I. HIGH COURT
15. [2020 (43) GSTL (Bom.) New India Civil Erectors Pvt. Ltd. vs. UOI Date of order: 25th September, 2020
Section 87 of Finance Act, 1994 – Without assessment and determination of tax due, no conclusion can be reached that any amount has become due to be paid and invocation of section 87 shall be premature and unjustified
FACTS
The petitioner was a private limited company engaged in the business of construction. For the period from 1st April, 2015 to 30th June, 2017, due to non-realisation of legitimate dues the petitioner was unable to discharge its service tax liability of Rs. 94,26,823 as alleged by the Department. The respondent also alleged that as per the statements by the accountant and legal consultant of the petitioner, it was evident that there was admission on the part of the petitioner of service tax liability. Such statement was also sustained by the director of the petitioner. The respondent contended that such declarations amounted to admission of liability which was recoverable u/s 87 of the Finance Act, 1994. Thus, the respondent issued a garnishee notice and froze the bank account of the petitioner to hold Rs. 94,26,823. Being aggrieved, the petitioner filed the present writ petition seeking relief by way of unfreezing of the bank account.
HELD
The High Court was of the view that the crucial expressions to be noted from section 87 of the Act are ‘any amount payable’, ‘is not paid’ and ‘shall proceed to recover’. A joint reading of these expressions can be interpreted to mean that before issuing garnishee notice u/s 87(b)(i), the amount has to be first determined and quantified. In the case of M.P. Enterprise vs. Union of India, 2018 (19) GSTL 487 (Bom.), the High Court had held that prior to determination of the amount due the invocation of section 87 would be premature. Further, mere statements by the officials themselves cannot lead to the conclusion that a certain amount has been determined as due from the petitioner. Without there being any assessment, no conclusion can be reached about any amount becoming due. Thus, the Court held that such invocation of section 87 was premature and unjustified and directed the respondent to withdraw the restraint on the petitioner’s bank account.
16. [2020 (42) GSTL 21 (HC-Mad.)] TVL Madura Coats W.P. (MD) No. 521 of 2020 and W.M.P. (MD) No. 399 of 2020 Date of order: 13th August, 2020
Section 83 of Central Sales Tax, 1956 – Onus lies on assessing authority to prove a statement as false in case of non-acceptance of explanation on the discrepancy pointed – Stand taken in subsequent assessment by the assessing authority prevails over a year unless it is justified
FACTS
The petitioner was served with an order rejecting exemption claimed on certain export transactions consequent to an assessment. The variation in the export value as set out in the export documents and books of accounts due to fluctuation in foreign exchange was rejected for want of a bank reconciliation statement. Reversal of export transactions erroneously shown by the petitioner as sales return were also rejected for non-submission of relevant documents even though the transactions were supported by bona fide documents and a certificate issued by the Chartered Accountant. The petitioner contended that the stand taken by the authority was contradictory to its subsequent assessment and thus had preferred the present writ.
HELD
The High Court held that when the assessing authority had accepted the explanation of the petitioner for the same discrepancy in the subsequent assessment, it cannot change its stand unless it has a proper reason for doing so. Further, if the authority was of the view that the statement of the petitioner was false, the onus lies on the authority itself to prove this. The petitioner cannot be expected to prove its point. Thus, the respondent was directed to revise the order.
17. [2020 (43) GSTL 479] Vianaar Homes Pvt. Ltd. vs. Asstt. Commr. (Circle-12), CGST, Audit-II, Delhi & Ors. (Del.) Date of order: 25th September, 2020
Rule 5A of Service Tax Rules, 1944 framed under the repealed / omitted Chapter V of the Finance Act, 1994 is saved by sections 173 and 174 of CGST Act, 2017
FACTS
The petitioner is a company engaged in the business of construction of residential complexes. It challenged a letter dated 1st November, 2019 by virtue of which the respondents commenced audit / verification under Rule 5A of the Service Tax Rules, 1994. The primary reason for challenging the action was that with effect from 1st July, 2017, with the advent of the CGST Act, the respondents cannot take recourse to a subordinate legislation (i.e., Rule 5A, Service Tax Rules, 1994) framed under Chapter V of the Finance Act, 1994 because it stands omitted by virtue of section 173 of the CGST Act. Besides, section 174 of the CGST Act, 2017 does not specifically repeal or save Rule 5A of the Service Tax Rules, 1994.
HELD
After extensively examining sections 173 and 174 of the CGST Act, 2017 along with sections 6 and 24 of the General Clauses Act, the High Court came to the conclusion that the intention of the Parliament was to save not only the ongoing proceedings but also the initiation of fresh investigation, inquiry, verification, etc., under the erstwhile service tax regime. Non-inclusion by title in the saving clause will not have any bearing on enforcement of the subordinate legislation (Rule 5A of the Service Tax Rules) where the parent Act is specifically saved. Thus, the Court held that Rule 5A of the Service Tax Rules, 1994 framed under the repealed / omitted Chapter V of the Finance Act, 1994 stood saved.
18. [2020 (43) GSTL 333 (Ker.)] Madhav Motors vs. State Tax Officer, GST
Department, Kannur Date of order: 27th October, 2020
Section 139 of Central Goods and Services Tax Act, 2017 – Where fresh registration is granted without cancellation of provisional registration, then such registration must relate back to the date of provisional registration and assessee be allowed to file returns and claim input tax credit from the date of provisional registration
FACTS
The petitioner was a dealer in automobiles registered under the erstwhile Kerala VAT Act. With the introduction of the GST Act, it applied for registration under the new Act and was granted provisional registration on 28th June, 2017 as per section 139 of the CGST Act, 2017. Thereafter, it tried uploading Form TRAN-1 for conversion of provisional registration to permanent registration and to claim transitional credit. But since no permanent registration was granted, it was not able to upload the said Form. Hence it opted for a representation, but the respondent did not give any response. In the interim, on 4th January, 2020 it was granted a fresh registration without cancellation of the provisional registration. The fresh registration indicated the liability of the petitioner from 1st July, 2017, whereas the registration certificate would be valid only from 4th January, 2020. Noticing this discrepancy, the petitioner requested the respondent for a change in the effective date of the registration certificate from 4th January, 2020 to 1st July, 2017. But this request was rejected. Aggrieved, the petitioner filed the present writ petition.
HELD
The High Court found that the provisional registration granted was not formally cancelled by the respondent as per the procedures envisaged under the GST law. The permanent registration was granted by the respondent on 4th January, 2020 and the date of liability was shown as being from 1st July, 2017. This clearly indicated that the respondent was aware that the petitioner was under the category of those who were taking refuge under transition credit. The respondent, however, stipulated the validity of the registration only from 4th January, 2020. Therefore, the Court held that where the provisional registration is not cancelled the permanent registration must relate back to the date of the provisional registration. It directed the respondent to amend the certificate and make it valid from 1st July, 2017 and permit the petitioner to upload returns and claim ITC (input tax credit) based on the returns so uploaded for the impugned period.
II. TRIBUNAL
19. [2020 (42) GSTL 66 (Tri.-Del.)] Om Logistics Limited ST/51121/2019 Date of order: 5th December, 2020
Rule 2(I) of CENVAT Credit Rules, 2004 – CENVAT credit available on tax paid on insurance premium under ‘Keyman’ insurance policy
FACTS
The appellant, registered under the Service Tax Act, availed CENVAT credit on tax charged on insurance premium paid in respect of the ‘Keyman’ insurance policy of key managerial persons. The respondent alleged that the life insurance policy was primarily for the personal use of the persons involved and not for any business purpose. Further, instead of the insurance policy, they had produced only the receipt of the premium. Thus, the credit availed was disallowed.
HELD
The Tribunal, relying upon on its own judgement, held that benefit of the policy in question was payable to the appellant company, being registered under the Companies Act and having perpetual existence. Thus, credit availed in respect of the insurance premium paid on account of ‘Keyman’ insurance had to be allowed to the appellant.
20. [2020 (42) GSTL 84 (Tri.-Hyd.)] Ushodaya Enterprises Pvt. Ltd. Date of order: 18th November, 2019
Section 73 of Finance Act, section 11A of Central Excise Act, 1994 – The show cause notice issued invoking extended period subsequent to Department audit wherein no such objection was raised is time-barred
FACTS
The appellant, a division of Ramoji Film City, operated satellite T.V. channels. A show cause notice was served on it on 7th April, 2011 for the period 2006-07 to 2009-10, alleging that the hire charges paid to a party abroad for the purpose of lease / rent of transponders which are attached to a satellite was to be classified as business support services and calling upon it to pay service tax on the same.
HELD
The Tribunal observed that the show cause notice was received by the appellant on 7th April, 2011, even though the Department claimed to have issued it on 24th March, 2010. The Department could not produce any document of dispatch or service thereof. Further, the appellant was admittedly audited by the Department where no objection was raised on the issue. Thus, the subsequent show cause notice cannot propose the demand for a period beyond one year of the period in dispute nor can it allege suppression of facts or misstatement with an intention to evade tax. Besides, if service tax paid under RCM on the value of hire charges paid by the appellant to the service provider abroad was available as credit in case such value was categorised as taxable, the situation would be revenue neutral. Consequently, penalty cannot be imposed as the facts indicated the absence of intention to evade tax.
21. [2020 (42) GSTL 79 (Tri.-All.)] Shriram Pistons and Rings Ltd. ST/70444/2019 Date of order: 4th February, 2020
Section 65 of Finance Act, 1994 – Amount recovered from salary of employees leaving job before completion of their term fixed as per contract entered into with them is not liable to tax
FACTS
The appellant was served with an order demanding service tax from that part of the amount which it recovers out of the salary paid to the employee if the employee breaches the contract of total term of employment.
HELD
It was held that the said recovery was out of the salary paid and also that the salary was not covered by the provisions of service tax. Relying upon the decision of the Madras High Court in GE T & D India Ltd. (Formerly ALSTOM T & D India Ltd.) vs. Deputy Commissioner of Central Excise 2020 (35) GSTL 89 (Mad.), the impugned order was set aside.
22. [2021-TIOL-04-CESTAT-Chd.] Mohan International Builders vs. Commissioner of Central Excise and Service Tax Date of order: 24th November, 2020
Works contract service is a service as a whole and therefore even though service tax is payable on a part of the value, reversal is not required under Rule 6(3) of the CENVAT Credit Rules, 2004
FACTS
The assessee is a registered contractor and providing Works Contract Service. It is liable to pay service tax on 40% of the value of service; therefore during audit an objection was raised that the remaining 60% of the value is to be treated as an exempted service in view of Rule 2(e) of the CENVAT Credit Rules, 2004; as such, the assessee was required to pay an amount under Rule 6(3)(i) of CENVAT credit availed by it.
HELD
The Tribunal relied on the decision in Surya Contractors Pvt. Ltd [2020-TIOL-899-CESTAT-Chd.] where the Tribunal categorically held that service as a whole provided by the appellant is a Works Contract Service and the same is a taxable service. It was also noted that the Scheme of Rule 6 read with Rule 2(e) of the CENVAT Credit Rules, 2004 shows that Rule 6 is applicable only in respect of distinct transactions of services wherein the appellant is providing two distinct transactions, one by way of a taxable service and another by way of an exempted service under Rule 2(e). Rule 6 does not become applicable in respect of the same taxable service where a part of it is being exempted by way of any notification issued which exempts a certain portion of the value of the same taxable service. The Tribunal accordingly held that Rule 6(3) of the CCR is not applicable to the present case.
23. [2021-TIOL-06-CESTAT-Bang.] M/s Northern Operating Systems Pvt. Ltd. vs. Commissioner of Customs, Central Excise and Service Tax Date of order: 3rd December, 2020
Deputation of employees by a group company is not liable to service tax under manpower recruitment or supply agency service – Employer-employee relationship exists therefore such transactions are excluded from the purview of service tax
FACTS
The appellant entered into an agreement with its group companies located outside India to provide general back office and operational support to such group companies. The terms of the agreement stipulated that when required the appellants would request the group companies for managerial and technical personnel to assist in its business and accordingly the employees would be deputed by the group company. The employees would act in accordance with the instructions and directions of the appellants, they would be on the payroll of the group company and would receive salary and other social security benefits from the group company. The Revenue alleged that the appellant failed to discharge service tax under manpower recruitment or supply agency service with respect to services received from their group company.
HELD
The Tribunal noted that service by an employee to the employer in the course of or in relation to his employment stands excluded from the definition of service. The persons seconded are working in the capacity of employees and payment of salaries, etc., is made by group companies only for disbursement purposes and hence an employee-employer relationship exists and such an activity cannot be termed as ‘manpower recruitment or supply agency’. The demand is accordingly set aside.
24. [2020 (43) GSTL 533 (Tri.-Del.)] Vaatikaa Construction Pvt. Ltd. ST/53250-53251/2015, 53307/2015 Date of order: 5th December, 2020
Section 65(105) – Service tax demand raised under one category cannot be confirmed under another category
FACTS
The appellant’s activities were in the nature of works contracts. A show cause notice was issued to it demanding service tax under ‘residential complex construction’ service, whereas the demand was confirmed under ‘works contract’ service.
Further, the respondent rejected the CA’s certificate and raised service tax liability on the closing balance of advances as reflected in the balance sheet, overlooking the months during which the advances were received.
HELD
The Tribunal, relying upon the various judgments quoted by the appellant, held that demand cannot be confirmed under a different category than the category quoted under the show cause notice even if the nature of business is in line with the said category quoted in the order. Besides, as the respondent failed to assign any specific reason for rejecting the CA’s certificate and computed the liability on the closing balance of the advance receipt, the additional demand was set aside.
