High Court :
1. Penalty :
Whether penalty u/s.76 can be reduced below the limit prescribed.
Commissioner of C.Ex. & Customs v. Port Officer, 2010 (19) STR 641 (Guj.)
The short issue before the High Court was whether penalty u/s.76 could be reduced below the mini-mum limit.
The High Court observed as follows :
a. As per S. 76, a person who failed to pay tax, shall in addition to tax and interest, pay penalty for such failure. The penalty shall not be less than Rs.100 per day to Rs.200 per day during which failure continues, but the penalty shall not exceed the service tax not paid.
There is no provision in the Section to provide the authority with any discretion to reduce the penalty below the limit prescribed.
b. S. 80 overrides provisions of S. 76, S. 77, S. 78, and S. 79, which state that if the assessee proves that there is reasonable cause for failure, no penalty can be imposed. The provision does not state that even upon establishment of reasonable cause, reduced quantum of penalty is imposable.
On combined reading of S. 76 and S. 80, it appears that the penalty cannot be reduced below the limit prescribed.
2. Classification of service:
Whether services provided by a consignment agent can be taxed as Clearing and Forwarding Agent’s service?
Commissioner of Service Tax, Bangalore v. Sangam Investments, 2010 (19) STR 650 (Kar.)
The Tribunal passed an order that services provided as a consignment agent were not covered under the category of C & F service based on Tribunal’s decision in Mahavir Generics case 2006 (3) STR 276 (Tri. -Del) which ultimately got reversed vide 2010 (17) STR 225 (Kar). In the Rev-enue’s appeal, the Court held that the definition of C & F agent includes consignment agent and therefore the assessee is liable for tax.
3. Constitutional validity : Renting of immoveable property:
Whether service tax can be recovered in respect of renting of immovaeble property when the Constitutional validity is challenged in the High Court.
Infiniti Retail Ltd. v. Union of India, 2010 (19) STR 801 (Bom.)
The constitutional validity of levy of service tax on renting of immoveable property was stayed by the High Court. In this regard the Court held that the Department shall not take coercive steps for recovery of service tax in respect of renting of immovaeble property. However, since the constitutional validity of levying service tax on ‘any other service in relation to such renting’ was not challenged, the High Court held that the Department could recover service tax from the service provider.
4. Import of service:
Whether foreign service provider liable to tax before introduction of Import Rules.
Commissioner of Service Tax, Bangalore v. Toyoda Iron Works Co. Ltd., 2010 (19) STR 802 (Kar.)
The respondent, a foreign company, entered into agreement with an Indian company for providing consultancy/technical assistance and transfer of technical know -how relating to the manufacture of automobile components to the Indian company. The Revenue taxed such services under the category of ‘Consulting Engineer Service’. The Commissioner (Appeals) held that the respondent was not liable to service tax. CESTAT dismissed the Departmental appeal.
The High Court held that the definition of ‘Consulting Engineer Service’ was amended w.e.f. 1-5-2006 and charge of service tax on service received from outside India (S. 66A) was amended w.e.f. 18-4-2006. Therefore, only from the date of aforesaid amendments, service receiver would be liable for tax and the foreign company being a service provider was not liable for service tax prior to the amendment i.e., for the period in question, 1-4-1999 till 31-3-2001.
5. Relevant date for applying rate of tax:
Whether applicable rate will be the rate prevailing on the date of provision of service or one prevailing at the time of billing and/or receipt of payment?
Commissioner of C.Ex. & Cus. v. Reliance Industries Ltd., 2010 (19) STR 807 (Guj.)
The Tribunal had held that service tax shall be payable at the rate prevailing on the date of provision of service and not at the rate prevailing at the time of billing and receipt of payment. The Revenue challenged this order before the High Court. The Court held that the relevant date is the date of provision of service and not the date of billing. The appeal accordingly was dismissed.
II. Tribunal:
6. Construction Service:
Whether construction of road liable for service tax as commercial or industrial construction service?
Commissioner of Service Tax, Ahmedabad v. Shilpa Constructions Pvt. Ltd., 2010 (19) STR 830 (Tri. Ahmd.)
The respondent filed a refund claim with regard to service tax wrongly paid for the construction of road which was not included in the definition of ‘Commercial and Industrial Construction’. However, the Department rejected the refund claim which was allowed in the appeal. Therefore, the Department preferred an appeal before the CESTAT.
The respondent contended that the term ‘drive-way work’ used in the agreement was in relation to road work and the respondent was not en-gaged in any other work. In respect of construction of road, service tax is required to be paid only if it is covered under a single contract of construction of commercial complex in terms of Circular No. B1/6/2005-TRU, dated July 27, 2005. Since the respondent did not collect such service tax from client, the doctrine of unjust enrichment did not apply to it. Invoices and chartered accountant’s certificate were produced as proof.
According to the Department, the exclusion of roads from the definition of ‘Commercial or Industrial Construction Service’ was to facilitate general public in the public interest and ‘driveway work’ could not be equated with road and therefore the stated Circular was not applicable. The Tribunal held that road constructed for public utility or not, was not the determining factor and held that construction of ‘driveway work’ amounted to construction of road and therefore, not liable for service tax.
7. CENVAT credit:
Whether CENVAT credit can be availed on garden maintenance service and repairs of deep freezer installed in canteen.
Reliance Industries Ltd. v. Commissioner of C.Ex., Pune-III 2010 (19) STR 823 (Tri.-Mumbai)
The appellants cited certain cases wherein it was held that the service provider is entitled to CENVAT credit on garden maintenance service which is used in or in relation to the manufacture of the final products or used in the business activity. In the present case, the appellants have used the garden maintenance service in relation to business activity.
The Revenue presented some contrary decisions and requested for referring the matter to a larger bench. The Tribunal observed that the cases referred by the Department were either not similar to the present case or were remanded back to the Tribunal by the High Court and therefore did not find it necessary to refer the matter to a larger bench. Following the Semco Electricals decision 2010 (18) STR 177 and I.S.M.T. Ltd.’s decision 2010 TIOL 27 CESTAT-MUM, the appeal was allowed.
8. Penalty:
Whether penalty could be imposed in case there is ignorance for payment of tax.
J. K. Industries v. Commissioner of Service Tax, Ahmedabad 2010 (19) STR 653 (Tri.-Ahmd.)
The facts of the case were:
The appellant, a consignment agent obtained service tax registration in the year 1999 and did not pay service tax till March, 2004 as they could not collect it from the recipient. The premises of the appellant were searched and liability was envisaged. The appellant demanded the amount of service tax from the recipient, which they agreed to pay only after 4-1-2005 and not for earlier period.
The appellant paid service tax from its own pocket before passing of order of adjudication.
The Tribunal held that correspondence between the appellant and the principal supports the case that there was no intention to evade payment of tax. Moreover, the appellant paid tax before any order was passed by the authority. Therefore, the Tribunal ordered for waiver of penalty.
9. Non-registration-Penalty:
Whether not taking registration amounts to suppression of facts attracting levying penalty.
Commissioner of Service Tax, Ahmedabad v. Pankaj Tyre Retreads, 2010 (19) STR 829 (Tri.-Ahmd.)
The respondent was in the business of tyre retreading which was considered by them as ‘Maintenance or Repair Services’ by reason of amendment with effect from June 16, 2005 and they held a bona fide belief that the threshold limit of Rs.4,00,000 was applicable only in relation to service element and the turnover of material used or sold while providing service was not required to be included for calculating such limit. The Department contended that the respondent did not take registration w.e.f. June 16, 2005 and the registration was taken only after search of premises by the Department and it amounted to suppression of facts attracting penalty. The Tribunal held that mere non- registration could not amount to suppression of facts and that there was a reasonable cause as depicted in S. 80 of the Finance Act, 1994 and accordingly the appeal was allowed.
