01 January 0001

Tax Amicus: February 2016


Determining character of ‘manufacture’-

Since the age old excise concepts like those on taxable event of ‘manufacture’ continue to evolve even today, the article in this issue attempts to highlight the concept or test of manufacture in the light of recent key decisions of the Supreme Court and seeks to give an overview of the possible outcomes. Discussing definition of ‘manufacture’ vis-à-vis marketability; essential character test & the two-fold test, as propounded through various decisions of the Supreme Court; landmark ruling in the case of Servo-Med; and other recent decisions of the Apex Court, the article concludes that whenever a new set of facts arise, it tends to upset the settled position and hence the issue of excisability has been scrutinized over and over again in innumerable decisions till date. The authors believe that similar debates will arise when GST is implemented as the taxable event of ‘manufacture’ would be replaced by ‘supply’ and various shades of interpretation of ‘supply’ will be interesting to watch.


Central Excise


  • Annual Information Return to be furnished by Officers of RBI and State Electricity Board — Rules notified for this purpose
  • Sunset clause introduced in area based exemption notifications relating to units in Jammu & Kashmir.

Ratio decidendi

  • Valuation — Rule 8 is not applicable when goods are not utilized for further manufacture — CESTAT Mumbai
  • Valuation — Cosmetic products for use in salons are to be assessed under Section 4A — CESTAT Mumbai
  • Payment of duty using wrong assessee code is not invalid — Gujarat High Court
  • Exemption available to goods cleared to the international competitive bidder for use in the mega power project — CESTAT Chennai
  • Penalty under Central Excise Rules is not imposable for non-payment of Automobile Cess — Jharkhand High Court
  • Base frames for pumps are not classifiable as part of pump — CESTAT Mumbai



Notification & Circular

  • All Industry Rates of Drawback revised for certain products

Ratio decidendi

  • Valuation — Copies of foreign documents, to be admissible as evidence, are required to be tested and signed by the foreign customs authorities — CESTAT Mumbai
  • Valuation — Second time enhancement of value, after value enhanced once based on contemporaneous imports, permissible if undervaluation established — CESTAT Mumbai
  • SAD refund cannot be rejected for want of jurisdiction — Madras High Court
  • Unjust enrichment — CA certificate is a good evidence — CESTAT Bangalore
  • Simultaneous penalty on partner and partnership firm, can be imposed under certain circumstances — Larger Bench of the Bombay High Court


Service Tax


  • Rebate of service tax paid on services used beyond factory of production or any other premises of manufacture, admissible in case of export of services
  • Cenvat Credit Rules amended — Sales promotion to include services by way of sale of dutiable goods on commission basis
  • Swachh Bharat Cess — Cenvat credit cannot be utilised for payment of SBC, and exemption on services received by a SEZ Unit or developer of SEZ

Ratio decidendi

  • Cenvat credit admissible on services used before registration — CESTAT Mumbai
  • Laying of pipelines not taxable under Erection, Commissioning and Installation service prior to 2005 — Madras High Court
  • No demand if service rendered as intermediary to postal department — CESTAT Mumbai observes that revenue neutrality principle applicable
  • Use of logo under a joint venture contract not necessarily amounts to franchise service — CESTAT Mumbai
  • Maintenance of own equipment during BOOT period not exigible to Service tax — CESTAT Mumbai
  • Refund on exports — Place where foreign exchange is realized does not decide jurisdiction for refund claim — CESTAT Chennai


Value Added Tax (VAT)


  • MP VAT — Section 9-AA has been introduced
  • Rajasthan VAT — Rate of tax increased for specified goods from 5% to 5.5%
  • Haryana VAT — Ordinance promulgated to enable Government to notify Amnesty Scheme for interest, penalty or any other dues

Ratio decidendi

  • Pure labour contract not covered under Works Contract — Delhi High Court


February, 2016/Issue-56 February, 2016/Issue-56

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