Recent Decisions: Part A: Service Tax Archives

Service Tax

I. Tribunal

8. 2018-TIOL-3086-CESTAT-BANG]

Commissioner of Central Excise, Customs and
Service Tax, Kerala vs. Askar Timbers

Date of Order: 18^th July, 2018

Reimbursement of Expenses not liable for service tax.

Facts

The Assessee is a clearing and
forwarding agent who receives the goods, warehouses the goods, receives
dispatch order and prepares invoices on behalf of the principal. Show Cause
Notice was issued for non-payment of service tax on amount reimbursed for services
rendered.

It was contended that charges like
loading/unloading, coolie, cartage, handling/portage and lorry freight charges,
electricity, telephone, godown rent, salary to staff etc., did not attract
service tax and service tax can be levied only on commission and other
reimbursed expenses cannot be added to commission.

Held

The Tribunal noted that as per
section 67, value of taxable service is the gross amount charged for providing
“such” taxable services. Any other amount, which is calculated not for
providing such taxable service, cannot be a part of valuation as that amount is
not attributable to such services.

Accordingly, relying on the
decision of the Apex Court in the case of UOI vs. Intercontinental
Consultants – [2018-TIOL-76-SC-ST] the demand was set aside.

9. [2018-TIOL-3152-CESTAT-MUM] Sairaj

Labour
Services vs. CCE and ST, Aurangabad Date of Order: 28^th June, 2018

Amount contributed towards EPF in relation to Manpower Recruitment
& Supply Agency service is includible in the value of the services
rendered.

Facts

Appellant was providing services
taxable under manpower recruitment and supply agency service. A Show Cause
Notice was issued demanding service tax on the amounts paid to ESIC and EPF on
the contention that such amount paid is includible in the gross taxable value.

Held

The Tribunal relied on the decision
in the case of Neelav Jaiswal [2014] 34 STR 225 (Tri.-Del) wherein the
Tribunal held that the liability to remit provident fund to provident fund
authorities is a statutory liability on the Appellant, employer of persons who
are deployed to serve the needs of their client. The consideration for such
services not only includes the amounts agreed between the parties but also
their statutory obligation towards PF and ESIC. Both the amounts therefore are
considered as the gross taxable value. The Appeal was accordingly dismissed.

10. [2018-TIOL-3150-CESTAT-MUM]
Kalyani Hayes Lemmerez Ltd. vs. CCE, Pune-III

Date of Order: 4^th August, 2017

CENVAT credit on outdoor catering and Rent-a-Cab service is
allowable as CENVAT credit.

Facts

The issue relates to entitlement of
CENVAT credit on transport and outdoor catering services during 2011 to 2013.
It was argued by the department that goods and services used primarily for
personal use or consumption of employees are not eligible for CENVAT credit.

Held

The Tribunal relying on the
decision in the case of Hindustan Coca-Cola Beverages Pvt. Ltd. vs.
Commissioner of Central Excise [2014-TIOL-2460-CESTAT-MUM] held that what
is excluded is only services used primarily for personal use. Since the service
is used in relation to business, the credit is allowable. Further,
relying on the decision in the case of Marvel Vinyls Ltd. vs. CCEx, Indore
[2016-TIOL-3071-CESTAT-DEL] it was held that credit on Rent-a-cab services
is also allowable.

Note: Readers may
note a similar decision on allowability of CENVAT credit on rent-a-cab in the
case of Nihilent Technologies Pvt. Ltd [2017-TIOL-2696-CESTAT-MUM]
digest provided in August, 2017 issue of BCAJ.

11. 2018 (14) GSTL
367 (Tri.-Del.) Accent Overseas P. Ltd. vs. Commissioner of Service Tax, New
Delhi
Date of Order: 2^nd March, 2017

Receipt of indirect foreign currency sufficient to determine
services are exported.

Facts

Appellant assessee was engaged in providing
services of promotion of sales of products in India for the principals located
outside India. Department alleged the said activity was business auxiliary
services and demanded the service tax.

Held

It appeared to the Hon’ble Tribunal
that consideration was received in foreign currency for the export of services.
An identical issue came up before the Tribunal in the case of National
Engineering and Industries Ltd. vs. CCE, Jaipur 2016 (42) STR 537 (Tri. Del.),
wherein it was held that in case when the commission is received from foreign
supplier for procuring orders from the Indian buyers to whom the goods were
directly supplied by the foreign supplier, the service rendered clearly
satisfies the requirement of the provisions relating to export of service.

The Tribunal by relying on the said
case set aside the order and allowed the appeal of Appellant.

12. 2018 (14) GSTL 373 (Tri.-Mumbai)

Commissioner
of Service Tax, Mumbai vs. Wall Street Finance Ltd.
Date of Order 18^th November, 2016.

Services of advertising and promoting activities of foreign entity
done in India, benefit of the same received abroad, hence activity amounts to
export of services.

Facts

The Revenue aggrieved by the order
of the Adjudicating Authority filed an appeal before Tribunal alleging that
demand of service tax on advertising and promotion services rendered by the
Respondent Assessee was incorrectly dropped by relying on Board’s circular
dated 24/02/2009 on “Export of services Rules, 2005” Further, it was alleged
that penalty u/s. 76 of the Finance Act, 1994 was not imposed correctly despite
various violations. The entire dispute in the matter was of determining the
place of provision of services when agents in India were recruited by overseas
entity to transfer money from abroad to persons situated in India. The
department contested that beneficiary was situated in India and therefore
services were taxable in India.

Held

The Hon’ble Tribunal held that since the
recipient of the service was located outside India and the consideration was
received in foreign exchange, the service undertaken by the Indian provider
amounted to export of service and therefore not taxable.

13. [2018]
97 taxmann.com 421 (New Delhi – CESTAT) H. N. Coal Transports (P) Ltd. vs. CCE
&ST

Date
of Order: 23^rd July, 2018

When service provider rendered two separate services under two
separate agreements to a single person, the Tribunal held that merely because
such services are provided to single person
in the same premises, the same cannot be said to be naturally bundled u/s. 66F
and regarded as provision of single service.

Facts

The appellant entered into two
separate contracts with their client SECL for providing services of loading and
transportation/movement of coal in their mining area. Under the loading
agreement, operations of loading of coal at coal face (i.e. a place where the
coal is mined) and the coal which is mined was required to be loaded into
tipper/trucks was carried out. Under the transportation agreement, appellant
was required to transport the coal from coal face to the railway
siding/dump/stock yards within the mining area. As regards consideration
received under transportation agreement, it was that it was provision of “goods
transport agency services” and accordingly, the service recipient i.e. SECL
paid service tax under reverse charge mechanism. The Department alleged that
the activities carried out under loading agreement as well as transportation
agreement are to be considered as a “bundled service” u/s. 66F of
Finance Act, 1994. It was alleged that the contracts have been artificially
vivisected even though the activity comprised is nothing but different aspects
of mining and as both the activities are performed within mining area, it
constitutes a single bundled service with the essential character of mining.

Accordingly, appellant was required
to discharge service tax liability in respect of consideration received under
transportation agreement. The decision of the Hon’ble Supreme Court in CCE
& ST, Raipur vs. Singh Transporters [2017] 84 taxmann.com 39/63 GST 340,
wherein it was held that the activity of transportation of coal from the
pit-heads to railway sidings within the mining area is to be classified under
GTA and not under mining was relied upon.

Held

The Hon’ble Tribunal noted that the
appellant has carried out the activity in terms of each contract under its own
terms and the two contracts have been executed irrespective of each other.
These contracts indicate the rates separately for the respective activities.
The machinery used for the two activities are independent and unconnected with
each other. Further, it was noted that the total quantum of coal loaded at the
coal face has no co-relation with the total quantum of coal transported from
the coal face to the railway siding.

Therefore, the Tribunal held that
simply because both the activities are to be performed within the mining area,
that is no reason to bundle the two together and to take the view that
provision of one service is combined with an element of provision of the other
service. The difference in the quantity of coal loaded and the quantity being
transported clearly show that the appellant is not doing transportation of
loaded coal as a continuous activity. It was observed that perusal of the terms
of the contract clearly indicate that the two are independent contracts.
Consequently,

The Tribunal held that the services
provided under transportation agreement will continue to enjoy the benefit
available to goods transport agency and cannot be bundled into a single service
u/s. 66F along with lifting of coal at the coal face into the activity of
mining and thereby allowed present appeals by setting aside impugned demand.

14. [2018]
97 taxmann.com 532 (Rajasthan HC) CCE vs. Rambagh Palace Hotels (P.) Ltd.

Date
of Order: 8^th November, 2017

When the assessee hotel entered into composite contract for
renting of premises for holding functions of marriage etc. and renting of rooms
for temporary stay in hotel, the amounts charged for such temporary stay in
hotel rooms and billed separately, are not chargeable to service tax under
“Mandap Keeper Services”.

Facts

The respondent hotel entered into
composite contracts with customers wherein they provided the banquet/conference
halls and gardens to hold the functions of marriage, conference & meetings
along with the rooms for stay of the persons who participated in such
functions. Revenue demanded service tax on amount charged towards renting of
rooms as such activity is part and parcel of the service provided in relation
to holding of the functions of marriage/meetings/conference and as such are
covered under the Mandap Keeper Service. The lower authorities held that when
the booking is composite and stay of the participants is in the same place as
the mandap, then such rooms are an extension/integral part of the mandap. It
was alleged that separate billing does not take away the fact of such services
being integral part of the overall service provided in relation to holding of
marriage/meeting/conference. The order of lower adjudicating authorities was
confirmed by first appellate authority and subsequently, in appeal before the
Tribunal, the impugned demand was set aside. Being aggrieved, revenue filed the
present appeal. Accordingly, in present appeal, the substantial question of law
before the Hon’ble High Court was whether the Tribunal is correct in holding
that no service tax is leviable/payable on the charges collected in the name of
booking of the rooms which were integrally used in connection with the
functions organised by the organisers in the adjacent gardens and the payment
for the entire premises was made by the organisers under a composite contract
whereas the service tax is leviable on the gross amount charged from the
customers under the category of Mandap Keeper Services in terms of the
provisions of section 67 of the Act, 1994?

Held

The Hon’ble High Court noted that
the Tribunal had relied upon decision in the case of Merwara Estate vs. C.C.
E., Jaipur (16) STR 268 (Tri-Del), wherein it was held that renting of
halls of hotel rooms cannot be held to be covered by the definition of “Mandap
Keeper” inasmuch as the hotel has an identity, personality and function quite
distinguishable from that of a mandap. In present case, the Tribunal had
observed that the activity of the appellant is entirely different from the
mandap keeper activity. The definition of mandap keeper nowhere covers the
temporary occupation of hotel rooms for the purpose of boarding, temporary
residence. It is not disputed that no function is held in the hotel room, which
is used for the purpose of staying. Therefore, the Tribunal held that the order
of the lower authorities holding inclusion of the hotel rooms rent into the
value of Mandap Keeper Service is not sustainable. Observing the same, the
Hon’ble High Court held that since the definition of mandap keeper does not
include the service in question, the Tribunal has rightly distinguished the
mandap service and the room rents received. Accordingly, present appeal was
dismissed.

II. High Court

15. Commissioner of Service Tax VI vs. Shreenath Motors Pvt. Ltd [2018-TIOL-2051-HC-MUM-ST] Date of Order: 19^th
September, 2018

Confirmation of demand would ipso facto not lead to
penalty. Divergent views, reasonable cause for non-levy of penalty

Facts

The Respondent is a car dealer and
also a selling agent of banking and financial institutions. They receive
commission from the banks granting loans to the purchasers of the vehicle. Out
of abundant compliance of law, they discharged service tax on the said income
under business auxiliary service. A show cause notice was issued invoking
extended period of limitation demanding service tax, interest and penalties.
The Tribunal relying on the decision of South City Motors Ltd vs.
Commissioner of Service Tax, Delhi [2012 (25) STR 483 (Tri.-Del)] held
that service tax is payable, however in view of contrary decisions, no malafide
intent or suppression can be present and therefore penalties were dropped.
Accordingly, the revenue is in appeal.

Held

The Court appreciated the fact that
there was divergence of views. It was held that in these facts, there was
reasonable cause for non-payment of service tax making section 80 of the Act
applicable. Thus, the department’s appeal was set aside.

Note: Readers may
also note the decision in the case of Concept Motors Pvt. Ltd vs. CST &
ST Ahmedabad [2018-TIOL-2972-CESTAT-AHM] where the demand itself was set
aside as the extended period was held to be not invokable.

16. Team Global Logistics Pvt. Ltd vs.
Commissioner of Service Tax-V
[2018-TIOL-2068-HC-MUM-ST]
Date of Order: 26^th September, 2018

A party who prosecutes a Writ Petition bonafide expecting
to succeed cannot be expected to keep preparing for an alternate remedy even
before his Petition is rejected. Accordingly the time spent in prosecuting the
petition before the High Court is required to be excluded for computing the
period of limitation in filing Appeal before the Tribunal.

Facts

The Assessee filed a writ petition
challenging the order of the Commissioner confirming the demand on the ground
that the order passed was without jurisdiction under Article 226 of the
Constitution of India. However, the Court refused to entertain the Appeal on
the ground that there is an
efficacious alternate remedy available by way of Appeal to the Tribunal.
Accordingly, appeal was filed before the Tribunal. The Tribunal dismissed the
condonation application on the ground that the provisions of section 14 of the
Limitation Act, 1963 and/or the principle thereof is not applicable to the
statutory Appeals filed under the Finance Act, 1994 read with Central Excise
Act, 1944. Further it was also stated that the delay is unreasonable on the
ground that the Appellant was agitating the issue before the High Court for over
a year, therefore, they should have kept its Appeal to the Tribunal ready and
filed it with the Tribunal no sooner the High Court dismissed its Writ
Petition. Accordingly, the present Appeal is filed before the High Court.

Held

The Court noted that a party who
prosecutes a Writ Petition bonafide expecting to succeed cannot be
expected to keep preparing for an alternate remedy even before his Petition is
rejected. The principle of section 14 of the Limitation Act, 1963 is applicable
even when in respect of statutory Appeals filed before the Tribunal from the
orders passed by the Collector of Customs (Appeals) under the Customs Act,
1962.

Thus, the period of time spent in prosecuting the Petition against
the order of the Commissioner of Service Tax has to be excluded while computing
the period of limitation in filing an Appeal before the Tribunal. In the
present case, after excluding the said period it is clear that the Appeal is
with a delay of merely 28 days. Therefore, the Court held that the delay is
sufficiently explained and therefore we condone the delay and direct the
Tribunal to consider the submissions on merits.

BCAJ Admin

Service Tax

Tribunal

1. [2018-TIOL-2674-CESTAT-MUM] K B Mehta
Construction Pvt. Ltd. vs. CST-Service Tax, Ahmedabad Date of Order: 12^th July, 2018

When the service is
inclusive of supply of goods in such case, value of goods is exempted by
Notification 12/2003-ST.

Facts

Appellant entered into a
consolidated contract involving service and supply of raw material wherein sale
and service value was provided separately. The department contended that the
bifurcation into goods and services is artificial and thus the total contract value is the
gross value of provision of service liable for service tax.

Held

The Tribunal noted that
when the service is inclusive of supply of goods, in such case the exemption in
respect of the value of the goods involved in the provision of services is
exempted by Notification No.12/2003-ST dated 20.06.2003. According to the
Tribunal, the Revenue did not make any effort to verify as to whether despite
making different invoices in respect of services and sale of the goods, the
value of service was suppressed and transferred to the transaction of sale of
the goods. Further, it was observed that they paid VAT in respect of those
invoices where the goods were shown to have been sold. Accordingly, it was held
that if the value shown in the sale invoices was correct towards the sale of
the goods, the same would not be chargeable to service tax in terms of
Notification No. 12/2003-ST dated 20.06.2003. The demand thus was set aside and
the matter was remanded to verify the above observation.

2.
[2018-TIOL-2656-CESTAT-MAD]
International Travel House Ltd vs. Commissioner of Service Tax, Chennai Date of Order: 23^rd March, 2018

There is no service
provider – service receiver relationship between inter-divisions and both are
one and the same entity. Cost of parking charges collected are in the nature of
reimbursable expenses and are not liable for service tax.

Facts

On perusal of ST-3 returns,
it was noticed in audit that assessee had not paid service tax on Parking
charges which their travel desk had collected from customers who were provided
with Rent-a-Cab Services, service charges which they received from their travel
division for booking air tickets for clients staying at the hotel and
Commission received from travel division for booking air tickets on behalf of
service provider. Show Cause Notice was issued proposing demand of service tax
under “Rent a Cab Services” and “Air Travel Agency
Services”. It was argued that the travel division undertakes the booking
of air tickets and raises an invoice charging service tax on basic fare, which
is forwarded to travel desk. The bills raised include the value of
inter-division services along with service tax and service charges. Since
service tax on basic fare is being discharged by travel division of assessee
company under Air Travel Agency Services, the demand on assessee treating these
two divisions as separate entities is incorrect.

Held

The Tribunal noted that the
company and its travel division are the same entity and there is no service
provider or service receiver relationship between these divisions. Thus, when
service tax is already discharged by the travel division on the basic fare, the
demand of service tax is without any factual or legal basis and requires to be
set aside. In regard to parking services, it is noted that while providing the
Rent-a-Cab service, the cost of parking charges is also collected. This is in
the nature of reimbursable expenses and therefore cannot be subject to service
tax, as decided in the case of Intercontinental Consultants and Technocrats
Pvt. Ltd. [2018-TIOL-76-SC-ST].

3.
[2018] 96 taxmann.com 2
(Mumbai – CESTAT) Amby Valley City Developer Ltd. vs.
Commissioner of Central Excise, Pune-1
Date of Order: 8^th June, 2018

The activity of allowing
complementary use of conference hall by hotel, to guests residing therein,
without charging any separate amount therefor cannot be charged on a notional
amount under “convention service”.

Facts

The appellant, owner of
hotel, while renting the rooms to various corporate entities, also allows use
of conference hall as complimentary and did not charge any amount separately
for said use of conference hall. The billing of rooms is done on the basis of
single occupancy or double occupancy and specifies that the additional facility
of conference hall, seating arrangements and audio visual will be provided.
Revenue alleged that such use of conference hall is liable to service tax as
provision of “convention services”. Whereas appellant submitted that they are
not separately providing “convention service” as alleged by department and the
conference hall charges are included in room tariff included in total bill i.e.
already loaded in value of taxable services on which service tax liability has
been discharged.

Held

The Tribunal noted that
appellant rented rooms and discharged service tax liability wherever
applicable. Further, no separate charges for Convention Center have been
charged and the use has been complementary. Therefore, the Tribunal held that
the demand is computed on notional basis and since the use of convention center
has been complementary, no service tax can be charged. Reliance was placed on
decision in Dukes Retreat Ltd. vs. C.C.Ex., [Final Order No.
M/86948-86949/17/STB, dated 13-4-2017] and Taj View Hotels vs. C.C.Ex. [2014]
47 taxmann.com 198/46 GST 601 (New Delhi – CESTAT). Accordingly, the demand
was set aside.

4.
[2018] 96 taxmann.com 390
(Allahabad – CESTAT) Commissioner of Customs, Central Excise & Service Tax,
Noida vs. Fortune Cookie
Date of Order: 26^th July, 2018

When assessee took
premises of golf course on rent and provided food to members of Golf Course
itself, Tribunal held that such services would be in the nature of “restaurant
services” and not “outdoor catering services”.

Facts

Respondent
took premises of Golf Course on rent and paid lumpsum amount to golf course.
From said premises, respondent was providing food to members of Golf Course.
Respondent treated said activity as provision of “restaurant services”, whereas
revenue contended that such activity is taxable as provision of “outdoor
catering service”.

Held

The Tribunal noted that the
“outdoor catering service” is to be provided at the premises of the
service recipient i.e. at his own premises or the premises taken on hire by the
service recipient, whereas in the case of “restaurant service”, the
service is to be provided by the service provider in its own premises. The
Tribunal observed that in instant case, the respondent i.e. service provider
renders services from its premises i.e. premises taken on rent from Golf
Course. It was also noted that in Tamil Nadu Kalyana Mandapam Assn. vs.
Union of India [2006] 4 STT 308 (SC), the Hon’ble Apex court held that the
service of restaurant and outdoor caterer are distinguishable. Further, the
Tribunal noted that the respondent maintains menu card, fixes prices for every
item and there is no personal interaction with service recipient in restaurant.
Accordingly, it was held that services provided by respondent qualify as
“restaurant services” and not “outdoor catering services” and set aside the
demand.

5.
[2018] 96 taxmann.com 28
(Bangalore – CESTAT) Hindustan Petrochemical Corporation Ltd. vs. CCE
Date of Order: 8^th June, 2018

Undertaking certain
activities in relation to maintenance and safety of tank trucks and merely
issuing certificates to the effect that tank trucks are purged as required
under petroleum law cannot be regarded as provision of “technical inspection
and certification services”.

Facts

The appellant is engaged in
the business of refining of crude and marketing of various petroleum products.
They have set up a facility to store the LPG and from there, the stored LPG is
sent to various LPG bottling plants of oil distribution companies through tank
trucks. Whenever LPG tank trucks require any repair or mandatory testing of
safety valves, the tanks are cleaned and completely degassed. For this
activity, the appellant collects cost of water, LPG and the labour charges from
the truck owners. On finding that the repairs to truck tankers had to be
conducted with the advance approval in writing and the repair work should be
conducted as per the code IS 2825/BS 5500, department alleged that the
certificates issued by appellant imply that appellant has certified purging of
truck tankers as required under petroleum law and thus, the activities
undertaken by appellant would be chargeable to service tax under “technical
inspection and certification services”.

Held

Hon’ble Tribunal noted that
the appellants are not basically an agency involved with testing and
certification and the activities performed by them make the truck tanks fit to
be filled with LPG for further transportation. Thus, the Tribunal held that
though appellant performed certain activities in relation to the maintenance
and safety of tank trucks and issued certificates to the effect that the tanks
are purged/degassed, such activities of appellant would be construed only as an
activity related to safety and maintenance of the tank truck. Accordingly, the
Tribunal concluded that since appellant has not fulfilled the conditions so as
to impart the activity of purging and degassing tank trucks as ‘technical
inspection and certification service’, the demand was set aside.

6.
[2018] 96 taxmann.com 323
(New Delhi – CESTAT) Ivanhoe Cambridge Investment Advisory India (P.) Ltd. vs.
Commissioner of Service Tax, Delhi
Date of Order: 27^th March, 2018

Investment advisory
services provided by Indian service provider to foreign service recipient in
relation to investment opportunities in India, would not be chargeable to
service tax under category of “real estate agency services”.

When experts provided by
foreign holding company to Indian subsidiary, had employer-employee relation
with Indian subsidiary, The Tribunal set aside demand under “manpower
recruitment or supply agency services”.

Facts

The appellant renders
non-binding investment advisory service to its holding company located abroad.
Scope of such services includes identification and advise on investment
opportunities to holding company in diverse sectors including real estate
sector, providing financial and economic market intelligence reports, providing
information on investment targets, structuring of investments as well as exit
options etc., and thereby, enables the foreign company to take decisions on
investment opportunities in India. Department alleged that such advisory
services are in the nature of “real estate agency services” and thus, liable to
pay service tax under reverse charge mechanism.

Further, the foreign
holding company of appellant provided certain expatriates to appellant who were
experts in the area of investment advisory and they were employed by appellant.
Department alleged that appellant supplied manpower to principal and thus, liable
to service tax under category of “manpower recruitment and supply agency
services”.

Held

As regards demand under
category of “real estate advisory services”, the Hon’ble Tribunal noted that in
terms of “Advisory Service Agreement” entered into between appellant and its
holding company, appellant was required to render investment advisory services
in connection with investment opportunities in India and such services were rendered
relating to real estate sector. Also, Tribunal categorically noted that the
scope of the agreement did not cover such advisory services in connection with
any piece of real estate. The Tribunal even observed that various judicial
decisions relied upon by appellant not only support the view canvassed by
appellant but also have held that such activities will be in the nature of
export despite the fact that the contract companies are in India.
Consequently, it was held that services provided by appellant cannot be said to
be covered within the scope of “real estate agency services”.

As
regards demand under “manpower recruitment and supply agency services”, the
Tribunal noted that the terms and conditions under which the expatriates were
placed at the disposal of the appellant are governed by “employment secondment
agreement”. The Tribunal noted that the payment letters issued by appellant to
the expatriates made it clear that such expatriates would be employees of the
appellant during the period of their assignments. Also, the income tax returns
filed by expatriates show appellant as their employer and Income-Tax has also
been paid for the amounts received by the expatriates in India, under the
category of salary. Therefore, the Tribunal held that as the appellant and
expatriates enjoyed employer-employee relationship with appellant, the demand
under “manpower recruitment and supply agency services” would not sustain.

7.
[2018] 96 taxmann.com 549
(New Delhi – CESTAT) Olam Agro India Ltd. vs. Commissioner of Central Excise,
Delhi-III
Date of Order: 31st July, 2018

The commission paid by
Indian company to its foreign parent company towards corporate guarantee
extended by such parent company in favor of Indian banks, so as to facilitate
provision of bank guarantee by such Indian banks to appellant, is liable to pay
service tax under “business auxiliary services”.

Facts

Appellant engaged in
agricultural business was exporting agricultural products. For obtaining loan
from various Indian banks, appellant obtained corporate guarantee from its
foreign parent company in favor of Indian banks. In lieu thereof, the appellant
paid commission amounting to 1 per cent of the value of such corporate
guarantee to their parent company. The Revenue contended this was liable for
service tax under category of “business auxiliary services” under reverse
charge mechanism as services were provided by parent company to appellant in
relation to procurement of service by Appellant. However, appellant contended
that such commission was paid to parent company towards providing guarantee for
obtaining loan by the appellant and not for procurement of any service.
Appellant relied on decision in case of Abdullabhai Abdul Kader vs.
Commissioner 2017 (4) GSTL 38 (Tri Mum.), wherein it was held that
providing the facility of L/C through their bank to various importers cannot be
charged to service tax under the category of “Business Auxiliary Service” since
it was not in connection with procurement of goods which are inputs for the
clients. It was further submitted that as the parent company did not procure
services from bank for the appellant, there cannot be said to be provision of
business auxiliary services.

Held

Hon’ble Tribunal noted that
a corporate guarantee is used when a corporation agrees to be held responsible
for completing the duties and obligations of debtor to a lender, in case the
debtor fails to comply with the terms of the debtor- lender contract; whereas a
bank guarantee is a promise from a bank that the liability of the debtor will
be met in the event the debtor fails to favour his contractual obligations.
Therefore, the nature of corporate guarantee as well as of bank guarantee is
one and the same i.e. for facilitation of the lending facilities. The Tribunal
observed that in present case the foreign parent company executed corporate
bank guarantee in favor of appellant for facilitation of lending of funds to
the appellant and in turn, received guarantee commission by way of foreign
exchange remittance from appellant. It was found that periodic debit notes were
issued by parent company on appellant towards guarantee commission. This
indicated that the transactions were with regard to lending facilities in
India, it was held that changing name from ‘bank’ to ‘corporate’, it cannot be
said that guarantee commission paid by appellant would not get covered as
“business auxiliary services”. Demand was thus upheld.

BCAJ Admin

SERVICE TAX

Tribunal

1.
[2019-TIOL-530-CESTAT-MAD]
The Leigh Bazar Merchants Association Ltd vs. Commissioner of GST and Central
Excise Date of Order: 24^th January, 2019

Demand of
service tax on rent received from members is not sustainable on account of
principles of mutuality.

Facts

The appellant is an
association formed for the purpose of facilitating merchants to store and trade
food grains from the demarcated premises. They received certain amounts from
its members, who are merchants for utilising the land owned by them. A show
cause notice was issued demanding service tax under the category of
“Renting of Immovable Property”.

Appellant contended that
members are able to take lease of the lands only because they are members of
the association and therefore the principle of mutuality prevails. Further it
was also stated where the property is leased to non-members, the total taxable
value would be within the threshold limit and therefore, the demand cannot
sustain.

Held

The Tribunal relying on
Appellant’s own case held that the rent collected from members cannot be
subject to levy of service tax due to the principle of mutuality as laid down
in the case of Saturday Club Ltd. [2004-TIOL-48-HC-KOL-ST] and Ranchi Club
Ltd. [2012-TIOL-1031-HC-JHARKHAND-ST]. Further the benefit of threshold
limit was extended for the rent collected from non-members and the demand on
such rent from non-members was also set aside.

2.
[2019-TIOL-722-CESTAT-MUM]
Commissioner of Service Tax, Mumbai-II vs. Reliance Communications
Infrastructure Ltd Date of Order: 8^th February, 2019

Not
considering the written submissions while passing the order is an error
apparent on record.

Facts

Revenue has filed this
miscellaneous application, seeking rectification of mistake in the order passed
by the Tribunal. The appeal was heard in presence of both sides and the order
was reserved. Both sides were directed to file written submissions within two
weeks’ time. Revenue filed the written submissions in the Registry but they
were not placed on the file.

Held

The Tribunal held that it
is evident that without considering the submissions made by Revenue, the order
was passed which is an apparent mistake on the face of the record. Accordingly,
the miscellaneous application merits consideration for recalling the order and
for hearing of appeals afresh.

3.
[2019-TIOL-725-CESTAT-DEL]
Premium Real Estate Developers vs. CST Service Tax, Delhi Date of Order: 27^th
November, 2018

In
absence of any defined consideration for alleged service, there is no contract
of service at all and hence is not liable for service tax.

Facts

The assessee, a partnership
firm in the business of real estate trade entered into a Memorandum of
Understanding with Sahara India Limited. On perusal of the MOU, it is obvious
that MOU is not only for providing purely service for acquisition of the land but
also involves many other functions such as verification of title deeds of the
persons from whom the lands are to be acquired, obtaining necessary rights for
development of the land from the Competent Authority etc. The remuneration or
payment for providing this activity was not quantified in the MOU. The MOU
provided “the difference, if any, of the amount being actually paid to the
owner of the land and the average rate shall be payable to the second party
(appellant).” A show cause notice was issued demanding service tax under the
category of Real Estate Agent.

Held

The Tribunal noted that no
fixed amount was agreed in the MOU, the amount of remuneration for service, if
any is not clear in this case. It was noticed that for levy of service tax, a
specific amount has to be agreed between the service recipient and the service
provider. Reliance was placed on the decision of Mormugao Port Trust vs. CC,
CE&ST, Goa [2016-TIOL-2843-CESTAT-MUM]. Accordingly it was held that
since the specific remuneration was not fixed in the deal for acquisition of
the land, both the parties have worked more as partners in the deal rather than
as an agent and the principal. Therefore the taxable value itself did not
acquire finality. Further it was also held that the issue relates to
interpretation and there is no malafide intention on the part of the
appellant. It was noted that the transaction is duly recorded in the books of
accounts. Therefore there is no suppression of information. Thus extended
period is also not invokable.

4.
2018
[19] G.S.T.L. 270 (Tri. Mumbai) Raymond Ltd. vs. Commissioner of Service Tax,
Mumbai-II
Date of Order: 23^rd March, 2018

Amount
deducted by foreign banks in foreign currency from the bank in India as
collection charges from export proceeds not taxable in the hands of Indian
exporter.

Facts

Appellant assessee incurred
certain expenditure on account of bank charges in foreign currency in respect
of which the Revenue authorities confirmed the demand contending that the said
charges were liable for service tax along with interest and penalty.

Held

Relying on its decision
passed in an identical case of Greenply Industries Ltd. vs. CCE, Jaipur,
Final Order No. 50149 dated 03.01.2014 of the Hon. Tribunal held that an
amount collected as bank charges by the foreign bank was collected from the
Indian bank and not from the assessee and thus the assessee cannot be construed
as service recipient and thereby not liable to service tax. The appeal was thus
allowed.

5.
2018 [19] G.S.T.L. 277 (Tri.
All.) P.V.S. Construction Pvt. Ltd. vs. Commissioner of Central Excise &
Service Tax, Ghaziabad Date of Order: 23^rd March, 2018

No
service tax on security deposit received as pure agent on behalf of flat owners
and subsequently given to society after its formation by flat owners.

Facts

Appellant,
a builder, did not discharge his service tax liability on account of late
registration and late filing of ST-3 returns. Consequent upon the audit by the
department, Appellant paid not only the tax amount, interest and late fee, but
also an excess amount at regular intervals except for the time when the
Appellant’s bank account was frozen. Despite paying more than the proposed tax
liability, the demand was confirmed along with interest, late fee and penalty.
Also tax was confirmed on amounts received by the Appellant as “Security
Deposit” from the prospective flat owners which were later handed over to the
Society.

Held

The Hon’ble Tribunal held
that the Appellant had no intentions of evasion of tax and freezing of bank
account was a reasonable cause for delay in submission of payment of taxes and
accordingly filing of returns were delayed. Therefore, penalty was liable to be
set aside. Further, Appellant suo motu applied for registration and also
did not have any taxable receipts prior to the date of registration. As regards
service tax liability on the amount of security deposit, it was held that said
amount received was in the nature of pure agent as it was later given to the
society when formed. Further it was also held that the amount paid in excess
was eligible for refund and such claim applied in respect of it shall be
granted with interest as per the rules.

6.
2018 [19] G.S.T.L. 653 (Tri.
All.) Commissioner of Central Excise and Service Tax, Allahabad vs. Balrampur
Chini Mills Ltd Date of Order: 2^nd August, 2018.

In case
of an exempt service, payment under reverse charge does not arise.

Facts

Appellant assessee obtained
certain amount from the International Finance Corporation as “External
Commercial Borrowings” for the purpose of purchase of a plant. Authorities
opined that service recipient was liable to pay tax on reverse charge basis
since supplier of service did not have an office in India. On perusal of facts
it was clearly seen that service supplier i.e. IFC was exempt from payment of
any tax and duty in India as per the IFC Act, 1958 and hence question of
payment of tax on reverse charge basis should not arise on something that was
already exempt. Thus, demand against assessee was set aside by Ld. Commissioner
(Appeals). The Revenue filed this appeal.

Held

On perusal of records and
facts of the case, the Tribunal held that the assessee had obtained services
from an institution that enjoys relief in the form of exemption given to it
vide the IFC Act, 1958 and thereby payment of tax by the service provider does
not arise. Therefore, the question of shifting any obligation on service
recipient does not arise. The Revenue’s appeal was thus dismissed.

7.
2019 [20] G.S.T.L. 88 (Tri.-
Mumbai.) Pushpak Steel Industries Pvt. Ltd. vs. Commissioner of Central Excise
& Service Tax, Pune-III Date of Order: 7^th May, 2018

Arrangement
of transportation merely to facilitate delivery of duty paid excisable goods at
buyers’ premises cannot be categorised as “Business Support Service”.

Facts

Appellant collected
delivery charges separately from the buyers along with assessable value of
goods, statutory dues etc., for delivery of excisable goods to buyers’
premises. No other agreement existed between the parties for providing any
service, over and above the supply of goods. Delivery charges were collected
from the buyers which were incurred for delivery of goods at buyers’ premises
for which appellant paid lump sum amount for transportation of goods and the
balance was shown as “Freight Reimbursement” in the books. Service tax and
penalty was imposed considering the balance amount retained by the appellant as
taxable service under the category of “Business Support Service”.

Held

The Hon’ble Tribunal held
that the appellant did not support the business of his clients in any manner.
The activity of the appellant cannot be held liable for service tax as Business
Support Service as they were outside the ambit of taxable services, thereby
allowing the appeal.

8. 2019 [21] G.S.T.L. 33 (Tri. All.)
Commissioner of Customs, Central Excise & Service Tax, Noida vs. Fortune
Cookie Date of Order: 26^th July, 2018

Restaurant
Services provided from rented premise in Golf Course would not amount to
Outdoor Catering Service.

Facts

Revenue
initiated proceeding against Respondent alleging that activity of providing
food in premises of Noida Golf Course to their members through Noida Golf
Course by the respondent would fall under “outdoor catering service” and not
under “restaurant service”. The demand was confirmed and penalty was imposed
vide adjudication order holding the assessee liable to pay service tax 2007
onwards. The adjudication order was quashed by the Ld. Commissioner (Appeals).

Held

It was held that since the
place from where service was provided was taken on rent from Noida Golf Course,
the services are considered as provided from premises of respondent assessee
only. Further, relying on the decision in the case of Tamil Nadu Kalyana
Mandapam Assn. vs. UOI 2006 (3) STR 206 SC, it was observed that the
service of restaurant and outdoor catering are distinguishable and the service
provided by respondent are in nature of “restaurant service”.

9.
2019 [21] G.S.T.L. 37 (Tri.
Chennai) MAS Logistics vs. Principal Commissioner of C.T. & Central Excise,
GST, Chennai Date of Order: 25^th September, 2018

Logistic
services provided from India to foreign company for re-export of returned goods
amounts to export of service. Eligible for refund of tax on input services used
for such re-export of returned goods.

Facts

The Appellant provided
Logistic Support Service of return of imported goods under instruction of a
foreign shipper and received consideration in convertible foreign exchange.
Also availed various input services for the export of logistic services and
hence filed a refund claim. The said refund claim was rejected by the Revenue
stating that it did not appear to be in relation to export of service.

Held

The Hon’ble Tribunal held
that the allegation of department that Appellant acted as intermediary and so
place of provision of service as India cannot be sustained in light of the fact
that as Appellant was engaged by H & H, China, to whom they actually
provided service and raised invoices on account of facilitating re-export of
goods. As contract between shipper and importer cancelled, the delivery of
goods was not taken by the importer and the goods were taken back to China
resulting in re-export. The input services availed for doing such return of
goods to China are services availed for exports of services. It was H & H,
China who acted as intermediary and as recipient of logistic services situated
outside India and which paid consideration in convertible foreign exchange.
Therefore Appellant’s service is export of service. Consequently the appeal was
allowed and the refund along with consequential relief was granted.

BCAJ Admin

SERVICE TAX

I.
Tribunal

17. [2018] 98 taxmann.com 85 (New Delhi – CESTAT) Executive
Engineer vs. CCE&ST
Dated of Order: 11^th September, 2018

The
Tribunal held that services provided by assessee to its other division having
different service tax registration under same PAN, cannot be said to get
covered within scope of section 67(4) i.e. transaction between associated
enterprises, and therefore, not liable to service tax.

Facts

The appellant provided
telecommunication services under the name Universal Service Operator (USO) to
various telecom operators. They issued monthly debit notes to one of its own
divisions viz CMTS covered under the same PAN for providing telecom services
and booked the amount as income.

However, no service tax was
discharged on the said income as it was from its own division. The department
alleged that obtaining separate registration under service tax law make USO and
CMTS as two different concerns i.e. associated enterprises. Department
contended that even provisions of section 67(4) makes it clear that the book
adjustment qua the transaction of taxable services with any associated
enterprise are taxable.

Held:

The Hon’ble Tribunal held
that the telecom services are provided in different circles in India and
different offices/units under one circle cannot be treated as associated
enterprise as these are not intermediaries in the management of or control or
capital of the other enterprises as required for being associated enterprises
as per section 92A of the Income-tax Act, 1961. Further, the Tribunal observed
that the lower adjudicating authority has failed to appreciate that monthly
advice debit notes are nothing but transfer of expenses to its another unit and
it will not make the gross transaction accounted for between units of the
organisation. It was also noted that since both the entities have the same PAN
number as such both have same incorporation, it is clear that mandatory
requirement for service tax that is of existence of two different entities is
absolutely missing. Consequently, the
Tribunal set aside impugned demand.

18. [2018] 98 taxmann.com 311 (New Delhi – CESTAT) Maulana Azad
National Institute of Technology vs. CCE Date of Order: 12^th September, 2018

The
Tribunal held that construction services provided by Government authority to
unit of educational institute established under the Act of Parliament, cannot
be said to be provision of support service to business entity and thus, not
liable to service tax under reverse charge.

Facts

The
appellant, a central Government authority, being established under an Act of
Parliament namely the National Institute of Technology Act, 2007 is engaged in
imparting education and related technical assistance. They procured services
from Central Public Works Department (CPWD) for construction of hostel blocks,
sports complex, academic blocks, literature hall complex, canteen, hospital,
staff residential quarters etc. in their premises. Department alleged that said
services procured from CPWD are support service related to contract provided by
Government to body corporate holding the appellant as a business entity and
thus are liable to service tax under reverse charge notifications. Accordingly,
in present appeal, the moot questions before tribunal were (i) whether
appellant can be regarded as “business entity” and (ii) whether the services
received by them from CPWD, a Government department, can be regarded as
“support services”.

Held

The Hon’ble Tribunal
observed that appellant is unit of Maulana Azad National Institute of
Technology, Bhopal, which is one of the National Institutes of Technology
established by Central Government under an Act of Parliament i.e. National
Institute of Technology Act, 2007 and also referred to ratio laid down in
decisions in Asstt. Collector of Excise vs. Ramdev Tobacco Co. 1991
taxmann.com 1335 and Senairam Doongamall vs. CIT AIR 1961 SC 1579.
Accordingly, it was held that once the purpose of the parent Institute is to be
engaged in education and in creating and disseminating knowledge through
different mode as that of teaching, seminars, workshop, publications and even
technical consultancy, the unit thereof assisting in the said work becomes part
of the parent institute and stands clothed with the same status. Therefore, the
Tribunal held that appellant cannot be regarded as “business entity”. As
regards next question as to whether services provided can be regarded as
“support services”, It was observed that definition of term “support service”
u/s. 65B(49) makes it clear that for any services received to be called as
support service, the important ingredient is that the support should have
comprised of such functions that the recipient is able to carry out in ordinary
course of operations themselves, however, they have outsourced the same to
someone else. The Tribunal noted that since the appellant in instant case is
carrying out the function of imparting education and the technical
know-how/consultancy but the service received from CPWD is that of construction
of various civil structures, the services received cannot be otherwise said to
be the activity of the appellant themselves. Therefore, the Tribunal held that
availing of such construction services from CPWD will not bring the service received
under the category of “support services” and hence will not attract liability
under reverse charge.

19. [2018] 98 taxmann.com 390 (New Delhi – CESTAT) International
Metro Civil Contractors vs. CST Date of Order: 17th September, 2018

The
Tribunal held that the assessee executing contract with Metro Corporation for
design of rail-based mass rapid transport system by procuring design, execution
and completion and remedying any defects in works of civil engineering
construction, mechanical and electrical installation of station and tunnel
infrastructure and buildings etc., along with supply of materials, would be
chargeable to service tax under category of “works contract services” and not
“erection, commissioning and installation services”.

Facts

The Delhi Metro Corporation
awarded contract for design of rail-based mass rapid transport system by
procuring the design, execution and completion and remedying any defects in the
works of civil engineering contract, mechanical and electrical installation of
the station (including tunnel ventilation and station area conditioning and
ventilation) and tunnel infrastructure and buildings. Revenue alleged that the
activities undertaken would be chargeable to service tax under category of
“erection, commissioning and installation services”. Whereas, appellant
contended that since all work other than erection, commissioning and
installation were also agreed to be executed including as that of design and
even manufacture along with supply of materials, thus, the activities would be
correctly classifiable as “works contract services”.

Held

The Hon’ble Tribunal noted
that the scope of “erection, commissioning and installation services” includes
those services which are service contract simpliciter without any other element
in them. Further, in terms of section 67 of Finance Act, 1994 the value of
taxable services is the gross amount charged by service provider for such
services rendered by them i.e. what is referred to in the charging provision is
the taxation of service contract simpliciter without having any element of
property in goods to be simultaneously transferred i.e. the provision is not
for composite work contracts. The Tribunal noted that in present case,
appellant was cast with the obligation of supplying/providing all equipments,
materials, labour and other facilities requisite for and incidental to the
successful completion of the works and in carrying out all the duties and
obligations imposed by the contract documents. The valuation of the cost of
works was agreed to be the total cost for the work carried out. It is also
noted that the nature of contract is such that erection, commissioning and
installation part cannot be severed from rest of the contractual
responsibility. Thus, the Tribunal held that the contract entered is of a
composite nature rather being the contract for service simpliciter.
Accordingly, following decision of the Hon’ble Supreme Court in Larsen and
Toubro Ltd. vs. State of Karnataka [2013] 38 taxmann.com 453, the Tribunal
held that activities undertaken would be liable for service tax under “works
contract services” and thereby set aside impugned demand.

20. [2018] 98 taxmann.com 121 (New Delhi – CESTAT) Commissioner of
Service Tax vs. Gourmets Food Date of Order: 11^th December, 2017

The activity of providing catering services to the
members of the club in terms of catering contract entered into with the club is
not regarded as revenue sharing agreement and held as chargeable to service tax
under category of “outdoor catering services”.

Facts

Respondent entered into an
agreement with a club for providing catering services in the premises offered
by the club. Proceedings were initiated against the respondent to demand and
recover service tax for such activities under the category of “outdoor caterer’s
service”. The original authority dropped impugned demand by holding that the
arrangement appears to be that of revenue sharing arrangement and as such there
is no service provider and service receiver relationship in such arrangement.
Being aggrieved, revenue filed present appeal.

Held

On perusal of the
agreement, the Tribunal held that various clauses of the agreement make it
clear that it is a service agreement for a consideration entered into between
the two parties. The Tribunal also held that mere fact that payment to be made
to club for various facilities like space, infrastructure is calculated as a
percentage of sales revenue of the assessee, would not per se make it a
joint venture agreement. The Tribunal noted that the agreement between respondent-assessee
and the club makes it clear that the club has no obligation or responsibility
in providing such services of catering by the respondent. There is no shared
responsibility or obligation legally enforceable against the club except the
provisions of terms and conditions inbuilt in the contract. The respondent is
appointed as caterer and is paying considerations for the premises allotted to
them. Consequently, there is no scope for interpreting the agreement as joint
venture agreement. The demand under outdoor catering services was accordingly
upheld.

Note:

Above decision of the
Hon’ble Tribunal has been affirmed by Hon’ble Supreme Court in [2018] 98
taxmann.com 122 (SC) Gourmets Food vs. Commissioner of Service Tax, wherein the
appeal filed by appellant assessee against order of the Tribunal is dismissed
for being devoid of merits.

21. [2018-TIOL-3296-CESTAT-MUM] Tahnee Heights Co-operative
Housing Society Limited vs. Commissioner of CGST, Mumbai South Date of Order: 12^th October, 2018

Incorporated
association and its members being one and the same, the activities undertaken
or the services provided by the former will not be considered as a service,
exigible to service tax under the principle of mutuality.

Facts

The appellant is a co-operative
housing society. The members of the society contribute towards maintenance and
upkeep of the building and common expenses. The amount collected is spent for
the common benefits of all. During the period July 2015 to January, 2017
service tax was paid in respect of the contributions received under protest.
Subsequently refund applications were filed on the ground that there is no
service provider and service receiver relationship existing and on the
principles of mutuality, the activity should not be subjected to service tax.
Show Cause Notice was issued and appeals filed was also rejected on the ground
that in the light of Explanation 3(a) to section 65B(44) of the Finance Act,
1994, the appellant and its members are to be treated as distinct entities and
therefore, the tax is correctly paid.

Held

The Tribunal primarily
noted that for the levy of service tax there must be existence of two parties
i.e. the service provider and the service receiver. As far as the relationship
between an incorporated society or club and its members is concerned, it is an
undisputed fact that such incorporated association is a distinct legal entity.
However, since the association was formed or constituted and existed for the
exclusive purpose of catering/meeting to the requirements of its members, as
per the laid down policy in the bye law, it cannot be said that there is
involvement of two persons. Thus, the incorporated association and its member
being one and the same, the activities undertaken or the services provided by
the former will not be considered as a service, exigible to service tax under
the principle of mutuality. The Tribunal further noted that though various
decisions on principles of mutuality under service tax were delivered under the
pre-negative list but are squarely applicable in the negative list regime. It
was also held that the appellant cannot be termed as an unincorporated
association or a body of persons, for the purpose of consideration as a
“distinct person”.

Accordingly, the
explanation furnished under Clause 3(a) in section 65B of the Act will not
designate the appellant as an entity, separate from its members. Accordingly
the service tax paid was held to be refund.

22. [2018-TIOL-3370-CESTAT-MAD] United India Insurance Company Ltd
vs. CCE, ST LTU, Chennai Date of Order: 1^st June, 2018

Service
tax paid on bill of the authorised service station is valid input service used
to provide output service of vehicle insurance.

Facts

Assessee is engaged in
providing General Insurance Services. Cenvat credit was availed of service tax
paid on repair & maintenance of vehicles by Authorised Service Stations on
vehicles insured by the assessee. The department held such availment of credit
to be invalid on grounds that the same was not valid input service under Rule
2(l) of the CENVAT Credit Rules, 2004.

Held

The Tribunal noted that it
is undisputed that credit was availed only proportionately to the extent of the
amount borne by them. General Insurance Service insures the vehicle against
damages. Such service can be provided to the vehicle owner only through
reimbursement of repair charges. Hence, service tax paid on bill of the
authorised service station is valid input service used to provide output
service of vehicle insurance

Also decision of the Tribunal
in Paul Merchants Ltd. vs. CCE, Chandigarh [2012-TIOL-1877-CESTAT-DEL]
was noted to hold that the assessee becomes the recipient of the services from
the authorised service station even though the beneficiary remains the owner of
the motor vehicle. Accordingly, the demand is set aside.

II. High
Court

23. 2018-TIOL-2195-HC-AHM-ST] Oil Field Warehouse and Service Ltd vs. Union of India Date of Order: 17^th October,
2018

Rule 5A
of Service Tax Rules, 1994 not saved by section 174(2) of CGST Act, 2017
therefore fresh proceedings for audit could not be initiated inexercise of
powers under the said Rule.

Facts

The petitioner has
challenged the communication issued by the Comptroller and Auditor General of
India (CAG) calling upon the petitioner to submit service tax audit at the
hands of the officers of the CAG. Provisions of Rule 5A of the Service Tax
Rules, 1994 were relied upon for exercising the powers of audit. Apart from
challenging the rule itself it was stated that with the introduction of the
Goods and Service Tax Act, the Finance Act, 1994 and the Service Tax provisions
made thereon, stand repealed.

Held

The High Court noted
section 174 of the GST Act dealing with repeal and saving and prima facie noted
that there was no saving of Rule 5A in such manner that fresh proceedings for
audit could be initiated in exercise of powers under the said rule. Under the
circumstances, High Court granted interim relief and ordered that CAG shall not
carry out any further service tax audit of the petitioner.

24. [2018-TIOL-2303-HC-MAD-ST] Ganesan Builders Ltd vs. The Commissioner of Service Tax
Date of Order: 19^th September, 2018

Service
tax paid on insurance services provided to workers is available as CENVAT
credit post 01.04.2011.

Facts

The assessee is a builder.
A Show Cause Notice was issued denying CENVAT credit availed on the ground that
the payment of insurance premium for availing the insurance policy stands
excluded from the definition of “input services”, pursuant to the definition of
“Input Services”, after 01.04.2011. It was contended that the services consumed
by the employees in their official capacity is distinguishable from the
services which are consumed by them purely in their personal capacity.

Held

The High Court primarily
noted that it is important to peruse the nature of the policy, the beneficiary
of the policy and the Statute, under which, the policy is required to be
availed. On perusal of the policies it is evident that these are workmen
Compensation Policies. The insured is the Assessee and the policy specifies the
area where the construction works is carried out. It was further stated that
there is a statutory requirement under the Building and Other Construction
Workers (Regulation of Employment and Conditions of Service) Act, 1996. Under
the said Act, the Workmen’s Compensation Act, 1923 has been included in the
Second Schedule of the 1996 Act and the provisions of Act has been made
applicable to the building workers. The intention of the policy is to protect
the employees, who work in the site and not to drive them to various forums for
availing compensation in the event of an injury or death. Thus, the Appeal is
allowed and CENVAT credit is granted.

BCAJ Admin

SERVICE TAX

I.
HIGH COURT

30. [2019] (25) GSTL 207 (Del.) Commr. of Central
Tax, GST, Delhi East vs. Team HR Services Ltd.

Date
of order: 24^th August, 2018

Invocation of extended period was
set aside as mere omission to fulfil one’s tax liability cannot automatically
lead the authorities to conclude that the assessee had practiced fraud or
misrepresentation

FACTS

The respondent was engaged in providing
services like marketing of car loans and other retail finance products which,
as per the department’s view, fell under the definition of ‘business auxiliary
service’. However, the respondent disclosed these services under the head
‘business support services’ when introduced with effect from 1^st
April, 2006 and filed its return.

Show cause notice was issued on 23^rd
July, 2008 proposing assessment of service tax for the period 1^stJuly,
2003 to 9^th September, 2004 and demanding tax under the head
‘business auxiliary services’ which was resisted by the respondent including
the invocation of extended period. Denying the contention of the respondent,
the demand was confirmed by the Commissioner.

Aggrieved, the respondent
approached the CESTAT against the imposition of tax liability along with
interest levied from 1^st July, 2003 onwards. CESTAT partially
confirmed the Commissioner’s order to the extent of levy of demand to the
extent of details filed by the respondent in its service tax return under the
head ‘business support services’ but set aside the extended period of
limitation invoked by the Department holding it to be unwarranted. Revenue
preferred an appeal before the Hon’ble High Court against the CESTAT order.

HELD

The Hon’ble High Court, relying on
decisions of the Hon’ble Supreme Court [2012 (9) SCC 753 and 2013 (288) E.L.T
161 (S.C)] dismissed the appeal filed by the Revenue holding that mere omission
to fulfil one’s tax liability cannot automatically lead the authorities to
conclude that the assessee had practiced fraud or misrepresentation and found
no reasons to interfere with the order passed by the CESTAT.

II.
TRIBUNAL

31. [2019] (25) GSTL 257 (Tri. – Mum.) Commr. of
C. Ex. & S.T. (LTU), Mumbai vs. IDBI Bank Ltd.

Date
of order: 15^th March, 2019

Inadmissible Cenvat credit not
available to the assessee for any purpose, not even for payment of pre-deposit
under section 35F

FACTS

The respondent
was issued the impugned order on 30^th June, 2016 by the Commissioner
disallowing the Cenvat credit and raising the service tax demand of Rs.
61,49,57,000. The respondent preferred an appeal before the Tribunal which,
under Rule 6(3B) of Cenvat Credit Rules, 2004 reversed the 50% Cenvat credit
amounting to Rs. 30,74,78,500 (equivalent to 50% of demand raised). However, no
pre-deposit amount equivalent to 7.5% of the disputed adjudged demand was made
u/s 35F of the Central Excise Act, 1944.

Revenue filed a miscellaneous
application challenging the maintainability of the appeal filed by the
respondent on the ground that the respondent had failed to meet the
prerequisites to file an appeal.

HELD

The Hon’ble
Tribunal affirmed the Revenue’s view, allowed the miscellaneous application
filed by the Revenue and directed the respondent to comply with the
requirements of section 35F read with section 83 of the Finance Act, 1994
within a period of 30 days from the date of receipt of order.

32. [2019] (25) G.S.T.L. 230 (Tri. – Hyd.) Bayer
Bio Science Pvt. Ltd. vs. Commr. of Cus., C. Ex. & S.T., Hyderabad-II

Date
of order: 26^th February, 2019

Providing guidance does not amount
to rendering of scientific and technical consultancy services since it amounts
to merely transferring of knowhow

FACTS

The appellant,
who was engaged in the activity of developing seeds of new varieties and
hybrids, had an agreement with its client in Germany to provide the services
under the guidance of its client. The appellant had a plant-breeding team which
looked for specific traits from the germplasm and then cross-pollinated such
plants with existing parental lines. Such varieties were tested for seven to
nine years across various climatic zones in the country to check their
performance. Reports were sent to its client who thereafter filed a patent
application and obtained Intellectual Property Rights (IPR) for the hybrid
seeds so produced. As per another set of agreements, the appellant provided
guidance to farmers for a fee to multiply the hybrid seeds which they provided
to farmers for multiplication and to purchase the seeds so produced for a
price; it sold the seeds for profit. The above appeal was filed contesting the
demand of service tax on the above services as ‘Scientific and Technical Consultancy’
services.

HELD

The Hon’ble CESTAT, after a
detailed perusal of the facts of the appellant, held that the services rendered
by it to its client in Germany were in the nature of Scientific and Technical
Consultancy services and were exempt from the levy for the period 1^stApril,
2004 to 14^th March, 2005 and were held as Export of Services under
Rule 3(1) of the Export of Services Rules for the period thereafter.

So far as the second element of the
demand was concerned, it was held that guidance provided by the appellant is
known as extension-education which involved merely transferring the knowhow to
farmers and no involvement of scientific or technical research. Therefore, the
said appeal was allowed setting aside demands, interest as well as the
penalties arising out of the impugned order.

33. [2019] (25)
G.S.T.L. 263 (Tri. – Chenn.) Ambika Cotton Mills Ltd. vs. Commissioner of GST
and C. Ex., Madurai

Date of order: 7^th March, 2019

Demand cannot
be raised invoking the extended period of limitation by issuing fresh show
cause notice abating the previous notice after the retrospective introduction
of the liability in the statute

FACTS

The appellants, engaged in
manufacturing of cotton yarn, had availed services of transporters during the
period 16^th November, 1997 to 1^st June, 1998. Show cause
notice was issued on 30^th August, 2001 alleging suppression of facts
and invoking the extended period of limitation. Later, the Finance Act, 2000
brought the retrospective amendments to validate the recovery of the service
tax. Till then it was settled that the recipient of the service could not be
made liable to pay service tax vide the Supreme Court judgement in the case of Laghu
Udyog Bharti vs. Union of India 1999 (112) ELT 365 (SC).

Subsequent to
the said amendment, a second show cause notice was issued on 27^thApril,
2004 to the appellants for demand of service tax for the period 16^th
November, 1997 to 1^st June, 1998, wherein it was stated that the
said notice arose out of the show cause notice issued earlier. However, in the
operative portion of the notice, contradicting its own statement, it specified
that the earlier notice issued on 30^thAugust, 2001 abates and
stands withdrawn.

HELD

The Hon’ble CESTAT held that when
there is no liability on the appellants, the expectation from it to file
returns and pay tax is unwarranted. The ingredients for invocation of extended
period were absent and therefore the demand was held unsustainable. Allowing the
appeal, the impugned order was set aside.

34. [2019] (25) G.S.T.L. 110 (Tri. – Del.)
Executive Engineer E., C/o BSNL vs. Commissioner of Central Excise and Service
Tax, Jaipur

Appellant, a telecommunication
service provider, provided service to its associate company and thus service
provided to one’s own self does not result in a taxable event

FACTS

The appellant is a holder of
service tax registration under the category of ‘Telecommunication Service’ and
provided such services to its telecommunication operators and its associate
company for which the appellant has collected monthly charges and discharged
tax on the same. It was evident that its associate company had booked the
amount as income in the books of accounts. However, the appellant had not
considered the said amount as taxable; as a result, a show cause notice dated
20^th October, 2014 was served on the appellant raising the demand
along with the appropriate interest and penalty which was confirmed by the
order under challenge.

HELD

The Hon’ble Tribunal held that for
the provision of service there had to be a service provider as well as a
service recipient. The appellant was a service provider and an associate
company was the service recipient; both had different service tax registrations
but under the same PAN as both had the same incorporation. The law mandatorily
required existence of two different entities which was missing in the instant
case and hence the transaction was not termed as provision of service. It was
certain that service provided to one’s own self is not a taxable event.
Therefore, the Department was not entitled to invoke the extended period of
limitation, thus the show cause notice was held time-barred. The order under
challenge was set aside and the appeal was allowed.

35. [2019] 105 taxmann.com 344 (Chandi. – CESTAT)
DLF Commercial Projects Corporation vs. CST

Date
of order: 22^nd May, 2019

When the appellant obtained land /
development rights from land-owning companies on behalf of another entity and
the land-owning companies had not transferred the development rights to the
appellant, the Tribunal held that such activity being only acquisition of land,
the same would be outside the definition of ‘service’ u/s 65B(44) of the
Finance Act, 1994

FACTS

M/s. DLF Ltd. (DLF) is engaged in
the business of construction and development of integrated townships. As per
its business module, it appointed the appellant to purchase the land /
development rights on its behalf from various land-owning companies (LOCs),
obtain necessary permissions / approvals from various Government authorities
for carrying out development of land and to hand over the land to DLF for
further development, and thereafter to transfer the same to the appellant for
construction and sale of flats / properties developed by DLF to prospective
buyers. DLF would pay advances to the appellant which in turn would remit the
same to various LOCs and which in turn would purchase the lands.

At the time of transferring the
constructed property to prospective buyers, there is a tri-pirate agreement
between the land-owning company, DLF and the prospective buyers and documents
of transfer of title are executed at that time. Revenue alleged that the
appellant has transferred development rights to DLF and therefore was liable to
pay service tax on amounts received by it from DLF as business advances from
which the appellant had paid the LOCs. The impugned demand was confirmed along
with interest and penalty was imposed. Being aggrieved, the appellant filed the
present appeal.

HELD

The Hon’ble
Tribunal noted that the agreement between the appellant and the LOCs provided
that on acquisition of land the appellant was required to transfer the
development rights to DLF. Further, it observed that the ownership of land /
development rights was never transferred by the LOCs to the appellant and the
LOCs remained the owner of the land. The Tribunal therefore held that when the
appellant never remained the owner of the land at the time of receiving the
advance from DLF against purchase of land, they cannot transfer the land
development rights to DLF. Thus this is mere transaction of the sale and
purchase of land, or purchase of land by the appellant for DLF for further
development. As the appellant did not get any ownership of the land, in the
circumstances transfer of development right does not arise.

Further, the
Tribunal observed that when the LOCs transfer land development rights to the
developers, the developers get the right to not only develop their project on
such land but also the right to sell such developed property along with
undivided interest in the land underneath and to receive payments for such
transfers from the buyers. Once the land-owning companies transfer the land
development rights to the developer for a consideration, they are obligated to
transfer the undivided interest in the land in favour of developer’s buyers for
which no separate consideration is paid. In other words, such transfer of
undivided interest in the land by the land-owning company is in return for the
initial consideration paid by the developer to it for transfer of land
development rights only.

Thus,
it is the ownership of the land, which stands transferred effectively by the
land-owning company in return for consideration payable by the developers. The
moment it is either land or ‘benefits arise out of land’, it goes outside the
purview of ‘service’ as defined in section 65B(44) of the Finance Act, 1994.
The Tribunal also noted that under similar factual circumstances, in Premium
Real Estate Developers vs. CST [2018] 100 taxmann.com 471 (New Delhi – CESTAT),
the impugned service tax demand on amounts received by the appellant therein
for acquisition of land was set aside.

BCAJ Admin

SERVICE TAX

I. Tribunal

2019 [21] G.S.T.L. 42
(Tri.-Chennai) Bharat Sanchar Nigam Ltd. vs. Commissioner of GST & Central
Excise, Chennai

Date of order: 6^th
September, 2018

Interconnectivity Usage Charges (IUC) service from a telecom service
provider located outside, tax demand not sustainable. SCN proceedings void ab
initio as it lacked clarity in regard to the category of service under
which the tax was proposed

FACTS

The
appellant was a provider of telecommunication services. During the Departmental
Audit it appeared to the Revenue that the appellant also provided Interconnectivity
Usage Charges (IUC) services to other telecom operators in India and was
receiving IUC services from a provider located outside India to whom payments
were made in foreign currency. Therefore, a show cause notice was issued
proposing to demand service tax without specifying the category of service.
Subsequently, the said demand. An appeal was filed against this before the
Hon’ble Tribunal.

HELD

It was observed that the show cause notice issued by the department
lacked proper clarity in regard to the category of service under which the tax
was proposed to be demanded, thereby spoiling the proceedings from the very
commencement. Further, a reference was made to the proposed new definition of
“Telecommunication Service” which made IUC service a taxable one.

Contesting the above definition, the appellant made a reference to
Circular 91/2/2007-S.T. which stated that since the service provider was
outside India and was not covered u/s. 65 (105) of the Finance Act, 1994, the
services provided by such a provider cannot be taxed under telecommunication
services. Based on the above facts and grounds as presented, it was held that
the demands made by the department were liable to be set aside.

2019 (21) GSTL 44 (Tri.-Chennai)
Good Fortune Capitals (P) Ltd. vs. Commissioner of GST & Central Excise,
Salem

Date of order: 14^th
September, 2018

No late fee, when return filed manually belatedly due to system error

FACTS

The appellant, a provider of “Stock Broker Service”, was served with a
show cause notice alleging default in filing ST-3 returns within the stipulated
time and thereby liable to pay late fee. The appellant contested that due to
difficulty in filing of ST-3 returns electronically within stipulated time,
they filed the return manually and got it duly acknowledged by the department
and also intimated the issue to the department. However, the department
contested that the appellant did not have any evidence of communication of the
said problem to the authorities, and therefore the Appellate Authority
confirmed the demand of late fee only for the partial period and set aside the
demand for the rest of
the period.

Aggrieved, the appellant preferred an appeal before the Tribunal and
submitted screen shots of the returns filed by them manually bearing signatures
of the Jurisdictional Superintendent.

HELD

It was held that the Appellant had communicated the said problem to the
department by way of acknowledgement obtained for the manually filed returns
and it is the duty of the department to solve such an issue as communicated by
the appellant. Since the problem faced by the appellant was genuine, the appeal
was allowed, setting aside the demand.

2019 (21)
GSTL 57 (Tri.-Chennai) B.S.N.L. vs. Commissioner of Central Excise, Tirunelveli

Date of
order: 11^th October, 2018

Sale of space on the reverse of the telephone bill for advertisement

FACTS

The appellant, a telecom company, issued telephone bills printed through
a printer, for which tender of two rates of printing telephone bills was
issued, one @ Rs. 0.68 per page without advertisement and the other @ Rs. 0.58
per page with free supply of space for advertisement. The appellant agreed to
Rs. 0.58 per page with free supply of space for advertisement. The Revenue
issued a show cause notice proposing service tax on the sale of space alleging
that the activity of making profit from agreeing to provide space on the
reverse side of the bill for commercial advertisement attracts service tax
under “selling of space or time for advertisement, other than print media”. The
adjudicating authority, however, quashed the SCN. The Appellate Authority held
that the Appellant was liable for service tax.

HELD

It was held that the printer was allowed to put advertisement on 1/5^th
portion of the bill by way of a consideration for reducing the printing cost.
Since this was for commercial benefit, it would be an indirect income or
consideration as per section 65(2) of the Finance Act, 1994. The differential
amount saved very much becomes value of taxable service under “sale of space
for advertisement” and thus the appeal was dismissed.

2019 (21)
GSTL 561 (Tri.-Mumbai) Holtec Asia P. Ltd. vs. Commissioner of Central Excise,
GST, Pune-I

Date of
order: 20^th April, 2014

Services provided to a foreign company, which had project office in
India, held as export of service as both were different establishments and the
project office had no connection with service rendered from the service provider
in India

FACTS

The appellant claimed refund of CENVAT credit of service tax paid on
input services used in providing output services under Rule 5 of CENVAT Credit
Rules, 2004 read with Rule 6A of Service Tax Rules, 1994. The appellant
provided service from India to Holtec International, USA which had its project
office in Pune, India. Therefore, Revenue rejected their claim of refund on the
ground that impugned service did not qualify as export of service as both
service provider and recipient are located in India; therefore, the conditions
of Rule 6(A)(b) and (d) of the Service Tax Rules, 1994 were not satisfied and
thus the Appellant was liable to pay service tax. This was also confirmed by
the appellate authority. Hence the appeal.

HELD

It was found that the Pune (India) office of Holtec International, USA
had no connection with the services rendered by the Appellant to the company
abroad and thus found the interpretation of lower authorities incorrect as
regards the place of provision of service. It was held that services were
rightly rendered to the recipient located outside India and further as per
Explanation 3 to section 65B(44) of the Finance Act, 1994, Holtel
International, USA was a distinct establishment from its project office at Pune,
India. Thus, services rendered by appellant would clearly fall under category
of Export of Service for which consideration was also received in convertible
foreign exchange and hence the Appellant was eligible for refund.

[2019-TIOL-1260-CESTAT-HYD]
Marinetrans India Pvt. Ltd. vs. Commissioner, Service Tax, Hyderabad-ST

Date of
order: 17^th January, 2019

The sale of space by freight forwarders acting on a
principal-to-principal basis is not liable for service tax under Business
Auxiliary Service

FACTS

The appellant is a freight forwarder and is registered as a service
provider. Intelligence gathered by the Excise Department revealed that they
purchased space from shipping lines and sold the same to exporters for a
profit. The space purchased at a lower price from the shipping lines is in turn
sold at higher prices to the exporters, on account of which they earn some
extra income. SCN was issued seeking to levy service tax under Business
Auxiliary Service, on grounds that they were promoting the services of the main
shipping line and getting paid for it.

HELD

The Tribunal primarily noted that their activity is on
principal-to-principal basis between them and the shipping lines and again
between the exporters and them. It could purchase the space for a lower price
and sell it at a higher price and so earn profit. On the other hand, if they
failed to sell the space to exporters after purchasing from the shipping lines,
they may incur a loss. Besides, it is evident from CBIC Circular No. 197/7/2016-ST
dated 12.08.2016 that service tax is
payable when one acts as an intermediary and not analogical to a trader dealing
on principal-to-principal basis on their own account; it was held that sale of
space on ships does not amount to rendering a service and so any profit arising
therein is not taxable. Considering such a position, the duty demands, interest
and penalties warrant being quashed.

[2019-TIOL-1336-CESTAT-HYD]
Oil India Ltd. vs. Commissioner of Central Tax

Date of
order: 6^th May, 2019

A refund claim filed for a tax paid beyond the provisions of the Act is
not maintainable as the same is beyond the jurisdiction of the officers and the
scope of the Act

FACTS

The assessee company is engaged in exploration of mineral oil and
natural gas. During the relevant period, they availed services of drilling
exploratory wells. The vendor paid the appropriate service tax amount. However,
the assessee also paid service tax on the same service, under reverse charge
mechanism. Upon realising this, a refund claim was filed u/s. 11B of the
Finance Act, 1994. The Revenue issued SCN proposing to deny refund on grounds
that it was claimed after one year from the date of payment of service tax. On
adjudication, the denial of refund claim was sustained on grounds of time bar.
On appeal, such findings were upheld. Hence the present appeal.

HELD

The Tribunal primarily noted that the refund application was clearly
filed beyond the one-year limitation period. Further, it was noted that the
refund jurisdiction of the Central Excise and Service Tax officers emanates
from sections 12E and 11B of the Central Excise Act, 1944 and section 83 of the
Finance Act, 1994. The Commissioner (A) draws authority from section 35 of the
CEA, 1944 to decide upon appeals or take such decisions. Thus, the officers
lack jurisdiction to decide matters falling beyond the scope of law.

In such cases, the appropriate remedy is to file a civil suit u/s. 72 of
the Indian Contracts Act, 1872 and the officers here lack the jurisdiction to
decide upon such suits. Where the contractor has already paid service tax and
the assessee also pays the same despite not being liable to do so, such payment
representing service tax is beyond the scope of the Finance Act, 1994. Hence
the limitation provisions or those pertaining to jurisdiction of officers to
sanction refund claims will not apply in such a case. Hence the order in
challenge is upheld because the refund claim is not maintainable for any amount
paid beyond the scope of the Finance Act, 1994 itself.

II. HIGH
COURT

[2019-TIOL-1027-HC-DEL-ST]
Amadeus India Pvt. Ltd. vs. Pr. Commissioner, Central Excise, Service Tax and
Central Tax Commissionerate

Date of order: 8^th
May, 2019

Show
Cause Notice issued without giving an opportunity for pre-consultation is
liable to be set aside

FACTS

Pre-show cause notice consultation by the Principal Commissioner /
Commissioner prior to issue of show cause notice in cases involving demands of
duty above Rs. 50 lakhs is made mandatory by Para 5 of instruction issued vide
F. No. 1080/09/DLA/MISC/15 dated 21.12.2015. In the present case, show cause
notice issued in the month of September, 2018 was despatched without an
opportunity for pre-consultation. Whether the said issuance was valid in law?

HELD

The Court primarily noted
that in terms of section 37B of the Central Excise Act, 1944 as made applicable
to service tax by section 83 of the Finance Act, 1994, instructions issued by
the CBEC would be binding on the officers of the department. The Court noted
that the exception to Para 5 of the said instruction is applicable in case of
preventive and offence-related cases which is not applicable in the present
case. Therefore, without expressing any view on the merits of the case of
either party in relation to the issues raised, the court sets aside the
impugned SCN and relegated the parties to the stage prior to issuance of
impugned SCN.

BCAJ Admin

Service Tax

I High Court

45. [2018] 95
taxmann.com 319 (Bombay-HC)
Commissioner of Service Tax, Mumbai-VI vs. Shri Krishna Chaitanya Enterprises
Date of Order: 25^th January, 2018

Since in terms of provisions of MOFA Act, 1963, the
builder/developer is statutorily obliged to assume responsibility for
maintenance and repairs of building till the process of conveyance is
completed, such activity cannot be construed as provision of “management,
maintenance and repair services”.

Facts

The assessee, being a builder and developer engaged in
construction of residential complexes, inter alia, collected certain
sums from prospective flat buyers as maintenance cost towards expenses for
maintenance and repair of building till conveyance of property to flat buyers.
Revenue alleged that said sums collected would be chargeable to service tax
under category of “management, maintenance or repair services”. During the
appellate proceedings, the Tribunal set aside impugned demand. Being aggrieved,
revenue filed present appeal raising a substantial question of law as to
whether the act of undertaking maintenance and repairs of flats till conveyance
and collecting certain charges for the same from flat buyers can be regarded as
provision of “management, repairs and maintenance services” and thereby,
whether the Hon’ble Tribunal was justified in setting aside the impugned
demand.

Held

The Hon’ble High Court noted that in terms of Maharashtra
Ownership Flats (Regulation of the Promotion of Construction, Sale, Management
and Transfer) Act, 1963 (hereinafter referred to as “MOFA”), the
builder/developer is regarded as promoter and that, various provisions listed
u/s. 5 to section 13 of MOFA deal with the duties and obligations to be
fulfilled by promoter so as to provide for safeguarding and protecting the
interest of flat takers and unit purchasers to ensure them a title in property.
The said Act provides for complete regulatory mechanism till conveying the
property to a legal entity namely a co-operative housing society or a company,
which is required to be formed by the promoter.

Accordingly, the Court observed that till the process of
conveying the property is complete, the builder/developer as a promoter is
statutorily obliged to hold on to the property and the money for complete
discharge of his eventual duties and therefore, he has to maintain, safeguard
and protect the property and look after the day-to-day wear and tear. In this
background, the Court held that when the builder/developer maintains the
structure or repairs, he is not rendering a taxable service in the sense
envisaged by the Financial Act, 1994 as such activities are performed as statutory
obligation casted upon him by MOFA. Further, the High Court held that it is not
a contract simplicitor of maintenance of immovable property, as if there is an
existing building comprising of flats, fully occupied, the maintenance and
upkeep of which is handed over under a contract.

It is a statutory obligation superimposed on a contract to
sell a flat/unit in a building to be constructed on a piece or parcel of land
in terms of MOFA. In other words, the maintenance of property till conveyance
is the statutory obligation of builder/developer in terms of provisions of MOFA
and thus cannot be equated with provision of taxable service. Therefore, the
High Court affirmed the decision of Tribunal and revenue’s appeal was
dismissed.

II. Tribunal

46. 2018 (14) GSTL 254
(Tri.-ALL.) Parle Biscuits Pvt. Ltd. vs. Commissioner of Central Excise,
Allahabad
Date of Order: 4^th April, 2018

CENVAT Credit on capital goods cannot be denied on grounds
that the same was availed on the basis of endorsed invoices.

Facts

The CENVAT credit on capital goods received two years back by
the Appellant on the basis of invoice endorsed by the original recipient was
disallowed by the department on grounds that endorsed invoices cannot be held
as valid documents for the purpose of availment of CENVAT credit.
Superintendent and Inspector of Central Excise endorsed the invoices at the
request of the original recipient in favour of Appellant.

Held

The Hon’ble Tribunal held that there was no dispute about
receipt of the capital goods and duty paid thereon. Substantive benefits cannot
be denied by raising grounds of procedural violation. Hence, set aside the
impugned orders and allowed the appeal

47. 2018 (14) GSTL 255
(Tri.-Del.) MTNL vs.
Commissioner of Service Tax, Delhi
Date of Order: 30^th January, 2018

Service tax collected from customers but delayed in
depositing the same with Government account, attract charge of interest.

Facts

Appellant collected the
consideration for the services rendered along with the service tax thereon.
However, the service tax collected from such customers was deposited with
Government account after an estimated delay of two months. Demand to the extent
of payment was dropped, however small amount of interest was demanded and
interest was charged. Aggrieved by the order appeal was filed stating that
since the demand for service tax has been dropped, there is no justification
for demand of interest.

Held

The Hon’ble Tribunal held that service tax amount collected
by the Appellant has been deposited with the Government only after delay.
Hence, the charging of interest is fair and reasonable. Appeal disallowed by
upholding the demand of service tax of a small amount along with interest and
penalty.

48. 2018 (14) GSTL 250
(Tri.-Ahmd.) Vijay Tanks & Vessels Pvt. Ltd. vs. Commissioner of C. Ex.
& S.T., Anand
Date of Order: 22^nd December, 2017

Registration is not a pre-requisite to claim credit.

Facts

Assessee availed CENVAT credit on various input services that
were used to provide output services of works contract services, supply of
tangible goods services, consulting engineering services, business auxiliary
services etc., at various locations/sites. However, certain locations/sites
were not included in the centralised registration. These locations/sites were
included only after several reminders from department. Department issued a show
cause notice demanding CENVAT credit availed along with interest and proposed
penalty thereon which was later confirmed by the Adjudicating and the Appellate
Authorities. Aggrieved Appellant assessee therefore preferred appeal before
the Hon’ble Tribunal.

Held

The Hon’ble Tribunal held that credit cannot be denied merely
on the ground that respective sites were not included in centralised
registration certificate issued to the Appellant. There is no dispute of the
fact that the input services were utilised in providing the output services.
Accordingly, the impugned order was set aside and appeal was allowed with
consequential relief.

49. [2018] 95
taxmann.com 242 (Chennai – CESTAT) Mail Related Services vs. Commissioner of
Service Tax, Chennai
Date of Order: 20^thJune, 2018

The “franking charges”, as collected by assessee from its
clients and paid to post master general, being a statutory levy in terms of
Indian Post Office Act, 1898 are not includible in taxable value in terms of
section 67 of Finance Act, 1994. The rebate given by post office to assessee on
franking charges cannot be said to be consideration for promotion and marketing
of services of postal department so as to attract service tax under “business
auxiliary services”.

Facts

The appellants are engaged in providing mailing services
using franking machines obtained on license from the postal department. They
collect the mails from their clients, frank them as per weight and then mail
the documents/packets. For the said activity, appellant collects service
charges from customers and duly discharges service tax liability on said
service charges under category of “Mailing List Compilation and Mailing
Services”. In respect of franking cost, either the clients directly take out
demand drafts in favour of the Post Master General or in some cases, appellants
pay the franking cost on behalf of their customers and get it reimbursed from
the latter subsequently. Department alleged that as reimbursement of cost of
postage received from the clients cannot be termed as pure agent expenditure,
such franking charges are includible in value of taxable services in terms of
section 67 of Finance Act, 1994. Besides, they also receive a rebate of 3% on
the franking charges from postal department, which was treated by the
department as chargeable to service tax under category of “business auxiliary
services” for promoting or marketing of postal service.

Held

As regards dispute pertaining to inclusion of franking
charges in the taxable value, the Hon’ble Tribunal noted that the postage is a
“statutory duty” as defined by the Indian Post Office Act, 1898 and that this
statutory duty is permitted to be paid to the Government of India by way of
affixing physical postage stamps and by franking of the appropriate postage on
the letters by making use of the licensed franking machines. As per section 17
(2) of the Indian Post Office Act, 1898 postage franked through Franking
Machine is a statutory levy. The Tribunal held that since such charges are
either directly collected by postmaster general or paid by them to the
postmaster general on behalf of clients, said charges cannot be said to be
accrued to the appellant and thus, cannot be made part of taxable value.
Further, it was held that ratio laid down by the Hon’ble Supreme Court in Union
of India vs. Intercontinental Consultants & Technocrats (P.) Ltd. [2018] 91
taxmann.com 67/66 GST 450 is squarely applicable in the present case.
Therefore, the Tribunal held that franking cost cannot be included in
computation of value of taxable service and set aside impugned demand. Regarding next issue of demand under
“business auxiliary services” on rebate received from postal department, it was
noted that the entire activity of dispatch is effected on behalf of the
business entities and the appellants are therefore, the users of the post office.
The transaction of franking or usage of the postal service is solely between
the appellants and the post office with the former as a customer of the latter.
Tribunal observed that the rebates are offered as an incentive for the reduced
workload on the post office staff, to encourage use of franking machines,
especially where the volumes are above a certain threshold level. Thus, such
rebates can hardly be designated as commission or remuneration for promoting
the postal services. The Tribunal referred to its own decision in United
Mailing Services, Sai Mailing Services vs. CST [Appeal No. ST/257/2011, dated
08-09-2015] holding that rebate received from the postal department on
franking charges is not liable to be taxed. Accordingly, impugned demand rebate
received was dropped.

50. [2018] 95
taxmann.com 277 (Mumbai – CESTAT) Ajit India (P.) Ltd. vs. Commissioner of
Service Tax, Mumbai-II
Date of Order: 25^th May, 2018

The Tribunal held that the activity of production, supply
and installation of aluminum structural glazing, sliding doors and window to
residential buildings is a composite supply involving sale of goods as well as
provision of service and thus, chargeable to service tax under “works contract
services”.

Facts

The appellants were inter alia engaged in production,
supply and installation of structural glazing, sliding doors and window to
residential buildings. The contract for installation of aluminum structures was
entered into with the builders and at times with individuals. The work involved
fabrication of the required components for structural glazing/windows at their
factory and installation of the same at various sites. The contract involved
designing, supply, fabrication, erection and commissioning and there was no
separate service contract for installation work with the customers. Revenue
alleged that the activity undertaken would come under the ambit of completion
and finishing services in relation to residential complex under the category of
“construction of complex service” and not under “erection commissioning and
installation”. Appellant submitted that the contract was composite and there
was no separate element of service or sale. During the appeal proceedings, the
first appellate authority held that there is no contract for sale of goods to
the service recipient and consequently in the absence of actual sale of goods,
impugned demand was confirmed. Being aggrieved, appellant filed present appeal.

Held

The Tribunal held that the conclusion reached by the first
appellate authority is erroneous inasmuch as just because VAT is paid at
composite rate, it cannot be said that there is no sale of goods involved. The
Tribunal noted that the major amount charged by appellant relates to the value
of materials. Also, reliance was placed on the decisions in case of Vistar
Constructions (P.) Ltd. vs. CST [ST/53190/2014, dated 01-04-2016] and URC
Construction (P.) Ltd. vs. Commissioner of Central [ST/00284/2008, dated
14-07-2016], the Tribunal held that in present case the activities
undertaken by appellant constitutes composite supply involving supply of goods
as well as services and thus, would be taxable under category of “works
contract services” and the same cannot be vivisected so as to bring it under
service tax net under category of “construction of residential complex
services”. Accordingly, the Tribunal allowed present appeal by setting aside
impugned demand.

51.
[2018-TIOL-2436-CESTAT-BANG]
Commissioner of Central Excise, Cochin vs. Coconut Lagoon Kumararkom
Date of Order: 31^stJuly, 2018

Ayurvedic treatment supervised by a doctor is therapeutic in
nature and therefore not covered by
Health club and Fitness services. Mere fact that the Ayurvedic centres are
located in the resorts and sometimes the duration of treatment is for one or
two days, it cannot be concluded that the massages or treatments are only for
general well-being and not for any therapeutic value.

Facts

Assessee is engaged in running resorts and are operating an
Ayurvedic treatment center. The specialised treatments provided include
treatments for ailments such as obesity, trauma, bronchial disorders etc. All
the treatments given are as per the standard ayurvedic medical texts and the
type of treatment and duration will be decided by a qualified and registered medical
practitioner after conducting the diagnosis. The department contended that the
services provided fell under the category of health club and fitness service
and accordingly issued a show cause notice. On appeals filed, the learned
Commissioner (A) has allowed the appeals of the assessee. Accordingly, the
department is in appeal.

Held

The Tribunal noted the definition of health club and fitness
service which means physical well-being service such as, sauna and steam
bath, turkish bath, solarium, spas, reducing or slimming salons, gymnasium,
yoga, meditation, massage (excluding therapeutic massage) or any other like
service. The term therapeutic massage is explained by CBEC Circular
No.B11/1/2002-TRU dated 1.8.2002 to mean a massage provided by qualified
professionals under medical supervision for curing diseases such as arthritis,
chronic low back pain and sciatica etc. The Tribunal noted that the centers
maintain case sheets, treatment files and a treatment schedule. The ayurvedic
doctors attached, supervise the treatment, prescribe food restrictions and the
type of oil that should be used. It is therefore seen that these centres
provide a holistic ayurvedic treatment, which includes massages given by
qualified professors under medical supervision for curing diseases. Thus, in
view of documentary findings produced by the respondents, it is seen that the
ayurvedic centres are providing therapeutic treatment under ayurvedic system
and therefore not covered by the definition of Health Club and Fitness Services
and therefore are not liable for service tax.

52.
[2018-TIOL-2351-CESTAT-MAD] Siemens Building Technologies Pvt. Ltd vs.
Commissioner of Central Excise, Puducherry
Date of Order: 21^st February, 2018

When goods are manufactured and thereafter installed in a single transaction charged compositely, the
predominant activity is manufacture and installation is only incidental to the
activity of manufacture.

Facts

Assessee is engaged in manufacture of Electronic Safety
System and Accessories. It receives composite orders for supply, installation
and commissioning of the system. They follow two patterns of billing depending
upon the purchase orders. In the first case, the charges for manufacture of the
system and the installation are raised compositely and excise duty is
discharged on the whole amount. Whereas, in the second case, the value of the
system manufactured is shown separately on which excise duty is discharged and
in respect of the installation charges, service tax is discharged. Department holds
a view, that service tax is required to be charged on the charges charged
compositely. It is argued that the activity of installation is only incidental
to the sale transaction in a composite transaction and not an independent
service liable for service tax.

Held

The Tribunal observed that when the goods are manufactured
and thereafter installed, the predominant activity is manufacture and
installation is only an incidental activity. The contention of the department
that service tax is payable on the whole amount, ignores the taxable event of
manufacture completely. Further, the contention that the service tax rate was
higher than the rate of central excise during a given period appears to be
totally unsound application of fiscal statutory provisions. Thus, the impugned
order is set aside.

53.
[2018-TIOL-2349-CESTAT-ALL] ICS Food Pvt. Ltd vs. Commissioner of
Service Tax, Noida Date of Order: 12^th April, 2018

Services by an outdoor caterer in relation to serving of
food and beverages in a canteen maintained by a factory under the Factories
Act, 1948 is exempt under entry 19A of the mega exemption
notification-25/2012-ST dated 20.06.2012.

Facts

Assessee enters into an agreement with various factories for
supply of food and beverages to the employees of the factory as per the agreed
charges. The main dispute pertains to entitlement of exemption Notification
No.25/2012-ST as amended by Notification No.14/2013-ST dated 22/10/2013 to the
services provided in relation to serving of food or beverages by a canteen
maintained in a factory, as required under the Factories Act, 1948 having the
facility of air-conditioning or central air-heating at any time during the
year. The department holds a view that the exemption is available to a canteen
run by factories themselves. It was
argued that the notification uses the phrase “canteen maintained in a factory”
and not “canteen maintained by a factory” which spells out the intent of the
exemption.

Held

The Tribunal noted in the negative list based service tax
regime “canteen” and “outdoor caterer” is not defined.
Therefore, it would be prudent to take recourse to definitions provided under
the Finance Act, 1994 as these were in existence till 30/06/2012. Even if such
services are considered as OUTDOOR CATERING, those have been used for providing
services in relation to serving food and beverages in a canteen.Thus, the
services provided is covered by Entry No.19A of the mega exemption notification
and exempted from payment of Service Tax.

BCAJ Admin

Service Tax

i Supreme
Court

26. 2018 (10) GSTL 118 (SC)
Commissioner of

Service Tax vs. Bhayana Builders Pvt. Ltd.

Date of Order: 19^th February, 2018

Value of materials
supplied free of cost by service recipient would not be includible in the value
of taxable services.

Facts

Respondent assessee was
engaged in the business of construction and was providing “Commercial or
Industrial Construction Service”. Revenue demanded to include value of goods
supplied by service recipient free while calculating “gross amount charged” and
33% thereof be treated as value for levying service tax vide Notification No.
15/2004-ST dated September 10, 2004. Later, Notification was amended vide
another Notification No. 4/2005-ST dated March 01, 2005 adding an explanation
stating that the “gross amount charged” shall include the value of goods and
material supplied and provided or used by the provider of construction services
for providing such service. The Larger Bench decided that value of free
goods/materials supplied by service recipient cannot be added for valuation of
service provided by service provider. Correctness of the said Larger Bench
decision was challenged in present appeals. Revenue argued that Explanation (c)
to section 67 (4) of Finance Act, 1994 provided that payment received in “any
form” and “any amount credited or debited’ was to be included in gross amount
charged. Department also argued that 33% rate was prescribed by Government
keeping in view the entire construction project which roughly comprises of 67%
of cost of material and 33% is value of services.

Held

Hon’ble Supreme Court noted
that the Phrase “gross amount” in section 67 only referred to the entire
contract value without deduction of any expenses. Further, the word ‘charged’
used in section 67 referred to the amount billed by service provider to service
receiver. By using further words “for such service provided”, the Act required
a nexus between the amount charged and services provided. Therefore, amount
having no nexus with taxable service cannot be part of taxable value u/s. 67.
Though section 67 (4) states that the value shall be determined in such manner
as may be prescribed, however, it is subject to the provisions of sub-sections
(1), (2) and (3). Moreover, no such
manner was prescribed which included the value of free goods/ material supplied
by the service recipient for determination of the gross value. Explanation (c)
to section 67 only provided for mode of payment or book adjustment and did not
expand the meaning of the term “gross amount charged”. Further it was held that
value of taxable services cannot be dependent on value of goods supplied free
of cost by service recipient since service recipient can use any quality of
material and value of such goods can vary significantly. Firstly, no material
was produced before Hon’ble Supreme Court to justify the basis of formula
adopted while issuing notification. Secondly, the language of notification also
provided for “33% of gross amount charged for providing taxable services”.
Further, even vide section 93 of the Finance Act, 1994, exemption from levy of
service tax leviable on “taxable service” only can be provided by Government.
Therefore, since value of goods provided by service provider free of cost was
not specifically included by legislature, the same cannot form part of taxable
value of services.

27. 2018 (10) GSTL 401 (SC)
Union of India vs. Intercontinental Consultants and Technocrats Pvt. Ltd. Date of Order: 07^th March, 2018

No Service Tax is leviable
on reimbursement of expenses prior to May 14, 2015.

Facts

Respondents were receiving
reimbursement of expenses incurred such as air travel, hotel stay, etc.
Writ petition was filed by assessees challenging the vires of Rule 5 of
Service Tax (Determination of Value) Rules, 2005 as unconstitutional and ultra
vires section 66 and 67 of the Finance Act, 1994. Contention of the
assessee was that section 67 was amended from May 14, 2015 to include
reimbursement of expenses through insertion of an explanation. Prior to such
amendment, ‘consideration’ in respect of taxable services provided or to be
provided was only leviable to service tax. Assessee relied on
Circular/Instruction F. No. B-43/5/97-TRU dated June 06, 1997. Section 67
provided for gross amount charged for providing ‘such’ taxable service and
therefore, any amount collected which was not for providing such taxable
service cannot be covered within tax net.

Held

Hon’ble
Supreme Court observed that the expression ‘such’ used in section 67 provided
for charging service tax only on gross amount charged for providing ‘such’
taxable services and value cannot be more or less than consideration paid as quid
pro quo for rendering such service. Therefore, any other amount cannot form
part of value of services. Though section 67 (4) was provided for making rules
to lay down manner of valuation, the same was subject to section 67 (1) and
therefore, cannot travel beyond section 67 (1). Consequently, noting the
amendment to section 67 vide the Finance Act, 2015, it was held that reimbursable expenditure or
cost will not form part of value of taxable services prior to May 14, 2015.

28. 2018 (9) GSTL 337
(SC) Commissioner of

Central Excise and S.T. vs. Ultra Tech Cement Ltd. Date of Order :
01^st February, 2018

No Cenvat Credit
admissible on outward transportation services from factory to buyer’s premises.

Facts

Assessee availed Cenvat
credit of service tax paid on outward transportation of goods through a
transport agency from their premises to the customer’s premises from January,
2010 to June, 2010. Revenue alleged that such transfer cannot be considered to
be used directly or indirectly in relation to clearance of goods from the
factory viz. place of removal and therefore, disallowed Cenvat credit
considering it not to be an input service within the ambit of Rule 2(l)(ii) of
the CENVAT Credit Rules, 2004. Considering the provisions of the Rules,
adjudicating authority held that post clearance transportation services cannot
be considered to be “input services”. Further, in absence of any documentary
evidence relating to prove conditions provided in Circular 97/8/2007-Service
Tax dated August 23, 2007 clarifying the definition of “place of removal”, OIO
was passed confirming demand. After rounds of litigation, Revenue filed an
appeal to Hon’ble Supreme Court.

Held

As per the definition of
“input service” contained in Rule 2(l) of Cenvat Credit Rules, 2004, Hon’ble
Supreme Court observed that such outward transportation is not covered under
Rule 2 (l)(i). Further, Rule 2 (l) (ii) covers only those services, which are
used by the manufacturer, whether directly or indirectly, in or in relation to
the manufacture of final products and clearance of final products upto the place of removal. The two clauses in
the definition should be read harmoniously and there should not be any
conflict, which defeats the scheme of the Law. Therefore, after the amendment
made from 01 March, 2008, wherein the word ‘from’ was replaced by the word
‘upto’, goods transport agency service used for the purpose of outward
transportation from place of removal i.e. factory to customer’s premises,
cannot be considered as “input service” for availment of Cenvat credit.
Circular was held to be inapplicable in the present case since it was issued
prior to the amendment in the definition of “input service”. If said circular
is made applicable even in respect of post amendment cases, it would be
violative of Rule 2(l) of the CENVAT Credit Rules.

II
High Court

29. 2018 (11) GSTL 341
(All.) Astt.. Commr. of
Central Excise vs. Advance Steel Tubes Ltd. Date of Order: 06^th
March, 2018

Doctrine of unjust
enrichment not applicable in case of pre-deposit of duty by the assessee at the
time of filing of appeal.

Facts

The officers of Central
Excise visited the factory premises of the assessee and found variation in the
finished good as compared to the balance shown in RG-1. The stock of finished
products was also found short. The stock of inputs was found excess as compared
to the stock register. An investigation was made and the party debited an
amount of 18.75 lakh under protest on account of the said discrepancies. The
assessee made pre-deposit of INR 18.75 lakh before filing of appeal. On account
of conclusion of proceedings before Tribunal and the Settlement Commission,
amount of INR 10,34,000 was claimed as refund out of
the pre-deposit made.

The refund claim was
rejected by the Adjudicating Officer by holding that the party had accounted
for the duty paid under protest as expenditure in the balance sheet and costing
of the products were finalised by taking into account the cost of raw materials
along with manufacturing and other expenses and hence, the presumption was that
the same has been passed on to the buyer in the form of incurred/enhanced
costing for current and further supplies of the party’s products. The assessee
filed an appeal with the Commissioner (Appeals) which was rejected. Appeal was
filed before the Tribunal.

Tribunal was of the view
that this was not the case of the unjust enrichment because the duty involved
in refund was not paid at the time of clearance of goods but subsequently
during the course of investigation for the past period. The goods had already
been cleared earlier. It was emphasised that the confirmed duty was adjusted
from the pre-deposit by treating it as a sanctioned refund. In so far as the
amount which had been taken by the department during investigation that is a
sum of Rs.8,40,120/-, the same had also been taken without considering the cost
structure of the goods and despite that the department was invoking the bar of
unjust enrichment to the balance amount for which the refund has been claimed
and this would not be tenable. Accordingly, order passed by the Hon’ble Tribunal
was in favour of assessee. The Revenue went on to file an appeal with the High
Court.

Held

The Hon’ble High Court has
accepted the final decision taken by Tribunal and held that that the bar of
section 11B of the Act did not apply in the present case, is correct and
justified.

30. [2018-TIOL-1058-HC-DEL-ST] Santani Sales Organization vs.
CESTAT, Delhi and Others Date of Order: 31^st May, 2018

Pre-deposit of 10% while
filing second Appeal u/s. 35F of the Central Excise Act, 1944 is inclusive of 7.5% deposit made
for the first appeal.

Facts

The question before the
Court is whether as per section 35F of the Central Excise Act, 1944, the
petitioner is required to make an additional pre-deposit of 10% of the
duty and penalty in dispute over and
above 7.5% deposit made for filing of first appeal before the Commissioner
(Appeals) while filing second appeal before the Tribunal. Circular No.
984/08/2014-CX dated 16^th September, 2014 clarifies that “in the
event of appeal against the order of Commissioner (Appeal) before the Tribunal,
10% is to be paid on the amount of duty demanded or penalty imposed by the
Commissioner (Appeal).

Held

The Court noted that the
section should not be construed by adding or substituting words. The intent is
that the assessee should pre-deposit 10% of the total tax or penalty, which is
the subject matter of the Appeal. It is not to ignore the pre-deposit of 7.5%
already made to file first appeal. There is logic in increasing pre-deposit by
2.5% when second appeal is filed, but adding words to the plain and unambiguous
provision that 10% pre-deposit will be
over and above 7.5% pre-deposit made at the time of the first appeal is
uncalled for. Therefore the writ petition is allowed and it is directed that
the petitioners and others on filing second appeal is required to deposit 10%
of the amount of duty/penalty as
confirmed by the first appellate authority inclusive of 7.5% pre-deposit
made for the first appeal.

III
Tribunal

31. [2018] 93 taxmann.com 338 (Mumbai-CESTAT) Ipca Laboratories
Ltd. vs. CCE & ST

Date of Order: 26^th April, 2018

Tribunal held that
reimbursements of salaries paid by distributors to sales representatives
appointed by them in foreign countries would not be taxed under “business auxiliary
services”. Service tax demand under
“scientific and technical consultancy services” was held to be unsustainable in
respect of payments made to foreign regulatory authorities for
registration/approval of products. Tribunal held that in absence of online
access, data storage services provided by foreign service provider would not be
liable to service tax under “online database access and retrieval services”

Facts

Appellant manufacturer of
medicaments engaged various distributors for distribution of medicaments in
various countries. These distributors appointed sale representatives for
promotion of products supplied by appellant and salaries of such sales
representatives are reimbursed by appellant to the distributors under a cover
of debit note. Revenue demanded service tax on such reimbursements under
category of “business auxiliary services.” As regards appellant receiving
services of registration of its therapeutic products in foreign company,
revenue alleged that such services are liable to service tax as “scientific and
technical consultancy services”. Further, service tax was demanded under
category of “online access and database retrieval services” in respect of
invoices raised by foreign company for alert storage charges, internet charges
etc.

Held

As regards demand under
category of “business auxiliary services”, Hon’ble Tribunal noted that the
agreement between appellant and distributors provides that promotional
activities will be directly under supervision of the appellant. The invoices
raised by distributors for such expenses describe the same as ‘”amounts towards
marketing survey and promotional expenses”/ “marketing expenses” etc. and
neither the invoices nor the debit notes contain any breakup of expenses.
Tribunal held that demand under “business auxiliary services” would not sustain
on reimbursements made by appellant. For this purpose, it relied on the
decision in case of Genom Biotech (P) Ltd. vs. CCE&C [2016] 71
taxmann.com 123 (Mum.-CESTAT), wherein Tribunal categorically held that
services rendered in connection with business and commerce outside India were
not intended to be taxed in India in terms of erstwhile service tax rules. As
regards next issue of demand under “scientific and technical consultancy
services”, Tribunal noted that such services are in the nature of regulatory
services obtained for registration/approval of appellant’s products in other
countries. Reference was made to the decision in Administrative Staff
College of India vs. CC & CE [2009] 18 STT 78 (Bang. – CESTAT), also
affirmed by Hon’ble Supreme Court in 2010 (20) STR J117, wherein it was
held that in order to assert that an organisation is providing scientific or
technical consultancy, two basic ingredients have to be established. The
organisation must be a science or technology institution and the consultancy
must relate to one or more disciplines of science or technology. In present
case Tribunal noted that the service provider merely executes registration
process without rendering any advise, consultancy or technical assistance in
the science. Also, the said service provider is not a scientist or a technocrat
or any science or technology institutions or organisations. Thus, Tribunal held
that as these regulatory services are not in the nature of “Scientific and
Technical Consultancy Services”, impugned demand is liable to be set
aside. Further, as regards demand under “online database and access retrieval
services”, it was observed that the services were used by appellant for data
storage. The foreign service provider neither has website where data can be
accessed nor any information is accessed by appellant from any database of said foreign company. Since no
online service is provided and also, there is no online service provider,
Tribunal set aside impugned demand.

32. [2018] 93 taxmann.com 482 (New Delhi-CESTAT) Deputy
Conservator of Forest and Deputy Field Director vs. CCE.

Date of Order: 11^thApril, 2018

Tribunal held that fees
collected by state forest department for making available vehicles on rent for
safari tour into forests, are fees for discharge of statutory functions and
hence cannot be said to be taxable as consideration for supplying “tour operator
services”.

Facts

Appellant comes under
Department of Forests, Govt. of Rajasthan and exercised the jurisdiction and
control over the Tiger Projects in Rajasthan. The Revenue noticed that the
appellant was collecting certain amounts from the tourists and making available
vehicles on rent for safari tour into the Ranthambore Park. Out of the amounts
so collected, a certain portion was paid to the vehicle owners towards rent of
the vehicle and the balance was retained and deposited with the State Government
in appropriate head of account. Revenue alleged that State Forest Department
had made arrangements for supply of vehicles to tourists for going around the
National Park and has recovered amounts towards the same, thereby liable to pay
service tax under “tour operator services”.

Held

Hon’ble Tribunal noted that
the Forest Department performs the sovereign function of protecting and
improving the environment and to safeguard the forests and wild life of the
country as mandated under Article 48A of the Constitution of India. The Wild
Life (Protection) Act, 1972, which provides for Notification and Management of
National Parks for conservation of wild life, empowers the State Government, to
notify the forests as National Park as well as to restrict the entry of
visitors as well as vehicles into the National Park. Tribunal noted that the
primary objective of such restriction is to protect wild life and tourism is
permitted only to the extent circumscribed by the above objectives. It was also
observed that the amount recovered from the tourists are credited to the
account of the State Government after reimbursing the vehicle owners towards
the rent payable for such vehicles. Tribunal noted that the Forest Department
has the mandatory duty to protect the environment and to safeguard forests and
wild life. Therefore, it was held that amounts recovered by appellant towards
issue of entry permits as well as vehicles which have also been credited to the
State Treasury are to be considered in the nature of fee or amount collected as
per the provisions of relevant statute for performance of statutory functions
and cannot be considered as consideration for purposes of organizing tour.
Accordingly, present appeal was allowed by setting aside impugned demand.

33. [2018] 93 taxmann.com 162 (New Delhi-CESTAT) Vijay Kumar
Kataria vs. CCE.

Date of Order: 30^thJanuary, 2018

Activities of replacing
old damaged water line, improvement of water supply in various villages etc.
falls under category of “commercial and industrial construction service” and as
the said services were provided to Government organisation, which is
non-commercial, no service tax liability would arise.

Facts

Appellant executed
contracts with Delhi Jal Board, in which nature of work involved replacing of
old damaged water line, for improvement of water supply in various villages as
well as replacement of badly silted and damaged sewer lines. Revenue alleged
that services provided by appellant are classifiable under Management,
Maintenance or Repair Service as such services are provided under maintenance
contract. On the other hand, appellant contends that services in question are
more appropriately classifiable under “commercial and industrial construction
services”. Appellant further submitted that since the services have been
rendered to Delhi Jal Board, such services are not indented for Commerce or
Industry and accordingly, no service tax would be liable to be paid.

Held

Hon’ble Tribunal noted that
contracts between appellant and Delhi Jal Board are for replacement of
pipelines in specified segments. It is neither in the nature of an ongoing
maintenance contract nor in the nature of construction or laying of
pipelines/conduit. Accordingly, Tribunal concurred with appellant’s submission
that the service in question is more specifically covered under the category of
Commercial and Industrial Construction. It was held that classification under
Management, Maintenance or Repair would not cover the activities of the
appellant since these are not in the nature of Maintenance Contract. Further, recording a finding that Delhi Jal
Board is not a commercial organisation, Tribunal held that appellant would not
be liable to pay any service tax demand and thereby, set aside impugned order.

34. 2018 (11) GSTL 104 (Tri. – Chennai) Prasad Corporation Ltd.
vs. Commissioner of Service Tax, Chennai.
Date of Order: 30^th Oct., 2017

Statutory provisions
relating to taxation to be construed literally without engraving any additional
meaning thereto.

Facts

Appellant assessee offered
services like Computer graphics, digital restoration and reverse telecine to
customers abroad, seeking to cover the services under Business Auxiliary
Services. Department initiated proceedings alleging that the services provided
are in the nature of “Video Tape Production Services” defined u/s. 65 (105)
(zi), hence falling within the ambit of Rule 3 (1) (ii) of Export of services
Rules, 2005, therefore will not be treated as export of service. Later,
confirmed the allegation and service tax liability along with interest and
penalty. Appellant appealed to Tribunal against the impugned order stating that
services provided by Appellant are post-production film activities rendered for
services to recipients outside India as per their requirements and for which it
received payment in free convertible foreign exchange. Whereas Respondent
department contested that Video Tape Production services include the services
relating to editing, cutting, colouring, imparting special effects, processing,
adding etc. Appellant thus performs such services of addition, modifying etc.
in respect of the work undertaken by them; hence their services should
justifiably fall within “Video Tape Production Services”.

Held

Hon’ble CESTAT held that
services performed by Appellant definitely do not involve recording of any
programme, event or function. In fact services of Computer Graphics, Digital
Restoration, and Reverse Telecine, all involving activities on old feature
films are post-production film activities rendered for service recipients’ as
per their requirements. The definitions have to be read in totality and part
thereof cannot be picked up to justify that the activities performed in the
instant case will come under “Video Tape Production Services”. The
statutory provisions relating to taxation have to be construed literally
without engraving any additional meaning thereto except in very rare cases
where, the maxim of casus omissus would apply. Thus, services of restoration,
giving special effects etc. in respect of old films would not be covered under
Video Tape Production service. Appeal allowed setting aside the Impugned Order.

35. 2018 (11) GSTL 427 (Tri. – Del.) Sir Ganga Ram Hospital,
Versus Commissioner of Central Excise Delhi-I. Date of Order:06^thDecember,
2017

Collection
charges/facilitation fees paid to doctors is not consideration for business
support services. It is exempt by virtue of Notification No. 25/ 2012 – ST
dated 20^th June 2012.

Facts

The appellants are engaged
in providing health care services to the patients. The appellants have engaged
professionals and doctors on contractual basis. The doctors are provided space
in the hospitals with required facilities to attend to the patients coming to
the hospitals, run by the appellants. These doctors engaged on contract basis
are paid professional fee on a predetermined ratio on the amount received by
the appellants from the patients. The Revenue contended that doctors are in
business and the “collection charges/facilitation fee” retained by the
appellants are liable to service tax under the category of Business Support
Service for the period prior to 01.07.2012 and are a taxable service post
negative list also. The Revenue held a view that such charges/fee retained by
the appellants formed a taxable consideration for the service of
infrastructural support provided by the appellants to the doctors to enable the
doctors to carry out their work in the hospital.

Held

Hon’ble Tribunal held that
for providing healthcare services, the appellants entered into agreements with
various consulting doctors and that it does not find any business support
services in such arrangement. Further, reliance is placed on Dr. Devender
Surtis AIR 1962 SC 63 and it has been held that the doctors are not in
business or commerce but are engaged in medical profession. Further,
Notification No. 25/2011-ST exempted levy of service tax on health care
services rendered by clinical establishments. Hon’ble Tribunal held that the
view of the Revenue that in spite of such exemption available to health care
services, a part of the consideration received for such health care services
from the patients shall be taxed as business support service/taxable service is
not tenable. Accordingly, it was held that the impugned orders against which
appellants’ hospital filed appeal are devoid of merit, the same were set–aside.

36. 2018 (11) GSTL 309 (Tri. – Bang) Sundaram Finance Limited vs.
Commissioner of C. EX. & S.T., LTU Chennai.

Date of Order: 14^th September, 2017

Charges levied by on
account of Fleet Card issued by the assessee to the customers who availed
vehicle loan facilities from them is for facilitating the customers to procure
is not in the nature of interest on loans – Chargeable to service tax.

Facts

The assessee is engaged in
finance operations as a Non-Banking Financial Company. During the verification
of accounts maintained by appellant-assessee, the officers noted that service
tax has not been paid on income shown under the heading “Fleet Card Income”
from their customers. The Fleet Card issued by the assessee to the customer,
who availed vehicle loan facilities from them is for facilitating the customers
to procure fuel from the outlets of petroleum companies, with whom the assessee
had prior arrangement. These cards carry pre-paid facility as well as credit
facility. The creditworthiness of the customers was verified and cards were
issued by the appellant in their trademark as well as that of oil companies.
The cards provide credit facilities for purchasing fuel for the vehicle of the
customer.

The Revenue entertained a
view that the assessee is liable to tax under the head “Banking and Other
Financial Services”, Credit Card Services” in respect of fleet card
income. The assessee contended that the “additional finance charge”
is nothing but interest. Circular issued by CBEC dated 17^th
September 2004 clearly specifies that interest on loans is excluded for payment
of service tax. Notification No. 12/2006-ST, dated 19^th April 2006
stipulates that Interest on Loans is not to be included in the assessable
value. Further, as per Black’s Dictionary, “finance charge” is
nothing but an additional payment in the form of interest paid by a retail
buyer with the privilege of purchasing goods or services in instalments.

Held

Hon’ble CESTAT relying on
the findings of original authority held that the arrangement of fleet card
cannot be treated as repayment of loan but only a payment against credit card
utilisation. A loan is a prearranged specific amount given at one-time or in
instalments. However, in “Fleet Card System”, the same credit limit
is extended every fortnight and sometimes even remains unutilised. Fleet Card
function cannot therefore, be treated at par with a loan transaction. Further,
the amount charged by the assessee is exclusive of interest and other charges.
Interest for the month is also shown separately. Hence, the claim that
“finance charge” and “additional finance charge” are
interest is not correct.

37. [2018-TIOL-1888-CESTAT-MUM] Holtech Asia P. Ltd vs. Commissioner of Central Excise,
GST-Pune-I. Date of Order: 20^th April, 2018

Registration
of Project office of a foreign company in India is not sufficient to conclude
that the services provided to the foreign company are
received in India, unless the project office is concerned with the
services provided

Facts

The Appellant rendered
services to its parent company in USA. A refund claim was filed under Rule 5 of
the CENVAT Credit Rules, 2004 read with Rule 6A of the Service Tax Rules, 1994
towards CENVAT credit paid on input services used in providing output services.
The refund was rejected on the ground that the parent company has a project
office which is registered in India. Therefore as the service provider and
service receiver are in India, Rule 8 of the Place of Provision of Service
Rules, 2012 is applicable and accordingly condition (b) i.e. recipient located
outside India and (d) i.e. place of provision outside India of Rule 6A is not
satisfied and therefore there is no export. It was argued that the person who
has contracted is the company in USA and payment is also received in foreign exchange.

Held

The Tribunal noted that it
is undisputed that the services are received by the parent company in USA and
the amount is received in foreign exchange. Further, the project office in
India was set up with an intention to provide services to the customer in
India. Accordingly, such office in India had no connection with the services
rendered by the Appellants. Accordingly, it was held that the project office
registered in India, having no connection with the services rendered cannot be
considered as a recipient. Further in terms of Explanation 3 to section 65B
(44) different establishment located
in non-taxable territory and
taxable territory are to be treated as establishment of different persons thus
clear that the office outside India is different establishment from its project
office in India. Thus, the recipient being outside India, place of supply being
outside India, refund is admissible.

38. [2018-TIOL-1700-CESTAT-MUM] Suzlon Energy Limited vs.
Commissioner of Central Excise & Service Tax, Pune-III. Date of Order: 02^ndMay, 2018. Period: June 2007 to September 2010

Taxation of Goods and that
of services are mutually and explicitly conceived levies

Facts

The Appellant entered into
an agreement with three subsidiary companies situated in Germany and Netherland
with whom product development and purchase agreement had been entered into. In
terms thereof, subsidiaries provided technical know-how used by the appellant
for manufacture of wind turbine generators. The technical know-how/engineering
designs and drawings were imported against the bill of entry. The supply was an
outright sale with full ownership vested with the appellant. The Revenue raised
a demand to bring such imports within the framework of design service and
confirmed the service tax demand. It was argued that outright transfer or
purchase of technical know-how being excluded from the definition of intellectual
property in service, it is not legal to bring in the coverage of design
service.

Held

The Tribunal relying on
several judgments noted that taxation of goods and that of services are mutually and explicitly
conceived levies, it is clear that the same activity cannot be taxed as goods and as services.

BCAJ Admin

SERVICE TAX

I. TRIBUNAL

16.
[2019-TIOL-3424-CESTAT-Del.] M/s Gurnani Infra Developers Pvt. Ltd. vs. The
Commissioner, Central Goods and Services Tax Date of order: 1^st October, 2019

Balance sheet shows
an advance recoverable in cash as being paid towards the service tax, there is
therefore no question of unjust enrichment

FACTS

The appellant
received a taxable service and had been depositing the service tax under
reverse charge mechanism. Since they were not liable to discharge the liability
under reverse charge mechanism, they filed a refund claim. The claim was
acknowledged but it was held that the same was hit by unjust enrichment and
therefore the amount was to be transferred to the Consumer Welfare Fund.
Accordingly, the present appeal was filed.

HELD

The Tribunal, on
perusal of the balance sheet, noted that till the time of filing the impugned
refund claim, an advance recoverable in cash as being paid towards the service
tax is shown. There is, therefore, sufficient evidence otherwise on record to
falsify any charge of unjust enrichment. The order is accordingly set aside and
the appeal is allowed.

17. [2019
(29) GSTL 441 (Tri.-Del.)] IDP Education India Pvt. Ltd. vs. Commissioner of
C. Ex., Delhi-IV Date of order: 8^th May, 2019

Conducting test does
not amount to commercial training or coaching services

FACTS

The present appeal
was filed by the appellant who operates the business of International English
Language Test Centres from various locations in India under license agreement with
IELTS Australia. The practice material was available on the website of the
appellant who was not engaged in training and coaching for preparation for the
said test. The test was required to be conducted in two modules, namely,
academic module and general training module. The appellant had sub-contracted
the services for conducting the tests. He received the fees for the test
directly from the students and remitted the respective share to IELTS Australia
and the sub-contractor after retaining certain amount. No service tax was paid
for the period April, 2012 to June, 2012. The Department passed an order
confirming demand of service tax treating the activity of the appellant to be
coaching and training services.

HELD

The Hon’ble Tribunal
held that the agreement clearly stipulated that holding of the IELTS Test by
the appellant was itself a skill and nothing in the agreement required the
appellant to coach or train the candidates. Besides, no consideration was
earmarked for such test. Conducting the test cannot be considered as imparting
skill or knowledge by any stretch of imagination. Therefore, the order was set
aside, thus allowing the appeal.

18.
[2019-TIOL-3393-CESTAT-Hyd.] M/s ArunExcello Foundation vs. Commissioner of GST
and Central Excise Date of order: 8^th November, 2019

Excess payment of
service tax can be adjusted in any month or quarter within a reasonable time as
per Rule 6(4A) of the Service Tax Rules, 1994

FACTS

The appellants made
excess payment of service tax from April, 2015 to June, 2016. This was adjusted
in the return of September, 2016. A show-cause notice was issued to them
alleging that the adjustment of the excess service tax made is against the
provisions of law and not in order. Since the appeal was rejected by Commissioner
(Appeals), the present appeal was filed.

HELD

The Tribunal held
that the Rule intends to adjust excess payment in order to avoid the hassles of
a refund claim. When there is already an excess amount in the hands of the
Revenue, while making such adjustment there is no revenue loss and, in fact,
the Revenue is enriched by the interest on the excess amount till the
adjustment. The word ‘immediate’ being absent in the Rule, the only
interpretation possible is that the assessee can adjust the excess payment to
any succeeding month or quarter when he has service tax liability. Further,
such adjustment should be made within reasonable time. The adjustment is in
accordance with Rule 6(4A) of the Service Tax Rules, 1994 and therefore
allowed.

19. [2019-TIOL-3327-CESTAT-Kol.] M/s Etrans Solutions Pvt. Ltd. vs. Commissioner of
CGST and Central Excise Date of order: 30^th July, 2019

When credit
attributable to exempted services is reversed, Revenue cannot insist that
option (3)(i) under Rule 6 of the CENVAT Credit Rules, 2004 of payment of 6% of
the value of exempted services should be followed by the assessee

FACTS

The assessee is
engaged in the provision of services as well as trading of goods. It maintains
a common balance sheet for its manufacturing as well as trading activity. The
short issue that arises for consideration is whether the assessee is required
to pay 6% of total sale value of the goods traded by it in terms of Rule
6(3)(i) of the CENVAT Credit Rules, 2004 when it paid the actual credit
attributed to the quantum trading sale in terms of Rule 6(3A) along with
interest following the option available under Rule 6(3)(ii) of the Rules.

HELD

The
Tribunal, relying on the decision in the case of M/s Mercedes Benz India
(P) Limited vs. Commissioner of Central Excise, Pune-I
[2015-TIOL-1550-CESTAT-Mum.], held that the main objective of Rule 6 is
to ensure that the assessee should not avail the CENVAT Credit in respect of
input or input services which are used in or in relation to the manufacture of
the exempted goods, or for exempted services. If this is the objective, then at
the most the amount which is to be recovered shall not be in any case more than
the CENVAT Credit attributed to the input or input services used in the
exempted goods. The Tribunal noted that the appellant reversed the
proportionate common credit taken on input services used in trading of goods
along with interest thereon. Therefore, Rule 6(3)(i) will not have any
application. The appeal is accordingly allowed.

BCAJ Admin

Service Tax

I.
TRIBUNAL

25. 2018 (18) G.S.T.L 438 (Tri. Mumbai) Matheson
K. Air India Pvt. Ltd. vs. Commissioner of Central Ex. & S.T., Pune
Date of Order: 29^th March, 2017

Service
tax liability under reverse charge mechanism not to arise on rent paid towards
transportation of helium gas by supplier of helium gas from abroad.

FACTS

Issue regarding applicability of service tax arose on the rent paid
towards helium gas tankers used for transportation of helium gas by the
suppliers abroad. Demand was raised on reverse charge basis and later
confirmed. Hence appealed before the Tribunal mentioning that in the identical
issue in their own case, the matter was decided (in citation 2017 (4) G.S.T.L.
379 (Tribunal)) holding in favour of the Appellant that the service tax
liability under reverse charge mechanism would not arise in the case of rent
paid for helium gas tankers for transportation of helium under the category of
‘supply of tangible goods for use’.

HELD

The Hon’ble
Tribunal found that issue arose earlier was identical to the other, and so
respectfully following the same and allowed the appeal.

26. 2018 (18) G.S.T.L 439 (Tri. Chennai)
Microcredit Foundation of India Ltd. vs. Commr. Of S.T., Chennai Date of Order:
9^th November, 2017

Levy of Business Auxiliary Service non sustainable prior to May, 2006 on
Company registered as non-profit organisation, not being a commercial concern.

FACTS

The
liability of service tax under “Business Auxiliary Service” on the appellant, a
company registered u/s. 25 of the Companies Act, 1956 as a non-profit
organisation was made. The definition of ‘Business Auxiliary Service’ as it
stood during the relevant period included only a ‘commercial concern’. The
definition was amended w.e.f. 1.5.2006 to substitute the words “commercial
concern” with “any person”. Since the period involved is prior
to the said date, it was outside the purview of the amended definition.
Decision in the case of Raja Charity Trust vs. CCE & ST Tirunelveli 2017
(4) G.S.T.L. 77 (Tri.-Chennai) was relied upon.

HELD

Tribunal appreciated that prior to 01.05.2006 services rendered to a
client by a commercial concern would only qualify as Business Auxiliary Service
and service rendered to any person would not fall in the ambit of the same. As
clear from the records, the appellant could not be considered as a commercial
concern. Following Raja Charity Trust (supra) allows the appeal the
demand was set aside.

27. 2018 (18) G.S.T.L 460 (Tri. Del.)
Commissioner of Service Tax, Delhi vs. SGC Services P. Ltd. Date of Order: 21^st
January, 2018

FACTS

Respondent
entered into an agreement with Discount City Hotels Ltd., UK (DCH) for
facilitating the working of its back office in India with respect to running
and maintaining online hotel booking. The Respondent also entered into an
Agreement with with Celergo, USA for performing various activities. Department
brought said services under the Business Auxiliary Services, which was
considered as export of services by the Appellate Authority and dropped the
demand. Consequently, the department filed the appeal.

HELD

The Hon’ble
Tribunal held that the issue was squarely covered by the ratio laid down by
Larger Bench in the case of Paul Merchants Ltd. vs. Commissioner – 2013 (29)
S.T.R. 257 (Tri. – Del.) as well as Microsoft Corporation IP Ltd. vs.
Commissioner 2009 (15) S.T.R. 680 (Tri.-Del.) and observed that the Order
was reasonable and required no
interference. Hence, Department’s appeal was rejected.

28. [2018-TIOL-3722-CESTAT-MUM] Pallonji and Co.
Pvt. Ltd vs. Commissioner of CGST & CX, Mumbai Date of Order: 20^th
November, 2018

Excess
payment of service tax consequent upon reduction in rate of contract and
issuance of credit notes thereof, refund claim rejected on the ground of time
bar – however, assessee was entitled to avail CENVAT credit of the excess tax
paid in terms of Rule 6(3) of STR, 1994

FACTS:

Appellant executed certain maintenance, repair and construction through
a work contract agreement. After
completion of the work, the rate was reduced on renegotiation by both the
parties and against which credit notes were raised to the customers for
differential rate in the value of services and service tax component. The
refund claim for excess service tax paid between the period April 2013 to March
2014 was filed on 30.07.2015 and the adjudicating authority rejected the refund
claim filed u/s. 11B on the ground that the same was not filed within the
stipulated time. Time bar issue was not challenged, however a claim to avail
CENVAT credit as per Rule 6(3) of the Service Tax Rules, 1994 was put forth.

HELD

The Hon’ble Tribunal noted that a request for adjustment of excess
payment was made before the Commissioner (Appeals), however the same was
refused as it was not the subject matter of appeal. As per the Tribunal,
section 35A(3) of the Central Excise Act, which is equally applicable to
service tax matters provides that the Commissioner (Appeals) shall make such
further enquiry as may be necessary, pass such order as he thinks just and
proper in confirming, modifying or annulling the decision or order appealed
against. Reliance was placed on the decision of the Apex Court in MIL India
Ltd. vs. CCE 2007 (260) ELT 188 (SC) where it was held that Commissioner
(Appeals) could also act as an adjudicating authority. Tribunal, further
invoked order 7 Rule 7 of the Civil Procedure Code, which empowers a court to
grant such other relief which may always be given, as a court may think just,
to the same extent as if it has been asked for. Thus the Appeal was allowed and
the Appellant was held entitled to avail CENVAT credit for the refused refund
claim.

29. [2018-TIOL-3703-CESTAT-MAD] Hyundai Motor
India Ltd vs. Commissioner of GST & Central Excise Date of Order: 17^th
September, 2018

Only
intellectual property recognised under the Indian law is taxable under the
service category of Intellectual Property Service taxable u/s. 65(105)(zzr) of
the Finance Act, 1994

FACTS

The
Appellant sold their spare part division vide a trademark licensing Agreement.
On audit by the department, it was noted that the buyer had carried out
valuation of their goodwill by an independent valuer. According to the
department, the amount received as consideration for the transfer of the
business included transfer of goodwill also and the said goodwill was an
intangible property & should be classified as intellectual property &
that the transfer of the same would fall u/s. 65(105)(zzr) of the Finance Act,
1994. Further, the Goodwill also valued to a lower amount than the original
one.

HELD

The Tribunal
noted that the mandate of section 65(55b) is that only transfer of intellectual
property recognised under Indian law is taxable. Further, the Karnataka High
Court in Commissioner of Income Tax vs. Associated Electronics and
Electrical Industries (Bangalore) Pvt. Ltd. [2016] 6 ITR-OL 471 (Kar.)
found that trademark & goodwill were distinct concepts. Hence goodwill of
business has no existence except in connection with the continuing business.
Accordingly, it was held that transfer of goodwill would not fall within the
definition of IPR service u/s. 65(55b) of Finance Act, 1994.

30. 2018 (17) GSTL 434 (Tri.-Ahmd.) Transpek
Silox Industries Pvt. Ltd. vs. Commr. Of C. Ex., Vadodara-I Date of Order: 15^thNovember, 2017

Recipient
paid 100% service tax instead of 25% under RCM on Manpower Recruitment or
Supply Agency Service, demand of 75% against service provider held not
sustainable

FACTS

Appellant
availed benefit of “Manpower Recruitment Agency Service”, in terms of
Notification No. 30/2012-S.T. dated 20.06.2012 (which provides for reverse
mechanism and partial reverse mechanism on certain services). But neither
Appellant paid 75% of the service tax nor supplier of service paid remaining
25% of service tax, which they were required to pay. Upon realisation from
Revenue, Appellant paid service tax and in one case the supplier itself has
paid 100% service tax instead of 25% and in that case Appellant did not pay
service tax. Therefore, demand of service tax was confirmed @ 75% of the
service tax on the value of manpower recruitment service received by them.
Aggrieved by the said order, the Appellant preferred appeal before the
Tribunal.

HELD

The Hon’ble
Tribunal held that on pointing out by the revenue the Appellant immediately
paid service tax, therefore demand is not sustainable in this case. For another
invoice on which Appellant did not pay service tax but the service provider
paid 100% of Service Tax, the Appellant was not required to pay 75% of the
service tax in terms of said Notification. The Hon’ble Tribunal also observed
that if payment would have been made by the Appellant, the same would become
double taxation against Appellant which was not permissible in the law.
Therefore, impugned Order was not sustainable in law and therefore set aside.

II HIGH COURT

31. 2018 (18) G.S.T.L 410 (Mad.) 3E Infotech vs.
CESTAT, Chennai
Date of Order: 28^th June, 2018

Tax paid
in excess is liable to be returned irrespective of time limit as prescribed
u/s. 11B of the Central Excise Act, 1944 in light of Article 265 of the
Constitution of India

FACTS

Appellant engaged in the export of services, paid service tax unaware of
the fact that the same was not payable as per Rule 6A of Service Tax Rules,
1994. Upon realisation, made representation before Revenue Department
requesting to refund the excess tax paid. SCN was issued and later order
denying the refund of service tax paid was made on the ground that the said
refund is barred by limitation as per section 11B of Central Excise Act,1944.
Even CESTAT disallowed the claim holding that there was no justification for
condoning the delay in making the application. Aggrieved by the same, the appeal to the High Court was filed.

HELD

Hon’ble High
Court relying on the decision of Hon’ble Supreme Court in the case of Union
of India vs. ITC Ltd. [1993 (7) TMI 75 (SC) held that the provisions of
section 11B of the Central Excise Act, 1944 are not applicable to the claim of
refund and the general provisions under the Limitation Act, 1963 would be
applicable. Further, it was held that the denial of refund of excess amount would
go against the mandate of Article 265 of the Constitution of India, which
provides that no tax shall be levied or collected except by the authority of
law. Thus, claim of refund was decided in favour of assessee.

32. 2018 (18) G.S.T.L 396 (Mad.) Industrial
Mineral Company (IMC). vs. Union of India Date of Order: 22^nd March,
2018

Notwithstanding
availability of alternative remedy, writ jurisdiction invocable when binding
precedent not followed

FACTS

Petitioner,
a registered 100% EOU, manufacturer and exporter had a dispute with the
Department on one customs tariff head of their export consignment. Considering
the dispute, export duty was paid under protest and later refund was applied
for by filing a writ petition. Department contested that claim of petitioner
was yet to be adjudicated and question of refund was premature. The Hon’ble
Court while deciding the writ petition, found the contention technically
correct but in order to render substantial justice, suo moto impleaded the
Adjudicating Authority and directed to pass orders. Meanwhile writ was kept
pending and later submissions were made before the adjudicating authority
relying on the decision of Tribunal in the case of V.V. Minerals vs. CC
Tuticorin Final Order No. 41412 of 2015, similar to their case. However,
the claim was rejected on the ground that the said case was pending before the
Supreme Court, hence could not be relied upon.

HELD

The Hon’ble
Court while deciding the writ petition was of the view that when the order
passed by the Tribunal has not been stayed or set aside by the Hon’ble Supreme
Court, it was the bounden duty of the authority to follow the law laid down by
the Tribunal, which was not followed, so the High Court can interfere
straightaway without relegating the assessee to file an appeal. And thus the
order passed stood quashed with a direction to refund the amount in question
within a period of four weeks from the date of receipt of the copy of this
order.

33. [2018-TIOL-2409-HC-DEL-ST]Vodafone Mobile
Services Ltd vs. CST, Delhi Date of Order: 31^st October, 2018

It is a
settled principle of law that entitlement of CENVAT credit is to be determined
at the time of receipt of the goods. If the goods that are received qualify as
inputs or capital goods, the fact that they are later fixed/fastened to the
earth for use would not make them a non-excisable commodity when received

FACTS

In the
present case, the entire tower and shelter is fabricated in the factories of
the Manufacturers/Appellants and these are supplied in CKD condition. They are
merely fastened to the civil foundation to make it wobble free and ensure
stability. They can be unbolted and reassembled without any damage in a new
location. The larger bench of the Tribunal denied the credit on the premise
that the towers erected result in immovable property. Accordingly ,it was the
case of the Appellants that a machine or apparatus annexed to the earth without
its assimilation by fixing with nuts and bolts on a foundation to provide for
stability and wobble free operation cannot be said to be one permanently
attached to the earth and, therefore, would not constitute an immovable
property. Further it was also argued that the towers and the parts thereon and
the pre-fabricated shelters are inputs, in accordance with the provisions of
Rule 2(k) of the Credit Rules used for the provision of infra-support services.

HELD

The Court primarily noted that clearly goods in question have gone into
the making of such towers which in turn are used for providing infra-support
service/ telecom service. The eligibility of credit must be determined at the
time of receipt of the goods in terms of Rule 4(1) of the Credit Rules. The
fact that such goods are later on fixed/ fastened to the earth for use would
not make them a non-excisable commodity when received. Credit cannot be denied
so as long as the goods are used for the provision of the output service.
Accordingly, the Court held that conclusion of CESTAT, denying the CENVAT
credit on the premise that the towers erected result in immovable property, is
erroneous. The fact that in the intermediate stage, an immovable structure
emerged is of no consequence. It is a settled principle of law that if the
goods that are received qualify as inputs or capital goods, the fact that they
are later fixed/fastened to the earth for use would not make them a
non-excisable commodity when received. Thus, the credit is allowed.

Note: Readers may note that the decision
has examined various decisions inter alia including Bharti Airtel Ltd
[2014-TIOL-1452-HC-MUM-ST], Sold and Correct Engineering Works
[2010-TIOL-25-SC-CX], Vodafone India Ltd [2015-TIOL-2098-HC-MUM-ST], Mundhra
Ports and Special Economic Zone Ltd [2015-TIOL-1288-HC-AHM-ST]

34. [2018-TIOL-2561-HC-AHM-CX] Sheelpa Enterprises
Pvt. Ltd vs. Union of India Date of Order: 30^th November, 2018

Costs
incurred to maintain the factory premises in an eco-friendly matter to
discharge a statutory obligation under the Environmental laws forms a part of
the cost of the final product and is accordingly available as CENVAT credit

FACTS

The
Appellants under the provisions of the Water (Prevention and Control of
Pollution) Act, 1974 was required to maintain a green belt comprising of 1000
trees per acre land. The question was whether the assessee was entitled to
avail the benefit of CENVAT credit with respect to the said maintenance.

HELD

The Tribunal
relying on the decision in the case of Millipore India Pvt. Ltd [2012] STR
514 noted that when the employer spends money to maintain factory premises
in an eco-friendly manner based upon
the directives issued by the Statutory Authorities, the tax paid on such
services would form part of the costs of the final product and the same would
fall within the ambit of ‘input services’ and thus the CENVAT credit should be
available. The appeal was thus allowed.

BCAJ Admin

SERVICE TAX

“Indirect Taxes –
Recent Decisions” was started in 2009 by Puloma Dalal and Bakul Mody. C B
Thakar, G G Goyal and Janak Vaghani started to contribute to ‘Part B’
consisting VAT decisions a few years later.

Indirect taxes gathered
momentum as a field of practice especially after the advent of Service tax
(1994) and VAT (2005). This column gave the practitioners and others, vital
decisions on both subjects. Post GST regime, and while decisions under Service Tax
and VAT continue to be given, Part C was added recently to include GST rulings
especially advance rulings. Jayesh and Mandar started contributing after a few
years and Ishaan joined from April, 2018.

PART A SERVICE TAX

I.
Tribunal

45. 2019 [20] G.S.T.L. 77 (Tri.-All.)
Commissioner of Service Tax, Noida vs. Meroform (India) Pvt. Ltd. Date of Order: 14^th March, 2018

Hiring of
Office furniture on which VAT was discharged cannot be leviable to service tax.

Facts

The Assessee provided
office furniture on hire for visitors in business exhibitions as per
requirements of the organisers. In the course of audit, it was observed that
income was booked under the head “Hiring of office Furniture”. Show Cause
Notice was issued subsequently on the ground that the said transaction was
service of supply of tangible goods. However, the impugned order was set aside
by the Ld. Commissioner (Appeals). Appeal was filed before the Tribunal by the
revenue.

Held

The
Hon’ble Tribunal held that the facts essential for the levy of service tax on
the said transaction were absent and the Show Cause Notice was ambiguous and
not maintainable. Upholding the order of the Ld. Commissioner, the appeal filed
by the revenue was dismissed.

46. 2019 [20] G.S.T.L. 86
(Tri.-Chennai.) Wheels Tourists Operator vs. Commissioner of GST & Central
Excise, Chennai. Date of Order: 6^th March,
2018

Facts

The
Assessee provided tourist transport services to the travel agencies and
corporate entities and collected hire charges on the same. The vehicles were
engaged by other travel agents mostly for the journey of the foreign and
domestic tourists. Pursuant to the investigation at the premises of the assessee,
Show Cause Notice was issued proposing to levy service tax as Rent-a-cab
service along with interest and penalties. The demand was subsequently
confirmed. Hence, the appeal.

Held

The
Hon’ble Tribunal citing the difference between ‘renting’ and ‘hiring’ and
maintaining other relevant decisions which included R. S. Travels 2015 (38)
STR 3 (Uttarakhand), CIT vs. Sachin Malhotra 2015 (37) STR 684 (Uttarakhand)
and considering that they were later than Commissioner vs. Vijay Travels
2014 (36) STR 513 (Guj) and also following this Bench’s own decision in Om
Shakti Travels vide Final order no.42127/2017 dated 18/09/2017, it was held
that the demand was unsustainable and the impugned orders were set aside and
appeals were allowed with consequential relief.

47. 2019 [20] G.S.T.L. 361 (Tri.- All.)
Saya Buildcon Consortium Pvt. Ltd. vs. Commr. Of C. Ex. & S.T., Noida. Date of Order: 22^nd January,
2018

Security
deposit received by builder from flat owners which would be transferred to
Society or Association of flat owners after completion or handing over, not
leviable to service tax.

Facts

Revenue
raised service tax demand on the amount of security deposit received by the
builder appellant. Contesting same builder appellant stated that said amount is
received by way of security deposit as a trustee of the flat owners, which
would be transferred to Society or Association of flat owners after completion
and handing over the flats. Thus, alleged amount was received as pure agent
and/ or trustees and not towards any service provided.

Held

The
Hon’ble Tribunal after being satisfied with the assessee’s contention held that
the amount in dispute was not towards provision of any service and received by
the builder as a pure agent of the owners, therefore cannot be held liable for
service tax and allowed the appeal.

48. [2019] 101 taxmann.com 461
(Ahmedabad CESTAT) Alembic Ltd. vs. Commissioner of Central Excise &
Service Tax, Vadodara Date of Order: 23^rd October,
2018

The
definition of “exempted services” amended w.e.f. 01.04.2016 to include within
its purview those transactions which do not constitute ‘service’ u/s. 65B(44)
of Finance Act, 1994, has no application on CENVAT credit availed for period
prior to 01.04.2016 and hence reversal of past credits is not required.

Facts

Appellants are engaged in
development of real estate projects. They availed CENVAT credit of service tax
paid on input services used for construction of residential complexes. After
receipt of completion certificate in July 2014 for construction of residential
complex, appellants gave intimation to service tax authorities that they
availed proportionate CENVAT credit on input services received by them after
obtaining completion certificates, on basis of square feet area basis, which
suffered the levy of service tax as compared to the area which was converted
into immovable property and on which no service tax would be paid. Meanwhile,
during the course of CERA Audit, department asked appellants to reverse
proportionate CENVAT credit availed by appellants prior to obtaining Completion
Certificate (i.e. credit availed during the period when entire output service
activity was wholly taxable) on the ground that after receipt of Completion
Certificate, the property had become immovable property and in case of future
sale thereof, no service tax would have been payable. Therefore CENVAT credit
in proportion to “area which is outside the purview of service tax”
compared to the entire property area was computed as qualifying for reversal.
The Appellant made such reversal under protest and subsequently claimed refund
of the same. Refund was rejected.

Thereafter the department
issued SCN demanding 6%/8%/10% amount of sale of immovable property after
obtaining Completion Certificate where no service tax was paid by the Appellants
on the ground that they had availed CENVAT credit and provided taxable as well
as exempt services (sale of immovable property) and they had not maintained
separate accounts. Both the matters i.e. rejection of refund and issue of SCN
were before the Tribunal. The demand was raised to regularise the incorrect
availment of CENVAT credit on the entire project, i.e. credits availed prior to
Completion Certificate and thereafter.

The assessee submitted
prior to 01.04.2016, Rule 6 was not applicable to their case. Consequently, no
reversal of CENVAT credit is required. It also submitted that in terms of
amendment carried out in CENVAT Credit Rules (CCR) vide Notification No.
13/2016-CE (NT) dated 01.03.2016, Explanation 3 was inserted to Rule 6 of the CCR,
2004 to provide that for the first time on prospective basis, the exempted
services defined under Rule 2(e) of the CCR shall include an activity which is
not a service as defined u/s. 65B (44). Such explanation clarified that sale of
immovable property was not covered as “exempt services’ till 01.04.2016 and
only by virtue of the said amendment, Rule 6 of CCR includes sale of property
after receipt of completion certificate in “exempted services” from 01.04.2016
onwards. Appellants submitted that the said Rule 6 deals with only the
prospective credits i.e. the credits availed on and after the output activity
becoming exempt under the said notification and not to input services which
were availed at the time when the output service was wholly taxable in the
hands of the Appellants. On the other hand, revenue contended that the
proportionate credit required to be reversed in respect of non-taxable
transaction will necessarily include the whole of credit availed by the
assessee right from the inception of the project and cannot be taken to be
limited only to the credits availed after receiving the Completion Certificate.
Being aggrieved by rejection of refund claim and another SCN requiring
appellants to reverse proportionate credit in terms of Rule 6 of CCR,
appellants filed present appeal.

Held

The Hon’ble Tribunal noted
that upon receipt of Completion Certificate for the projects, the output
activity of sale of residential units becomes “non-service” u/s. 65B
of Finance Act, 1994 read with definition
of “exempt service”. For invocation of Rule 6, the output service must be
primarily exempt service. Since the deeming fiction that “exempted service”
would also include an activity which is not a ‘service’ as defined u/s. 65B(44)
was inserted w.e.f. 01.04.2016 only, the Tribunal held that prior to
01.04.2016, such an activity cannot be considered as “exempted service” and
would not attract reversal under Rule 6 of the CCR, 2004. Further, the Tribunal
relied upon decision of Hon’ble SC in Dai-Ichi Karkaria Ltd. vs. Union of
India2000 taxmann.com 1350 to hold that CENVAT credit is a vested right of
assessee and once the credit is validly and legally availed by assessee, the
same cannot be denied/recovered subsequently unless provided by specific
provision. Therefore, the Tribunal held that in present case, Rule 3 of CCR, 2004 would apply w.e.f.
01.04.2016 and not for period prior to April 2016.

As regards demand for
reversal of proportionate credit 8%/10%, the Tribunal noted that payment of
8%/10% is only an option or rather a mechanism to seek credit reversal on lump
sum basis, where the assessee cannot maintain separate accounts/reverse
proportionate credit on turnover basis or in cases where the assessee himself
so chooses to follow such option. Tribunal held that since the credits availed
when output service was wholly taxable cannot be called into question, it
cannot be said that such 8%/10% amount of sale of immovable property is to
regularize not only credits availed after Completion Certificate but also availed
during 2010 till the time Completion Certificate was obtained. As regards
services availed after completion certificate, Tribunal noted that the
appellants have availed proportionate credit attributed to the taxable output
service only. Accordingly, Tribunal allowed present appeals by setting aside
impugned SCN and allowing Appellants’ refund claim of reversal made under
protest.

49. [2019] 101 taxmann.com 462 (Mumbai –
CESTAT) – Allied Blenders And Distillers (P.) Ltd vs. Commissioner of Central Excise
& Service Tax, Aurangabad Date of Order: 25^th June,
2018.

The
remuneration paid to whole time directors is not liable to pay tax under
Reverse Charge Mechanism as they are employees of the Company.

Facts

The
department raised demand on the Company under reverse charge mechanism in
respect of remuneration paid by it to its whole time directors, treating the
same as ‘service’.

Held

The
Tribunal noted that, the Appellant has treated the remuneration paid to
directors as salary and Forms 16 are accordingly issued to the directors and
records filed with Provident Fund authorities are also on record. Besides,
records filed with Registrar of Companies also indicate the directors as
executive directors indicating that they are employees of the company. The
Tribunal noted that the Appellant does not pay the director’s sitting fee to
any of the directors. The Tribunal also referred to decision of Hon’ble Supreme
Court in the case of Ram Prasad vs. CIT [1972] 86 ITR 192 (SC) and Employees
State Insurance Corpn. vs. Apex Engg. (P.) Ltd. [1998] 1 SCC 86 which laid
down tests for determining employer-employee relationship. Having regard to the
fact that the directors who are concerned with the management of the company,
were declared to all statutory authorities as employees of the company and
complied with the provisions of the respective Acts, Rules and Regulations
indicating the director as an employee of the company and such authorities have
also treated them likewise, the appeal was allowed.

50. [2019] 101 taxmann.com 196 (New
Delhi – CESTAT) Kafila Hospitality & Travels (P) Ltd. vs. Commissioner of
Service Tax, Delhi Date of Order: 16^th November,
2018

Tribunal
referred the matter to larger bench to decide whether performance-based
incentives given by Airlines to the travel agents can be charged to service tax
as consideration for providing ‘business auxiliary services’.

Facts

The appellant a travel
agent was engaged in providing services of booking of tickets for passengers
travelling by air and other travel related services. The Airlines introduced
target based incentive scheme to General Sales Agents (GSA), who are also IATA agents.
GSA in turn pass on certain percentage of incentives received by them from
Airlines. The Appellant purchases tickets by using the said CRS system from any
of the IATA agents or from Airlines and makes payment of the same through
Billing Settlement Plan of IATA.

For
discharging service tax liability on sale of tickets to customers, appellant
opted Rule 6(7) of the Service Tax Rules, 1994, thereby discharging service tax
liability on basic fare. Further, appellant received incentives from Airlines, which
were recorded in its books as ‘commission’. Department alleged that said
commission would be chargeable to service tax under category of ‘business
auxiliary services’, whereas, the Appellant submitted that Since it has opted
to discharge service tax liability on Basic fares i.e. Commissionable fare, the
value of services rendered by it stands fixed and therefore, any other income
received by it is not taxable. Further, appellant also submitted that
Incentives for appreciable performance cannot be subjected to service tax and
in absence of three parties to the contract, no service tax liability would
arise under category of ‘Business Auxiliary Services’(BAS). Meanwhile, during
the pendency of proceedings, in another case dealing with very same issue i.e. D.
PAULS CONSUMER BENEFIT LTD. vs. CCE [Final order No. 50861/2017, dated
15-2-2017], without considering various judicial precedents on said issue,
it was held that ‘incentives’ would be chargeable to service tax under category
of BAS instead of tour operator services. In light of such divergent judgments
on said issue, appellant filed miscellaneous application to the Hon’ble
Tribunal requesting to refer the matter to Larger bench.

Held

The Hon’ble Tribunal noted
that in terms of decisions rendered by various tribunals, the law has been
settled that incentives on account of appreciable performance cannot be
subjected to Service Tax under provisions of the Act. It is settled position of
law that in absence of specific sub-clause of BAS, under which the activity is
proposed to be taxed, no service tax liability would sustain under category of
BAS. Further, tribunal noted that in order to merit the classification of
activity under BAS, there must be three parties i.e. provider of service/owner
of goods, an intermediary providing goods/services on behalf of client and the
targeted audience/parties. Without presence of these three parties, the
activity cannot be said to fall under any of the sub set of services. Further,
tribunal observed that in appellant’s own case Kafila Hospitality &
Travels Ltd. vs. CST [2015] 58 taxmann.com 348/51 GST 646 (New Delhi – CESTAT),
it was held that service tax demand on ‘incentives’ was set aside in view of
the fact of appellant having exercised option under Rule 6(7) and no appeal had
been filed by revenue against said decision.

As
regards decision in D. Pauls Consumer Benefit Ltd. (Supra), the Tribunal
noted that said order has been passed without considering and discussing any of
the judgments of various Benches on non-taxability of incentives and without
specifying the sub clause of BAS and the targeted audience before whom the
services of other service providers were promoted. The Tribunal held that, it
is cardinal principal that co-ordinate Bench of CESTAT could not have taken a
contrary view to the settled judicial precedents and in case of any difference
of opinion the matter should have been referred to Larger Bench, as also held
in CCE Customs vs. KRAPS Chem (P.) Ltd. [2015] 60 taxmann.com 375/51 GST 872
SC and CCE vs. Mahindra & Mahindra Ltd. [2015] 58 taxmann.com 278/51
GST 712 SC – Para – 4. Accordingly, the Tribunal has referred the matter to
Larger Bench to determine (i) Whether the Incentive received by service
receiver from service provider, on appreciable performance, can be subjected to
service tax, (ii) Whether a demand can be confirmed without specifying the sub
clause of BAS under which the activities are covered, (iii) Whether demand can
be confirmed under the taxable category of BAS in absence of three parties –
service provider, service receiver and targeted audience?, (iv) Whether in
cases where value of service is fixed under an option provided under the Rules,
such option having been exercised and not withdrawn, is it open for the
authorities to demand service tax on other consideration or incentive received,
be taxed under another category?, (Vi) Can service tax liability be fastened
without specifying the consideration for service as provided u/s. 67 of FA,
1994 and (vii) Can service tax liability be fastened in absence of the
relationship of service provider and service receiver. Thereby, tribunal
directed the registry to place records before the Hon’ble President for
constitution of larger bench.

51. [2019-TIOL-360-CESTAT-MUM] Lavgan Dockyard Pvt. Ltd vs. Commissioner of
Central Goods and Services Tax, Kolhapur Date of Order: 9^th July, 2018

Ineligible Credit not utilised for payment of service
tax, interest not liable. Similarly, credits availed reflected in the service
tax return, penalties dropped.

Facts

Appellant engaged in
providing various taxable services availed CENVAT Credit of service tax paid on
various input services including personal insurance of employees and security
service of guest house. during the disputed period. This was disputed by the
department considering that they are not input services and also had no nexus
with the output services.

Held

The Tribunal noted that the
definition of input service contained in Rule 2 (l) of the Rules specifically
excludes life insurance and health insurance service, which are used primarily
for personal use of any employee. Thus, in view of the embargo created in the
definition itself, service tax paid on insurance service for insuring the
employees should not be considered as input service. With regard to security
service, which is located outside the factory, there is no nexus between such
disputed service with the output service provided. Hence service tax paid on
the security service should not be considered as input service. However, it was
noted that irregularly availed credit was not utilised for payment of service
tax. In absence of utilisation, there was loss of revenue to the Government,
which can be compensated by way of payment of interest. Further, since the
CENVAT credit particulars were reflected in the books of accounts and verified by department, there was no
suppression of any material particulars with regard to availment of CENVAT
benefit, penalties were held not sustainable.

52. [2019-TIOL-272-CESTAT-MUM] Hardesh Ores Pvt. Ltd vs.
Commissioner of Customs, Central Excise and Service Tax, Goa Date of Order: 11^th January, 2019

Consideration-monetary
or non-monetary for a service is an essential requirement for charge of service
tax.

Facts

The Appellants deputed
employees temporarily to a group-company. The salary and other compensation was
settled as inter-company dues since employees continued to be on the rolls of
the appellant while operationally deployed in group company. The demand was
confirmed under manpower recruitment or supply service.

Held

The Tribunal noted the
decision of the Supreme Court in the case of Intercontinental Consultants
and Technocrats Pvt. Ltd [2018-TIOL-76-SC-ST] wherein the court held that
the inclusion of value in section 66 imposing the tax on service restricted the
scope of value to the service itself would leads to a further conclusion that
levy of tax is permitted by law contingent upon there being a value inherent as
consideration for the service and not a provision of service gratis to which a
value could be assigned under the relevant Rules. The Court observed that there
is no allegation in the show cause notice, or in the impugned order, that the
appellant retained any amount from out of the payment received from the group
company, thus, discrediting the receipt of any consideration. There is no
provision in the relevant rules for computing the value in the absence of
consideration even though provisions exist for monetising consideration other
than in money. Absence of consideration is not the same as uncountable
consideration requiring rules for conversion. In absence of any consideration,
there is no taxable service and, in the absence of taxable service, leviability
of duty would not arise.

53. [2019-TIOL-286-CESTAT-BANG] Dell International Services India Pvt. Ltd vs. Commissioner of Central Tax Date of Order: 13^th December, 2018

Mandatory
pre-deposit u/s. 35F of the Central Excise Act, 1944 while filing appeal can be
made through the CGST Credit

Facts

In reply to Registry is objection that the appellant has
required to pay 7.5%/10% of the duty/tax and file proof of the same. The
appellant informed that they had already reversed 7.5% of the duty demanded
through Central Goods and Service Tax Credit and indicated the same in Column
4B(2) of GSTR-3B filed for the month of August 2018. Reliance was placed on
Circular No. 58/32/2018-GST dated 04.09.2018 and also Circular No.
42/16/2018-GST dated 13.04.2018 which clearly states that the arrears of
Central Excise duty, Service Tax or wrongly availed CENVAT credit under the
existing law is permissible to be paid through the utilisation of amounts
available in the electronic credit ledger.

Held

The
Tribunal noted appellant’s reversal of 7.5% of the duty through the CGST Credit
and indication of the same in Column 4B(2) of the GSTR-3B for August 2018.
Department accepted this. Accordingly, the Registry was directed to admit the
appeal.

II
High Court

54. 2019 [20] G.S.T.L. 20 (Del.) South India Krishna Oil and Fats
Pvt. Ltd. vs. Commissioner of S.T. Date of Order: 1^st October, 2018

Validity
and vires of the provisions not to be examined which are no longer in
operation.

Facts

Writ petition was filed
challenging the vires and the validity of
Rule 10 of Place of Provision of Service Rules, 2012 being ultra
vires to section 66B read with section 64 and 65B (52) and 66C(1) of the
Finance Act, 1994. Prayer was also made to strike down the section 66B of the
Finance Act, 1994 and paragraph 4 and 4.1 of the TRU circular No. 206/4/2017-ST
dated 13^th April, 2017. The said writ petition was filed after the
cessation of the provisions relating to service tax. It was also noted that no
proceedings were pending against the petitioner.

Held:

The
Hon’ble High Court held that it would be inappropriate to issue notice to
examine the validity and vires of statutory provisions that have already ceased
and no proceedings pending against the petitioner. The petitioner left with an
option to challenge similar provisions in Central Goods and Services Tax Act,
2017. The writ petition was dismissed.

55. 2019 [20] G.S.T.L. 351 (Bom.)
Commissioner of S.T., Mumbai-VI vs. DBOI Global Services P. Ltd.
Date of Order: 28^th November, 2018

To grant
refund of service tax on input services used for export of goods, test of
necessity
not relevant.

Facts

Appellant Revenue appealed
against the order of the Tribunal vide which it held Respondent assessee being
entitled to refund of tax paid on four input services viz. event management
services, pandal or shamiana contractor’s services, Mandap keeper services and
health and fitness services used in exported services. Revenue’s contention was
that all the 4 input services did not have any relation to the export services
done by Respondent and export could have taken place in absence of the claimed
input services even.

Held

The
Hon’ble High Court while deciding the matter held that Tribunal well examined
all 4 services and then came to conclusion that it had been used in providing
output service and so had nexus with output services. Denied Revenue’s
contention that definition of input services under CENVAT Credit Rules, 2004
(CCR) satisfies only when it is shown to be necessary for providing output
services and held it to be not a legitimate mandate. Further, held that the
only requirement under CCR to satisfy the definition on input service is the
use in providing output service, which the Tribunal has rightly seen.
Therefore, held no interference in the Tribunal’s view and consequently
dismissed Revenue’s appeal.

56. [2019] 101 taxmann.com 251 (Bombay
HC) Commissioner of Central Tax, Pune-1 vs. Oerlikon Blazers Coating India (P)
Ltd. Date of Order: 19^th December,
2018

Prior to
amendment w.e.f. 01.04.2016 in Rule 7 of Cenvat Credit Rules, 2004,
distribution of CENVAT credit of common input services by input service
distributor to all units was not mandatory, as the rule used the expression
“may distribute the CENVAT Credit”.

Facts

For the period October 2009
to March 2014, the respondent assessee imported “intellectual property
services” as well as “information technology services”, paid service tax
liability under reverse charge mechanism and took credit of the same. Revenue
alleged that in terms of Rule 7 of CENVAT Credit Rules, 2004,
respondent-assessee should have distributed said CENVAT credit to its various
units situated across the country and should not have availed CENVAT credit
only at one of its unit because such services were used by all the units of the
respondent assessee and not restricted to one particular unit. During the
appeal proceedings, the Hon’ble Tribunal held that the entire exercise would
have been revenue neutral as other units would have taken the credit of RCM
liability paid by them to discharge output service tax liability and thus, set
aside impugned demand. Being aggrieved, revenue filed present appeal.

Held

The Hon’ble High Court
observed that prior to amendment which is effected from 01.04.2016, having
regard to the wordings of erstwhile Rule 7 of CENVAT Credit Rules i.e. “may
distribute the CENVAT credit“, the assessee had an option to
distribute CENVAT credit of input services available to it amongst its other
units which are providing output services. High Court observed that post
amendment 01.04.2016, said wordings of Rule 7 were substituted as “shall
distribute the CENVAT credit“. Therefore, the High Court held that
prior to 01.04.2016, the respondent assessee was entitled to avail and utilise
said credit at one of its unit only instead of distributing the same to other
units. Further, the High Court noted that even otherwise, the Tribunal has
rightly observed that entire exercise would have been revenue neutral as the
distribution of CENVAT credit to the various units would result lesser service
tax being paid by cash on their output services as they would have utilised the
CENVAT credit available for distribution. Consequently, the High Court upheld
decision of the Hon’ble Tribunal and dismissed present appeal.

Note: Readers may note that
as regards the provisions dealing with Input Service Distributor in GST,
section 20(1) of the CGST Act, uses the expression ‘shall’, and section 20(2)
uses the expression ‘may’. Section 20(1) deals with how the ITC of IGST or as
the case may be CGST can be transferred. Whereas section 20(2) deals with
quantification of distribution qua recipient units. Applicability of
this decision of the Hon’ble Bombay High Court in GST regime may therefore need

further examination.

57. [2019-TIOL-153-HC-KOL-ST] Gitanjali Vacationville Pvt. Ltd & ANR vs. Union of India and ANR Date of Order: 15^th January, 2019

On a prima
facie reading of sections 173 and 174 of the GST Act, 2017, it appears that
an enquiry or an investigation or even a legal proceeding under the Act of 1994
is permissible notwithstanding the coming into effect of the Act of 2017.

Facts

The authorities are proposing
to conduct an audit under the provisions of the Chapter V of the Finance Act,
1994. The Petitioner challenges these communications on the ground that they
were issued without jurisdiction as the Central Goods and Services Tax Act,
2017 repeals Chapter V of the Finance Act, 1994. It is challenged that an audit
contemplated under Chapter V of the Finance Act, 1994 is not saved by the
provisions of section 174 of the Act of 2017.

Held

The Court noted that
Chapter V of the Finance Act, 1994 stands omitted by section 173 of the Act of
2017 save as otherwise provided under the Act of 2017 – Therefore, if any
provision of the Act of 2017 allows the applicability of the Chapter V of the
Finance Act, 1994, then notwithstanding the omissions of the said Chapter V
u/s. 173, the same continues to apply – On a prima facie reading of
sections 173 and 174 of the Act of 2017, it appears that an enquiry or an
investigation or even a legal proceeding under the Act of 1994 is permissible
notwithstanding the coming into effect of the Act of 2017. The authorities are
proposing undertaking an audit for the period when the Act of 1994 was
applicable, the authorities are entitled to do so and it was held that no
interim stay can be granted. The case is posted for hearing in March 2019.

Note: Readers
may note a contrary decision on the same issue in the case of Oil Field
Warehouse and Service Ltd vs. Union of India[2018-TIOL-2195-HC-AHM-ST] digest
provided in BCAJ December 2018 issue wherein the Gujarat
High Court granted an interim stay on the proceedings of audit under the Finance
Act, 1994.

58. 2019 [20] G.S.T.L. 333 (All.) R.K.
Distributors vs. Commissioner of Commercial Tax, U.P. Date of Order: 5^th December,
2018

ITC
admissible on excess tax paid on purchase in comparison to tax payable.

Facts

Assessee paid excess tax on
purchase in comparison to the tax payable. Dispute arose when assessee claimed
ITC on the entire tax payable under Uttar Pradesh Value Added Tax Act, 2008
(the Act in short), resulting in refundable amount to assessee. Assessing
Authorities ordered for reversal of ITC to the extent of excess amount paid.
Aggrieved by the decision of Commercial Tax Tribunal, Allahabad which uphold
the order of Assessing Authority of reversal of ITC, Assessee filed revision
petition before the High Court.

Held

The
Hon’ble High Court while deciding the matter held that the fact is undisputed
that the amount with respect to which the ITC claimed was admittedly the amount
paid by the assessee by way of tax on purchase of goods that have given rise to
the dispute. The language of section 13(1)(a) [table entry 1(1)] read with
section 2(p) of the Act, sufficiently clear and provides that the ITC referred
to the entire amount of tax i.e. the aggregate amount of tax paid or payable,
in respect of the purchase of goods. When legislature itself contemplated that
amount paid, may itself give rise to input tax, there remains no room to enter
into any exercise of interpretation to restrict the plain meaning of the word
‘paid’. When sale was made within state, the reasoning of the authorities on
the excess realisation of tax cannot be sustained. Thus, revision allowed in
favour of the assessee.

59. 2019 [20] G.S.T.L. 346 (Bom.) ACG
Associated Capsules P. Ltd. vs. Commissioner of C. Ex., Thane-III Date of Order: 5^th December,
2018

Guest
House whether situated near factory premise or far eligible of input service
credit, if not used for personal use or consumption of employees.

Facts

Appellant
Assessee had its manufacturing unit located at three place in Maharashtra but
its guest houses were situated at various places of country. Assessee claimed
input credit of services related to guest houses maintained by it, which was
objected and denied by the Department holding that the same were not utilised
for the purpose of its manufacturing activity and therefore liable to be
reversed. On further, appealing the order before the Tribunal, it was held that
the credit of guest houses located next to manufacturing unit would be allowed
and the credit in respect of guest houses located away from manufacturing unit
cannot be allowed and remanded the matter to original authority for
determination of credit on this ground. Aggrieved Appellant preferred appeal
before the High Court.

Held

The Hon’ble High Court
while deciding the matter found Tribunal’s formula of allowing benefit of guest
houses situated next to manufacturing unit and denying for the rest, incorrect.
Further, held that the benefit in respect of guest house not situated close to
manufacturing unit, if not used for personal use or consumption of employees
(the case being excluded from the definition of input service) be allowed.

The Hon’ble Court not interfered with the remand order but leaving
open to Assessee to persuade the Assessing Officer in regard to guest houses in
question were not used for personal use or consumption of the employees.

BCAJ Admin

Service Tax

I. HIGH COURT

1. [2019]
(27) GSTL 182 (Cal.) Perfect Technologies vs. CESTAT, Kolkata Date of order: 23^rd
April, 2019

Mandatory
pre-deposit @ 7.5% of total tax amount demanded on pending appeals as per section
35F of Central Excise Act, 1944. Appellant directed to deposit 50% of 7.5% in
cash and balance 50% as bank guarantee

FACTS

The appellant was aggrieved that he had to pre-deposit 7.5% of the
amount at the time of filing the appeal. He had to do so as per section 35F of
the Central Excise Act, 1964. But he felt that the order of pre-depositing 7.5%
was too high and harsh.

HELD

The Hon’ble
High Court held that considering the circumstances, relief be given to the
appellant. He was asked to deposit only 50% of the pre-deposit amount in cash
and give a bank guarantee for the balance amount.

2. [2019] (26) GSTL 462 (Kar.)
Praxair India Pvt. Ltd. vs. Commr. of C.Ex. & ST, LTU, Bangalore Date of order: 15^th April, 2019

For sufficient
cause, condonation of delay was allowed on cost

FACTS

The appellant submitted that the Tribunal had dismissed the application
seeking condonation of delay. One of the reasons for delay in filing was
misplacement of the order due to shifting of office. However, the application
for condonation was dismissed and the Tribunal rejected the appeal on the
grounds of delay. The appellant
approached the High Court.

HELD

It was held
that the reason of delay being bona fide, the impugned order be set
aside. The appeal was restored on the payment of cost of Rs. 50,000 with the
Registry.

II. TRIBUNAL

3. [2019] (26) GSTL 116 (Tri. –
Ahmd.) Amar Engineering Co. vs. Commissioner of C.Ex. & ST, Vadodara-I Date of order: 14^th June, 2018

Refund of duty,
interest and penalty cannot be granted where voluntary payment was made by the
assessee during the course of the audit

FACTS

The appellant
had voluntarily made payment towards duty, interest and penalty during the
course of the audit and had requested not to issue show cause notice. The
appellant submitted an undertaking assuring that no refund shall be claimed.
However, the appellant claimed that the said amount was not liable to be paid
and, therefore, the refund claim was filed.

HELD

The Tribunal
observed that there was no dispute that voluntary payment was made by the
appellant on the objection raised by the audit party. Further, it was also
observed that an undertaking was filed by the appellant stating that no refund shall be claimed in the future. Thus, there
was no substance in the refund issue raised by the appellant; therefore, the
Tribunal dismissed the appeal.

4. [2019] (26)
GSTL 104 (Tri. – Del.) Theme Exports Pvt. Ltd. vs. Commissioner of Service Tax,
Delhi Date of order: 9^thApril,
2018

The amount
charged by the foreign bank while remitting export proceeds from the assessee’s
bank cannot be leviable (subjected) to reverse charge in the hands of the
exporter

FACTS

The appellant
was engaged in export of garments. The appellant realised sale proceeds through
approved banking channels. Certain amount was deducted from the sales proceeds
remitted to the appellant’s bank in India either by the foreign bank or the
intermediary bank involved in the transaction.

HELD

The Tribunal, relying on the decision of M/s Dileep Industries
Pvt. Ltd. vs. CCE, Jaipur 2017 (10) TMI 1231-CESTAT, New Delhi wherein,
relying on the case of Greenply Industries Ltd. vs. CCE, Jaipur it
was held that as the amount deducted by the foreign bank while remitting it to
the Indian banks is in turn charged by the Indian bank from the exporter,
therefore, the appellant was not required to pay tax under reverse charge.
Thus, the appeal was allowed in favour of the appellant.

5. [2019]
TIOL-2496-CESTAT-Hyd.] Asmitha Microfin Ltd. vs. Commissioner of Customs, Central Excise and Service Tax Date of order: 17^th June, 2019

Service tax under RCM set aside on the ground of
revenue neutrality and limitation

FACTS

The assessee is
a public limited company registered as a Non-Banking Finance Company u/s 45 IA
of the Reserve Bank of India Act, 1934. They entered into a guarantee fee
agreement with a foreign company. As per the agreement, the foreign company
agreed to provide a guarantee to Standard Chartered Bank, London in relation to
the amount borrowed by the assessee from Standard Chartered Bank, Hyderabad.

Pursuant to an
audit, a SCN was issued covering the period April, 2009 to March, 2012
demanding service tax along with interest on the guarantee fees paid to the
foreign company covered by the definition of Banking and Other Financial
Services under reverse charge mechanism.

HELD

The Tribunal noted that the entire demand is under reverse charge
mechanism and if the appellant had paid the service tax under reverse charge
mechanism, they would have been entitled to CENVAT credit of exactly the same
amount. Therefore, the revenue neutrality in this case is evident. Thus, it was
held that the present demand is hit by limitation and deserves to be set aside
forthwith.

BCAJ Admin

Service Tax

I. TRIBUNAL

13. [2019-TIOL-3177-CESTAT-Kol.] M/s. Amit Metaliks Ltd. vs.
Commissioner, CGST Date of order: 25^th October,
2019

Development
of land is a benefit arising out of land and not a service. Compensation
received by way of settlement for revoking development agreement is not a
service, hence not even declared service u/s 66E(e) of the Finance Act, 1994
dealing with toleration of an Act, etc. Further, ‘taxable event’ was time of
entering development agreement and settlement agreement and not date of payment

FACTS

The appellant had entered
into an agreement in May, 2010 as developer with 31 different
landowner-companies whereunder he was to develop the land. However, pieces of
land owned by the landowners did not make up one piece of land for development.
Hence, the landowners assured the appellant that the remaining intermittent
pieces of land would be acquired by them in a specific time frame and would be
handed over to the developer-appellant to make a contiguous piece of land for
development. Since the landowners could not provide this, the appellant became
entitled to compensation as per the said agreement. The landowners eventually
terminated all the development agreements by May, 2012 and agreed for a full
and final settlement for a sum payable by each individual owner of land.

The issue therefore arose
as to whether the compensation received against the settlement amounted to
consideration for any service provided chargeable u/s 65B(44) and it was paid
in lieu of admission of any party’s liability and therefore a declared service
as per section 66E(e), viz., ‘agreeing to obligation to refrain from an act
or to tolerate an act or a situation or to do an act’. The Department,
while alleging this, also scrutinised ST-3 returns and accounts of the
appellant in addition to the development agreement and the settlement
agreement, including compensation reflected in the books.

The Department’s case that
it is a declared service inter alia relied on Rule 5 of the Point of
Taxation Rules, 2011 stating that the date of receipt of money for compensation
in January, 2013 was the time of provision of a new service and the fact was
that the development agreement and the settlement agreement were not registered
and hence could not be relied upon. The Department also advanced the argument
that under the current GST law, liquidated damages attract GST and relied on
AAAR’s ruling in the case of GST Maharashtra State Power Generation Co.
Ltd. [2018 (17) GSTL 451 (APP-AAR-GST)].

The appellant, on the other
hand, pleaded inter alia that:

(a) the compensation was
not against any service by the appellant as cancellation of development
agreement did not amount to service; nor was it a declared service u/s 66E(e)
of the Finance Act, 1994;

(b) further, the agreements
were made in the period prior to 1^st July, 2012, the date of
introduction of declared service and therefore the taxable event, if any, was
rendition of service and which took place prior to this date. In this context,
reliance was placed on Vistar Construction P Ltd. vs. UOI [2013 (31) STR
129 (Del.)]. Thus the date of payment of receipt did not determine the
taxable event.

(c) Relying on the decision
in DLF Commercial Projects Corporation (DCPC) Gurugram, Haryana vs. CST
2019-TIOL-1514-CESTAT-Chd., it was prayed by the appellant that development
of land does not amount to service.

In response to rival
claims, the Bench examined the definition of ‘service’ in the Finance Act, 1994
vis-à-vis the clauses in the development agreement and also the settlement
agreement and examined the decision in DCPC (Supra) and noted, inter
alia, the decision in the case of Premium Real Estate Developers vs.
CST 2019-TIOL-725-CESTAT-Del. which was relied upon in the case of DCPC
(Supra).

HELD

Development
right is not a service but it is a benefit arising out of immovable property.
Compensation received out of settlement claim is not liable for service tax. It
was further noted that compensation received by the appellant was the debt in
present and future for the landowners which, as per Transfer of Property Act,
is in the nature of actionable claim while placing reliance after a detailed
examination of the decision of Kesoram Industries & Cotton Mills Ltd.
vs. CWT 2002-TIOL-1062-SC-IT-LB and Sunrise Associates vs. Govt.
of NCT of Delhi 2006-TIOL-40-SC-CT-LB.

Citing the settlement
agreement, it was also observed that the landowners paid an ascertained amount
to resolve the entire claim of settlement and thus the said settlement
agreement resulted in creation of a debt and so would be in the scope of
actionable claim in terms of section 3 of the Transfer of Property Act, 1892,
and hence not liable for service tax under the 1994 Act, it being beyond
section 65B(44)(iii) of the Finance Act. It was further held that when the
development agreement, settlement agreement and the compensation were outside
the scope of service under the Finance Act, section 66E(e) could not be
applied.

Lastly, it was also noted
that the Revenue’s contention that liquidated damages were liable for CGST as
held as per AAR in the case of Maharashtra State Power General Company
(Supra) as Finance Act and CGST Act are different enactments, besides
the distinguishable fact that in that case, the issue related to performance of
service agreement and not development of land as per development agreement, and
thus the appeal was dismissed.

14. [2019-TIOL-3147-CESTAT-Del.] M/s. Manan Infra Development Pvt. Ltd. vs. Commissioner of Central
Goods and Services Tax, Custom and Central Excise Date of order: 13^th May, 2019

Show
cause notice has not invoked section 73(1) and there is no such proviso u/s 75
and hence the notice is defective and no amount could be recovered

FACTS

The appellant deposited
service tax quarterly and filed the returns with the Department. Subsequently,
while scrutinising them and the documents evidencing the payment of service
tax, it appeared that since it was a private limited company, it was required
to deposit service tax on monthly basis. Thus, on re-calculation on monthly
basis, interest was payable. Show cause notice dated 16^th
January, 2015 was issued for the period
October, 2011 to March, 2013 invoking extended period of limitation demanding
interest u/s 75 of the Act for delay in deposit of service tax. Further, a
penalty was also proposed.

It was primarily argued
that the show cause notice has not invoked section 73(1) and there is no such
proviso u/s 75 and hence the show cause notice is defective and no amount could
be recovered.

HELD

The Tribunal held that the
show cause notice was bad, both for invocation of extended period of limitation
and also for non-invocation or non-mentioning of proper section 73(1) with
proviso. Accordingly, the show cause notice was held to be non-maintainable.
The appeal was allowed.

15. [2019-TIOL-3185-CESTAT-All.] Commissioner of Central Tax vs. Viami Business Solution Pvt. Ltd. Date of order: 22^nd April, 2019

Service
tax demanded under reverse charge available as CENVAT credit leads to a
revenue-neutral situation and therefore the demand is set aside

FACTS

The assessee has failed to
discharge tax under reverse charge mechanism which is available as CENVAT
credit against their output services. Revenue contends that it is a statutory
requirement to first discharge the said service tax on reverse charge basis.
Without payment of service tax, they were not in a position to avail CENVAT
credit. Since the Commissioner (Appeals) set aside the demand on the ground of
Revenue neutrality, the Revenue is in appeal.

HELD

The Tribunal primarily
noted that the service tax required to be paid by the assessee was available to
them as credit. During the period they paid service tax on output services by
way of cash. Had they paid service tax on the input services received by them,
they could have taken the credit and utilised that credit for payment of duty,
instead of paying service tax in cash. Thus, there definitely exists a case of
Revenue neutrality. Further, the Tribunal noted that the reliance placed on the
decision in the case of Jet Airways (I) Ltd. vs. Commissioner of Service
Tax, Mumbai 2016 (44) S.T.R. 465 (Tri.-Mum.) [2016-TIOL-2072-CESTAT-Mum.]
is also upheld by the Supreme Court and thus the appeal of the Revenue
is rejected.

BCAJ Admin

Service Tax

I. SUPREME COURT

36. [2019] 106 taxmann.com 217 (SC) Steel
Authority of India Ltd. vs. Commissioner of Central Excise, Raipur Date of order: 8^th
May, 2019;

In case of retrospective escalation in prices of goods sold, for calculation
of interest on excise duty on price differential, the date of removal of goods
shall be considered and not the date of price revision

FACTS

The appellant sold and cleared the goods to its client and paid excise
duty on the price charged. Subsequently, the price of the goods was enhanced
retrospectively. The appellant discharged excise duty on the price differential
arising on account of the revision in price. Revenue demanded interest from
appellant u/s 11AB of the Central Excise Act, 1994, contending that the
appellant was liable to pay interest based on the date of removal of such goods
and not from the date of the price revision. The Tribunal rejected the appeal
filed by the appellant relying upon the judgement of the Supreme Court in CCE
vs. SKF India Ltd. [2009] 21 STT 499.

While deciding the appeal filed by the appellant against the order of
the Tribunal, a bench of two judges of the Supreme Court doubted the
correctness of the decision in the case of SKF India Ltd. (Supra) and
also in the case of CCE vs. International Auto Ltd. [2010] 24 STT 586
(SC) and referred the matter to a bench of three judges. Accordingly,
in the present appeals, the three-judge bench was required to decide that when
price is revised upward with retrospective effect and the excise duty on the
same is paid immediately on a future date, for the purposes of computation of
interest u/s 11AB, which is the month in which the duty ought to have been
paid?

HELD

The Supreme Court opined that where there is an escalation clause, goods
are cleared on a provisional price. Consequently, the value is provisional. If
there is a subsequent escalation with retrospective effect, it will affect the
valuation which was employed in the self-assessment by the assessee which would
necessarily be provisional. Enhancement of the value will date back to the date
of removal in view of the retrospective operation.

The Court did not agree with the reasoning of the bench of two judges
which held that for the purpose of section 11AB, the expression ‘ought to have
been paid’ would mean the time when the price was agreed upon by the seller. It
held that interpreting the words in the manner contemplated by the bench would
result in doing violence to the provisions of the Act and the Rules because
when an assessee in similar circumstances resorts to provisional assessment
upon a final determination of the value consequently, the duty and interest
dates back to the month ‘for which’ the duty is determined. Duty and interest
is not paid with reference to the month in which the final assessment is made.

Though the differential duty becomes crystallised only after the
escalation is finalised under the escalation clause, but it is not a case where
escalation is to have only prospective operation but admittedly retrospective
operation. In other words, the value of the goods which was only admittedly
provisional at the time of clearing the goods is finally determined and it is
on the said differential value that differential duty is paid. The Supreme Court
held that while the principle that the value of the goods at the time of
removal is to reign supreme, in a case where the price is provisional and
subject to variation and when it is varied retrospectively it will be the price
even at the time of removal. The fact that it is known later cannot detract
from the fact that the later-discovered price would not be value at the time of
removal. The three-judge bench also concurred with the views expressed in SKF
India Ltd. (Supra) and International Auto Ltd. (Supra).
Consequently, the present appeal filed by the appellant was dismissed.

II. HIGH COURT

37. [2019] (27) GSTL 12 (Mad.) Hitachi Power
Europe GMBH vs. C.B.I. & C. Date of order: 2^nd
April, 2019;

Pre-show cause notice consultation with Principal Commissioners or
Commissioners is made mandatory in nature involving demand of duty above Rs. 50
lakhs as per the C.B.I. & C. Circular and recommendation of Tax
Administration Reforms Commission (TARC)

FACTS

An intimation for conduct of service tax audit was issued by the audit
department on the petitioner in 2015. In 2016, another notice was issued by
senior audit officer / CERA authority – V about the proposed CERA audit and for
keeping ready the documents for smooth audit. Audit was conducted and no
specific query was raised or explanation called for. Later, in 2016, a letter
was issued by Assistant Commissioner of Service Tax making reference of the
audit slips issued by CERA and the assessee was called upon to deposit the service
tax due as per the audit slips. The petitioner offered an explanation and
sought an opportunity of personal hearing prior to finalisation of proceedings.
Later, another notice was issued calling for various documentary evidence in
support of contentions in the explanation offered. A detailed reply was filed
along with a request to drop the proposals raised by audit. The request for
personal hearing was reiterated. The above events culminated with impugned show
cause notice with a reference to CERA audit. There was, however, no reference
to the replies filed or the details furnished in the course of the audit.

A writ petition was filed by the petitioner that he had not got an
opportunity of personal hearing prior to finalisation of proceedings against him
and eventually a show cause notice was issued against him which ultimately
triggered the commencement of adversarial proceedings between the petitioner
and the department. The circular of C.B.I & C. and recommendation of TARC
states that there should be pre-show cause notice consultation between the
petitioner and the officer prior to the stage of issuance of show cause notice.

HELD

The Hon’ble High Court held that the impugned show cause notice has been
issued to the petitioner without the process of pre-show cause notice
consultation and directed the officer to call upon the petitioner with all
relevant details and afford him full opportunity of pre-show cause notice
consultation, prior to issuance of the show cause notice.

38. [2019] (25) GSTL 534 (Del.) Vaani Kapoor vs.
Commissioner of Service Tax Date of order: 10^th
September, 2018;

Consideration paid by flat buyers to a builder for acquisition of the
flats is not subject to service tax

FACTS

The petitioner was the owner of the residential flat constructed by the
builder. Service tax amount on the residential flat under construction was
collected from the petitioner by the builder. Subsequently, a writ petition was
filed challenging such levy on the construction of residential flats as
unconstitutional vide the judgment of Suresh Kumar Bansal & Ors. vs.
UOI & Ors. (2016) 287 CTR (Del) 1 wherein, the levy of service tax
on residential flat u/s 65(105) (zzzh) of the Finance Act, 1994 – as well as
explanation to section 65(105) (zzzzu) was held ultra vires and
unconstitutional and the amount collected towards service tax was directed to
be refunded.

HELD

The High Court, referring to the judgement of Suresh Kumar Bansal
& Ors. (Supra), held that identical relief shall be granted to the
petitioners. The respondents were directed to undertake the requisite
procedures for the remittance of the refund amount to the petitioner and to
issue required notices to the builder and to the petitioner to facilitate the
process, thereby allowing the writ petition.

III. TRIBUNAL

39. [2019] 106 taxmann.com 148 (Bang. – CESTAT)
AMD India (P) Ltd. vs. Commissioner of Service Tax, Bangalore Date of order: 20^th
November, 2017;

Tribunal held that activity
of providing sales and marketing support in India to entities located outside
India cannot be said to be covered under purview of ‘intermediary services’

FACTS

The appellant, a 100%
software export-oriented unit, provided business auxiliary services to its
holding company located outside India, i.e., sales and marketing support
services which involved activities including meeting with original equipment
manufacturers, providing training on products, holding events or trade shows,
etc. The appellant’s claim of refund for unutilised CENVAT credit, in terms of
Rule 5 of CENVAT Credit Rules, 2004 was rejected by the Revenue on the ground
that the services provided by appellant are in the nature of ‘intermediary
services’ under Rule 9 of Place of Provision of Services Rules, 2012 and, thus,
cannot be said to be ‘export of services’ under Rule 6A of Service Tax Rules,
1994.

HELD

The Tribunal noted that the terms of Master Service Agreement with its
holding company does not provide that the appellant will facilitate or will
arrange the purchase and sale on behalf of entities outside India. Further, it
was noted that the appellant’s potential customers for the products of the
foreign company are located abroad. Though the services are provided with
respect to the buyer in India, the benefit of the same accrued to the service
recipient located abroad.

The Tribunal relied on its decision in Lenovo India (P) Ltd. vs.
CCE [2009] 21 STT 134 (Bang. – CESTAT) holding that promoting sale of
goods of foreign clients in India being BAS fulfils the conditions under Export
of Service Rules, 2005 and qualifies as export of service. Further, in KSH
International (P) Ltd. vs. CCE [2010] 25 STT 307 (Mum.), it was held that
the phrase ‘used outside India’ is to be interpreted to mean that the benefit
of the service should accrue outside India; thus, it is possible that export of
service may take place even when all the relevant activities take place in
India so long as the benefits of these services accrue outside India.
Accordingly, in this case the Tribunal held that the appellant cannot be said
to be providing ‘intermediary services’ and allowed the present appeals with
consequential reliefs.

Note: Similarly, in [2019]
106 taxmann.com 213 (Bang. – CESTAT) Commissioner of Central Excise &
Service Tax, Bangalore-V vs. Analog Devices India (P.) Ltd. [13-11-2017],
it was held that when an Indian entity provided consulting engineering service
and business auxiliary service to the holding company located outside India and
it located potential customers for products of the foreign company located
abroad, such services cannot be said to be in the nature of ‘intermediary
services’. However, in Excel Point Systems India (P) Ltd. vs. CST [2019]
106 taxmann.com 174 (Bang. – CESTAT) [28-09-2017], where the assessee
had entered into a Buying Services Agreement with its parent company located in
Singapore to render marketing support services, which included data collection
and statistical and business analysis in relation to the company’s products /
customer market and sending across data / reports to the company, etc., and
technical support services, which included advisory support provided to
customers with regard to the project design based on directions from the
company, the Bangalore Tribunal held that such services rendered by the
assessee would fall within the definition of intermediary services.

40. [2019] 106 taxmann.com 74 (Chandi. – CESTAT)
Evalueserve.Com (P) Ltd. vs. Commissioner of Service Tax, Gurgaon Date of order: 7^th
February, 2018;

Where assessee provided various services to the customers of the client
(i.e. service recipient), on direction of service recipient located outside
India, Tribunal held that such services cannot be said to be ‘intermediary
services’

FACTS

The appellant entered into an agreement with a client, a foreign entity
located outside India, wherein the appellant was required to provide the
services to the customers of the client in accordance with the requirements as
specified by the client. The appellant would directly interact with the
customers of the client, as and when required, and hence would provide the
services to such customers on behalf of the client in close coordination with
the client’s team. The final reports were directly provided by the appellant to
the customers of the clients.

Accordingly, for the services provided by the appellant on behalf of the
client in relation to inter alia, business research (including financial
services), market research and intellectual property activities, the appellant
received the margin every month from its client in convertible foreign
exchange. Revenue alleged that the activities of the appellant would get
covered within the scope of ‘intermediary services’ under Rule 2(f) of Place of
Provision of Services (POPS) Rules, 2012 and, hence, cannot be said to be
export of services under Rule 6A of ST Rules, 1994.

HELD

The Tribunal noted that the lower authority committed an error in
holding that the appellant provided services on behalf of the foreign client,
whereas the appellants are themselves engaged in providing services to their
client on their own account. In fact, the appellant has provided the services
to customers of their client and having no direct nexus with the customers of
their client and nowhere has facilitated or arranged for the services provided
to their client by a third party. Furthermore, the appellant have themselves
provided the services to their client as the main service provider on
principal-to-principal basis; therefore, the activity undertaken by the
appellant does not qualify as intermediary as defined in Rule 2(f) of Place of
Provision of Services Rules, 2012.

The Tribunal also referred to the view taken by the Advance Rulings
Authority of India in the case of Universal Services India (P) Ltd. vs.
CST [Ruling No. AAR/ST/07/2016, dated 4-3-2016] and Godaddy India
Web Services (P) Ltd. In re [2016] 67 taxmann.com 324/64 GST 681 (AAR –
New Delhi). Accordingly, the Tribunal held that the appellant cannot be
said to be a provider of ‘intermediary services’ and, thus, not liable to pay
service tax under Rule 9 of POPS Rules, 2012.

41. [2019] (25) GSTL 460 (Tri. – Ahmd.)
Commissioner of Service Tax, Ahmedabad vs. Om Air Travels Pvt. Ltd. Date of order: 2^nd
April, 2019;

Discount received from main IATA agent by the appellant as a sub-agent
is not taxable

FACTS

The appellant was a sub-agent, purchasing tickets at a discounted price
from the main IATA agent and later selling these at a higher price to
customers. The Department was of the view that the discount received from the
main IATA agent as a sub-agent was liable to be taxed under Business Auxiliary Service.
Relying on the decision in the case of CCE Goa vs. Zuari Travel
Corporation vide order dated 18^th July, 2013, the appellant
submitted that the services are classifiable as an air travel agent service and that the commission received from the main IATA agent and selling
the tickets to customers is not taxable.

HELD

The Tribunal held that purchasing tickets at lower price, i.e.,
discounted price and selling at a higher price is a trading activity and the
difference is a trade margin during the process of sale and purchase of the
tickets, and hence the trade margin is not taxable. The impugned order is
upheld and Revenue’s appeal is dismissed.

42. [2019] (25) GSTL 59 (Tri. – All.) Logix Infrastructure
Pvt. Ltd. vs. Commissioner of Central Excise & Service Tax, Noida Date of order: 29^th
September, 2018;

Entire consideration on residential complex service including components
such as preference location charges, external and internal development charges,
legal specification, etc. are eligible for abatement under Notification No.
26/2012-ST

FACTS

An appeal was filed by a service provider giving
residential complex services stating that with effect from 1^st July,
2012 there does not exist the concept of individual service in the statute as
per the introduction of section 66F. The section provides that when there are
various elements of services then they are to be bundled together and shall be
treated as a single service. Thus, the assessee can claim an abatement of 75 %
on tax rate of 12.36 % as per Notification No. 26/2012-ST for the service
provided by them to recipients in the form of preference location charges,
external and internal development charges, legal specification, etc., as such
services do not have independent existence but are associated with the
provision of residential complex service; thus they cannot be vivisected and
cannot be treated as separate and charged at a different rate. But the C.B.E.
& C. were of the view that such services should be treated as independent
service and should be subject to different rate of tax, i.e., benefit of
abatement should not be granted on preferential service.

HELD

The Tribunal held that section 66F will prevail over any clarification or
view taken by C.B.E. & C.; therefore the components such as preferred
location charges, external development charges, etc., are part and parcel of
various elements of the main service, which is residential complex service, and
therefore the entire consideration received by the appellants is eligible for
abatement.

43. [2019] (25) GSTL 573 (Tri. – Chan.) Hitachi
Metals (I) Pvt. Ltd. vs. Commissioner of C. Ex. & ST (Gurgaon-1) Date of order: 3^rd
April, 2019;

Claiming refund of service tax beyond the period of one year from the
date of payment

FACTS

The appellant entered into an agreement with M/s Hitachi Metals (India)
Pvt. Ltd. having its office in Japan and similar agreements with outside
clients for promotion of products by way of customer’s identification and
contact and to co-operate with and represent MET in promotional efforts. The
appellant, due to lack of clarity, had paid service tax for the period April,
2006 to February, 2008 for the services provided to the foreign-based service
recipient receiving payment in convertible foreign exchange. As per C.B.E.
& C. Circular No. 111/05/2009-ST dated 24^th February, 2009, it
had been clarified that services of Indian agents who carry out marketing in
India for foreign sellers would be treated as exports and no service tax was
required to be paid.

On the basis of this, the appellant filed a refund
claim on 12^th January, 2010. However, the refund was rejected on the
grounds that it was filed beyond the period of limitation mentioned in section
11B of Central Excise Act, 1944. As per this section, the refund claim shall be
filed within a period of one year from the date of payment. As the appellant
filed the refund claim beyond that period, it was rejected.

HELD

The Tribunal allowed the appeal relying upon the decision in the case of
National Institute of Public Finance & Policy vs. Commissioner of
Service Tax 2019 (20) G.S.T.L. 330 Delhi. In that case, the assessee
paid service tax under the wrong impression that it was liable to pay service
tax. Subsequently, it was informed by C.B.E.C. on 13^th April, 2009
that its activities were not taxable. While processing the refund application,
the refund of certain amounts was denied on the ground that the application was
filed after a lapse of one year.

Revenue relied upon Collector of C.E., Kanpur vs. Krishna Carbon
Paper Co., 1988 (37) E.L.T. 480 (S.C.) and submitted that refund claim
before a departmental authority is to be made within the four corners of the
statute and the period of limitation prescribed in the Central Excise Act and
the Rules framed under it.

The Hon’ble Court, however, distinguished the said judgement stating
that Krishna Carbon Paper Co. (Supra) was a case where principal
duty was payable; excess amount had been paid on a mistaken notion with respect
to the liability for excess production under a notification which was later
discovered to be not correct. In the present case, the levy never applied – a
fact conceded by no less than the authority of C.B.E.C. In these circumstances,
the general principle alluded to in Krishna Carbon Paper
Co. (Supra) would apply. Accordingly, the appeal was allowed.

BCAJ Admin

SERVICE TAX

i High Court

39.
[2018-TIOL-1361-HC-AHM-CX] Commissioner, Central GST and CX vs. Ishan
Copper Pvt. Ltd. Dated 06^th July, 2018

Dealer is entitled to input tax credit on closure of
factory.

Facts

The Assessee is registered under Central Excise and avails
input credit on inputs. Due to a disproportionate rate of inputs and final
product, the credit was accumulated and the assessee applied for refund of such
credit at the time of surrender of registration. The Tribunal allowed the
refund and accordingly the revenue is in appeal.

Held

The Hon’ble High Court relying on the decision of the
Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd confirmed
by the Supreme Court reported at 2008 (223) ELT A 170 and the decision of the
Bombay High Court in the case of Commissioner vs. C.Ex. Nasik vs. Jain
Vanguard Polybutlene Ltd. [2010] 256 ELT 523 (Bom) held that it is specifically
observed in all the decisions that the dealer is entitled to the refund of
unutilised input credit on closure of factory.

II. Tribunal

40.
[2018-TIOL-2137-CESTAT-AHM] Kalpataru Power Transmissions Ltd vs.
Commissioner of Central Excise and Service Tax Ahmedabad-III. Dated 11^th
April, 2018

Service of Outdoor Catering availed for the employees
pursuant to the requirement under a law cannot be considered as meant for
personal use and therefore the credit is allowable.

Facts

The Appellants availed CENVAT credit of service tax paid on
Outdoor Catering Service provided to the employees pursuant to the provisions
of the Building and other Construction Workers (Regulation of Employment and
Conditions of Service) Act, 1996. The revenue denied the CENVAT credit.
Accordingly, the present appeal is filed before the Tribunal.

Held

The Tribunal relying on
the decision in the case of Reliance Industries Ltd vs. CCE & ST, LTU,
Mumbai [2016 (45) STR 383 (Tri.-Mum)] noted that the credit is allowable
provided the service is not used for personal use. In the present case, since
the service is provided pursuant to the Building and Other Construction Workers
Act, it is not meant for personal use. Therefore credit is allowed.

41. [2018] 94
taxmann.com 5 (New Delhi – CESTAT) Additional Police Deputy Commissioner vs.
Commissioner of Central Excise, Jaipur. Dated 23^rd April, 2018

Tribunal held that the state police department cannot be
regarded as person engaged in running security business and thus, deployment of
police personnel on payment basis, being statutory function of State
Government, cannot be said to be supply of “security agency services”.

Facts

The issue in present appeal was whether the activities
undertaken by police department such as deployment of police personnel on
payment basis are covered under “security agency services”.

Held

The Hon’ble Tribunal held that the issue is no more res-integra
in view of its Final Order No. ST/A/55321-55348/2016-CU (DB) dated 25.11.2016
wherein it was held that Police Department, being an agency of the State
Government, cannot be considered to be a ‘person’ engaged in the business of
running security services. It was further observed that the charge of
deployment of additional force is also prescribed by the statutory
notification, issued by the State Government. Therefore, in the said decision,
Tribunal held that the deployment of police personnel on payment basis be
considered as part of statutory function of State Government and thus, such
activity would not get covered under scope of “security agency services”.
Consequently, Tribunal dismissed present appeal.

Note: In [2018] 94 taxmann.com 307 (SC) Commissioner of
Central Excise And Service Tax, Jaipur-I vs. Superintendent of Police,
Hanumangarh, Hon’ble Supreme Court has dismissed revenue’s appeal against
decision of Hon’ble New Delhi Tribunal vide Dy. Commissioner of Police vs.
CCE&ST [2018] 93 taxmann.com 236 wherein it was held that the charges
collected by State police department for various activities such as providing
security personnel to various organizations and sending police personnel for
character verification of candidates selected for various jobs would not be
liable to service tax under category of “security agency services”.

42. [2018] 94 taxmann.com 217 (New Delhi-CESTAT) Theme
Exports (P.) Ltd. vs. Commissioner of Service Tax, Delhi dated 09^th
April, 2018

When the exporter
realised sale proceeds through banking channels and foreign bank remitted
proceeds to exporter after deducting certain charges, the exporter cannot be
treated as recipient of banking and other financial services.

Facts

The appellant is engaged in export of garments and realised
the sale proceeds of such exported items, through proper and approved banking
channel. Against the bills issued, the foreign buyer instructed their banker to
remit the amount as indicated in the invoice.

The transaction between foreign bank and the appellant’s bank
is either direct or facilitated by an intermediary bank. For providing such
services, either the intermediary bank located abroad or foreign bank deduct
certain amount and remit the balance amount to the appellant’s bank account.
Such modus operandi of the transactions was interpreted by the
department that the same should fall under the taxable category of service
under “Banking and other Financial Services” and accordingly, department
alleged that being recipient of said services, would be liable to pay service
tax under reverse charge mechanism.

Held

Hon’ble Tribunal set aside the order, relying upon the
decision of this Tribunal in the case of Dileep Industries (P.) Ltd. vs. CCE
[Order No. ST/A/56726/2017-CU[DB], dated 15-9-2017]. In said decision, Hon’ble
Tribunal referring to Greenply Industries Ltd. vs. CCE, Jaipur (Final
Order No. 50149/2014 dated 03-01-2014) held that in absence of documents
establishing that foreign bank has charged any amount from the appellant
directly, the appellant therein cannot be treated as service recipient and no
service tax can be charged u/s. 66A read with Rule 2(1)(2)(iv) of the Service
Tax Rules, 1994.

43. [2018] 94
taxmann.com 306 (New Delhi-CESTAT) Rishi Enterprises vs. Commissioner of
Central Excise, Indore dated 08^th May, 2018

The different contracts between assessee and railways
involving different activities such as collection of bed rolls, napkins,
blankets, washing/dry cleaning of same and ironing and distribution of same to
passengers during their journey in train by deploying assessee’s personnel cannot be taxed as independent
activities and would be chargeable to service tax as composite service under ‘business
auxiliary services’.

Facts

The appellant entered into different contracts with railway
department wherein appellant was required to undertake cleaning of bed rolls,
towels, pillow covers and blankets, pick-up the dirty clothes from the AC
coaches of the nominated trains and carry out the work of cleaning, washing/dry
cleaning, ironing and also distribution of items to passengers on board.
Appellant was also required to provide service of personnel for distribution of
bed rolls to on board passengers of AC coaches. Revenue alleged that appellant
provided “business auxiliary services” to railways and thus, liable to pay
service tax. It was contended that all the three activities could be classified
differently and considering threshold limit and exemption to cleaning linen, no
service tax liability would arise. The first appellate authority upheld
impugned demand. Being aggrieved the present appeal is filed.

Held

Hon’ble Tribunal observed that services rendered comprise of
collection of bed rolls, napkins, blankets, washing/dry cleaning of the same
and ironing and distribution of the same to the passengers during their journey
in the train by deploying their own personnel. Thus, Tribunal held that the
activities carried out are required to be considered as a composite service and
it will not be proper to vivisect the services into the various components even
though the contract specified the different components and separate charges for
the same. Further, Tribunal noted that the services were provided to passengers
who are customers of railways.

Since the responsibility of providing said services is that
of railways and appellant has provided services on behalf of railways, Hon’ble
Tribunal held that the activities undertaken are correctly taxable under
“business auxiliary services” as held by lower adjudicating authorities. Also,
Tribunal relied upon its decision in R.C. Goel vs. CCE, New Delhi – 2017 (5)
G.S.T.L. 324 (CESTAT – New Delhi). Accordingly, demand was sustained.

44. 2018 (12) GSTL 39
(Tri. Del.) Commissioner of Service Tax, Delhi vs. DLF Golf Resorts Ltd. Dated
20^th November, 2017

Services provided by a club to its members not taxable under
Club Association Services.

Facts

Appellant assessee was providing services of Mandap Keeper,
Health Club & Fitness Centre, BAS, Membership of Clubs, Maintenance or
Repair Services, Manpower Recruitment services, Renting of Immovable Property
and Sponsorship services. Department observed that assessee was collecting
charges from members of the club for various services but not paying service
tax on amount collected for these services. SCN was issued and demand was
confirmed with a view that such collected amount would fall within the ambit of
“any other amount” as defined u/s. 65(105)(zzze) read with Section 65(25a) of
the Finance Act, 1994. Appellant challenged the order before Hon’ble
Commissioner (Appeals), wherein demand was dropped. Revenue being aggrieved
filed appeal before Hon’ble Tribunal.

Held

Hon’ble Tribunal observed that the issue is no longer pending
to be examined as having been decided by Hon’ble Jharkhand High Court in Ranchi
Club Ltd. vs. Chief Commr. of C. Ex. & S.T., Ranchi Zone 2012 (26) S.T.R.
401 (Jhar.), Gujarat High Court in Sports Club of Gujarat Ltd. vs. Union
of India 2013 (31) S.T.R. 645 (Guj.) and CESTAT in Federation Of Indian
Chambers Of Commerce & Industry vs. C.S.T., Delhi 2015 (38) S.T.R. 529
(Tribunal). Thus, various services provided by Club to its members not
taxable under aforesaid service. Revenue’s appeal is dismissed.

BCAJ Admin

SERVICE TAX

I. HIGH COURT

25 2019
[22] G.S.T.L. 21 (Bom) Nirmal Seeds Pvt. Ltd. vs. Commissioner of Central
Excise, Nashik

Date of order: 5^th
December, 2018

Freight
charges paid by dealer and reimbursed by supplier is includible in assessable
value

FACTS

The
appellant sold goods to its dealers at a price inclusive of freight charges
which was later reimbursed by the appellant. During the course of audit it
appeared from some invoices to Revenue that the appellant deducted freight
charges from the total invoice amount, with a note saying ‘consignee to pay’.
Consequently, a show cause notice was issued alleging that service tax was not
paid on the freight element, which was in fact paid by the consignee on behalf
of the appellant. Later, both the appellate authority as well as the Tribunal
confirmed the demand against the appellant holding that the entire arrangement
was made with dealers so as to reduce its service tax liability. Aggrieved, the
appellant preferred an appeal before the Hon’ble High Court, also contesting
the extended period of limitation.

HELD

The
Hon’ble High Court held that all the authorities had concluded that the arrangement
arrived at between the appellant and its dealers was such that the payment of
service tax could be reduced. This factual finding of the authorities was based
on detailed scrutiny of the invoices, ledger accounts, etc., from which the
authorities had held that the freight paid by the dealers was for and on behalf
of the appellant, thus the appellant was rightly held liable for payment of
service tax.

Further,
the High Court held that on the basis of the definition as provided in Rule
2(1)(d)(v) of the Service Tax Rules, 1994 it was correctly held by the lower
authorities that the payment made by the agent would be the liability of the
principal for the purpose of service tax. The extended period of limitation was
also held as rightly invoked. The appeal was thus disallowed, holding the order
of lower authorities correct.

26 [2019
104 taxmann.com 225] (Calcutta HC) Srijan Realty (P) Ltd. vs. Commissioner of
Service Tax

Date of order: 8^th
March, 2019

The Hon’ble
High Court held that in the absence of a license granted under the Electricity
Act, 2003 the activity of receiving high-tension electric supply and
redistribution of the same after its conversion into low-tension supply cannot
be regarded as ‘trading of goods’ so as to be covered u/s. 66D(e) or 66D(k) of
FA, 1994, i.e., negative list, and thus, chargeable to service tax

FACTS

The
petitioner developed and operated a commercial complex and entered into an
arrangement with an electricity company whereby he received high-tension
electric supply in the sub-stations in the commercial premises. The electricity
company raised a single consolidated bill on the petitioner. Thereafter, the
electric supply was converted into low-tension and redistributed to various
occupants of the commercial complex. Sub-meters were installed for the
respective occupants and, based on the readings, the petitioner raised invoices
(bills).

The
Revenue contended that since the petitioner is authorised to sell electricity
in terms of the Electricity Act, 2003 he would not be entitled to avail benefit
of section 66D(e). Revenue opined that conversion of electricity from
high-tension to low-tension and redistribution thereof to the occupiers being a
service, the entire consideration charged by the petitioner to various
occupants would be eligible to service tax

HELD

The
Hon’ble High Court observed that in light of provisions of the Electricity Act,
2003 the petitioner cannot be said to be an electricity-generating company. Nor
could it said that the petitioner engaged in the supply or trading of
electricity because the definition of ‘supply’ and ‘trading’ did not allow him
to come within that definition. The petitioner is not an electricity trader as
defined in section 2(26) of the Electricity Act, 2003. Besides, the petitioner
does not have a license to undertake trading in electricity u/s. 12 of the
Electricity Act, 2003. The petitioner also cannot be said to be engaged in the
business of transmission because he does not have such a license. The
petitioner is not a person authorised to transmit, supply, distribute or
undertake trading in electricity.

Thus, the
Court held that sale, trading and distribution being not applicable, the only
other thing that remains to describe the activity undertaken by the petitioner
is service. Though electricity is regarded as ‘goods’ and capable of being
traded as held in State of Andhra Pradesh vs. National Thermal Power
Corpn. Ltd. 2002 taxmann.com 2376 (SC) and Aluminium Co. vs.
State of Kerala 1996 taxmann.com 1097 (SC), the Court held that the
activity of the petitioner cannot be treated as a trade as it would violate the
provisions of the Electricity Act, 2003. Therefore, it held that the activity
was liable for service tax. The Court dismissed the petition.

II. TRIBUNAL

27 [2019-TIOL-1705-CESTAT-DEL]
BSNL vs. Commissioner of Central Excise and Service Tax

Date of order: 20^th
December, 2018

Reversal of
wrongly availed credit without utilisation is not liable for interest or
penalty

FACTS

During the
course of scrutiny of service tax record, it was observed that the appellant
wrongly availed CENVAT credit during the month of April, 2009 as 50% of duty
paid on capital goods on which 100% credit was already taken in the financial
year 2008-09. Although on being pointed out the said (availed) credit was
reversed from the credit balance, the department issued a show cause notice
stating that the impugned credit availed was not admissible in terms of Rule
4(2a) of CENVAT Credit Rules, 2004 and as such was proposed to be recovered
along with interest and penalty u/s. 78. The Commissioner ordered to
appropriate the impugned amount of wrongly availed CENVAT credit which was
reversed. Recovery of interest on the said amount was also confirmed and a
penalty of same amount was imposed. Being aggrieved, the appellant went before
the Tribunal.

HELD

The
Tribunal primarily observed that the credit wrongly availed in the books was
immediately reversed in the books of accounts when it was pointed out. Further,
Rule 14 of the CENVAT Credit Rules, 2004 in clear terms provides that only when
credit is taken and utilised there is a liability of interest. However, in the
present case the CENVAT credit was not utilised. It therefore becomes a
revenue-neutral situation. Further, even with respect to penalty it was held
that since there is no intention to evade payment of tax, the question of
imposition of penalty is absolutely irrelevant.

28 [2019-TIOL-1650-CESTAT-Ahm]M/s.

Innovate Securities Pvt. Ltd. vs. CCE & ST

Date of order: 27^th November, 2018

Service tax
not applicable on recovery of service tax, stamp duty, etc. by stock brokers
from clients

FACTS

The issue
relates to service tax applicability on transaction charges, SEBI turnover
fees, stamp duty, security transaction tax, etc. paid to National Stock
Exchange (NSE), Bombay Stock Exchange (BSE), etc. and collecting reimbursement
of the same along with brokerage from the clients in the hands of stockbrokers.
Taxability of these facts was dealt with in detail earlier in the case of Span
Caplease Pvt. Ltd. & Others vs. CST, Ahmedabad in a bunch of 28
appeals vide order dated 29^th September, 2017 by the Ahmedabad
Tribunal and by the Delhi Tribunal in Mohak Commodities P. Ltd. vs. CCE,
Jaipur 2018(10) GSTL 316 (Tri.-Del).

HELD

The Tribunal
observed that the issue was dealt with in various judgements whereunder the
Tribunal had consistently held that these charges were statutory in nature and
therefore not liable for service tax. The order contains no discussion but the
extracts from the above judgements are reproduced wherein discussion on
valuation provisions in Rule 67 is taken up in detail. It was observed that no
receipt other than brokerage or commission received by the stock broker was
intended to be brought in the ambit of taxable value. There was no question of
equity in tax and the taxation statute has to be construed strictly. Value is
generally derived from the price. Other charges realised by the appellants not
being commission, could not be included in the assessable value.

Further,
the Revenue had not discharged the burden to bring the above receipts to
charge. A similar view had been expressed in the case of Consortium
Securities Pvt. Ltd. vs. CST 2017-TIOL-232-CESTAT-DEL and the appellant
had succeeded on the fundamental principle of taxation. Based on the
observation made in the above two judgements, the appeal was allowed.

29 [2019-TIOL-1417-CESTAT (Mum)] Popular Caterers
vs. CCGST

Date of
order: 8^th May, 2019

Outdoor
caterers not required to reverse credit, when service tax is paid as per Rule
2C of ST Valuation Rules as balance 40% value is not ‘exempted service’

FACTS

The
appellant, a provider of catering services, paid service tax as per Rule 2C of
Service Tax (Determination of Value) Rules, 2006 on 60% of the gross invoice
amount charged to customers with effect from 1^stJuly, 2012. Prior
to that, he paid service tax on 50% of abated value in accordance with
Notification 1/2006-ST which had a condition of non-availment of CENVAT credit.
Consequent upon EA-2000 audit, the appellant was directed to reverse CENVAT
credit under Rule 6 of CENVAT Credit Rules, 2004 considering the balance 40%
value of invoice as “non-taxable” for the period 2010-11 to 2014-15.

As per the
appellant, Rule 2C of the valuation rules do not exempt any service or portion
of the value and there was no other provision in law to make Rule 6 applicable
to outdoor catering service. Therefore, 40% value cannot be treated as exempt
portion. According to the department, the Commissioner (Appeals) was correct in
finding that Rule 6 was mandatorily applicable.

HELD

The
definition of catering as per section 65(24) would mean a person supplying
directly or indirectly any food, edible preparations, alcoholic / non-alcoholic
beverages, crockery or similar articles for any purpose or occasion. Further,
as per Explanation 1 to Rule 2C of the valuation rules also, it is fair market
value of all goods and services supplied. Therefore, while determining the
aspect of catering service, both sale of food and service for consumption of
food are already included in 60% of the value of invoice.

On the other hand, the definition of service in
section 65B(44) of the Finance Act, 1994 excludes pure sale not associated with
delivery of goods and services together and deemed sale within the meaning of
Article 366(29A) of the Constitution. Therefore, the other component of 40% of
gross value received cannot be considered as ‘exempted service’ to make Rule
6(3) of CCR applicable and to maintain separate record for availment of CENVAT
credit on it, including on processed food purchased as raw material.

BCAJ Admin

SERVICE TAX

I.
Tribunal

35.
[2019-TIOL-05-CESTAT-ALL] Logix Infrastructure Pvt. Ltd vs. Commissioner
of Central Excise and ST, Noida Date of Order: 20^th September, 2018

Preferred
location charges, external development charges are part and parcel of the main
service of Residential Complex Service eligible for abatement under
Notification 26/2012-ST.

Facts

The
appellants are provider of Residential Complex Service. They discharged service
tax on preferential location charges
@ 3.09%. A show cause notice was issued demanding service tax at the full rate
on the ground that abatement is granted only in respect of services where there
is transfer of material. Thus such charges collected separately are liable for
service tax at the full rate.

Held

The
Tribunal noted that the components such as preferred location charges, external
development charges etc., are part and parcel and for various elements of the
main service which is Residential Complex Service and therefore the entire
consideration received by the appellants is towards the bundled service of
construction of residential complex as per section 65F of the Finance Act, 1994
which is eligible for abatement under said Notification No.26/2012-ST.

36.
[2019-TIOL-25-CESTAT-MUM] Allied Blenders and Distillers Pvt. Ltd vs.
Commissioner of Central Excise and Service Tax, Aurangabad Date of Order: 25^th
June, 2018

Remuneration
paid to directors as salary is not liable for service tax.

Facts

During the course of audit,
on scrutiny of records, it was noticed that the appellant had been receiving
services from the directors, but failed to discharge service tax under reverse
charge mechanism on the remuneration paid in accordance with Notification
No.30/2012-ST dated 20.06.2012 and Notification No.45/2012 dated 07.8.2012.
Consequently, a demand notice was issued. It was argued that all the directors
are whole-time directors and therefore the services rendered by them fall under
the category of service rendered by an employee to the employer which is not
liable for service tax.

Held

The Tribunal noted that
from the documents produced viz. Form 16, deductions on account of provident
fund, profession tax, it is crystal clear that the directors who are concerned
with the management of the company, were declared to all statutory authorities
as employees of the company and complied with the provisions of the respective
Acts, Rules and Regulations indicating the director as an employee of the
company. Thus the demand of service tax is set aside.

37.
[2019-TIOL-54-CESTAT-MAD] Visshu Constructions vs. Commissioner of
Central Excise Salem Commissionerate, Salem Date of Order: 4^th September, 2018

Since all
the facts are disclosed in the returns filed, there is no suppression and
therefore the extended period of limitation cannot be invoked.

Facts

The Assessee had availed
the benefit of Notification No.1/2006-ST which provided that the benefit of
abatement is available only if CENVAT credit is not availed. However, the
assessee availed such credit. Accordingly a show cause notice was issued
invoking longer period of limitation. The matter was contested mainly on the
ground of limitation.

Held

The Tribunal noted that on
perusal of the ST-3 returns it is seen that they have disclosed that they are
availing the benefit of Notification 01/2006. As per the Notification, the
benefit would not be eligible if the assessee avails credit on inputs/input services.
However, they availed credit on certain input services. The same was also
disclosed by them in the ST-3 returns in Column 5B. Thus, the department was
put to knowledge and it cannot be said that the facts were suppressed from the
department with an intention to evade payment of service tax. Thus extended
period of limitation cannot be invoked and the demand was therefore set aside.

38.
[2019-TIOL-81-CESTAT-AHM] Kiran Gems Pvt. Ltd vs. Commissioner of
Central Excise & Service Tax, Surat-I Date of Order: 26^th November, 2018

Electricity
charges collected from the tenants at actuals amounts to reimbursement of
expenses and cannot be considered as additional rent liable for service tax.

Facts

Appellant engaged in
providing services of “Renting of Immovable Property” also recovered as
reimbursement the charges towards electricity charges in additional to the rent
amount. The case of the department is that such reimbursement is a part of the
gross value of service and thus exigible to service tax.

Held

The Tribunal noted that
electricity is consumed by the service recipient therefore, they are liable to
pay the same at actuals unless the same is included in the rent. As per the
facts of the case, the electricity expense is supposed to be borne by the tenants
(service recipient) therefore, merely facilitating the payment of electricity
charges by the appellant and subsequently taking the reimbursement of the same
will not form part and parcel of the gross value of service of renting of
immovable property and thus the demand was set aside. Reliance was placed on
the decisions of ICC Realty (India) Pvt. Ltd [2013-TIOL-1751-CESTAT-MUM
and SB Developers [2018-TIOL-1866-CESTAT-DEL].

39.
2018 [19] G.S.T.L. 269 (Tri.- Del.) Gokul Ram Gurjar vs. Commissioner of
Central Excise, Jabalpur-II Date of Order: 20^th February, 2018

In case
of self-owned labour used for carrying out certain activities, service tax on
Manpower Recruitment or Supply of Agency Service cannot be alleged or demanded.

Facts

The Appellant entered into
an agreement with one milk production co-operative limited company for washing
of cans/ crates, sorting of milk bags, milk packing etc. For this activity the
Appellant received remuneration as fixed amount per litre basis. The Revenue
raised service tax demand on the said activity interpreting it to be taxable
under category of manpower recruitment or supply agency service, as labours
were supplied by Appellant, who were under control of the Dairy Authorities.

Held

The Hon’ble CESTAT after
perusing the work order issued by the milk production company found that scope
of work related to washing of cans/ crates and packing of milk. There was no
specific mention about deployment of labour/ work force. Therefore, held that
service provided should not fall under taxable category of manpower recruitment
or supply agency service. The Hon’ble CESTAT also observed that the rate
contract provided in the work order clearly indicated that the amount should be
paid on a fixed basis i.e. per litre per pack basis and there appeared no
specific mention on payment of reimbursement of wages and salaries to the
workmen. Thus the services provided cannot fall under alleged taxable category.
Hence, allowed the appeal.

40. [2018] 100 taxmann.com 471 (New
Delhi – CESTAT) Premium Real Estate Developers vs. Commissioner of Service Tax,
Delhi Date of Order: 27^th November, 2018

Land
procured from various landowners and after obtaining power of attorney from
them and selling it to another entity, is in the nature of trading in land and
service of real estate agent.

Facts

The appellant entered into
MOUs with another entity by which the appellant procured land at pre-determined
locations from various landowners and undertook ancillary activities i.e.
divide and demarcate the entire land into blocks, furnish title papers and other
necessary documents for the land to be purchased, obtain the permission and
approval from the concerned authority for transfer of land etc. bring owners of
the land for the purposes of negotiating, registration, etc., to the relevant
places and bear all the expenses involved on these. The said other entity
agreed to procure such acquired land at pre-decided average rate per acre of
land which included all the cost of land, development expenses etc. The MOU
further provided that the other expenses like stamp duty/registration charges,
mutation charges would be borne by the said another entity. On satisfaction by
the said another entity about the fitness of deal(s) for the land, the
appellant organised the registration in the name of the said another entity
after making payment to the owners of land from the advance amount given to
them for the purchase of land. The land was then directly transferred in the
name of another entity without first registering the same in the name of
appellant. The difference, if any, between the amount actually paid to the
owners of land and the average rate per acre settled between the parties as
indicated, would be payable to the appellant as their margin or profit. Further
the said another entity reserved its right to withhold 50 per cent of the
amount (out of margin) to ensure that the obligations on the
developer/appellant are fully discharged in terms of the MOU and in case there
was any serious default, the same could be made good by way of forfeiture of
such amount so withheld. Pursuant to the MOU, the appellant received advance
amount from the other entity for each site. Substantial part of such amount was
used by the appellant to pay to the seller or the prospective seller of the
land for agreeing to sell land to the said other entity. Revenue alleged that
the services were in the nature of “real estate agency” and thus, liable for
service tax. The Appellant contended that their transactions were on
principal-to-principal basis and they did not act as agent of other entity.

Held

The
Hon’ble Tribunal noted that there was no consideration defined and/or provided
for the alleged service in the MOU. In absence of any defined consideration for
the alleged service, there is no contract of service at all and hence the
transaction was not liable for service tax. The Tribunal observed that the MOU
was not only for providing purely service of acquisition of the land but
involved many other functions such as verification of the title deeds of the
persons from whom the lands were to be acquired, obtaining necessary rights for
development of the land from the Competent Authority etc. The remuneration or
payment for providing this activity was actually not quantified in the MOU. The
Tribunal also held that since specific remuneration was not fixed in the deal
for acquiring land. Both the parties worked more as partners in the deal rather
than as an agent and the principal. The amount payable to the appellant was
more of the nature of a margin and share in the profit of the deal in purchase
of land. Further, the Tribunal categorically noted that the said another
entity, instead of paying the price directly to the land owner, paid lump sum
amount to the appellant. Thereafter the appellant identified the land, the
seller and after being satisfied with the title of the seller, entered into
agreement with the seller and obtained power of attorney in their favour.
Thereafter the appellant transferred the land. Thus the transaction was one of
trading in land. The order was thus set aside.

41. [2018] 100 taxmann.com 261
(Ahmedabad – CESTAT) Modern Business Solutions vs. Commissioner of Service Tax,
Ahmedabad Date of Order: 18^th October, 2018

The
nature of costs converted into reimbursements in terms of contractual
expressions is assessable value of services. Only expenses borne by service
provider on behalf of service recipient qualify to be reimbursable
expenses.

Facts

Appellant entered into
agreement where under they were required to manage a sales team on behalf of
the service recipient to extend the business of service recipient and receive
management fees by way of agreed percentage as well as reimbursements towards cost
of salaries, rent and incentives. They contended that their activities would be
classifiable as “manpower supply and agency services” and not as “business
auxiliary services” as alleged by the department and the value of
reimbursements received by them was not includible in the value of services.

Held

From
perusal of contractual terms between appellant and their clients, the Hon’ble
Tribunal noted that the scope of contract was not supply of manpower services
but it was a contract for promotion of services provided to the appellant. The
Tribunal found that the remuneration received was based on actual expenses by
adding percentage of profit margin over certain expenses. The Tribunal held
that this does not convert the expenses incurred by appellant into
reimbursements. Further, it was categorically observed that though
reimbursements cannot be included in assessable value of services in terms of
decisions of the Hon’ble Supreme Court in Union of India vs.
Intercontinental Consultant and Technocrats (P.) Ltd. [2018] 91 taxmann.com
67/66 GST 450 (SC), what constitutes reimbursements is required to be
determined in light of the decision in Bhagawathy Traders vs. CCE [2011] 33
STT 1 (CESTAT – Bang.) (LB), wherein it was held that only when the service
recipient has an obligation legal or contractual to pay certain amount to any
third party on behalf of the service recipient, the question of reimbursing the
expenses incurred on behalf of the recipient shall arise. Accordingly, the
Tribunal observed that the moot question is whether the expenses can be
converted into reimbursable expense by way of a contract or the expenses are
integral to the activities of the service provider that they cannot be
performed without such expenses. The distinction between the so called
“reimbursable expenses” and “free supplies” clarifies that all expenses
incurred by a service provider cannot be called reimbursable expenses and only
the expenses that qualify the test laid down in the decision of Bhagawathy
Traders (supra) can be called reimbursable expenses. Therefore, it was held
that in the context of business auxiliary services, the cost of manpower and
rent is not a reimbursable expense but a cost of service of the appellant and
merely in terms of contract, such costs cannot be converted into a reimbursable
expense. Thus, demand in respect of reimbursements received towards cost of
salaries and rent, was upheld.

42. [2018] 100 taxmann.com 306 (Kolkata –
CESTAT) Timken India Ltd. vs. Commissioner of Central Excise, Jamshedpur Date of Order: 24^th October, 2018

When in terms of agreement with foreign licensor for use
of its proprietary technical information for manufacture and servicing of
products, the assessee was also required to represent to its customers only by
identity of licensor, services received by assessee from licensor held
“franchisee services” and not “intellectual property services”.

Facts

When,
in terms of agreement with foreign entity i.e. licensor, for use of its
proprietary technical information for manufacture and servicing of products,
the assessee was also required to represent its customers only by identity of
licensor, the Tribunal held that services received by assessee from licensor
would be regarded as “franchisee services” and not “intellectual property
services”.

In
terms of Technology License and Technical Assistance Agreement entered into
with foreign entity i.e. licensor, appellant acquired licenses to manufacture
and service the products manufactured with the use of licensor’s proprietary
technical information. Department demanded service tax under reverse charge
mechanism under category of “franchisee services” from appellant in respect of
royalty remitted by them to foreign entity for use of licenses on the ground
that appellant acted as franchisee of said foreign entity. Appellant rebutted
department’s contentions on the ground that they received limited right to use
the trademark of foreign service provider by way of license and thus, would be
taxable under the category of Intellectual Property Right Services.

Held

The Hon’ble Tribunal noted
that the contractual terms clearly establish that the agreement between appellant
and foreign entity is not limited to use of intellectual property right of
foreign entity for manufacture of products and for service of the main
products, rather the appellant is required to represent the foreign entity i.e.
licensor to appellant’s various customer in such a way that the appellant loses
its own individual identity and would perhaps be known only by the identity of
such foreign entity. Thus, it was held that the services availed by the
appellant are more akin to franchise services rather than intellectual property
right service. Further, reliance was placed on the decision of the Hon’ble
Delhi HC in Delhi International Airport (P.) Ltd. vs. Union of India[ 2017]
77 taxmann.com 92/59 GST 308 (Delhi). Accordingly, the Tribunal upheld
impugned demand under “franchisee services” by dismissing present appeal.

Note:
It appears that the dispute covered the period when intellectual property
services were not taxable. The case law is important from classification
perspective as the GST rate on “franchisee services” and “IPR services” may be
different.

II. High Court

43. 2018 [19] G.S.T.L. 611 (Kar.) XL Health
Corporation India Pvt. Ltd. vs. Union of India Date of Order: 22^nd
October, 2018

On failure to follow the judicial discipline, cost of Rs.
1 lakh was imposed by High Court on Commissioner (Appeals) to pay from his
personal fund.

Facts

The
petitioner assessee claimed refund of tax on account of export of services
rendered by them, which was disallowed by the Commissioner (Appeals). The
CESTAT quashed the order stating that the issue is well settled. Later the same
petitioner again claimed refund on same ground for subsequent period and also
quoted favorable order of the Tribunal passed in their favour. But the
Commissioner (Appeals) in total breach of the judicial discipline disallowed
the refund vide its order despite being fully aware of the Tribunal’s earlier
order passed on similar issue in favour of assessee. The matter was then referred
to the Hon’ble High Court.

Held

The Hon’ble High Court
taking the issue on very serious note held that it is a total callous,
negligent and disrespectful behaviour shown by the departmental authorities
which should not be tolerated at all. It was this kind of lack of judicial
discipline which if it went unpunished would lead to more litigation and chaos
and such public servants were actually a threat to the society. By allowing the
writ petition, the Hon. Court directed Commissioner (Appeals) to pay cost of
Rs. 1 lakh from his personal funds and asked the assessee to approach concerned
Commissioner with fresh request of refund in accordance with the law and in
terms of the Tribunal order.

44. 2018 [19] G.S.T.L. 478 (Del.) MRF
Ltd. vs. Commissioner of Trade and Taxes
Date of Order: 10^th August, 2018

Entitlement to interest on refund of pre-deposit amount,
calculable from the date when appeal was allowed in favour of assessee by the
Court.

Facts

Petitioner paid pre-deposit
amount to seek recourse to an appellate authority. Later the appeal was allowed
to the assessee and letter for refund
of the same along with interest was filed. The Revenue accepted refund plea but
did not pay interest. Aggrieved assesse preferred writ petition before the High
Court contesting that pre-deposit does not amount to payment of tax as it did
not bear such character, the refund of the same ought to have carried interest. Revenue on the
contrary contested that interest amounts would be due only from the time when
assessee would have filed form ST21 as per section 30 of the Delhi Sales Tax
Act, 1975.

Held

The Hon’ble Court held that
the pre-deposit sum that the assessee was compelled to pay to seek recourse to
an appellate remedy did not necessarily bear the character of tax, especially
when it succeeded on the particular plea. Revenue’s insistence upon a
procedural step, i.e. filing of a form which was purely for the purpose of
administrative convenience could not in any manner fix the period of limitation
when the amounts became due on the question of interest. The fact that the
amount due and payable from the date the appeal was allowed was not in dispute,
the postponement of the period from when interest became payable was
incomprehensive and illogical. For these reasons the petitioner was entitled to
interest from the date when its appeal was allowed by the Hon. Court.

BCAJ Admin

Service Tax

I. TRIBUNAL

6. [2019] (28) GSTL 478 (Tri-Chan.) DLF Cyber City
Developers Limited vs. Commissioner of S.T., Delhi-IV Date of order: 22^nd May, 2019

Activity of corporate
guarantee to banks / financial institutions is not liable for service tax in
absence of consideration

FACTS

The
appellant provided corporate guarantee to various banks / financial
institutions on behalf of their holding companies / associate enterprises /
joint ventures. SCN was issued on the presumption that their associates had received
loan facilities from financial institutions at a lower rate, therefore the
differential amount was consideration liable to tax. The Revenue, however, did
not produce any evidence in the matter; on the other hand, the assessee
contended that they did not receive any consideration, thus no tax was payable.

HELD

It
was held that since no consideration was received by the appellant for
providing corporate guarantee and the SCN was based merely on presumption, the
appellant was not liable for payment of tax.

7. [2019] TIOL-2734 (CESTAT-Mum.)
M/s S.S. Construction vs. Commissioner of Central Excise Date of order: 4^th
June, 2019

Rejection of CA
certificate for want of supporting documents cannot be sustained

FACTS

The
appellant provides ‘commercial and industrial construction service’, ‘manpower
recruitment and supply service’, etc. On comparison of the balance sheet with
their ST-3 returns, a short payment was found; hence a show-cause notice was
issued. The Tribunal, vide order dated 20^th September, 2012,
remanded the matter to the adjudicating authority for reconciliation of the
balance sheet with the ST-3 returns. On reconciliation, both the authorities
below confirmed the demand issued earlier with interest and penalty. Hence the
present appeal.

HELD

On
remand by the Tribunal, since the appellant had already earlier submitted the
details of profit and loss account, ledger, invoices, bills, etc., they also
placed the C.A. certificate in support of their claim for reconciliation of the
figures between the ST-3 returns and the balance sheet. The authority rejected
the C.A. certificate on the ground that the supporting documents were not
enclosed along with the certificate.

The
Tribunal noted that there is no justification in the findings of the lower
authorities inasmuch as all the documents were submitted and the rejection of
the C.A. certificate for want of supporting documents cannot be sustained.
Since the appellant was able to reconcile the differential figures between ST-3
returns and the balance sheet supported by the C.A. certificate, the Tribunal
allowed the appeal.

8. [2019] TIOL-2945 (CESTAT-All.) M/s Mega Trends
Advertising Ltd. vs. Commissioner of Central Excise and Service Tax Date of order: 21^st February, 2019

Production
of design given by the client on chosen material such as cloth, PVC sheet,
etc., would not amount to providing a service taxable as advertising agency.
Further, longer period of limitation also would apply as the figures were
picked up from the balance sheet and profit and loss account and thus there was
no suppression of facts

FACTS

The
assessee was engaged in supply and installation of hoardings as well as printing
activities. With respect to the printing activity, they merely carried out
printing operations on the instructions of clients on the given material. There
was no creativity involved and they acted merely as printers and thus the
activity was not liable for service tax. On scrutiny of the appellant’s
financials, there was excess income found and hence a show-cause notice was
issued for evasion of service tax.

HELD

The
Tribunal, relying on the decision in Avon Awning vs. CCE & ST [2017]
(51) STR 33 (Tri.-All.) where it was categorically held that production
of design given by the client on chosen material such as cloth, PVC sheet,
etc., would not amount to providing any service taxable under the category of
advertising agency, and thus set aside the demand on merit. The Tribunal also
noted that the appeal was barred by limitation as the figures were picked up
from the financials which are public documents; hence the charge of suppression
was held unsustainable.

9. [2019] (28) GSTL 279 (Tri.-Chan.) Great India Steel
Fabricators vs. Commissioner of C. Ex. & ST, Panchkula Date of order: 14^th February, 2019

Refund claim of CENVAT
credit to be sanctioned in cash in view of section 142 of CGST Act, 2017

FACTS

A
refund claim was filed by the appellant for the refund of unutilised CENVAT
credit on export of goods. The Department sanctioned the claim amount, partly
in cash and partly credited in the CENVAT credit account. The appellant filed
an appeal on the basis of section 142 of the CGST Act, 2017 requesting to
modify the impugned order and sanction the whole refund in cash.

HELD

Section
142 of the CGST Act, 2017 deals with situations which direct the authorities to
sanction all the refund claims in cash. Therefore, the appellant was entitled
for refund in cash. Allowing the appeal, the order was modified to the extent
the amount was credited to CENVAT credit account and thus the cash refund was
allowed.

10. [2019] (28) GSTL 96 (Tri.-Ahmd.) Commissioner of
CESTAT vs. Reliance Industries Ltd. Date of order: 12^thMarch, 2019

While calculating CENVAT
credit reversal as per rule 6(3A) of CENVAT Credit Rules, 2004, total CENVAT
credit shall mean credit of only common input service and does not include
input service exclusively used for manufacturing dutiable goods which are
entitled to full credit

FACTS

The assessee supplied dutiable as well as
exempted goods through various units. In terms of Rule 6 of CCR, they did not
avail CENVAT credit of tax paid on inputs and input services used exclusively
in the manufacture of exempt goods. Likewise, they availed the entire amount of
CENVAT credit of tax paid on inputs and input services used exclusively for the
manufacture of dutiable goods. They also received input services commonly
consumed for manufacture of exempt and dutiable goods. They calculated the
amount of common credit reversal by apportioning ‘Total CENVAT credit’ as per
Rule 6(3A)(c)(iii) as existed during the relevant period. However, they contended
that for the purpose of apportioning the CENVAT credit on common input
services, the total CENVAT credit cannot be taken since the same also includes
credit on input services which were exclusively used in the manufacture of
dutiable goods. Therefore, they re-calculated the amount of CENVAT reversal by
taking only ‘common CENVAT credit’. Thus, due to excess CENVAT credit reversal
earlier, the assessee filed a refund claim. The adjudicating authority
contended that the respondent had rightly reversed CENVAT originally. The
amendment in Rule 6(3A) brought by Notification No. 13/2016-C.E. dated 1^st
March, 2016 did not apply retrospectively and hence, no refund was granted.

HELD

It
was held that the legislators very consciously substituted sub-rule 6(3A) with
an intention to give a clarification to the provision so as to make it
applicable retrospectively. Therefore, for the purpose of reversal of common
credit, total CENVAT credit should mean credit of only common input services
and not of credit exclusively used for manufacturing of dutiable goods.

11. [2019] (28) GSTL 278 (Tri.-Chan.) Central Public
Works Department vs. Commissioner of Central Excise, Gurgaon-1 Date of order: 10^th October, 2018

Section
11B of Central Excise Act, 1994 entitles a person to get the refund when he has
suffered the duty

FACTS

A
contractor had executed a works contract for the appellant who also paid
service tax on it. Later, the service was exempted from the payment of service tax.
The appellant filed a refund claim of the service tax borne by him, which was
paid by the contractor to the government. The Department rejected the claim on
the ground that the service tax was not paid by the appellant.

HELD

It
was held that the appellant had borne the duty and thus was eligible for the
refund. As per the Hon’ble Supreme Court in the case of Mafatlal Ltd. vs.
UOI 1997 (89) ELT 247 (SC), in terms of section 11B of the Central
Excise Act, 1994 a person who has borne the duty can get the refund. Hence the
impugned order was set aside and the appeal was allowed with consequential
relief.

12. [2019] (28) GSTL 280 (Tri.-Mum.) C.S.T., Mumbai-II
vs. Reliance Communications Infrastructure Ltd. Date of order: 8^th February, 2019

Order passed without
considering submissions is a mistake apparent from records and miscellaneous
application filed merits consideration for recalling such order

FACTS

On
18^th January, 2018 an appeal was heard and the order was reserved,
directing both the sides to file written submissions within two weeks. The
written submissions were filed by the Revenue through its authorised
representative along with other documents on 1^st February, 2018.
However, such written submissions were not placed in the file and it was
evident that the Tribunal passed the order without considering the submissions.
Therefore, a miscellaneous application for rectification of mistake apparent on
record was filed.

HELD

It was held that the
order passed by the Tribunal was an apparent mistake on the face of the record
as it was passed without considering the submissions. Therefore, the
miscellaneous application filed by Revenue merits consideration for recalling
the order and hearing of appeal afresh.

BCAJ Admin

Service Tax

I. TRIBUNAL

10. [2019-TIOL-914-CESTAT-MUM] ABM Knowledge Ltd. vs. Commissioner of
Customs, Mumbai, Appeal-III Date of Order: 12^th February, 2019

Registration of premises is not a condition
precedent to avail CENVAT credit.

FACTS

Whether the Appellant is entitled to avail
input credit on invoices which are issued in the name of the premises other
than the registered premises?

HELD

The Tribunal
noted that there is no condition in the CENVAT Credit Rules, 2004 which
prescribes that registration of premises is a condition precedent for claiming
CENVAT credit and in its absence the claim has to be rejected. It was held that
it is a settled legal principle that any beneficial provision should be
interpreted liberally. There is also no dispute that there is a lapse, but it
is merely a procedural lapse for which the substantive benefit of CENVAT credit
cannot be denied. Thus, the appeal is allowed.

11.
[2019-TIOL-931-CESTAT-MUM] Kalika Steel Alloys Ltd. vs. Commissioner of Central
Excise, Customs and Service Tax, Aurangabad Date of Order: 25^th April, 2018

Since appellant was entitled for CENVAT
credit on the excess paid service tax, the entire exercise is revenue neutral.

FACTS

The appellant
paid service tax on GTA on 100% of the amount without availing abatement of 75%
as available and availed the credit of the entire tax paid. Objection was
raised that since, as per notification, tax is payable only on 25%, the credit
of the service tax paid on 75% is inadmissible. The credit was reversed as
advised by the audit party and the excess payment was adjusted against tax
liability for the subsequent period. Revenue’s allegation is that such adjustment
can be made only during the succeeding month and not beyond that. Accordingly,
the present appeal is filed.

HELD

The Tribunal noted that unlike in Central
Excise law, wherein the unconditional notification is to be followed
mandatorily, similar provision is missing in service tax. Therefore, payment of
service tax on GTA on 100% of the amount is legal and correct. Further, since
the entire exercise is revenue neutral, the impugned order is unsustainable and
hence set aside.

12.
[2019-TIOL-1013-CESTAT-HYD] Commissioner of Customs, Central Excise &
Service Tax vs. Vignan Tutorials Date of Order: 4^th January, 2019

The cost of study materials and textbooks
cannot be included in the value of services rendered for commercial coaching
and training centre.

FACTS

The appellant
is engaged in providing commercial training and coaching services. The Revenue
authorities were of the view that the amounts collected towards the cost of
study material needs to be included in the value of service. The Adjudicating
Authority, after following due process of law, confirmed the demand raised. The
First Appellate Authority held in favour of the appellant and accordingly the
present appeal is filed.

HELD

The Tribunal noted that separate invoices
are prepared for the services rendered for coaching and for the textbooks.
Further, it was also noted that the textbooks are available to any other person
not joining the coaching and training service centre as the books are freely
available in the market. Accordingly, it was held that the value of books is
not includible in the value of service and the appeal was dismissed.

13. [2019-TIOL-864-CESTAT-MAD] VLCC Healthcare
Ltd., Chennai vs. the Commissioner of GST and Central Excise, Chennai South Date of Order: 11^th February, 2019

The department cannot force the assessee to
pay 5% or 6% of the value of exempted services when the assessee has exercised
the option of reversing the proportionate credit.

FACTS

The assessee
provides “Beauty Treatment Service” and “Health Club and Fitness Service”. They
are also doing trading activity and selling their products to their customers.
Trading activity is deemed to be an exempted service with effect from
01.04.2011. The department alleges that since separate accounts are not
maintained, they have to pay an amount equal to 6% of value of their exempted
clearances for the reason that they have not intimated the department about
exercising the option.

HELD

The Tribunal noted that the appellants have,
in fact, issued a letter to the jurisdictional Range Officer explaining that
they were availing only the proportionate credit on the value of taxable
services, which is also reflected in their balance sheet as well as their ST-3
returns. It was held that the department cannot force them to pay 5% or 6% of
the value of exempted services when the option of reversing the proportionate
credit is exercised. Relying on the decision of Mercedes Benz
[2015-TIOL-1550-CESTAT-MUM], the demand was set aside.

14. 2019 [21] G.S.T.L. 37 (Tri. Chennai) MAS Logistics
vs. Principal Commr. of C.T. & C. Ex., GST, Chennai Date of Order: 25^th September, 2018

Logistic services provided in India to
foreign company for re-export of return goods, amounts to export of service.
Eligible for refund of tax on input services used for such re-export of return
goods.

FACTS

The appellant assessee provided logistic
support service of return of imported goods on instruction of the shipper,
namely, Jinneng Energy Technologies Ltd., China (JETL, for short) and received
consideration in convertible foreign exchange. They also availed various input
services for export of logistic services; hence they filed a refund claim. The
said refund claim of the appellant was rejected by the Revenue stating that it
did not appear to be in relation to export of service, rather, it seemed to be
incurred for import of goods. The same was upheld by the Commissioner
(Appeals). Aggrieved, the appellant preferred an appeal before the Tribunal.

HELD

The Hon’ble Tribunal held that the allegation
of the department, that appellant acted as intermediary and so place of
provision of service within India cannot be sustained, as the appellant was
engaged by H & H, China, to whom they actually provided service and raised
invoices on account of facilitating re-export of goods. As the contract between
the shipper (JETL) and the importer was cancelled, the delivery of goods was
not taken by the importer and consequently goods were taken back to China,
resulting in re-export of the goods. The input services availed for doing such
return of goods to China are services availed for exports only. It was H &
H, China who acted as an intermediary and as recipient of logistic services
situated outside India, for which consideration was paid in convertible foreign
exchange, so it is export of service. Consequently, the appeal filed by the
appellant was allowed and the refund along with consequential relief was
granted.

15. 2019 [21] G.S.T.L. 167 (Tri. Mumbai) Onward
E-Services Ltd. vs. Commissioner of Service Tax, Mumbai Date of Order: 19^th April, 2018

Penalty against suppression not sustainable
when defaulted tax paid along with interest before issuance of show-cause
notice.

FACTS

The appellant assessee, a provider of
software maintenance and repair services and information technology software
services, short-paid service tax during the period April, 2011 to August, 2012.
Although he subsequently paid the said amount along with interest before
issuance of a show-cause notice and also intimated the department to conclude
the matter in light of section 73(3) of the Finance Act, 1994, the Revenue
authorities still issued show-cause notice and confirmed the demand along with
interest and imposed penalty u/s. 78 and
77 of the Act, alleging suppression.

HELD

The Hon’ble
Tribunal, on noting that the appellant furnished the details of the records in
the ST-3 returns and only defaulted in the payment of the tax collected, thus
provided with immunity u/s. 73(3) of the Act, it set aside the penalty u/s. 78 in absence of suppression, holding that mere
default in the payment of tax could not amount to evasion of tax. The Tribunal
allowed the appeal in light of similar observations and various precedents.

16. 2019 [21] G.S.T.L. 165 (Tri-All.) Bhootpurva
Sainik Security & Detective Service vs. C.C.E., Allahabad Date of Order: 13^th February, 2018

Show-cause
notice issued in the name of firm after death of partner, no liability on legal
heir for any dues.

FACTS

The appellant provided certain services and
was liable to pay service tax on the same. The show-cause notice was sent
through Speed Post but was returned undelivered; consequently, the same was
pasted at the address obtained from the records by the department and was also
displayed on the notice board of the division office of Varanasi. An ex-parte
order was passed confirming the demand along with penalty under the Finance
Act, 1994. Later, Revenue failed to trace any of the partners of the firm
against whom the order was confirmed. However, they could find the legal heir
(Mr. Shashi Bhushan Pandey) of one of the partners for recovery of dues.

Mr. Shashi Bhushan filed a first appeal
against the confirmed order stating that neither any show-cause notice was issued
upon him nor was any order communicated. Rather, the order was communicated to
the legal heir (Mr. Bhushan) after 3 years and 8 months of passing of the
order. But the first appeal was rejected and, thus aggrieved, the legal heir
filed an appeal before the Tribunal. The legal heir also filed a miscellaneous
application to bring on record that the partnership deed stated that the late
person was a partner in the firm along with two other partners.

HELD

The Hon’ble Tribunal held that the legal
heir of the late partner was not liable for any dues of the appellant as the
show-cause notice was issued after the death of the partner. Revenue was
directed to locate the remaining partners for recovery of dues. Also, there was
no proper authority with the Hon’ble Tribunal to pass the impugned order as it
was not evident from the show-cause notice whether it was issued on the
proprietorship or on the partnership firm. The appeal was, thus, allowed.

II. SUPREME COURT

17. [2019-TIOL-150-SC-ST] Commissioner of Service
Tax, Mumbai-II vs. Greenwich Meridian Logistics (I) Pvt. Ltd. Date of Order: 1^st April, 2019

Appeal
dismissed on account of inordinate delay in filing the same.

FACTS

The assessee is a multi-modal transport
operator engaged in booking cargo space in shipping lines and thereafter
allotting space to its customers. A demand of service tax was raised on the
difference between the freight received and freight paid under the category of
business auxiliary service. The Tribunal held that the slots are purchased by
the assessee and therefore they are neither promoting nor marketing the
services of the shipping line, nor is the shipping line their client.
Accordingly, the demand was set aside. Thus, the present appeal is filed by the
department.

HELD

The Court noted that there is an inordinate
delay of 1,180 days in filing the appeal; therefore, the appeal is dismissed.

BCAJ Admin

Service Tax

I.
HIGH COURT

1. [2019
(29) GSTL 199 (Mad.)]

Shanmugasundaram
vs. Assistant Commissioner of C.Ex., Karur

Date
of order: 15^th July, 2019

Recovery proceedings cannot be
initiated where the order passed by Commissioner (Appeals) has not been served
to the petitioner

FACTS

Recovery was initiated by the
Department even though the petitioner had not received the order passed by the
Commissioner of Customs and Central Excise (Appeals). The disposal of the
appeal came to the knowledge of the
assessee only when the assessing authority approached the assessee and
initiated coercive action for recovery of service tax and penalty. There was no
acknowledgement from the postal department for service of the order upon the
petitioner. Hence, the writ petition was filed.

HELD

The Hon’ble Madras High Court
provided relief to the petitioner by allowing him to file an appeal challenging
the order of the Commissioner (Appeals) dated 28^th September, 2009
within a period of four weeks. The Assistant Commissioner was directed to keep
the recovery proceedings in abeyance for eight weeks from the date of the High
Court’s order. Further, the Tribunal was directed to hear and dispose of the
case once the appeal was filed within the stipulated time.

2. [2019
(28) GSTL 545 (Mad.)]

Vendhar
Movies vs. Jt. Dir., DG of GST
Intelligence, Chennai

Date
of order: 16^th April, 2019

Permanent / perpetual transfer of
copyright is outside the purview of service tax. Assignment of copyright cannot
be equated with relinquishment

FACTS

The
petitioners entered into various agreements with distributors, exhibitors and
television channels for assignment of exclusive rights for broadcast and
exhibition of various cinematographic films, both produced as well as purchased
by them. The rights so assigned were perpetual in nature, conferred permanently
and absolutely without any restriction or limitation.

Show cause notices /
orders-in-original were issued by the Service Tax Department disputing the
nature of the transfer of copyright on the basis that only specific copyrights
were assigned and that other copyrights were retained in the same
cinematographic films. Besides, the rights were assigned for 99 years.
Therefore, the transfer was ‘temporary’ in nature, attracting service tax. The
Department also relied upon the judgment of AGS Entertainment Pvt. Ltd. [2013
(32) STR 129 (Mad.)] to substantiate its contentions. The
Department further contested that the agreement entered into between the
parties for transfer of copyright contains the word ‘revocable’. Therefore, the
agreements were only a sham, designed to camouflage, and the true intent of the
petitioners was to enter into a temporary transaction.

While examining the impugned show
cause notices and the orders-in-original, the Hon’ble High Court specifically
clarified that the same were taken up since the stand taken in such show cause
notices and orders-in-original were not in consonance with the Finance Act,
1994 or the Copyright Act, 1957. Besides, the Court was not concerned with any
factual particulars, except for the limited purpose of appreciating and
adjudicating upon the legality of the impugned notices and orders.

HELD

The Hon’ble Madras High Court
concluded that perpetual transfer or a transfer for 99 years is permanent in
nature as it is in excess of the period of 60 years as set out under the
Copyright Act. As regards the usage of the term ‘revocable’, it was solely
restricted to those situations where the consideration for the right was not
fully remitted by the purchaser. The interpretation accorded by the Department
was wholly misconceived as section 21 of the Copyright Act itself uses the
phrase ‘all or any of the rights comprised in the copyrights in the work’.
Therefore, copyright in work may either comprise of ‘single right’ or ‘bundle
or rights’, some may be relinquished and others pursued and survive and, thus,
the transaction clearly stands outside the ambit of service tax. The Department
was given directions to initiate proceedings afresh in accordance with section
73 of the Finance Act, 1994 after considering the observations of the Court.

II.
TRIBUNAL

3. [2020-TIOL-349-CESTAT-Mad.]

M/s
Altom and D India Limited vs.
Commissioner of Central Excise and Service Tax

Date
of order: 12^th December, 2019

CENVAT credit of service tax on
group mediclaim policy of employees and their dependants is allowed

FACTS

A show cause
notice was issued disallowing input tax credit on the group mediclaim policy
for employees and their dependants on the grounds that the same had no nexus
with the manufacture or clearance of final products or with the provision of
output service by the assessee. It was alleged that such services were intended
for the personal consumption of the employees and so were ineligible.

HELD

The Tribunal, relying on the
decision in the case of M/s. Ganesan Builders Ltd. vs. Commissioner of
Service Tax, Chennai [2018-TIOL-2303-HC-Mad-ST] held that the denial of
CENVAT credit on group medical insurance policy on the dependants of employees
is bad and consequently the credit is allowed.

4. [2020-TIOL-350-CESTAT-Del.]

M/s Prakash Associates vs. Commissioner of
CGST

Date of order: 18^th December, 2019

In absence of a definite
consideration defined in the contract of service, the demand of service tax on any
income received is not justified

FACTS

The assessee is engaged in the
collection of toll and royalty on behalf of the State and Central Governments.
The consideration is a lump sum amount for the given period. In such activity,
the assessee may either collect more amount than the bid amount and make a
profit in the process, or may also incur a loss by collecting less amount. The
Revenue is of the view that any surplus amount collected would be commission
earned for providing toll / royalty collecting service to the Government and as
such is liable to tax. The demand being confirmed, the present appeal was
filed.

HELD

The Tribunal primarily noted that
there is no defined consideration. Consideration is an essential element or
pre-requisite in a contract of service. Under the contract, the assessee is not
entitled to retain any amount by way of commission, irrespective of the total
royalty amount collected. The assessee would incur losses in some years or earn
profits in some and therefore the understanding is on principal-to-principal
basis. Therefore, the demand is not sustainable.

5. [2020-TIOL-255-CESTAT-Hyd.]

Bharat
Heavy Electricals Ltd. vs. Commissioner of Central Tax

Date
of order: 23^rdDecember, 2019

There is no provision in law for
refund of unutilised input tax credit in cash

FACTS

The assessee is a public sector
company engaged in manufacturing various products and avails benefit of CENVAT
credit. Upon introduction of GST, the assessee migrated to the new regime from
the erstwhile service tax and Central Excise regime. As per the new provisions,
CENVAT credit lying in balance at the time of transition could be taken as
input service credit and utilised accordingly. As on June, 2017 the credit of
Education Cess, Secondary and Higher Education Cess, Swachh Bharat Cess and
Krishi Kalyan Cess was lying unutilised. A refund application was filed u/s 11B
of the Central Excise Act, 1944. The application was rejected by the original
authority on the ground that there was no legal provision under which refund
could have been sanctioned.

HELD

The Tribunal
primarily noted that section 11B allows refund of duty paid and not of CENVAT
credit. There is no scheme under which CENVAT credit can be refunded except
under Rule 5 of CENVAT Credit Rules, 2004 in respect of CENVAT credit utilised
in manufacture of exported goods or exported services. Thus, there is no
provision in law where CENVAT credit can be refunded in cash.

6. [2019
(31) GSTL 102 (Tri. Mum.)]

Executive
Engineer, Nagpur vs. Commissioner of C.Ex. & Cus., Nagpur

Date
of order: 13^th December, 2018

Service provider being a
government department not liable for imposition of penalty under sections 77
and 78 of Finance Act, 1944. Non-payment caused by lack of understanding and
absence of motive

FACTS

The appellant, a department of
the Government of Maharashtra, fabricates and erects gates of various types and
carries out inspection of ‘parts of gate’ manufactured by outside entities. The
appellant collected inspection charges along with service tax, which was not
deposited with the Government. Penalties under sections 77 and 78 of the
Finance Act, 1944 were imposed. It was the contention of the appellant that the
activity undertaken by them is not a taxable service.

HELD

It
was held that service tax collected must be deposited with the government irrespective
of whether the services provided are taxable or not. However, the appellant
being a department of the Government of Maharashtra, owing to lack of
understanding and absence of motive, penalties under sections 77 and 78 of the
Finance Act, 1994 were set aside.

BCAJ Admin

SERVICE TAX

I.
HIGH COURT

26. [2020-TIOL-397-HC-AP-ST] Vasudha
Bommireddy vs. Assistant Commissioner
of Service Tax, Hyderabad Date of
order: 20^th December, 2019

Tax collected without
authority of law is liable to be refunded with interest

FACTS

A writ petition was filed for refund of
service tax consequent upon the decision of the Delhi High Court in Suresh
Kumar Bansal’s case, 2016-TIOL-1077-HC-DEL-ST, wherein it was
held that in respect of the composite contracts for purchase of immovable
property along with goods used therein and also a part of the undivided land,
service tax cannot be levied on the composite price as per the provisions of
the Act as the statute did not contain any mechanism to segregate / bifurcate
the value of goods and the cost of the land from the gross value for
determining the value of the service.

HELD

The Court noted that the refund (plea)
is filed within two months of the decision of the Delhi High Court. Article 265
of the Constitution of India provides that ‘no tax shall be levied or collected
except by authority of law’. Therefore, refund was sanctioned with interest of
9% per annum from the date of payment.

II. TRIBUNAL

27. [2020-TIOL-249-CESTAT-Ahm.] Surya
Shipping vs. Commissioner of Central Excise and Service Tax Date of
order: 22^nd August, 2019

The difference
between freight received and freight paid is not a service liable to service
tax

FACTS

The assessee is engaged in purchasing
space on ocean-going vessels from shipping companies and selling the same to
various exporters. The shipping companies raise invoices on the assessee for
freight and the assessee in turn raises its own invoices on the exporters for
the freight. The difference in freight represents the profit or loss, as the
case may be, in respect of the said activity of buying and selling space on the
ocean-going vessels. The Revenue claimed that the profit or excess freight is
taxable under Business Support Service. The demand was confirmed by the
Commissioner (Appeals). Hence, the present appeal was filed.

HELD

The Tribunal noted that there is no
service involved in such transaction as the purchase and sale of the space is
an activity of sale and purchase and hence not liable to service tax. Further,
relying on several judgments it is held that any amount charged for space on
ocean-going vessels, over and above the purchase price, is not liable to
service tax.

28. [2020-TIOL-324-CESTAT-Mad.] M/s
Broekman Logistics India Private Limited vs. Commissioner of GST and Central
Excise Date of
order: 31^stJanuary, 2020

The intention of
creating a Free Trade Zone is to give exemption from levy of all duties and
taxes and therefore by application of service tax rules, place of provision of
service rules, the activities undertaken by such units cannot be made taxable

FACTS

The appellants are engaged in the
business of logistics supply, chain management, clearing and forwarding,
licensed CHA, etc. They did not pay any service tax on the services provided by
them from the Free Trade Warehousing Zone (FTWZ) exclusively to foreign-based
clients. It was contended by the Revenue that the service does not qualify as
export of services, therefore tax is payable.

HELD

The Tribunal primarily noted that the
Special Economic Zone Act, 2005 provides for exemption from service tax.
Section 51 states that the Act will have overriding effect notwithstanding
anything inconsistent in any other law. The Act, therefore, overrides the
Finance Act, 1994. Accordingly, it was held that the Department cannot press
the application of service tax rules, place of provision of service rules or
other rules to hold that the appellant has not exported any service. The
meaning of service and export contained in the special legislation by which SEZ
or FTWZ has been created has to be given effect. Thus, the demand was set
aside.

29. [2020-TIOL-209-CESTAT-All.] M/s Radhey
Krishna Technobuild Pvt. Ltd. vs. Commissioner of Central Excise Date of
order: 17^th December, 2019

Electric meter
charges collected along with the sale of residential units is a bundled service
u/s 66F of the Finance Act, 1994; therefore, the electric charges collected is
also admissible for abatement

FACTS

During the time of sale of residential
units the assessee was also collecting some charges from the buyers under the
head ‘electric meter main load supply charges’ and was discharging service tax
by claiming an abatement. The Revenue opined that such charges collected were
other than the construction of residential complex service and therefore
abatement was inadmissible.

HELD

The Tribunal noted
that section 66F(3) of the Finance Act, 1994 provides that taxability of a
bundled service shall be determined if various elements of such services are
naturally bundled in the ordinary course of business. The charges for electric
meter main load supply were collected along with the consideration for sale of
residential unit and they were collected from every person to whom the
residential unit was sold; further, as explained, the same was for providing
electricity supply during power failure/s to the residents of the complex.
Therefore, such service is bundled service u/s 66F of the Finance Act, 1994.
Accordingly, the abatement is admissible and the demand is set aside.

BCAJ Admin

Service Tax

I. HIGH COURT

23. [2020-TIOL-1128-HC-Del.-ST] Bsa Citi Courier Pvt. Ltd. vs. Commissioner of Central
Goods and Services Tax Date of order: 2^nd July, 2020

An application under Sabka Vishwas (Legacy Dispute Resolution)
Scheme, 2019 cannot be rejected without giving an opportunity of being heard

FACTS

The petitioner challenged the communication
dated 5^th March, 2020 whereby the declaration filed under the Sabka
Vishwas (Legacy Dispute Resolution) Scheme 2019 only for waiver of interest
from April, 2015 to June, 2017 has been rejected without affording any
opportunity of hearing and by stating that – ‘the date of communication
declared is 5^th September, 2019 which is beyond the cut-off date (i.e.,
30^th June, 2019). Therefore, the application cannot be accepted u/s
125(1)(e) of Chapter V of the Finance Act, 2019’. Revenue submits that the
quantification in the present case was done post 30^th June, 2019 and
was communicated to the petitioner for the first time on 5^th
September, 2019. Therefore, they cannot rely on the internal correspondences /
communications between different departments of Revenue to contend that the
quantification took place in March, 2019.

HELD

The High Court noted that the impugned communication dated 5^th
March, 2020 has been issued without giving an opportunity of hearing to the
petitioner and without considering the case as put forward. Consequently, the
present writ petition and pending application are disposed of by setting aside
the order / communication dated 5^thMarch, 2020 and by directing the
respondent to give a hearing to the petitioner.

II. TRIBUNAL

24. [2020-TIOL-1039-CESTAT-Mad.-LB] Commissioner of Service Tax vs. M/s Repco Home Finance
Ltd. Date of order: 8^th June, 2020

Foreclosure charge recovered from customers for premature termination of
loan is in the nature of damages and cannot be considered as a consideration
for a contract leviable to service tax under banking and financial services

FACTS

Divergent views have been expressed by Division Benches of the Tribunal
on the issue of whether foreclosure charges levied by banks and non-banking
financial companies on premature termination of loans are liable to service tax
under the head ‘Banking and other financial services’. The matter has therefore
been placed before the larger Bench.

HELD

The Bench primarily noted that service tax would be leviable only when
an activity is considered to be a service and such service classifies as a
‘taxable service’ defined in section 65(105) of the Finance Act. It is clear
from the definition of ‘consideration’ that only an amount that is payable for
the taxable service will be considered as ‘consideration’. Any amount charged
which has no nexus with the taxable service and is not a consideration for the
service provided does not become part of the value which is taxable u/s 67.
Consideration must flow from the service recipient to the service provider and
should accrue to the benefit of the service provider. There is marked
distinction between ‘conditions to a contract’ and ‘considerations for
the contract’. A service recipient may be required to fulfil certain
conditions contained in the contract but that would not necessarily mean that
this value would form part of the value of taxable services that are provided.

As per section 2(d) of the Indian Contract Act, 1872 consideration
should flow at the desire of the promisor. Thus, if the consideration is not at
the desire of the promisor, it ceases to be a consideration. The banks and
non-banking financial companies are the promisors and the borrowers are the
promisees. The contractual relationship between the banks and non-banking
financial companies and the customers is repayment of the loan amount over an
agreed period. The banks and non-banking financial companies would not desire
premature termination of the loan advanced by them as it is in ‘their interest’
that the loan runs the entire agreed tenure, for the banks thrive on interest earned
from lending activities. As premature termination of a loan results in loss of
future interest income, the banks charge an amount for foreclosure of loan to
compensate for the loss in interest income. It is the customer who has taken
the loan who moves for foreclosure of the loan by making the payment of the
loan amount before the stipulated period, thereby breaching the promise to
service the loan for the agreed period of time.

This results in a
unilateral act of the borrower in repudiating the contract and consequently
breach of one of the essential terms of the loan agreement. A breach of
contract may give rise to a claim for damages. The ‘expectation interest’ is a
popular measure for damages arising out of breach of contract. The foreclosure
charges, therefore, are not a consideration for performance of lending services
but are imposed as a condition of the contract to compensate for the loss of
‘expectations interest’ when the loan agreement is terminated prematurely.
Therefore, foreclosure charges are recovered as compensation for disruption of
a service and not towards ‘lending’ services. The phrase ‘in relation to
lending’ cannot be so stretched as to bring within its ambit even activities
which terminate the activity. Therefore, service tax cannot be levied on the
foreclosure charges levied by the banks and non-banking financial companies on
premature termination of loans under ‘Banking and other financial services’ as
defined u/s 65 (12) of the Finance Act.

BCAJ Admin

Service Tax

I. HIGH COURT

15. [2020] 117 taxmann.com 46 (Mad.) MIOT Hospitals Ltd. vs. State of Tamil Nadu Date of order: 28^th May, 2020

The medical
/ health care services that involve fitting out or implanting of prosthetics
into the physiology or the body of the patient for the alleviation of pain or
improvement of the life of the patient in the course of medical / surgical
procedure can be construed as ‘works contract’. At the same time, dispensing of
medicines to such patients while they undergo treatment as inpatients in the
hospital cannot come within the purview of the definition of ‘works contract’

FACTS

In this
writ petition, the issue before the High Court was whether private hospitals
are liable to pay VAT on the stents, valves, medicines, X-rays and other goods
used while treating the inhouse patients. The petitioner did not charge any
amount separately towards the cost of these items and charged a consolidated
amount to the patients towards the cost of medical treatments. The VAT
Department argued that purported deemed sale of stents, valves, hip replacement
and knee replacement, etc., in the course of the provision of medical services
by the petitioners is ‘works contract’ within the meaning of section 2(43) of
the Tamil Nadu Value Added Tax Act, 2006.

HELD

The High Court referred to
the 61^st Law Commission Report and the decision of the Hon’ble
Supreme Court in the case of Larsen & Toubro Ltd. vs. State of
Karnataka and Ors. [2013] 65 VST 1 (SC) to observe that the concept of
‘works contract’ contained in Article 366(29A)(b) takes within its fold all
genre of works contract and is not restricted to one species of contract to
provide for labour and service alone. Referring to the illustration in
paragraph 44 of the BSNL case, the Court held that although the
Supreme Court has held that sub-clauses of Article 366(29A) do not cover
hospital services, there is no legal basis to follow the said conclusion any
longer in the light of the subsequent decisions of the Apex Court. It further
held that a simple treatment with medicines cannot be equated with complicated
medical procedures undertaken by the petitioners involving skill and use of expensive
prosthetics and the use of laboratory testing equipment. Even if the dominant
intention of the contract was not to transfer the property in goods and rather
rendering of service, or the ultimate transaction was a transfer of movable
property, it is open to the states to levy sales tax on the materials used in
such contract if such contract otherwise has elements of a ‘works contract’.

In constitutional terms, it
is a transfer either in goods or in some other form. The Court distinguished
the decision in the case of the Tata Main Hospital case stating
the reason that the decision pertains to the period prior to the 46^th
Constitutional Amendment and ‘dominant test’ does not survive thereafter in
respect of works contracts. The decision rendered by the full bench of the
Kerala High Court in the case of Aswini Hospital Pvt. Ltd. and Ors.
and the Allahabad High Court in the case of M/s International Hospital
Pvt. Ltd. were disagreed with on the ground that there is no discussion
as to how the conclusions therein were arrived at when indeed the very purpose
expanding the scope of the expression ‘tax on the sale or purchase of goods’ in
Article 366(29A) by the 46^th Amendment to the Constitution and the
corresponding statutory amendments to the definitions in the respective tax
enactments of the States, were to include a transaction which involves not only
sale but also deemed sale which was traditionally not considered as ‘sale’.

The Hon’ble Single Judge also
disagreed with the reasoning given in the decision of the Punjab & Haryana
High Court in M/s Fortis Healthcare Ltd. vs. State of Punjab on
the ground that it runs not only contrary to the express language in Article
366(29A) of the Constitution of India, but also to the ratio of the
Hon’ble Supreme Court in BSNL vs. Union of India (2003) 6 SCC 1
itself. It further held that an example / illustration in paragraphs 44 and 45
of the BSNL decision which appears to be the basis of the relief
in the four mentioned cases cannot be applied to the kind of hospital / medical
service provided by the petitioners. The Hon’ble Court also expressed a view
that in all the four judgments, these Courts have not examined the point of
view of ‘works contract’.

The Court accordingly held
that fitting out or implanting of prosthetics into the physiology or the body
of the patient for the alleviation of pain or improvement of the life of the
patient in the course of medical / surgical procedure can be construed as
‘works contract’. However, the Court also held that dispensing of medicines to
such patients while they undergo treatment as inpatients in the hospital cannot
come within the purview of the definition of ‘works contract’. Consequently, no
tax can be demanded on the value of such medicine.

Note:
At paragraph 149 of the Order, the Hon’ble Court has indicated that various
decisions relied upon by the petitioners dealing with taxability of single
economic supply, although not relevant in VAT regime due to the Constitutional
mandate of Article 366(29A), may become relevant in the GST regime. Therefore,
this decision may be distinguished while deciding the applicability of GST on
similar service.

II. TRIBUNAL

16. [2020-TIOL-870-CESTAT-Chd.] M/s DLF Project Ltd. vs. Commissioner of Central Excise and Service Tax Date of order: 21^st October, 2019

In absence
of consideration, no service tax is leviable on corporate guarantee given to
banks / financial institutions on behalf of holding company / associate
enterprises

FACTS

During the course of audit it
was found that the appellant has provided corporate guarantee to various banks
/ financial institutions on behalf of their holding companies / associate
enterprises / joint venture and other loan facilities. The Revenue alleges that
such activity is taxable under Banking and Finance Institution Services.
Further, the appellant has also collected certain charges on account of prime
location of the flats and other relevant charges from the flat owners but did
not pay service tax thereon. On pointing out by the Revenue, the entire amount
was paid with interest. Later, a show cause notice (SCN) was issued demanding
service tax on corporate guarantee and to impose penalty on account of
non-payment of service tax on preferential location charges. The demand was
confirmed and therefore the present appeal is filed.

HELD

The Tribunal primarily noted
that no consideration is received either from the financial institutions or
from their associates for providing corporate guarantee. It was also noted that
the demand raised in the SCN is on the basis of assumption and presumption,
presuming that their associates have received the loan facilities from the
financial institution at lower rate; therefore, the differential amount of
interest is consideration, but there is no such evidence produced by the
Revenue on service tax before or after 1^st July, 2012. Further, with
reference to preferential location charges, since the tax and interest is paid
before the issuance of the SCN, section 73(3) of the Finance Act, 1994 is
applicable and the penalty is set aside.

17. [2020-TIOL-858-CESTAT-Bang.] Hotel Moti Mahal vs. Commissioner of Central Excise and Service
Tax Date of order: 29^th May, 2020

Service tax
can only be levied when there is a service provider, service receiver and
consideration. It cannot be assumed that consideration is inbuilt merely on the
basis of assumptions and presumptions

FACTS

The appellants are a
restaurant having banquet halls. They sometimes charge only for the food served
and do not charge any rentals for the banquet halls. The argument of the
Department is that any prudent man can understand that without any function no
person can stay in the hotel for the entire day and have mid-morning tea with
biscuit, buffet lunch, evening tea with biscuit and dinner. Further, though no
separate rent was collected for the function hall, charges were recovered for
use of LCD projector, laptop, white board, mike system, podium, etc., and
service charge on the same was paid. The Revenue alleges that the organisation
of functions is evident by the usage of LCD projector, etc., and the rent for
the function hall is inbuilt in the value of the food served in the function;
and therefore service tax is liable to be paid on such rent.

HELD

The Tribunal primarily noted
that the demand is based on surmises and conjectures. The two major surmises
were that with the usage of LCD display, etc., it is evident that the banquet
halls were let out temporarily for a day and that the charges for the same are
inbuilt into the bill raised towards the food charges and this inbuilt value
needs to be treated as consideration towards the ‘Mandap Keeper’ services provided.

But the Tribunal held that it
is not open to the Revenue to decide the taxability of a new entry merely on
the basis of imagination. For any service to be held to be taxable there should
be a service provider, service recipient and consideration for the service. It
cannot be imagined that such consideration was inbuilt. It is incumbent upon
Revenue to show such consideration in quantifiable terms in order to levy
service tax, though on a discounted value. It was noted that they have
discharged VAT on the food supplied and have also discharged service tax on the
items like LCD projector, etc., allowed to be used. Revenue could not place any
proof in the form of a bill, etc., to substantiate the allegation that the
banquet halls were rented out for a consideration. Therefore, since the
Department’s stand is not substantiated, the appeal is allowed.

18. [2020-TIOL-824-CESTAT-Del.] Man Trucks India Pvt. Ltd. vs. CCE, C and ST Date of order: 24^th February, 2020

Discount
extended against sales made for not providing after sales service is not a
service liable for service tax

FACTS

The assessee is engaged in
manufacturing heavy commercial vehicles falling under Chapter 87. It entered
into an agreement with a foreign company for supply of heavy commercial
vehicles. The transaction involved sale of heavy commercial vehicles by the
appellant to a company in Germany and thereafter by the latter to its buyers.
The agreement clearly provides that no after sales service would be provided.
Since the after sales service is to be provided by the foreign company itself,
they extended a price reduction to the foreign company on the sale of each
heavy commercial vehicle. A show cause notice was issued to the assessee,
proposing duty demand on the discounts allowed by the assessee for the relevant
period. The demand had been raised under reverse charge and on account of being
a declared service for agreeing to refrain from providing warranty services. On
adjudication, the demands were partly dropped. Hence the present appeal.

HELD

The Tribunal noted that the
assessee’s role is limited to the sale of trucks and spare parts thereof. The
agreement clearly provides that they would not be responsible for rendering any
after-sale services. The agreement provides that the assessee will provide a
discount in respect of any truck sold to the foreign company, it does not
entail that the foreign company is rendering after sales service on behalf of
the assessee. The after-sale service is agreed to be provided by the foreign
company on its own account. The discount offered is simply an adjustment in the
price of the goods sold and is not provision of any service. Thus the service
provided cannot be classified as business auxiliary service. The discount was
offered only because they were not providing warranty and after sales service.
Hence the demand cannot be sustained.

19. [2020-TIOL-807-CESTAT-Del.] M/s Shivani Textiles Ltd. vs. Commissioner of Central TaxDate of order: 13^th March, 2020

VCES
application cannot be rejected merely on the ground of clerical errors

FACTS

The assessee made a clerical
error in filing the VCES application. As per the gross taxable receipts, the
gross tax payable including cess was calculated at Rs. 27,05,933. However, due
to an error, it failed to adjust or reduce the gross amount of tax payable with
the amount of tax already paid of Rs. 5,68,859 paid during the period 18^th
October, 2012 to 29^th March, 2013. Thus, the actual tax dues to be
reflected in Form VCES-1 should have been Rs. 27,05,933 (-) Rs. 5,68,859, or
Rs. 21,37,074. However, the appellant wrongly reflected Rs. 27,05,933.
Admittedly, it deposited Rs. 14,28,439 on or before 31^st December,
2013 which is a little more than the amount of Rs. 13,52,967 required to be
deposited as per Form VCES-2, and an amount of Rs. 12,77,497 during the period
1^st January, 2014 to 30^th June, 2014, which is also in
compliance with the deposit of full tax as required to be paid before 30^th
June, 2014. Accordingly, against the amount payable of Rs. 27,05,933, it has
deposited Rs. 27,32,038.

HELD

The
Tribunal noted that the benefit of VCES 2013 has been denied by Revenue for the
simple clerical error in filling Form VCES-1. The assessee has admittedly
deposited the declared amount of tax dues and it cannot be asked to deposit
more tax which will be against the provisions of service tax law, as well as
Article 265 of the Constitution of India. Accordingly, the impugned order is
set aside and the benefit of the scheme is allowed to the assessee.

20. [2020] 117 taxmann.com 69 (CESTAT-Bang.) Karnataka Industrial Areas Development Board vs. CCT Date of order: 9^th June, 2020

Karnataka
Industrial Areas Development Board is a statutory body discharging the
statutory function as per the KIAD Act, 1966 and hence is not liable to pay
service tax

FACTS

The appellant, M/s Karnataka
Industrial Areas Development Board (KIADB) is established by the Karnataka
Industrial Areas Development Act, 1966 (KIAD Act, 1966). They were engaged in
providing various services such as renting of immovable property services,
construction of commercial and residential complexes, business support
services, management, maintenance or repair services, manpower recruitment and
supply services, works contract services, etc., to various clients. It appeared
that they did not obtain any registration under service tax for the said
services. The appellant contended that they are performing sovereign functions
and hence are not liable to pay service tax.

HELD

The Hon’ble Tribunal examined
various provisions contained in the KIAD Act, including the Preamble, the
provisions dealing with the establishment and incorporation, constitution,
functions, powers of the board, directions of the state government, board’s
fund and application of the board’s assets, accounts and audit, etc. On
examination of the said provisions, the Tribunal held that the appellant is a
state undertaking and the creature of a statute to exercise the power of ’eminent
domain’. The appellant is engaged in discharging statutory functions under an
act of the Legislature, viz., the KIAD Act, 1966. It is a statutory body
performing statutory functions and exercising statutory powers. Since it is
carrying out the objectives of the Act, it cannot be treated as a service
provider under the Finance Act, 1994. The appellant has undertaken various
activities and functions in the state of Karnataka as per the directions of the
State Government given from time to time under the provisions of the Act and
hence its activities cannot be considered as a taxable service and no service
tax can be levied for these activities.

The Tribunal relied upon the
decision of the Bombay High Court in the case of CCE, Nashik vs.
Maharashtra Industrial Development Corporation [2018 (9) GSTL 372 (Bom.)]
and the Delhi Tribunal’s decision in the case of Employee Provident Fund
Organisation vs. CST [2017 (4) GSTL 294 (Tri.)(Del.)] to hold that
statutory authorities performing statutory functions are not liable to pay
service tax. It observed that the functions of the MIDC under the MID Act, 1961
are more or less identical with the functions of the appellant KIADB under the
KIAD Act, 1966. Hence, relying on MIDC’s case, the Tribunal held that when the
maintenance of an industrial area itself is held to be a statutory function,
then the main function of acquisition of land, development of such land into
industrial area and allotment of such land on lease-cum-sale basis by the
appellant would certainly be a statutory function and does not attract levy of
service tax. By the same analogy, other functions being incidental cannot be
brought into the tax net.

The Tribunal did not follow
the decision of the Allahabad High Court in the case of the Greater Noida
Industrial Development Authority on the ground that it has been stayed
by the Hon’ble Supreme Court as reported in 2015 (40) STR J231 (SC).
The Allahabad High Court had held that if the sovereign / public authority
provides a service, which is not in the nature of the statutory activity and
the same is undertaken for consideration (not statutory fee), then in such
cases, service tax would be leviable as long as the activity undertaken falls
within the scope of taxable service as defined in the Finance Act, 1994. It
also relied upon the decision in the case of KIADB and Anr. vs. Prakash
Dal Mill and others [(2011) 6 SCC 714] wherein the Court observed that
the amount of fees and deposits collected by the KIADB is based on principles
of rationality and reasonableness. It cannot fix prices arbitrarily. The
fixation of price by the Board is always under the authority of law.

Lastly, referring to the
decisions in the case of Balmer Lawrie & Co. Ltd. vs. Partha Sarathi
Sen Roy [2013 (8) SCC 345]; MD, HSIDC vs. Hari Om Enterprises [AIR 2009 SC 218];
and Jilubhainanbhai Khachar vs. State of Gujarat [1995 Supp (1) SCC 596],
the Hon’ble Tribunal held that the ratio of the said decisions
considering the scope of ’eminent domain’ and sovereign function are applied to
the facts of the present case, and hence the appellant is a creature of the
statute to exercise the power of ’eminent domain’ and the eminent domain is a
sovereign function not attracting service tax.

21. [2020-TIOL-882-CESTAT-Chd.] Wave Beverages Pvt. Ltd. vs. Commissioner of Central Excise and
Service Tax Date of order: 26^th February, 2020

The act of
promotion of beverage leads to incidental promotion of concentrate; however,
such promotion cannot be made liable to tax under business auxiliary service

FACTS

The appellants are engaged in
the distribution and sale of non-alcoholic beverages under the brand name The
Coca Cola Company. As per the agreement, they are required to take steps for
advertising, marketing and promoting the sale of beverages. Show cause notices
were issued alleging that while undertaking the sales promotion programme for
the beverages, the concentrate owned by The Coca Cola Company was also getting
marketed as the same was linked to the promotion of the brand name and thus the
remuneration received from them is taxable as business auxiliary services (BAS)
of ‘promotion or marketing of goods produced or provided by or belonging to the
client’ chargeable to service tax.

HELD

The Tribunal noted that in
every sales promotion activity undertaken by the manufacturer of finished
products, it will amount to sales promotion of the raw material as well. This
is neither the intention nor the rationale of ‘Business Auxiliary Service’. By
stating that the goods, namely concentrate, was transferred for use by M/s Coca
Cola India Pvt. Ltd. to the appellant for consideration, a fact not in dispute,
the sale of the goods in terms of the Central Excise Act, 1944 has occurred.
Accordingly, the demand is set aside.

22. [2020-TIOL-881-CESTAT-Chd.] M/s Interglobe Aviation Limited vs. CST Service Tax Date of order: 22^nd October, 2019

Charges
recovered for excess baggage is an integral part of passenger transportation
service; cannot be taxable under transportation of goods by air service. CENVAT
credit is allowable on activities of setting up prior to 1^st April,
2011. Reimbursement of expenses is not liable to service tax in view of the
decision of the Apex Court in the case of Intercontinental Consultants and
Technocrats Private Limited

FACTS

The issue relates to charges
levied for excess baggage carried by passengers in regular flights. The Revenue
has demanded service tax under the head transportation by air service. The
second issue relates to CENVAT credit in respect of services availed prior to
the start of their actual business operations. The last issue deals with the
service of manpower recruitment and supply agency service, where the service is
received from a foreign agency and tax is paid under reverse charge. The issue
is whether reimbursement of insurance charges for pilots is includible in
value.

HELD

The Tribunal, relying on the
case of Kingfisher Airlines Limited [2015-TIOL-2329-CESTAT-Mum.]
held that the charges for excess baggage is an integral part of transportation
of passengers by air and therefore cannot be taxable under the category of
transportation of goods service. In the second issue, the Tribunal, relying on
the decision in Vamona Developers Pvt. Ltd. [2015-TIOL-2705-CESTAT-Mum.],
allowed the CENVAT credit. Lastly, relying on the decision in Intercontinental
Consultants and Technocrats Pvt. Ltd. [2013 (29) STR 9 (Del)], the
demand on reimbursement of expenses is set aside.

BCAJ Admin

Service Tax

I.
HIGH COURT

7. [2020-TIOL-593-HC-Del.]

Aargus
Global Logistics Private Ltd. vs. Union of India & Anr.

Date
of order: 6^th March, 2020

The Central Government has the
powers to frame Rule 5A of the Service Tax Rules, 1994 and the same is also
saved w.e.f. 1^st July, 2017

FACTS

The petitioner preferred the
present petition to seek directions to quash Rule 5A of the Service Tax Rules,
1994 by declaring that it is in conflict with various provisions of the Finance
Act, 1994. Further, it also sought a writ of certiorari declaring Rule
5A as having lapsed w.e.f. 1^stJuly, 2017 on the grounds that there
is no saving of the said provision under the CGST Act.

HELD

The Court noted that section 94
empowers the Central Government to make rules for carrying out the provisions
of the Finance Act. In addition to the specific matters in relation to which
Rules can be framed, there is also a general rule-making power. The only
statutory limitation is to ensure that rules are framed to enforce the
provisions of the Finance Act. The Court held that the powers granted were
exhaustive and included the power to frame Rule 5A of the Service Tax Rules,
1994.

Further, w.e.f. 1^st
July, 2017, the Court noted that Rules are framed to carry out the provisions
of the Act and are framed under the Act. Thus, the Rules are saved by clause
(b) of section 174(2) which states that anything done under the Finance Act
shall not be affected by the amendment of the Finance Act. It was also noted
that the powers of the competent authorities stood preserved by virtue of section
6 of the General Clauses Act. Thus, it was held that the petitioner is obliged
to maintain and provide all records which they are required to maintain in the
normal course of business to the respondent and dismissed the writ.

8
[2020 116 taxmann.com 4 Guj.]

Deendayal
Port Trust vs. UOI

Date
of order: 12^th February, 2020

Provisions of Rule 7B of Service
Tax Rules permit the assessee to revise the ST-3 returns multiple times within
the prescribed period. Hence, the ACES portal not allowing it to revise the
Form ST-3 for the second time within a prescribed period resulting in technical
glitches is contrary to the provisions of the said Rule 7B

FACTS

The
petitioner filed ST-3 return for the period April, 2017 to June, 2017 in
August, 2017 and after filing the return realised that there were certain
invoices pertaining to the said period which remained unaccounted;
consequently, the Input Tax Credit involved in such invoices could not be
claimed in the return of service tax in Form ST-3. The petitioner therefore
revised its return and claimed such ITC in the revised return filed in
September, 2017. Thereafter, the petitioner further realised that a few more
invoices for the said period remained to be included in the revised ST-3
returns as well. Therefore, it again tried to file a second revised return to
claim the correct amount; however, ACES did not permit it to file a revised
return for the second time. Therefore, credit of Rs. 99,46,810 remained
unclaimed.

The Department was requested to
consider the additional claim of credit. Thereafter the entire ITC (including
the ITC of Rs. 99,46,810) was claimed in TRAN-1. On scrutiny, the said credit
was denied. It was contended (by the petitioner) that credit should be allowed
as it was well within its right to revise the return a second time as per Rule
7B of the Service Tax Rules; however, the ACES portal did not allow the same.
Therefore, it should be given the benefit of Order No. 01/2020-GST dated 7^th
February, 2020 to submit its claim manually.

HELD

The High Court examined the
provisions of Rule 7B of the Service Tax Rules, 1994 and held that the said
Rule permits revision of the original return multiple times within the time
limit prescribed. Hence, the ACES portal not allowing it to revise the Form
ST-3 for a second time within the prescribed period resulting in technical
glitches is contrary to the provisions of the said Rule 7B. Accordingly, the
High Court directed the respondent to consider the claim of Rs. 99,46,810
manually under Rule 7B of the Rules, 1994 and order dated 7^th
February, 2020.

II.
TRIBUNAL

9. [2020-TIOL-493-CESTAT-Bang.]

M/s
TPI Advisory Services India Pvt. Ltd. vs. Commissioner of Central Tax

Date
of order: 27^th January, 2020

Service Tax paid legitimately on
invoice raised cannot be refunded

FACTS

The appellant raised credit notes
in the GST regime relating to the service tax regime and issued fresh invoices
in the GST regime and paid GST thereon. Subsequently, a refund claim was filed
for the service tax paid prior to July, 2017 u/s 11B of the Central Excise Act,
1944. It was stated that the clients did not accept the service tax invoice and
thus they raised credit notes with respect to those invoices and paid GST on
the fresh invoices raised. The refund claim was rejected on the ground that
raising subsequent invoices under GST as per the request of the clients and
claiming for the refund of service tax already paid under the erstwhile Finance
Act, 1994 is not under the purview of the law to consider for refund of service
tax paid for the correctly declared invoice value in the ST-3 returns.

HELD

The Tribunal noted that the
appellant issued the GST invoices subsequently simply at the instance of their
clients. When the service tax was paid for the services rendered during the
relevant period, the same was liable to be paid. The four invoices issued
subsequently were without any supplies under the GST regime which in itself is
a violation warranting rejection of refund. The tax paid during April to June,
2017 against the service tax invoices was the legitimate tax that was due to
the government as per the prevailing Finance Act, 1994. Hence, the service tax
paid is in order and correct and there is no provision for the refund of duty /
tax that was liable to be paid legitimately.

10. [2020-TIOL-549-CESTAT-Del.]

M/s
Regency Park Property Management
Services P. Ltd. vs. Commissioner, Service Tax

Date
of order: 29^th January, 2020

Inputs, input services and
capital goods used for construction of mall which is rented out services
received prior to April 11 is available as CENVAT credit post April 11

FACTS

The appellant availed CENVAT
credit on inputs, input services and capital goods for construction of a mall
and thereafter rented out the same for commercial purposes. Service tax was
paid under renting of immovable property service. The said credit availed was
held as inadmissible. Two show cause notices were issued for the periods April,
2007 to March, 2010 and April, 2011 to March, 2012.

HELD

Relying on the decisions of
various High Courts, including the case of Sai Sahmita Storages (P) Ltd.
(23) STR 241 (AP) and various Tribunals, it was held that there
is no doubt that CENVAT credit availed on inputs, input services and capital
goods used for construction of the mall, which was ultimately let out, cannot
be denied. With respect to the period April, 2011 to March, 2012, it is argued
that the CENVAT credit availed for the period 2011 to 2012 pertains to input
services received prior to 1^stApril, 2011. In this connection, the
relevant pages of the CENVAT Register for the period 2011-2012 were enclosed.
Relying on Board Circular No. 943/04/2011 dated 29^thApril, 2011
that credit on such service shall be available if its provision had been
completed before 1^stApril, 2011, CENVAT credit was allowed.

11. [2020-TIOL-500-CESTAT-Bang.]

Commissioner
of Central Tax vs. M/s Karnataka Golf Association

Date
of order: 17^th February, 2020

No service tax on advance
entrance / enrolment fee levied by club from its members as there exists
mutuality of interest

FACTS

The assessee is an Association of
Persons. The issue at hand is whether it is liable to pay service tax on
‘advance entrance / enrolment fee’ collected from prospective members.

HELD

Relying on the decision in the case of State of
West Bengal vs. Calcutta Club Ltd. 2019 (29) GSTL 545 (SC) and of the
Jharkhand High Court in Ranchi Club Ltd. 2012 (26) STR 401 (Jharkhand),
the Court held that since there is mutuality of interest between the club and
its members, there is no transfer of ownership of the service and accordingly
the appeals are disposed of.

BCAJ Admin

SERVICE TAX

I. HIGH COURT

20. [2019 109 taxmann.com 265 (Bom.)] Raymond Ltd. vs. UOI Date of order: 6^th August, 2019

Even if notices
can be kept in the call-book to avoid multiplicity of proceedings, yet the
principle of natural justice would require that before the notices are kept in
the call-book, or soon after, the petitioners are informed the status of the
show-cause notices so as to put the parties to notice that the said notices are
still pending. Giving notices for hearing after a gap of 17 years is to catch
the parties by surprise and prejudice a fair trial, as the documents relevant
to the show-cause notices may not be available with the petitioners for it is
reasonable for the assessee to presume that the notices have been abandoned

FACTS

The petitioner
challenged the action of the Central Excise Department seeking to revive six
show-cause notices issued between April, 2001 and January, 2004 under the
Central Excise Act, 1944 by issuing a notice for a personal hearing in respect
thereof in June and July of 2018. The petitioner submitted that issuing notices
to hear 14 to 17 years later is bad in law. Even in the absence of any time
limit in the law, show-cause notices must be disposed of within a reasonable
time. This revival of abandoned show-cause notices after so long causes
prejudice to the petitioner as the relevant documents pertaining to the
impugned notices were not available so as to appropriately meet the charge in
the impugned show-cause notices. The petitioner relied upon the decision in the
case of Bhagwandas S. Tolani vs. B.C. Aggarwal 1983 (12) ELT 44 (Bom.);
Premier Ltd. vs. Union of India 2017 (354) ELT 365 (Bom.); and
Sanghvi Reconditioners (P) Ltd. vs. Union of India [Writ Petition No. 2585 of
2017, dated 12^th December, 2017].

The Department
represented that the Revenue had kept the show-cause notices issued to the
petitioner in the call-book in 2001 (although show-cause notices for the
subsequent period were issued) in terms of the CBEC Circular No. 162/73/95-CX
dated 14^th December, 1995 and only after the Hon’ble Supreme Court
passed the final order in Revenue’s appeal in September, 2017 that the impugned
show-cause notices were removed from the call-book and the notices for personal
hearing were issued to the petitioners. It also submitted that at no time did
the Revenue inform the petitioner that the show-cause notices are being
dropped; therefore, it was obligatory on the part of the petitioner to keep the
papers and proceedings available till such time as the show-cause notices were
disposed of.

HELD

The Hon’ble
High Court observed that the Department gave no intimation to the assessee of
the fact that the impugned notices were kept in the call-book. It, therefore,
held that this delay in taking up the adjudication of the show-cause notices
(in the absence of any fault on the part of the party complaining) is a facet
of breach of the principles of natural justice. It further held that such a
practice impinges upon procedural fairness, in the absence of the party being
put to notice that the show-cause notices will be taken up for consideration
after some event and / or time when it is not heard in reasonable time. The
reasonable period may vary from case to case.

However, when
the notices are kept in abeyance (by keeping them in the call-book as in this
case), the Revenue should keep the parties informed about the same. This is the
transparent manner in which the State administration must function. The High
Court also quoted Circular No. 1053 of 2017 dated 10^th March, 2017
wherein at paragraph 9.4 the CBEC has directed the officers of the Department
to formally communicate to the party that the notices which have been issued to
them are transferred to the call-book. In the absence of such procedure being
followed by the Department, it was reasonable for the petitioners to proceed on
the basis that the Department was not interested in prosecuting the show-cause
notices and had abandoned them. The High Court thus quashed the show-cause
notices.

21. [2019 110 taxmann.com 293 (Mad.)] Delphi TVS Technologies Ltd. vs. Assistant
Commissioner (ST) Date of order: 9^th September, 2019

Where in response
to the notices received from the Department, the assessee requested for
additional time stating reasons for the same, passing final orders by simply
confirming the proposals made in the notice without first intimating to the
assessee as to whether his request for additional time is accepted or not, is
violation of the principle of natural justice

FACTS

The Department
originally issued notices of the proposal in February, 2019 to the assessee in
respect of four assessment years. The assessee, through letters in March, 2019,
requested the AO to give time up to April, 2019 for submission of reply by
stating that they need to collect more data to justify their stand; and that
they are occupied in preparing GSTR2A reconciliation against their input credit
taken in the monthly return. However, the AO, without giving time to the
assessee, proceeded to pass assessment orders in March, 2019 by stating that
the assessee failed to file their objection, though sufficient time was given.
The assessee challenged these orders before the High Court in a writ petition.

HELD

The Hon’ble
High Court observed that the assessee sought time to file their objection
through their letter dated March, 2019 and that such communication was also
received by the AO, as found in the impugned order itself. The Court,
therefore, held that in such circumstances the AO is not justified in
proceeding to pass assessment orders without informing the assessee as to
whether their request for time to submit their reply has been accepted or
rejected. The High Court further held that in both events, the AO is bound to
send a communication to the assessee and inform the result of the request made
by the assessee. In the absence of any such communication from the AO, there is
a possibility of drawing a reasonable presumption by the assessee that their
request has been accepted.

Therefore, the
act of the AO in not passing any order on the request of the petitioner seeking
time and proceeding to pass the orders of assessment straightway amounts to a
violation of the principles of natural justice. The High Court also observed
that the orders of assessment were passed simply by confirming the proposals in
the absence of any objection from the petitioner. Accordingly, the High Court
remanded the matter back to the AO to redo the assessment once again on merits
and in accordance with the law after inviting objection/s from the petitioner.

II. TRIBUNAL

22. [2020-TIOL-130-CESTAT-Kol.] M/s. Adhunik Fuels Pvt. Ltd. vs. CCE & ST Date of order: 17^th December, 2019

Suppression
requires to be established. If not, section 78 not invokable

FACTS

During the EA 2000 audit, the Department observed that the assessee as
recipient did not pay service tax liable to be paid under the reverse charge
mechanism. On this being pointed out, the assessee paid service tax with
interest. However, a show-cause notice was issued wherein tax was adjudged and
penalty was confirmed and also upheld by the first appellate authority. The
appellant pleaded before the Hon. Tribunal that they did not contest the tax
adjudged and interest but that would not justify the element of suppression and
penalty u/s 78. Further, section 74 was not invoked in the show-cause notice
and therefore late fee imposed meant going beyond the show-cause notice.

HELD

Short payment
was detected based on records maintained by the assessee. However, suppression,
misstatement, etc. needs to be established for invoking section 78. In its
absence thereof, section 78 cannot be invoked to levy penalty; and since the
show-cause notice did invoke section 74, late fee for delayed filing of ST-3
returns was also not sustained. The appeal thus was fully allowed.

23. [2020-TIOL-67-CESTAT-Mum.] M/s. Visible Alpha Solution India Pvt. Ltd.

vs. CCGST Date of order: 4^thDecember, 2019

Registration
not a prerequisite for granting refund claim. No contrary decision of any other
High Court to Karnataka High Court

FACTS

Two refund claims filed under Rule 5 of CENVAT Credit Rules, 2004 were
rejected on the ground that the appellant did not obtain registration. The
appellant pleaded that in terms of various decisions registration was not
required in terms of Karnataka High Court in the case of mPortal India
Wireless Solutions Pvt. Ltd. 2011-928-HC-Kar-ST.

HELD

Considering the matter no more res integra as per the decisions
of this Bench and other Benches and in terms of the Karnataka High Court’s
decision in the case of mPortal (Supra) and the fact of no
contrary decision being pronounced by any other High Court though Revenue
presented a few adverse decisions of the Coordinate Bench at Delhi, the issue
is settled in favour of the appellant. So far as the credit on general
insurance service for Mediclaim and water and recreation services is concerned,
they are covered by the ratio of the cases cited by the appellant (and)
are required for the business of the assessee. There is nothing on record that
proves their use for anything other than business purpose. Hence the credit is
eligible and consequently the refund.

24.
[2020-TIOL-16-CESTAT-Del.] Om Logistics Ltd. vs. Commissioner (Appeals) CGST Date of order: 5^th
December, 2019

Service tax on
Keyman Insurance Policy eligible credit if the beneficiary is the company

FACTS

The assessee,
providing courier agency service and business auxiliary service, filed ST-3
returns and paid service tax regularly. Credit for expenses on Keyman Insurance
Policy taken for the Managing Director was availed. Revenue contended that this
policy was for personal use and not for business purpose and hence directed the
assessee to reverse the credit – and hence the dispute.

The assessee
submitted that in the case of their own appeal No. 52845 of 2018 (SM), it was
held as eligible credit. The Revenue supported the order and stated that the
assessee had produced only the premium receipt and not the policy and hence was
required to be remanded to the adjudicating authority for deciding afresh.

HELD

Considering the
Tribunal’s order in the earlier appeal, it was observed that the benefit under
the policy in question is payable to the policy holder, viz., the company and
there is no nominee required when the policy is in the name of the corporate.
In view thereof, the order was set aside.

25. [2020-TIOL-52-CESTAT-Chd.] Verma Brothers vs. CCE & ST Date of order: 20^th November, 2019

Refund claimed
for an amount paid on exempted service not to be considered tax payment. Hence
not barred by limitation

FACTS

The appellant,
a construction service provider, paid service tax mistakenly on an exempt
service under entry 12(a) of Mega Exemption Notification No. 25/2012-ST dated
20^th June, 2012. This exemption was withdrawn with effect from 1^st
April, 2015 vide Notification No. 6/2015 dated 1^st March, 2015.
Assuming that the said notification was applicable from 1^stMarch,
2015 instead of 1^st April, 2015, the appellant paid service tax for
the said period and later, on 7^th November, 2016 as per the limit
prescribed under the Central Excise Act, lodged a refund claim.

Considering it
time-barred, the Department rejected it. The Revenue contended that the refund
is governed by section 11B of the Central Excise Act as per the decision of the
Apex Court in the case of Anam Electric Manufacturing Company 1997 (90)
ELT 260 (SC) relying on the decision of Mafatlal Industries vs.
Union of India 1997 (89) ELT 247 (SC), and therefore barred by
limitation.

HELD

Relying on the
decision in the case of Anam Electrical Manufacturing Co.
2002-TIOL-650-SC-CUS and based on this the view taken by the Delhi High
Court in National Institute of Public Finance and Policy 2018-TIOL-1746-HC-Del-ST,
the appellant was held as entitled to claim refund as in the case of Anam
Electric (Supra), the time prescribed is three years. In this case, the
assessee had filed the claim of refund within three years.

BCAJ Admin

Service Tax

I. HIGH COURT

15. [2020 (43) GSTL (Bom.) New India Civil Erectors Pvt. Ltd. vs. UOI Date of order: 25th September, 2020

Section 87 of Finance Act, 1994 – Without assessment and determination of tax due, no conclusion can be reached that any amount has become due to be paid and invocation of section 87 shall be premature and unjustified

FACTS

The petitioner was a private limited company engaged in the business of construction. For the period from 1st April, 2015 to 30th June, 2017, due to non-realisation of legitimate dues the petitioner was unable to discharge its service tax liability of Rs. 94,26,823 as alleged by the Department. The respondent also alleged that as per the statements by the accountant and legal consultant of the petitioner, it was evident that there was admission on the part of the petitioner of service tax liability. Such statement was also sustained by the director of the petitioner. The respondent contended that such declarations amounted to admission of liability which was recoverable u/s 87 of the Finance Act, 1994. Thus, the respondent issued a garnishee notice and froze the bank account of the petitioner to hold Rs. 94,26,823. Being aggrieved, the petitioner filed the present writ petition seeking relief by way of unfreezing of the bank account.

HELD

The High Court was of the view that the crucial expressions to be noted from section 87 of the Act are ‘any amount payable’, ‘is not paid’ and ‘shall proceed to recover’. A joint reading of these expressions can be interpreted to mean that before issuing garnishee notice u/s 87(b)(i), the amount has to be first determined and quantified. In the case of M.P. Enterprise vs. Union of India, 2018 (19) GSTL 487 (Bom.), the High Court had held that prior to determination of the amount due the invocation of section 87 would be premature. Further, mere statements by the officials themselves cannot lead to the conclusion that a certain amount has been determined as due from the petitioner. Without there being any assessment, no conclusion can be reached about any amount becoming due. Thus, the Court held that such invocation of section 87 was premature and unjustified and directed the respondent to withdraw the restraint on the petitioner’s bank account.

16. [2020 (42) GSTL 21 (HC-Mad.)] TVL Madura Coats W.P. (MD) No. 521 of 2020 and W.M.P. (MD) No. 399 of 2020 Date of order: 13th August, 2020

Section 83 of Central Sales Tax, 1956 – Onus lies on assessing authority to prove a statement as false in case of non-acceptance of explanation on the discrepancy pointed – Stand taken in subsequent assessment by the assessing authority prevails over a year unless it is justified

FACTS

The petitioner was served with an order rejecting exemption claimed on certain export transactions consequent to an assessment. The variation in the export value as set out in the export documents and books of accounts due to fluctuation in foreign exchange was rejected for want of a bank reconciliation statement. Reversal of export transactions erroneously shown by the petitioner as sales return were also rejected for non-submission of relevant documents even though the transactions were supported by bona fide documents and a certificate issued by the Chartered Accountant. The petitioner contended that the stand taken by the authority was contradictory to its subsequent assessment and thus had preferred the present writ.

HELD

The High Court held that when the assessing authority had accepted the explanation of the petitioner for the same discrepancy in the subsequent assessment, it cannot change its stand unless it has a proper reason for doing so. Further, if the authority was of the view that the statement of the petitioner was false, the onus lies on the authority itself to prove this. The petitioner cannot be expected to prove its point. Thus, the respondent was directed to revise the order.

17. [2020 (43) GSTL 479] Vianaar Homes Pvt. Ltd. vs. Asstt. Commr. (Circle-12), CGST, Audit-II, Delhi & Ors. (Del.) Date of order: 25th September, 2020

Rule 5A of Service Tax Rules, 1944 framed under the repealed / omitted Chapter V of the Finance Act, 1994 is saved by sections 173 and 174 of CGST Act, 2017

FACTS

The petitioner is a company engaged in the business of construction of residential complexes. It challenged a letter dated 1st November, 2019 by virtue of which the respondents commenced audit / verification under Rule 5A of the Service Tax Rules, 1994. The primary reason for challenging the action was that with effect from 1st July, 2017, with the advent of the CGST Act, the respondents cannot take recourse to a subordinate legislation (i.e., Rule 5A, Service Tax Rules, 1994) framed under Chapter V of the Finance Act, 1994 because it stands omitted by virtue of section 173 of the CGST Act. Besides, section 174 of the CGST Act, 2017 does not specifically repeal or save Rule 5A of the Service Tax Rules, 1994.

HELD

After extensively examining sections 173 and 174 of the CGST Act, 2017 along with sections 6 and 24 of the General Clauses Act, the High Court came to the conclusion that the intention of the Parliament was to save not only the ongoing proceedings but also the initiation of fresh investigation, inquiry, verification, etc., under the erstwhile service tax regime. Non-inclusion by title in the saving clause will not have any bearing on enforcement of the subordinate legislation (Rule 5A of the Service Tax Rules) where the parent Act is specifically saved. Thus, the Court held that Rule 5A of the Service Tax Rules, 1994 framed under the repealed / omitted Chapter V of the Finance Act, 1994 stood saved.

18. [2020 (43) GSTL 333 (Ker.)] Madhav Motors vs. State Tax Officer, GST
Department, Kannur Date of order: 27th October, 2020

Section 139 of Central Goods and Services Tax Act, 2017 – Where fresh registration is granted without cancellation of provisional registration, then such registration must relate back to the date of provisional registration and assessee be allowed to file returns and claim input tax credit from the date of provisional registration

FACTS

The petitioner was a dealer in automobiles registered under the erstwhile Kerala VAT Act. With the introduction of the GST Act, it applied for registration under the new Act and was granted provisional registration on 28th June, 2017 as per section 139 of the CGST Act, 2017. Thereafter, it tried uploading Form TRAN-1 for conversion of provisional registration to permanent registration and to claim transitional credit. But since no permanent registration was granted, it was not able to upload the said Form. Hence it opted for a representation, but the respondent did not give any response. In the interim, on 4th January, 2020 it was granted a fresh registration without cancellation of the provisional registration. The fresh registration indicated the liability of the petitioner from 1st July, 2017, whereas the registration certificate would be valid only from 4th January, 2020. Noticing this discrepancy, the petitioner requested the respondent for a change in the effective date of the registration certificate from 4th January, 2020 to 1st July, 2017. But this request was rejected. Aggrieved, the petitioner filed the present writ petition.

HELD

The High Court found that the provisional registration granted was not formally cancelled by the respondent as per the procedures envisaged under the GST law. The permanent registration was granted by the respondent on 4th January, 2020 and the date of liability was shown as being from 1st July, 2017. This clearly indicated that the respondent was aware that the petitioner was under the category of those who were taking refuge under transition credit. The respondent, however, stipulated the validity of the registration only from 4th January, 2020. Therefore, the Court held that where the provisional registration is not cancelled the permanent registration must relate back to the date of the provisional registration. It directed the respondent to amend the certificate and make it valid from 1st July, 2017 and permit the petitioner to upload returns and claim ITC (input tax credit) based on the returns so uploaded for the impugned period.

II. TRIBUNAL

19. [2020 (42) GSTL 66 (Tri.-Del.)] Om Logistics Limited ST/51121/2019 Date of order: 5th December, 2020

Rule 2(I) of CENVAT Credit Rules, 2004 – CENVAT credit available on tax paid on insurance premium under ‘Keyman’ insurance policy

FACTS

The appellant, registered under the Service Tax Act, availed CENVAT credit on tax charged on insurance premium paid in respect of the ‘Keyman’ insurance policy of key managerial persons. The respondent alleged that the life insurance policy was primarily for the personal use of the persons involved and not for any business purpose. Further, instead of the insurance policy, they had produced only the receipt of the premium. Thus, the credit availed was disallowed.

HELD

The Tribunal, relying upon on its own judgement, held that benefit of the policy in question was payable to the appellant company, being registered under the Companies Act and having perpetual existence. Thus, credit availed in respect of the insurance premium paid on account of ‘Keyman’ insurance had to be allowed to the appellant.

20. [2020 (42) GSTL 84 (Tri.-Hyd.)] Ushodaya Enterprises Pvt. Ltd. Date of order: 18th November, 2019

Section 73 of Finance Act, section 11A of Central Excise Act, 1994 – The show cause notice issued invoking extended period subsequent to Department audit wherein no such objection was raised is time-barred

FACTS

The appellant, a division of Ramoji Film City, operated satellite T.V. channels. A show cause notice was served on it on 7th April, 2011 for the period 2006-07 to 2009-10, alleging that the hire charges paid to a party abroad for the purpose of lease / rent of transponders which are attached to a satellite was to be classified as business support services and calling upon it to pay service tax on the same.

HELD

The Tribunal observed that the show cause notice was received by the appellant on 7th April, 2011, even though the Department claimed to have issued it on 24th March, 2010. The Department could not produce any document of dispatch or service thereof. Further, the appellant was admittedly audited by the Department where no objection was raised on the issue. Thus, the subsequent show cause notice cannot propose the demand for a period beyond one year of the period in dispute nor can it allege suppression of facts or misstatement with an intention to evade tax. Besides, if service tax paid under RCM on the value of hire charges paid by the appellant to the service provider abroad was available as credit in case such value was categorised as taxable, the situation would be revenue neutral. Consequently, penalty cannot be imposed as the facts indicated the absence of intention to evade tax.

21. [2020 (42) GSTL 79 (Tri.-All.)] Shriram Pistons and Rings Ltd. ST/70444/2019 Date of order: 4th February, 2020

Section 65 of Finance Act, 1994 – Amount recovered from salary of employees leaving job before completion of their term fixed as per contract entered into with them is not liable to tax

FACTS

The appellant was served with an order demanding service tax from that part of the amount which it recovers out of the salary paid to the employee if the employee breaches the contract of total term of employment.

HELD

It was held that the said recovery was out of the salary paid and also that the salary was not covered by the provisions of service tax. Relying upon the decision of the Madras High Court in GE T & D India Ltd. (Formerly ALSTOM T & D India Ltd.) vs. Deputy Commissioner of Central Excise 2020 (35) GSTL 89 (Mad.), the impugned order was set aside.

22. [2021-TIOL-04-CESTAT-Chd.] Mohan International Builders vs. Commissioner of Central Excise and Service Tax Date of order: 24th November, 2020

Works contract service is a service as a whole and therefore even though service tax is payable on a part of the value, reversal is not required under Rule 6(3) of the CENVAT Credit Rules, 2004

FACTS

The assessee is a registered contractor and providing Works Contract Service. It is liable to pay service tax on 40% of the value of service; therefore during audit an objection was raised that the remaining 60% of the value is to be treated as an exempted service in view of Rule 2(e) of the CENVAT Credit Rules, 2004; as such, the assessee was required to pay an amount under Rule 6(3)(i) of CENVAT credit availed by it.

HELD

The Tribunal relied on the decision in Surya Contractors Pvt. Ltd [2020-TIOL-899-CESTAT-Chd.] where the Tribunal categorically held that service as a whole provided by the appellant is a Works Contract Service and the same is a taxable service. It was also noted that the Scheme of Rule 6 read with Rule 2(e) of the CENVAT Credit Rules, 2004 shows that Rule 6 is applicable only in respect of distinct transactions of services wherein the appellant is providing two distinct transactions, one by way of a taxable service and another by way of an exempted service under Rule 2(e). Rule 6 does not become applicable in respect of the same taxable service where a part of it is being exempted by way of any notification issued which exempts a certain portion of the value of the same taxable service. The Tribunal accordingly held that Rule 6(3) of the CCR is not applicable to the present case.

23. [2021-TIOL-06-CESTAT-Bang.] M/s Northern Operating Systems Pvt. Ltd. vs. Commissioner of Customs, Central Excise and Service Tax Date of order: 3rd December, 2020

Deputation of employees by a group company is not liable to service tax under manpower recruitment or supply agency service – Employer-employee relationship exists therefore such transactions are excluded from the purview of service tax

FACTS

The appellant entered into an agreement with its group companies located outside India to provide general back office and operational support to such group companies. The terms of the agreement stipulated that when required the appellants would request the group companies for managerial and technical personnel to assist in its business and accordingly the employees would be deputed by the group company. The employees would act in accordance with the instructions and directions of the appellants, they would be on the payroll of the group company and would receive salary and other social security benefits from the group company. The Revenue alleged that the appellant failed to discharge service tax under manpower recruitment or supply agency service with respect to services received from their group company.

HELD

The Tribunal noted that service by an employee to the employer in the course of or in relation to his employment stands excluded from the definition of service. The persons seconded are working in the capacity of employees and payment of salaries, etc., is made by group companies only for disbursement purposes and hence an employee-employer relationship exists and such an activity cannot be termed as ‘manpower recruitment or supply agency’. The demand is accordingly set aside.

24. [2020 (43) GSTL 533 (Tri.-Del.)] Vaatikaa Construction Pvt. Ltd. ST/53250-53251/2015, 53307/2015 Date of order: 5th December, 2020

Section 65(105) – Service tax demand raised under one category cannot be confirmed under another category

FACTS

The appellant’s activities were in the nature of works contracts. A show cause notice was issued to it demanding service tax under ‘residential complex construction’ service, whereas the demand was confirmed under ‘works contract’ service.

Further, the respondent rejected the CA’s certificate and raised service tax liability on the closing balance of advances as reflected in the balance sheet, overlooking the months during which the advances were received.

HELD

The Tribunal, relying upon the various judgments quoted by the appellant, held that demand cannot be confirmed under a different category than the category quoted under the show cause notice even if the nature of business is in line with the said category quoted in the order. Besides, as the respondent failed to assign any specific reason for rejecting the CA’s certificate and computed the liability on the closing balance of the advance receipt, the additional demand was set aside.

BCAJ Admin

Service Tax

I. TRIBUNAL

8. [2020-TIOL-1626-CESTAT-Kol.] Bengal Beverages Pvt. Ltd. vs. CGST and CE Date of order: 9^th October, 2020

A whole-time
director is an employee of the company. Merely because the director is
compensated by a variable pay the same does not alter the employer-employee
relationship

FACTS

The Department has raised a
demand of service tax under reverse charge mechanism on the entire remuneration
paid to the whole-time directors, on both the fixed part as well as the
variable pay, in terms of Notification No. 30/2012-Service Tax dated 20^thJune,
2012. The case of the Department is that the remuneration paid to the directors
would constitute ‘service’ liable to service tax in their hands and the
assessee is required to discharge tax under reverse charge mechanism. Aggrieved
by the decision of the lower authority, the present appeal was filed.

HELD

The Tribunal primarily
noted that the only dispute is on payment of remuneration in the nature and
form of commission based on percentage of profit to whole-time directors, which
is a fact on record. Section 2(94) of the Companies Act, 2013 duly defines ‘whole-time
director’ to include a director in the whole-time employment of the company. A
whole-time director refers to one who has been in the employment of the company
on a full-time basis and is also entitled to receive remuneration. The
certificate issued by the Company Secretary states that the remuneration is
given in various forms as allowed under the Companies Act, 2013. Moreover, a
whole-time director is considered and recognised as a ‘key managerial
personnel’ u/s 2(51) of the Companies Act. Further, he is an officer in default
for any violation or non-compliance of the provisions of the Companies Act.

Thus, the whole-time
director is essentially an employee of the company and whatever remuneration is
being paid in conformity with the provisions of the Companies Act is pursuant
to the employer-employee relationship; the mere fact that the whole-time
director is compensated by way of variable pay will not in any manner alter or
dilute the position of the employer-employee relation between the company and
the whole-time director. Thus, the appellant is not required to discharge tax
under reverse charge.

9. [2020-TIOL-1603-CESTAT-Del.] M/s Sir Ganga Ram Hospital vs. Commissioner
of Service Tax Date of order: 2^nd September, 2020

The
facilitation fee retained from the fees payable to the consultant doctors is a
part of healthcare services and cannot be taxed separately as business support
services

FACTS

The appellant provides
various categories of healthcare services to its patients and for this purpose
has appointed professionals / doctors / consultants on contractual basis. The
doctors were given designated space in the hospital premises in the form of
chambers with an examination table for examining the patients coming to the
hospital. The professional fee was paid after retaining the facilitation fee.
The Department alleges that the ‘collection charges’ / ‘facilitation fee’
retained should be subjected to service tax as it was rendering infrastructural
support services to the doctors which was an activity taxable under the
category of ‘business support services’.

HELD

The
Tribunal placed reliance on the appellant’s own case reported in 2018-TIOL-352-CESTAT-Del.
where it has been categorically held that the view of the Revenue that in spite
of exemption available to healthcare services, a part of the consideration
received for such services from the patients shall be taxed as business support
service is not tenable. In effect, this will defeat the exemption provided to
the healthcare services by clinical establishments.

Admittedly, the
healthcare services are provided by the clinical establishments by engaging
consultant doctors. For such services, an amount is collected from the
patients. The same is shared by the clinical establishment with the doctors.
There is no legal justification to tax the share of the clinical establishment
on the ground that they have supported the commerce or business of doctors by
providing infrastructure. Thus, the demand is set aside and the appeal is
allowed.

BCAJ Admin

Service Tax

I.
HIGH COURT

10. [2020 (122) taxmann.com 32 (Guj.)] Britannia
Industries Ltd. vs. UOI Date of order: 11^th March, 2020

SEZ unit is
entitled to refund of unutilised ITC distributed to it under ISD mechanism

FACTS

The petitioner
is an SEZ unit making zero-rated supplies under GST. The petitioner was not
able to utilise the Input Tax Credit (ITC) of IGST from its ISD and hence filed
applications for refund. But the applications were rejected inter alia on
the ground that for supply received from outside SEZ or within SEZ, SEZ unit is
not supposed to pay any tax and thus there would be no question of ITC.

HELD

Referring to
various provisions of the Act, the High Court held that the contention of the respondents
that as the petitioner is not the supplier of the goods and services he would
not be entitled to file an application for refund is not tenable because in the
facts of the present case, the input service distributor, i.e., ISD as defined
u/s 2(61) of the CGST Act is an office of the supplier of goods and services
which receives tax invoices issued u/s 31 of the CGST Act towards the receipt
of input services and issues a prescribed document for the purpose of
distributing the credit of CGST, SGST or IGST paid on such goods or services.
Therefore, in the facts of the case it is not possible for a supplier of goods
and services to file a refund application to claim the refund of the ITC
distributed by ISD.

The Court also
referred to the terms of Notification No. 28/2012 CE-(NT) dated 20^th
June, 2012 applicable to the service tax regime providing that credit of input
services to be distributed by ISD to all units. The High Court also accepted
that there is no express provision in section 54 of the CGST Act denying refund
claims filed by SEZ units and relied upon the decision in the case of
Amit Cotton Industries 2019 (29) GSTL 200 (Guj.) wherein in similar
facts this Court allowed the claim made by the petitioner for a refund of the
IGST in case of an export unit.

11. [2020 (122) taxmann.com 25 (A.P.)] Shiridi Sainath
Industries vs. Deputy Commissioner of Services Tax (International Taxation) Date of order: 20^th November, 2020

Agreement
permitting millers to retain the by-products generated in the course of the
milling process cannot be termed as granting additional consideration (in the
form of the by-products) payable to the millers for providing milling services
and hence cannot form part of the value or be liable to be taxed under GST Act

FACTS

The petitioner
is a rice miller and registered dealer under the APGST Act, 2017 (GST Act). The
State Government procures paddy from the roots and gives it to the rice mills
for milling and handing over to the Andhra Pradesh Civil Supplies Corporation
(APCSC) for public distribution. As consideration for milling, APCSC pays at
the rate of Rs. 15 per quintal of paddy milled. As per the terms of the
agreement, the rice millers have to supply rice equivalent to 67% of the paddy
given for milling irrespective of the yield. In fact, the actual yield will be
only around 61% to 62%. The balance of 5% to 6% has to be provided by the
petitioner to the APCSC out of his own stock. Therefore, as a compensation /
exchange for the same, APCSC allows the petitioner to retain the broken rice,
bran and husk obtained in the course of milling of the paddy. The petitioner
sells the said broken rice, bran and husk. The broken rice and husk are
exempted from tax and the petitioner pays tax on the bran at the rate of 5%.

The Department
contended that the by-products which are retained can only be treated as part
of the consideration for the work agreed to be done, i.e., custom milling, as
both the parties arrived at the rate of Rs.15 per quintal only after
considering the fact that the petitioner would retain the by-products. Hence,
in the present case the price is not the sole consideration for custom milling
of rice as the consideration involves something other than cash. Thus, even the
monetary value of the goods and services will form part of the consideration.
It further contended that the by-products may include some exempted products
like husk. However, their value shall be taken for the purpose of calculation
of consideration.

HELD

The High Court
referred to the decision in the case of Food Corporation of India vs.
State of AP and held the following:

When the terms are entered in the form of a
written agreement, the same are sacrosanct and shall be looked into to know the
purpose for which the by-products were given to the miller and not by adducing
oral evidence;

When the terms only specify a certain amount as
remuneration and nothing else is indicated towards remuneration, no further
condition can be regarded as remuneration; and

When the terms say that the by-products shall be
the property of the agent (miller), such transfer of property in the goods
cannot be treated as a sale.

The Court thereafter referred to the agreement between the parties and held
that Clause 22 allowing millers to retain the by-products and Clause 17 dealing
with consideration for the milling process are distinct and independent of each
other and that there is not even the slightest insinuation in either clause
that the by-products shall form part of the consideration. The Court further
noted that in the said agreement all the terms, trivial as well as significant,
are meticulously incorporated and hence one can logically conclude that if the
parties wanted to covenant that by-products shall form part of the
consideration they would have mentioned it in clear terms. In these
circumstances, the High Court held that the by-products which are allowed to be
retained by the petitioner are not part of the consideration.

12. [2020 (122) taxmann.com 114 (Ker.)] Uniroyal Marine Exports Ltd. vs. CCE Date of order: 17^th November, 2020

If the amounts paid by the assessee as tax under a mistake of law / fact
are refunded to it by the tax authorities, the same cannot be ordered to be
recovered back from the assessee as it does not partake the character of tax
under Article 265 of the Constitution of India

FACTS

The controversy herein is with respect to the
refund of service tax paid by the appellant for services rendered prior to 18^th
April, 2006 when service tax was not levied on foreign agency commission. The
appellant had paid the tax without demur. Later, the High Court of Bombay in Indian
National Ship Owners’ Association vs. Union of India [2009 (13) STR 235 (Bom.)]
held that the service recipient in India is liable to service tax for payments in
lieu of service received from abroad only from 18^th April, 2006
after section 66A was incorporated in the Finance Act, 1994. The Supreme Court
upheld the judgment of the Bombay High Court on 14^th December, 2009;
within eight months of that, the application for refund was filed by the
appellant before the original authority. The original authority allowed the
claim. A review was filed, which was rejected. In the first appeal, by
Annexure-A4, the refund order was set aside, by which time the refund had been
made. A further appeal before the CESTAT also ended in rejection.

The appellant contended that the payments were made by a mistake in law
and hence the same has to be refunded even if the application is not filed
within the time provided.

HELD

Referring to the decision in the case of Southern Surface
Finishers and Another vs. Assistant Commissioner of Central Excise [2019 KHC
47], the Court held that in the said case the Court considered the
Constitutional Bench decision in the case of Mafatlal Industries Ltd. vs.
Union of India [(1997) 5 SCC 536] and found that the mistake if
committed by the assessee, whether it be on law or facts, the remedy would be
only under the statute. Accordingly, the Court decided the matter in favour of
Revenue. However, the Court noted that in the instant case the amounts have
been refunded to the assessee as per the order of the original authority. In
such circumstances, the Court held that as the amount cannot be treated as tax
due under Article 265 of the Constitution, recovery thereof cannot be directed.
For this proposition, the Court also relied upon the decision of the Supreme
Court in CIT Madras vs. Mr. P. Firm Muar [AIR 1965 SC 1216]. The
Court accordingly held Revenue to be incapable of recovery of the amounts
refunded as tax due.

II. TRIBUNAL

13. [2020-TIOL-1694-CESTAT-Mum.] Man Infraprojects Ltd. vs. CCGST Date of order: 9^th December, 2020

A residential complex of nine floors comprising of nine duplex flats is
eligible for exemption before 30^th June, 2012 as it has less than 12 residential units

FACTS

Rejection of refund claim of service tax paid for construction of
residential complex before 30^th June, 2012 on the ground that the
appellant failed to establish that it comprises of less than 12 residential
units so as to be covered under exemption clause is assailed in this appeal.

HELD

The Commissioner (Appeals) had failed to arrive at a conclusion that the
complex had less than 12 residential units as it had 13 floors. However, going
by the architect certificate, floor plan and the full occupation certificate
issued by the Executive Engineer of the Municipal Corporation of Greater Mumbai
dated 2^nd August, 2013, it clearly indicates that the complex
comprises of nine residential units, taking each duplex to be counted as one
unit. Therefore, the appellant is entitled to get the refund sought for. The
appeal is allowed. The Department is directed to refund the tax with applicable
interest as per section 11AA of the Central Excise Act, 1994 within three
months of receipt of the order:

14. [2020-TIOL-1676-CESTAT-Del.] M/s Rohan Motors Ltd. vs. Commissioner of Central
Excise Date of order: 5^thOctober, 2020

Incentives received are not liable to service tax pre- and post-July,
2012 – Bouncing of cheques and cancellation of orders are penal in nature and
therefore cannot be viewed as consideration for a service

FACTS

The appellant buys vehicles from Maruti
Suzuki India Ltd. for further sale to buyers under a dealership agreement
entered into between them. Under the said agreement, they receive discount
which is referred to as ‘incentives’ under the schemes. The Department has
sought to levy service tax on the incentives received under the category of
‘business auxiliary service’. The period involved is both pre- and
post-negative list. Further, demand is also confirmed on bouncing of cheques
and cancellation of orders.

HELD

The Tribunal primarily noted that the appellants are traders in vehicles
and work on a principal-to-principal basis. The sales promotion activities
undertaken are for the mutual benefit of their business. The amount of incentives
received cannot therefore be treated as consideration for any service. Further,
it was also noted that for the period after July, 2012 a different view cannot
be taken when in the appellant’s own case (2018- TIOL-2860 – CESTAT-Del.),
incentive was held as non-taxable. Reliance was also placed on the decisions of
Toyota Lakozy Auto Pvt. Ltd. vs. Commissioner of Service Tax &
Central Excise [2016-TIOL-3152-CESTAT-Mum.] and Sai Service
Station Ltd. vs. Commissioner of Service Tax, Ahmedabad [2014 (34) STR 416
(Tri.-Ahmd)]. Further, with respect to bouncing of cheques and
cancellation of orders, it was held that these amounts are penal in nature and
not towards consideration for any service.

Note: A similar decision is also passed by the Hon’ble Bangalore CESTAT
in the case of Popular Vehicles and Service Ltd. vs. CCE [2020 (120)
taxmann.com 305 (Bangalore-CESTAT), 12^th February, 2020].

BCAJ Admin

Service Tax

I. TRIBUNAL

6. [2020-TIOL-1464-CESTAT-Mad.] M/s Hexaware Technologies Ltd. vs. Commissioner of GST and
Central Excise Date of order: 5^th February, 2020

The refund
claim cannot be rejected for reason of error in mentioning the address on FIRC.
Further, the date of filing the original application should be considered for
the purpose of time bar and not date on the application filed after
rectification of defects

FACTS

The refund
claim is rejected on the grounds that the address mentioned on the FIRC is that
of the Mumbai unit instead of the Chennai Unit. Secondly the claim is
time-barred, computing the date from the date of submission of refund claim
after rectification of defects. The third ground is with respect to
non-submission of documents / FIRC.

HELD

With respect to
the first ground, the Tribunal held that the address of the Mumbai unit
mentioned in the FIRC document is only an error by oversight and rejection of
refund claim on this ground requires to be set aside. With respect to the
second ground, the Tribunal held that the period has to be computed from the
date of original submission of the refund claim and not from the date when it
is re-submitted after rectification. Further, with respect to non-submission of
FIRC, the Tribunal remanded the matter to the adjudicating authority.

7. [2020-TIOL-1470-CESTAT-Del.] Sitq India
Private Limited vs. Commissioner of Service Tax Date of order: 22^nd January, 2020

Investment
advisory services provided in relation to real estate cannot be classified as
real estate agent service

FACTS

The assessee is
engaged in providing non-binding investment advisory service to SITQ Mauritius
Advisory Services and other such entities. The service recipients do not have
any office in India and are located outside India. The service is classified by
them under ‘Management, Business Consultancy Services’. Since the entire
service income was on account of service provided by it to foreign-based
companies, they did not pay any service tax on provision of such services,
treating the same as ‘Export of Service’ in terms of Rule 3(1)(iii) of the
Export of Service Rules, 2005.

The Department
contended that the service is covered under ‘Real Estate Agent Service’ and
since the properties are not situated outside India it cannot be categorised as
‘Export of Services’.

HELD

The Tribunal noted
that the appellant renders investment advisory services in relation to
investments and not to any particular real estate project. It is advising in
respect of investment in companies in the real estate sector in the form of
equity / debt and not in real estate property per se. Further, the
advisory services provided are not restricted to advising in respect of
investments. It is wider in scope and also includes general economic and market
conditions, tax environment, etc. The appellant also advises on various funding
and investment structuring options.

Accordingly, it is held that the service provided is classifiable under
‘Management, Business Consultancy Services’, and therefore the service provided
to the foreign company is considered as export.

BCAJ Admin

Service Tax

I. HIGH COURT

1. [2020]
119 Taxmann.com 174 (SC) L.R. Brothers Indo
Flora Ltd. vs. CCE Date of order: 1^st
September, 2020

The Hon’ble Supreme Court held that
amendment to Notification No. 126/94-Cus dated 3^rd June, 1994 by
Amending Notification No. 56/01-Cus dated 18^th May, 2001 is
prospective in nature, as an essential requirement for application of
legislation retrospectively is to show that the previous legislation had any
omission or ambiguity or it was intended to explain an earlier act; in the
absence of the above ingredients, legislation cannot be regarded as having
retrospective effect

FACTS

The appellant is a 100% Export-Oriented Unit
required to export all articles produced by it. As a consequence, it is
exempted from payment of customs duty on the imported inputs used for the
production of the exported articles, vide Notification No. 126/94-Cus
dated 3^rd June, 1994. Under the said Notification, exemption on levy
of customs duty had been extended even to the inputs used in the production of
articles sold in the domestic market in accordance with the Export-Import
Policy and subject to other conditions specified by the Development
Commissioner. In the case of non-excisable goods, the customs duty was payable
on the inputs used for production, manufacturing or packaging of such articles
at a rate equivalent to the rate of customs duty that would have been leviable
on the final articles.

The said
Notification was amended by Notification No. 56/01-Cus dated 18^th
May, 2001 after which the customs duty on inputs was charged at the rate
equivalent to the duty leviable on such inputs and not on the final articles. The
EXIM Policy 1997-2002 provided that a 100% Export-Oriented Unit in the
floriculture sector was permitted to sell 50% of its produce domestically,
subject to achieving a positive net foreign exchange earning of 20% and upon
approval of the Development Commissioner. The appellant, without obtaining the
approval of the Development Commissioner and without maintaining the requisite
net foreign exchange earning, made sales domestically. Notably, they
subsequently sought ex-post facto approval from the Development
Commissioner. However, in the meanwhile a show cause notice was issued for levy
of customs duty on the domestic sales made in contravention of the EXIM Policy.
The duty was confirmed as per the pre-amended Notification which was
operational during the period under consideration.

HELD

As regards the first ground, the Hon’ble
Supreme Court held that on a combined reading of the Notification with the
conditions laid down in the EXIM Policy, it is clear that the fulfilment of the
said conditions is a condition precedent to becoming eligible to make domestic
sales. The domestic sales pertaining to excisable goods made in conformity with
the conditions of the EXIM Policy are exigible to excise duty, but once there
is a contravention of the conditions of the Policy, irrespective of the goods
produced being excisable or non-excisable, the benefit under the exemption
Notification is unavailable. In such a situation, the very goods would become
liable to the imposition of customs duty as if being imported goods. The Court
further held that the demand made in the show cause notice ‘treating’ cut
flowers that were grown on Indian soil as deemed to have been imported was only
for the purpose of quantification of the customs duty on the imported inputs
and not the imposition of customs duty on the domestically grown cut flowers as
such.

The Supreme Court held that the language
employed in the amendment Notification does not offer any guidance on whether
the amendments as made were to apply prospectively or retrospectively. It is a
settled proposition of law that all laws are deemed to apply prospectively
unless either expressly specified to apply retrospectively or intended to have
been done so by the Legislature. The latter would be a case of necessary
implication and it cannot be inferred lightly. Referring to Circular No.
31/2001-Cus dated 24^th May, 2001, the Court held that upon a bare
reading of the circular, it can be noted that it discusses the mechanism in
force before the amendment, the reason for bringing in the change and the
changes brought in. The circular does not mention that the earlier methodology
in force was deficient or devoid of clarity in any manner. It rather says that
the same was being disadvantageous to the export units as compared to the other
units due to the difference in charging rates in the respective circulars. Upon
considering that, the amendment has been brought in to establish parity with
the excise notifications and to vindicate the disadvantage that the earlier
regime was causing to export-oriented units.

Merely because an anomaly has been
addressed, it cannot be passed off as an error having been rectified. Unless
shown otherwise, it has to be seen as a conscious change in the dispensation,
particularly concerning fiscal matters. To call the amendment Notification
clarificatory or curative in nature it would require that there had been an
error / mistake / omission in the previous Notification which is merely sought
to be explained. As regards the Notifications, in this case, referring to the proviso
in the charging section of the Central Excise Act, the Court concluded that the
exemption Notification was not an error that crept in but was intentionally
introduced by the Government to determine the charging rate and hence it cannot
be said to be clarificatory in nature.

II. HIGH COURT

2. [2020 (39) G.S.T.L. 388 (Guj.)] Hitech Projects vs.
UOI Date of order: 6^thJuly, 2020

Section 125 of Sabka Vishwas (Legacy
Dispute Resolution) Scheme – Fair opportunity to be provided to the petitioner
if unable to attend the personal hearing owing to the lockdown on account of
the Covid-19 pandemic

FACTS

The petitioner applied for the Sabka
Vishwas (Legacy Dispute Resolution) Scheme with respect to two pending
appeals. However, the applications were held to be not maintainable as the case
involved confiscation of goods and imposition of redemption fine. A personal
hearing for the same was scheduled during the period of lockdown when the
offices of the petitioner and the Department were closed. On failure of the
petitioner to appear for the matter, SVLDRS-3 was issued by the Department
directing it to pay the disputed amount. The petition was filed requesting a
fresh hearing and to set aside the SVLDRS-3.

HELD

Without going into the merits of the case
whether benefit of the SVLDR Scheme would be available to the petitioner, the
High Court held that an opportunity should be given to the petitioner to put
forward its case before the Department in person. Besides, though the payment
under the Scheme was to be made by 30^th June, 2020, the Department
was directed to accept the payment considering the fact that the litigation was
pending before the Court.

III. TRIBUNAL

3. [2020-TIOL-1403-CESTAT-Kol.] M/s Acclaris Business
Solutions Pvt. Ltd. vs. Commissioner of CGST and Central Excise Date of order: 10^th
September, 2020

When the services are 100% exported, refund
is eligible of the entire CENVAT credit irrespective of whether export payment
is received or not received

FACTS

A 100% exporter of services, the appellant
claimed refund of accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004. Both the authorities below denied the refund of a
certain amount while applying the formula prescribed for maximum permissible
refund of the credit amount. In the said formula, the authorities included the
value of export invoices for which payment is not received in the relevant
period while considering the value of ‘total turnover’ and granted
the refund proportionately to the extent of payment received.

HELD

The Tribunal noted that refund is allowed of
the ‘net CENVAT credit’ availed. The intention of the formula of refund claim
of export value in the numerator and total turnover in the denominator is to
restrict the refund only to export services and not for domestic services.
Thus, when there is no domestic service, in both numerator and denominator the
amount of export turnover has to be considered. There is no reason to consider
the aggregate of the value of export turnover payment of which has been
received and that for which payment has not been received, since it is not
required in the prescribed formula. It was further noted that if the contention
of Revenue is accepted, then the assessee will never be allowed refund of the
‘CENVAT credit amount availed in the relevant period’ inasmuch as the refund in
the subsequent period would be allowed by considering the ‘net CENVAT credit’
availed in that period. That is neither the intention of the law nor prescribed
in the formula above and therefore the refund is fully admissible.

4. [2020-TIOL-1401-CESTAT-Kol.] Commissioner of
Service Tax vs. M/s Naresh Kumar and Company Date of order: 6^th
February, 2020

The activity of liaising and supervision,
not involving physical handling of goods, is not covered by clearing and
forwarding agent services

FACTS

The assessee is rendering various services
like liaison and follow-up on behalf of consumers between collieries and the
railways, supervision, monitoring, witnessing the loading of specified size and
grade of coal and shortage en route, ensuring optimum quantity of supply,
ensuring proper weighment, coordinating receipt of necessary documents and
submitting the same to consumers and organising sampling and analysis of coal.
It is the case of Revenue that these activities amount to rendering ‘clearing
and forwarding services’. But as per the assessee, these activities do not
amount to rendering ‘clearing and forwarding services’ as they do not
physically handle or receive or store the goods, but only do liaising,
supervision and coordination.

HELD

The Tribunal,
relying on the decision of the Supreme Court in the case of Coal Handlers
Pvt. Ltd. vs. Commissioner of Central Excise [2015-TIOL-121-CESTAT-Mum.]
where the Apex Court has categorically held that the activity of liaising and
supervision will not be considered as clearing and forwarding since there is no
physical activity involved, set aside the demand.

5. [2020-TIOL-1377-CESTAT-Mum.] M/s Aban Offshore
Ltd. vs. Commissioner of GST and Central Excise Date of order: 28^th July, 2020

Short-term accommodation, rent-a-cab
service and outdoor catering service are allowable as CENVAT credit post-1^st
April, 2011

FACTS

The appellant was engaged in providing
various services including mining service, utilised CENVAT credit on the input
services used for providing such output services. The input services used
included short-term hotel accommodation, rent-a-cab, outdoor catering and
housekeeping services. A show cause notice was issued disallowing the said credit
availed post-1^st April, 2011. The assessee contended that the crew
is deployed to the offshore location from various geographical locations;
further, there are several permissions and approvals required before the work
is commenced. Therefore, the crew requires to be accommodated during the
relevant time. With respect to the rent-a-cab service, it was stated that the
same is required for their naval officers and surveyors to travel to the rig.
And outdoor catering services were used for the personnel working on the rig. Thus, the services used being wholly for business
purposes, the credit should be allowable.

HELD

The Tribunal noted that the service of
accommodation was necessarily required to be provided till the time the
necessary approvals and permissions were received. Therefore, such service not
being for personal consumption, the credit is allowable. As for the rent-a-cab
service, it was submitted that the exclusion merely restricts credit on
vehicles which qualify as capital goods. From the recipient’s point of view, a motor vehicle can never be
capital goods and he would never be eligible for credit if a narrow
interpretation is given. Thus, credit is allowable on rent-a-cab service. With
respect to the outdoor catering, it is held that access to proper food is the
most basic requirement for any person to carry out a task. If the appellant’s
personnel fall ill on account of stale / spoilt food, the operation being
carried out by the appellant would be adversely impacted and, consequently, the
output service. Thus, the service being in relation to output service, the
credit is allowable.

BCAJ Admin

Service Tax

I. TRIBUNAL

25. [2021 (124) taxmann.com 351 (CESTAT-Ahmd.)] Pujan Builders Engineers & Contractors vs. CCE&ST Date of order: 11th February, 2021

The period for which the assessee was under the bona fide belief that no refund is due to him (as the excess service tax paid was adjusted by him in TRANS-1), should not be reckoned for the counting period of limitation u/s 11B of the Central Excise Act

FACTS

For the period April to June, 2017, Service Tax return was filed on 14th August, 2017. Due to the cancellation of some of the invoices, the appellant revised the return on 21st September, 2017. The excess tax paid as a result of the cancellation of invoices was adjusted by it in Form TRAN-1. The GST Department objected to the said adjustment and it was reversed along with payment of interest on 27th February, 2019. Thereafter, a refund application was filed on 5th April, 2019 for the excess payment. The refund claim was rejected on the ground of time bar by treating the relevant date as the date of payment of service tax, i.e., 5th July, 2017, u/s 11B of the Central Excise Act, 1944.

HELD

The Hon’ble Tribunal held that since the amount of excess paid service tax was adjusted against the TRAN-1 account and the same was reversed on 27th February, 2019 along with interest, till such date there is no cause for claiming refund of this amount. The refund arises only after the amount is reversed. The refund was admittedly filed on 5th April, 2019, i.e., well within the prescribed time limit of one year in terms of section 11B and hence is not time-barred.

26. [2021 (123) taxmann.com 444 (CESTAT-Bang.)] Target Corporation India (P) Ltd. vs. Commissioner of Central Excise Date of order: 10th January, 2021

Reimbursement of salaries and out of pocket expenses to the foreign group entity in respect of employees seconded by it to the Indian entity would not be regarded as ‘Manpower Recruitment and Supply of Manpower Agency Service’ as the group companies are not in the business of supplying manpower

FACTS

The appellant entered into an agreement with its group company in the USA (Target, USA) for secondment of employees. Apart from the agreement, it issued a letter of assignment to such seconded employees specifying the location of work, the position of duties, hours of work, computation of employee benefits, terms of employment, annual revision, termination of employment and taxation, etc., relevant to their secondment. The terms of the agreement provided that the employees seconded shall continue to have their payroll processed by Target, USA. They will act in accordance with the instructions and directions of the appellants and the appellant shall reimburse Target, USA all remuneration including the out of pocket expenses incurred by the seconded employees at actuals. In addition, a service charge was to be paid to Target, USA for processing of the payroll and it was agreed that during the secondment period the role of Target, USA is restricted to that of payroll service provider only.

Target, USA raised debit notes towards salaries and the payments were remitted in foreign currency. In the financials the same were grouped as ‘salaries, wages and bonus’ under the head ‘expenditure incurred in foreign exchange’. Further, the amount under the said head also contained salaries deposited in the foreign bank accounts of its own employees deputed on overseas assignments. After investigation, the Revenue authorities entertained the view that the assessee has evaded the payment of service tax towards import of services on ‘Manpower Recruitment and Supply of Manpower Agency Service’.

HELD

The Tribunal referred to the definition of ‘Manpower Recruitment or Supply Agency’ Services u/s 105(k) under the Finance Act, 1994, the scope of the said services explained by Circular F. No. B1/6/2005-TRU dated 27th July, 2005, and also to the definition of service u/s 65B(44) for a period on or after 1st July, 2012. The Tribunal held that the legal position post the negative list regime does not make any departure from the settled position of law as it existed before 2012 with respect to the service tax implications on deputation of employees. It further held that the agreement entered into with the group entity is for provision of certain specialised services and is not related to the supply of manpower services and that the group companies are not in the business of supplying manpower. It further held that the persons seconded to the appellant were working in the capacity of employees and payment of salaries, etc., is made to such employees by group companies only for disbursement purposes and hence an employer-employee relationship exists between the appellant and such employees and such an activity cannot be termed as ‘manpower recruitment or supply agency’ and the whole arrangement between the appellant and its group companies does not fall under the taxable service of ‘manpower recruitment or supply agency’ service as defined under the Finance Act, 1994.

The Tribunal also referred to many decisions, including that of Honeywell Technology Solutions Pvt. Ltd. vs. CST, Bangalore, 2020-TIOL-1277-CESTAT-Bang., M/s Volkswagen India Pvt. Ltd. vs. CCE, Pune-I 2014 (34) S.T.R. 135 (Tri.-Mumbai), Computer Sciences Corporation India Pvt. Ltd. vs. Commissioner of Service Tax, Noida reported in 2014-TIOL-434-CESTAT Del, etc., in support of its conclusion.

27. [2021 (124) taxmann.com 355 (CESTAT-Mum.) Vantage International Management Company vs. CCGST Date of order: 12th February, 2021

The value of diesel supplied free of charge by the receiver as per the agreement in the course of execution of the contract does not form part of the taxable value even after the amendment made in section 67 by the Finance Act, 2015 (20 of 2015), with effect from 14th May, 2015

FACTS

The appellant was engaged in providing mining services to ONGC for performing drilling operations on oil wells in the East and West Coasts of India. The agreement was entered into with M/s ONGC for carrying out the drilling operations. The agreement inter alia provided that there will be an average consumption of diesel @ 50 KL/per day which will be provided by M/s ONGC at their cost. The Revenue authorities took a view that the cost of such fuel should form part of the gross amount u/s 67 of the Finance Act, 1994 for payment of service tax on such value.

HELD

On perusal of the agreement, the Tribunal observed that M/s ONGC was required to supply the fuel (diesel) for running of the drilling equipment; that it was not required to make payment of fuel to the appellant; and that the same was in fact supplied free of cost to accomplish the assigned task. The Tribunal also noted that as per the amendment made in section 67 by the Finance Act, 2015 with effect from 14th May, 2015, the taxable value includes inter alia any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, subject to the fulfilment of the prescribed conditions. However, in the present case it is an admitted fact on record that the appellant had never charged any cost of fuel to M/s ONGC over and above the amount claimed by it for providing the taxable service. Therefore, the value of the fuel cannot be added to the taxable value both under the non-amended and the amended provisions of section 67.

Further, the Tribunal held that the entire consideration was received in monetary terms. Hence, it cannot be said that it was not properly able to determine the value of taxable service in order to attract the provisions of Rule 3(b) of the Service Tax (Determination of Value) Rules, 2006. Similarly, the provisions of Rule 5 ibid also would not attract in this case inasmuch as no cost of fuel was charged or billed to the recipient of the service. The decision of the Supreme Court in the case of Commissioner of Service Tax vs. Bhayana Builders (P) Ltd. 2018 (10) GSTL 118 (SC) was referred to in support of the aforesaid conclusions.

28. [2021 (44) GSTL 284 (Tri.-Ahmd.)] Lakshmi Exports vs. Commissioner of C.Ex.&S.T., Surat Date of order: 22nd September, 2019

Amount deducted from invoice under the head of commission cannot be treated as business auxiliary service (commission) where the transaction itself is on principal-to-principal basis

FACTS

The appellants are merchant exporters and engaged in the export of goods such as fabric, scarves, saris, dress material, etc. While charging consideration to the buyer located in the foreign country, the appellant had reduced amounts ranging from 11% to 12.5% from the invoice value under the heading of ‘commission’. During the audit of refund claims of the appellant, the Department observed that the said amount being reduced under the head ‘commission’ amounts to commission paid by the appellant to the commission agent in relation to export of their goods and that the commission is liable to service tax under the head ‘Business Auxiliary Service.’

HELD

The Tribunal, after considering the facts of the case, observed that since the transaction was of sale and purchase between the appellant and the buyer of the goods, whatever was shown on the invoice was the sale value and the deduction shown was nothing but discount given by the exporter to the foreign buyer. Further, it also noticed that the Department had grossly failed to bring any evidence on record to show that there existed a commission agent in the entire transaction. In the entire transaction only two persons were involved, one, the appellant as exporter of the goods, and two, the buyer of the goods. In the sale of goods, in case of the service of a commission agent, if involved, there has to be a third person as service provider to facilitate and promote the sale of an exporter to a different foreign buyer. In the present case, there was absolutely no evidence that this 11% was paid to some third person as commission. There was no contract of commission agent service with any of the commission agents and there was no person to whom payment of commission was made; therefore, no service provider, i.e., foreign commission agent, exists in the present case and no service was provided by any person to the appellant. In the absence of any provision of service, no service tax can be demanded. The Tribunal, citing various precedents, held that no service tax exists in the entire transaction and accordingly quashed the demand.

It was also observed that if at all the amount deducted was considered as business auxiliary service, the said service being provided for export of goods in any case shall not be liable to service tax. Hence, the entire exercise would be revenue neutral. Further, as the appellant had shown all the figures and data in the documents, there was absolutely no suppression of facts and thus the longer period of demand shall not be invoked. Accordingly, the impugned orders were set aside and the present appeals were allowed.

29. [2020 (43) GSTL 183 (Tri.-Mum.)] V. Express vs. Commissioner of Service Tax-I, Mumbai Date of order: 28th February, 2020

Tax demand by the Department where there is a clarificatory confusion or uncertainty in the provisions of the law cannot be maintainable on such shaky foundation

FACTS

The appellant, as a ‘goods transport agency’, had been rendering service of ‘transportation of goods by road’. On investigation it was alleged that the service rendered by the appellant was liable as ‘courier agency service’ instead of the acknowledged taxability. Though both services are, admittedly, taxable, the differential tax arises from the benefits available to providers of ‘transport of goods by road service’.

HELD

In the given case, the Department emphasised on ‘door-to-door delivery’ and ‘time sensitive’ nature of the delivered documents, goods or articles, thus considering it as a ‘courier agency service’. The Tribunal held that the two taxable entries, i.e., ‘goods transport’ and ‘courier agency’, are opposite in nature and suffer clarificatory confusion. Thus, due to uncertain conformity with the definition of ‘courier agency’ in its entirety and inability to discard, with certainty, the demand of differential tax is not maintainable. Therefore, the matter is dismissed.

BCAJ Admin

Part A Service Tax

I. HIGH COURT

25. [2020-TIOL-1285-HC-AHM-ST] M/s. Linde Engineering India Pvt. Ltd. vs.
Union of India Date of order: 16^th January, 2020

Services rendered by a
company located in India to its holding company outside India not being
establishments of distinct persons, are considered as export of service

FACTS

The petitioner is engaged
in providing services in India and outside India. Service is provided to their
holding company located outside India. A show cause notice was issued alleging
that the services provided to the holding company being merely an establishment
of a distinct person, cannot be considered as export of service and would fall
within the definition of exempted service, and therefore Rule 6(3) of the
CENVAT Credit Rules, 2004 is applicable and hence a demand is raised for
reversal of credit.

HELD

The Court noted that the
demand is raised on mere misinterpretation of the provisions of the law. The
petitioner and its parent company can by no stretch of the imagination be
considered as the same entity. The petitioner is an establishment in India
which is a taxable territory and its 100% holding company, which is the other
company in the non-taxable territory, cannot be considered as establishment so
as to treat them as distinct persons for the purpose of rendering services.
Thus, services provided to its holding company are considered as export of
service as per Rule 6A of the Service Tax Rules, 1994.

II. TRIBUNAL

26. [2020-TIOL-1178-CESTAT-ALL] M/s Encardio-Rite Electronics Pvt. Ltd. vs.
Commissioner of Appeals, Central Excise and Service Tax Date of order: 25^th November, 2019

Even though the
sub-contractor and the main contractor are located in the taxable territory,
since the service is consumed in the state of Jammu and Kashmir the service is
not taxable

FACTS

The appellants are sub-contractors
engaged in laying of tracks for the Indian Railways and work associated with the construction of dams. The entire activity is performed in the state of
Jammu and Kashmir. The Revenue argues that since both the sub-contractor and
the main contractor are located in the taxable territory in view of Rule 6 of
the Taxation of Services (Provided from Outside and Received in India) Rules
2006 as well as Rule 8 of the Place of Provision of Service Rules, 2012, the service is taxable and therefore tax is leviable.

HELD

The Tribunal primarily
noted that the services were provided and consumed in the state of Jammu and
Kashmir. It was held that the provisions of the rule cannot override provisions
of the sections provided in the Act. Section 64 clearly lays down that provisions
of Chapter V of the Finance Act, 1994 which deals with service tax are not
applicable in the state of Jammu and Kashmir. Accordingly, since the service is
consumed in a non-taxable territory, the demand of service tax is not
sustainable.

27. [2020-TIOL-1167-CESTAT-CHD] State Bank of India vs. Commissioner
(Appeals) of CGST, Ludhiana Date of order: 27^th February, 2019

Refund cannot be rejected
on technical grounds that the payment of tax sought to be refunded was made in
a wrong service code

FACTS

The appellant is a banking
company providing banking and financial services. They received services from a
contractor and discharged service tax under reverse charge on works contract
service. However, while making the payment the same was made under the category
of banking and financial services. Since they were not required to pay service
tax under reverse charge, they filed a refund claim. The claim was rejected on
the ground that they have failed to show that the payment was made under works contract
service.

HELD

The Tribunal noted that
whatever service tax was payable by the appellant has been paid under banking
and financial services. They have also produced a certificate issued by the
chartered accountant showing that the service tax of which the refund claim is
filed is none other than the works contract service. The Tribunal accordingly
held that the refund claim cannot be rejected on technical grounds and the
appeal was allowed.

28. [2020-TIOL-1166-CESTAT-CHD] M/s Hitachi Metals India Pvt. Ltd. vs.
Commissioner of Central Excise and Service Tax Date of order: 3^rd April, 2019

The provisions of section
11B are not applicable when tax is not required to be paid

FACTS

The appellant entered into
an agreement with a foreign company for promotion of products in India by way
of customer identification and contact, communication to or from, inquiries
relating to business, co-operate with and represent companies in its
promotional efforts, etc. Due to confusion and lack of clarity, the appellant
paid service tax during the period from April, 2006 to February, 2008 for the
services provided to their foreign-based service recipient for the payment
received against the services in convertible foreign exchange. A refund claim
was filed which was rejected on the ground that the same is filed beyond the
time limit prescribed u/s 11B of the Central Excise Act, 1944. Accordingly, the
present appeal is filed.

HELD

The
Tribunal relying on the decision in the case of National Institute of
Public Finance and Policy vs. Commissioner of Service Tax
[2018-TIOL-1746-HC-DEL-ST] held that since the appellant was not liable
to pay service tax, the time limit prescribed u/s 11B of the Central Excise
Act, 1944 for filing of refund claim is not applicable.

shailesh.kwebmaker

2016 (44) STR 258 (Tri-Ahmd.) Newlight Hotels 25 & Resorts Ltd. vs. CCE & ST, Vadodara

Classification of service cannot be changed at service recipient’s end.

Facts

The appellant received management
consultancy services. However, department intended to classify it as Business
auxiliary Services. Relying on numerous judicial pronouncements, it was
contested that classification by service provider cannot be changed at
recipient’s end. It was argued that service provider had paid service tax under
management consultancy category at the behest of revenue and therefore,
classification cannot be altered.

Held

Relying on CCE Pondicherry vs.
Mohan Breweries & Distilleries Limited 2010 (259) ELT 176 (Mad.) and also
on Sarvesh Refractories Pvt. Ltd. vs. CCE & C 2007 (218) ELT 488 (SC), it
was Held that classification cannot be changed at service recipient’s end.
Credit of service tax paid cannot be denied or reduced on the grounds that
classification was wrongly done by service provider. Accordingly, appeal was
allowed.

shailesh.kwebmaker

2016 (44) STR 97 (Tri-All.) LG Electronics India Pvt. Ltd. vs. Commissioner of C.Ex. &S.T., Noida

Whether CENVAT credit on employees shifting expenses are admissible.
(Period of dispute – prior to 2011)

Facts

The appellant had incurred
expenses including freight charges on shifting and relocation of its employees
in accordance with transfer policy of its business and availed CENVAT credit of
service tax paid on the said services. The said credit was disallowed on the
contention that the said services have no nexus with the business, shifting of
employee was not an activity of the business.

Held

Relying on ruling, in the case of
“CCE vs. Ultratech Cement Ltd. – 2010 (20) S.T.R. 577 (Bom.), where the hon’ble
High Court Held that the definition of “input service” is not restricted to
services used in or in relation to the business of manufacturing the final
product, input service is defined illustratively and not
restrictively/exhaustively. And restriction if any is imposed post year 2011,
only if such travel expenses are of primarily of personal use and consumption.
Prior to 2011, such expenses are allowable if the same are provided to
employees in general expenditure in relation to the business of the assesse.

Appeal was allowed with
consequential relief to appellant.

shailesh.kwebmaker

2016 (44) STR 65 (Tri-Mumbai) Kolland Developers Pvt. Ltd. vs. Commissioner of C.Ex., Nagpur

Whether refund claim of SEZ developer can be rejected on the ground
that input services on which refund sought were not pre-approved from approval
Committee before its availment?

Facts

The Appellant was a developer of
SEZ and had filed a refund claim in respect of input services availed in terms
of the notification 12/2013-S.T. dated 01/07/2013. The refund claim was
rejected by the lower authorities on the ground that the specified input
services were not approved at the time of its availment.

Before the tribunal, the
appellant, relying on the decision of
“mahindra engineering Services
ltd – 2015 (38) S.t.r. 841 (tri.-mum)”, argued that
erstwhile exemption notification (09/2009-ST) did not mandate pre-approval of
services before its availment.

Held

The tribunal observed that, in
case of “Mahindra Engineering Services Ltd.”, the said notification was an
exemption notification and at the time of availment, the conditions of
exemption have to be fulfilled. However, the Notification No. 12/2013 (which is
under dispute) provides for refund of tax paid on specified input services
which are approved by approval committee and to avail the exemption the
assessee must fulfill the conditions of the said notifications at the time of
availing the services. Accordingly, appeal was dismissed and refund claim
rejection was Held to be appropriate.

shailesh.kwebmaker

[2016] 72 taxmann.com 4 (Hyderabad-CESTAT) – Spandana Spoorthy Financial Ltd. vs. Com- missioner, Hyderabad

Tribunal affirmed appellant’s entitlement to CENVAT credit for period
prior to registration and utilisation thereof for discharging service tax
demanded for such period.

Facts

The appellant, engaged in micro
finance Business, was not registered
with service tax department from April 2004 till june 2009. In June
2009, when statutory auditors pointed
out this fact, appellant obtained opinion
from their consultants and applied for service tax registration. Part of
the liability for the period prior to June
2009 was discharged by adjustment of CENVAT credit pertaining to that
period and balance liability was paid in cash along with interest. on scrutiny
of records in august 2009, department issued SCN to appellant by invoking
extended period of limitation by alleging suppression of Facts by appellant
with intention to evade service tax liability and also proposed to deny
availment of CENVAT credit on the ground that rule 3(4) of CCR, 2004 permits
utilisation of CENVAT credit only to the extent such credit is available on the
last day of the month or quarter for which tax liability is being discharged. The
appellant challenged invocation of extended period and also submitted that the
case is covered by provision of section 73(3) of the finance act, 1994 as entire liability was discharged
prior to scrutiny by department.

Held

As regards eligibility for CENVAT
credit, the hon’ble CeStat opined that if and when the department demands
service tax liability for taxable services rendered during a particular period,
a corresponding right shall accrue to the assessee entitling him to avail of CENVAT
credit on CENVATable documents evidencing inputs or capital goods or input
services received by such assessee during the same period, subject to the
conditionalities envisaged in CCr, 2004. as regards rule 3(4) of CCr, 2004 the
tribunal Held that it merely puts cap on
the credit that can be ‘utilised’ for payment of duty or tax and not on the
quantum that be ‘availed’. The tribunal relied upon decisions in cases of
mPortal India Wireless Solutions (P.) Ltd vs. CST [2011] 16 taxmann.com 353
(Kar.), Nitesh residency Hotels (P.) Ltd. vs. CST [Misc. Order No. 27030/2013,
dated 27-8-2013], Amar Remedies vs. CCE 2010 (257) ELT 552 (Tri-Ahd.) and C.
Metric Solution (P.) Ltd. vs. CCE [2013] 31 taxmann.com 344,to hold that
appellant was entitled to availment and utilisation of CENVAT credit on the
basis of documentary evidences for the period prior to obtaining registration.

As regards applicability of
proviso to section 73(3) the hon’ble tribunal Held that since major part of
duty which was adjusted by CENVAT credit was in dispute, issuance of SCn is
legal and the said proviso is not applicable.

As regards invocation of extended
period, the tribunal affirmed allegations of suppression on the ground that
appellant neither filed returns nor approached department for clarifying
taxability of services rendered by them. however, penalties imposed u/s. 78
were dropped on the basis of finding that as appellant was not aware of tax
liability ab initio, non-payment thereof cannot be said to be done knowingly
and even adjudicating authority took note of the fact that appellant become
aware of its liability only after obtaining opinion from consultants.

{Note: readers may note that, although the tribunal on one hand has Held that invocation of
extended period is justified and on other hand has deleted the penalty u/s. 78,
hon’ble Bombay high Court in the case of
Saswad Mali Sugar Factory Ltd vs. CCE, Pune [2014] 44 taxmann.com 149 has Held
that conditions for invocation of extended period of limitation u/s. 73(1) and
the conditions for imposing penalty u/s. 78 are identical. therefore both the
provisions go hand-in-hand, and if one did not survive, the other also cannot
be invoked.}

shailesh.kwebmaker

[2016] 72 taxmann.com 5 (Mumbai-CESTAT) – Dhanshree Ispat vs. Commissioner of Customs & Central Excise, Aurangabad

If, commission agent, who arranges for transportation of goods, pays
tax on gTa services and claims reimbursement thereof from its customer, input
tax credit of tax paid on gTa services is not allowable in terms of CCR, 2004.

Facts

The appellant, a commission agent,
handled receipt of goods from principal and transportation to the buyers. The
appellant discharged service tax liability as a provider of “goods transport
agency” and also recovered the said tax paid towards Gta services from the
buyers of goods who were contractually required to reimburse freight charges
along with taxes paid thereon to the appellant. While discharging service tax
liability on his commission income, the appellant claimed CENVAT credit of tax
paid on Gta services. Revenue denied availment of CENVAT credit on the ground
that for Gta services, the appellant was acting only as agent of the buyers and
hence, he cannot be said to be discharging tax on Gta services on its own
account and accordingly, is not eligible for CENVAT claim.

Held

The Hon’ble Mumbai Tribunal
affirmed the denial of CENVAT credit by holding that the activity of
“transportation of goods” as undertaken by the appellant is same as other
agency functions rendered by the appellant on reimbursement basis and hence, it
does not constitute performance of taxable service by appellant, so as to
entitle the appellant to claim CENVAT credit thereof.

As regards imposition of penalty
u/s. 78 of the finance act, 1994 for period covered by second show cause
notice, the hon’ble tribunal Held that when second show cause notice (SCN) is
issued within few months after first SCN is issued, it is not open for revenue
to contend suppression of Facts and resultantly, in absence of clear evidence
of suppression with intention to evade service tax payment, levy of penalty
u/s.78 in relation to second period of demand is not proper.

shailesh.kwebmaker

[2016-TIOL-2576-CESTAT-DEL] M/s. Marud- han Motors vs. Commissioner of Central Excise and Service Tax, Jaipur-II

Trading cannot be considered as an exempted service prior to April 2011

Facts

The appellant,
a service provider,
was also engaged in trading activities. CENVAT credit
on common input services was disallowed under rule 14 of the CENVAT Credit
rules, 2004 on the ground that trading activity should be considered as
exempted service in terms of rule 2(e) of the said rules. Since separate
accounts were not maintained, reversal was demanded in accordance with rule 6(3a)
of the said
rules and the
demand was confirmed.

Held

The tribunal noted that the term exempted service
is defined in Rule 2(e) of the said rules during the relevant period as
taxable services which
are exempt from the whole of the service tax leviable
thereon. The said definition was amended vide notification 3/2011-CE(NT) dated
01/03/2011 and an explanation was added clarifying that exempted service
includes trading. On perusal of both un-amended and amended provisions of
exempted service, it reveals that the activity of trading was not included
within the ambit of the definition prior to 01/04/2011. Since the period in the
present case is prior to April 2011, the amended definition would not be
applicable and thus rule 6(3) of the CENVAT Credit rules 2004 does not have any
application and therefore credit is allowable.

{Note: readers may note a similar decision in the case of Kundan
Cars Pvt. ltd. [2016 (43) STR 630
(tri.-mumbai)] wherein the tribunal relying on the decision of Shariff motors
[2010] 18 Str 64(tr.-Bang) upheld by the
andhra Pradesh high Court [2015 (38) St j53(a.P)] and Badrika motors [2014 (34)
STR349] Held that reversal of CENVAT credit attributable to trading activity is
not required.}

shailesh.kwebmaker

[2016-TIOL-2520-CESTAT-DEL] Commissioner of Central Excise, Raipur vs. M/s Hira Ferro Alloys Ltd, Unit-II

Allegation of suppression is not sustainable when the information is
declared in balance sheet which is publicly available documents.

Facts

The appellant acted as an
intermediary between two companies
and received brokerage
for such services on which no service tax was
discharged. The lower authorities confirmed the demand under business auxiliary
service and the Commissioner (appeals) set aside the demands as being
timebarred, considering the fact that the departmental authorities were in
knowledge of the activity undertaken at the time of their departmental audit in
the earlier years. Accordingly, the revenue was in appeal.

Held

The tribunal noted that the
appellant acted as a commission
agent   and   therefore
service   tax   was payable under the category of business
auxiliary service. However, it was observed that the same issue of non payment
was not raised earlier during the departmental audit. Moreover, it was not in
dispute that receipt of brokerage was declared in the published balance sheet
of the company. Thus, once the information
was declared in balance sheets which are publicly available documents, the
allegation of suppression is not sustainable and accordingly, the revenue’s
appeal was dismissed.

shailesh.kwebmaker

[2016-TIOL-2571-CESTAT-CHD] M/s Fermanta Biotech Ltd vs. Commissioner of Central Excise, Chandigarh

Suppression cannot be alleged when there is a failure to pay
service tax under reverse charge mechanism as there is a scope of
interpretation in such cases.

Facts

The appellant received services
from foreign based commission agents and failed to pay service tax under
reverse charge mechanism. on this being pointed out by the audit team, service
tax liability was discharged and a show cause notice was issued demanding equal
penalty u/s. 78 of the finance act,
1994. The lower authorities confirmed the demand.

Held

The tribunal noted that in this case, the services were
received from outside india and the tax was payable under reverse charge
mechanism. It was not a case where the services were provided and the service
tax is payable thereon. Accordingly, the benefit of doubt goes in favor of the
appellant and therefore the charges of suppression cannot be alleged. Thus
provisions of section 73(3) of the finance
act are attracted and therefore, no show cause notice was required to be
issued and accordingly the penalty was set aside.

shailesh.kwebmaker

2016-TIOL-709-CESTAT-MUM] Milind Kul- karni vs. Commissioner of Central Excise, Pune-I

ii. Tribunal

Reimbursements made to Overseas Branch Office by head Office in india
are not liable to service tax.

Facts

The appellant viz. the Head
Office had established network of branches at different locations outside the
country. The branches acted as salary disbursers of the staff deputed from
india to client locations and carried out other assigned activities. The
salaries and other expenses of running the branch are borne by the head office.
Payments made by the customers are also received in the branches and
transmitted to the head office after netting the expenses incurred by the
branch. Show Cause notice was issued demanding service tax under reverse charge
mechanism on the payments made to the branches considering it business
auxiliary services rendered by them to their head office along with interest
and penalties thereon. The adjudicating authority confirmed the demand
primarily on the basis that head office and its branches were different
persons. Accordingly, the present appeal was filed.

Held

The tribunal noted that there was no dispute
that the appellant had entered
into contractual agreements with overseas customers for
supply of services which also involved onsite activity undertaken by deputing
employees at the site. Section 66a(2) of
the finance act, 1994 provided that “a person carrying on a business through a
permanent establishment in India and through another permanent establishment in
a country other than India, such permanent establishments shall be treated as
separate persons for the purpose of this section”. The explanation 1 in s/s.(2)
has designated branches as business establishment overseas. It was observed
that the section is not elastic enough to govern the corporate intercourse and
commercial indivisibility of headquarters and its branches. Accordingly, any service rendered to the other contracting
party by the branch as branch of the service provider would not be within the
scope of section 66A. Such a legal fiction in relation to overseas activities
is undertaken to prevent escapement from tax by resort to branches to take
advantage of principles of mutuality. A branch by its very nature cannot
survive without resources assigned by the head office. Its employees are the
employees of the organisation itself. There was no independent existence of the
overseas branch as a business. The transfer of funds by gross outflow or by netted
flow is, therefore, nothing but reimbursements and taxing of such reimbursement
would amount to taxing of transfer of funds which was not contemplated by the
act whether before 2012 or after. Accordingly the appeals were allowed.

shailesh.kwebmaker

2016 (44) STR 236 (Mad.) Sree Daksha Property 16 Developers Pvt. Ltd. vs. CCE, Coimbatore

Non-consideration of submissions made by assessee while
passing adjudication order, is an error apparent from record.

Facts

During
adjudication, petitioner asked for deduction of land value for determining
value of services and provided relevant information for calculation.
Adjudication got completed without considering such information and it was
stated that no corroborating and convincing evidences were produced.
Consequently, application for rectification of mistake apparent from record was
filed. The same was rejected by the department on the ground that this was not
an error apparent from record and it was Held that there cannot be a long drawn
process of reasoning on points if there are two opinions, relying on the
hon’ble Supreme Court’s decision in Sant
Lal Gupta vs. Modern Co-op. Group Housing Society 2010 (262) ELT 6 (SC).

Held

It
was Held that the power to rectify a mistake u/s. 74 of Finance Act, 1994 cannot be put under a straight
jacket formula and each case has to be tested on its own Facts. Adjudication
order did not discuss the relevance or irrelevance of records produced by
petitioner and did not examine records. This was undoubtedly an error apparent
from records. Further, opportunity of
being heard was not granted to the petitioner. Accordingly, the writ petition
was allowed.

shailesh.kwebmaker

2016 (44) STR 207 (M.P.) Indore Municipal 15 corporation vs. CCE (A), Indore (MP)

No time limit is
prescribed under Central Excise act, 1944 for filing
cross-objection.

Facts

Department filed an appeal and sent
relevant documents to the appellants
with directions to
file memorandum of cross
objections within 45 days. Due to non-receipt of order, one week’s time was
requested to file cross objections during personal hearing. Cross objections
and one appeal was filed thereafter. However, the same were rejected as
time-barred since department had dispatched the orders through speed post. However,
despite follow up with speed post department, the appellants could not gather
information as to whether the orders were delivered to them. Revenue argued
that in view of section 37C of Central excise act, 1944 read with section 27 of
General Clauses act, 1897, the burden of proof was on assessee to rebut the
presumption of service of speed post.

Held

The hon’ble high Court observed
that section 27 of General Clauses act, 1897 provides presumption for
registered post. However, having regard to section 114 of evidence act, burden
of proof was on assessee to prove that speed post was not delivered. In the
absence of any evidences, the issue was decided against the appellants.

Cross objections should be filed
within 30 days from receipt of notice of appeal vide order 41, rule 22 of CPC. Though direction was made
to file cross objection within 45 days, no time limit is prescribed under Central
Excise Act, 1944. Accordingly, cross objection filed within extended time
period allowed by the appellate authority and taken on record cannot be said to
be time-barred.

shailesh.kwebmaker

2016 (44) STR 31 (Mad.) Hitech Manpower 14 Consultant Pvt. Ltd. vs. CESTAT Chennai

Is condonation of a delay in filing an appeal beyond statutory
prescribed period possible?

Facts

An appeal was filed by Appellant
before the Tribunal after a lapse of statutory period of filing of appeal along
with application for condonation of delay. Appellant prayed that delay occurred
due to misplacement of order by security guard who received the order on
account of closure of company for the last four years. The tribunal dismissed
the appeal on the ground that the reason stated for the delay was not
acceptable.

Held:

On appeal before the high Court, the Court observed that normally, fault
of employees cannot be a reason for condoning delay. But, considering the fact
of closure of company in this case, the Court agreed to condone the delay and
accordingly, set aside the order of the tribunal rejecting the appeal and
directed the tribunal to take up the appeal for hearing.

shailesh.kwebmaker

[2016-TIOL-1851-CESTAT-MUM] Bny Mellon International Operations India P. Ltd vs. Commissioner of Central Excise, Pune-III

When premium on group insurance does not vary with the number of family members covered, entire service tax charged on such premium is available as CENVAT credit.

Facts
The Appellant an exporter of services filed a refund claim of the accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004. CENVAT credit of service tax paid on premium charged on group insurance scheme was disallowed on the ground that the said insurance also covered the family members of the employee which is not related to the output service.

Held
The Tribunal noted that the premium charged does not vary with the number of dependents who are additionally covered by the same insurance scheme. Accordingly even if none of the dependents were within the coverage, the premium amount would not alter or vary. Thus no part of premium is attributable to the extension of coverage to family members. Appeal is allowed and refund granted.

shailesh.kwebmaker

[2016-TIOL-1299-CESTAT-MUM] Commissioner of Central Excise, Aurangabad vs. Ratnaprabha Motors

Services provided by automobile dealers to financial institutions was decided only upon issuance of Circular No. 87/06/2006-ST dated 06/11/2006. Therefore demands prior to the said date cannot be confirmed.

Facts
The Assessee receives commission from various financial institutions for introducing customers seeking loans/finances to such banks/NBFCs. The First Appellate Authority confirmed the demand only from 06/11/2006. Further the demand pertaining to sharing of profit was also set aside as such an arrangement was not liable to service tax. The Revenue appealed only against the demands set aside for the period prior to 06/11/2006.

Held
The Tribunal noted the observations of the First Appellate Authority wherein it has been provided that the classification of service was finally decided by the Board vide Circular dated 06/11/2006 as Business Auxiliary Service. Therefore extended period and penalties under section 78 of the Finance Act, 1994 are liable to be set aside. Reliance was placed on the decision of the Apex Court in the case of M/s. Jaiprakash Ind. Ltd. [2002-TIOL- 633-SC-CX] and Suchitra Components [2008 (11) STR 430 SC] to hold that extended period is not invokable.

shailesh.kwebmaker

[2016-TIOL-1408-CESTAT-MAD] GRR Logistics P. Ltd vs. Commissioner of Service Tax, Chennai

Penalty u/s. 78 cannot be imposed when there is no discussion on the allegation of fraud, collusion, willful misstatement or suppression of facts in the Show Cause Notice.

Facts
During the course of audit it was observed by the departmental officers that there was a short payment of service tax. On being pointed out the Appellant paid up the entire demand along with interest. Thereafter a Show Cause Notice was issued proposing appropriation of amounts already paid and imposing penalty u/s. 78 of the Finance Act, 1994. It was argued that the entire demand along with interest was paid and there was no non-payment and therefore the SCN cannot survive u/s. 73(3) of the Finance Act, 1994.

Held
The Tribunal noted that the SCN is silent on the ingredients of suppression. The only allegation is that the “fact of nonpayment came to the notice of the department on account of audit” which is not sufficient for invocation of penalty u/s. 78. Penalty can be imposed only under the circumstances mentioned in section 78 which is not alleged in the SCN. Thus what is not alleged cannot be traversed at a later point of time in any proceedings. Therefore the penalty is unsustainable.

Note: Readers may note a similar decision in the case of Ishvarya Publicities P. Ltd vs. Commissioner of Service Tax [2016-TIOL-1409-CESTAT -MAD] and the decision of S. K. Poly Formulations P. Ltd vs. Commissioner of Service Tax, Mumbai-II [2016-TIOL-1407-CESTAT -MAD] where penalty imposed u/s. 76 was accordingly set aside.

shailesh.kwebmaker

2016 (42) STR 752 (Tri.-Mum.) JDSU India Pvt. Ltd. vs. Commissioner of Service Tax, Pune.

Classification of input services cannot be changed by service recipient for availing CENVAT credit on input services. Further, works contract for repairs, renovation and modernization of the premises are not eligible for CENVAT credit.

Facts
Appellant availed CENVAT credit on services of repairs, renovation and modernization of the premises classified as “works contract service” by service provider. Works contract services are specifically excluded from the definition of “input services”. The Appellant challenged denial of CENVAT credit on the grounds that the services for renovation and modernization of the premises were specifically covered in the inclusion clause of the definition of “input services”.

Held
There cannot be different yardstick for the purpose of classification of service at the service provider’s and service recipient’s end. In other words, classification of service cannot be disputed at service recipient’s end. Works contract service is not one service but a bunch of various activities like renovation, repairs, construction, erection, installation where the material is also involved during the course of provision of service. If renovation and modernization services are provided and classified individually, they shall be eligible for credit. However, if these services are provided as bunch under works contract, they shall not be considered as input services. If CENVAT credit is allowed on the basis of nature of service by claiming that services were for renovation and modernization of premises, it would make exclusion clause of input service redundant. Accordingly, CENVAT credit was denied.

shailesh.kwebmaker

2016 (42) STR 329 (Tri.-Bang.) AMR India Ltd. vs. Commissioner of C. Ex, Cus. and S.T., Hyderabad-II.

Free supply of items by service recipient cannot be added to the value of service.

Bonus or incentive given for good performance to service provider after the completion of service cannot be assumed to be the value of services as it was not known at the time of provision of services.

Facts
Appellants were engaged in providing site formation, clearance and excavation services and service tax was discharged on consideration for such service. As per the terms of agreement, their clients were providing specific quantities of diesel and explosives with the condition of incentives/penalties for short/excess usage of free supplies. Revenue contended that cost of free supplies and amount of incentive should be added to value of services. Commissioner did not follow the decision of Larger Bench in case of Bhayana Builders (P) Ltd vs. CST, Delhi 2013 (32) STR 49 (Tri.-LB) on the basis that the said decision was in the context of construction services in general and on the meaning of the term “gross amount charged” provided in specific notification. Further, various judgements were relied observing that bonus/incentive given to service provider for appreciating services which were not known at the time of providing services were never a ‘consideration’ received by the assessee.

Held
Following various decisions, it was held that the value of diesel and explosives supplied free of cost shall not be included in the value of services. Further, bonus/ incentives calculated after the provision of services were in the nature of prize money for good performance and cannot be linked to the value of services.

shailesh.kwebmaker

2016 (42) STR 686 (Tri.- Ahmd.) Paul Mason Consulting India (P.) Ltd. vs. C.C.E. & S.T., Vadodara.

Relevant date for calculation of time limit of 1 year for CENVAT credit refund shall be the date of export invoice.

Facts
The Appellant filed claim for refund of accumulated CENVAT credit on account of export of services. Department rejected the claim as time barred under section 11B of the Central Excise Act, 1944 (CEA). The Appellant contended that section 11B is applicable only to the refund of duty and interest whereas refund of CENVAT credit is governed by Rule 5 of CENVAT Credit Rules which does not prescribe any such time limit. Furthermore, it was contended that they have filed the refund claims within one year of the quarter-ending, pertaining to the quarter for which refund claims were made and also claimed that relevant date shall be the date of export invoice. Respondent contested that procedure for refund of CENVAT credit has been prescribed vide notification no. 27/2012-CE(NT) dated 18/06/2012, issued under Rule 5 of CENVAT Credit Rules, 2004 wherein time limit as per section 11B is made applicable for refund of CENVAT credit.

Held
Time limit of one year is applicable to refund of CENVAT credit. Analysis of decision on the subject matter revealed that CENVAT credit though not a duty but has been equated with duty since section 11B is made applicable to refund of CENVAT credit. The relevant date for filing of refund claim would be the date of export invoice, being the date when cause for refund has arose and time limit of one year shall be reckoned from the said date.

shailesh.kwebmaker

2016 (42) STR 527 (Tri-Delhi) Maruti Suzuki India Ltd. vs. Commissioner of C. Ex. & ST. Delhi –III.

Whether proportionate service tax paid on services used for generation of electricity at factory needs to be reversed in case of partial sale of electricity?

Facts
The appellant was engaged in manufacture of motor vehicles and parts thereof which were liable to excise duty. They have a captive power plant inside their factory. Some portion of the power generated was sold to other units for a consideration. CENVAT was availed on transportation of gas services used for manufacture of power. Adjudicating authority passed an order for reversal of CENVAT credit attributable for electricity sold outside. It was contested that ‘nexus’ test is applicable only in case of inputs and not input services. In case of input services, it should be used directly or indirectly, in or in relation to the manufacture of final products. Hence, as long as input service was used by the manufacturer, no portion of credit pertaining to such service can be reversed.

Held
The admitted fact is that electricity which is sold by the appellant is not used in or in relation to manufacture of dutiable final products. Consequently, inputs and input services which are used in production of such electricity sold outside will not be eligible for credit as they are outside the ambit of definition of input and input service as defined in CENVAT Credit Rules, 2004. Hence, demand for reversal of proportionate CENVAT credit is sustainable. It was also observed that since demand was issued on the basis of audit para, it was held that extended period was not invocable and considering repeated amendments in the Cenvat Credit Rules resulting in huge amount of litigation, it was held that no penalty shall be imposed.

shailesh.kwebmaker

2016 (42) STR 450 (Tri-Mum.) Commr. Of Ex., Goa vs. Kamat Constructions & Resorts Pvt. Ltd.

III. Tribunal

CENVAT credit on capital goods is allowed when the assessee was registered as a service receiver (person liable to take registration under reverse charge) only which was subsequently amended as a service provider. Further full CENVAT credit of capital goods is allowed in the second or the third year when no CENVAT is taken in the first year.

Facts
The Appellants had bought duty paid capital goods and subsequently availed CENVAT credit for the same. However, it was registered as service receiver when the capital goods were bought. Therefore, the adjudicating authority disallowed the CENVAT with respect to the same. Subsequently the Appellants amended its registration as Service provider on a later date. With respect to some capital goods procured by the assessee, the assessee had not taken any CENVAT credit in its first year and had taken full CENVAT credit in the second/subsequent years. The adjudicating authorities levied interest and penalties stating that CENVAT credit was taken wrongly.

Held
It was observed that in various judgments, Tribunals have allowed CENVAT credit for those assessees who were not registered with the service tax department at all. However, in the present case, the Appellants were at least registered as a service recipient. Therefore, there is no reason why credit in the present case be not allowed. Further, it was observed that with respect to CENVAT credit of capital goods, provision of Rule 4(2) of CCR allows an assessee to avail 50% of CENVAT in the first year and balance CENVAT in the subsequent years. Hence, if no credit has been taken in the first year at all, the assessee can avail 100% CENVAT in subsequent years. Therefore appeal was allowed.

shailesh.kwebmaker

2016 (42) STR 668 (Mad.) Classic Builders (Madras) Pvt. Ltd. vs. CESTAT, Chennai.

Tribunal has power and jurisdiction to restore the appeal on belated payment of pre-deposit on the basis of merits of the case.

Facts
The Appellant’s application for pre-deposit in installments was rejected by the Tribunal and the appeal was dismissed for non-compliance. Furthermore, restoration of appeal consequent to belated pre-deposit was also dismissed. Revenue contended that Tribunal had become “functus officio” on account of dismissal of appeal and it had no power to restore the appeal, once it is dismissed. Appellant contended that they had a very good case on merits which needs to be considered while deciding restoration of appeal.

Held
Right to appeal is a statutory right and pre-deposit requirement is procedural. Therefore, delay in making pre-deposit cannot hamper the primary right of appeal.

shailesh.kwebmaker

2016 (42) STR 425( Ori.) Maa Engineering vs. Registrar, CESTAT, Kolkata.

Court can reduce the amount of pre-deposit as directed by the Tribunal on the grounds of financial difficulties of the assessee and direct them to pay pre-deposit equal to mandatory percentage as prescribed in section 35F of Central Excise Act, 1944 even for appeals filed during the year 2012

Facts
The petitioner had filed appeals before the CESTAT in the year 2012 wherein pre-deposit of 25% of tax amount was ordered. Due to financial hardship they were unable to comply with the directions and hence challenged the predeposit order before the High Court.

Held
Although the amended provisions of section 35F of Central Excise Act, 1944 are not retrospective yet the High Court exercised its writ jurisdiction and considering the financial difficulties of Appellant to obtain statutory remedy, directed to make pre-deposit of 7.5% of the duty amount and passed the stay order till disposal.

shailesh.kwebmaker

2016 (42) STR 420 (Del) CHL Limited vs. Commissioner of Service Tax, Delhi.

Department cannot refuse application for adjournment on medical grounds of Chartered Accountant and pass ex-parte order when case was pending with department over six years.

Facts
A Show Cause Notice was pending since more than 6 years wherein only one hearing was held. An application for adjournment was filed before adjudicating authority accompanied by a Medical Certificate for the representative CA. However, the Adjudicating Authority passed an ex-parte order on the last date of his service period by refusing the adjournment request. Appellant filed writ before High Court challenging the ex-parte order.

Held
Reasonable request of adjournment was unjustifiably refused and the Petitioner was deprived of the opportunity of effectively participating in the adjudication proceedings which appears to be a case of violation of principles of natural justice. Therefore the High Court held that writ is maintainable in spite of availability of alternative remedy. It was observed that it would not have caused any serious prejudice to the department if the request for adjournment was accepted. It appears that the Adjudicating Authority was in a hurry to conclude the proceedings as he did not want to show the notice as pending for over six years and therefore, passed the order on the last date before his retirement. Therefore, the order was set aside with a direction to resume adjudication proceedings.

shailesh.kwebmaker

[2016] 69 taxmann.com 97 (Calcutta HC) – Simplex Infrastructures Ltd. vs. Commissioner of Service Tax, Kolkata

When Show Cause Notice is issued on the basis of allegation of “suppression of facts”, department must specify particulars of allegedly suppressed facts, otherwise such SCN issued by invoking extended period of limitation is bad in law.

Facts
Department initiated an enquiry in the year 1998 for levy of service tax under consulting engineer service. The petitioner clearly replied that they were engaged in civil engineering construction and therefore were not consulting engineers. An enquiry was again initiated in the year 2004 which was duly attended to. Thereafter summons were issued after almost 16 months which was also duly replied to. Finally, without making any reference to the previous notices, department issued a show cause notice in the year 2006 for the period October 2000 to March 2005 by invoking extended period of limitation on the ground of suppression of facts with an intention to evade service tax. A reply was filed to the said notice. Another show cause notice was issued in the year 2009 for the period September 2004 to June 2005. This notice culminated in an order in February, 2012. Thereafter in 2013 a personal hearing notice was received for the notice pertaining to 2006. The said notice invoking extended period by alleging suppression of facts which were actually known to the department since 1998 as well as the notice of hearing which was issued after almost 7 years is challenged in the present writ.

Held
The High Court firstly noted that the question of limitation is a question of jurisdiction and therefore the writ is maintainable. As regards allegations of suppression of facts, it was noted that all the enquiries raised by the department were diligently replied and the scope of business was also explained. Further the notice itself provided that the same was issued on basis of records submitted. In the notice there is no allegation of any conscious act constituting fraud, collusion or suppression of facts but a sweeping statement is made that had investigation not been conducted material facts would not have been unearthed. Relying upon various judicial precedents, i.e. CCE vs. Chennai Petroleum Corpn. Ltd. [2007] 8 STT 168, CCE vs. Chemphar Drugs and Liniments 1989 taxmann.com 612 (SC), Anand Nishikawa Co. Ltd. vs. CCE [2005] 2 STT 226 (SC), it was held that it is well known preposition that mere failure to disclose a transaction and pay tax thereon or mere misstatement or contravention of provisions of law is not sufficient for invocation of extended period of limitation. There has to be a positive, conscious and deliberate action, viz. a deliberate misstatement/suppression, in order to evade payment of tax. Once the information is supplied to the revenue authority and the same is not questioned, a belated demand has to be held as barred by limitation [CCE vs. Punjab Laminates (P.) Ltd. 2006 (202) ELT 578 (SC) replied upon]. Further while quashing the notice, the court also held that two show cause notices cannot be issued for the same period and further the notice issued with a pre-determined mind at the instance of a CERA Audit is also not sustainable. It was also held that a quasijudicial authority must act independently and not at the dictates of some other authority. Further on merits also it was held that Civil Engineering Construction carried on by the petitioner being a composite works contract cannot be vivisected to segregate the service element as held by the Supreme Court in the case of C,CE&C vs. Larsen & Toubro Ltd [2016] 60 taxmann.com 354. Thus the writ was allowed.

Note: Readers may note that, the case involves a principle which could be of use in matters involving extended period of limitation. Recently, Hon’ble Bombay High Court, in the case of Excel Production Audio Visuals (P.) Ltd vs UOI, [2016] 69 taxmann.com 94 (Bombay), quashed the adjudication order which was passed almost 16 months after the date of hearing and directed re-adjudication.

shailesh.kwebmaker

[2016-TIOL-1077-HC-DEL-ST] Suresh Kumar Bansal vs. Union of India & ORS

II. High Court

In absence of machinery provisions to exclude non-service elements from a composite contract of construction of residential complex service, no service tax can be levied.

Facts
The petitioner entered into an agreement with a builder to buy flats in a housing project developed by the builder. It is contended that the agreement with the builder is a composite contract for purchase of immovable property and therefore in absence of a specific provision for ascertaining the service component of the said agreement, the levy would be beyond the legislative competence of the Parliament. Thus the question before the Court is whether consideration paid by flat buyers to builder/developer for acquiring a flat in a complex which is under construction is leviable to service tax. Reliance was placed on Circular No. 108/02/2009-ST dated 29/01/2009 wherein it was provided that the initial agreement between the promoters/builders/developers and the ultimate owner is in the nature of agreement to sell and the property remains under the ownership of the seller. Therefore, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of “self-service” and consequently would not attract service tax. Further levy of service tax on preferential location charges was also challenged

Held
The High Court observed that the explanation to section 65(105)(zzzh) inserted by the Finance Act, 2010 created a legal fiction, whereby a set of activities carried on by a builder for himself are deemed to be that on behalf of the buyer and the Parliament is also competent to create such a deeming fiction. Moreover it cannot be disputed that the buyer acquires an economic stake in the project and the services subsumed in construction service in relation to a construction of a complex are rendered for the benefit of the buyer. Therefore it was held that the element of service involved cannot be disputed. However it was noted that it is essential to examine the measure of tax used for the levy as it is impermissible to tax the nonservice elements involved in the transaction viz. goods and immovable property. In the present case section 67 of the Finance Act, 1994 read with the Service Tax (Determination of Value) Rules, 2006 do not provide for any machinery for ascertaining the value of services involved in relation to construction of a complex. Rule 2A of the said rules does not cater to determination of value of service which involves sale of land. Thus neither the Act nor the Rules provide the required machinery. The abatement to the extent of 75% by a notification or a circular cannot substitute the lack of statutory machinery provisions to ascertain the value of services involved in a composite contract. Thus it was held that in absence of a measure of tax, the levy fails. Further the levy of service tax on service of preferential location was upheld as it represented an additional value that a customer would derive by obtaining a particular unit as per its preference and therefore involved an element of service.

Note: Readers may note a contrary decision of the Madras High Court in the case of N. Bala Baskar vs. Union of India & others [2016-TIOL-824-HC-MAD-ST] digest provided in BCAJ June 2016 wherein the Court primarily held that the writ was not maintainable as it is not open for a recipient to challenge the levy. However it is important to note that decision dealt with the case of joint development agreement and the Court merely held that such agreement for development is a service exigible to service tax without commenting on its valuation aspect.

shailesh.kwebmaker

2016 (42) STR 401 (S.C) Commissioner of Service Tax, Mumbai vs. Lark Chemicals P. Ltd.

I. Supreme Court

Section 80 of the Finance Act, 1994 envisages a complete waiver of penalty once reasonable cause of failure is established and the same cannot be applied to reduce partially minimum penalties prescribed u/s. 76 and 78 of Finance Act, 1994

Held
On following the judgement of Union of India and Others vs. Dharamendra Textile Processors and Others’ 2008 (231) ELT 3 (SC), it has been held that penalties imposed under section 76 and section 78 cannot be reduced u/s. 80 of Finance Act, 1994.

(Note: section 80 has been omitted with effect from 14/05/2015. The judgment may be relevant to the period prior to deletion of section 80).

shailesh.kwebmaker

[2016-TIOL-1974-CESTAT-MUM] Raymond Ltd vs. Commissioner of Central Excise & Customs, Nashik

Section 11BB of Central Excise Act, 1944 is intended to ensure accountability on the part of revenue officials and therefore withholding of interest will only serve to encourage irresponsibility and non-responsiveness on part of tax authorities.

Facts
The Appellant paid service tax following a show cause notice issued. The adjudicating authority dropped the demand and after protracted recourse to appeal and review, the Tribunal also accorded finality to non-taxability. The refund claim filed was allowed but the amount sanctioned was transferred to the fund on the ground of “unjust enrichment”. On appeal the first appellate authority allowed the refund to be paid but claim for interest was rejected. Accordingly the present appeal is filed.

Held
The Tribunal noted that section 11BB of Central Excise Act, 1944 is unambiguously clear that non-sanction of refund within three months of filing of claim will set the “interest clock” ticking. Mere pendency of any appellate/ revisionary proceedings cannot justify non-sanction of such refunds. The law does not acknowledge recoveries to any such excuse or loopholes. Section 11BB is intended to ensure accountability on the part of revenue officials and if interest legally provided for in the law is not granted, it tantamounts to defying legislative intent. It was observed that wrongful collection of tax was known since the date of adjudication order and therefore there is no justification to hold back the wrongly credited amount. Accordingly appeal was allowed with a direction to immediately release the interest due on receipt of the order.

Note: Readers may also the note the decision in the case of CCE & ST vs. Ghatge Patil Industries Ltd [2016-TIOL-1970- CESTAT-MUM] holding that even though the amount became refundable after Tribunal order, the interest shall be payable for the period from three months of the date of application till the date of sanction of refund. Reference can also be made to a similar decision of the Bombay High Court in the case of Tahnee Heights Co-op Housing Society Ltd vs. The Union of India & ORS [2015-TIOL-1828-HC-MUM-ST] digest reported in the October 2015 issue of BCAJ.

shailesh.kwebmaker

2016 (43) STR 166 (Guj.) New Asian Engineers & Amp. vs. Union of India

Application for condonation of delay shall be decided liberally.

Facts
Petitioner prayed for condonation of delay of 300 days on the ground of financial distress, his daughter’s suicide, scarcity of staff and unfamiliarity with legal procedures. CESTAT rejected the application since the grounds were related to the earlier period and not to the period of delay.

Held
Substantial justice shall be preferred as against technical requirements. Unless delay is inordinate or not explained at all or is due to mala fide intentions or neglect and lethargy, condonation shall be granted liberally. Having regard to the facts of the case, delay was condoned subject to payment of cost.

shailesh.kwebmaker

[2016-TIOL-2072-CESTAT-MUM] Jet Airways India Ltd vs. Commissioner of Service Tax, Mumbai

II. Tribunal

Tax paid under reverse charge mechanism which is available as CENVAT credit results in a revenue neutral situation and is a good ground to set aside demands, interest and penalties.

Facts
The Appellant is engaged in running airlines all over India as well as outside India. They have entered into agreements with the providers of computer reservation system (CRS) services outside India to display real time availability of flights, reservation of flights etc. on the basis of data collected from the main server of the Appellant for a consideration to be paid on the basis of each ticket issued by the travel agent.

A show cause notice was issued demanding service tax, interest and penalties on such payments made outside India u/s. 66A of the Finance Act, 1994 under reverse charge mechanism falling under “online information and database access or retrieval service”. It was argued that to be covered under the said service category, the person who renders that service should be the owner or should have exclusive right over the relevant information/data so as to put him in a position to charge the recipient for access/retrieval of that data/information.

However in the present case the data/information was owned by the Appellant itself. Further revenue neutrality was claimed to set aside the demands.

Held
The Tribunal relying on the decision of British Airways [2014-TIOL-979-CESTAT-DEL] held that the classification of the activity is correctly determined by the revenue and therefore the demand stands correct. However, it was noted that the tax paid under reverse charge mechanism would be available as CENVAT credit against the output service tax liability of “transport by air and other services” resulting in a revenue neutral situation. It was held that it is trite law that question of revenue neutrality is a good ground, more so when the tax liability is being discharged under reverse charge mechanism and therefore demands, interest and penalties imposed are set aside.

shailesh.kwebmaker

2016 (43) STR 57(Kar.) Commr. of ST, Bangalore vs. Tavant Technologies India Pvt. Ltd.

Refund of unutilised CENVAT credit be claimed without even having any service tax registration.

Facts
The respondent was engaged in export of services and is not registered under the Service Tax Law. However a refund claim of unutilised CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 was filed. In absence of registration, the claim was rejected. Tribunal relied on the decision of M/s. mPortal India Wireless Solutions Private Limited 2011 (16) taxmann.com 353 (Kar) of Hon’ble Karnataka High Court and held that there is no such precondition under the CENVAT Credit Rules for the assessee to take any registration. Also, one to one co-relation with respect to the input services used for providing output services was established and accordingly refund was allowed. Being aggrieved by the decision of the Tribunal, department has filed an appeal.

Held

The High Court dismissed the appeal due to absence of substantial question of law.

shailesh.kwebmaker

[2016-TIOL-1730-HC-Del-ST] Federation of Hotels and Restaurants Association of India and ORS vs. Union of India and ORS

I. High Court

Constitutional validity of restaurant service along with Rule 2(C) of the Service Tax (Determination of Value) Rules, 2006 is upheld and entry 65(105)(zzzzw) pertaining to levy of service tax on short term accommodation is held unconstitutional and invalid.

Facts:
The petitioner challenges the constitutional validity of section 65(105)(zzzzv) viz. restaurant service and section 66E(i) of the Finance Act, 1994 seeking to constitute service portion in an activity of supply of food as a declared service. Further it is claimed that Rule 2C of the Service Tax (Determination of Value) Rules, 2006 arbitrarily determining 40% as the value of service is invalid. Further the constitutional validity of section 65(105)(zzzzw) viz. Hotel, Inn, Club and Guest House service is also challenged. It was stated that with the insertion of clause 29(f) in Article 366 of the constitution, the state legislatures have the exclusive competence to legislate in respect of levy of tax on sale or purchase of goods and no part of the transaction of supply of food in a restaurant is amenable to service tax. Further in respect of hotel accommodation it was submitted that Entry 62 of the State List imposes tax on entertainment, amusement, betting and gambling and moreover state legislatures have enacted statutes for levy of luxury tax on hotel accommodation and therefore levy of service tax lacks legislative competence.

Held:
The High Court relied on the decision of Larsen and Toubro [2015-TIOL-187-SC-ST] and BSNL vs. Union of India [2006-TIOL-15-SC-CT-LB] wherein it has been observed that the taxation powers of the Centre and States are mutually exclusive under the constitution and therefore the moment a levy enters into a prohibited exclusive field it is liable to be struck down. Accordingly Parliament can only tax the service element and the states can only tax the transfer of property in goods. Therefore the Court noted that in the present writ it is essential to examine whether the composite catering contract is capable of being segregated into a portion pertaining to supply of goods and that pertaining to services provided. Relying on the decision of Larsen and Toubro vs. State of Karnataka [2013-TIOL-46-SC-CT-LB] it was held that even if some part of the composite transaction involves rendering of service, there should be no difficulty in recognizing the power of the Union to bring to tax that portion. Since the Parliament has made the legal position explicit by taxing the service portion of a composite contract of supply of food and drinks the same has sound constitutional basis and therefore section 65(105)(zzzzv) and section 66E(i) are constitutionally valid. In the matter of Rule 2C the Court relying on the decision of Association of Leasing and Financial Services Companies vs. Union of India [2010-TIOL-87-SC-ST-LB] observed that the grant of abatement has the approval by the Supreme Court more so when the assessee does not maintain accounts to determine the service portion. However it was pointed out that if an assessee is able to demonstrate on the basis of accounts and records that the value of service is different than that provided in the Rule, the assessing authority is obliged to consider such submission and give a decision thereto. In respect of Hotel accommodation, however the Court noted that the “Delhi Tax on Luxuries Act, 1996” which provides for levy of luxury tax on provision of service of hotel accommodation is traceable to entry 62 of the State list and therefore the State is competent to levy tax on such taxable event. Thus, this is a case of encroachment by the Union in the domain of the State and therefore the Court strikes down section 65(105)(zzzzw) of the Finance Act 1994 pertaining to levy of service tax on provision of short-term accommodation.

shailesh.kwebmaker

[2016-TIOL-26-ARA-ST] M/s Steps Therapeutics Ltd

Clinical pharmacology and Clinical research undertaken of the formulations viz. tablets, capsules etc. on the volunteers is covered by Rule 4(a) of the Place of Provision of Service Rules, 2012.

Facts:
The Applicant is in the process of establishing, developing and carrying on research in basic and applied sciences in relation to all kinds of drugs, pharmaceuticals and formulations, health care and bio-technology. The services to be provided include Clinical Pharmacology which is a study carried out for generic drugs. The study is proposed to be undertaken using formulations in the form of tablets, capsules, syrups, inhalers etc. Further they would undertake clinical research which involves project management, monitoring, medical writing etc. In terms of a sample agreement, clinical trials are to be undertaken for the drugs of the customers situated outside India on volunteers in India. These volunteers are kept under observation and their blood samples are tested for identification of various parameters as required by the customer and a consideration is charged on a project to project basis. This is the main activity of providing research assistance services to its customers. The question before the authority is whether the services provided are covered by Rule 3 of the Place of Provision of Services Rules, 2012.

Held:
The Authority noted that the issue to be decided is whether the services of clinical pharmacology and clinical research are covered by Rule 3 viz. location of service recipient or Rule 4 viz. the location where the services are actually performed of the Place of Provision of Services Rules 2012. The service is covered by Rule 4(a) if the service is provided in respect of goods which are required to be made physically available by the recipient of service to the provider of service. In the present case, the study is undertaken using formulations, tablets, inhalers etc. provided by customers outside India on eligible volunteers in India. Therefore it is clear that the goods are required to be made physically available by the customers located outside India to the applicant and therefore the service of clinical pharmacology is covered by Rule 4(a) of the Rules. It was argued that the Education Guide issued by the CBEC categorically mentions that the service of market research is not covered by the said Rule 4. The authority noted that the guide at para 1.2 categorically provides that it is neither a departmental circular nor a manual of instructions and does not command the required legal backing to be binding on either side and in any case the provisions of Rule 4 are clear and therefore the Education Guide cannot take precedence over it. Further if the service of clinical pharmacology is not provided and only the service of clinical research is provided, the said service being in the nature of monitoring, project management etc. the authority held then it will not be in relation to the formulations provided by the service receiver and nor will it require physical presence of any representative of the drug company and therefore such service will not fall in the ambit of Rule 4 and will be covered by Rule 3 of the Place of Provision of Service Rules, 2012.
Note: Readers may note, that Rule 4 of the Place of Provision of Service Rules, 2012 requires the services to be provided in respect of goods. Examples provided in the Education Guide at para 5.4.1. include repairs, reconditioning, cargo handling etc. Accordingly the service is essentially any physical service carried out on another person’s goods. However in the present case the drugs are the object of research whereas the service involves various aspects of research viz. study of the blood samples, the minute observation of the physical changes in the volunteers consuming the drugs, its analysis and then drawing an inference on the basis of their skill/knowledge/expertise etc. on the basis of which a report is sent outside India which is directly consumed outside India. There is no physical service or manipulation performed on the drugs of the service receiver and therefore its inclusion in the said Rule 4 appears questionable.

shailesh.kwebmaker

[2016-TIOL-20-ARA-ST] M/s Global Transportation Services P. Ltd.

III Authority of Advance Ruling (AAR)

Facts:
The Applicant a provider of logistic solutions provides a number of services which are mutually exclusively viz. transportation of goods by road, loading/unloading of goods, air/ocean freight etc. on various outbound and inbound shipments. They enter into a contract with the airline for transportation of consignment who issues an Airway Bill which governs the terms of contract between them on a principal-to-principal basis. The Applicant in turn in a majority of cases issues a House Airway Bill upon its customers. The earning for all the services rendered is the difference between the amount charged to the customer and paid to the airlines/shipping lines/transporters etc. They also enter into reciprocal freight business arrangements with freight forwarders in other jurisdictions. The questions raised before the authority were whether the freight margin recovered from their customer/freight partner in case of outbound shipments is not taxable in light of Rule 10 of the Place of Provision of Service Rules, 2012 and whether in case of inbound shipments the same is covered under section 66D(p)(ii) of the Finance Act, 1994-Negative list which provides an exemption to transportation of goods by aircraft/vessel from a place outside India upto the customs station. Further questions of valuation and CENVAT availability were also raised in case the above transactions were held to be taxable.

Held:
The Authority noted that the relationship between the airline/shipping line and applicant is separate and distinct from the relationship between the applicant and its customer. The contract with the customer is to provide the service of transportation of cargo. In case of any damage or destruction, the applicant has an independent right against the airline/shipping line and the customer also has a right to recover damages from the applicant independently. Therefore they are acting on a principal-to-principal basis providing the main service and are thus excluded from the definition of intermediary provided in Rule 2(f) of the Place of Provision of Services Rules, 2012 . Accordingly the place of provision of the said service will not be location of the service provider. The place of provision of transportation of goods is the destination of goods as per Rule 10 of the said rules and therefore in case of an outbound shipment the destination is outside India and accordingly the freight margin is not liable for service tax. Similarly in case of inbound shipments the service is covered by the Negative List – section 66D(p)(ii) and therefore is not exigible to service tax. However with effect from 01/06/2016, the said section has been omitted and therefore the said service of transportation is made taxable. However the exemption to transportation of goods by aircraft continues under the mega exemption notification vide notification 9/2016-ST dated 01/03/2016.
[Note: Readers may note the decision of Greenwich Meridian Logistics (India) P. Ltd [2016-TIOL-869-CESTAT-MUM] on similar facts reported in the May 2016 issue of BCAJ dealing with the period prior to July 12. Reference can also be made to the decision of Phoenix International Freight Services P. Ltd vs. Commissioner of Service Tax, Mumbai-II [2016-TIOL-2353-CESTAT-MUM] wherein the Tribunal relying on the decision of Greenwich Meridian (supra) has dropped the demand prior to July 2012.]

shailesh.kwebmaker

2016] 71 taxmann.com 92 (New Delhi – CESTAT) – Swastik Wires vs. CCE

Rule 6(3)(b) of CENVAT Credit Rules is not applicable if there is no levy of duty on goods cleared on account of absence of manufacture. Hence, where assessee availed the entire CENVAT credit and paid 8% at the time of clearance of such goods, the procedure was held to be in contravention of the law. However, demand is reduced to the extent of amount of 8% already paid by way of utilizing CENVAT credit.

Facts:
The appellant a manufacturer of wires falling under chapter 72 and 85 of the first Schedule to the Central Excise Tariff Act registered with the Central Excise and cleared final product on payment of duty after availing Cenvat Credit of duty paid on inputs. The appellant was also doing galvanization on H B wire procured from other manufacturers. Since the process did not amount to manufacture there was no duty incidence on such product. For the period under consideration, the appellants availed cenvat credit on the entire common inputs used in the manufacture of dutiable products as also the products which did not attract duty. Such non-dutiable products were being cleared by them on payment of 8% of the value of the same in terms of provisions of Rule 6(3)(b) of Cenvat Credit Rules. Revenue, denied the CENVAT credit on the ground that, in as much as the appellants final product i.e. galvanized wire and the other wires which emerges by the process of wire drawing are not process amounting to manufacture and hence not liable to excise duty, the provisions of Rule 6(3) (b) of Cenvat Credit Rules is not applicable to them. Appellant contended that, the fact that the said goods are specified in the schedule to the Central Excise Tariff, they are required to be held as excisable goods, and although emerging as a result of non-manufacturing activity, the provisions of Rule 6(3)(b) would fully apply.

Held:
Tribunal observed that, said goods are admittedly specified in the tariff and in terms of Rule 2(d) and hence they have to be held excisable goods. The same attract duty at the rate of 16% ad valoram and there is no exemption notification in respect of said goods. It was further observed that admittedly, the said product did not attract duty at all on account of being a non-manufactured product. It was observed that on one hand, the appellant is taking a stand that no duty is required to be paid on the galvanized wire inasmuch as there was no manufacturing activity involved and thus reason that he is not paying full rate of duty of 16% on the said goods at the time of clearance of the same and on the other he is claiming the applicability of Rule 6(3)(b) on the ground that said goods are dutiable but exempted. Referring to the definition of “exempted goods” under rule 2(d) of Central Excise Rules, Tribunal held that if no duty of excise is leviable on account of non-manufacture, the question of exemption of same does not arise. As such, goods cannot held to be exempted goods, thus making the applicability of Rule 6(3)(b) as nil. It further held that, Rule 3 of Central Credit Rules allows a manufacturer or producer of final product to avail the credit of duty paid on the inputs, which are to be used by them in the manufacture of final product. If there is no manufacturing activity involved, the said Rule debars the availment of credit at the ab initio stage itself. It was however held that the Appellant has already reversed 8% of the cenvat credit for the purpose of payment of 8% of duty and hence to that extent payable duty demand has to be neutralized against the same.

shailesh.kwebmaker

[2016] 71 taxmann.com 133 (Bangalore-CESTAT) Dell India (P) Ltd. vs. Commissioner of Service Tax

When excess payment is made due to charging service tax at higher rate, by way of credit note adjustment of such excess payment is allowed against liability of subsequent period as per Rule 6 of Service Tax Rules, 1994.

Facts:
The Appellant continued to pay service tax at old rate although there was reduction in service tax rate. This resulted in excess payment of service tax. Later, appellant issued credit notes to customers and issued fresh invoices by applying correct rate of service tax. However, the Appellant revised their ST-3 returns for the said period by showing this adjustment by way of reduction in valuation, though strictly speaking, this was not reduction in value, but applicability of correct rate of tax. Revenue did not allow the suo motu adjustment of excess payment of service tax as it was contended that this was neither strictly covered under Rule 6(3) of the Service Tax Rules 1994 (Rules) nor under Rule 6(1A) of the Rules. Therefore, issue involved was whether appellant could claim refund of excess payment by following procedure governing refund claim or whether they could claim the credit of excess payment by way of adjustment as per Rule 6 of the Rules.

Held:
Liberal interpretation and generous view of provisions of service tax rules was required to be adopted. Though the appellant’s case was not strictly covered by provisions of different sub-rules of Rule 6 of Service Tax Rules, 1994, admittedly appellant was entitled to benefit of adjustment of excess service tax paid by them. Reliance was placed upon decision in the case of General Manager (CMTS) v. CCE [Final Order No. ST/A/52446/2014-CU (DB), dated 8-5-2014], wherein it was held that when an assessee during certain months, for reasons other than interpretation of law, taxability, classification, valuation or applicability of exemption, has paid service tax in excess of his actual tax liability, the Government cannot retain the excess tax paid by the assessee by refusing its adjustment against his tax liability during other months and refusing adjustment of such excess tax payment during a month against tax liability during other months and appropriation and retention of the same would amount to collection of tax without the authority of law which is contrary for the provisions of Article 265 of the Constitution of India.
[Note: Readers may note that in case of Schwing Stetter India (P.) Ltd. vs. Commissioner of Central Excise, LTU, Chennai [2016] 71 taxmann.com 228, Chennai Tribunal held that in terms of Rule 6(4A) of STR, 1994, assessee is entitled to adjust excess payment against any of the subsequent months/quarters and department is not permitted to retain such excess payment by stating a reason of mere procedural lapse.]

shailesh.kwebmaker

[2016] 71 taxmann.com 68 (Hyderabad CESTAT) Xilinx India Technology Services (P) Ltd. vs. Commissioner

Refund of CENVAT Credit –Tribunal allowed refund of CENVAT Credit in respect of various services received by the Appellant in the light of definition of ‘input service’ amended w.e.f. 01.04.2011 – Rent paid for ‘fit out’ was held as part of the renting of immovable property service applying principles of bundled services contained in section 66F.

Facts:
The Appellant a 100% EOU and provider of information technology and software service filed refund application under Rule 5 of Cenvat Credit Rules, 2004 r/w Notification No.5/2006 CE(NT) dated 14-03-2006 for the period October, 2011 to December, 2011 in respect of various input services. Department denied the refund claimed relying upon decision of Maruti Suzuki Ltd. v. CCE [2009] 22 STT 54 (SC) observing that appellant has failed to establish that the input service has direct nexus with output services provided by appellant. The Appellant submitted that all the services in respect of which refund claim is denied are very much essential for providing the output services. It was also submitted that the view taken in the said case was doubted and referred to larger Bench of Supreme court in Ramala Sahkari Chini Mills Ltd. v. CCE [Civil Appeal No. 3976/2007, dated 19-2-2016] and further that the said decision dealt with interpretation of inputs and not input services, and therefore not applicable.

Held:
Hon’ble Tribunal allowed refund claim in respect of each of the services by holding as under:

Air Travel Agent: These services were used for booking air ticket for the employees to travel abroad to attend seminar and other meetings. Tribunal noted that, the invoices are accompanied by other documents (e-mail communications) which evidence that the employee has travelled to attend seminar.

Club or Association Services – Services is in respect of the membership fee paid to the Chamber of Commerce. Services were availed for augmenting business and it is the organization which acquires the membership in such associations. It is not for personal consumption or use of employee and therefore is not excluded.

Renting of ‘fit-out’ – The original Authority had partly allowed the credit on renting and disallowed credit on fit out. However considering the components of rent, maintenance and fit out as part of the same agreement for rent, it was considered naturally bundled and full credit was allowed.

Other than the above services, credit in respect of banking and financial services, support services for Xeroxing documents CA service, courier service, custom house agents service, IT Software and Telecommunication service, manpower recruitment service, management and business consultant, commercial coaching and training service also has been allowed fully considering them essential for providing output services.

[Note: Readers may note that decision is important in view of the fact that it takes a view on eligibility of various input services in the light of amended definition of input services w.e.f.01.04.2011.]

shailesh.kwebmaker

[2016] 71 taxmann.com 293 (Mumbai-CESTAT) Decos Software Development Pvt. Ltd. vs. Commissioner of Central Excise, Customs & Service Tax, Pune-III

“Net CENVAT credit” under Rule 5 of CENVAT Credit Rules means the CENVAT credit availed during the relevant period irrespective of the date of invoice or when services were received or used for the purpose of export. Further, when records maintained by assessee clearly shows the actual date of availment of CENVAT credit, denial thereof on sole basis of clerical error in ST-3 returns is not valid.

Facts:
While filing ST-3 return, appellant mistakenly showed CENVAT credit in respect of certain invoices against April-June 2012 period although such credits were actually availed during July 2012–September 2012. The credit pertained to invoices dated prior to July 2012. By the time appellant realized this mistake in ST-3 return, time limit for filing revised return for “April-September 2012” had elapsed. However, from CENVAT account details maintained by the appellant, it was amply clear that the CENVAT credit (mistakenly shown in ST-3) was actually availed by the appellant during “July 2012-September 2012”. Accordingly, while filing refund claim for period “July 2012-September 2012” in terms of Rule 5 of CCR, 2004, the CENVAT credit in respect of the said invoices issued prior to 01/07/2012 was also included in “Net Cenvat Credit”. In spite of appellant informing the authorities about the mistake in filing ST-3 returns, refund claim to the extent of above component of CENVAT credit, was rejected by the revenue on the ground that invoices pertained to period prior to 01/07/2012 and appellant declared the same in ST-3 return for period “April 2012-June 2012” and ST-3 return, being statutory return should be taken as correct position of availment of CENVAT credit and in absence of revised return, the original return cannot be ignored.

Held:
Referring to Rule 5 of CENVAT Credit Rules, the Tribunal held that while deciding the claim for July – September 2012, whatever CENVAT credit is ‘availed’ in the quarter July to September, 2012 shall be taken as Net CENVAT credit. If the CENVAT credit is availed in any period prior to 01/07/2012, the same cannot be taken into Net CENVAT credit for the quarter July to September, 2012. In other words, even if services which were received and ENVAT credit taken prior to 01/07/2012, were used for export of service for the quarter July to September 2012, the same cannot be included in the net credit for the quarter July to September 2012. While arriving at such conclusion, Tribunal placed reliance on decision of Gujarat High Court in case of Commissioner vs. Man Industries (I) Ltd. 2015 (321) ELT 442 wherein it was held that when inputs were received in different period and credit was availed in subsequent period, the relevant period would be the one in which credit was availed and not the period in which input/input services were received.
As regards the facts of the case, Tribunal held that, just because the appellant has filed ST-3 return and shown the CENVAT credit availed in the April to June 2012 quarter cannot be the sole basis to conclude that the CENVAT credit was availed in that quarter. Appellant made categorical statement in their submissions that the CENVAT credit shown in the quarter April to June, 2012 is due to clerical error and in support of this statement they also produced the CENVAT credit account maintained on the computer which shows that the CENVAT credit was availed in the quarter July 2012 to September, 2012. Tribunal therefore remanded the matter with a specific direction that appellant’s claim be verified on the basis of CENVAT credit account produced by them as well as any other corroborative evidences, if required and if it is found that the CENVAT credit was availed in July to September 2012, even though on the invoices pertaining to the period prior to 01/07/2012, the refund shall be admissible.

shailesh.kwebmaker

[2016] 71 taxmann.com 69 (Hyderabad CESTAT) GE India Exports (P) Ltd. vs. Commissioner of Customs, Central Excise & Service Tax, Hyderabad-II

Invoice issued to unregistered premises of service recipient is valid for claiming input tax credit as Rule 4A of Service Tax Rules does not require to issue invoice only at registered premises.

Facts:
Appellant obtained a centralized registration and filed a refund claim of CENAVT credit which included certain input services for which service provider issued invoices to the unregistered premises under service tax. Refund claim in respect of such invoices was rejected by revenue. It was argued that in terms of Rule 4A of Service Tax Rules, 1994, invoice bearing service tax registration number of service provider and disclosing the name, address and details of service recipient is valid enough to claim input tax credit and there is no such requirement of stating registered address of service recipient on the invoice.

Held:
Hon’ble Tribunal noted that when the invoice gives detailed description of services performed, when service tax is correctly paid by the service provider and in absence of any express requirement in Rule 4A of Service Tax Rules, 1994 stating that premises of service recipient has to be registered, department’s act of denying CENVAT credit was invalid and accordingly, appeal was allowed.

[Note: Readers may note that while deciding on similar issue, in case of [2016] 71 taxmann.com 251 Prasad Corporation Ltd. vs. Commissioner of Service Tax-II, Hon’ble Chennai Tribunal held that CENVAT credit cannot be denied merely on the ground that service provider has mentioned incorrect address of service recipient on the invoice.]

shailesh.kwebmaker

[2016] 71 taxmann.com 188 (New Delhi-CESTAT) – Commissioner of Central Excise, Bhopal vs. Diamond Cement

Where assesse filed refund claim in the year 2002 within one month of the rejection of Revenue’s appeal to the Tribunal, in respect of amount debited to Cenvat account in 1996, refund claim not time-barred.

Facts:
Prior to adjudication proceedings, the assessee debited their CENVAT credit account on various dates, by following Revenue’s view. However, proceedings were initiated resulting in confirmation of demand by the Adjudicating Authority. The said order was set aside by Commissioner (Appeals). Revenue’s appeal against the order of Commissioner (Appeals) was rejected by the Tribunal and resultantly, the assessee was entitled to refund of amount debited from CENVAT account. A refund claim was filed within a period of one month of the rejection of Revenue’s appeal by the Tribunal. This refund claim was rejected on the ground of time-bar. Commissioner (Appeals) allowed assessee’s appeal relying upon CCE vs. BCL Forgings Ltd. 2005 (192) E.L.T. 922 (Tri. – Mumbai), Hutchisom Max Telecom Pvt. Ltd. vs. CCE, Mumbai 2004 (165) E.L.T. 175 (Tri. – Del) and Shree Ram Food Industries vs. Union of India 2003 (152) E.L.T. 285 (Guj) wherein it was held that payments made pursuant to department’s threats are not voluntary payment and hence limitation under section 11B is not applicable in that case. Further, the appeal against an assessment order or demand order amounts to protest and a formal letter of protest is not necessary.

Held:
Tribunal held that apart from reiterating that debit entries were made by assessee without any threat or coercion, the revenue has only contended that the decisions relied upon by the Commissioner (Appeals) are not applicable, without giving any details as to how the said decisions involving the same legal issue, are not applicable to the facts of the case. Merely because department has filed appeal against Tribunal’s judgment in the case of BCL Forgings Ltd. (supra), before Bombay High Court, Tribunal’s decision do not become inapplicable. It was noticed that Commissioner (Appeals) recorded observations and findings that the debit entry was countersigned by Superintendent (Preventive) and the show cause notice itself mentions that the debit was made on pursuance of the officers of the Central Excise. Accordingly, the Revenue’s appeal was dismissed.

shailesh.kwebmaker

2016 (43) STR 634 (Tri. –Mum.) Rent Works India Pvt. Ltd. vs. CCE, Mumbai V

Different departments of Government of India cannot take different stands on same transactions.

Facts:
Appellants paid salary to a foreign national person being the director of the company. Service tax was demanded under reverse charge mechanism on such payments. Relevant agreement, minutes of board meetings, records available at the website of Ministry of Company Affairs as well as income tax decision were produced holding that the amount paid was nothing but salary to director. Revenue stated that these evidences were not produced before lower authorities and argued that though the person was director, invoices indicated that the payment was made towards consultancy charges.

Held:
The agreement was for providing services for monthly remuneration and additional amount at the discretion of board of directors. The director had signed the Balance Sheet of the period under consideration. Therefore, the amount paid was towards remuneration. If the amount is considered as salary by income tax department, one branch of Ministry of Finance, the other branch viz. service tax department cannot hold it to be consultancy charges. The same department of Government of India cannot take different stand on the amount paid to the very same person and treat it differently.

shailesh.kwebmaker

2016 (43) STR 601 (Tri. –Hyd.) Amara Raja Electronics Ltd. vs. CCE, Tirupathi

If service tax is paid on sharing of common expenses which is not objected by department, CENVAT credit thereof cannot be denied to service receiver.

Facts:
Appellants received invoices from its group company relating to common expenses incurred at branch. CENVAT credit was denied on the ground that it was merely sharing of common expenses. Relying on various judicial pronouncements, it was contested that the requisites for running a branch office was provided by group company which had nexus with manufacture of final product. However, department contended that it was not a case of rendition of services and in order to distribute common credits, the Appellants ought to be “Input Service Distributor”.

Held:
Since department was collecting service tax from group companies which was never objected, allegation cannot be made against service receiver that no services were rendered. In absence of any evidence by revenue that services were not rendered, appeal was allowed.

[Note:- Readers may note the decision in the case of Commr. Of ST vs. Arvind Mills Ltd. 2014 (35) STR 496 (Guj.), wherein the activity of deputation of employees to subsidiary company and recovery of cost thereon was held as not liable to service tax. Reference can also be made to a similar decision of the Delhi CESTAT in the case of ONGC vs. Comm. Of ST, Delhi 2016 (8) TMI 500 – CESTAT Delhi. In sum and substance, in cases of sharing of common expenses, in absence of service, service tax shall not be paid. However, if paid, CENVAT credit thereof shall not be denied.]

shailesh.kwebmaker

[2016-TIOL-2171-CESTAT-MUM] Tata Quality Management Services vs. Commissioner of Central Excise, Pune-III

Actual expenditure incurred for rendering services can be taxed only as per the provisions of Rule 5(1) of the Service Tax Valuation Rules but the said rules are struck down as ultra vires by the Hon’ble High Court of Delhi in the case of Intercontinental Consultants and Technocrats Pvt. Ltd.

Facts:
Appellant engaged services of foreign service providers and paid service tax under reverse charge mechanism on the amounts paid to them. Further, amount on their stay and other out of pocket expenses during their visit in India was also paid. The department contended that these expenses are required to be included in the value of the service rendered by the foreign party as the same is incurred in relation thereto. It was argued that these amounts were paid to various service providers who have charged service tax on the bills raised by them and therefore adding these amounts for payment of service tax under reverse charge mechanism will result in double taxation. Further the decision of Intercontinental Consultants and Technocrats Pvt. Ltd. vs. Union of India & Anr. – 2012-TIOL-966-HC-DEL-ST was relied upon.

Held:
The Tribunal noted that due service tax is discharged on the entire amount paid to the foreigners. The amount paid for stay and travel are incidental expenses paid directly to the vendors who have paid applicable service tax and cannot be considered as amounts paid or payable to the foreigners. Further it was held that the said amount can be taxed only as per Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 which is struck down as ultra vires by the Hon’ble High Court of Delhi in the case mentioned above and therefore is not liable for service tax under reverse charge mechanism and the appeal was allowed.

shailesh.kwebmaker

[2016-TIOL-2223-CESTAT-HYD] M/s. Hindustan Coca Cola Beverages Pvt. Ltd. vs. CCE, Hyderabad-I

II. Tribunal
Catering services provided in terms of the requirement under the Factories Act, 1948 is allowable as CENVAT credit post April 2011.

Facts:
The Appellant manufacturer availed CENVAT credit on outdoor catering services post April 2011. The department contended that post the said date these services are excluded from the definition of input service and therefore the credit is inadmissible. It was argued that only services which are used primarily for personal use or consumption of any employee are excluded whereas in the present case the services are provided within the factory premises as per the statutory requirement imposed by the Factories Act, 1948 and further the unit is located away from the city and therefore non-provision of food will directly impact the production.

Held:
The Tribunal observed the term ‘primarily’ in the exclusion clause and noted that the word means most proximate or important. However in the present case the service is most importantly used to comply with the requirements under the factories act failing which they will not be able to engage in production/manufacture of final products. Accordingly it was held that services are used in relation to the business of manufacture and not for any personal use or consumption of the employee and therefore the credit is allowed.

[Note: Readers may note a similar decision in the case of Gateway Terminals (I) P. Ltd vs. Commissioner of Central Excise, Raigad [2015-TIOL-1471-CESTAT-MUM] digest provided in August 2015 wherein the Tribunal noted that provision of canteen facilities being a statutory obligation is a part of the business need and accordingly credit was allowed.]

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2016 (43) STR 249 (Tri. Ahmd.) L& T Sargent & Lundy Limited vs. CCE & ST, Vadodara

Non-intimation to department regarding adjustment of service tax suo motu is a curable defect.

Facts
Excess payment of service tax was adjusted by the Appellants suo motu without intimation to department. The adjustment was denied. It was contended that no intimation was required under Rule 6 (3) of Service tax Rules, 1994. Even if intimation was required, it was a minor procedural defect and therefore, penalties were not warranted. Department argued that penalties shall be imposed on such big industrial group who must be well aware of these laws.

Held
Since there was no short payment of service tax and the defect was not so serious, adjustment was allowed and penalties were set aside.

Note: Readers may note a similar decision in the case of State Bank of Hyderabad [2016-TIOL-1105-CESTAT-HYD] reported in the June 2016 issue of BCAJ. Further please note the decision in the case of ONGC vs. CCE, Cus. & ST., Surat-II [2016 (43) STR 317 (Tri. – Ahmd.)] where on similar facts, the Tribunal had directed the appellant to follow prescribed procedure in future.

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2016 (43) STR 234 (Tri. – Chan.) Jindal Water Infrastructure Ltd. vs. CCE, Rohtak

In cases of centralized registration, appeal may be transferred to jurisdictional CESTAT even if adjudicated at some other place.

Facts
Appellant obtained centralized registration at Delhi. However, adjudication was made at Rohtak. Appeals relating to such adjudication were assigned to Chandigarh Bench on the basis of territorial jurisdiction.

Held
In view of centralized registration and since the cause of action had arisen in Delhi, appeal was directed to be transferred to Delhi CESTAT .

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2016 (43) STR 110 (Tri-Mum.) Sumeet C. Tholle and Prathima S. Tholle vs. C.C.E.&C., Aurangabad

Service Tax collected and deposited without authority of law by the service provider can be refunded to service receiver.

Facts
The appellants jointly purchased a house wherein service tax as well as VAT was collected from them. Even though the transaction between the appellants and its vendor was of transfer of immovable property, the vendor charged service tax. On understanding the facts, the appellants filed a refund claim with the department since tax was levied and collected without authority of law. The refund claim got rejected on the grounds that the appellants had not provided any proof of deposit of service tax by the service provider with the Government.

Held
Since the transaction of transfer of immovable property is squarely covered in the exclusion part of the definition, the activity of transfer of immovable property is not a taxable activity. Service recipient cannot be made liable to prove that the service tax paid by him to the service provider has been credited to the Government or not. Refund can be granted to the recipient on the basis of invoices held by them wherein service tax has been charged. Whether service tax has been deposited to the Government or not is to be looked by the department and not the service recipient. Service recipient having borne the incidence of tax can challenge taxability by claiming refund.

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[2016-TIOL-1982-CESTAT-ALL] M/s. Shiel Autos vs. Commissioner of Central Excise, Kanpur

Extended period cannot be invoked and penalties cannot be imposed on matters involving interpretational issues referred to the larger bench.

Facts
The Appellant is an automobile dealer. On the basis of information obtained from various banks it was observed that they were in receipt of commission on which no service tax was paid. A show cause notice was issued proposing demand of service tax along with interest and penalties on the commission received as a direct selling agent. It was argued that they have only let the financing agency to use their premises in order to promote the sale of vehicles and there is no principal agent relationship with the finance company and that they merely act as a channel between the customer and the finance company. On confirmation of demand by the adjudicating authority, the first appellate authority observed that the receipt of commission from the bank is not on the basis of space occupied in the premises but is on the basis of quantum of finance sanctioned to the customers who purchased vehicle. Therefore demand as a direct selling agent of the bank/institution was confirmed. Accordingly the present appeal is filed.

Held
The Tribunal noted that no agreement with the banks was placed on record regarding provision of any space and further the commission amount varied from month to month. Therefore undoubtedly the activity falls under the category of “business auxiliary service” for promotion and marketing of services provided by banks. However considering the fact that there was an interpretational issue and the matter was decided by the larger bench in the case of Pagariya Auto Centre vs. Commissioner of Central Excise, Aurangabad [2014-TIOL-141- CESTAT-DEL-LB, extended period is not invokable and penalties are set aside. Demand is upheld only for the normal period.

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2016 (43) STR 542 (Kar.) Commr. of ST, Bangalore vs. Kyocera Wireless (India) Pvt. Ltd.

I.High Court
Registration not a pre-requisite for claiming refund of CENVAT Credit

Facts:
The Respondent is an exporter of services and claimed refund of CENVAT credit. Department rejected the claim on two grounds; namely; absence of service tax registration and non-production of sufficient documents for input services and output services.

Held:
Relying upon the decision of mPortal India Wireless Solutions Pvt. Ltd. vs. CST, Bangalore [2012 (27) STR 34 (Kar.)], it was held that registration was not required to claim CENVAT credit and refund thereof. In absence of clear findings from original adjudicating authority as well as Tribunal, matter was remanded to adjudicating authority for verification of records within 3 months from the date when the order of the said decision is received.

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[2016] 69 taxmann.com 328 (New Delhi – CESTAT) – Chambal Fertilizers & Chemicals Ltd vs. Commissioner of Central Excise, Jaipur

If service receiver has borne the incidence of tax, he can apply for refund of tax before his own jurisdictional officer.

Facts
Assessee is a manufacturer of exempted excisable goods which uses natural gas as a raw material. Transmission charges for transportation of natural gas is regulated. The regulated price was fixed at a lower rate than the price at which it was procured. The vendor issued credit notes for price differentials towards the value of the service, but no credit notes were issued for excess service tax collected by him from the assessee and paid to the Government. The Appellant being a service recipient of the service filed a refund claim with the jurisdictional tax authorities claiming refund of such tax. The application was considered as ‘not maintainable’ by both the authorities below on two grounds namely; (i) the tax amount is paid in the Government treasury by the vendor and not by the Appellant. (ii) the appropriate authority for sanction of the refund amount is the tax authorities having jurisdiction over the premises of the vendor and not the Appellant.

Held
Tribunal observed that there is no dispute as to the fact that excess tax has been paid for which refund application is maintainable under the statute. It held that since the recipient of service has filed the refund application before its jurisdictional authorities the same is proper and maintainable u/s. 11B of the Central Excise Act, 1944. As regards department’s stand that receiver is not entitled to file refund application, It was held that since the incidence of service tax has been borne by the appellant itself, the refund claim can very well be lodged by him claiming refund of excess service tax paid to the supplier of goods which was ultimately deposited into the Government Exchequer. In arriving at such conclusion, Tribunal relied upon its own decision in the case of Ms. Jindal Steel & Power Ltd. vs. CC & CE [2015] 64 taxmann.com 383 (New Delhi-CESTAT) and also decision of Hon’ble Allahabad High Court in the case of CC, CE & ST vs. Indian Farmer Fertilizers Co-op. Ltd. [2014] 47 GST 4/48 taxmann.com 79.

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62. [2016] 69 taxmann.com 176 (Mumbai – CESTAT) CCE vs. Cityland Associates

When failure to make 50% payment within time-limit prescribed under VCES is for the reasons not attributable to declarant but for the system error, benefit of the scheme cannot be denied.

Facts
Assessee applied for VCES Scheme on 31/12/2013 and after obtaining the service tax registration attempted to deposit 50% of declared tax dues. After making number of attempts on the website, the transaction could not be completed and error message “assessee code invalid” was reported all the time. Subsequently on 01/01/2014 the amount was deposited through banker’s cheque. The Adjudicating authority observed that since 50% dues were not paid on or before the 31/12/2013, benefit of VCES Scheme notified under Finance Act, 2013 was not available.

Held
Tribunal observed that admittedly, as per VCES Scheme, 2013, 50% of the declared dues is supposed to be deposited by 31/12/2013 and there is no provision for extension of that period for deposit. However in the present case, the respondent undisputedly applied for registration, obtained assessee code number and attempted to deposit 50% amount on 31/12/2013 however due to system fault the amount could not be deposited. It further observed that report which shows that “assessee code invalid” was also on record on 31/12/2013 and their bank account had credit balance of more than 50% amount which was to be deposited. In these factual circumstances, Tribunal held that assessee has scrupulously followed the procedure and complied with condition i.e. applied for registration and attempted to deposit the amount on the due date i.e. 31/12/2013 but only due to system fault online, the amount could not be deposited which is beyond their control therefore, it can be construed that there is no delay and though the payment is made on 01/01/2014, the same can be treated as if payment was made on 31/12/2013.

shailesh.kwebmaker

2016 (43) STR 301 (Tri.-Bang.) Kirthi Constructions vs. CCE. & ST., Mangalore

Even if refund of service tax is on account of mistake of law, provisions of “time bar” and ‘unjust enrichment’ would apply.

Facts
Refund of service tax paid on construction services was claimed as it was not leviable to service tax. Appellants contested that since service tax was paid by mistake of law and it was not collected from buyers, refund claim cannot be held as time barred. Revenue demanded service tax as it was not a case of self-service, service tax was collected from buyers and in any case, the refund was time barred.

Held
Since the typical arrangement was that the Appellants were first selling the plot of land and then the buyer was appointing the Appellant for construction, it was covered by the exclusion clause of construction services. Accordingly, no service tax was payable. Relying on Hon’ble Supreme Court’s decision in case of Mafatlal Industries Ltd. vs. UOI (1997 (89) ELT 247 (SC)), it was held that all refund claims except unconstitutional levies have to pass the test of limitation of one year (time bar) and non-passing of service tax burden to buyers (unjust enrichment).

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2016 (43) STR 280 (Tri.-Mum.) JSW Steel Coated Products Ltd vs. CCE, Thane II

CENVAT credit eligibility for input services and capital goods for generation of electricity which is partly consumed captively and partly sold to MSEB.

Facts
The Appellant is a manufacturer of excisable goods and had installed power plant for generating electricity. Some proportion of electricity generated was consumed captively and balance was sold. CENVAT credit on capital goods was rejected on the ground that they were used for the sale of electricity. Further, in view of non-maintenance of separate records for captive consumption and sale of electricity, demand was raised for payment on value of electricity sold vide Rule 6 (3) of CENVAT Credit Rules, 2004. It was argued that when exclusively used for exempted production CENVAT credit on capital goods is not available. Further, CENVAT credit on input services was taken at the end of the month having regard to the actual captive consumption and therefore, proper records were maintained and therefore, CENVAT credit was not deniable and no payment was required to be made as per Rule 6 (3).

Held
Relying on the decision of H.E.G. Ltd. 2012 (275) ELT 316 (Chhattisgarh), it was held that since capital goods were not exclusively used in electricity sold, CENVAT credit cannot be denied. Further CENVAT credit was not availed on input services used in generation of electricity sold and therefore, relying on the decision of Hon’ble Supreme Court in case of Maruti Suzuki Ltd. 2009 (240) ELT 641 (SC), payment was not required to be made under Rule 6 (3).

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[2016] 69 taxmann.com 101 (New Delhi-CESTAT) – Intertool Engg. & Trading Co. (P.) Ltd. vs. Commissioner of Central Excise, Delhi-II

Credit of capital goods used for both the activities of job-work as well as for manufacturing dutiable products is admissible in terms of Rule 6(4) of CCR, 2004. Further once capital goods are transferred under cover of invoice, transferee is not required to prove the correctness of CENVAT credit availed by transferor.

Facts:
Appellant received a crane from its sister concern under a cover of an invoice which showed its depreciated value. Appellant took CENVAT credit of the entire duty which was paid by its sister concern at the time of acquisition of the crane. Department contended that CENVAT credit available to the Appellant is restricted to duty payable on depreciated value mentioned in the invoice. It was submitted that if sister concern has paid any excess duty, said issue is required to be taken up at supplying unit’s viz. sister concern’s end. Further, CENVAT credit in respect of another machine was denied by revenue contending that such machine is used exclusively for job work undertaken by Appellant and not used for manufacture of dutiable goods.

Held
As regards availment of CENVAT credit on acquisition of crane, Tribunal noted that in terms of Rule 3(5) of the CENVAT Credit Rules, 2004, if the capital goods were removed as such i.e. as capital goods, the sister concern of the Appellant was required to pay amount equivalent to CENVAT credit availed in respect of such crane. Once the duty paid on the crane was shown in the invoice, CENVAT credit was available to that extent. Further it was held that as regards question of correctness of payment of duty by its sister concern, such issue shall be dealt with by the authority having jurisdiction over the supplying unit. As regards availment of credit on capital goods used for job-work, the Tribunal noted that since it was clarified that machine used in its manufacturing unit was used for job-work as well as in the manufacture of dutiable goods and balance-sheet figures showed both charges received from job-work activities and sales made of dutiable goods, the Tribunal held that CENVAT credit was undoubtedly available in respect of such machine. Accordingly credit was allowed.

Note: Readers may also refer to the decision in the case of [2016] 69 taxmann.com 331 (New Delhi-CESTAT) – Shree Rajasthan Syntex vs. Commissioner of Central Excise, Jaipur-II which deals with entitlement of CENVAT credit on capital goods used initially towards manufacture of exempted goods and subsequently towards manufacture of dutiable goods. Amendment to Rule 6(4) of CCR, 2004 w.e.f. 01/04/2016 provides that if capital goods are used exclusively in manufacture of exempted goods/provision of exempted services for a period of two years from the date of commencement of commercial production or provision of service, or as the case may be installation of capital goods (if such capital goods are received after the date of commencement of commercial production), no CENVAT credit would be available, even if, after expiry of two years, such capital goods are used in manufacture of dutiable goods or provision of taxable services.

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[2016] 70 taxmann.com 276 (Mumbai – CESTAT) Global Networking Recourses vs. Principal Commissioner, Service Tax, Pune

There is no provision in the VCES to condone the delay in payment of tax dues beyond the prescribed time limit. Hence, non-compliance as regards the conditions of payment would lead to rejection of declaration and no show cause notice would be required to be given in such case.

Facts
The Appellant filed VCES declaration, however failed to pay 50% of the declared liability before 31/12/2013 and a small portion was paid on 02/01/2014. The designated authority issued show cause notice proposing rejection of VCES declaration on the ground of non-payment of requisite 50% amount before due date. The Appellant contended that due to system error this balance amount could not be deposited and also produced snap shot, bank website as a token of proof of their attempt to make payment on 31/12/2013 and prayed that since it is beyond the control of the Appellant, delay if any, occurred should be condoned.

He further contended that no show cause notice within one month of the filing of declaration as clarified by Circular No. 170/05/2013-ST dated 08/08/2013 was issued.

Held
Hon’ble Tribunal noted that the Appellant had admittedly not paid entire 50% of the total dues declared by them on or before 31/12/2013 and have also shown reason for non-payment of part of the said amount before that date. However it held that even if the reason given is accepted, there is no provision in the scheme to condone the delay in payment and therefore time line prescribed under the scheme cannot be extended in absence of any provision for condoning the delay. As regards issue of show cause notice, the Tribunal observed that issuance of show cause notice referred to in the circular is with reference to section 106(2) which provides that if any deficiency or error is found in the declaration filed under the said section, notice is required to be issued, whereas in case of failure to deposit of an amount as provided under 107 there is no provision for issuance of any notice. Therefore, even the notice given to the Appellant was also not required for rejecting declaration. Accordingly, appeal was dismissed.

(Note: Readers may note a contrary decision of the same bench in the case of Commissioner of Customs & Central Excise Vs. Cityland Associates [2016] 69 taxmann.com 176 (Mumbai- CESTAT ) reported in the BCAJ July 2016 issue wherein the same bench held that delay in payment due to system fault cannot be attributed to assessee and the declaration was held as valid.

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[2016] 70 taxmann.com 303 (Mumbai-CESTAT) – Giriraj Construction vs. Commissioner of Central Excise & Customs, Service Tax, Nasik.

Refund cannot be granted if the claim is filed beyond time limit set out in section 11B, irrespective of whether such refund claim pertains to amount mistakenly paid as duty/ tax or amount correctly paid as duty/tax.

Facts
The Appellant mistakenly paid service tax in respect of certain services provided by it but which were not liable to service tax. A refund claim in respect of such mistaken services was filed after one year from relevant date. When revenue rejected refund claim as unsustainable being time barred, Appellant contended that since the service to which the refund claim relates as not liable for service tax, service tax paid by them was without authority of law and hence, time limit of one year as prescribed u/s. 11B of the Central Excise Act, 1994 would not be applicable to refund claim filed by the Appellant. Revenue submitted that in various judicial pronouncements, it has been categorically held that refund of any amount is governed by the provisions of section 11B in absence of any other provision dealing with refund claims.

Held
The Tribunal held that it would not be correct to state that section 11B is not applicable in cases, where the applicant has paid service tax although there was no levy. In every case of refund, the refundable amounts are neither service tax nor excise duty and such amount becomes refundable only where it is not payable as per law and therefore, every such amount shall be treated as payment without authority of law. At the time of payment the assessee pays the amount under a particular head such as service tax, excise duty etc. and when subsequently it is found that this amount is not payable, the same amount stand refundable to the assessee and such refund is treated as refund of service tax/duty only. Therefore, for the purpose of claiming refund of such amount of service tax, section 11B of the Central Excise Act read with section 83 of the Finance Act 1994 is the only provision and the amount claimed for refund by the Appellant can be refunded only under that section, the limitation provided therein also would apply. Any other interpretation would make section 11B redundant. Relying upon the various decisions of Supreme Court and Hon’ble Bombay High Court, the Tribunal disallowed the claim.

(Note: Readers may note a similar decision in the case of Benzy Tours & Travels (P) Ltd vs. CST [2016-TIOL-1104-CESTAT – MUM] reported in the June 2016 issue of BCAJ.

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[2016] 70 taxmann.com 59 (Mumbai CESTAT) – Sanjay Automobiles Engineers (P) Ltd. vs. Commissioner of Central Excise, Pune-III.

Demand cannot be raised by invoking extended period when EA-2000 audit is already conducted by the department and no objections were raised in the audit report on a particular point, in respect of which appropriate disclosure is contained in financial statements.

Facts
During the period July 2003 to March 2007, Appellant earned commission income and provided infrastructural support services but did not pay service tax on it. The Revenue alleged that such receipts were liable to service tax under “business support services”/”business auxiliary services”. Appellant challenged the adjudication order by contending that the demand is barred by limitation as no point regarding taxability of commission was raised by the audit party of the department during EA-2000 audit conducted for period July 2001 to March 2006. Appellant’s contention was rebutted by the department by submitting that the mandate for the audit party of the Commissionerate was very limited and audit party was not required to look into entire records in detail to conclude that all angles are covered.

Held
The Tribunal held that the commission received by the assessee from the financial institutions and the insurance companies would be taxable pursuant to decision of Larger Bench in the case of Pagariya Auto Centre vs. CCE [2014] 44 GST 23/42 taxmann.com 371 (Mum). However, as regards the question of limitation, the Hon’ble Tribunal observed that Audit Party conducted detailed audit of the records of the assessee on various days and except for one small amount of interest not paid on the incentives, no objections were raised in the Audit report. It therefore held that the Revenue authorities were aware of the amount received as commission by the Appellant and recorded in the balance sheet. Tribunal further stated that, is a common knowledge that the EA-2000 audit is an extensive audit of the records of the assessee. Accordingly, relying upon the ratio laid down by Hon’ble Karnataka High Court in case of CCE vs. MTR Foods Ltd. 2012 (282) ELT 196 the Tribunal held that since no objection was raised regarding particular issue during the audit of records, the demand raised by issuing extended period is barred by limitation.

shailesh.kwebmaker

2016 (42) STR 290 (Tri.- Mum) Tata Technologies Ltd. vs. Commissioner of Central Excise, Pune – I

CENVAT credit cannot be denied on belated filing of declaration under Rule 6(3A)

Facts
The Appellant is engaged in providing taxable as well as exempt service. It had made a declaration as provided by Rule 6(3A) of the CENVAT Credit Rules, 2004 but the declaration was filed belatedly. Delay in filing declaration was considered as non-filing of declaration by the department and credit was denied.

Held
Condition of filing declaration is only directory and not mandatory. Intention of the legislation is that assessee should not get any undue benefit in the form of CENVAT credit which is attributable to the exempt services. Substantial benefit cannot be denied due to minor procedural lapse. Rule 6 of CENVAT Credit Rules, 2004 cannot be used as a tool of oppression to extract the amount which is much beyond remedial measure and what cannot be connected directly cannot be collected indirectly as well. Accordingly appeal was allowed.

shailesh.kwebmaker

2016(41) STR 236(Tri.-Del) Travel Inn India Pvt. Ltd. vs. Commissioner of Service Tax, Delhi

Payment of CENVAT credit availed along with interest at a later stage shall be considered as non-availment of CENVAT credit.

Facts
The Appellants are providing Tour Operator Service and were availing CENVAT credit on input services for providing output services. Notification No. 01/2006-ST had been issued granting exemption to the above services stating that exemption will not apply if CENVAT credit has been taken. On realizing the exemption and its condition, the credit taken was immediately paid along with applicable interest. However, department disallowed the exemption since they had not only availed the credit but had also utilized it for payment of service tax and therefore the conditions of the exemption were not satisfied.

Held
The Tribunal relied upon the decision of Khyati Tours and Travels [2011 (24) STR 456 (Tri.-Ahmd)] wherein it was held that reversing CENVAT credit with interest shall amount to non-availment of CENVAT credit. Paying the CENVAT amount along with interest amounts to non-availment of CENVAT credit and therefore exemption is available.

shailesh.kwebmaker

2016 (41) STR 213 ((Tri.-Del) Charanjeet Singh Khanuja vs. CST, Indore/Lucknow/Jaipur/ Ludhiana

Buying of branded goods at lower price by Distributors and selling at MRP and getting of commission on the bulk purchases is not considered as a service

Facts
The Appellants are distributors of Amway India Enterprises Pvt. Ltd who are engaged and are remunerated for acquiring goods from Amway at Distributor’s acquisition price and selling them at Retail Selling Price. Commission/ Bonus is provided by Amway depending on their monthly purchases. Commission is also paid on monthly purchases done by sub-distributors enrolled through the Appellants. The revenue confirmed demand of service tax on the commission income. It was contended that they are not engaged in promoting the sale of products and moreover the substantial portion of the commission is based on volume of purchases. Further till 30th April, 2004 definition of Business Auxiliary Service included the word “provided by Commercial Concern” and since they all are individuals they cannot be termed as a Commercial Concern.

Held
Business Auxiliary Service would include promotion of sale of goods which are produced or provided by or belonging to a third person. In the present case the goods are procured at Distributor’s acquisition price and subsequently sold at MRP which is a sale of goods and cannot be termed as any service provided. When the goods are purchased by the Distributors, they cease to be owned by Amway and the ownership transfers from Amway to the Distributors. Similarly, commission received by the Distributors for buying certain quantum of goods are in a nature of bulk discount and cannot be termed as promotion of sale of goods. However, the activity wherein Distributor appoints another distributor and gets remunerated based on the purchases made by the elected distributor comes within the definition of Business Auxiliary Service and is taxable. Further since branded goods are involved, the benefit of small scale exemption will be available. It was further noted that commercial concerns can be of a proprietary nature and therefore the appellants even though individuals can be considered as commercial concerns. It was also held that only on the reason that registration was not applied and returns were not filed, period of limitation cannot be invoked. Since there was an ambiguity amongst the department on the taxability of the service itself, longer period of limitation cannot be invoked.

shailesh.kwebmaker

2016 (42) STR 1009 (Tri.-Del.) Ashoka Industries vs. CCE, Jaipur-I

CENVAT credit on outward transportation and insurance of goods from factory to buyer’s premises shall be eligible if the terms of the contract are “FOR at buyer’s premises”.

Facts
The appellants had availed CENVAT credit on transportation and transit insurance on finished goods from factory to buyer’s premises on the basis that the place of removal was buyer’s premises where the goods were delivered since the terms of the contract were “FOR at buyer’s premises” and the transportation is included in assessable value of finished goods. CENVAT credit was disallowed since as per definition of “input services” transportation “upto the place of removal” was only allowed.

Held :
Since ownership and responsibility of goods were transferred by way of sale to the buyer on delivery at the destination, place of removal was buyer’s premises and therefore, CENVAT credit was allowed.

shailesh.kwebmaker

[2016-TIOL-1507-CESTAT-MAD] M/s JAKG Communications Pvt. Ltd vs. Commissioner of Central Excise, Chennai-III

There is no provision for reversal of CENVAT credit availed in respect of output services for which the amount to be realized is written off as bad debt.

Facts
In the course of provision of service certain amount receivable from the recipient of service could not be realized by the Appellant. Revenue contended that on the amount not realized CENVAT credit is to be reversed.

Held
The Tribunal noted that there is no mandate in the statute for reversal of the CENVAT credit already availed in respect of the output service provided and the consideration thereof not realized for which such receivable amount is written off as bad debt, thus the Appellant cannot be directed to reverse proportionate CENVAT credit. Law is well settled that where tax paid has gone into the treasury, credit thereof should be available unless there is a fraud involved. Thus the appeal is allowed.

shailesh.kwebmaker

[2016-TIOL-1571-CESTAT-MUM] Nirlon Ltd vs. Commissioner of Central Excise, Mumbai

Renting of Property not possible unless it comes into existence – input credit of Service tax on services used during construction Available against renting services.

Facts
Appellant availed CENVAT credit of service tax paid on input services, goods used in construction services against their service tax liability under the category of Renting of Immovable Property Service. Relying on Circular No. 96/7/2007-ST amended by Circular No. 98/1/2008-ST the department contended that such credit is ineligible and a show cause notice was issued. The adjudicating authority confirmed the demands and therefore the present appeal is filed.

Held
The Tribunal noted that due service tax is discharged under the category of “Renting of Immovable Property Service”. Such service tax payment is not possible unless the immovable property comes into existence. Thus without its construction the same cannot be rented out. Relying on the decision of the Andhra Pradesh High Court in the case Sai Samhita Storages [2011-TIOL-863- HC-AP-CX] and the decision in the case of Navaratna S.G. Highway [2012-TIOL-1245-CESTAT -AHM] the credit was allowed.

Note: Readers may note a similar decision in the case of Maharashtra Cricket Association vs. Commissioner of Central Excise, Pune-III [2015-TIOL-2418-CESTAT -MUM] refer digest in the BCAJ December 2015 issue and Vamona Developers P. Ltd [2015-TIOL-2705-CESTAT -MUM] refer digest in the BCAJ January 2016 issue. Further w.e.f. 01.04.2011 only services used in respect of modernization, renovation, repairs of premises from where service is provided are admissible for CENVAT credit and ‘setting’ up of the premises has been omitted.

shailesh.kwebmaker

[2016-TIOL-1572-CESTAT-MUM] United Phosphorous Ltd vs. Commissioner of Service Tax, Mumbai

When the CENVAT credit of service tax paid under reverse charge mechanism is available to the assessee itself, the situation being revenue neutral the demand of interest and penalties on the said tax is liable to be set aside.

Facts
The Appellant raised an amount as External Commercial Borrowing (ECB) in the form of convertible bond and paid amounts to various entities abroad for services rendered. Revenue contended that the amount paid abroad is liable to service tax under reverse charge mechanism. The service tax liability was discharged and the matter was contested. The demand for the period prior to 18/04/2006 was dropped by following the decision of the Apex Court in the case of Indian National Ship Owners Association [2010 (17) STR J-57]. However the demand for the post period was confirmed along with interest and penalties. CENVAT credit was availed of the service tax paid and therefore the present Appeal is filed contesting the interest and penalties only.

Held
The Tribunal relied on the decision in the case of Jain Irrigation Systems Ltd [2015-TIOL-1674-CESTAT-MUM] wherein it was held that since the duty stands paid and the credit of the duty paid is admissible to the Assessee itself, the interest and penalties are set aside. Accordingly the demand of interest and penalty is set aside.

Note: Readers may also note the decision in the case of Lime Chemicals Ltd [2016-TIOL-1567-CESTAT-MUM] wherein the Tribunal held that when the situation is revenue neutral, the assessee would naturally not get any benefit by not paying such tax therefore the extended period could not be invoked and the penalties were set aside.

shailesh.kwebmaker

[2016-TIOL-1536-CESTAT-HYD] M/s Ramboll Imisoft Pvt Ltd vs. CC,CE & ST, Hyderabad-II

II Tribunal

Service tax paid on common input services used for providing services in the State of Jammu and Kashmir and other parts of India is fully available as CENVAT credit. Further for the period prior to April 2011 group insurance services availed for the benefit of employees is an eligible input service.

Facts
The Appellant availed CENVAT credit on input services used for providing output services in the State of Jammu and Kashmir and other parts of India. The department observed that since the Finance Act, 1994 is not applicable to Jammu and Kashmir the services rendered in that state are exempted services and therefore since separate accounts are not maintained as per Rule 6(2) of the CENVAT Credit Rules 2004 for providing taxable and exempted services, credit reversal is required on the common input services in terms of Rule 6(3)(ii) read with Rule 6(3A)(b)(iii) of the said rules. Further reversal is also sought for the service tax paid on the insurance premium paid for the family members of the employees for the period prior to April 2011.

Held
The Tribunal noted that undisputedly common input services have been used for providing services to Jammu and Kashmir and other parts of India. As per Rule 2(e) of the CENVAT Credit Rules, 2004 a service becomes exempted when it is exempted by notification or law. Since the services provided in Jammu and Kashmir are not liable to service tax u/s. 64 of Chapter V of the Finance Act, 1994, these services are neither taxable nor exempted. Further the proviso to sub-clause (2) of Rule 1 of the CENVAT Credit Rules, 2004 clearly states “nothing contained in these rules relating to availment and utilization of credit of service tax shall apply to the State of Jammu and Kashmir”. Thus reversal of credit on input services used for providing service in State of Jammu and Kashmir is justified. However in respect of common input services the Tribunal observed that though it is doubtful as to whether such services can be construed as “output services” in any case the service cannot be construed as an exempted service. It is a non-taxable service. Rule 6(2) does not apply to a situation where the service provider renders both taxable and non-taxable services and the law is silent in this regard. Therefore it was held that reversal of credit on common input services is unsustainable. With regard to credit of service tax paid on insurance premium it was noted that the premium is uniform to all employees and has no regard to the number of dependents and therefore service availed for the benefit of employees qualifies as input service.

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2016(42) STR 3(Bom) Commissioner of Central Excise, Pune-I vs. S. S. Engineers

Cross utilization of credit of excise duty and service tax is allowed.

Facts
Assessee is engaged in manufacture and is also providing services for which they have taken separate registration with the respective authorities. During scrutiny, it was observed that credit of service tax paid on services which were required in connection with erection and commissioning service were utilized for payment of excise duty on manufacture which the departmental authorities disputed. The adjudicating authority confirmed the demand. Therefore an appeal was filed before the Tribunal wherein it was held that CENVAT Credit Rules, 2004 provides restrictions on utilisation of CENVAT credit but such restrictions do not cover cross utilization of credit of excise and service tax, as a general proposition and the intention appears to be to permit cross utilization of excise duty and service tax.

Held
The Court observed that Rule 3(1) of the CENVAT Credit Rules, 2004 provides that a manufacturer or a service provider shall be allowed to take credit on various duties which includes excise duty, service tax etc. and that is a substantive provision in the rules. Therefore Tribunal has rightly come to the conclusion that cross-utilization is permitted. It was further noted that department has issued a circular dated 30/03/2010 on the issue of cross utilization guiding the departmental officers on the accounting aspects and on verification of the credits in both the excise and service tax returns. The Appeal is accordingly dismissed.

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2016 (42) STR 948 (Bom.) Cleartrip Private Ltd. vs. Union of India

Unless investigation is completed and prosecution is launched, coercive measures including arrest cannot be taken by Department.

Facts
Petitioners were engaged in facilitating provision of services of hotel accommodation and travel. The hoteliers collect and discharge appropriate service tax and the Petitioner does not collect any service tax on room bookings through their portal. Department had arrested officials of Make-My-Trip since they had collected and failed to deposit service tax. Since the Petitioner is in similar line of business, assuming similar case under service tax, department officials demanded service tax. On the apprehension that the department may take coercive actions including arrest without issuance of Show Cause Notice or adjudication, Writ Petition is filed. Department contested that on the facts of the case, service tax was collected more than what was permissible under service tax Laws. Further, department assured that due process of law would be followed for adjudication and prosecution.

Held
When investigation is underway, it does not mean that arrest would be effected. Arrest under Finance Act, 1994 could arise only when investigation is completed and prosecution is launched. Further, there is no question of recovery by coercive means unless SCN is issued, opportunity of being heard is given and reasoned adjudication order is passed. Therefore, in view of facts and circumstances of the case it was held that any recovery by coercive measures is not permissible straightway without following the due process of law.

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[2016-TIOL-1061-HC-DEL-ST] Mega Cabs Pvt. Ltd vs. Union of India and ORS

I. High Court

Rule 5A(2) of the Service Tax Rules, 1994 and the Circulars issued by the CBEC exceed the scope of the Finance Act, 1994 and are therefore ultra vires.

Facts
In this petition, Rule 5A(2) of the Service Tax Rules, 1994 empowering deputation of officers from the Comptroller and Auditor General of India to demand documents was challenged. Further validity of section 94(2)(k) of the Finance Act, 1994 was also challenged which gives uncontrolled delegated powers to the Central Government to frame rules. Lastly a letter issued by the Commissioner of Service Tax informing that the records of the petitioner would be verified by a team of officers was challenged. Pursuant to the decision in the case of Travelite (India) vs. Union of India [2014 (35) STR 653 (Delhi)] wherein a division bench of this Court struck down Rule 5A(2) as being ultra vires section 72A read with section 94(2) of the Act, an amendment was made to the said rule and section 94(2)(k) was inserted in the Act. Circular No. 181/7/2014- ST dated 10/12/2014 clarified that the department officers could now proceed with the Audit as before and thereafter norms for conducting audit were issued vide circular no. 995/2/2015-CX dated 27/02/2015 followed by an Audit Manual 2015. It was contended that the amendment continues to be ultra vires section 72A of the Act which contemplates only a special audit by a cost accountant or a chartered accountant whereas Rule 5A(2) permits any officer of the Government to ask for production of books on demand and without observing any safeguards spelt out in section 72A of the Act.

Held
The Court noted the provisions of section 72 of the Finance Act and observed that for invocation of the said section it has to be established that the return filed is not in accordance with the law without which the records cannot be called for mechanically. Further section 72A also requires the Commissioner to record the “reasons to believe” that any of the three contingencies as required in the said section exists. Only after such ascertainment the records can be audited only by a chartered accountant or a cost accountant nominated by the Commissioner. Section 73 also requires the issuance of a show cause notice to the person who has short paid or not paid the service tax. Even the powers to search the premises under section 82 are not without any guidelines or restrictions.

Thus the Court was of the view that before the records is called for, the assessee should be provided with a predecisional hearing to explain his case. Further Rule 5A(2) of the Rules require production of records in addition to those mentioned in Rule 5(2) of Rules which is not envisaged under any provisions of the Act and itself is beyond the Finance Act. Further it was noted that there is no authorization under the Finance Act provided to the officers of the department or the CAG to examine the books of accounts of the assessee and if any such officer is deputed it will result in harassment of the assessees. It was noted that the term ‘verify’ in section 94(2)(k) is not wide enough to include the audit of accounts of an assessee.

Further the Circular issued by the CBEC appears to be without any reference to the applicable provisions in the Act or the Rules and thus the lacuna pointed out in Travelite India (supra) has not been set right. It was held that audit is a special function which has to be carried out by duly qualified persons like a cost accountant or a chartered accountant and cannot be undertaken by any officer of the department. Thus Rule 5A(2) and the circulars exceeds the scope of the Act tested vis-à-vis sections 72, 72A,73 and 82 and is therefore ultra vires.

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[2016] 69 taxmann.com 199 (Mumbai-CESTAT) – Indago vs. Commissioner of Service Tax

Appellate authority cannot reject refund claim on grounds/issues which are not arising out of adjudication order. Time limit of one year for filing a refund claim shall be calculated from end of quarter.

Facts
Appellant filed a refund claim under Rule 5 of CENVAT Credit Rules for the period April 2012 to June 2012 on 08/05/2013. The sanctioning authority rejected a part of the refund claim on the grounds of (i) certain invoices mentioned incorrect address and (ii) FIRC was received by Appellant on 13/04/2012 and hence refund claim filed on 08/05/2013 was time barred. On appeal to Commissioner (Appeals), the claim was rejected on altogether different ground i.e. FIRC was issued in March 2012 and hence there being no export during April to June 2012, Appellant is not entitled to refund.

Held
Tribunal observed that the Commissioner (Appeals) categorically held that since the refund has to be filed quarterly the period of 1 year should be computed from the end of the quarter and held that the refund is not time-barred. In other words, reason given by adjudicating authority for denial of refund was rejected by the Commissioner (Appeals). However, he rejected the refund on some other ground i.e. by interpreting the amended provision as per Notification No. 18/2012-CE(NT) dated 17/03/2012 according to which, though the FIRC was received in the month of April 2012, the export had to be considered made in the month of March 2012 and hence there being no export during the quarter from April 2012 to June 2012, refund was rejected. In such a situation, Tribunal held that it was not open for the Commissioner (Appeals) to go into the issues, which do not arise out of the adjudication order. Since refund was rejected only on time-bar, the Commissioner (Appeals) was supposed to decide the issue only on time-bar. It further held that as the refund of the Appellant was filed within 1 year from the quarter ending was within time-limit, the refund was not time-barred and assessee was entitled to refund.

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