Service Tax

I. HIGH COURT

The Hon’ble Supreme Court held that
amendment to Notification No. 126/94-Cus dated 3^rd June, 1994 by
Amending Notification No. 56/01-Cus dated 18^th May, 2001 is
prospective in nature, as an essential requirement for application of
legislation retrospectively is to show that the previous legislation had any
omission or ambiguity or it was intended to explain an earlier act; in the
absence of the above ingredients, legislation cannot be regarded as having
retrospective effect

FACTS

The appellant is a 100% Export-Oriented Unit
required to export all articles produced by it. As a consequence, it is
exempted from payment of customs duty on the imported inputs used for the
production of the exported articles, vide Notification No. 126/94-Cus
dated 3^rd June, 1994. Under the said Notification, exemption on levy
of customs duty had been extended even to the inputs used in the production of
articles sold in the domestic market in accordance with the Export-Import
Policy and subject to other conditions specified by the Development
Commissioner. In the case of non-excisable goods, the customs duty was payable
on the inputs used for production, manufacturing or packaging of such articles
at a rate equivalent to the rate of customs duty that would have been leviable
on the final articles.

The said
Notification was amended by Notification No. 56/01-Cus dated 18^th
May, 2001 after which the customs duty on inputs was charged at the rate
equivalent to the duty leviable on such inputs and not on the final articles. The
EXIM Policy 1997-2002 provided that a 100% Export-Oriented Unit in the
floriculture sector was permitted to sell 50% of its produce domestically,
subject to achieving a positive net foreign exchange earning of 20% and upon
approval of the Development Commissioner. The appellant, without obtaining the
approval of the Development Commissioner and without maintaining the requisite
net foreign exchange earning, made sales domestically. Notably, they
subsequently sought ex-post facto approval from the Development
Commissioner. However, in the meanwhile a show cause notice was issued for levy
of customs duty on the domestic sales made in contravention of the EXIM Policy.
The duty was confirmed as per the pre-amended Notification which was
operational during the period under consideration.

HELD

As regards the first ground, the Hon’ble
Supreme Court held that on a combined reading of the Notification with the
conditions laid down in the EXIM Policy, it is clear that the fulfilment of the
said conditions is a condition precedent to becoming eligible to make domestic
sales. The domestic sales pertaining to excisable goods made in conformity with
the conditions of the EXIM Policy are exigible to excise duty, but once there
is a contravention of the conditions of the Policy, irrespective of the goods
produced being excisable or non-excisable, the benefit under the exemption
Notification is unavailable. In such a situation, the very goods would become
liable to the imposition of customs duty as if being imported goods. The Court
further held that the demand made in the show cause notice ‘treating’ cut
flowers that were grown on Indian soil as deemed to have been imported was only
for the purpose of quantification of the customs duty on the imported inputs
and not the imposition of customs duty on the domestically grown cut flowers as
such.

The Supreme Court held that the language
employed in the amendment Notification does not offer any guidance on whether
the amendments as made were to apply prospectively or retrospectively. It is a
settled proposition of law that all laws are deemed to apply prospectively
unless either expressly specified to apply retrospectively or intended to have
been done so by the Legislature. The latter would be a case of necessary
implication and it cannot be inferred lightly. Referring to Circular No.
31/2001-Cus dated 24^th May, 2001, the Court held that upon a bare
reading of the circular, it can be noted that it discusses the mechanism in
force before the amendment, the reason for bringing in the change and the
changes brought in. The circular does not mention that the earlier methodology
in force was deficient or devoid of clarity in any manner. It rather says that
the same was being disadvantageous to the export units as compared to the other
units due to the difference in charging rates in the respective circulars. Upon
considering that, the amendment has been brought in to establish parity with
the excise notifications and to vindicate the disadvantage that the earlier
regime was causing to export-oriented units.

Merely because an anomaly has been
addressed, it cannot be passed off as an error having been rectified. Unless
shown otherwise, it has to be seen as a conscious change in the dispensation,
particularly concerning fiscal matters. To call the amendment Notification
clarificatory or curative in nature it would require that there had been an
error / mistake / omission in the previous Notification which is merely sought
to be explained. As regards the Notifications, in this case, referring to the proviso
in the charging section of the Central Excise Act, the Court concluded that the
exemption Notification was not an error that crept in but was intentionally
introduced by the Government to determine the charging rate and hence it cannot
be said to be clarificatory in nature.

II. HIGH COURT

2. [2020 (39) G.S.T.L. 388 (Guj.)] Hitech Projects vs.
UOI Date of order: 6^th
July, 2020

Section 125 of Sabka Vishwas (Legacy
Dispute Resolution) Scheme – Fair opportunity to be provided to the petitioner
if unable to attend the personal hearing owing to the lockdown on account of
the Covid-19 pandemic

FACTS

The petitioner applied for the Sabka
Vishwas (Legacy Dispute Resolution) Scheme with respect to two pending
appeals. However, the applications were held to be not maintainable as the case
involved confiscation of goods and imposition of redemption fine. A personal
hearing for the same was scheduled during the period of lockdown when the
offices of the petitioner and the Department were closed. On failure of the
petitioner to appear for the matter, SVLDRS-3 was issued by the Department
directing it to pay the disputed amount. The petition was filed requesting a
fresh hearing and to set aside the SVLDRS-3.

HELD

Without going into the merits of the case
whether benefit of the SVLDR Scheme would be available to the petitioner, the
High Court held that an opportunity should be given to the petitioner to put
forward its case before the Department in person. Besides, though the payment
under the Scheme was to be made by 30^th June, 2020, the Department
was directed to accept the payment considering the fact that the litigation was
pending before the Court.

 III. TRIBUNAL

3. [2020-TIOL-1403-CESTAT-Kol.] M/s Acclaris Business
Solutions Pvt. Ltd. vs. Commissioner of CGST and Central Excise Date of order: 10^th
September, 2020

When the services are 100% exported, refund
is eligible of the entire CENVAT credit irrespective of whether export payment
is received or not received

FACTS

A 100% exporter of services, the appellant
claimed refund of accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004. Both the authorities below denied the refund of a
certain amount while applying the formula prescribed for maximum permissible
refund of the credit amount. In the said formula, the authorities included the
value of export invoices for which payment is not received in the relevant
period while considering the value of ‘total turnover’ and granted
the refund proportionately to the extent of payment received.

HELD

The Tribunal noted that refund is allowed of
the ‘net CENVAT credit’ availed. The intention of the formula of refund claim
of export value in the numerator and total turnover in the denominator is to
restrict the refund only to export services and not for domestic services.
Thus, when there is no domestic service, in both numerator and denominator the
amount of export turnover has to be considered. There is no reason to consider
the aggregate of the value of export turnover payment of which has been
received and that for which payment has not been received, since it is not
required in the prescribed formula. It was further noted that if the contention
of Revenue is accepted, then the assessee will never be allowed refund of the
‘CENVAT credit amount availed in the relevant period’ inasmuch as the refund in
the subsequent period would be allowed by considering the ‘net CENVAT credit’
availed in that period. That is neither the intention of the law nor prescribed
in the formula above and therefore the refund is fully admissible.

4. [2020-TIOL-1401-CESTAT-Kol.] Commissioner of
Service Tax vs. M/s Naresh Kumar and Company Date of order: 6^th
February, 2020

The activity of liaising and supervision,
not involving physical handling of goods, is not covered by clearing and
forwarding agent services

FACTS

The assessee is rendering various services
like liaison and follow-up on behalf of consumers between collieries and the
railways, supervision, monitoring, witnessing the loading of specified size and
grade of coal and shortage en route, ensuring optimum quantity of supply,
ensuring proper weighment, coordinating receipt of necessary documents and
submitting the same to consumers and organising sampling and analysis of coal.
It is the case of Revenue that these activities amount to rendering ‘clearing
and forwarding services’. But as per the assessee, these activities do not
amount to rendering ‘clearing and forwarding services’ as they do not
physically handle or receive or store the goods, but only do liaising,
supervision and coordination.

HELD

The Tribunal,
relying on the decision of the Supreme Court in the case of Coal Handlers
Pvt. Ltd. vs. Commissioner of Central Excise [2015-TIOL-121-CESTAT-Mum.]
where the Apex Court has categorically held that the activity of liaising and
supervision will not be considered as clearing and forwarding since there is no
physical activity involved, set aside the demand.

5. [2020-TIOL-1377-CESTAT-Mum.] M/s Aban Offshore
Ltd. vs. Commissioner of GST and Central Excise Date of order: 28^th July, 2020

Short-term accommodation, rent-a-cab
service and outdoor catering service are allowable as CENVAT credit post-1^st
April, 2011

FACTS

The appellant was engaged in providing
various services including mining service, utilised CENVAT credit on the input
services used for providing such output services. The input services used
included short-term hotel accommodation, rent-a-cab, outdoor catering and
housekeeping services. A show cause notice was issued disallowing the said credit
availed post-1^st April, 2011. The assessee contended that the crew
is deployed to the offshore location from various geographical locations;
further, there are several permissions and approvals required before the work
is commenced. Therefore, the crew requires to be accommodated during the
relevant time. With respect to the rent-a-cab service, it was stated that the
same is required for their naval officers and surveyors to travel to the rig.
And outdoor catering services were used for the personnel working on the rig. Thus, the services used being wholly for business
purposes, the credit should be allowable.

HELD

The Tribunal noted that the service of
accommodation was necessarily required to be provided till the time the
necessary approvals and permissions were received. Therefore, such service not
being for personal consumption, the credit is allowable. As for the rent-a-cab
service, it was submitted that the exclusion merely restricts credit on
vehicles which qualify as capital goods. From the recipient’s point of view, a motor vehicle can never be
capital goods and he would never be eligible for credit if a narrow
interpretation is given. Thus, credit is allowable on rent-a-cab service. With
respect to the outdoor catering, it is held that access to proper food is the
most basic requirement for any person to carry out a task. If the appellant’s
personnel fall ill on account of stale / spoilt food, the operation being
carried out by the appellant would be adversely impacted and, consequently, the
output service. Thus, the service being in relation to output service, the
credit is allowable.