I. HIGH COURT
25 2019
[22] G.S.T.L. 21 (Bom) Nirmal Seeds Pvt. Ltd. vs. Commissioner of Central
Excise, Nashik
Date of order: 5th
December, 2018
Freight
charges paid by dealer and reimbursed by supplier is includible in assessable
value
FACTS
The
appellant sold goods to its dealers at a price inclusive of freight charges
which was later reimbursed by the appellant. During the course of audit it
appeared from some invoices to Revenue that the appellant deducted freight
charges from the total invoice amount, with a note saying ‘consignee to pay’.
Consequently, a show cause notice was issued alleging that service tax was not
paid on the freight element, which was in fact paid by the consignee on behalf
of the appellant. Later, both the appellate authority as well as the Tribunal
confirmed the demand against the appellant holding that the entire arrangement
was made with dealers so as to reduce its service tax liability. Aggrieved, the
appellant preferred an appeal before the Hon’ble High Court, also contesting
the extended period of limitation.
HELD
The
Hon’ble High Court held that all the authorities had concluded that the arrangement
arrived at between the appellant and its dealers was such that the payment of
service tax could be reduced. This factual finding of the authorities was based
on detailed scrutiny of the invoices, ledger accounts, etc., from which the
authorities had held that the freight paid by the dealers was for and on behalf
of the appellant, thus the appellant was rightly held liable for payment of
service tax.
Further,
the High Court held that on the basis of the definition as provided in Rule
2(1)(d)(v) of the Service Tax Rules, 1994 it was correctly held by the lower
authorities that the payment made by the agent would be the liability of the
principal for the purpose of service tax. The extended period of limitation was
also held as rightly invoked. The appeal was thus disallowed, holding the order
of lower authorities correct.
26 [2019
104 taxmann.com 225] (Calcutta HC) Srijan Realty (P) Ltd. vs. Commissioner of
Service Tax
Date of order: 8th
March, 2019
The Hon’ble
High Court held that in the absence of a license granted under the Electricity
Act, 2003 the activity of receiving high-tension electric supply and
redistribution of the same after its conversion into low-tension supply cannot
be regarded as ‘trading of goods’ so as to be covered u/s. 66D(e) or 66D(k) of
FA, 1994, i.e., negative list, and thus, chargeable to service tax
FACTS
The
petitioner developed and operated a commercial complex and entered into an
arrangement with an electricity company whereby he received high-tension
electric supply in the sub-stations in the commercial premises. The electricity
company raised a single consolidated bill on the petitioner. Thereafter, the
electric supply was converted into low-tension and redistributed to various
occupants of the commercial complex. Sub-meters were installed for the
respective occupants and, based on the readings, the petitioner raised invoices
(bills).
The
Revenue contended that since the petitioner is authorised to sell electricity
in terms of the Electricity Act, 2003 he would not be entitled to avail benefit
of section 66D(e). Revenue opined that conversion of electricity from
high-tension to low-tension and redistribution thereof to the occupiers being a
service, the entire consideration charged by the petitioner to various
occupants would be eligible to service tax
HELD
The
Hon’ble High Court observed that in light of provisions of the Electricity Act,
2003 the petitioner cannot be said to be an electricity-generating company. Nor
could it said that the petitioner engaged in the supply or trading of
electricity because the definition of ‘supply’ and ‘trading’ did not allow him
to come within that definition. The petitioner is not an electricity trader as
defined in section 2(26) of the Electricity Act, 2003. Besides, the petitioner
does not have a license to undertake trading in electricity u/s. 12 of the
Electricity Act, 2003. The petitioner also cannot be said to be engaged in the
business of transmission because he does not have such a license. The
petitioner is not a person authorised to transmit, supply, distribute or
undertake trading in electricity.
Thus, the
Court held that sale, trading and distribution being not applicable, the only
other thing that remains to describe the activity undertaken by the petitioner
is service. Though electricity is regarded as ‘goods’ and capable of being
traded as held in State of Andhra Pradesh vs. National Thermal Power
Corpn. Ltd. 2002 taxmann.com 2376 (SC) and Aluminium Co. vs.
State of Kerala 1996 taxmann.com 1097 (SC), the Court held that the
activity of the petitioner cannot be treated as a trade as it would violate the
provisions of the Electricity Act, 2003. Therefore, it held that the activity
was liable for service tax. The Court dismissed the petition.
II. TRIBUNAL
27 [2019-TIOL-1705-CESTAT-DEL]
BSNL vs. Commissioner of Central Excise and Service Tax
Date of order: 20th
December, 2018
Reversal of
wrongly availed credit without utilisation is not liable for interest or
penalty
FACTS
During the
course of scrutiny of service tax record, it was observed that the appellant
wrongly availed CENVAT credit during the month of April, 2009 as 50% of duty
paid on capital goods on which 100% credit was already taken in the financial
year 2008-09. Although on being pointed out the said (availed) credit was
reversed from the credit balance, the department issued a show cause notice
stating that the impugned credit availed was not admissible in terms of Rule
4(2a) of CENVAT Credit Rules, 2004 and as such was proposed to be recovered
along with interest and penalty u/s. 78. The Commissioner ordered to
appropriate the impugned amount of wrongly availed CENVAT credit which was
reversed. Recovery of interest on the said amount was also confirmed and a
penalty of same amount was imposed. Being aggrieved, the appellant went before
the Tribunal.
HELD
The
Tribunal primarily observed that the credit wrongly availed in the books was
immediately reversed in the books of accounts when it was pointed out. Further,
Rule 14 of the CENVAT Credit Rules, 2004 in clear terms provides that only when
credit is taken and utilised there is a liability of interest. However, in the
present case the CENVAT credit was not utilised. It therefore becomes a
revenue-neutral situation. Further, even with respect to penalty it was held
that since there is no intention to evade payment of tax, the question of
imposition of penalty is absolutely irrelevant.
28 [2019-TIOL-1650-CESTAT-Ahm]M/s.
Innovate Securities Pvt. Ltd. vs. CCE & ST
Date of order: 27th November, 2018
Service tax
not applicable on recovery of service tax, stamp duty, etc. by stock brokers
from clients
FACTS
The issue
relates to service tax applicability on transaction charges, SEBI turnover
fees, stamp duty, security transaction tax, etc. paid to National Stock
Exchange (NSE), Bombay Stock Exchange (BSE), etc. and collecting reimbursement
of the same along with brokerage from the clients in the hands of stockbrokers.
Taxability of these facts was dealt with in detail earlier in the case of Span
Caplease Pvt. Ltd. & Others vs. CST, Ahmedabad in a bunch of 28
appeals vide order dated 29th September, 2017 by the Ahmedabad
Tribunal and by the Delhi Tribunal in Mohak Commodities P. Ltd. vs. CCE,
Jaipur 2018(10) GSTL 316 (Tri.-Del).
HELD
The Tribunal
observed that the issue was dealt with in various judgements whereunder the
Tribunal had consistently held that these charges were statutory in nature and
therefore not liable for service tax. The order contains no discussion but the
extracts from the above judgements are reproduced wherein discussion on
valuation provisions in Rule 67 is taken up in detail. It was observed that no
receipt other than brokerage or commission received by the stock broker was
intended to be brought in the ambit of taxable value. There was no question of
equity in tax and the taxation statute has to be construed strictly. Value is
generally derived from the price. Other charges realised by the appellants not
being commission, could not be included in the assessable value.
Further,
the Revenue had not discharged the burden to bring the above receipts to
charge. A similar view had been expressed in the case of Consortium
Securities Pvt. Ltd. vs. CST 2017-TIOL-232-CESTAT-DEL and the appellant
had succeeded on the fundamental principle of taxation. Based on the
observation made in the above two judgements, the appeal was allowed.
29 [2019-TIOL-1417-CESTAT (Mum)] Popular Caterers
vs. CCGST
Date of
order: 8th May, 2019
Outdoor
caterers not required to reverse credit, when service tax is paid as per Rule
2C of ST Valuation Rules as balance 40% value is not ‘exempted service’
FACTS
The
appellant, a provider of catering services, paid service tax as per Rule 2C of
Service Tax (Determination of Value) Rules, 2006 on 60% of the gross invoice
amount charged to customers with effect from 1st July, 2012. Prior
to that, he paid service tax on 50% of abated value in accordance with
Notification 1/2006-ST which had a condition of non-availment of CENVAT credit.
Consequent upon EA-2000 audit, the appellant was directed to reverse CENVAT
credit under Rule 6 of CENVAT Credit Rules, 2004 considering the balance 40%
value of invoice as “non-taxable” for the period 2010-11 to 2014-15.
As per the
appellant, Rule 2C of the valuation rules do not exempt any service or portion
of the value and there was no other provision in law to make Rule 6 applicable
to outdoor catering service. Therefore, 40% value cannot be treated as exempt
portion. According to the department, the Commissioner (Appeals) was correct in
finding that Rule 6 was mandatorily applicable.
HELD
The
definition of catering as per section 65(24) would mean a person supplying
directly or indirectly any food, edible preparations, alcoholic / non-alcoholic
beverages, crockery or similar articles for any purpose or occasion. Further,
as per Explanation 1 to Rule 2C of the valuation rules also, it is fair market
value of all goods and services supplied. Therefore, while determining the
aspect of catering service, both sale of food and service for consumption of
food are already included in 60% of the value of invoice.
On the other hand, the definition of service in
section 65B(44) of the Finance Act, 1994 excludes pure sale not associated with
delivery of goods and services together and deemed sale within the meaning of
Article 366(29A) of the Constitution. Therefore, the other component of 40% of
gross value received cannot be considered as ‘exempted service’ to make Rule
6(3) of CCR applicable and to maintain separate record for availment of CENVAT
credit on it, including on processed food purchased as raw material.
