to levy of service tax.”

Finding that in the present case, the dominant user of the stadium was non-commercial, the Court held that no service tax was attracted. Therefore, upholding the impugned order, the court dismissed the present appeals. [CCE v. B.J. Shirke Construction Technology (P) Ltd., 2019 SCC OnLine Bom 477, decided on 15-03-2019]

Case BriefsSupreme Court

Supreme Court: Hearing the appeal where the question was that whether the appellant was eligible to clear goods up to a certain specified limit after obtaining due permission from the Development Commissioner in terms of Export Import (EXIM),  the bench comprising of Dipak Misra and Shiva Kirti Singh, JJ held that the assessee shall be liable to pay the excise duty as per Section 3(1) of the Central Excise Act, 1944. In the present case, Commissioner of Central Excise (CCE) had seized the nylon covered yarn, confirmed the central excise duty and imposed penalty. The appellant appealed before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and later to a larger bench against the order of CCE who both reiterated the same view and said that the decision taken by the adjudicating authority was adverse. The case was taken to the Division Bench of the Gujarat High Court which later quashed the order of CESTAT and directed them to hear all the appeals again.

Considering the ruling of the Court in SIV Industries ltd v. CCE & Customs (2000) 3 SCC 367 and CCE v. NCC Blue Water Product ltd., (2010) 12 SCC 761, the Court held that it is clear that the expression “allowed to be sold in India” used in proviso to Section 3(1) of the Act would be applicable only to sales made in Domestic Tariff Area of the production by 100% EOUs, which are allowed to be sold into India as per the provisions of the Exim Policy. The Court, hence, said that the Tribunal had taken an erroneous approach while relying upon the above-mentioned rulings and upheld the decision of the High Court.  [Sarla Performance Fibers Limited v. Commissioner of Central Excise, Surat-II, 2016 SCC OnLine SC 593  decided on 03.06.2016]