I High Court
45. [2018] 95
taxmann.com 319 (Bombay-HC)
Commissioner of Service Tax, Mumbai-VI vs. Shri Krishna Chaitanya Enterprises
Date of Order: 25th January, 2018
Since in terms of provisions of MOFA Act, 1963, the
builder/developer is statutorily obliged to assume responsibility for
maintenance and repairs of building till the process of conveyance is
completed, such activity cannot be construed as provision of “management,
maintenance and repair services”.
Facts
The assessee, being a builder and developer engaged in
construction of residential complexes, inter alia, collected certain
sums from prospective flat buyers as maintenance cost towards expenses for
maintenance and repair of building till conveyance of property to flat buyers.
Revenue alleged that said sums collected would be chargeable to service tax
under category of “management, maintenance or repair services”. During the
appellate proceedings, the Tribunal set aside impugned demand. Being aggrieved,
revenue filed present appeal raising a substantial question of law as to
whether the act of undertaking maintenance and repairs of flats till conveyance
and collecting certain charges for the same from flat buyers can be regarded as
provision of “management, repairs and maintenance services” and thereby,
whether the Hon’ble Tribunal was justified in setting aside the impugned
demand.
Held
The Hon’ble High Court noted that in terms of Maharashtra
Ownership Flats (Regulation of the Promotion of Construction, Sale, Management
and Transfer) Act, 1963 (hereinafter referred to as “MOFA”), the
builder/developer is regarded as promoter and that, various provisions listed
u/s. 5 to section 13 of MOFA deal with the duties and obligations to be
fulfilled by promoter so as to provide for safeguarding and protecting the
interest of flat takers and unit purchasers to ensure them a title in property.
The said Act provides for complete regulatory mechanism till conveying the
property to a legal entity namely a co-operative housing society or a company,
which is required to be formed by the promoter.
Accordingly, the Court observed that till the process of
conveying the property is complete, the builder/developer as a promoter is
statutorily obliged to hold on to the property and the money for complete
discharge of his eventual duties and therefore, he has to maintain, safeguard
and protect the property and look after the day-to-day wear and tear. In this
background, the Court held that when the builder/developer maintains the
structure or repairs, he is not rendering a taxable service in the sense
envisaged by the Financial Act, 1994 as such activities are performed as statutory
obligation casted upon him by MOFA. Further, the High Court held that it is not
a contract simplicitor of maintenance of immovable property, as if there is an
existing building comprising of flats, fully occupied, the maintenance and
upkeep of which is handed over under a contract.
It is a statutory obligation superimposed on a contract to
sell a flat/unit in a building to be constructed on a piece or parcel of land
in terms of MOFA. In other words, the maintenance of property till conveyance
is the statutory obligation of builder/developer in terms of provisions of MOFA
and thus cannot be equated with provision of taxable service. Therefore, the
High Court affirmed the decision of Tribunal and revenue’s appeal was
dismissed.
II. Tribunal
46. 2018 (14) GSTL 254
(Tri.-ALL.) Parle Biscuits Pvt. Ltd. vs. Commissioner of Central Excise,
Allahabad
Date of Order: 4th April, 2018
CENVAT Credit on capital goods cannot be denied on grounds
that the same was availed on the basis of endorsed invoices.
Facts
The CENVAT credit on capital goods received two years back by
the Appellant on the basis of invoice endorsed by the original recipient was
disallowed by the department on grounds that endorsed invoices cannot be held
as valid documents for the purpose of availment of CENVAT credit.
Superintendent and Inspector of Central Excise endorsed the invoices at the
request of the original recipient in favour of Appellant.
Held
The Hon’ble Tribunal held that there was no dispute about
receipt of the capital goods and duty paid thereon. Substantive benefits cannot
be denied by raising grounds of procedural violation. Hence, set aside the
impugned orders and allowed the appeal
47. 2018 (14) GSTL 255
(Tri.-Del.) MTNL vs.
Commissioner of Service Tax, Delhi
Date of Order: 30th January, 2018
Service tax collected from customers but delayed in
depositing the same with Government account, attract charge of interest.
Facts
Appellant collected the
consideration for the services rendered along with the service tax thereon.
However, the service tax collected from such customers was deposited with
Government account after an estimated delay of two months. Demand to the extent
of payment was dropped, however small amount of interest was demanded and
interest was charged. Aggrieved by the order appeal was filed stating that
since the demand for service tax has been dropped, there is no justification
for demand of interest.
Held
The Hon’ble Tribunal held that service tax amount collected
by the Appellant has been deposited with the Government only after delay.
Hence, the charging of interest is fair and reasonable. Appeal disallowed by
upholding the demand of service tax of a small amount along with interest and
penalty.
48. 2018 (14) GSTL 250
(Tri.-Ahmd.) Vijay Tanks & Vessels Pvt. Ltd. vs. Commissioner of C. Ex.
& S.T., Anand
Date of Order: 22nd December, 2017
Registration is not a pre-requisite to claim credit.
Facts
Assessee availed CENVAT credit on various input services that
were used to provide output services of works contract services, supply of
tangible goods services, consulting engineering services, business auxiliary
services etc., at various locations/sites. However, certain locations/sites
were not included in the centralised registration. These locations/sites were
included only after several reminders from department. Department issued a show
cause notice demanding CENVAT credit availed along with interest and proposed
penalty thereon which was later confirmed by the Adjudicating and the Appellate
Authorities. Aggrieved Appellant assessee therefore preferred appeal before
the Hon’ble Tribunal.
Held
The Hon’ble Tribunal held that credit cannot be denied merely
on the ground that respective sites were not included in centralised
registration certificate issued to the Appellant. There is no dispute of the
fact that the input services were utilised in providing the output services.
Accordingly, the impugned order was set aside and appeal was allowed with
consequential relief.
49. [2018] 95
taxmann.com 242 (Chennai – CESTAT) Mail Related Services vs. Commissioner of
Service Tax, Chennai
Date of Order: 20th June, 2018
The “franking charges”, as collected by assessee from its
clients and paid to post master general, being a statutory levy in terms of
Indian Post Office Act, 1898 are not includible in taxable value in terms of
section 67 of Finance Act, 1994. The rebate given by post office to assessee on
franking charges cannot be said to be consideration for promotion and marketing
of services of postal department so as to attract service tax under “business
auxiliary services”.
Facts
The appellants are engaged in providing mailing services
using franking machines obtained on license from the postal department. They
collect the mails from their clients, frank them as per weight and then mail
the documents/packets. For the said activity, appellant collects service
charges from customers and duly discharges service tax liability on said
service charges under category of “Mailing List Compilation and Mailing
Services”. In respect of franking cost, either the clients directly take out
demand drafts in favour of the Post Master General or in some cases, appellants
pay the franking cost on behalf of their customers and get it reimbursed from
the latter subsequently. Department alleged that as reimbursement of cost of
postage received from the clients cannot be termed as pure agent expenditure,
such franking charges are includible in value of taxable services in terms of
section 67 of Finance Act, 1994. Besides, they also receive a rebate of 3% on
the franking charges from postal department, which was treated by the
department as chargeable to service tax under category of “business auxiliary
services” for promoting or marketing of postal service.
Held
As regards dispute pertaining to inclusion of franking
charges in the taxable value, the Hon’ble Tribunal noted that the postage is a
“statutory duty” as defined by the Indian Post Office Act, 1898 and that this
statutory duty is permitted to be paid to the Government of India by way of
affixing physical postage stamps and by franking of the appropriate postage on
the letters by making use of the licensed franking machines. As per section 17
(2) of the Indian Post Office Act, 1898 postage franked through Franking
Machine is a statutory levy. The Tribunal held that since such charges are
either directly collected by postmaster general or paid by them to the
postmaster general on behalf of clients, said charges cannot be said to be
accrued to the appellant and thus, cannot be made part of taxable value.
Further, it was held that ratio laid down by the Hon’ble Supreme Court in Union
of India vs. Intercontinental Consultants & Technocrats (P.) Ltd. [2018] 91
taxmann.com 67/66 GST 450 is squarely applicable in the present case.
Therefore, the Tribunal held that franking cost cannot be included in
computation of value of taxable service and set aside impugned demand. Regarding next issue of demand under
“business auxiliary services” on rebate received from postal department, it was
noted that the entire activity of dispatch is effected on behalf of the
business entities and the appellants are therefore, the users of the post office.
The transaction of franking or usage of the postal service is solely between
the appellants and the post office with the former as a customer of the latter.
Tribunal observed that the rebates are offered as an incentive for the reduced
workload on the post office staff, to encourage use of franking machines,
especially where the volumes are above a certain threshold level. Thus, such
rebates can hardly be designated as commission or remuneration for promoting
the postal services. The Tribunal referred to its own decision in United
Mailing Services, Sai Mailing Services vs. CST [Appeal No. ST/257/2011, dated
08-09-2015] holding that rebate received from the postal department on
franking charges is not liable to be taxed. Accordingly, impugned demand rebate
received was dropped.
50. [2018] 95
taxmann.com 277 (Mumbai – CESTAT) Ajit India (P.) Ltd. vs. Commissioner of
Service Tax, Mumbai-II
Date of Order: 25th May, 2018
The Tribunal held that the activity of production, supply
and installation of aluminum structural glazing, sliding doors and window to
residential buildings is a composite supply involving sale of goods as well as
provision of service and thus, chargeable to service tax under “works contract
services”.
Facts
The appellants were inter alia engaged in production,
supply and installation of structural glazing, sliding doors and window to
residential buildings. The contract for installation of aluminum structures was
entered into with the builders and at times with individuals. The work involved
fabrication of the required components for structural glazing/windows at their
factory and installation of the same at various sites. The contract involved
designing, supply, fabrication, erection and commissioning and there was no
separate service contract for installation work with the customers. Revenue
alleged that the activity undertaken would come under the ambit of completion
and finishing services in relation to residential complex under the category of
“construction of complex service” and not under “erection commissioning and
installation”. Appellant submitted that the contract was composite and there
was no separate element of service or sale. During the appeal proceedings, the
first appellate authority held that there is no contract for sale of goods to
the service recipient and consequently in the absence of actual sale of goods,
impugned demand was confirmed. Being aggrieved, appellant filed present appeal.
Held
The Tribunal held that the conclusion reached by the first
appellate authority is erroneous inasmuch as just because VAT is paid at
composite rate, it cannot be said that there is no sale of goods involved. The
Tribunal noted that the major amount charged by appellant relates to the value
of materials. Also, reliance was placed on the decisions in case of Vistar
Constructions (P.) Ltd. vs. CST [ST/53190/2014, dated 01-04-2016] and URC
Construction (P.) Ltd. vs. Commissioner of Central [ST/00284/2008, dated
14-07-2016], the Tribunal held that in present case the activities
undertaken by appellant constitutes composite supply involving supply of goods
as well as services and thus, would be taxable under category of “works
contract services” and the same cannot be vivisected so as to bring it under
service tax net under category of “construction of residential complex
services”. Accordingly, the Tribunal allowed present appeal by setting aside
impugned demand.
51.
[2018-TIOL-2436-CESTAT-BANG]
Commissioner of Central Excise, Cochin vs. Coconut Lagoon Kumararkom
Date of Order: 31st July, 2018
Ayurvedic treatment supervised by a doctor is therapeutic in
nature and therefore not covered by
Health club and Fitness services. Mere fact that the Ayurvedic centres are
located in the resorts and sometimes the duration of treatment is for one or
two days, it cannot be concluded that the massages or treatments are only for
general well-being and not for any therapeutic value.
Facts
Assessee is engaged in running resorts and are operating an
Ayurvedic treatment center. The specialised treatments provided include
treatments for ailments such as obesity, trauma, bronchial disorders etc. All
the treatments given are as per the standard ayurvedic medical texts and the
type of treatment and duration will be decided by a qualified and registered medical
practitioner after conducting the diagnosis. The department contended that the
services provided fell under the category of health club and fitness service
and accordingly issued a show cause notice. On appeals filed, the learned
Commissioner (A) has allowed the appeals of the assessee. Accordingly, the
department is in appeal.
Held
The Tribunal noted the definition of health club and fitness
service which means physical well-being service such as, sauna and steam
bath, turkish bath, solarium, spas, reducing or slimming salons, gymnasium,
yoga, meditation, massage (excluding therapeutic massage) or any other like
service. The term therapeutic massage is explained by CBEC Circular
No.B11/1/2002-TRU dated 1.8.2002 to mean a massage provided by qualified
professionals under medical supervision for curing diseases such as arthritis,
chronic low back pain and sciatica etc. The Tribunal noted that the centers
maintain case sheets, treatment files and a treatment schedule. The ayurvedic
doctors attached, supervise the treatment, prescribe food restrictions and the
type of oil that should be used. It is therefore seen that these centres
provide a holistic ayurvedic treatment, which includes massages given by
qualified professors under medical supervision for curing diseases. Thus, in
view of documentary findings produced by the respondents, it is seen that the
ayurvedic centres are providing therapeutic treatment under ayurvedic system
and therefore not covered by the definition of Health Club and Fitness Services
and therefore are not liable for service tax.
52.
[2018-TIOL-2351-CESTAT-MAD] Siemens Building Technologies Pvt. Ltd vs.
Commissioner of Central Excise, Puducherry
Date of Order: 21st February, 2018
When goods are manufactured and thereafter installed in a single transaction charged compositely, the
predominant activity is manufacture and installation is only incidental to the
activity of manufacture.
Facts
Assessee is engaged in manufacture of Electronic Safety
System and Accessories. It receives composite orders for supply, installation
and commissioning of the system. They follow two patterns of billing depending
upon the purchase orders. In the first case, the charges for manufacture of the
system and the installation are raised compositely and excise duty is
discharged on the whole amount. Whereas, in the second case, the value of the
system manufactured is shown separately on which excise duty is discharged and
in respect of the installation charges, service tax is discharged. Department holds
a view, that service tax is required to be charged on the charges charged
compositely. It is argued that the activity of installation is only incidental
to the sale transaction in a composite transaction and not an independent
service liable for service tax.
Held
The Tribunal observed that when the goods are manufactured
and thereafter installed, the predominant activity is manufacture and
installation is only an incidental activity. The contention of the department
that service tax is payable on the whole amount, ignores the taxable event of
manufacture completely. Further, the contention that the service tax rate was
higher than the rate of central excise during a given period appears to be
totally unsound application of fiscal statutory provisions. Thus, the impugned
order is set aside.
53.
[2018-TIOL-2349-CESTAT-ALL] ICS Food Pvt. Ltd vs. Commissioner of
Service Tax, Noida Date of Order: 12th April, 2018
Services by an outdoor caterer in relation to serving of
food and beverages in a canteen maintained by a factory under the Factories
Act, 1948 is exempt under entry 19A of the mega exemption
notification-25/2012-ST dated 20.06.2012.
Facts
Assessee enters into an agreement with various factories for
supply of food and beverages to the employees of the factory as per the agreed
charges. The main dispute pertains to entitlement of exemption Notification
No.25/2012-ST as amended by Notification No.14/2013-ST dated 22/10/2013 to the
services provided in relation to serving of food or beverages by a canteen
maintained in a factory, as required under the Factories Act, 1948 having the
facility of air-conditioning or central air-heating at any time during the
year. The department holds a view that the exemption is available to a canteen
run by factories themselves. It was
argued that the notification uses the phrase “canteen maintained in a factory”
and not “canteen maintained by a factory” which spells out the intent of the
exemption.
Held
The Tribunal noted in the negative list based service tax
regime “canteen” and “outdoor caterer” is not defined.
Therefore, it would be prudent to take recourse to definitions provided under
the Finance Act, 1994 as these were in existence till 30/06/2012. Even if such
services are considered as OUTDOOR CATERING, those have been used for providing
services in relation to serving food and beverages in a canteen.Thus, the
services provided is covered by Entry No.19A of the mega exemption notification
and exempted from payment of Service Tax.
