(v) Comments:
In the judgment in the case of Hindustan Zinc Ltd. v. CCE, [aipur, 2008 (11) STR 338 (Tri.-LB) (narrated under this feature at length in September 2008 issue of BCAn, no distinction was made between services provided in India by a person from outside India and services performed outside India. As such, the issue of taxability on services provided outside India remained open for the period from 1-1-2005 to 17-4-2006. Decision in the case of Foster Wheeler Energy Ltd. v. CCE Vadodara Il, 2007 (7) STR 443 (Tri.-Ahd), on the other side provided that prior to insertion of S. 66A i.e., 18-4-2006, the recipient could not be made liable for service tax in respect of offshore services provided by person from outside India. However, the validity or otherwise of Rule 2(1)(d)(iv) was not examined, nor was examined the distinction be-tween scope of provision of Notification No. 36/ 2004-ST and that of S. 66A. Only in the case of Sterlite Industries (India) Ltd. v. CCE, 2008 (11) STR 325 (Tri.-Chennai), the issue as a whOle and distinction between coverage of Notification No. 36/2004 and scope of S. 66A was presented by the appellant. However, it being only a stay application, no finality was reached. Hon. Bombay High Court has dealt with all issues concerning services provided by persons from outside India and the liability of Indian receivers vis-a-vis such services, except examining constitutional validity of the extra-territorial jurisdiction of the levy.
2. Handling of export cargo whether liable to service tax?
CCE, Mangalore v. M/s. Konkan Marine Agencies, [2008 TIOL 601 HC Kar. ST]
The assessee paid service tax under the category of ‘port service’ for the period March 2004 to September 2004 and filed a refund claim of service tax and interest paid, stating that they were handling only export cargo which was outside the purview of service tax under ‘cargo handling service’ and that they had erroneously paid service tax under port services. The claim was rejected considering the services as port services. The Commissioner (appeals) remanded the matter to the adjudicating authority to determine the nature of the service. On examination, it was decided to be ‘cargo handling service’, however the refund was directed to be paid to the Consumer Welfare Fund.
The Commissioner took suo motu revision against the order of the adjudicating authority u/ s.84 and held that the services were port services, therefore, refund stood rejected. The assessee filed an appeal before the CESTAT.After relevant findings, CESTAT held that the assessee was not rendering services on behalf of port, but on its own behalf to customers for loading of export cargo. Accordingly, the Revenue’s appeal was dismissed in limine.
3. Whether reimbursement of expenses part of service rendered ?
Intercontinental Conslt. & Tech. Pvt. Ltd. v. Union of India, 2008 (12) STR 689 (Del)
The petitioner challenged constitutional validity of Rule 5 of the Valuation Rules, 2006 as it is ultra vires provisions of S. 66, S. 67 and Chapter V of the Finance Act, 1994 for inclusion of reimbursement of expenses as part of value of services.
The petitioner paid service tax only on services rendered to clients (NHAI) and not on reimbursement of expenses.
The authorities treating reimbursement of expenses as forming part of gross value of taxable services as per S. 67 and Rule 5, issued show-cause notice. The appellant contended that such expenses did not form part of value of services rendered and therefore was not liable u/ s.67 and further that reimbursable expenses were shown separately in the bill issued to clients.
It was held that no coercive steps be taken till an adjudication order was passed, but proceedings for SCN could continue.
II. Tribunal:’
4. Banking and other Financial Services:
CCE, [aipur v. Bank of Rajasthan Ltd., (2008 TIOL 1866 CESTAT Del.)
The Revenue had appealed against the order of the Commissioner (Appeals) whereby’ Anywhere Banking Business (ABB) transactions’ were held not liable to service tax. The respondent contended that ABB came under the net of service tax w.e.f. 10-9-2004, therefore, prior to 10-9-2004 this service was not chargeable to service tax. As this service was only for operation of bank account, the Revenue’s appeal was dismissed. No infirmity in the order.
5. Business Auxiliary Service:
APL Logistics India (Pvt.) Ltd. v. Commissioner of Service Tax, Chennai, 2008 (12) STR588 (Tri.-Chennai)
The appellant was in the business of collecting export goods from different Indian suppliers for a foreign party under an agreement with the latter. Such goods were consolidated into one cargo and exported for a consideration in Indian rupees. Thus, the appellant was undertaking the activity of handling of export cargo that is excluded from the ambit of cargo handling service. The Revenue contended to tax this activity as ‘Business Auxiliary Service’ as services were provided on behalf of client. The decision of Dr. Lal Path Lab Pvt. Ltd. v. CCE; Ludhiana, 2006 (4) STR 527 (Tribunal) was relied upon and contention was made that handling export could not be brought within the scope of ‘provision of service on behalf of the client’ as well as ‘cargo handling service’. Since the matter involved detailed examination for Revenue’s claim, waiver of pre-deposit was granted.
6. CENVAT Credit :
(i) Whether TR-6 challan a valid document?
M/s. Gaurav Krishna Ispat (I) Pvt. Ltd. v. CCE, Raipur (2008 TIOL 1979 CESTAT Del.)
The assessee was denied Cenvat credit for the period prior to 16-6-2005 as TR-6 challan was considered as an invalid document for availing the same.
It was held by the Commissioner (Appeals) that it was an inadvertent omission of not including TR-6 challan as a valid document, which was rectified by Notification. The Tribunal’s decision of National Organic Chemicals India Ltd., 2004 (178) ELT 331 (Tribunal) was also relied upon. It was held that CENVAT credit could not be denied and penalty could not be sustained.
(ii) Can CENVAT credit be denied on procedural ground?
M/s. Bharat Sanchar Nigam Ltd. v. CCE, Salem, (2008 TIOL 1989 CESTAT-Mad.)
BSNL divided the country into what they called Secondary Switching Areas (SSAs) and had a Central Stores Dept. (CSD) at Madurai, which catered the SSAs by purchasing and supplying capital goods required for rendering telephone services. The lower authorities denied the credit taken by SSA, Salem on capital goods supplied by CSD covered by copies of manufacturer’s invoice, on the ground that the credit was taken without issuing invoices as registered first stage dealer in accordance with Rule 9.
However, the appellant’s contention that credit could not be denied on technical grounds as the two substantive conditions (a) that the capital goods must be duty paid, and (b) that they should be used in rendering of output service were satisfied.
On finding that CSD was registered at a later date as a first stage dealer, the credit was allowed.
iii) CENVAT credit: Consignment agent’s place – whether place of removal?
CCE, Rajkot v. Rajhans Metals Pvt. Ltd., (2008 TIOL 1871 CESTAT-Ahm.)
The assessee availed Cenvat credit of service tax paid on transportation service availed for movement from factory to consignment agent’s premises. The property of the goods did not transfer to the agent. The Revenue claimed that only depots could claim credit as per Board’s Circular, therefore Commissioner (Appeals)’ s extension of benefit was incorrect. It was contended that the Circular discussed the place of removal, wherein consignment agent’s premises has been defined as place of removal. It was held that the fact that expenses are borne by manufacturer, property of goods does not get transferred and the consignment agent’s premises are defined as the place of removal makes them eligible for Cenvat credit.
iv) CENVAT credit on capital goods when goods received at one place and invoice issued in the name of other:
M/s. BSNL v. CCE, Bhopal (2008 TIOL 1938 CESTAT-Del.)
The Revenue denied the credit on the ground that the credit was availed on the strength of improper document. It stated that the invoices were in the name of Headquarter Bhopal, whereas credit was taken at Jabalpur on the strength of debit notes. However the appellant contented that invoices for capital goods received at Jabalpur were issued in the name of circle Headquarter i.e., Bhopal, and Jabalpur comes under the Bhopal circle. Further, there was no dispute as to payment of duty on those capital goods and they were used for providing output service. Finding merit in the contention, waiver of pre-deposit and penalties was granted.
7. Commercial Training and Coaching Services:
M/s. Administrative Staff College of India, Hyderabad v. The CCE, Hyderabad (2008 TIOL 2007 CESTAT-Bang.)
The appellant is a college for practising managers that pioneered post-experience management education in India. The Revenue proceeded on the grounds that they did not pay service tax on services rendered as ‘Commercial Training or Coaching Centre’ and ‘Scientific or Technical Consultancy’. The Revenue contended that any institute satisfying this definition would be liable for service tax, irrespective of whether it was a commercial institute or not and that the college was recognised as a research institute by the Ministry of Science & Technology and as such, they were covered as Scientific and Technical Consultant.
However, it was held that the word ‘commercial’ qualified the commercial coaching or training. It did not qualify coaching or training, but qualified the centre. As long as the institute was registered under the Societies Registration Act and also exempted from income-tax, it cannot be considered as commercial and so no service tax was leviable under Commercial Coaching or Training Service. As regards Scientific and Technical Research, it was held that the appellants carried out research broadly in the field of social sciences, which was not considered ‘Scientific and Technical Consultancy’, and hence no service tax was leviable and the appeal was allowed on both the counts.
8. Import of services:
Nestle India Ltd. v. Commissioner of Service Tax, New Delhi, [(2008 (12) STR 570 (Tri.-Del.)]
Service tax was demanded under consulting engineer services for import of services. The appellant received service of consulting engineer from their holding company and the period under dispute was 6-8-2002 to 9-9-2004. The Larger Bench of the Tribunal’s decision in the case of Hindustan Zinc Ltd. v. CCE, 2008 (11) STR 337 (Tri.-LB) was followed, finding the facts of the case similar and relief was provided for the period prior to 1-1-2005.
9. Revisionary authority – Whether can revise the decision taken u/s.80 ?
M/s. Solomon Foundry v. CCE, Tiruchirapalli, (2008 TIOL 1826 CESTAT-Mad.)
The assessee entered into a contract when the service of maintenance and repair was not under the tax net, therefore the contract did not contain any provision to recover the service tax from its clients and hence the tax liability was absorbed and lenient decision was prayed for. The original authority considered that default in payment of service tax was because of bona fide belief as to non-taxability. The amount due was mostly paid before the issue of show-cause notice and the remaining before the decision of adjudicating authority.
The Tribunal allowed the appeal and held that the revisional authority does not have powers to revise a decision of competent authority, which had refrained from imposing penalty on the assessee ul s.80 of the Act.
10. Stevedoring a port service? Homa Engineering decision disregarded with issue referred to Larger Bench:
Western Agencies Pvt. Ltd. v. Commissioner of Service Tax, Chennai, 2008 (12) STR 739 (Tri.-Chennai)
In this case, the issue relates to whether or not services other than stevedoring activity could be considered as port services. The Tribunal has dif-fered from the decisions taken in the following cases:
Briefly stated, the Revenue contended that the Apex Court dismissed the Department’s appeal against Tribunal decision in Velji’s case (supra) not on merits but for the reason that no appeal against the Tribunal’s order in Homa Engineering (supra) was filed. However, the appeal in Homa Engineering’s case (supra) has been subsequently filed in the Bombay High Court. Therefore, the Tribunal’s de-cision could not be deemed to have been affirmed on merits in case of Velji’s by the Apex Court. It was also observed by the Tribunal that port services of minor ports were governed by the Indian Ports Act, 1908 and major ports by the Major Port Trust Act, 1963 whereas in Velji’s case, services in question were minor port services and decision was rendered with reference to many provisions of the Major Port Trust Act which did not apply. Further, the Tribunal observed that the view taken to the effect that licence issued by the port was unrecognised as authorisation also seemed incorrect. In the case of Konkan Marine Agencies (supra) it was concluded that stevedoring licence issued by the Mangalore Port Trust permitted them to perform within port premises.
According to the Tribunal, cargo handling services i.e., loading and unloading of cargo when performed within territorial limits of minor and major ports qualify to be ‘port services’. Port service can be performed from premises only if authorised by major port or minor port authorities and therefore stevedoring operations performed from port premises were port services. However, considering the importance of the issue and disagreement made with the decision in the above mentioned cases, the matter was referred to the Larger Bench.
11. Turnkey contracts – Daelim’s decision to be examined by Larger Bench:
CCE, Raipur v. Mls. BSBK Pvt. Ltd., (2008 TIOL 1880 CESTAT-Del.]
The respondent was engaged in the business of execution of turnkey contracts for engineering works at the site of their clients. The authorities ordered the respondents to pay service tax and penalty on these contracts to which the respondents appealed before the Commissioner (A) who set aside this order.
Relying on various decisions which inter alia included the decisions on the cases of Daelim Industrial Co. v. CCE, Vadodara, 2003 and Turbotech Precision Engg. P. Ltd. v. CCE, Bangaiore-III, the respondents claim that a turnkey works contract, could be vivisected as sale contract and service contract, and thus a part of a works contract cannot be subjected to tax.
However, the Revenue stated that the decision in Daelim (supra) was not in accordance with the decision of the Supreme Court in BSNLv. VOl and was challenged in the Supreme Court. Considering the decision in Daelim’s case (supra) was not in accordance with the law, the case was referred to the Larger Bench to consider the correctness of the decision.
12. Valuation and S. 67:
Shakti Motors v. Commissioner of Service Tax, Ahmedabad, 2008 (12) STR 710 (Tri.-Ahmd.)
The assessee, an authorised dealer selling motor bikes and scooters, also provides business auxiliary services to various financial institutions. Servicetax was paid by the appellant before issue of show-cause notice and penalty was levied u/ s.76 and u/ s.77of Finance Act 1994.The appellant contended that the amount received was a cum – tax value, therefore actual demand should be reduced and requested waiver of penalty u/ s.80. It was held that amount received could not be treated as cum- service tax price as no evidence supported it. The benefits of S. 80 were granted considering confusions in budget of 2005.The liabilityof interest could not be set aside.
