I.
Tribunal
17. [2018] 98 taxmann.com 85 (New Delhi – CESTAT) Executive
Engineer vs. CCE&ST
Dated of Order: 11th September, 2018
The
Tribunal held that services provided by assessee to its other division having
different service tax registration under same PAN, cannot be said to get
covered within scope of section 67(4) i.e. transaction between associated
enterprises, and therefore, not liable to service tax.
Facts
The appellant provided
telecommunication services under the name Universal Service Operator (USO) to
various telecom operators. They issued monthly debit notes to one of its own
divisions viz CMTS covered under the same PAN for providing telecom services
and booked the amount as income.
However, no service tax was
discharged on the said income as it was from its own division. The department
alleged that obtaining separate registration under service tax law make USO and
CMTS as two different concerns i.e. associated enterprises. Department
contended that even provisions of section 67(4) makes it clear that the book
adjustment qua the transaction of taxable services with any associated
enterprise are taxable.
Held:
The Hon’ble Tribunal held
that the telecom services are provided in different circles in India and
different offices/units under one circle cannot be treated as associated
enterprise as these are not intermediaries in the management of or control or
capital of the other enterprises as required for being associated enterprises
as per section 92A of the Income-tax Act, 1961. Further, the Tribunal observed
that the lower adjudicating authority has failed to appreciate that monthly
advice debit notes are nothing but transfer of expenses to its another unit and
it will not make the gross transaction accounted for between units of the
organisation. It was also noted that since both the entities have the same PAN
number as such both have same incorporation, it is clear that mandatory
requirement for service tax that is of existence of two different entities is
absolutely missing. Consequently, the
Tribunal set aside impugned demand.
18. [2018] 98 taxmann.com 311 (New Delhi – CESTAT) Maulana Azad
National Institute of Technology vs. CCE Date of Order: 12th September, 2018
The
Tribunal held that construction services provided by Government authority to
unit of educational institute established under the Act of Parliament, cannot
be said to be provision of support service to business entity and thus, not
liable to service tax under reverse charge.
Facts
The
appellant, a central Government authority, being established under an Act of
Parliament namely the National Institute of Technology Act, 2007 is engaged in
imparting education and related technical assistance. They procured services
from Central Public Works Department (CPWD) for construction of hostel blocks,
sports complex, academic blocks, literature hall complex, canteen, hospital,
staff residential quarters etc. in their premises. Department alleged that said
services procured from CPWD are support service related to contract provided by
Government to body corporate holding the appellant as a business entity and
thus are liable to service tax under reverse charge notifications. Accordingly,
in present appeal, the moot questions before tribunal were (i) whether
appellant can be regarded as “business entity” and (ii) whether the services
received by them from CPWD, a Government department, can be regarded as
“support services”.
Held
The Hon’ble Tribunal
observed that appellant is unit of Maulana Azad National Institute of
Technology, Bhopal, which is one of the National Institutes of Technology
established by Central Government under an Act of Parliament i.e. National
Institute of Technology Act, 2007 and also referred to ratio laid down in
decisions in Asstt. Collector of Excise vs. Ramdev Tobacco Co. 1991
taxmann.com 1335 and Senairam Doongamall vs. CIT AIR 1961 SC 1579.
Accordingly, it was held that once the purpose of the parent Institute is to be
engaged in education and in creating and disseminating knowledge through
different mode as that of teaching, seminars, workshop, publications and even
technical consultancy, the unit thereof assisting in the said work becomes part
of the parent institute and stands clothed with the same status. Therefore, the
Tribunal held that appellant cannot be regarded as “business entity”. As
regards next question as to whether services provided can be regarded as
“support services”, It was observed that definition of term “support service”
u/s. 65B(49) makes it clear that for any services received to be called as
support service, the important ingredient is that the support should have
comprised of such functions that the recipient is able to carry out in ordinary
course of operations themselves, however, they have outsourced the same to
someone else. The Tribunal noted that since the appellant in instant case is
carrying out the function of imparting education and the technical
know-how/consultancy but the service received from CPWD is that of construction
of various civil structures, the services received cannot be otherwise said to
be the activity of the appellant themselves. Therefore, the Tribunal held that
availing of such construction services from CPWD will not bring the service received
under the category of “support services” and hence will not attract liability
under reverse charge.
19. [2018] 98 taxmann.com 390 (New Delhi – CESTAT) International
Metro Civil Contractors vs. CST Date of Order: 17th September, 2018
The
Tribunal held that the assessee executing contract with Metro Corporation for
design of rail-based mass rapid transport system by procuring design, execution
and completion and remedying any defects in works of civil engineering
construction, mechanical and electrical installation of station and tunnel
infrastructure and buildings etc., along with supply of materials, would be
chargeable to service tax under category of “works contract services” and not
“erection, commissioning and installation services”.
Facts
The Delhi Metro Corporation
awarded contract for design of rail-based mass rapid transport system by
procuring the design, execution and completion and remedying any defects in the
works of civil engineering contract, mechanical and electrical installation of
the station (including tunnel ventilation and station area conditioning and
ventilation) and tunnel infrastructure and buildings. Revenue alleged that the
activities undertaken would be chargeable to service tax under category of
“erection, commissioning and installation services”. Whereas, appellant
contended that since all work other than erection, commissioning and
installation were also agreed to be executed including as that of design and
even manufacture along with supply of materials, thus, the activities would be
correctly classifiable as “works contract services”.
Held
The Hon’ble Tribunal noted
that the scope of “erection, commissioning and installation services” includes
those services which are service contract simpliciter without any other element
in them. Further, in terms of section 67 of Finance Act, 1994 the value of
taxable services is the gross amount charged by service provider for such
services rendered by them i.e. what is referred to in the charging provision is
the taxation of service contract simpliciter without having any element of
property in goods to be simultaneously transferred i.e. the provision is not
for composite work contracts. The Tribunal noted that in present case,
appellant was cast with the obligation of supplying/providing all equipments,
materials, labour and other facilities requisite for and incidental to the
successful completion of the works and in carrying out all the duties and
obligations imposed by the contract documents. The valuation of the cost of
works was agreed to be the total cost for the work carried out. It is also
noted that the nature of contract is such that erection, commissioning and
installation part cannot be severed from rest of the contractual
responsibility. Thus, the Tribunal held that the contract entered is of a
composite nature rather being the contract for service simpliciter.
Accordingly, following decision of the Hon’ble Supreme Court in Larsen and
Toubro Ltd. vs. State of Karnataka [2013] 38 taxmann.com 453, the Tribunal
held that activities undertaken would be liable for service tax under “works
contract services” and thereby set aside impugned demand.
20. [2018] 98 taxmann.com 121 (New Delhi – CESTAT) Commissioner of
Service Tax vs. Gourmets Food Date of Order: 11th December, 2017
The activity of providing catering services to the
members of the club in terms of catering contract entered into with the club is
not regarded as revenue sharing agreement and held as chargeable to service tax
under category of “outdoor catering services”.
Facts
Respondent entered into an
agreement with a club for providing catering services in the premises offered
by the club. Proceedings were initiated against the respondent to demand and
recover service tax for such activities under the category of “outdoor caterer’s
service”. The original authority dropped impugned demand by holding that the
arrangement appears to be that of revenue sharing arrangement and as such there
is no service provider and service receiver relationship in such arrangement.
Being aggrieved, revenue filed present appeal.
Held
On perusal of the
agreement, the Tribunal held that various clauses of the agreement make it
clear that it is a service agreement for a consideration entered into between
the two parties. The Tribunal also held that mere fact that payment to be made
to club for various facilities like space, infrastructure is calculated as a
percentage of sales revenue of the assessee, would not per se make it a
joint venture agreement. The Tribunal noted that the agreement between respondent-assessee
and the club makes it clear that the club has no obligation or responsibility
in providing such services of catering by the respondent. There is no shared
responsibility or obligation legally enforceable against the club except the
provisions of terms and conditions inbuilt in the contract. The respondent is
appointed as caterer and is paying considerations for the premises allotted to
them. Consequently, there is no scope for interpreting the agreement as joint
venture agreement. The demand under outdoor catering services was accordingly
upheld.
Note:
Above decision of the
Hon’ble Tribunal has been affirmed by Hon’ble Supreme Court in [2018] 98
taxmann.com 122 (SC) Gourmets Food vs. Commissioner of Service Tax, wherein the
appeal filed by appellant assessee against order of the Tribunal is dismissed
for being devoid of merits.
21. [2018-TIOL-3296-CESTAT-MUM] Tahnee Heights Co-operative
Housing Society Limited vs. Commissioner of CGST, Mumbai South Date of Order: 12th October, 2018
Incorporated
association and its members being one and the same, the activities undertaken
or the services provided by the former will not be considered as a service,
exigible to service tax under the principle of mutuality.
Facts
The appellant is a co-operative
housing society. The members of the society contribute towards maintenance and
upkeep of the building and common expenses. The amount collected is spent for
the common benefits of all. During the period July 2015 to January, 2017
service tax was paid in respect of the contributions received under protest.
Subsequently refund applications were filed on the ground that there is no
service provider and service receiver relationship existing and on the
principles of mutuality, the activity should not be subjected to service tax.
Show Cause Notice was issued and appeals filed was also rejected on the ground
that in the light of Explanation 3(a) to section 65B(44) of the Finance Act,
1994, the appellant and its members are to be treated as distinct entities and
therefore, the tax is correctly paid.
Held
The Tribunal primarily
noted that for the levy of service tax there must be existence of two parties
i.e. the service provider and the service receiver. As far as the relationship
between an incorporated society or club and its members is concerned, it is an
undisputed fact that such incorporated association is a distinct legal entity.
However, since the association was formed or constituted and existed for the
exclusive purpose of catering/meeting to the requirements of its members, as
per the laid down policy in the bye law, it cannot be said that there is
involvement of two persons. Thus, the incorporated association and its member
being one and the same, the activities undertaken or the services provided by
the former will not be considered as a service, exigible to service tax under
the principle of mutuality. The Tribunal further noted that though various
decisions on principles of mutuality under service tax were delivered under the
pre-negative list but are squarely applicable in the negative list regime. It
was also held that the appellant cannot be termed as an unincorporated
association or a body of persons, for the purpose of consideration as a
“distinct person”.
Accordingly, the
explanation furnished under Clause 3(a) in section 65B of the Act will not
designate the appellant as an entity, separate from its members. Accordingly
the service tax paid was held to be refund.
22. [2018-TIOL-3370-CESTAT-MAD] United India Insurance Company Ltd
vs. CCE, ST LTU, Chennai Date of Order: 1st June, 2018
Service
tax paid on bill of the authorised service station is valid input service used
to provide output service of vehicle insurance.
Facts
Assessee is engaged in
providing General Insurance Services. Cenvat credit was availed of service tax
paid on repair & maintenance of vehicles by Authorised Service Stations on
vehicles insured by the assessee. The department held such availment of credit
to be invalid on grounds that the same was not valid input service under Rule
2(l) of the CENVAT Credit Rules, 2004.
Held
The Tribunal noted that it
is undisputed that credit was availed only proportionately to the extent of the
amount borne by them. General Insurance Service insures the vehicle against
damages. Such service can be provided to the vehicle owner only through
reimbursement of repair charges. Hence, service tax paid on bill of the
authorised service station is valid input service used to provide output
service of vehicle insurance
Also decision of the Tribunal
in Paul Merchants Ltd. vs. CCE, Chandigarh [2012-TIOL-1877-CESTAT-DEL]
was noted to hold that the assessee becomes the recipient of the services from
the authorised service station even though the beneficiary remains the owner of
the motor vehicle. Accordingly, the demand is set aside.
II. High
Court
23. 2018-TIOL-2195-HC-AHM-ST] Oil Field Warehouse and Service Ltd vs. Union of India Date of Order: 17th October,
2018
Rule 5A
of Service Tax Rules, 1994 not saved by section 174(2) of CGST Act, 2017
therefore fresh proceedings for audit could not be initiated inexercise of
powers under the said Rule.
Facts
The petitioner has
challenged the communication issued by the Comptroller and Auditor General of
India (CAG) calling upon the petitioner to submit service tax audit at the
hands of the officers of the CAG. Provisions of Rule 5A of the Service Tax
Rules, 1994 were relied upon for exercising the powers of audit. Apart from
challenging the rule itself it was stated that with the introduction of the
Goods and Service Tax Act, the Finance Act, 1994 and the Service Tax provisions
made thereon, stand repealed.
Held
The High Court noted
section 174 of the GST Act dealing with repeal and saving and prima facie noted
that there was no saving of Rule 5A in such manner that fresh proceedings for
audit could be initiated in exercise of powers under the said rule. Under the
circumstances, High Court granted interim relief and ordered that CAG shall not
carry out any further service tax audit of the petitioner.
24. [2018-TIOL-2303-HC-MAD-ST] Ganesan Builders Ltd vs. The Commissioner of Service Tax
Date of Order: 19th September, 2018
Service
tax paid on insurance services provided to workers is available as CENVAT
credit post 01.04.2011.
Facts
The assessee is a builder.
A Show Cause Notice was issued denying CENVAT credit availed on the ground that
the payment of insurance premium for availing the insurance policy stands
excluded from the definition of “input services”, pursuant to the definition of
“Input Services”, after 01.04.2011. It was contended that the services consumed
by the employees in their official capacity is distinguishable from the
services which are consumed by them purely in their personal capacity.
Held
The High Court primarily
noted that it is important to peruse the nature of the policy, the beneficiary
of the policy and the Statute, under which, the policy is required to be
availed. On perusal of the policies it is evident that these are workmen
Compensation Policies. The insured is the Assessee and the policy specifies the
area where the construction works is carried out. It was further stated that
there is a statutory requirement under the Building and Other Construction
Workers (Regulation of Employment and Conditions of Service) Act, 1996. Under
the said Act, the Workmen’s Compensation Act, 1923 has been included in the
Second Schedule of the 1996 Act and the provisions of Act has been made
applicable to the building workers. The intention of the policy is to protect
the employees, who work in the site and not to drive them to various forums for
availing compensation in the event of an injury or death. Thus, the Appeal is
allowed and CENVAT credit is granted.
