Category: Indirect Taxes

Facts:
Appellant provided taxable service of “sale of space or time for advertisement” to various advertising agencies. The agreements entered into with these service receivers contained a clause that the liability to tax including service tax would be borne by the recipient of the service. Appellant therefore claimed that it neither obtained registration nor collected and paid service tax from service receivers under the bonafide belief that by virtue of the agreement, liability to remit service tax stood transferred to the recipient. The assessee also pointed out that, in terms of specific clause in the agreement, disputes arose between Appellant and service receivers some of which are subject matter of arbitration proceedings and that, advertisers had not reimbursed the Appellant for the service tax component. It was also submitted that, in one of such proceedings, the High Court has given a direction, that in the event service tax liability is imposed, such liability shall be on the service receiver in terms of the agreement. Accordingly reliance was placed on the Apex Court judgment in the case of Rashtriya Ispat Nigam Ltd. vs. Dewan Chand Ram Saran [2012] 21 taxmann.com 20.

Revenue rejecting the contention of the assessee invoked extended period of limitation which is assailed by the assessee on the ground of bonafide belief.

Held:
The Tribunal rejecting the claim of bonafide belief held that, nothing is alleged, asserted nor established that there is any ambiguity in the provisions of the Act, which might justify a belief that the Appellant/service provider was not liable to service tax. It further held that it is axiomatic that no person can harbour a “bonafide belief” that a legislated liability could be excluded or transferred by a contract. It is a well settled position that legislation is not rejected or amended by private agreement.

Decision of the Apex Court relied by the assessee was distinguished on the ground that, in that case Court only observed that, transferring of the burden of liability to tax to a contractor was not prohibited and qua the terms of the agreement between the parties, the contractor was liable to bear the burden. However, it is not an authority for the proposition that if the Appellant’s tax burden is shifted to the advertisers under the private agreement, the Appellant is immune to tax so far as revenue authorities are concerned. Appeal was accordingly dismissed.

Facts:
Rebate claim
filed by the appellants vide Notification No. 11/2005 was rejected on
ground that services provided in India to international inbound roamers
registered with Foreign Telecom Network operator but located in India at
the time of provision of service, was not export of services vide
Export of Service Rules, 2005 and that the refund claim was not filed
within one year and therefore, the claim was time barred. Further,
doctrine of unjust enrichment was also not fulfilled.

The
appellant contended that the Tribunal in its own case, relying on Paul
Merchants Ltd. vs. CCE 2013 (29) STR 257 (Tri.), had delivered a
favourable decision and had held that that the services provided by
appellant were “export of services” since the services were rendered to
foreign telephone service providers, who were located outside India and
the principle of unjust enrichment is not applicable for export
transactions vide section 11B (2) (a) of the Central Excise Act, 1944.
Also, there was no time limit to file rebate claim under Notification
No. 11/2005. Relying on the various High Court decisions, the appellants
advanced the argument that the ratio of Central Excise decisions will
not be applicable to service tax export matters and therefore, the time
limit prescribed in section 11B of the Central Excise Act for filing of
refund claim does not apply to service tax rebate claim filed under
Notification No. 11/2005.

The respondents claimed that the
decision of Paul Merchants Ltd. (supra) was challenged before High Court
and the case was admitted. Further, the decision delivered in
appellant’s own case was also challenged before the High Court and
therefore, the decisions given were in jeopardy. Since section 11B is
made applicable to service tax vide section 83 of the Finance Act, 1994,
time limit of one year is applicable even to the rebate claims filed
under Notification No. 11/2005. Even if it was assumed that there was no
time limit prescribed, the authority should exercise their powers
within reasonable period, i.e., one year.

Held:
The
decisions delivered in case of Paul Merchants Ltd. (supra) and in
appellant’s own case were not granted any stay. Therefore, on merits,
the appellants were eligible for rebate claim. Since the transaction was
one of export, the principle of unjust enrichment was not applicable in
view of specific provisions u/s. 11B. Time limit of one year was
applicable even to rebate claims vide section 11B of the Central Excise
Act, 1944 read with section 83 of the Finance Act, 1994. Even if it was
assumed that there was no time limit, it is a settled law that though
the law is silent, a reasonable time limit should be read into the Law.

Relying
on decisions of GOI vs. Citadel Fine Pharmaceuticals 1989 (42) ELT 515
(SC) and Everest Flavours Ltd. 2012 (282) ELT 481 (Bom.), 7 rebate
claims were remanded back for the limited purpose of verification as to
whether the claims were time barred or not in view of decision delivered
therein and two rebate claims were allowed.

Facts:
During the period from September, 2006 to July, 2011, the appellants availed CENVAT Credit of input services, invoices of which were raised at the registered/head office. The head office, not being registered as Input Service Distributor, did not raise any invoice on the appellants to distribute CENVAT Credit. Accordingly, CENVAT Credit availed by the appellants was disallowed in absence of valid document for availment of CENVAT credit vide Rule 9(1) of the CENVAT Credit Rules, 2004. The department contended that in absence of registration as Input Service Distributor, the appellants were not allowed to distribute CENVAT Credit only to one unit.

Held:
It was not disputed that the appellants had more than one unit, the invoices received by head office related to actual provision of services and that the appellants had availed more than eligible CENVAT Credit of service tax paid. In a similar case of Doshion Limited vs. Commissioner of Central Excise, Ahmedabad 2013 (288) ELT 291 (Tri- Ahmd.), it was held that there was no requirement for proportionate distribution of CENVAT Credit. Further, there was no loss to Revenue. Also, in absence of any legal requirement, the procedural irregularity had to be ignored. Further in case of Modern Petrofils vs. Commissioner of Central Excise 2010 (20) STR 627 (Tri. Ahmd.), the invoices were raised in the name of head office as against factory and the appellants were not registered as Input Service Distributor. The Tribunal held that since admissibility of input services was not disputed, the omissions were curable defects and CENVAT Credit was allowed. Since there were no provisions for distribution of proportionate CENVAT Credit as Input Service Distributor to various units before 1st April, 2012 and in view of ratio of decisions cited above, the appeal was allowed.

Facts:
The Tribunal directed the appellants to deposit entire amount of duty demanded as pre-deposit vide Order dated 5th July, 2005. However, due to non-compliance with the said requirement, the appeal was dismissed vide Order dated 5th October, 2005. Subsequently, the appellants deposited 50% duty on 30th December, 2005 and 20th February, 2006 and requested the Tribunal to restore the Appeal. The Tribunal extended the time limit for predeposit till 30th November, 2006. Further, the payment made was supposed to be reported on 1st December, 2006. Since, the amount was not deposited within even such extended time limit, the Appeal was dismissed vide Order dated 13th December, 2006.

The appellants filed an application for restoration of appeal after four years with the reasoning of financial difficulty and closure of business, they could not deposit balance amount. Further, since there were various decisions in favour of the appellants, the appellants requested to restore the Appeal without insisting on deposit of balance dues.

Held:
The Tribunal observed that the Mumbai Tribunal in case of Kiritkumar J. Shah vs. C.C.E, Nagpur 2011 (22) STR 246 (Tri.-Mum.), had held that three months, being the maximum time allowed for filing appeal, should be considered to be time limit even for filing application for restoration of appeal and that there cannot be any justification to file application at the sweet will of the assessee. Relying on the Mumbai Tribunal’s decision and having regard to inordinate delay in filling such application, the application for restoration was not considered and no merits of the case were not decided.

Facts:
The
appellants undertook maintenance and repairs of ships. They discharged
service tax on the value of services provided. However, the adjudicating
authority confirmed service tax demand on value of goods supplied while
undertaking maintenance, management or repair service. Further, service
tax on GTA services availed was not paid by the appellants. The
appellants stated that Notification Nos. 12/2003 and 1/2006 specifically
excluded value of goods sold and they discharged service tax on correct
amount with respect to GTA services.

Held:
The
Tribunal observed that the Hon’ble Delhi High Court in case of G. D.
Builders & Others vs. UOI 2013 (32) STR 673 (Del) held that Section
67 of the Finance Act, 1994 enables the Government to levy service tax
only on the consideration received for rendering taxable service and it
prohibits inclusion of value of goods supplied while rendering services.
Following the Hon’ble Delhi High Court’s decision, the Tribunal
remanded back the matter with the order to quantify and exclude the
value of goods supplied/sold along with provision of services from
service tax levy.

Facts:
The appellants paid excess service tax which was adjusted suo motu by them after a long lapse of period. The appellants contested that such service tax adjustment was appropriate vide Rule 6(4A) and 6(4B) of the Service Tax Rules, 1994 since the amount involved was less than Rs. 1 lakh. According to Service Tax Department, such adjustment could be made in the next month or next quarter provided intimation was filed to the department within 15 days of such adjustment. The case of the department was that since the appellant did not follow the procedure prescribed, their adjustment was not acceptable. The first Appellate authority confirmed the demand along with interest and also imposed penalties u/s. 76 and 77 of the Finance Act, 1994. The appellants argued that they have adjusted their own money and hence, penalty was unwarranted in the present case.

Held:
The Tribunal observed that the phrase used under Rule 6(4A) was “subsequent month or quarter” and not “subsequent months and quarters.” Further, the appellants had not fulfilled all conditions as required under the said Rules. Distinguishing the case of Siemens Limited vs. CCE, Pondicherry 2013 (29) STR 168 (Tri.), it was held that since, in the present case, there was no reasonable explanation provided by the appellant, the first Appellate authority was correct in demanding service tax along with interest. However, since the appellants had a bonafide belief with respect to adjustment of excess service tax paid, the penalties were set aside.

Facts:
The appellant was engaged in exporting taxable as well as exempt business auxiliary services. The appellants had, therefore, filed refund claims for unutilised CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 read with Notification No. 5/2006-CE (NT) dated 14th March, 2006. The appellants argued that exempted services shall form part of export turnover as well as total turnover and therefore, they were eligible for 100% CENVAT Credit. However, the department was of the view that while calculating refund claim, exempted services exported shall not be considered as “Export Turnover” though the same is includible in the total turnover and accordingly, CENVAT Credit proportionate to exempted services exported shall not be admissible.

Held:
The Tribunal observed that the definition of “Export turnover of services” under Clause D of Rule 5(1) of the CENVAT Credit Rules, 2004, does not make any distinction with respect to payments received from export services. The logic of giving cash refund of taxes used in relation to export of goods/services is to have “Zero Rated exports.” Therefore, following the decision delivered in case of Zenta Pvt Ltd. 2012 (27) STR 519 (Tri.), it was held that even exempted export services should be added to export turnover of services and the appellants were allowed refund of total unutilised CENVAT Credit.

Facts:
The
appellants, being manufacturer of excisable goods, availed CENVAT Credit
on accidental and medical insurance premium paid for the employees and
their family members. The appellants relied on the decisions of the
Karnataka High Court in case of CCE vs. Micro labs Ltd.- 2012 (26) STR
383 (Kar.) and CCE vs. Stanzen Toyotetsu India (P) Ltd.-2011 (23) STR 44
(Kar.) wherein group insurance and health insurance policy of employees
was held to be qualified “input service.”

Revenue relied on the
decision of the Gujarat High Court in case of CCE vs. Cadila healthcare
Ltd. – 2013 (30) STR 3 (Guj) wherein it was concluded that all services,
the cost of which became part of the cost of the business, cannot be,
prima facie considered as an input service.

Held:
The
Tribunal observed that the employer took accidental insurance policy for
the workers of the company to cover its business risk and similarly,
health insurance for providing proper treatment to the employees falling
sick. Insurance bring employees back to work without loss of man-hours
and disruption of manufacturing lines of the company. Thus, such
insurance cannot be considered as having no relation with the
manufacturing activity. However, insurance premium attributable to the
families of employees had no direct nexus with the manufacturing
activity and will not be qualified as input service. Following the
decision of the Karnataka High Court in Micro labs Ltd. (supra), the
order was set aside and matter was remanded back to the adjudicating
authority to quantify the insurance premium attributable to family
members which was held ineligible as CENVAT credit.

Facts:
After paying service tax on advances received, the agreement for provision of services was terminated and consequently, no services were provided by the appellants. The appellants filed refund claim which was rejected by the Revenue.

The appellants contested that they had refunded the value of taxable service along with service tax to the customer and sufficient documents were already shown for the amounts received and refunded back to the customer. Furthermore, chartered accountant’s certificate was provided for refund of service tax amount to the customer. Further legality of claim has substantiated through guidance note, circular and judicial pronouncements and since the amount was already refunded to customer, there was no question of unjust enrichment.

Held:
The Tribunal observed that there was no dispute regarding eligibility of refund claim but, prima facie the claim was rejected since the amounts were not shown in the Balance Sheet as ‘receivable’. The rejection made on such a short ground cannot be held to be just and fair. Therefore, the Tribunal held that irrespective of the non-reflection of refund amount in the Balance Sheet, the same needs to be refunded inasmuch as the same was not required to be paid by the assesse.

Facts:
The appellants manufacturers of paints and varnishes had various factories. The appellants, being a sick company applied to BIFR for finalising rehabilitation package and in the process availed services of techno feasibility study of rehabilitation and obtained report on further fund raising. The appellants took CENVAT Credit on such services which was denied by revenue authorities.

The appellants contested that the services were obtained in view of order of BIFR and the same were financial services covered very well within the definition of input services. In any case, these services were “activities relating to business” specifically covered under the definition of input services.

Held:
In terms of BIFR’s orders, the appellants availed such services with respect to techno-economic feasibility of rehabilitation and modalities of finance. Without such feasibility report, it was not possible for BIFR to finalise the rehabilitation package for the appellants. Therefore, such services had nexus with its manufacturing activity and are covered within the term “activities relating to business” and therefore, CENVAT Credit was allowed to the appellants.

Facts:
The appellants manufacturers of fabrics and readymade garments supplied qualified/skilled employees to its subsidiary/group companies. Department alleged that the transaction was covered under manpower recruitment and supply agency services. Relying on the Divisional Bench decision in case of M/s. Paramount Communication Ltd. vs. CCE, Jaipur 2013-TIOL-37-CESTAT -DEL, the appellants contested that the services were not in the nature of manpower recruitment and supply agency services.

Held:
The appellants had deputed its employees to subsidiary/ group companies engaged in similar line of business. There was no allegation or findings about deputation of employees to any concern other than its own subsidiary/group companies. The employees did not work under the direction/ supervision and control of subsidiary/group companies but completed the work as directed by the appellants.

Manpower recruitment or supply agency phrase under service tax laws, stipulated “any commercial concern” within its purview and the appellants were merely a composite textile mill and not a commercial concern engaged primarily in recruitment or supply of manpower. The Hon’ble Tribunal relied on the decision in the case of Paramount Communication Ltd. (supra) wherein it was observed that in case the personnel works for two sister concerns, the rendition of services was by the personnel to both the companies and it was not a case of one company providing services to another. Accordingly, the appeal was allowed.

Facts:
The appellant availed of CENVAT Credit on commission services procured during the period July, 2008 to April, 2009. The Adjudicating Authority and Tribunal relying on the decision of the jurisdictional High Court in the case of CCE, Ahmedabad-II vs. Cadila Healthcare Limited 2013(4) STR 3 (Guj.) and disallowed CENVAT Credit on sales commission. Being aggrieved, the appellants filed appeal before the Hon’ble High Court with following substantial questions of law:

• Whether the Tribunal was justified in passing the order without considering contrary decisions of the Punjab & Haryana High Court and the Gujarat High Court on the same subject and also that the department had not filed appeal against the Punjab & Haryana High Court’s decision?

• Whether the Tribunal was justified in relying only on the Gujarat High Court’s decision since service tax is a central levy and such discrimination would violate Article 14 and 19(1)(g) of the Constitution of India?

• Whether there was injustice on the part of the Tribunal and the order was illegal and absurd?

• Whether sales commission was not in the nature of sales promotion, an activity specifically covered in inclusive part of definition of input services for availment of CENVAT Credit?

The appellants contended that they were entitled to CENVAT Credit on sales commission in view of CBEC Circular dated 29th April, 2011 which is binding on the department. The appellants relied on various decisions in support of their contention. The appellants argued that in view of the favourable decision of the Punjab & Haryana High Court in the case of Ambika Overseas 2012 (25) STR 348 (P & H), the appellants was entitled to CENVAT Credit and since there were contrary decisions of the two High Courts, the appellants requested to refer the matter to the Larger Bench.

Held:
If there is conflict between the jurisdictional High Court’s decision and CBEC Circular, decision of the jurisdictional High Court is binding on the department.

Decision of the jurisdictional High Court in case of Cadila Healthcare Limited (supra) has been challenged before the Hon’ble Supreme Court and the said order is not stayed by the Hon’ble Supreme Court.

Decision of the jurisdictional High Court is binding on the department rather than decision of the other Courts even in case there are contradictory decisions prevailing on the subject matter.

Since decision of Cadila Healthcare Limited (supra) is pending before the Hon’ble Supreme Court, the matter cannot be referred to the Larger Bench. Even otherwise, the High Court did not see any reason to take a contrary view than as given in Cadila Healthcare Limited (supra).

Just because there were contrary decisions, matter cannot be referred to the Larger Bench when the High Court was in agreement with the view taken by the jurisdictional High Court.

Accordingly, the Hon’ble High Court held that the Tribunal was right in relying on the decision of Cadila Healthcare Limited (supra) CENVAT Credit of sales commission services.

Facts:
Respondent availed CENVAT Credit on input services of transportation of goods from place of removal. The adjudicating authority disallowed such CENVAT Credit, however the first Appellate authority relying on CBEC Circular F. No. 137/3/2006-CX.4, dated 02-02-2006 decided the case in favour of the respondent. Department appealed against the order and the matter was referred to the Larger Bench. The Larger Bench relying on the judgement of the Punjab & Haryana High Court in the case of Gujarat Ambuja Cement Ltd. vs. Commissioner of Central Excise, Ludhiana 2009 (14) S.T.R. 3 (P & H), CBEC Circular and the Hon’ble Supreme Court’s decision in the case of All India Federation of Tax Practitioners vs. UOI 2007 (7) STR 625 (SC), held that service tax is a destination based consumption tax to be borne by customers. The Larger Bench also held that if CENVAT Credit is denied on transportation services, it would be a tax on business rather than being a consumption tax. The argument advanced by the department that CENVAT Credit cannot be allowed for services the value of which do not form part of value under Excise Law was not accepted by the Larger Bench.

Held:
The Hon’ble High Court agreed with the analysis of the Larger Bench of Tribunal and dismissed the appeal by the department.

Facts:
The assessee obtained zinc ore concentrate from the mines on payment of excise duty which is used as an input for the production of zinc. In the process of manufacturing, sulphuric acid was produced as a by-product which is also a dutiable product. However, clearance of sulphuric acid as a by-product to fertiliser plants was chargeable at nil rate of duty in terms of Notification No. 6/2002-CE. Revenue contended that as per Rule 57CC of the Central Excise Rules, 1944 (Rule 6 of the CENVAT Credit Rules, 2004), the assessee was obliged to maintain separate accounts and records for the inputs used in the production of zinc and sulphuric acid and in the absence of the same the assessee was obliged to pay 8% as an amount on the sale price of exempt sulphuric acid.

The assessee filed writ petitions under Article 226 before the High Court challenging the vires of Rule 57CC and constitutional validity of Rule 6 of the CCR, 2004 on the ground that the Central Government by subordinate legislation cannot fix rates of duties which is the prerogative of the Parliament u/s. 3 of the Central Excise Act, 1944 read with Central Excise Tariff Act, 1975. The High Court decided the petition in favour of the respondents on the interpretation of Rule 57CC and Rule 57D itself, without going into the question relating to the vires. On appeal by the department, the Apex Court decided the matter on merits and held as under:

Held:
The Apex Court observed that emergence of sulphur dioxide in the calcination process of concentrated ore is a technological necessity and then conversion of the same into sulphuric acid as a non-polluting measure cannot elevate the sulphuric acid to the status of final product. Technologically, commercially and in common parlance, sulphuric acid is treated as a by-product in extraction of non-ferrous metals by companies not only in India but all over the world.

It was further observed that the given quantity of zinc concentrate will result in emergence of zinc sulphide and sulphur dioxide according to the chemical formula on which respondents have no control. The ore concentrates (zinc or copper) are completely utilised for the production of zinc and copper and no part can be traced in the sulphuric acid which is cleared out. The Court held that, when in the case of the respondents, no quantity of zinc ore concentrate has gone into the production of sulphuric acid, and that entire quantity of zinc concentrate is used for the production of zinc, applicability of Rule 57CC cannot be attracted. Accordingly, the Hon’ble Court affirmed the decision of the High Court holding that the mischief of recovery of 8% under Rule 57CC on exempted sulphuric acid is not attracted.

Facts:
The appellant engaged a lawyer for conducting his appeal before the High Court. Later on, the lawyer was elevated as judge of the High Court and consequently, he returned the brief. Though the appellant engaged another lawyer, due to oversight of the clerk, Vakalatnama of the new advocate was not placed on record and therefore the new lawyer was not intimated of the final hearing. On the day of final hearing, the old lawyer informed that he had been returned the brief and therefore there was no effective appearance made on behalf of the appellant. Even the respondent was absent. The learned judge however, decided the appeal on merits by a detailed judgment.

The appellant contended that the High Court was not justified in deciding the appeal on merits since there was no representation on behalf of the appellant. The appellant alleged that the only course open to the High Court was either to dismiss the appeal on default or adjourn the same, in view of Explanation to Order 41 Rule 17(1) of the Code of Civil Procedure (CPC).

The respondent’s counsel contested that since the appeal was of the year 2003 which came up for the final hearing after nine years, the High Court can decide the matter on merits even in the absence of the appellant.

Held:
After discussing the Explanation to Order 41 Rule 17 (1) of CPC in detail, the Hon’ble Supreme Court observed that the explanation was introduced to give an opportunity to the appellant to convince the Appellate Court that there was a sufficient cause for non-appearance. Such an opportunity would be lost, if the Court decides the appeal on merits. Following the decision in case of Abdul Rahman and Others vs. Athifa Begum and Others (1996) 6 SCC 62, the Hon’ble Supreme Court allowed the appeal, restored the appeal and directed the High Court to dispose off the appeal in accordance with Law.