Month: February

Facts:
The appellant is a public sector unit which adjusted the excess payment of service tax against the tax liability of a subsequent period. The appellant held a view that this adjustment was allowable as per the provisions of Rule 6 of the Service Tax Rules, 1994. As per the said Rule 6, excess payment of service tax can be adjusted against future liability on a pro-rata basis, but only under specific conditions mentioned therein.

Held:
Though the appellant’s plea for adjustment was held invalid, it was found that subsequently the Service Tax Rules were amended. As per the amended rules the appellant could adjust his excess payment.

However, the amended rules were not in force during the material time and therefore did not apply to the case at hand. But considering the spirit of the amended rules and the fact that the appellant was a public sector unit, a lenient view was taken and the adjustment was allowed fully.

Facts:
The assessee provided commercial training and coaching services. The appeal was filed in relation to the fees received by the respondent during April, May and June, 2003 for the period after 1-7-2003, when the service was brought under the tax net. Show-cause notice was issued to the respondent on 20-7-2006 for the period April-September 2003. The Revenue claimed that the assessee suppressed facts since they had not disclosed the amount of consideration received prior to 1-7-2003 and also not filed ST-3 return for the relevant period.

Held:
It was held that the longer period could not be invoked on the grounds that an audit was conducted in 2004 and also, there was extensive communication with the Department, but a show-cause notice was issued only on 20-7-2006. Hence the demand was barred by limitation and the Revenue’s appeal was rejected.

Facts:
The appellant received a sum of Rs.4,26,000 for letting out of land and open ground for the period 12-2-2003 to March, 2005 and receipt of Rs.6,000 each for the financial years 2005-06 and 2006-07 and Rs.93,000 for the financial year 2007-08 upon which no service tax was paid.

Held:
However, since the notice issued failed to bring out the nature of the receipt and the nature of functions performed over rented immovable property, the show-cause notice was rendered unjustified and hence, the stay application and the appeal were dismissed.

Facts:
The appellants hold franchisee for ‘Abacus’ training which is an ancient Chinese tool to solve arithmetical calculations with speed and accuracy without calculator. They are engaged in imparting such training to students as well as teachers who could be either employed by them or had an option for self-employment after such training and to train students at various centres run by themselves. They also receive amounts towards granting franchise for imparting training through Abacus. For all the three revenues, service tax was demanded.

The appellant contended that the training imparted to the students could not be taxed under the category ‘Commercial Training or Coaching Services’ for it was recreational in nature as held by the Bangalore Bench in Fast Arithmetic v. Asst. Comm. of Central Excise & ST, (2010) 17 STR 158. Also, no service tax was payable for training which is recreational in nature vide Notifications Nos. 9/2003 and 24/2004. Similarly, the above Notifications also exempted such vocational training provided to teachers.

Held:
In terms of the Notifications and case cited above the demand with respect to training given to students and teachers was set aside along with the penalty.

On the other hand the amount received towards franchisee services was held liable to service tax. The appellant did not dispute this and had paid service tax on the franchise fee received. The penalty stood reduced only to the extent of delayed payment towards franchise fee and the cost was waived.

Facts:
The appellant, a ‘Clearing and Forwarding Agent’, during the period 2003-04 to 2005-06 did not charge service tax on the reimbursable receipts, such as transportation charges, loading and unloading charges, rent, salary to staff, electricity, courier charges, stationery charges, etc. According to the adjudicating authority, such charges were liable for service tax and were includible in the gross amount of value of service. The appellant submitted a series of Tribunal decisions wherein it was held that the gross value for the discharge of service tax liability would not include reimbursement charges. The Revenue relied upon a contrary decision in the case of M/s. Naresh Kumar & Co. Pvt. Ltd. v. Commissioner of Service Tax, Kolkata, (2008) 11 STR 578 (Tri.).

Held:
It was previously held in various cases that service tax is restricted to amounts received by the assessee for carrying C&F only and other charges such as loading, unloading should be excluded. Similarly, it was also proposed that transportation expense collected by such an agent was not liable to tax along with the actual expenses such as labour, freight, telephone, electricity reimbursed by the principal. However, in the case referred by the Revenue (cited above), it was concluded that those expenses which are indispensable and inevitable for providing such services and which would essentially make value addition to the services be liable to service tax. Since there were two different stands taken by the Co-ordinate Benches, it was decided to refer the matter to the Larger Bench.

Facts:
The appellant, a direct selling agent for banks and non-financial corporation was held taxable under Business Auxiliary services. However the appellant claimed benefit under the exemption provided to small service providers by exemption Notification 6/2005, which was denied by the adjudicating authority stating that the direct selling agent used the brand name of the bank it served.

Held:
The Tribunal held that the appellant was eligible to claim exemption under the said Notification, as the banks were mere recipient of the services and the appellant did not provide any service by using recipient’s brand name. Also, the Notification did not put restriction with reference to the brand name of the service recipient, however, debarred the benefit to the service provider, if and only if the brand name of another person was being used for rendition of services. On this ground, the confirmation of the demand of the duty was set aside and the matter was remanded for re-adjudication.

Facts:
The appellant was sub-contracted by M/s. Noida Toll Bridge Company Ltd. (NTBCL) for specified functions relating to operations of Delhi-Noida bridge. It was contended by the authority that the agreement entered with the appellant clearly pointed out various services to be provided by them taxable under the category of Business Auxiliary services.

Appellant argued that toll levied by municipal corporation is a duty and tax levied by the Government is exempt from service tax liability under Notification No. 13/2004- S.T.

Further, the appellant contended that they were not providing any Business Auxilary services (BAS). The said services if at all taxable are in the nature of ‘Management, Maintenance and Repair of Immovable Property service’.

The appellant submitted that the customer care services envisaged under BAS were not applicable to the facts of this case as there is no third party involved.

Held:
It was held that the persons who are using the bridge cannot be called customers of either the appellant or NTBCL as the same would not fit into the definition of customers as defined in advanced Black Law Lexicon. Also, the appellant cannot be taxed under Business Auxiliary services as it was very clearly evident that NTBCL was not the client of the appellant as the appellant was not promoting any services of NTBCL. The services were in the nature of ‘Management, Maintenance and Repair of Immovable Property services’ as correctly contended by appellant.

Facts:
The figures depicted in the show-cause notice as well as adjudication order did not throw light as to what was the consideration received for different activities to bring them under the fold of law.

The appellant contended that since show-cause notice being basic foundation of any legal proceedings. For it to be valid it should have the substance of allegation and should be clear in all aspects.

Held:
Adjudicating authorities failed to pass a well-reasoned order. Neither did they speak on incidence of tax on each activity separately, nor did they test the activities of the appellant in detail to bring them under the tax net correctly. Appeal was allowed.

Facts:
The appellant filed a refund claim of service tax paid on the technical testing and analysis service, essentially used for export of goods claiming benefits under Notification No. 41/2007 as amended.

The refund claim was rejected on the ground that the condition mentioned in the Notification that there should be a written agreement with the buyer was not satisfied. However, the appellant contended that the letter of credit submitted by them can be issued by the bank only on the instructions of the customer.

Ratio in the case of Commissioner of Service Tax, Delhi v. Convergys India P. Ltd., (2009) 16 STR 198 was relied upon by the appellant, wherein it was held that a liberal view should be taken in similar cases pertaining to exports.

Held:
It was held that the refund claim cannot be rejected only on the grounds that the exporter had no written agreement for the mentioned input service with the buyer. Non-fulfilment of the procedure cannot lead to denial of the benefits under the beneficial legislation provided for exports. It is settled law that taxes cannot be exported, hence the appeal was allowed.

Facts:
The appellant was a subsidiary of Microsoft Corporation, Washington and provided product support services, consulting services, did marketing of Microsoft products, and other inter-company services.

The appellant claimed that the said services provided by them fell in the category of export of services for which it was not liable to pay service tax. It also claimed that the income earned on account of maintenance and repair of software was not chargeable to service tax in its hands.

The Revenue argued that no service was provided outside the defined territory, and hence there was no export of service at all made by the appellant.

Held:
The adjudicating authority held that as per the agreement, business support was provided by the appellant to the Singapore concern; and that such services were provided in India and were never provided outside India and therefore there was no export of service. According to the Member judicial, the principle of equivalence applied for sale of goods outside India should also be applied to services provided outside India. Therefore, in present case appellant’s services will not qualify to be export of services.

On the other hand, the Member judicial (technical) was of the opinion that while interpreting rules on such ambiguous subject it is necessary that an interpretation that is consistent to deliver the intention of the law-makers should be adopted. Accordingly, the business auxiliary services provided to promote sale for products of Microsoft operations in Indian market should be considered to be delivered outside India. According to the Member, the theory of equivalence did not exactly apply between taxation of export of goods and services. The above difference of opinion led to the matter being referred to the Larger Bench.

Facts:
Polyester staple fibre was manufactured out of PET scrap and waste bottles since the classification of the item involved technical aspect the writ petition by the High Court could not solve the issue.

The CBEC issued a Circular as to classification of polyester staple fibre manufactured out of PET scrap and waste bottles and it was contrary to the Tribunal decision in the case of GPL Polyfils, on the same issue. The Circular specifically instructed its officers that the Tribunal decision in GPL Polyfils was not a binding precedent.

Held:
As regards the classification issue it was held that according to paragraph 8 of the Circular, it is to be classified as textile material and not as a plastic article. With reference to paragraph 10 of the impugned Circular, the same was struck down by the High Court stating that the Circular shall not be binding. Further, it stated that the adjudicating officers must take into consideration the Tribunal decision in GPL Polyfils and applicability of the same should be looked into.

Facts:-
The Appellant received mobilisation advance, they paid service tax under works contract composition scheme. However, the contract was terminated and the advance received was recovered by the customer. The refund application filed was rejected on the ground that it had been filed beyond the limitation period u/s. 11B of the Central Excise Act. On appeal, the first appellate authority allowed the appeal, aggrieved by which the present appeal is filed.

Held:
Once service is not rendered then no service tax is payable, any duty paid by mistake cannot be termed as ‘duty’. The payment made has to be considered as a ‘deposit’ to which provisions of section 11B of the Central Excise Act, 1944 will not be applicable. Similar view was taken in the case of M/s. Barclays Technology Centre India P. Ltd vs. CCE [2015] – TIOL-82-CESTAT-MUM, where it was decided that refund cannot be denied for procedural infraction when service tax was not required to be paid. On slightly different facts, in the case of Jyotsana D Patel vs. CCE, Nagpur [2014] 52 taxmann.com 255 (Mumbai CESTAT), it was also held on similar lines that when the service tax is not required to be paid, the amount paid cannot constitute service tax and thus the provisions of section 11B are not applicable.