Synopsis of Significant Case Laws [Upto 30 STR Part 1] |
Contents
I.
GENERAL PRINCIPLES
1
Time of Supply and
rate of service tax (Prior to 1.4.2011
i.e. Point of Taxation Rules, 2011)
1.1
In
respect of hire purchase contracts, the taxable event occurs upon entering into
the contract. Therefore, the rate of service tax will be the rate prevailing on
the date on which the contract is entered into. It is not a case where there is
a continuous service during the term of the contract when the installments are
paid. The payment of installments is only the obligation of the hirer. Hence
contracts entered into prior to 14.5.2003 would be exigible to service tax @5%
notwithstanding the contract continued post 14.5.2003 when the rate became 8%.
[Art Leasing Ltd. vs. CCE (2007) 8
STR 162 (Tri. – Bang.). See also L.F.C.
Hire Purchase Company Ltd. v. CCE & C (2008) 12 STR 320 (Tri. – Bang.)]
1.2
For
determination of service tax liability, the relevant date is the date on which
service is received by the service recipient and not the date on which payment
is received by the service provider. [Lumax Samlip Industries v. CCE (2007)
8 STT 82 (CESTAT-Chennai) - Based on law prior to 16.6.2005]
1.3
The
rate of tax applicable is the rate prevailing on the date of rendering of services
and not the rate prevailing on the date of billing. [Reliance Industries
Ltd. vs. CCE (2008) 10 STR 243 (Tri-Ahmd.) affirmed in CCE vs. Reliance Industries Ltd. (2010)
19 STR 807 (Guj.)]
1.4
In
a case where insurance premium was received in advance and policy was issued
and thereafter the rate of service tax had increased the Tribunal held the
enhanced rate of Service tax is not applicable to the policies, which were
issued prior to the enhancement of the rate. [Bajaj Allianz General Insurance Co. Ltd. v. CCE (2009) 13 STR 259
(Tri.- Mumbai)].
1.5
Where
the appellant entered into an agreement with a foreign company in 19.11.90
(later modified on 19.5.2004) whereby the foreign company supplied know-how in
consideration for royalty to be paid for a specific period, the Tribunal held
that – (i) the services of supply of know-how being a one-time affair were
provided in 1990, much before the introduction of service tax; and (ii) the
services were not provided continuously inasmuch as no continuous information was
supplied by the foreign company and the mode of payment whether in lump or
periodic is not relevant. Accordingly, the Tribunal set aside the demand of
service tax on the royalty paid [Modi-Mundipharma
P. Ltd. v. CCE (2009) 15 STR 713 (Tri-Del.)].
1.6
Where the construction services were provided prior
to 1.3.2006 though payment for the same was received after that date, it was
held that the appellant was entitled to abatement under notification no.
18/2005 dated 7.6.2005 which provided for 67% abatement without the bar on
availment of cenvat credit relating to input services, notwithstanding that the
said notification was rescinded by notification no. 1/2006 dated 1.3.2006
(and prevalent when payment was received) which imposed a bar on taking cenvat
credit for availing abatement [Santosh
Associates v. CST (2009) 16 STR 87 (Tri-Ahmd.)].
1.7
Advance
fee received by the assessee, a commercial training or coaching centre, prior
to 01.07.03 (date on which its services were brought into the tax net), for the
coaching to be given from 01.07.03 to 31.03.04, is taxable since the taxable
event was provision of service and not receipt of fees. Hence, tax was held to be payable by 5th
day immediately following the month in which services are rendered. [CCE vs.
1.8
The assessee, a
commercial training and coaching centre, received an advance prior to
10.9.2004, on which date the rate of tax was increased from 8% to 10%, but paid
service tax on the entire advance
@ 8%. The revenue
contended that tax @ 10% would be applicable on the advance to the extent it
pertains to services provided post 10.9.2004. Noting that there are no
provisions that provide for the relevant date for determining the rate of tax
(which were introduced only on 1.4.11) and the fact that service tax is payable
only on receipt of payment, the Tribunal held that “rate applicable at the time
of receipt of value of service will apply in a case where the assessee chose to
pay tax on the advance amount received”. [Vigyan
Gurukul v. CCE (2012) 25 STR 459 (Tri. – Del.)]
2
Point of Taxation
2.1
Prior
to 1.4.2012, the point of taxation (‘POT’) in case of the “Chartered
Accountant’s Service” (‘CA’s Service’) was prescribed as the date of receipt of
payment u/r.7(c) of the Point of Taxation Rules, 2011 (‘POT Rules’) and hence
service tax was payable at the rate applicable on the date of receipt. However,
pursuant to the Budget, 2012 (w.e.f. 1.4.2012) the rate of tax was increased
changed to 12% from 10% and the erstwhile rule 7 of POT Rule was made
inapplicable to the CA’s service w.e.f. 1.4.2012. An issue arose in case of a
CA who had provided services and issued invoice invoices prior to 1.4.2012 but
received the payment post 1.4.2012 – what could be the rate of service tax. To
resolve this issue, the Board issued 2 circulars nos.154/5/2012-S.T. dated
28.3.2012 and 158/9/2012-S.T. dated 8.5.2012 and clarified that the POT in the
present situation would be governed by the erstwhile rule 7(c) of the POT rules
and service tax @ 12% would be payable on payment received post 1.4.2012. In a
writ challenging the validity of these circulars, the High Court struck down
the said circulars and observed as follows:
(i)
Both
the circulars were erroneous and contrary to the law since they referred to the
erstwhile rule 7(c) of the POT Rules which did not exist at the time of receipt
of payment i.e. post 1.4.2012;
(ii)
The
present issue was squarely covered by Rule 4 (a) (ii) of the POT rules which
prescribes the POT of service in case of changes in the rate of tax as the date
of issuance of invoice.
Hence,
the rate of service tax applicable to the present case was held to be 10% i.e.
the rate of service tax applicable as on the date of issuance of invoice [Delhi Chartered Accountants Society (REGD.)
vs. UOI (2013) 29 STR 461 (Del.)].
N.B: The survival of repealed Rule 7 in view of s. 38A(c)
of the Central Excise Act, 1944 made applicable to service tax vide s. 83, as
well as erstwhile Rule 5B of the Service Tax Rules, 1994 was not brought to the
notice / considered by the High Court.
3
Sovereign activity
not subject to service tax
3.1
Sovereign
activities of inspection and certification of electrical installations done by
Electrical Inspectorate, Government of Karnataka, a State Government
Department, in terms of the Electricity Act is not subject to service tax being
a statutory function. [Electrical
Inspectorate, Government of Karnataka v. CST (2008) 9 STR 494 (Tri-Bang.)].
3.2
The
appellant company provided services for the issue of Electors Photo Identity
Cards. The Revenue contended that such an activity is liable for service tax
under the category of ‘Photography Services’. The Tribunal dismissed the
contention and observed as follows:
(i)
Notification No.
141/52/95-CX, dated 14.8.1995 and 195/20/CX, dated 3.4.1996 clarified that
Photo Identity Cards are required to be treated as “goods” and hence does not
attract service tax;
(ii)
Issue of Photo
Identity Cards is a sovereign duty under the Constitution of India, to be
treated as an activity of the State and not a service.
[CCCE vs. CMC Ltd. (2007) 7 STR 702 (Tri.
– Bang.) relying on CCE vs. Ankit
Consultancy Ltd. (2007) 6 STR 101 (T) and Circular no. 89/7/2006-ST dated
8.12.2006 – referred. See also CCCE v. C.S.Software Enterprises Ltd.
(2008) 10 STR 367 (Tri-Bang); UTI Technology Services Ltd.
vs. CST
(2012) 26 STR 147 (Tri. -Mumbai) where the assessee was engaged in issuing PAN
Cards on behalf of Income tax department]
4
Services rendered
to self not liable
4.1
Services
provided by one part of the company to another part of the same company is not
liable for service tax as no service is being rendered by any “other person”. [Precot Mills Ltd v. CCE (2006) 2 STR 495
(Tri – Bang); Indian Oil Corporation Ltd.
vs. CCE (2007) 8 STR 527 (Tri-Kolkatta) see also
Chemplast Sanmar
Ltd. vs. CCE (2010) 19 STR 424 (Tri. –
Che.)].
4.2
No
service tax is payable on services rendered by one constituent unit of an HUF
to another constituent unit since they are part of the HUF which is one legal
entity [CCE vs Universal Travels 2010 (18) STR 157 (Tri- Bang.)].
4.3
Where
the subsidiary company (IBP) merged with
its Holding company (IOCL) with retrospective effect from 1.4.04 pursuant to the order of Ministry of Petroleum dated
30.4.07 which was approved by the Registrar of Companies on 2.5.2007, the
Tribunal held that the effect of the order is that from 1.4.04, IBP ceased to
exist as a separate company and during the period between 1.4.04 to 30.4.07 any
transaction between IBP and IOCL could not be treated as between a service
provider and service recipient, and accordingly IOCL was entitled to claim
refund of tax paid on storage and warehousing services provided to IBP during
the period March 2006 – February 2007. [CCE
v. IOC Ltd. (2011) 23 STR 625 (Tri- Chennai)].
4.4
For
a service to be liable for service tax existence of two distinct parties’ viz.
the service provider and service recipient is required. In absence of the same,
it cannot be said that there has been any provision of service by one to
another. Thus where the revenue had sought to demand service tax from the
member’s club in respect of the mandap keeper’s service provided by the club to
its members the High Court held that the same would not be liable for service
tax based on the doctrine of mutuality. The High Court inter alia relied on the judgment of Supreme in Joint Commercial Tax Officer v. The Young
Men’s Indian Association 1970 (1) SCC 462 where the Supreme Court in the
context of Madras General Sales Tax Act, 1959 held that inspite of specific
inclusion of the club in the definition of dealer and the term “sale” being
defined to include any transfer of property by club to its members, in absence
of two there cannot be transaction of transfer of property [Ranchi Club Limited v. CCE (2012) 26 STR
401 (Jhar.)].
4.5
In case of amalgamation of companies, the amalgamation takes effect not
from the date the order sanctioning the scheme is filed with the ROC (popularly
called “effective date”) but would relate back to the ‘transfer date’ as
specified in the scheme of amalgamation (popularly called “appointed date”).
Thus, where the appointed date was 1.4.04 for amalgamating A into B, and the
order of the High Court sanctioning the scheme was filed with the ROC on
23.3.2005 (effective date), it was held that the services provided by the
amalgamated company (B) to the amalgamating company (A) post 1.4.2004 would not
be liable for service tax since the amalgamated company (B) would be deemed to
have provided the services to itself [CST
vs. ITC Hotels Ltd. (2012) 27 STR 145 (Tri. – Del.)].
5.1
The
appellant an advertising agency while providing advertising services also
created original concept, designed advertising material, brochures, annual report
etc. and raised an invoice on the customers giving break up of service element
and material. The appellant paid sales
tax on value of materials and service tax on design and work charges. The sales
tax department took a view that sales tax is payable on the entire amount
charged from the customer including the amount of design and concept charges
since the same went into the creation of the product which was ultimately sold.
The Supreme Court held that the contract was a composite contract [as distinguished
from an indivisible contract] for services and sale and accordingly sales tax
would not be payable on the value of entire contract but only on the material
component. [Imagic Creative Pvt. Ltd. vs.
CCT (2008) 9 STR 337 (SC)].
6
No service tax on
sub-contracted services prior to 23.8.2007
6.1
Where
the appellant provided services as a sub-contractor to the main-contractor who
in turn provided services to the client and paid the entire amount of service
tax (including the charges of the sub-contractor), no service tax is payable by
the sub-contractor on his services to
the main contractor prior to the issue of CBEC Circular no 96 dated 23.8.2007. [Sunil Hi-Tech Engineers Ltd v CCE 2010(17)
STR 121 (Tri-Mum); See also CCE vs.
Shivhare Roadlines (2009) 16
STR 335 (Tri-Delhi); Urvi
Construction vs. CST (2010) 17 STR
302 (Tri-Ahmd.)]
7
Receipt of revenue
share not liable for service tax
7.1.
Where
CONCOR paid the appellant, its agreed revenue share in a transaction, and had
discharged the service tax liability on the gross amount, the Tribunal held
that service tax liability has been discharged by CONCOR and hence appellant
would not be liable. [
7.2.
In
this case, the Court held the following services of Cochin International
Airport Ltd (CIAL) as not liable:
(i) Air India rendered ground handling
services to all airlines, collected charges from them, paid service tax on the
said charges and paid a royalty to CIAL, which was held not liable since CIAL
did not render any service to Air India and Air India had paid service tax on
the gross collections of which the royalty was a part;
(ii) Rent or License charges for providing
space in the airport to set up shops is not for any service rendered by CIAL and
hence is not liable.
(iii) Collections for disposal of garbage
represents value of materials sold and not for any service rendered and hence
not liable for service tax.
[CCE v. Cochin
International Airport Ltd, 2011 (24) S.T.R. 20 (Ker)]
8
SEZ Exemption
8.1
The
appellants, provided containers to units located in SEZ for the purpose of
carrying inputs into the SEZ and finished goods out of the SEZ, and had claimed
exemption from payment of service tax under Notification No. 4/2004-ST dated
31.3.2004 which exempts taxable services provided to a unit of the SEZ “for
consumption of services within the SEZ”. The revenue disallowed the claim
contending that it is not ‘consumed within the SEZ’. The Tribunal held that the
same would be exempt since:
(i) A harmonious reading of the expressions
“for consumption of services within the special economic zone” and “taxable
services provided to a unit of the SEZ” mentioned in the said notification,
would entitle the appellants to claim exemption;
(ii) In any case, exemption from payment of
service tax on services rendered to a unit in the SEZ for the authorized
operations is available under Section 26 of Special Economic Zones Act, 2005
and Rule 31 of Special Economic Zone Rules, 2006 without any restriction
regarding the consumption of services
[Norasia Container Lines v. CCE (2011) 23
STR 295 (Tri-Del)].
9
Benefit of Exemption
9.1
Benefit
of exemption can be claimed at any stage of the appeal proceedings, if the same
was available to the assessee. [Sahni
Video Movies v. CCE (2011) 23 STR 299 (Tri- Del)].
9.2
Where
the appellant claimed the benefit of an exemption at the time of filing a reply
to the SCN and not prior to that, the Tribunal held that if the exemption is
otherwise available, it cannot be rejected on the sole ground that the same is
claimed belatedly. [CCE v. Suresh C. Nayi
(2011) 24 STR 123]
10
Small Service
Providers
10.1
Where
the appellant was selling and marketing goods of his client as consignment
agent and provided business auxiliary services to him, the Tribunal held that
it cannot be considered that the appellant is providing taxable services under
a brand name of another person and hence is eligible to avail the benefit of
small service provider exemption [Fashion
Square vs. CCE (2011) 24 STR 421 (Tri-Del)].
11
Territorial
Jurisdiction of departmental officers
11.1
The Commissioner, in
whose jurisdiction the registered office of the service provider is located is
the competent authority to initiate proceedings in relation to
service tax and has jurisdiction over the activities of the said service
provider irrespective of the place where service is provided [CCE vs. Helios Food Additives Pvt. Ltd.
(2011) 24 S.T.R. 721 (Tri.-Mumbai)].
11.2
Where the assessee, a
manufacturer at Ratnagiri, was registered for service
tax in Mumbai and provided services in Mumbai,
it was held that the Commissioner in whose jurisdiction the service tax
registered office of the assessee is located shall have the
jurisdiction over him irrespective of the place of rendering of service and
hence the SCN issued by Asst. CCE, Ratnagiri demanding service tax is not
sustainable in law as being without jurisdiction [CCE v. Helios Food Additives P. Ltd. (2012) 25 STR 107 (Tri-Mum)].
12
Circular
12.1
The circulars issued by CBEC shall come into effect from the date it is
issued and not from the date when it is notified by way of public notice [CCE v. Kedia Vanaspathi Ltd. (2012) 28
STR 308 (A.P.)].
13
Sale vs. Service
13.1
Supply of imported
as well as indigenous designs and drawings which were assessed as goods liable
to customs duty / excise duty, cannot be made liable to service tax [Mitsui & Co. Ltd. vs. CCST (2012) 28
STR 491 (Tri. – Kolkata)].
14
No service No service
tax
14.1
Where on facts it
was found that the appellant had neither provided any service nor received any
consideration, no tax was payable merely because of entries passed in its books
of accounts. Further, the Notification No. 19/2008 which deems debits / credits
in the books as receipt of consideration is not retrospective and hence not
applicable [Futura Polyester Ltd. vs. CCE (2013) 29 STR 371
(Tri-Chennai)]
II. CLASSIFICATION
15.1
Where the
department had registered the appellants in respect of its activity under a
particular category of service, the levy service tax in respect of same
activities for prior periods under any other category of service was not
justifiable. [Coromandel Fertilizers Ltd.
vs. CCE (2009) 13 STR 542 (Tri-Chennai)]
15.2
Where the appellant
rendered cash management services which during the impugned period was
specifically excluded under the category of Banking and Other Financial
Services, the Tribunal held that the services could not be taxed under the
category of Business Auxiliary Services. [Federal
Bank v. CCE (2009) 15 STR 279 (Tri. - Bang.)]
15.3
The appellant, a
blood collection center, draws / collects samples of blood and forwards the
sample after certain processing (e.g. serum separation) to test laboratories
who do the testing. On facts, the Tribunal held –
(i)
The above service
is a service in relation to technical testing and analysis;
(ii)
Testing in relation
to human being is specifically excluded from this service and hence this
service is not liable for service tax;
(iii)
These services are
not in the nature or same genre as any of the services in the definition of
‘business auxiliary services’
(iv)
It is well settled
that once there is a specific entry for an item in the tax code, the same
cannot be taken out of that specific entry and taxed under any other entry.
What is specifically kept out of a levy by the legislature cannot be subjected
to tax by the revenue administration under another entry.
(v)
If the legislature
had any intention to tax the testing or analysis in relation to human beings or
animal at a different rate than other technical testing and analysis service,
the legislature would have separately specified the levy. In the present case,
clearly the intention of the legislature is not to impose any levy at all on
testing or analysis of human beings or animals. Hence the said services cannot
be taxed under ‘business auxiliary services’.
[Dr.
Lal Path Lab Pvt. Ltd. v CCE (2006) 4 STR 527 (Tri-Del.) affirmed in CCE v.
Dr. Lal Path Lab P. Ltd. (2007) 8 STR
337 (P&H); CCE v. Patient Service
Centre (2008) 9 STR 229 (P&H)]
III. VALUATION
16.1
Where an agreement
is a composite one viz., consisting of (i) transfer of technical know under a
licence (which is non-taxable); and (ii) provision of technical assistance in
implementation and use of the technical know how in India (which is taxable)
the consideration would have to be bifurcated for the purpose of valuation and
only that which is related to the taxable service would be liable [Indian Farmers Fertilizer Co-op. Ltd. v. CCE
(2007) 5 STR 281 (Tri-Del.)].
16.2
When service tax is
not separately collected from the clients, gross amount collected is to be
considered as inclusive of service tax. The Explanation inserted to this effect
in Section 67 of Chapter V of Finance Act, 1994 on 10.9.2004 only clarifies the
general principle. [Gem Star Enterprises
Pvt. Ltd. v. CCE (2007) 7 STR 342 (Tri.-Bang.); See also Abirami Associates vs. CCE (2009) 14 STR
801 (Tri-Chennai);
P. Jani &
16.3
Where the consideration for services was collected before
the imposition of the levy in respect of services rendered after its
imposition, the consideration collected can be considered to be cum-tax and
computation and payment of tax on that basis is in order [CCE vs. Daswani
Classess (2008) 11 STR 189 (Tri. – Del.)]
16.4
Unless the invoice
mentions that invoice amount is inclusive of service tax it cannot be treated
as cum-service tax price. [Shakti Motors
vs. CCE (2008) 12 STR 710 (Tri. – Ahmd)]
16.5
Where the amounts invoiced on the clients did not include service tax,
it was held that the demand must be computed after giving cum-tax benefit [Mitul Engineering Services v. CCE (2011)
24 STR 323 (Tri-Del.)].
16.6
Where the assessee,
a telecommunications company, sold pre-paid SIM cards to dealers and
distributors at prices below the MRP and paid service tax only on the amount
received, the Tribunal held that although the service rendered by the assessee
by way of sale of SIM cards was ultimately received by the consumers /
subscribers the value of taxable service is the gross amount charged which is
the amount received by them from dealers / distributors and not the MRP value [BPL
Mobile Cellular Ltd. v. CCE (2007) 82 RLT 920 (CESTAT - Che.)].
16.7
In this case the
Supreme Court held –
(i) The amount received by the cellular telephone
company from its subscribers towards SIM card forms part of the taxable value
of services for levy of service tax since –
(a) they are part and parcel of the services
provided and the dominant position of the transaction is to provide services
and not to sell the material i.e. SIM card as goods independent from services
provided which on its own but without the service would hardly have any value
at all;
(b) the value of SIM card forms part of the
activation charges as no activation is possible without a valid functioning of
SIM card;
(c) there is no element of sale (of SIM card)
involved in the transaction.
(ii) Even if sales tax is wrongly remitted on the
value of SIM card it would not absolve the parties from paying service tax on
the same if service tax is otherwise found payable and a liability accrues on
the assessee.
[Idea Mobile Communication Ltd vs. CCE
(2011) 23 STR 433 (SC)]
16.8
On a question,
whether the cost of goods and materials consumed in the course of rendering
photography services can be excluded for the purpose of service tax, the Larger
Bench of the Tribunal held as follows:
(i) For the purpose of Section 67 of the Finance
Act, 1994, the value of service in relation to photography would be the gross
amount charged including cost of goods and material used and consumed in the
course of rendering such service. The cost of unexposed film etc. would stand
excluded in terms Explanation to Section 67 if ‘sold’ to the client.
(ii) The value of other goods and material, if
‘sold’ separately would be excluded under exemption Notification No. 12/2003
and the term ‘sold’ appearing there under has to be interpreted using the
definition of ‘sale’ in the Central Excise Act, 1944 and not as per the meaning
of ‘deemed sale’ under Article 366(29A)(b) of the Constitution.
The Tribunal also
observed that on the aforesaid analysis of the legal position it can be said
that the determination of value of taxable service of photography depends on
the facts and circumstances of each case as the Finance Act, 1994 does not
intend taxation of goods and materials sold in the course of providing all the
taxable services. [Aggarwal Colour
Advance Photo System v. CCE (2011) 23 STR 608 (Tri-LB.)]
16.9
Service tax is not
leviable for the free service rendered by the authorised agency in respect of
the cars sold by them. [AVG Motors Ltd.
vs. CCE 2008 (10) STR 20 (Tri. – Bang.) see also Indus Motor Company vs. CCE (2008) 9 STR 18 (Tri. – Bang.); ASL Motors Pvt. Ltd. vs. CCE&ST
(2008) 9 STR 356 (Tri. – Kol.)].
16.10
Income-tax deducted
at source under the provisions of Income tax Act would form part of the gross
amount charged for the purpose of charging service tax. [CCE vs. Louis Berger International Inc. (2009) 13 STR 381
(Tri-Del.)]
16.11
Wharfage charges
collected by the Custom House Agents (CHA) and paid to the port being a
reimbursable expense is not liable for service tax [Alvares & Thomas vs. CCE (2009) 13 STR 516 (Tri-Bang.)]
16.12
Prior to 18.4.2006, expenses reimbursed by a service recipients to the service provider
would be excludible from the value of taxable service only if the service
recipient had a legal or contractual obligation to incur the expenses which the
service provider incurred on behalf of the service recipient. Cost of input
services and inputs used for providing services cannot be treated as
reimbursable costs and excluded from the value of taxable service [Sri Bhagavathy Traders v. CCE (2011) 24
STR 90 (Tri-LB)].
16.13
Where the assessee under a composite contract
provided the services of a consignment agent including transportation of
materials, the Tribunal observed that the entire value received would be liable
as clearing and forwarding agency services and no deduction in respect of
transportation charges would be allowed. [CCE
vs. Metal Engineering & Forging Co. (2009) 14 STR 16 (Tri-Del.)]
16.14
In this case the Tribunal held -
(i)
Spare parts etc., used in the course of maintenance under any Annual
maintenance contract are to be considered as ‘sold’ to the customer and the
exemption in respect of value of goods and materials sold as provided in
Notification No. 12/2003 dated 20.6.2003 is allowable
(ii)
Adoption of 70% of the gross value as representing material component
based on state VAT law is not arbitrary and is permissible.
[Wipro GE Medical Systems Pvt. Ltd.
vs. CST (2009) 14 STR 43 (Tri-Bang.); See
also PLA
16.15
The appellant, a
consignment agent, under a single contract with its principal, received goods
from the principal’s factory, warehoused the same, arranged dispatch of the
goods and invoiced the same on behalf of the principal. It also performed
cutting, bending, straightening during the warehousing. It charged the client
one single bill which included the cost of transportation, loading and
unloading, cost of cutting, bending, etc. On the question of exclusion of
transportation cost, loading and unloading cost and cost of cutting, bending,
etc. for the purpose of charging service tax, the Tribunal held-
(i)
since there is one
contract and the total consideration is also charged in one bill, the cost of
transportation and loading or unloading cannot be excluded;
(ii)
since the activities of cutting, bending,
straightening cannot be said to be service provided by consignment agent, these
charges are not to be included for charging service tax.
[Agra Steel Corporation Vs. CCE (2009) 15 STR 202 (Tri.- Del.)]
16.16
Where the appellant
provided construction services to NTPC for the period 10.9.2004 – 31.3.2006 and
paid sales tax on the material component and service tax on the labour
component, the Tribunal held extended the benefit of notification no. 12/2003
dated 20.6.2003 which exempts value of goods ‘sold’ in the execution of taxable
service and dismissed the revenue’s contention that there was no sale of goods
which were used in the works contract.
[Sunil
Hi-Tech Engineers Ltd v CCE 2010(17) STR 121 (Tri-Mum)]
16.17
In-flight catering
services is liable for service tax under the category of ‘outdoor catering
services’ and where VAT has been paid on the value of foods and beverages sold
the same cannot be included within the taxable value for levy of service tax. [Grand Ashok vs. CST (2009) 15 STR 344
(Tri-Bang.)].
16.18
Where the appellant has already paid VAT on the
material component of the construction contract which as per the state VAT law
was deemed as 70% and on the balance 30% paid service tax, the Tribunal held
that the Revenue cannot collect service tax on the material component since it
would violate the principles of fiscal federalism and mutuality of service tax
and sales adopted in the Constitution. [Sobha
Developers Ltd. v. CCE & ST (2010) 19 STR 75 (Tri. – Bang.)]
16.19
The optional hostel
and mess charges charged separately and collected from the students who are interested
in availing such facility by an assessee, a commercial coaching and training
centre, is not includable in gross receipts for levy of service tax under
commercial training or coaching services. [Vikas
Coaching Centre vs. CCE & ST (2011) 22 STR 650 (Tri. – Bang.)]
16.20
Where the appellant
providing Commercial Training and Coaching services recovered the cost of books
purchased from another company and supplied to the students in addition to the
coaching fee, the Tribunal held that the cost of such books is excludible from
the taxable value on the basis of Notification No. 12/2003-ST dated 20th June,
2003 which seeks to exempt value of goods/material sold during the course of
provision of taxable service. The Tribunal also held that the exemption cannot
be restricted only to ‘standard textbooks’ as was clarified by CBEC in Circular
no. 59/8/2003 dated 20.06.2003 since the notification has not used expression
“standard textbooks” [Pinnacle vs. CCE
(2011) 24 STR 453 (Tri-Del); See also
Chate Coaching Classes Pvt Ltd vs. CCE (2013)
29 STR 138 (Tri- Mum)].
16.21
Retreading of
rubber tyres is an activity liable for service tax under the category of
‘Management, Maintenance and Repair’ services. Further the value of materials
like tread rubber, patches, bonding gum consumed in retreading of tyres cannot
be said to be sold in the course of providing retreading services and
accordingly the value thereof cannot be claimed as deduction from the value of
taxable services under Notification No. 12/2003 – ST., dated 20.6.2003. [Safety Retreading Company (P) Ltd. vs. CCE (2012)
26 STR 225 (Tri-LB)]
16.22
An outdoor catering contract for supply
of food and beverages to airlines and loading the food in the aircraft is a
composite contract which falls under sub-clause (f) of clause 29A of Article
366 of the Constitution of India consisting of–
(i)
sale of food articles which are liable
for sales tax; and
(ii)
the service of bringing the food
articles to a place designated by client which is liable for service tax.
No service tax would be payable on the value of food
and beverages [CCE v. LSG Sky Chef India Pvt. Ltd. (2012)
27 STR 5 (Kar.)].
16.23
CMC charges levied by the computer centre for filing Bill of entry and
shipping bills electronically would be includable in the taxable value of
services provided by the Custom House Agent (CHA) even though recovered at
actuals from the customer since the charges are incurred by the CHA in
discharging their primary responsibility as a CHA [Pioneer Services vs. CST, Chennai (2012) 27 STR 285 (Tri. – Chennai)].
16.24
Where
the appellant had a comprehensive maintenance contract (including supply of
spares) for a single consideration, but the spares were directly imported from
abroad by the service recipient, the Tribunal held that there was a ‘sale’ of
those parts and allowed the deduction of the assessable value of the parts from
the maintenance contract value under notification no. 12/2003 dated 20.6.2003 [CCE vs. GE Nuova Pignone (2012) 27 STR
380 (Tri. – Ahmd.)].
16.25
Where the price to be paid to the foreign service provider was stated in
the contract to be ‘net of income tax’
the value of taxable service was held to include the income tax [T.V.S. Motor Co. Ltd. vs. CCE, Chennai – III
(2012) 28 STR 150 (Tri. – Chennai)].
16.26
The assessee, a
consulting engineer, charged his ‘fee’ and ‘out-of-pocket expense’ (OPE) such
as air travel, hotel stay etc. separately and paid service tax only on his
‘fee’ and not on the OPE. When the revenue sought to initiate proceeding for
recovery of service tax on out-of-pocket expenses, the High Court in a writ
petition considering provisions of section 66 and 67 of the Act and the
Valuation Rules held as follows:
(i)
The
relevant provisions for valuation of taxable service [i.e. s. 66 read with s.
67(1)(i) of the Act] envisage that the value of taxable service is nothing more
or nothing less than the “consideration” paid as quid pro quo for the service.
(ii)
Rule
5(1) of the Valuation Rules which provides for including any expenditure or
costs incurred by the service provider in the course of providing the taxable
service in the value of the taxable service has gone beyond the charging sections (s. 66 r.w.s. s. 67) under the
Act which is not permissible. Hence the said rule is unconstitutional.
[Intercontinental Consultants & Technocrats Pvt. Ltd. vs. UOI
(2013) 29 STR 9 (Del.)].
16.27
“Turnover charges’,
stamp duty, charges, SEBI fees, DEMAT charges, charged by a stockbroker to a
client were not in the nature of “commission or brokerage” and hence was not liable for service tax for the
period prior to 2004 [LSE Securities Ltd
vs. CCE (2013) 29 STR 591 (Tri-
Del)].
17.1
Where the
appellants provided commercial or industrial construction services and claimed
abatement (67%) under notification no. 1/2006 dated 1.3.2006, the High Court
held that for the purposes of computing the abatement, the term “gross amount”
charged in the Explanation to the said notification shall not include the value
of free material supplied by the clients of the appellants. [ERA Infra Engineering Ltd. vs. U.O.I
(2008) 11 STR 3 (Del.); See also CEMEX Engineers vs. CST (2010) 17 STR 534 (Tri-Bang.)].
18
Valuation & abatement
18.1
The
assessee was engaged in laying of pipelines and registered under ‘Commercial or Industrial construction services’. The assessee claimed abatement of 67% of the “gross
amount charged” under notification 15/2004 dated 10.9.2004 and 1/2006 dated
1.3.2006 and paid service tax on the 33% of the “gross amount charged” without
including the value of pipes provided by the customer in the ‘gross amount
charged’. The Tribunal held that the value of pipes supplied has to be included
since –
(a)
the pipeline is
essential component required for providing pipeline services and is to be
treated as non-monetary consideration in terms of Rule 3 of Valuation Rules;
(b)
The notification defined the term ‘gross amount charged’ to include value
of goods and materials supplied or provided or
used by the provider of the
construction service for providing such service. Since pipes are ‘used’
by the service provider for laying pipelines, the value of pipes would have to
be included in the ‘gross amount charged’ for the purpose of computing the
abatement.
[Jaihind
Projects Ltd vs CST 2010 (18) STR 650 (Tri-Ahmd.)]
IV. IMPORT AND
EXPORT OF SERVICES
19.1
Prior to 16.8.2002
services provided by a person or a company which is situated outside India
having no business establishment in India is not liable for service tax
especially considering that the rules were amended on 16.8.2002 to recover
service tax in such cases from the recipient of the service. [Philcorp PTE. Ltd. v. CCE (2007) 7 STR
266 (Tri – Mum) see contra Calvin Wooding Consulting Ltd.
v. CCE (2007) 7 STR 411
(Tri-Del.) below].
19.2
In a batch of
appeals, where certain foreign companies provided manpower recruitment services
to an Indian company the department sought to tax such services and recover the
tax in certain cases from the service recipient and in certain cases from the
service providers. Upholding the department’s plea the Tribunal held as follows
:
(i)
By Section 68 of
the Act, it is provided that, every person providing taxable service to any
person shall pay service tax at the rates specified in Section 66 in the manner
and within such period, as may be prescribed by the Rules. Therefore, there is
no distinction made between a foreigner and an Indian as regards the liability
to pay Service Tax, when the taxable service is provided in
(ii)
The argument that the search for engineers was done abroad in
(iii)
Prior to 16.8.2002, in respect of services provided by non-residents, the
tax could be paid by the non-resident himself or by a person authorised by him.
Since in certain cases the appellants although the recipients of the service
had undertaken to discharge the obligation contractually they would be liable
to pay tax and file returns. However, such an obligation cannot be inferred
from a statutory obligation to deduct income-tax at source under the income-tax
law.
[Calvin Wooding Consulting Ltd. v.
CCE (2007) 7 STR 411 (Tri-Del.)].
19.3
Rule 2(1)(d)(iv) of
Service tax Rules, 1994 which came into effect from 16.8.2002 fastened the
liability for payment of service tax on the service recipient would not operate
in respect of services provided prior to 16.8.2002 though the invoices were
raised and payments made after 16.8.2002. [Schott
Glass India P. Ltd. vs. CCE (2007) 8 STR 407(Tri – Ahmd.).See also CCE vs. Schott Glass India Pvt. Ltd.
(2009) 14 STR 146 (Guj HC.)]
19.4
In respect of
taxable services provided by a person who is a non resident or is from outside
India, who does not have any office in India, it is the recipient of the taxable
service who is liable to pay service tax. Such service was notified in the
Official Gazette, in exercise of the powers conferred by sub-section (2) of
Section 68 of the Finance Act, 1994 only on 31.12.2004 with the issue of
Notification 36/2004-ST which came into force on 1.1.2005. Hence for a period
prior to such date the recipient of the service is not liable to pay service
tax in such cases. [ISPAT Industries Ltd. v. CCE (2007) 8 STR 282
(Tri-Mum.) following Aditya Cement vs. CCE, Jaipur (2007) 7
STR 153 (Tri-Del.) approved in Hindustan Zinc Ltd. vs. CCE
(2008) 11 STR 338 (Tri-LB)].
19.5
Prior
to 1.1.2005, in respect of taxable services provided by a non-resident or
a person from outside India who does not have an
office in India to a person based in India, the recipient of the service is not
liable to pay service tax notwithstanding that the recipient has agreed to bear
the tax liability since the tax liability is a creature of the statute and
governed by statutory provisions and cannot be determined or apportioned by an
agreement between two private parties. [JCB
India Ltd. vs. CST (2008) 12 STR 714
(Tri. –
19.6
The appellants
provided consulting engineering services (project management consultancy) to
its customer in respect of a project which involved offshore supply, offshore
services, onshore supply, onshore services and construction & erection of a
plant in
19.7
Overseas agents who
procured orders for the appellant, an Indian company, were held to have
rendered their services abroad notwithstanding that they were in touch with the
appellants for taking instructions in issues like prices, discounts, etc. Hence
the appellant was not liable to pay service tax as a recipient of service on
the overseas commission paid prior to 18.4.2006 i.e. before the insertion of
section 66A. [Anant Spinning Mills vs.
CCE (2009) 14 STR 184 (Tri-Del.)]
19.8
In respect of taxable services received
outside
19.9
Section 66A as
inserted by the Finance Act 2006 w.e.f 18-4-06 and the Taxation of Services
(Provided from Outside India and received in India) Rules, 2006 are not unconstitutional on the ground of lack of
legislative competence or extra territorial operation of laws. [Glyph Internatonal v. UOI (2012) 25 STR
209 (All)]
19.10
Where the appellant
received technical know-how and assistance from five foreign entities and the
Revenue contended that in terms of the second proviso to Rule 6(1) of the
Service tax Rules, 1994 (as it stood prior to it amendment w.e.f. 16.8.2002)
the recipient of service would be liable to pay service tax since the overseas
entities by virtue of the agreement authorized the service recipient to pay
tax, the High Court dismissed the contention of the Revenue and held –
(i)
Section
68 of the Finance Act casts the liability on the service provider to pay
service tax. Hence in absence of any express provision in Act the rules casting
the liability on the recipient of service would be contrary to the provisions
in the Act and therefore, would not be sustainable.
(ii)
The
second proviso to rule 6(1) provides that if the service provider authorizes
the service receiver, then the receiver of service can pay tax on behalf of the
service provider. However, this would apply only if the service provider in the
first place is liable. The provisions of the Act (as it stood then) are not
applicable to non-resident service providers and hence there is no liability on
their part to pay service tax. Hence the second proviso can also not be
triggered.
[CST
vs. Bharat Electronics Ltd. (2010) 20 STR 307 (Kar.)]
19.11
Where the appellant
reimbursed certain coaching fees to its employees who availed and paid for the
coaching services outside
(i)
the coaching
services were received by the employees abroad in their individual capacity and
the assessee merely reimbursed the costs and did not pay the coaching centres
directly which is a basic requirement for levying service tax.
(ii)
the issue involved is prior to 18.4.2006 i.e. prior to
introduction of section 66A and hence service tax on the recipient cannot be
levied on the recipient
[CCE v. Maersk
India P. Ltd (2011) 22 STR 187 (Tri-
Mum)
19.12
Consulting
engineering services rendered by a ‘foreign company’ to the appellants during
the period 1.4.99 to 31.3.01 is not liable for service tax, since:
(i)
Consulting
engineering services provided by a ‘body corporate’ would be liable for service
tax only w.e.f. 1.5.2006 and not prior to that date;
(ii)
in any event no
service tax would be payable on services provided from outside India prior to
18.4.2006 since s.66A of the Finance Act, 1994 was introduced only w. e. f.
18.4.06.
Accordingly the High Court held that the appellants
would not be liable to pay service tax on the services provided by overseas
foreign company. [CST v. Toyoda Iron Works Co Ltd (2010) 19 S.T.R 802
(Kar) - relying on CCE vs. Araco
Corporation (2010) 19 STR 169(Kar.) & CCE vs. SKF India Ltd. (2010) 18 STR 388 (Kar.) see
also CCE vs. Araco Corporation (2010)
19 STR 169(Kar.)]
19.13
Where the appellant based outside India supplied designs, technical
know-how, etc. prepared by them outside India to a company based in India who consumed the same in India the Tribunal held that
such services would not be liable for service tax under the category of
“consulting engineering services” since they were provided outside India. The
Tribunal observed “The consumption of service in India is not taxable event.
Situs of the tax would be where the taxable event occurs and not where the
effect or the consequence thereof is felt. The taxable event has not occurred
in India, inasmuch as the activity of development of technology, technical
information & know-how, transfer of design, drawing etc has taken place in
USA. The consumption of such services in India, when admittedly no such service
stands provided by the appellant in India, cannot be held to be a taxable
event.” [Stone & Webster
International Inc vs. CCE (2011) 22 STR 467 (Tri. – Ahmd.)].
19.14
No service tax
would be payable for services received from foreign service provider for the
period prior to 18.4.2006 even if the service provider has a liaison office in
India [Mitsui & Co. Ltd. vs. CCST (2012)
28 STR 491 (Tri. – Kolkata)].
20.1
In the case of
courier services involving delivery of articles abroad for consignors in India
the Tribunal held that the service would be completed only when the courier is
delivered outside India to the consignee abroad and hence part of the service
being performed outside India the service is to be considered as performed
outside India under Rule 3(2) of the Export of Services Rules, 2005 Accordingly the service would be considered as
exported under rule 3(2) of the Export Rules and no service tax is payable in
terms of Rule 4 of the said Rules. The argument that transportation is merely
incidental in providing courier services is not correct especially considering
that Cenvat Credit Rules, 2004 also provide that credit of duty paid on motor
vehicles would be allowed to select service providers one of which are courier
service providers. [TNT India Pvt. Ltd.
V. CCE (2007) 7 STR 142 (Tri - Bang.). See also U.B.Xpress (South) Pvt. Ltd. vs. CCE&ST (2008) 12 STR 152
(Tri-Chennai)]
20.2
The appellant was
an agent of a foreign company – GMC. It sourced contracts from the India
Railways to GMC for a commission. The commission was denominated in USD but
payable by GMC in INR through the Indian Railways. Thus, from the amount of USD payable to GMC
by Indian Railways, the Railways deducted the USD equivalent of the commission
payable to the appellant and remitted the net amount of USD to GMC and paid the
commission in INR to the appellant. The department denied the export exemption
on the basis that the commission was received in INR. The Tribunal allowed the
exemption holding that the appellant was paid an amount in INR equivalent to
the USD commission and correspondingly equivalent USD was not released to the
Indian Railways for remittance to GMC. Hence, the requirements of earning in
convertible foreign exchange was held to be satisfied interpreting the
condition in accordance with its object and purpose. [National Engg.
Industries Ltd. v. CCE (2008) 11 STR 156 (Tri. –
20.3
Where the
appellants were engaged in booking orders in India for their foreign principals
and received commission for such services in convertible foreign exchange the
Tribunal held that such services were in the nature of business auxiliary
services provided from India and used outside India and hence would qualify as
export of service under rule 3(2) of the Export of Service Rules, 2005. [Blue Star Ltd. vs. CCE (2008) 11 STR 23
(Tri-Bang.); CCE vs.Gleason Works (India)
Ltd. (2011) 22 STR 607 (Tri-Bang.)].
20.4
Where the
appellants booked orders in
(i)
it cannot be said
that the booking of orders indicate services being rendered in
(ii)
since the orders
were booked for a
(iii)
when the recipient
of the service is Singapore Company, it cannot be said that services is
delivered in
(iv)
because of the
booking of orders, the Singapore Company gets business therefore the services
are also utilized abroad
Accordingly, the
services of the appellant would be considered as export of services and not liable
for service tax. [ABS India Ltd. vs. CST
(2009) 13 STR 65 (Tri-Bang.)]
20.5
Commission received
in convertible foreign exchange for procuring orders in India for the products
manufactured by the company based in Germany would not attract service tax
during the following periods :
(i) 1.7.03 to 20.11.03 – Commission agents for
goods were exempted in terms of Notification no. 13/03-ST dated 20.6.03.
Further, even based on Circular No. 56/5/03-ST dated 24.4.03 which clarified
that service tax is a destination based
consumption tax and would not be applicable to ‘export of services’ even after
withdrawal of Notification no. 6/99-ST dated 9.4.99 (exemption for receipts in
convertible foreign exchange), the said commission would not be liable for
service tax.
(ii) 15.3.05 to 30.11.06 – The services would be
considered as ‘exports’ in terms of rule 3 of Export Rules. [based on Circular
No. 111/5/09-ST dated 24.2.09 and ABS India Ltd. v. CST (2009) 13 STR 65
(Tri-Bang.) ; Blue Star Ltd. vs. CCE (2008) 11 STR 23 (Tri. Bang.)].
[Mapal India Pvt. Ltd. vs. CCE (2011) 22
STR 454 (Tri. – Bang.)]
20.6
The appellant
provided services to clients based abroad. It got these clients through its
agent in
(i)
The condition for
receipt in foreign exchange was not
applicable prior to 1.3.07 in respect of
services falling under rule 3(3) [i.e. location of service recipient category]
and the appellants claim was in respect of services exported prior to 1.3.07
and also in respect of services falling under rule 3(3) [i.e. location of
service recipient category].
(ii)
Even if there was
condition for receiving the money in foreign exchange–
(a.)
The appellant would
be satisfying such a condition also by liberal interpretation since it is the
appellant who have rendered the services directly to the recipient situated
abroad and not the agents and the payment has been received in foreign exchange
though by their agents.
(b.)
The receipt of
monies by an agent of the appellant in foreign exchange would be deemed to have
been received by the appellant in foreign exchange for the purposes of export
Rules.
[Nipuna
Services Ltd vs. CCE (2009) 14 STR 706 (Tri. – Bang.)]
20.7
In the present
case, the appellants were sub-representatives of one M/s. WFL which in turn was
representative of Western Union, an overseas entity providing money transfer
services to persons based abroad for transferring money to
(i)
On a reading of the
agreement it was held that the services was rendered by the appellant directly
to the Western Union situated outside India and they were ultimate
beneficiaries of the services;
(ii)
the services would
be considered as used outside
(iii)
during the disputed
period, there was no requirement that the money must be received in convertible
foreign exchange.
Hence the services
would be considered as exported and accordingly not liable for service tax [Muthoot Fincorp Ltd. vs. CCE (2010) 17
STR 303 (Tri-Bang.); See also Kerala State Financial Enterprises Ltd. v. CCE (2011) 24 STR 585
(Tri-Bang.)].
20.8
Where the appellant procured orders for foreign
principals in consideration for a commission received in convertible foreign
exchange, the Tribunal held that the appellant’s services are used outside
India in view of the fact that the rendering of the service was complete only
when the purchase orders canvassed by the appellant in India were received by
the foreign companies and since these purchase orders were received abroad and
acted upon abroad the benefit of the service accrued to the foreign companies
abroad. Accordingly the appellant’s services were held to be exported and the
appellant was held entitled to refund of tax paid on exports. [EM JAY Engineers v. CCE (2010) 20 STR
821 (Tri-Mum.)].
20.9
Where the assessee procured orders for foreign
principals and received their consideration in foreign exchange, it was held
that the assessee’s services were exported since it fulfilled all the
conditions, including the condition of the service being “delivered outside
India and used outside India” since the
rendering of the service was complete only when the purchase orders canvassed
by the assessee in India were received by the foreign companies and these
purchase orders were received and acted upon by the foreign companies abroad.
In other words, the benefit of the service provided by the appellant accrued to
the foreign companies outside
20.10
Where the assessee conducted clinical trials for
foreign clients and delivered the report to them abroad it was held that the
services are not complete until the reports are submitted to the client and in
the present case since the reports were sent abroad the service was to be
considered as partly performed abroad. Further, the services were also ‘delivered outside
20.11
The appellant provided technical testing and inspection services to
their clients who were foreign importer to enable them to decide whether the
goods imported by them from India conformed to the requisite specifications and
standards and received their monies in convertible foreign exchange. For the
period 1.7.03-19.11.03 when the exemption from service tax in respect of
foreign currency receipts (Notification No 6/99 dated 9.4.99) was not in force,
the department sought to demand tax. On appeal relying mainly on
(i) Circular No 56/5/2003 dated 25.4.03 which
clarified that ‘‘service tax is a destination based consumption tax and it is
not applicable on export of service. Export of service would continue to remain
tax free even after withdrawal of notification no.6/99 dated 9.4.99.”; and
(ii) the judgment of the Supreme Court which held
that ‘Service tax is a destination based consumption tax’
the Tribunal held
that the benefit of the service accrued
to the foreign clients outside the Indian territory and hence the services in
question would be considered “exported”. Since export of services has forever been
tax free and never been affected by withdrawal of notification no 6/99 dated
2.4.99, no service tax was leviable on the appellant. [SGS India Pvt Ltd v. CST (2011) 24 STR 60 (Tri-Mumbai)]
20.12
Notification No. 41/2007 provides for exemption by way of refund of
Service Tax paid on overseas commission agent’s services used for export of goods upto
2% of export value. Notification No 33/2008 dated 7.12.08 increased the limit
to 10%. The Tribunal held that the 10% limit would apply only to refund claims
where export is post 7.12.08 and the date of filing the refund claim is not
relevant.[Arvind Ltd v. CCE (2011) 24
STR 222 (Tri- Ahmd]
20.13
Where tax was paid on overseas agent’s commission in December 2009,
after the amendment in notification no. 41/2007 was made on 1.4.2008 whereby
the restriction of allowing the exemption only upto 2% of the FOB value of the
goods exported was removed, it was held that refund of the whole amount would
be admissible even for the services rendered prior to the amendment [CCE v. ABG Shipyard Ltd. (2011) 24 STR
620 (Tri-Ahmd.)].
20.14
Notification no. 41/2007 requires a written agreement between the buyer
and the exporter for testing and analysis of the goods as condition to the
grant of refund of tax paid by the exporter on the technical testing and
analysis services. It was held by the Tribunal that even in the absence of such
an agreement, a term in the letter of credit opened by the exporter with the
Bank requiring a technical testing report would meet the condition as a liberal
view of the refund notification needs to be taken in the light of the principle
that taxes cannot be exported [Texport
Industries P. Ltd. v. CST (2011) 24 STR 553 (Tri-Mum.)].
20.15
Service tax
paid on transportation of empty containers from yard to factory (from where
they were stuffed and transported to port for export) being “in relation to
transport of export of goods” is entitled to refund vide notification no.
41/2007 as amended by notification no. 3/2008 dated 19.12.2008 [Balkrishna Industries Ltd. vs. CCE (2011)
(24) STR 433 (Tri-Mum)].
20.16
Western Union (WU) a
company located abroad provided money transfer services to its clients abroad
for remitting monies to intended recipients in India. WU appointed agents and
sub-agents (assessees) in India, to give money to the intended recipients for a
commission. The assessees also received reimbursement of expenses on
advertisement and sales promotion activities. The department sought to deny the
export exemption under the “Export of Services Rules”, 2005
(“Export Rules”), since the
services were performed in India and hence were not delivered / used outside
India. The Tribunal (by a 2:1 majority) allowed the export exemption and
observed as follows:
(i)
The term "export" has not been defined
either in Article 286 (l)(b) or in any of the article of the Constitution of
India. The meaning of the term "export", with regard to export of
goods, is not applicable for determining what constitutes “export” of services.
The Export Rules are not in conflict with Article 286 (1) (b) of the
Constitution of India. The Export Rules are in accordance with the Apex Court's
ruling in the AIFTP case [(2007) 7 STR 625 (SC)] and Association of
Leaing & Financial Services Companies case [(2010) 20 STR 417
(SC)] that service tax is a destination based consumption tax. There is nothing
in the Export Rules contrary to the principle that a service not consumed in
India is not be taxed in India. What constitutes export of service is to be
determined strictly with reference to the provisions of the Export Rules.
(ii)
The service being provided by the agents and
sub-agents is delivery of money to the intended beneficiaries of the customers
of WU abroad and this service is "business auxiliary service", being
provided to Western Union more particularly covered in clause (vi) of s.
65(19), ‘provision of service on behalf of the client’.
(iii)
The consumer and service recipient of the service
provided by the Agents and sub-agents of WU in India is the Western Union,
located abroad who use their services for their money transfer business not the
persons receiving money in India. Since the service is provided in relation to
business of Western Union located abroad, and the payment for the service has
been received in India in convertible foreign currency, the same has to be
treated as export of service. It is the person who requested for the service
and is liable to make payment for the same who has to be treated a recipient of
the service, not the person or persons affected by the performance of the
service. Thus, when the person on whose instructions the services in question
had been provided by the agents/ sub-agents in India and who is liable to make
payment for these services, is located abroad, the destination of the services
in question has to be treated abroad. The destination has to be decided on the
basis of the place of consumption, not the place of performance of service.
(iv)
Reimbursement of advertisement and sales promotion
activities received from WU is not taxable as the same are for the services
provided to WU, which are export of service.
[M/s.
Paul Merchants Ltd. vs. CCE (2013) 29 STR 257 (Tri. – Del)]
20.17
Dividend paid by
the assessee company to its overseas parent out of disposable profits is
payment for shares held and cannot be held as “repatriation of” or “sending
outside India” of monies received in convertible foreign exchange for taxable
services rendered so as to deny the exemption for receipts in convertible
foreign exchange under Notification No. 6/99 dated 6.4.99 [Gillette India Ltd. vs CCE (2012)
26 STR 59 (Tri- Del.)].
V. TAXABLE
SERVICES
21
Advertising agency
services
21.1
The appellants
booked space in Government buses and then contacted government departments for
placing advertisements which was mainly in the nature of general awareness
programmes. The advertisements were either readymade or at times prepared by
the appellants. The Tribunal held that –
(i)
An advertisement is
a public announcement which can be made by way of display of any hoardings or
otherwise. Advertisement is used to awaken, enlighten and activate the public
at large concerning matters that effect the society generally. The fact that
such advertisements were public interest advertisements made no difference.
Hence the materials displayed would be “advertisements”;
(ii)
The appellants were
an “advertising agency” inasmuch as they made profit out of the said activity
of display of advertisements and accordingly were liable for service tax;
(iii)
The activity of
hiring space and providing the same to a person who uses it for advertisements
will not attract service tax;
(iv)
The expenses
incurred for making the space available or rental charges paid for getting such
space for advertisements are not includable in the value of taxable services.
[Prithvi
Associates vs. CCE (2005) 70 RLT 483 (CESTAT-Mum.)]
21.2
Where the
appellants were engaged in making of signages and hoardings including the
painting and writing of advertisement on the signboards and hoardings, the
Tribunal held that –
(i)
the appellants are
not equipped for functioning as an advertising agency since the services
provided by the appellants do not partake of or include the services of
designing, conceptualizing, or visualizing the advertisements which are
normally rendered by advertising agencies.
(ii)
the extended
definition of the term “advertisement” cannot bring an entirely alien or
unconnected activity or a manufacturing service within the scheme of levy of
service tax.
[Ajanta Fabrication v. CCE (2006) 4 STR 605 (Tri-Del.).
See also Market Chase Advertising vs. CCE (2008)
10 STR 598 (Tri. – Chennai)].
21.3
The appellants
solicited for and booked advertisements in foreign broadcasting channels for a
consideration as their representatives in
(i)
The phrase
“advertising agency” though defined in the statute as being a concern engaged
in providing a service connected with the making, preparation, display or
exhibition of advertisements must be construed in a normal sense and
essentially must be a concern which specializes in providing services such as
media selection, creative work, etc. Since the appellants in the present case
were not performing any of these services they were not liable for service tax
under the category of advertising agency.
(ii)
A “client” is the
person who wants to advertise his goods or services. The appellants had no
contract with the advertisers but only with their principals. Their principals
were broadcasting agencies and not “client” and hence there was no service to a
“client”;
(iii)
Where the
legislation itself covered the activity of the appellants under the category of
broadcasting services w.e.f 16.7.2001, the appellants could not be taxed as
advertising agency prior to that date;
(iv)
The Finance Bill,
2006 specifically introduced a category of “sale of space or time for
advertisements” within the ambit of service tax but had excluded sale of time
slots by a broadcasting agency since it was already taxed. Hence the activity
of sale of time slots was not an advertising agency services.
[Zee Telefilms Ltd. v. CCE (2006) 4 STR 349 (Tri-Mum.)
See also MTV Network India Pvt. Ltd. v. CCE
(2007) 5 STR 374 (Tri.-Mumbai) and Siticable
Network P. Ltd. v. CCE (2006) 4 STR 555 (Tri. Mumbai)]
21.4
The appellants were
an advertising agency who provided advertising services to their clients and
charged a fixed fee for its services. Their services consisted of booking slots
in print and electronic media for the advertiser. The media billed the
appellants @15% discount. If Rs. 100/- was the tariff rate the media charged
them Rs. 85/- plus 10.2% service tax.
The appellants in turn charged the same Rs. 85/- + 10.2% service tax to the
advertisers, recovered the amount from them and paid it over to the media who
paid the service tax of 10.2% on Rs. 85/- to the Exchequer. The appellants paid
service tax on the fixed fee it received from their clients. Further, the
appellants also received cash discounts (discount for prompt payment) and
target incentives (incentive for achieving a certain level of business) from
the media. The department sought to tax – (i) the discount of 15%; (ii) cash
discount; and (iii) target incentives under the category “Advertising agency”
services. Dismissing the department’s contentions the Tribunal held –
(i)
For an advertising
agency it is the advertiser who is its ‘client’. Its client is not the media.
It is only the amounts that are received from its clients which is taxable
under the category of “Advertising agency” services and any amount received
from media will not be liable for service tax.
(ii)
The discount given
by media is not an amount “received” by the advertising agency. It is only a
“discount”. Further, the media is not the client of the advertising agency.
Hence the discount is not taxable.
(iii)
Both cash discounts
and target incentives are not connected to the service rendered to the clients
(advertisers) nor are they billed to the clients (advertisers). Hence these
incomes earned by appellants are not liable for service tax under the category
of “Advertising agency services”.
[Euro RSCG Advertising Ltd. v. CCE (2007)
7 STR 277 (Tri.-Bang.) See also Kerala Publicity Bureau vs. CCE (2008) 9 STR 101 (Tri-Bang)]
21.5
The appellants were
a non-profit making organization registered under the Societies Registration
Act and promoted and organized cricket tournaments. In earned its income inter alia from the following
activities:
(i)
sale of telecast
right of cricket matches.
(ii)
Permitting sponsors
to use space for putting up of advertisement in stadium, and
(iii)
Permitting logos on
clothing and clothing accessories of players.
The department
sought to tax these activities under the category of “advertising agency
services”. Dismissing the department’s contention the Tribunal held as under:
(a)
An advertising
agency as defined in section 65(3) must be a “commercial concern” and BCCI is
not a ‘commercial concern’ as held by the Supreme Court in Secy, Ministry of I&B v Cricket Assn. Of Bengal (1995) 2 SCC
161; further the fact that BCCI is a charitable institution in terms of the
Income Tax Act would lend support to the BCCI’s plea that it is not an
advertising agency.
(b)
A “definition” in a
statute has to be interpreted, in a sense appropriate to the phrase defined and
to the general purpose of enactment. The ordinary meaning of the term
advertising agency is an office which plans, designs and manages advertising
for other companies. The definition of advertising agency can not be read in
isolation and out of context. Even if the services provided by the appellant is
broadly covered by the expression "exhibiting" or
"displaying" of advertisement, but when viewed in the context, would
not convert BCCI into an advertising agency.
(c)
If BCCI is not an
advertising agency then BCCI’s activity would not attract service tax under
‘Advertising Agency Services’
(d)
As regards the sale
of telecast rights there is no advertisement when the performance rights of the
match vested in BCCI is being sold for viewer ship of millions of people and
there is no client to which such service in relation to advertisement is being
provided. Hence sale of television/telecasting rights would not be covered by a
taxable service in relation to advertisement.
(e)
What is being taxed
is planning and expertise involved in making, preparing display or exhibiting
the advertisement and not simply providing of a place or space to the
advertiser. The expression "display" or "exhibit" does not
mean the physical act of display and exhibit, but relates to the services
rendered, as an expert body, to the client, for the purposes of display or
exhibit. The same may involve the expertise of the provider of the services to
advise the client as to in which manner, the advertisement should be displayed
i.e. whether in the newspaper or on TV channel or by way of hoardings or a
audio/video advertisement in air or any other medium on at what point of time
the same should be exhibited. The fact that physical display or exhibition is
not liable under advertisement agency service is also substantiated by the fact
that "sale of space or time for advertisement and sponsorship
services" were specific entries introduced for the purposes of service tax
w.e.f. 1.5.06. Hence permitting sponsors to use space for putting up an
advertisement and logo money is not liable for service tax under the category
of “advertising agency services”.
[BCCI v. CST (2007) 7 STR 384
(Tri-Mum.)]
21.6
Where on facts it
was found that the appellants were only engaged in buying the time slots from
channels on commission basis and selling the same to the advertising agencies
for the purpose of exhibiting the advertisement during those time slots, the
Tribunal observed that the appellants would not be liable for service tax under
the category of advertising agency services since-
(i)
the appellants were not connected with making, preparing, displaying or
exhibiting of any advertisements; and
(ii)
services of sale and purchase of time slots for advertisement was brought
within the ambit of service tax only w.e.f. 1.5.2006 under the category of
“sale of space or time for advertisements” and accordingly, the same would not
be liable for service tax prior to that date under the category of advertising
agency services.
[Needwise
Advertising Pvt. Ltd. vs. CST (2011) 21 STR 229 (Tri-Ahmd.)]
22.1
Admission ticket fee collected from the passengers and
visitors at the airport for providing amenities and facilities therein is
liable for service tax under the category of ‘airport services’. Further where
the appellants were licensed and authorised by the airport authority to collect
admission ticket fee, the Supreme Court held that the appellant steps into the
shoes of airport authority for the services provided on the basis of
authorisation and hence it is he who would be liable to pay service tax under
airport services. [P.C. Paulose, Sparkway
Enterprises vs. CCE (2011) 21 STR 353 (SC)]
22.2
User fee collected
only from outgoing international passengers (not collected from domestic
passenger or incoming international passengers) are not liable for service tax
since the fee is only for enhancing the Airport’s revenue and not for any
services rendered. [CCE vs. Cochin
International Airport Ltd (2009) 16 STR 401 (Ker.) confirming Tribunal’s
decision of assessee’s own case in (2007) 7 STR 468 (Tri.)].
22.3
The assessee took a
licence from the Airports Authority of India (AAI) for operating a lounge
within the airport premises for a licence fee. They supplied food and drink in
the lounge to ‘exclusive passengers’ of various airlines who produced lounge
cards and in terms of the agreement with the airlines, they charged the
airlines for supply of food and drink to the passengers. The Tribunal held that
such services may more appropriately fall under the category of “Business
Auxiliary Services” more specifically under section 65(19)(iii) i.e. “any
customer service on behalf of the client” and not under the category of
‘Airport service’ under section 65(105)(zzm) as contended by the Revenue [Oberoi Flight Services vs. CCE (2012) 26 STR 41 (Tri- Del.)].
23
Automated teller
machine operations, maintenance or management services
23.1
Cash replenishment
services in an ATM is liable for service tax only from 1.05.2006 under
‘Automated teller machine operations, maintenance or management services’ and
not under ‘business auxiliary services’. [NCR
Corporation Pvt. Ltd. vs. CST (2008) 12 STR 68 (Tri-Bang.)]
24
Authorised service
station services
24.1
‘Free services’
rendered by automobile dealers in respect of vehicles sold are not liable for
service tax since –
(i)
the value for such
services have already been included in the price of the vehicle paid by the
customer and has been subjected to payment of excise duty and sales tax.
(ii)
no payment is
received for the services from the customers.
(iii)
there is no
evidence that the vehicle manufacturers have specifically reimbursed any amount
towards the said services.
[Hindustan Auto
House (P) Ltd. vs. CCE (2009) 13 STR 190 (Tri-Del.).
See also K.P.Authomobiles Pvt. Ltd vs. CCE (2009)
13 STR 389 (Tri-Del))]
24.2
Where
the appellants were servicing / repairing of ‘light commercial vehicles’ during
the warranty period for which they were reimbursed by the manufacturer it was
held that ‘authorised service station’ services do not cover services in
respect of ‘transport vehicles’ such as light commercial vehicles and hence the
amount received from the manufacturer was not liable for service tax. [Popular Mega Motors (
24.3
Where the assessee, an authorised service centre of General Motors, had
provided services of repair, reconditioning or restoration of vehicles
manufactured by other manufacturers for which it did not have authorization
from the said manufacturers, the Tribunal held that the services provided in
respect of other vehicles would not be liable for service tax under the
category of service provided by authorised service station [CCE, vs. Dynamic Motors (2012) 26 STR
145 (Tri. - Del.)].
25
Banking and other
financial services
25.1
The appellants
entered into an agreement whereby its customer identifies the vehicle that he
wishes to purchase from the manufacturer/dealer thereof, makes a part payment
to the seller of the vehicle, applies to the appellants for financing the
balance, and once the financing is sanctioned, the customer enters into an
agreement with the appellants and provides as security, right of repossession
of the vehicle to the appellants in the event of his (customer’s) default in
payment of instalments to the appellants. The customer becomes the owner of the
vehicle - the title to the vehicle vests with him who is a purchaser and it is
in his name that the vehicle stands registered and insured and the appellants
are the nominees. The Tribunal held that such an agreement is a ‘hire purchase finance agreement’ which
is different from ‘hire purchase
agreement’ where the title to the goods remains with the finance company
which bails the goods to the hirer in return for periodical payments and the
title to the goods is transferred to the customer/hirer only if he exercises
the option to purchase the same on full payment to the finance company. Having
noted the distinction the Tribunal observed that only “hire purchase” and not “hire
purchase finance” is covered under the category of “Banking or other
financial services”. [Bajaj Auto Finance
Ltd. v. CCE (2007) 7 STR 423 (Tri.-Mum.) affirmed by Supreme Court
in (2008) 10 STR 433 (SC). See also Kausalva Finance Ltd.
vs. CCE&S (2008) 10 STR 150 (Tri-Bang)].
25.2
Where the appellant
gave an extrusion machine on a lease of 35 months extendable to another period
of 2 years for a monthly ‘user charge’ without an option to transfer the asset
at the end of the term, the Tribunal, relying upon the ICAI Accounting Standard
17 defining ‘Financial lease’, held that the lease was for a short period
without any relation to the economic life of the asset and the risks and rewards
incidental to ownership was not transferred to the lessee. Accordingly, the
lease was not a ‘financial lease’ liable for service tax under the category of
‘Banking and other Financial Services’.[CCE
vs. G.E. India, Industries (P) Ltd. (2008) 12 STR 609 (Tri-Ahmd.)]
25.3
The very nature of
business and transaction under the Chits as per the provisions of the Chit
Funds Act stands on its own as a class. It does not have any parlance or
similarity to that of normal transactions as one understood in law or commercially.
Hence in absence of specific definition of ‘cash management’ or ‘asset
management’ in the statute governing service tax Circular No. 96/7/2007-ST
dated 23.8.2007 clarifying Chit funds business to be within ambit of service
tax as being in the nature of cash management is incorrect and liable to be set
aside. [A.P. Federation of Chit Funds vs.
UOI (2009) 13 STR 350 (A.P.)].
25.4
The Supreme Court
upheld the legislative competence of the Parliament to impose service tax under
Entry 97, List I of the Seventh Schedule to the Constitution on transactions covered under section
65(12)(a)(i) of the Act defining ‘Banking and other financial services’, more
particularly, “financial leasing, including equipment leasing and
hire-purchase”. In this regard the Supreme Court observed as under :
(i)
The impunged
provision viz., section 65(12)(a)(i) basically operates qua an activity
of funding/ financing of equipment/ asset.
(ii)
In a ‘finance
lease’, it is the lessee who selects the equipment to be supplied by the dealer
or the manufacturer and takes delivery, but the lessor [finance company]
provides the funds, acquires the title to the equipment, accepts the invoice
and pays for it and allows the lessee to use it for its expected life. During
the period of the lease the risk and rewards of ownership are transferred to
the lessee who bears the risk of loss, destruction and depreciation or
malfunctioning. Equipment Leasing/ Hire-Purchase finance are long term
financing activities of equipment/ asset.
(iii)
The above
transactions are different and distinct from operating lease/ hire-purchase
transactions in the classical sense. A hire-purchase agreement is a hiring
agreement coupled with an option to purchase, i.e., to say that the owner lets
out the chattel on hire and undertakes to sell it to the hirer on his making
certain number of payments. There is no contract of sale until the hirer has
made the required number of payments and he remains a bailee till then.
However, the bailment which underlies finance leasing is only a device to
provide the finance company with a security interest [its reversionary right].
If the lease is terminated prematurely, the lessor is entitled to recoup its
capital investment [less the realizable value of the equipment at the time] and
its expected finance charges [less an allowance to reflect the return of the
capital]. It is not a contract of bailment but is merely a financing
transaction.
(iv)
there are two
different and distinct transactions, viz., the financing transaction and the
equipment leasing/hire-purchase transaction. The former is exigible to service
tax under Section 66 of Finance Act, 1994 (as amended) whereas the latter would
be exigible to local sales tax/VAT.
(v)
As far as the
taxable value in case of financial leasing including equipment leasing and
hire-purchase is concerned, the amount received as principal is not the
consideration for services rendered. Such amount is credited to the capital
account of the lessor/ hire-purchase service provider. It is the interest/
finance charge which is treated as income or revenue and which is credited to
the revenue account. Such interest or finance charges together with the lease
management fee/ processing fee/ documentation charges are treated as
consideration for the services rendered and accordingly they constitute the
value of taxable services on which service tax is made payable.
(vi)
The above
transactions covered under section 65(12)(a)(i) are leviable to service tax
which is within the legislative competence of the Parliament under Entry 97 of
List I of Seventh Schedule to the Constitution. The transactions are not
hire-purchase transactions under article 366 (29A)(d) i.e. a ‘transfer of right
to use goods’ read with Entry 54, List II of the Seventh Schedule.
[Association of Leasing & Financial Service
Companies vs. UoI (2010) 20 STR 417 (SC)]
25.5
In respect of
financial leasing services, service tax is leviable on lease management fee/
processing fee and documentation charges and on finance /interest charges and
not on the principal amount. [ITW India Ltd.
vs. CCE (2011) 23 STR 159 (Tri-Ahmd.)]
25.6
Foreclosure of loan
is not a service rendered by the financial institution and the foreclosure
premium is only a kind of compensation received by the bank for possible loss
of interest revenue on loan amount returned by the customers. Accordingly, the
activity of foreclosure of loan is not liable for service tax under the
category of ‘banking and other financial services’ [Small Industries & Development Bank of India vs. CCE (2011) 23
STR 392 (Tri-Del.) See Contra Housing & Dev. Crporation Ltd. (HUDCO) vs. CST
(2012) 26 STR 531 (Tri. – Ahmd.) wherein
pre-payment charges recovered at time of foreclosure of loan and
resetting charges recovered at time of restructuring of loans has been held to
be liable for service tax under the category of banking and other financial
services].
25.7
“Interchange
income” received by an ‘issuing bank’ of credit card [i.e. the bank that issues
credit cards to the customers for buying goods and services in merchant
establishments (ME) on credit] from the ‘acquiring bank’ (i.e. the bank that
has a contract with the MEs for settlement of dues incurred by the cardholders
at the MEs for a consideration called ‘ME discount’) which is paid by the
‘acquiring bank’ out of the ME discount earned is liable for service tax under
the category of “Banking and other financial services” w.e.f. 16.7.2001 [more
particularly, under the erstwhile Clause (ii) of section 65(12)(a) ‘credit card
services’] since the issuing bank had issued the credit cards to its customers
and the use of the card by the cardholder (customer) at the MEs gave rise to
the share of Interchange fee from the acquiring bank [ABN Amro Bank v. CCE (2011) 23 STR 529 (Tri.-Del)].
25.8
Profit on dealing
in foreign exchange is not liable for service tax under the category of Banking
and other Financial Services. [State Bank
of Bikaner & Jaipur vs. CCE (2011) 24 STR 425 (Tri-Del)].
25.9
On the question
whether a co-operative society engaged in business of banking would be covered
in any of the classes of service providers during the relevant period viz.,
“banking company or a financial institution including a non-banking financial
company or any other body corporate or any person”, the Tribunal observed that
it would be covered within the phrase ‘any other person’ on the following
grounds:
(i)
A Co-operative
society is specifically excluded from the definition of ‘body corporate’ as
defined under s. 2(7) of the Companies Act, 1956 but that exclusion cannot be
read as exempting co-operative societies.
(ii)
Co-operative
society fall under the category “any other person”. They cannot be excluded
from that expression by applying the principle of ‘ejusdem generis’ to say that the expression must be understood in
the same manner as the other expressions so as to include only companies since:
a)
The specific
exclusion u/s. 2(7) of the Companies Act would show that a co-operative society
is of the same genus as a company and was excluded from the tight controls of
the Companies Act, 1956.
b)
Circular no.
83/2006-ST dated 4.7.2006 which clarified that the term ‘any other person’ must
be read ejusdem generis with the
other terms so as to exclude services rendered by a post office like
maintaining savings bank accounts and issuing money orders cannot be applied to
co-operative society since the Department of posts is a department of
government providing very limited services in relation to banking; does not
provide loans and advances and are perceived differently from banks by the
customers.
[Madhav Nagrik Sahkari Bank Ltd. vs. CCE (2012)
27 STR 352 (Tri. – Del.)].
25.10
Under s. 21 & 21A of the RBI Act, 1934, RBI has the right to transact
Government business in India and u/s. 45 of the said Act, it has a right to
appoint Nationalised banks/SBI as its agent for such purposes. The appellant
bank was appointed as such an agent for a consideration. It was held that, if
RBI had undertaken transaction of Government business, it would have been
exempted under notification no. 22/2006 dated 13.4.2006 which exempts taxable
services rendered by RBI; therefore, since the appellant is an ‘agent’ of RBI,
it steps into the shoes of RBI, and hence the benefit of exemption available to
RBI would also be available to its agent viz., the appellant bank [Canara Bank v. CST (2012) 28 STR 369
(Tri.-Ahmd.)].
25.11
Where the
assessee-bank was engaged in providing bill collection services to various
telephone companies for a fee, it was held that Collection of receivables
rendered by bank is a ‘cash management service’. Further it was held that
though in a broad sense cash management is a business auxiliary service the
services rendered by the assessee bank would not be liable under the category
of business auxiliary services more particularly under clause (vii) of S.65(1)
since clause (vii) of section 65(19) is with reference to services covered
under clause (i) to (vi) which do not specifically cover banking and other
financial services. It is more appropriately covered under the category of
banking and other financial services which excluded cash management services upto
31.5.2007. Accordingly bill collection services provided by the assessee- bank
were held not taxable until 31.05.07 [CCE
vs. Federal Bank Ltd (2013) 29 STR 554 (Ker)].
25.12
‘Chit funds’ are in
the nature of cash management services which were brought within the ambit of
service tax under the category of banking and other financial services w.e.f.
1.6.2007 in view of the deletion of the exclusion of cash management services
from the fund management services which were included within the definition of
banking and other financial services [All
Kerala Association of Chit Funds vs. UOI (2013) 29 STR 557 (Ker) departing from A.P. Federation of Chit Funds vs. UOI (2009) 13 STR 350 (A.P.)].
26.1
The appellants in
this case were engaged in selling time slots and obtaining sponsorships for the
programme, events, etc. to be played out by foreign broadcasting organizations
like ATL / EXPAND and STAR which are located outside India. The foreign
broadcasting organizations like STAR beamed signals from outside
(i)
When the programmes
and advertisements are telecast outside India but are received in India through
MSOs and Cable TV Operators, they would come within the definition of
‘broadcasting’ under section 2(c) of Prasar Bharti Corporation Act, 1990 and
accordingly within the definition of ‘broadcasting’ as per section 65(13) of
Chapter V of the Finance Act, 1994 (“Act”) even as it stood before the
amendment by Finance Act, 2002.
(ii)
After the amendment
by the Finance Act, 2002 also the appellant’s activity would be treated as
‘broadcasting’ and the appellant would be treated as a ‘broadcasting agency’.
(iii)
The entire amount
paid would be treated as value of taxable service.
(iv)
Considering the
nature of dispute which related to a legal issue regarding interpretation of
provisions of different Statutes and also taking into account the conduct of
the appellants in taking out registration and submitting returns under protest,
the Tribunal set aside the imposition of penalty under section 76.
[Zee Telefilms Ltd. v. CCE (2004)
166 ELT 34 (Tri. Del.)]
26.2
Where the
appellant, a cable operator, was engaged in disseminating viewables through
cable, the Tribunal held that the same would amount to broadcasting service
liable for service tax w. e. f. 16.7.2001. However, in view of Notification no.
8/2001 – ST dated 9.7.2001 granting exemption to cable television operators the
same would not be liable for service tax during the period 16.7.2001 to
9.7.2004 [Moon Network Pvt. Ltd. vs. CCE
(2011) 24 STR 723 (Tri.-Del)].
27
Business Auxiliary
services
27.1
Sale of SIM cards
is a sale of goods and cannot be considered as an auxiliary service for the
purpose of service tax. [BPL Mobile Communications Ltd v. CCE (2007) 80
RLT 351 (CESTAT-Mum.) following Idea Mobile Communications Ltd. v. CCE (2006)
4 STR 132 (Tri.-Bang.) see also Karakkattu
Communications v. CCE (2007) 8 STR 164 (Tri. – Bang.); South East Corporation vs. CCE 2007(8)
STR 405 (Tri – Bang); R.B.Agencies vs.
CCE (2008) 11 STR 124 (Tri- Bang.);
Vallamattam Communication v. CCE (2008) 12 STR 267 (Tri. – Bang.); R. Venkataramanan vs. CCE (2009) 13 STR
187 (Tri – Chena)]
27.2
Where the
legislation itself covered the services of share transfer agent and registrar
to an issue under service tax w.e.f 1.5.2006, the said services would not be
liable for service tax under the category of business auxiliary services prior
to that date. [CCE vs. Sathguru
Management Consultants Pvt. Ltd. (2007) 7 STR 654 (Tri. – Bang.) See
also Karvy Consultants Ltd. vs.
CCE (2008) 10 STR 166 (Tri-Bang.) Cameo Corporation Services Ltd. v.
Commissioner of Service Tax (2008) 11 STR 161 (Tri. – Chennai)]
27.3
Services of
generating various MIS reports in pre-defined formats using input supplied by
the client fall within the realm of ‘computerised data processing’ and
accordingly would not be liable to service tax under the category of ‘Business
Auxiliary services’ since ‘information technology services’ is specifically
excluded. [Dataware Computers vs. CCE
(2008) 12 STR 121 (Tri – Bang.)].
27.4
Where the assessees
were merely engaged in feeding of the data provided by their clients in the
computer network system with the help of software specifically developed by
them for their clients and generating bills and other reports for the client
the Tribunal held that appellants’ work of data processing using custom made
software deserves to be considered as ‘information technology services’ and
since the same had been specifically excluded from the definition of business
auxiliary services during the relevant period of time it would not be liable for service tax under the
category of ‘business auxiliary services’. [CCE
vs. Galaxy Data Processing Centre (2011) 23 STR 375 (Tri-Del.)]
27.5
The appellants in the
present case were engaged in the activities of beneficiation of coal i.e. a
process whereby the coal extracted from the mines is crushed into pieces and
thereafter washed to remove its impurities and ash content so as to make it fit
for sale. The Revenue raised a demand on the ground that the said activity
would liable for service tax under business auxiliary services as “production
or processing of goods for or on behalf of the client”. On appeal, the Tribunal
referring to a number of enactments and cases with regard to mining of coal,
held that beneficiation of coal is an integral part of ‘mining’ and liable
under the category of ‘mining services’ which came into effect only from
01.06.2007 and not under ‘business auxiliary services’ [Aryan Energy (P) Ltd. vs. CCCE (2009) 13 STR 42 (Tri-Bang)].
27.6
Where a company
NBCC contracted to render site formation services to NTPC and in turn
sub-contracted the work to two companies – SAC & APR, the Tribunal held-
(i) NBCC’s supervision of their own sub-contracted
job to SAC &APR cannot be considered
as rendering ‘business auxiliary services’ to SAC & APR (provision of
service to NTPC on behalf of SAC & APR) and the margin retained by them
cannot be treated as consideration notionally received from SAC & APR
towards the said ‘business auxiliary services’.
(ii) SAC & APR also cannot be regarded as
rendering business auxiliary services to NBCC (provision of service to NTPC on
behalf of NBCC) since the services are essentially provided by them to NBCC and
not to NTPC. The sub-contracted service is also in the nature of site formation
services provided to main contractor NBCC. Further, the tax was not paid by SAC
& APR on the basis of Board’s clarification dated 14-9-97 (that
sub-contracted services are not liable for service tax if the main contractor
has paid the same) and if the tax was paid by the sub-contractors the same was
available as credit to NBCC and therefore, it is a case of revenue neutrality.
Therefore, no tax is demandable from the sub-contractors – SAC & APR.
[National Building Construction Corporation
Ltd v. CCE & ST (2011) 23 STR 593 (Tri. Kol)]
27.7
Where the
appellants entered into a contract for installation of a system at its client’s
premises on a turnkey basis for which it procured certain components, such
procurement of materials is not liable under the category of ‘business
auxiliary services’ since the procurement was only for the purpose of
installing the machines and even if it were to be considered as a service the
service was rendered to the appellants themselves and not to its clients. [Cethar Vessels Pvt. Ltd. vs. CCE (2009)
14 STR 234 (Tri-Chennai)]
27.8
Purchase of SIM
cards and recharge coupons from BSNL at a discount and sold by the assessee to
its customers at the MRP is transaction of purchase and sale of ‘goods’ and
sales tax is attracted. The discount allowed is not in the nature of commission
attracting service tax under the category of business auxiliary services. [JR Communications & Power Controls vs. CCE (2009) 14 STR 379
(Tri-Chennai). See also
Chetan Traders vs. CCE (2009) 13 STR
419 (Tri-Del.)]
27.9
Prior
to 16.6.2005, the appellant’s activity of powder coating, bending, drilling of
components and machinery parts done for a consideration cannot be said to be
liable for service tax as ‘production of goods on behalf of the client’ under
the category of business auxiliary services since the activities were done for
themselves for a fee and not on behalf of any other person. [Auto
Coats v. CCE (2009) 15 STR 398 (Tri-Chennai)].
27.10
Since coal is an
excisable product (attracting Nil rate of duty) the activity of ‘mining’ coal
would fall under business auxiliary services more particularly under clause (v)
of section 65(19) viz., ‘production of goods for the client’ but would be
excluded from it being an activity amounting to ‘manufacture’ as defined in
section 2(f) of the Central Excise Act, 1944 in respect of assessee’s
activities for the period 10.7.2004 to 15.6.2005. However, post 1.6.2007 it
would be liable for service tax under the category of “mining services”. [Avian Overseas Pvt. Ltd. v. CCE (2009)
15 STR 540 (Tri-Kol.)].
27.11
Where the assessee supplied heated oil (which was in
excess of their own consumption) to neighbouring companies for a heating
charge, the Tribunal held that there was no question of rendering any service
and the supply cannot be considered as ‘procurement of goods or services which
are inputs for the client’ inasmuch as they have not procured it through a
third person for supply directly to the companies [General Precured Treads Pvt. Ltd. v. CCE (2009) 15 STR 724 (Tri-Chennai)].
27.12
Where, during the
period 01.07.2003 to 31.03.2005, the appellant provided services of spot
billing and data processing to Andhra Pradesh Central Power Distribution
Company, the Tribunal held that it would fall under the definition of
“Information Technology Services” and consequently excluded from ‘Business
Auxiliary Services’. Further the service
is more appropriately classifiable as business support services w.e.f 01.05.06
since it is an outsourced activity and accordingly not liable under Business
auxiliary service prior to that date. [Gandhi
& Gandhi Chartered Accountants vs.CCE (2010) 17 STR 25 (Tri – Bang)]
27.13
Call centre
Services:
A call centre for an electricity company which is engaged in registration of
complaints on behalf of the electricity board and monitoring the same till
complaints are resolved, was held as not providing any ‘assistance, help or
information’ to the customer, and accordingly not entitled to exemption under
Notification no. 8/2003 dated 20.6.2003. So also a Customer Service Centre and
Computerised Collection Centre which collected cheques from the customer,
accounted the same, remitted it to the bank and maintained a proper database
was held not be a ‘call centre’ under the aforesaid notification. The Tribunal
also held that the activities are liable under Business Auxiliary Services and
not Business Support Services since the said services involved interaction with
the customers on behalf of the service providers whereas in case of business
support services that would not be so.
Billing and
accounting:
The service of generating electricity bills based on meter reading and
accounting the same for electricity companies is in the nature of transaction
processing and would be liable for service tax under the category of “Business
Support Services”.
Energy Audit &
Consumer Indexing: The services of finding differences between the energy
received by the electricity companies and supplied to the customers (energy
audit) and the services of compilation of
data, assets owned by the electric utility on a map for electricity
companies (consumer indexing) are in the nature of “management of distribution
and logistics” of electricity supplies and accordingly liable for service tax
under the category of “Business Support Services”.
[Phoenix IT Solutions Ltd. vs. CCE (2011)
22 STR 400 (Tri. – Bang)]
27.14
The assessee a
dealer in motor vehicles let out table space in its premises to a financial
institution which provided financial assistance to customers of the assessee,
for a consideration and the assessee also informed the vehicle buyer about the
various types of loans available and directed them to the financial
institutions. On these facts the Tribunal held that the assessee was not
promoting or marketing the services of the financial institution and hence
assessee would not be liable for service tax under the category of “Business
auxiliary services”. [Tribhuvan Motors
Ltd. vs. CST (2010) 17 STR 281 (Tri-Bang.) relying on Silicon Honda v. CCE (2007) 7 STR 475 (Tri.-Bang.); See
Contra City Motors and Financial
Services v. CCE (2012) 25 STR 449 (Tri. – Del.); South City Motors Ltd. v. CST (2012) 25 STR 483 (Tri. – Del.) and Brij Motors Pvt. Ltd. v. CCE (2012) 25
STR 489 (Tri. – Del.)]
27.15
On facts, where the
appellants contracted to mine iron ore, process the ore and supply it to its
client it was held that it was a composite contract of mining liable for
service tax under ‘mining’ services w.e.f. 1.6.2007 and not under ‘business
auxiliary services’ prior to that date.
[CCE vs. SVM NettProject Solution Pvt Ltd.(2010) 17 STR 298 (Tri-Bang.)]
27.16
Activities such as processing and assembling jeans
buttons with metal inserts and nylon inserts and processing needle threader
being in the nature of ‘processing of goods’ is liable for service tax under
the category of business auxiliary services only w.e.f. 16.6.2005 and not prior
to that date. [N. K. Fasteners vs. CCE(2010) 20 STR 689 (Tri-Chennai)]
27.17
In this case the
Tribunal relying on Board Circular No. 249/1/2006 – CX dated 27.10.2008 held
that the activity of manufacturing alcohol based perfumes and pharmaceutical
products though not liable for Central excise duty amounts to ‘manufacture’ as
defined under s. 2(f) of the Central Excise Act, 1944, and accordingly would
not be liable for service tax under the category of ‘business auxiliary
services’. [Rubicon Formulations Pvt. Ltd
vs. CST (2010) 19 STR 515 (Tri-Mumbai) See
also Tilaknagar Industries Ltd v. CCE
(2011) 22 S.T.R. 284 (Tri-Mum)]
N.B
: The above
case is prior to the amendment in the definition of Business Auxiliary services from 7.7.09.
27.18
Where the assessee was engaged in encrypting data of
products / services of various clients in their computer system for a
consideration and provided the data on products / services to the persons who
enquired with them, the Tribunal held that the services provided by the
assessee was in the nature providing assistance, help or information through
telephone to a caller on behalf of various parties (i.e. its clients) and thus
the assessee would be considered as “Call Center” entitled to exemption from
service tax under notification no. 8/2003-ST dated 20.6.2003. [CST vs. Citizen Info-Line Ltd. (2011) 21
STR 20 (Tri. – Ahmd.)]
27.19
Where the appellant
is engaged in electroplating (gold plating) of watch straps for various parties
on job work basis the Tribunal held that the appellant’s activity would not be
liable for service tax under the category of Business Auxiliary Services as
being production of goods ‘on behalf of’ a client since an activity would be
considered as being performed ‘on behalf of’ the client if there are three
parties to the transaction and in the appellant’s case there were only two
parties to the transaction. Hence, the appellant had not undertaken any job
work on behalf of its client. [Sonic
Watches Ltd. vs. CCE (2011) 21 STR 34 (Tri. – Ahmd.)].
27.20
Where the assessee, an authorised dealer, received overriding
commission from the manufacturer on the sales made directly by the manufacturer
in the territory of the dealer, the Tribunal on facts observed that such
commissions are
paid mainly as a compensation for the dealer’s effort in popularizing the
products in the territory; for the
opportunity loss of not being able to get the dealers margin on the said sales;
for the dealer’s efforts to procure order; and for realization of sale
proceeds. The dealer was held not to be an agent of the manufacturer and his
services could not be considered as services provided by a commission agent.
Hence the commission is not eligible for exemption under notification 13/2003
-ST. dated 20.6.2003 [CCE vs. Krishna
Automobiles (2011) 23 STR 57(Tri – Delhi)]
27.21
The process of cutting paper into sheets though does not amount to
‘manufacture’, does form part of
‘production’ and accordingly would be liable for service tax under the category of business
auxiliary services as being ‘production of goods on behalf of client’.[Orient Packaging Ltd. vs. CCE (2011) 23
STR 167(Tri – Delhi.)]
27.22
The following incomes of the appellant were held not liable for
service tax under the category of business auxiliary services:
(i) Earnings from NTBCL (the owner and constructor
of the Delhi – Noida bridge under BOT ) as a percentage of toll for – (a)
collection of toll from the users of the bridge; (b) managing the bridge by
ensuring that the facility is available to the public at all times, would not
be liable under clause (iii) viz., ‘customer care services on behalf of the
client’, prior to 10.9.2004 or under cl.
(vi) ‘provision of service on behalf of the client’ or Cl. (vii) ‘incidental or
auxiliary support services’ post 10.9.2004 since the users of the bridge could
not be said to be the customers of NTBCL or the appellants. Further, the said
services would be more appropriately liable for service tax under the category
of ‘management, maintenance and repair services’ (of immoveable property) w.e.f
16.6.2005 and not under business auxiliary services prior to that date.
(ii) Remuneration earned from M/s. Banas Sands who
had right to collect toll from users and sub-contracted to the appellant the
work of collection of toll levied by the Municipal Corporation of Delhi, was
not liable for service tax since it was exempt under notification no. 13/2004
dated 10.9.2004 as being a service in relation to collection of duties and
taxes levied by the Government.
[Intertoll India Consultants (P) Ltd. v. CCE
(2011) 24 STR 611 (Tri-Del.)].
27.23
Where a Chartered Accountant provided the services to a bank
consisting of verification of contact point verification of addresses of
residence and offices of its customers, the
Tribunal held that such services cannot
amount to a service equivalent to promotion or marketing of services provided
by the client or evaluation of prospective customers and hence, is not liable
for service tax under the category of business auxiliary service [Rakesh Porwal & Associates vs. CCE (2011)
24 STR 408 (Tri-Del)].
27.24
Where the appellant was
engaged in arranging documents for the bank to evaluate creditability,
eligibility and financial status of prospective customer for funding by the
bank, the Tribunal held that appellant was acting as a catalyst in connecting
the bank with the borrower and hence was promoting the funding business of the
bank. Accordingly the appellant was liable to pay service tax under the
category of business auxiliary service [S.K.Jalendra
& Associates vs. CCE (2012) 26 STR 135 (Tri-Del.)]
27.25
Where the appellant who purchased ingots from a supplier did some
grinding and annealing operations to the ingots as they were defective and
recovered the costs from the supplier, the Tribunal held that the appellant has not
rendered any service to its supplier and hence, the question of assessee being
liable to service tax does not arise [Bay
Forge Ltd. vs. CCE (2011) 24 STR 434 (Tri-Chennai)].
27.26
Discounts or incentives received by an Advertising Agency from print media
is not liable for service tax under the business auxiliary services in view of
the following:
(i) Since discounts/incentives are received by the
assessee for providing advertising agency services and was held as not be
liable to service tax under the category of advertising agency services by the
Tribunal in
a) Kerala Publicity Bureau [2008(9) STR 101
(Tri-Bang)];
b) Euro RSCG Advertising Ltd. [2008 (7) STR 277
(Tri-Bang);
c) Marketing Consultants & Agencies Ltd.
[2006 (4) STR 136 (Tri-Bang)];
the same cannot be
considered for the purpose of taxability under the category of business
auxiliary services; and
(ii) the amounts are discounts and incentives and
are not the charges for services
[P. Gautam & Co. vs. CST (2011) 24
STR 447 (Tri-Ahmd)].
27.27
The activity of affixing colour yoke with picture tube by way of
yamming process and then adjusting them electronically to keep proper light
rays on screen amounts to manufacture and hence not liable for service tax
under the category of business auxiliary service [Hotline CPT Ltd vs CCE (2011) 24 STR 687 (Tri-Del) relying
on Weston Electronics Ltd vs. CCE
(2001) 130 ELT 451 (Tri-LB)].
27.28
A company CIDBI entered into a contract with NHAI for construction
operation and maintenance of certain stretches of National highways on a Build,
Operate and Transfer
(BOT) basis. It assigned the contract to a special purpose vehicle, STPL (the
appellants). The department alleged that STPL collected toll on behalf of CIDBI
and hence was liable to pay service tax on the toll collected by them under the
category of business auxiliary services. The Tribunal held, on facts that STPL
was collecting toll in the capacity of a concessionaire of NHAI and not as an agent
of CIDBI and hence the entire basis of the SCN collapsed and accordingly the
demand failed. [Swarna Tollway (Pvt.)
Ltd. vs. CCE (2011) 24 STR 738 (Tri.-Bang.)]
27.29
Purchase agents i.e. commission agents for procurement of inputs would
not be liable for service tax under the category of “Business Auxiliary
Services” prior to 10.9.2004 [New Quest
Corp. Ltd. (2012) 25 STR 441 (Tri. – Del.)]
27.30
If on the services of mutual fund distributor, where rule 2(1)(d)(vi)
provides that it is the mutual fund or the asset management company paying the
commission to the distributor that is liable to pay service tax, the service
tax has not been paid by the mutual fund, the liability to pay tax cannot be
transferred to the mutual fund distributor. [Raj Ratan Castings Pvt. Ltd. v. CCCE (2012) 25 STR 481 (Tri. –
Del.)]
27.31
The activity of grinding and smoothening the edges,
called fettling of the rough castings on job work basis amounts to processing
of goods on behalf of client and hence would be liable for service tax under
the category of business auxiliary services only w.e.f. 16.6.2005 and not prior
to that date [Rathour Engg Works v. CCE (2012)
27 STR 37 (Tri-Del)]
27.32
Activities like excavation, picking, sorting, breaking, sizing and
stacking, loading of ore in to BG wagons at railway sidings and removal of
rejects are liable for service tax under the category of mining services and
not under the category of business auxiliary services [CST vs. Ores India (P) Ltd. (2012) 27 STR 188 (Tri. – Kolkata)].
27.33
The appellant an
association of chemists and druggists collected advertisement charges from
manufacturers of medicines for publishing details such as name of the company,
product, packing details, category, VAT payable, stockist price, retailer
price, MRP of the medicines manufactured in the “Chemist News”. These were held
not to be liable under the category of “Business Auxiliary Services” by the
Tribunal on the basis of the following:
(i)
Mere publication of
the above details is not for promoting or marketing the products but is only to
provide information on products and prices to chemists and druggists. The
products are generally promoted through representatives and other means;
(ii)
The above service
if at all would be more appropriately covered under the category of ‘sale of
space for advertisements’ and not under the category of ‘business auxiliary
services’
[Federation of Gujarat State
Chemist and Druggist vs. CCE(2012) 27 STR 292 (Tri.–Ahmd.)].
27.34
Commission received by the bank from MSEB (an account holder) for
providing services of collecting payments towards electricity bills raised by
MSEB on its customers and crediting the same to its account would not be liable
for service tax under the category of ‘Business Auxiliary Services’ [CC&CE vs. Akola District Central Co-Op.
bank Ltd (2012) 27 STR 274 (Tri. – Mumbai)].
27.35
(i) Referral fees received by the
appellant, a dealer of motor vehicles, from various banks for recommending
customers is liable for service tax under the category of “business auxiliary
services”
(ii)
Where the appellant, a dealer
in motor vehicles identified customers for an insurance company and also
incurred cost of advertisement, sales campaign,
souveniers, etc. which cost was reimbursed in part by the insurance
company, it was held that the reimbursement was a consideration for marketing
the services of the insurance company and hence liable for service tax under
the category of “Business Auxiliary Services”
[TVS Motor Co. Ltd. vs.
CCE (2012) 28 STR 127 (Tri. – Chennai)].
27.36
Where distributors purchased lottery tickets at a discounted price from
the promoter/organiser of the lottery and sold them to retailer sharing the
discount with them who in turn sold the tickets to the ultimate consumers who
are the purchasers, the High Court held that the discount/commission received by
the distributors as well as the retailers for marketing the lottery tickets is
nothing but consideration for service rendered to the promoter or organizer of
lottery and is liable for service tax u/s. 65(19)(ii) read with the Explanation
introduced by the Finance Act, 2008 as being ‘service in relation to promotion
or marketing of a service provided by the client’. Further, it was also held
that the Explanation is not unconstitutional [P. Muraleedharan v. UOI (2012) 28 STR 344 (Ker.)].
Business auxiliary
services / Storage and warehousing services
27.37
Where on facts it
was found by the Tribunal that the assessee purchased liquor from various
distilleries and sold it to retail outlets as its ‘own property’, and did not
act as an agent of the distilleries, it was held that the since the goods
(liquor) belonged to the appellant, it cannot be said that the appellant
provided services –
(i) to promote the sale of goods (liquor)
belonging to its client (distilleries) and accordingly would not be liable for
service tax under the category of business auxiliary services; or
(ii) of storage and warehousing of goods (liquor) to
another person and accordingly would not be liable for service tax under the
category of storage and warehousing services.
[Kerala State Beverages (Mfrg. & Mktg.)
Corpn. v. CCE (2011) 23 STR 640 (Tri-Bang.)]
28
Business Support Services
28.1
In this case the Tribunal observed that the
following amounts received by the assessee, a developer of a port, is not
liable for service tax under the category of Business Support Service:
(i)
The royalty received from a sub-licencee in
consideration for conferring on them the right and authority to develop,
design, finance, construct, operate and maintain a container freight station would not be
liable for service tax under the category of business support services as
being “infrastructural support
services”, since it was essentially a sub-licence.
(ii)
The assessee had entered into an agreement with Railways wherein the
assessee had agreed to incur the cost of laying down the railways lines and the
Ministry of Railways would operate the railway, recover its cost of operation
and pay the balance to the assessee. The revenue sought to tax the share
received by the appellant from the railways as consideration for providing infrastructural
support services. However, the Tribunal held that the share received by the
assessee was a payment towards the cost of investment made by the assessee and
not for providing any infrastructural facility to the railways.
(iii)
Amounts received under the agreements for allowing various lessees the
use of vacant plots in the port so as to have access to their area of work
alongwith facilities of water and electricity connection was held to be
excluded from the ambit of service tax under the category of renting of
immovable property services and accordingly the same would not be liable for
service tax under the category of business support services.
[Mundra Port & Special Economic
Zone Ltd. vs. CCE (2012) 27 STR 171 (Tri-Ahmd)]
29.1
In this case, the
appellants provided labour for managing various points in the mechanized
process of packing and loading of cement bags. The processes of packing,
loading were automatic and mechanized. The role of manpower was to supplement
and oversee and guide the activity. On facts, the Tribunal held that the
appellant were merely supplying manpower and not providing cargo handling
services. [M/s. J & J Enterprises vs.
CCE (2005) 186 ELT 189 (Tri –
29.2
Where as per the
terms of contract the contractors were to make arrangement for the
transportation of goods which incidentally included loading and unloading of
goods it was held that the activity of loading and unloading would not be
liable as cargo handling services. [Dalveer
Singh vs. CCE (2008) 9 STR 491 (Tri-Del)].
29.3
Mechanical transfer
of coal from coal face to tippers and subsequent transportation of coal within
the mining area would not constitute as cargo handling services since :
(i)
the dominant
activity undertaken was movement of coal within the mining area, and loading
and unloading was incidental;
(ii)
‘Cargo’ in common parlance means
something which is carried as freight in a ship, plane, rail or truck while in
the present case the coal was merely moved within the mining area.
[Sainik Mining & Allied Services Ltd. vs.
CCEC & S (2008) 9 STR 531
(Tri-Kolkata) See also Modi Construction
Co. vs. CCE (2008) 12 STR 34 (Tri-Kolkata) affirmed in CCE v. Modi Construction Company (2011)
23 STR 6 (Jhar); Gaytri Construction Co v. CCE (2012) 25 STR 259
(Tri-Del)]
29.4
On facts the
Tribunal held that the respondent’s activity comprising of excavation,
transportation and filling of iron ores to the crusher plant are primarily in
the nature of mining activities and not ‘cargo’ handling services since:-
(a)
“Cargo” is
commercially known to be something which is carried as freight in a ship, air
plane, rail or truck for freight while in the present case what is carried
cannot commercially be called ‘cargo’; and
(b)
The incidental
activities of loading and unloading cannot give the contracted activities
(mining of ores) the character of cargo handling services.
[CCE & C vs. B.K.Thakkar (2008) 9 STR
542 (Tri-Kolkata); Thriveni Earthmovers Pvt. Ltd. v. CCE (2009) 15 STR 393 (Tri-Chennai)]
29.5
Where the assessee
had undertaken a series of activities from mining to the delivery of limestone
to designated places, the Tribunal rejected the Department’s contention that
the amount attributable to loading charges should be treated as liable under
cargo handling services since –
(i)
the activity of
loading is incidental to mining and transportation; and
(ii)
the same is rendered
to the assessee himself in completing the entire work assigned to it by the
contract.
[CCE vs. Giriraj Brothers (2008) 10 STR
549 (Tri. – Del.); See also CCE vs. Laxmi
Trading Co. (2008) 10 STR 620 (Tri. –
29.6
Where the
appellants neither collected cargo from the consignor’s premises nor delivered
the same at the consignee’s premises but merely undertook transportation of
cargo by air from air cargo station at source location to air cargo station at
destination location the Tribunal observed that the services of loading and
unloading of goods rendered by the appellants is an integral part of the
transportation services. Further relying on decision in Asian Paints India Ltd. vs. CCE (1988) 35 ELT 3 (SC) the Tribunal
held that:
(i)
the appellants are
admittedly not understood in the common parlour as a cargo handling agency, inasmuch as they are
admittedly airline company;
(ii)
the contract
entered into between the appellant and their customer is not for rendering
cargo handling services but is for transportation of appellant’s cargo by air.
Accordingly, the
same cannot be subjected to tax under the category of ‘cargo handling
services’. [Jet Airways (
29.7
The appellants in this case were engaged in
strapping of various steel items in the production line in steel companies.
Revenue sought to levy service tax on the activities of the appellants under
the category of cargo handling services. On appeal the Tribunal dismissing the
contention of the revenue held that –
(i)
the appellants merely undertook packaging which was a apart of the
manufacturing process on which excise duty was being paid by the manufacturers.
Hence no service tax was payable on the packing charges.
(ii)
the strapping of steel items was part of production process and not for
transportation and hence the item they packed were not ‘cargo’..
(iii)
the services of the appellant being in the nature of packaging services
would not be liable for service tax prior to 16.6.05 since the packaging
services came into the service tax net only w.e.f. 16.6.05.
[ITW India Ltd. vs. CCE (2009) 14 STR 826
(Tri-Bang.)]
29.8
‘Loading and
unloading’ coal within the mining area would not be liable for service tax
under the category of ‘cargo handling services’ while loading and unloading
outside the mining area would fall within the said category [Avian Overseas Pvt. Ltd. v. CCE (2009)
15 STR 540 (Tri-Kol.); See Contra Gangadhar Bulk Movers Pvt. Ltd. vs. CCE (2012)
27 STR 258 (Tri. – Mumbai)].
29.9
In the present case
the Tribunal relying on Modi Construction
Co. v. CCE (2008) 12 STR 34 (Tribunal) held that mere transportation will
not amount to ‘cargo handling” unless loading, unloading, packing or unpacking
of cargo and handling of such cargo is the primary object of the contract. [CCE & C vs. Scrap Material Handling Co.
(2009) 16 STR 68 (Tri. –
29.10
Where the appellant
was engaged in loading of coal into railway wagons using pay loaders and where
they were compensated based on the quantity of coal loaded by them into the
wagons, the Tribunal, on facts, held that appellant would be liable for service
tax under the category of cargo handling agency services. Further, the Tribunal
also observed that since the coal was loaded into railway wagons for transport
the same would be considered as ‘cargo’ [Niranjan
Lal Agarwal v. CCE (2012) 26 STR 457 (Tri-Del.)].
29.11
(i)
Crushing, screening and
sieving of dolomite boulders in mining area and movement of the end product
from site of one activity to site of second activity within the mining area
would not amount to providing ‘Cargo Handling Services’.
(ii) The activity of loading of
finally processed dolomites in railway sidings for further transportation, by
using pay loaders and tippers is liable for service tax under the category of
‘Cargo Handling Services’
[Singh Transporters VS. CCE (2012) 27 STR 488(Tri. – Del.)].
‘Cargo
handling’ vs. ‘Packaging’
29.12
‘Palletizing’ cargo i.e. packing of cargo on a wooden platform (pallet),
which could be lifted and loaded to the container by using forklift, crane,
etc., is classifiable as “cargo handling service” [s. 65(23)] and not as
“packaging service” [s.65(76b)] since ‘packaging’ covered u/s. 65(76b) is basic
packing of products either in the course of manufacturing or subsequent to
manufacturing for marketing and ‘packing’ covered by the broad definition of
“cargo handling service” is the group packing of cargo for easy handling. The
cargo, in the present case being export cargo, it was held as not to be liable
for service tax since export cargo handling is excluded u/s. 65(23)(b). The
High Court also observed that the conclusion is in line with the object and
purpose of granting service tax exemption for handling of export cargo viz.,
the reduction of cost to exporters thereby making the Indian goods competitive
in the international markets. [Beena
Pradeep vs. Government of India (2013) 29 STR 225]
Cargo handling / storage and warehousing services
29.13
Income from sale of
abandoned cargo (after meeting all expenses of sale, etc.) received by a
container freight station would not be liable for service tax under the
category of Cargo handling / storage and warehousing services [Maersk
India Pvt Ltd v. CST (2013) 29 STR 170 (Tri- Mum)]
30
Chartered
Accountants Services
30.1
Notification no.
59/1998 dated 16.10.1998 exempted all services provided by Chartered
Accountants other than accounting, auditing and certification services.
Notification No. 15/2002 dated 1.8.2002 amended the said exemption by inserting
an explanation to the effect that where the services fall under any other
service category such as management consultancy or manpower recruitment
services, such services would be liable. The department contended that the
notification would have retroactive operation from 16.10.98. However, the
Tribunal held considering the language of the notification, in absence of a
specific stipulation regarding its date of effect, the amendment has to be held
effective only from the date of issue of this notification.[Sridhar & Santhanam vs. CCE (2009)
14 STR 756 (Tri. – Che.)]
30.2
Transfer Pricing certification / report under section
92E of the Income-tax Act, 1961 would be considered as ‘auditing’ services and
accordingly not entitled for exemption under notification no. 59/98-ST dated
16.10.98 (whereby all services except accounting, auditing and certain
certification services were exempt).[Price
Waterhouse vs. CST (2010) 19 STR 63 (Tri. – Che.)]
31
Clearing and forwarding agent
31.1
In this case the
appellants a clearing forwarding agent were also a
31.2
The activity of
financing the purchase of coal, and arranging for its transportation by paying
the freight, arranging insurance and R/R etc. is not liable for service tax
under the category of ‘Clearing and Forwarding Agent Services’ [Kaveri Coal Suppliers v. CCE (2011) 23
STR 35 (Tri-Del) relying on Hanuman Coal
Co v. CCE (2011) 22 STR 350 (Tribunal); See also R.K. Paliwal vs. CCE (2012) 26 STR 567
(Tri. – Del.)]
31.3
Where the assessee was engaged in procuring orders from the customers,
for their principal and also guaranteeing the payment, the Tribunal held that
the said activity would not be covered under the category of ‘Clearing
and Forwarding agent service’ since clearing and forwarding agent services
mainly comprised of receiving the goods on behalf of principal, storing them
and thereafter delivering the same at the instruction of the principals. [CCE v K.K.Polymers (2011) 23 STR129
(Tri-Del)]
31.4
Where the assessee was engaged in the activity of promoting sale of
their principal’s products by identifying buyers the Tribunal held that the
said activity would not be covered under the category of ‘Clearing and Forwarding agent
service’ [Susheel Yarn Pvt. Ltd. vs. CCE
(2011) 23 STR 130 (Tri –Delhi)].
31.5
Mere procuring or
booking of orders for the principal by an agent on payment of commission would
not amount to providing services as “clearing and forwarding agent” within the
meaning of the definition of that expression under section 65(25) of the
Finance 1994 since –
(i)
The activity of
mere procurement of orders for a principal on a commission basis is an activity
of a “commission agent” which falls under business auxiliary services and the
Legislature has treated this activity as separate from the activities of a
clearing and forwarding agent;
(ii)
An agent only for
procuring purchase orders for vendors on a commission basis does not engage in
any clearing and forwarding operations “directly
or indirectly” “in any manner”. These [italicized] expressions occurring in
the definition of clearing and forwarding agent cannot be isolated from the
activity of clearing and forwarding operations which has a very specific
connotation in the context of movement of goods from the supplier to their
destination. The agents undertaking clearing and forwarding operations may
never have been concerned with procurement of orders for the goods which are
cleared and forwarded or vice versa.
[Larsen
& Toubro Ltd. v. CCE 2006(3) STR 321 (Tri-LB) overruling Prabhat Zarda Factory P. Ltd. v. CCE
(2002) 145 ELT 222 (T) See also Acer India P Ltd v. CCE (2007) 6 STR 380 (Tri.-Bang.); Tehri Pulp and Paper Ltd. vs. CCE (2007)
8 STR 453 (Tri- Del); Harinagar Sugar Mills Ltd. vs. CCE (2008) 9 STR 128 (Tri. –
Kol); Patwari Forgings Pvt. Ltd. vs. CCE
(2008) 10 STR 52 (Tri-Kolkata); CCE vs.
Shivangi Steel Pvt. Ltd. (2011) 24 STR 701 (Tri.- Del)].
31.6
Pre-delivery
inspection to ensure that the product is without defect and is in good
condition for sale and dispatch does not form part of clearing and forwarding
operation which is subsequent to the inspection. Hence such services are not
liable for service tax under the category of clearing and forwarding services.
The person assuming the risk during transport would also not make him a C&F
agent though the risk cover is in relation to clearing, forwarding and
transport since it is a completely separate activity. [Larsen & Toubro Ltd. v. CCE (2006) 4 STR 466 (Tri-Del.)].
31.7
Dealers/distributors
who purchased and sold goods of prominent manufacturers would not be considered
as clearing & forwarding agent. Their activities such as promoting the
sales, advertisement and maintaining trained salesman were activities in their
own interests and formed part of their job. These activities cannot be treated
as services rendered to the manufacturers. Any discount given by the
manufacturer to such dealers cannot be taken as service charges for the above
activities. [Pratap Singh & Sons v.
CCE (2007) 5 STR 389 (Tri. – Mumbai); See also Coir Board vs. CCE (2011) 22 STR 646 (Tri. – Bang.)]
31.8
On facts the
Tribunal held that receipt of goods from the principal, storing them, selling
the goods to the customers and pursuant to the sale making despatches of goods
to the customer for a commission on sale proceeds would not be liable for
service tax under the category of “clearing and forwarding” since the appellant
is in substance a commission agent earning commission on sale and the
activities of receipt of goods, storage and effecting despatches are merely
incidental to the sale. Its services would more specifically be covered under
business auxiliary services as “commission agent” and be exempt upto 9.7.04
vide notification no. 13 dated 20.6.03 which exempts commission agents in
respect of goods. [CCE v. Chandan
Chemicals (2007) 7 STR 578 (Tri-Del);
V.S.Distributors
vs. CCE. (2010) 17 STR 530 (Tri-Del) – Per Rakesh
Kumar – Member(T) Contra: CCE
vs. ADH Agencies (2007) 7 STR 660 (Tri. – Del.)]
31.9
In
order for a service to be covered under the category of ‘clearing and forwarding’ services,
the service provider must provide both clearing “and” forwarding
services and not only clearing “or” forwarding. [CCE v. Kulcip Medicines (P)
Ltd. (2009) 14 STR 608 (P&H) overruling Medpro Pharma Pvt.
Ltd. v CCE (2006) 3 STR 355 (Tri. – LB)].
31.10
By an agreement
between the assessee and Cipla Ltd., the assessee was appointed as a
“consignment agent” of Cipla under the following terms :
(i)
the assessee
received and stored the goods supplied by Cipla;
(ii)
the assessee sold
the goods as an “agent” of Cipla on a “commission” basis.
(iii)
the price at which
goods were to be sold were decided by Cipla after consultation with the
assessee; and
(iv)
the assessee was
authorized to appoint stockists / dealers / distributors with the approval of
Cipla.
On the question
whether the assessee would be considered as a “clearing and forwarding agent”
u/s. 65(16) which includes a “consignment agent” the High Court held as
follows:
(a)
The agreement with
the principal clearly states that the assessee is a “consignment agent” and
hence would be covered under the inclusive limb of definition of “clearing
& forwarding agent” u/s. 65(16)
(b)
The assessee in the
present case doesnot stop at rendering only the commission agency service [i.e.
mere procurement of purchase orders] but his duties extend beyond that
involving activities such as price determination, appointment of stockists /
dealers / distributors, etc.
[CCE v. Mahaveer Generics (2010)
17 STR 225 (Kar.)]
31.11
Where the assessee procured customers for its
principal (Maruti Udyog Ltd.) for purchase of cars on commission basis and in
that connection arranged documentary
requirements; liaisoned with the customers for timely delivery; delivered vehicles; sent provisional receipts
and inspection notes from consignee to the principal and arranged various
permits required for dispatch of the vehicles etc, the High Court held that the
assessee’s main work was to sell cars on behalf of its principal and carrying
out the above work in that connection would not make them a ‘Clearing &
Forwarding Agent’.[CCE vs. Amitdeep
Motors (2010) 17 STR 514 (All.)]
31.12
Where the appellant
was engaged in the activity of transmission of natural gas through pipelines
for its clients (who were either suppliers or users of natural gas) from the
source point to the point of utilisation pursuant to a Gas Transmission
Agreement the Tribunal held that the appellant is not liable under the category
of Clearing and Forwarding services since :
(i)
the relationship
between the appellant and its client (suppliers/ users) cannot be termed to be
that of principal and agent and hence the essential ingredient of a Clearing
and Forwarding agent’s services was not fulfilled;
(ii)
the appellant’s
activities are more aptly covered within the category of ‘Transport of goods
through pipeline or other conduit service’ which is effective from 16.6.2005
and hence cannot be taxed under the category of ‘clearing and forwarding agent
services’ prior to that date.
[Gujarat State Petronet Ltd. vs. CST
(2010) 20 STR 502 (Tri. – Ahmd)]
31.13
Where the petitioners were engaged in liasoning, co-ordination and
supervision of coal loading at mines to ensure that proper indents are placed,
requisite quality of coal is loaded and wagons are loaded to full capacity and
thereby facilitated movement of coal to plants and factories of their
customers, the High Court held that the petitioners prima facie would not be liable for service tax under clearing and
forwarding services. [Karamchand Thapar
& Bros. (Coal Sales) Ltd. v. UoI (2010) 20 STR 3 (
31.14
The activity of cutting of sugarcanes and its loading and transportation
upto the sugar factories does not amount to ‘clearing and forwarding agent’
services. [Ajinkyatara Sahakari Krishi
Audyogik Otvs Ltd. vs. CCE (2010) 19 STR 285 (Tri-Mumbai)]
31.15
Where the assessee was involved only in canvassing
of orders for his principal without any involvement in material handling, it
was held that the assessee is not liable for service tax under the category of
clearing and forwarding agent’s services [CCE
v. Risansi Industries Ltd. (2011) 24 STR 575 (Tri-Del.)]
31.16
Where the assessee was appointed as consignment
stockiest by his client and agreed to arrange at his own cost suitable godowns
for warehousing the products and also arrange for insurance of the goods in the
joint name with the client for which he was entitled to annual commission on
the basis of volume of sales, the Tribunal held that the assessee was not dealing at the arms length as a buyer
and seller with his client and was liable for service tax under the category of
Clearing and Forwarding Agents service [PSA
Polymers Ltd. v. CCE (2012) 25 STR 94 (Tri-Del)]
31.17
On
facts, it was held that the assessees were not acting as a clearing and
forwarding ‘agent’ but as an independent businessman qua their principals and are selling the products of their
principal to their own clients without any interference of the principal and
accordingly not liable for service tax under the category of ‘Clearing and
Forwarding agency service’ [Kamal Auto
Finance Ltd. vs. CST (2012) 26 STR
46 (Tri- Del.)]
31.18
Activities like
facilitating clearances of export/ import cargo, freight booking of ocean going
vessels, shifting empty containers from container yard to CFS, facilitating
freight required for agro product, employing labourers for stuffing of cargo in
containers, co-ordinating with shipping lines and Custom House Agent, would not
fall within the ambit of clearing and forwarding agent services [Gudwin Logistics v. CCE (2012) 26 STR
443 (Tri. – Ahmd.)].
31.19
Where on facts, the High Court found that the assessee as per an
agreement with the manufacturer / vendor purchased goods at a discount and sold
them on his own account although at prices decided by the manufacturer /
vendor, the nature of activities performed by the assessee would not amount to
providing ‘clearing and forwarding services’ to the manufacturer / vendor [CCE&C vs. Trade Tek Corporation (2013)
29 STR 23 (Guj.)].
32
Clubs or
Association services
32.1
There has to be a quid
pro quo between the members and the association/club. This has to be
established before levying service tax on the fees or subscription or any other
amount received by any association. Thus, membership fees received by the
appellant were held not taxable under the category of “club or association”
services since no specific service was provided to its members. [Ahmedabad Management Association vs. CST
(2009) 14 STR 171 (Tri- Ahmd.)]
33
Commercial coaching and training
33.1
Students trained in
‘private / parallel colleges’ in Kerala are trained in subjects such as
humanities, language, commerce, etc. where they are allowed to write university
examinations without completing “course study” since it is not a requirement as
per University Regulations. However, University Regulations prescribe a
“course-study” for subjects such as science etc. which a student must as a
pre-condition to write university examinations, complete in an ‘affiliated
college’. The affiliated college grants a course completion certificate to
students to make them eligible to write the examinations in terms of the
university regulations. Drawing the above distinction between a parallel
college and an affiliated college, the Kerala High court held that the
affiliated college therefore confer an “educational qualification” recognized
by law and hence are specifically excluded from the definition of “commercial
coaching and training” while the services of coaching and training rendered by
parallel colleges would be liable for service tax. However, considering the
special facts of the case and also the fact that the curriculum, the
examinations written and the degrees obtained from the university are one and
the same for students undergoing training in parallel colleges and students
undergoing training in affiliated colleges, the High Court held that the levy
of service tax on parallel colleges in Kerala is discriminatory and violative
of article 14 of the Constitution of India and hence prohibited the department
from demanding registration for service tax [Malappuram District Parallel College Association v. Union of India
(2006) 3 STT 90 (Ker.)]. Following the above case, in yet another case, the
Kerala High court laid down the general proposition that an educational
institution conducting any course which is a requirement to write examination
to obtain degree or certificate awarded by any agency created by law are
specifically excluded from the definition of “commercial coaching and training”
[St. Antony’s Educational and Charitable
Society v. Union of India (2006) 1 STR 137 (Ker.)].
33.2
Notification no.
7/2003 dated 1.7.2003 exempted – (i) vocational training institute (ii)
computer training institute and (iii) recreational training institute from the
category of commercial coaching and training from 1.7.2003 – 30.6.2004.
Thereafter, Notification no. 24/2004 dated 10.9.2004 exempted only “vocational
training institute” and “recreational training institute” and this notification
was amended on 16.6.2005 to provide that computer training institutes are
excluded from the purview of vocational training institutes. However, in the
interim period between 10.9.04 – 15.6.05 the Tribunal held that computer
training institutes would qualify as vocational training institutes since such
training imparts skill to the trainee to undertake self-employment or seek employment
after such training and accordingly be exempt. [Sunwin Technosolutions Pvt. Ltd. vs. CCE, Ranchi 2007 (7) STR 700
(Tri. – Kolkata) see also Doon Institute
of Information Tech. Ltd. vs. CCE (2008) 12 STR 459 (Tri-Del.)]
33.3
The appellants who
provided coaching and training in business management and fashion technology,
advertising, graphic design, media studies to the students who achieve skills
to seek employment or undertake self employment directly after such training or
coaching are eligible for exemption as a “vocational training institute” under
notification no. 9/2003-S.T. dtd. 20-6-2003 and the exemption cannot be denied
on the mere ground that it was not registered with AICTE as a ‘vocational
Institute’. [
33.4
Where the
appellants were conducting diploma or
post graduation course in management but were a non-profit organisation under
the Companies Act and a Public Charitable trust under the Income tax Act, 1962
and there were also restrictions on distribution of profits or dividends to
their members, the Tribunal held that no service tax would be leviable under
the category of commercial training or coaching service since the appellants
were not providing “commercial” training with a sole object of making profit. [Great Lakes Institute of management Ltd. vs.
CST (2008) 10 STR 202(Tri-Chennai). See also Magnus Society vs. CCCE (2009) 13 STR 509 (Tri-Bang.); Shri. Chandraprasad Desai Memorial
Foundation vs. CST (2009) 16 STR 442 (Tri- Ahmd.);
CCE v.
33.5
Where the
appellants who were a non-profit making organisation engaged in doing research
in advanced computing also provided training in certain aspects of advanced computing
for a consideration the Tribunal held that the appellants would not be
considered as a commercial training or coaching centre for the following
reasons:
(i)
imparting of
training for consideration is only an incidental activity undertaken by the
appellants.
(ii)
The appellants were
not carrying out the activity with an
aim to make profit since they were –
a.
a Society
registered under the Societies Registration Act, 1860;
b.
exempted under the
Income-tax Act being a charitable organisation;
c.
a scientific society
recognized by the Ministry of Science & Technology of Government of India
d.
ploughing back all
incomes for the purpose of research and not distributing any dividends to its
members.
(iii)
the intellectual
level in the activity imparted by the appellant
is of very high order as against a case of coaching or training centre
where the level of intellectual activity is not of a very high order but very
repetitive like a drill.
Hence it could not
be considered as a ‘commercial training or coaching centre’.
[Centre for Dev. Of Advanced Computing vs.
CCE (2009) 14 STR 165 (Tri-Bang.); See also Inst. Of Chartered Fin. Analysts of
33.6
In section 65(105)
(zzc) defining “taxable service” in the context of “commercial training or
coaching centre”, read with section 65(26) and 65(27) defining ‘commercial
training or coaching’ and ‘commercial training or coaching centre’
respectively, the word ‘commercial’ qualifies the ‘coaching or training centre’.
It doesn’t qualify ‘coaching or training’. It qualifies the centre. Thus, where
the appellants, a society registered under Societies Registration Act, 1860 and
also exempt from income tax as a charitable organization conducted various
training programmes for professional people in service in all fields of
administration and management, the Tribunal held that as long as the institute
is registered under Societies Registration Act and is also exempted from
income-tax, it cannot be considered as ‘commercial’ centre and accordingly not
liable under the category of “Commercial training or coaching” services. [Administrative
33.7
Providing
training to candidates, sponsored by various insurance companies to appear for
examinations conducted by IRDA which are required to be cleared to work as an
insurance agent would be considered as a vocational training entitled for
exemption from service tax under Notification No. 9/2003 – S.T.
[Pasha Educational Training Inst. vs. CCE (2009)
14 STR 481 (Tri-Bang.)]
33.8
Where the
appellants provided ‘abacus’ training that made learning arithmetic / math
enjoyable, the Tribunal held that the appellants provided ‘recreational
training’ in terms of notification no 9/2003 dated 20.06.2003 and accordingly
exempt
[FAST Arithmetic vs ACEST (2010) 17 STR 158 (Tri-Bang.)].
33.9
Coaching provided by parallel colleges, having
memorandum of understanding with the University, to the students registered
under the distance education programme of University leading to issuance of
certificate or diploma or degree recognized by law is not liable for service
tax. [JMC Educational Charitable Trust
vs. CCE (2011) 21 STR 421 (Tri-Chennai) relying on
33.10
On facts, the tribunal held that, where the appellant
imparted computer training to educated unemployed youth under Yuva.com
programme (announced by the Government of Karnataka) and the said training
equipped the candidates with skill and competence to set up their ventures, the
appellant would be considered as ‘vocational training centre’ and would qualify
to claim exemption under notification no. 24/04-ST dated 10.9.2004. [Svenpa
Systems vs. CCE (2010) 19 STR 891
(Tri-Bang)]
33.11
Notification no.
7/2003 dated 20.6.03 exempted – (i) vocational training institute; (ii)
computer training institute; and (iii) recreational training institute for the
period 1.7.03 – 30.6.04. This notification specifically defined the scope of
the three types of institutes. This notification was withdrawn from 1.7.04 and
another Notification no. 24/2004 dated 10.9.04 was issued granting exemption to
‘vocational training institute’ and ‘recreational training institute’. Further,
on 7.6.2005 the Government issued another notification no. 19/2005 w.e.f.
16.6.05 amending the 2004 notification to the effect that exemption shall not
apply to computer training institutes. On the question whether the appellant, a
computer training institute, is liable for service tax from 10.09.04 – 15.6.05,
the Supreme Court held –
(i)
‘computer training
institute’ was consciously excluded from purview of notification no. 24/2004
dated 10.09.04 so as to restrict the benefit of exemption to only ‘vocational
training institutes’ & ‘recreational training institutes’.
(ii)
Amendments to
notification of 2004 vide Notification. No 19/2005 dated 7.6.05 was only in the
nature of clarification.
Accordingly, computer training institutes are liable
to pay tax during the period 10.09.04 to 15.6.05. [CST v. Sunwin Technosolution P.Ltd. (2011) 21 STR 97 (SC)]
33.12
Abacus training
imparted to students being in the nature of ‘recreational training’ is exempt
from payment of service tax under Notification no. 24/2004 - ST dated
10.9.2004.Similiarly Abacus training imparted to teachers that enable the
teachers to either get employment in a Franchisee or open their own training
centre (self employment) being in the nature of a ‘vocational training’ is also
exempt under the above notification [K.K
Academy Pvt. Ltd. vs. CST (2011) 24 STR 702 (Tri.-Chennai)].
33.13
An institute
imparting training in export-import merchandising and retail management
enabling students to take employment or undertake self employment after the
training would qualify as a “vocational training institute” and the exemption
cannot be denied on the ground that “vocational training” would mean only
training in skills like carpentry, smithy, making of gem and jewellery etc.
which are skills meant for people with relatively low levels of education and
training imparted to a person with education upto 12th Standard [Ashu Export Promoters (P) Ltd. v. CST
(2012) 25 STR 359 (Tri – Del) See also
WLC College India Ltd.
(2012) 27 STR 377
(Tri.-Del.) wherein providing training in the field of business, fashion,
technology, advertisement and graphic design, media, hospitality and hospital
administration has been held as vocational training].
33.14
Where the assessee
had sent its employees to its overseas parent company for training, which
training was imparted without charging any fee, for which the assessee had
incurred expenditure in foreign exchange for travel, accommodation and other
expenses incurred by its employees while staying abroad and not for training it
was held that the assessees were not liable to pay any service tax under
reverse charge mechanism as they had not paid any remuneration for training. If
at all any charges were paid for training outside India then the same would not
be liable for service tax as per provisions of Taxation of Services (Provided
from Outside India and Received in India) Rules, 2006 [CST vs. Heidelberg India Pvt Ltd. (2013) 29 STR 620 (Tri-Chennai)].
34
Construction of Residential Complex service
34.1
Where the
petitioners were engaged in development and sale of residential flats to
various purchasers who booked such flats on payment of an advance under an
agreement for sale which was executed and registered during the course of
construction and the title to which passed after the completion of the
construction the High Court held -
(i)
“service” is an act of doing
something useful, rendering assistance or help. Service does not involve supply
of
goods; “service” rather connotes transformation of
use/user of goods as a result of voluntary intervention of “service provider”
and is an intangible commodity in the form of human effort. To have “service”,
there must be a “service provider” rendering services to some other person(s),
who shall be recipient of such “service”.
(ii)
Under the Finance Act, 1994, “service tax” is levied on “taxable service”
only and not on “service provider”. A “service provider” is only a means for
deposit of the “service tax” to the credit of the Central Government. Although
the term “service receiver” has not been defined in the Finance Act, 1994, the
“service receiver” is a person, who receives or avails the services provided by
a “service provider”.
(iii)
The petitioners
were not engaged in rendering any services of construction of residential
complex to the prospective purchasers but were merely
undertaking
the construction activities for its own self and any advance, made by a prospective buyer, or deposit received by the
petitioner-company, is against consideration of sale of the flat/building to
such prospective buyer and not for the purpose of obtaining any “service” from
the petitioner-company. Accordingly amounts received from prospective
purchasers were not liable for service tax.
[Magus Construction Pvt. Ltd. vs. UOI
(2008) 11 STR 225 (Gau.). Also refer circular no.108/2/09 dated 29.1.09].
34.2
Construction and
transfer of individual residential units would not be liable for service tax
under the category of “Construction of residential complex services” since the
service is not for construction of a residential complex comprising of more
than 12 residential units. [Macro Marvel Projects Ltd. vs. CST (2008) 12
STR 603 (Tri-Chennai); See also A. S. Sikarwar vs. CCE (2012) 28 STR 479
(Tri. – Del)].
34.3
In the present case the petitioners challenged the validity of
Explanation inserted to section 65(105)(zzzh) [construction of complex
services] on the grounds that the explanation widens the scope of levy beyond
the concept of ‘service’ by including therein sale of flats and taxing of such
sale and purchase was beyond the legislative competence of Union Legislature.
Dismissing the above contention, the Hon’ble High Court held as follows:
(a)
the levy of tax is on service and not on service provider and
construction services are certainly provided even when a constructed flat is
sold.
(b)
Taxing of such transaction is not outside the purview of the Union
Legislature as the same does not fall in any of the taxing entries of State
list.
Hence the Explanation
inserted by the Finance Act, 2010 is constitutional.
[G.S. Promoters v. Union of
34.4
Where the appellant constructed residential quarters for the CPWD
(Government of India) to rent the same to the employees of Income Tax
Department (Government of India), the Tribunal held that since the complex was
intended for “personal use” within the meaning of clause (a) of Explanation to
s. 65(91a) of the Act which includes permitting the complex for use as
residence by another person for rent the appellant’s services would fall within
the exclusion part of the definition of ‘residential complex’ and accordingly would
not be liable for service tax. [Khurana
Engineering Ltd v. CCE (2011) 21 STR 115 (Tri-Ahmd)]
34.5
Where the respondent Co-op. Housing Society had availed the services of
Contractor for constructing the residential units for its members it was held
by the High Court relying upon the High Court judgment in the case of M/s Sujal
Developers that the housing society is not liable to pay service tax since the
society cannot be said to have supplied any services to its members (it being a
service to oneself). Further, the explanation inserted in sub-clause (zzzb) of
section 65(105) of Finance Act, 1994 w. e. f. 1.7.2010 would also not be
applicable since it was introduced in the statute book long after the taxing
event in the present case had arisen and there was no indication in the
amendment to make it retrospective or clarificatory in nature. [CST v. Shrinandnagar – IV Co-op Housing
Society Ltd. (2011) 23 STR 439 (Guj)].
34.6
The explanation to Section 65 (105) (zzzh) added by the Finance Act, 2010
w.e.f. 1.7.2010 which had sought to tax sale of under construction flats where
monies are received from the buyers before completion of construction is not
retrospective in nature [CCE vs. Skynet
Buildres, Developers, Colonixer (2012) 27 STR 388 (Tri. – Del.); See also
CCE v. Amar Nath Aggarwal Builders P. Ltd. (2012) 28 STR 364
(Tri.-Del.); CCE vs. Green View Land
& Buildcon Ltd. (2013) 29 STR 527 (Tri. – Del.)].
35
Commercial or
Industrial Construction service’
35.1
Construction of a
driveway in a petrol pump is excludible from the ambit of ‘commercial or
industrial construction services’ as being construction of ‘roads’ and it is
irrelevant whether the road is for
public utility purpose or is part of a commercial complex [CST vs. Shilpa Constructions Pvt. Ltd.
(2010) 19 STR 830 (Tri. – Ahmd.)]
35.2
Construction of
warehousing complexes for the Central Warehousing Corporation, an undertaking
of Government of India, which rents these warehouses and earns revenue is
liable for service tax under the
category of ‘Commercial or industrial construction service’, it being a
commercial construction for the Government.
[A. B. Projects Pvt. Ltd. vs. CCE (2010) 19 STR 886 (Tri. –Mum)]
35.3
Laying of pipelines
for Gujarat Water Supply and Sewerage Board (GWSSB) for supply of drinking
water to gram panchayats and nagar panchayats would not be liable under
‘commercial or industrial construction services’ [which includes construction
of pipeline or conduit] since the pipelines were not laid to facilitate any
commercial or industrial activity of GWSSB. [Nagarjuna Construction Co. Ltd. vs. CCE (2010) 19 STR 259
(Tri-Bang.) relying on Indian Hume
Pipe Co. Ltd. vs. CCE (2008) 12 STR 363 (Tri)
See also
Larsen & Toubro
Ltd. vs. CST (2011) 22 STR 459 (Tri. –
Ahmd.)]
35.4
Where the appellant
was engaged in laying of long distance pipe lines for the Gujarat Water Supply
and Sewerage Board (GWSSB), the Tribunal held that the ‘pipelines’ were not
used by GWSSB primarily for commerce or industry since-
(i)
the
sale of water was not the primary function of GWSSB. GWSSB was established for
rapid development and proper regulation of drinking water supply and sewerage
services in the state of
(ii)
GWSSB
was established by the State for the purpose of fulfilling the basic
requirement of the people i.e. supply water at the nominal rates.
(iii)
The
water was sold at the subsidized rate i.e. even below the operating cost.
Hence, the
appellant was not liable for service tax under the category of “Commercial or
Industrial Construction services”.
[Dinesh Chandra Agarwal Infracon P. Ltd. vs. CCE (2010) 21 STR 41
(Tri. – Ahmd.)]
36
Construction Services
vs. Works Contract Services
36.1
Where the appellant was registered as works
contractor under the state sales tax law and paid sales tax on the construction
contracts executed by it, the Tribunal held that the services of the appellant
would be liable for service tax only w.e.f. 1.6.2007 under the category of
“works contract services” and not under commercial or industrial construction /
construction of complex services prior to that date [Soma Enterprises Ltd. vs. CCE (2009) 15 STR 559 (Tri-Bang.); See also CEMEX Engineers vs. CST (2010) 17 STR 534 (Tri-Bang.). Contra Sunil Hi-Tech Engineers vs. CCE (2010) 17 STR 121 (Tri-Mumbai)].
37.1
M/s. Indian Oil
Corporation Ltd. awarded a contract for construction of a diesel
hydro-desulphurisation plant to the appellants on a lumpsum turnkey basis. The
contract involved “residual process design, detailed engineering, procurement,
supply, construction, fabrication, erection, installation, testing,
commissioning and mechanical guarantee”. The department sought to tax the
residual process design and detailed engineering, commissioning of plant under
the category of consulting engineers. After noting various clauses of the
contract the Tribunal held that “Thus, a perusal of the clauses of the contract
leaves no doubt that the appellant contract with IOC was a work contract on
turnkey basis and not a consultancy contract. It is well settled that a work
contract cannot be vivisected and part of it subjected to tax. The impugned
orders have proceeded to do precisely that. Therefore, they are required to be
set aside”. Thus, in case of works contract, the contract cannot be split into
a services / labour component and material component in order to levy service
tax on the service / labour component. [M/s.
Daelim Industrial Co. Ltd. v. Commissioner of Central Excise (2003) 155 ELT
457 (Tri-Del.) See also Larsen &
Toubro Ltd. vs. CCE – 2004 (174) ELT 322 (Tri.-Del), CCE v. Shapoorji Pallonji and Co. Ltd.
(2006) 1 STR 164 (Tri-Del.), CCE v.
Flex Engineering Ltd. (2006) 1 STR 208 (Tri-Del.), CCE v. Larsen & Toubro Ltd. (2006) 4 STR 63 (Tri-Mum.), Kerala State Electronics Dev. Corpn. Ltd. v
CCE(A) (2007) 8 STR 163 (Tri. – Bang.), Orissa
Sponge Iron Ltd. v.CCE (2007) 82 RLT 808 (CESTAT – Kol.), Transformers & Electricals Kerala Ltd.
vs. CCE (2008) 9 STR 285 (Tri. – Bang.), Jyoti Limited vs. CCE (2008) 9 STR 373 (Tri. – Ahmd.), Air Liquid Engg.
37.2
The appellants who
provided services to the owner of a plant under an operation & maintenance
agreement were fully autonomous and responsible for the performance of
operation and maintenance. Engineering issues if any were also attended to by
the appellants, during the course of the operation of the plant. They were not
required to render any advice or take any orders from the owner of the plant.
On these facts the Tribunal held that the appellants are not liable for service
tax under the category of Consulting Engineers, since service tax is attracted
only in a case involving rendering of engineering consultancy and in the
present case there are no two parties, one giving advise and the other
accepting it. [Rolls Royce Indus. Power (I) Ltd. vs.CCE 2004 (171) E.L.T. 189
(Tri. -
37.3
In the present case
the appellants paid an amount of royalty for technical know how, equipment,
skill, expertise and services for production of VAT dyes to M/s. Ciba Geigy
Ltd.,
(i)
During the period
under dispute, the person liable to pay tax in respect of services provided by
non-residents or persons from outside
(ii)
Since royalty is a
share profit reserved by the owner for permitting the use of his property,
payment of royalty for the use of technology and know how cannot be equated
with any services to be provided by Ciba Geigy Ltd. Payment of royalty is not
payment for a service. Hence such royalty payments are not liable for service
tax.
(iii)
The reliance on the
agreement with Ciba Geigy Ltd. which stipulates that payment to be made by the
appellants are subject to withholding tax cannot be a reason for fastening
service tax liability on the appellants.
(iv)
The recipient of
services cannot be made liable for service tax for the period prior to the
amendment in rule 2(1)(d) in August 2002. The said amendment provides that in
respect of services provided by non-residents or persons from outside
[Navinon
Ltd. vs. CCE 2004 (172) E.L.T. 400 (Tri.-Mumbai) See also Bajaj Auto Ltd v/s CCE (2005) 179 ELT
481 (Tri-Chennai)]
37.4
By a Technical
Collaboration Agreement M/s. Yamaha Co. Ltd.,
(i)
the consideration
is not for any consultancy service rendered;
(ii)
it is for the
transfer of intellectual property;
(iii)
the relationship
between the parties is not one of consultant and client, but seller and buyer
of assets;
(iv)
the value of
incidental advice, if any, cannot be cut out and subjected to service tax.
[Yamaha Motors (I) Pvt. Ltd. v. CCE
(2005) 186 E.L.T. 161]
37.5
The Tribunal
observed “advice” and “consultancy” services in a discipline of engineering
envisage an intangible service. Further, the words “technical assistance” which
follows the words “advice” and “consultancy” are required to be interpreted
ejusdem generis with “advice” and “consultancy” and would also mean an
intangible service. Thus, services of repairs and maintenance of machines which
is a tangible service inasmuch as they are physically carried out would not be
liable for service tax under the category of consulting engineering services.
These services became taxable only from 1.7.2003. [Roots Multiclean Ltd. v. CCE (2006) 1 STR 17 (Tri-Chennai) see also
Lakshmi Automatic Loom Works Ltd. v. CCE
(2007) 7 STR 435 (Tri-Chennai)]
37.6
On facts, where the
assessee supplied manpower to its client which worked under the instructions of
the client for successful completion of pre-commissioning, commissioning,
operation and maintenance of plant it was held that such services are not
liable for service tax under the category of
‘Consulting Engineer Service’ since the assessee cannot qualify as a
‘Consulting Engineer’ and the activities undertaken by the assessee cannot be
considered as ‘advice’, ‘consultancy’ or ‘technical assistance’ in nature [Reliance Industries Ltd. vs. CCE (2011)
23 STR 555 (Tri-Ahmd.)]
37.7
Where the appellant entered into an agreement
with a foreign company for – (i) transfer of technical know under a licence;
and (ii) provision of technical assistance in implementation and use of
the technical know how in India, and the consideration for each of the above
components was separately specified, the Tribunal observed that –
(i)
The licencing of technical know is not a service and no service tax is
leviable thereon;
(ii)
The ‘utility’ of the technical information was first targeted in
(iii)
The amount paid in respect of provision of technical assistance in
implementation and use of the technical know how in
[Indian Farmers Fertilizer Co-op.
Ltd. v. CCE
(2007) 5 STR 281 (Tri-Del.)
See also Prudent
Communications Sys P. Ltd. v. CCE (2007) 5 STR 264 (Tri-Bang.) for
proposition (i)]
37.8
Services of
supervising installation and commissioning equipments constituting an ‘oxygen
plant’ would not be liable for service tax under the category of consulting
engineering services but only under commissioning and installation services
which is taxable w.e.f. 1.7.2003 [Southern
Iron & Steel Co. v. CCE (2008) 12 STR 725 (Tri-Chennai)].
37.9
Services of
installation and commissioning of machinery are liable for service tax only
w.e.f. 1.7.2003 under the category of ‘errection, commissioning and
installation’ services and not prior to that date under the category of
‘consulting engineering’ services. [CCE vs. Gleason Works (India) Ltd.
(2011) 22 STR 607 (Tri-Bang.)]
37.10
Where the appellants activities viz., testing and
inspection of materials, machinery, designs etc., were classifiable under the
category of ‘technical inspection and certification services’ w.e.f. 1.7.2003
the Tribunal held that the services rendered prior to 1.7.2003 would not be
liable for service tax under the
category of consulting engineer services. [Indian
Institution Of Quality Assurance vs. CCE (2009) 14 STR 40 (Tri-Chennai)]
37.11
Where
the agreement was mainly for transfer of technical know-how/ intellectual
property for manufacture of cots and aprons but also included technical
advice, technical assistance, training, etc. the Tribunal held that technical
advice, technical assistance, training, etc. is not liable for service tax under the category of consulting
engineering services since they are incidental in the process of
achieving the dominant objective of manufacturing of licenced product as per
the agreement and hence cannot be identified as constituting consulting
engineer service. [Day International Inc.
vs CCE (2009) 14 STR 333 (Tri- Chennai); See also B.E.Gelb Consultancy Services vs. CCE (2009)
14 STR 241 (Tri-Chennai)].
37.12
Prior to 16.6.2005, soil testing and survey work
would not be liable for service tax under the category of consulting
engineering services since post 16.6.2005, they are specifically covered under
“site formation and clearance, excavation and earthmoving and demolition” and
“survey and map-making services” respectively [Geo Foundations & Structures Pvt. Ltd. v. CCE (2009) 15 STR 408
(Tri-Bang.)].
37.13
Property valuation by an individual architect is not
liable under the category
of consulting
engineering services. [CCE v. Sthapatya Rachana (2009) 15 STR 438 (Tri.- Ahmd.)]
37.14
Where the assessee
company executed a works contract of design, development, commissioning etc.,
of an oil free compressor system for its client during the period 1997–2001 it
was held that the assessee is not liable under ‘consulting engineering
services’ –
(i)
since services
rendered by ‘companies’ were not liable prior to 1.5.2006 under this category;
(ii)
since the assessee company’s service fall under works
contract services which was brought into the ambit of service tax only w.e.f.
1.6.2007.
[CST vs. Turbotech Precision Engineering Pvt
Ltd, (2010) 18 STR 545 (Kar)]
37.15
The appellant
entered into a contract with IOCL for construction of a storage tank and
certain utilities which involved drawing, designing and detailed engineering
etc., and separate prices were demarcated for such activities. The department contended that the activities
of drawing, design etc. were liable under the category of ‘Consulting
engineering services’ since after the 46th amendment to the
Constitution a works contract can be vivisected and the service component of it
could be subjected to service tax under the relevant entries. Dismissing this contention the Tribunal
(Third Member bench) held that –
(i)
The ruling in Daelim’s
case [(2006) 3 STR 124 (Tri-Del.)] given by a division bench of the Tribunal
holding that a works contract cannot be vivisected and part of it be subjected
to service tax and consistently followed by co-ordinate Benches in numerous
subsequent cases is still binding on co-ordinate benches;
(ii)
The 46th amendment to the constitution was
made with an intent to enable the States to levy sales tax on the sale
component of a works contract. It did not purport to enable the central excise
authorities to levy any tax on the service component of a works contract.
(iii)
Service portion of the works contract is subject to
service tax levy only post 1.6.07 and not prior to 1.6.07
[CCE vs Indian Oil Tanking Ltd 2010 (18) STR
577 (Tri-Mumbai) relying substantially on INSA vs UoI 2009 (14) STR 289
(Bom.)].
37.16
When Article
366(29-A)(b) to the constitution has made indivisible works contracts divisible
to find out goods component and value thereof, it can be unambiguously be
stated that the remnant part of the contract may be attributable to the scope
of service tax under the provisions or Finance Act, 1994. Thus, turnkey
contracts can be vivisected and discernible service elements involved therein
can be segregated and classifiable as well as valued for levy service tax under
Finance Act, 1994 provided such services are taxable services as defined by
that Act and depending on the facts and circumstances of each case, service by
way of advice, consultancy or technical assistance in the case of turnkey contract
shall attract service tax liability. [CCE vs BSBK Pvt. Ltd 2010 (18) STR 555 (Tri-LB) overruling Daelim’s
case 2006 (3) STR 124 (Tri-Del.)]
37.17
Where an engineering college providing technical assistance to the needy
in
respect of technical aspects by its engineering faculty was held not liable for
service tax under the category of “Consulting engineer services” since service tax being levied on the value of
economic services which are commercially feasible and are consumed by the
recipient with a clear object to pay for the commercial services. The
appellant’s institute not serving such purpose was not an engineering
consultant to provide engineering consultancy service. [Punjab Engineering College vs. CCE (2011) 22 STR 421 (Tri. – Del.)]
37.18
Supply of technical know-how in consideration for a royalty is not
liable for service tax under the category of Consulting Engineering service [Kinetic Engineering Ltd. v. CCE (2012) 25 STR 26 (Tri-Mum)].
37.19
Limited companies were not covered under the category of Consulting
Engineer service prior to 01.05.2006 [Simplex
Engineering & Foundry Works P. Ltd. v. CCE (2012) 25 STR 106
(Tri-Del)].
37.20
The consideration (a running royalty and one time lumpsum payment)
received by foreign corporation from a Indian Company for transfer of technical
know how (for manufacture of cars) would not be liable for service tax under
the category of ‘Consulting Engineer Services’. [CST v. Suzuki Motor Corporation (2012)25 STR 266 (Tri-Del)]
37.21
‘Valuation services’ rendered by professionally qualified engineers or
any other person would not be liable for service tax under the category of
consulting engineering services since the services are not in the nature of
advice, consultancy or technical assistance in any one or more disciplines of
engineering [Institution of Valuers vs.
UOI (2012) 27 STR 113 (Guj.) disagreeing with Dr. V. Shanmugharel v. CCE (2006) 2 STR 466(Mad.)].
37.22
Supply of technical
know-how cannot be taxed under Consulting Engineering Services [Futura
Polyester Ltd. vs. CCE (2013) 29 STR 371 (Tri-Chennai)]
38
‘Consulting Engineering services’; ‘Errection, commissioning and
installation services’ vs. Works
Contract Services
38.1
On facts, where the
contract between the assessee and its client was for –
(i) Design;
(ii) Manufacture and supply; and
(iii) Erection, testing and commissioning
of train control,
signalling and telecommunication system with milestone payments specified for
each component (viz., design, supply and erection), the Tribunal held that –
(a) The contract was a composite (divisible)
contract for –
(i) Supply of goods [supply portion]; and
(ii) Provision of services [i.e. design and erection
components]
and not an
indivisible works contract;
(b) The design portion is liable under ‘consulting
engineer’ services and the erection portion is liable under “erection,
installation and commissioning” services.
(c) Since the definition of “work contract” is only
for the purpose of clause 65(105)(zzzza) which came into force w.e.f. 1-6-07,
it is valid only for the period w.e.f. 1-6-07 and for the types of contracts
mentioned in it. Therefore, for the period prior to 1-6-07, the meaning of
‘Works Contract’ as commonly understood i.e. a contract for work and labour and
in other words, a service contract has to be adopted, and it would not be
correct to treat a works contract as something different from a service
contract. If such a work contract is an indivisible service contract, whether
or not involving use of goods which get consumed or get passed on to service
receiver either as such or in changed form, and that service is taxable, the
works contract will attract service tax and if the work contract is a composite
contract involving sale of goods and one or more services and those service are
taxable, the service tax will be chargeable on the value of these services.
Thus a contract for erection, installation and commissioning, even if involving
transfer of property in goods on which state VAT/Sales Tax is paid, would
attract service tax even for the period prior to 1-6-07. Similarly a divisible
contract involving consulting Engineer’s service (preparation of
drawings/designs, preparation of operation manuals, or other technical
assistance), procurement of goods, erection, installation and commissioning
would attract Service Tax on Engineering Consultancy component and erection
installation and commissioning component even prior to 1-6-07. This is so since
there is nothing in Sec. 65(105) and Section 66 of the Finance Act, 1994 from
which it can be inferred that the taxable services defined in various clauses
of Section 65(105) have to be standalone services and will not attract tax, if
they are provided along with other services or providing of the service
involves supply/use of goods on which VAT or Sales Tax is payable. Hence the appellant’s
contention that the service of designing erection, installation &
commissioning alongwith supply of goods, provided as a turnkey works contract
could be subjected to tax only w.e.f. 1-6-07 under Section 65(105)(zzzza) of
the Finance Act, 1994, read with Rule 2A of the Service Tax (Determination of
Value) Rules, 2006 as “Work Contract Service” and this being a new entry,
during the period prior to 1-6-07 no service tax could be charged in respect of
such contracts, is incorrect.
[Alstom Projects India Ltd. vs. CST
(2011) 23 STR 489 (Tri-Del); See also Instrumentation Ltd. vs. CCE (2011) 23 STR 221(Tri-Del.)]
39
Convention Services
39.1
Where the appellant had organized a meeting for
educational discussion at its college premises and had collected some money from
each of the delegates for making arrangement for the mutual benefit of the
delegates in the conference the Tribunal held that the appellant would not be
liable to pay service tax on the delegate fee under the category of convention
services since –
(i)
it had provided the services of organizing the
conference for itself; and
(ii)
the delegates who had attended the conference were not clients of the
appellant.
[Mayo College v. CST (2012) 27
STR 53 (Tri-Del)]
40
Courier Services
40.1
The appellant, a
courier agency had engaged several agents named as ‘Franchisees’ for collection
of articles from customers and who collected service charges alongwith service
tax from the customers and paid the tax under the category of ‘courier service’
in their own registration. The entire service charges were fully paid over to
the appellant and appellant shared a fixed amount with the ‘franchisees’. On these facts, the High Court held that the
appellant is not liable to pay any further service tax on the service charges
retained after payment to the franchisee under the category of ‘franchise
service’ since –
(i)
The service tax on
the entire amount of charges received from the customers having been paid by
the franchisees (agents) under ‘courier services’, the net amount cannot again
be taxed in the hands of the appellant under ‘Franchisees services’ since there
is no provision in the Finance act, 1994 to tax the very same service charges
twice under two heads.
(ii)
Notwithstanding the
(i) above, the net amount is not liable under the category of ‘franchise
services’ since –
(a)
the franchisee is
acting only as an agent of the appellant;
(b)
apart from
appointing the franchisee the appellant is not providing any service to
them.
(c)
the franchisees do
not make any payment to the appellant unlike in case of franchise where a
franchisor provides a service to the franchisee for a fee paid by the
franchisee. Infact it is franchisee who
are paid for work done for the franchisor (the appellant) i.e. acting as an
agent for rendering courier service to the customers.
[Speed and Safe Courier Service v.
Commissioner (2010) 18 STR 550 (Ker.)]
40.2
The appellant through its network of branches provided money transfer
services. If the remitter at one branch deposited cash to be given to an
intended recipient outside the city, the branch would instruct its closest
branch at the recipients end to dispense cash to the recipient from its corpus.
In such a scenario there is no actual transportation of cash from the branch by
another, and hence such services would not be liable for service tax under the
category of “courier services” [C.C.C.
vs. Patel Vishnubhai Kantilal & Co. (2012) 28 STR 113 (Guj.)].
41
Custom House
Agent’s (CHA) services
41.1
The function of a CHA mainly relates to the documentation part for the
clearance of goods from the customs for import/export. Thus, -
(i)
Charges collect fees received from the importers for collecting freight
on import consignments;
(ii)
import console handling charges for deconsolidation of cargo on arrival
to
are charges relating to
transportation of goods and not clearance of
goods from customs and accordingly not liable for service tax under the category of
CHA services. Further, delivery order fees is with regard to delivery of cargo
and is not CHA service. Hence these services are also not liable under the
category of CHA services. [Lee & Muir
Head Pvt. Ltd. vs. CST (2009) 14 STR 348 (Tri- Bang.)]
41.2
Service charges
received for liaisoning with customs authorities for collection of duty
drawback is within scope of CHA’s service in relation to export of goods, and
accordingly are liable for service tax [CCE
vs. Kochi Logistics Services Pvt. Ltd (2012) 26 STR 30 (Tri-Bang.)].
42
Dredging Services
42.1
Where the appellant was engaged in the activity of dredging of the
river for the purpose of drainage
and flood control, the Tribunal held that ‘dredging service’ has been defined
in an inclusive manner to include the appellant’s activities and the purpose
for which the dredging is undertaken in the river whether it is for the
navigational purpose or for any other purpose is irrelevant. [Mackintosh
Burn Ltd. vs. CST (2010) 19 STR 682 (Tri. – Kol.)]
43
Electricity
Transmission
43.1
Activities of the appellant, a electricity transmission company, like
installation of electricity meters and testing the same were held to be
services relating to the transmission and distribution of electricity and hence
exempt from service tax vide notification no. 45/2010-ST dated 20.7.2010 [Paschimanchal Vidyut Vitran Nigam Ltd. v.
CCE (2012) 28 STR 412 (Tri.-Del.)].
44
Erection, Commissioning
or Installation
44.1
Where the
appellants, who were engaged in manufacture and sale of medical equipments, had
paid excise duty on the manufacture of the equipments including the charges for
training, erection and installation of the equipments at the buyers premises
and had not charged any separate amounts towards erection and installation of
the equipments the Tribunal held that no service tax would be levied on
erection / installation of the equipments. [Allengers
Medical Systems Ltd. vs. CCE (2009) 14 STR 235 (Tri-Del.); See also ABB Ltd v. CST (2011)24 STR 199 (Tri-Bang); Alidhara Texspin Engineers vs. CCE (2010) 20 STR 315 (Tri-Ahmd.)]
44.2
Where the appellant
was engaged in fabrication of structures at the customer’s site the Tribunal
held that this service was not covered under erection, commissioning and
installation services in view of the following:
(i)
After surveying all
Board Circulars Tribunal held:
(a)
Structures were not
intended to be covered under Plant, Machinery or Equipments.
(b)
Erection refers to
civil work for installation / commissioning of a plant & machinery.
(c)
Erection,
commissioning or installation of structures whether fabricated or not was not
covered by the definition of Erection, Commissioning or Installation service
prior to 1-5-2006.
The activity
undertaken by the appellant is fabrication of structures and this was not
covered under erection of Plant, Machinery, or Equipments as no civil work was
undertaken by the appellant. Accordingly, the process of pre-fabrication of
structures was not covered under the “Erection, Commissioning &
Installation Service” prior to 1-5-2006.
(ii)
The activity
undertaken by the appellant is covered under Section 2(f) of Central Excise Act
as manufacturing activity. Hence the appellants are not liable to pay the service
tax on the activities undertaken by them.
[Neo Structo
Construction Ltd. vs. CCE & C (2010) 19 STR 361 (Tri. – Ahmd)]
44.3
Laying of pipelines
is not covered under the category of “Erection, Commissioning or Installation” service and hence not liable for
service tax [A. Sekar v. CCE (2010)
19 STR 82 (Tri. – Chennai) relying on Indian Hume Pipe Co.Ltd. v. CCE (2008) 12 STR 363 (P&H)]
44.4
Laying the pipes in
wall/roofs/floors for crossing of wires, fixing the junction box, MS box,
Wooden box, fixing the cable trays would not amount to installation or
commissioning of plant, machinery or equipment and therefore would not be
liable for service tax under ‘Erection, Commissioning or Installation service’
during the relevant point of time. [CCE vs Rajeev Electricals Works 2010
(18) STR 705 (P & H)].
44.5
Civil construction
services necessary for the commissioning of petrol pump (without actually
installing/commissioning the petrol pumps) would not be liable for service tax
under the category of “Commissioning and Installation services” [Subhash Khandelwal & Sons vs. CCE
2011 (24) STR 461 (Tri-Del)].
45
Works Contract vs.
Erection commissioning and installation services
45.1
A company PG,
intending to set up a power plant, accepted the bid of a Swedish Company ABB
and as requested by the bidder entered into 3 contracts – one with ABB (Sweden) for off-shore supply of
equipment; another with ABB(India) for on-shore supply of equipment and a third
again with ABB(India) for on-shore services including errection, commissioning
etc. All the above contracts were interlinked and the overall responsibility
for successful completion of all the 3 contracts was on ABB(
(i)
three agreements
were interlinked to each other and a combined reading of the 3 contracts taken
together for the purpose of executing the turnkey project for PG, would satisfy
the definition of ‘works contract’ under section 65(105)(zzzza).
(ii)
the agreement had been subjected to state VAT / Sales
tax as a ‘works contract’ and sales tax was also deducted from the payments
made to the appellants under the sales tax law.
(iii)
Accordingly the appellants would be liable for service
tax only w.e.f. 1.6.2007 and not prior to that date under errection,
commissioning or installation services.
[ABB Ltd. vs.
CST (2010) 20 STR 610 (Tri-Bang.)]
46.1
Where the appellant conducted ‘computer
software courses’ not by himself but by franchisees all over India and received
a one time fee on execution of the agreement (on which Service Tax was paid)
and also a ‘royalty’ of 25% of the course fees paid by each participant (on
which no tax was paid) the Tribunal held that the 25% royalty is liable for
service tax under the category of “Franchise” services.[CMC Ltd v. CCE (2011) 23 STR 586 (Tri-Bang)]
47
General
Insurance Services
47.1
The Insurance
department of the Government of Karnataka who were
holding registration u/s 3 of the Insurance Act, 1938, and were engaged in
insurance of vehicles –
(i)
owned by the government departments
and commercial concerns; and
(ii)
in
which the government had financial interest or for which the government has
advanced money,
are liable
for service tax under the category general insurance services and that the
insurance business carried out by it was not in the nature of a sovereign
activity or statutory function carried out for a fee to entitle them the
benefit of Circular No. 89/7/2006 – ST dated 18.12.2006 [Karnataka Govt. Insurance Dept. v. ACCE (2012) 26 STR 521 (Kar.)].
47.2
The following services of the Kerala State Insurance Department was held
to be taxable/non-taxable by the Court:
(i)
Providing life insurance coverage to the employees of the state government
under rule 22A of Part I of Kerala Service Rules, is part of a ‘statutory
obligation’ and hence not a ‘taxable service’ so as to attract service tax
liability.
(ii)
General Insurance provided in case of assets owned by the State
Government is not liable for service tax as no service is being extended to
anybody else, but to self.
(iii)
General insurance extended to commercial institutions/ individuals
including Government companies are liable for service tax as no statutory duty
is involved, unless it is exempted u/s. 93 of the Act.
[Kerala State Insurance Department v. Union of India (2012) 28 STR
337 (Ker.)].
48
Goods transport operators / Agencies
48.1
Service tax is
leviable only on the services provided by a commercial concern engaged in the
transportation of the goods. Hence, where the appellants who have received
goods directly from their suppliers, who have themselves undertaken the
deliveries of the goods at the appellants’ door-steps, it cannot be said that
the appellants received the services of any commercial agency. The said
suppliers cannot be held to be transporters. Hence payment of transport charges
to the suppliers will not attract service tax. [Kesoram Spun Pipes & Foundries Vs. CCE (2002) 146 ELT 475 (Tri.
– Kolkata)]
48.2
Where the
consignment agent paid the freight charges as well as service tax payable
thereon as a payer of freight and deducted the same from the sale proceeds
payable to the appellant manufacturer the Tribunal held that the appellant is
not liable to pay service tax on freight charges deducted by the consignment
agents since it is the consignment agent who is liable to pay service tax on
the goods transport agency services as it is he who pays the freight charges [Rajalakshmi Paper Mills Pvt. Ltd. vs. CCE
(2011) 22 STR 635 (Tri. – Che.)].
48.3
Where the service
tax on GTA services was paid by the transporters, the Tribunal held that tax in
respect of the same services cannot be demanded again from the service
recipient. [Navyug Alloys Pvt. Ltd. vs.
CCE (2009) 13 STR 421 (Tri-Ahmd.); See also Mandev Tubes v. CCE (2009) 16 STR 724 (Tri. – Ahmd.);
CST v. Geeta Industries P. Ltd. (2011) 22 STR 293
(Tri-Del)]
48.4
Where the appellants imported yarn from Nepalese
suppliers who charged the appellant in two invoices – one, for the cost of
goods and transport upto Nepal border; and another, for the transport from
Indo-Nepal border to the appellant’s factory, the Tribunal held that the
appellant’s contract with the Nepalese suppliers was a contract for supply of
goods and the arrangement of transportation is merely incidental to the supply
of goods and not a provision of service. Since the appellants did not engage a
transporter nor was there any evidence that the suppliers engaged transporters
as agents of the appellant, the appellant is not liable to pay service tax on
the transportation charges reimbursed to the suppliers under GTA services.
[Sumangalam
Suitings (P) Ltd. v. CCE (2010) 19 STR 809 (
48.5
The term
‘vegetables’ in the notification no. 33/2004 dated 3.12.2004 exempting services
provided by goods transport agency services in relation to transport of
‘fruits, vegetables, eggs or milk’, is not be understood in a technical or
botanical sense but must be understood as in common parlance i.e. green
vegetables plucked and sold in the market without any processing done thereto.
Hence transport of ‘Canned mushrooms’ (which is obtained after processing fresh
mushrooms) cannot be construed to be transport of ‘vegetables’ qualifying for
exemption [Agro Dutch Industries Ltd. v.
CCE (2011) 24 STR 355 (Tri-Del.)].
48.6
Where on facts it
was found that the assessee had hired vehicles from its vendors and they were
not responsible for transporting the goods and no consignment note was issued
by them, the Tribunal held that no ‘Goods Transport Agency Services’ was
provided to the assessee and hence the assessee
was not liable to pay service tax as a payer of freight [Birla Ready Mix vs. CCE (2013) 30 STR 99
(Tri. – Del.)].
49
Information
Technology software services
49.1
Where the
petitioners, an association of companies engaged in the business of reselling
of the computer software products under an “End User Licence Agreement”
challenged the legislative competence of the Parliament to impose service tax
on ‘information technology software
services’ [Section 65(105)(zzzze)] the Hon’ble High Court dismissing the
petition observed as under:
(i)
Software, whether
canned or customized, is goods;
(ii)
Entry 97 of List I
of Schedule VII of the Constitution of India being a residuary entry the
Parliament has legislative competence to make law for service tax under the
said entry.
(iii)
For the reason that
software is goods, all transactions in relation to software need not
necessarily amount to a sale and whether a transaction is a sale or service
depends on the individual transaction and on that ground the vires of section 65(105)(zzzze) cannot
be questioned.
(iv)
The transaction
between the members of petitioner association and the ultimate customer (end
user) is not of a sale of software (goods) as such but is only allowing the
right to use the contents of the data stored in the software (goods) which
would amount only to a service. Further, the transaction would also not be
considered as deemed sale under Article 366(29A)(d) of the Constitution of
India i.e. ‘transfer of right to use any
goods’ since the right to use the software (goods) as such is not
transferred.
[Infotech Software Dealers Association vs. UOI
(2010) 20 STR 289
(Mad.)]
49.2
On facts, it was
held that, services of maintenance of various softwares provided by the
appellant would be liable for service tax w.e.f. 1.6.2007 on insertion of
Explanation to the definition of repair and maintenance services clarifying
that “goods” to include “software”. However, the Explanation would not have a
retrospective effect.
[Phoenix IT Solutions Ltd. vs. CCE (2011)
22 STR 400 (Tri. – Bang.)]
49.3
Where the appellant was
engaged in managing and monitoring the modernization and computerization of
various operations conducted by the Department of Company Affairs and in
acquisition and installation, commissioning and system integration of IT
systems, hosting facilities for central site, preparation and issue of NSSN
cards to the members of EPFO, the Tribunal held that the activities would be
liable for service tax under the category of “Information Technology Software
Services” w.e.f. 16.5.2008 and not prior to that date under the category of
Management Consultancy Services [UTI
Technology Services Ltd. vs. CST (2012) 26 STR 147 (Tri. -Mumbai)]
50
Insurance Auxiliary Services
50.1
The
appellants, reinsurance brokers, arranged reinsurance for certain Indian
insurance companies. The overseas reinsurance companies paid the Indian
insurance companies a ‘reinsurance commission’ – 50% of which was paid to the
appellants and 50% to the Indian insurance companies. The department sought to
tax the appellant’s remuneration under the category of “insurance auxiliary
services” for the period from 16.7.2001 to 30.6.2005. On appeal based on the
facts the Tribunal held that -
(i)
a contract of
reinsurance is essentially a contract of insurance and the definition of term
‘insurer’ as defined in section 65(58) was wide enough to include the services
of ‘reinsurer’. The amendment made by the Finance Act, 2006 w.e.f. 1.5.06 to
expressly include a “reinsurer” within the definition of “insurer” was a
clarificatory amendment;
(ii)
the services of
reinsurance brokers were provided to the Indian insurance company. Hence its
services cannot be considered to be exported out of
(iii)
in absence of
physical receipt of convertible foreign exchange the appellants could not claim
exemption under notification no. 6/99 or 21/2003.
[Suprasesh G.I.S. & Brokers P. Ltd. vs.
CST (2009) 13 STR 641 (Tri-Chennai)].
51
Intellectual
Property Service
51.1
An
agreement for permitting the use of a trademark for a consideration is liable
for service tax under the category of ‘Intellectual Property Right services’
notwithstanding that the ‘trademark’ was registered only in connection with
some products and the permission to use the trademark was given in respect of
products not ‘registered’. [Hero Honda
Motors Ltd. vs. CST (2012) 27 STR 409 (Tri. – Del.)].
51.2
On facts, the Tribunal held
that permitting a person to use the trademark of the assessee in perpetuity for
a consideration is liable for service tax under the category of ‘intellectual
property right’ services [Eicher Good
Earth Ltd. v. CST (2012) 28 STR 279 (Tri.-Del.)].
52
Interior Decorator services
52.1
Activities such as
false ceiling, partitioning, flooring, providing modular systems, painting,
carpeting, electrical connections; supply and fixing or various furniture, etc.
would not be liable for service tax
under the category of ‘Interior Decorator Services’ since -
(i)
The said activities
are in the nature of ‘execution of work’ and not in the nature of advice,
consultancy and technical assistance or planning and designing and hence would
not fall under ‘Interior Decoration Service’.
(ii)
The appellant’s works are more aptly covered /
included under the category of ‘Commercial or Industrial Construction services’
w.e.f. 16.6.2005. Thus, the appellant’s services were not liable to service tax
under the category of ‘Interior Decoration Service’ prior to 16.6.2005.
[Spandrel v. CCE (2010) 20 STR 129 (Tri.
– Bang.)]
53.1
Interconnection
Usage Charges collected by one telecom authority from another telecom authority
is not liable for service tax prior to 1.6.2007. [Bharti Airtel Ltd. v. CST (2008) 12 STR 565 (Tri-Ahmd.)]
54.1
Prior to 16.6.2005
any maintenance services carried out under any contract other than a pure
maintenance contract would not be liable for service tax under the category
“Maintenance and Repair Services”. Hence maintenance and repair of a ship in
absence of a maintenance contract was held not liable for service tax. [Cochin
Shipyard Ltd. v. CCE (2007) 80 RLT 484 (CESTAT-Ban.) see also Unipower Systems Ltd. v. CCE (2007) 7
STR 590 (Tri- Bang.); Raj Trans Stampings
(P) Ltd. vs. CCE (2011) 23 STR 394 (Tri-Del.)]
54.2
Where only repair
work was undertaken by the appellants without a maintenance contract,
maintenance and repair being distinct (maintenance is prevention from failure,
repair is restoration after failure), such repair services were not liable to
service tax prior to 16.6.05. [CCE vs.
Bhiwadi Cylinders Pvt. Ltd. (2008) 11 STR 37 (Tri. –
54.3
The assessee’s activities of maintenance of green
belt (Horticulture and Landscaping) which comprised of activities like growing
of grass, plants, trees or fruits, vegetables, regular mowing of lawns, pruning
and trimming of shrubs and cleaning of garden etc. was held not liable for
service tax under the category of maintenance of immovable property for the
following reasons–
(i)
The CBEC Circular no. B1/6/2005 – TRU dated 27.7.2005 refers to
maintenance of civil/electrical and construction work of park and green belt
and not maintenance of grass, plants trees or
shrubs;
(ii)
Services in relation to ‘horticulture’ is specifically kept outside the
purview of ‘cleaning services’, a separate service;
(iii)
The expression “immovable property” as defined under section 3 of the
Transfer of Property Act, 1882 does not include standing timber, growing crops
or grass.
[CCE vs. ANS Constructions Ltd.
(2010) 17 STR 549 (Tri-Del.)]
54.4
It was held that activity of tyre retreading is
neither ‘repair’ nor ‘maintenance’ but a ‘reconditioning’ activity to give
economic life to the tyre retreaded and hence would be liable for service tax
only w.e.f 16.6.05 when reconditioning activity was brought under tax net. [CCE
vs Balwinder Singh 2010 (18) STR 70 (Tri-Del.); See also Stallion Rubbers Ltd. vs. CCE (2011) 23 STR 380
(Tri-Del.)].
54.5
‘Software Maintenance’ services provided in respect
of application software already licensed and installed in the
computer systems of the clients (banks) during the period 9.7.04 to 30.4.06
would be covered under the category of ‘information technology software
services’ w.e.f. 16.5.2008 and not prior to that date under the category of
‘maintenance or repair services’ [EBZ
Online Pvt. Ltd V. CCE (2011) 22 STR 185 (Tri- Mum); See also
SAP India Pvt. Ltd. vs. CCE (2011) 21 STR 303 (Tri-Bang.)]
54.6
Notification No. 24/2009 dated 27.7.2009 which grants exemption from levy
of service tax to road maintenance or repair is not retrospective.[Karvembu & Co. vs. Under Secretary,
Dept. of Revenue (2010) 20 STR 591 (Mad.); R. Devarajan v Union of India (2010) 20 STR 758(Mad.)]
54.7
Where the appellants were engaged in erection and commissioning of
pre-fabricated structures at
site and also did maintenance and repair work under various work orders at
pre-determined prices, the Tribunal held on facts, that there is no
finding/evidence/ observation flowing from the agreement that both parties
intended repair / maintenance is a separate part and has to be treated as such.
Thus, in the absence of any maintenance & repair contract, the demand based
on rate or value contract work is not sustainable prior to 16.6.05. [Neo
Structo Construction Ltd. vs. CCE & C (2010) 19 STR 361 (Tri. – Ahmd); See also Basant Enterprises v. CCE
2011 (24) STR 352 (Tri-Del.)]
54.8
On facts, it was held
that capital, routine and breakdown maintenance of ash handling plant under a
contract was held liable under the category of maintenance and repair services
[Mitul Engineering Services v. CCE 2011 (24) STR 323 (Tri-Del.)].
54.9
Where the contract required the assessee to – (i)
transport faulty transformers; and (ii) repair them, each for a distinct price,
the Tribunal affirmed the decision of the CCE(A) holding that there were two
distinct services and the value of transportation of faulty transformers would
not be liable for service tax under the category of maintenance and repair
services [CCE vs. Technical Associates (2011)
24 STR 567 (Tri-Del.)].
54.10
Gas turbines which
were affixed to the earth are immoveable property and hence maintenance service
provided in respect thereof prior to 10.4.2006 (should be 1.5.06) would not be
liable to service tax since the relevant entry did not cover immoveable
property [CCE vs. GE Nuova Pignone (2012)
27 STR 380 (Tri. – Ahmd.)].
54.11
The services of Management,
maintenance and repair of roads would not be liable for service tax for the
period 16.6.05 to 26.7.09 (both days inclusive) by virtue of section 97(1) of
the Finance Act, 2012. [J.K.
Constructions vs. CCE (2012) 27 STR 507 (Tri. – Chennai) and K. Seerangan vs. CCE (2012) 27 STR 522
(Tri. – Chennai.)].
55
Management Consultancy services
55.1
The appellants,
engaged in the business of manufacture and sale of drugs,
recovered certain amounts towards ‘staff costs’ and
‘other expenses’ from a
group company which was sought to be taxed by the lower authorities under the
category of Management Consultancy Services. Allowing the appeal the Tribunal
held –
(i)
The plea of the
appellant of being in the business of manufacture and sale of drugs & not
belonging to a profession, trade or calling, would not ipso facto exempt them from service tax since it is the rendering
of service that is taxed and not belonging to a profession, trade or calling.
Similarly, the fact that the service is provided at cost or at profit is not
relevant as taxable event will determine the Tax and not the compensation
thereof.
(ii)
Recovery of ‘other
expenses’ such as publicity, freight, traveling, power and fuel, rent, and
miscellaneous expenses are not for management consultancy services. Further,
service tax is in any case not payable on reimbursement /out of pocket expenses
charged on actuals as per the clarifications & Trade Notices of the
department.
(iii)
Recovery of ‘Staff
Costs’ which comprised of staff costs incurred for 8 teams in marketing
exclusively working for the group company, was for conducting executory
functions and not advisory functions and hence not liable for service tax under
the category of management consultancy services [CBEC circular dated 27.7.2001
noted].
(iv)
The recovery of
staff costs incurred for 8 teams in marketing working exclusively for the group
company were more appropriately covered under the category of business
auxiliary services. The Tribunal stated that when an existing Tariff definition
remains the same, then the introduction of new Tariff entry would imply that
the coverage under the new Tariff for purpose of Tax is an area not covered by
the earlier entry. The new entry of business auxiliary services is extension of
the scope of coverage of Service Tax and not carving out of a new entry, from
the erstwhile entry of "Management Consultancy Service".
[Glaxo
Smithkline Pharmaceuticals Ltd. v. CCE (2005) 188 ELT 171 (Mum.)]
55.2
Where the assessee
trained his customers in computer programming which is not related to their
basic business activity it was held that the activity of the assessee would not
be liable for service tax under the category of management consultancy services
[CCE v. Aisco Engineering Pvt. Ltd.
(2006) 1 STR 324 (Tri - Mumbai)].
55.3
Tata
Technologies Ltd. (TTL) entered into an agreement with SAP
55.4
Enterprise Resource
planning software implementation services would only be liable for service tax
under “IT Software service” w.e.f. 16.5.2008 and not under the category of
Management Consultancy Services prior to that date more so in view of the
specific exclusion of same from the category of ‘consulting engineer’ services.
[IBM India Pvt. Ltd. vs. CST (2010)
17 STR 317 (Tri- Bang)]
55.5
Where the main
object of the appellant’s activity was to find investment proposal/to explore
possibility of investment involving fund allocation, the Tribunal held that the
appellant was not providing the service of management consultancy [Punjab Venture Capital Ltd. vs. CCE (2011)
24 STR 410 (Tri- Del)].
55.6
Where the appellant
had only rendered services in the nature of compliance with statutory
requirement such as applying for and obtaining approvals from Government
bodies, liaison with Government departments, filing of requisite documents with
the Registrar of Companies, and other statutory authorities, carrying out local
statutory requirements and other registrations under various laws and statutes
such as registration under Service Tax, Custom, Central Excise Act,
Export-Import Policy etc., the Tribunal held that the same would not be liable for
service tax under the category of ‘management consultant services’ since the
services did not involve any change / improvement in management of organisation
and also did not require any specialised knowledge of management consultant [CCE vs. Futura Polysters Ltd. (2011) 24
STR 751 (Tri.-Chennai)].
55.7
The activity of
organizing short term courses on various topics relating to forestry
management, environment for the Indian Forest Service, an autonomous body under
the Ministry of Environment and Forest, to improve the skills and knowledge
level of the officers attending the courses, cannot be called as rendering
advice, directly or indirectly, in connection with management of any
organization, and hence would not be liable to pay service tax under the category
of ‘management consultancy service’. [Indian
Institute of Forest Management v. CCE (2012) 25 STR 245 (Tri-Del)]
55.8
Market research
done by an assessee company for its overseas parent cannot be considered as
‘Management Consultancy Services’ especially since during the period there was
a separate entry for “Market Research Services” [Gillette India Ltd. vs
CCE (2012) 26 STR 59 (Tri- Del.)].
55.9
A firm rendering legal
compliance services such as filing documents and obtaining approvals under
various statutes for its clients was held as not rendering ‘Management
Consultancy Services’[Ernst & Young
Pvt. Ltd. vs. CST (2012) 27 STR 462 (Tri. – Del)]
56.1
In this case, the
appellants let out their premises / complex for holding trade fairs to various
parties and also to the Election Commission for arranging for voting, storing
boxes, counting votes etc. for a rent. The revenue sought to tax the rental
receipts under the category of Mandap Keeper. Negativing the Revenue’s
contention the Tribunal held that –
(i)
In order to be a
“mandap keeper” a person must allow temporary occupation of a mandap for
organizing official, social, or business “functions”. The appropriate meaning
of the word “function” in this context would be a ceremony. The levy thus
extends to temporarily organized official, social or business functions i.e.
ceremonies and not to official, social or business activities.
(ii)
A Trade fair is
nothing but a temporary market place because what goes on at the fair is
business as usual and not a business function. Likewise the letting out of
stalls to Election Commission for storing election material etc. is letting out
to carryout its official activities and not to organize official functions /
ceremonies.
Accordingly the Tribunal held that none of
the above activities of the appellant would be liable for service tax under the
category of “mandap keepers”. [
56.2
In the present
case, service tax levied on services rendered by Mandap–Keeper was challenged
on two grounds:
(i)
That it amounts to
the tax on land and therefore by reason of Entry 49 of List 2 (State List) of
the Seventh Schedule to the Constitution, only the State Government is
competent to levy such tax; and
(ii)
Insofar as it
levies a tax on catering services, it amounts to a tax on sale and purchase of
goods and, therefore, is beyond the competence of Parliament, particularly in
view of the definition of tax on sale and purchase of goods contained in
Article 366(29A)(f) of the Constitution.
Repelling the contentions of the appellants
and upholding the judgment of the Madras High Court [133 ELT 36 (
Tax on services provided by a Mandap Keeper
is not a “tax on land”
In order to constitute a “tax on land” under Entry 49 of List 2 [State List] of
Seventh Schedule [Tax on Land and Buildings] to the Constitution the tax must
be directly a tax on land and tax on income from the land does not come within
the purview of this entry. Therefore the tax on services provided by a Mandap
Keeper is within the “legislative competence” of the Parliament.
Tax on catering services does not amount to tax on sale or purchase of goods
(i)
For a tax to amount
to a tax on sale of goods, it must amount to a sale according to the
established concept of sale in the law of contract or more precisely the Sale
of Goods Act, 1930. Article 366(29A)(f) of the Constitution only permits the
State to impose a tax on the supply of food and drink by whatever mode it may
be made. It does not conceptually or otherwise include the supply of services
within the definition of sale and purchase of goods. The fact that there is a
tax on sale of goods involved in a catering service under article 366(29A)(f)
of the Constitution does not mean that service tax cannot be imposed on the
service aspect of catering.
(ii)
Making available a
premise for a period of few hours for the specific purpose of being utilized as
a Mandap whether with or without other services would itself be a service and
cannot be classified as any other kind of legal concept. The services provided
by a mandap keeper cannot be termed as a hire-purchase agreement or a right to
use goods or property. The services provided by a mandap keeper are professional
services which he alone by virtue of his experience has the wherewithal to
provide. The manner in which services is provided assumes predominance over the
providing of food in such situations which is a definite indicator of the
supremacy of the service aspect.
A tax on services provided by a mandap
keeper is therefore in pith and substance a tax on services and not a tax on
sale or purchase of goods or on hire purchase activities.
[Tamil
Nadu Kalyana Mandapam Association v. Union of
56.3
The petitioners a ‘members’ club’ sought a writ from the
High court for a declaration that the petitioner is not a mandap keeper within
the meaning of Chapter V of the Finance Act, 1994 and no service tax would be
payable for the facilities / amenities provided to its members. Upholding this
contention the High laid down the following propositions :
(i)
A writ would not be
entertained if there is an alternative efficacious remedy. Though in this case
there was an alternative efficacious remedy, the court entertained the writ
since interim relief had already been granted earlier and to nip litigation at
its bud;
(ii)
There should be
existence of two sides / entities for having transaction. The ‘Members’ and the
‘club’ both are the same entity, one is the principal and the other is the
agent and therefore a transaction between themselves cannot be regarded as a
service.
(iii)
The ratio of the
judgments in income tax and sales tax would also be applicable to service tax
in such a case and a transaction between the members and the club cannot be
recorded as income, sale or service.
[Saturday
Club Ltd. v. Asst. CCE (2005) 180 ELT 437 (
56.4
CKP, a charitable
trust, let out its halls to several of its clients for official, social or
business functions on the condition that the hirer shall, if catering or decoration
service is required, avail them only from M/s. SCD. CKP entered into two
separate contracts with SCD, giving them an exclusive monopoly right for
rendering the services of catering and decoration to the hirers using the said
halls for a consideration of Rs. 8.35 lakhs and 9.8 lakhs paid to them in
instalments during the period spanning from 1997 – 2002. The question was
whether these amounts are chargeable for service tax under the category of mandap
keepers? The High Court reversing the judgment of the Tribunal held that the
amounts are not liable for service tax under the category of “mandap keeper”
since –
a.
The hirers were the
“clients” of CKP and the charges received from the hirers for use of the halls
for organizing official, social or business functions is alone taxable;
b.
There is no
relationship of mandap keeper and client between CKP and SCD since SCD is not
the person who has hired the halls for organizing any official, social or
business function;
c.
The consideration
received from SCD is not an amount charged by CKP from the hirer but is for
giving them monopoly rights to provide catering and decoration services to the
hirers;
d.
By giving SCD
monopoly rights to provide catering and decoration services to the hirers it
cannot be said that catering services are provided “indirectly” to the hirer
(client) by CKP since CKP has not charged the hirer of the halls on that
account.
[CKP Mandal v. CCE (2006) 4 STR 183
(Bom.)].
56.5
Where the appellants,
a hotel which let out its halls for functions as well as conferences / meetings
but registered itself only under mandap keeper services and not under
convention services, the Tribunal held that the assessee is required to
register under both as mandap keeper services and convention services and
should classify the service each time either as convention or mandap keeper
depending upon whether the hall is let out for organizing official, social or
business function, or for formal meetings / conferences and discharge service
tax appropriately. [Welcome Hotel vs. CCE
(2009) 13 STR 375 (Tri-Ahmd.)]
56.6
“Breakfast” and
“High Tea” (which in social context is used in replacement of dinner) would be
considered as ‘substantial and satisfying meal’ within the meaning of
Notification no. 21/97-S.T. dated 26.6.1997 and an assessee providing them
whether on fixed menu basis or unlimited basis alongwith mandap keeper services
would be entitled to abatement under the said notification. In order to claim
exemption each and every invoice disclosing as to whether the supplied item was
only tea or coffee or the same was inclusive of how many number of snacks etc.
so as to fulfill the meaning of ‘substantial and satisfying meal’ is not
required to be gone through. It would be sufficient if the mandap keeper has
provided catering services and has disclosed the same as ‘inclusive of catering
charges’ in the invoices raised by him. [Welcome
Hotel vs. CCE (2009) 13 STR 375 (Tri-Ahmd.)]
56.7
In a “members club” the members and club both are the
same entities. One maybe called as ‘principal’ and other may be called as
‘agent’. The members have formed the club to service themselves mutually and
for this purpose, members are paying for such user and any amount of receipt
and expenditure of the clubs is enjoyed and / or incurred by the members alone
and not by third party. Thus, applying the principle of mutuality, the facility
of use of premise by the members of the club cannot be termed as “letting out”
nor the members of the club using such facilities can be termed to be “client”.
In the absence of two entities the transactions between the club and its
members would not be a service and consequently no service tax would be
imposable. [Karnavati Club v. UoI
(2010) 20 STR 169 (Guj.) See also Sports
Club of Gujarat Ltd. v. UoI (2010) 20 STR 17 (Guj.)]
56.8
Any service
provided by a mandap-keeper ‘in relation to’ the use of a mandap is liable for
service tax under the category of mandap-keeper services. Thus where the
appellant had made available parking space to the clients, who had availed the
services of the appellant’s Mandap, and had separately recovered parking
charges from them, the Tribunal held that the service of car parking was in
relation to the use of Mandap and hence would be liable for service tax under
the category of mandap-keeper services. [Desert
Inn Limited v. CCE (2011) 23 STR 254 (Tri –Del)]
56.9
The appellant, a
hotel, served food and beverages to the guests of its customer to whom it had
allowed the use of a banquet hall with all its facilities like decoration,
lighting, stage, music etc. It split its bill into 3 parts:
(a) Charges for use of mandap/hall;
(b) Service charges for serving food &
beverages to the guests.
(c) Value of food and beverages sold
It paid service tax
on (a) & (b) above and VAT/sales tax on (c) above. It claimed exemption
from payment of service tax under Notification 12/2003 dated 20.6.03 (i.e
exemption for goods ‘sold’ in the course of providing a service) on (c) above,
which the department disallowed on the ground that there was no ‘sale’ of food.
Upholding this contention the Tribunal held as follows:
(i) The deeming fiction under article 366(29A) (f)
by which the supply of food and drink by way of or as part of service is
considered to be a ‘sale’ for the purpose of charging sales tax does not extend
to service tax and hence the expression ‘sold’ (or Sale) occurring in
notification No.12/2003 cannot be construed to include such a deemed sale.
(ii) The contract of the Mandap keeper with its
customers is to allow use of Mandap with all its facilities like decoration,
lighting, stage, music, catering service etc. for some consideration for
organizing some official, social or business function. The catering service
provided is a service incidental and ancillary to the service in relation to
use of Mandap and though it involves supply of food and beverages, it is
essentially a service contract, not for sale of food and beverages. Supply of
food & beverages by a mandap keeper in the course of providing mandap keeper
services (i.e use of a mandap) is not “sale” of goods as defined in section
2(h) of the Central Excise Act,1944 (i.e transfer of possession in goods) since
the food and beverages served to the guests get consumed by them without there
being a ‘transfer of possession’ of food and beverages from the mandap keeper
to his customer for some consideration notwithstanding the fact that the
invoice shows a specified amount as value of food and beverages.
(iii) The plea that Service tax cannot be levied on
the portion of value of Mandap Keeper Service which represents the value of
food and beverages served is incorrect.
[Sayaji Hotels Ltd v. CCE (2011) 24 STR 177
(Tri-Del)]
57
Manpower, Recruitment or Supply Agency Service
57.1
Where the
appellants conducted examinations for recruitment of clerks, officers and
specialist officers in banks, financial institutions and other organisations
with the object to plan, promote and provide for competent, well qualified and
efficient cadres of personnel at various levels to banks and financial
institutions in the country, and also collected fees for rendering similar
services to persons other than Banks and Financial Institutions, the Tribunal
held that the appellant is not a “commercial concern” (whose primary aim is to
earn profit) and hence not liable to pay service tax on such fees since –
(i)
the activity
undertaken by the appellants was within its object clause and was only with a
view to minimise costs / fees charged to member banks; and
(ii)
the profit earned
from the aforesaid activity was ploughed back and used for the objects of the
organisation itself and not for distributing the profits to its members. [
57.2
The appellant’s
employees were working on the client’s site.
The clients were software companies. The issue was whether the appellant
was providing a service or had only deputed personnel at the client’s disposal.
The appellants contended that he provided a service viz., ‘Consulting
engineering service’ or ‘Information technology service’ and the department
contented that the appellant provided ‘Manpower Recruitment or Supply Agency Service’.
The Tribunal observed that as per the actual operations the appellants
are providing the skilled personnel to the client and hence would be liable
under ‘Manpower
Recruitment or
Supply Agency Service’ based on the following reasons.
(i)
There was no evidence to show that the software project undertaken by the
clients are sub-contracted to the appellant or that the appellants were working
on any such project on their own;
(ii)
The appellant’s skilled
personnel were working under the supervision and control of the clients;
(iii)
The contract provided that
in case where the appellant’s skilled personnel leave the job they are to be replaced
by suitably trained personnel as substitutes thus indicating that the number of
skilled persons supplied was important from the point of view of the
client. If the appellants were actually
to deliver the software projects, the clients would have nothing to say how
many personnel the appellants engage to complete the project or who they
employ.
[Future Focus Infotech
Contra : In a similar case, in Cognizant
Tech Solutions (I) Pvt Ltd vs CCE 2010 (18) STR 326 (Tri-chennai) on facts
it was held that services were in the nature of “IT software services” and not
“Manpower recruitment services” since the work force recruited and retained by
the appellants were required to work under a project manager appointed by the
appellants who had to act as a single point of contact being responsible for
overall management of the project and the nature of services required to be
provided by the appellants were in the nature of information technology
services as the same related to data management.
Where the assessee
was an academic institution, and not a ‘commercial concern’ the Tribunal held
that receipts from various business organizations for the campus recruitment
programme conducted by them would not be liable for service tax under the
category of ‘manpower, recruitment and supply agency’ services prior to
01.05.2006, since at that point of time only service rendered by a ‘commercial
concern’ was liable for service tax. [CST
vs. Indian Institute of Management (2011) 23 STR 132 (Tri – Bang)]
58
Market Research
Agency’s service
58.1
‘Product promotion
service’ and ‘market development service’ under ‘Market Assistance Agreement’
provided by the assessee to their clients whereby the assessee developed
prospective customers, provided growth plans for its client’s products,
assisted in formulating market strategies, customer service and pricing
policies etc. could not have been accomplished without ‘market research’ and
therefore the amount collected by the appellant under the agreement is liable
under ‘Market Research Agency’s service’. [Kopran
Ltd v CCE (2011) 23 STR 627
(Tri-Mumbai)]
59
Mining Service
59.1
The appellant
entered into contracts with its customers for beneficiation / washing of raw
coal at its washery (which included bringing the coal to its washery) and
supply of washed coal to its customers. The appellant charged his customers for
washing and handling separately. The Revenue sought to tax the washing charges,
under ‘business auxiliary services’ and handling charges under the category of
‘cargo handling services’. On appeal, the Tribunal held –
(i)
The
activity of beneficiation / washing of
raw coal is liable for service tax under the category of ‘mining services’
w.e.f 1.6.2007 and not under the category of ‘Business Auxiliary Services’
prior to 1.6.2007
(ii)
The
activity of handling coal for bringing it to the washery is an integral part of
mining services. It is not handling provided to any other person but only to
self. Hence, handling charges are not liable for service tax under ‘cargo
handling services’
[Aryan Coal Benefications Pvt. Ltd. vs. CST
(2013) 29 STR 74 (Tri. – Del); See also Spectrum Coal & Power Ltd. vs. CCE (2012) 28 STR 510(Tri. –
Del.)].
60
Operation and
maintenance contracts
60.1
The appellants
operated and maintained a power plant for the owner of the
plant and were responsible for generation of
electricity and selling it to TNEB which had an agreement with the owner. The
appellants received a fixed monthly remuneration from the owners. The
department sought to tax the remuneration under the categories of Management
Consultancy services, consulting engineering services, clearing and forwarding
services, business auxiliary services, maintenance and repair services. The
Tribunal dismissed the department’s contentions and held as follows :
(i)
In order to fall
within the ambit of “management consultancy services” a person must provide
advice in applying management principles for efficient functioning of an
organization. In the present case the appellant was not offering any advice for
improvement of owner’s organization. Its primary function was to generate and
transfer power to TNEB including carrying out incidental and ancillary
functions such as maintaining the plant with its team of experts including
engineers. Accordingly, its services are not liable for service tax under the
category of “Management consultancy services”.
(ii)
As the plant is run by the appellants, it
cannot be held that they had rendered any engineering consultancy to owner or
anybody else. Accordingly its services are not liable for service tax under the
category of “Consulting engineering services”.
(iii)
Ensuring quality of
the fuel and its availability to run the plant without interruption are
functions incidental to the operation of the plant for generating power and
therefore coordinating the delivery of lignite with the transporting agency and
ensuring that the fuel of required specification is supplied cannot be held as
a separate service rendered by it and such activities are not liable for service
tax under the category of “Clearing & Forwarding Agent” as contended by the
department.
(iv)
As per the
definition of “Business auxiliary services” any activity involving
manufacturing of any goods within the meaning of clause (f) of Section 2 of the
Central Excise Act, 1944 is specifically excluded. Generation of electricity
being “manufacture” would therefore not be liable for service tax under the
category of “business auxiliary services”.
(v)
The services
provided by the appellants could not be considered as maintenance and repair
since maintenance and repair are only incidental and ancillary functions to
generation of power which was its primary function. Here these services could
at the most be considered as services rendered to themselves and not to another
person. Accordingly, their services are not liable for service tax under the
category of “Maintenance and repair services”.
The Tribunal
concluded that the O&M contract is a works contract and it is bad in law to
vivisect it and tax certain activities covered by the contract. It held that
the contract was intended to ensure generation and supply of power as per the
power purchase agreement and not for rendering any service to the owner. It
also observed that tax cannot be levied when the liability of the assessee is
not determined precisely with respect to each of the taxable services found to
have been rendered. No tax can be levied
without specifying taxable value. [CMS
(I) Operations & Maintenance Co. P. Ltd. v. CCE (2007) 7 STR 369
(Tri-Chennai) See also Basti Sugar Mills Co. Ltd. v. CCE (2007)
7 STR 431 (Tri.-Del.); GVK Power & Infrastructure Ltd. vs. CCE
(2008) 10 STR 146 (Tri-Bang.)].
61
Online Information
and Database Access or Retrieval service
61.1
Providing online
computer courses through the medium of internet is in the nature of “commercial
training and coaching services” and not “online information and database access
or retrieval services” since, the essential character of the services involves
providing education through the medium of internet i.e. providing online
lessons on computer hardware and software, online interaction with the faculty,
students and experts, online test, etc. and not merely providing online access
to data or information. However, computer training institutes being exempt vide
notification no. 9/2003 dated 20.6.2003, the appellants were not liable for
service tax. [Dewsoft Overseas Pvt. Ltd.
vs. CST (2008) 12 STR 730 (Tri. –
62.1
The appellant
supplied food, beverage and dry stores to air lines; prepared two separate
invoices – one for supply of food and another for service charges. It paid VAT
on supply of food and service tax on the service charges after availing benefit
of notification no. 12/2003. The department denied the benefit of notification
no. 12/2003 on the ground that there is no ‘sale of goods’ but granted
abatement of 50% of the total amount (supply of food + service charges) under
notification no. 20/2004 dated 10.9.04. The Tribunal setting aside the order of
department held that –
i.
In view of the
Article 366(29A) read with provisions of Karnataka VATAct, 2005 the supply of
food would be deemed as sale of goods. Further, since VAT has been paid on such
supply of goods service tax is not payable on the same value.
ii.
Benefit of
notification no. 12/2003 is squarely applicable to the appellant since the
supply of food constitutes ‘sale of goods’.
iii.
Where benefit under
two notifications is available to the assessee, he has an option to choose more
beneficial notification.
[Sky Gourmet Pvt. Ltd. Vs. CST (2009) 14
STR 777 (Tri. – Bang.); See also
LSG Sky Chefs (
62.2
Mere preparation and serving food items to the
employees of the company using the facilities such as canteen, stores,
furniture, utensils, gas, electricity, etc. provided by the company itself, is
not covered under outdoor catering service. [Rajeev Kumar Gupta vs. CCE (2009) 16 STR 26 (Tri. – Del.)]
63.1
Packaging and bottling of country made liquor would
not be liable for service tax under the category of ‘packaging service’ since
the same is in the nature of a manufacturing process as defined under Section
2(f) of the Central Excise Act, 1944 for the following reasons:
(i)
‘Manufacture’ includes any process which is incidental or ancillary to
the completion of manufactured product such as ‘bottling’. Further, it is not
necessary that the manufacturing process referred to in section 65(76b) of the
Finance Act must result in excisable goods.
(ii)
Bottling of liquor cannot be considered as a process distinct from
manufacturing of liquor so as to levy service tax thereon.
[Maa Sharda WineTraders vs. UOI
(2009) 15 STR 3 (M.P)]
64
Pandal and shamiana Service
64.1
Section 65(77a) defines a “Pandal and Shamiana” as a
place specially prepared for organizing an official, social or business
function and the Explanation provides that a social function includes marriage.
The High court dismissed the writ petition for considering the Explanation to
section 65(77a) as unconstitutional on the contention that Hindu marriage is
sacred institution and not a social function in view of the following:
(i) When a “pandal or shamiana” is used for
marriage, it earns the status of social function as service component is
involved.
(ii) The statute itself postulates that marriage is to be regarded as a
social function and full effect has to be given to the same.
[All India Tent Dealers Welfare
Organisation vs. UoI (2011)24 STR 385 (Del)].
65
Photography services
65.1
Goods and materials
during the course of providing photography services is not includable in the
value of taxable service for the purpose of charging service tax. Further, the
Circular F.No.233/2/2003-CX-4 dated 3.3.2006 clarifying otherwise is not in
accordance with the judgment of the Supreme Court in BSNL case. [Shilpa Color Lab v. CCE (2007) 5 STR 423
(Tri.-Bang.) Contra
S.R.Gupta & Sons. Vs.
CCE
(2012) 27 STR 501 (Tri. –
Del.)]
65.2
Colour photo laboratories which are merely engaged
in receiving exposed negatives/ rolls, developing the same and printing the
photographs of desired size are liable for service tax under the category of
photography service.[Colorway Photo Lab vs. UOI (2009) 15 STR 17 (M.P.)]
66.1
In the present case
the following issues were referred to the Larger Bench of the Tribunal viz.,-
(i) Whether
any provisions other than clause (q) of Section (2) of the Major Port Trust
Act, 1963 or any provisions other than clause (4) of Section (3) of the Indian
Ports Act, 1908 are applicable to interpretation of “port service” defined
under section 65(82) of the Finance Act, 1994;
(ii) Whether
stevedoring in a major or minor port is a “port service” within the meaning of
this expression defined under Section 65(82) of the Finance Act, 1994;
(iii) Whether
activities like intercarting (transportation of cargo after its unloading from
a vessel to a place of storage within the port area), storage of cargo in plots
allotted by the port, blending of different grades of coal in the port area and
any other kind of cargo handling in the port area can be held to be services
ancillary to stevedoring and whether they can be classified as port services?
The Larger Bench of
the Tribunal answered the reference as follows:
(a) The
Finance Act, 1994, is a legislation enacted for the purpose of taxation whereas
Major Port Trust Act, 1963 (“MPT Act”), and the Indian Ports Act, 1908 (“IP
Act”), are enacted for setting-up and administration of ports. In absence of
legislative mandate except the definition of the term “port” or “other port” as
defined in the two acts, any other provisions of the said Acts cannot be used
for interpretation of the “port services” as defined under section 65(82) of
the Finance Act, 1994. Accordingly, “port services” would mean any service
which is provided by a port or other port or any authorised person in relation
to vessel or goods.
(b) The
definition of ‘port services’ brings any service provided by port or other port
in relation to vessel or goods within the service tax net. Hence the facilities
provided by a port to render the stevedoring service performable brings the
stevedoring service under the category of ‘port service’ [Following Karnataka
High court judgement in CCE vs. Konkan Marine Agencies (2009) 13 STR 7 Kar.)].
(c) A service which is attributable or inevitable
or indispensable for the functioning of the “port” or “other port” and advances
the object of setting up the ports, such service is said to have been provided
by a ‘port’ or ‘other port’. The expression ‘any service’ encompassed by the
term ‘port services’ does not exclude any service provided by a port or other
port to serve the purpose of the port. Hence the activities like intercarting
(transportation of cargo after its unloading from a vessel to a place of
storage within the port area), storage of cargo in plots allotted by the port,
blending of different grades of coal in the port area and any other kind of
cargo handling in the port area can be held to be services ancillary to
stevedoring and classified as port services.
[Western
Agencies Pvt. Ltd. vs. CCE (2011) 22 STR 305 (Tri-LB)].
66.2
Railway siding
charges received by the appellants, a port trust, from the Railways for
allowing them to utilise their railway marshalling yard for construction and
maintenance of railway sidings are not services in relation to vessels or goods
and accordingly not liable for service tax under Port Services. [New
66.3
The appellants,
a minor port, provided various port
services and registered for service tax with effect from 1.7.2003. It raised separate bills for wharfage,
storage, etc. The department contended that the storage charges are liable for service tax under the category of “Storage and
Warehousing Services” w.e.f. 16.8.02. Dismissing the contention of the
department the Tribunal held that storage charges was not liable for service
tax under “storage and warehousing services” but under “port services” since:
(i)
Storage & Warehousing is not a separate service but were an
essential, integral and core part of the port service and were performed for
the better enjoyment of the port service;
(ii)
Port services were subsequently introduced w.e.f. 1.7.03 without making a
change in the definition of Storage and Warehousing service thus indicating
that the two services were distinct and separate services.
[Gujarat Chemical Port Terminal Company Ltd. v. CCE (2008) 9 STR 386
(Tri. – Ahmd.)].
66.4
Where the
appellants holding licences as a stevedoring agent were providing cargo
handling services but such services were
not rendered on behalf of the port authorities - the Tribunal held that the
appellant’s services are Cargo handling services and not port services [H.K. Dave Ltd. v. CCE (2008) 12 STR 561
(Tri-Ahmd.) See also CCE vs. Konkan Marine Agencies (2009) 13 STR
7 (Kar)].
66.5
(i) In a case where the appellant conducted an
auction of the cargo not cleared by the importers and appropriated the proceeds
towards terminal /port charges, the Tribunal held that ‘conducting of auction’
of cargo is not a service rendered to importers and hence the service tax is not
payable.
(ii) Fees collected for making available the
infrastructure facility for examination of the cargo by customs authorities
before the goods enter into the port area is not liable for service tax under
the category of port services.
[
66.6
In the present case
the Tribunal held that the following revenues would not be liable under the
category “port services:
(i)
Royalty received by
the appellant [Cochin Port Trust (“CPT”)] from India Gate Terminal Pvt. Ltd.
(IGTPL) to develop & operate a terminal named the Rajiv Gandhi Container
Terminal (RGCT) in the port area is not a consideration for providing any port
services (i.e. a service in relation to vessels or goods). Further, if at all
IGTPL pays service tax as demanded the same will be available to it as cenvat
credit to pay its output tax. Hence demand on this count under the category of
the “Port Services” is not sustainable.
(ii)
the rent collected
from individuals / agencies for allowing them to construct and operate jetties,
cannot be considered as consideration towards port services.
[
66.7
Ship
repairs undertaken by shipchandlers in port area under a licence from the port
is liable for service tax under the category of ‘Port Services’. The argument
that the scope of ‘port services’would only include those services which the
port under a statutory obligation under Major Port Trusts Act, 1963 or other
statute is entitled to perform itself or ‘authorise’ others to do, is
incorrect. The ‘authorisation’ need not necessarily be in respect of only those
functions which the Port itself was required to perform under the Act [Kandla shipchandlers and ship repairers
association v. Union of India (2013) 29 STR 233 (Guj.) – Homa Engineering Works v. Commissioner
(2007) 7 STR 546 (Tri.) overruled]
67.1
Where the
appellants provided the service of transportation of passengers of the Indian
Oil Corporation to destinations fixed by the Corporation, in a “matador”, for a
consideration fixed per trip depending on the distance, time, etc. and during
the time of the operation the vehicles continued to be with the appellant and
the vehicle was not leased out to the Corporation for use according to its
discretion, the Tribunal held that the appellants were not a liable for service
tax under the category of “rent-a-cab scheme” operator. [Kuldip Singh Gill v. CCE Jalandhar (2005) 186 ELT 373 (Tri-Del.) see
also
[Vijay Travels vs. CST (2010) 19 STR 671 (Tri-Ahmd)]]
67.2
Where the
appellants had rented out two of its vehicles having seating capacity of less
than 6 and 6-12 passengers for hire, the Tribunal held that the activity of the
appellants would be covered under “rent-a-cab services” since all vehicles with
the relevant seating capacity used for transportation of passengers would fall
within the definition of ‘cab’, ‘motor cab’ and ‘maxi cab’ for the purpose of
service tax notwithstanding that other requirements of Motor Vehicles Act with
respect to the vehicles have not been complied to consider it as motor cab or
maxi cab. [Neeraj Construction vs. CCE
(2009) 13 STR 145 (Tri-Del)]
67.3
Providing a cab on hire on monthly basis in different shifts of
8/12/16 hours and limit of maximum kilometres per month as well as maximum
hours per day was fixed is liable for service tax under the category of ‘rent a cab’ service
[Lok Priya Travels v. CCE (2012) 25
STR 49 (Tri-Ahmd), see also Gopal Singh
Chundawat v. CCE (2012) (25) STR 86 (Tri-Del)].
67.4
‘Ambulances’ not being meant for carrying passengers on hire would not
be liable for service tax under rent a cab services [CCE v. Surya Bhan Tripathi (2012) 25 STR 65 (Tri-Del)].
67.5
Where the assessee
had entered into a long term contract with various units of Indian Army for
making available on hire basis various means of transportation such as taxis,
mini buses, deluxe and non deluxe buses at fixed rates but had not put the
vehicles at the disposal of army for any fixed duration, the Tribunal held that
the said services would not be covered under the category of ‘Rent-a-cab’
services [CCE vs. Sapan Mehrotra (2012)
26 STR 219 (Kar.)].
67.6
On facts, where the
assessee transported ONGC’s personnel from point to point under the directions
of ONGC for a specified period, but the control over the vehicles and drivers
were always with the assessee and it was he who bore the cost of fuel,
maintenance, etc. and got paid based on the kilometers travelled, it was held
that the assessee’s services were that of ‘transportation’ and not ‘renting a
cab’ so as to be liable for service tax [Shree
Gayatri Tourist Bus Service vs. CCE (2013) 29 STR 499 (Tri. – Ahmd)]
67.7
Where the assessee
had contracted to provide cab on call basis and at scheduled rates and not on
term basis without any exclusive control to the customer, the Tribunal held
that its services were in the nature of transportation and would not be liable
for service tax under ‘Rent-a-cab Service’ [CCE
vs. Singh Travels (2013) 30 STR 96 (Tri.-Del.)].
68
Renting of Immovable property
68.1
In this case the larger bench (3 judges) of the Delhi High Court held-
(i) When
premise is taken for commercial purpose, it is basically to subserve the cause
of facilitating commerce, business and promoting the same. Therefore, there can
be no trace of doubt that an element of value addition is involved and once
there is a value addition, there is an element of service. Hence the imposition
of service tax on renting is not a tax on land and building under Entry 49 of
List II (State List).
(ii) The
provisions, namely, Section 65(105)(zzzz) and Section 66 of the Finance Act,
1994 and as amended by the Finance Act, 2010, are intra vires the Constitution
of India.
(iii) The
decision rendered in the first Home Solution case does not lay down the correct
law as there is value addition when the premises is let out for use in the
course of or furtherance of business or commerce and it is, accordingly
overruled.
(iv) As
the first Home Solution case is overruled, the provisions would operate from
2007 and the amendment brought by the Parliament is by way of ex abundanti
cautela.(i.e as a matter of abundant caution)
(v) The
retrospective amendment made by Finance Act, 2010 is constitutionally valid.
[Home
Solutions Retails (India) Ltd v. Union of India (2011) 24 STR 129 (Del-LB) overruling
Home Solutions Retail India Ltd. vs. UOI
(2009) 14 STR 433 (Del.)]
68.2
Letting out the property (air-conditioned space) where
the customer airlines
install
and operate their x-ray machines would be liable for service tax under the category of ‘renting of immovable property
services’. [Kerala State Industrial
Enterprises Ltd. vs. CST (2011) 21 STR 423 (Tri-Bang.)]
68.3
In a petition
seeking declaration of the provisions relating to service tax on renting of
immoveable property as ultra vires,
the Constitution, the
(i)
It cannot be held
that renting of property did not involve any service. Renting of property for
commercial purposes is certainly a service and has value for the service
receiver.
(ii)
service tax on the service of renting of property is
not a “tax on land and building” covered by Entry 49 List II which is the
subject of the State Legislatures but is on the service element in renting
transaction which is within the legislative competence of the Parliament under
Entry 92C read with Entry 97 of List I.
(iii)
The amendment made by the Finance Act, 2010
retrospectively from 1.6.2007 is constitutionally valid.
[Shubh Timb
Steels Ltd. v. Union of India (2010) 20 STR 737 (P&H) See
also Utkal Builders Ltd. vs. UOI
(2011) 22 STR 257 (Ori.)].
68.4
A tenant not being
the ‘service provider’ has no locus standi to challenge the imposition of
service tax on ‘renting’. [Devyani
International Ltd. vs. UOI & Ors. (2011) 22 STR 262 (Kar.)]
69
69.1
The appellant’s
services of soliciting clients for sale of space in newspapers would be
considered as a service ‘in relation to’ sale of space and more aptly covered
within the category of ‘sale of space or
time for advertisement’ which is effective from 1.5.2006 and not under the
category of ‘business auxiliary services’ prior to that date. [Margadarsi Marketing Pvt. Ltd. vs. CCE &
ST (2010) 20 STR 195 (Tri. – Bang.)]
70
Scientific or Technical Consultancy
70.1
‘Grants-in-aid’ received by the assessee from the
Central and State Governments for implementing various social welfare schemes
for the benefit of various sections of the society such as minorities, poor
villagers, etc. is not liable for service tax under the category of ‘scientific
and technical consultancy services’ since the assessee only acted as an
implementing agency and did not render any ‘service’ to the Government and
hence there was no service provider-client relationship between the assessee
and the Government. [APITCO Ltd. Vs CST (2010) 20 STR 475 (Tri. –Bang.)]
70.2
Agreements for transfer of brandnames/trademarks and
knowhow by the appellant for a consideration are not liable for service tax under the category of
‘Scientific or technical consultancy’services. These transactions involve
permanent transfer of intellectual property and are covered under ‘intellectual
property service’, which was not taxable during the period of dispute.[Kopran Ltd v CCE (2011) 23 STR 627
(Tri-Mumbai)]
70.3
Where the appellants were engaged in carrying out
advanced research & development projects in Maritime Transportation sector
mainly in relation to ship design and production the Tribunal held that the
same is liable for service tax under the category of ‘scientific and technical
consulting’ services and not under the category of ‘consulting engineer’
services [CCE vs. National Ship Design
& Research Centre (2011) 24 STR 716 (Tri.- Bang)].
71.1
The appellants were
a corporation formed under the Punjab Ex-Servicemen Corporation Act, 1978 with
an objective of welfare and rehabilitation of Ex-Servicemen. As a part of their
objectives they were engaged inter alia
in providing security agency services. They contested the levy of service tax
on the grounds that they were not a commercial concern engaged in business and
hence their activities would not be liable for service tax. Further in any case no service tax would be
payable on the amount of salaries paid by it to its security personnel. On appeal
the Tribunal dismissing the above contentions observed that
i)
for levy of service
tax the nature of activity is relevant and not the objectives. The test for
determining as to whether a concern is a “commercial concern” would be as to
whether it charges fully commercial price for the goods or services sold by it
and monitors its commercial performance by preparing Annual balance sheets and
profit and loss account. From mere objectives of an organisation – like welfare
of ex-servicemen or other sections of the society requiring help, promotion of
sports etc. it cannot be concluded that it is not a commercial concern. Since
the appellants charged full commercial price for the services rendered by it
and used to monitor its commercial performance by preparing Balance sheets and
Profit and loss account it was held to be a “commercial concern”.
ii)
the assessable
value of the security agency services shall include the salaries of the
security personnel provided.
[Punjab Ex-Servicemen Corpn. vs. CCE
(2009) 13 STR 529 (Tri-Del.) affirmed in Punjab Ex-Servicemen Corporation v. UOI (2012) 25 STR 122 (P&H)]
71.2
On facts the
Tribunal held that an Association which was a co-operative society or
organizations whose object was to serve ex-servicemen and look after the
welfare activities of their families was not a “commercial concern” so as to
make them liable to service tax prior to 18.04.2006 under the category of
security agency service [Bhootpurva
Sainik Society v. CCE & ST (2012) 25 STR 39 (Tri-Del)].
72
Short-term Accommodation Service
72.1
The
services of providing accommodation to pilgrims in guest houses would be liable
for service tax under the category of ‘Short-term
Accommodation Service’ [Tirumala Tirupati
Devasthanams vs. Superintendent (2013) 30 STR 27 (A.P.)].
73
Site formation and
clearance, excavation and earth moving and demolition Services
73.1
Where the
appellants under a contract with APMDCL
were required not only to remove the overburden but to extract Barytes Ore the
Tribunal held that the essential character of the activities of the appellants
were in the nature of mining services and site formation (i.e. removal of
overburden) was only incidental. Since mining services were liable to service
tax only w.e.f. 1.6.2007 the demand for a period prior to 1.6.2007 is not payable.
Further, the Tribunal also observed that the contract for mining being
comprehensive in nature cannot be vivisected for the purpose of levying service
tax on the portion of activity relating to site formation services.[M. Ramakrishna Reddy vs. CCE&C (2009)
13 STR 661 (Tri-Bang.); See also CCE vs. Vijay Leasing Company (2011) 22 STR 553 (Tri-Bang.) ]
74
Supply of tangible goods for use services
74.1
The petitioner
supplied various types of vessels (offshore drilling rigs, off-shore support
vessels, harbour tugs and construction barges) on ‘time charter basis’ to
various oil and gas producers to carry out off-shore exploration and production
activities. The department contended
that the services are in the nature of services ‘in relation to’ mining and
hence liable under the category of ‘mining services’ w.e.f. 1.6.07, while the
petitioners contended that it would be liable for service tax under the
category of ‘supply of tangible goods for use’ without transferring effective
control and possession w.e.f. 16.05.08. Upholding the contention of the
petitioners the High Court observed:
(i)
When a new entry is
introduced and certain services are included in that entry, it would presuppose
that there was no earlier entry covering the said services. Since the services
of the petitioner are squarely covered by the entry 65(105)(zzzzj) i.e. service
in relation to supply of tangible goods, prior to introduction of the said
entry, the services rendered by the
petitioners were not liable.
(ii)
The services
rendered by a person must have a direct or proximate relation to the subject
matter of the taxing entry and the context in which the words ‘in relation to’
are used has to be borne in mind to judge the extent of the scope of an entry
which may be of wide amplitude. Thus, in the present case, services having
remote connections cannot be included in entry (zzzy) i.e. service in relation
to mining of mineral, oil or gases on the strength of the words “in relation
to”.
[Indian National Shipowners vs. UOI
(2009) 14 STR 289 (Bom.)]
75.1
In a case where
assessee was registered as a stock broker with SEBI but working as a sub-broker
the Tribunal held that the assessee was providing taxable services as a stock
broker and is covered by the definition of stock broker. Accordingly service
tax recovered from the customers is liable to be deposited u/s. 11D of the
Central Excise Act, 1944. [
75.2
Services provided
by a sub-broker to a stock broker viz., of getting prospective investors for
sale or purchase of securities is liable for service tax post 10.9.04 under the
category of “stock broker services”. [Unique
Investment Centre vs. CCE (2009) 13 STR 158 (Tri-Del.) Decision in Vijay Shantha v. CCE (2007) 7 STR 518
(Tri-Del.) held per incurium]
Note: As per Finance (No.
2) Act, 2009 services provided by sub brokers are excluded from service tax
under the category of stock broking services w.e.f. 1.9.2009.
76
Storage and
Warehousing services
76.1
Where the
appellants, who were engaged in manufacturing of sugar, were required by
Government of India to maintain a specific quantity of free sale sugar for a
specified period to comply with the provisions of Sugar development Fund Act,
1982 for which they were compensated by way of reimbursement of expenses
towards interest, storage and insurance, the Tribunal held that they would not be treated as providing of
‘storage and warehousekeeping services’ to Government and accordingly would not
be subjected to service tax on the said reimbursement received from the
Government.[Nawanshahr Co-op. Sugar Mills
vs. CCE (2008) 12 STR 176 (Tri-Del.)]
76.2
In this case the Tribunal held that -
(i)
Terminal charges collected by the custodian at the air cargo complex for
providing services such as stacking, unloading and facilitation for x-raying of
export cargo being incidental to the provision of storage services is liable
for service tax under the category of storage and warehousing services.
(ii)
Demurrage charges collected by the appellant for storing unaccompanied
passenger baggage is liable for service tax under the category of storage and
warehousing services.
[Kerala State
Industrial Enterprises Ltd. vs. CST (2011) 21 STR 423 (Tri-Bang.)]
76.3
In this case the
High Court held that subsidy received from the Government towards interest, storage and insurance for
maintenance of a specific quantity of free sale sugar for a specified period
(buffer stock) under the provisions of Sugar Development Fund Act, 1982 is not
liable under the ‘storage and warehousekeeping services’ after making the
following observations-
(i)
Nobody
can provide service to himself – the appellant stored the goods owned by
himself for a specified period and after the expiry of the period he was free
to sell the same;
(ii)
Subsidy
received was not on account of services rendered to Government but is received
as compensation on account of loss of interest, cost of insurance etc. incurred
on account of maintenance of stock.
(iii)
Just
because the storage period of free sale sugar had to be extended at the behest
of Government of India, neither the sugar mills becomes ‘Storage and Warehouse
Keeper’ nor the Government of India become their client in this regard.
[CCE vs. Nahar Industrial Enterprises
Ltd. (2010)
19 STR 166 (P&H)]
76.4
The Karnataka State
Warehousing Corporation, whose services are requisitioned by the State
Government for storing of essential commodities like fertilizers on payment of
a charge, does not perform a “statutory function”, and is liable for service
tax under storage and warehousing services [Karnataka
State Warehousing Corporation Ltd. v. CCE (2010) 19 STR 32 (Tri-Bang.)]
76.5
The Apex Court in case of R.D.Saxena
v. Balram Prasad Sharma AIR 2000 SC 912 held that the ‘case files’ of banks
retained by an advocate would not be considered as ‘goods’ as they are not
‘saleable’ and do not have any marketability. The Tribunal relying on the
aforesaid judgment held that the service of storage of old records and files
provided by the assessee to various banks and corporate houses would not be
considered as storage and warehousing of ‘goods’ and hence not liable for
service tax under the category of ‘storage and warehousing service’ [CST v. P.N. Writer & Co. Ltd. (2012)
28 STR 264 (Tri.-Mumbai)].
76.6
On the question whether ‘terminal charges’ charged by an assessee, owning
an air cargo terminal, from airlines for providing the facility for x-raying,
security check, completion of custom-formalities and short duration safe
custody of goods and passenger baggage for transit to the plane within a
cut-off period of 48 hours from the arrival of the cargo/baggage is liable for
service tax under the category ‘storage and warehousing service’, the High
Court held as follows:
(i)
Where standard rates are charged based on quantity, volume, nature of
handling, etc. irrespective of the time taken within the cut-off period of 48
hours then such charges are not liable for service tax under the category
‘storage and warehousing services’.
(ii)
Where additional charges are levied over the standard rates for handling
and clearance of goods within 48 hours, then such additional charges can be
treated as attributable to storage & warehousing and service tax can be
levied.
[Kerala
State Indl. Enterprises Ltd. v. CCE, C&ST (2012) 28 STR 574 (Ker.)].
76.7
The appellant, under a contract with its client drew crude oil from
subsea wells, processed it in a ‘floating production unit’ (FPU) and
transported it to fleets. It engaged a foreign company for provision of
operations personnel, maintenance, spare parts, supplies and all other
resources necessary for operation at FPU. The department contended that the
foreign company provided ‘storage and warehousing’ services to the appellant
and hence the appellant liable for service tax as a recipient of services. On
facts, the Tribunal held that the foreign company cannot be treated as ‘storage
and warehouse keeper’ providing storage services [Aban Loyd Chiles Offshore Ltd. v. CST (2012) 28 STR 622
(Tri.-Chennai)].
77
Survey or Map
making services
77.1
Where the
appellants undertook detailed engineering survey, cadastral survey (collection
of records related to land), soil investigations (testing of soil samples),
drawing and submissions of maps the Tribunal held that the said activities
would be liable for service tax under the category of ‘survey or map making
services’ w.e.f 16.6.2005 and not consulting engineering services. [CCE vs Mascon Multiservices &
Consultants P. Ltd. (2009) 14 STR 190 (Tri-Ahmd.)]
78
Technical
Inspection and certification services
78.1
Software testing is not liable for service tax under
the category of ‘Technical inspection and certification service’ since
(a)
it is an integral part of software development which is not liable for
service tax;
(b)
it has ben specifically brought under ‘Technical testing & Analysis’
w.e.f. 16.5.08 and hence not liable prior to that date.
[Relq Software Pvt. Ltd. vs. CST (2009) 14 STR 799 (Tri-Bang.)]
78.2
Licencing of standard mark popularly known as ‘ISI’
mark to be affixed in products (such as cement bags etc.) which is granted
after drawal of sample, testing, etc. by the Burueau of Indian Standards
(“BIS”) in consideration for a marking fee is liable for service tax under
‘technical inspection and certification services’. [Grasim Industries Ltd. v. CCE (2009) 15 STR 734 (Tri-Chennai).]
78.3
The Tribunal in the
present case held that the activities carried out for
certification of quality
management systems practiced by clients for ISO 9001:2000 certification
requirements, would not come within the purview of ‘Technical inspection and
certification services’ after making the following observation:
(i)
only inspections related
with goods, materials or immovable property would be liable for service tax
under the said category;
(ii)
the word ‘process’ used
in the definition clause would keep company with the words ‘goods’, ‘materials’
or ‘immovable property’ on the principle of ejusdem generis;
(iii)
the word ‘process’ would
relate only to physical and chemical process and would not extend to include
‘management process’ which is in relation to human beings;
[American Quality Assessors (I) Pvt. Ltd.
vs. ACST (2009) 16 STR 413 (Tri Bang)]
79
Technical testing and
analysis
79.1
Clinical testing of
drugs is not liable for service tax under the category of “Technical testing
and analysis” for the period prior to 1.5.2006 since –
(i)
the
testing is ‘in relation to’ human beings or animals which is specifically
excluded; and
(ii)
The
Explanation to section 65(106) inserted w.e.f 1.5.2006 which specifically
included within the definition of “Technical Testing and Analysis”, clinical
testing of drugs and formulations but excluded diagnostic testing w.e.f.
1.5.2006 expanded the scope of the definition of Technical Testing and Analysis
service and hence cannot considered as clarificatory in nature despite the use
of the words “For the removal of doubts, it is hereby declare that” and accordingly
the said Explanation would not have retrospective effect i.e. prior to 1.5.2006.
[B.
A. Research India Ltd. vs. CST (2010) 18 STR 604 (Tri. – Ahmd.); See
also Synchron Research Services
P. Ltd. vs. CST (2011) 24 STR 654 (Tri.-Ahmd)]
80.1
Leasing out
bandwidth available on a network by a telegraph authority to another telegraph
authority would not be liable for service tax under the category of ‘leased
circuit services’ as it was defined prior to 1.6.07 [Power Grid Corporation of India Ltd. v. CST (2011) 24 STR 307
(Tri-Del.)].
80.2
Leased lines
capable of providing voice communication are covered under the “telephone
service” even prior to 16.07.2001. However, leased lines capable of providing
only data communication are covered under ‘Leased circuit Services” only from
16.07.2001 and cannot be brought under “telephone service” prior to 16.07.2001
[BSNL vs. CCE (2011) 24 STR 435
(Tri-Del)].
81
Tour operator
81.1
Services like
arranging guide services, monument visit services, porter services, food
services, general assistance services etc. provided by the assessee to
Principal Tour operators who offered package tours to tourists are liable for
service tax even before 10.9.2004 since they are services “in relation to” to a
tour. However, amounts paid as advances by the principal tour operators to be
paid to tour escorts and inter-branch billing would not be liable. [Touraids (I) Travel Services vs. CCE
(2008) 12 STR 452 (Tri-Del.)]
81.2
Where
the appellants used its buses
for transportation of its employees the Tribunal on facts held that appellants
would not be liable for service tax under the category of Tour operator service
since:
i.
The appellants were not
engaged in the business of operating tours;
ii.
The vehicles used for
transportation of employees is not a tourist vehicle
iii.
The vehicles do not have
a permit under the Motor Vehicles Act to conduct tourism business.
[Prakash & Poonam Tours & Travels vs. CCE(2009) 16 STR 452 (Tri-Del)]
81.3
The appellant arranged ‘package tours’ in the State of Andhra Pradesh and
charged abated rate of service tax
on the net amount i.e. gross collection less
the value of ‘supplementary services’ viz., train fare, tirumala tirupathi
devasthanam darshan ticket charges, ramoji film city entry fee, hill
transportation charges and waterfleet charges contending that such charges
could not be taxed since ‘tour’ means a ‘journey’ from one place to another and
any consideration received for such journey is liable and not the above
charges. It also contended that these are in the nature of ‘reimbursements’ not
includable in taxable value. The Tribunal dismissed the contention holding that
the phrase ‘in relation to a tour’ in the definition of taxable service in the
context of ‘tour operators’ is wide enough to cover such ‘supplementary
services’ and the amounts collected from tourists for supplementary services
rendered by the appellant cannot be termed as ‘reimbursements’ as the amounts
collected are towards the service provided by the appellant and not towards
expenditure incurred on behalf of the client [Andhra Pradesh Tourism Devl. Corpn. Ltd. v. CCE (2012) 28 STR 595
(Tri.-Bang.) Relying on Touraids (I) Travels Services v.
Commissioner (2008) 12 STR 452 (Tri.)].
81.4
Where the appellants provided the following services:-
(i)
Operating point to point buses under contract carriage permits for
transport of passengers;
(ii)
Providing buses on lease to other companies; and
(iii)
Booking bus tickets for other tour operators,
it was held that the service
in Sl. No. (i) and (ii) are not taxable under the head ‘tour operator services’
since the appellants were eligible for exemption under Notification No. 20/2009
which exempts the service provided by a tour operator having a contract
carriage permit for inter-state or intra-state transportation of passengers,
excluding tourism, conducted tours, charter or hire service. With regard to
service in Sl. No. (iii), it was held that the same was taxable under ‘business
auxiliary service’ as they were in the nature of promoting the services of
other operators [Sharma Transports vs.
CST (2013) 29 STR 249 (Tri. – Bang)].
82
Transportation of goods by pipeline
82.1
Where the appellants was
merely engaged in operation and maintenance of fly ash handling system (a
system through which the fly ash generated in thermal plant was transported
through pipeline) but did not own or possess the system the Tribunal held the
activity in the contract was partially operation of fly ash handling system
owned by client and partially maintenance and repair of the system and the
appellant cannot be held to be doing the service of transporting fly ash
through pipeline. Hence the appellant’s activities would not be liable for
service tax under the category of ‘transportation of goods by pipeline
services’[Macawber Beekay Pvt. Ltd. vs. CCE (2011) 23STR 354 (Tri-Del)].
83.1
The respondents
were engaged in the activity of booking of tickets and making travel
arrangements for passengers, under an agreement with another travel agency in
consideration for a commission paid to it by the other travel agency. It was
held that the services rendered by the respondent is essentially liable for
service tax under the category of
“travel agency service” w.e.f. 10.9.04 and not liable for service tax under
the category of “business auxiliary
services’.[CCE v. Shabeer Travels (2011)
24 STR 171 (Ker)]
84
Underwriting vs.
Banking and Other Financial Services
84.1
The appellant
issued Foreign Currency Convertible Bonds (FCCBs) in overseas markets and
appointed overseas Merchant Bankers/Lead Managers who were paid – (1) 1.15% of
the principal amount of bonds as ‘underwriting commission’ [for guaranteeing
subscriptions]; and (2) 0.10% of the principal amount as ‘management fee’ [for
organizing the issue]. The appellant paid service tax as a service recipient on
the management fee under the category of “Banking and Financial Services”
[which fell under location of service recipient criteria] but not on the
underwriting commission on the ground that the underwriting service fell in the
performance based criteria and since the services were performed abroad it was
not taxable. The Revenue contended that underwriting is part of a composite
agreement for ‘merchant banking services’ which falls under the category of
‘banking and other financial services. On appeal, the Tribunal observed as
follows:
(i)
The
lead manager’s services involved organizing the issue of FCCBs whereas
underwriter’s services involved financial risks and separate remuneration was
fixed for each service. Hence, there were two distinct services and it cannot
be considered as bundled services.
(ii)
Further,
even if it is considered as a single bundled service the dominant nature is not
the lead manager’s services but it was only a minimal part since the
underwriting fee was the major component of remuneration and the entire issue
was first subscribed by the lead managers and then the bonds were sold.
(iii)
Even
going by s.65A(2)(c), which provides that the category which occurs first needs
to be taken where the service cannot be classified based on specific over
general principle or essential character
principle, the category of underwriting
would be the relevant category since it occurs before banking and other
financial services.
Thus, it was held
that the underwriting fee was paid for a separate underwriting services and
underwriter’s services provided by a foreign service provider would be liable
to service tax only if the same is being performed in India as provided
u/r.3(ii) of the Taxation of Service (Provided from Outside India and Received
in India) Rules, 2006, which is not so in the present case, the appellant is
not liable to pay service tax on the underwriting fee [Jubilant Life Sciences Ltd. vs. CCE (2013) 29 STR 529 (Tri.
-Del.)].
85
Visa Facilitation
services
85.1
Commission received
by visa facilitators for providing services of obtaining passport and visa
would not be liable for service tax in view of Board Circular No. 137/6/2011 –
ST dated 20.4.2011[Green Channel Travel
Services P. Ltd. v. CST (2012) 26 STR 527 (Tri.- Ahmd.)].
86
Works contract services
86.1
Where the appellant had an on-going works contract as
on 1.6.07 (the date on which service tax on “works contract services” were
introduced) but had paid service tax on
payments received prior to 1.6.07 inter
alia under the category of “construction services” the High Court held that
the assessee would not be entitled to avail the benefits of the Composition
Scheme [payment of 4% on the gross contract value] since the election to opt
for the composition scheme is to be made before service tax is paid in respect
of the works contract. [Nagarjuna Construction Company Ltd. vs. Government
of India (2010) 19 STR 321 (AP) Affirmed in Nagarjuna
Construction Company Ltd. vs. Government of India (2012) 28 STR 561 (S.C.)].
86.2
Where the appellant’s contract with the Government of Andra Pradesh was
for - survey, design, engineering and construction of earth dams / barrages and
canal system meant for irrigation including maintenance during warranty period
and beautification of the sites, for a lumpsum amount (billed based on running
bills submitted) without separate charge for each activity, the Tribunal held that –
(i)
The contract is a ‘turnkey’
EPC (engineering, procurement and
construction or commissioning) project squarely covered by clause(e) of the
definition of “works contract” u/s. 65 (105) (zzzza).
(ii)
The contract for construction of earth dams / barrages is not
construction of “dams” which are gigantic RCC structures built across rivers
and hence is not excluded from
65 (105) (zzzza).
(iii)
The contract cannot be described as ‘construction of a new building or
civil structure or pipeline or conduit’ falling under clause (b) of S.65 (105)
(zzzza) since it does not encompass the entire gamut of service provided by the
appellant.
(iv)
The contract cannot fall as ‘commercial or industrial construction
service u/s. 65(25b) since –
(a)
Irrigation is a non-commercial end-use and only structures with
commercial / industrial end-use fall under that category; and
(b)
The category u/s.65(25b) envisages no transfer of property in goods liable
to VAT / sales tax which is not so in the present case.
(v)
The contract cannot be classified u/s. (97a) as ‘site formation,
clearance, excavation, etc.’ since –
(a)
These activities are only minor preparatory activities to the execution
of the project and would not determine the classification of the appellant’s
service.
(b)
The category u/s.65(97a) envisages no transfer of property in goods
liable to VAT / sales tax which is not so in the present case.
Hence the exclusion
pertaining to ‘site formation, clearance, excavation etc.’ services for
irrigation is not applicable to the present case.
(vi)
Though the contracts were awarded prior to 1.6.07 (before ‘works contract
service’ came into existence) since the contracts were executed and payments received post 1.6.07, they are
liable for service tax under the said category.
(vii)
Notification no.41/2009 dated 23/10/09 exempting works contract in
respect of canals is not retrospective and hence would not apply.
(viii)
The ‘gross amount charged’ under the composition scheme can be considered
as cum-tax value. Consequently, the appellant can deduct service tax element
from ‘gross amount charged’ and arrive at the taxable value.
(ix)
The amount of “retention money” is
only a deferred payment of consideration and includible in the ‘gross amount
charged’ for ‘works contract service’
[Ramky Infrastructure Ltd. vs. CST (2013)
29 STR 33 (Tri. –Bang.)].
86.3
The services rendered
in relation to execution of works contract in respect of railways is
specifically excluded from the definition of ‘works contract service’ and would
not be liable for service tax [B.M.R.
Corporation Ltd. vs. GOI (2013) 29 STR 469 (Kar.)].
V. REGISTRATION, PAYMENT OF TAX, ADJUDICATION,
APPEALS, etc.
87.1
Rule 4(5) of the Service Tax Rules, 1994,
providing that the registration applied for shall be ‘deemed’ to have been
granted if the Superintendent does not grant registration within 7 days
from the date of application is applicable only to registrations granted by the
Superintendent and not to Centralised Registration under rule 4(2) granted by
the Commissioner of Central Excise for whom there is no time stipulation.
However, Centralised Registration must be granted within reasonable time. 7
days may be considered reasonable time. But this time is only
directory not mandatory. Further, registration would have to be granted so
long as the form is completely and properly filled and cannot be refused. It
cannot even be granted under a category other than that applied for nor can it
be granted by the department on its own without application. [Karamchand
Thapar & Bros. (Coal Sales) Ltd. v. UoI (2010) 20 STR 3 (
88.1
Where the appellant had admittedly paid
education cess alongwith the excise duty under the accounting head of basic
excise duty, the Tribunal held that the appellant cannot be again held liable
for payment of education cess.
[Guala Closure (India) Pvt. Ltd. vs. CCE (2009)
16 STR 536 (Tri. – Ahd.); See also
BAS Engineering (P) Ltd. vs. CCE (2011) 23 STR
145 (Tri-Del.)]
88.2
The contract
between the service provider and the recipient mentioned the service provider
shall bear all taxes and duties in respect of the services provided by him.
Under the law, the service recipient was liable to pay service tax under the
reverse charge. The service recipient deducted the tax so paid from the service
provider’s bills. On appeal by the service provider object to the deduction,
the Supreme Court observed:
(i)
the
service tax requiring the service recipient to pay the tax as an assessee is
only relevant between the service recipient and tax authorities and not
relevant to determine the rights and liabilities contractually agreed between
the service provider and service recipient.
(ii)
under
the contract, the service recipient cannot be faulted for deducting the service
tax from the service provider’s bill since it was his liability to bear the
tax.
[Rashtriya Ispat Nigam Ltd. CE v. Dewan Chand
Ram Saran (2012) 26 STR 289 (S.C.)]
89
Payment of amount collected
as service tax
89.1
The assessee, an authorized service station, provided
services to customers of M/s HHM (a vehicle manufacturer), charged service tax
on the customers and paid it to the Government. M/s HHM reimbursed 50% of the
tax to the assessee. The revenue contended that the amount collected from HHM
must be paid to the Government u/s 11D of the Central Excise Act, 1944 made
applicable to service tax. On appeal, the Tribunal held that u/s 11D only
excess amounts collected from the buyer of goods had to be paid to the credit
of the government. Since in the present case, the tax was collected from the
manufacturer (M/s HHM) and not the buyer section 11D did not apply and the
assessee was not liable to pay such amount to the Government. [Nagappa
Motors vs. CCE (2011) 21 STR 503 (Tri. – Che.)]
90.1
Where
the assessee paid service tax by incorrectly debiting CENVAT credit account
instead of payment in cash but later, corrected the error by making payment in
cash the Tribunal held that there was no failure to make payment but only
adoption of an incorrect method of payment and hence no interest is payable.
[CCE v. Sterlite Industries (I) Ltd.
(2011) 21 S.T.R. 534 (Tri- Che.); See also
Topland vs. CCE
(2012) 28 STR 177 (Tri.
–Ahmd.)]
90.2
Interest can be
recovered only when the duty liability has been finally determined. Thus where
the assessee had challenged the liability to duty in an appeal before the
Tribunal, it was held that interest in respect of said duty liability could not
be recovered from the assessee. [CCE vs.
Needle Industries (India) Pvt. Ltd. (2011) 23 STR 278 (Tri-Chennai)]
91
Adjustment of tax
91.1
Where service tax
was collected and paid by the assessee on Commissioning and installation
services prior to 01.07.03 (date of introduction of service tax on the said
services) but was refunded to the customers by way of credit notes and the
amount paid was adjusted against tax liability of July’ 03 onwards, the
Tribunal allowed the adjustment of tax.
The Tribunal dismissed the Revenues contention that such adjustment was
not permissible under Rule 6(3) since the assessee has refunded only the
service tax amount and not the value of taxable service on the ground that rule
6(3) was not applicable to the present case at all since rule 6(3) is
applicable only when service rendered is taxable and not where service is not taxable.
[CCE vs. Aurore Trust 2010(17) STR 376 (Tri-Chennai)]
91.2
Where the assessee had adjusted the excess service tax
paid for services rendered to SEZ against its subsequent liabilities the
Tribunal held that such adjustment was permissible [CCE vs. SRC Projects Ltd. (2010) 20 STR 687 (Tri-Chennai)]
91.3
Where the assesee
adjusted the service tax liability for the month of January, 2008 – February,
2008 against the excess service tax paid in the month of October, 2007 and had
intimated the same to the department but not within the prescribed period of 15
days the Tribunal held that the non-intimation of adjustment within 15 days was
only a technical default and accordingly allowed the adjustment. [CCE vs. Rajdeep Buildcom Pvt. Ltd.
(2011) 21 STR 663 (Tri. – Mum.)]
91.4
On facts the
Tribunal held that where advance payment of service tax has been made
(i) There is no question of adjustment of excess
tax paid since it is not excess payment of tax as per the rules;
(ii) No further proceeding need to be initiated.
[Dahej Harbour and Infrastructure Ltd. vs.
CCE (2011) 24 STR 676 (Tri.-Ahmd.)]
91.5
Excess payment of service
tax adjusted under rule 6(4A) on the basis that the assesee was having a
centralized registration need not be recoverd since the payment of excess service
tax not being disputed by the department. The irregularity of not having a
centralized registration is only of a technical nature and could not jeopardize
the adjustment [Gujarat NRE Coke Ltd. vs.
CCE (2012) 27 STR 372 (Tri – Ahmd)]
91.6
Where the appellants
had paid excess service tax in the month of October 2006 owing to payment of tax without receipt of
monies, and only in June 2007 when the customer settled for a lesser sum, they suo motu took credit of the excess
service tax and disclosed in the returns, the Tribunal allowed the excess
adjustment although technically it was allowable only in the ‘succeeding’ month
(i.e. November, 2006) and that too after intimation to the department (which
was not done), which infractions were considered to be minor [Siemens Ltd vs. CCE (2013) 29 STR 168
(Tri-Chennai)]
91.7
Where the
appellants, a recipient of GTA services, overpaid service tax on 31st
March, 2005 and 31st March, 2006 and adjusted the excess service tax
in April, 2006 and April, 2007 the tribunal held that the excess tax paid was
adjustable u/r. 6 (3)[Tamilnadu Newsprint
& Papers Ltd vs. CCE (2013) 29 STR 197 (Tri. – Chennai)].
92.1
Where the
appellants had discharged the service tax liability along with interest before
issuance of SCN and informed the department about the payment as well as bona
fide belief they entertained as to their non-taxability, the Tribunal held
that the SCN should not have been issued in view of section 73(3) and
accordingly no penalties would be imposable. [V.S.T. Tillers Tractors vs. CCE (2009) 14 STR 159 (Tri-Bang.)]
92.2
Where the show
cause notice failed to indicate the specific category of service under which
the department proposed to levy service tax the Tribunal held the SCN to be
defective and demand not sustainable [Coromandel
Fertilizers Ltd. vs. CCE (2009) 13 STR 542 (Tri-Chennai); See
also United Telecoms Ltd. vs. CST (2011) 22 STR 571 (Tri-Bang.)]
92.3
Where the assessee
had centralised billing system at Vijaywada, Andhra Pradesh falling under the
jurisdiction of Guntur commissionerate and rendered ‘site formation’ etc.
services at Bilaspur falling under jurisdiction of Chindwan division of Bhopal
commissionerate and took a separate registration at Madhya Pradesh and did not
opt for centralised registration, it was held that a show cause notice issued
by Guntur commissionerate on services rendered by assessee at Bilaspur, Madhya
Pradesh is without jurisdiction. [CCE vs.
Integral Construction Company 2010(17) STR 380 (Tri-Bang)]
92.4
Where the show
cause notice had sought to deny Cenvat credit on the ground that the said input
services were not taxable at all but the department at the time of argument
before the Tribunal contended that the input services had no nexus with the
manufacturing activity of the appellant, the Tribunal held that the
department’s contention is beyond the scope of show cause notice [Ultratech Cement Ltd v CCE (2011) 22 STR
289 (Tri-Mum)].
92.5
Where the show
cause notice had sought to deny credit on the ground that the services availed
were not ‘input services’, but the Commissioner (Appeals) had sought to
disallow credit on a ground that the appellant had exported certain exempted
products and hence cannot claim Cenvat credit, the Tribunal held that the order
of the Commissioner (Appeals) is beyond the show cause notice and hence not
sustainable [MTR Foods Ltd. vs. CCE
(2011) 22 STR 342 (Tri-Bang.)]
92.6
Where the show cause notice and the O-I-O did not quantify and reason
out why each of the several distinct activities of the appellant were liable
for service tax under the proposed categories, the Tribunal set aside the
demand observing that
a “show cause notice is basic foundation of proceedings which may give rise to
different consequences of law. Composite show cause notice issued left the
matter in dark.” [O.P.Khinchi vs. CCE
(2011) 24 STR 579 (Tri-Del.)].
92.7
Where the show cause notice
did not show how a ‘carrier’ without seats
could be considered as a ‘cab’ or for what purpose – transportation of goods or
passengers – were the vehicles used, the Tribunal set aside the demand
observing that an ill founded show cause notice not giving rise to a specific
charge neatly is fatal to adjudication [CCE
vs. Shemco India Transport (2011) 24 STR 409 (Tri-Del)]
92.8
Where the SCN had
been issued demanding service tax on money received from renting out land and
open ground under the category of Mandap keeper’s services but had failed to
clearly bring out – the nature of use of the immovable property (i.e. as to
whether any official, social or business functions were performed over the
immovable property) and whether such activity brought the assessee into the
fold of law, the Tribunal held that demand under the said SCN is not
sustainable [CCE vs. Municipal Council (2011)
24 STR 705 (Tri.-Del.)].
92.9
If service tax is paid along with interest before the issue of SCN and
there is no intent to evade payment of service tax, then a SCN cannot be issued
in respect of the service tax so paid. But, there
is no bar on
issuance of SCN to impose penalty. To this extent, the Board’s Clarification
No. 137/167/2006 – CX - 4 dated 3.10.2007 was held to be incorrect [CST v. Gowri Computers (P) Ltd. (2012)
25 STR 380 (Tri – Bang)].
92.10
Mere mention of
wrong section number in the show cause notice does not invalidate the notice so
long as the acts comprising the offence are explained and they constituted
offence within meaning of the correct section that was in force at time of
issue of the notice [CCE vs. Ajmer Automobiles P(Ltd) (2012) 26
STR 19 (Tri-Del.)].
92.11
Where the assessee has billed Rs.1,00,000/- in March, 2004 and disclosed
the same in ST-3 return for the
half year ended March’04 but the payment was realised in March’05 on which no
service tax was paid, the period of 1 year / 5 years for issue of SCN needs to
be reckoned from date of filing the ST–3 return pertaining to the period in
which short payment occurred i.e. March 2005 and not from the date on which
information regarding billing is furnished i.e. March, 2004 since service tax
is paid when value is realised and not when value is billed [Indfos
Industries Ltd. vs. CCE (2012) 26 STR 129 (Tri. – Del.)].
92.12
Where Show Cause
Notice was issued and adjudicated in
favour of the assessee on an issue, against which no appeal was filed by the
revenue, there is no scope for subsequently issuing a second show cause notice
on the same issue [Tamilnadu Newsprint
& Papers Ltd vs. CCE (2013) 29 STR 197 (Tri. - Chennai)]
93.1
The tribunal in
this case held that where the show cause notice is only for imposition of
penalty and for levy of interest no demand can be made in the absence of any
specific demand for service tax in the show cause notice. [Bayer Diagnostics India Ltd. vs. CCE (2005) 182 ELT 487 (Tri-Mum.) See
also Marked Oil & allied
industries v. CCE (2002) 146 E.L.T. 466 (Tri–Del.); Gujarat Containers Ltd.v. CCE (2003) 157 E.L.T. 67 (Tri.-Mumbai)
and L.H. Sugar factories v. CCE (2004) 165 E.L.T. 161, Diamond Cables Ltd. v.
CCE (2005) 180 ELT 444 (Tri-Mum.)]
93.2
Where the SCNs did
not specify the period of demand nor quantify it, the Tribunal held that the
demands cannot be sustained. [Praseetha Suresh v. CCE (2006) 3 STR 777
(Tri-Bang.). Following Coolade
Beverages Ltd. v. CCE (2004) 172 ELT 451 (All.); Bayer Diagnostics India Ltd. v. CCE (2005) 182 ELT 487 (T)].
93.3
The Tribunal laid
down certain important propositions regarding demand as under:
(i)
SCN should be
issued in accordance with the provisions of law existing at the time of issue
of SCN.
(ii)
In view of the
above, the larger period of limitation cannot be sustained without invoking in
the SCN, the ingredients of the proviso to Section 73 (i.e. fraud, collusion,
willful misstatement, etc.) which was enacted by the Finance Act, 2004 though
the demand pertained to a period prior to the enactment.
(iii)
The Adjudicating
Authority cannot confirm demand under a different category of service other
than the one alleged in the SCN as this leads to a change in the character of
the SCN.
[Mahakoshal Beverages Pvt. Ltd. v. CCE
(2007) 6 STR 148 (Tri. – Bang.)]
93.4
Where
the show cause notice only demanded ‘interest’ on credit wrongly utilised [and
subsequently paid], an order confirming the demand of ‘credit’ wrongly utilised
is incorrect since it travels beyond the Show Cause Notice.
[C.C.E vs. Jagatjit
Industries Ltd 2010 (17) STR 137 (Tri-Del)]
93.5
Recovery of demand from the partners of a firm, in
respect of service tax
payable
by the firm, is not permissible merely by marking a copy of the SCN to the partners of the firm [G. Govindaraj vs. CCE (2010) 17 STR 529
(Tri-Chennai)].
93.6
Where the SCN did not identify the documents based
on which it raised the demand, the Tribunal held that there was a violation of
principles of natural justice and accordingly the demand is not sustainable [V. S. Distributors vs. CCE. (2010) 17 STR 530 (Tri-Del) – Per D. N. Panda
– Member (J)].
93.7
The respondents provided Pandal or Shamiana services
which was liable for service tax w.e.f. 10.9.2004. They declared certain
undisclosed incomes which they stated pertained prior to 10.9.2004 during a
survey conducted by the Income tax Department on 6.1.2006. The Service tax
department sought to tax the entire undisclosed income. On appeal the Tribunal
held that the demand cannot be sustained without enquiry as to whether the
undisclosed income is earned post 10.9.2004. [CCE vs. Bindra Tent Service (2010) 17 STR 470 (Tri-Del.)]
93.8
Income voluntarily disclosed to the income-tax authorities cannot be
added to value of taxable services in absence of any evidence that such income
disclosed was part of taxable service. [CCE
v. Ramesh Studio & Colour Lab (2010) 20 STR 817 (Tri-Del.)].
93.9
Where the assessee registered and paid service tax
in respect of charges received from banks and financial institutions for
storing their vehicles (repossessed from loan defaulting customers) under the
category of ‘business auxiliary services’ w.e.f 1.6.2006 and the Revenue did
not dispute this, and having accepted it, it was held that the Revenue cannot
tax the assessee under the category of Storage & Warehousing services prior
to 1.6.06. [CCE v. Devika Security
Services (2011) 23 STR 606 (Tri-Del.)]
93.10
The provisions of
Finance Act, 1994 does not extend to any place outside India. Thus, where the
revenue had issued a SCN by invoking the larger period of limitation to the assessee company, located in France who had
provided IPR services under the technology transfer agreement, the Tribunal
held that since the assessee being situated outside India was not under an
obligation to take out registration / file return the allegation of suppression
is not maintainable and hence the confirmation of demand by invoking the
extended period of limitation is not sustainable [CCE vs. Institut Francais Du Petrole (IFP) (2011) 24 STR 696
(Tri.-Del)].
93.11
Where the service tax demand had been confirmed under a category of service different
from the one alleged in the SCN the Tribunal held that the same is not
permissible and accordingly confirmation of demand of interest and penalty is
also not sustainable [Prabhudas Kishordas
vs. CST (2011) 24 STR 711 (Tri.- Ahmd)].
93.12
The Tribunal relying on judgment in case of Unison Metals Ltd. v. Commissioner (2006) 4 STR 491 (Tri.-LB) held
that where the appellant had already paid the service tax amount collected from
the customers to the revenue through Cenvat Credit, no service tax needs to be
deposited once again in cash in case of proceedings u/s. 73A [Sangam India Ltd. v. CCE (2012) 28 STR
627 (Tri.-Del.)].
94
Demand when service tax already paid by client
94.1
Two companies ‘B’
and ‘C’ respectively facilitated sale of insurance policies and finance to
purchasers of vehicles of their parent company ‘M’ and received commission from
Insurance companies and finance companies on which they paid tax under
‘Insurance Auxiliary services’ and ‘Business Auxiliary Services’
respectively. They shared part of the
commission with the appellant ‘A’, a dealer in vehicles manufactured by ‘M’,
for recommending buyers to avail Insurance and finance from those companies of
which B & C were agent/brokers. On
these facts, it was held that no separate tax was required to be paid by ‘A’ on
part of the commission received from B & C based on the following reasons:
(i)
tax on the entire
commission has already been paid by B & C.
(ii)
If tax was paid by A, B & C would be eligible for
input credit thereby making the impugned demand revenue neutral.
[Popular Vehicles & Services Ltd. vs
CCE, 2010 (18) STR 493 (Tri-Del.); See also CCE vs. Ajmer Automobiles P Ltd. (2012) 26 STR 19 (Tri-Del.)]
95.1
Where the assessee had failed to obtain service tax registration, since
it bona fide believed that its activities were not liable for service tax but
had subsequently on being pointed out by the department obtained the service
tax registration and discharged its service tax liability, the High court held
that the extended period of limitation could not be invoked [CST v. Karnataka State Warehousing
Corporation (2011) 23 S.T.R. 126 (Kar)].
95.2
Where there was a
doubt as to whether advisory services on mergers and acquisitions would be
liable for service tax under the category of management consultancy services [the
scope for doubt being established by the fact that the Bombay High Court in a writ directed the
CBEC to clarify the position] the Tribunal held that the extended period of
limitation cannot be invoked since there was no suppression of facts with an intention
to evade tax and hence a Show Cause Notice dated September, 2001 seeking to
recover tax for the period 16.10.98 to 31.3.99 is barred by limitation [CCE v. DSP Merrill Lynch Ltd. (2007) 7
STR 59 (Tri.-Mumbai); See also CCE vs.
Abharan Motors Pvt Ltd. (2011) 23 STR 72 (Tri-Bang); CCE vs. Vivekram Bajaj (2011) 23 STR 136 (Tri-Chennai);Reliance Industries Ltd v CCE (2011) 23
STR 555 (Tri-Ahmd); Aadishwar Motors Pvt
Ltd v. CST (2011) 24 STR 81].
95.3
Where the
departmental authorities were not clear as to the nature of activities rendered
by the assessee and had taken different views at different points of time the
extended period of limitation cannot be invoked. [Nexcus Computers (P) Ltd. vs. CCE (2008) 9 STR 34 (Tri. –
Chennai)].
95.4
Where service tax
is not paid as a result of confusion prevailing in the field as regards the
liability of service tax it was held that the benefit of doubt is to be
extended to the assessee and the extended period of limitation is not
invokable. [Dalveer Singh vs. CCE
(2008) 9 STR 491 (Tri-Del)].
95.5
Where there were
conflicting tribunal decisions on the issue whether a consignment agent would
be liable for service tax under the category of “clearing and forwarding
agents”, an SCN dated 2.7.2002 seeking to demand tax from the assessee under
the above category on the same issue for the periods 16.7.1997 – 31.8.1999 is
barred by limitation [Bharat Aluminium
Co. Ltd. v. CCE (2007) 8 STR 27 (Tri-Del.) See also Sunil Metal Corporation vs.CCE (2009) 16 STR 469 (Tri-Ahmd.); Padam Chand Mutha
& Co. v. CCE (2009) 16 STR 721
(Tri-Del.)].
95.6
Where the
appellants had filed the memorandum and articles with the department at the
time of registration specifying the activities carried out by company it was
held that there was no suppression of facts and the extended period of
limitation cannot be invoked. [Karvy
Consultants Ltd. vs. CCE (2008) 10 STR 166 (Tri-Bang.)]
95.7
The department in
the year 2000 asked the appellants to register and pay service tax on security
services w.e.f. 16.10.1998. The appellants replied vide letter dated 3.4.2000
claimed exemption under notification no. 58/2002-ST. The department did not
pursue the matter until 2002 and finally issued a SCN on 22.1.2004 demanding
service tax for the period 16.10.1998 to 30.9.2002. The Tribunal held that the
department was aware of the relevant facts and hence the SCN being beyond the
one year limitation period the demand is time-barred [Dolphine Detective Agency v. CCE (2006) 4 STR 25 (Tri-Bang.)].
95.8
Where the issue
involved legal interpretation as to whether the appellant could be considered
as clearing and forwarding agents it can be safely concluded that the
appellants were under a bona fide belief and the extended period of limitation
is not invokable [NRC Ltd. v. CCE
(2007) 5 STR 308 (Tri-Mum.); See also Lanxess Abs Ltd. vs. CCE
(2011) 22 STR 587 (Tri-Ahmd.)].
95.9
Where the
department had earlier issued a show cause notice for an issue, the department
being aware of the appellant’s activities, cannot invoke the extended period
for issuing a second show cause notice. [Cairn
Energy (I) Pvt. Ltd. vs. CCCE (2008) 11 STR 632 (Tri-Bang.)]
95.10
Where the assessee
had suo-motu assessed and paid the
tax and reflected
their income in the balance sheet and income tax returns for the impugned
period the Tribunal held that the extended period of limitation cannot be
invoked. [Om Sai Professional Detective
& Sec. Ser. P. Ltd. vs. CCE (2008) 12 STR 79 (Tri-Bang.)]
95.11
Where an order was
issued u/s. 11C dated 4.4.2007 of the Central Excise Act under which the
Government acknowledged that there was a general practice of not levying
service tax in respect of vehicles used as stage carriages and accordingly
granted exemption for the period 1.4.2000 to 4.2.2004, it was held that a show
cause notice dated 13.6.2005 invoking longer period of limitation to demand tax
for the period 1.4.2001 to 31.3.2004 is time barred. [Mangalwardhini Travels vs. CCE (2009) 13 STR 51 (Tri-Del)]
95.12
Where the SCN is
based on the information disclosed in balance sheet and other documents
maintained by the appellants and the appellants have been regularly paying tax
and filing returns the Tribunal held that there is no suppression of facts with
an intent to evade tax and hence larger period of limitation cannot be invoked.
[Rolex Logistics Pvt. Ltd. vs. CST
(2009) 13 STR 147 (Tri-Bang.)]
95.13
Where the
department had issued an SCN to include erection, commissioning and
installation charges in the assessable value for charging excise duty, a
subsequent SCN on the assessee seeking to invoke the larger period of
limitation for charging the said charges to service tax is not permissible
since the department is deemed to be aware of the facts and there was no
suppression of the facts.[Kirlburn Engg.
Ltd. vs. CCE (2009) 13 STR 285 (Tri- Ahmd.)]
95.14
Where the
appellants had been regularly furnishing the ST-3 returns which was assessed
and finalized by the department larger period of limitation cannot be invoked.
[Alvares & Thomas vs. CCE (2009)
13 STR 516 (Tri-Bang.)]
95.15
Where the assessee
was a PSU of the Govt of India, no mala
fide intention to evade tax could
be attributed to it and hence extended period of limitation cannot be invoked. [BSNL
vs. CCE (2009) 14 STR 359 (Tri- Ahmd.)]
95.16
Where no objections
were raised by the department as regards valuation when the appellant firm
filed returns regularly during its existence nor when they surrendered their
registration certificate on dissolution of the firm, the Tribunal held that
extended period of limitation cannot be invoked to confirm a demand prior to
dissolution. [CCE & ST v. P.V.
Narayana Reddy (2009) 14 STR 701 (Tri-Bang.).
95.17
Where the appellant could take Cenvat credit on
payment of tax on ‘Goods Transport Agency’ (GTA) services availed by him,
non-payment of service tax on GTA services (as a payer of freight) cannot be
said to be with an ‘intent to evade service tax’ since it would be revenue
neutral. Accordingly it was held that the extended period of limitation cannot
be invoked [Dineshchandra R. Agarwal Infracon Pvt Ltd. vs CCE 2010 (18)
STR 39 (Tri-Ahmd.)].
95.18
The law as it stood
on the date of issuance of show cause notice is relevant for applying the
provision of limitation under section 73 [Viking
Tours & Travels (2011) 22 STR 69 (Tri. – Che.)]
95.19
Where the appellant bonafide believed himself to be entitled to
exemption, the extended period of limitation is not invokable and the fact that
the appellant did not approach the Revenue for clarification and did not
disclose the activities undertaken by them, cannot be made a reason for
alleging any suppression or mis-statement on the assessee. [Aditya Birla Nuvo Ltd. vs. CCE (2011) 22
STR 41 (Tri. – Ahmd.)]
95.20
Where the original refund claim (under notification no. 41/2007) was
filed within the prescribed time limit but before a wrong authority, a subsequent
filing before the appropriate authority even though after the prescribed period
cannot be held to be barred by limitation. [CCE
vs. AIA Engineering Ltd. (2011) 21 STR 367 (Guj.)].
95.21
Where the Revenue had invoked the larger period of
limitation, in a case where the assessee who was earlier registered for service
tax but had subsequently surrendered the same under the belief that his
services were not liable for service tax, the Tribunal observed that the
revenue having failed to adjudge the activities of the appellant and their
subsequent liability to pay service tax under any category of service at the
time of surrender of the registration certificate could not subsequently
question the assessee’s intention and his belief that his activities were not liable
for service tax.[Needwise Advertising
Pvt. Ltd. vs. CST (2011) 21 STR 229 (Tri-Ahmd.)]
95.22
Where the appellant
surrendered his certificate of registration on 19.6.05 on the ground that his
turnover was less than the threshold limit and hence exempt, a show cause
notice dated 30.4.2008 demanding service tax for the
period 10.9.04 – 31.1.08 was held to be barred by limitation since on
surrender, the onus was on the department to investigate the cause for
surrender within a year of surrender and a surrender of certificate of
registration cannot be considered as for evading payment of service tax [Amalner Co-operative Bank Ltd. vs. CCE (2011) 24 STR 618 (Tri-Mum.)].
95.23
Income voluntarily disclosed to the income-tax authorities cannot be
added to value of taxable services in absence of any evidence that such income
disclosed was part of taxable service. [CCE
v. Ramesh Studio & Colour Lab (2010) 20 STR 817 (Tri-Del.)].
95.24
Where the department issued the first show cause notice for a period
1.4.00 to 31.3.01 on 20.10.05 and subsequently issued another show cause notice
for the period 1.4.01 to 31.3.04 on 31.8.2006 on the same issue invoking the
extended period of limitation the Tribunal held that the second show cause
notice would be barred by limitation. [Vijay Travels vs. CST (2010) 19 STR 671 (Tri-Ahmd)]
95.25
Where the appellants, challenged the constitutional validity of levy of
service tax on tour operators, was upheld by the High Court vide order dated
30.4.01, tax on tour operators became payable 1.4.2000. However , the
appellants paid tax only from 1.5.01. On the facts the Tribunal held that a show cause notice issue to the appellant in
the year 2005 seeking to levy service tax for the period 1.4.2000 – 30.4.01 is
barred by limitation. The extended period of limitation cannot be invoked since
the facts were already known to the department. [Travel Aid vs. CST (2010) 19 STR 570 (Tri-Chennai)]
95.26
The appellant, a hotel, was registered for service tax under the category
of ‘Mandap Keeper’ services and filed its returns regularly from 1997-2007 but
had stopped paying service tax under mandap keeper services from 2002 claiming
exemption under notification no. 12/2001 dated 20.12.2001. The department
issued a SCN dated 30.1.2007 seeking to reclassify the services under ‘Convention
Services’ to deny the exemption for the period 1.2.2002 – 13.7.2004. The
Tribunal held that the extended period of limitation cannot be invoked on the
ground of suppression of facts since the assessee was regularly filing its
returns and the department could have asked for further details as they were
aware of the appellant’s activities. [CCE
vs. Casino Hotel (2010) 19 STR 425 (Tri. – Bang.)]
95.27
Where the appellant a service recipient, who received services from
foreign companies did not pay service tax for the period 18-4-06 to June 2006 though it had disclosed
the transactions to the department it was held that the SCN issued on 5.12.07
cannot invoke the extended period of limitation. However, the Tribunal did not
accept the plea of revenue neutrality to uphold the bar of limitation. [ABB Ltd vs. CCE,, 2010 (18) S.T.R.433
(Tri-Bang)]
95.28
Where the department
issued a show cause notice in sequel to an audit to deny
Cenvat credit invoking the extended period of limitation on the ground that the
appellant had not disclosed the details of Cenvat credit availed nor enclosed
copies of invoices with its return and hence had suppressed the facts from the
department which could be discovered only after conduct of departmental audit,
the Tribunal held that the extended period of limitation could not be invoked
since –
(i) The
appellant had disclosed the quantum of Cenvat credit availed in its ER-1 return
and there was no requirement to either disclose the details of Cenvat credit
availed nor to enclose the copy of invoices alongwith the returns;
(ii) under the
self assessment system once the return has been filed by the assessee, the
central excise officers are supposed to scrutinize the same and since the
quantum of credit was disclosed the officers were always free to enquire about
the details and satisfy themselves about the correctness.
(iii) The fact
that the Department held a different view as to the admissibility cannot be a
ground concluding ‘an intent to evade tax’ in absence of evidence to
substantiate the same.
[CCE v. Pushp Enterprises
(2011) 22 STR 299 (Tri-Del); See also
CCE v. Medicaps Ltd. (2011) 24 STR
572 (Tri-Del.)]
95.29
The extended period of
limitation cannot be invoked on the ground that the appellant had not made enquiries with the department about its obligation to pay
duty / tax on the activity undertaken by them unless there is a evidence that
such lapse was on account of mala fide intention. [Stone & Webster International Inc vs. CCE (2011) 22 STR 467
(Tri. – Ahmd.) Contra - Phoenix IT Solutions Ltd. vs. CCE (2011)
22 STR 400 (Tri. – Bang.)].
95.30
Failure to obtain
registration and pay service tax cannot be equated with deliberate suppression with an intent to evade payment of duty. A positive act
on the part of assessee is imperative to invoke the extended time limit [CCE vs. Global Software Solutions (P). Ltd.
(2011) 24 STR 707 (Tri.- Chennai)].
95.31
If law does not require
certain details to be disclosed in returns etc., then
non-disclosure of the same cannot lead to suppression or misstatement of facts
in order to invoke the extended period of limitation [Parekh Plast (India) Pvt. Ltd. v. CCE (2012) 25 STR 46 (Tri-Ahmd)].
95.32
Where the penalties levied under Section 76, 77 and 78 of the Finance
Act, 1994 had been dropped on the grounds that there was a bonafide doubt regarding the applicability of service tax on the
assessee’s activities, the High Court held that non-payment of service tax
would not fall within any of the circumstances mentioned in the proviso to
subsection (1) of Section 73 and accordingly the extended period of limitation
was not invocable. [CCE vs. Indian
Institute of Chemical Technology (2012) 26 STR 97 (A.P.)].
95.33
Where the assessee had not paid tax due to the prevalence of conflicting
decisions passed by the Tribunals, the High Court held that the same would
amount to bonafide doubt and hence
there being no intent to evade payment of tax the extended period of limitation
was not invocable [UOI vs. Bharat
Aluminium Co. Ltd. (2012) 26 STR 101 (Chhattisgarh); See also
Mundra Port & Special Economic Zone Ltd. vs. CCE
(2012) 27 STR 171 (Tri-Ahmd)].
95.34
Where the appellant
had not paid tax due to prevalence of confusion during the relevant point of
time, the Tribunal held that there was no suppression with intent to evade
payment of tax. Accordingly the extended period of limitation was not invocable
[Niranjan Lal Agarwal v. CCE (2012)
26 STR 457 (Tri-Del.)].
95.35
Where the assessee
did not pay service tax on certain receipts, it was held that, the fact that
the appellant was a wholly owned government company would not mean they had no
intention to evade tax, if they did not seek a clarification from the
department or obtain a legal opinion or disclose the receipts in the ST-3
returns or intimate the department [Housing
& Dev. Corporation Ltd. (HUDCO) v. CST (2012) 26 STR 531 (Tri.-
Ahmd.)].
95.36
Where the revenue
had demanded interest beyond the limitation period of 1 year, the High Court
held that the same is not sustainable since the period of limitation that
applies to claim the principal amount would also be applicable for claim of
interest thereon [Kwality Ice cream
Company v. UOI (2012) 27 STR 8 (Del.)].
95.37
Where the Tribunal found
that the assesses’s did not pay service tax on an issue that involved
interpretation of law and CBEC also had issued circulars, the Tribunal did not
invoke the extended period of limitation observing that ‘at the infancy stage of implementation of law there appears to have
been confusion as to taxability’.[Gangadhar Bulk Movers Pvt. Ltd.
vs. CCE (2012) 27 STR 258 (Tri. – Mumbai)].
95.38
When assessee did not pay service tax on ‘legal compliance services’
rendered to its clients under the category of ‘management consultancy services’
on the basis of CBEC circulars, the extended period of limitation cannot be
invoked [Ernst & Young Pvt. Ltd. vs.
CST (2012) 27 STR 462 (Tri. – Del)].
95.39
Where the appellant had not paid service tax on the transportation of
processed dolomites under the category of ‘cargo Handling Service’, the
invocation of extended period of limitation and imposition of penalty were set
aside in view of complicated issue involving legal interpretation of the
definition of various services [Singh
Transporters VS. CCE (2012) 27 STR 488 (Tri. – Del.)].
95.40
Where, the bonafide belief was established due to prevalence of decisions
in favour of the appellant during the relevant period which were later
overturned by a larger bench decision, the extended period of limitation was
held not invocable and penalty u/s 76 were set aside by the Tribunal [S.R.Gupta & Sons. vs. CCE (2012) 27
STR 501 (Tri. – Del.)].
95.41
Where the original
adjudicating authority in his order did not impose penalty on the ground of
‘reasonable cause’ by invoking s. 80, it was held that presence of a
‘reasonable cause’ means absence of mala
fide and hence the extended period of limitation is also not invocable [R.N. Singh
v. CCE (2012) 28 STR 13 (Tri. – Del.)].
95.42
The Tribunal relying on
judgment in case of Nizam Sugar Factory
v. CCE(2008) 9 STR 314 (SC) held that the extended period of limitation
cannot be invoked where a show cause notice on the same ground and on the basis
of same facts was issued for the previous period [Bhavana Motors v. CCE (2012) 28 STR 268 (Tri.-Del.)].
95.43
Extended period of
limitation could not be invoked where there was ample correspondence with the
department on the issue under consideration and several tribunal decisions in
favour of the appellant during the relevant period.[Universal Enterprises vs. CCE (2012) 28 STR 466 (Tri. – Del.)].
95.44
On facts, where it was found that there was continuous correspondence
with the department on the issue and conflicting interpretation of statutory
provisions and notifications, the extended period of limitation cannot be
invoked [Andhra Pradesh Tourism Devl.
Corpn. Ltd. v. CCE (2012) 28 STR 595 (Tri.-Bang.)].
Limitation and Penalty
95.45
Where one of the venturers of the appellant (a joint venture), executing
similar turnkey / EPC projects as that of the appellant was registered for
service tax under works contract service, paid service tax and regularly filed
service tax returns, it was held that the appellant cannot be said to have
entertained a bona fide belief that
it was not liable to do so. Further, on facts, the Tribunal found that the
appellant –
(i)
did not disclose the material facts regarding EPC projects to the
department;
(ii)
Obtained registration under works contract services and filed Service tax
return under compulsion from department; and
(iii)
did not disclose material particulars or reasons for exemption claimed in
the service tax returns
and hence held that the
extended period of limitation is invokable and penalty u/s. 78 is rightly
imposable [Ramky Infrastructure Ltd. vs. CST (2013)
29 STR 33 (Tri. –Bang.)].
95.46
Where the assessee
did not pay service tax and file returns on time but later on, on their own
ascertainment paid service tax, filed the returns and informed the department,
then in such a case show cause notice is not required to be issued as per
S.73(3) and Board Circular no. 137/167/2006–CX–4 dated 3.10.07. Accordingly, no
penalty is imposable. [Gupta Coal Field
& Washeries Ltd v. CST (2013) 29 STR 166 (Tri-Mum)]
95.47
When the issue
under consideration involved taxability of two services and the appellant had
pursuant to the audit conducted by the department paid service tax in respect
of one of them and also reported the same in the service tax return, the
extended period of limitation cannot be invoked in respect of the other service
[Jubilant Life Sciences Ltd. vs. CCE
(2013) 29 STR 529 (Tri. -Del.)].
96.1
The Superintendent
of Service tax assessed the quarterly and half yearly returns from September 97
to March 99 without any demand. The Deputy Commissioner reopened the assessment
u/s 74 on the ground that there was mistake apparent from records and made
demand and imposed penalties. On appeal, the Tribunal held -
i.
Where the ST-3
returns have been assessed, it cannot be said that there was error and
non-production of records by the assessee;
ii.
Where assessment of
ST-3 returns has become final under section 71 i.e. no appeal is filed within
the time allowed u/s 85, it cannot be reopened by invoking s. 74 on the ground
that there is “mistake apparent from record” so as to circumvent the provisions
of s. 85.
iii.
S. 74 can be
invoked only by the Superintendant who passed the order of assessment and not
by Deputy Commissioner
[Onkar travels Ltd v.CCE, 2006, (3) S.T.R 164 (Tri-Del).]
96.2
An order of the
Tribunal concluded contrary to a decision of a superior court (High Court or
Supreme Court) rendered “subsequent” to the order of the Tribunal would be
amenable to rectification as involving an error apparent from records even
though the Tribunal had decided the order “prior to” the judgement of the
superior court since the subsequent decision does not “enact” the law but
“declares” the law as it always was [Hindustan Lever Ltd. vs. CCE (2008)
10 STR 91 (Tri. – LB)].
97
Remand of Case
97.1
Where the Commissioner (Appeals) held that the appellant was entitled to
cenvat credit in principle but directed the original authority to merely
quantify the refund, it was held that there was no ‘remand’ of the case by the
appellate authority [CCE vs. Mavenir
Systems Ltd. (2012) 27 STR 510 (Tri. – Bang.)].
98.1
Where
the breach flowed from a bonafide belief that the assesses were not liable for
service tax; they paid the tax alongwith interest and also co-operated with the
investigating authorities, the Tribunal held that they had reasonable cause
under section 80 and accordingly set aside the penalties imposed under section
76 and 77.[ETA Engineering Ltd. v. CCE
– 2004 (174) ELT 19 (Tri-Larger Bench) See also CCE v. Sikar Ex-Serviceman
Welfare Co-op.
Society Ltd. (2006) 4 STR 213 (Tri-Del.); Jagdeep Singh Saluja v. CCE (2008) 12
STR 309 (Tri. – Del.); Amman Steel
Corporation vs. CCE (2011) 22 STR
563 (Tri-Chennai); CST v. Vinayaka
Travels (2011) 23 STR 5 (Kar)]
98.2
A subsequent
amendment in the statue with retrospective effect cannot bring about penal
consequence on the assessee. [Mahalakshmi
Sugar Mills Co. Ltd. v. CCE (2006) 1 STR 121 (Tri. –
98.3
Once it was found
by the original authority that there was reasonable cause for the failure of
the assessee to pay service tax in time, the proposal to impose penalties on
them u/s. 76 and 77 should be dropped inasmuch as the assessee had, by showing
such reasonable cause for the failure to pay tax in time, established a case
for exoneration from penalty u/s. 80. Once the adjudicating authority forms his
satisfaction on reasonable cause for commission of the offence it is not open
to Commissioner (Appeals) to substitute his ‘satisfaction’ for the
‘satisfaction’ recorded by the lower authority for purposes of s. 80 of the
Finance Act. [Sre Venkateswara Hi-Tech
Machinery v. CCE (2007) 6 STR 139 (Tri. - Chennai); See also CST v. Competent Automobiles Co. Ltd. (2011)
24 STR 561 (Tri-Del.)]
98.4
Where the assessee
was bona fide labouring under a
mistake as to the extension of an exemption notification and had also disclosed
the receipts in his books indicating that he had no intention to evade tax, the
Tribunal held that there is a reasonable cause u/s. 80 for failure to pay the
service tax and accordingly no penalty u/s 76 and 78 is impossible. [Ace Computer Education v. CCE (2007) 6
STR 361 (Tri.-Del.); See also CMC Ltd v. CCE (2011) 23 STR 586 (Tri-Bang) ]
98.5
Penalty under Rule
15 of Cenvat Credit Rule was waived by the Tribunal since issues involved in
this case were a question of interpretation of the provisions. Since there
could have been two possible interpretations, the appellant cannot be visited
with a penalty, as there was no malafide intention to avail ineligible Cenvat
Credit on these two services. [Universal
Cable Ltd V. CCE (2007) 80 RLT 821 (Tri. –
98.6
On facts, the
Hon’ble High Court held:
a.
The Tribunal cannot
entertain an appeal on merits where the appeal has been rejected by the lower
adjudicating authorities on account of non-compliance with the requirement of
pre-deposit; and
b.
Penalty imposable
u/s. 76 of the Finance Act, 1994, in absence of reasonable cause, cannot be
reduced below the minimum amount prescribed in that section. It can, however,
be completely dispensed with (not reduced below prescribed minimum) if
reasonable cause is shown by the assessee.
[UoI vs. Aakar Advertising (2008) 11 STR
5 (Raj.).See also CCE vs Bhakya
Beauty Parlour (2008) 12 STR 44 (Tri-Chennai)]
98.7
Where the service
tax was paid before the issuance of show cause notice and the assessee also had
a bona fide doubt as to the
taxability of their activity, the Tribunal held that penalty u/s. 78 is not
imposable since-
(i)
u/s. 73(3) show
cause notice itself was not required to be issued; and
(ii)
there was
‘reasonable cause’ u/s. 80 for not imposing penalty.
[Bhoruka
Aluminium Ltd. v. CCE (2008) 11 STR 163 (Tri. – Bang.). See
also Tidewater Shipping Pvt.Lt. vs. CST (2008) 11 STR 475 (Tri-Bang.); Haiku
Motors Pvt Ltd. vs CST (2009) 14 STR 410 (Tri-Bang); see also Majestic Motorbikes Pvt. Ltd. vs. CST (2008) 11
STR 609 (Tri- Bang.); Reach Event Managements vs CCE 2009 (14) STR 251
(Tribunal)].
98.8
Where the
appellants, bonafide believed that only services provided by cable operators
who were receiving signals directly from the satellite, and not from multi
system operator, were liable under cable operator service, the Tribunal held
that there was a reasonable cause for waiver of penalty u/s. 80. [
98.9
Though the plea of
bona fide belief was not specifically raised before the lower authorities the
fact that the appellant had been resisting the demand of service tax on the
premise that his activity is not liable for service tax led the Tribunal to
believe that the appellants were entertaining bona fide belief of not being liable to pay service tax.
Accordingly the penalties u/s. 76, 77 and 78 was waived on the reasonable cause
ground. [Prodorite Anticorosive Ltd. v.
CCE (2008) 12 STR 618 (Tri-Chennai)]
98.10
When the original
authority waived the penalty exercising the discretion vested in him u/s. 80
the Tribunal held that such order cannot be revised by the Commissioner. [Solomon Foundry v. CCE (2008) 12 STR 750
(Tri-Chennai) following the Karnataka High Court judgement in CCE vs. Sunitha Shetty (2006) 3 STR 404
(Kar.); Handiman Services Ltd vs. CST (2008) 12 STR 765 (Tri. – Bang.); Ganesh
Tours and Travels vs Commissioner of service tax 2010 (18) STR 171
(Tri-Bang.)].
98.11
In absence of malafide intention for delay in payment
of tax, penalties u/s.76, 77, 78 and 79 must be waived under section 80 on the
ground of “reasonable cause” instead of merely reducing the penalties.[M.R. Coatings Pvt. Ltd. vs. CCE (2009)
13 STR 79 (Tri-Ahmd.) see also
Pawnar Satellite vs. CCE (2011) 22 STR 14 (Tri. – Del.)]
98.12
On a question as to
whether the benefit of immunity from penalty under the Extraordinary Tax Payer
Friendly Scheme communicated vide D.O. Letter dated 20.9.2004 would be
available to the assessees who have registered themselves prior to the
communication of Scheme, The Hon’ble High Court observed:
(i)
the amnesty scheme
is an administrative instruction issued for the benefit of both the service
providers and the Revenue and is not an instruction envisaged under section 37B
of the Central Excise Act. Thus it would not be considered as having a
statutory force.
(ii)
The scheme is
issued with an intention to provide immunity to defaulters who chose to deposit
arrears of tax and interest before the cut off date and hence immunity should
not be denied to persons who have already got themselves registered prior to
the communication of the Scheme.
[UOI
vs. Amit Kumar Maheshwari (2009) 13 STR 119 (Raj.)]
98.13
Where there is no
intent to evade tax and prevalence of confusion as to taxability at the infancy
stage of implementation of the law the Tribunal waived the levy of penalties
u/s. 76, 77 & 78. [Gajanand Agarwal
vs. CCE (2009) 13 STR 138 (Tri-Kolkata); See also Mitul Engineering Services v. CCE (2011)
24 STR 323 (Tri-Del.)]
98.14
(a) It is a settled principle
that show cause notice gives rise to civil and penal consequences. Thus where
there was no proposition in the show cause notice for levy of penalty under
section 78 but the same had been imposed by the adjudicating
authority the
Tribunal held that there was no opportunity of rebuttal granted to the
appellant and hence the same is not imposable.
(b) Existence of several controversies at the
infancy stage of law is a reasonable cause u/s. 80 for non-imposition of
penalties.
[BAS Engineering (P) Ltd. vs. CCE (2011)
23 STR 145(Tri-Del.)]
98.15
Where the
provisions of S. 73(1A) were in existence at the time of issuance of SCN,
proceedings shall be deemed to be concluded on voluntary payment of service
tax, interest and 25% of penalty u/s. 73(1A) even if the demand pertains to the
period prior to the introduction of section 73(1A). [Aneja Property Dealer v. CCE (2009) 13 STR 266 (Tri. –
98.16
Where the assessee had paid service tax alongwith interest before the
issuance of the show cause notice and claimed waiver from the issue of SCN and
penalties u/s 73(3) [which grants such waiver where there is no intent to
evade] the Tribunal granted the claim and also held that there was no requirement to
pay 25% of penalty alongwith tax and interest which was only required under
73(1A) of the Act [which covers cases where there was an intent to evade tax.]
[CST v. Independent News Services P. Ltd.
(2011) 23 STR 23 (Tri-Del)].
98.17
Where the appellants
had reflected their income from services in their financial statements and had
collected it by raising invoices the Tribunal observed that there was no
attempt to on the part of appellant to suppress or hide the fact from the
revenue. Further in view of the prevalence of divergent view with regard to the
interpretation of law during the relevant point of time the Tribunal held that
the larger period of limitation was not invokable. [Steelcast Ltd. vs. CCE (2009)
14 STR 129 (Tri-Ahmd.) affirmed in
(2011) 21 STR 500 (Guj.)
See also R. R. Construction Company vs. CCE
(2008) 11 STR 53 (Tri-Del.)]
98.18
Where non-payment
of service tax was on account of confusion with regard to the liability to pay
service tax the Tribunal held that there was a reasonable cause as envisaged
u/s. 80 for waiver of penalties. [Life Insurance Corporation of
98.19
Enhancement of penalty by way of revising the order
of adjudicating authority during the pendency of appeal before CCE(A) is not
sustainable. [Agarwal Color Lab vs. CCE (2009) 14 STR 547 (Tri-Del.)]
98.20
In this case the question before the Hon’ble bench
was – Can the penalty levied u/s. 78 of the Finance Act, 1994 be
reduced below the statutory minimum envisaged in the said section by invoking
the provisions of section 80. The Tribunal observed that on invoking of section
80 of the Finance Act, no penalty was imposable. On the other hand where
section 78 was invoked the penalty imposable cannot be less than the amount of
service tax not levied or paid. If at all, section 80 is invoked no penalty can
be imposed. Accordingly, it held that the quantum of penalty leviable u/s. 78
cannot be reduced below the statutory minimum envisaged by invoking the
provisions of section 80. [CCE vs. Riya Travels & Tours (I) Pvt. Ltd.
(2009) 15 STR 124 (Tri-Mumbai); See
contra in CCE vs. Madhuri Travels
(2009) 15 STR 241 (Bom.)]
98.21
In this case the appellant sought waiver of the
deposit of penalty levied under section 76 of the Finance Act, 1994 since they
had deposited the amount of service tax alongwith interest before the issuance
of SCN. The Tribunal granted stay of recovery of penalty u/s. 76 distinguishing
the case of UOI vs. Dharmendra Textile
Processors (2008) 231 ELT 3 (SC) which dealt with penalty u/s. 11AC of the
Central Excise Act by distinguishing that penalty u/s. 11AC is not comparable
with section 76 since section 11AC provided for penalty on defaulter of Central
Excise duty, whose default arises on account of fraud, suppression of facts or
contravention of provisions of law with intent to evade payment of duty. [Deccan Mechanical & Chemical Industry
Pvt. Ltd. vs. CCE (2009) 16 STR 263 (Tri-Mumbai);]
98.22
Mere detection by
the department does not amount to non – payment with an intent to evade payment
of service tax. Department ought to bring out clear facts that appellant was in
the know that service tax was payable but still chose not to pay tax inorder to
evade the same. Accordingly, the Tribunal held that no penalty u/s. 78 for
suppression of facts was imposable. [Sands
Hotel Pvt. Ltd. vs. CST (2009) 16
STR 329 (Tri-Mumbai)]
98.23
Where the appellants had paid duty on the bearings
manufactured and supplied to the Railways but failed to discharge the service
tax payable on their installation the Tribunal held that since the department
was well aware that installation flows from the supply there cannot be case for
suppression of material fact and accordingly no penalties were imposable.[National Engineering Industries vs. CCE
(2009) 16 STR 340 (Tri-Del.)]
98.24
Where appellants had paid the service tax alongwith
interest and had also paid the differential amount of tax on being pointed by
the department the Tribunal observed that there was no need to issue show cause
notice u/s. 73 of the Finance Act for recovery of tax and interest. Further,
where no show cause notice was required to be issued u/s. 73, issue of show
cause notice for recovery of penalty u/s 76 does not arise. Accordingly, the Tribunal held that no
penalty u/s. 76 was imposable.[U.B.Engineering
Ltd vs. CCE (2009) 16 STR 457 (Tri-Ahmd.) see also
Amiras Enterprises vs. CCE
(2010) 20 STR 631
(Tri-Ahmd.); Ratindranath K. Kanungo vs.
CCE (2010) 20 STR 636 (Tri-Ahmd.); Lajpat
Rai Jindal vs. CST (2010) 20 STR 645 (Tri-Del.); P. Jani & Co. vs. CST (2010) 20 STR 701 (Tri-Ahmd.); Nischint Engineering Consultants Pvt. Ltd.
vs. CCE (2010) 19 STR 276 (Tri-Ahmd.)]]
98.25
The appellants in
the present case had paid service tax alongwith interest as a recipient of
service on royalty payments made abroad for the period October, 2004 to March
2006. The Revenue contended to impose penalties u/s. 76,77 and 78. The Tribunal
relying on the decision of High Court in Indian
National Ship Owners Association vs. UoI (2009) 13 STR 235 (Bom.) held that
since the services provided from outside India were held to be liable for
service tax only w.e.f. 18.4.06 no service tax was payable by the assesse.
Accordingly, where the liability to pay tax was absent no penalty u/s. 76,77
and 78 was held imposable. [Jet Audio
Pvt. Ltd. vs. CCE (2009) 16 STR 497 (Tri-Mumbai)]
98.26
Where the
department had not imposed penalty u/s. 78 on the ground that there was no
suppression of facts by the assessee it cannot impose penalty u/s. 76 & 77
on the ground that there is no “reasonable cause”. [Sanghi Industries Ltd.
v. CCE (2009) 16 STR 696 (Tri. – Ahmd.)]
98.27
Penalty
u/s 78 is not imposable for wrong availment of cenvat credit.
[C.C.E vs. Jagatjit
Industries Ltd
(2010) 17 STR 137 (Tri-Del)].
98.28
Mere failure to apply for registration and failure
payment of tax and file the returns cannot be construed as suppression with
intent to evade payment of duty [CCE vs.
Star Crane Service (2010) 17 STR 576 (Tri-Ahmd.)].
98.29
Where service tax
was paid with interest before the issue of SCN and the adjudicating authority
imposed penalties u/s. 76 and 78 the Tribunal held that:
(i)
Once penalty u/s.
78 is imposed penalty u/s 76 is not imposable since they are mutually
exclusive.
(ii)
Penalty u/s 78 is
to be reduced to 25% of the service tax in view of the first proviso to section
78 which provides that where the service tax as determined under Section 73(2)
and the interest payable thereon under Section 75 is paid within 30 days from
the date of communication of the order of the Central Excise officer
determining the tax, amount of the penalty liable to pay shall be 25% of the
Service tax so determined.
[Safe Test
Enterprises vs CCE 2010 (18) STR 172 (Tri-Chennai)]
98.30
Where the lower appellant authority did not impose
penalty u/s. 76 & 77 on the reasonable cause ground by invoking the
provisions of the Section 80, the Tribunal held that the penalty u/s. 78 (which
was imposed ) would also stand deleted on the same ground [Anil Kumar Yadav vs. CCE (2011) 22 STR 20 (Tri. – Che.); See
also Jayadasa Engineering &
Exports P. Ltd. v. CST (2012) (25) STR 102 (Tri-Che)]
98.31
Where the appellant has paid service tax alongwith
interest and filed its returns and on the basis of these returns an SCN was
issued seeking to impose penalties u/s 76, the Tribunal held that no penalty is
imposable u/s. 76. [Inland Mines &
Minerals Pvt. Ltd. vs. CCE (2011) 21 STR 630 (Tri. – Ahmd.) see also Jay Dwarkadish Engg. & Electricals
Contractor vs. CCE (2011) 21 STR 631 (Tri. – Ahmd)]
98.32
Section 80 confers a discretion on the authorities to
condone imposition of
penalty u/s. 76 and 78. Such discretion includes
imposition of penalty less than that is
prescribed under law depending upon the reasonable cause to be shown for
failure to pay the tax. Further, the appellate authority also has jurisdiction
to reduce the penalty imposed by the assessing officer. [CCE vs. Tiger Service Bureau (2011) 21 STR 364 (Kar.)]
98.33
Where the appellant voluntarily registered and paid
service tax alongwith interest when he came to know about his liability and the
department thereafter started proceedings for confirmation of the demand and
imposition of penalties, the Tribunal held that there is no intent to evade
payment of tax and accordingly no penalty u/s. 76 and 78 is imposable. [Ascent Communication vs. CST (2010) 20
STR 655 (Tri-Ahmd.)]
98.34
Where the appellant
paid tax on C&F agency services but took cenvat credit of the tax so paid
on the belief that the tax was not payable, instead of claiming refund the
Tribunal held that –
(i)
penalty u/r. 15(4)
of the Cenvat Credit Rules, 2004 is not imposable in absence of an allegation
of fraud, collusion, etc. in the SCN; and
(ii)
penalty u/s. 76 and 77 is not imposable since
the default does not concern delay / non-payment of tax or infraction of any
provisions of the Finance Act, 1994.
[Sudhakar Plastic Ltd. v. CCE (2010) 20 STR 792 (Tri-Bang.)]
98.35
Where the assessee paid excess tax in March 2007 and adjusted the
same in subsequent months, the
Tribunal held that the assessee has in a way paid tax in advance and as such
penalty no penalty u/s. 76 is imposable since it applies only to cases of
failure to pay service tax. [Chettinad
Cement Corporation Ltd. v. CCE (2010) 20 STR 815 (Tri- Chennai)]
98.36
Where the appellant voluntarily registered and paid
service tax alongwith interest when he came to know about his
liability and the department thereafter started proceedings for confirmation of
the demand and imposition of penalties, the Tribunal held that there is no
intent to evade payment of tax and accordingly no penalty u/s. 76,77 and 78 is
imposable. [Star Energy Systems vs. CST
(2010) 20 STR 479 (Tri. – Ahmd.); See
also Hajarilal Jangid vs.
CCE&ST (2011) 24 STR 510 (Tri-Mum)]
98.37
On a question
whether the penalty u/s.76 can be reduced below the limit prescribed by section
76, the Gujarat High Court held that –
(i)
the quantum of
penalty has been specified in Section 76 by laying down minimum and maximum
limits with further cap insofar as the maximum limit is concerned. Hence it is
not possible to read any further discretion, than the discretion provided by
the legislature when legislature has prescribed minimum and maximum limits.
Thus, section 76 does not give any discretion to the authority to reduce the
penalty below the minimum prescribed.
(ii)
Section 80 says no penalty is imposable once
the assessee establishes reasonable cause. The provision does not say that even
upon establishment of reasonable cause a reduced quantum of penalty is
imposable.
Therefore on
a conjoint reading of Section 76 and 80 of the Act it is not possible to
envisage discretion as being vested in authority to levy a penalty below the
minimum prescribed limit. The High Court disagreed
with several other High Court judgments whose citations are - (a) 16 STR 19
(P&H); (b) 9 STR 348 (Bom.); (c) 14 STR 145 (P&H); (d) 15 STR 241
(Bom.); (e) 16 STR 135 (P&H); (f) 9
STR 123 (Bom); (g) 17 STR 8 (P&H); (h) 9 STR 350 (Bom.); (i) 14 STR 9
(Kar.); & (j) 7 STT 372 (Raj.) on the ground that in none of the judgments
have the provisions of either Section 76 or Section 80 of the Act been analyzed
and dealt with. [CCE vs. Port Officer (2010) 19 STR 641 (Guj.); See
also CCE vs. V.M. Constructions
(2011) 22 STR 520 (Guj.)]
98.38
Penalties u/s. 76 & 78 cannot be imposed simultaneously for the
same default viz, default in payment of
service tax.[CCE vs. City Motors
(2010) 19 STR 486 (P& H); See also
CCE v Krishna automobiles (2011) 23
STR 57 (Tri- Del); CCE vs Pendharkar
Constructions (2011) 23 STR 75 (Tri-Mumbai); CCE v. Pannu Property Dealers (2011) 24 STR 173 (P&H); CST vs. Motor World (2012) 27 STR 225
(Kar.); See Contra Bajaj Travels Ltd. v. CST (2012) 25 STR
417 (Del.);]
98.39
Where the Commissioner had enhanced the penalty by way of a revisonary
order passed u/s. 84 during the pendency of appeal before the Commissioner
(Appeals) the Tribunal held that the revisionary order u/s. 84 was not sustainable.
[K.T.V. Oil Mills vs. CCE (2010) 19
STR 587 (Tri-Chennai)]
98.40
Where the appellants had collected the service tax
but had not deposited the same with the Central Government, but disclosed the
said amounts as service tax liability in its returns and had deposited the same
alongwith interest before the issuance of show cause notice the Tribunal held
that there being no suppression of facts by the assessee no penalty u/s. 78 was
imposable but upheld the penalty imposed u/s. 76 of the Act. [RNS Infrsatructure Ltd. vs. CCE (2011)
22 STR 347 (Tri-Bang.)]
98.41
Where the issue involved in the case was one
relating to interpretation of statute, the Tribunal held that it was a fit case
for invoking Section 80 of the Finance Act, 1994, to waive imposition of
penalty.[Orient Packaging Ltd. vs. CCE
(2011) 23STR 167 (Tri – Delhi)]
98.42
Where the failure to
pay service tax
was for the period August 2001 – October 2002 when
penalty u/s. 76 was Rs. 100/- to Rs. 200/- per day during which such failure
continues but the CCE(A) had vide order dated 21.1.06 imposed penalty u/s. 76 @
Rs. 100/- per day u/s. 76 which provision came into force from 10.9.04, the
High Court held that penalty under the revised provision would be imposable
only for the period post 10.09.2004 and not for the period prior to the said
date [CCE vs. Dee Pee En Corporation
(2011) 23 STR 345 (Kar.)]
98.43
Where the
assessee-manufacturer was under a bonafide belief that in the light of
provisions of EXIM Policy, they were not liable to service tax on the commission paid to
agents as a recipient of services even
post 18.4.06, but paid the tax on being
pointed out by the department prior to issue of show cause notice [and the
interest before adjudication] penalty was set aside especially since the
assessee would have been entitled to take Cenvat credit.[Paradigm International v. CCE (2011) (24) STR 69 (Tri-Chennai)]
98.44
Section 73(3) provides
that no notice could be served on the assessee if tax alongwith interest has
been paid before the issue of SCN and there was no willful
statement or suppression of facts on the part of the assessee. Thus, where the
assessee suo motu discharged their service tax liability alongwith interest and
also filed a return after payment of late fee much before the issue of the SCN,
penalties u/s. 76, 77 and 78 were set aside based on section 73(3). [Saraswati Engineering v. CST (2011) 24
STR 298 (Tri- Mumbai)]
98.45
Where the appellant a
sole proprietor bona fide believed based on the advice of
his clients that he was not liable for service tax on the rent-a-cab services
provided and paid almost 90% of the tax on being pointed out before the issue
of SCN and was also ready to pay the balance amount, the Tribunal set aside the
penalty u/ss. 76, 77 & 78 there being a ‘reasonable cause’ u/s. 80 [K. Prabhakar Reddy v. CCE (2011) 24 STR
330 (Tri-Bang.)].
98.46
Where the assessee was
under the bonafide belief that no service tax is payable on
(i) free
services provided by them as an authorized dealers for which they are getting
reimbursed from the manufacturers; and
(ii) the
commission/incentive received from the financial institutions for introducing
customers for loans,
and the circular of the Board also mentioned that there was confusion in
the taxability of the aforesaid receipts, the Tribunal waived the imposition of
penalties on reasonable cause ground. [C.R.
Scooters v. CCE (2012) 25 STR 177 (Tri.-Ahmd.)]
98.47
If proviso to section 73(1) of the Act is not invoked (extended period of limitation due to
fraud, etc.), then penalty u/s 78 is not imposable [CST v. Gowri Computers (P) Ltd. (2012) 25 STR 380 (Tri – Bang)].
98.48
Where the appellant
had entertained a bonafide belief
with regard to the admissibility of Cenvat credit on expenses such as
maintenance and security of guest house, fees related to business seminars,
share related expenses, due to existence of two different views, but had
subsequently agreed to pay the tax alongwith interest the Tribunal held that no
penalty was imposable especially since they had Cenvat credit balance in their
account throughout the period. [Adani
Enterprises Ltd. vs.CCE (2012) 27 STR 13 (Tri. – Ahmd)].
98.49
The Karnataka High Court in a landmark case laid down several
proposition with regard to imposition of penalties under the service tax law:
Requisites
for imposing penalty
(i)
The sine qua non for the
authority to impose penalty is as follows:-
(a)
Existence
of ingredients mentioned in Sections 76, 77 and 78;
(b)
Failure
on the part of the assessee to comply with the requirements of the said
provisions;
(c)
Absence
of “reasonable cause” for the failure to comply with the requirement of law.
(ii)
First, the
authority has to find out whether in the facts of the given case whether the
ingredients mentioned in sections 76, 77 or 78 exist.
(iii)
Secondly, once it is held that
those ingredients exist and the provisions are attracted, then if the language
used in the said provisions do not leave any discretion in the authority in the
matter of imposition of penalty, penalty is to be imposed in terms of the said
provision. However, if any discretion is left (as in section 78 which states
that ‘he may direct’ the imposition of penalty), then the said quasi
judicial discretion is to be exercised reasonably.
(iv)
Thirdly, before
levying penalty, the authority is required to find out whether the failure
referred to in the concerned provision was without a “reasonable cause”.
“Reasonable cause” means an honest belief founded upon reasonable grounds, of
the existence of a state of circumstances, which assuming them to be true,
would reasonably lead any ordinarily prudent and cautions man, to come to the
conclusion that the same was the right thing to do. It cannot be said that
there is any intention to avoid payment of tax by such taxpayers who bonafide believe that their activity is
not liable to service tax.
(v)
The initial burden is on the assessee to show that there existed
reasonable cause, which was the reason for the failure referred to in the
concerned provision. Thereafter the authority has to consider the explanation
offered by the assessee for failure and whether it constitutes a reasonable
cause. Only if it found to be frivolous, without substance or foundation, the
question of imposing penalty would arise.
Quantum of penalty
(vi)
When the statute stipulates the minimum penalty to be imposed and
the maximum penalty to be imposed, an authority cannot exercise its discretion
to impose penalty either less than the minimum or in excess of the maximum that
is prescribed by the Statute. In this regard no discretion is left to the
adjudicating authority. The discretion is only within those two parameters.
What exactly is the quantum of penalty to be imposed is a matter left to the
authority having regard to the facts of that particular case.
[CST vs. Motor World (2012) 27 STR 225 (Kar.)]
98.50
Section 73(3)
provides that no notice could be served on the assessee if tax alongwith
interest has been paid before the issue of SCN and there was no willful
statement or suppression of facts on the part of the assessee. Thus, where the
assessee pursuant to an investigation carried by the department more than three
years before the issue of SCN had discharged their service tax liability
alongwith interest, penalties u/s. 76 and 78 were set aside based on section
73(3) holding no SCN should have been issued in the present case[VirTeja Road Lines vs. CCE (2012) 27 STR
290 (Tri.-Ahmd.)].
98.51
The Tribunal
imposed penalty u/s 76 as the appellant who had originally paid service tax
stopped paying service tax based on the new interpretation of law which was not
warranted. However based on judgment in case of First Flight Couriers Ltd. (2011) 22 STR 622 (P&H), penalty
u/s. 78 was waived since penalty was levied u/s. 76 [Madhav Nagrik Sahkari Bank Ltd. vs. CCE (2012) 27 STR 352 (Tri. –
Del.)].
98.52
Where, the
appellant a 100% EOU didn’t initially pay service tax on commission paid to
overseas agents but paid it before the O-I-O, the Tribunal considering that the
said tax would be available as credit which can be claimed as refund in terms
of rule 5 of Cenvat Credit Rules, 2004, condoned the levy of -
(i)
penalty u/s. 78 since on account of
revenue neutrality there was no ‘intent to evade tax’;
(ii)
penalty u/s. 76 since there was
‘reasonable cause’ u/s. 80 on account of revenue neutrality.
[CCL
Products (India) Ltd. vs. CCE & ST(Appeals) (2012) 27 STR 342 (Tri.-
Bang.)].
98.53
In case where the appellant had defaulted in payment of service tax and
filing of the return, penalties u/s 76 and 78 were set aside since these
obligations were complied alongwith payment of interest before any reminder
from the revenue and before the issuance of the Show Cause notice [Kishan M. Mehta & Co. vs. CST (2012) 27 STR 481 (Tri. –
Ahmd.)].
98.54
Where the assessee in spite of having service tax registration did not
pay the service tax due to financial difficulties but on being pointed out by
the department paid the service tax alongwith interest before issuance of show
cause notice and informed the department the Tribunal held that penalty u/s. 76
& 78 was not called for in view of the provisions of section 73(3) [CCE v. Mukesh Jain (2012) 28 STR 277
(Tri.-Del.)].
98.55
Where, the appellant on being pointed out by the department during the
course of investigation paid service tax alongwith interest on GTA service and
overseas commission, the Tribunal waived penalty u/s 78 of the Act as the
appellant is entitled to take credit of the same and no extra benefit was
earned on account of suppression [India
Trimmings Pvt. Ltd. v. CCE (2012) 28 STR 401 (Tri.-Chennai)].
98.56
The Tribunal relying on judgment in case of Commissioner v. Motorworld (2012) 27 STR 225 (Kar.) deleted the penalty u/s. 76 since the show cause notice is issued post
amendment in section 78 w.e.f. 10.5.2008 which provided for non-imposition of
penalty under section 76 if penalty under section 78 is imposed [Jivant Enterprise v. CST (2012) 28 STR 582
(Tri.-Ahmd.)].
98.57
Where the appellant utilized cenvat credit in excess of prescribed limit
even though it had provided taxable and exempt services and did not disclose
the same in its returns, the Tribunal justified the invocation of the extended
period and imposition of penalty u/s. 78 observing as follows:
(i)
When the return contains a declaration as to the self assessment
particulars stating that the assessee had paid service tax correctly in terms
of provisions of the Act and Rules made thereunder such declaration becomes
faulty if tax is held to be not so paid, in absence of bona fide statement
either on the return or made through a letter accompanying the return.
(ii)
Failure to make disclosure in return or submitting entire fact by any
letter accompanying the return appears to be a case of wilful suppression.
(iii)
Suppression does not vanish by mere passage of time to issue show cause
notice and contravention of law gets no immunity from penal consequences.
Suppression corroborated by an untrue declaration in the return filed calls for
levy of penalty.
The
High Court agreed with the above observation of the Tribunal.
[Vodafone Digilink
Ltd. v. CCE (2013) 29 STR 229 (Raj.)]
98.58
Where the assessee
had bonafide believed that the
drawings and designs imported were liable to customs duty and not to service
tax but later on paid the service tax alongwith the interest prior to the
issuance of the show cause notice and did not dispute the liability, the court
upheld the order of the Tribunal holding that there was a reasonable cause for
failure to pay service tax and hence penalties u/s.76, 77 and 78 were not
imposable [Commissioner vs. Welspun
Gujrat Sthal Rohren Ltd. (2013) 29 STR 471 (Guj.)].
98.59
Where the assessee wrongly
availed cenvat credit on rent-a-cab services used for transportation of
employee’s children to school / tution centres, the Tribunal held that the
issue involved was of interpretation of provisions of the Cenvat Credit
Rules,2004 and hence the penalty u/s.78 was set aside [Hindustan Zinc Ltd. vs. CCE (2013) 29 STR 492 (Tri-Del.)].
98.60
Even if extended
period of limitation is invoked in the show cause notice (‘SCN’) no penalty
u/r. 15 (4) of the Cenvat Credit Rules, 2004 for wrong availment of cenvat
credit would be imposable unless the willful misstatement or suppression of
facts etc. with an intent to evade payment of tax for imposing the said penalty
is alleged in the SCN [Inox Air Products
Ltd. vs. CCE (2013) 30 STR 47 (Tri. – Bang.)].
98.61
Where the assessee
under a bona fide belief did not pay
service tax on handling / storage of empty containers and the adjudicating
authority while setting aside penalty levied u/s. 78 had also recorded that
there was no mala fide intention to
evade tax, penalty imposed u/s. 76 was also set aside by the Tribunal on the
ground of “reasonable cause” [Balmer
Lawrie & Co. Ltd. vs. CST (2013) 30 STR 75 (Tri. – Kolkata)].
98.62
Where the assessee
had discharged the service tax liability along with interest before issuance of
SCN the Tribunal held that the SCN should not have been issued in view of
section 73(3) and accordingly no penalty u/s. 76 would be imposable [M.R. Coatings Pvt. Ltd. vs. CCE (2013)
30 STR 76 (Tri. – Ahmd.)].
99.1
The assessee billed
its clients at an amount less discount but paid tax on the gross amount before
discount. On realizing that service tax is payable only on the amounts after
discount it issued credit notes for return of the excess service tax and
claimed refund from the department. The lower authorities rejected the refund
claim on the ground that the issue of credit note cannot be considered to
conclude that the burden of the duty has not been passed on to the buyers or
ultimate customers. On appeal, the Tribunal allowing the refund held that since
service tax is payable only on the amount realized and not on the amount billed
the decisions in the context of Central Excise duty laying down that once
invoice is issued it is conclusive proof that the incidence of duty is passed
on notwithstanding subsequent issue of credit notes would not apply to service
tax considering that the service tax recognizes post clearance transaction by
way of refund of value of taxable service and the tax paid thereon [rule 6(3)].
[Prachar Communications Ltd. V. CCE
(2006) 2 STR 492 (Tri. – Mum) followed in Standard Charted Bank v.CCE (2007) 7 STR 449 (Tri-Mum)]
99.2
The assessees,
engaged in providing telephone services, inadvertently paid service tax on the
MRP mentioned on the recharge vouchers instead of the discounted price [i.e. on
the net monies received] and on certain vouchers distributed free. The vouchers
were distributed by their agents. The assessees filed refund claims which were
rejected by the lower authorities on the time bar, eligibility and unjust
enrichment. However, the Tribunal allowed the refund observing as follows:
(i)
As regards time-bar
the department had returned back the refund claim for insufficiency of
documents and thereafter re-submitted by the assessees. The department
contended that the date of re-submission is relevant and the refund claim was
time barred. The Tribunal held that even if a refund claim is incomplete or is
not substantiated by documentary evidence it cannot be retuned back by the
adjudicating authorities. It is incumbent upon the authorities to make an order
on such refund claim. Hence the re-submitted refund claim is in continuation of
the original refund application and thus not hit by limitation.
(ii)
As regards the
eligibility for refund the department had contested that the invoices were
issued by the assessee’s agent and hence the assessee would not be eligible.
The Tribunal disagreed and held that the agent issued invoices “on behalf of”
the assessees, collected the monies and paid to the assessees. Further, the
Tribunal held that the assessee is the service provider and having paid service
tax on the entire MRP they are eligible for the refund of service tax on the
amounts not realised by them.
(iii)
As regards unjust
enrichment, though the issue was raised in the show cause notice and replied by
the assessee the lower authorities did not record any adverse finding in the
Order-in-Original nor was it challenged before the CCE(A) who relied upon the
Chartered Accountant’s Certificate and the invoices and found that doctrine of
unjust enrichment did not arise. The Tribunal concurred with CCE(A)’s findings
though it observed that the said question cannot be raised before it.
[CST vs. Reliance Communication Ltd.
(2008) 11 STR 258 (Tri-Mumbai)]
99.3
The assesee DTIPL
provided services to DT, USA for preparation and filing of US Federal, State
and local tax returns, and property tax returns, as well as for computing
advance Tax estimates, wage card processing and transfer pricing planning and
execution which involved data entry, data processing, and such other incidental
and support services. They paid service on the said services under the category
of “Business Auxiliary Services”. Further they also claimed input credit on –
(i) Equipment hiring charges; (ii) Professional Consultation Service; (iii)
Recruitment Services; (iv) Security Services; (v) Telephone Services; (v)
Transport Services; (vi) Training Services; (vii) Facility Operation Service;
(viii) Courier Services; (ix) Cafeteria Services; (x) Other input services like
advertisement service. They claimed refund of input credit on the basis that their
services were exported. The Department denied refund on the ground that –
(i)
The services were
in the nature of information technology service not liable under business
auxiliary services and accordingly input credit cannot be taken;
(ii)
Notwithstanding (a)
above, the input services were not used for providing output services;
(iii)
The input credit
pertained to services exported prior to 14.3.2006
Tribunal dismissed
the Revenue’s contention and held as follows –
(a)
The services are
not information technology services since the use of computer or computer
programme for their services is only secondary and the primary activity that of
is business-related services. Hence their services would be liable as “Business
Auxiliary Services”.
(b)
The services on
which credit has been claimed are necessary for providing output services and
fall within the definition of input services u/r. 2(l) of Cenvat Credit Rules,
2004 which has defined the scope of an input service quite widely.
(c)
Rule 5 of the
Cenvat Credit Rules alongwith Notification no. 5/2006 dated 14.3.2006 provides
for refund of credit on input services used for exports. This rule would apply
even in cases where the claim for refunds are filed on or after 14.03.06 but
the exports in respect of which were made prior to that date.
[CCE vs. Deloitte Tax Services India Pvt.
Ltd. (2008) 11 STR 266 (Tri –Bang.)].
99.4
Any amount
including interest (though not forming part of duty), wrongly collected, is
refundable by the Government. The department cannot refuse refund on the ground
that it is not provided under the statutory provisions of the refund. However,
the refund is subject to the bar of unjust enrichment [Mothersons Sumi Systems Ltd. v. CCE (2007) 5 STR 16 (Tri-Del.)].
99.5
Documents produced
in a Compact Disc (CD) is admissible evidence for the purpose of sanction of
refund in view of the provisions of the section 4 of the Information Technology
Act, 2000 and Rule 5(1) of the Service Tax Rules, 1994 which provides that the
records including computerized data as maintained by the assessee shall be
accepted. [Standard Chartered Bank v. CCE
(2007) 7 STR 449 (Tri-Mum)]
99.6
The appellants
initially collected and paid service tax on the assumption that they are liable
to pay service tax but on discovery of the error they returned the service tax
to their clients by way of cheques as well as by credit notes and claimed
refund from the department. The department sought to disallow the refund on the
ground of unjust enrichment since the issue of credit note does not alter the
fact of unjust enrichment. The Tribunal allowed the refund and held that issue
of credit note is also a form of payment as held in Mohd. Ekram Khan and
Sons (2004) 6 SCC 1083 and accordingly there was no unjust enrichment since
the assessee had returned the service tax to their clients. [Shiva
Analysticals (
99.7
Where refund is
granted by the Assistant Commissioner pursuant to the order of the Tribunal,
the CCE cannot revise the Assistant Commissioner’s order merely because the
order of the Tribunal has been appealed against by the department unless a
competent court stays the operation of the Tribunal’s order. [Bharati Hexacom India Ltd. v. CCE (2007)
7 STR 438 (Tri-Del.)].
99.8
The assessee
debited excess amount to their Cenvat credit account and made an application
vide letter dated 12.6.01 to take credit of the same. On advise of the Revenue
they filed a refund claim although after a year. The Revenue claimed time bar.
The Tribunal allowed the refund claim after holding:
(i)
It is a simple
arithmetical mistake meriting adjustment;
(ii)
If at all a refund
claim is required to be made the letter dated 12. 6.01 must be considered as
the refund claim
(iii)
The amount paid
should be considered as a deposit and not duty.
(iv)
The denial of the
refund claim for the excess amount paid on account of clerical error is unjust.
[Motorola India
Pvt. Ltd. V. CCE (2007) 7 STR 613 (Tri-bang.)].
99.9
The appellants
collected certain amounts from the customers from April, 2000 to January, 2005
and paid service tax under the category of Real Estate Agent’s services, filed
returns and accepted assessments for the said period. However, when the
services of Management, Maintenance and Repair of immovable property was
notified w.e.f. 16.6.2005, the assessee claimed refund for the said period
arguing that the amount paid was not “tax” but “money simplicitor” and must be
refunded unaffected by the provisions of Section 11B. The authorities refunded
the amount paid for the period March, 2004 – January, 2005 (which was within 1 year
limitation period provided u/s. 11B) but rejected the refund claim for the
previous period. On appeal, the Tribunal, on facts, dismissed the appeal of the
assessee and held that the amount paid was “tax” and not “money simplicitor”
especially considering that the assessee had paid tax, filed returns and also
accepted the refund for 2004-05 for which he submitted a CA certificate that
the tax was not collected from the customers. Accordingly, the provisions of S.
11B were held to be applicable and the amount for the period April 2000 – March
2004 was held time barred. [Campus
Service (
99.10
Where the order of
the Tribunal granting refund to the appellants was pending adjudication before
the Supreme Court and show cause notice was issued to nullify the order and to
withhold the amount of refund the Tribunal observed that in the absence of any
interim order by Supreme Court the department was bound to implement the orders
of the Tribunal. [CCE vs. Diamond Cement
(2008) 10 STR 183 (Tri-Del.)]
99.11
Where on the facts
the amount of service tax paid by the assessee could not be recovered from the
customers and a claim for refund of the amount paid in excess was made it was
held that the principle of unjust enrichment would not apply to such refund
since it is just money which the assessee is entitled as the same was paid by
assessee in excess. [CST vs. Standard Chartered Bank (2008) 10 STR 6
(Kar) affirming CCE & ST v. Standard
Chartered Bank (2006) 3 STR 751 (Tri-Bang.)]]
99.12
Rule 5 of the
Cenvat Credit Rules alongwith Notification no. 5/2006 dated 14.3.2006 provides
for refund of credit on input services used for exports. This rule has been
held to apply even in cases where the claim for refunds are filed on or after
14.03.06 but the exports in respect of which were made prior to that date. [Caliber Point Business Solutions Ltd. vs.
CCE (2008) 11 STR 15 (Tri. – Mum.); See also CST vs. WNS Global Service (P) Ltd. (2011) 22 STR 609 (Bom.)].
99.13
Where the
appellants have not challenged the order of assessment passed by the
Superintendent, no refund claim is maintainable after the order has become
final notwithstanding that the Superintendent had no jurisdiction to pass the
assessment order.[Malwa Cotton Spinning
Mills Ltd. vs. CEGAT (2008) 11 STR 82 (P&H)].
99.14
Where locational
exemptions to units located at Jammu was granted by a Notification by allowing
refund of “duty of excise or additional duty of excise” paid by such units, it
was held that the exemption also extended to “education cess” since cess is
also excise duty as per section 93 of the Finance Act, 2004. [Sun Pharmaceutical Industries vs. CCE
(2008) 11 STR 93 (Tri. – Del.) relying on T.T.K.-LIG
Ltd. vs. Commissioner (2006) 193 ELT (169) (Tribunal – LB)].
99.15
The assessee was
granted refund pursuant to the Tribunal’s order. The assessee subsequently also
asked for interest u/s. 11BB of the Central Excise Act. However, the department
instead of paying the interest issued another SCN seeking to recover the refund
already granted on the ground that the Revenue appealed against the Tribunal’s
order to the High Court. The assessee made a miscellaneous application to the
Tribunal which held that, in absence of stay against the order of the Tribunal,
refusing to pay the interest u/s. 11BB is illegal and issue of SCN for
recovering refund already granted amounts to contempt of the Tribunal. [Toyota Kirloskar Motor Ltd. vs. CCE
(2008) 11 STR 551 (Tri-Bang.)]
99.16
Amounts paid by
mistake cannot be termed as duty. Accordingly the limitation u/s. 11B would not
apply for seeking refund of such amounts. [CCE
vs. Motorola India Pvt. Ltd. (2008) 11 STR 555 (Kar)].
99.17
In this case the
Tribunal held:
(a)
Where the assessee
paid service tax on amounts not received from the customers, it is not necessary
for the CCE(A) to examine each and every entry to overrule the plea of unjust
enrichment. Further, the question of unjust enrichment would not arise in such
a case [7 STR 449 (Tri-Mum.); 3 STR 751 (Tri-Bang.); 10 STR 6 (Kar) relied
on];
(b)
Boards instruction
No. 137/50/2007 CX 4 dated 16.3.2007 clarifying that in the event of
centralized registration obtained by the assessee, the rebate refund claim shall be dealt with the Service
tax Commissionerate having jurisdiction
over the centralized registration of the assessee is not applicable to refunds
pertaining to the period prior to 16.3.2007.
[CCE
v. Standard Chartered Bank (2008) 88 RLT 440 (Tri-Bang.)]
99.18
Where the assessee
erroneously paid service tax on pilotage services rendered in minor ports,
under the category of Management consultancy services instead of ‘minor port’
services which came into effect from 1.07.2003 and claimed refund of tax for the period 1.10.99 to 30.09.2002 on
9.10.2003 the Tribunal rejected the refund claim as barred by limitation after
observing that payment on account of mis-construction, mis-application or wrong
interpretation of the provisions of law would not change the character of the
amounts from tax to deposit, and accordingly the refund claim being filed
beyond the statutorily prescribed period (of 1 year) would be barred by
limitation. [Karnik Maritime Pvt. Ltd.
vs. CCE (2008) 12 STR 145 (Tri-Mumbai)]
99.19
Passing an
assessment order is contemplated only when a notice u/s.73 is issued.
Otherwise, there is no provision for assessment. Thus, where the assessee
deposited excess services tax and claimed refund (which was rejected by the
lower authorities for certain reasons), the rejection of the refund claim by
the Tribunal on the ground that the assessee had not challenged the assessment
by filing a statutory appeal is not sustainable since no order capable of being
appealed against had ever been passed. [
99.20
The appellants
claimed refund on the ground that service tax was not recovered from the client
at the time of receipt of the value of services. It produced evidence in the
form of CA certificate, invoices and books of account where the amount of
service tax was shown as receivable. The department contended that service tax
might have been recovered after the issue of CA certificate. The Tribunal
allowed the refund claim and held that as the tax was not paid or recovered at
the time of payment of value of services the Revenue’s contention is in the
realm of assumption and presumption. [CCE
vs. Gujarat Chemical Port Terminal Co. Ltd. (2008) 12 STR 564 (Tri-Ahmd.); See
also CCE v. Shrinathji Dyg (2011)
24 STR 108]
99.21
Refund arising due
to the order of the Tribunal is refundable even if SLP has been filed by the
department and the matter is pending before the Supreme Court. [Jai Bhagwati Impex Pvt. Ltd. vs. UoI
(2009) 13 STR 24 (Bom.)]
99.22
Where the revenue
contended that since goods exported out of country were exempted from payment
of duty and therefore, the amount paid by the respondent manufacturer cannot be
treated as “duty” paid and he is not entitled to rebate on account of duty paid
on goods removed from factory / authorised warehouse for export out of India,
the High Court held that -
(i)
if no duty was
leviable and the assessee was not required to pay the duty but still he has
paid the duty the Government cannot retain the same on any ground and must
refund the amount received from the assessee as on their own showing. It has
not received the amount by way of duty which could be appropriated by them nor
to which Section 11B applies.
(ii)
If on the other
hand, the assessee is entitled to remove such goods on payment of duty in
ordinary course he is entitled to claim rebate thereon because the goods were
exported out of country on payment of excise duty.
In either case the
refund is admissible. [CCE vs. Suncity Alloys Pvt. Ltd. (2009) 13 STR 86
(Raj.)]
99.23
Claim for refund of
service tax not required to be paid under the law (“illegal levy”), [in the
present case – interest on loans which is not subject to service tax], would
also fall within the corners of section 11B and the claim has to be preferred
within the statutory period, else it would be barred by limitation. [
99.24
Refund claim filed
by the service recipient is maintainable [Chandigarh
Vayu Bharti Co-op. Society vs. CCE
(2009) 14 STR 161 (Tri-Del.)]
99.25
Refund of service
tax paid under TR-6 challan cannot be denied merely on the ground that the same
was not a prescribed document at the relevant point of time especially when the
payment of service tax has not been denied; the objection of the revenue
pertains more to the form rather than substance.[CCE vs. Nitin Spinners Ltd. (2009) 14 STR 527 (Tri – Del.)]
99.26
Where the appellants, the service provider, had made
excess payment of service tax on which Cenvat credit was also availed by the
service recipient, but subsequently, they returned the service tax to the
service recipient by way of credit notes on which the Cenvat credit availed was
also reversed by the service recipient alongwith interest, the Tribunal allowed
the refund claim filed by the appellants holding that there was no unjust
enrichment. [Professional International Couriers (P) Ltd. vs. CST (2009)
15 STR 295 (Tri-Chennai)]
99.27
Even in respect of
refund of amounts paid in excess due to clerical error, the provisions of
section 11B would be applicable and hence the refund application filed beyond
the period of one year from the relevant date would be considered as time
barred. [General Manager, B.S.N. L vs.
CCE (2009) 14 STR 250 (Tri-Bang.); See also CCE vs. Beharay & Rathi Constructions (2009) 14 STR 246
(Tri-Mumbai)]
99.28
Where the appellant, an exporter of services,
claimed rebate of tax paid on various ‘input services’ like telephone, fax,
management consultancy, real estate agent, security agency, etc. under notification
no. 12/2005 dated 19.4.2005 but filed a declaration only prior to the date of
refund and not prior to the date of export as required by the notification, the
Tribunal held –
(i)
On facts, the various services qualified as ‘input services’ and accordingly
the tax paid on them qualified for rebate;
(ii)
The belated filing of declaration is only a procedural lapse for which
the substantive benefit of rebate should not be denied.
[CST v Convergys India Pvt. Ltd. (2009)
16 STR 198 (
99.29
Where the appellant claimed refund of tax paid as a
recipient of services on reimbursement of expenses to foreign technicians the
Tribunal disallowed the refund claim holding as follows.
(i)
The tax paid was on ‘reimbursements’ and not on consideration for
‘services’, and hence the tax paid is not in the nature of service tax and
accordingly would not qualify for cenvat credit. Thus, clause (c) of the
proviso to Section 11B(2) of Central Excise Act, 1944 which provides that the
bar of unjust enrichment would not apply to refund of cenvat credit would not
be applicable.
(ii)
the appellant has debited the said tax payments to its Profit and Loss
Account which implied an increase in the cost of finished goods sold. Hence the
appellant had passed on incidence of such duty to another person and
accordingly the refund claim would be hit by the bar of unjust enrichment.
N.B.:
The above judgment reiterates the point that if an
assessee claims refund of any tax it should appear in the ‘current assets’ and
should not have been written off.
[Keihin Fie Pvt. Ltd. vs. CCE
(2009) 16 STR 71 (Tri. – Mum.)].
99.30
Where tax has been erroneously paid on an activity which is not liable
(architectural activity in Sri Lanka), what is paid is not “Service tax” and
consequently, a refund claim filed (on 20.09.2006) even beyond a period of one
year from the date of payment of tax (on 04.07.2005) is not barred by the limitation u/s 11B of
the Central Excise Act, 1944
[Natraj and Venkat Associates vs.ACST 2010 (17) STR 3(Mad.); See also K.V.R Constructions vs CCE 2010 (17) STR 6 (Kar.)].
99.31
A refund of tax on
notified services such as Port services, Goods transport services, Custom house
agent services, technical testing and analysis services etc., used for the
export of goods under Notification no. 41/2007 dated 17.9.07 cannot be denied
to the service recipient on the basis that a part of the services of the
service providers would not fall in the notified service categories without
first revising the assessment of service providers. [CCE vs Anant
Commodities Pvt. Ltd. 2010 (18) STR 214 (Tri-Del.)].
99.32
Bar of unjust enrichment would not be applicable to
pre-deposit made during pendency of appeal since pre-deposit amount
is not payment of duty. [CCE vs. Sam
Industries (2009) 16 STR 382 (Tri-Mumbai)]
99.33
Where the assessee filed refund claim for the period July 2002 to June
2003 on 29.8.2003 but on the department pointing out certain defects and
deficiencies it filed a revised claim on 17.3.2004, the Tribunal held that the
date of the filing the refund claim was 29.8.2003 and accordingly only part of
the refund claim was held time-barred i.e. tax paid on 16.08.2002 [CST v. HMA Udyog Pvt. Ltd. (2010) 20 STR
827 (Tri-Del.); See also CCE vs. Motherson Sumi Systems Ltd.
(2011) 22 STR 496 (Tri – Mum.)].
99.34
Notification no. 41/2007 – ST dated 6.10.07 which provided for refund of
tax paid on specified input services used for exports initially provided for a
time limit of two months from the end of
the quarter to which the refund relates for claiming refund of the said
quarter. The time limit was extended to six months vide notification no. 32/08
– ST dated 18.11.08 by ‘substituting’ the word “six” for the word “two”. The
Tribunal held that the amendment is retrospective and hence a claim for
December, 2007 quarter filed on 27.5.2008 is within the time limit [CCE v. Essar Steel Ltd. (2010) 20 STR
769 (Tri-Ahmd.) See contra
Kalyanihayes Lemmerz Ltd. vs. CCE (2013) 30 STR 71 (Tri. – Mumbai)]
99.35
Where the assessee paid service tax on advance received for construction
services to be provided but did not provide the service due to cancellation of
contract and returned the same alongwith service tax to their clients, the
Tribunal held that the assessee is entitled to refund and the time limit of 1
year from the date of payment of service tax would not be applicable, there
being no service provided there is no
liability to pay tax and consequently the amount of tax paid earlier would be
treated as deposit with the department liable to be refunded without invoking
the provisions of Section 11B of the Central Excise Act, 1944 [CCE v. Pratibha Constn. Engnr & Contr
(I) P. Ltd (2011) 22 STR 182 (Tri- Mum)]
99.36
Where the appellant- manufacturer reimbursed service tax on services used
by the merchant exporter through whom he exported goods and filed a refund
claim under the notification no. 41/2007 dated 6.10.07 with respect to service
tax so paid by him the Tribunal denied the refund claim observing that the
refund can be claimed only by the exporter of goods and not by the
appellant-manufacturer who did not export the goods. [Noble Grain India Pvt Ltd v. CCE (2011) 22 STR 189 (Tri-Mum)]
99.37
‘Relevant date’ for reckoning the due date of one
year for filing the refund claim of service tax paid on input services used for
export of services is the date when the assessee has received the payment for
service exported [CCE v. Eaton Industries
P.Ltd 2011 (22) S.T.R. 223 (Tri – Mum)]
99.38
Where the appellant, a stock-broker, refunded brokerage with service tax
to his clients on the basis that the clients had reached a certain turnover of
business with him, and claimed refund of the excess tax after a period of one
year from the date of payment of tax (
to the Government), the Tribunal held that the refund claim was barred by
limitation and the proper course for him was to avail the facility of
provisional assessment for payment of tax.
[H. Nyalchand Financial Services Ltd v. Comm of S T , 2011
(21) S.T.R. 669 (Tri- Ahmd)]
99.39
The
(i)
that New Delhi
Branch and Tokyo Branch of Bank of Tokyo both were branches of the same legal
entity. Thus, even if any services are provided between them it would be
considered as self-service and hence would not be liable for service tax.
(ii)
Notwithstanding,
there is no service to third party the services, if any, rendered by New Delhi
Branch would qualify as export of services and accordingly refund would be
allowed without reference to unjust enrichment.
[Bank of
99.40
Refund of credit of tax paid on input services used for exports under
rule 5 of Cenvat Credit Rules, 2004 is not deniable on the ground that the
credit pertained to a month in which there was no exports [Fine Care Bio-systems vs. CCE (2010) 20 STR 193 (Tri. – Ahmd) relying
on Philco Exports v. CCE (2009)
234 ELT 568 (Tri. Del) wherein it was held that the time lag between date of
receipt of inputs, date on which they were used and date of export are not
relevant.; See also CCE v. Chamundi Textiles (Silk Mills) Ltd.
(2010) 20 STR 219 (Tri.- Bang.)]
99.41
Refund granted to the assessee by an order passed by the Asst. CCE can be
recovered by the department as being “erroneously refunded” by issuing a show
cause notice u/s 73 without the department filing an appeal before CCE(A)
against the refund order of Asst. CCE. [Ogilvy & Mather Pvt Ltd vs CST 2010
(18) 502 (Tri-Bang.)]
99.42
Where an assessee paid tax on a misinterpretation of the statutory
provisions, it was held that refund
claim filed after 1 year from the
payment of service tax would be time-barred. [CCE vs Manorath Builders (p) Ltd.
2010 (18) STR 453 (Tri-Del.)]
99.43
‘Amount deposited’ during investigation not found payable on adjudication
is only a deposit refundable to the assessee and the claim for refund of such
deposit made within one year from the date of order of adjudication was held as
within the prescribed time limit. The Tribunal further held that there was no
unjust enrichment since tax was paid as deposit much later than the issue of
invoices. [Wazir Singh Swaran Singh
Consignment Stockist (P) Ltd. vs CCE 2010 (18) STR 468 (Tri-Del.)]
99.44
Where duty was paid by the assessee during investigation and contested
in subsequent fora which finally ended in a favourable order the duty is
deemed to have
been paid under protest
and the bar of limitation for claiming refund would not be applicable. [CCE vs. Crompton Greaves Ltd. (2011) 22
STR 380 (Tri-Mumbai); See also CST vs. Wardes Pharmaceuticals Pvt. Ltd. (2011) 22 STR 274(Mad.)].
99.45
Refund of service tax paid on input services [Cenvat credit] availed
by the assessee in relation to export of its services is permissible even if the refund claim pertained to the period prior to
the date of the assesseee obtaining registration. [CST vs. E-Care India Pvt. Ltd. (2011) 22 STR 529 (Tri – Chennai)]
99.46
Where although at the time the duty was paid on the directions of the Central
Excise
Officers, no protest was specifically recorded, yet the payment was considered
to be made under protest since-
(a) The duty was paid on the directions of the
preventive officers; and
(b) The assessee contested the demand when SCN was
issued
Hence there was no
time bar for refund.
[Star Coolers & Condensers Pvt Ltd v. CCE
(2011) 24 STR 110 (Tri); See also Mangalam Cements vs. CCE
(2011) 24 STR 699 (Tri-Del)]
99.47
Where the amount received by the service provider is inclusive of all taxes
and the service provider claimed a refund of the tax paid out of that amount,
the Tribunal held that there was no unjust enrichment as the price was fixed
and the service provider paid the tax out of the consideration offered by the
service recipient. [CST v. V.S.
Infrastructure Capital Ltd. (2012) 25 STR 170 (Tri. – Del.)]
99.48
Refund of service tax paid on transportation of empty containers to the
factory premises for stuffing of export goods and on detention charges
is admissible under
Notification No. 41/2007-ST dated 6.10.07 since the same would fall within the
expression “in relation to”
transportation of goods [Inox India Ltd. vs.
CCE (2012) 26 STR 120 (Tri-Ahmd)].
99.49
The assessee in the
present case had mistakenly paid service tax on certain construction services
provided by it which were not liable for service tax. Accordingly it filed a
refund claim though beyond the period of limitation prescribed under Section
11B of Central Excise Act, 1944. The Revenue had not disputed the assessees
liability to pay service tax. However, it denied the refund claim on the ground
that the same was barred by limitation by virtue of Section 11B of the Act. The
issue before the High Court was whether the provision of Section 11B would be
applicable even in cases where the amount of tax has been paid under mistaken
notion. The High Court observed as follows.
(1)
Since
the assessee was not liable to pay Service Tax on the construction services
rendered by it, the revenue could not have demanded payment of such tax from
the assessee. Hence it lacked the authority to levy and collect the said tax
amount from the assessee and retain it.
(2)
In absence of the authority, payment made by
the assessee as service tax would not partake the character of service tax
liable to be paid by them. Mere nomenclature will not be an embargo on the
right of assessee to demand refund of payment made under mistaken notion.
Accordingly, the
High Court held that provision of Section 11B would not be applicable in such
circumstances since it is not a duty as referred to in s. 11B and hence refund
was admissible
[CCE.
vs. KVR Construction (2012) 26 STR 195(Kar.)].
99.50
Notification No.
41/2007 – ST dated 6.10.2007 had been amended on 19.2.2008 allowing refund of
service tax paid on goods transport agency services (“GTA services”) for
transport of export goods from place of removal to the port. The Tribunal
allowed refunds to tax paid on GTA services even for goods exported prior to
19.2.08 but refund claims whereof was filed post 19.2.08 since on the date of
filing the claims the requirement of notification had been satisfied [East India minerals Ltd. vs. CST (2012)
27 STR 18 (Tri. – Kolkata)].
99.51
Where the appellant,
who was eligible for the benefit of small service provider exemption under
Notification No. 6/2005, had made payment of service tax without availing the
exemption and subsequently claimed refund of the tax paid the Tribunal held
that –
(i)
the refund claim
cannot be disallowed on the ground that the appellant had by paying service tax
not exercised the exemption option available under the said notification since
amount deposited in government account becomes payment towards service tax only
when return is filed and the assessee had not shown the amount in the return as
paid towards tax, the amount paid was only a remittance of higher amount to the
bank for credit of service tax account;
(ii)
neither has the tax
paid been passed on to the customer.
Hence unjust enrichment is not involved and the amount is refundable to the
appellant
[Nandan Kumar Goila v. CCE (2012) 27 STR
33 (Tri. – Del.)].
99.52
The appellant in the present case were rejected the
refund claim made by them under Notification No. 9/2009-S.T. on the grounds
that the service tax was paid on the input services on the basis of ‘debit
notes’ which was not a specified document under Rule 4A of the Service Tax
Rules, 1994. On appeal the Tribunal held that where the debit note contained
all the information required under Rule 4A of the Service Tax Rules, 1994 and
where the appellant had fulfilled all the conditions of the notification the
denial of refund on the mere ground that the name of document was ‘Debit Note’
was not warranted [Mission Pharma Logistics(I)
Pvt Ltd v.CCE
(2012) 27 STR 60 (Tri-Ahmd)].
99.53
Where the appellant claimed refund of certain
service tax amounts which it had debited as expenditure in its Profit &
Loss account, the Tribunal held that by debiting as expenditure, value of
output services was inflated and hence the incidence was passed on to that
extent and accordingly the refund claim was held to be barred by unjust
enrichment. [A.A.Memon & Company vs.
CCE (2012) 27 STR 41 (Tri-Ahmd.)].
99.54
(i) Refund of service tax paid on input ‘port
services’ cannot be denied at the service recipient’s end on the ground that
the services provided by service provider was not classifiable as under the
category of ‘port’ services.
(ii)In absence of written
agreement with the buyer refund of service tax paid in respect of technical
testing and analysis services is not allowable under Notification No.
41/2007-ST [Cadila Pharmaceuticals Ltd. vs. CCE (2012) 27 STR 160 (Tri. – Ahmd)].
99.55
(i)Refund of service
tax paid on input ‘port services’ and ‘CHA services’ cannot be denied at the
service recipient’s end on the ground that the service provider was not
classifiable as under the category of ‘port / CHA’ services.
(ii)Service tax paid on
services of commission agent located abroad for sales promotion is admissible
as credit and hence refund claim thereof is also admissible.
[Bodal Chemicals Ltd. vs. CCE (2012) 27
STR 276 (Tri. – Ahmd.)].
99.56
Service tax paid on transportation of empty containers from
yard to factory (for stuffing of export goods) and from factory to port of
export being “in relation to transport of export goods” is entitled to refund
vide notification no. 41/2007 as amended by notification no. 3/2008 dated
19.12.2008 [Garware Polyester Ltd. vs.
CCE (2012) 27 STR 288 (Tri-Mumbai)].
99.57
Where the appellant debited the cenvat credit account for discharging
duty liability though on wrong advice of the departmental officers suo moto re-credit of the same was held
to be inadmissible in law and only a refund claim was held permissible.
However, it was further held that the refund claim if any also would be time
barred since more than 1 year had elapsed since debiting the Cenvat credit
account [Vighnahar SSK Ltd. vs. CCE (2012)
28 STR 219 (Tri. – Mumbai)].
99.58
The appellant, a manufacturer and exporter of excisable goods, claim
refund of service tax paid on input services viz., inland haulage charges,
terminal handling charges, bill of lading charges, processing fee, terminal
services etc. under notification no. 41/2007 dated 6.10.2007 on which the
service provider had charged service tax under the category of ‘port services’.
The department denied refund on the ground that the said services are not
classifiable under ‘port services’. The Tribunal upheld the refund claim on the
basis of the following:
(i)
The person rendering the
service to the appellant was registered for rendering ‘port service’ and bill
was issued classifying the service as ‘port service’. The classification of the
service cannot be changed at the service recipient’s end.
(ii)
The opening para of the
notification does not make any reference to ‘classification’ [column (2)]but
only to the ‘nature of the service’ i.e. ‘service provided for export of said
goods’[column (3)] which seems to be a serious lacuna, the omission cannot be
supplied by the Tribunal which only interprets a notification. Thus, the
situation is to be judged with reference to the expressions actually used.
(iii)
Subsequent amendment in the
definition of ‘port service’ to cover any service rendered in the port area
shows the intention of the government in this regard. Though it operates
prospectively a beneficial notification must be construed liberally.
[Max India Ltd. v. CCE (2012) 28 STR 248 (Tri.-Del.)].
99.59
The appellant, a merchant exporter, had applied for refund of service tax
paid (as payer of freight) on GTA service used for export of food items under
n/n. 17/2009-ST, though service tax on such transportation was exempt vide n/n.
33/2004-ST. The department denied refund on the ground that the services were
exempt. The Tribunal held that there is no provision barring payment of service
tax on an exempt service like s. 5A(1A) of Central Excise Act, 1944 which bars
payment of excise duty on an exempt product. Hence the refund claim of the
appellant cannot be denied [Crown
Products Pvt. Ltd. v. CCE (2012) 28 STR 406 (Tri.-Mumbai)].
99.60
Refund of service
tax paid on input services used for export of goods was held to be allowable on
the basis of certified copies of invoices instead of original invoices, in view
of Board’s Circular no. 112/6/2009 – ST dated 12-3-2009 [CCE vs. Gokul Refoils & Solvents Ltd. (2012) 28 STR 488 (Tri. –
Ahmd.)].
99.61
Refund of service
tax paid on fumigation charges i.e. specialised cleaning charges incurred for
containers carrying agricultural products for export was disallowed in absence
of written agreement between the buyer and seller [CCE vs. Gokul Refoils & Solvents Ltd. (2012) 28 STR 488 (Tri. –
Ahmd.)].
99.62
For claiming refund
of service tax paid on scientific testing services used in export of goods,
there is no need to establish correlation between the samples tested and
consignment exported under Notification no.17/2009 dated 7.7.2009 [Trident Ltd. vs. CCE (2012) 28 STR 505
(Tri. – Del.)].
99.63
For claiming refund
of service tax paid on transportation service vide notification no.17/2009
dated 7.7.2009, it is sufficient that invoice issued by the exporter indicate
that the goods were exported through the Inland Container Depot (ICD) concerned
and it is not material that the receipt issued for the said service could not
be correlated with the consignments exported [Trident Ltd. vs. CCE (2012) 28 STR 505 (Tri. – Del.)].
99.64
Refund of amount
deposited during investigation as payment under protest – unjust enrichment not
possible when demand dropped since it is refund of deposit towards duty and not
refund of duty [CCE vs. Krypton
Industries (2012) 28 STR 555 (Tri. – Kolkata)].
99.65
Where the
appellants, had initially paid tax but had challenged the same before the
CCE(A) who held in the assesse’s favour, the Tribunal held that the payment made
by it would amount to payment under protest and the relevant date for claiming
refund u/s. 11B of the said tax paid would be the date of the order of the
CCE(A). Hence refund claim filed within a year of the order of CCE(A) was held
not time barred. Further, it was also held that though the appellants had paid
service tax on cum-tax basis it had not collected the same from the customers
which was substantiated by a Chartered Accountant's certificate. Hence bar of
unjust enrichment was also not applicable. Accordingly, the Tribunal allowed
the refund claim [Karur Gayathri Finance
Ltd. CCE (2013) 29 STR 373 (Tri. – Chennai)]
99.66
Where the
appellants, a unit in the SEZ, had obtained a list of ‘taxable services’ as are
required for its authorized operations approved by the Approval Committee of
the SEZ (in which the jurisdictional Commissioner of Central Excise is also a
member) the adjudicating authorities cannot disallow exemption/ refund in
respect of services as mentioned in the said list, on the basis that there was
no direct nexus between those services and the operations of the SEZ unit.
Accordingly, the refund claim of the SEZ unit was allowed [Tata consultancy Services Ltd. vs. CST (2013) 29 STR 393 (Tri Mumbai)]
99.67
Under Notification
No. 9/2009 dated 3.3.2009, services ‘wholly consumed’ in an SEZ unit were
entitled to upfront exemption. In respect of other services, the SEZ unit had
to pay the service tax to its suppliers and thereafter claimed refund. The
appellant paid service tax on ‘wholly consumed’ services to its suppliers and
claimed refund. The department denied the refund on the ground that the
notification does not prescribe the refund procedure for ‘wholly consumed’
services. On appeal, the Tribunal allowed the refund claim observing that –
(i)
Though
in the case of services which are wholly consumed within the SEZ, there is no
necessity to discharge the service tax liability ab initio, that does not mean that in a case where service tax
liability has been discharged, the appellant is not eligible or not entitled
for refund of the service tax paid under the provisions of Section 11B of the
Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. If the
appellant is eligible for refund under Section 11B, then the same cannot be
denied on the ground that the claim was made under Notification No.9/2009-S.T.
(ii)
Services
provided to a SEZ unit are exempt under Rule 31 of the Special Economic Zone
Rules, 2006. And, s. 51 of the Special Economic Zone Act, 2005 provides that
the provisions of the SEZ Act and Rules would prevail over other legislations.
Thus, even if the appellant was not entitled to refund of service tax paid on
services ‘wholly consumed’ within the SEZ under Notification No. 9/2009 they
were entitled to refund u/s. 11B of the Central Excise Act
[Tata
consultancy Services Ltd. vs. CST (2013) 29 STR 393 (Tri Mumbai)]
99.68
The appellant had
claimed refund of penalties that were initially paid but which were set aside
in appeal proceedings. The department denied the refund claim on the ground
that the principle of ‘unjust enrichment’ applies and appellant had debited the
penalty as its expenditure in its Profit & Loss account. On appeal the
Tribunal allowed the refund holding that —
(i)
Principle
of unjust enrichment is not applicable to refund of penalties; and
(ii)
In
view of the presumption in law that penal liability can never be passed on to
another person who has not committed the offence, the burden to show that
penalty has been passed on to another cannot be discharged merely by looking at
the balance sheet and the profit & loss A/c.
[Shree Perfect Security Services (India) P.
Ltd. vs. CST (2013) 29 STR 389 (Tri. - Ahmd.)].
99.69
Where the
assessee-club had paid tax on the entry fee received from non-members on
cum-tax basis and later claimed refund of the tax paid on the ground that fees
from non-members are not liable, the Tribunal allowed the refund claim holding
that there was no unjust enrichment as the fees was fixed and the service
provider paid the tax out of the consideration offered by the service recipient
[CST v. Sun-N-Step Club Ltd. (2013)
29 STR 521 (Tri. – Ahmd.) see also Alstom Projects India Ltd v.
CST, 2013 (29) S.T.R 618 (Tri-
Chennai)]
99.70
Where the
appellant, a call centre BPO was continuously exporting its services (every
call attended was an export), considering the nature and peculiarities of the
business, the High Court held that, the description, value, service tax payable
on input services actually required to be used in providing the taxable service
to be exported are not determinable prior to the date of export so as to comply
with the ‘prior declaration’ formality as per para 3 of Notification no.12/2005-ST dated 19.4.2005 to
claim rebate of tax paid on input services used for export of services. In such
cases it was held that after the export if such particulars are furnished to
the service tax authorities within a reasonable time along with the necessary
documentary evidence so that their accuracy and genuineness may be examined,
and if those particulars are not found to be incorrect or false or
unauthenticated or unsupported by documentary evidence, the rebate claims must
be allowed [Wipro Ltd vs.UOI (2013) 29
STR 545 (Del)].
99.71
When the assessee
claims refund under specific exemption notification then the time limit
prescribed therein for filing the claim would be applicable and not the one
prescribed under Section 11B of the Central Excise Act, 1944. Hence, where the
notification time limit was exceeded the claim was held to be time barred [Aaryan Mines and Minerals Corpn. vs. CCE (2013)
30 STR 78 (Tri. –Ahmd.)].
Interest on Delayed Refund
99.72
The
liability of revenue to pay interest on delayed refund u/s. 11BB of the Central
Excise Act commences from the date of expiry of 3 months from the date of
receipt of application for refund u/s. 11BB and not on the expiry of period of
3 months from the date on which order of refund is made [Ranbaxy Laboratories Limited vs. UOI (2012) 27 STR 193 (SC)].
Interest on refund
of pre-deposit
99.73
Where the assessee made a pre-deposit on 21.11.2002 in terms of a
Tribunal order and succeeded in the appeal in terms of a final order dated
31.12.2003 and the amount was refunded without interest on 14.9.04, the
Tribunal relying on section 35FF (which came into effect from 10.5.08) ordered
interest from 1.4.2004 (3 months from the date of communication of the
Tribunal’s order) to 14.9.2004. [CCE v.
Kamdeep Marketing Pvt. Ltd. (2012) 25 STR 199 (Tri.- Del.)]
100.1
Where the original
authority had exercised his discretion under section 80 of the Finance Act,
after recording proper reasons, the matter cannot be reopened to enhance the
penalty by the Commissioner in the Order-in-Revision. [VEE
100.2
The show cause notice and order in revision issued
by the Commissioner in exercise of its revisional power cannot go beyond the
original show cause notice.[Sands Hotel
Pvt. Ltd. vs. CST (2009) 16 STR 329
(Tri-Mumbai); See also Aero Products vs. CST (2011) 22 STR 522
(Tri-Bang.) wherein the Tribunal held that Making a new case under the
revisionary proceedings is not permissible.; Brij Mohan Surinder Kumar v. CCE (2012) 25 STR 58 (Tri-Del)]
100.3
The revision order dated 16.12.08 being passed two years after the date
of passing the original order dated 14.12.06.(although issued on 28.12.06) is time-barred u/s 84 (5) [Paramount Corporate Network Ltd
v. CST (2011) 21 STR 542 (Tri – Bang.)]
100.4
Revision of adjudicating authority’s order by the commissioner after
appeal decided by the Commissioner of Central Excise (Appeals) is bad in law [SMP Steel Corporation vs. CCE (2011) 22
STR 56 (Tri. – Che.)]
100.5
Where an appeal has been preferred before the Commissioner (Appeals)
against the order of the adjudicating authority, suo-motu revision of the
adjudicating authority’s order by the Commissioner u/s.84 for increasing the liability during the
pendency of the appeal was held to be not permissible even though the appeal
before the Commissioner(Appeals) was only as to the validity of the
adjudicating authority’s order since u/s. 35A(3), the CCE(A) is also empowered
to increase the liability and hence the issue of higher liability was also an
issue before the CCE(A) [CCE v. Shiva
Builders (2011) 22 STR 513 (P& H)]
100.6
The Joint
Commissioner (JC) in his order dropped the demand of 1.66 lakhs but confirmed a
demand of Rs. 2.43 lakhs against which the assessee went in appeal and the CCE
(A) allowed the appeal. Thereafter the Commissioner reviewed the JC’s order
insofar as the demand of Rs. 1.66 lakhs was dropped and raised the said demand
of Rs. 1.66 lakhs. It was held, by the Tribunal that the review order was not
maintainable since the JC’s order was already set aside by the CCE (A) on the
same subject matter [CCE vs. Ajmer
Automobiles P (Ltd) (2012) 26 STR 19(Tri-Del.)].
101.1
The department issued notices for recovery of
amount stayed by the Tribunal on the grounds that stay order passed by the
Tribunal stands vacated on expiry of 180 days. On appeal the Tribunal held that
there was no
requirement to pass any order extending stay already granted since the order of stay
of recovery shall remain valid till final disposal of appeal.[A. Mohammed Mubarrac vs. CCE (2009) 16
STR 385 (Tri-Chennai)]
101.2
(i) Even in
the absence of express provisions conferring power to the Tribunal to pass stay
order the power of granting stay is incidental and ancillary to its appellate
jurisdiction.
(ii) Under
the first proviso to section 35C(2A) of the Central Excise Act, where in an
appeal, the Tribunal has granted a stay, it is obligatory on the Tribunal to
dispose the appeal within 180 days from the date of the stay order. If the
appeal is not so disposed, the second proviso to section 35C(2A) provides that
the stay order shall stand vacated. However, even in the absence of express
provisions, the Tribunal has the power to extend the stay order beyond 180 days.
(iii) But,
the extension of stay order is not automatic. The assessee has to make proper
application before the Tribunal for extension of stay order otherwise the stay
order granted comes to an end at the expiry of 180 days.
(iv) When an
application is filed for extension of stay, the Tribunal has to apply its mind
to find out for what reasons, the appeal is not disposed within statutory
period of 180 days. If the assessee’s conduct is not the cause for the appeal
not being disposed of, then the assessee cannot be denied the benefit of
extension of the stay order.
[CCE vs. Indian Oil Corporation
(2010) 20 STR 458 (Kar.)]
102.1
New pleas such as
relating to coverage under service tax is a legal plea and can be raised at any
stage of the appeal proceedings. [Siddhi
Travels v. CCE (2006) 2 STR 132 (Tri-Mum)]. Similarly, question of
limitation is a question of law and can be raised for the first time even at
the stage of second appeal. [Euro
Advertising (P) Ltd. V. CCE (2006) 2 STR 38 (Tri-Kol.)].
102.2
Section 85(4) does
not authorise the Commissioner (Appeals) to issue any fresh show cause notice
of the nature contemplated under section 73 of the Act for recovery of service
tax. It only empowers the Commissioner (Appeals) to issue show cause notice for
enhancing the service tax, interest or penalty. Thus, were the original show
cause notice u/s. 73 alleged that the appellants were liable for service tax
under the category of consulting engineering services, the Commissioner
(Appeals) u/s. 85(4) cannot issue a notice alleging that the assessee is liable
under other categories . [Autolite (
102.3
Where the issues
before the Commissioner (Appeals) against the order-in-original were only grant
of refund by way of cheques and relief in respect of the amounts rejected by
the lower authority on account of time-bar he was not expected to go into
matters such as unjust enrichment which were not raised before him. Hence an
appeal by the department before the Tribunal is not maintainable on a ground
which is entirely new and it is not permissible for the Tribunal to consider a
case laid for the first time in appeal. [CCE
& ST v. Standard Chartered Bank (2006) 3 STR 751 (Tri-Bang.)].
102.4
Dispatch of
adjudication order by speed post / registered post would not amount to a valid
service in absence of proof of actual delivery of the speed post [Triveni Glass Ltd. v. CCE (2007) 5 STR
41 (Tri-Del.); Amidev AgroCare Pvt. Ltd
v. Union of India (2012) 26 STR 299 (Bom)].
102.5
Rule 20 of the
CESTAT (Procedure) Rules, 1982 which provides for restoration of the appeal
disposed of ex-parte where the “appellant” afterwards shows sufficient cause
for non-appearance, is not applicable to a case where the Revenue’s appeal has
been upheld and none appeared for the assessee who was only a respondent. [CCE v. Yamuna Bardana Trading (2007) 6
STR 150 (Tri. –
102.6
The miscellaneous
application signed by a person having a vakalatnama is not valid. It has to be
signed by the appellant. [SBEC Sugar Ltd.
vs. CCE (2008) 9 STR 573 (Tri-Del)]
102.7
Appeal to
Commissioner (Appeals) - additional grounds can be added by filing an addendum
before the hearing [CCE vs. Tata SSL Ltd.
(2008) 9 STR 579 (Tri-Mumbai)].
102.8
Amounts
pre-deposited at the time of pendency of appeal before the Tribunal is required
to be refunded to the appellants on success notwithstanding that department had
filed a reference before the High Court, in absence of stay by the High Court.
[Morargee Goculdas Spg. & Wvg. Mills
Co. Ltd. vs. CCE (2008) 11 STR 444 (Tri-Mumbai)]
102.9
Where a compendious
order was passed by lower authorities disposing of two SCNs there was no need
to file as many number of appeals as the SCNs before the higher authority – a
single appeal would be in order. [Escorts
vs. CCE (2008) 11 STR 532 (Tri-Del.)]
102.10
Where the
respondents had failed to avail the opportunity of agitating before the
Tribunal by filing a cross objection, they were not allowed to raise new
grounds at a later stage.[
CCE vs. Delta Elastometal Compound Pvt. Ltd.
(2008) 11 STR 534 (Tri-Mumbai)].
102.11
Where the appeal
was dismissed on account of non-compliance of pre-deposit and its restoration
on compliance was refused by the CCE(A) the Hon’ble High Court held that it was
not permissible to refuse the restoration of appeal on compliance of the
pre-deposit requirement. [Scan
Consultancy vs. UOI (2008) 12 STR 108 (Guj.) see also D.K Mishra v. CCE
(2011) 22 STR 241 (Tri-Del)]
102.12
The Tribunal need
not decide all the grounds raised in the memo of appeal if the authorised
person has appeared and argued only some of grounds therein.[CCE vs. Kothari Products (2008) 12 STR 5
(All.)]
102.13
An appeal filed
even after the statutory period for which delay can be condoned by the CCE(A)
is barred by limitation and cannot be saved even by Section 5 of the Limitation
Act,1963, since:
(i)
the provisions of
Limitation Act, 1963 apply only to courts or the forums that has trappings of
the court;
(ii)
under the
provisions of Central Excise Act, CCE(A) is only an executive authority
performing quasi judicial functions but he cannot be considered as a court or a
forum having trappings of the court;
(iii)
the application of
Limitation Act must be held to be expressly excluded by virtue of the specific
provisions in section 35 of Central Excise Act which have provided a maximum period
for which delay can be condoned.
[Navinon Ltd.vs. UOI (2008) 12
STR 84 (Bom.)]
102.14
Where additional
evidence was not adduced before the Tribunal by filing an application in
writing to that effect under r. 23 of CESTAT (Procedures), Rules, 1982 it was held
by the High Court that the order of the Tribunal rejecting the additional
evidence and upholding the order of lower authorities was correct. [Kay Iron Works Pvt. Ltd. vs. CCE (2009)
13 STR 87 (Bom.)]
102.15
Appeals filed
before the High Court u/s. 35G of the Central Excise Act, 1944 beyond the
prescribed period of limitation in terms of section 35G(2)(a) [180 days from
the date of receipt of the order] would be barred by time and the High Court
would have no jurisdiction to condone the delay and entertain the appeal after
the said period of limitation. Further, the language of the provisions
[especially section 35G(9) – opening words] seen in conjunction with the
legislative intent and the objects of expeditious disposal sought to be
achieved would exclude the application of section 5 of the Limitation Act, 1963
(which provides for condonation of delay on sufficient reasons) by necessary
implication. [CCE vs. Shruti Colorants Ltd. (2009) 13 STR358 (Bom)].
102.16
Appeal filed
inadvertently in the office of Dy. CCE, a month in advance of the due date,
which is in the same premise as that of the CCE(A), in whose office it should
have been filed cannot be rejected as time-barred. [Global Telecom v. CST (2009) 14 STR 634 (Tri. – Mum.)]
102.17
Where, while
passing ‘orders’, the CESTAT members differed in their opinion on some points
and referred the matter to a Third member but did not give their findings on
several points raised by the petitioner for which the petitioner made an
application for rectification of ‘order’ before the CESTAT, which application
was resisted by the Revenue on the ground that no ‘order’ came to be passed
since the matter was pending before the Third member, the High Court allowed
the application and held –
a.
Orders made by the
CESTAT though differing in opinion are nevertheless ‘orders’ and not merely
‘opinions’ though they may not be enforceable ‘orders’ due to absence of
majority;
b.
the rectification
application before the CESTAT is maintainable and should be heard first before
disposing of the reference to the Third member.
[Suzlon Infrastructure Ltd. v. Union of
102.18
The question
whether a member’s club is liable for service tax on the amounts received from
its members is a question ‘having a relation to the rate of service tax’ and
accordingly an appeal against the order of the CESTAT would lie to the Supreme
Court and not the High Court u/s. 35L of the Central Excise Act, 1944 read with
section 83 of the Finance Act, 1994.[CST v. Delhi Gymkhana Club Ltd. (2009)
16 STR 129 (Del.) see also CST
vs. Atria Convergence Technologies P. Ltd. (2011) 21 STR 209 (Kar.)].
102.19
Where the appellant
initially did not intend to challenge the impugned order but on pronouncement
of favourable decision by the Larger bench in a similar matter filed an appeal
against the impugned order with a delay of more than 73 days, the Tribunal
considering the same to be a sufficient cause for delay in filing the appeal
condoned the delay. [
102.20
Though there is no
limitation of time to file an application for restoration of appeal, such an
application cannot be prolonged inordinately. The Tribunal observed, since the
original period for filing the appeal is itself three months, the application
for restoration will have to be filed within the maximum period of three months
from the dismissal of the appeal. In any case, any application filed beyond
such period has to disclose cause for the delay. Thus, where the appeal was
dismissed on 5.11.07 and an earlier restoration application was also dismissed
on 25.6.08, a second application for restoration made on 29.8.08 without
disclosing sufficient cause for delay was dismissed by the Tribunal. [KirtiKumar J. Shah v. CCE, (2011) 22
STR. 246 (Tri- Mumbai)]
102.21
In case of appeals against rejection of refund claims filed before the
Tribunal, in absence of demand of duty or levy of penalty, the appellant is
required to pay a minimum fee of Rs.1,000/- only under sub-section (6) of Section
35C of the Central Excise Act, 1944 [which is similar to sub-section (6) of
Section 86 of the Finance Act, 1994]. The quantum of fees payable is not
determinable based on the amount of refund involved. [Morarjee Textiles Ltd. vs. CCE (2011) 22 STR 371 (Tri-Mumbai)]
102.22
The department filed an appeal before the Tribunal against the CCE(A)
order on merits. The CCE(A) had without deciding on the stay application passed an
order on merits since the department did not contest the assessee’s stay application.
The Tribunal remanded the matter on the ground that CCE (A) was not correct in
passing an order on merits without deciding the stay application. On appeal,
against the Tribunal’s order remanding the case, the High Court held that the
remand was incorrect since -
(i) the department had not contested application
filed by the appellant for waiver of pre-deposit before the CCE(A) and hence it
is not open to them to contest it before the Tribunal; and
(ii) The sec. 35F clearly empowers the CCE (A) to
dispense with pre-deposit.
(iii) Where appeal is preferred on merits, the order
cannot be set aside on extraneous grounds than on merits.
The matter was remanded to the Tribunal for
deciding on merits. [Annapoorna
Re-rolling (P) Ltd. vs. CESTAT (2011) 22 STR 481 (Mad.)]
102.23
Appeals against the Tribunal’s order involving questions of
classification of service rendered lies before the Apex Court by virtue of
section 35L of the Central Excise Act,
1944, and not before the High Court u/s
35G of the said Act. [CCE v. S.S.
Maritime (2011) 23 STR 114 (Kar) See also CST vs. John Flower (I) Ltd. (2012) 26 STR 301 (Kar); CST vs. Shah Polymers (2012) 26 STR 513
(Kar.)].
102.24
With regard to the question whether the assesse’s activities fall
within the category of ‘clearing and forwarding agent’ services an appeal would
be only before the Apex Court u/s. 35L of the Central Excise Act, 1944 and not
before the High Court u/s. 35G since it is involves the determination of a
question having relation to the ‘rate of duty or value of goods for the
purposes of assessment’. [CST vs.
Siddarth Polymers (2011) 23 STR 209 (Kar.); See also CCE vs. Rai Associates (2011) 23 STR 210
(Kar.) - question whether activity liable under CA services or business
auxiliary services?; See also Prakash Freight Pvt. Ltd. (2011) 23 STR 220 (Kar.)]
102.25
In this case the High Court analysed the meaning of the expression
“determination of question relating to rate of duty of excise or value of goods
for the purpose of assessment” mentioned in s. 35G and 35L of the Central
Excise Act, 1944 made applicable to service tax and laid out the broad disputes
emanating from the order of the Tribunal wherein an appeal would lie before the
Supreme Court and not before the High Court. The court further observed that
the expression “rate of tax” does not mean only the rate at which tax is
payable or fraction thereof but is much beyond. The disputes wherein appeal
would lie to Supreme Court are as follows:
(a) Dispute
relating to the service tax payable on any service / taxable service;
(b) The
value of table service for the purpose of assessment;
(c) A
dispute as to the classification of services;
(d) Whether
those services are covered by exemption notification or not?;
(e) Whether
the value of services for the purpose of assessment is required to be increased
or decreased?;
(f) The question
of whether any services are taxable service or not;
(g) Whether
any activity is a service rendering activity or not, so as to attract levy of
service tax?;
(h) Whether
a particular service falls within which heading, sub-heading of Section 65(105)
of the Finance Act, 1994 which defines “taxable service?”
Further it also observed that matters other than what is set above,
which relates to refunds, duty drawbacks, rebates, etc., which relate to a
particular manufacturer falls within the jurisdiction of the High Courts’. [CST vs. Scott Wilson Kirkpatrick (I) Pvt.
Ltd. (2011) 23 STR 321 (Kar.)]
102.26
Appeal against an order of the Tribunal holding service tax not
recoverable based on the income shown in the income tax returns being a
question relating to valuation, is maintainable only before the Supreme Court
and not the High Court. [CST v. ALP
Management Consultants P. Ltd. (2011) 24 STR 287 (Kar.)]
102.27
An appeal before the CCE(A) by a manufacturer against an adjudication
order disallowing cenvat credit on input services used for payment of excise
duty is to be preferred u/s. 35 of the Central Excise Act, within a period of 2
months and not u/s. 85 of the Finance Act, 1994 within a period of 3 months
from the date of receipt of the order and an appeal filed beyond the said
period of 2 months was held to be time barred [Hi Tech Arai Ltd. vs. CCE & ST (2011) 24 STR 577
(Tri-Chennai)].
102.28
Power of remand is
available to the Commissioner (Appeals) in cases where the assessee had no
opportunity to even reply to the show cause notice and in absence of any
material before the Commissioner (Appeals), it was not possible for the
Commissioner (Appeals) to decide the case on merits.[CST vs. World Vision (2011) 24 STR 650 (Del)]
102.29
Appeal against the orders of Tribunal involving questions relating to
rate of duty of excise or value of goods for the purpose of assessment lies
before the Supreme Court under Section 35L of the Central Excise Act, 1944 and
not before the High Court [CST. vs. Maini
Material Movement Pvt. Ltd. (2012) 26 STR 106 (Kar)].
102.30
Where an appeal against the orders of Tribunal involving questions
relating to levy of duty of excise or value of goods for the
purpose of assessment lies before
the Supreme Court under Section 35L of the Central Excise Act, 1944, appeal in
respect of validity of penalty would also lie before the Supreme Court and not before the High Court
[CCE v. T. D. Power Systems Pvt. Ltd. (2012)
26 STR 481 (Kar.); See also
CST vs. Jindal South West
Steel India Ltd.
(2012) 27 STR 201 (Kar.)].
102.31
Where
the issue involved was whether the appellant was required to reverse the credit
on the Capital Goods removed as such or to pay the duty on the transaction
value the High Court held that the same being a question relating to
determination of rate of duty, the appeal in respect thereof would lie before
the Supreme Court and not High Court [CCE
v. Jalansarshini Pipes Pvt. Ltd. (2012)
26 STR 594 (Kar)].
102.32
Appeal
against the order of Tribunal involving questions such as whether the assessee
is liable to pay service tax under a particular agreement on reverse charge
basis, being a question relating to rate of duty / tax appeal against the same
lies before the Supreme Court and not the High Court [CST vs. Siemens VDO Automotive Ltd. (2012) 27 STR 11 (Kar.)].
102.33
Where an appeal against the order of the Tribunal involving questions
relating to rate of duty has been filed before the Supreme Court, the question
of bar of limitation as well as setting aside of penalty being dependant on the
question of leviability of excise duty would also lie before the Supreme Court
and not the High Court. [CST vs. Jindal
South West Steel India Ltd. (2012) 27 STR 201 (Kar.)].
102.34
Where the Commissioner (Appeals) held that there was a clear nexus,
between input and output services and allowed cenvat credit, a mere assertion
of the absence of nexus between Input and
Output service without any effort to substantiate by the revenue the claim
is not sufficient [CCE vs. Mavenir
Systems Ltd. (2012) 27 STR 510 (Tri. – Bang.)].
102.35
Section 84 which
provided for revision of orders by the Commissioner was omitted w.e.f
19.8.2009, and in its place a new section 84 enabling the department to file an
appeal to the CCE(A) against an order of the adjudicating authority was
enacted. Simultaneously, on 19.08.2009
the remedy of the assessee to file an appeal before CESTAT u/s 86 against a
revision order passed by the Commissioner was deleted. However, Explanation to
new sec 84(3) protected the assessee’s remedy before CESTAT in respect of
revision orders passed before 19.8.09. An issue arose whether in respect of
revision proceedings initiated before 19.8.09 where the Commissioner passes an
order u/s 84 after 19.8.09, the assessee’s remedy before the CESTAT is
protected? Answering the question in the affirmative, the Tribunal held:
(i)
A
Commissioner of Central Excise as revisionary authority under the old section
84 of the Finance Act,1994, could continue beyond 19-8-2009 to revise any order
passed immediately before the said date by any adjudicating officer subordinate
to him;
(ii)
The
order passed by the Commissioner in such revision proceedings under the old Section 84of the
Act would be appealable to this Appellate Tribunal as if the words and figures
“or section 84” had not been omitted from sub-section (1) of Section 86 of the
Act;
(iii)
The
finding at (ii) above is based on the established premise that the lis between
the Department and the assessees commenced on the dates of institution of the
revision proceedings and the law prevailing on such dates would govern the
maintainability of appeals against the orders-in-revision and also based on the principles laid down by the Hon’ble
Supreme Court in Garikapati Veeraya’s
case (AIR 1957 SC 540) coupled with the provisions of Section 6 of the General
Clauses Act,1897.
[T.A. Pai Management Institute vs. CCE (2013)
29 STR 577 (Tri-Bang)]
103
Appeals – Letter
from Commissioner appealable?
103.1
Pursuant to a
clarification sought by the respondent-assessee the Addl. CCE vide letter dated
23.12.2004 clarified that service tax was not payable on international
door-to-door courier service but the Commissioner vide letter dated 9-1-2006
stated that the clarification of the Addl. CCE was not in accordance with a
Board Circular and directed the payment of service tax. On appeal, the CESTAT
held that the Commissioner’s letter dated 9.1.2006 was an order but was bad in
law since it did not give an opportunity to the assessee of being heard /
showing cause either under section 73 or section 84. The High Court affirmed
the order of the CESTAT. [Chief Commissioner,
LTU,
103.2
The assessee had
reversed Cenvat Credit at the instance of the department but wanted to agitate
the matter and requested the Asst CCE to issue a SCN which request was denied
by letter dated 17.3.09. The appeal on 1.5.09 of the assessee against the said
letter before the CCE(A) was rejected as time barred. On appeal, the Tribunal
held that the Asst CCE’s letter dated 17.3.09 refusing to issue SCN created
civil consequences and an appeal filed within 2 months from that date is not
time barred u/s 35 of the Central Excise Act, 1944. [Koya & Co. Construction Pvt. Ltd v. CCE (2011) 24 STR 120
(Tri-Bang)]
103.3
Refund claim can be
rejected even without issuing a show
cause notice simply by issuing a letter and there would not be a violation of
natural justice since the remedy to appeal against such rejection i.e. the
letter is available to the assessee [Aaryan
Mines and Minerals Corpn. vs. CCE (2013) 30 STR 78 (Tri. –Ahmd.) relying
on CCE vs. U.P. Sheet & Metal
Containers Pvt. Ltd. (1991) 51 ELT 90 (Tribunal)].
104
Appeals –
Pre-deposit from Cenvat Credit
104.1
Amount debited to Cenvat credit account pursuant to adverse adjudication
order is to be considered “pre-deposit” even though no stay application was
filed alongwith appeal and no order for pre-deposit was made. On success in
appeal recredit of pre-deposit made out of cenvat credit account cannot be
denied either on the ground that credit was availed on the basis of the
appellate order which is not a prescribed document for taking credit or on the
ground that the appellate order did not contain the words “consequential
relief”. [Samtel Electronic Devices vs.
CCE (2012) 26 STR 125 (Tri. - Del.)].
105
Rectification of Tribunal orders
105.1
When the finding
given in Tribunal order is after due consideration of all the issues raised, it
is not open to the revenue to reargue the matter or call upon the Tribunal to
review the basis of decision on the ground of non-citing of an existing
judgement and failure to make enquiries. Hence the application for
rectification of mistakes not tenable. [CCE
v. Victor Gaskets India Ltd. (2008) 12 STR 341 (Tri. – Mumbai)]
105.2
The Tribunal held
that in the absence of any express statutory provision for filing application
for rectification in orders in service tax appeals disposed of by the Tribunal,
such an application for rectification of tribunal order cannot be made. [CCE vs. Fairline Worldwide Express (2011)
24 STR 411 (Tri-Chennai)].
105.3
If once the order
regarding the pre-deposit of duty is not complied with, the Tribunal has no
power or discretion but to reject the appeal and such an order would be a final
order. Also, the Tribunal cannot entertain an application for rectification of
mistake in this regard for recalling its order dismissing the appeal. [V. Ramkrishna Rao v. CCC (2012) 25 STR
395 (Mad.)]
105.4
Where the Tribunal
rejected the application for condonation of delay in filing rectification
application as the delay was beyond 6 months as stated in section 35C(2) of the
Central Excise Act, 1944, the High court held in the absence of any express
reference to section 5 of the Limitation Act in the Central Excise Act or a
power to condone the delay in filing a rectification application, the Tribunal
cannot be considered to have committed any irregularity in rejecting an
application for condonation of delay in filing rectification application on the
ground that it is time barred [CCE v.
Sree Chamlundeswari Sugars Ltd. (2012) 25 STR 400 (Kar)]
106
Authority on advance ruling
106.1
Having regard to
the provisions of section 96A(a) and (b), the Authority held that it is only an
applicant who is yet to commence his business activity who can take the benefit
of an advance ruling and not a person who has an ongoing business or an
undertaking which has already commenced the business [McDonald’s India Pvt.
Ltd. (2004) 165 ELT 404 (A.A.R.)].
106.2
The Authority on
Advance ruling refused to modify its ruling in the applicant’s case on the
ground that there was no mistake of law or fact. It held that since the
Authority had recorded its findings based on the material before it there was
no mistake of law or fact which is a sine
qua non for modification of an advance ruling. The authority further
observed that a modification in a ruling cannot be made – (i) for addressing a
question [relating to quantum] which is not the subject matter of the question
of the original ruling [relating to exigibility]; or (ii) due to a change in
approach of the CBEC on the subject; or (iii) for clarification of some
positions of the ruling which the applicant fears would be misinterpreted [In
Re : Google Online India P. Ltd. (2007) 5 STR 69 (AAR)].
106.3
The applicants, ‘A’
was a subsidiary of B which in turn was a subsidiary of C, a Government
Company. ‘A’ sought an advance ruling on an issue which was identical with a
question in respect of B which was pending before the CESTAT. Considering that
a ruling in such a case could lead to incompatible decisions concerning the
same question being rendered by two different authorities, the Authority on
Advance Ruling rejected the application in exercise of the discretion vested in
it u/s 96D(2) of the Act [Re: GSPL India
Transco LTD. (2013) 29 STR 642 (A.A.R)].
107
Departmental
clarifications
107.1
The following propositions
with respect to departmental circulars was laid by the larger bench of the Supreme
Court:
i.
Circulars and
clarifications issued by the board are binding on the authorities under the
respective statute but are not binding upon the courts.
ii.
When the Supreme
Court or the High Court declares the law on the question arising for
consideration, it would not be appropriate for the Court to direct that
Circular should be given effect to and not the view expressed in a decision of
the Supreme court or the High Court.
iii.
Circulars issued by
the board which run contrary to the statutory provisions have no existence in
law.
iv.
The revenue can
lodge an appeal taking a ground contrary to a circular if it runs counter to
the decision of a court.
[CCE vs. Ratan Melting & Wire Industries
(2008) 12 STR 416 (SC)]
108
Binding effect of precedents
108.1
Once the Court lays down the law that the recipient
of the service is not liable for paying service tax, that law is binding on all
Tribunals and Authorities functioning within the jurisdiction of the said court
[A.C.Nealsen Org-marg Pvt. Ltd. vs. UOI
(2009) 16 STR 259 (Bom)]
108.2
Where the Revenue challenged a decision of the
Tribunal in a case before the High Court, though it had not challenged the
Tribunal’s decision in another case involving a similar issue, it was held by
the High Court that the Revenue is not precluded from taking such a contrary /
different stand where –
(a) there is a “just cause”; or
(b) it is in public interest to
do so; or
(c) when a pronouncement of the
higher court is different and / or divergent views are expressed by the
Tribunals or High Courts (other than jurisdictional high court).
[Shiva Taxfabs Ltd. vs. UoI (2011)
24 STR 525 (Del.)]
108.3
A Board circular treating a decision of the Tribunal
as being relevant only to the facts of that case and not a binding precedent is
incorrect and liable to be struck down [Shiva
Taxfabs Ltd. vs. UoI (2011) 24 STR 525 (Del.)].
109.1
The revenue cannot proceed to recover dues if the
stay application for waiver of pre-deposit of the said dues is pending before
the Tribunal. [FCM Travel
Solutions(
109.2
The department has no authority to use coercive measures to collect any
amount of tax in advance at the time of raid. It can legitimately do so only at
the time of recovery proceedings when tax liability has been ascertained by
following the procedure of issue of show cause notice and not before that. Thus
where the assesee had to make a compulsory payment towards tax in advance at
the time of raid and in absence of any show cause notice issued by the
department, the Hon’ble High Court held that the department had no right to do
so and accordingly ordered the amount to be refunded.[Naresh Kumar & Co. vs. UOI (2010) 19 STR 161 (Cal.)]
109.3
Where the department had issued notice to ONGC u/s. 87(b)(i) of the
Finance Act, 1994, for recovery of service tax on services provided by certain
manpower supply agencies to ONGC without passing assessment orders
crystallising the service tax liability of the manpower supplying agencies the
High Court held that, only after an assessment order has been passed and the
assessees have defaulted in payment of assessed tax, the department has powers
to issue notice to ONGC u/s. 87 and not before that.[O.N.G.C. Ltd. vs. DyCCCEST (2010) 19 STR 164 (A.P.)]
109.4
The Delhi High
Court held that no proceedings can be initiated by the department against
assessee for payment of tax on renting of immovable property where the matter
is in appeal before the Supreme Court (by the department) and there is no order
passed by the Supreme Court staying the operation of the High Court order in
appeal. [SSIPL Retail Ltd vs. UOI (2010) 18 S.T.R. 262 (Del.)]
109.5
In a writ petition challenging the validity of
Circular No. 967/01/2013-CX, dated 1-1-2013 which mandates the
department to initiate recovery proceedings inter
alia in the following situations–
(1)
where appeal alongwith the stay
application is filed with the appellate authority [CCE(A) or CESTAT] and no
stay is granted within 30 days after filing; and
(2)
immediately on confirmation of demand by
the Commissioner (Appeals) or Tribunal or High court although the time-limit of filing further appeal alongwith stay
application has not expired,
the High Court held as follows:
(i)
As regards situation (1), it was held
that recovery proceedings cannot be initiated where the assessee’s application
for stay has remained pending for reasons beyond his control such as
unavailability of the officer concerned before whom the stay application is
filed, absence of bench before CESTAT for decision of stay application etc.
However, if application for stay has remained pending for more than a
reasonable period, due to default/improper conduct of an assessee, recovery
proceedings can well be initiated.
(ii)
As regards situation (2), it was held
that recovery proceedings cannot be initiated unless the specific time limit
prescribed by the law for filing the further appeal alongwith with the stay applications
does not expire.
(iii)
Further, the Court also suggested the
Finance Ministry to keep track of stay applications and other
adjudication/appellate proceedings by use of modern technology so as to dispose
of the appeals /stay applications expeditiously.
[Larsen &
Toubro Ltd. vs. UOI (2013) 29 STR 449 (Bom.)].
110
Reimbursement of
service tax under a contract not conditional upon payment by the service
provider
110.1
In case where the service recipient contended that
he would pay service tax only upon the service provider first paying the
service tax the court dismissing his contention directed –
(a)
the service recipient to pay the service tax along with interest @ 18%;
and
(b)
the service provider to deposit the service tax amount with the
department.
Further, this fact was considered as reasonable cause for not depositing
the service tax in time and accordingly penalty proceedings were quashed. [Introspective Detective Pvt. Ltd vs BSNL
2010 (18) STR 3 (All.)]
111.1
Even if a
job-worker’s services to a manufacturer are exempt under notification no
8/2005-ST, where a job-worker has forgone exemption and paid service tax, the
manufacturer is eligible for Cenvat credit in respect of service tax paid to
the job-worker [CCE vs Laxmi Metal Pressing works Pvt. Ltd. 2010 (18)
STR 149 (Tri-Mumbai.)].
111.2
Where the capital
goods were installed in the factory premises and were in a position to be used
at any time, Cenvat credit on the capital goods cannot be denied for the mere
reason that the said capital goods could not be made functional. [CCE vs. Seat Metal Components
111.3
Where on facts it was found that, the fly-ash extraction plant
situated away
from the factory was neither a captive plant nor was the fly ash exclusively
used by them, the Cenvat Credit of duty paid on capital goods used in the
flyash extraction plant would not be admissible. [India Cements Ltd v. CCE (2011)24 STR 94)]
111.4
Where duty paid
capital goods purchased by the assessee were destroyed by fire and the
insurance company paid compensation equivalent to the value of the goods and
excise duty paid thereon, there is no need to
reverse credit availed and utilized in respect of the capital goods
destroyed [CCE v. Tata Advanced Materials Ltd. (2012) 26 STR 600 (Kar)].
111.5
Where the appellants had availed Cenvat Credit on capital goods which
while in use were destroyed by flood and thereby cleared as scrap on payment of
duty on the amount realised [as per the provisions of rule 3(5A) as it stood
then], no demand could be raised either on the ground that the duty was payable
on the insurance compensation received by treating it as the value of capital
goods or on the basis of ‘depreciation method’ which was introduced only in
2011 [Total Oil India Pvt. Ltd. vs. CCE (2013)
29 STR 334].
111.6
Where the
appellants entered into two agreements with a contractor - one for supply of
components and parts and the other for erection at the appellant’s site, the
Tribunal held that credit of duty paid on parts and components which were used
in setting up of the plant at the appellant’s site was fully admissible and the
department’s contention that the components and parts were inputs of the
contractor who supplied and assembled them at the manufacturer’s site since it
is he who used it to manufacture the plant is incorrect. [Rajarambapu Patil
SSK Ltd. v. CCE (2008) 11 STR 437 (Tri-Mumbai)]
111.7
Where the inputs
(viz. brake assemblies) purchased by a manufacturer of automobiles were
directly transported to the processor (to save costs) for being fitted with
rear/front axels, and thereafter received in the factory of the manufacturer,
Cenvat credit cannot be denied on the inputs merely because it was not received
physically in the factory. [CCE v.
Hindustan Motors Ltd. (2012) 25 STR 292 (Tri-Del)]
111.8
Where the duty charged by the supplier of inputs and paid to him by the
purchaser (assessee) was in excess of the amount payable on the said inputs,
the High Court held that in absence of refund of such excess duty to the
supplier of inputs, the assessee – purchaser of inputs would be eligible to
claim credit of entire duty paid [V.G.
Steel Industry v. CCE (2012) 27 STR 94 (P&H)].
111.9
Bought out tool kits sold alongwith manufactured two wheelers are
‘accessories’ of final product i.e. Motor Vehicles especially since rule 138
(4) (b) of Central Motor Vehicle Rules, 1989 mandates every driver to carry a
tool kit and accordingly would qualify to be ‘input’. Accordingly, cenvat
credit on bought out tool kits would be available [Hero Motocorp Ltd. vs. CCE (2012) 27 STR 473 (Tri. – Del.)].
111.10
Excise duty paid on ‘Tippers’ used for providing excavation, site
formation, etc., services is not available since -
(a)
Tippers are not ‘capital goods’ for the assessee since -
(i)
they are classifiable under Chapter 87 and not under Chapter 82, 84, 85,
90 or other goods specifically included in the definition of ‘capital goods’ as
per rule 2(a); and
(ii)
he is not one of the service providers for whom ‘motor vehicles’
qualifies as capital goods as per rule 2(a).
(b)
Tippers are not ‘inputs’ since ‘motor vehicles’ are specifically excluded
from the definition of inputs.
[Ganta Ramanaiah Naidu vs CCE 2010 (18) STR 10 (Tri-Bang.)].
111.11
Cenvat credit of excise duty paid on cement and TMT Bars used for
construction of warehouses by the assessee, a storage & warehouse keeper,
would be admissible since without a storage facility, storage and warehousing
services could not be provided by the assessee [CCE vs. Sai Sahmita Storages (P) Ltd. (2011) 23 STR 341 (AP)]
111.12
The Tribunal relying on judgment in case of Spenta International Ltd. v. Commissioner (2007) 216 ELT 133 (Tri.-LB) held
that eligibility of Cenvat credit on capital goods is to be determined with
reference to the taxability of the output service on the date of receipt of
such capital goods. Thus, Cenvat credit on capital goods received on 5.5.2005
for providing ‘construction services’, which subsequently became taxable w.e.f.
16.6.2005, cannot be allowed [CCE v.
Aneri Construction (2012) 28 STR 578 (Tri.-Ahmd.)].
111.13
The assessee, a
cellular telephone services provider had availed Cenvat Credit of duty paid on:
(i) ‘Towers’ built for supporting antennas including parts thereof; (ii)
‘Prefabricated buildings’ (PFBs) which housed transmission equipments; (iii)
Printers; and (iv) Office chair. The claim was made on the basis that the above
would be eligible as ‘capital goods’ or ‘inputs’. The revenue denied credit. On
appeal, the Tribunal denied the claim of the appellants by observing as follows:
1.
‘Towers’ including parts thereof:
(a)
The
assessee contended that the ‘site’ (called ‘cell-cite’) where the towers were
erected including the PFBs together formed an integrated system classifiable
under chapter 8525 of the Central Excise Tariff Act and therefore were ‘capital
goods u/r. 2(a)(A)(i). Hence the ‘towers’ being
‘components’ of ‘cell-site’ are capital goods u/r. 2(a)(A)(iii). The
Tribunal dismissed this contention on the basis that the site is an ‘immovable
property’ – a non-excisable item, and hence not capital ‘goods’.
(b)
The
‘towers or its parts’ also cannot be considered as ‘component’ of the
‘antennas’ [which are capital goods u/r. 2(a)(A)(i)] since a ‘component’ means
something which enters the composition of another article or its constituent
part. Towers do not enter the composition of antennas nor are they a
constituent part of the antennas and hence would not be capital goods u/r.
2(a)(A)(iii).
(c)
The
towers or parts thereof cannot be considered as an ‘accessory’ of the antenna
since an ‘accessory’ is generally understood to be a supplementary,
subordinate, additional or extra thing that is added to make something more
useful, effective and convenient. It is absurd to hold that a huge gigantic
immovable structure like tower is an accessory of small equipment (antenna)
that is placed on its top. Further, the expression `component, spares and
accessories' used in Rule 2(a)(A)(iii) should be understood as standing for
movable goods only and ‘towers’ being immoveable property would not qualify.
(d)
Further,
towers being an ‘immovable property’ – a non-excisable item cannot be held as
‘goods’ (i.e. moveable property) and hence cannot be classifiable as ‘inputs’
u/r. 2(k) used for providing output services.
(e)
Further,
the Explanation 2 to rule 2(k) which includes within the ambit of ‘inputs’, goods
used in the manufacture of captively used capital goods by a ‘manufacturer’ but excludes cement,
angles, CTD / TMT bars, etc. used for construction of factory shed or for
building or laying foundation or making of structures for support of capital
goods is applicable only to ‘manufacturers’
and not to ‘service providers’. Hence
this Explanation is not relevant to
the present case.
2.
PFBs, pirnters and Office Chairs:
(a)
Since
PFBs and Office chairs are classifiable under Chapter 94 which has not been
specified in Rule 2(a)(A)(i) the same cannot be considered as ‘capital goods’
under rule 2(a)(A)(i) or (iii). As regards printers, though they are
classifiable under Chapter 84 (a specified chapter) since there was no sufficient
nexus between printers and the cellular telephone service provided by the
assessee, they could not be regarded as ‘capital goods’.
(b)
Further,
printers and office chairs could also not be regarded as ‘inputs’ in absence of
nexus between them and the cellular telephone service provided by the assessee.
Hence
cenvat credit on the above items was held to be inadmissible [Bharti Airtel Ltd. vs. CCE (2013) 29 STR
401 (Tri. — Mumbai)]
111.14
Where the assessee
used internet services in its factory at Satna but the bill was addressed to
and paid by its head office at Mumbai, the Tribunal held that the internet
services were used for information relating to manufacture, sale and dispatch
instructions and hence the input credit is not deniable. [Universal Cable Ltd V. CCE (2007) 80 RLT 821 (Tri.-Del.); See
also CCE v.DNH Spinners (2009)
16 STR 418 (Tri.-Ahmd.)]
111.15
The appellants
generated power in their power plants situated 200 kms away from their factory
and supplied the same to Gujarat Electricity Board in consideration whereof
they were permitted to withdraw electricity for their factory from the power
grid on payment of fixed wheeling charge. On the question whether credit of
service tax paid on maintenance and repair services consumed in their power plants
would be admissible the Tribunal observed that the transaction of delivering
power to the grid and sale of power from the grid are two distinct transactions
and there was no direct nexus between the services received within the power
plant and goods manufactured within the factory by the appellants and hence
credit was not admissible. {Ellora Times
Ltd. vs. CCE (2009) 13 STR 168 (Tri-Ahmd.) See Contra
Rajratan Global Wires Ltd.
vs. CCE (2012) 26 STR 117 (Tri. –
Del.) [wherein in a similar circumstance the Tribunal held that credit would be
admissible since – (i) the windmill
though situated at a distance from the factories of the appellant were in the
nature of captive power plant; and (ii) there was a clear nexus between the
electricity generated by wind mills of the appellant and that used for running
factories of the appellant];
Hindalco Industries
Ltd. vs. CCE (2012)
27 STR 401 (Tri. – Del.) wherein [the Tribunal allowed credit holding that the
power plant was a captive power plant as per section 2(8) of the Electricity
Act, 2003 and based on the judgment in case of Vikrant Cement vs. CCE (2006)
197 ELT 145 (SC) the power plant supplying power exclusively to its
manufacturing unit will be treated as one integrated unit and cenvat credit of
service tax paid on insurance policies concerning power plant situated would be
allowable]; Maharashtra Seamless Ltd. v.
CCE (2012) 25 STR 167 (Tri – Mumbai)}.
111.16
The definition of
input service has been expanded by the words “and includes” basically for the
reason that the service which are enumerated after the words “and includes” are
those services which may not be as directly or indirectly relatable to
manufacture but yet the intention is to provide the benefit of credit of
service tax paid on such services as Cenvat Credit. Thus, service tax paid on
services relating merger (which is basically for financing), issuance of NOC by
the bank for borrowing, custody fees (relating to share registry) and
maintenance of fax machines at the residences of company’s executives are all
covered by the inclusive clause of the definition.
[Aditya Birla Nuvo Ltd. v.
CCE (2009) 14 STR 304 (Tri.-Ahmd.)]
111.17
Though the contents
of advertisements made by the appellants, a manufacturer of ‘concentrates’, essentially featured the
‘bottle of aerated waters’, the
bottles being the final products manufactured by bottlers and not the
appellants, the High Court held that the credit on advertising services
received by the appellant cannot be denied on the ground that the advertisement
is not of the final product of the appellants viz., ‘concentrates’ but is of ‘aerated
waters’ which are manufactured by bottlers. The High Court laid down the
following propositions –
(i)
so long as the
manufacturer can demonstrate that the advertisement services availed have an
effect or impact on the manufacture of the final product and establish the
relationship between the input service and the manufacture of final product,
credit must be allowed. In the present case, Court held that the advertisement
of soft-drink enhanced the marketability of the concentrate [Pepsi Foods Ltd. v. CCE (2003) 158 ELT 552
(SC); Philips India Ltd. v. CCE (1997)
91 ELT 540 (SC) ; and Explanatory Notes to HSN – heading 21.06 relied on].
(ii)
The definition of
“input service” which is expressed in the form of ‘“means” … and “includes”…..’, would cover even those services in
the ‘inclusive’ part which otherwise
would not come within the ambit of the ‘means’
part.
(iii)
The phrase “activities relating to business such as
accounting, auditing, financing,....” are words of wide import. The
expression ‘such as’ is illustrative and not exhaustive of services related to
‘business’. The word ‘business’ is also of wide import and cannot be given a
restricted definition to say that business of a manufacturer is to manufacture
final products only. In the present case, the business of the appellant would
include apart from manufacture of concentrates, also entering into franchise
agreements with bottlers, permitting use of brand name, promotion of brand
name, etc. The expression ‘relating to further widens the scope of the
expression ‘activities relating to business’ and therefore all activities
(essential or not) in relation to a business would fall within the ambit of
input service and in the present case all activities having a relation with the
manufacturer of a concentrate would fall within the definition of input
service.
(iv)
Service tax is a
value added tax and a consumption tax and the burden of service tax must be
borne by the ultimate consumer and not by any intermediary i.e. the
manufacturer or service provider. In order to avoid the cascading effect cenvat
credit on input stage goods and services must be allowed as long as a
connection between the input stage goods and services is established.
Conceptually as well as a matter of policy, any input service that forms a part
of value of final product should be eligible for the benefit of cenvat credit.
In the present case, since the advertising cost forms part of the assessable
value the assessee is eligible to take credit of tax paid on advertising
services.
(v)
The definition of
‘input service’ under rule 2(l) can be conveniently divided into the following
five independent limbs :
a.
Any service used by
the manufacturer, whether directly or indirectly, in or in relation to the
manufacture of final products,
b.
Any service used by
the manufacturer whether directly or indirectly, in or in relation to clearance
of final products from the place of removal,
c.
Services used in
relation to setting up, modernization, renovation or repairs of a factory, or
an office relating to such factory,
d.
Services used in
relation to advertisement or sales promotion, market research, storage upto the
place of removal, procurement of inputs,
e.
Services used in
relation to activities relating to business and outward transportation upto the
place of removal.
Each of the above
limbs of the above definition is an independent benefit/concession. If an
assessee can satisfy any one of the above, then credit on input service would
be admissible even if the assessee does not satisfy the other limbs.
[Coca Cola India Pvt. Ltd. v. CCE
(2007) 15 STR 657 (Bom.)].
111.18
Where an assessee
was engaged in the business of manufacturing cement and claimed credit on
outdoor catering services availed by it for the purpose of provision of canteen
facility to the workers of the factory, the Bombay High Court allowed the
credit holding as follows:
(i)
The
definition of “input service” as per Rule 2(l) of Cenvat Credit Rules, 2004
(insofar as it relates to the manufacture of final product is concerned),
consists of three categories of services. The first category, covers services
which are directly or indirectly used in or in relation to the manufacture of
final products. The second category, covers the services which are used for
clearance of the final products up to the place of removal. The third category,
includes the following services :
(a)
Services
used in relation to setting up, modernization, renovation or repairs of a
factory,
(b)
Services
used in an office relating to such factory,
(c)
Services
like advertisement or sales promotion, market research, storage upto the place
of removal, procurement of inputs;
(d)
Activities
relating to business such as, accounting, auditing, financing, recruitment and
quality control, coaching and training, computer networking, credit relating,
share registry and security, inward transportation of inputs or capital goods
and outward transportation upto the place of removal.
Thus, the
definition of ‘input service’ not only covers services, which fall in the substantial
part, but also covers services, which are covered under the inclusive part of
the definition.
(ii)
The
definition of input service read as a whole makes it clear that the said
definition not only covers services, which are used directly or indirectly in
or in relation to the manufacture of final product, but also includes other
services, which have direct nexus or which are integrally connected with the
business of manufacturing the final product.
(iii)
The
expression “activities in relation to business” in the definition of “input
service” postulates activities which are integrally connected with the business
of the assessee. If the activity is not integrally connected with the business
of the manufacture of final product, the service would not qualify to be an
input service under Rule 2(1) of the Cenvat Credit Rules, 2004 .
(iv)
The
judgment of the Apex Court in Maruti
Suzuki Ltd. (supra) would not apply in its entirety because unlike the
definition of ‘input’, which is restricted to the inputs used directly or
indirectly in or in relation to the manufacture of final products, the
definition of ‘input service’ not only means services used directly or
indirectly in or in relation to manufacture of final products, but also
includes services used in relation to the business of manufacturing the final
products.
(v)
The
assessee carried on the business of manufacturing cement by employing more than
250 workers and mandatorily required under the provisions of the Factories Act,
1948 to provide canteen facilities to the workers. Failure to do so entails
penal consequences under the Factories Act, 1948. To comply with the above
statutory provision, the assessee had engaged the services of a outdoor
caterer. Thus, in the facts of the present case, use of the services of an outdoor
caterer has nexus or integral connection with the business of manufacturing the
final product viz., cement. Hence, the assessee is entitled to the credit of
service tax paid on outdoor catering service. However, credit of service tax
would not be allowable to a manufacturer in cases where the cost of the food is
borne by the worker.
[CCE v. Ultratech Cement (2010) TIOL 745
(Bom.) / (2010) STR 577 (Bom) See also CCE vs. Hindustan Coco Cola Beverages Ltd.
(2012) 27 STR 440 (Tri. – Del.)]
111.19
Any service to be construed as “input service” must satisfy the main part
of the definition that it should be ‘used for the manufacture’ including those
that are specifically mentioned in the inclusive part of the definition. The
Tribunal further held that –
(a)
credit of tax paid by the appellant, a manufacturer of steel, on the
membership of Sponge Iron Manufacturers Association would not be entitled to
credit
(b)
credit on tax paid by the appellant on – (i) security services at railway
siding where the raw materials were loaded / unloaded; (ii) rent-a-cab services
and (iii) mobile telephone services would not be available to the appellant on
the ground that the appellant did not adduce any evidence that the said
services were used for manufacture of products.
[Vikram Ispat v. CCE (2009) 16
STR 195 (Tri – Mum.)]
111.20
Cenvat credit on
“input services” cannot be denied on the ground that they are incurred outside
the factory premises. [CCE vs H.E.G
Limited 2010 (18) STR 56
(Tri-Del.)].
111.21
Cenvat credit of
service tax paid on Rent-a-cab services, Outdoor catering, Air Travel agent
services, and Telephone/mobile services and Steamer agent services was held
allowable as being ‘activity relating to business’. [Semco Electrical Pvt.
Ltd. vs CCE 2010 (18) STR 177 (Tri-Mum.) relying on Coca cola
India Pvt. Ltd vs CCE (2009) 15 STR 657 (Bomb);Maruti Suzuki vs
CCE (2009) 240 ELT 641 (SC) distinguished].
111.22
Where the appellant, a manufacturer, had received the taxable services
prior to 10.09.04 [before the Cenvat Credit Rules, 2004, (“Credit Rules”) came
into force] but had paid the service tax thereon to the input service provider
post 10.09.04 and availed
cenvat credit the Tribunal held that the same was not permissible since –
(i) under Rule 3(1) of the Credit Rules, a
manufacturer of final product shall be eligible for credit on only those input
services which are received on or after 10.09.04; and
(ii) credit of Service tax in terms of the
transitional provision of sub-rule (1) of Rule 11would also not be admissible
since input service credit was available
only to service providers and not to manufacturers.
[Ajay Poly Pvt. Ltd. vs. CCE (2011) 22
STR 535 (Tri-Del.)].
111.23
Credit of service
tax paid on Air ticket service charges (air travel agent services) since it is
used for the company’s business. [CCE v. Fine Care Biosystems (2009) 16 STR 701 (Tri. – Ahd.)]
111.24
Credit of service
tax paid on air travel fare incurred for the purpose of company’s business is
admissible. [CCE v. DCW Ltd (2011) 22
STR 214 (Tri-Chennai)]
111.25
Cenvat credit of service tax paid under business
auxiliary services on follow-up services for installation of captive power
plant is allowed being ‘services in relation to setting up or modernization of
factory’ which are specifically covered in the input service definition.
[Monnet Ispat & Energy Ltd. vs. CCE (2010)
19 STR 417 (Tri. –
111.26
Credit of service tax paid on business auxiliary services availed for
preparation of pre-shipment and post-shipment documents in respect of export of
final products is admissible [Ucal Fuel
Syestem Ltd v. CCE (2011) (23) STR 276 (Tri-Chennai)].
Chartered
Accountant’s services
111.27
Cenvat credit on
Chartered accountants services availed for verification of stock of final
product lying with the distributors for the purpose of giving quantity
discounts to the distributors is admissible as cenvat credit [CCE v. Hindustan Coca-Cola Bevrages Ltd.
(2011) 23 STR 268 (Tri-Del)]
Clearing
and forwarding agent’s services at port:
111.28
Credit of service
tax paid on Chartered Accountant’s service accounting and auditing of the transactions of the
assessee is admissible since auditing
and accounting has been specifically included in the definition of input
service [Utopia India Pvt. Ltd v. CST
(2011) 23 STR 25 (Tri- Bang)]
111.29
Where the goods
exported have been sold on FOB/CIF basis the Tribunal held that the load port
would be the “place of removal” and accordingly, credit of service tax paid on
CHA services availed for facilitating clearance of goods from the place of
removal (i.e. load port) would be admissible. [CCE vs. Adani Pharmachem P.
Ltd. (2008) 12 STR 593 (Tri-Ahmd) See also Beekay Engg. & Castings Ltd. (2009) 16 STR 709 (Tri. –
111.30
Credit of service
tax paid on clearing and forwarding agent’s services availed for clearance of
final product from the factory to port for export is admissible. [Heera Overseas (P) Ltd. v. CCE (2012) 26
STR 545 (Tri. – Bang.) relying on Rawmin Mining and Indus. Ltd. v. CCE (2009) 13 STR 269 (Tri. –
Ahmd.)].
Services
of clubs or associations
111.31
Cenvat Credit of
service tax paid by the appellant on club membership fee for its Directors (who
individually were members of the club) is not admissible in absence of any evidence
that they hold their business meetings in the club for which the directors took
membership of the club. [Jai Corporation
Ltd v. CCE (2011) 22 STR 222 (Tri –
Mum)]
111.32
Services of commission agent being in the nature of sales promotion,
cenvat credit of service tax paid thereon is admissible as input credit. [CCE
vs. Bhilai Auxiliary Industries (2009) 14 STR 536 (Tri-Del.); See also Lanco
Industries Ltd vs. CCE
2010(17) STR 350 (Tri-Bang);Cadila Healthcare Ltd vs C.C.E 2010(17) STR 134
(Tri-Ahmd);
CCE vs. Rightway
Fabrics Pvt. Ltd. 2011 (24) STR 505 (Tri-Del)
]
111.33
Credit of service
tax paid on Commission Agent’s services is allowed as input credit in full. The
services cannot be split so as to allow credit on pre-clearance activities
(procuring of orders) and disallow credit on post-clearance activities
(collection of monies). [Pan Asia
Corporation vs. CCE (2009) 16 STR 587 (Tri-Mumbai)]
111.34
Credit of service tax paid on the services received
from commission agent for selling DEPB scrips is not allowed since no nexus
exists between the service availed for selling DEPB scrips and the manufacture
of pharmaceutical products. [Shasun Chemicals & Drugs Ltd v. CCE (2011)
21 STR 536 (Tri- Che.)]
111.35
Cenvat credit on
commission paid to agents for sales was allowed as being in the nature of
“sales promotion” which is expressly mentioned in the inclusive part of the
definition of ‘input service’ [Wadpack
Pvt. Ltd. vs. CCE (2013) 30 STR 51 (Tri. – Bang.) relying on Commissioner vs. Ultratech Cement Ltd.
(2010) 20 STR 577 (Bom.)].
111.36
Credit of service tax paid on brokerage to brokers/
commission agent appointed for sale of finished goods
is admissible since
the assessee has availed services of brokers before clearance of goods from
factory. [CCE vs. Indorama Synthetics (I)
Ltd. (2010) 20 STR 626 (Tri-Mumbai); See also CCE vs. Ambika Forgings (2010) 20 STR 662 (Tri-Del.)]
111.37
Credit of service tax paid on commission paid to the
overseas agent for the purpose of canvassing and procuring order is admissible
being sales promotion activities. Since the tax was paid as a recipient of
services the appellant is correct in taking credit on the basis of TR-6
challans in terms of rule 9(1)(e) of the Cenvat Credit Rules, 2004. [CCE vs. Ambika Overseas (2010) 20 STR 514
(Tri. – Del.)]
111.38
Input credit in respect of services of procuring sales
order and collecting payment from customers was held to be eligible being
“activity relating to business” and hence covered by the definition of input
services. [Nav Bharat Tubes Ltd. vs CCE 2010 (18) STR 470 9Tri-Del.)].
111.39
Input credit of tax
paid on ‘construction services’ for construction of compound wall around the
factory is admissible since on facts the compound wall is an integral part of
the factory. [CCE vs Raymond Zambaiti
Pvt Ltd 2010 (18) STR 734 (Tri-Mumbai)].
111.40
Credit of service
tax paid on courier (inward freight) is allowed [CCE v. Beekay Engg. &
Castings Ltd. (2009) 16 STR 709 (Tri. –
111.41
Credit of service tax paid on Courier Services used for placing orders, filing
quotations for procurement as well as marketing, dispatch instructions, issuing
cheque for procurement, sending stock transfer documents to depots, receiving
dispatch instructions from marketing, depots, head office etc. is admissible
since the services have been used in relation to manufacture and clearance of
final product as well in relation to its business activities.[CCE vs. Apar Industries Ltd. (2010) 20
STR 624 (Tri-Ahmd.); See also Meghachem Industries vs. CCE (2011) 23 STR 472 (Tri- Ahmd.)]
111.42
Where the appellant
had taken cenvat credit on courier services used for sending documents, demand
drafts, etc and not for dispatch of final product, the Tribunal held that the
same was admissible [Meghmani Organics
Ltd. v. CCE (2012) 26 STR 555 (Tri-Ahmd.)].
111.43
Cenvat Credit on
courier services used for sending samples to the customers and correspondence
with the head office is admissible being activities related to the
manufacturing business [CCE vs. Parle
International Pvt. Ltd. (2012) 28 STR 111 (Tri.-Ahmd.) See also CCE v. Topworth Steels Pvt Ltd (2012) 26
STR 420 (Tri. – Del.)].
111.44
Custom house
agent’s services availed for clearance of goods exported does not have any
nexus with the manufacturing and clearance of the final products from the
factory and hence tax paid on custom house agent services is not eligible for
cenvat credit. [Nirma Ltd. vs. CCE (2009)
13 STR 64 (Tri-Ahmd.)]
111.45
Where
the goods have been exported by the appellant on FOB basis retaining ownership
till the delivery of goods on board the vessel, the ‘load port’ would be the
place of removal and hence CHA service
upto sea port would be treated as input service (being services used for
clearance of goods upto the ‘place of removal’) [Fiamm Minda Automotive Ltd v. CCE, (2011) 22 STR 210 (Tri- Del) see also Leela Scottish Lace Pvt. Ltd..
vs. CCE. (2010) 19 STR 69 (Tri. – Bang.); CCE vs. Fourrts (I) Laboratories Pvt. Ltd. (2010)
19 STR 86 (Tri. – Che.);
MTR Foods Ltd. v. CCE (2011) 22
STR 342(Tri – Bang); Meghachem Industries vs. CCE (2011) 23
STR 472 (Tri- Ahmd.)].
111.46
Cenvat credit in respect of Custom House Agent service
used for clearance of imported inputs used in the manufacture of dutiable
finished goods is admissible. [Nelsun Paper Mils Ltd. vs CCE 2010 (18)
STR 648 (Tri-Chennai)]
111.47
Wearing of clean
uniforms / clothing is mandatory under Drugs and Cosmetics Act for personnel
engaged in the manufacturing of medicaments or drugs. Hence, said services are
relating to business and cenvat credit of tax paid on same is allowed [CCE vs. Fourrts (I) Laboratories Pvt. Ltd.
(2010) 19 STR 86 (Tri. – Che.)]
Expenditure
for employees entertainment
111.48
On facts, the
Tribunal held that ‘event management services’ availed for celebration by
employees on expansion of plant cannot be said to ‘activity related to
business’ in the absence of evidence to prove that the event was organised for
sales promotions/advertisements and hence input credit of service tax paid on
such services is not eligible. Before the above conclusion the Tribunal
observed that “any expenses incurred relating to business activity would be
treated as input service cannot be accepted, unless it is established by
evidence that the service was rendered for the purpose of business include
advertisement or sale promotion….” [
111.49
Credit on services used for organizing employee
picnics would not be allowable, since they do not have any nexus with the
business activity.
[L’oreal India Pvt. Ltd. vs. CCE (2011) 22 STR 89 (Tri. – Mum.)]
Expenses
of employees’ residential colony
111.50
Where the
appellant’s factory for manufacture of cements was located at remote places
without any facilities for accommodation and stay of their employees, and the
appellants had constructed residential colonies for its employees so that their
employees are available to them on the spot in order to maintain continuity of
manufacture it was held that management, maintenance or repair services used by
the appellants in the residential colonies are “input services” being relatable
to business of the assessee and service tax paid on such maintenance and repair
services is entitled to input credit. [Manikgarh
Cement vs. CCE&C (2008) 9 STR 554 (Tri-Mumbai)].
111.51
Credit of service
tax paid on security agency services engaged by the appellants with regard to
the residential colony of its employees which is in proximity to the factory is
admissible. [GHCL Ltd. vs. CCE (2009)
16 STR 588 (Tri-Ahmd.) relying on Manikgarh Cement vs. CCE (2008) 9 STR 554 (Tribunal); See
also CCE v. Hindustan Zinc Ltd.
(2009) 16 STR 704 (Tri. – Bang.). Contra CCE vs. Ultra Tech Cements Ltd. vs. CCE (2009) 16 STR 611
(Tri-Mumbai) – In this case the Tribunal disallowed the Cenvat Credit on
security agency services engaged by the appellants with regard to the
residential colony of its employees on the following grounds –
(i)
Services mentioned
in the inclusive part of the definition of “input service” have also to satisfy
the parameters laid down in the main (general) part of the definition. The two
parts are not independent of each other.
(ii)
Provision of
security in a residential colony is not one of the activities relating to
business of the appellant and, in any case, no nexus between the security and
the business of manufacturing excisable products has been established.
See also CCE vs. Gujarat Heavy Chemicals Ltd.
(2011) 22 STR 610 (Guj.)]
111.52
On facts, the
tribunal held that, where the appellant owing to business exigencies maintained
a residential colony for staff (sale and purchase of land in the vicinity of
the factory being prohibited), all the services availed for maintaining the
staff colony would qualify as input service being “activities relating to
business”.
[ITC Ltd vs C.C.E 2010 (17)
STR 146 (Tri-Bang)]
111.53
Where an assessee engaged in the business of
manufacturing cement claimed
credit of service tax paid on account of repairs, maintenance and civil
construction services used in the residential colony of the assessee on the
ground that the said services were ‘activities relating to the business’, the
Bombay High Court denied the credit and held as follows :
(i)
the expression
‘activities relating to business’ in Rule 2(l) of CENVAT Credit Rules, 2004
refers to activities which are integrally related to the business activity of
the assessee and not welfare activities undertaken by the assessee;
(ii)
rendering taxable
services at the residential colony established by the assessee for the benefit
of the employees, is not an activity integrally connected with the business of
the assessee.
[CCE vs.
Manikgarh Cement (2010) 20 STR 456 (Bom.)]
111.54
Cenvat credit of service tax paid on construction of
staff quarters is allowed on the ground that staff quarters are premises of the
bank and input services include services used in the premises of output service
provider [The Lakshmi Vilas Bank Ltd. vs.
CCE (2010) 19 STR 40 (Tri.-Che)]
111.55
Credit of service tax paid on inspection charges for
constructing staff quarters admissible. [Port
Officer,
111.56
In absence of even
a remote nexus between the manufacture of excisable goods and garden
maintenance service and since the same was not used either directly or
indirectly in relation to the manufacture or clearance of final product cenvat
credit paid thereon was inadmissible. [GKN
Sinter Metals Ltd. vs. CCE (2009) 16 STR 615 (Tri-Mumbai)
see also Kirloskar
Oil Engines Ltd. v. CCE (2009) 241 ELT 474 (Tri. Mum.); H.E.G Ltd vs CCE 2010 (17) STR 178 (Tri-Del); Stanadyne Amalgamations
Pvt. Ltd v. CCE (2011) 22 STR344 (Tri-Chennai)]. However, per contra cenvat credit of service tax paid on garden maintenance
services was allowed as being activity relating to business’ relying on Coca Cola case. Further, the Tribunal
dismissed the argument of Revenue that Maruti
Suzuki case had impliedly overruled the Coca
Cola case, since in Maruti Suzuki
case the court was considering the definition of “input” which in the inclusive
part also contains the condition that the inputs must be “used in relation to
manufacture of final products” and hence the definition of “input” is not in part materia with that of “input
sevices”. [ISMT Ltd. v. CCE & C –
2010-TIOL-27-CESTAT-Mum; See also Millipore India Ltd. vs. CCE (2009) 13 STR 616 (Tri-Bang.) Affirmed
in
CCE vs. Millipore India Ltd. (2012)
26 STR 514 (Kar.); L’oreal India Pvt.
Ltd. vs. CCE (2011) 22 STR 89 (Tri. – Mum.);
Rane TRW Steering Systems Pvt. Ltd. vs. CCE (2010) 19 STR 251 (Tri-Chennai);
CCE v. Nutrine Confectionery Co. Ltd. (2012) 26 STR 556
(Tri-Bang.); Biesse Manufacturing Co.
Ltd. v. CCE (2012) 26 STR 546
(Tri-Bang.)]
111.57
Cenvat credit of service tax paid on garden
maintenance services is allowable being activity relating to business.
[I.S.M.T.Ltd. v. C.C.E&C (2010) 20
STR 68 (Tri. – Mumbai). Maruti Suzuki
case [240 ELT 641(SC)] was held not
applicable since in Maruti Suzuki
case the court was considering the
definition of “input” which in the inclusive part also contains the condition
that the inputs must be “used in
relation to manufacture of final products” and hence the definition of
“input” is not in pari materia with
that of “input services”. See also Kirloskar Oil Engines Ltd. v. C.C.E
(2010) 20 STR 30 (Tri. – Mumbai)]
111.58
Cenvat credit availed on the garden maintenance service and repair of freezer
installed in canteen is admissible being input services used ‘in relation
to the manufacture of final product’ or ‘in relation to the business activity’.
The Tribunal further held that since there are no contrary decisions there is
no need to refer the issue to a
Larger Bench. [Reliance Industries Ltd v. CCE (2010) 19 STR 823 (Tri-Mum).
Case law analysis: (i)
ISMT Ltd v. CCE (2010) TIOL
27 (Tri-Mum) and SEMCO Electricals v. CCE (2010) 18 STR 177 (Tri-Mum) relied
on. (ii) Kirloskar Oil
Engineers Ltd.v. CCE (2009) 247 ELT 734 (Tri-Mum) being set aside by Bombay High Court and remanded back to
the Tribunal, held, cannot be followed. (iii) Vikram Ispat v. CCE (2010) 19 STR 52 (Tri-Mum) only follows Kirloskar
case and hence cannot be followed. (iv) CCE v. Manikgarh Cements (2010) 18 STR 275 held not on
same facts. Consequently, the matter was not referred to Larger Bench]
111.59
Cenvat credit of service tax paid on manpower
recruitment services used for maintenance of garden within the factory premises
using treated industrial and domestic sewage water, was held to be admissible
where it was a statutory requirement
under the consent given by the Karnataka State Pollution Control Board
(KSPCB).[Brakes India Ltd. vs. CCE (2010)
19 STR 524 (Tri-Bang.)]
111.60
Credit of service
tax paid to interior decorator towards garden development and to manpower
supplier for supply of manpower for gardening activity is admissible [CCE
vs. Nirma Ltd.(2010) 20 STR 346 (Tri-Ahmd.) relying on Millipore India Ltd. vs. CCE (2009) 13
STR 616 (Tri-Bang.)]
111.61
Jungle cutting service availed by the appellant for the purpose of keeping the environment
bacteria free in the surroundings of the factory is a service for their
business of manufacturing and accordingly credit of tax paid on the jungle
cutting service is allowable. [L’oreal India Pvt. Ltd. vs. CCE (2011) 22 STR 89
(Tri. – Mum.)]
111.62
A
garden creates a
better atmosphere and environment which increases the working efficiency and
hence credit of service tax paid on garden maintenance is allowable. [Balkrishna
Industries Ltd vs CCE 2010 (18) STR 600 (Tri-Mumbai)]
111.63
Where the assessee
was allowed to manufacture goods and discharge the effluents within his factory
premises subject to maintenance of a green belt (garden), the cenvat credit of
service tax paid on garden maintenance services utilized by the assesseee was
held allowable. [CCE vs. Voith Turbo Pvt.
Ltd. (2011) 21 STR 52 (Tri. – Bang.)]
111.64
Cenvat credit of service tax paid on landscaping services would not be
admissible
relying on Tyco Sanman [CCE v. Chemplast
Sanmar Ltd.(2011) 24 STR 71(Tri- Chennai)]
Goods
Transport Agency Services
111.65
“Input service” is
defined as any service used by a manufacturer whether directly or indirectly “in or in relation to” -
(i)
“manufacture” of final products; and
(ii)
“clearance” of final products from the place of
removal,
and includes
amongst other things “outward
transportation upto the place of removal”. On a question whether
“transportation services” availed by a manufacturer for transporting his goods
from his factory to the customer’s premises would be “input services”, the
Tribunal answered in the negative and held as follows:
(i)
Such transportation
services cannot be said to be used “in or
in relation to the manufacture” of the goods since ‘‘manufacture” completed in the
factory is an anterior process to such transportation.
(ii)
Such “transportation”
starts from where “clearance” ends. The term “clearance” under the relevant
provisions of the Central Excise Act or under common parlance does not include
“transportation”. Hence such transportation is not a service used directly or
indirectly “in the clearance” of
final products from the place of removal.
(iii)
A service can be
said to be used, directly or indirectly, “in
relation to the clearance” of final products when the service has
at least remotely aided the clearance of the final products or when the
clearance of the final products would have been facile in the absence of the
service. Outward transportation of final products from factory (i.e. the place
of removal), being an activity posterior to the clearance of the goods cannot
be said be used directly or indirectly “in
relation to the clearance” of
final products from the place of removal. Had the “place of removal” of final
products been other than factory say a depot, the transportation of the goods
out of the factory upto the depot (place of removal) would have qualified to be
“input service” for in such a situation, transportation is anterior to
clearance from the place of removal.
(iv)
The services
specified in the inclusive part of the definition of “input service” pertain to
activities performed either in relation
to manufacture of final products or in
relation to clearance of such goods. They can, definitely, be of aid to the
determination of the scope of the expression, “in relation to”, used in the main part of the definition. This is
not to say generally that the inclusive part of the definition is expansive or
restrictive. But one thing which can be said with certainty is that, insofar as
transportation of final products is concerned, the inclusive part of the
definition is restrictive as it permits such transportation upto the place of removal only as input
service. Hence where the place of removal is the factory the transportation
from the factory to the customers premises would not fall within this clause.
[India Japan Lighting Pvt. Ltd. vs. CCE (2007)
8 STR 124 (Tri. – Chennai) see also CCE
v. N.H.K Springs Ltd. (2007) 7 STR 63 (Tri.-Del.); Gujarat Ambuja
Cements Ltd. v. CCE (2007) 6 STR 249 (Tri-Del.) reversed in ABB Ltd. v. CCE (2009) 15 STR 23 (Tri- LB) – see below]
111.66
The Larger Bench of
The Tribunal holding that outward transportation of final product from the
factory (place of removal) to customer’s door-step would be considered as
“input service” under the Cenvat Credit Rules, 2004 laid down the following
propositions:
(ii)
The definition of
‘input service’ under rule 2(l) can be conveniently divided into the following
five independent limbs :
(a)
Any service used by
the manufacturer, whether directly or indirectly, in or in relation to the
manufacture of final products,
(b)
Any service used by
the manufacturer whether directly or indirectly, in or in relation to clearance
of final products from the place of removal,
(c)
Services used in
relation to setting up, modernization, renovation or repairs of a factory, or
an office relating to such factory,
(d)
Services used in
relation to advertisement or sales promotion, market research, storage upto the
place of removal, procurement of inputs,
(e)
Services used in
relation to activities relating to business and outward transportation upto the
place of removal.
(iii)
Each of the above
limbs of the above definition is an independent benefit/concession. If an
assessee can satisfy any one of the above, then credit on input service would
be admissible even if the assessee does not satisfy the other limbs.
(iv)
Transportation of goods
to customer's premises is “an activity relating to business”. The term
‘business’ is of a wide import. Further, the word ‘relating to’ further widens
the scope of the expression ‘activities relating to business’. It is not
essential that the activity should be relating to main/ essential activity. It
is an integral part of the business of a manufacturer to transport and deliver
goods manufactured. If services like advertising, market and research which are
undertaken to attract a customer to buy goods of a manufacturer are eligible to
credit, services which ensure physical availability of goods to the customer,
i.e. services for transportation should also be eligible to credit.
(v)
Though “outward
transportation upto the place of removal” is specifically mentioned in the
inclusive part the Tribunal held that the principle of specific over general
does not apply to such provisions just as it does not apply to exemption
provisions where an assessee can successfully claim exemption if brings his
case within any one notification notwithstanding he does not satisfy others.
(vi)
The use of the
expression ‘outward transportation' in the inclusive clause of the definition
is by way of abundant caution so as to avoid any dispute being raised on the
“means clause” which refers to clearance from the place of removal thereby
resulting in transportation upto the place of removal not being eligible for
credit. Credit in respect of transportation within the factory is available
under the inclusive part.
(vii)
Credit
on outward transportation is admissible even if freight does not form part of
value since the definition of input service has no connection with the
definition of value under the Central Excise Act.
[ABB Ltd. vs. CCE (2009) 15 STR 23 (Tri-LB); See
also wherein the High Court
held that the above conclusion of the
Tribunal is incorrect though the ultimate order passed by the Larger Bench
(allowing credit) would not suffer from any infirmity (since the issue was
pertaining to the period pre-1.4.2008)
CCE vs. ABB Ltd (2011) 23
STR 97 (Kar).; CCE v. Parth Poly Wooven
Pvt. Ltd. (2012) 25 STR 4 (Guj) relied
upon in Thiru Arooran Sugars Ltd.
vs. CCE (2009) 16 STR 404 (Tri-Chennai); Daman
Polyfab vs. CCE
(2010) 17 STR 276 (Tri-Ahmd.); CCE vs.
Vasavadatta Cements Ltd. (2011) 24 STR 542 (Kar.)]
111.67
The appellants in
the present case had availed credit of service tax paid on transportation
charges in case of ‘FOR Sales’. The department sought to disallow such credit.
On appeal the Hon’ble High Court observed that the customer’s doorstep would be
considered as “place of removal” u/s.4(3)(c) of the Central Excise Act, 1944
which inter alia considers “any other
place or premises from where excisable goods are to be sold …..” as “place of
removal” since -
(i)
the ownership of
the goods remained with them till the delivery thereof since the sales were
‘FOR’ basis;
(ii)
they bore all the
risk of loss or damage during the transit substantiated by the fact that they
took insurance; and
(iii)
the freight charges
were integral part of price in a FOR Sale.
[Ambuja Cements Ltd. vs. UOI (2009) 14
STR 3 (P&H) - CBEC Circular No. 96/6/2007 – ST dated 23.8.2007 referred. See
also CCE Vs. Colour Synth
Industries P. Ltd (2009) 14 STR 309 (Tri- Ahmd.); Inox Air Products Ltd. v. CCE & C (2009) 16 STR 411 (Tri. –
Mum.); CCE v. Fine Care Biosystems (2009) 16 STR 701 (Tri. – Ahd.); CCE v. A. D. F. Foods Ltd (2009) 16 STR 564 (Tri. – Ahmd.); Cauvery Stones Impex Pvt. Ltd. vs CCE. (2010) 18 STR 73
(Tri-Chennai); Hindustan Coca Cola
Beverages Pvt Ltd v CCE 2010(17) STR 140
(Tri-Bang) – Circular No. 96/7/2007-ST dated 23.08.07 held clarificatory
and applicable for prior period also.]
111.68
Service tax paid on
goods transport agency services availed for transportation of goods from the
factory to the consignment agent’s premises is entitled to cenvat credit since
consignment agent’s premises is also defined as a place of removal and the
property in the goods never passes to a consignment agent. [CCE vs. Rajhans Metals P. Ltd. (2008) 12
STR 597 (Tri-Ahmd.)]
111.69
Goods transport
services used for transporting iron, steel and cement for construction of new
plant is eligible as input services as the said service is used in relation to
setting up, modernization, renovation or repairs of a factory. [CCE v. Videocon Industries Ltd. (2009)
14 STR 692 (Tri. – Ahmd.)
111.70
Empty containers are used for packing final products and hence can be
treated as inputs used by the manufacturer in relation to manufacture of final
products. Accordingly, credit of service tax paid on freight for moving empty
containers called for export of goods is held to be admissible. [CCE vs. Nitin Spinners Ltd. (2009) 16
STR 323 (Tri-Del.)
111.71
Cenvat credit of service tax paid on Goods Transport Agency services used
for transportation from the factory of inputs / capital goods removed as such
is not reversible though the credit of duty paid on such inputs/ capital goods
is reversible under rule 3(5) of the Cenvat Credit Rules, 2004 [J.S.Khalsa Steels (P) Ltd. vs. CCE (2010)
17 STR 517 (Tri-Del.) relying on
Chitrakoot Steel and Power Pvt. Ltd. vs.
CCE (2008) 10 STR 118 (Tribunal)
where the Tribunal held that credit of service tax on inward transportation of inputs/ capital goods removed as such is
not reversible see also
A.R. Casting (P) Ltd v. CCE
2010(19) S.T.R. 384
(Tri-Del)].
111.72
The appellant, a
dealer in motor cycles and also a service station, paid service tax on Goods
Transport agency service for transporting new motor cycles from the
manufacturer’s factory to its showroom (where it would be sold) and took credit
of the service tax paid on such GTA services and utilised the same for payment
of service tax on ‘Authorised service station’ services. The credit was denied on the ground that GTA
services are related to sale of vehicle and not for providing output services.
The Tribunal allowed the credit holding that unless vehicles are received and
sold there cannot be any servicing of the same. [CCE vs.Shariff Motors (2010)
18 STR 64 (Tri-Bang.)]
111.73
The main issue in this case was whether tax paid for
transport of empty containers from yard to factory for stuffing export goods is
eligible for refund. The Tribunal held that the expression ‘in relation to
transport of export of goods’ is wide enough to cover transport of empty
containers from the yard to the factory for stuffing of export goods. [CCE v. Tata Coffee Ltd. (2011) 21 STR
546 ( Tri – Chennai)]
111.74
Where the appellant availed GTA services for
transportation of goods from the factory to the consignment agent’s premises
from where the goods are sold to the customers the Tribunal held that such
premises of consignment agent would be treated as ‘place of removal’ and credit
of tax paid on GTA services would be allowed. [Anmol Bakers Pvt. Ltd. vs.
CCE (2010) 19 STR 656 (Tri. –
111.75
Cenvat credit of service tax paid by the assessee on
goods transport agency services availed by them for transportation of empty
cylinders from its factory premises to the supplier for procuring liquid
chlorine, which was an essential input used in manufacture of its final product
is admissible being ‘service used for procurement of inputs’ [Kerala Minerals and Metals Ltd. vs. CCE
(2010) 19 STR 505 (Tri-Bang.)]
111.76
Where the goods are sold on F.O.R. basis the Tribunal
held that credit is admissible on outward transportation upto the buyers’
premises based on CBEC Circular dated 23.08.2007 and Ambuja Cements Ltd. v .UoI (2009) 14 STR 3 (P & H). The Tribunal made the following significant
observations -
(i)
Since a value added
tax operates by taxing input goods and services and output goods and services
with provisions for credit of tax paid on input goods and services which can be
utilized for payment of tax on output goods services, the present system of
levy of central excise duty on manufactured goods and levy of service tax on
certain services with facility of credit being available of the central excise
duty paid on inputs capital goods and of service tax paid on input services,
which can be utilized towards payment of central excise duty on finished goods
or for payment of service tax on output service, has the character of a value
added tax. Since basic principle of a value added tax is that while subjecting
a finished product to tax, credit of tax paid on all input goods, capital goods
and input service is allowed which can be utilized towards payment of tax on the
finished product, a corollary to this principle would be that in an indirect
tax of the nature of value added tax, when a finished product is taxed, credit
of duty paid on all input goods, capital goods and input services has to be
allowed.
(ii)
When the assessable value of the goods under Section 4
of the Excise Act is not confined to the manufacturing cost and manufacturing
profit but includes all the components like marketing and selling organization
expenses, advertisement expenses, after sales service, storages upto time of
removal etc. which have contributed to the value of the goods and in case of
FOR destination sales at the customer’s premises, all expenses including
transport expenses upto the customer’s premises are includible in the
assessable value for charging duty, the input duty credit cannot be confined
only to the services used in the completion of manufacturing process.
Therefore, while interpreting the scope of “input services” as defined in Rule
2(l) of Cenvat Credit Rules, 2004, clause (xvia) and (xviaa) of subsection (2)
of Section 37 of the Excise act should not be looked at in isolation
and it is the entire Central Excise Act containing the scheme of levy and
collection of central excise duty which has to be taken into account. In view
of the above, there is no conflict between the provisions of Rule 2(l) of the
Cenvat Credit Rules, 2004 and clause (xvia) and (xviaa) of Section 37(2) of the
Excise Act.
(iii)
Credit cannot be denied just because the duty on the
goods has been paid on the assessable value determined under Section 4A of the
Central Excise Act i.e on the value determined with reference to declared MRP
minus abatment instead of transaction value under section 4 of Central Excise
Act.
(iv)
The appellant’s sales are on FOR destination basis and
the three conditions in this regard mentioned in the Board’s Circular dated
23-8-07 are satisfied, that is, ownership and property in the goods remains
with the appellant till delivery of the goods in acceptable condition to the
customers at their door steps, the appellant bear the risk of loss or damage to
goods during transit upto the destination and freight charges are integral part
of the price of the goods.
[L.G.
Electronics (
111.77
Where goods are exported on
FOB/CIF basis, Cenvat credit of service tax paid on outward transportation from
factory to port of shipment is admissible. [Modern Petrofils vs CCE 2010
(18) STR 625 (Tr-Ahmd.); See also
Oriental Containers Ltd. v. CCE (2012)
28 STR 397 (Tri.-Mumbai)].
111.78
Where the appellants, manufacturers of ‘Instant
Coffee’ required metal tins for packing their final product and to procure the
metal tins, it transported plastic pallets to metal tin suppliers it was held
that ‘Goods Transport Agency’ (“GTA”) services used for transport of plastic
pallets to and from suppliers is an input service being a service in relation
to ‘procurement of inputs’ or alternatively as ‘activities relating to
business’ and hence service tax paid on such GTA services is eligible for
credit.[CCE vs. CCL Products (India) Ltd.
2010 (18) STR 430 (Tri- Bang)].
111.79
Credit of service tax paid on goods transport agency
services used for delivery of goods to the customers’ premises on FOR basis is
not eligible for input credit. [Lafarge
India Pvt. Ltd. vs. CCE (2011) 22 STR 603 (Tri-Del.)]
111.80
Where the sale of goods were not on FOR basis (i.e. a
sale where during the transit the ownership of, and risk of loss or damage to,
goods remains with the seller and freight is an integral part of value of goods
on which excise duty is paid) and the assessee had paid excise duty on the
price at the factory gate and the transportation from the factory gate to the
customer’s premises was not part of the assessable value of the goods for
payment of excise duty, the Tribunal held that the cenvat credit of tax paid on
transportation services from the factory / depot to the customer’s premises is
not allowable for the period 1.2.2006 to 31.3.2006 since credit was allowable
on transportation of final products only upto the ‘place of removal’ which in
the present case was factory / depot. [CCE
v. Radix Impex P. Ltd. (2011) 24 STR 374 (Tri-Del.)].
111.81
Where the appellant
had paid service tax on goods transport agency services by making a debit in
Cenvat Credit account and had availed credit of the same for discharging duty
liability on goods manufactured by them the Tribunal held that the same was
permissible since –
(i)
u/r
9(1) of the Cenvat Credit Rules, 2004, credit can be taken on the basis of
documents evidencing payment of service tax; and
(ii)
A
debit entry made in the Cenvat credit account on the basis of a lorry receipt
is a proof of payment of service tax.
(iii)
The
lorry receipt shows all details viz., name of the consignor & consignee,
serial no. etc.
[CCE v. Rajasthan Spinning & Weaving
Mills (2012) 26 STR 466 (Tri. – Bang.)].
111.82
The cenvat credit in respect of GTA services used for clearance of final
product from the place of removal to customers premises would be allowed only
for the period prior to 1.4.08 and not for the period post 1.4.08 due to
amendment in the definition of ‘input service’[Madras Cements Ltd. vs. CCE (2012) 27 STR 470 (Tri. – Bang.)].
111.83
Since the definition of ‘output service’ [Rule 2(p) of Cenvat Credit
Rules, 2004] specifically excluded GTA services w.e.f. 1.3.08, the appellant
was held to be liable to pay service tax towards GTA services by making payment
in cash only and not by utilising the cenvat credit [Topland vs. CCE (2012) 28 STR 177 (Tri. –Ahmd.)].
111.84
Cenvat credit of service tax paid on GTA service used for transporting
raw material from the place of supplier to job worker’s premises without
bringing them into the assessee’s premises is allowable [CCE v. KEC International Ltd. (2012) 28 STR 399 (Tri.-Del.)].
Guest
house maintenance expenditure
111.85
Credit on
maintenance services of guest house which is used in connection with the
business would be allowed as being ‘activities related to business’. [CCE v. Hindustan Zinc Ltd. (2009) 16
STR 704 (Tri. – Bang.)]
111.86
Cenvat credit on
outdoor catering services and house keeping services availed at the guest house by the appellant is
allowable except to the extent of recoveries made from the guests since the
guest house has been maintained by the appellant for business activity and not
for any welfare of the society.
111.87
Credit of service tax
paid on security agency services engaged by
the assessee (manufacturer) in the company’s guest house is not admissible
since it does not have any nexus with the activity of manufacture of final
product. [Kilburn Chemicals Ltd. vs. CCE
(2011) 22 STR 637 (Tri. – Che.)]
111.88
Cenvat credit in respect
of Cable TV Services and Repair & Maintenance Services received in guest
house of the appellants is not admissible since the same does not have any
nexus with the manufacture of the finished goods [Hindustan Zinc Ltd v. CCE
(2011) 23
STR 274 (Tri- Del)].
111.89
Credit of tax paid
on house keeping services vital for keeping factory in good condition is
allowable.
[Rotork Control
(India) Pvt.Ltd. v.C.C.E (2010) 20 STR 29 (Tri.- Chennai)]
111.90
Plant house keeping services are essential and related to
manufacturing activity and accordingly the cenvat credit of service tax paid on
house keeping service is admissible.[
Balkrishna Industries Ltd vs CCE 2010 (18) STR 600 (Tri-Mumbai)]
111.91
Insurance on plant
and machinery is an expenditure which goes into costing and, therefore, the
credit of service tax on the same cannot be denied. Further following Excel Corp Care v. CCE
(12) STR 436 (Guj.) & CCE v. GTC Industries (2008) 12 STR 468
(Tri.-LB) credit on mobile phone services and catering services were allowed. [Finolex Cables Ltd. v. CCE (2009) 14 STR
303 (Tri-Mumbai)]
111.92
Service tax paid on
medical and personal accident insurance policies of employees and catering
services would be entitled to input credit since these costs are included in
the cost of final product in terms of CAS-4. Further, in view of the broad
definition of input services, cenvat credit on the services of landscaping the
surrounding of the factory premises was held to be admissible especially in the
present day conditions where much importance is given to keeping the
environment in a proper manner. [Millipore
India Ltd. vs. CCE (2009) 13 STR 616 (Tri-Bang.) Affirmed in CCE vs. Millipore India Ltd. (2012) 26 STR
514 (Kar.); CCE v. Nutrine Confectionery
Co. Ltd. (2012) 26 STR 556 (Tri-Bang.); Biesse
Manufacturing Co. Ltd. v. CCE (2012)
26 STR 546 (Tri-Bang.)]
111.93
Credit of service
tax paid on insurance premium for losses due to fire, machinery breakdown, cash
handling, group gratuity and group accident policy is allowed [CCE v. Beekay
Engg. & Castings Ltd. (2009) 16 STR 709 (Tri. – Del.) See
also H.E.G Ltd vs CCE (2010) 17
STR 178 (Tri-Del)].
111.94
Where
the goods have been exported by the appellant on FOB basis retaining ownership
till the delivery of goods on board the vessel, the ‘load port’ would be the
place of removal and hence transit
insurance upto sea port would be treated as input service (being services used
for clearance of goods upto the ‘place of removal’) [Fiamm Minda Automotive Ltd v. CCE, (2011) 22 STR 210 (Tri- Del) see also Somaiya Organo Chemicals v. CCE,
(2011) 21 S.T.R. 114 (Tri – Mum].
111.95
Credit of
service
tax paid on insurance charges of company vehicles being availed in relation to
manufacture of final products is admissible. [CCE v. DCW Ltd (2011) 22 STR 214 (Tri-Chennai) See also CCE
v. Topworth Steels Pvt Ltd
(2012) 26 STR 420 (Tri. – Del.)]
111.96
Cenvat Credit on group insurance and health policy for
the employees and workers is admissible [Fiamm
Minda Automotive Ltd v. CCE, (2011) 22 STR 210 (
111.97
Credit of service tax
paid on insurance taken by the appellant, a port service provider for
individual employees working in port area is admissible. [
111.98
Credit of service tax paid on Group Mediclaim Policy and
Workmen’s accident policy would be considered as input services since they are
part of manufacturing cost as per Cost Accounting Standard – 4 issued by the
ICWAI and accordingly credit of the same is admissible. [CCE & C vs. Endurance Systems India Pvt. Ltd. (2010) 20 STR 267
(Tri. – Mum); See also CCE v. Stanzen
Toyotetsu India (P) Ltd. (2011) 23 STR 444 (Kar) wherein the High Court
held that the said insurance was relating to an business activity and hence was
admissible; CCE v. Mahamaya Steel Industries
(2011)(24) S.T.R. 124 (Tri-Del); CST v.
Micro Labs Ltd. (2011) 24 STR 272 (Kar.); CCE & ST. vs. Micro Labs Ltd. (2012) 26 STR 383 (Kar.)]
111.99
(i) Marine inland transit insurance :
Cenvat credit of
service tax paid on insurance of captive power plant during its transportation
was allowed on the ground that since the ‘input service’ definition
specifically covers ‘inward
transportation of input and capital
goods’, it also covers insurance during such transportation.
(ii)
Insurance for money in transit : Cenvat credit of service
tax paid on insurance of money in transit is allowed being ‘activity relating
to the business’.
(iii) Accident Insurance of personnel: Cenvat credit of service tax
paid on accident-insurance on personnel working in the appellant’s factory is
allowed being activity relating to the business even if they relate to workers
supplied by the contractors since as per the provisions of the Facties Act, the
appellant asa principal employer has a vicarious liability for any compensation
in the case of injury etc. to even contract workers
[Monnet
Ispat & Energy Ltd. vs. CCE (2010) 19 STR 417 (Tri. –
111.100
Cenvat credit in respect of service tax paid on
(i)
insurance of capital goods in factory or in transit;
(ii)
group personnel accident insurance; and
(iii)
Group Health Guard policy of the workers and staff
was held admissible.
[CCE vs
111.101
Credit of service
tax paid on General insurance service availed for insuring the premises (from
where the output service is provided) and the equipments (which are used in
providing the output services) is admissible since the same is an activity
related to its business.
[Utopia India Pvt. Ltd v. CST
(2011) 23 STR 25 (Tri- Bang)]
111.102
Cenvat
credit of service tax paid on insurance of vehicles registered in the name of
director of company was allowed subject to verification that vehicle was
figuring as asset in the balance sheet of the company and its expenditure were
met by the company [Valco Industries Ltd.
vs. CCE (2012) 28 STR 457(Tri. – Del.)].
Maintenance
& Repairs for warranty obligation
111.103
The assessee was
under legal obligation to provide repair and maintenance services during the
warranty period with regard to the products sold by it, but had outsourced the
same to another service provider and had availed credit of service tax paid to
such service provider and adjusted credit against the excise duty payable. The
Tribunal allowed the cenvat credit taking into consideration that –
(i)
it was a legal
obligation to provide the services during warranty period;
(ii)
the warranty cost
is included in the assessable value of the products; and
(iii)
these activities
are relating to sale of goods and hence are ‘activities relating to business’.
[CCE vs. Danke Products (2009) 16 STR
576(Tri-Ahmd.)]
Maintenance and
Repair services.
111.104
Cenvat credit on Repair
and Maintenance of photo copier, Air conditioner, water cooler etc. is admissible.[Cadila Healthcare Ltd vs C.C.E (2010) 17
STR 134 (Tri-Ahmd) see also
CCE v. DCW Ltd (2011) 22 STR 214 (Tri-Chennai)]
111.105
Credit of service tax paid on repair and
maintenance services
undertaken in relation to air
cooler, pay loader, dumper and changing of damaged asbestos is admissible.[
CCE vs. H.E.G. Ltd. (2010) 20 STR 312 (Tri-Del)]
111.106
Cenvat credit of
tax paid on services of maintenance of water coolers installed in the factory
of the assessees is allowed, installation of water coolers being an essential
requirement under the provisions of the Factories Act. [Rotork Control (
111.107
Services used for maintenance of an effluent treatment plant, keeping of
which was mandated by the Pollution Control Board,
were held to be ‘activities relating to business’, and accordingly, the credit
on such services was held admissible. [Anar Chemicals Pvt Ltd v. CCE (2011)(24)
S.T.R. 32]
111.108
Cenvat Credit of
Service Tax paid on repair and maintenance services used for air-conditioning
plant situated in the office space of the factory is admissible since –
(i)
the
definition of input service specifically includes the services used in relation
to setting up, modernization, renovation or repairs of a factory or premises of
provider of output service or office relating to such factory or premises; and
(ii)
the
same has to be treated as activities having nexus with the manufacturing
business of the appellant.
[Bry Asia Pvt Ltd v. CCE (2012) 26 STR
333(Tri-Del)]
111.109
Cenvat
credit of duty paid on HR plate / coil, jointing sheet & M. S. Stud and
welding electrodes used for maintenance and repair of plant and machinery is
admissible [J.K.Sugar Ltd v. CCE [(2012)
26 STR 391 (Tri-Del)].
111.110
Cenvat Credit of
service tax paid on maintenance/repair of company owned vehicles being activity
related to business is admissible [J.K.Sugar
Ltd v. CCE (2012) 26 STR 391 (Tri-Del)]
111.111
Cenvat credit of
service tax paid on maintenance of aircraft used by the managing director of
company was allowed subject to verification that the aircraft was used for business
activity [Lakshmi Machine Works Ltd. vs.
CCE (2013) 30 STR 98 (Tri. – Chennai)].
111.112
Credit on mandap
keeper services incurred for stockists-meet held for
promoting
sale of final product allowed since it is used in relation to business [Jaypee Rewa Plant v CCE (2009) 16 STR
707 (Tri.
111.113
Mandap Keeper’s services utilized by the assessee a Del credere
consignment agent registered under Business Auxiliary Service, for advertising
and publicizing the products is an ‘input service’ and Cenvat credit of service
tax paid on such services
is admissible. [Tradex Polymers Pvt Ltd
v. CCE (2011)24 STR 82 (Tri-Ahmd)]
Manpower Recruitment or Supply services
111.114
Credit of service
tax paid on manpower supply services used for operation and maintenance of
power plant set up by manufacturers for generating electricity (not excisable)
which is used to produce excisable goods is admissible. [Sanghi Industries Ltd. vs. CCE (2009) 13 STR 167 (Tri-Ahmd.)]
111.115
Credit of service
tax paid on Manpower recruitment and supply service availed by the assessee for
recruiting qualified personnel (skilled engineers engaged in data retrieval) to
render its output service (data retrieval) is admissible.
[Utopia India Pvt. Ltd v. CST (2011) 23
STR 25 (Tri- Bang)]
111.116
Credit of service tax paid on mobile phones was held
allowable where mobile phones were used in “activities relating to business”. [Grasim
Industries vs. CCE 11 STR 168 (Tr. –
111.117
Credit of service
tax on mobile phones used by staff of output service provider is admissible. [CST vs. STIC Travels Pvt. Ltd. (2007) 8
STR 495 (Tri- Del) See also CCE vs. Excel
Corp Care Ltd. (2008) 12 STR 436 (Guj.); Muscat Polymers Pvt. Ltd. vs. CCE (2012) 26 STR 122 (Tri. – Ahmd)].
111.118
Service tax paid on
cell phone bills of Individuals (presumably
employees)
would be allowable subject to verification that phones are being used for
attending calls of the appellant’s customers. [Wiptech Peripherals Pvt. Ltd. vs. CCE (2008) 12 STR 716
(Tri-Ahmd.)]
111.119
Credit of service
tax paid on mobile phones which are standing in the name of the company and are
used by the employees in relation to work cannot be denied only on the ground
that the same has been incidentally used for personal work. [CCE vs. Conzerv Systems (Pvt.) Ltd.
(2009) 13 STR 638 (Tri-Bang.); See also CCE vs. Brakes India Ltd. (2009) 13 STR 684 (Tri-Chennai); CCE vs. Steelcast Ltd. (2009) 13 STR 696
(Tri-Ahmd); CCE v. Stanzen Toyotetsu
India (P) Ltd. (2009) 13 STR 289 (Tri.- Bang.); CCE v T. G. Kirloskar
Automotive (P) Ltd. (2009) 14 STR 743 (Tri. – Bang); CCE v. Beekay Engg.
& Castings Ltd. (2009) 16 STR 709 (Tri. – Del.) - in this case it was
also observed that there is no specific provision in Cenvat Credit Rules that
mobile phone should be used exclusively in relation to the manufacturing
process in business activities.]
111.120
Credit of service
tax paid in respect of Mobile phones provided to its
employees
for official purposes i.e. in relation to manufacture of excisable goods cannot
be disallowed on the ground that phones are not installed in the factory
premises [CCE vs. Showa Engineering Ltd.
(2009) 14 STR 840 (Tri. – Che.) See also ITC Ltd. vs. CC & E
(2009) 14 STR 847 (Tri. – Che.)
CCE & C v. Ultratech Cement Ltd.
(2009) 16 STR 702 (Tri. – Mum.) Jaypee Rewa
Plant v. CCE (2009) 16 STR 707 (Tri. –
111.121
Credit of service tax paid on mobile phones supplied
to employees during the financial year 2006-07 is allowable under the Cenvat
Credit Rules, 2004. Further the Board Circular No. 59/8/2003, dated 20.06.03
issued under the erstwhile Service tax Credit Rules, 2002 which clarified that
credit on mobile phones is not allowable would not apply to Cenvat credit
Rules, 2004 in absence of a provision like the erstwhile rule 3(6) which
specifically provided that credit in respect of services in relation to
telephones shall be allowable only if such telephone connections are installed
in the premises from where output services are provided. [CCE vs. Ultratech Cement (2010) 20 STR 589 (Bom.)]
111.122
Credit of service tax paid on mobile phones which are
standing in the name of the company and are used by the employees in relation
to business purpose cannot be denied as the department failed to produce enough
evidence that the mobile phones are not used for business purposes. [Sidel India Pvt. Ltd. vs. CCE (2010) 18
STR 273 (Tri. – Mum.)]
111.123
Cenvat credit of
mobile services used by director would be allowable subject to reduction of
cenvat credit attributable to factory located in exempted area [Valco Industries Ltd. vs. CCE (2012) 28 STR 457(Tri. – Del.)].
111.124
Allowing the credit
of service tax paid on outdoor catering for providing canteen facilities to
employees in factory premises the Tribunal held as follows:
(i)
The meaning
assigned to “input service” is divided in two parts. The first part giving the specific meaning and the second
part gives the inclusive meaning of the same. In the second part, an inclusive
meaning is given to “input service”, which otherwise would not have been
covered in the main first part.
(ii)
The expression
“such as” contained in the phrase “activities ‘relating to’ the business such as accounting, auditing,
financing, ………..” means that the stipulated activities that follow the said
expression in the definition are only illustrations and not limitations.
(iii)
The expression
“relating to” occurring in the above phrase is to be given a wide construction.
(iv)
Canteen facility
although not specifically stated in the list of activities in the definition of
“input service” is an “activity relating to the business” of the appellants.
(v)
Canteen facility is
beneficial for the workers as they are served food at concessional rates and it
is they who are engaged in the business of the appellants which is nothing but
manufacture of goods. Hence the manufacturer can be said to be using the
canteen facility indirectly for manufacture of goods.
(vi)
The following facts
fortify that canteen expenditure is an ‘activity relating to business’. (a)
maintenance of a canteen is a statutory requirement u/s. 46 of the Factories
Act, 1948; (b) the appellants have paid fringe benefit tax [which is a tax on
business expenditure] on canteen related expenses under the Income Tax Act; (c)
credit of service tax paid on repairs and maintenance of residential colonies
provided to employees is allowed. [Manikgarh
Cement v. CCE (2008) 9 STR 554 (T)]; (d) credit on mobile phones are
allowed [CBEC Circular No. 97 dated 23.8.2007]; (e) expenditure on restoration
of buildings and residential quarters as well as expenditure on maintenance of
transit quarters for accommodating outstation employees have been held to be
business expenditure under the Income-tax Act, 1961.
[Victor
Gaskets India Ltd. v. CCE (2008) 10 STR 369 (Tri. – Mumbai) See also Indian
Card Clothing Co. Ltd. v. CCE (2008) 11 STR 175 (Tri. – Mum); CCE vs. GTC Industries Ltd. (2008) 12
STR 468 (Tri-LB) relied upon in
Thiru Arooran Sugars Ltd. vs. CCE (2009) 16 STR 404 (Tri-Chennai);GKN Sinter Metals Ltd. vs. CCE (2009) 16 STR 615 (Tri-Mumbai) see also
CCE vs. Ferromatic Milacron India Ltd.
(2009) 21 STR 8 (Tri-Guj.); CCE v. Hindustan Coca-Cola Bevrages Ltd. (2011) 23 STR 268 (Tri-Del); CCE v. Stanzen Toyotetsu India (P) Ltd. (2011)
23 STR 444 (Kar);
Paramount
Communication Ltd vs. CCE
(2013) 29 STR 146 (Tri-Del)]
111.125
Where the Factories Act stipulates that any Company
employing more than 250 workers have to maintain the canteen facility and also
provides punishment for violation of the stipulation the Tribunal held that
availing outdoor catering services for provision of canteen to employees would
be considered as integrally connected to the manufacture of the finished
excisable goods and accordingly entitled to Cenvat credit. [Samsung Electronics (I) Pvt. Ltd v. CCE (2011)
22 STR 200 (Tri-Del); See Contra CCE
vs. Suzuki Powertrain India Ltd. (2012) 27 STR 141 (Tri.- Del.)]
111.126
Cenvat credit of
service tax paid on outdoor catering services availed by the various assessee –
manufacturers for providing canteen facilities to their employees would not be
admissible for the following reasons:
(i)
credit of duty /
tax in respect of inputs or input services is permitted only when the same is
used “in, or in relation to manufacture of excisable goods”.
(ii)
Cenvat credit would not be available merely on the
basis that the value of input / input services is included in the value of
finished excisable goods;
(iii)
Use of the input service must be integrally connected
with the manufacture of the final product. The input service must have nexus
with the process of manufacture. It has to be necessarily established that the
input service is used in or in relation to the manufacture of the final
product. One of the relevant test to determine the availability of credit would
be – “can the final product emerge without the use of the input service in
question?” Since Outdoor Catering is not integrally connected with the
manufacture of final product it is not an “input service”.
[CCE vs. Sundaram Brake Linings (2010) 19
STR 172 (Tri-Chennai), departing from CCE
v. GTC Industries Ltd (2008) 12 STR 468 (Tri-LB) in view of the
Supreme Court decision in Maruti Suzuki
Ltd. vs. CCE (2009) 240 ELT 641 (SC)]
111.127
Credit of service
tax paid on outdoor catering service availed for the staff of the company, to
the extent borne by the assessee, is admissible. [Utopia India Pvt. Ltd v. CST (2011) 23 STR 25 (Tri- Bang)]
111.128
CENVAT Credit of service tax on outdoor catering
service would not be admissible to the extent the cost is borne by the
employees [CCE v. Bosch Chassis Systems
India Ltd. (2012) 25 STR 175 (Tri. – Mumbai)].
111.129
Cenvat
credit of service tax paid on outdoor catering services availed for providing
canteen facilities to the employees is admissible since the same has been
utilised directly or indirectly in or in relation to the manufacture of final
product [CCE & ST. vs. ACE Designers
Ltd. (2012) 26 STR 193(Kar.) relying on CCE vs. Stanzen Toyotetsu India Pvt. Ltd. (2011) 23 STR 444(Kar.)].
111.130
Rent-a-cab services
availed for transportation of employees to factory premises is an “input
service” since -
(a)
it may be
considered as being used indirectly in relation to manufacture of goods; or
(b)
as part of business
activity for promoting the business since any facility given to the employees
will result in greater efficiency and promotion of business.
Accordingly,
service tax paid on rent-a-cab scheme services would be entitled to cenvat
credit. [CCE. v. Cable Corporation of India Ltd. (2008)
12 STR 598 (Tri. – Mumbai); See also CCE v. Hindustan Zinc
Ltd. (2009) 16 STR 704 (Tri. – Bang.); CCE v. Beekay Engg. &
Castings Ltd. (2009) 16 STR 709 (Tri. –
111.131
Credit of Service tax paid on rent-a-cab services used
for transporting its employees to factory and back and on outdoor catering
services used for providing food to the employees in factory is admissible
since they are activities relating to the business and they are part of cost of
production. [Bell Ceramics Ltd. vs. CCE
(2011) 21 STR 417 (Tri-Bang.) relying on
Coca Cola India Pvt. Ltd. vs. CCE
(2009) 15 STR 657 (Bom.); See also
CCE vs. Graphite India Ltd. (2012) 27 STR 130 (Kar);
Paramount Communication Ltd vs. CCE
(2013) 29 STR 146
(Tri-Del);
Hindustan Zinc Ltd. vs. CCE
(2013) 29 STR 492 (Tri-Del.)]
111.132
Cenvat Credit of
service tax paid on Rent-a-cab services used for procurement of inputs is
admissible [J.K.Sugar Ltd v. CCE (2012) 26 STR 391 (Tri-Del)].
111.133
Rent-a-cab services availed
for transportation of employee’s children to school / tution centres though
being a welfare activity would not amount to ‘input service’ and hence, credit
of service tax paid thereon is not admissible [Hindustan Zinc Ltd. vs. CCE (2013) 29 STR 492 (Tri-Del.) relying on
Comm v. Manikgarh Cement
(2010) 20 STR 456
(Bom)].
Security agency services
111.134
Credit of service
tax paid on security services to guard the premises from where the output
service is provided is admissible.
[Utopia India Pvt. Ltd v. CST
(2011) 23 STR 25
(Tri- Bang); see also CCE v. Hindustan Coca-Cola Bevrages Ltd. (2011) 23 STR 268 (Tri-Del); C. J. Gelatine Products Ltd. v. CCE (2012)
25 STR 109 (Tri-Del)]
Technical
testing and analysis services
111.135
Technical testing and analysis services availed by a
manufacturer of medicaments for trial manufacture and R&D conducted in
respect of drugs which did not reach the stage of commercial production or the
market is to be considered as ‘input service’ since they were part of
manufacturing process and business activity and accordingly cenvat credit is
admissible.
[Cadila Healthcare Ltd vs
C.C.E 2010(17) STR 134 (Tri-Ahmd)]
111.136
Credit of service tax
paid on Technical inspection service availed to assess the credentials in order
to qualify for grading ISO 9001 2000 is admissible since –
(a) the certification enables the assessee to
market its services successfully; and
(b) the services are akin to ‘credit rating’
services specifically covered under the definition of input service
[Utopia India Pvt. Ltd v. CST (2011) 23 STR 25 (Tri-
Bang)]
111.137
Credit
not deniable in absence of allegation that landline Telephones installed in the
residence of staff was not used in relation to business activity. [H.E.G Ltd vs CCE (2010) 17 STR 178
(Tri-Del) see also
CCE vs. Andhra Pradesh Paper Mills Ltd.
(2011) 22 STR 126
(Tri. – Bang.); CCE v. DCW Ltd (2011)
22 STR 214 (Tri-Chennai)]
111.138
Cenvat Credit on telephone services in respect of telephone installed at
General Manager’s residence and Guest house are not allowed in absence of
evidence that these services are in relation to manufacturing business. [Monnet Ispat & Energy
Ltd. vs. CCE
(2010) 19 STR 417 (Tri. –
111.139
Telephone is used by the appellant for the day to
day business operation and hence cenvat credit of service tax paid on the same
is allowed. [CCE vs. Fourrts (I)
Laboratories Pvt. Ltd. (2010) 19 STR 86 (Tri. – Che.); See also Agsar Paints Pvt. Ltd. vs. CCE (2011) 24 STR 422 (Tri- Chennai)]
111.140
Credit of service tax paid on Tour operator services
used for picking up and dropping the staff of the assessee to the factory being
services in relation to business activities is admissible. [CCE vs. Hyderabad Industries Ltd. (2010)
20 STR 704 (Tri-Chennai)]
111.141
In this case the
Tribunal held as follows:
(i)
Cement and steel
used in construction of a jetty of a port does not fall within the definition
of term ‘inputs’ as defined under Rule 2(k) of the Cenvat Credit Rules, 2004
since it cannot be said that they are “used for providing” port services and
accordingly credit of duty paid on cement and steel is inadmissible.
(ii)
Mobile phone
services, Custom house agent’s services, Surveyor’s services and rent-a-cab
services availed for hiring cars for port officers are “used for providing
output services” and credit of service tax paid on these services is
admissible.
(iii)
Credit of service
tax paid on club house fees meant for recreation of workers being not directly
connected with rendering of port services would be inadmissible.
(iv)
Credit of duty paid
on air—conditioners being capital goods falling with the definition of term
capital goods is fully admissible.
[Mundra Port & Special Economic
Zone Ltd. vs. CCE (2009) 13 STR 178 (Tri-Ahmd.)]
111.142
The appellants (an
Indian Company) were agents appointed by BBC
(i)
the appellants
being agents in
(ii)
Since the
broadcasting charges collected by them as well as commission earned by them are
their output services liable for service tax credit of service tax paid under
the category of business auxiliary services cannot be utilized for making
payment in respect of service tax under broad casting services.
[BBC World (I) Pvt. Ltd. vs. CST (2009)
14 STR 152 (Tri-Del.)]
111.143
Where the assessee
sold machineries ex-factory and also charged the customer for erection and
commissioning at the customer’s site, the Tribunal allowed credit in respect of
service tax paid on erection, commissioning and installation services availed
by the assessee from third party contractors on the following grounds:
(i)
The process of
erection and commissioning is incidental to manufacture and hence is in
continuation of the manufacturing activity which can be said to be complete
only upon erection and commissioning.
Hence, the said service is used in relation to manufacture.
(ii)
The stand of the
Revenue that the credit would not be allowed since the service is provided at
the buyer’s premises is incorrect since the credit rules do not require the
service to be rendered at the factory for the purpose of eligibility to credit.
(iii)
Once the entire
transaction of manufacture, erection and supply is considered as a single
transaction and excise duty paid on whole transaction value, services rendered
in the completion of this whole transaction has to be treated to have been
rendered in or in relation to the manufacture.
(iv)
The above services
cannot be said to be provided to the buyer of machinery, since the
responsibility for erection and commissioning is with the manufacturer and the
agency was nominated by them for erection and commissioning.
[CCE v. Alidhara Textool Engineers Pvt. Ltd.
(2009) 14 STR 305 (Tri- Ahmd.)]
Note : It is to be
noted that the period involved in the present case was 30.12.2002 – 7.6.2005.
However, it is to be noted that erection and commission services were
introduced into the service tax levy only from 1.7.2003. Hence prior to
1.7.2003 how service tax was levied is not clear. Further, prior to 10.9.2004,
manufacturers were not eligible for credit of service tax paid by them against
the excise duty.
111.144
Where the premise
viz., Secondary Switching Area (SSA) of the appellant received capital goods
from its Central Stores Department (CSD), although not under cover of an
invoice, as a “first stage dealer” the Tribunal allowed credit holding that -
(i)
the CSD is strictly
speaking not a first-stage dealer since it does sell goods for a consideration;
(ii)
the appellant had
satisfied the substantive conditions of
the goods being -
(a)
duty paid; and
(b)
used for output
services.
Hence the
substantive benefit of cenvat credit should not be denied on a technical ground
of non-registration of the CSD as a first stage dealer.
[BSNL v. CCE (2009) 14 STR 699
(Tri.-Chennai)]
111.145
Cenvat
credit of service tax paid on amounts paid to Airport Authority for allowing
the appellants to park their aircraft, used for the business purposes, in the
airport, is allowable in absence of evidence that the aircraft had not been
used for business purposes. [Force
Motors Ltd. vs. CCE (2009) 13 STR 692 (Tri-Mumbai)].
111.146
Cenvat
credit of service tax paid on canteen services, transportation and group
insurance health policy for the employees/workers in factory are allowable
being “activity related to business”.
[Stanzen Toyotetsu India Pvt. Ltd. vs. CCE,
(2009) 14 STR 316 (Tri- Bang.);
CCE & ST. vs. Micro Labs Ltd.
(2012) 26 STR 383 (Kar.)]
111.147
On facts, the Tribunal held that service tax paid on
rent-a-cab services, repair and maintenance services for vehicles, cellular
telephone services and photography services are used directly / indirectly in
relation to manufacture of final product and cenvat credit thereon is
allowable.[CCE vs. J.K.Cement Works (2009) 14 STR 538 (Tri-Del.)]
111.148
Credit of service tax paid on insurance premium,
repair of vehicles, AMC charges on telecom and courier charges being availed in
relation to manufacture of final products is admissible.[CCE vs. CCL Products (India) Ltd. (2009) 16 STR 305 (Tri-Bang.)]
111.149
Credit of service tax paid on -
(a)
repair and maintenance
services received for staff colony;
(b)
gardening services;
(c)
security services in wind
farms;
(d)
maintenance of swimming
pools; and
(e)
civil works undertaken at
auditorium and shopping complex
is inadmissible since the same does not have any nexus with the
manufacturing of finished goods.[CCE vs.
Grasim Industries (2011) 21 STR 378 (Tri-Chennai)]
111.150
Where the appellant had availed credit of service tax paid on services
received prior to 1.1.2005 from non-resident service provider, the Tribunal
held that the assessee cannot be asked to reverse the credit on the ground that
appellant was not liable to pay service tax during the said period under the
reverse charge mechanism since these was a revenue neutral situation.[Rajratan Global Wires Ltd. vs. CCE (2011)
21 STR 383 (Tri-Del.)]
111.151
(i) Credit of service tax paid on bank charges, courier and
clearing charges, professional service charges, computer maintenance, clearing
charges and insurance charges is admissible since the same are being incurred
in relation to manufacture of final product i.e. the business of the assessee.
(ii)
credit of service tax paid on rental charges for premises which are used
for manufacturing of goods is admissible.
(iii)
credit of service tax paid on repair and maintenance of vehicles which
are used for shifting of semi-finished goods from one premises to another for
next level of production is admissible.
[Jeans Knit P. Ltd. vs. CCE (2011) 21 STR
460 (Tri-Bang.)]
111.152
Where the appellant being 100% EOU were availing
services for transporting goods from the factory to airport, loading them to
the aircraft and making all documentation for the transportation by air the
Tribunal held that such services were availed by the appellant till the goods
are loaded into the aircraft for export and not thereafter. Therefore, the
place of removal in such cases would be the airport and accordingly, credit of
service tax paid on such services for facilitating export of goods from the
place of removal (i.e. airport) would be admissible. [Fine Care Bio-systems vs. CCE (2010) 20 STR 193 (Tri. – Ahmd)].
111.153
The Tribunal held
as follows :
(i)
Credit of tax paid
on invoices in the name of the ‘pure agent’ of the assessee is allowable.
(ii)
Credit of tax paid
by the appellant, a manufacturer and exporter of silk fabrics, on CHA services
and servicing of cars is admissible.
(iii)
Credit of tax paid
by Bangalore Head Office of the appellant on input invoices addressed to it,
but services in respect of which was for Mysore factory is admissible.
(iv)
Credit of tax paid
on inputs used for manufacture of goods sold to SEZ is admissible.
[CCE v. Chamundi Textiles (Silk Mills) Ltd.
(2010) 20 STR 219 (Tri.- Bang.)].
111.154
Cenvat credit on (i) Vehicle maintenance; (ii)
Transportation,
installation and maintenance of coolers; (iii) Marketing and
publicity services and (iv) Calibration services and Systems maintenance
services are allowed on ground that these are ‘activities relating to the business’ of the appellant. [Hindustan
Coca Cola Beverages P. Ltd. vs. CCE & ST (2010) 19 STR 356 (Tri. –
Bang.)]
111.155
Cenvat Credit of tax paid on ‘shifting of household
goods of employees’ is not allowed since it not in any way connected with the
appellant’s business activity. [Hindustan Coca Cola Beverages P. Ltd. vs.
CCE & ST (2010) 19 STR 356 (Tri. – Bang.)]
111.156
The assessee manufactured & sold ‘rebar coils’
from their factory and from its Branch Sales Offices (BSOs) and paid excise
duty on such sales. It had appointed C&F agents to receive, stock &
sell the products at its BSOs. On specific requests from its customers, in a
few cases, the C&F agents did cutting, bending & straightening before
selling the goods and charged the assessee certain processing charges. The
assessee took credit of the tax paid on such charges. The department denied the
credit contending that the process of cutting, bending etc. does not amount to
manufacture and hence the service is not ‘used
in relation to manufacture’. The Tribunal dismissed the contention and held
that cenvat credit is allowable since the said service is an ‘activity relating
to business’ of the assessee which is an independent limb available to the
assessee to claim credit. [Rashtriya
Ispat Nigam Ltd v. CCE [2010 (19) S.T.R. 389 (Tri – Bang) relying on Coca Cola India Pvt. Ltd. V. CCE (2009)
15 STR 657 (Bom.)].
111.157
CENVAT credit of
service tax paid on repair / maintenance, insurance, surveys, technical
inspection certification services and manpower recruitment services all
relating to vessels, viz., tugs and barges which were used for the purpose of
transporting raw materials and final products from / to ships anchored at sea
to/from the appellant’s factory was disallowed by the Tribunal on the ground
that none of the above mentioned services would be considered as input services
since the quintessential requirements of “input service” laid down in the main
part of the definition have not been established by the appellant i.e. a nexus
between the services in question and manufacture / clearance of excisable goods
by the appellant.[Vikram Ispat vs. CCE
(2010) 19 STR 52 (Tri. – Mumbai)]
111.158
Rent-a-cab, air
travel and servicing of motor vehicle services were considered as activities
relating to business and cenvat credit of service tax paid on those services
were allowed [Dr. Reddy’s Lab. Ltd. vs.
CCE (2010) 19 STR 71 (Tri. – Bang.); Tufropes Pvt. Ltd. vs. CCE (2012) 27 STR 269 (Tri. – Ahmd.)]
111.159
Cenvat credit of
service tax paid on mediclaim policy, Security services, vehicle insurance, Car
rentals,
111.160
The assessee, a
pharmaceutical company, was held eligible to take
Cenvat credit of duty paid on Industrial washing machines used for washing of
employees’ uniforms since they are ‘capital goods’ being -
(i)
goods falling under
chapter 84; and
(ii)
used in the factory of manufacturer to provide clean
uniforms to employees which is a mandatory requirement under the Drugs and
Cosmetics Act.
[CCE vs Micro Labs Ltd
2010 (18) STR 771 (Tri-Bang.)]
111.161
Cenvat credit is
admissible in respect of -
(a)
Security services
availed by the assessee for ensuring safety of goods stored in godown.
(b)
being ‘activities relating to
business’.
[CCE vs
Hindustan Coca-Cola Beverages Pvt Ltd. 2010 (18) STR 500 (Tri Bang.)]
111.162
Where the assessee
removes inputs as such it was held that Rule 3(5) of Cenvat Credit Rules, 2004
only requires him to reverse the amount of the Cenvat credit availed on such
“inputs” or “capital goods” but not the credit of service tax availed by him on
GTA services which were used for transporting the said goods into his factory.
[CCE vs.
111.163
The Tribunal held that the following services were directly or
indirectly used for purpose of appellant’s business and accordingly Cenvat
credit of service tax paid on the said services are allowed:
(i) Architect Services and interior decorator
services availed for construction of BFW Tech Center which is used for
marketing and demonstration of the appellants product;
(ii) Authorised Service Station services availed
towards repairs and maintenance of vehicle used by executives involved in
production, marketing, administration and finance;
(iii) Rent paid on premises used for operation and
marketing offices;
(iv) Stock Broker Services availed for operating
DEMAT account for business
[Bharat Fritz Werner Ltd. vs. CCE (2011)
22 STR 429 (Tri. – Bang.)]
111.164
Cenvat Credit of service tax paid on the following services availed by a
telecom company were held allowable as being ‘activity relating to business’ :
(i)
insurance services
availed for the transit of valuables (laptops, vehicles, etc.) and the transit
of cash from collection centres to the bank is admissible.
(ii)
Services of customer care and attending to customer
complaint.
(iii)
Hiring conference room for the purpose of providing
training courses for staff and business development.
However, the Tribunal disallowed credit where the
invoice did not indicate:
(a)
whether the invoice is for service or sale of goods;
and
(b)
service tax element in it.
[Ideal Cellular
Ltd. vs. CCE (2011) 22 STR 450 (Tri. – Del.)]
111.165
Use of JCBs in compost yard (situated 2 km away from factory) for
treating waste
generated in manufacturing activity being part of effluent treatment is an
‘activity relating to business’ and hence Cenvat Credit of service tax paid on
hire of JCBs is admissible. [2010 (17) STR 211 (Tri)] [CCE v.
Chemplast Sanmar Ltd. (2011) 24 STR 71(Tri- Chennai)]
111.166
Where the appellant had availed cenvat credit on pandal or shamiana
services and photography services availed in connection with the celebration of
Karnataka Rajosthava Day, a State Function which it had organised in its factory
premises for the welfare of the employees of the industry, in order to maintain
industrial peace, the High Court held that the same is admissible since –
(a) the services fall within the ambit of the
expression ‘activities relating to business’; and
(b) the services have a nexus or integral
connection with the manufacture of final product as well as the business of
manufacture of final product.
[Toyota Kirloskar Motor Pvt. Ltd. vs. CCE
(2011) 24 STR 645 (Kar)].
111.167
The Cenvat Credit of service tax paid on transportation of ‘empty
trolleys’ required for packaging the final products is admissible. [Madras Radiators & Pressings Ltd. vs.
CCE(2012) 27 STR 163 (Tri – Chennai)]
111.168
Where the Pollution Control Board had consented to manufacture goods
subject to the condition of gardening the plant premises and where the
appellant had availed manpower supply services for undertaking garden
maintenance work, the Tribunal held that credit of service tax paid on manpower
supply service was admissible [JBM Auto
Systems Pvt. Ltd. vs. CCE (2012) 27 STR 170 (Tri.–Chennai)].
111.169
Cenvat credit on inputs like red lead chemical/ primer/ red-oxide and
m-seal which are received in the factory and used for painting of pipes and
machinery is admissible [U.G. Sugar &
Indus. Ltd. vs. CCE (2012) 27 STR 214 (Tri.- Del.)].
111.170
Where the assessee purchased shares of another company pursuant to an MOU
for supply of electricity by that company to the assessee; and the electricity
was used in the manufacture of final products, the Tribunal held that Cenvat
credit of service tax paid on stock brokers services used for purchasing the
other company’s shares would be admissible [CCE
v. Neuland Laboratories Ltd. (2012) 27 STR 168 (Tri. – Bang)].
111.171
Cenvat
credit of service tax paid on insurance taken to meet workmen’s compensation
liability is an activity related to the business, and hence would be allowed [Surani ceramics Ltd.
vs. CCE (2012) 27 STR 270 (Tri. – Ahmd.)].
111.172
Cenvat
Credit of services tax paid on maintenance of windmills used to generate
electricity usedfor manufacture of final products is admissible and cannot be
denied on the ground that the windmills are located far away from the factory
since there is no stipulation that input services (unlike inputs) must be
received in the factory [Endurance
Technologies P. Ltd. vs. CCE (2012)
27 STR 320 (Tri. – Mumbai)].
111.173(i)
Cenvat Credit of service tax paid on
hotel rent by the assessee for the purpose of stay of its Chief Executive to
attend business and client meeting is admissible.
(ii) Cenvat credit of service tax paid on
decorator’s service forming part of expense for event management service
provided by the appellant to its clients clearly shows the nexus between the
input and output service, and hence is admissible.
The Tribunal by invoking s. 80 set aside the penalties
levied as there was no intent to evade tax [One
Advertising & Communication Services Ltd. vs. CST (2012) 27 STR 344
(Tri. – Ahmd.)].
111.174
Cenvat Credit availed on consultancy engineering services used for
modernisation of the power plant used for manufacturing paper (dutiable
product) cannot be denied merely on the ground that the modernisation was done
using technology that resulted in earning carbon credits/ Certified Emission
Reduction Sale (CERS) income which is not liable to excise duty/service tax [Shree Bhawani Paper Mills Ltd. v. CCE (2012)
28 STR 409 (Tri.-Del.)].
111.175
Cenvat credit
availed by an exporter on clearing, commission on export sales, material
handling, terminal handling, bank commission and aviation charges would be
allowable since these services are availed in the course of business of
manufacturing [JSW Steel Ltd. vs. CCE
(2012) 28 STR 557 (Tri. – Mumbai)].
111.176
Cenvat credit
availed on insurance of vehicles, finished goods in godown located inside and
outside factory, finished goods in transit, cash in box/counters, cash in
transit and personal insurance of cashier would be allowed since it is
necessary to make the assessee risk free for carrying out its manufacturing
operations and other activities related thereto [DSCL Sugar vs. CCE (2012) 28 STR 559 (Tri. – Del.)].
111.177
Credit of service
tax paid on —
(i)
advertisement
services used for recruitment of manpower;
(ii)
security agency
services used for securing the office premises;
(iii)
services of hiring
furniture which were used in office premises;
(iv)
housekeeping
services; and
(v)
clearing and
forwarding services used in relation to import of equipments
is
admissible as input credit
[C. Cubed Solutions Pvt. Ltd. vs. CCE
(2013) 29 STR 385 (Tri-Bang)]
111.178
Ambulance services availed by the assessee for carrying sick employees to
the hospital for treatment being an activity having nexus with production of
final product, credit of service tax paid thereon is admissible [Hindustan Zinc Ltd. vs. CCE (2013) 29
STR 492 (Tri-Del.)].
111.179
The following
credits on input services were held by the High court to be admissible /
inadmissible to a company engaged in manufacture of drugs:
(i)
Credit
on clinical testing services availed prior to commencement of commercial
production was allowed in view of the fact that the final product could be
manufactured only after obtaining regulatory approval of the clinically tested
samples and therefore such services were directly related to the manufacture of
the final product. The department plea that unless goods reaches commercial
production stage cenvat credit was not admissible was rejected.
(ii)
Service
tax paid (as a recipient of service) on commission paid to foreign agents for
‘sale of final products’ was held inadmissible
since –
(a)
They
are not services directly or indirectly in relation to manufacture of final
products or clearance of final product from the place of removal;
(b)
The
services are not in relation to ‘sales promotion’ but are for actual sales of
goods on behalf of the principal;
(c)
They
are not ‘activities related to business’ “such as” (meaning of the same nature)
accounting, auditing, financing share registry etc. since it is not of the same
nature.
(iii)
Cenvat credit on courier services used for
transportation of goods outside
factory would be admissible for the period prior to 1.4.2008, being service
used in relation to clearance of final products from the place of removal.
(iv)
Cenvat credit in respect of clearing and forwarding agent’s service would
be admissible for
the period prior to 1.4.2008 as being services used in relation to clearance of
final products from the place of removal
(v)
(a) Cenvat credit on repair and maintenance
of copier machine,
air – conditioner
and water cooler are admissible being services
necessary for the factory building as
well as for activities relating to business and therefore, integrally connected
with the business of the manufacturer.
(b)
The services of interior decorator and commercial or industrial construction
being services used in relation to repair / renovation of factory would fall
under the inclusive part of the definition of ‘input services’ and cenvat
credit on the same would be admissible.
Notwithstanding the
above, cenvat credit on the above services and services of a management
consultant would be admissible since the said services are specifically
mentioned as input services u/r. 6(5) of the Cenvat Credit Rules, 2004 and all
services mentioned in rule 6 (5) are essentially ‘input services’ as defined in
rule 2(l).
Note: The rule 6(5) of CCR, 2004 allows cenvat credit
on specified input services which are not used exclusively in relation to
manufacture of exempted product. However, the said rule has been omitted vide
notification no.3/2011-C.E. (N.T.) w.e.f. 1-4-2011.
(vi)
Credit
on Technical inspection and certification services availed for calibration and
checking of measurement instrument used for manufacture of products is
admissible as being a service in relation to manufacture of final products.
[CCE vs. Cadila Healthcare Ltd. (2013) 30
STR 3 (Guj.)].
111.180
Where the decision
of the Tribunal, ordering refund of unutilized Cenvat credit to the assessee
who had surrendered its registration due to the closure of the company was
challenged, the High Court held that claim for refund cannot be rejected
relying on r. 5 of Cenvat Credit Rules, 2002 when the assesee company has been
closed and the assesee has opted out of the Modvat scheme. [Union of
111.181
Unutilized balance lying in cenvat credit account is refundable where
the assessee’s factory had been closed down and he was not in a position to
utilize the said balance. [CCE v. Kores (India) Ltd. (2011) 22 STR 361
(Tri-Bang)]
111.182
Refund can be
claimed in respect of unutilised cenvat credit on input services used in the
manufacture of excisable goods exported even if they are otherwise ‘exempt’ or
subject to ‘nil’ rate of duty.[Noble
Grain India Pvt Ltd vs C.C.E 2010 (17) STR 128 (Tri-Del)]
111.183
Where the revenue rejected the refund of Cenvat credit on input
services used for exports by the appellant, a 100% EOU, on the ground that the
services in respect of which credit had been taken in a particular quarter,
cannot be linked to goods exported in that particular quarter the Tribunal held
that once the credit is held to be admissible, there is no restriction of
having one to one correlation between the goods exported and cenvat credit
availed and hence the appellants are entitled for refund of the same.[Capiq Engineering Pvt. Ltd. vs. CCE
(2011) 22 STR 366 (Tri-Ahmd.)]
111.184
Service tax paid on transportation of export goods (which are sold on FOB
basis) from factory to port would qualify as ‘input service’ and consequently
refund is admissible under Rule 5 of Cenvat Credit Rules, 2004. [CCE vs. Stangl Pickles & Preserves (2011)
22 STR 396 (Tri-Chennai)].
111.185
Refund of credit of
tax paid on input services used for exports under rule 5 of Cenvat Credit Rules, 2004 is not deniable on the ground
that the credit pertained to a month in which there was no exports [CCE vs. Chamundi Textiles (Silk Mills) Ltd.
(2012) 26 STR 498 (Tri-Bang)].
111.186
The Tribunal held that the
refund claim of cenvat credit of tax paid on input services used for export of
software was admissible under rule 5 of the Cenvat Credit Rules, 2004 even
though the output was not a taxable service and the limitation period of 1 year
prescribed u/s. 11B of the Central Excise Act, 1944 was also not applicable for
refund of accumulated cenvat credit, but denied the refund on the ground that
the appellant was not registered with the department. On appeal, the High Court
held that registration with the service tax department is not a mandatory
condition for availing refund of accumulated cenvat credit [M. Portal India Wireless Solutions P.
Ltd. vs. CST (2012) 27 STR 134
(Kar.)].
111.187
The appellant made
pre-deposit pursuant to the Tribunal’s order by debit to their Cenvat Credit
account. Subsequently, the Tribunal disposed the appeal by way of remand and by
setting aside the order of the lower authority. Consequently, the appellant
became eligible for refund of pre-deposit amount for which it duly applied but
insisted on refund in cash since by then the appellant had opted out of Modvat
Credit scheme and was unable to utilize the credit. The department sought to
refund the pre-deposit by credit to Cenvat Credit account. On appeal, the
Tribunal relying on the Jharkhand High Court judgment in Ashok ARC (2006) 199
ELT 399 (Jhar.) ordered refund of pre-deposit in cash. [Raymond Ltd. vs. CCE (2012) 27 STR 447 (Tri.-Mumbai)].
111.188
Where the appellant
provided Business Process Outsourcing services which were exempt vide
notification no. 8/2003-ST, to overseas entities it was held that the assessee
would be eligible to claim refund of Input Service Credit availed for providing
the said services in terms of Rule 5 of Cenvat Credit Rules, 2004 [Zenta Pvt. Ltd. vs. CCE (2012) 27 STR
519 (Tri. – Mumbai) relying on Dell
International Services India Pvt. Ltd. vs. CCE (2010) 17 STR 540 (Tri. –
Bang)]
111.189
The Tribunal relying on
judgment in case of Well Known Polyesters
Limited vs. CCE (2012) 25 STR 411 (Tribunal) held that the appellant after
obtaining service tax registration would be eligible to avail cenvat credit of
input service tax paid prior to obtaining such registration. It further held
that refund
of such credit could also be claimed if it remains unutilized [C. Metric Solution Pvt. Ltd. vs. CCE (2012)
28 STR 460 (Tri. – Ahmd.)].
111.190
The refund of Cenvat Credit on inputs/input services used for manufacture
of goods exported under Rule 5 of Cenvat Credit Rules, 2004 r/w notification
no. 5/2006-C.E. (N.T.) and section 11B of the Central Excise Act, 1944, must be
claimed within one year from the date on which final products are cleared for
exports [CCE v. GTN Engineering (I) Ltd. (2012)
28 STR 426 (Mad.)].
111.191
The
appellants, a 100% EOU, had availed cenvat credit on inputs & input
services on which credit was denied by the Revenue, but later held as admissible
by CCE(A) vide order dated 28.1.2009. The appellant thereafter filed a claim
for under Notification no. 5/2006 on 13.8.2009 and 5.11.2009 for the period
April 2007 to Mar 2008 which was rejected by the revenue as time barred. On
appeal, the Tribunal allowed the claim and held that the relevant date for the
purpose of filing the claim would be the date of settlement of dispute i.e.
28.1.2009 [India Trimmings Pvt. Ltd. vs.
CCE (2013) 29 STR 383 Tri-Chennai)]
Interest on Refund
111.192
Where the appellant had paid service tax alongwith interest on reverse
charge basis on overseas payments made prior to 18.4.2006 (though not liable);
took Cenvat Credit of the tax paid but claimed refund of the interest, the
Tribunal rejected the refund claim relying on judgment in case of CCE v. SKF India Ltd. (2009) 239 ELT 385
(S.C.) on the ground that when the appellant had admitted the service tax
liability by not claiming refund and taking credit of the same, interest on
delayed payment is payable by the appellant and cannot be refunded [Skoda Auto India Pvt. Ltd. v. CCE (2012)
28 STR 391 (Tri.-Mumbai)].
111.193
Where the assessee
took full credit based on the supplier’s invoice but subsequently received
discounts from the supplier which effectively reduced the invoice price, the
Tribunal held that, the assessee was not required to reverse proportionate
credit on receipt of discounts unless the supplier had obtained a refund of
duty from the Government. [Kedia Electricals Ltd. vs. CCE (2008) 11 STR
197 (Tri. - Bang.)].
111.194
Once the service
tax has been paid by the supplier of services credit cannot be denied to the
receiver by contending that service tax was not required to be paid by the
supplier on the said service. [Maersk
India Pvt. Ltd. vs. CCE (2008) 12 STR 150 (Tri-Mumbai); See
also H.E.G Ltd vs CCE 2010
(17) STR 178 (Tri-Del); CCE v. Carborandum Universal Ltd. (2009) 16 STR 181 (Tri- Chennai); Ultratech Cement Ltd v CCE (2011) 22
STR 289 (Tri-Mum); Manikgarh Cement vs.
CCE (2011) 22 STR 471 (Tri. – Mum.); Ultratech
Cement Ltd v CCE (2011) 22 STR 289 (Tri-Mum); Sterlite Industries Ltd. v. CCE (2012) 25 STR 66 (Tri-Che)]
111.195
In this case the
Tribunal held that:
(i)
Where the
appellants had paid the service tax as a recipient of the service they were
entitled to take/avail the credit of the same.
Such credit can be availed/taken for tax paid even before the appellant
become registered as an output service provider since the tax is paid as a
“deemed” output service provider.
(ii)
Where there is no
dispute as regards the fact that services have been received and payment of tax
on the services so received denial of credit was not justifiable on the ground
of non production of original invoice.
(iii)
Where the service
tax had been wrongly paid as a recipient of service under consulting engineers
services instead of intellectual property right services at the instance of the
department the availment of credit cannot be denied.
(iv)
Credit of tax paid
as an a recipient of services even before registering as an output service
provider was available to be set off against output tax liability arising post
registration.
[Jindal Steel & Power Ltd. vs.
CCE (2009) 14 STR 68 (Tri-Del)]
111.196
Where the appellant initially claimed abatement
(67%) on construction services and also availed the cenvat credit on input
services [violating the condition in notification no. 1/2006 dated 1.3.2006]
but subsequently reversed the cenvat credit on being pointed out, it was held
that the appellant being entitled to the benefit of abatement, no penalty is
imposable. [CST vs. Amola Holdings Pvt.
Ltd Pvt. Ltd. (2009) 16 STR 46 (Tri. – Ahmd.)].
111.197
There is no time
limit for taking cenvat credit. [Pierlite
India Pvt. Ltd. vs. CCE (2010) 17 STR 237 (Tri-Ahmd.) relying on M/s. Coromandel Fertilizers Ltd. vs. CCE (2009)
239 ELT 99 (Tri-Bang.)]
111.198
Denial of credit of service tax paid on input service
on the ground that the services were not received within the factory premises
of the assessee is not sustainable. [CCE
vs. Ultratech Cement Ltd. (2010) 20 STR 683 (Tri-Mumbai)]
111.199
Transfer of capital
goods by the appellant to a job worker does not warrant any reversal of cenvat
credit availed on said capital goods since the goods processed by the
job-worker are received from the job-worker for further use in manufacture and
the appellant always had option to avail the credit on capital goods as and
when he receives back the Capital Goods [Rule 4(5)] thus, resulting in revenue
neutrality. Further, service tax paid on telephone and security services of by
job-workers would not be available for credit by the appellant. [Zenith Machine Tools Pvt. Ltd. vs. CCE (
2010) 20 STR 554 (Tri. – Bang.)].
111.200
Cenvat Credit
cannot be denied by questioning the assessment of service provider since it is
beyond the jurisdiction of the authorities in-charge of the service recipient.
[Hindustan Coca Cola Beverages Pvt.
Ltd. vs. CCE (2010) 19 STR 280 (Tri-Del.)]
111.201
Penalty u/s 76 & 77 is not attracted for wrong
availment of Cenvat credit. Further
penalty under rule 15(4) of the credit Rules can be imposed only if Cenvat
credit is taken wrongly by reason of fraud, collusion etc., with an intent to
evade payment of service tax. [Sudhakar
Polymers Ltd vs CCE 2010 (18) STR 635 (Tri-Bang.)]
111.202
Cenvat credit of service tax paid on input services is not conditional
upon actual payment of tax/duty by the supplier and can be taken when the
assessee has paid for the value and service tax. [Lason
111.203
The appellant manufacturer
availing SSI exemption is allowed to avail the credit of input services since
the exemption notification does not provide for bar on taking credit on input
services as in the case of input goods. [Vallabh
Vidyanagar Concrete Factory vs. CCE & C (2010) 18 STR 271 (Tri. –
Ahmd.)]
111.204
Provision of
technical know-how by foreign collaborator is an ‘input service’ since the
required quality of final product could not have been manufactured without the
technical know-how. Further, the credit can be taken on the basis of TR-6
challan which evidenced the payment of service tax by the service recipient
(prior to 15.6.2005) even though TR-6 challan was not a prescribed document
under Rule 9 of the Cenvat Credit Rules since the substantial benefit of cenvat
credit cannot be denied on the basis of procedures which cannot be implemented
[CCE v. Sonasomic Lemforder Components
(2012) 26 STR 338 (Tri- Del)].
111.205
The cenvat credit in respect of construction service and other services
availed for construction of a mall whose units are subsequently rented out is
admissible as being used for providing output services, since without
utilization of the said input services the construction of mall and its renting
would not have been possible [Navaratna
S.G. Highway Prop. Pvt. Ltd. vs. CST (2012) 28 STR 166 (Tri.- Ahmd.) relying
on CCE vs. Sai Samita Storages (P) Ltd. (2011) 23 STR 341 (A.P.); See
also Venus Investments vs. CCE (2013) 29 STR 72 (Tri. – Ahmd.)].
111.206
Where the appellant, a manufacturer of excisable goods, had short paid
service tax under reverse charge on services received from overseas marketing
agents prior to 18.4.2006 but took credit of the tax actually paid, the
Tribunal held that –
(i)
Prior to 18.4.2006, no service tax is payable by the service recipient
for services received from abroad as the provisions of rule 2(1)(d)(iv) were
ultra vires the provisions of Finance Act, 1994, and hence the demand of the
service tax short paid is not sustainable.
(ii)
As per rule 9(1) of Cenvat Credit Rules, 2004, the criterion for availing
Cenvat Credit is with reference to the date of the invoice (which must be after
10.9.2004) and not the date on which service is provided. Hence the departments
contention for denying credit on the ground that the services pertained to a
period prior to 10.9.2004 is not sustainable
[H.R. International v. CCE (2012) 28 STR 580 (Tri.-Del.)].
111.207
Where a
manufacturer of goods who does not provide any output service, but is liable to
pay service tax on Goods Transport Agency services as payer of freight, such
goods transport agency services shall be deemed to be “output service” as per
the Explanation to section 2(p) until 19.4.2006 and accordingly credit of
service tax paid on any input service and/or credit of duty paid on any input
or capital goods can be validly utilised for discharging service tax on such
goods transport agency services. [R. R.
D. Tex Pvt. Ltd. vs. CCE (2007) 8 STR 186 (Tri. – Chennai) relying
on CCE v. Nahar Industrial
Enterprises Ltd. (2007) 7 STR 26 (Tri-Del.) affirmed in CCE v. Nahar Industrial Enterprises Ltd.
(2012) 25 STR 129 (P & H); See also Andhra Pradesh Paper Mills Ltd. vs. CCE (2007) 8 STR 166 (Tri. –
Bang.); CCE v. Visaka Industries Ltd. (2007) 82 RLT 559 (CESTAT – Mum.);
Ambattur Petrochem Ltd. & Ors. v. CCE (2007) 82 RLT 922 (CESTAT –
Del.); Soundararaja Mills Ltd. ‘E’ Mills
vs. CCE (2008) 9 STR 183 (Tri. – Chennai); Bhushan Power & Steel
Ltd. vs. CCE (2008) 10 STR 18 (Tri-Kolkata); CCE vs. Flowserve
Microfinish Valves Pvt. Ltd. (2008) 10 STR 21; Nagammai Cotton Mills (P)
Ltd. vs. CCE (2008) 10 STR 77 (Tri-Chennai) (Tri-Bang); CCE vs. Gupta Steel (2008) 12 STR 101
(Guj.); Scan Synthetics Ltd. vs. CCE
(2008) 12 STR 766 (Tri. – Del.); CCE vs.
Arvind Fashions Ltd. (2009) 13 STR 544 (Tri-Bang.); Mahindra Ugine Steel Co. Ltd. vs. CCE (2008) 12 STR 159
(Tri-Mumbai.); Iswari Spinning Mills v.
CCE (2011) 22 STR 549 (Tri-Chennai); CST
vs. Hero Honda Motors Ltd. (2013) 29 STR 358 (Del); CCCE & ST vs. Aster Teleservices (P) Ltd. (2013) 29 STR 475
(Tri – Bang.) (These cases pertain to period prior to 19.4.2006); Shree Rajasthan Syntex Ltd vs.CCE (2011)
24 STR 670 (Tri-Del); ]
111.208
In the present case, the issue before the Tribunal was whether the
goods transport agency (“GTA”) services received by the appellant during the
period April’05 to March’07 could be treated as an output service and the service tax
thereon could be discharged through Cenvat credit. The Tribunal held that-
(i) For the period prior to 19.4.06(i.e. before
the deletion of explanation to r. 2(p) of the Cenvat Credit Rules, 2004) though
by virtue of the explanation the GTA services received by the appellant were
deemed to be their output services yet the appellants would not be eligible to
discharge the service tax liability in respect thereof by using cenvat credit
since by virtue of r. 3(1) of the credit rules cenvat credit on inputs/capital
goods /input services can be taken only if the same has been received and used
in provision of services or for
manufacture of final products. Since the assessee was neither engaged in
provision of services nor in manufacture of final products it could not avail
Cenvat credit on any input services and consequently cannot utilize such credit
for discharging its service tax liability in respect of goods transport agency
services received by it.
(ii) For the period post 19.4.06 after the deletion
of explanation to r. 2(p) only services actually provided by assessee could be
treated as output service. Hence irrespective of the fact whether or not the
assessee was manufacturing any final products or providing taxable output services
service tax on goods transport agency services was required to be paid by the
assessee in cash and not through cenvat credit.
[ITC vs. CCE (2011) 23 SRT 41(Tri –Bang)]
111.209
Prior to 19.4.2006 by virtue of explanation to rule 2(p) of the Cenvat
Credit Rules, 2004 (which defined output service) service tax liability as a
recipient of goods transport agency services could be discharged through Cenvat
credit only by those persons who did not provide any taxable service or
manufactured any final product. The appellants in the present case were engaged
in manufacturing activities. Further the goods transport agency services which
is received by the assessee is specifically covered by the definition of “input
services” and the same service cannot be considered as “input service” as well
as “output service”. Hence the goods
transport agency services received by the assessee cannot be treated as their
“output service”. Accordingly, the Tribunal held that the appellants could not
discharge their service tax liability in respect of goods transport agency
services by availing Cenvat credit.[CCE
vs. B.P.L. Display Devices Ltd. (2011) 23 STR 356 (Tri-Del.)]
111.210
Where the
appellants were engaged in manufacture of goods the Tribunal held that they
were not entitled to treat the goods transport agency services obtained by them
as an output service and utilise the balance in cenvat credit account for
payment of service tax on goods transport agency services taking recourse to
the erstwhile Explanation to section 2(p) of the Cenvat Credit Rules, 2004. [Alstom Projects India Ltd. vs. CCE
(2008) 12 STR 23 (Tri-Chennai).
111.211
Cenvat credit in
respect of basic excise duty can be utilised for payment of education cess
under rule 3(7) of the Cenvat Credit Rules, 2004. [Sun Pharmaceutical Industries vs. CCE (2008) 11 STR 93 (Tri. –
Del.)].
111.212
Service tax payable
on the goods transport agency services by a service recipient can be paid by
way of debit to cenvat credit account since GTA is deemed to be an output
service [Selvakumar Spinners Pvt. Ltd. v.
CCE (2009) 16 STR 406 (Tri. – Chen)].
111.213
Unutilized balance
of service tax credit as on 10.9.2004 earned under the Service tax Credit
Rules, 2002 can also be utilised towards payment of excise duty (and not only
service tax) by virtue of the transitional provision envisaged under Rule 11 of
the Cenvat Credit Rules, 2004. [Uttam
(Bharat) Electricals (P) Ltd.vs. CCE (2010) 17 STR 240 (Tri-Del.); See
also Idea Mobile Communications
Ltd. v. CCE (2012) 25 STR 385 (Tri – Del) ]
111.214
Where the assessee was a manufacturer and a service provider, (renting
services), the cenvat credit availed on inputs, capital goods and input
services used for manufacturing final products can also be utilized for payment
of tax on output services since the Cenvat credit account is a common pool and
there was no requirement under the Cenvat credit rules to maintain separate
Cenvat accounts – one for the payment of excise duty and other for discharging
service tax liability. [CCE v. Lakshmi
Technology & Engineering Indus Ltd.
(2011) 23 STR 265 (Tri- Chennai)]
111.215
Construction services provided to a SEZ Unit are ‘exempt services’ and
not ‘export services’ under the Export of Service Rules, 2005. However,
the ‘exemption’ under notification no. 4/2004, dated 31st March, 2004 read with
section 26 of the SEZ Act, 2005 and rule 31 of the SEZ Rules, 2006 is a
‘conditional exemption’ and in view of the judgments in Bajaj Tempo v. CCE
(1994) 69 ELT 122 (Tri-Mum.) and Sterlite Industries Ltd. v. CCE (2005) 183 ELT 353 (Tri-LB) the provisions of
rule 6 of the Cenvat Credit Rules, 2004 disallowing credit of tax paid on input
services for providing exempt services would not apply since Rule 6(1) is
applicable only in case the exemption is without conditions. [Sobha Developers Pvt. Ltd. v. CCE (2012)
25 STR 136 (Tri. – Bang.)]
111.216
The Tribunal relying on judgment in case of Shree Rajasthan Syntex Ltd. v. CCE (2011) 24 STR 670 (Tri.-Del.)
held that the appellant is entitled to utilise Cenvat Credit for payment of
service tax on commission paid to an overseas agents under the reverse charge [Indian Acrylic Ltd. v. CCE (2012) 28 STR
354 (Tri.-Del.)].
111.217
Rule 6(3)(c) – pre
1.4.2008:
The appellant, a telephone service provider, provided
taxable services (such as basic telephone connection) as well as exempt services
(such as interconnection services to other telephone operators) and took credit
of entire duty / tax paid (including
duty paid on capital goods) on input services (including input services
specified in rule 6(5) of the Cenvat Credit Rules, 2004). The department
alleged excess utilisation of credit and restricted the credit to 20% of the
output tax payable under the erstwhile rule 6(3)(c) of the Cenvat Credit Rules,
2004. The Tribunal held–
(i)
the expression
‘exempted services’ covers not only the services taxable under Section 66 of
the Act, which are fully exempt from service tax by some exemption notification
issued under Section 93, but also those services which are not taxable under
Section 66 of the Act. Hence interconnectivity services provided to other
telephone operators is an exempt service even if it is otherwise not taxable
and hence the appellant was providing taxable and exempt services thus
attracting Rule 6(3)(c).
(ii)
Rule 6(3)(c) of the
Cenvat Credit Rules, 2004 i.e. restriction of 20% would not be attracted in
case of credit availed on capital goods and input services mentioned in Rule
6(5).
(iii)
If during certain
months, the credit utilisation for payment of service tax was less than the 20%
ceiling specified in Rule 6(3)(c) of Cenvat Credit Rules, 2002, the unutilised
credit of those months can be adjusted against utilization in excess of the 20%
ceiling, in other months.
[Idea Cellular Ltd. v. CCE (2009)
16 STR 712 (Tri. – Del.)
See also Vijayanand Roadlines Ltd. vs. CCE (2007) 80 RLT 831
(CESTAT-Ban.)]
111.218
Where the assessee
provided taxable services as well as was engaged in trading activity, and
availed Cenvat Credit on input services used for taxable services as well as
trading activity, the Tribunal held that –
(i)
Trading activity is
nothing but purchase and sales and cannot be called a service and therefore it
cannot be considered as exempted service.
(ii)
Rule 6(2) and 6(3)
of the Cenvat Credit Rules, 2004 only deal with a situation where service
provider is providing taxable and exempted ‘services’. Since trading activity
is not an exempted service rule 6 cannot be applied to such a situation.
(iii)
The only obvious
solution which would be legally correct appears to be to ensure that once in
quarter or once in six months, the quantum of input service tax credit
attributed to trading activity according to standard accounting principles is
deducted and the balance only availed for the purpose of payment of service tax
of output service. This proposition is not against the law in view of the fact
that there are several decisions of various High Courts and also of the
Tribunal wherein a view has been taken that subsequent reversal of credit
amounts to non-availment of credit.
[Orion
Appliances Ltd. vs. CST (2010) 19 STR 205 (Tri-Ahmd.)]
111.219
Where the appellant
had reversed the entire credit on common input services which were used for
manufacture of both dutiable as well as exempted goods, before adjudication the
Tribunal held that the same was a sufficient compliance under Rule 6(3) of the
Credit Rules as retrospectively amended by the Finance Act, 2010, and hence the
appellant would not be liable to pay 10% of the value of the exempted goods.
However, interest @ 24% was held to be payable [Standards Intl. Precision Engineers P. Ltd. vs. CCE (2011) 22 TSR
594 (Tri-Bang.)].
111.220
The appellant
manufactured sponge iron (dutiable), during the course of which ‘iron ore
fines’ were generated as a ‘waste product’ and cleared without payment of duty
in terms of exemption notification no. 4/2006. The appellant used input
services for such manufacture on which it took credit. The tribunal, relying on
Rallis India Ltd. (2009) 233 ELT 301
(Bom.) held that the appellant need not reverse any credit u/r. 6 (3) since the
‘waste’ cannot be considered as ‘final products’ exempt from duty [CCE vs. Devi Iron Power Ltd. (2013) 29
STR 172 (Tri. – Del.)].
Reversal of credit
and re-credit thereof
111.221
Recredit of wrongly
reversed credit is admissible. [CCE &
C v. Radha Krishna Synthetics Pvt.
Ltd. (2007) 8 STR 190 (Tri. – Ahmd.)]
111.222
Where the
respondent had voluntarily reversed the amount of credit at the instance of the
department the Tribunal held that the Original reversal is a kind of deposit of
disputed amount which needs to be confirmed by a formal order. As no further
actions were initiated against the reversed amount the appellant was eligible
to re-credit the amount of cenvat or refund. [CCE vs. Intricast Pvt. Ltd. (2008) 11 STR 107 (Tri-Mumbai)].
111.223
Where the appellant
initially claimed the benefit of abatement under the notification no. 1/2006
dated 01.03.2006 and also availed Cenvat credit in violation of the condition
stipulated for availing the benefit of abatement but subsequently, reversed
such Cenvat credit, the Tribunal held that the benefit of the abatement cannot
be denied to the assessee since reversal of wrongly availed credit along with
interest has the effect of not having availed the credit at all [Khyati Tours & Travels Vs. CCE 2011
(24) STR 456 (Tri-Ahmd)].
Transfer of Cenvat
credit
111.224
Where the
appellants transferred their factory from one place to another, the input
credit can be allowed to be transferred to the new place without actual
physical transfer of the inputs. [CCE vs.
Smithkline Beecham Consumer Healthcare Ltd. (2008) 11 STR 446 (Tri-Chennai)]
111.225
Unutilised Cenvat credit on inputs and capital goods
of a company which was merged with the appellant company is available to the
appellant and no prior permission from the Deputy Commissioner was required
under rule 10 of the Cenvat Credit Rules, 2004. [Kiran Pondy Chems Ltd. vs. CCE (2011) 22 STR 119 (Tri. – Che.)]
111.226
In this case the
Tribunal held that where the appellant firm was converted into a Private
Limited company no formal permission from the Central Excise Officers was
required by the company to avail the unutilized balance of Cenvat credit lying
with the firm. [Flex Art Foil Pvt. Ltd.
vs. CCE (2011) 22 STR 591 (Tri-Ahmd.)]
111.227
Where there had been only a change in the name of the assessee company
without any change in the Constitution, the
Tribunal held that the unutilized Cenvat credit standing in the old name of the
company can be transferred in the new name of the company [CCE vs. Sri Varahiamman Steels (P) Ltd. (2011) 23 STR 91
(Tri-Chennai)]
111.228
CENVAT Credit cannot be denied merely based on the facts
that the input service invoices were received in an earlier name of the company
which had since got changed. [Showa India
(P) Ltd. v. CCE (2012) 25 STR 152 (Tri- Del.)].
111.229
Where only the
people controlling the affairs of the assessee company had changed but the
assessee company continued to be the owner of factory, the Tribunal held that
provisions of Rule 8 of Cenvat Credit Rules, 2002, (Corresponding to Rule 10 of
the 2004 Rules) which mainly deals with transfer of cenvat credit on account of
shifting of factory to another site or change in the ownership in certain
specified circumstances, would not apply [Auora
Foam Pvt. Ltd. v. CCE (2012) 26 STR 603
(Tri – Del.)].
Denial
of credit on account of procedural lapses
111.230
Prior to 16.6.2005,
credit in respect of service tax paid on Goods Transport Agency services can be
availed on the basis of TR-6 challans if no document was prescribed for taking
credit especially when the service tax was paid and the assessee is otherwise
entitled to credit. [CCE vs. Essel
Pro-Pack Ltd. (2007) 8 STR 609 (Tri. – Mumbai); See also Gaurav Krishna
Ispat (I) Pvt. Ltd. vs. CCE (2009) 13 STR 629 (Tri-Del.); CCE v. Shree Sidhbali Steel Ltd. (2009)
13 STR 284 (Tri. – Del.); CCE v.
Hindustan Coco Cola Beverages (P) Ltd. (2011) 22 STR 292 (Tri-Del); Dharampur Sugar Mills Ltd. vs. CCE
(2011) 22 STR 598 (Tri-Del.)]
111.231
Credit
taken on the basis of the photocopy of the invoices is inadmissible.
[CCE vs. Vandana Energy & Steel
Pvt. Ltd. (2008) 9 STR 31 (Tri. - Del.) See also
CCE vs. Chamundi Textile (Silk Mills) Ltd.
(2012) 26 STR 498
(Tri-Bang)].
111.232
Cenvat credit on
inputs cannot be denied merely on the ground of non-mentioning of registration
number in the invoice where the receipt and consumption of goods and discharge
of duty liability thereon is not in dispute. [Agarwal Industries vs. CCE (2008) 12 STR 223 (Tri-Del.)]
111.233
Where
the assessee availed Cenvat credit in respect of services availed at premises
not mentioned in the Registration Certificate [but which were subsequently
endorsed in the Registration Certificate], the Tribunal held that the credit is
not deniable.
[Raaj Khosla &
Co. Pvt. Ltd. vs. CST (2008) 12 STR
627 (Tri. – Del.)].
111.234
Credit of service
tax availed on the basis of TR-6 challans cannot be denied since no document
was prescribed for taking credit during the relevant point of time especially
when the payment of service tax has not been denied. [Centaur Phamaceuticals P. Ltd.
vs. CCE. (2009) 13 STR 171 (Tri. – Mumbai); See also Cosmos Castings India Ltd. vs. CCE (2011)
23 STR 144 (Tri-Del.)].
111.235
Credit cannot be
denied merely on failure to comply with the procedural requirements of
mentioning the registration number of the Head office as Input service
distributors [ISD] on the invoice especially when the rules for ISD were being
implemented. [CCE vs. Jindal Photo Ltd. (2009) 14 STR 812 (Tri-Ahmd.)]
111.236
Credit availed on the basis of debit notes is
inadmissible since u/r. 9(1) of the Cenvat Credit Rules, 2004, Cenvat Credit
can be availed only on the basis of an invoice, supplementary invoice, challan
or bill of entry. [Godrej Consumer
Products Ltd. vs. CCE (2010) 20 STR 609 (Tri-Del.); See contra CCE vs. Grasim Industries Ltd. (2011) 24
STR 691 (Tri-Del)]
111.237
Where the appellant had availed credit on the basis of
invoices which were not in the name of their factory but in the name of head
office the Tribunal held that in absence of any dispute about the receipt of
services by the factory to whom credit has been passed the omission of the name
of the factory in the invoice becomes a curable defect and is condonable. Hence
credit is admissible. [Modern
Petrofils vs. CCE (2010) 20 STR 627 (Tri-Ahmd.) relying
on CCE vs. DNH Spinners (2009) 16 STR 418 (Tribunal); See
also Parekh Plast (India) Pvt.
Ltd. v. CCE (2012) 25 STR 46 (Tri-Ahmd); CCE vs. Chamundi Textile (Silk Mills) Ltd. (2012) 26 STR 498
(Tri-Bang)]
111.238
Where the appellant has centralised registration
(centralized billing/ centralized
accounting system) credit cannot be denied even if invoices of input services
are issued in the name and address of its branches especially when the
appellant has been discharging the entire service tax liability from its
registered premises and has also made the payment from its registered premises
for the value of input services received by its branch offices. [Manipal Advertising Services Pvt. Ltd. vs.
CCE (2010) 19 STR 506 (Tri-Bang.)]
111.239
The assessee availed taxable services from service
providers who were not registered and invoices raised by them did not bear any
registration number. However, the service providers registered themselves
subsequently and assessee paid service tax on the supplementary invoices issued
by them. It was held that credit cannot
be denied on the basis that at the time of receipt of input services, the
service providers were not registered where there was no dispute that the input
services were received and used for providing output services. [Secure
Meters Ltd. vs CCE 2010 (18) STR 490
(Tri-Del.)]
111.240
Where the inputs were entered in the stock record; were used in the
manufacture of final product; and the transporters of inputs were paid by
cheques; the Tribunal held that the denial of credit solely on the ground that the
vehicle numbers on which inputs were transported to the assessee were not
genuine, is incorrect.[CCE v. Parmatma
Singh Jatinder Singh Alloys P.Ltd, (2012) 25 STR 281]
111.241
A manufacturer of automobile components registered for central excise
on 28.11.2006 but claimed credit of construction services on invoices/services
prior to the date of registration. The
Revenue denied Cenvat credit on the ground that the appellants were not
registered as an input service distributor. The Tribunal upheld the Revenue’s
contention holding as follows:
(a)
though under Cenvat Credit Rules, 2004 there is no provision regarding
registration, section 69 of the Finance Act, 1994 requires every person liable
to pay tax to get registered. Being so, the payment of service tax is directly
related to requirement of registration. Hence in order to enable the party to
avail cenvat credit in relation to service tax paid on input services, a person
has to get registered in terms of Finance Act, 1994 read with rules framed
thereunder.
(b)
rule 3 of the Service Tax (Registration of Special Category of Persons) Rules,
2005 requires registration of an input service distributor within 30 days from
the date of ‘commencement of business’. The term ‘commencement of business’
would commence from the time the preparation commences for the establishment of
manufacturing unit and not only when actual production starts as the party is
entitled to avail credit even prior to actual commencement of production.
[Showa India (P) Ltd. v. CCE (2012) 25
STR 152 (Tri- Del.); Contra in Well Known Polyesters Ltd. v. CCE (2012) 25 STR 411 (Tri – Ahmd)]
111.242
Where the assessee availed credit of inut services before payment of
value and tax thereon to the supplier the Tribunal held that since subsequently
payment
was made and the supplier was a genuine supplier, the credit need not be denied
but held that interest was payable from the time credit was taken till the time
the amounts were paid to the supplier. [Praveen
Jain & Co. Pvt. Ltd. v. CST (2012) 25 STR 196 (Tri. – Del.)].
111.243
Where the
appellants had taken the credit of duty paid on capital goods in the month of
November, 2005 when in fact the capital goods were received in the factory on
22-12-2005 the Tribunal held that the credit was not deniable since the
appellants were entitled to take credit after 22-12-2005. [Hot Sport Colour Lab v. CCE (2012) 26 STR 336 (Tri-Del)]
111.244
Where the bills of
entry contained the name of the importer (head office) but the goods were
received at the factory unit, the Tribunal held that credit on said bills of
entry was admissible. Further credit cannot be denied on the grounds that the assessee
had failed to take credit immediately on the receipt of inputs. [SGS India Pvt. Ltd.
v. CCE (2012) 26 STR 395 (Tri-Mumbai)]
111.245
The assessees
factory in New Delhi had cleared goods to its sister unit at Bangalore without
payment of duty since it believed that the said goods were not liable for
excise duty. However, at the instance of the department, it deposited the said
amount of which its unit at Bangalore had taken credit. The revenue denied
Cenvat credit to the Bangalore unit on the grounds that the duty was not paid
at the time of clearance of goods. On appeal the High Court held that though
the duty was not deposited by the assessee in accordance with the rules but
once the same has been deposited its Bangalore unit is entitled to take credit and
utilize the same. [CCE vs. Himalaya Drug
Co. Ltd. (2012) 26 STR 386 (Kar.)].
111.246
Credit availed on
the basis of photocopy of the bill of entry and photocopy of challan is not
allowable [CCE v. Survoday Blending (P)
Ltd. (2012) 28 STR 104 (Tri.- Ahmd.)].
111.247
The Cenvat credit taken by the appellant’s factory was allowed even
though the invoices were raised in the name of registered office, in view of
the fact that the appellant had only one factory and there was no allegation in
the show cause notice that the said factory had not received the input services
[Bloom Dekor Ltd. vs. CCE (2012) 28
STR 182 (Tri. – Ahmd.)].
111.248
Cenvat Credit cannot be
disallowed on the ground that the assessee did not maintain separate accounts
of Cenvat Credit used for payment of excise duty on final product manufactured
and service tax paid on output service since there is no such provision in
Cenvat Credit Rules, 2004 [Jyoti
Structures Ltd. v. CCE (2012) 28 STR 380 (Tri.-Mumbai)].
111.249
Invoices raised in
the ‘brand name’ or ‘earlier name’ of the company would be eligible documents
for claiming cenvat credit in view of proviso to Rule 9(2) of Cenvat Credit
Rules, 2004 [Valco Industries Ltd. vs.
CCE (2012) 28 STR 457(Tri. – Del.)].
111.250
Interest would be
payable only if wrongly taken credit is utilised and not where the credit
remains unutilised. [C.C.E vs. Jagatjit
Industries Ltd 2010 (17) STR 137 (Tri-Del) affirmed in CCE vs.
Jagatjit Industries Ltd. (2011) 22 TSR 518 (P& H); See also Ganta Ramanaiah Naidu vs CCE 2010 (18) STR 10 (Tri-Bang.);
CCE vs. Gokaldas Images (P) Ltd. (2012) 28 STR 214 (Kar.)]
111.251
Where the assessee had reversed the entire credit taken before utilising
the same the High Court held that no interest would be payable for taking
credit in terms of rule 14 of the Cenvat credit Rules, 2004 read with section
11AB of the Central Excise Act, 1944 since –
(a)
if amount credited in Cenvat account but is not utilised in making
payment of excise duty on final products there would be no consequences since
neither the assessee gets any advantage nor the revenue suffers any loss since
it does not amount to improper or non-payment of duty.
(b)
if credit is reversed before utilisation it amounts to not taking credit
[CCE vs. Bombay Dyeing and Manufacturing
Company Ltd. (2007) 215 ELT 3 SC)]. Once credit is reversed before its
utilization it does not amount to taking credit. Accordingly Rule 14 of the
Cenvat Credit Rule read with Section 11AB would not be attracted.
[CCE
vs. Asoka Metal Decor (P) Ltd. (2011) 21 STR 469 (All.)]
111.252
Interest under Rule 14 of
the CENVAT Credit Rules, 2004 is applicable from the date of wrong availment of
CENVAT Credit and not from the date of utilization of the credit. [UOI v. Ind-Swift Laboratories Ltd.
(2012) 25 STR 184 (SC)]
111.253
The assessee in the
present case had wrongly taken Cenvat Credit in their
cenvat account without the actual receipt of
capital goods. However, on being pointed out it accordingly reversed the credit.
The revenue sought to recover the interest u/r 14 of the Cenvat Credit Rules,
2004 for wrongly taking the Cenvat credit. On appeal, the High Court held that
–
(1)
Crediting
of excise duty in the Cenvat credit register is only a book entry. Credit is
actually taken only at the time when stage for payment of excise duty/ service
tax is reached. Further credit is said to be utilized only when it is adjusted
/ set off against the duty payable by making a debit entry in the Cenvat credit
register. If entry has been reversed in the register before utilization, it
amounts to not taking credit. Accordingly there would be no credit taken/
utilized wrongly and hence no interest is payable.
(2)
Interest
being compensatory in nature, the same would be imposable only when the
assessee by taking credit had not paid the duty/ tax which is legally due to
the government on due date. If there is no liability to pay duty/ tax, there is
no liability to pay interest. Further, both section 11AB of the CEA, 1944 and
Section 75 of the Finance Act, 1994 do not stipulate payment of interest from
the date of book entry showing entitlement of Cenvat Credit.
[CCE & ST, vs Bill Forge Pvt Ltd.
(2012) 26 STR 204(Kar.)].
111.254
The High Court
relying on the judgment in case of CCE
& ST LTU vs. M/s. Bill Forge Pvt. Ltd. (2012) 26 STR 204 (Kar.) held
that as the respondent had reversed the Cenvat Credit availed on inputs used in
exempted product before utilisaton, no interest would be leviable [CCE vs. Pearl Insulation Ltd. (2012) 27
STR 337 (Kar.)].
111.255
Where the Head office of the assessee company paid
for certain input services consumed in unit ‘A’ it was held that the Head
Office can validly distribute the credit on such services even to unit ‘B’ in
absence of a specific prohibition in rule 7 of the Cenvat Credit Rules, 2004 [ECOF Industries Pvt. Ltd. vs. CCE (2010)
17 STR 515 (Tri-Bang.) affirmed in
CCE vs. ECOF Industries Pvt. Ltd.
(2011) 23 STR 337 (Kar); See also
CCE
vs. ECOF Industries Pvt. Ltd. (2012) 26 STR 100 (Kar)].
111.256
Where the appellant, a manufacturer, had availed the credit of tax paid
by its depot at Jaipur against the tax liability of its manufacturing unit at
Kolkata, the Tribunal held that in absence of registration of its Jaipur depot
as an input service distributor the credit of service tax availed on services
received by Jaipur depot could not be set-off against the tax liability of unit
at Kolkata. [Khaitan Electricals Ltd v.
CCE (2011) 21 STR 184 (Tri-Kolkata)]
111.257
Where the appellant had
a single EOU unit, in respect of which he claimed refund of unutilised cenvat
credit availed on invoices issued in the name of its head office which refund
was denied on
the ground that the head office was not registered
as an input service credit distributor u/r. 7 of the Cenvat Credit Rules, 2004,
(“Credit Rules”), the Tribunal allowed the refund and held that Rule 7 of the credit rules would be
applicable only if the assessee wishes to get himself registered as input
service credit distributor and in absence of more than one manufacturing unit
there was no compulsion on him to register under Rule 7 of the credit rules.[Durferrit Asea Pvt. Ltd. vs. CCE (2011)
22 STR 583 (Tri-Bang.)].
111.258
The registration of an input service distributor
(ISD) was made mandatory w.e.f. 16.6.05 under Notification no. 27/05 dated
7.6.05 which provided that the ISD shall make an application for registration
within 30 days from the date of commencement of business or 16.6.05 whichever
is later. Thus, where an existing entity made an application for registration
on 13.7.05 i.e. within 30 days from 16.6.05 and got its registration on
18.7.05, the Tribunal allowed the distribution of credit vide invoice dated
1.7.05 (i.e. prior to the date of its registration). [CC & CE vs. Grasim Industries (2010) 20 STR 513 (Tri. – Del.)]
111.259
Where Madurai
office of BSNL procured capital goods and transferred to Kumbakonam
office of BSNL which claimed the Cenvat credit of duty paid based on the
invoice received by Madurai office, the Tribunal held that Cenvat credit is
admissible even though the Madurai office was registered only later since there
is no dispute that the duty was paid by the appellant and receipt and use of
capital goods was for authorised purposes [BSNL
vs. CCE (2011) 22 STR 628 (Tri. – Che.)]
111.260
Cenvat Credit of
input services received in a factory can be taken on the basis of bill
addressed to the headquarters (H.Q.) without the H.Q. obtaining registration as
Input Service Distributor [Valco
Industries Ltd. vs. CCE (2012) 28 STR 457(Tri. – Del.)].
111.261
The sales office of
the authorised distributor of vehicles can be registered as an ‘input service
distributor’ and the registration cannot be denied on the ground that it was
not a service provider unit [CCE vs.
Varun Motors (2013) 30 STR 31 (Tri. – Bang.)].