By Puloma Dalal, Jayesh Gogri , Mandar Telang , Chartered Accountants
Tribunal
1. [2018-TIOL-2674-CESTAT-MUM] K B Mehta
Construction Pvt. Ltd. vs. CST-Service Tax, Ahmedabad Date of Order: 12th July, 2018
When the service is
inclusive of supply of goods in such case, value of goods is exempted by
Notification 12/2003-ST.
Facts
Appellant entered into a
consolidated contract involving service and supply of raw material wherein sale
and service value was provided separately. The department contended that the
bifurcation into goods and services is artificial and thus the total contract value is the
gross value of provision of service liable for service tax.
Held
The Tribunal noted that
when the service is inclusive of supply of goods, in such case the exemption in
respect of the value of the goods involved in the provision of services is
exempted by Notification No.12/2003-ST dated 20.06.2003. According to the
Tribunal, the Revenue did not make any effort to verify as to whether despite
making different invoices in respect of services and sale of the goods, the
value of service was suppressed and transferred to the transaction of sale of
the goods. Further, it was observed that they paid VAT in respect of those
invoices where the goods were shown to have been sold. Accordingly, it was held
that if the value shown in the sale invoices was correct towards the sale of
the goods, the same would not be chargeable to service tax in terms of
Notification No. 12/2003-ST dated 20.06.2003. The demand thus was set aside and
the matter was remanded to verify the above observation.
2.
[2018-TIOL-2656-CESTAT-MAD]
International Travel House Ltd vs. Commissioner of Service Tax, Chennai Date of Order: 23rd March, 2018
There is no service
provider – service receiver relationship between inter-divisions and both are
one and the same entity. Cost of parking charges collected are in the nature of
reimbursable expenses and are not liable for service tax.
Facts
On perusal of ST-3 returns,
it was noticed in audit that assessee had not paid service tax on Parking
charges which their travel desk had collected from customers who were provided
with Rent-a-Cab Services, service charges which they received from their travel
division for booking air tickets for clients staying at the hotel and
Commission received from travel division for booking air tickets on behalf of
service provider. Show Cause Notice was issued proposing demand of service tax
under “Rent a Cab Services” and “Air Travel Agency
Services”. It was argued that the travel division undertakes the booking
of air tickets and raises an invoice charging service tax on basic fare, which
is forwarded to travel desk. The bills raised include the value of
inter-division services along with service tax and service charges. Since
service tax on basic fare is being discharged by travel division of assessee
company under Air Travel Agency Services, the demand on assessee treating these
two divisions as separate entities is incorrect.
Held
The Tribunal noted that the
company and its travel division are the same entity and there is no service
provider or service receiver relationship between these divisions. Thus, when
service tax is already discharged by the travel division on the basic fare, the
demand of service tax is without any factual or legal basis and requires to be
set aside. In regard to parking services, it is noted that while providing the
Rent-a-Cab service, the cost of parking charges is also collected. This is in
the nature of reimbursable expenses and therefore cannot be subject to service
tax, as decided in the case of Intercontinental Consultants and Technocrats
Pvt. Ltd. [2018-TIOL-76-SC-ST].
3.
[2018] 96 taxmann.com 2
(Mumbai – CESTAT) Amby Valley City Developer Ltd. vs.
Commissioner of Central Excise, Pune-1
Date of Order: 8th June, 2018
The activity of allowing
complementary use of conference hall by hotel, to guests residing therein,
without charging any separate amount therefor cannot be charged on a notional
amount under “convention service”.
Facts
The appellant, owner of
hotel, while renting the rooms to various corporate entities, also allows use
of conference hall as complimentary and did not charge any amount separately
for said use of conference hall. The billing of rooms is done on the basis of
single occupancy or double occupancy and specifies that the additional facility
of conference hall, seating arrangements and audio visual will be provided.
Revenue alleged that such use of conference hall is liable to service tax as
provision of “convention services”. Whereas appellant submitted that they are
not separately providing “convention service” as alleged by department and the
conference hall charges are included in room tariff included in total bill i.e.
already loaded in value of taxable services on which service tax liability has
been discharged.
Held
The Tribunal noted that
appellant rented rooms and discharged service tax liability wherever
applicable. Further, no separate charges for Convention Center have been
charged and the use has been complementary. Therefore, the Tribunal held that
the demand is computed on notional basis and since the use of convention center
has been complementary, no service tax can be charged. Reliance was placed on
decision in Dukes Retreat Ltd. vs. C.C.Ex., [Final Order No.
M/86948-86949/17/STB, dated 13-4-2017] and Taj View Hotels vs. C.C.Ex. [2014]
47 taxmann.com 198/46 GST 601 (New Delhi – CESTAT). Accordingly, the demand
was set aside.
4.
[2018] 96 taxmann.com 390
(Allahabad – CESTAT) Commissioner of Customs, Central Excise & Service Tax,
Noida vs. Fortune Cookie
Date of Order: 26th July, 2018
When assessee took
premises of golf course on rent and provided food to members of Golf Course
itself, Tribunal held that such services would be in the nature of “restaurant
services” and not “outdoor catering services”.
Facts
Respondent
took premises of Golf Course on rent and paid lumpsum amount to golf course.
From said premises, respondent was providing food to members of Golf Course.
Respondent treated said activity as provision of “restaurant services”, whereas
revenue contended that such activity is taxable as provision of “outdoor
catering service”.
Held
The Tribunal noted that the
“outdoor catering service” is to be provided at the premises of the
service recipient i.e. at his own premises or the premises taken on hire by the
service recipient, whereas in the case of “restaurant service”, the
service is to be provided by the service provider in its own premises. The
Tribunal observed that in instant case, the respondent i.e. service provider
renders services from its premises i.e. premises taken on rent from Golf
Course. It was also noted that in Tamil Nadu Kalyana Mandapam Assn. vs.
Union of India [2006] 4 STT 308 (SC), the Hon’ble Apex court held that the
service of restaurant and outdoor caterer are distinguishable. Further, the
Tribunal noted that the respondent maintains menu card, fixes prices for every
item and there is no personal interaction with service recipient in restaurant.
Accordingly, it was held that services provided by respondent qualify as
“restaurant services” and not “outdoor catering services” and set aside the
demand.
5.
[2018] 96 taxmann.com 28
(Bangalore – CESTAT) Hindustan Petrochemical Corporation Ltd. vs. CCE
Date of Order: 8th June, 2018
Undertaking certain
activities in relation to maintenance and safety of tank trucks and merely
issuing certificates to the effect that tank trucks are purged as required
under petroleum law cannot be regarded as provision of “technical inspection
and certification services”.
Facts
The appellant is engaged in
the business of refining of crude and marketing of various petroleum products.
They have set up a facility to store the LPG and from there, the stored LPG is
sent to various LPG bottling plants of oil distribution companies through tank
trucks. Whenever LPG tank trucks require any repair or mandatory testing of
safety valves, the tanks are cleaned and completely degassed. For this
activity, the appellant collects cost of water, LPG and the labour charges from
the truck owners. On finding that the repairs to truck tankers had to be
conducted with the advance approval in writing and the repair work should be
conducted as per the code IS 2825/BS 5500, department alleged that the
certificates issued by appellant imply that appellant has certified purging of
truck tankers as required under petroleum law and thus, the activities
undertaken by appellant would be chargeable to service tax under “technical
inspection and certification services”.
Held
Hon’ble Tribunal noted that
the appellants are not basically an agency involved with testing and
certification and the activities performed by them make the truck tanks fit to
be filled with LPG for further transportation. Thus, the Tribunal held that
though appellant performed certain activities in relation to the maintenance
and safety of tank trucks and issued certificates to the effect that the tanks
are purged/degassed, such activities of appellant would be construed only as an
activity related to safety and maintenance of the tank truck. Accordingly, the
Tribunal concluded that since appellant has not fulfilled the conditions so as
to impart the activity of purging and degassing tank trucks as ‘technical
inspection and certification service’, the demand was set aside.
6.
[2018] 96 taxmann.com 323
(New Delhi – CESTAT) Ivanhoe Cambridge Investment Advisory India (P.) Ltd. vs.
Commissioner of Service Tax, Delhi
Date of Order: 27th March, 2018
Investment advisory
services provided by Indian service provider to foreign service recipient in
relation to investment opportunities in India, would not be chargeable to
service tax under category of “real estate agency services”.
When experts provided by
foreign holding company to Indian subsidiary, had employer-employee relation
with Indian subsidiary, The Tribunal set aside demand under “manpower
recruitment or supply agency services”.
Facts
The appellant renders
non-binding investment advisory service to its holding company located abroad.
Scope of such services includes identification and advise on investment
opportunities to holding company in diverse sectors including real estate
sector, providing financial and economic market intelligence reports, providing
information on investment targets, structuring of investments as well as exit
options etc., and thereby, enables the foreign company to take decisions on
investment opportunities in India. Department alleged that such advisory
services are in the nature of “real estate agency services” and thus, liable to
pay service tax under reverse charge mechanism.
Further, the foreign
holding company of appellant provided certain expatriates to appellant who were
experts in the area of investment advisory and they were employed by appellant.
Department alleged that appellant supplied manpower to principal and thus, liable
to service tax under category of “manpower recruitment and supply agency
services”.
Held
As regards demand under
category of “real estate advisory services”, the Hon’ble Tribunal noted that in
terms of “Advisory Service Agreement” entered into between appellant and its
holding company, appellant was required to render investment advisory services
in connection with investment opportunities in India and such services were rendered
relating to real estate sector. Also, Tribunal categorically noted that the
scope of the agreement did not cover such advisory services in connection with
any piece of real estate. The Tribunal even observed that various judicial
decisions relied upon by appellant not only support the view canvassed by
appellant but also have held that such activities will be in the nature of
export despite the fact that the contract companies are in India.
Consequently, it was held that services provided by appellant cannot be said to
be covered within the scope of “real estate agency services”.
As
regards demand under “manpower recruitment and supply agency services”, the
Tribunal noted that the terms and conditions under which the expatriates were
placed at the disposal of the appellant are governed by “employment secondment
agreement”. The Tribunal noted that the payment letters issued by appellant to
the expatriates made it clear that such expatriates would be employees of the
appellant during the period of their assignments. Also, the income tax returns
filed by expatriates show appellant as their employer and Income-Tax has also
been paid for the amounts received by the expatriates in India, under the
category of salary. Therefore, the Tribunal held that as the appellant and
expatriates enjoyed employer-employee relationship with appellant, the demand
under “manpower recruitment and supply agency services” would not sustain.
7.
[2018] 96 taxmann.com 549
(New Delhi – CESTAT) Olam Agro India Ltd. vs. Commissioner of Central Excise,
Delhi-III
Date of Order: 31st July, 2018
The commission paid by
Indian company to its foreign parent company towards corporate guarantee
extended by such parent company in favor of Indian banks, so as to facilitate
provision of bank guarantee by such Indian banks to appellant, is liable to pay
service tax under “business auxiliary services”.
Facts
Appellant engaged in
agricultural business was exporting agricultural products. For obtaining loan
from various Indian banks, appellant obtained corporate guarantee from its
foreign parent company in favor of Indian banks. In lieu thereof, the appellant
paid commission amounting to 1 per cent of the value of such corporate
guarantee to their parent company. The Revenue contended this was liable for
service tax under category of “business auxiliary services” under reverse
charge mechanism as services were provided by parent company to appellant in
relation to procurement of service by Appellant. However, appellant contended
that such commission was paid to parent company towards providing guarantee for
obtaining loan by the appellant and not for procurement of any service.
Appellant relied on decision in case of Abdullabhai Abdul Kader vs.
Commissioner 2017 (4) GSTL 38 (Tri Mum.), wherein it was held that
providing the facility of L/C through their bank to various importers cannot be
charged to service tax under the category of “Business Auxiliary Service” since
it was not in connection with procurement of goods which are inputs for the
clients. It was further submitted that as the parent company did not procure
services from bank for the appellant, there cannot be said to be provision of
business auxiliary services.
Held
Hon’ble Tribunal noted that
a corporate guarantee is used when a corporation agrees to be held responsible
for completing the duties and obligations of debtor to a lender, in case the
debtor fails to comply with the terms of the debtor- lender contract; whereas a
bank guarantee is a promise from a bank that the liability of the debtor will
be met in the event the debtor fails to favour his contractual obligations.
Therefore, the nature of corporate guarantee as well as of bank guarantee is
one and the same i.e. for facilitation of the lending facilities. The Tribunal
observed that in present case the foreign parent company executed corporate
bank guarantee in favor of appellant for facilitation of lending of funds to
the appellant and in turn, received guarantee commission by way of foreign
exchange remittance from appellant. It was found that periodic debit notes were
issued by parent company on appellant towards guarantee commission. This
indicated that the transactions were with regard to lending facilities in
India, it was held that changing name from ‘bank’ to ‘corporate’, it cannot be
said that guarantee commission paid by appellant would not get covered as
“business auxiliary services”. Demand was thus upheld.
