I. HIGH
COURT :
1. Applicability
of Service Tax :
Whether laying pipes in
wall/roof/floor, etc. or fixing cable trays and digging earth to lay cables,
etc. liable under ‘Erection, Commissioning or Installation service’.
Commissioner of C. Ex., Chandigarh v.
Rajeev Electrical Works, 2010 (18) STR (P&H)
The appellant, engaged in electrical
fittings obtained registration under ‘Erection, Commissioning or Installation
service’ on 30-11-2004. Since the service was taxable from 1-7-2003, a
show-cause notice was issued for recovery of tax with interest and penalty for
the period 1-7-2003 to 30-11-2004.
The appellant contended that they were
engaged in laying pipes in wall/roof/floor for crossing of wires, fixing the
junction box, etc. and were not involved in any services in relation to
installation of plant, commissioning, machinery and equipment for the period
under dispute.
In Department’s appeal, the High Court held
that laying pipes in wall/roof/floor for crossing of wires, fixing the junction
box, etc. would not amount to installation of plant, commissioning, machinery
and equipment, and therefore was not liable to service tax. A reference was
made to Circular No. 62/11/2003, dated 21 -8-2003 where it was clarified that
putting up electric wires and fitting in residential premises would not be
covered in the definition of taxable service and thus not liable to service
tax.
2. Applicability
of Service Tax on Rent-a-cab :
Whether tourist permit is essential for
levying tax on tour operator under Rent-a-cab service.
Commissioner of C. Ex., Chandigarh v.
Kuldeep Singh Gill, 2010 (18) STR 708 (P&H)
The respondent was providing transport
service to Indian Oil Corporation (IOC) for which service tax was demanded
under ‘Rent-a-cab’ category.
The Commissioner (Appeals) upheld the levy
of tax and penalty u/s.76.
However, the Tribunal held that since the
cabs were not leased to IOC for use of the vehicles at its own discretion,
service tax was not leviable.
In Department’s appeal to the High Court,
relying upon the decision in Secretary Federation of Bus Operators v. Union of
India, 2006 (2) STR (Mad.), it was observed that S. 65 of service tax
articulates a tourist vehicle and not holding a permit under the Motor Vehicle
Act as necessity for levy of tax. Just because it is essential to hold a permit
under the Motor Vehicle Act, the same cannot be made squarely applicable to
service tax.
Hence, it was held that the respondent
provided transport service and was liable for service tax under Rent-a-cab service.
3. Order
:
Whether a letter from Commissioner
can be treated as order.
Chief Commissioner, LTU, Bangalore v.
TNT India Pvt. Ltd., 2010 (19) STR 5 (Kar.)
The respondent engaged in door-to-door
international courier service, approached the Additional Commissioner
questioning the applicability of service tax on the service provided by them.
The Additional Commissioner confirmed that the service was not taxable vide
order dated 23-12-2004.
Subsequently the Revenue realised that the
said order was against the Circular No. 341/43/96 TRU dated 31-10-1996 and
hence the order of Commis-sioner was void-ab-initio. A letter dated 9-1- 2006
was issued in this respect. The respondent filed an appeal before the Tribunal
contending that the letter dated 9-1-2006 was an order and the same was
appealable. The order was passed without providing opportunity of being heard
and hence was bad in law. The Tribunal passed the order in favour of the
respondent.
The Revenue then preferred an appeal before
the High Court where the main issues involved were :
(a) Whether
Tribunal was correct in concluding that the letter of Commissioner was an order
appealable u/s.86, even though same was not passed u/s.73, u/s.83A, u/s.84 or
u/s.85 of the Finance Act, 1994 ?
(b) Whether
‘International Flight’ activity was taxable service ?
The Revenue asserted that the letter of
Commissioner was only a clarificatory letter and powers conferred u/s.73,
u/s.83A, u/s.84 or u/s.85 of the Finance Act, 1994 were not exercised and
consequently S. 86 for appeals to the Appellate Tribunal could not be made
applicable. Hence, the order passed by the Tribunal was not maintainable.
The respondent contended that the letter
issued by the Commissioner was a valid order u/s.84 and was passed without
providing opportunity of being heard. Similarly the letter issued to the
respondent was different from the letter issued to the lower authorities. The
letter was incomplete and did not contain footnote, which contained directions
to the lower authorities to issue a show-cause notice for recovery of service
tax and interest thereon.
The High Court examined S. 84 pertaining to
revision of orders by the Commissioner and affirmed that any exercise of power
u/s.84 was an order within the meaning of the Finance Act, 1994. The Court
opined that order of the Additional Commissioner was reviewed by the
Commissioner. Therefore, the Commissioner should have provided opportunity of
being heard.
Hence, the High Court held that the
Tribunal was correct in concluding that the letter of the Commissioner was an
order, it was appealable and directed the competent authority to pass a valid
order on the issue of taxability after providing opportunity of being heard.
4. Powers
of Director General of Service Tax (DGST) :
Whether DGST has power to entertain
appeal against order of lower authorities?
Aircargo Agents Association of India v.
Union of India, 2010 (18) STR 715 (Bom.)
The High Court in its order against writ
petition directed the parties to approach the DGST and the DGST to grant a
hearing before passing an order.
However, the parties contended that the
DGST had no power to entertain appeal against order of the lower authorities
and pass order.
The High Court held that the DGST did not
have power to pass orders.
II. TRIBUNAL
:
5. Applicability
of Service Tax :
Whether secondary services provided
towards export of services are exempt ?
Ruth Shipping Agencies Pvt. Ltd. v.
Commissioner of C. Ex., Thirunelveli, 2010 (19) STR 39 (Tri-Chennai)
The appellant, a CHA received brokerage
from steamer agent for arranging containers on which service tax was demanded
as ‘Business Auxiliary Service’. The appellant contended that the service was
non-taxable and the same was accepted by the Assistant Commissioner. However a review
order was passed by the Commissioner who held that the appellant was liable to
tax.
In an appeal preferred to the Tribunal, the
appellant relying on Circular No. 56/5/2003, dated 25-4-2003 contended that
secondary service of arrang-ing a container were primarily used by exporter of
services and they get consumed/merged with exported services, they were not
liable to tax.
The Tribunal holding that the view of the
appellant was corroborated by Lee & Muirhead Pvt. Ltd. v. Commissioner of
Service Tax, Bangalore, 2009 (14) STR 348, the demand was set aside.
6. Burden
of proof of suppression :
Whether Department owns the burden to
prove suppression of facts by the assessee ?
R. A. C. Steels v. Commissioner of
Central Excise, Salem, 2010 (18) STR 775 (Tri-Chennai)
The Department levied penalty u/s.76,
u/s.77 and u/s.78 of the Finance Act, 1994 invoking extended period of
limitation.
The appellant pleaded to the Tribunal of
their ignorance. However, their prayer that the burden to prove that there was
suppression of facts by the appellant was not discharged by the Department was
accepted and penalties were set aside.
7. CENVAT
Credit :
Whether CENVAT credit on washing
machines used in factory allowable ?
Commissioner of C. Ex. & ST, LTU,
Bangalore v. Micro Labs Ltd., 2010 (18) STR 771 (Tri-Bang.)
The respondent utilised CENVAT credit on
indus-trial washing machines falling under Chapter 84 of CETA and used for
washing uniforms of employees. The Department denied the credit on the machines
contending that the same are not used in manufacture of final products.
The matter was decided in favour of the
respondent by the Deputy Commissioner, LTU as well as the Commissioner
(Appeals).
The appellant relied upon India Cements
Ltd. v. CCE, Trichy 2006 (205) ELT 170 (Tri-Chennai) where it was held that any
capital goods which do not take part in the process of manufacture are not
eligible for CENVAT credit.
According to the assessee, industrial
washing machines fall within the definition of ‘capital goods’ as defined in
Rule 2(a) of the CENVAT Credit Rules, 2004. Further, the Commissioner (Appeals)
found that requirement of clean clothes is mandatory as per Rule 5.4 of the
Drugs & Cosmetics Act, 1945. The assessee also relied upon the case of
Toyota Kirloskar Motor Ltd. v. CCE, Bangalore-III, 2002 (148) ELT 402
(Tri-Bangalore).
The Tribunal held that the industrial
washing machines fall within Rule 2(a) and as they are used in factory of
manufacture, credit was admissible.
8. CENVAT
credit on construction :
Whether CENVAT credit on construction
of staff quarters allowable?
The Laxmi Vilas Bank Ltd. v.
Commissioner of Central Excise, Trichy 2010 (19) STR 40 (Tri-Chennai)
CENVAT credit on construction of staff
quarters was disallowed on the ground that the staff residential quarters
located within the bank premises cannot be construed as office relating to bank
premises.
The Tribunal held that construction
services used in staff residential quarters located within the bank premises
are covered under the definition of input service as per Rule 2(l) of the
CENVAT Credit Rules, 2004. So, the CENVAT credit on construction service was
allowed.
9. Penalty
:
Whether penalty u/s.76 and u/s.78 is
mutually exclusive ?
AR. AS. PV. PV. Motors Erode (P) Ltd. v.
Commissioner of Central Excise, Salem, 2010 (18) STR 722 (Tri-Chennai)
The appellant was ordered to pay penalty
u/s.76 and u/s.78 of the Finance Act, 1994 where service tax and interest were
already paid prior to com-munication of adjudication order.
The appellant contended that the penalty
u/s.76 and u/s.78 was mutually exclusive and since they had paid the penalty
u/s.78 @25%, the penalty imposed u/s.76 was liable to be set aside.
The appellant relied upon S. 78(1) of
service tax and the Tribunal’s decision in the case of M/s. Safe Test
Enterprises v. Commissioner of Central Excise, Salem and argued that since
service tax and interest had been paid prior to communication of the order,
penalty u/s.78 was liable to be reduced.
The High Court agreed with both the
contentions and set aside the penalty u/s.76 and reduced penalty u/s.78 to 25%
of service tax demanded.
10. Refund
:
Whether refund can be denied on the
grounds beyond the scope of show-cause notice ?
Caliber Point Business Solutions Ltd. v.
Commis-sioner of Service Tax, Mumbai, 2010 (18) STR 737 (Tri-Mumbai)
The appellant, a BPO service provider filed
refund claim under Rule 5 of the CENVAT Credit Rules which was rejected on
technical grounds like ab-sence of registration number on input invoices,
non-availability of original invoices and absence of nexus between input and
output services. How-ever, no explanation was provided for absence of nexus.
The appellant filed an appeal wherein
rejection was made on the ground of absence of nexus, non-utilisation of CENVAT
credit and difference between ST-3 and refund claim. The later two grounds were
not a part of the original show-cause notice.
Relying on Reckitt & Colman of India
Ltd. v. CCE, 1996 (88) ELT 641 (SC), it was held that the Tribunal cannot
travel beyond show-cause notice and favour the Revenue and require the
appellant to meet demands which were never required to be met before the
Revenue.
Regarding the absence of nexus in case of
rent-a-cab service, air travel service and BPO service, the appellant relied
upon CST, Delhi v. Conver-gys India Pvt. Ltd., 2009 (16) STR 198 (Tri-Del.)
wherein it was held that without questioning the CENVAT credit, its eligibility
for rebate cannot be questioned.
Further the refund claim was allowed as the
appel-lant proved the nexus between rent-a-cab service, air travel service and
BPO service.
Refund — GTA service :
Whether service tax on transport
service paid by GTA as well as consignor can be refunded to GTA ?
Commissioner of C. Ex., Cochin v. Garuda
Transport, 2010 (18) STR 773 (Tri-Bangalore)
The respondent filed refund claim of
service tax on transport service paid twice. The tax was paid by him and the
consignor also. The refund claim was rejected by the lower authorities on the
ground of inadequacy of records. An appeal to the Commissioner (Appeals) was
filed by the Revenue.
The Commissioner (Appeals) in his findings
record-ed that the respondent had submitted audited final accounts, freight
bills, challans, CA certificate as to absence of unjust enrichment and
certificate from the sole consignor and accepted double payment of service tax
and held refund claim as valid.
The Revenue contended that the Commissioner
(Appeals) did not verify the documents to prove absence of unjust enrichment.
However, the Tribunal held that findings in order of the Commissioner (Appeals)
indicate that he had verified all the relevant documents and hence the refund
claim was accepted.
11. Review order : Scope :
Whether a review order can be passed
after appeal is filed against the original order ?
Avery India Ltd. v. Commissioner of
Service Tax, Delhi, 2010 (18) STR 760 (Tri-Delhi)
A refund claim of the appellant was accepted
by the Department but was credited to Consumer Welfare Fund. The Commissioner
(Appeals) how-ever passed the order that refund be credited to the appellant’s
account.
On receipt of order from the Commissioner
(Appeals), the Commissioner issued a show-cause notice to review the original
order passed by the lower authorities and later passed an order rejecting the
claim of refund.
The appellant contended that the original
order of the lower authority got merged with the order of the Commissioner (Appeals).
They also claimed that an appeal was filed by the Revenue against the order of
the Commissioner (Appeals) before the date of review order by the Commissioner
and hence the review order and order of rejection of refund based on review
order were not established.
The Tribunal observed that revision powers
of the Commissioner u/s.84 of the Finance Act, 1994 are restricted. As per S.
84(4), “no revision order could be passed by the Commissioner if any issue in
the order was pending before the Commissioner (Appeals).” In the instant case,
the order of the Commissioner (Appeals) was also appealed before the Tribunal.
Hence, the review order was set aside.
12. Show-cause
notice :
Whether an order, which is at
variance with show-cause notice, is sustainable in law
Glass Fibres v. Commissioner of Central
Excise, Cochin, 2010 (18) STR 726 (Tri-Bangalore)
The appellant was engaged in the activity
of receipt and stacking operation, loading, packing, repacking, storage, etc.
and was registered as ‘Cargo Handling’ agency. The client of the appellant
refused to pay tax on the activity relating to storage, as it was not covered
as ‘Cargo Handling’ service. The appellant filed a refund claim of
non-reimbursed tax.
The original authority rejected the plea on
the ground that it was covered as ‘Cargo Handling’ services. However, the
Commissioner (Appeals) held that the activities related to storage, stacking
and shifting should be more appropriately classifiable under ‘Storage and
warehousing’ services.
Being aggrieved with the order of
Commissioner (Appeals), the appellant filed an appeal before the Tribunal and
contended as follows :
The Commissioner affirmed the order on the
grounds not mentioned in the show-cause notice. The appellant relied on various
case laws for taking such stand and contended that the order should be seen in
the light of show-cause notice and order-in-original and that the order at
variance of show-cause notice is not sustainable in law.
The Tribunal held that the judicial
authorities amply support the case of the appellant and in facts of the case,
the appeal was allowed and that the appellant was held not liable for service
tax even though the activity was as such taxable for the reason that the demand
was not conformed to the services alleged in the show-cause notice.
