I.
Tribunal
35.
[2019-TIOL-05-CESTAT-ALL] Logix Infrastructure Pvt. Ltd vs. Commissioner
of Central Excise and ST, Noida Date of Order: 20th September, 2018
Preferred
location charges, external development charges are part and parcel of the main
service of Residential Complex Service eligible for abatement under
Notification 26/2012-ST.
Facts
The
appellants are provider of Residential Complex Service. They discharged service
tax on preferential location charges
@ 3.09%. A show cause notice was issued demanding service tax at the full rate
on the ground that abatement is granted only in respect of services where there
is transfer of material. Thus such charges collected separately are liable for
service tax at the full rate.
Held
The
Tribunal noted that the components such as preferred location charges, external
development charges etc., are part and parcel and for various elements of the
main service which is Residential Complex Service and therefore the entire
consideration received by the appellants is towards the bundled service of
construction of residential complex as per section 65F of the Finance Act, 1994
which is eligible for abatement under said Notification No.26/2012-ST.
36.
[2019-TIOL-25-CESTAT-MUM] Allied Blenders and Distillers Pvt. Ltd vs.
Commissioner of Central Excise and Service Tax, Aurangabad Date of Order: 25th
June, 2018
Remuneration
paid to directors as salary is not liable for service tax.
Facts
During the course of audit,
on scrutiny of records, it was noticed that the appellant had been receiving
services from the directors, but failed to discharge service tax under reverse
charge mechanism on the remuneration paid in accordance with Notification
No.30/2012-ST dated 20.06.2012 and Notification No.45/2012 dated 07.8.2012.
Consequently, a demand notice was issued. It was argued that all the directors
are whole-time directors and therefore the services rendered by them fall under
the category of service rendered by an employee to the employer which is not
liable for service tax.
Held
The Tribunal noted that
from the documents produced viz. Form 16, deductions on account of provident
fund, profession tax, it is crystal clear that the directors who are concerned
with the management of the company, were declared to all statutory authorities
as employees of the company and complied with the provisions of the respective
Acts, Rules and Regulations indicating the director as an employee of the
company. Thus the demand of service tax is set aside.
37.
[2019-TIOL-54-CESTAT-MAD] Visshu Constructions vs. Commissioner of
Central Excise Salem Commissionerate, Salem Date of Order: 4th September, 2018
Since all
the facts are disclosed in the returns filed, there is no suppression and
therefore the extended period of limitation cannot be invoked.
Facts
The Assessee had availed
the benefit of Notification No.1/2006-ST which provided that the benefit of
abatement is available only if CENVAT credit is not availed. However, the
assessee availed such credit. Accordingly a show cause notice was issued
invoking longer period of limitation. The matter was contested mainly on the
ground of limitation.
Held
The Tribunal noted that on
perusal of the ST-3 returns it is seen that they have disclosed that they are
availing the benefit of Notification 01/2006. As per the Notification, the
benefit would not be eligible if the assessee avails credit on inputs/input services.
However, they availed credit on certain input services. The same was also
disclosed by them in the ST-3 returns in Column 5B. Thus, the department was
put to knowledge and it cannot be said that the facts were suppressed from the
department with an intention to evade payment of service tax. Thus extended
period of limitation cannot be invoked and the demand was therefore set aside.
38.
[2019-TIOL-81-CESTAT-AHM] Kiran Gems Pvt. Ltd vs. Commissioner of
Central Excise & Service Tax, Surat-I Date of Order: 26th November, 2018
Electricity
charges collected from the tenants at actuals amounts to reimbursement of
expenses and cannot be considered as additional rent liable for service tax.
Facts
Appellant engaged in
providing services of “Renting of Immovable Property” also recovered as
reimbursement the charges towards electricity charges in additional to the rent
amount. The case of the department is that such reimbursement is a part of the
gross value of service and thus exigible to service tax.
Held
The Tribunal noted that
electricity is consumed by the service recipient therefore, they are liable to
pay the same at actuals unless the same is included in the rent. As per the
facts of the case, the electricity expense is supposed to be borne by the tenants
(service recipient) therefore, merely facilitating the payment of electricity
charges by the appellant and subsequently taking the reimbursement of the same
will not form part and parcel of the gross value of service of renting of
immovable property and thus the demand was set aside. Reliance was placed on
the decisions of ICC Realty (India) Pvt. Ltd [2013-TIOL-1751-CESTAT-MUM
and SB Developers [2018-TIOL-1866-CESTAT-DEL].
39.
2018 [19] G.S.T.L. 269 (Tri.- Del.) Gokul Ram Gurjar vs. Commissioner of
Central Excise, Jabalpur-II Date of Order: 20th February, 2018
In case
of self-owned labour used for carrying out certain activities, service tax on
Manpower Recruitment or Supply of Agency Service cannot be alleged or demanded.
Facts
The Appellant entered into
an agreement with one milk production co-operative limited company for washing
of cans/ crates, sorting of milk bags, milk packing etc. For this activity the
Appellant received remuneration as fixed amount per litre basis. The Revenue
raised service tax demand on the said activity interpreting it to be taxable
under category of manpower recruitment or supply agency service, as labours
were supplied by Appellant, who were under control of the Dairy Authorities.
Held
The Hon’ble CESTAT after
perusing the work order issued by the milk production company found that scope
of work related to washing of cans/ crates and packing of milk. There was no
specific mention about deployment of labour/ work force. Therefore, held that
service provided should not fall under taxable category of manpower recruitment
or supply agency service. The Hon’ble CESTAT also observed that the rate
contract provided in the work order clearly indicated that the amount should be
paid on a fixed basis i.e. per litre per pack basis and there appeared no
specific mention on payment of reimbursement of wages and salaries to the
workmen. Thus the services provided cannot fall under alleged taxable category.
Hence, allowed the appeal.
40. [2018] 100 taxmann.com 471 (New
Delhi – CESTAT) Premium Real Estate Developers vs. Commissioner of Service Tax,
Delhi Date of Order: 27th November, 2018
Land
procured from various landowners and after obtaining power of attorney from
them and selling it to another entity, is in the nature of trading in land and
service of real estate agent.
Facts
The appellant entered into
MOUs with another entity by which the appellant procured land at pre-determined
locations from various landowners and undertook ancillary activities i.e.
divide and demarcate the entire land into blocks, furnish title papers and other
necessary documents for the land to be purchased, obtain the permission and
approval from the concerned authority for transfer of land etc. bring owners of
the land for the purposes of negotiating, registration, etc., to the relevant
places and bear all the expenses involved on these. The said other entity
agreed to procure such acquired land at pre-decided average rate per acre of
land which included all the cost of land, development expenses etc. The MOU
further provided that the other expenses like stamp duty/registration charges,
mutation charges would be borne by the said another entity. On satisfaction by
the said another entity about the fitness of deal(s) for the land, the
appellant organised the registration in the name of the said another entity
after making payment to the owners of land from the advance amount given to
them for the purchase of land. The land was then directly transferred in the
name of another entity without first registering the same in the name of
appellant. The difference, if any, between the amount actually paid to the
owners of land and the average rate per acre settled between the parties as
indicated, would be payable to the appellant as their margin or profit. Further
the said another entity reserved its right to withhold 50 per cent of the
amount (out of margin) to ensure that the obligations on the
developer/appellant are fully discharged in terms of the MOU and in case there
was any serious default, the same could be made good by way of forfeiture of
such amount so withheld. Pursuant to the MOU, the appellant received advance
amount from the other entity for each site. Substantial part of such amount was
used by the appellant to pay to the seller or the prospective seller of the
land for agreeing to sell land to the said other entity. Revenue alleged that
the services were in the nature of “real estate agency” and thus, liable for
service tax. The Appellant contended that their transactions were on
principal-to-principal basis and they did not act as agent of other entity.
Held
The
Hon’ble Tribunal noted that there was no consideration defined and/or provided
for the alleged service in the MOU. In absence of any defined consideration for
the alleged service, there is no contract of service at all and hence the
transaction was not liable for service tax. The Tribunal observed that the MOU
was not only for providing purely service of acquisition of the land but
involved many other functions such as verification of the title deeds of the
persons from whom the lands were to be acquired, obtaining necessary rights for
development of the land from the Competent Authority etc. The remuneration or
payment for providing this activity was actually not quantified in the MOU. The
Tribunal also held that since specific remuneration was not fixed in the deal
for acquiring land. Both the parties worked more as partners in the deal rather
than as an agent and the principal. The amount payable to the appellant was
more of the nature of a margin and share in the profit of the deal in purchase
of land. Further, the Tribunal categorically noted that the said another
entity, instead of paying the price directly to the land owner, paid lump sum
amount to the appellant. Thereafter the appellant identified the land, the
seller and after being satisfied with the title of the seller, entered into
agreement with the seller and obtained power of attorney in their favour.
Thereafter the appellant transferred the land. Thus the transaction was one of
trading in land. The order was thus set aside.
41. [2018] 100 taxmann.com 261
(Ahmedabad – CESTAT) Modern Business Solutions vs. Commissioner of Service Tax,
Ahmedabad Date of Order: 18th October, 2018
The
nature of costs converted into reimbursements in terms of contractual
expressions is assessable value of services. Only expenses borne by service
provider on behalf of service recipient qualify to be reimbursable
expenses.
Facts
Appellant entered into
agreement where under they were required to manage a sales team on behalf of
the service recipient to extend the business of service recipient and receive
management fees by way of agreed percentage as well as reimbursements towards cost
of salaries, rent and incentives. They contended that their activities would be
classifiable as “manpower supply and agency services” and not as “business
auxiliary services” as alleged by the department and the value of
reimbursements received by them was not includible in the value of services.
Held
From
perusal of contractual terms between appellant and their clients, the Hon’ble
Tribunal noted that the scope of contract was not supply of manpower services
but it was a contract for promotion of services provided to the appellant. The
Tribunal found that the remuneration received was based on actual expenses by
adding percentage of profit margin over certain expenses. The Tribunal held
that this does not convert the expenses incurred by appellant into
reimbursements. Further, it was categorically observed that though
reimbursements cannot be included in assessable value of services in terms of
decisions of the Hon’ble Supreme Court in Union of India vs.
Intercontinental Consultant and Technocrats (P.) Ltd. [2018] 91 taxmann.com
67/66 GST 450 (SC), what constitutes reimbursements is required to be
determined in light of the decision in Bhagawathy Traders vs. CCE [2011] 33
STT 1 (CESTAT – Bang.) (LB), wherein it was held that only when the service
recipient has an obligation legal or contractual to pay certain amount to any
third party on behalf of the service recipient, the question of reimbursing the
expenses incurred on behalf of the recipient shall arise. Accordingly, the
Tribunal observed that the moot question is whether the expenses can be
converted into reimbursable expense by way of a contract or the expenses are
integral to the activities of the service provider that they cannot be
performed without such expenses. The distinction between the so called
“reimbursable expenses” and “free supplies” clarifies that all expenses
incurred by a service provider cannot be called reimbursable expenses and only
the expenses that qualify the test laid down in the decision of Bhagawathy
Traders (supra) can be called reimbursable expenses. Therefore, it was held
that in the context of business auxiliary services, the cost of manpower and
rent is not a reimbursable expense but a cost of service of the appellant and
merely in terms of contract, such costs cannot be converted into a reimbursable
expense. Thus, demand in respect of reimbursements received towards cost of
salaries and rent, was upheld.
42. [2018] 100 taxmann.com 306 (Kolkata –
CESTAT) Timken India Ltd. vs. Commissioner of Central Excise, Jamshedpur Date of Order: 24th October, 2018
When in terms of agreement with foreign licensor for use
of its proprietary technical information for manufacture and servicing of
products, the assessee was also required to represent to its customers only by
identity of licensor, services received by assessee from licensor held
“franchisee services” and not “intellectual property services”.
Facts
When,
in terms of agreement with foreign entity i.e. licensor, for use of its
proprietary technical information for manufacture and servicing of products,
the assessee was also required to represent its customers only by identity of
licensor, the Tribunal held that services received by assessee from licensor
would be regarded as “franchisee services” and not “intellectual property
services”.
In
terms of Technology License and Technical Assistance Agreement entered into
with foreign entity i.e. licensor, appellant acquired licenses to manufacture
and service the products manufactured with the use of licensor’s proprietary
technical information. Department demanded service tax under reverse charge
mechanism under category of “franchisee services” from appellant in respect of
royalty remitted by them to foreign entity for use of licenses on the ground
that appellant acted as franchisee of said foreign entity. Appellant rebutted
department’s contentions on the ground that they received limited right to use
the trademark of foreign service provider by way of license and thus, would be
taxable under the category of Intellectual Property Right Services.
Held
The Hon’ble Tribunal noted
that the contractual terms clearly establish that the agreement between appellant
and foreign entity is not limited to use of intellectual property right of
foreign entity for manufacture of products and for service of the main
products, rather the appellant is required to represent the foreign entity i.e.
licensor to appellant’s various customer in such a way that the appellant loses
its own individual identity and would perhaps be known only by the identity of
such foreign entity. Thus, it was held that the services availed by the
appellant are more akin to franchise services rather than intellectual property
right service. Further, reliance was placed on the decision of the Hon’ble
Delhi HC in Delhi International Airport (P.) Ltd. vs. Union of India[ 2017]
77 taxmann.com 92/59 GST 308 (Delhi). Accordingly, the Tribunal upheld
impugned demand under “franchisee services” by dismissing present appeal.
Note:
It appears that the dispute covered the period when intellectual property
services were not taxable. The case law is important from classification
perspective as the GST rate on “franchisee services” and “IPR services” may be
different.
II. High Court
43. 2018 [19] G.S.T.L. 611 (Kar.) XL Health
Corporation India Pvt. Ltd. vs. Union of India Date of Order: 22nd
October, 2018
On failure to follow the judicial discipline, cost of Rs.
1 lakh was imposed by High Court on Commissioner (Appeals) to pay from his
personal fund.
Facts
The
petitioner assessee claimed refund of tax on account of export of services
rendered by them, which was disallowed by the Commissioner (Appeals). The
CESTAT quashed the order stating that the issue is well settled. Later the same
petitioner again claimed refund on same ground for subsequent period and also
quoted favorable order of the Tribunal passed in their favour. But the
Commissioner (Appeals) in total breach of the judicial discipline disallowed
the refund vide its order despite being fully aware of the Tribunal’s earlier
order passed on similar issue in favour of assessee. The matter was then referred
to the Hon’ble High Court.
Held
The Hon’ble High Court
taking the issue on very serious note held that it is a total callous,
negligent and disrespectful behaviour shown by the departmental authorities
which should not be tolerated at all. It was this kind of lack of judicial
discipline which if it went unpunished would lead to more litigation and chaos
and such public servants were actually a threat to the society. By allowing the
writ petition, the Hon. Court directed Commissioner (Appeals) to pay cost of
Rs. 1 lakh from his personal funds and asked the assessee to approach concerned
Commissioner with fresh request of refund in accordance with the law and in
terms of the Tribunal order.
44. 2018 [19] G.S.T.L. 478 (Del.) MRF
Ltd. vs. Commissioner of Trade and Taxes
Date of Order: 10th August, 2018
Entitlement to interest on refund of pre-deposit amount,
calculable from the date when appeal was allowed in favour of assessee by the
Court.
Facts
Petitioner paid pre-deposit
amount to seek recourse to an appellate authority. Later the appeal was allowed
to the assessee and letter for refund
of the same along with interest was filed. The Revenue accepted refund plea but
did not pay interest. Aggrieved assesse preferred writ petition before the High
Court contesting that pre-deposit does not amount to payment of tax as it did
not bear such character, the refund of the same ought to have carried interest. Revenue on the
contrary contested that interest amounts would be due only from the time when
assessee would have filed form ST21 as per section 30 of the Delhi Sales Tax
Act, 1975.
Held
The Hon’ble Court held that
the pre-deposit sum that the assessee was compelled to pay to seek recourse to
an appellate remedy did not necessarily bear the character of tax, especially
when it succeeded on the particular plea. Revenue’s insistence upon a
procedural step, i.e. filing of a form which was purely for the purpose of
administrative convenience could not in any manner fix the period of limitation
when the amounts became due on the question of interest. The fact that the
amount due and payable from the date the appeal was allowed was not in dispute,
the postponement of the period from when interest became payable was
incomprehensive and illogical. For these reasons the petitioner was entitled to
interest from the date when its appeal was allowed by the Hon. Court.
