Service TaxI. HIGH COURT :
1. Whether bottling of liquor amounts to packaging service ?
Maa Sharda Wine Traders v. UOI, 2009 (15) STR 3 (MP)
In this case, the question arose as to whether bottling of liquor amounted to packaging activity, liable for service tax considering that alcohol is not dutiable under the Central Excise Act (although it is liable under the State Excise Laws). The appellant among various others had filed a writ in the High Court primarily to challenge constitutional validity of the definition of packaging activity [S. 65(76b) of the Finance Act, 1994]. However, it was felt that justice would be done even on adopting apposite interpretative process whereby conclusion could be reached as to whether bottling of liquor could be treated as service liable for service tax or treated as ‘manufacture’ u/s.2(f) of the Central Excise Act and therefore, not liable under the service tax law. After doing a detailed analysis of the terms ‘manufacture’ and ‘excisable goods’ and considering the Department’s clarification vide CBEC Circular No. 249/1/2006-CX-4, dated October 27, 2008 in consonance with the statutory provisions as well as the law laid down by the Apex Court in Sir Shadilal Distillery and Chemical Works v. State of Uttar Pradesh, (1998) 8 SCC 428, it was held that bottling of liquor being incidental or ancillary to the completion of a manufactured product was ‘manufacture’ for the purpose of S. 2(f) of the Central Excise Act and since this is excluded from the definition of ‘packaging activity’ under the service tax law, it was held as not liable for service tax. Decision in the case of Vindhyachal Distilleries Pvt. Ltd. 2006 (3) STR 723 (LMP) was accordingly overruled.
Note :
The case has been reported in the July issue of BCAJ under the citation SOM Distilleries Pvt. Ltd. & Ors v. UOI & Ors., 2009 TIOL 292 HC MP ST LB. It may be noted further that to render the decision ineffective prospectively, Budget 2009 has sought to amend the definition of ‘business auxiliary service’ by excluding ‘manufacture of excisable goods’ instead of mere ‘manufacture’ in terms of S. 2(f).
2. Penalty :
CCE Jalandhar v. Darmania Enterprises, 2009 (14) STR 741 (P&H)
The Commissioner in this case enhanced the penalty imposed by the Assistant Commissioner while exercising revisional power u/s.84 of the Act from Rs.1,000 to Rs.31,652. The Commissioner also recorded suppression. However, the Tribunal set aside revision order and restored the original order by observing that leniency considered in view of S. 80 did not suffer any illegality and therefore, could not have been interfered by the revisional authority. The Court observed that since no evidence was produced before the revisional authority to prove fraud, misrepresentation, etc., no jurisdiction was acquired by the authority to impose penalty and dismissed the appeal stating that no question of law arose for determination of the Court.
II. TRIBUNAL :
3. Binding precedent :
S. V. Colour Lab v. CCE, 2009 (15) STR 231 (Tri. Bang.)
The issue of excluding cost of paper, chemicals, etc. being covered by the Tribunal decision in case of Shilpa Colour Lab & Others v. CCE, 2007 (5) STR 423 (Tri.-Bang), the Tribunal held that finding of the Commissioner (Appeals) that the Tribunal decision was distinguishable was wrong and against the judicial discipline and allowed the appeal.
4. Cargo Handling Service :
ITW India Ltd. v. CCE, Hyderabad 2009 (14) STR 826 (Tri.-Bang)
The issue in this case related to whether packaging viz. strapping of steel items, a part of manufacturing process which already suffered excise duty, was chargeable to service tax as cargo handling service. Packaging activity was brought under service tax only from 16-6-2005 and the assessee paid service tax from this date. The decision of the Calcutta Tribunal in the assessee’s own case reported at 2007 (8) STR 490 as well as B. K. Thakkar’s case 2008 (9) STR 542 (Tri.) were distinguished. Relying on the Rajasthan High Court’s decision in the case of S. B. Construction Co. v. UOI, 2006 (4) STR 545 (Raj.), wherein it was held that when goods are packed for transport, it should be followed by transportation of the same in order to be covered by cargo handling service. It was held that later amendment in the definition of cargo handling service also linked service of packaging together with transportation of cargo and therefore, demand of service tax under the category of cargo handling service was not sustainable.
5. CENVAT Credit : Document for availing credit :
(i) CCE Vapi v. Jindal Photo Ltd., 2009 (14) STR 812 (Tri.-Ahd.)
Credit was taken based on invoices not containing registration number of Input Service Distributor (ISD) viz. the head office of the appellant. However, the receipt of services was not in dispute. Considering that the omission took place when relevant rules were being implemented, credit was held as admissible in terms of the proviso to Rule 9(2) and Rule 14 of the CENVAT Credit Rules.
(ii) Rohit Surfactants P. Ltd. v. CCE, 2009 (15) STR 169 (Tri.-Del)
Holding that the words ‘directly and indirectly’ used in relation to ‘manufacture’ in the definition of input service had to be given very wide meaning, and relying on the decision in the case of Keltech Energies Ltd. v. Commissioner, 2008 (107) STR 280 (Tri.), it was held that banking & other financial services, general insurance service and courier agency service are to be treated as input service; stay petition was allowed.
6. Chartered Accountant’s Service — whether explanation had retrospective effect ?
Sridhar & Santhanam v. CCE (ST) Chennai, 2009 (14) STR 756 (Tri.-Chennai)
Exemption under Notification 59/2002-ST was not extended to a C.A.s’ firm by applying explanation in Notification No. 15/2002-ST re-trospectively. The Notification did not indicate retrospective effect in specific terms, so it was held that the amendment had to be held effective from the date of issue of Notification. Observing that the benefit available on plain reading could not be made retrospective by issuing Notification, the appeal was allowed.
7. Penalty: Levied u/s.78, whether reducible?
CCE, Mumbai v. Ria Travels & Tours (I) Pvt. Ltd., 2009 (15) STR 124 (Tri.-Mum.)
In this case, the assessee was registered as a travel agent for its multi-locational business. On investigation by DCCEI authority, short payment of service tax was discovered. After upholding the service tax liability as demanded in the SCN, the Divisional Bench was divided on the view of levying penalty u/s.78. The Member Judicial held that in terms of the decision in the case of CCE&E v. Ashish Vasantrao Patil, 2008 (10) STR 5 (Born), the Tribunal has the power to reduce the penalty imposed u/ s.80. The fact that only in one out of twenty branches, the infraction was brought on record, the penalty of Rs.50 lakh in place of Rs.10 cr. would meet the ends of justice. However, the other Member dissented and per majority decision, it was held that mandatory penalty u/s.78, was not reducible as held by the Supreme Court in the case of UOI v. Dharmendra Textile Processors, 2008 (231) ELT 3 (SC) where the suppression was found deliberate. It was further held that the non-obstante S. 80 provided for NIL penalty in case of bonafide belief. The Member Judicial however did not hold that there was bona fide belief. Citing Dharmendra Textile Processor (supra), it was further observed that the Court could interpret the law and not legislate the same and accordingly, the wordings of the statute in S. 78 had to be given full effect by virtue of which the penalty had to be equal the amount of short payment. As such, the penalty of Rs.10 cr. was held as sustained.
8. Valuation:
Sky Gourmet Pvt. Ltd. v. CST, Bangalore 2009 (14) STR 777 (Tri.-Bang.)
The appellant’s services being those of supply of food, beverages, etc. to airlines, were registered as outdoor catering service provider. Supply of food was claimed as exempt under Notification No. 12/ 2003-ST and on which due VAT was paid. Demand was made to receive service tax on gross receipts and agreeing to grant only abatement under Notifications 20/2004-ST and 1/2006-ST but not benefit under Notification No. 12/2003-ST. Invoices evidencing sale were available on records. Considering both the Notifications as mutually exclusive and relying on BSNL v. UOI, 2006 (27) STR 161 (SC), the appellant’s right to avail option of more beneficial Notification was upheld.
