Month: April

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Refund claim by SEZ Unit – What constitutes sufficient evidence for establishing services received and consumed in SEZ?

Facts:
The Appellant in SEZ received GTA services during the period April to September, 2009 and filed a refund claim. The adjudicating authority as well as the first appellate authority rejected the refund claim only on the ground that the Appellant did not produce documentary evidences in respect of taxable services provided to SEZ and consumed partially or wholly outside the SEZ.

Held:
Tribunal observed that the refund application is supported with the bills of transport companies, which indicate the consignors or beneficiary of the services as the Appellant in a particular Clause which is in SEZ. From the records, the Tribunal also observed that the said transport company is for transportation of the goods into the SEZ unit and also taking up the goods from the SEZ unit. These documents were held as sufficient evidence before the lower authorities to justify his refund claim and accordingly the claim was allowed.

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The claim of rebate be allowed even if duty-paid goods are not exported ‘directly’ from the factory/ warehouse, provided documentary evidence establishing direct co-relation between duty-paid goods manufactured/cleared by assessee and those exported by assessee is placed on record.

Facts:
The Assessee – a manufacturer from Gujarat, filed different rebate claims in terms of Rule 18 of the Central Excise Rules, 2002 and Notification No.19/2004 dated 06-09-2004. Rebate claims were granted as such claims were found allowable. The department filed appeal before the Appellate Commissioner, which was rejected. Aggrieved by the order, the department preferred writ before the High Court.

The primary objection of the department for not allowing claim was that, manufacturer had breached condition 2(a) of the Notification dated 06-09-2004, by not directly exporting the goods from factory or warehouse at Gujarat, but first by supplying the same to a trader exporter and thereafter, exporting from Maharashtra.

Held:
The High Court observed that the revenue authorities as well as the revisional authority have concurrently come to the conclusion that there was a direct corelation between goods manufactured in the factory with the goods exported and when such fact was established through reliable, undisputed and contemporaneous documentary evidence, there was no infirmity in granting refund.

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Merely calling an agreement as “Joint Venture Agreement” would not make the parties joint ventures or partners unless there is sharing, both in profit and losses and a community of interest among the parties.

Facts:
The assessee entered into agreements with distinct entities which intended to establish schools in different areas (within India and overseas as well) in collaboration with the assessee. The assessee was experienced in establishing and managing schools that provided quality education and had a brand image in the area. The agreements were named as “Education Joint Venture”. As per the agreement, the schools were to be established, run and managed by Board of Management comprising of nominees of assessee and the other entity in each case. The Assessee provided academic, operational and managerial expertise for establishing and running the school and allowing the use of the name DPS, its motto/ logo, subject to assessee retaining right, interest and title therein and other reasonable restrictions. The obligation of the other party was to provide land, buildings and all infrastructural amenities like furniture, laboratory, library and sports materials etc. for the school including residential accommodation for the principal, teachers and staff including meeting the revenue deficit, budgeted expenditure, to raise loans for all running expenditure and to meet the consequent financial liability. The assessee was specifically indemnified from any claims in this regard. The assessee, under the terms of the agreements was to receive an annual fee from the other entity.

The department contended that, the services provided by the assessee to the other party constitute a franchisee service. The assessee contended that, since the agreements between the assessee and the other parties are “education joint ventures”, the services provided by the assessee thereunder would not constitute taxable services.

Held
The Tribunal held that, on a true and fair analysis of the agreements between the parties, it is clear that the assessee is wholly immune from any losses arising out of the enterprise i.e., the educational institution to be established pursuant to the agreement and also no entitlement to any share in the profits arising therefrom, hence the normative ingredients of a partnership or a joint venture are absent. Hence, in the totality of circumstances neither the indicia of a partnership or a joint venture is discernable from the terms and conditions of the agreements between the parties. The participation of the assessee in the management of the schools is calibrated only for effectuation of the assessees perceived expertise and experience, in establishing and running quality English Medium Schools and is in furtherance of effective execution of the franchise service provided by it for which the assessee receives remuneration as clearly indicated in Clause 3 of the agreement and therefore, would not tantamount to the assessee being a joint venturer. The Tribunal therefore held that, since all the ingredients of ‘franchisee services’ are fulfilled, the service is taxable under the category of franchisee service.

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In absence of specific allegation in the SCN for levy of penalty for a specific purpose, no penalty can be levied.

Facts:
The
appellant had one manufacturing unit (Unit-I) and one service providing
unit (Unit-II). During the period from April 2007 to April 2008, Unit-I
took the CENVAT credit on certain input services though it was not
eligible to do so. This credit was, in fact, meant for Unit-II. The
irregular availment of CENVAT credit by Unit-I was noticed by the
department in October 2008, whereupon the credit was reversed forthwith
on 16-10-2008. For this, a Show Cause Notice was issued in April 2009.
The Appellant paid interest in February 2010. In the Show Cause Notice, a
penalty of Rs. 2,000/- was imposed under Rule 15(3) of the CCR, which
was also paid by the Appellant.

Subsequently, order was reviewed
by the department for non-imposition of penalty under sub-rule (4) of
Rule 15 of the CCR, 2004 read with section 78 of the Finance Act, 1994
and accordingly an appeal was filed with the Commissioner (Appeals) who
allowed the same and imposed penalty under 15(4) of CCR.

This
higher penalty was challenged by the Appellant contending that, no
ground for imposing penalty under Rule 15(4) was alleged in the Show
Cause Notice.

The department contended that, such penalty could
not be resisted by the appellant by mere reason of non-mentioning of
sub-rule (4) of Rule 15 or of section 78 of the Finance Act, 1994 in the
Show Cause Notice. Further, the wrong mentioning of section 11AC of the
Central Excise Act is also not fatal to the Revenue. It was further
contended that the demand confirmed against the appellant by the
original authority by invoking the extended period of limitation was not
challenged by it, it was precluded from resisting penalty under Rule
15(4) read with section 78.

Held:
It was held that
Para 5 of the Show Cause Notice contained an allegation to the effect
that the appellant contravened certain rules with intention to evade
payment of duty, but such allegation was made for the specific purpose
of invoking the extended period and not for imposing a penalty under
Rule 15(4). It further observed that irregular availment of the CENVAT
credit as alleged for invoking Rule 15(3) and not for invoking Rule
15(4) and that though the Show Cause Notices invoked Rule 15 of the
CENVAT Credit Rules, 2004, any sub-rule was not specified therein. The
Tribunal held that, since the different sub-rules of Rule 15 covered
different factual situations and, it was incumbent on the department to
specify the particular sub-rule which they wanted to invoke in a
particular Show Cause Notice. Relying upon Amrit Foods vs. CCE 2005
(190) ELT 433 (SC), the penalty under Rule 15(4) was set aside.

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Valuation –Cost of spare parts sold by an Authorised Service Station, whether as sale simplicitor or under the composite contract, is not to be included in taxable value, if sale price of sales tax/Vat is separately shown.

Facts:
The Appellant, an authorised service agent for Hyundai Motor cars undertook maintenance/service of motor cars. It also supplied spare parts of these vehicles. During the course of scrutiny of the records, it was noticed that the Appellant was selling spare parts for motor vehicles during the course of providing repair services on which it was paying VAT. However, the value of these spare parts was not included in the consideration received for repair services and Service tax liability was not discharged on the value of such spare parts.

The department demanded Service tax on sales portion on the grounds that, any goods used in the course of providing service has to be treated as inputs used for providing the service and accordingly, the cost of such inputs formed integral part of the value of taxable service. The Appellant contended that the sale figure in the balance sheet included sale of spare parts simplicitor as well as sale of spare parts that may occur in the course of repair of motor vehicles. It also relied upon Circular No. B. 11/1/2001-TRU, dated 09-07-2001, wherein it was clarified that the cost of parts and accessories supplied during the course of repair and servicing of vehicles would not be includable in the taxable value if such cost was shown separately in the bills/ invoices. Further, they discharged Sales tax/VAT liability on the sale of spare parts.

Held:
The Tribunal referring to above circular held that, if a transaction involves only sale of spare parts, the question of levying Service tax would not arise at all. It further held that, even in a case of composite transaction involving sale of goods and rendering of service, if the bill/invoice issued clearly shows payment of Sales tax/VAT on the spare parts, then the value of such spare parts would not be included in the gross consideration for the service.

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Whether in order to claim deduction for sale/supply of goods under Notification No. 12/2003 –ST dated 20-06-2003, only sale invoices are to be considered? Matter remanded.

Facts:
The Appellant provided services of erection, commissioning and installation of power stations to various electricity boards. The contract entered with customers were composite contracts where supply of goods and services were involved. The Appellant was registered with the Service tax department and discharged Service tax liability. The revenue confirmed the demand on account of mismatch between the figures reflected in the ST-3 Returns and those in the P & L A/c. also invoking longer period of limitation. The plea that supply of goods was part of sale figure was not taken cognizance of.

In the Appeal before the Tribunal, the Tribunal dropped demand beyond the period of limitation but upheld the demand for normal period on account of  non-availability of deduction under Notification No. 12/2003 –ST on account of the Appellant’s failure to produce sale invoices and directed to pre-deposit Rs. 1 crore. The Appellant contended that it had already produced sample copies of running bills, its sales tax returns etc. which were sufficient for claiming deduction under the said Notification.

Held:
Notification No. 12/2003 is a conditional notification which extends the benefit only upon the Appellant producing the documentary proof, indicating the value of goods supplied while rendering the service. The above condition does not mean that the goods have to be necessarily shown separately under the invoices. If the Appellant is able to show from the documents such as running bills, contract copies, returns filed with Sales tax authorities, it would be held that it is complying with the conditions. The Tribunal committed a fundamental error in insisting only upon the production of invoices as evidence of goods sold and ignoring the running bills, sales tax returns, contract terms etc. to arrive at value of goods. The High Court, accordingly, set aside the Order and remanded the matter to consider the petition afresh and pass the appropriate order on merits.

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Whether the share broker’s service used by a manufacturer of telecom equipments for sale of its investment in shares of another company is an input service?

Facts:
The Appellant was engaged in the manufacture and sale of telecom equipments and was paying excise duty on the same. In the month of November 2008, the Appellant had availed the services of a Stock Broker for selling its investment in the other company’s shares. The Appellant availed Service tax paid on said stock broker’s service treating the same as input service. The Revenue authorities and Tribunal disallowed the claim of the Appellant by contending that the same was not integrally connected to the business of the Appellant.

Before the High Court, the Appellant contended that the stock broker’s service was used for the purpose covered by the inclusive part of the definition of “input service”.

Held:
The High Court observed that, though the Appellant’s activity of investing in the shares was one of the incidental objects as per its Memorandum of Association, the claim for CENVAT Credit of Service tax paid on stock broker’s service was not against any liability arising out of the business activity of the Appellant and not relatable to the business activity and hence the High Court found no scope for making any interference with the Tribunal’s Order and as such, the appeal was dismissed.

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No powers to reduce penalty below minimum prescribed limit by invoking section 80 of the Finance Act, 1994.

Facts:
The short question under consideration was whether penalty u/s. 76 of the Finance Act, 1994 (the Act) be reduced below the minimum limit prescribed by invoking section 80 of the Act. The department argued that the Commissioner (Appeals) and CESTAT had no authority to reduce the penalty as provided in the law.

Held:
Applying the decision of the Gujarat High Court in Port Officer 2010 (19) STR 641 (Guj), it was observed that section 80 of the Finance Act, 1994 had an overriding effect over sections 76, 77, 78 and 79 of the Act (the Act) and no penalty was imposable in case of reasonable cause for failure to comply with laws as provided in respective sections. The authorities, Commissioner (Appeals) and CESTAT however, do not have powers to levy penalty below minimum prescribed limit and therefore, it was held that penalty u/s. 76 could not be reduced below the minimum prescribed limit by invoking section 80 of the Act.

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If the assessee was eligible for VCES and had taken benefit of VCES, recovery proceedings cannot be initiated until application under VCES is decided.

Facts:
On 31st May, 2013, a search was conducted wherein it was detected that the petitioners were liable to pay service tax. Consequently, an order was passed on 7th June, 2013 u/s. 87 of the Finance Act, 1994 which was challenged on the ground that they had filed declaration of such tax dues under Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) on 20th June, 2013. Having regard to section 106 of the Finance Act, 1994, it was pleaded that they were eligible for VCES since the date of notice or order of determination was not prior to 1st March, 2013 and therefore, the order was illegal and arbitrary without deciding the application. The department claimed their right to initiate recovery proceedings and argued that unless the application under VCES was found valid and in time, the petitioners were not entitled to any relief in the writ petition.

Held:
The petitioners had prima facie demonstrated that they were eligible to take benefit of VCES u/s. 106 and 107 of the Finance Act, 1994 and unless application under VCES was decided, proceeding u/s. 87 shall not be continued. The object of VCES would be defeated if the recovery was allowed to proceed. An interim order was passed directing Competent Authority to decide the application under VCES within 60 days of passing the Order.

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Reimbursable expenses not in the nature of remuneration/ commission cannot form part of gross amount for clearing and forwarding agent’s services.

Facts:
The substantial question put forth before the High Court was whether reimbursable expenses such as freight, labour, electricity, telephone etc. received by the assessee at actuals should not be added to the taxable value related to clearing and forwarding agent’s services in view of Rule 6 (8) of the Service Tax Rules, 1994, providing for service tax levy on gross amount of remuneration.

Held:
In the absence of any material to show the understanding between the principal and the client that the commission was all inclusive, it was difficult to hold that the gross amount/commission would include expenses for providing services and all incidental charges for running of business. Receipts in the nature of reimbursements would not take colour of remuneration or commission. Rule 6(8) of the Service Tax Rules, 1994 referred to gross amount i.e. receipts in nature of remuneration or commission.

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The Department has to follow prescribed monetary limits for filing appeal in various Courts having regard to the Circulars in place which are binding on the department.

Facts:
The respondents were engaged in the manufacture and export of Rotary Screen Printing Machines and parts thereof. Aggrieved by the order of the CESTAT with respect to rejection of CENVAT Credit of around Rs. 2,02,472/-, the department was in appeal. The appeal was filed on 5th August, 2011. The respondents contested that vide Circular dated 20th October, 2010, the Central Excise department was not allowed to file an appeal if the duty involved was less than or equal to Rs. 2 lakh with equal mandatory penalty and any other penalty. The limit of Rs. 2 lakh was increased to Rs. 10 lakh vide Circular dated 17th August, 2011.

Held:
In view of Circular dated 17th August, 2011 taking effect from 1st September, 2011, the appeal could not be preferred by department in the High Court. The appeal, therefore, was dismissed without going into the substantial question of law since the department was bound by its own Circulars.

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Whether CENVAT credit can be disallowed in the hands of the service receiver on the ground that it was subsequently held that the input services were not liable to tax – Held, No.

Facts:
The three issues involved in this case were, (i) whether the appellant was required to pay Service tax on services received prior to 18-04-2006 when section 66A was introduced in the Finance Act, 1994 (ii) whether Service tax liability in such cases could have been discharged through the CENVAT credit (iii) whether the appellant could have taken credit of the Service tax paid by debiting the CENVAT account (since the services itself were not liable to Service tax).

Held:
The first two issues were decided in favour of the assessee relying upon the decision of Indian National Shipowners Association vs. Union of India [2009] 18 STT 212 (Bom.) and Nahar Industrial Enterprises Ltd. [2012] 35 STT 391 (Punj. & Har) respectively. As regards the third issue, the Hon’ble Tribunal held that, there was no dispute that the impugned services were input services and then in such circumstances, the credit taken under CENVAT Credit Rules cannot be disputed for the reason that later it was decided that the appellant need not have paid the service tax.

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Rule 9(3) of CCR- What constitutes reasonable steps to ensure the validity of the CENVAT?

Facts:
The Assessee took credit of duty paid on inputs based on invoices issued by the First Stage Dealer (FSD). Inputs were used for the manufacture of final products which were cleared against the payment of duty. The Department sought to deny credit on the ground that original manufacturer of said goods was found to be non-existent.

The Commissioner (Appeals) observed that in terms of Rule 7(4) read with Rule 9(5) of the CENVAT Credit Rules, 2002 (CCR), the assessee submitted Form 31 issued by Trade Tax Department, the ledger account evidencing payments by cheques made to the FSD and Form RG 23-A, Part-II. It was held that the assessee had received goods against the invoices of FSD for which payment was made by cheque and that the manufactured goods were cleared against the payment of central excise duty. He, therefore, allowed the Appeal on the ground that the transaction was bona fide and a buyer can take only those steps which are within his control and would not be expected to verify the records of the supplier to check whether, in fact, he had paid duty on the goods supplied by him. Tribunal also observed that, the fact that FSD is a registered dealer is undisputed and held that, it would be sufficient for the assessee to buy the goods from the FSD whose status he has checked and verified and dismissed the Revenue’s Appeal.

Before the High Court, the Revenue contended that the assessee ought to have made an enquiry which would have indicated that the original manufacturer that had supplied the raw material was a fictitious entity.

Held:
The Hon’ble High Court while examining the provisions of Rule 9(3) of CCR held that, the Explanation to Rule 9(3) provides a deeming definition as to when a manufacturer or a purchaser of excisable goods would be deemed to have taken reasonable steps. However, even in a situation where the Explanation to Rule 9(3) is not attracted, it would be open to an assessee to establish independently that he had in fact taken reasonable steps. Whether an assessee has in fact taken reasonable steps, is a question of fact. The High Court observed that both fact finding authorities found that assessee have duly acted with all reasonable diligence in its dealings with the first stage dealer and held that, the assessee has taken reasonable steps to ensure that the inputs for which the CENVAT credit was taken were the goods on which appropriate duty of excise was paid within the meaning of Rule 9(3) of CCR.

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Whether the CENVAT Credit on inputs can be denied to the receiver of input on the grounds that supplier of raw materials did not deposit duty to the Government? Held, No.

Facts:
The assessee claimed the MODVAT credit in respect of the inputs supplied to the assessee on the strength of invoices issued to it. The full amount of invoices was paid by the appellant to the supplier. The inputs supplied were excisable items was also not in dispute. The MODVAT credit was denied only on the ground that the supplier did not actually deposit the excise duty payable on the said inputs supplied to the assessee. The Revenue relying upon Rule 57G contended that, unless the duty was paid on inputs, no MODVAT credit can be availed by the assessee. Reliance was also placed on the decision in the case of IDL Chemicals Ltd. vs. CCE 1996 (88) ELT 710 (Tri – Cal.).

Held:
The Hon’ble High Court held that, once a buyer of inputs receives invoices 17 of excisable items, unless factually established to the contrary, the buyer is entitled to assume that the excise duty has been/ will be paid by the supplier on the excisable inputs. It would be most unreasonable and unrealistic to expect the buyer of such inputs to go and verify the accounts of the supplier or to find out from the department of Central Excise whether duty has actually been paid on the inputs by the supplier. No business can be carried out like this and the law does not expect the impossible. The High Court overruled the decision in the case of IDL Chemicals relied upon by the Revenue holding it as incorrect.

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In respect of services covered under RCM, if service tax is undisputedly paid by the service provider, whether it can be once again demanded from service receiver? Held, No.

Facts:
Both the adjudication authority and the Commissioner (Appeals) confirmed the demand on the ground that the appellant being recipient of GTA service is liable to pay Service tax. The Appellant contended that, he has paid Service tax to the service provider and service provider in turn has paid the same to the Government. The revenue submitted that, in such case, service receiver was not discharged of its statutory liability and if the Service tax is paid by service provider he can seek refund thereof.

Held:
The Tribunal observed that there is no dispute regarding payment of Service tax by the provider of GTA service and therefore held that once the amount of Service tax is accepted by the Revenue from the provider of GTA service, it cannot be again demanded from the recipient of the GTA service.

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Whether the CENVAT Credit can be utilised for payment of Service tax on GTA service under reverse charge for the period post 19-04-2006? Held, Yes

Facts:
The Assessee received goods transport agency’s (GTA) service and paid Service tax thereon under reverse charge utilising the CENVAT credit during the period April 2006-September 2006.

The Revenue’s contention was that since the GTA service were not output service, they are not entitled to use the CENVAT credit for payment of Service tax on such services. The Revenue further contended that since the issue was from April, 2006 to September, 2006 and the legal fiction given to the said service to treat as output service, as defined in Rule 2(p) of the CENVAT Credit Rules, 2004 (CCR) was withdrawn with effect from 19-04-2006 inasmuch as Explanation thereto was deleted, the ratio of Nahar Industrial Enterprises Ltd. [2012] 35 STT 391 (Punj. & Har) (which was in the context of pre-amended period) is not applicable to this case. The Revenue also relied upon the decision of Single Member Decision in the case of Uni Deritend Ltd. vs. CC&CE [2012] 34 STT 356/17 taxmann.com 102 (Mum) rendered in the context of post amendment period in support of its contention.

The Assessee contended that, the fact of withdrawal/ deletion of explanation to Rule 2(p) of CCR did not have much effect inasmuch as no amendment was made in the provisions of Rule 2(r) “provider of taxable service” of CCR which included a person liable to pay Service tax. Assessee submitted that, since the assessee was liable to pay Service tax in respect of GTA service received by him, he is a provider of taxable service and consequently he is covered by the definition of output service. He also relied upon the decision of Division Bench in the case of Shree Rajasthan Syntex Ltd. 2011 (24) STR 670 (Tri-Del).

Held:
Accepting the assessee’s contention and approving the decision in the case of Shree Rajasthan Syntex (supra), it was held that the assessee being recipient of services from the GTA was liable to pay the Service tax and as such, he is provider of taxable Service in terms of Rule 2(r) and consequently gets covered by output service definition as appearing in Rule 2(p) of the Rules. It further held that deletion of explanation with effect from 18-04-2006 from Rule 2(p) of the CCR would not make much difference.

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Whether profit earned on ocean freight is exigible to Service tax under ‘Business Auxiliary Service’?

Tribunal took a prima facie view that, Service tax is not applicable on the profit earned on ocean freight by Appellant and its foreign counterparts while granting unconditional stay against Order of department demanding Service tax under ‘Business Auxiliary Service’.

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Whether shortage of materials in an internal statement of stock taking is a ground for denial of CENVAT credit?

Facts:
The Appellant, a manufacturer of Polyester Films, availed the CENVAT credit on various inputs and capital goods. During the departmental audit, Revenue noticed shortage in raw materials as per internal stock statement and accordingly, demanded the duty to the extent of credit involved in the differential value of materials. The Appellant contended that there were no actual shortage and offered to provide the reconciliation.

Held:
The Tribunal observed that the entire case was on account of shortage of cenvatable inputs as per statement of the Appellant and there was no allegation or evidence that the said inputs were not received or cleared without duty payment, hence the order was set aside.

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Pre-deposit waiver – Reversal of CENVAT credit in respect of inputs, input services used in manufacture of non-dutiable capital goods used and thereafter sold as scrap.

Facts:
The Appellant, a manufacturer of sanitary-ware made Plaster of Paris (POP) moulds. For the manufacture of POP moulds, it used propane gas and input services in respect of which the CENVAT credit was taken. After its use, the POP moulds were sold as waste. The department was of the view that since, in respect of manufacture of POP moulds, CENVAT credit on inputs and input services has been availed, as per the provisions of Rule 3(5A) of CCR, 2004, at the time of clearance of such scrap, an amount equal to excise duty on transaction value shall be payable. The Appellant contended that, Rule 3(5A) of CCR, 2004 is applicable only where the CENVAT credit taken on capital goods have been cleared after use, as scrap, while in this case, neither any duty has been paid on POP moulds nor credit of that duty has been taken; that POP scrap is non-excisable and hence in any case, no duty is payable on POP scrap.

Held:
Tribunal held that, prima facie, Rule 3(5A) of CCR, 2004 applies to those cases where the CENVAT credit was availed on capital goods after use in the factory are cleared as scrap and waste and only in such situation an amount equal to the duty on transaction value of such scrapped capital goods is required to be reversed. In this case, POP moulds cannot be said to be cenvated capital goods, as the CENVAT credit has been taken of the duty/service tax paid on inputs/input services, not of excise duty on POP moulds. Accordingly pre-deposit of duty, interest and penalty was waived.

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Pre-deposit Waiver – Threshold Exemption is prima facie available to each Co-owner separately.

Facts:
The Appellants were co-owners of a building which was rented out to a person. The said person issued separate cheques to individual Appellant as they were co-owners of the property. The amount received by the individual Appellant was within the threshold exemption limit and therefore no Service tax was paid. The department contended that, for individual purposes and for the purpose of benefit of individual co-owners, the Appellants sought the payment individually, hence the Service tax liability should be considered after taking into account collective rent received by the Appellants.

Held:
The Tribunal after perusing the threshold Exemption Notification and agreements between the parties held that, amount of rent received by individual Appellant is specifically mentioned in the agreement so as to make it specific that individually they are renting out the property to a person. Hence, individually, each of the Appellants would be considered as provider of such service, whose aggregate value did not exceed the threshold limit. Complete waiver of pre-deposit was granted.

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Stockbroker — Sub-broker — Sale and purchase of securities listed on stock exchange for their clients — Service tax is leviable considering the activity as that of stockbroker. It is not Business Auxiliary Service provided to the main broker.

Facts:
The appellant was a sub-broker. Prior to April 2005 in all the transactions through sub-broker, sub-broker used to issue bill to the client for their brokerage, stockbrokers used to bill the sub-brokers and as such the brokerage was being charged by both stockbroker as well as sub-broker in their respective bills and both were making separate payment of service tax. Since April 2005, in all the transactions in respect of purchase and sale of securities, it is the main broker who issues the transaction note and charges brokerage, a part of which is shared by him with the sub-broker.

Held:
The appellant was treated as a broker for the period post 2005. The service provided by him is the service of sub-broker of the stockbroker in connection with sale or purchase of securities listed in the stock exchange for their clients and during the period of dispute, it is the main broker who was issuing the transaction note and was receiving the commission from clients, a part of which was received by the appellant i.e., the subbroker. The question therefore related to whether or not the part of brokerage received by the appellant as sub-broker would attract service tax as it could not be held business auxiliary service as the service provided related to sale or purchase of stock. However, according to the Tribunal, this had to be decided in the light of the Larger Bench of Tribunal’s decision in case of Vijay Sharma & Co. v. CCE, Chandigarh (2010) 20 STR 309 (Tri.- LB) after ascertaining whether the main broker had paid service tax on the amount paid to the appellant. Since this judgment was not discussed in the order appealed against, the matter was remanded to the Commissioner (Appeals) for de novo decision in the light of judgment in the case of Vijay Sharma & Co. (supra).

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CENVAT credit — Capital goods pending installation, whether 50% credit can be availed in the subsequent year — Assessee held eligible — Goods lying in the factory for installation — The process of erection was carried out — Thus, capital goods were in possession of manufacturer as per Rule 4(2b) of the CENVAT Credit Rules, 2004 (CCR).

Facts:
The question of law referred to the Larger Bench was, whether an assessee is eligible to avail the credit of balance 50% of the credit in respect of capital goods in the subsequent financial year without installing the same and putting it to use as held by Ispat Industries v. Commissioner, (2006) 199 ELT 509 (Tri.) or the assessee cannot avail credit as held by Parasrampuria Synthetics Ltd. v. Commissioner, (2004) 170 ELT 327 (Tri.-Del.). The issue thus involved related to interpretation of provisions of Rule 4(2)(b) of CCR as to whether the situation of goods would be regarded as possession of capital goods and use for the manufacture of final products in such subsequent years. In Ispat’s case (supra), in Revenue’s appeal before the Bombay High Court, reported at (2012) 275 ELT 79 (Bom.), the High Court held that since the Tribunal had held that the expression ‘possession and use of the manufacture of final products’ have to be read together and would denote that the goods were available for use in the manufacture of final products and since the finding of the fact was that capital goods were under erection process, no substantial question of law had arisen and therefore the appeal was dismissed.

Held:
In terms of the above decision of the Bombay High Court, it was held that the condition under the relevant Rule for taking 50% credit in subsequent financial years when capital goods are lying in the factory for installation and under the process of erection has to be interpreted as capital goods in possession and use for manufacture and accordingly the Division Bench was directed to decide the appeal on merits.

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Service tax — Tax payable under reverse charge on services received from abroad — Tax can be paid from CENVAT credit account.

Facts:
The assessee had paid service tax as a receiver of intellectual property service using CENVAT credit on advertisements, manpower recruitment, repairs and maintenance, construction services, etc. The Tribunal held that though the assessee is a recipient of service in law, as the service provider is outside the country, the tax is levied on him. But to discharge such liability, he can use CENVAT credit which is to his credit. The Revenue filed appeal against the Tribunal’s order.

Held:
In law, though the person is a service recipient, he is treated as service provider and is levied tax. To discharge his liability, he is entitled to use the CENVAT credit available with him. The Tribunal was held justified in holding so. No merit was found in the appeal of the Revenue. The Revenue’s appeal for penalty was also dismissed as substantial question of law was decided in favour of the assessee.

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Tax liability — Retrospective effect — Validity of service tax on renting of immovable property — Amended section 65(95)(zzzz) of the Finance Act, 1994 with retrospective effect — Even if the amendment is not clarificatory but creates a substantive liability or right, the Parliament’s right to legislate and create liabilities or rights with retrospective effect can be curtailed only by restriction placed upon the legislative power of Parliament by one or the other provision of Constitution of India — No provision of Constitution of India shown restricting the right of Parliament to legislate retrospectively creating a tax liability.

Facts:
The amended section 65(95)(zzzz) of the Finance Act, 2010 defined taxable service as “any service provided or to be provided to any person, by any other person, by renting of immovable property”. This amendment is not clarificatory, but brings about a substantive liability of taxation upon the service providers. It was also contended that the service provider is liable to pay interest as well as penalty on default in payment of service tax for the past period.

Held:
The Parliament’s right to legislate or create liability of service tax with retrospective effect can be curtailed by a restriction placed upon its legislative powers by one or other provision of the Constitution of India. Hence it was held that the service tax liability arises retrospectively.

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Interest — CENVAT credit wrongly availed — Entry reversed before its utilisation — It amounted to not taking credit — Department pleas that there was no discretion in authorities for consideration of factors that (i) wrongly taken credit was not utilised or was reversed voluntarily or (ii) there was no mala fide intent on part of assessee — Liability to pay interest was rejected.

Facts:
The respondent is engaged in manufacture of poly bags/flat films. During the course of audit, it was observed that the assessee wrongly availed CENVAT credit. The assessee reversed the said credit account and failed to pay the interest on the credit availed by it. A show-cause notice was issued for the recovery of interest. The adjudicating authority held the show-cause notice as dropped. The Department filed an appeal before the Commissioner (Appeals) who dismissed the appeal. The Department preferred second appeal before the Tribunal which also was dismissed. The adjudicating authority recorded that the assessee has not paid interest on the amount of CENVAT credit which was admittedly availed wrongly, but was subsequently reversed by it on being pointed out during the course of audit by the Departmental officer. It was urged that if the restrictive interpretation adopted by the adjudicating authority is accepted for non-chargeability of interest, then no recovery of interest on erroneous credit taken can be made.

Held:
In both situations i.e., where CENVAT credit has been wrongly taken or wrongly utilised, interest is recoverable. It was held that when the entry has been reversed before utilisation, the same amounts to not taking credit. Comment: The above judgment is in contradiction with a recent judgment of the Apex Court in the case of Ind-Swift laboratories. However, the ratio laid down by the above judgment of the Gujarat High Court is incorporated in law by amending the provisions in the CENVAT Credit Rules with effect from 1-4-2012.

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Manufacturer of sugar — Took over management of the sugar mill of another entity for a consideration — Levy of tax as management consultancy agreement — Held, it was management function and hence not liable for tax.

Facts:
The appellant was engaged in the manufacture of sugar in its sugar mill and under an agreement with Indo Gulf Industries Limited, it took over the management of Indo Gulf Industries Limited sugar mill in consideration for certain payment. The Service Tax Department treated the above agreement as a Management Consultancy agreement and demanded service tax on this payment.

Held:
The appellant was in-charge of the operation of the factory and thus was performing the management function. The Tribunal held that no service tax would be applicable for rendering these management functions.

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Service tax — Construction of complex service — Construction of individual houses is not taxable under ‘construction of complex service’ or under ‘works contract’.

Facts:
The appellants constructed individual residential houses, each being a residential unit. The appeal was against demand of service tax under the head ‘construction of complex’ service. The demand was on the amount collected by the appellants from their clients as consideration for construction and transfer of residential houses.

Held:
The construction of residential complex having not more than 12 residential units was not sought to be taxed under the Finance Act, 1994. For the levy, it should be a residential complex comprising more than 12 residential units. Hence the construction of individual residential units was not subject to levy of service tax.

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CENVAT credit — Cell towers, prefabricated building (pfb), printer, office chair, etc. — Neither capital goods nor inputs for providing cellular telephone services — Availed CENVAT credit on the towers, pfb, printer and office chairs. Held, CENVAT credit disallowable — The tower being an immovable property, would not qualify as a capital good or an input which was used for providing output service.

Facts:
The assessee was engaged in the business of providing cellular telephone service which was taxable under the Finance Act for provision of services. The appellant availed CENVAT credit on the towers, pfb, printer and office chairs. Revenue disallowed the CENVAT credit on the said goods on the ground that the tower being an immovable property, would not qualify as a capital good or an input which was used for providing output service.

Held:
The Tribunal held as follows:

The towers and pfb were not a part of an integrated system and were not included in the definition of capital goods.

Alternatively, the tower and pfb would not be considered as components since the components are inputs required to make a good a finished item. As the tower was not an input for the antennas, it would not be considered as a component of the antenna.

Also, as the tower being an immovable property did not satisfy the definition of goods, it would not be considered as an input used for providing output service. The same conclusion was drawn in respect of chairs, printer, etc.

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Rebate of CENVAT credit on exported services — No dispute as regards the services on which rebate claimed were ‘input services’ in terms of Rule 2(l) of CCR — Deficiency in declaration — A technical lapse — Genuine claim not deniable — Provisions of unjust enrichment not applicable to rebate claim.

Facts:
The appellant filed a declaration for claiming rebate on export of service with the Jurisdictional Assistant/Deputy Commissioner of Central Excise within the limitation period. The appellant mentioned some input services specifically and other input services were described as ‘other services’ instead of mentioning each input service separately. No allegations were made that either services not specifically declared had not been received or invoices for all input services had not been submitted. This declaration was accepted. The Commissioner reviewing this order concluded that the declaration filed was incorrect on the grounds that the appellant did not mention all the services but mentioned some input services along with the words ‘other services’. The appellant produced a statement showing the correlation between export invoices and Foreign Inward Remittance Certificate (FIRC) but did not mention the invoice numbers of the export invoices and hence it was not possible to establish that FIRCs pertained to export services. The appellant claimed a rebate for services of Advertisement, Chartered Accountant and Management Consultant Services. The Department did not dispute that the same were covered by the definition of ‘input service’ but they contended that these services were not used for providing the Customer Care Services which were exported. The Commissioner rejected the rebate claim and ordered the same to be credited to Consumer Welfare Fund on the ground of unjust enrichment. The Commissioner alleged that there was willful misstatement and suppression of facts by the assessee. The assessee had submitted rebate claims with all relevant documents to the jurisdictional authority, which sanctioned rebate after being satisfied about its correctness. This sanction did not discover any new document indicating misstatement or suppression of any information.

Held:
Even if certain services were not mentioned in the declaration, it was considered only a technical lapse, for which rebate could not be denied. Since only some input services were not mentioned, it was highly irrational to deny the entire rebate claim. Further, simply because FIRCs did not bear the export invoice numbers, it could not be concluded that the same did not pertain to the service provided by the appellant to their client abroad. It was held that whenever credit was permitted to be taken, the same were permitted to be utilised and when the same is not possible, there is provision for grant of rebate. Hence the Department could not object that these services were not used for providing services exported by the assessee. It was held that the principle of unjust enrichment was not applicable to rebate claims and the rejected refunds/rebates could not be credited to the Consumer Welfare Fund. It was held that penalty could be imposed only if there was evidence of collusion with jurisdictional authorities sanctioning the inadmissible rebate.

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Cargo handling services — Scope of shifting of goods within factory premises, supply of manpower for manual assistance at various points of loading using conveyer system, and small part of service of manual loading of cargo into railway wagons of trucks — Held, it is not within the scope of cargo handling service — Hence not liable to service tax.

Facts:
The appellant required manpower for managing various points in the mechanised process of loading of cement bags into trucks and railway wagon. The loading job was fully automated and the manpower supplied related only to supplementing the mechanised process of loading of cement bags. The appellant had also shifted the packed cement bags from various places within the factory premises. These goods were not meant for transportation. The appellant also carried out the job of shifting of coal from power plant to cement plant, breaking of big lumps of coal, etc. These activities were carried within the factory premises and were not meant for transportation.

Held:
Since labour supplied by the appellant were only supplementing the job of loading, the services carried out by the appellant did not come under cargo handling services. The job of internal shifting of goods at both the places did not come under cargo handling services.

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Cenvat/Modvat — Inputs sent directly to processor — to save transport cost — Held, assessee is entitled to take credit of duty paid since there was no dispute about their receipt in their factory and use in manufacture of finished goods — Demand — Limitation — Inputs received in factory sent for further processing to save cost — Held, there was no intention to evade payment of duty by taking wrong credit.

Facts:
The respondent purchased the brake assemblies and took the credit on the basis of invoice issued to them. The goods were not sent to the factory of the respondent, but were dispatched to a job-worker processor at Pune from whom the respondent was getting finished goods produced which in turn were used for further manufacturing of excisable goods in the factory of the respondent. The Department was of the view that the respondent was not eligible for CENVAT credit as the brake assemblies had not been physically received in their factory. The Department filed an appeal against the above order on the ground that since brake assemblies purchased by the respondents from the supplier had not been received but dispatched to the processor for being fitted with rear/front axles being supplied to the respondent, hence the respondents were not eligible for CENVAT credit.

Held:
If the respondent had first transported the brake assemblies to their factory and then sent the same to the processor for being fitted with rear/ front axles being supplied by them, they would be entitled to CENVAT credit for brake assemblies on the basis of invoices issued by the supplier. To avoid unnecessary transportation, the brake assemblies were sent to the processor. Hence, the CENVAT credit cannot be denied as there was no intention to evade payment of duty by taking wrong CENVAT credit.

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Appeal — Filing in format meant for excise appeal used in appeal involving customs duty — Held, it was a technical and rectifiable mistake for which appeal could not be dismissed — Direction should have been given to remove the defect.

Facts:
The Commissioner of Central Excise rejected the appeal on the ground that the appeal memo filed by the appellant was in the format meant for excise appeal, whereas the duty of customs stood confirmed by the lower authorities.

Held:
It was held that the mistake pointed out by the Commissioner being of technical nature was a rectifiable mistake and therefore appeal was not to be dismissed. The matter was remanded for fresh decision on merits.

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Cenvat/Modvat — Documents for availing credit — Tampering of inputs and capital goods received in Unit-1 while credit availed in unit 2 — Invoices altered by themselves — Both units situated in the same premises — Held, credit was justified but the penalty would not be reduced.

Facts:
The appellant was denied input credit and capital goods credit on the grounds that the impugned goods which were consigned to unit-I of the appellant were utilised in unit-II of the appellant located in the same premises. The appellant themselves altered the excise code number on the relevant invoices and also wrote unit-II on the said invoices. The denial was on the grounds of tampering with the duty-paying documents and not on the grounds of non-receipt or non-utilisation of the impugned goods of the factory of the appellant. There was no allegation of non-receipt or nonutilisation of the impugned duty-paid goods.

Held:
The Tribunal observed that since the appellant themselves had made alterations instead of intimating the Department, the reduced penalty was justified. With regards to the CENVAT credit, the assessee was allowed to avail it.