Clearing and forwarding service : Consignment
agent :
Super Polyfabriks Ltd. V. CCE, Punjab, 2008 (10) STR
545 (SC)
The appellant under an agreement with Gas Authority of India
is a ‘consignment stockist’. The period in question was from 1-9-1999 to
31-7-2002. Both the Appellate Authority and the Tribunal dismissed respective
appeals. The short question was, whether in the facts and circumstances of the
case, the petitioner was providing services of clearing and forwarding. The
appellant pleaded that lower authorities proceeded only on the premise that the
agent was clearing and forwarding agent relying on the decision in the case of
Prabhat Zarda Factory P. Ltd. V. CCT, Patna 2002 (145) ELT 222 —
which was subsequently overruled by a Larger Bench in the case of Larsen &
Toubro Ltd. V. Commissioner, 2006 (3) STR 321. The Supreme Court relying on
the decision in the case of V. Lakshmanan v. B. R. Mangalagiri & Others,
(1995 Supp 2 SCC 33) opined that for determination of the liability, the
agreement has to be read as a whole. The purport and object in a contract could
be ascertained only from terms and conditions thereof. Neither nomenclature nor
a particular activity would be decisive. Whether in substance and effect the
person was a clearing and forwarding agent must be ascertained from the terms of
the agreement and conclude whether job of clearing and forwarding agent’s
operation was incidental to the main activity of getting the orders and selling
to clients or otherwise. Matter was remitted back to the assessing authority as
the orders were passed ex-parte because the appellant had not appeared
either before the assessing authority or the Appellate Authority.
2. High Court :
2.1 Construction service : Whether value of material
supplied free of charge includible in the value of taxable service ?
Era Infra Engineering Ltd. V. UOI, 2008 (11) STR 3
(Del.) :
The petitioner, engaged in providing commercial or industrial
construction service, received material free of cost from the owner company, was
issued show cause notice proposing to levy Service Tax on such free supply of
material, based on the explanation in Notification No. 1/2006-ST, which provides
for inclusion of value of goods supplied, provided or used by the provider of
construction service. Relying on the provisions of S. 67(3) and interim order in
the case of Larsen & Toubro v. UOI, 2007 (7) STR 123 (Mad.), the High
Court ruled that until conclusion of adjudication proceedings, material value
supplied free of charge would not be added for determining the taxable value and
that explanation in the Notification would not be applied to the detriment of
the petitioner. [CESTAT Delhi in the case of Millennium Constructions Pvt.
Ltd. V. CST, Delhi, 2008 TIOL 838 CESTAT Del. Waived pre-deposit of interest
and penalty levied when Service Tax demanded on addition of cement and steel
value received from recipient of services was already paid by the appellant.]
2.2 Penalty : Whether reducible below the minimum prescribed limit ?
UOI v. Aakar Advertising, 2008 (11) STR 5 (Raj.)
The Tribunal in the appeals in question :
à
reduced the penalty imposed to 10% of the duty demanded
à
Entertained an appeal on merits when order was passed dismissing the appeal
for non-payment of pre-deposit.
Short questions that arose in the two appeals aggregated
were :
à
Whether the Tribunal could reduce the penalty imposable u/s.76 below the
minimum prescribed limit ?
à
Whether the Tribunal could entertain an appeal on merits when the Commissioner
(appeals) rejected the appeal because of default in making pre-deposit u/s.35F
of the Central Excise Act, 1944 ?
For the question no. 2, it was pleaded that since the
Tribunal already allowed the appeal, the assessee be granted reasonable time to
comply with requirement of pre-deposit even at such stage and set aside the
order of the Commissioner (Appeals) and direct the Commissioner to decide on
merits. The High Court acceded to such request and directed the Commissioner to
decide the appeal on merits on condition of complying with pre-deposit within 4
weeks’ time.
As regards the question no. 1, it was held that if cause of
failure was reasonable, penalty may be set aside. Penalty could be played with
only between minimum and maximum prescribed limits and could not be reduced
below the minimum prescribed limit under the garb of any discretion. Yet it was
not always necessary to impose maximum penalty. The matter was remitted back to
the Commissioner (Appeals) with a direction to decide the penalty afresh
objectively and dispassionately after hearing the parties and in view of the
above observations in the instant order.
3. Tribunal :
3.1 Cargo handling service :
M/s. Jet Airways (India) Ltd. V. CST, Ahmedabad, 2008
TIOL 979 CESTAT Ahm.
The appellant, an airlines that transports passengers and cargo by air, receives booking of cargo to be transported by themselves at the booking office or through lATA agents appointed at various locations all over the country. The Revenue demanded Service Tax considering the appellant as cargo handling agency, although the appellant neither collected cargo from the premises of consignor, nor delivered the same to the consignee. The appellant contende ‘ that the service of transportation of goods by air was ” made taxable w.e.f. 10-9-2004 without disturbing any of the existing entries. Further that, the Board’s Circular F. No. B/11/1/2002, dated 1-8-2002 while detailing cargo handling services cited illustrations of services provided by Airports Authority of India, Inland Container Depot, Container Freight Station, etc. did not refer to any airlines undertaking transportation of goods. Accepting these pleas and relying on the Tribunal decisions inter alia cases of Dr. Lal Nath Lab. (P) Ltd. v. CCE, 2006 (4) STR 527 (Tri. Del.) and Glaxo SmithKline v. CCE, 2005 (188) EL 171 (Tri.-Mum.), it was held that when new entry is introduced without disturbing existing entries, it has to be held that the new entry was not covered by any previous entry.
3.2 CENVAT Credit:
Hindustan Coca Cola Beverages Pvt. Ltd. v. CCE, Meerut, 2008 TIOL 1022 CESTAT Del.
Considering that manpower supply service was not liable for Service Tax prior to 16-6-2005, the credit of Service Tax paid by the contractor of the company was denied. Stay application was allowed on the ground that since the Revenue accepted Service Tax paid by the contractor, applicant had prima facie – strong case.
3.3 Construction Service:
M/s. Greenview Land & Buildcon Ltd. v. CCE Chandigarh, 2008 TIOL 900 CESTAT Del.
The appellant, a developer and a builder, constructed complex himself without engaging a contractor and sold flats. The order of the original authority was based on DGST Circular dated 16-2-2006, which provided that Service Tax was attracted on such construction. The Commissioner (Appeals) rejected the appeal for non-fulfilment of pre-deposit vide – stay order. The plea of the appellant was that CBCE Circular No. 96/7/2007-ST of 23-8-2007 suppressed the DGST Circular and clarified that when builder did not engage contractor for construction, no service provider-service recipient relationship existed to attract provision of Service Tax. This was accepted by the Tribunal and the matter was remanded for de novo consideration in the light of Circular No. 96/ 7/2007 and without insisting on pre-deposit.
3.4 Export of service:
i) Blue Star Ltd. v. CCE, Bangalore, 2008 (11) STR 23 (Tri.-Bang.)
The appellant booked orders of foreign principals and received commission in convertible foreign exchange and accordingly, contented that such business auxiliary services were provided from India and used outside India fulfilled conditions to construe the services as ‘exports’ in terms of Export of Services Rules, 2005. The Department’s contention was that services were provided in India and refund of Service Tax paid on ‘exported’ services was rejected. The Tribunal held that refund be granted as the conditions of Rule 3(2) were satisfied and the appellant’s services were held as exports. The Tribunal allowed the appeal stating that the Commissioner had not considered the clause in the agreement relating to services rendered by the appellant.
ii) M/s. National Eng. Industries Ltd. v. CCE, [aipur, 2008 TIOL 939 CESTAT Del.
The appellant, an agent of General Motors, USA provided services of sourcing them on contract with Indian Railways. The appellant, although ‘exported’ service, paid Service Tax on the commission received from General Motors through Indian Railways. Refund claim was rejected on the ground that the commission from General Motors was received through Indian Railways in Indian rupees in lieu of foreign exchange and therefore, condition of Rule 3(1)(b) of the Export Rules was violated. According to the appellant, the purchase order of the party provided that agency commission of certain amount of US dollars be paid in equivalent non-convertible Indian rupees at prevailing exchange rate on relevant date and based on this, Indian Railways paid to the foreign party net of the said commission amount.
The Tribunal held that the purpose of Rule 3(2) was to extend benefit of exemption of Service Tax to persons earning convertible foreign exchange and since the equivalent amount payable to the appellant was not released to Indian Railways, the appellant complied with the provision of Rule 3(1)(b). The appeal was allowed while stating that machinery of a statute should be interpreted so as to promote the object and purpose of the scheme and the case should be decided in fulfilment with the legislative intention.
3.5 Import of Services: Effective date: Whether 18-4-2006 or 16-8-2002 ?
CCE Raipur v. Jindal Steel Power Limited, 2008 (11) STR 14 (7)
Contention of the Revenue that services provided by foreign-based commission agent were liable for Service Tax prior to 18-4-2006 under the category of business auxiliary service under Rule 2(1)(d)(iv) of the Service Tax Rules was rejected as the issue is considered settled in the case of Foster Wheeler’s [2007 (7) STR 443], wherein it was held that services provided by a service provider not having an office in India is taxable with effect from 18-4-2006 only with the insertion of S. 66A of the Finance Act, 1994.
3.6 Subcontractor’s services:
JAC Air Services Pvt. Ltd. v. CCE, New Delhi, 2008 TIOL 839 CESTAT DEL
The appellant provided cargo handling services in terms of agreement with Airports Authority of India for import of cargo. Relying on the Board’s instructions contained in F. No. 43/5/97-TRU of 2-7-1997 as to sub-consultancy, the plea of the appellant that they were subcontractors to Airports Authority of India was considered and waiver of pre-deposit was granted.
3.7 Refund: Under Rule 5 of the CENVAT Credit Rules, 2004:
Caliber Point Business Solutions Ltd. v. CCE, Belapur, 2008 (11) STR 15 (Tri.-Mum.)
The appellant exported taxable services and availed CENVAT credit on input services. Refund claim filed under Rule 5 of the CENVAT Credit Rules, 2004 was rejected on the premise of non-application of the said rule to service providers prior to 14-3-2006. Relying on the decision in the case of MNS Global Services (P) Ltd. v. CCE, 2008 (10) STR 273 (7), wherein it was held that any claim filed on or after 14-3-2006 even pertaining to the past period satisfying other requirements of the Rule and the Notification cannot be turned down on a ground which was not a condition of the Rule or Notification, it was held that the issue being identical, the ruling was binding on the Bench. The matter was remanded for a limited purpose of verifying other conditions of Notification 5/2006 CE(NT) as earlier rejection was made only on the ground of non-applicability of Rule 5.
