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Category: Recent Decisions: Part B: Service Tax

Service Tax

I. SUPREME COURT

2 (2024) 16 Centax 121 (S.C.) KantilalBhagujiMohite vs. Commissioner Of Central Excise And Service Tax, Pune-III dated 14th February, 2024

Payment of pre-deposit under section 35F of Central Excise Act, 1944 is mandatory for filling an appeal in CESTAT.

FACTS

Appellant initially filed an appeal with CESTAT. However, appeal was dismissed as petitioner did not submit mandatory pre-deposit, as per section 35F of Central Excise Act, 1944. Aggrieved by dismissal, petitioner filed a Writ Petition in Hon’ble High Court of Bombay alleging that appeal was dismissed without considering merits, thereby violating Article 14 and Article 19(1)(g) of Constitution of India. However, Hon’ble High Court also upheld dismissal. Hon’ble Bombay High Court had ruled that the right to file an appeal is a statutory-conditional right and compliance of it is mandatory. Being aggrieved by the rejection, Appellant filed a Special Leave Petition at Hon’ble Supreme Court.

HELD

Hon’ble Supreme Court decided not to interfere with the case and dismissed the petition without providing any further clarification.

II. TRIBUNAL

1 (2024) 16 Centax 169 (Tri. -Bang) Naveen Chava vs. Commissioner of Central Excise dated 30th January, 2024.

Non-compete clause cannot be separated from an agreement and taxed as Declared Service under section 66 E(e) of Finance Act, 1994.

FACTS

Appellant was engaged in the business of designing integrated sheets/circuit for telecom Industry. He entered into a business transfer agreement as going concern on slump sale basis. After this transaction an investigation was initiated by DGGI and SCN was issued alleging that the contract contains a “non-compete” clause. According to which, appellant was prohibited from engaging in any business similar to the onebeing transferred, for a duration of two years. SCN classified this clause as a Declared Service under section 66(E)(e) of Finance Act, 1994 and demanded tax on such basis. Subsequently, an order was issued which confirmed demand along with penalty. Being aggrieved by impugned order, petitioner filed this appeal before Tribunal.

HELD

Tribunal observed that “non-compete” clause was general in nature and there was no ‘consideration’ involved in the agreement to quantify non-compete clause as service. As a result, it was squarely covered under mega exemption list of service tax. Court further relied on GST Circular No.178/10/2022, which clarified that unless payment was made for tolerating an independent act, it will not qualify as ‘consideration’. Accordingly, appeal was allowed, and impugned order was set aside.

Service Tax

SUPREME COURT

29 Commissioner of Central Tax vs. IJM (India) Infrastructure Ltd.

2024 (15) Centax 309 (SC)

Date of Order: 2nd February, 2024

Service tax cannot be demanded for previous period outstanding receivables from associate enterprises where the law was amended prospectively.

FACTS

The respondent was engaged in providing different categories of taxable services. Pursuant to amendment in section 67 of Finance Act, 1994 and Rule 6 of Service Tax Rules, 1994, a SCN was issued demanding service tax amounting to ₹8,98,61,292 against receivables shown in books of accounts as outstanding from its associate enterprise under section 73(1) along with interest under section 75 and penalties under sections 76 and 78 of Finance Act, 1994. Also, a reply filed by the respondent was not considered and an Order-in-Original confirming tax demand along with interest and penalties was issued. Aggrieved, an appeal was filed by the respondent before the Tribunal and the same was allowed in favour of the respondent and an order demanding tax, interest and penalty were set aside. Being aggrieved by the Tribunal’s order, Revenue preferred an appeal before the Hon’ble Supreme Court.

HELD

Hon’ble Supreme Court did not interfere with the decision of Tribunal where it had relied upon the decision of Delhi High Court in case of Principal Commissioner of GST, Delhi vs. McDonalds India Pvt. Ltd.[2018 (8) GSTL 25 (Del.)] and held that amendments made in section 67 of Finance Act, 1994 and Rule 6 of Service Tax Rules, 1994 were amended w.e.f. 10th May, 2008 and could not be applied retrospectively. Accordingly, appeal was dismissed against appellant.

Part B – Service Tax

I. TRIBUNAL

25 Ours Aariya Bhavan vs. CGST & CE

2023-TIOL-1-36-CESTAT-MAD

Date of Order: 13th October, 2023

Whether service charge for the supply of bed rolls for the use of passengers travelling in A/C and First Class during train journeys would amount to business auxiliary service. Held, No.

FACTS

Appellant vide an agreement with Indian Railways Catering and Touring Corporation (IRCTC) supplied bed rolls for the use by passengers and collected a service charge from IRCTC and paid no service tax. A show-cause notice was issued proposing to levy service tax considering the activity and service charge towards business auxiliary service along with interest and imposed penalties. It was upheld by the adjudicating authority and also in the first appeal. It was argued for appellant that the clause (vi) of definition of business auxiliary service contained in section 65(19) of Finance Act, 1994 (the Act) relates to rendering of a service on behalf of a client whereas the service in the instant case of providing bed rolls is rendered to IRCTC and charge also is collected from them and no amount is collected from passengers. According to the department, the demand was legal and proper as the appellant had to clean bed rolls periodically and supply the same for passengers. Hence, it was covered by the definition of business auxiliary service in the clause invoked.

HELD

On examining the definition contained in section 65(19) of the Act, there was no merit found in sustainability of demand apart from non-justification of invoking of extended period.
Appeal was thus allowed on merits.

26 HSBC Electronic Data Processing India Pvt. Ltd. vs. CCT
2023-TIOL-1102-CESTAT-HYD
Date of Order: 20th November, 2023

Input services of advertising, air travel agents, courier services, erection, commissioning insurance, insurance auxiliary service, management consultancy etc., whether can be disallowed ad hoc?

FACTS

Appellant provided Information Technology (IT) or IT enabled service and claimed CENVAT credit on input services utilized for providing these output services. However, credit was disallowed under Rule 14 of CCR though a similar issue involved in refund proceeding under Rule 5 of CCR read with Notification No. 26/2012 and nexus theory was examined in detail allowing CENVAT credit. Hence, pursuant to the order of Commissioner (Appeals) which recorded that disallowances were arbitrarily done during adjudication and as a result of inadequate effort to determine justifiability, the eligibility or otherwise of the credit of tax on input services was in dispute. Considering the nature of activity, its relevance and judicial rulings, the benefit was extended to appellants on input services listed above in the said refund proceeding.

HELD

It was observed that the proceedings under Rule 14 and Rule 5 of CCR are similar in nature. Taking notice, the order of the Commissioner (Appeals), it was found that the issue involved was already adjudicated in detail and has been allowed in favour of appellants.

Hence the order was set aside.

27 Hawkins Cookers Ltd vs. CCGST & CE
2023-TIOL-1136-CESTAT-MUM
Date of Order: 6th November, 2023

CENVAT credit of service tax on outdoor catering service provided for canteen facilities for employees and staff during shifts and office hours, whether an eligible input service.

FACTS

Appellant, a manufacturer registered under Central Excise and also under service tax under reverse charge mechanism had a dispute with the department on eligibility of CENVAT credit of service tax paid on canteen facility provided by outdoor caterer. Per department, outdoor catering service is excluded from the definition of “input service” contained in Rule 2(l) of CCR for the period 1st January, 2016 to 30th June, 2016, and hence credit is disallowable with interest and attracting penalty under section 78. Both adjudicating authority and the appellate authority confirmed the liability with interest and penalties and hence, the present appeal. For appellant, it was conceded that the issue stood covered in the Larger Bench of the Tribunal in the case of Wipro Ltd. vs. CCE Bangalore – III 2018-TIOL-3256-CESTAT-Bang-LB. However, the extended period of limitation along with imposition of interest and penalty are not sustainable in view of the decisions of higher judicial forum in support of the same. Reliance was placed on:

a) ICCE 7 ST Rohtak vs. Merino Panel products Ltd. 2023 9383) ELT 129 (SC)

b) Hindustan Coca Cola Beverages Ltd. vs. CCE & ST Vadodara (2023) 2 CENTAX 116 (Tri. Ahmd), and

c) Sasken Technologies Ltd. vs. CCE Bangalore 2019-TIOL-3374 CESTAT Bang.

It was submitted for appellant that for the earlier period in their own case, Tribunal had allowed the appeal by way of remand for verification and passing of fresh order vide order dated 29th November, 2017. Thus it was claimed that the department was well aware of the issue of taking credit in respect of outdoor catering service. According to the department, however the issue has attained finality when Supreme Court upheld Karnataka High Court’s order denying credit of service tax on outdoor catering services in the case of Toyota Kirloskar Motors Pvt. Ltd. 2021(55) GSTL129 (SC) post 01/04/2011 and interest on irregular availment of CENVAT credit is provided under section 75 read with Rule 14 of CCR and consequently penalty imposed was sustainable.

HELD

Submissions of both the parties were heard, considered and discussed in detail to reach a conclusion that the appellant was registered under both Central Excise and Service Tax, and the department was well aware of the factual matrix of the case and grounds of suppression was unable to be accepted. Reliance in this context was placed on the case of Pushpam Pharmaceutical Company vs. CCE Bombay 1995 (78) ELT 401 (S.C) ruling that when the Revenue is aware of the facts, issuance of show cause notice should be confined to normal period. Also it was observed, similar situation and decision in the case of Anand Nishi Kawa Co. Ltd. vs. CCE Meerut 2005 (188) ELT 149 (SC) and it was observed and held that various Tribunal decisions bring out the fact that there was lack of clarity during the disputed period on the issue of availment of CENVAT credit of service tax on outdoor catering service and hence, was considered an interpretational issue. There were divergent views prevailing until it got settled by the Larger Bench in case of Wipro (supra) and ultimately also at the highest forum in Toyota Kirloskar (supra). Hence, invoking suppression and penalty under Rule 15(2) for demanding inadmissible credit cannot sustain. Hence, interest and penalty imposed were set aside and the matter was remanded back to original authority for re-quantification of demand for the normal period with regard to outdoor catering service and thus allowed appeal partly.

28 Naya Sarai SSS Ltd vs. CST & Others

2023-TIOL-1135-CESTAT-KOL

Date of Order: 23rd November, 2023

When work order clearly provided for execution of jobs as contractors, confirmation of demand as manpower supply was unsustainable.

FACTS

All the three appellant societies involved executed various jobs entrusted to them by Heavy Engineering Corporation Ltd. (HEC) and the impugned common order was passed for all the three appellants. Hence, all are taken together. As per specimen work order issued by HEC, according to appellants, fixed rate on Tonnage basis and the quantity was specified and not the number of workers to be employed. It had to be decided by each of the appellant societies to display the workers as required and number of days as they deemed appropriate. HEC being a PSU, however was responsible to avoid exploitation of labour and hence ensured adherence by appellants of Minimum Wages Act, deductions of ESI, CPF etc. and depositing the same to the respective authorities. The execution of work did not amount to supply of manpower as defined in section 65(68) of the Act read with section 65(105)(L). Reliance was placed inter alia on 2016 (41) STR 806 (Bom) CCCEX & ST Aurangabad vs. Shri Samarth Sevabhavi Trust and 2023 (73) GSTL 363 (Tri. Chennai) S Selvam vs. CCE & ST Tiruchirapally.

HELD

After interpreting the contract between the parties and perusing statutory provisions of manpower recruitment and supply agency and considering relied upon authorities, it was held that the work orders issued by HEC clearly revealed job and the quantity by contractors and not to supply or recruit manpower.

Hence, the orders were set aside.

Service Tax

I. SUPREME COURT

Commissioner of CGST, CST, Delhi East vs. Haldiram Marketing Pvt. Ltd.

2023 (11) Centax 23 (S.C.)

Date of Order: 25th September, 2023

Service tax cannot be levied on the sale of packaged food over the counter as there was no service element and merely the sale of goods.

Service tax is not leviable on rent received from associate enterprises for the joint sale of goods; it merely amounts to sharing of rental expenses and not sub-letting of property.

FACTS

Respondent was engaged in the operation of food outlets of packaged foods on a take-away basis. An audit was conducted wherein it was observed that the assessee failed to pay service tax on the sale of take-away food items and on the share of rent received from the associate enterprise. Further, a SCN was issued proposing a service tax demand of Rs.23,09,45,317 with interest and penalty. Respondent submitted a reply to SCN for dropping the entire demand and explained that service tax was not required to be paid on the activities. However, the department issued an order demanding Rs.20,12,46,762 with interest and penalty and a demand of Rs.2,96,98,555 was dropped on account of cum duty benefit. Being aggrieved, an appeal was filed before CESTAT on the grounds that the supply of packaged food on a take-away basis was solely a sale transaction and hence service tax should not be levied. Respondent further stated that service tax could not be levied on the amount received from associate enterprises as it was towards space sharing. Thereafter, the entire service tax demand with interest and penalty was dropped by CESTAT. Being aggrieved by such dropping of demand by the Tribunal, the department filed an appeal before Hon’ble Supreme Court.

HELD

The order passed by CESTAT was affirmed by Hon’ble Supreme Court relying inter alia on the judgements of the Hon’ble Madras High Court in the case of Anjappar Chettinad A/C Restaurant, M/s RSM Foods (P) Ltd wherein it was held that there was no element of service in preparation of food, packaging and then selling the same over the counter as take-away item without any dining facility. Such activity in essence is the sale of goods and hence service tax is not leviable thereon. Further, rent received from associate enterprises for selling goods along with their own goods was only a sharing of rental expenses and did not amount to sub-letting. Hence, service tax was not leviable under renting of immovable property service. Consequently, the department’s appeal was dismissed.

Service Tax

I TRIBUNAL

18. M/s. ODC Logistics Pvt. Ltd. vs. CST
2023-TIOL-639-CESTAT-KOL

Date of Order: 23rd June, 2023

Order beyond the scope of SCN is legally unsustainable. The conclusion based on assumptions and conjectures cannot deprive the assessee of the credit.

FACTS

Appellant provided logistics services including transportation of goods. Of the two issues involved in the show cause notice (SCN), the first related to RCM liability under Goods Transport Agency (GTA) service for payments made to suppliers of lorries on hire, based on expenses booked in financial statements as “freight charges”. The appellant contended that the supplier had not issued a consignment note and hence legally, it was not liable to pay service tax. However, the adjudicating authority proceeded by examining the nature of income of the appellant for providing output transportation services and observed that by avoiding issuing consignment notes for rendering output services, it could not avoid service tax liability as the appellant earned freight income and based on the said observation, service tax on GTA service was confirmed. For this conclusion, the appellant’s submission was that besides traveling beyond allegation in the SCN, which is the foundation of the levy and recovery, service tax liability could not be fastened when SCN did not contain allegations for liability on output services and further that service tax on GTA service is payable by the recipient of the service. In the second issue, CENVAT credit availed by the appellant on invoices issued by two specific vendors was disallowed on the ground that the department was unable to trace them at their office address and hence service providers were non-existent. For this, the appellant’s contention was that there was neither any investigation report brought on record nor was there any allegation made in the SCN as to having connivance with the service providers or that the service provider had not deposited by the service tax.

HELD

In the case of the demand under GTA service, the adjudicating authority traveled beyond SCN as the only allegation contained in the SCN was that the appellant did not pay service tax under RCM on expenditure involved on lorry hire charges / freight charges. However, the order conferring liability on the output services is beyond the scope of SCN and hence impermissible in law. Also, the Commissioner has accepted the order that lorry suppliers were not required to issue consignment notes and hence RCM cannot be invoked and hence the demand is set aside. On the issue of disallowance of CENVAT credit, it was observed by Hon. Bench that both SCN and the impugned order are silent on the inquiry report which was not made available at any stage of proceedings. Moreover, there being no allegation of any connivance with the service providers, the Bench was agreeable that denial of credit based on assumptions and conjectures cannot be held legally correct.

Hence the order was unsustainable and hence the appeal was allowed.

19. Alstom Projects India Ltd. vs. CCE
2023-TIOL-629-CESTAT-KOL

Date of Order: 2nd June, 2023

SCN issued after 4 years of information gathered is highly barred by limitation.

FACTS

The impugned order in this case confirmed the duty amount on compensation received on account of the cancellation of the order by West Bengal Power Development Corporation treating the same as additional consideration under Rule 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 by invoking extended period of limitation. The appellant submitted all material information regarding the non-receipt of two contracts, vide their letter dated 10th May, 2002 and subsequent letter dated 25th March 2003, and that as per the MOU, the appellant received the payment. The show cause notice, however, was issued in October, 2007 to the appellant engaged in the manufacture of boilers and boiler parts. The appellant was awarded two contracts, out of which one was canceled in 1994 on account of a financial crisis at the end of the client wherefore a cancellation order was passed to terminate the unexecuted portion of the contract to mutually agree on the amount of damages for cancellation. On a similar footing, another order of cancellation was issued in 2002 wherein also damages were payable by the contractee to the appellant. Despite the above, a show cause notice was issued as above on the grounds of suppression. The appellant submitted that damages did not attract excise duty and reliance in this regard was placed on various judicial pronouncements inter alia including the latest in the case of Skoda Auto Volkswagen India Private Limited vs. CCE, Aurangabad 2023-TIOL-149-CESTAT-MUM.

HELD

It was found that all the information was available to the department in 2003 itself and since no information was suppressed, the show cause notice issued four years later is not sustainable and is highly barred by limitation and hence merits of the case were not gone into and the appeal was allowed.

20. Maa Kalika Transport Pvt. Ltd. vs. Commissioner of CGST & CE
2023-TIOL-625-CESTAT-KOL

Date of Order: 10th July, 2023

The demand of service based on the IT department’s data is not sustainable based on merits as well as a limitation when it is without corroborative evidence. Also, the order was held beyond the scope of SCN.

FACTS

The appellant was issued a show cause notice in December, 2020 demanding a service tax of Rs. 9.50 crore  for the F.Y. 2015–16 based on the data received by the service tax department from the income tax department and which was confirmed by adjudicating authority under the category of cargo handling service by also imposing an equal amount of penalty under section 78(1) of the Act. Hence the appeal. According to the appellant, the bonafide belief is that they provided transportation service for which the service receiver is liable to pay service tax. They transported coal within a distance of 180 km. to 200 km. which was rightly classifiable as transportation of goods (GTA service) and hence service tax is not leviable under cargo handling service. Adjudicating authority was provided with work orders of various parties wherein terms of contract with each party were different. However, essentially the contracts were for the transportation of coal as per the appellant. Further, SCN had not specified any category for proposed demand of service tax.

HELD

In terms of the above facts, the issues before Hon. Tribunal was to examine which of two, viz. cargo handling service or transportation of goods was correct classification and also whether transportation service was bundled with other individual services and hence whether the contract could be vivisected and also whether the demand of tax under “cargo handling service” was beyond the scope of the SCN and whether the demand could be made based on the data received from income tax department without there being any corroborating evidence available with the department, Hence whether suppression was involved at all to demand service tax invoking extended period? Consequently, whether penalties could sustain at all. Based on a perusal of the contracts, it was found that the contracts were composite contracts but primarily for transportation and other services were incidental to it. The contract did not specify separate charges for such ancillary services and hence it could not be vivisected to arrive at a separate value for each service. Also, there was no proposal in the impugned SCN as to the classification of cargo handling service and hence adjudicating authority traveled beyond the scope of the notice which is legally unsustainable. Also as per the appellant, based on the data received from income tax, the department put in no effort to ascertain corroborative evidence and the impugned order contained no finding on this. This view also found support in the case of Larsen & Toubro Ltd. vs. ACST (2023) 2 Centax 327 (Cal.) and in CST vs. Hindustan Cables Ltd, 2022 (382) ELT 188 (Cal.). As for the existence of suppression, it was found that when the department itself was unclear about the classification, no suppression of the facts was involved. For this, reliance was placed on Ugam Chand Bhandari vs. CCE 2004 (167) ELT 491 (SC) and hence extended period was held as not invokable.

Thus, it was held that the appellant provided transportation services which were mutually bundled in the contracts. Further, since SCN did not have a proposal to demand service tax under cargo handling service, the order impugned traveled beyond the scope of the notice. The demand for tax could not be made only on the basis of data furnished by the income tax department without any corroborative evidence. Also when suppression did not exist and hence even on the ground of limitation, the demand would fail and consequently the penalty would not be sustained.

Service Tax

I. HIGH COURT

21 Commissioner of Central Tax vs. M/s. Singtel Global India Pvt. Ltd.

[2023-TIOL-1155-HC-DEL-ST]

Date of Order: 6th September, 2023

The Telecommunication service provider in India has entered into an Agreement with the foreign telecommunication service provider to provide services to its consumers with all the necessary infrastructure on its own account. The service is not an intermediary service and is an export of service eligible for refund.

FACTS

The Company claimed refund under Rule 5 of the CENVAT Credit Rules, 2004 read with the Place of Provision of Service Rules, 2012 of the unutilised input tax credit of input services used to provide telecommunication services to Singapore Telecommunication Ltd. (SingTel) located in Singapore. The refund was disallowed on the ground that the company is acting as an intermediary and therefore the service does not qualify as export of service. The Tribunal allowed the refund and accordingly, the revenue is on appeal.

HELD

The Court noted that the company is a licensed telecommunication service provider in India that has entered into a contract with SingTel in Singapore to ensure seamless global telecommunication services to its customers registered in Singapore and elsewhere. The company has entered into separate contracts with the telecom operators in India but on its own account and not as in the nature of a broker or agent for SingTel. The agreement envisages that the company has to provide, at its own expense, all necessary infrastructure in order to provide the services. It is further noted that the invoices will be raised in US dollars for the services rendered on a monthly basis and on such transfer prices as may be agreed upon from time to time. Accordingly, the company is not an intermediary and the refund is allowed against the export of services.

II. TRIBUNAL

22 M/s. Bharti Realty Ltd. vs. Commissioner of Service Tax, Delhi – III

[2023-TIOL-838-CESTAT-DEL]

Date of Order: 9th May, 2022

CENVAT credit on inputs, input services and capital goods used for construction of immovable property rented out for commercial purposes is allowable.

FACTS

The Assessee constructed buildings which they rented for commercial purposes and paid service tax under the head of “renting of immovable property service”. CENVAT credit was availed of service tax paid on “input services” and excise duty paid on inputs and capital goods used for construction of the buildings and utilized the same for payment of service tax on the renting service. Notices were issued denying CENVAT credit so availed on the ground that the inputs, input services and capital goods resulted in the creation of immovable property which is neither goods nor services as clarified by the CBEC Circular No. 98/1/2008-ST dated 4th January, 2008 and CBEC Instruction No. 267/11/2010-CX, dated 8th July, 2010 and, therefore, no CENVAT credit is available.

HELD

The Court noted that the immovable property so constructed is a means of providing the taxable service of renting of immovable property. It is not being constructed for its own sake but is being built with the intention of providing taxable service. All the inputs, capital goods and input services are used for the construction of buildings which are then rented out and service tax is paid thereon. Thus, they are entitled to the disputed CENVAT credit.

23 M/s. Sun Microsystems India Pvt. Ltd. vs. Commissioner of Central Excise and Service Tax

[2023-TIOL-844-CESTAT-BANG]

Date of Order: 28th June, 2023

Where marketing services are provided in India as per the direction and instruction of the foreign company and no Agreement entered into with the prospective customers in India, the activities qualify as an export of service.

FACTS

Appellant had entered into a Marketing Service Agreement with M/s. Sun Micro Systems Pvt. Ltd., Singapore for the purpose of marketing / sales promotion, and technical pre-sales support services in India. Notices were issued alleging that the services rendered are classifiable under “Business Auxiliary Services” covered under section 65(19) of the Finance Act, 1994 and do not qualify to be an export service.

HELD

The Court noted that the activity undertaken is canvassing for the products and services of the foreign company which is ultimately used by them for further business. There is no agreement between the prospective customers of the foreign company in India and the appellant. The agreement is only with the foreign company. It is on their request and direction that the marketing activities are carried out in India and it is for these services that they get the consideration in convertible foreign exchange. Thus, the service provided can be considered as an “export of service”.

Service Tax

I. TRIBUNAL

5 [2021-TIOL-207-CESTAT-Bang] Textronix India Pvt. Ltd. vs. Commissioner of Central Tax Date of order: 6th April, 2021

Penalty cannot be levied u/s 78 of the Finance Act, 1994 when tax with interest is paid before issuance of show cause notice

FACTS
During the course of audit it was observed that the appellant had wrongly availed service tax credit on services not used for providing output service which includes civil interior works carried out on office building, garden maintenance charges, pooja expenses, etc. The credit availed was immediately reversed on being pointed out by the Department. Further, the credit availed was not utilised and sufficient balance was available during the relevant period. However, penalty u/s 78 for wrongly availing the credit was confirmed on the ground that the same was detected only during the audit.
    
HELD
The Tribunal noted that the credit was reversed immediately on it being pointed out by the Department before issuance of show cause notice. It was also noted that the credit was not utilised and sufficient balance was available during the relevant period. The Tribunal, relying on the decision in the case of YCH Logistics (India) Pvt. Ltd. [2020] 43 GSTL 518 (Tri-Bang), where it has been held that when tax with interest is paid before issuance of show cause notice, no show cause notice is required to be issued. Further, the Department has not bought any material on record to prove suppression and concealment of facts to evade payment of tax. Accordingly, the appeal is allowed and the demand of penalty is dropped.
    
6 [2021-TIOL-160-CESTAT-Bang] 24/7 Customer Pvt. Ltd. vs. Commissioner of Central Tax, Bengaluru East Date of order: 8th March, 2021

There is no requirement of nexus between input services and output services exported – The Department cannot question the eligibility of credit at the time of claiming refund

FACTS
The appellant is engaged in the export of Call Centre Services besides domestic supply of Renting of Immovable Property service. They are an STPI unit located in Bangalore and they availed CENVAT credit of service tax paid on various input services in respect of STPI unit and used the same in the export of services and taxable services provided in India. The CENVAT credit was availed after setting off against output service tax liability arising on domestic services; a refund claim was filed under Rule 5 of the CENVAT Credit Rules. The refund claim was rejected on the ground that there was no nexus between the input service and the output service exported.

HELD
The Tribunal noted that the services on which the credit is proposed to be rejected have been consistently held to be input services in various decisions. It was also noted that the Department has not questioned the eligibility of input services at the time when the CENVAT credit was taken and that as per the decision of this Tribunal in the case of K Line Ship Management [2019-TIOL-100-CESTAT-Mum], the Department is not permitted to question the same at the time of claiming refund. Further, Rule 5 of the CENVAT Credit Rules does not require a correlation between the output service exported and the input services used in such output services exported. Accordingly, the appeal was allowed.

7 [2021-TIOL-159-CESTAT-Del-LB] Kafila Hospitality and Travels Pvt. Ltd. vs. Commissioner, Service Tax Date of order: 18th March, 2021

Incentive received by air travel agents from airlines and CRS companies is not liable for service tax

FACTS
The assessee is a travel agent paying service tax considering the value of service as determined under Rule 6(7) of the Service Tax Rules, 1994. The main issue in the present case is whether incentive received from the airlines is liable for service tax. Besides, the assessee receives commission from the CRS companies and the same is alleged to be taxed under business auxiliary service on the ground that the assessee is promoting and marketing the business of such companies. The reference is made to the larger bench.

HELD
It is noted that for an activity to be considered as promotional, it is necessary that a service provider must ‘promote’ or ‘endorse’ the service of the client. It is, therefore, to be seen whether in the present case the travel agent is encouraging a passenger to purchase a ticket of a particular airline. The facts reveal that the travel agent is only providing options to the passenger and it is the passenger who determines the airline for travel. It is only when the target of having achieved the pre-determined number of bookings is achieved that the airline pays an incentive to the travel agent. It cannot, therefore, be said that the travel agent is promoting the services of any airline. Incidentally, the airlines may benefit if more tickets are sold, but this would not mean that the travel agent is providing a service for promoting the airlines. Thus, by rendering of services connected to travel by air, a travel agent would render ‘air travel agent’ services, which services cannot be said to be for ‘promotion or marketing’ of the airlines.

Similarly, in the case of CRS companies, the passenger is not aware of the CRS company being utilised by the travel agent for booking the segment, nor can a passenger influence a travel agent to avail the services of a particular CRS company. For an activity to qualify as ‘promotional’, the person before whom the promotional activity is undertaken should be able to use the services. The passenger cannot directly use the CRS software provided by the company to book an airline ticket. It cannot, therefore, be said that a travel agent is promoting any activity before the passenger. A mere selection of software would not result in any promotional activity. Accordingly, the assessee is neither promoting the business of the airlines nor of the CRS companies. Therefore, in the absence of a service there cannot be any liability of service tax.

8 [2020 (43) GSTL 540 (Tri-Hyd)] Infotech Enterprises Ltd. vs. CCCE & ST, Hyderabad-IV Date of order: 17th February, 2020

The real test of determining the nature of service is to understand the ‘deliverable service’ agreed in the agreement – Merely because billing is measured based on the number of man hours / man days, it does not become a manpower supply service
    
FACTS
The appellant was engaged in providing software services to customers located abroad. The provision of such services required some of the work to be done at the customers’ site. As these activities could not be done from Hyderabad, they created subsidiaries in different countries to carry out the services required at the customers’ end. The appellant received payment for the entire services from the customers and paid the subsidiaries for their services as per the performance agreements. Two show cause notices were issued to the appellant demanding service tax, inter alia, under reverse charge mechanism on the amounts paid to the subsidiaries located abroad under the head ‘manpower recruitment or supply agency services’ along with interest and penalty on the ground that the subsidiary had billed them based on the number of man hours which were required to perform these services.

HELD
Merely because the total amount has been billed using the number of man hours as a measure, it does not become a manpower supply service. If this logic is accepted, every case where the billing is done based on the number of man hours / man days would be treated as a manpower supply service. The real test of determining the nature of service is to go through the agreement to understand what is the deliverable that was agreed to be delivered to the service recipient. In the present case, the deliverable was software services and not supply of manpower. Therefore, the demand made under reverse charge mechanism under the head ‘manpower recruitment or supply agency service’ along with interest and penalties was set aside.

9 [2020 (43) GSTL 549 (Tri-All)] Radhey Krishna Technobuild (P) Ltd. vs. Commr. of C. Ex., Lucknow Date of order: 17th December, 2019

Charges collected along with the consideration for residential units are considered as bundled service – Therefore, abatement under construction of residential complex service is admissible on such charges
    
FACTS
On the sale of residential units, in addition to the consideration the appellant also collected some charges from the flat buyers under the head ‘electric meter main load supply charges’. It appeared to Revenue that the appellant had taken abatement on the said charges even though such charges were collected for a purpose other than construction of residential complex service. Therefore, such abatement was not admissible, it said.

HELD
The Tribunal held that the charges for electric meter main load supply were collected along with the consideration for sale of residential units. They were collected from the very person to whom the residential unit was sold. Therefore, the said services were bundled services u/s 66F of the Finance Act, 1994 and, consequently, abatement was admissible.

10 [2020 (43) GSTL 533 (Del-Trib)] Vaatika Constructions Pvt. Ltd. vs. Pr. Commr. of ST, Delhi-III Date of order: 2nd March, 2020

Section 65(105) of Finance Act, 1994 – When a show cause notice is issued under a particular category of service, then the demand cannot be confirmed under a different category

FACTS
At the time of issue of the show cause notice, service tax was demanded under the category of ‘construction of complex’ services. However, the Principal Commissioner passed the order by confirming the demand under the category of ‘works contract’ services. Hence, the present appeal was filed.

HELD
The Tribunal, relying on some past judgments, held that a demand of service tax under a particular category cannot be confirmed under a different category. Thus, the demand of service tax could not have been confirmed under ‘works contract’ when the show cause notice was issued under ‘construction of complex’ services.

11 [2020 (43) GSTL 562 (Ahmd-Trib)] Mafatlal Industries Ltd. vs. CCE & ST, Ahmedabad Date of order: 1st June, 2020

CENVAT credit cannot be denied only on technical infraction

FACTS
In the present appeal, various queries pertaining to CENVAT credit were placed before the Tribunal. CENVAT credit was denied, inter alia, for the following reasons:

1. CENVAT credit of Rs. 3,31,189 was denied on the ground that invoices did not carry either the serial number or the service tax registration number.
2. CENVAT credit of Rs. 41,94,123 was denied on the ground that credit lying in other branches of the appellant was transferred under centralised registration without any documents.
3. CENVAT credit of Rs. 5,59,851 was denied on various services such as Mediclaim, vehicle insurance, canteen expenses, CHA bills, guest house, vehicle hire charges, membership charges and residential premise on the ground that the said services do not have any nexus with the manufacturing activity.
4. CENVAT credit of Rs. 39,60,634 was denied on the ground that it pertained to ISD invoices issued by the appellant’s branches for services received by the said units prior to their registration as ISDs.

HELD
The Tribunal heard the matter extensively and held in respect of each issue as follows:

1. Denial of CENVAT credit on the ground that invoices do not carry either serial number or service tax registration number is in the nature of technical infraction which was not done by the appellant. It was not the case of the Department that in the said invoices no service tax was paid and there is no dispute about receipt and use of the services, which are the main criteria for allowing CENVAT credit on input service. Therefore, CENVAT credit cannot be denied merely on technical infraction.

2. No documents are prescribed to transfer CENVAT credit from branches under centralised registration. It is undisputed that the appellant had made necessary recording in the statutory books of the transferee’s branch. There is no case that transferor branches have transferred excess credit or wrong credit. Therefore, CENVAT credit cannot be denied only on the ground that proper documents under centralised registration were not issued for transfer of credit.

3. It was held that CENVAT credit in respect of input services such as Mediclaim, vehicle insurance, canteen expenses, CHA bills, guest house, vehicle hire charges, membership charges and residential premise have been allowed in various judgments:
(a) For Mediclaim, the Tribunal relied on Chennai vs. Spectrasoft Technologies Limited 2019 (24) GSTL 224 (Tri-Chennai) and CST Mumbai vs. FIL Capital Advisors (India) Pvt. Limited 2015 (40) STR 1073 (Tri-Mumbai).
(b) For canteen and insurance services, the Tribunal relied on CCE, Bangalore vs. Stanzen Toyotetsu India (P) Limited 2011 (23) STR 444 (Kar).
(c) For vehicle insurance, the Tribunal relied on Vinayak Steels Limited vs. CCE & ST, Hyderabad 2017 (4) GSTL 188 (Tri-Hyderabad).

4. The Tribunal, by relying upon the judgment in mPortal (I) Wireless Solutions (P) Limited vs. CST, Bangalore 2012 (27) STR 134 (Kar), held that CENVAT credit cannot be denied even if ISD invoices were issued for the distribution of input service credit prior to registration.

Service Tax

I. HIGH COURT

1. [2021] 125 taxmann.com 197 (Guj) Deepak Print vs. UOI Date of order: 9th March, 2021

The Gujarat High Court ordered that rectification of GSTR3B be permitted to the assessee. Also ordered not to levy late fees hoping that such unnecessary litigation would be avoided in future

FACTS
The writ applicant while submitting the GSTR3B return in May, 2019 inadvertently uploaded the entries of M/s Deepak Process instead of M/s Deepak Print. It, therefore, made an application to the Nodal Officer for allowing it to edit the figures and off-set the correct liabilities and to re-submit the said return. Failing to get the appropriate response from the authority concerned, the applicant filed a writ before the Gujarat High Court.

HELD
The Court noted that the short question in the writ was whether the applicant was entitled to seek rectification of Form GSTR3B for the month of May, 2019. Relying on the decision of the Delhi High Court in the case of Bharti Airtel Limited vs. Union of
India & Ors., Writ Petition (Civil) No. 6345 of 2018, the Court held that the applicant should be permitted to rectify the Form GSTR3B in respect of the relevant period. It further ordered that since it had been dragged into unnecessary litigation only on account of technicalities, it should not be saddled with the liability of payment of late fees. The Court also expressed the hope that the applicant may not have to come back to it on any further technicalities that the Department was in the habit of raising and thereby resulting in unnecessary litigation.

2. [2021] 125 taxmann.com 241 (Bom) Skoda Auto Volkswagen India (P) Ltd. vs. Commissioner (Appeals) Date of order: 12th March, 2021

As per section 9(1) of the General Clauses Act read with section 85(3A) of the Finance Act, 1994, if the order was received on 30th August, 2019 the extended period of three months for filing an appeal would end on 1st December, 2019 and not on 30th November, 2019 because there are ‘no 31 days’ in November and the word ‘to’ is not used in section 85(3A) to cap the limitation period to 30th November, 2019. Further, when the period for filing of appeal expires on a Sunday and the said appeal is dispatched by Speed Post on the immediate next working day, then the appeal is said to have been filed within the period of limitation

FACTS
The petitioner had filed a service tax appeal before the Commissioner (Appeals) against the adjudicating order dated 8th July, 2019. The order was dispatched on 29th August, 2019 and was received on 30th August, 2019. On 29th November, 2019 the petitioner made a mandatory pre-deposit u/s 35F of the Central Excise Act. It had also dispatched its appeal to the Commissioner (Appeals) which was received by him on 4th December, 2019. The limitation period for filing such an appeal is two months extendable by another one month, a total of three months. The three months’ period had lapsed on 30th November, 2019 which was a Saturday. Therefore, the appeal was dispatched by the petitioner immediately on the following Monday, 2nd December, 2019, being the next working day. The petitioner also sent an application dated 5th December, 2019 to the Commissioner (Appeals) requesting the latter to condone the delay in presenting the appeal, if any, which was received by him on 9th December, 2019. The Commissioner (Appeals) held that the appeal was filed beyond the extended period of limitation and since as per the decision of the Apex Court in the case of Singh Enterprises vs. Commissioner of Central Excise, 2008 (221) ELT 163 he had no power to condone the delay beyond the period of one month after the normal period of limitation of two months, the appeal was found to be time-barred. Accordingly, the application for condonation of delay was rejected and the appeal was dismissed. Aggrieved by the same, the applicant filed the writ petition before the High Court.

HELD
The High Court noted that since the matter relates to a service tax appeal, the provisions of section 85 of the Finance Act would be of relevance. Section 85(3A) of the Finance Act is in pari materia to the provisions relating to filing of an appeal in matters of Central Excise and uses the word ‘presented’ and not ‘filed’. In other words, the appeal is to be presented and not filed. It also noted that while u/s 35 of the Central Excise Act, 1944 the limitation period is 60 days from the date of communication, extendable by another period of 30 days, in section 85(3A) of the Finance Act, 1994 the limitation period for presentation of appeal is two months from the date of receipt of the decision or order, extendable by a further period of one month.

The Court held that there is no dispute on the proposition that section 5 of the Limitation Act, 1963 would stand excluded when the statute itself provides the limitation period for filing of appeal as well as the period beyond the limitation period within which the delay in filing the appeal can be condoned. Noting the differences between the provisions of the Central Excise Act and the Finance Act as mentioned above, it held that as per sub-section (35) of section 3 of the General Clauses Act, the word ‘month’ has been defined to mean a month reckoned according to the British calendar. The Court referred to the decision of the Supreme Court in the case of Bibi Salma Khatoon vs. State of Bihar, AIR 2001 SC 3596, wherein it was held that when the period prescribed is a calendar month running from any arbitrary date, the period of one month would expire upon the day in the succeeding month corresponding to the date upon which the period starts. Therefore, it held that a month means and has to be reckoned according to the British calendar and not by the number of days comprising a month.

Referring to the decision of Bhikha Lal vs. Munna Lal, AIR 1974 Allahabad 366 (Full Bench), the Court held that there was no infirmity on the part of the petitioner in dispatching the appeal by post, Speed Post in the present case, as the order challenged in the appeal was also sent to the petitioner by Speed Post. It was also clarified that there is no bar u/s 85(3A) of the Finance Act, 1994 or the rules framed thereunder, i.e., the Service Tax Rules, 1994 for dispatching or presentation of appeal by Speed Post or by post. Referring to section 9(1) of the General Clauses Act, the Court held that the said section statutorily recognises that while computing the time period the first date is to be excluded when the word ‘from’ is used and to include the last date when the word ‘to’ is used. It also referred to the principle laid down in the decision in Jhabboo Lal Kesara Rolling Mills vs. Union of India, 1985 (19) ELT 367 (All) that if the appeal was sent by registered post to the appellate authority at the correct address within the period of limitation but was received beyond the period of limitation, that would not render it barred by limitation. This principle will apply where it is found that the appeal had been dispatched to the appellate authority prior to the expiry of the period of limitation.

Next, referring to the provisions of section 10 of the General Clauses Act, the Court held that as propounded by the Supreme Court in Harinder Singh vs. S. Karnail Singh, AIR 1957 SC 271, the object of this section is to enable a person to do what he could have done on a holiday on the next working day. Where, therefore, a period is prescribed for the performance of an act in a Court or office and that period expires on a holiday, then according to this section the act should be considered to have been done within that period if it is done on the next day on which the Court or office is open. For section 10 to apply the requirement is that there should be a period prescribed and that period should expire on a holiday. Section 10 itself indicates that this provision is for the computation of time. Therefore, if the limitation for filing an appeal or the extended period for filing an appeal expires on Sunday but it is filed on Monday, then by operation of section 10 it would be deemed to have been done within time.

After discussing the various legal principles as above, the High Court held that as the petitioner received the order on 30th August, 2019, this date would have to be excluded while counting (and) the limitation period of two months would commence from 31st August, 2019. Accordingly, it held that the delay could have been condoned till 31st November, 2019 but because there are no 31 days in November, the extended period of limitation would spill over to 1st December, 2019. This is more so because the word ‘to’ is not used in section 85(3A) to cap the limitation period on 30th November, 2019. Therefore, the appeal was required to have been dispatched by 1st December, 2019. But it was dispatched on 2nd December, 2019. The Court, however, noted that 1st December, 2019 was a Sunday and therefore the benefit of this public holiday would be available to the petitioner in terms of section 10 of the General Clauses Act. Accordingly, the appeal presented on 2nd December, 2019 would be construed to be within the extended period of limitation. The writ petition was therefore allowed.

II. TRIBUNAL
    
3. [2021-TIOL-152-CESTAT-Mum] State Street Syntel Service Pvt. Ltd. vs. CGST Date of order: 25th November, 2020

Notice pay recovered on termination of employment before serving the notice period is a service liable to service tax

FACTS
The appellant was issued with a show cause notice alleging non-payment of service tax during the period 2012-13 to 2015-16 on account of recovery of certain amounts from the employees who had opted for termination of employment or resignation from service before serving the notice period prescribed under the contract of employment, in violation of section 66E(e) of the Finance Act, 1994. The demand was confirmed, hence the present appeal is filed.
    
HELD
The Tribunal noted that the issue of levy of service tax on the amount received by the employer from the employee in lieu of ‘notice period’ on termination of employment is no more res integra and covered by the judgment of the Madras High Court in GET&D India Ltd.’s case -2020-TIOL-183-HC-Mad-ST. The said judgment clearly provides that notice pay in lieu of sudden termination does not give rise to rendition of service either by the employer or the employee. Thus, the appeal is allowed.

4. [2021-TIOL-147-CESTAT-Ahmd] Gujarat Eco Textile Park Limited vs. Commissioner of Central Excise and Service Tax Date of order: 5th March, 2021

Contribution made by own members is not liable to service tax on the ground of mutuality

FACTS
The appellant is a Special Purpose Vehicle (SPV), a public-private partnership. The SPV was formed for acquiring land and setting up infrastructure for establishing textile parks wherein different member textile units could operate. In terms of the scheme the member unit intending to establish a unit in the said park executes a share subscription agreement with SPV and becomes a member of the SPV. On becoming a member, it is entitled to allotment of a parcel of land and access to the common facilities at the park. Subsequent to the execution of the share subscription agreement, the member units and the SPV entered into a lease deed for allotment of land situated in the park. Accordingly, the SPV received payment against the shares purchased, rent for the allotted parcel of land, non-refundable contribution towards capital expenditure and usage charges for the common facilities from the member units. The Revenue sought to demand service tax on non-refundable contribution made by member units under the category of ‘renting of immovable property service.’

HELD
The Tribunal noted that the case of the Department is that the rental amount is collected in the guise of a non-refundable contribution which is nothing but service charge against ‘renting of immovable property service’ and hence liable to service tax. However, the Department has failed to provide any evidence to bolster the allegation. Hence, the contention of the Department has no legs to stand on. In the judgment in Calcutta Club Limited 2019-TIOL-449-SC-ST-LB the Supreme Court has held that the service provided by a company incorporated under the Companies Act to its members is not under the tax net. There is no dispute that the appellant is an incorporated company under the Companies Act and provided the service to its own members; therefore, the ratio of judgment in Calcutta Club applies directly. The demand is therefore unsustainable, hence the same is set aside.

Service Tax

I. TRIBUNAL

12 Cadila Healthcare Limited vs. CST & ST, Ahmedabad [2021 127 taxmann.com 112 (CESTAT-Ahd)] Date of order: 27th April, 2021
    
Partners and partnership firm are not distinct persons and hence their relationship cannot be that of service providers and service receivers – The activities of the appellant performed as its obligation as a partner as per partnership deed and there being no separate contract of services between the appellant and the partnership firm, the remuneration received by the appellant is merely a special share of profits in terms of the partnership deed – Cannot be considered as consideration towards any services between two persons and, hence, not liable to service tax

FACTS

The appellant is a partner in a partnership firm. As per the terms of the partnership agreement, the appellant agreed to provide certain services related to the promotion and marketing of the firm’s products and other related services. The appellant received remuneration towards the said services from the firm and paid service tax. Subsequently, when it was realised, based on their consultant’s advice, that the services provided by a partner to a partnership firm do not fall under the ambit of services as per the Finance Act, 1994, they filed for a refund. The refund claims were rejected by the lower authorities, hence the appellant filed an appeal before the Tribunal. The period involved in the case was prior to 1st July, 2012.
    
HELD
Referring to the partnership deed, the CESTAT noted that the appellant in its capacity as a partner of the partnership firm was obliged to carry out certain activities such as distribution and marketing of the goods manufactured by the partnership firm, functioning as consignee and sales agent of the partnership firm, etc. The Tribunal also observed that these activities were not undertaken pursuant to a separate contract for the provision of services between the appellant and the partnership firm and that the consideration received by the appellant from the partnership firm has been accounted for as remuneration received from the partnership firm. The Tribunal held that as there was no definition of ‘person’ in the Finance Act, 1994 prior to 1st July, 2012, the same cannot be applied retrospectively. Referring to various Supreme Court judgments, the Tribunal held that the firm is not a different entity or a person in law than its partners. It is merely an association of individuals and a firm name is only a collective of those individuals who constitute a firm. Hence, it cannot be said that the appellant being a partner, he and his partnership firm have a relationship of service provider and service recipient.
    
Applying various judicial pronouncements, the Tribunal also held that the appellant received remuneration from the partnership firm towards certain activities performed in terms of the partnership deed and this is nothing but profit share in partnership sharing and the same cannot be treated as consideration towards the provision of service under the Finance Act, 1994. The Tribunal relied upon the decision of the Supreme Court in the case of Chandrakant Manilal Shah to hold that the remuneration received by a partner by employing his skill and labour as per the partnership deed is also a profit.

13 CSG Systems International (India) (P) Ltd. vs. CC Tax [2021 126 taxmann.com 139 (CESTAT-Bang)] Date of order: 29th March, 2021

Show cause notice is the foundation of any demand and any order passed beyond the notice is not legally permissible – Order passed on the basis of selectively picked up clauses in the Master Agreement without analysing the agreement as a whole is also bad in law – The sales, marketing and support services provided by Indian entities to its group companies abroad in pursuance of an agreement entered into on a principal-to-principal basis would qualify for export of services

FACTS

The appellant filed a refund application for refund of unutilised CENVAT credit of service tax availed on the input services used for providing output services said to have been exported during the period from January to March, 2013 in terms of the provisions of Rule 5 of CENVAT Credit Rules, 2004 declaring export turnover consisting of ITSS and BAS services treating the same as export of services under Rule 3 of the Provision of Services Rules, 2012. The Authorities denied part of the refund claim on the ground that as the sales, marketing, and administrative services classified as BAS are provided in India, the same cannot be treated as export of service. The appellant filed an appeal against the impugned order and the Commissioner (Appeals) set aside the said Order-in-Original to a limited extent of the refund rejected, by way of remand to the original adjudicating authority for fresh adjudication in the light of his earlier Order-in-Appeal in some other matter. The appellant, therefore, filed a refund claim for the said partially rejected amount.

However, the lower authorities once again denied the refund claim and reached the same conclusion that the BAS provided by the appellant to its group companies outside India would be considered as ‘Intermediary Services’ and cannot be treated as export of service. Aggrieved by the said order, the appellant filed an appeal before the Commissioner (Appeals) who rejected the appeal. Hence, the appellant came before the Tribunal in a second appeal.

HELD

The Tribunal observed that when the appellant filed the refund claim, the grounds raised in the show cause notice were lack of nexus, the claim was time-barred and there was lack of documentation or discrepancies in the documents; whereas when the first Order-in-Original was passed the original authority travelled beyond the show cause notice and came to a finding that the sales, marketing and administrative services are classified as BAS provided in India and hence Rule 6A was not fulfilled and the appellant is acting as an intermediary. The Tribunal held that all the orders, i.e., Order-in-Original, Remand Order-in-Original and the impugned Order-in-Appeal have travelled beyond the show cause notice and accepted the appellant’s contention that the show cause notice is the foundation of any demand and any order passed beyond the show cause notice is not legally permissible. The Tribunal referred to the following decisions in support of this proposition:

a) CCE & Cus., Surat vs. Sun Pharmaceuticals Inds. Ltd. [2015 (326) ELT 3 (SC)]
b) Caprihans India Ltd. vs. CCE [2015 (325) ELT 632 (SC)]
c) Mumbai vs. Toyo Engineering India Ltd. [2006 (201) ELT 513 (SC)]
d) CCE, Bangalore vs. Brindavan Beverages (P) Ltd. [2007 (213) ELT 487 (SC)]

As regards the merits of the case, referring to the Master Service Agreement between the appellant and its group entities abroad, the Tribunal held that the sales, marketing and support services provided to its group companies are export of service because the said services have been provided on principal-to-principal basis and there is no element of a principal-agent relationship. The Tribunal further observed that the Commissioner (Appeals) selectively picked up the clauses in the Master Agreement without analysing the agreement as a whole which is also bad in law as held by the Supreme Court in the case of Super Poly Fabriks Ltd. vs. Commissioner 2008 (10) STR 545 (SC). It also held that the appellant has satisfied all the six conditions of Rule 6A which proves that the services rendered by them are export of service.

The Tribunal relied upon the decision in the case of AMD India Pvt. Ltd. vs. CST, Bangalore 2017 (12) TMI 772 – CESTAT Bangalore wherein the Tribunal held that the denial of refund of service tax to the appellant under Rule 5 is contrary to the express provisions of law as clarified in CBEC Circular No. 111/5/2009-ST dated 24th February, 2009. The Board, in respect of business auxiliary services falling under Rule 3(1)(iii) of the Export of Services Rules, 2005, clarified thus: 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 the 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, the impugned order denying refund was set aside.

14 Ace Creative Learning (P) Ltd. vs Commissioner of Central Tax [2021 126 taxmann.com 215 (CESTAT-Bang)] Date of order: 15th April, 2021

Redemption in mutual fund is not same as trading in securities and hence in cases involving the redemption of mutual funds, reversal under Rule 6(3) of the CENVAT Credit Rules is not warranted

FACTS

The appellant is engaged in providing taxable services, viz., Commercial Training & Coaching Services, and availed CENVAT credit in respect of input, input services and capital goods. In the course of audit for the period 2104-15 to 2016-17, the Department observed that the appellant is engaged in the purchase and redemption of various mutual fund units and has declared profit on the sale of mutual fund investments. The Department took a view that as mutual funds are securities, i.e., goods and that the appellant has neither opted for nor followed the procedure prescribed under Rule 6(3)(ii) for payment of such amount as determined in Rule 6(3A), the appellant is liable to pay an amount as determined in terms of Rule 6(3)(i), i.e., 6% / 7% of the value of services contained in the trading activities. On this basis, a show cause notice was issued to the appellant and the demand was confirmed.

HELD

The Tribunal observed that the appellant has shown the profit earned from the redemption of mutual fund under the head ‘other income’. The Department has wrongly considered the investment in mutual funds as trading in mutual funds. The Tribunal held that ‘trading’ has not been defined under service tax but in the context of securities, ‘trading’ means an activity where a person is engaged in selling the goods for the purpose of making profit but certainly, trading is different from the redemption of mutual fund units. The appellant cannot transfer the mutual fund units to a third party and give only by way of redemption to the mutual fund because the appellant is not permitted to trade the mutual fund units in the absence of a license from SEBI. The Tribunal also held that the appellant cannot be termed as a ‘service provider’ because he only makes an investment in the mutual fund and earns profit from it. Accordingly, the Tribunal held that the Department has wrongly invoked the provisions of Rule 6(3) demanding the reversal of credit on the exempted services.

15 Cholamandalam MS General Insurance Co. Ltd. vs. The Commissioner of GST & Central Excise [2021 (47) GSTL 263 (Chennai Trib)] Date of order: 24th February, 2021

Rule 9 of CENVAT Credit Rules, 2004 – Credit cannot be denied at the recipient’s end unless the supplier’s assessment is revised

FACTS
The appellant was engaged in the business of general insurance and had entered into an agreement with car manufacturers for issuance of insurance policies through their dealers’ network, where car dealers collected premium from the customers and issued policies to them by accessing the portals of the insurance brokers. For insuring the vehicle, a pay-out was given to dealers for which dealers issued invoice with description of services as ‘Provision of Space, Computer, Internet and Administrative Support’. Service tax was also collected by the dealers vide said invoices and the same was availed as CENVAT credit by the appellant.

The Department alleged that no service was provided by the dealers to the appellant as per the description mentioned in the invoice and therefore the appellant was not eligible to avail CENVAT credit for non-compliance of Rule 9 of the CENVAT Credit Rules, 2004.

HELD
The Tribunal relied on the judgment of M/s. Modular Auto Ltd. vs. Commissioner of Central Excise, Chennai 2018-VIL-541-Mad-ST and held that unless and until the assessment made by the dealer was revised, the credit at the recipient’s end cannot be denied. Thus, the impugned order denying credit was set aside.

16 Gannon Dunkerley & Co. Ltd. vs. Commissioner (Adj.) of S.T., New Delhi [2021 (47) GSTL 35 (Del-Trib)] Date of order: 22nd October, 2020

Section 73 of Finance Act, 1994 – Extended period for issuing show cause notice cannot be invoked merely on the contention that had audit not been conducted, non-payment of service tax would have gone unnoticed

FACTS
The appellant was primarily engaged in the provision of commercial or industrial construction services and had been regularly filing its returns. During the course of audit, the Department identified certain discrepancies. Based on audit objections, a show cause notice was issued on 22nd October, 2009 for the period 2004-2007 by invoking extended period as per the proviso to section 73 of the Finance Act, 1994, stating that the appellant had disclosed incorrect assessment under self-assessment provisions, thereby leading to ‘suppression of facts’ and that had an audit not been conducted, such discrepancy would have gone unnoticed. This was further upheld by the Commissioner, Appeals.

HELD
The Tribunal stated that it was correct that section 70 of the Finance Act requires every person liable to pay service tax to himself assess the tax on the services provided by him and furnish a return, but at the same time the Circular dated 23rd April, 2009 also cast a duty on the A.O. to effectively scrutinise the returns, at least at the preliminary stage. As the appellant had been regularly filing the returns, the Department cannot take a stand that it was only during the audit that it could examine the factual position and that had audit not been conducted, non-payment of service tax would not have been unearthed. Thus, it was held that the Commissioner (Appeals) was not justified in holding that the extended period of limitation was correctly invoked; the order was set aside.
    
17 Dharti Dredging and Infrastructure Ltd. vs. CCT [2021-TIOL-223-CESTAT-Hyd-LB] Date of order: 1st April, 2021]
    
In case of a workmen’s compensation policy, it is the responsibility of the employer to provide compensation to the employee, therefore the employer is the beneficiary of the policy and hence credit is allowed
    
FACTS

The appellant availed CENVAT credit of service tax paid on the insurance premium paid in respect of ‘workmen compensation insurance policy’ which was denied by the lower authorities. When this matter was heard by the single member (Judicial), he found that contrary views had been expressed on the same issue by two Benches of the same strength (both single-member benches) [namely, Hydus Technologies India Pvt. Ltd. 2017-TIOL-1189-CESTAT-Hyd which allowed the credit and Ganesan Builders Ltd. 2017-TIOL-3152-CESTAT-Mad which denied the same; hence, the matter has been referred to a larger bench for a decision.

HELD


The decision of the CESTAT-Madras (Supra) in Ganesan Builders has been overruled by the High Court of Madras [2018-TIOL-2303-HC-Mad-ST] specifically dealing with ‘workmen compensation insurance policy’. The Madras High Court has held that the Workmen Compensation Act, 1923 is a beneficial legislation and the policy taken by the assessee in that case does not name the employees but categorised the employees based on their vocation / skill. The insured in that case is the assessee and the intention of the policy is to protect the employees who work at the site and not to drive them to various forums for availing compensation in the event of an injury or death. The service in that case was not primarily for personal use or the consumption of the employee and the insured is the assessee and not the employees. It is noted that section 3 of the Workmen Compensation Act places the liability of compensation upon the employer. Thus, since the workmen are not the beneficiaries of the policy but it is the assessee, the credit is allowable.

Service Tax

I. TRIBUNAL
    
7 Interface Communication Pvt. Ltd. vs. Commissioner of CGST [2021-TIOL-708-CESTAT-Mum] Date of order: 25th October, 2021
    
Without any allegation of fraud, suppression, wilful misstatement, collusion, suppression or contravention of facts with an intention to evade payment of tax, longer period of limitation cannot be invoked

FACTS
The assessee is in appeal against the order of the Commissioner (Appeals) wherein interest was confirmed on delayed payment of service tax through CENVAT Credit Account. Interest is proposed to be levied for the period from October, 2006 to September, 2010 and the notice was issued on 19th March, 2012, during which period the Department was only empowered to demand tax due for a period of one year unless there is allegation of fraud, misrepresentation, collusion, misstatement, suppression of fact or contravention of the provisions of the Finance Act, and is made with a proposal for penalty u/s 78 of the Finance Act, 1994.

HELD
The Tribunal primarily noted that there is no allegation of wilful withholding of payment of service tax on any of the grounds of suppression, fraud or contravention of provisions of the Act. There is no requirement to give a finding that u/s 75 of the Finance Act interest is a natural corollary and consequence for any default of payment of service tax within the stipulated time. On the contrary, the tax liability or its interest component can never be enforced and recovered from the assessee beyond the period from one year without any allegation of wilful non-payment on the ground of fraud, misstatement or collusion. The appeal was accordingly allowed.

8 M/s Terex India Pvt. Ltd. vs. The Commissioner of GST&CE [2021-TIOL-696-CESTAT-Mad] Date of order: 11th October, 2021

Payment of tax under reverse charge on pointing out by the audit officers cannot be considered as payment consequent to assessment / adjudication proceedings – Input tax credit / refund is allowed of the said tax payment

FACTS
On four dates, viz., 11th, 12th, 21st and 22nd December, 2012, the appellant had received services from its parent company in the USA. It appeared that the appellant is liable to pay service tax on the amount paid to the parent company under Reverse Charge Mechanism. It paid the service tax with interest and applied for a refund. The original authority rejected the refund claim holding that as per section 142(8)(a) of the CGST Act, 2017 credit is not admissible and therefore not eligible for refund
in cash.

HELD
The Tribunal noted that the Department has considered the said payment as consequent to assessment / adjudication proceedings and as recovery of arrears of tax not eligible for ITC / refund. However, as the said payment is made on pointing out by the audit officers, such payment does not fall under the category of arrears of tax by an assessment / adjudication proceeding. The claim is only for refund and not proceedings for assessment or adjudication. In this scenario, rejection of refund is unjustified and the impugned order is set aside.

9 Pradeep Deviah and Associates Pvt. Ltd. vs. Commissioner of Central Tax, Bengaluru East [2021-TIOL-653-CESTAT-Bang] Date of order: 22nd March, 2021

Once proportionate credit is reversed as per Rule 6(3A) of the CENVAT Credit Rules, 2004, reversal of credit at 6% / 7% cannot be enforced
    
FACTS
The appellant is engaged in rendering both taxable and exempt services. The sale of space in print media is considered as an exempt service by the Department and therefore reversal of credit is sought. At the time of audit itself, they reversed proportionate common credit attributable to both taxable and exempt services. However, an SCN was issued for reversal of credit at 6% / 7% of the exempted turnover. Accordingly, the present appeal is filed.
    
HELD
The Tribunal primarily noted that the activity of sale of space or time for advertisement in print media is specifically covered under the negative list in terms of section 66D of the Finance Act, 1994 and therefore the same cannot be said to be an exempted service and the provisions of Rule 6(3) are not applicable to an activity which is in the negative list. It was also noted that proportionate credit is already reversed as per Rule 6(3A) of CCR, 2004, therefore, it was not incumbent on the Department to issue a show cause notice demanding reversal of 6% / 7% of the exempted turnover. The appeal is accordingly allowed.

10 Uttaranchal Cable Network vs. CCE&ST [2021] 132 taxmann.com 95 (New Delhi–CESTAT) Date of order: 13th October, 2021

The unutilised CENVAT credit as on 30th June, 2017 not carried forward into GST regime by filing TRAN-1 is permitted to be adjusted against the pre-GST demands as there is no bar in section 142 on the same

FACTS
The appellant was registered in the service tax regime for providing cable operator services; however, it did not carry forward the CENVAT credit balance as on 30th June, 2017 in the GST regime. A show cause notice was issued to the appellant for the pre-GST period u/s 73(1) of the Finance Act, 1994. The appellant did not contest the demand on merits but offered that the amount of CENVAT credit lying in its favour (credit) as on 30th June, 2017 may be allowed to be adjusted against the demand payable since it was not carried forward to GST in Form TRAN-01. The Adjudicating Authority disallowed such adjustment on the ground that credit account cannot be adjusted because CENVAT Credit Rules, 2004 are no longer applicable and that section 140 of the CGST Act read with Rule 117 of the CGST Rules specifically provides the procedure for carry-forward of CENVAT credit. If the appellant did not follow the same, the unutilised amount cannot be permitted to be adjusted. Aggrieved by this, the appellant filed the appeal.

HELD
The Tribunal held that there is no bar or disability u/s 140(1) read with section 142 of the CGST Act, 2017 on an assessee for claiming adjustment of the tax demand from the unutilised CENVAT credit (lying to the credit as on 30th June, 2017) which has not been carried forward to the GST regime and allowed the appeal directing the Adjudicating Authority to grant adjustment of the unutilised amount against the demand payable by the assessee.

11 Atul Ltd. vs. CCE&ST [2021] 132 taxmann.com 165 (Ahm-CESTAT) Date of order: 9th November, 2021]

The assessee is entitled to refund of Education Cess and Higher Education Cess lying unutilised as on 30th June, 2017 as the said cess is ‘cenvatable’ in terms of Notification No. 12/2015 dated 30th April, 2015 and section 142 of the CGST Act provides a refund for the same

FACTS
The assessee claimed refund of Education Cess and Higher Secondary Education Cess as was in the balance as on 28th February, 2015 and carried forward till 30th June, 2017 by an application dated 5th February, 2018. The said refund was rejected on the grounds that once the amount stands lapsed, the question of its refund even under the provisions of the CGST Act does not arise.

HELD
The Tribunal noted that these cesses were leviable up to 28th April, 2015. However, with effect from 1st March, 2015, EC and SHEC paid on imports of capital goods received in the factory of the manufacturer of the final product on or after 1st March, 2015 were permitted to be utilised for payment of duty of excise leviable. Similarly, by Notification No. 12/2015 dated 30th April, 2015 the assessee was permitted to utilise the credit of EC and SHEC for payment of duty of excise for such inputs or capital goods received after 1st March, 2015. It also noted that the said refund in question would not have been allowed to be claimed in TRAN-1 for want of any column in the requisite form to carry forward the balance of such cess and the Department in its verification report also stated the same. The Tribunal also observed that the refund is claimed in time and there is no unjust enrichment. It held that EC and SHEC were ‘cenvatable’, the credit whereof was allowed even for such inputs and capital goods which were received by the manufacturer even after 1st March, 2015. The appellant had accumulated credit of EC and SHES which could not be utilised till 30th June, 2017. The unutilised amount is the assessee’s money and accordingly has to be refunded to it.

Referring to the decision of the Supreme Court in the case of Eicher Motors Ltd. vs. Union of India, 1999 taxmann.com 1769 (SC) it was held that right to credit becomes vested and duly crystallised in favour of the assessee the moment input goods / services are received and by virtue of assessee paying the duty thereon by reimbursing the said amount to the supplier of the goods. The Tribunal set aside the order of the Adjudicating Authority on the ground that he has made a wrong interpretation of Notification No. 12/2015 that such EC and SHEC could not be utilised for payment of excise duty despite the specific permission for the same in the said Notification and the subsequent amendment in CENVAT Credit Rules in 2015 permitting the utilisation of credit on cess. The Tribunal further noted that with effect from 1st July, 2017 with the introduction of GST, the utilisation of the said credit became impossible. However, in terms of section 142 of the said new Act, the amount is made refundable to the appellant in cash. Accordingly, the appeal was allowed.

Service Tax

I. TRIBUNAL

4 Convance Clinical Development Ltd. vs. Commissioner of Central Excise, Bengaluru East [2021 (50) GSTL 433 (Tri-Bang)] Date of order: 2nd July, 2021

Rule 5 of the CENVAT Credit Rules, 2004 read with Notification No. 27/2012-CE dated 18th June, 2012 – Refund cannot be rejected on the ground that the reversal of credit was not made through service tax return

FACTS
The appellant is a 100% export company and it had filed a refund application under Rule 5 of the CENVAT Credit Rules, 2004 read with Notification No. 27/2012-CE dated 18th June, 2012 for claiming the refund of unutilised CENVAT credit. But it inadvertently transferred the CENVAT credit to the GST regime through Form GST TRAN-1. On realising the mistake, the appellant voluntarily reversed the said credit in the GSTR3B return filed for the month of May, 2018. However, the refund claim was rejected because the appellant had failed to debit the refund amount in the CENVAT credit account, the ST-3 return and Form A at the time of filing the refund claim, and in terms of the conditions specified under Notification No. 27/2012-CE dated 18th June, 2012.

HELD
The Tribunal observed that as per Notification No. 27/2012-CE dated 18th June, 2012, there was no requirement to debit the amount of refund claimed in the service tax return. The only condition under condition 2(h) of the said Notification No. 27/2012-CE is that the amount that is claimed as refund shall be debited by the claimant from his CENVAT credit account, maintained in the books of accounts at the time of making the claim. This condition was followed before filing the refund claim. The Tribunal also found that transition of credit to the GST regime is merely a procedural lapse which was rectified by the appellant by way of reversal in GSTR3B. Therefore, the Learned Commissioner (Appeals) should have taken a liberal view of a bona fide mistake without any intention to claim unjustified refund. Hence, the order was set aside, allowing the appeal.
    
5 M/s International Travel House Ltd. vs. Commissioner of Service Tax, Delhi [2021-TIOL-620-CESTAT-Del] Date of order: 17th September, 2021

Incentive received from airlines by air travel agents is not liable for service tax

FACTS
The appellant, an air travel agent, purchased tickets from various IATA Agents / Airlines which pay commission to them. A show cause notice was issued demanding service tax on the commission received. The appellant’s case was that the air travel agent is neither promoting its own business nor of the CRS Companies. Therefore, the receipt of incentive / commission from the airline cannot be liable for service tax.

HELD
The Tribunal, relying on the decision in the case of Kafila Hospitality and Travel Private Limited vs. Commissioner of Service Tax, Delhi [2018-TIOL-3504-CESTAT-Del] held that the incentives received by a service recipient from a service provider cannot be subjected to levy of service tax and a passenger cannot be deemed to be an audience for promotion of the business of CRS Companies.

6 Jay Jee Enterprises vs. CCE&ST, Daman [2021-TIOL-643-CESTAT-Ahm] Date of order: 20th September, 2021

Service recipient discharged 100% service tax instead of 75% on supply of manpower service and security service. Since tax is paid in full, the service recipient is allowed full input tax credit

FACTS
The issue involved is whether the appellant is entitled to CENVAT credit in respect of service tax paid on Manpower Supply and Recruitment Agency Service and Security Service under Reverse Charge Mechanism when the service tax was 100% paid by the appellant as a service recipient. However, Notification No. 30/2012-ST dated 20th June, 2012 provides that the service provider is supposed to pay the service tax on 25% of the value of the service and the service recipient is required to pay the service tax on 75% of the value of the service. The contention of the Revenue is that in the present case even the portion of the service tax which is liable to be paid by the service provider was paid by the service recipient; therefore, the appellant is not eligible for CENVAT credit. Being aggrieved by the impugned order, the present appeal has been filed.

HELD
The Tribunal primarily noted that whether it is the service recipient or the service provider who is liable to pay the service tax, so long as the service tax was admittedly paid even by the recipient of the service, the CENVAT credit cannot be denied. The credit was accordingly allowed.

Service Tax

I. TRIBUNAL

23 Commissioner of Service Tax vs. Intas Pharmaceuticals [2021-TIOL-367-CESTAT-Mum] Date of order: 25th June, 2021

Notice pay received from the employee being in the nature of compensation for premature termination of service not liable to service tax

FACTS

The contractual agreement between the company and its employees is that the employee should not leave the employment before the prescribed period. In case of breach of this condition, he would be required to pay one month’s salary which is penal in nature. A show cause notice is issued demanding service tax on the amounts received by the company from its employees alleging toleration of act of breach of contract taxable as a declared service u/s 66E(e) of the Finance Act, 1994.

HELD

The Tribunal relied on the decision of the Madras High Court in the case of GE T&D India Pvt. Ltd. [2020] (35) GSTL 89 (Mad) where the Court categorically holds that the definition in clause (e) of section 66E is not attracted as the employer has not ‘tolerated’ any act of the employee but has permitted a sudden exit upon being compensated by the employee in this regard. Notice pay, in lieu of sudden termination, does not give rise to the rendition of service either by the employer or the employee. Accordingly, the demand was set aside.

24 M/s PVR Ltd. vs. Commissioner of Service Tax [2021-TIOL-368-CESTAT-Del] Date of order: 5th July, 2021

Booking of online tickets and charge of convenience fees is in the nature of E-commerce transaction not taxable under OIDAR services

FACTS

The issue involved in these two appeals relates to taxability of ‘convenience fee’ charged by the appellant to its customers for online booking of movie tickets under the category of ‘online information and database access retrieval system (OIDAR)’ defined u/s 65(75) of the Finance Act and taxable u/s 65(105)(zh) of the Finance Act.

HELD


The Tribunal noted that any person who visits the website of the appellant to seek information about the show timings or other information does not have to make any payment and it is only when a ticket is booked online that convenience fee is required to be paid by the user. The substance of the transaction is, therefore, to book a ticket online and thereby engage in E-commerce. Therefore, it cannot be said that convenience fee is charged for any access / retrieval of information or database as contemplated under OIDAR service. It is also noted that the Board Circular dated 9th July, 2001 also clarifies that E-commerce transactions do not fall within the ambit of OIDAR service. Thus, service tax under the category of OIDAR cannot be levied upon a user merely because he receives a code for getting a printout of the ticket from the cinema hall.

Service Tax

I. HIGH COURT

18 Anjappar Chettinad A/c Restaurant vs. Joint Commissioner [2021-TIOL-1270-HC-Mad-ST] Date of order: 20th May, 2021
    
Takeaway and food parcels by restaurants tantamount to sale of food and drinks and does not attract levy of service tax

FACTS
The petitioners provide restaurant services, outdoor catering services and mandap keeper services. An audit was undertaken and service tax was demanded on the takeaway / parcel services. Accordingly, a petition is filed regarding taxability of food taken away or collected from restaurants in parcels.

HELD
The Court noted that not all services rendered by restaurants are taxable and the tax gets attracted only in certain specified situations. Sale of food and drink simpliciter, services of selection and purchase of ingredients, preparation of ingredients for cooking and the actual preparation of the food and drink would not attract the levy of tax. Only those services commencing from the point where the food and drinks are collected for service at the table till the raising of the bill, are covered. This would include a gamut of services including arrangements for seating, decor, music and dance, the service of waiters, the use of fine crockery and cutlery, among others. In the case of takeaway or food parcels, the aforesaid attributes are conspicuous by their absence. In many cases, there is a separate counter for collection of the takeaway and is generally positioned away from the main dining area which may or may not be air-conditioned. In any event, since the consumption of the food and drink is not in the premises of the restaurant, the same does not attract service tax.
    
19 Qualcomm India Pvt. Ltd. vs. Union of India and Others [2021-TIOL-1170-HC-Mum-ST] Date of order: 21st May, 2021

Interest is payable on delay in processing the refund claim beyond a period of three months from the date of receipt of application u/s 11BB of the Central Excise Act, 1944

FACTS
The petitioner is engaged in the export of services and receives various input services and avails input tax credit (ITC) of service tax paid on various input services. It filed a refund claim for the accumulated ITC under Rule 5 of the CENVAT Credit Rules, 2004. The refund was sought to be rejected on the ground that the input services did not have any nexus with the output services and thus were not eligible for refund. A part of the refund amount was sanctioned and a part was rejected. On appeal, the appellate authority allowed the refund claim. However, since the refund amounts were sanctioned beyond three months from the date of filing of refund applications, the petitioner claimed that it was entitled to interest on delayed payment of refund u/s 11BB of the Central Excise Act, 1944 made applicable to service tax vide section 83 of the Finance Act, 1994. Accordingly, the present writ application is filed to claim the interest on the refund amount.

HELD
The Court primarily noted that the orders granting refund were issued after the expiry of three months from the date of receipt of the refund application which resulted in a delay in granting the refund. Section 11BB clearly provides that if any duty ordered to be refunded is not refunded within three months from the date of receipt of an application, there shall be paid to that applicant interest at such rate as may be prescribed. Thus, irrespective of the fact that the delay was intentional or unintentional, interest ought to be granted. Non-granting of interest in such a case would amount to failure to discharge statutory duty / obligation by the refund sanctioning authority for which the aggrieved claimant can seek a writ of mandamus from the Writ Court under Article 226 of the Constitution of India.

20 M/s TV Sundram Iyengar and Sons Pvt. Ltd. vs. Commissioner of CGST & CE[2021-TIOL-1025-HC-Mad-ST] Date of order: 30th March, 2021

Relationship between the buyer and seller being on a principal-to-principal basis, trade discount received by way of credit note is not liable to service tax

FACTS
The petitioner is a dealer in motor vehicle parts and motor vehicle chassis. It entered into dealership agreements with various manufacturing entities. The case of the petitioner is that the relationship between it and the manufacturer is on a principal-to-principal basis. It purchases chassis from the manufacturer and resells the same in its own name and on its own account. A show cause notice was issued proposing levy of service tax with interest and penalty on the trade discount received from the manufacturers by way of credit notes.

HELD
The Court states that a mere reading of the dealership agreement between the assessee and the manufacturers would clearly indicate that the petitioner purchases the goods from the manufacturers by way of sale. It is also pointed out that the adjudicating
authority has not read the document as a whole but instead given undue emphasis to certain individual clauses mentioned in the agreement, thereby misinterpreting the transaction and relationship between the parties. The Court accordingly allowed the writ.

21 Commissioner of GST & CE vs. Sutherland Global Services Pvt. Ltd. [2021 (47) GSTL 454 (Mad)] Date of order: 24th February, 2021

Refund under Rule 5 shall be granted in case of export of exempted services

FACTS
The respondent was a 100% export-oriented unit and Software Technology Park of India (STPI) registered for service tax under ‘Business Auxiliary Services’ providing call centre services and technical support service. The appeal was filed by the Revenue against the order passed by the Tribunal approving the refund of CENVAT credit on input services used for exporting services which are otherwise exempt under servicetax laws. The Department contended that CENVAT credit cannot be availed of inputs, input services or capital goods used for output services, whether provided domestically or exported, if the same are exempted unconditionally.

HELD
The Court referred to the decision of Repro India Limited [2009 (235) ELT 614 (Bom)] and various other rulings wherein the scheme of CENVAT Credit Rules was elaborately discussed and distinction was drawn between Rules 5 and 6 of the CENVAT Credit Rules, 2004. The Tribunal had rightly held that Rule 6 uses the words ‘exempted goods / services’ and Rule 5 uses the words ‘final product / output service’. Further, exemption is applicable within Indian territory and therefore, goods as well as services whether taxable or exempted can be exported. Besides, the intention of the Legislature was to avoid export of duties or taxes. Therefore, the case was decided in favour of the assessee.

II. TRIBUNAL

22 Schlumberger Asia Services Ltd. [2021-TIOL-313-CESTAT-Chd] Date of order: 24th May, 2021

Credit of Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess was eligible to be carried forward to the GST regime as on 1st July, 2017 – The amendment of bar in transition was made in section 140 on 30th August, 2018 effective from 1st July, 2017 – The refund claim filed within one year from the amendment is not time-barred

FACTS
The CENVAT credit of Education Cess, Secondary and Higher Education Cess, Krishi Kalyan Cess was lying unutilised and the appellant could not utilise the same till 30th June, 2017. On 1st July, 2017, the GST regime came into force and the credit lying in the account was allowed to be transferred under the GST regime. The credit was accordingly transited. Later, section 140 of the GST law was amended on 30th August, 2018 retrospectively, stating that the credit of cess cannot be carried forward to the GST regime. The appellant accordingly reversed the credit and filed a refund claim. The refund was rejected on the ground of time bar. Accordingly, the present appeal is filed.

HELD
The Tribunal noted that on 1st July, 2017 there was no bar on carry forward of the CENVAT credit of Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess to the GST regime. The amendment to section 140 came after one year of the switch to the GST regime on 30th August, 2018 which was applicable retrospectively. In these circumstances, how could the appellant have filed the refund claim within one year from 1st July, 2017 to 30th August, 2018? Therefore, the relevant date of filing the refund claim shall be 30th August, 2018 and within one year of the said date, the refund claim has been filed. Thus, the refund claim is not barred by limitation and should be allowed.

Service Tax

I. TRIBUNAL

1 Neyveli Lignite Corporation Ltd. vs. CCE&ST [2021-128 taxmann.com-405-CESTAT-Chen] Date of order: 26th July, 2021

Liquidated damages recovered from the contractor cannot be said to be a consideration for agreeing to tolerate the act of the contractor of not completing the task within time schedule so as to attract the provisions of section 66E(e) of the Finance Act, 1994

FACTS
The issue before the Tribunal relates to the demand of service tax on liquidated damages recovered by the appellant for acts of default such as delayed or deficient supplies by various suppliers. The period involved in all the appeals is after 1st July, 2012 and the case set out by the Department is that the appellant had agreed to tolerate breach of timelines stipulated in the contract against the amount imposed as liquidated damages as consideration u/s 66E(e) of the Finance Act, 1994.

HELD
The Tribunal relied upon the decisions in the cases of South Eastern Coalfields Ltd. vs. CCE&ST [2021] 124 taxmann.com 174 (New Delhi-CESTAT) and M.P. Poorva Kshetra Vidyut Vitaran Co. Ltd. vs. Pr. Commissioner CGST & CE [2021] 126 taxmann.com 182 (New Delhi – CESTAT) and held that it is not possible to sustain the view taken by the Commissioner that since the contractor did not complete the task within the time schedule, the appellant agreed to tolerate the same for a consideration in the form of liquidated damages, which would be subjected to service tax u/s 66E(e) of the Finance Act. The appeal was accordingly allowed.

Note: A similar view is also taken by the Chennai Tribunal in the case of Steel Authority of India Ltd. vs. CCE [2021] 128 taxmann.com 400 (Chennai-CESTAT), order dated 26th July, 2021.

2 M/s Seaport Lines India Pvt. Ltd. vs. CGST&CE [2021-TIOL-574-CESTAT-Mad] Date of order: 7th September, 2021

A freight forwarder, when acting as a principal, will not be liable to pay service tax when the destination of the goods is from a place in India to a place outside India when there is a mark-up between the freight received and freight paid

FACTS
During verification of records of the assessee, it was noticed that they hire containers from different liners like Maersk and Hapag Lloyd and ‘sell’ these to their customers; that while arranging containers for shippers, the assessee collected ocean freight and local charges like terminal handling charges and documentation charges; and they also availed CENVAT credit on such charges and paid service tax on the invoice amount raised on customers. It was noticed that the assessee collected ocean freight charges higher than the actual amounts charged by shipping lines / steamer agents; however, they did not include the ocean freight charges collected in taxable value for the purpose of payment of Service Tax under business support services.

HELD
The Tribunal, relying on the decision in the case of M/s Marinetrans India Pvt. Ltd. [2020] (33) GSTL 241 (Tri-Hyd) held that buying and selling space on ships does not amount to rendering a service and any profit or income earned through such transactions is not liable to service tax. The demand was accordingly set aside.

3 M/s. Bharat Coking Coal Ltd vs. CCE&ST [2021-TIOL-551-CESTAT-Kol] Date of order: 25th August, 2021

A joint reading of section 67 of the Finance Act and Rule 3 of the Service Tax (Determination of Value) Rules, 2006 clarifies that service tax is chargeable on the value of the service provided. Any other expenses incurred and reimbursed is not includible in the value for charge of service tax

FACTS
The appellant is a PSU and a 100% subsidiary company of Coal India Limited engaged in the business of mining and selling of coal. They receive security services under a Memorandum of Understanding from the Central Industrial Security Force (CISF) and were discharging service tax under reverse charge. For the purpose of valuation, the amount paid to CISF towards cost of deployment, cost of arms and ammunition and cost of clothing items (uniforms), etc., was considered. In addition to the above, they were also providing facilities to CISF for free residential accommodation, free medical services to the CISF personnel at its premises, free vehicles / cabs to CISF personnel and reimbursement of expenditure on petty imprest expenses, medicines and telephones on actual submission of bills / invoices. The appellant has not included the value of the above facilities for payment of service tax on reverse charge basis.

HELD
The Tribunal, relying on the case of Central Industrial Security Force 2019-TIOL-3277-CESTAT-All where it has been held that expenses incurred towards medical services, vehicles, expenditure on dog squad, stationery expenses, telephone charges, expenditure incurred by service recipient for accommodation provided to CISF, are not includible as the same cannot be considered as consideration for providing security services.

Service Tax

I. TRIBUNAL

25 Khushboo Beauty Care vs. CCE&ST, Daman [2021-TIOL-467-CESTAT-Mum] Date of order: 27th July, 2021

When it is established that the goods are received by the appellant job-worker, credit should be allowed even if the Bill of Entry is in the name of the principal supplier

FACTS
The issue involved in the present case is whether the appellant is entitled to CENVAT credit on the strength of the Bill of Entry which was in the name of the supplier of the raw material, whereas the goods were received by the appellant as a job-worker and used in the manufacture of goods on job-work basis.

HELD
The Tribunal noted that right from the show cause notice, the case of the Department is only whether the appellant is entitled for CENVAT credit on the strength of the Bill of Entry which is in the name of the principal supplier along with the declaration given by the supplier. The Tribunal finds that there is no dispute about the receipt and the use of the goods supplied under the cover of the Bill of Entry along with the declaration in favour of the appellant. Even though the Bill of Entry is in the name of the supplier, but on the basis of the declaration it is established that the material has been supplied to the appellant for job work, therefore, merely because the Bill of Entry bears the name of the supplier, CENVAT credit cannot be denied to the appellant.

26 M/s NSSL Pvt. Ltd. vs. Commissioner of Central Excise [2021-TIOL-469-CESTAT-Mum] Date of order: 3rd August, 2021

Refund of service tax paid under reverse charge after 1st July, 2017 is available in accordance with the provisions of the erstwhile statute by virtue of section 142(3) of the CGST Act

FACTS
The appellant filed a refund application claiming refund of service tax paid by it under the Reverse Charge Mechanism. The refund application was rejected on the ground that ITC can only be claimed under GST / CGST Act, 2017 and not otherwise. The Commissioner (Appeals) relied upon sub-section (8)(a) of section 142 of the CGST Act, 2017 to reject the refund application which deals with assessment and adjudication.

HELD
The Tribunal noted that the appellant is not falling within the scope and ambit of sub-section (8)(a) of section 142 inasmuch as no assessment / adjudication orders were passed by competent authorities in determining the tax liability, which the appellant was required to pay under the erstwhile statute. Actually, the case of the appellant is governed under provisions of sub-section (3) of section 142 which provides that every claim of refund filed after the appointed day shall be disposed of in accordance with the provisions of the erstwhile statute. The authorities below have not questioned the issue regarding the entitlement of the CENVAT credit under the erstwhile CENVAT statute. On careful examination of the statutory provisions, it is held that the refund claims should merit consideration under the provisions of sub-section (3) of section 142 and, as such, the appellant should be entitled to the benefit of refund of service tax paid by it.

Service Tax

I.     HIGH COURT

18. Commissioner of CGST Delhi East vs. Anand and Anand
2022 (65) GSTL 137 (Del.)
Date of order: 1st August, 2022
 
Refund of unutilized credit admissible to exported legal consultancy services.

FACTS

The respondent, a law firm of legal practitioner, provides legal services to clients in India as well as outside India and specializes in providing services in the field of intellectual property services and exports 70 to 80 percent of its services. The short issue in the Revenue’s appeal related to whether the assessee should be allowed refund of unutilized CENVAT credit for the period from July 2012 to March 2015. The Revenue’s contention based on the sole contention was that for the legal services, the tax burden is on the recipient of service and hence such service is clearly excluded from the definition of “output service” as defined in Rule 2(p) of CENVAT Credit Rules, 2004 (CCR). Therefore, even when the said services are exported, CENVAT credit is not available on such exported services also.

HELD

The Court examined section 68(2) of the Finance Act, 1994 along with the definition of “output service” in Rule 2(p) of CCR, the definition of “exempt service” as per Rule 2(e) of CCR as well as Rules 5 and 6(7) of Service Tax Rules, 2004 (“the Rules”). As per Rule 5 of the rules for all exported services, service providers are eligible for refund. Rule 6(7) keeps SEZ services out of the ambit while providing for the method and procedure for computing the value of exempted goods and/or exempted services used for providing taxable exempted services and/or manufacturing excisable and exempted goods. In addition to this, the Court also noted that commensurate with these observations, in Rule 2(e) of CCR also, the definition of exempted service excludes services exported in terms of Rule 6A of the Rules. Hence, the Court held that the analogy drawn by the Revenue with exempt service was flawed, or else, as per the assessee’s contention, Rule 5(1) of CCR would have been rendered redundant. Hence, agreeing with Tribunal’s conclusion, the Revenue’s appeal was dismissed.

II. TRIBUNAL

19 Karnataka Beverages Corporation Ltd. vs. CST Bangalore
2022 (64) GSTL 605 (Tri.-Bang.)
Date of order: 28th April, 2022

Demurrage charged on the Corporation from manufacturers of liquor not liable for service tax.
 
FACTS

The appellant–a corporation established for distribution of liquor, purchased it from distilleries and stored the same in hired godowns, and subsequently sold the same to licensed dealers. Where they did not sell within 90 days, the appellant was entitled to charge Rs. 2 per carton. According to the Revenue, the said amount collected was towards business auxiliary service (BAS) and storage and warehousing service. The appellant charged no storage charge till the period of 90 days.

HELD

Relying on several earlier decisions of various High Courts including Kerala State Beverages (M&M) Corporation vs. CCE 2014 (33) STR 484 (Kerala) and Karnataka State Beverages Corporation 2017 (8) STR 411 (Tri.-Bang) [Revenue’s Appeal dismissed by Hon’ble Karnataka High Court as reported at 2011 (24) STR 405 (Kar), which was affirmed by Supreme Court as reported at 2015 (40) STR 209 (SC)], the Tribunal found that appellants discharged their statutory function as no mandate was given by the Karnataka State Excise Act and the Rules framed thereunder and did not render any service as BAS and storage and warehousing service. Hence, the so named ‘commission’ or ‘warehousing charge’ are not exigible to service tax.

20. Flemingo Travel Retail Ltd. vs. CC & CE, Mumbai East
2022 (64) GSTL 564 (Tri.-Mum.)
Date of order : 10th February, 2022

Rent of duty-free shops at arrival/departure terminals of airport are beyond customs frontiers. Hence outside taxable territory of India. No service tax payable. Also, judicial discipline ought to be followed.

FACTS

The appellants challenged the rejection of refund in a bunch of claims of service tax borne by them for 7 years on rent paid to Mumbai Airport International Airport Ltd. for their duty-free shop. The issue relates to whether or not the rent charged for the immovable property is within the taxable territory when it is beyond the customs frontiers. Though there was a precedent available of the Mumbai Tribunal itself in the case of CST vs. Flemingo Duty Free Shop Pvt. Ltd. 2018 (8) GSTL 181 (Tri.-Mum), wherein the claim of refund was upheld, the refund was refused on the grounds such as unjust enrichment, and in some of the claims, the reason for rejection was that the precedent in the case of CST vs. DFS India P. Ltd. 2019 (365) (Tri.-Mum) pertained to only the departure terminal which is a “taxable territory”. However, in the decision of Flemingo Duty Free Shops Pvt. Ltd.’s case, the Tribunal had settled the issue as “there is no dispute that duty-free shops whether in arrival lounge or departure lounge of the International airports are beyond customs frontiers……. and that the rental space in arrival or departure lounge area in non-taxable territory and same therefore is not a taxable service”.

HELD

The Hon. Tribunal held that taxable territory is not necessarily the same as geographical reaches of India, nor can it be limited to the physical frontiers, it is what Finance Act, 1994 states it to be. Reiterating its reliance on the Supreme Court’s decision in the case of Hotel Ashoka vs. Assistant Commissioner of Commercial Taxes 2012 (270) ELT 433 (SC), which had laid the foundation for the ruling of Tribunal to follow inter alia in DFS India’s case (supra), the Tribunal observed that the lower authorities not only disregarded judicial discipline but also patently decided contrary to the said Supreme Court’s decision. Also, it was held that the provision relating to unjust enrichment was not available to the Revenue to deny refund of such tax collected without authority of law for non-taxable services.
 

21. PMI Organisation Centre Pvt. Ltd. vs. Commissioner of CGST, Mumbai East
G.S.T.L. 244 (Tri. – Mum.)
Date of order: 7th February, 2022

Refund of CENVAT credit cannot be denied merely on the ground of lack of nexus between input service and output service.

FACTS

The appellant was engaged in providing Business Auxiliary Service and exported output taxable services during the relevant period. As a result, the appellant filed a refund application as per Rule 5 of CENVAT Credit Rules, 2004 for the refund of CENVAT credit availed on input services used to provide output service. The Adjudicating Authority rejected the refund claim of certain input services stating that there was no nexus between input services and output services which were exported. The Commissioner (Appeals) upheld the stand taken by Adjudicating Authority denying refund. Being aggrieved by such an order, the appellant preferred an appeal before this Hon’ble Tribunal.

HELD

It was held that the department had only a limited angle to assess whether the refund application was filed as per prescribed formula under Rule 5 of CENVAT Credit Rules, 2004. Further, denial of CENVAT credit solely on the basis of lack of establishing nexus between input and output service without pointing any discrepancy was arbitrary and illegal. The appeal was thus allowed.

22. Bharti Realty Ltd. vs. Commissioner of Service Tax, Delhi-III
2022 (65) G.S.T.L. 234 (Tri. – Del.)
Date of order: 9th May, 2022

CENVAT credit on inputs used for construction of buildings which were subsequently rented out for commercial purpose was eligible.

FACTS

The appellant was engaged in construction of buildings and had rented the same for commercial purpose. It had paid service tax after utilizing the CENVAT credit on inputs used for construction. A show cause notice was issued to the appellant covering the period 1st April, 2008 to 31st March, 2011 for denial and recovery of CENVAT credit on grounds that the inputs, input services and capital goods used result into creation of immovable property which is neither good nor services as per the Circular No. 98/1/2008-S.T. dated 4th January, 2008 and CBE&C. Instruction No. 267/11/2010-CX, dated 8th July, 2010. The appellant stated that the definition of input services specifically used for construction of buildings have been excluded from the ambit of eligibility of CENVAT credit w.e.f. 1st April, 2011, prospectively. However, the respondent passed an order denying CENVAT credit on such inputs used for construction. Being aggrieved by such an order, the appellant preferred an appeal before this Hon’ble Tribunal.

HELD

It was held that the CENVAT credit of inputs used for construction of building which were then rented out, was eligible and the same cannot be denied by relying upon the decision of jurisdictional High Court in Vodafone Mobile Services Ltd 2019 (27) GSTL 481 (Del. HC). It was further held that CENVAT credit on such inputs cannot be denied merely because Revenue had gone in appeal against the above mentioned decision of the High Court before the Apex Court. Thus, the impugned order seeking to deny and recover CENVAT credit was set aside.

Service Tax

I. TRIBUNAL

15 Ishwar Metal Industries vs. Commr., C. EX. & CGST, Jaipur
2022 (62) G.S.T.L. 168 (Tri. – Del.)
Date of Order: 28th January, 2022

Limitation period to claim refund does not apply to service tax paid by mistake as the same was merely a deposit, not tax
 
FACTS

The Appellant had procured a work order contract under an open bid from Electricity Board and mistakenly paid service tax on such services, which were not liable to Service Tax. The Appellant did not charge any service tax from Electricity Board. Also, the price charged was fixed and independent of any variation. As per Appellant, the principle of unjust enrichment was not applicable since it had not collected any tax from Electricity Board. The Appellant, thus, filed a refund claim for the amount paid mistakenly. The refund claim was rejected by the Assistant Commissioner on the ground that the amount charged was inclusive of service tax, and the same was time- barred. The Commissioner of Appeals also rejected the Appellant’s refund claim. Being aggrieved by such rejection, the Appellant preferred an appeal before the Tribunal.
 
HELD
It was held that service tax paid mistakenly by the Appellant was merely a deposit and not tax. Accordingly, the limitation period u/s 11B of the Central Excise Act, 1944 to claim the refund did not apply to the amount deposited as the same was revenue deposit and not a tax. Accordingly, the impugned order was set aside, and the appeal was allowed.

16 Brose India Automotive Systems Pvt. Ltd. vs. Commr. of CGST & C.Ex., Pune-I
2022 (62) G.S.T.L. 40 (Tri. – Mum.)
Date of Order: 5th May, 2022

Refund of CENVAT credit shall be granted to Appellant for service tax paid in GST regime for services rendered in pre-GST regime

FACTS

The Appellant was liable to pay service tax under Reverse Charge Mechanism. The service was rendered in the pre-GST regime, but Service tax was paid in the GST regime. The Appellant finalised its Balance Sheet for F.Y. 2016-17 and the period April to June, 2017 on 30th November, 2017 and 31st December, 2017. The Service tax and interest were discharged in November, 2017 and January, 2018 respectively. The Appellant filed a refund application within the time limit specified u/s 11B of the Central Excise Act, 1944. The Adjudicating Authority rejected the refund claim on the ground that GST was payable since the booking was made in the books of accounts in the GST regime though the service was rendered in the pre-GST regime. The Commissioner (Appeals) also rejected the Appellant’s refund claim. Being aggrieved by such rejection, the Appellant preferred an appeal before the Tribunal.

HELD

It was held that as per Section 142 of the CGST Act, 2017, refund of CENVAT Credit accruing under the Central Excise Law shall be decided as per the Central Excise Law and be paid in cash. Further, as per Section 174 of CGST Act, 2017, an appeal filed under Central Excise Law shall be continued as if GST Law had not come into force. Accordingly, the Appellant was eligible for a refund of CENVAT credit along with interest. Thus, the appeal was allowed in favour of the Appellant and the order rejecting the refund was set aside.

17 Abdul Khalique vs. Commissioner of CGST, Delhi
2022 (62) G.S.T.L. 175 (Tri. – Del.)
Date of Order: 16th February, 2022

Penalty imposed cannot exceed the tax demanded
 
FACTS

The Appellant was engaged in providing work contract services. Based on audit findings, a show cause notice was issued demanding Rs. 1,22,174. Subsequently, due to a correction in Notification No. 1/2006, abatement at 67% was allowed for such services and simultaneously, the demand was reduced to Rs. 40,318. The Adjudicating Authority levied a penalty of Rs. 2,56,000, Rs. 5,000 and Rs. 40,318 u/s 77(1)(a), s. 77(2) and s. 78 of the Finance Act, 1994, respectively on the tax demand of Rs. 40,318. The Appellant preferred an appeal levying such an unreasonable penalty which was rejected by the Commissioner Appeals. Being aggrieved by the same, the Appellant preferred an appeal before the Hon’ble Tribunal.

HELD

The Tribunal relied upon the decision of M/s. Philips Electronics India Ltd. vs. State of Karnataka Petition Civil No. 9689/2006 dated 2nd January, 2009, where it was held that penalty could not exceed the tax amount. It was specifically stated that a penalty exceeding the tax amount was grossly disproportionate and arbitrary. Accordingly, the impugned order levying penalty was set aside, and the appeal was allowed.

Service Tax

I. HIGH COURT
 
12 Ashwini Builders and Developers (P.) Ltd vs. Assistant Commissioner, Central Excise and Service Tax  [2022] 139 taxmann.com 102 (Bombay) Date of order: 8th February, 2022

The application filed by the petitioner under SVLDRS continues to be under the “litigation category” and not as “arrears category” even if the petitioner has not filed an appeal against the Order-in-Original but against the rectification application sought against such order-in-Original and pending as on 30th June, 2019

FACTS
The department issued a show-cause notice to the petitioner for recovery of refund of the service tax followed by the Order-in-Original (OIO). The petitioner filed a rectification application under section 74 which was rejected by the department. The petitioner, therefore, preferred an appeal before the Commissioner (Appeals) in respect of such a rejection order. In the meantime, the petitioner filed an Application/Declaration under section 125 of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (‘scheme’) under “Litigation Category” in respect of the said pending appeal. The petitioner received notice in form SVLDRS-2 stating that the case was confirmed under the “Arrears Category”. The petitioner submitted form SVLDRS-2A explaining the reason why it could not be treated as a case under the “arrears category” but under a “litigation case”. The Designated Committee (DC) issued a notice/statement in form SVLDRS-3 requiring the petitioner to pay an amount computed treating the application under the “arrears category”. The pending appeal also came to be dismissed. Therefore, the petitioner filed a writ praying direction to set aside the notice/statement issued by DC in form SVLDRS-3 and sought order and direction to allow/accept the application filed by him under the scheme. The department contended that the petitioner has admittedly not challenged the OIO and that the pendency of appeal against the Order of assessing Officer refusing to rectify the mistake on the application filed under section 74, does not fall under the said Scheme.

HELD
Referring to the provision of Section 74 of the Finance Act, 1994, the Hon’ble Court held that it is clear beyond reasonable doubt that any Order allowing the application for rectification partly or fully would modify the Order-in-Original passed by the Assessing Officer in pursuance of show-cause notice issued by the Assessing Officer. Such Order of rectification has to be read with the Order-in-Original and hence the said Order is also appealable under section 85 of Finance Act, 1994. The Court thereafter referred to the definition of ‘order’ under section 121(o) of the said Scheme and held that Order-in-Original duly modified/rectified under section 74 would be also an order within the meaning of Section 121(o) of the said scheme. Thus rejecting the contention of the department, the Hon. Court held that there is no merit in the contention of the department that the declaration form filed by the petitioner could only fall under “arrears category” within the meaning of Section 121(c) on the ground that the petitioner had not filed any appeal against the Order-in-Original. Such a view being contrary to the objects and intent of the scheme for the benefit of the assessee and to bring them out of litigation forever pending under the pre-GST regime. The Hon’ble Court accordingly quashed the order passed by the designated authority treating the application under the “arrears category” and directed the revenue to process the declaration under “litigation category”.

13 Vice Chairman Settlement Commission vs. Zyeta Interiors (P.) Ltd  [2022] 139 taxmann.com 225 (Karnataka) Date of order: 7th April, 2022

Although Section 68(2) and the Notifications issued thereunder prescribed specified percentages of service tax to be paid by the service receiver and the provider, once the fact is not disputed that the entire 100% tax is deposited combined by the service provider and service receiver, merely because the service receiver deposited tax in the lower ratio cannot be the ground for recovery of service tax from such service recipient for it would amount to double taxation

FACTS
The assessee requested the Settlement Commission for modification of its final order which came to be rejected. In terms of Section 68(2) of the Finance Act and amendments to the Notifications issued thereunder, the assessee being the recipient of the services, was liable to pay service tax in the ratio of 75% the balance being payable by the provider. Instead, tax was paid by both in the ratio of 50:50 as per the pre-amended provision which was not accepted by the settlement commission in its order. Being aggrieved, the assessee filed a writ petition before High Court which was allowed by Ld. Single Judge, and the matter was remitted to the Settlement Commissioner for consideration afresh. Aggrieved by the same, the department filed an appeal contending that the assessee was strictly required to adhere to the provisions of Section 68(2) of the Act and also advanced the reason that the photocopies of invoices produced by the assessee cannot be considered as required documents to award CENVAT credit prescribed under Rule 9 of the CENVAT Credit Rules, 2004 and hence the order of Single Judge remanding the matter for consideration afresh is incorrect.

HELD
As regards the issue of double taxation, the Court held that whatever the ratio, the tax in its entirety has reached the hands of the ex-chequer. Merely for the reason that there was no strict adherence to the ratio as envisaged during the relevant point of time for payment of tax by the assessee and the service provider, the assessee cannot be made liable to pay the double tax. What is significant to note is that the discharge of the entire tax amount is not disputed. Thus, the reverse charge mechanism would not lead to double taxation. As regards the remand issue, the Hon’ble Court noted that the Learned Single Judge has remanded the matter for fresh consideration mainly on the ground that the assessee is ready and willing to produce the original invoices. The Court accordingly disposed of the appeal by confirming the order of remand.

14 Way2Wealth Brokers Pvt. Ltd vs. Comm of C.T. Bengaluru [2022 (61) GSTL 349 (Kol)]  Date of order: 16th September, 2021

Refund not hit by limitation of service tax is paid mistakenly on exempted services
 
FACTS
Appellant-assessee inter alia provided a stock broking service, collected late payment charges when customers delayed payment beyond stipulated time for stocks brought and paid service on the same during April 01, 2009 to March, 2011. Pursuant to a clarification circular dated 3rd August, 2011 by Central Board of Excise and Customs that service tax was not attracted on the LPC by the brokers, appellant filed a refund claim being service tax paid inadvertently which was not due as per the law. Out of the total claim, the claim period 2009-10 was held limitation and also rejected by Tribunal by upholding order of Commissioner (Appeals). Hence this appeal.
 
HELD
Tribunal’s reliance on the Supreme Court’s judgment in Asst. Commissioner vs. Annam Electric Manufacturing Co. 1997 (90) ELT 260 (SC) was distinguished because refund did not pertain to illegal levy collected but service tax paid by the assessee voluntarily under self-assessment under mistaken belief. Hence, reliance was placed on Commissioner vs. K.V.R. Construction 2012 (26) STR 195 (Kar) by Supreme Court dismissing Revenue’s appeal wherein it was held that Section 11B does not apply as mistaken notion does not come within realm of duty and hence limitation under section 11B of the Central Excise Act is not applicable. Hence appeal was held as deserved to be allowed.

[Note: Here contrary to the above, Madras High Court in 2022 (61) GSTL 355 (Mad) in Quest Global Engineering Services P. Ltd vs. Dy. Commr. GST & C.Ex, Chennai South around the same time for mistaken payment of GST on 20th December, 2017 (on account of the system picking up irrelevant invoices of earlier period) and the refund claims filed on 30th May, 2020 (beyond two years from the date of payment) thus delayed by about five months was held as “long after expiry of limitation” prescribed under section 54 of CGST Act, 2017 and hence the petition of the assessee was dismissed.]

Service Tax

I. TRIBUNAL

8 M/s Reliance Industries Ltd, Vadodara vs. The Commissioner of Central Excise and Service Tax, Mumbai  [2022-TIOL-336-CESTAT-MUM-LB] Date of order: 18th April, 2022

CENVAT credit of service tax is available to the employer on premium paid towards medical insurance policy of employees under voluntary retirement scheme

FACTS
The Appellant is engaged in manufacturing petrochemical products at its Vadodara plant. It introduced a voluntary separation scheme for certain category of its employees. In terms of the scheme, the Appellant provided medical insurance policy to the employees who opted for it. The company claimed Rs. 1,33,37,699 as CENVAT credit on service tax paid on the policy. The CENVAT credit, thus availed by the Appellant, was disallowed on the grounds that the services are not confirming to the definition of ‘input service’ under Rule 2(I) of the CENVAT Credit Rules. The Commissioner raised a demand of the credit availed vide order dated 29th December, 2011. Aggrieved by the order, the Appellant filed the appeal before the Tribunal.

HELD
The Larger Bench of the CESTAT heavily relied upon the decision of the Supreme Court in Coca Cola India and Ultratech Cement. It observed that the medical insurance provided is a contractual obligation and not in the nature of gratuity. The scheme was necessary to keep the operations of the company cost-effective and profitable. The Tribunal referred to CAS-4 and CAS-7 and further concluded that future benefits such as Voluntary Retirement Scheme are integral part of employee costs. In view of the above, it was held that the premium paid on medical insurance policy towards employees has a direct relation with the company’s operations. Thus, it falls under the definition of ‘input service’ under Rule 2(I) of CENVAT Credit Rules, 2004, and CENVAT credit was allowed.

9 J J Patel and Brothers vs. Commissioner of Central Excise and Service Tax, Surat  [2022-TIOL-398-CESTAT-AHM] Date of order: 11th April, 2022

Service tax not payable on reimbursement of electricity charges

FACTS
Appellant provided infrastructural support services to Gujarat Gas Ltd. by providing land, building, equipment, manpower, electricity connection, selling and billing of CNG gas, collection of bills etc. It received service charges from Gujarat Gas Ltd. at a rate based on per kg. The CNG gas sold in a month was subject to their selling minimum amount in terms of the contract. There was a substantial difference noticed by the department in the taxable value as disclosed in the ST-3 Returns and the amount of service charges received in the bank account, and for which Appellants provided the reason of receiving reimbursement of electricity expenses. After the due process of law, the demand thereon was confirmed with interest, penalties etc. As per Appellants, they earned commission income under the franchise agreement and acted as pure agent for payment of electricity charges for compressors, dispensers etc. in terms of the said agreement and inter alia relied on decisions of UOI vs. Intercontinental Consultants & Technocrats P. Ltd. 2018 (10) GSTL 401 (SC) and M/s. Kiran Gems Pvt. Ltd. 2019 (25) GSTL 62 (Tri.-Ahmd), wherein under similar circumstances, exclusion of electricity charges recovery was upheld by Tribunal whereas Revenue’s case was to include electricity cost in the gross value of taxable services and relied on the decision in the case of M/s. Bhagwathy Traders 2011 (24) STR 290 (Tri.-LB).

HELD
Hon. Bench observed that Appellants paid service tax on the fixed charges received from Gujarat Gas and observed that the case was squarely covered by the case of Kiran Gems (supra), wherein after relying on the decisions of ICC Reality (India) Pvt. Ltd. vs. Commr. 2013 (32) STR. 427 (Trib.) & Others, it was held that electricity reimbursed is not includable in the gross value of renting of immovable property service. The same principle being equally applicable, the issue thus no longer being res integra, the appeal was allowed.

10 M/s. Asveen Air Travels Pvt. Ltd. vs. CGST & Central Excise, Chennai  [2022-TIOL-404-CESTAT-MAD]  Date of order: 21st April, 2022

Incentives from CRS companies are not liable for service tax – Larger Bench decision of Kafila Hospitality followed

FACTS
Appellant, an air travel agent, paid service tax on the commission received from airlines. During investigation, it was found by the Revenue that Appellant received incentives from computerized reservation booking system offered by companies such as Galileo India, Amadeus India and Abacus Distribution System India. The case of the Revenue is that this is liable for service tax as ‘business auxiliary service’. Whereas, as per Appellant, the issue was no longer res integra as it is settled by the decision of the Larger Bench of the Tribunal in the case of Kafila Hospitality & Travels P. Ltd. 2021-TIOL-159-DEL.LB.

HELD
Citing and examining the decision in the case of Kafila Hospitality’s case (supra), it was inter alia observed that CRS companies provide OIDAR services to airlines. In lieu thereof, airlines pay consideration to them in the form of charges or commission. In turn, CRS companies allow IATA agents to subscribe to their portals to book tickets for their clients / sub-agents. On account of competition, these companies started to part with their consideration with IATA agents. Hence, it was observed that an air travel agent promotes his own business and not that of airlines or that of CRS companies. Air travel agent’s classification is ‘air travel agent’ not ‘business auxiliary service’ in terms of section 65A, and hence incentive received from CRS companies is not liable for service tax.

11 Circor Flow Technologies India Pvt. Ltd. vs. Pr. Commissioner of GST & C.Ex.,
Coimbatore  [2022 (59) G.S.T.L. 63 (Tri. – Che.)]  Date of order: 16th December, 2021

Refund of Service Tax paid for pre-GST Regime cannot be denied where no CENVAT credit was admissible post introduction of GST Laws

FACTS
The Appellant was engaged in the manufacture of valves and was holding registrations under Central Excise Act, 1944 and Service Tax Law. Appellant had entered into various transactions during the period January, 2017 to June, 2017 pertaining to import of software and belatedly paid the service tax under Reverse Charge Mechanism (RCM) in March, 2019. Appellant could not avail the CENVAT credit of service tax paid and hence filed an application for refund of the amount paid under RCM. However, the refund application was rejected by the Adjudicating Authority stating that tax had been paid voluntarily and no credit was eligible in the GST Regime. Further, Commissioner Appeals also upheld the same view. Being aggrieved by such rejection, the Appellant preferred an appeal before this Hon’ble Tribunal.

HELD
It was held that section 174(2) of the CGST Act specifically states that any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts shall remain unaffected. Thus, if liability, under the erstwhile law of Finance Act, 1994 to pay service tax would continue even after the introduction of GST, then the right to avail the credit on similar lines cannot be denied. Also, section 142(3) of CGST Act states that CENVAT credit arising out of erstwhile law has to be disposed of in accordance with the erstwhile law, and any amount eventually accruing has to be refunded in cash. Consequently, the impugned order was set aside, and the refund was granted.  

Service Tax

I. TRIBUNAL

3 Sporty Solutionz Pvt. Ltd. vs. Commissioner, CGST, Noida  [2022 (58) G.S.T.L. 336 (Tri. – All.)] Date of order: 28th September, 2021

Service tax cannot be demanded where the service is provided outside the taxable territory and the place of service is outside India

FACTS
Appellant was engaged in providing the service of telecasting/broadcasting rights of sports events. Appellant had acquired the telecasting/broadcasting rights from M/s. Taj TV Ltd. (Mauritius), on payment of licence fee for broadcasting cricket matches between Zimbabwe and Bangladesh, held in Zimbabwe and Bangladesh. It further sub-licensed the broadcasting rights to other parties for consideration received in the form of license fees. Adjudicating Authority demanded tax on Reverse Charge Mechanism (RCM) basis by categorising the service under ‘Commercial Exploitation of Rights of Sporting Events’ which would qualify as import of service. The same stand was further taken by the Commissioner (Appeals). Being aggrieved by the order passed by Commissioner (Appeals) demanding tax, interest and penalty the Appellant preferred an appeal before this Hon’ble Tribunal.

HELD
The Tribunal observed that as per section 66B of Finance Act 1994, no service had been provided in the taxable territory by one person to another. Further, Rule 6 of the Place of Provision of Service Rules, 2012 states that in case of any cultural or sporting event, place of service should be the place where the event was held which is Zimbabwe. Hence, it was held, that services cannot be said to be imported into India. As a result, the appeal was allowed, and the Tribunal set aside the impugned order.

4 Astrazeneca India Pvt. Ltd. vs. Commissioner of Central Tax, Bangalore North  [2022 (58) GSTL 339 (Tri. – Bang.)] Date of order: 16th August, 2021

A fresh refund application is not required to be filed at every stage of adjudication

FACTS
Appellant was engaged in the export of services and registered with the service tax Department. They filed a refund application on 17th July, 2007 for claiming a refund under Rule 5 of the CENVAT Credit Rules, 2004 for 2006-2007. A show cause notice (SCN) was issued to the Appellant proposing to deny the refund. Appellant filed a reply to SCN, after which refund claim was partially allowed. Appellant preferred an appeal before Commissioner (Appeals). The Commissioner (Appeals) allowed a certain portion of such rejected refund claimed. Being aggrieved by the partial rejection of refund, the Appellant preferred an appeal before Tribunal, wherein the Tribunal allowed the appeal and set aside the order rejecting the refund claim. Thereafter, the decision of the Tribunal was not challenged by the Department. After three months of the decision of the Tribunal, the Appellant filed a letter dated 21st February, 2017 and requested the Department to grant a refund. However, Assistant Commissioner asked the Appellant to file a fresh refund application. The Appellant submitted such fresh application on 15th July, 2019. Department rejected the refund claim filed on 23rd November, 2019 on the ground of limitation, stating that the refund application was not filed within one year from the date of receipt of the order. Commissioner (Appeals) upheld the decision of the Original Authority. Being aggrieved by such rejection, the Appellant preferred an appeal before the Hon’ble Tribunal.

HELD
Tribunal held that refund application need not be filed at every stage of the adjudication process. Further, relevant date to file refund application as per section 11B(2) of Central Excise Act, 1944 applies only to the first application. Consequently, the order rejecting refund was set aside, and refund was granted along with interest.

5 Syndicate Bank vs. Commissioner of Central Excise, Mangalore  [2022 (58) GSTL 440 (Tri. – Bang.)] Date of order: 18th February, 2020

CENVAT credit cannot be denied by an order for a ground that was not raised in SCN

FACTS
Appellant was engaged in providing banking and financial services, business auxiliary services, services of renting of immovable properties, etc. On verifying the ST-3 Returns, the Department observed that the Appellant had wrongfully utilised CENVAT credit. Thus, a show cause notice (SCN) was issued on the ground that proper documentation and records were not maintained. However, the order was passed on a different ground that input services were not directly or indirectly related to output services provided by Appellant. Being aggrieved by the denial of CENVAT credit, Appellant preferred this appeal before the Hon’ble Tribunal.

HELD
It was held by Hon’ble Tribunal that SCN was issued on the ground that the Appellant did not maintain proper documentation and accounts under Rule 9 of the CENVAT Credit Rules, 2004. However, order was passed on a different ground, i.e. absence of correlation between input service and output service. Hence, by denying the CENVAT credit, the order had travelled beyond the scope of SCN, and hence it was set aside.  

6 Quest Engineers & Consultants Pvt. Ltd. vs. Commissioner, CGST & C. EX., Allahabad [2022 (58) GSTL 345 (Tri. – All.)] Date of order: 28th September, 2021

Form 26AS of Income Tax cannot form the basis for issuing show cause notice and determining taxable turnover under service tax

FACTS
Appellant was engaged in providing ‘Consulting Engineer Service’. A show cause notice was issued based on Form 26AS, alleging that the Appellant had suppressed the taxable value of consulting engineer services. Accordingly, service tax was demanded along with interest and penalty. Also, the extended period of limitation was invoked by stating suppression of facts by the Appellant would have gone unnoticed if Department would not have conducted the enquiry. Commissioner upheld the decision of adjudicating authority. Being aggrieved by the same, the Appellant preferred an appeal before the Hon’ble Tribunal.

HELD
Tribunal held that Form 26AS is not a statutory document to determine the value of taxable service. Also, Appellant was registered and regularly filing returns and paying taxes. Therefore, the allegation of suppression of facts for invoking extended period was not maintainable.

7 Gujarat Mineral Development Corporation Ltd. vs. Commr. of C. EX. & S. T., Vadodara-II  [2022 (58) GSTL 49 (Tri.-Ahmd.)]   Date of order: 6th October, 2021

CENVAT credit cannot be denied where exempted products were generated unavoidably as by-product along with the main product

FACTS
Appellant was engaged in outsourcing contracts for excavation of lignite. During the mining process, silica sand and ball clay were excavated, which was unavoidably generated along with the main product, lignite. Department demanded the reversal of CENVAT credit under Rule 6 of CENVAT Credit Rules, 2004 to the extent of silica sand and ball clay, as they were exempted from service tax. Appellant was of the view that both these products namely silica sand, and ball clay were by-products and therefore, no CENVAT credit reversal was required. However, the Respondent rejected the said claim. Being aggrieved by such rejection, the Appellant preferred an appeal before the Tribunal.

HELD
Tribunal held that the main contract was for mining lignite, and while doing so, the by-products were unavoidably generated, namely silica sand and ball clay. Hence, CENVAT credit cannot be denied or varied on any input/input services contained in any by-product. Thus, no demand under Rule 6 of CENVAT Credit Rules, 2004 was sustained, and the impugned order was set aside by allowing the appeal.  

SERVICE TAX

I. HIGH COURT

1 Linde Engineering India Pvt. Ltd. vs. Union of India
[2022 (57) GSTL 358 (Guj.)]
Date of order: 16th January, 2020

Services provided to foreign holding company would be qualified as export of service since foreign holding company outside India cannot be treated merely as an establishment of distinct person in accordance with item (b) Explanation 3 of Clause (44) of Section 65B of Finance Act, 1994

FACTS
Petitioner, a private limited company, was engaged in providing consulting engineering services and works contract services to various entities located in and outside India, including its holding company Linde AG, Germany and had claimed the benefit of export of services. Audit objection was raised where it was questioned that Linde Group Companies would be treated as mere establishment of petitioner and the services rendered to them would not fall under ‘export of service’ under Rule 6A of Service Tax Rules and consequently, fall under ‘exempted service’ under Rule 2(e) of CENVAT Credit Rules, 2004. The petitioner submitted a satisfactory response with no further inquiry. Thereafter Show Cause Notice was issued for recovery of tax for the period 2012-13 to 2016-17. Being aggrieved by the aforesaid show cause notice, petitioner preferred a writ before Hon’ble High Court.

HELD
It was held that services rendered by an Indian subsidiary company to its foreign holding company in non-taxable territory would be considered as export of service because foreign holding company cannot be termed as establishment of distinct person as per item (b) Explanation 3 of Clause (44) of Section 65B of Finance Act, 1994.

II. TRIBUNAL

2 Nasir Mohd. Rawat Contractor vs. Commr. of C. EX & S.T., Shimla
[2022 (57) GSTL 382 (Tri. – Chan.)]
Date of order: 19th August, 2021

Amount paid during the course of investigation is merely a deposit which cannot be appropriated towards service tax without issuing a valid show cause notice and hence the same is refundable

FACTS
Appellant was engaged in providing ‘Manpower Recruitment Supply Agency’ and ‘Works Contract Services’ in Himachal Pradesh. During the course of investigation, Rs. 13 lakhs were deposited. Thereafter neither the said amount was appropriated, nor was any show-cause notice issued to the appellant. Further, the appellant filed a refund claim of Rs. 7,41,939, which was rejected by the Adjudicating Authority, stating that the appellant was liable for Service Tax. Commissioner (Appeals) also reiterated that service tax was appropriated u/s 73(3) of Finance Act, 1994, and therefore, refund claim was not maintainable. Being aggrieved by the order rejecting refund, the appellant preferred an appeal before the Hon’ble Tribunal.

HELD
Tribunal held that since neither show cause notice was issued for appropriation of the amount nor for rejection of the refund claim, the order rejecting refund claim was bad in law, and the same was against the provisions of the Finance Act, 1994 as well as Central Excise Act, 1994. Hence it was without the authority of law, and the appellant was entitled for refund claim u/s 11B of the Central Excise Act read with Section 83 of the Finance Act, 1994. The appeal was thus allowed.

Service Tax

I. TRIBUNAL

21 Shri S. Sakhtikumar vs. The Commissioner of GST and Central Excise  [2022-TIOL-139-CESTAT-MAD] Date of order: 2nd December, 2021

Service tax paid by mistake cannot be barred by limitation and ought to be refunded

FACTS
Appellant had taken on lease the maintenance of toilets at the Central Bus Stand and the New Bus Stand at Tirunelveli in 2017. It was noticed that Tirunelveli Municipal Corporation had collected service tax from the appellant for the above services and paid the same in the Government treasury. Subsequently, it was noticed that the said service forming a part of Article 243W is exempted from payment of service tax. A refund claim was filed with respect to the above in 2019. A show-cause notice was issued rejecting the claim on the ground of time bar.

HELD
The Tribunal relied on the decision in the case of M/s 3E Infotech vs. CESTAT, Chennai [2018(18) GSTL 40 (Mad.)] which is binding and where it is laid down that when service tax is paid by mistake a claim for refund cannot be barred by limitation, merely because the period of limitation under section 11B had expired. Such a position would be contrary to the law laid down by the Hon’ble Apex Court, and therefore we have no hesitation in holding that the claim of the Assessee cannot be barred by limitation and ought to be refunded. In view of the above decision of the Hon’ble jurisdictional High Court, the rejection of refund is unsustainable. Hence, the impugned order of the First Appellate Authority is set aside.

[Note: Readers may also refer to a similar decision in the case of Ishwar Metal Industries vs. CCE & CGST dated 28th January, 2022 reported at [2022-TIOL-133-CESTAT-DEL]]

22 V.V. Minerals vs. Commissioner of GST & Central Excise, Madurai  [2022 (56) GSTL 167 (Tri. – Chennai)] Date of order: 4th June, 2021

Refund of service tax paid by the exporter cannot be denied merely because the supplier of goods had violated the provision of local law

FACTS
Appellant is a 100% Export Oriented Unit engaged in the manufacture and export of ‘Garnet’ and ‘Super Garnet’. They had filed a refund claim of service tax paid for May 2016 to December 2016. It came to the knowledge of the department from the District Level Committee of Tirunelveli District about illegal mining of beach sand and unlawful transportation thereof. Respondents were of the view that Appellant was not eligible for the refunds claimed, inasmuch as, the sands had been exported by way of illegal mining and unlawful transportation. The Commissioner (Appeals) also rejected the refund claim of the Appellant. Being aggrieved by the order rejecting refund, the Appellant preferred this appeal before the Hon’ble Tribunal. Appellant submitted before the Hon’ble Tribunal that allegation of illegal mining was against M/s. V. V. Minerals [Mines], whereas the export is made by M/s. V. V. Minerals [100% EOU], which is a different entity from M/s. V. V. Minerals [Mines]. Appellant procures minerals from other licence holders and exports the goods after further processing. Since Appellant does not have any mining lease, the recommendation by District Level Committee is not applicable to them.

HELD
It was observed that merely because M/s. V.V. Minerals [Mines], i.e. supplier of goods, has committed violation of a local law, M/s. V. V. Minerals [100% EOU], i.e. the exporter who procured goods cannot be put into adverse situations, especially when there was no evidence with respect to abetment or collusion on the part of the exporter. Since all the conditions specified in Notification No. 41/2012-ST, which are necessary for a refund of service tax paid, are fulfilled, the Appellant is eligible for the refund of service tax, and the order rejecting refund was set aside.

23 Vandana Global Ltd. vs. Commr. of CGST, Central Excise & Customs, Raipur   [2022 (56) GSTL 310 (Tri. – Delhi)] Date of order: 23rd June, 2021

Extended period of limitation cannot be invoked by alleging suppression of availment of CENVAT credit on ineligible services, where regular audit was conducted by the Department

FACTS
Appellant was engaged in the manufacture of Sponge Iron, M.S Billets and ‘Dolachar’. During the audit by Auditor General Raipur, it was noticed that during April 2012 to March 2016, CENVAT credit was availed on various input services such as membership fees, construction services, rent-a-cab services, general insurance of vehicles, repair services, etc. that were not ‘input services’. Assistant Commissioner disallowed CENVAT credit availed on car insurance, repair and maintenance of motor vehicles. Further, Commissioner Appeals also disallowed the CENVAT credit and being aggrieved by such disallowance; Appellant preferred an appeal before the Tribunal.

HELD
Tribunal held that since the records of Appellant was regularly audited by the Audit Authority, department had knowledge about the affairs including availment of CENVAT credit. As a result, invocation of the extended period of limitation was not available to the Revenue, and hence the impugned order was set aside.

24 Microsoft India (R&D) Pvt. Ltd. vs. Commr. of C. EX. & S.T., Bangalore  [2022 (56) GSTL 29 (Tri-Bang.)] Date of order: 26th July, 2021

Department is estopped from taking a contrary view than the view taken for the previous period unless the order passed for the prior period is revised by the competent authority

FACTS
Appellant was engaged in providing customer care and product support services in relation to Microsoft Software products to the customers of Microsoft located in India and abroad. Appellant provides these services through its Global Technical Support Centre (GTSC), a 100% Export Oriented Unit located in Bangalore. The major portion of Appellant’s turnover qualifies as export of services, which results in accumulation of CENVAT credit on various input services. Appellant had been regularly filing refund claims of such accumulated credit. For the period April 2010 to March 2011, Appellant was denied CENVAT credit availed on event management service, outdoor catering, mandap service and rent-a-cab service mainly on the two grounds: firstly, there was no nexus between input services and output services and secondly, that absence of such input services will not directly have an impact on the quality and efficiency of its output services. Being aggrieved by the order of Commissioner, the Appellant preferred an appeal before the Honourable Tribunal.

HELD
It was held that the Appellant had given full justification and established nexus of all the above-mentioned services. Further, Appellant’s refund applications for the previous periods for the same input services were allowed. Tribunal pointed out the Principal of Consistency and held that once the nexus has been accepted by the department for the previous period, such nexus cannot be denied for a subsequent period. There cannot be two different yardsticks; one for allowing refund and another for deciding the eligibility of CENVAT credit. In view of this, the impugned order denying CENVAT credit was set aside, and the appeal was allowed.

25 Commissioner of CGST and Central Excise vs. M/s Ethics Infra Development Pvt. Ltd.  [2022-TIOL-97-CESTAT-MUM] Date of order: 21st December, 2021

Service tax is not leviable on the activity of construction of residential complex to existing members as there is an absence of sale – Also when the service tax is discharged on the gross consideration received from new buyers there is no question of levy of service tax from the existing members

FACTS
Appellant is providing taxable service of re-development of residential complex. It was observed during audit that the assessee did not discharge service tax on services of construction of residential complex services rendered by them towards the flats allocated to existing members. It was noted that from 1st July, 2012 these services had become classifiable as ‘declared service’ under section 66E(b) of the Finance Act, 1994. Its valuation method also had been highlighted vide CBEC Circular no. 151/2/2012-ST dated 10th February, 2012 read with High-Level Committee clarification issued vide Board’s letter F. No. 354/311/2015-TRU dated 20th January, 2016. The adjudicating authority observed that flats given to existing members cannot be considered a sale and hence is outside the ambit of service tax. It was noted that the entire income in the present transaction had been generated from the sale of flats to customers other than the existing society members because those members were provided flats free of cost. Accordingly, the demand was set aside. Being aggrieved by the said order, revenue filed an appeal.

HELD
The Tribunal primarily noted that in the present case, the respondent had discharged the complete service tax liability on the consideration received by him for providing the taxable services to the buyers of the flats that the respondent could sell in an open market. Further, it was also observed that there was no material change in the provisions of law relating to construction service in the negative list based taxation. Hence the Circulars relied upon by the adjudicating authority were applicable. Once the tax liability was discharged on the consideration received from the service in respect of flats to new buyers, the demand of service tax for the flats handed over to the existing members of the societies without any consideration cannot be sustained. Reliance was placed in the case of Vasantha Green Projects [2019 (20) GSTL 568 (THyd)]. The Appeal of the revenue was accordingly dismissed.

Service Tax

I. TRIBUNAL

15 M/s. Suraj Forwarders and Shipping Agencies vs. The Principal Commissioner of GST and Central Excise  [2021-TIOL-844-CESTAT-Mad] Date of order: 10th December, 2021

When service tax paid twice is established, the refund cannot be denied on the ground of limitation

FACTS
The appellant inadvertently paid service tax under the wrong service tax registration number. At the time of scrutiny of the returns, it was found that the payment was made under the wrong service tax number. Thereafter, they discharged the service tax once again under the correct number. A refund claim was filed for the refund of the amount wrongly paid. A show-cause notice was issued proposing to reject the claim as the same was barred by limitation under section 11B of the Central Excise Act, 1944. After due process of law, the original authority rejected the refund claim. On appeal, the Commissioner (Appeals) upheld the same. The appellant is thus before the Tribunal.

HELD
The Tribunal noted that the service tax was paid twice by the appellant for the very same taxable value. The department directed them to pay the tax again as their in-house formalities do not allow adjustment of tax wrongly paid towards one Commissionerate to another. The appellant again paid service tax mentioning the correct service tax registration number. It is clear that the department has collected service tax twice. This is not permissible under the law. Relying on several decisions, the Tribunal held that the rejection of claim on the ground of limitation is not justifiable and therefore deserves to be set aside forthwith.

16 M/s Cades Digitech Pvt. Ltd. vs. Commissioner of Central Tax [2022-TIOL-52-CESTAT-Bang] Date of order: 4th January, 2022

Reimbursement of expenses in the nature of salary, rent, travelling expenses etc., from the head office to the branch office cannot be considered a service provided by the head office to the branch

FACTS
The appellants are engaged in providing “Consulting Engineers Services” to their customers through their branches located outside India namely USA, Korea, Japan, UK, Germany etc. Their branches are manned by their own employees, and they are reimbursing the expenses on account of salaries, rents, other and other expenses etc. They are also receiving consideration/remuneration for the Consultancy Services rendered abroad to their customers through their branches. Remuneration earned in this regard is treated as export of service, and no dispute is made on this count. Revenue has raised an issue stating that the appellants are paying money to their branches located outside India, as consideration towards the service rendered by the branches to them, such payments made are consideration towards the services provided by the branches to the appellants.

HELD
The Tribunal noted that the amounts incurred by the head office towards the salaries etc., of the employees working in their branches could by no stretch of imagination be equated to any service rendered to them by the respective branches. The legal fiction created in the proviso to section 66A for consideration of branch as a separate establishment is certainly not for the purposes of demanding service tax on the services alleged to have been rendered by the branch to the head office. In fact, the payments made by the appellants are none other than the recurring expenses like salary, travelling allowance, rent, telephone charge etc. It is not brought on record if any other payment for any other service alleged as provided was made. Thus, the demand on account of reimbursement of expenses to the employees working in the overseas branches does not constitute any remuneration in lieu of a service received by the appellants. The demand is therefore set aside.

17 Circor Flow Technologies India (P.) Ltd. vs. Principal Commissioner of GST & Central Excise  [2021 133 taxmann.com 327 (CESTAT – Chen)]  Date of order: 16th December, 2021

The assessee is entitled to refund in respect of CENVAT credit of service tax paid under the RCM in the GST period under section 142(3) of the CGST Act if the said CENVAT credit was otherwise eligible under the erstwhile law

FACTS
The appellant paid service tax under reverse charge mechanism on the import of software made during the pre-GST period belatedly in March 2019. In terms of CENVAT Credit Rules, 2004, as it stood during the relevant period, the appellants were eligible to avail credit of the service tax paid by them.

HELD
Hon’ble Tribunal noted that the Adjudicating Authority had rejected the refund holding that the service tax has been paid voluntarily and also that no credit is available in the GST regime. Hon’ble Tribunal held that as per section 174(2) of the CGST Act, as amended Act shall not affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts. As the liability, if any, under the erstwhile law of Finance Act, 1994 to pay service tax would continue even after the introduction of GST, conversely, the right accrued under the said Act in the nature of credit available under CCR 2004 also is protected. It also observed that in this case, there is no allegation that the credit is not eligible to the appellant in the service tax regime and accordingly held that such credit has to be processed under section 142 (3) of GST Act, 2017 and refunded in cash to the assessee.

Note: The Hon’ble New Delhi Tribunal in a similar matter, in the case of Jagannath Polymers (P.) Ltd. vs. Commissioner, Central Goods and Services Tax, Jaipur 1 [2021] 133 taxmann.com 328 (New Delhi – CESTAT) [15-12-2021] also held that merely because the appellant has deposited the service tax payable under RCM in the GST period only after being pointed out by the audit, they shall not be denied refund thereof as the CENVAT credit was available under the service tax regime.

18 MIRC Electronics Limited vs. Commissioner of CSGT, Thane  [2021 (55) GSTL (301) (Tri – Mum)] Date of order: 19th July, 2021

Penalty under the provisions of section 11AC of Central Excise Act, 1944 cannot be invoked merely on the basis that irregularities were observed by the audit wing where the appellant has maintained statutory records reflecting particulars of CENVAT credit

FACTS
The appellant was engaged in the business of manufacture of colour television sets, washing machines, etc. The appellant was availing CENVAT credit of excise duty paid on input and service tax paid on input service. During the course of audit by the department, it was observed that CENVAT credit was availed in respect of Rent-a-Cab Service, Insurance, Membership Fees, Foreign Travel expenses. The department denied the CENVAT credit on the ground that the above services are not confirming to the definition of input service under Rule 2(l) of CENVAT Credit Rules. The Adjudicating Authority raised a demand of Rs.9,80,675 with interest and imposed penalty under section 78. This was confirmed by Commissioner Appeals. Hence this appeal.

HELD
Since the appellant failed to produce proper documentary evidence and substantiate its claim with respect to CENVAT credit Rent-a-Cab Service and foreign travel expenses, the respondent was justified in denying the CENVAT credit pertaining to such services. Further, penalty under section 11AC of the Central Excise Act cannot be levied because there was no concealment on the part of appellant as the particulars of CENVAT credit have been recorded in statutory records and books of account.

19 Chryso India Private Limited vs. Commissioner of GST & Central Excise, Alwar  [2021 (55) GSTL 159 (Tri- Del)] Date of order: 10th August, 2021

Service tax paid twice on ocean freight is liable to be refunded

FACTS
The appellant had imported raw material and discharged customs duty along with CVD on CIF basis. During the course of audit, it was pointed out that service tax is payable on reverse charge basis on ocean freight for the period prior to 30th June, 2017. In response to the audit objection, appellant deposited service tax along with interest. On being advised that appellant had already paid customs duty and CVD on the import price which includes freight element therefore, the appellant was not required to pay service tax again on freight (under reverse charge basis). Accordingly, appellant filed refund application of the amount of service tax paid on reverse charge basis. However, the refund application was rejected.

HELD
Tribunal held that since the transaction value for Customs Duty and CVD included ocean freight element, therefore, appellant had suffered the double taxation, by again paying the service tax on ocean freight on reverse charge basis. Thus, appellant was allowed refund of such service tax along with interest.

20 Astra Zeneca India Pvt Ltd. vs. Commissioner of GST & Central Excise, Chennai  2021 (55) GSTL 39 (Tri – Chen)  Date of order: 23rd June, 2021

Refund of CENVAT credit cannot be rejected merely because such refund claim is clubbed with the CENVAT credit of previous quarter

FACTS
The appellant had filed a refund claim by clubbing the unutilized CENVAT credit of two quarters, namely July to September, 2016 and October to December, 2016. The primary reason for combining the credit for two quarters was that there was no Foreign Inward Remittance Certificate (FIRC) during the earlier quarter, i.e. July to September 2016. The Adjudicating Authority granted a partial refund and rejected the amount of Rs.12,00,695 pertaining to CENVAT credit of the quarter July to September, 2016 by stating that the definition of export turnover under Rule 5(1)(D) of CENVAT Credit Rules, 2004 was not satisfied. Similarly, Commissioner Appeals also rejected the refund claim, and hence the appellant, aggrieved by the Commissioner Appeals’ order filed the appeal before the Chennai Tribunal.

HELD
The Learned Bench relied upon the orders of M/s. B.A. Continuum India Pvt Ltd vs. Commissioner of Service Tax-II, Mumbai 2018 (6) TMI 1011-CESTAT-Mum, M/s. WNS Global Services Pvt. Ltd. vs. C.C.E., Pune III-2015 (11) TMI 905-CESTAT-Mum, and held that for the purpose of refund, the CENVAT credit of any particular quarter can include the amount of brought forward credit from the earlier quarter; the only bar is that refund application must be filed within one year. The refund cannot be rejected merely on the ground that CENVAT credit pertaining to the period prior to October, 2016 was taken while arriving at the total CENVAT credit taken during the quarter October to December, 2016. The Tribunal concluded that the rejection of the refund claim was unjustified and set aside the order of Commissioner Appeals.

Service Tax

I. TRIBUNAL

12 Shanti Construction Co. vs. CCE&ST [2021 (54) GSTL 164 (Tri-Ahm)] Date of order: 18th June, 2021

Reversal of CENVAT credit availed when output service was taxable is not required to be reversed on grant of retrospective exemption subsequently

FACTS
The appellants provided works contract services to various Government departments. They availed credit on input service from various sub-contractors on which the sub-contractors had discharged service tax. The appellant availed and utilised the CENVAT credit for discharging the service tax liability for the period 1st April, 2015 to 29th February, 2016. The Central Government later inserted section 102 to the Finance Act, 1994 for giving retrospective exemption to works contract services provided to the Government, local authority or Governmental authority and allowing refund of service tax paid for such services. The appellant filed a refund claim for service tax paid which was partially rejected, to the extent payment was made through the utilisation of CENVAT credit, by the Commissioner (Appeals).

HELD
The appellant had discharged the service tax as per the legal provision prevailing at that time and hence was rightfully entitled to CENVAT credit. Section 102 was unambiguous with respect to the amount to be refunded retrospectively and had no distinction whether it was paid in cash or through the utilisation of CENVAT credit. Thus, the appellant’s claim falls within the purview of section 102 and hence is held eligible for the refund of the entire service tax
paid.

13 Neyveli Lignite Corporation Ltd. vs. CCE&ST [2021 (53) GSTL 401 (Tri-Chen)] Date of order: 26th July, 2021

Service tax is not applicable on liquidated damages recovered by appellant for not completing the task in the scheduled time as per the terms of the contract

FACTS
The appellant, formerly known as Neyveli Lignite Corporation India Limited, was engaged in the excavation from the captive mines of lignite that is principally consumed in the generation of electricity. The appellant executed a contract with Bharat Heavy Electricals Limited (BHEL). As per clause 4.7.1 of the said contract, BHEL was required to complete successful performance guarantee within 35 months and 39 months for Unit 1 and Unit 2, respectively. Further, there was a clause 4.9.1 in the contract which stated that liquidated damages would be levied on failure to adhere to the above time limit. As BHEL failed to do so, the appellant recovered liquidated damages from it. Consequently, the Department issued five show cause notices covering the periods from April, 2012 to June, 2017 for recovering service tax on liquidated damages. The appellant submitted a detailed reply stating that service tax was not payable on liquidated damages. However, these contentions were rejected and orders passed holding that liquidated damages were liable for service tax as ‘agreeing to an obligation to tolerate an act’ in terms of section 66E(e).

HELD
Following the decisions of M/s South Eastern Coalfields Ltd. 2020 (12) TMI 912 and Poorva Kshetra Vidyut Vitran Co. Ltd. 2021 (46) GSTL 409, it was held that the view of the Commissioner to charge service tax on liquidated damages recovered was unsustainable.

14 Chadriot International Pvt. Ltd. vs. CCT, Bengaluru East [2021 (54) GSTL 29 (Tri-Bang)] Date of order: 17th June, 2021

Delay in debiting credit is only a procedural delay that does not disentitle the appellant from claiming refund

FACTS
The appellant is engaged in the manufacture and export of granite tiles and is availing CENVAT credit of service tax paid on input services used in the manufacture and export of finished goods. It filed three applications for refund of CENVAT credit under Rule 5 of CCR, 2004 read with Notification No. 27/2012-CE (N.T.) dated 18th June, 2012. Thereafter, the appellant received a show cause notice proposing to reject the refund claim on the ground that the appellant has not debited the amount equivalent to refund claims from the CENVAT register as required under para 2(h) of Notification No. 27/2012 CE (N.T.) dated 18th June, 2012.

The appellant replied to the notice stating that the balance of CENVAT credit was carried forward in TRAN-1 under GST in December, 2017 and the amount equivalent to refund claims was debited from the electronic credit ledger at the time of filing GSTR3B for the period December, 2017. The Original Authority sanctioned the refund after following the due process. However, the Department filed an appeal before the Commissioner (Appeals) against the refund-sanctioning order. The Commissioner (Appeals) set aside the order-in-original sanctioning refund on the ground that credit reversal in GSTR3B pertains to GST credit and not CENVAT credit and disallowed the refund. Aggrieved, the appellant filed this appeal.

HELD
The Tribunal held that credit reversed without being utilised is as good as credit not taken. The delay in debiting credit is merely a procedural lapse which cannot debar the appellant from claiming the refund. Thus, the order rejecting the refund was not sustainable.

Service Tax

TRIBUNAL

6. Commissioner of Central Excise & Service Tax, Goa vs. Goa Golf Club Pvt Ltd
Date of order: 9th February, 2023

Share of Profit received by co-venturer under a joint venture agreement was not liable to service tax.

FACTS

Respondent M/s Goa Golf Club Pvt Ltd (GGCPL) had entered into a joint venture agreement with M/s Britto Amusement Pvt Ltd (BAPL) to run and operate a casino at the premise of M/s BAPL, on a mutually agreed profit-sharing ratio. SCN was issued demanding service tax on the distribution of share of profit. The respondent submitted the response and the adjudicating authority dropped the demand of service tax. Aggrieved by the same, an appeal was filed by the department contesting the dropping of service tax demand.

HELD

Tribunal after relying upon Circular No. 109/03/2009 dated 23rd February, 2023 held that there was no relationship of the service provider and service receiver with the parties to joint venture agreement. Also, no consideration was received by GGCPL for rendering any service. Consequently, the appeal was decided in the favor of respondent.

7. M/s Lakshmi Electrical Driver Ltd. vs. CCE & ST (Appeals)
2023-TIOL-462-CESTAT-MAD

Whether RCM is applicable under section 66A when the foreign service provider has a 100 per cent subsidiary in India.

FACTS

Appellant, a manufacturer, availed services of technical inspection and certification for which payment was made in foreign currency to a company in Canada who had also issued inspection certificate. However, the said service was performed by a 100 per cent subsidiary of the Canadian company in India. During departmental audit, the revenue raised the issue of non-payment of service tax under Reverse Charge Mechanism (RCM) for payment made to the foreign party who had also issued the certificate of inspection. It was the Revenue’s contention that in terms of sub-section (2) of section 66A, when a person is carrying only business through a permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purpose of this section. On the other hand, as per the appellant, relying on Explanation 1 it was argued that a person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country, and since the Canadian company had 100 per cent subsidiary in India which had performed the service, RCM was not applicable to them. The appellant in support of their contention, submitted factory inspection reports which were signed by the representatives from the Indian subsidiary company to evidence that services were performed in India by the subsidiary company.

HELD

It was observed that at the relevant time (period of 2009-2010) there was no condition attached for RCM that the Foreign Service provider should not have an office in India. The reports indicate that the inspection service was performed in India though the certificate was issued by the Canadian company. Hence, invoking section 66A of the Finance Act and fastening tax liability on appellant on RCM basis is not legally sustainable. Accordingly, the appeal was allowed.

8. M/s Max Life Insurance Company Ltd. vs. CCE-ST
2023-TIOL-426-CESTAT-DEL
Date of order: 12th April, 2023

Service Tax on interest for reviving a lapsed insurance policy not liable to be paid.

FACTS

The issue in the appeal relates to leviability of service tax on the amount of interest charged by the appellant insurance company on the reinstatement of a lapsed policy. The Service Tax was confirmed for the reasons of lapsed interest charged for revival of the lapsed policy. According to the Revenue, interest was not chargeable when the policy got terminated on account of the failure to make premium payment. Interest was not charged at a uniform rate and according to the revenue, it must be recovered periodically and whereas it was neither charged at a uniform rate nor periodically. It was alleged that it was not interest, and was in the nature of administration charge or a processing fee and hence liable for service tax.

In the said context, the basic concepts of a life policy were examined and more specifically the relevant aspect was that the policy contract allows a policy holder to revive a lapsed policy within a specified period of non-payment of the last premium and subject to payment of overdue premium, along with charges as per terms and conditions specified in the policy. In the instant case, the policy specified the payment of overdue premium along with interest. Thus, a policy does not terminate on non-payment of premium due.

HELD

The order of the Commissioner was held unsustainable as the contract provided for interest only and not for any processing fee or administration charge.

9. M/s. SEW Infrastructure Ltd vs. CCE
2023-TIOL-470-CESTAT-DEL
Date of order: 2nd May, 2023

Composite contracts involving both good and services are necessarily works contracts and were not liable for service tax prior to the introduction of specific entry on 1st June, 2007.
 
FACTS

Appellant, an infrastructure construction company executed turnkey contracts such as irrigation, power projects, etc. An electric supply company awarded a contract for setting up a power plant to Bharat Heavy Electricals Ltd (BHEL) who in turn sub-contracted a portion of the work to the appellant. The job required the appellant to perform land development involving earth work, excavation, back filling, site levelling, grading and disposal. The Revenue alleged that it was an activity that would be categorised as “site formation and clearance excavation and earthmoving and demolition” as contained in section 65(97a) of the Finance Act, 1994 and hence taxable under section 65(105)(zzza) of the Act. Further, the payment made through CENVAT credit was also rejected on the grounds that invoices on which the credit was availed were not issued to the Bhilai premises of the appellant. However, the credit availed was already reversed by the appellant. The period involved in the case was up to September, 2006.

HELD

a) The work order is a composite contract consisting of goods and services. The contract specified that earth work was to be done by using borrowed good earth and which had to be arranged by the contractor at its own cost. Relying upon Larsen & Toubro’s case 2015-TIOL-187-SC-ST, it was observed that in that case a distinction was drawn between service contracts simplicitor and composite works contracts which would involve both services and goods. It was held in that case that it was a composite contract involving both goods and services as the work order so specified and hence, the service performed was a works contract and not one of “site formation” service. However, only after 1st June, 2007, this service was subjected to service tax. Hence prior to this date, no service tax was payable.

b) As regards availment of CENVAT credit, it was held that since the order finds that no service tax was liable to be paid prior to 1st June, 2007, the appellant cannot avail CENVAT credit. However, interest was not chargeable as the credit was already reversed by the appellant. Thus, penalty and interest were also set aside.

Service Tax

TRIBUNAL

3 Punjab National Bank vs.
Commissioner, CGST Division H, Jaipur
2023 (71) G.S.T.L 290/4 (Tri.-Del.)
Date of order: 12th January, 2023

CENVAT credit cannot be denied merely on the grounds that input services were availed by offices located in different premises which formed an integral part to execute business operations even if ISD registration was not taken.

FACTS

The Appellant was engaged in providing “banking and financial services” and had availed entire CENVAT credit of the service tax paid under reverse charge mechanism. The said input services were provided at a Zonal Training Centre, Zonal Audit office and Zonal Office. These offices were set up by the Appellant at different premises for operational efficiency and better control. The appellant had obtained a centralised service tax registration. A show cause notice was issued for recovery of the CENVAT credit availed by the appellant along with interest and penalty was confirmed by Adjudicating Authority. The appeal filed was dismissed on the grounds that no output service was provided on their own by Zonal Training Center and Zonal Audit Centre while the Zonal Office provided administrative services to six different offices and no ISD registration was obtained for distribution of credit. Aggrieved by the impugned order, the Appellant filed an appeal before the Tribunal.

HELD

The Tribunal held that the offices are not a separate entity but an integral part of the business. The service tax has already been paid by the Appellant for its offices under Centralised registration obtained. It was further held that the failure to obtain ISD registration is a mere procedural lapse and credit cannot be denied for the same. Thus, demand raised in Show Cause Notice was not sustainable.

4 Credence Property Developers Pvt. Ltd v/s. Commissioner of CGST & C. Ex., Mumbai
2023 (71) G.S.T.L. 294/3 (Tri. – Mumbai)
Date of order: 5th January, 2023

Refund of service tax paid on account of cancellation of flat purchase ought to be granted where appellant had himself borne the same.

FACTS

The appellant was engaged in providing the service of construction of residential projects. A buyer had booked two flats in the project and paid advance along with service tax to appellant. Subsequently, the buyer cancelled the booking of both the flats and entire advance along with service tax paid was returned by the appellant. Accordingly, refund was claimed for the service tax paid which was rejected by adjudicating authority as well as first appellate authority. Hence the appeal.

HELD

The Tribunal held that as per Article 265 of Constitution, the Government was not authorised to retain the amount of service tax which was not payable under the law. Moreover, since no services were rendered, the question of liability to pay service tax does not arise. The appeal was thus allowed.

5 Balmer Lawrie & Company td. vs. CST
2023-TIOL-346-CESTAT-DEL
Date of order: 1st May, 2023

Profit share / mark-up of overseas agent being an associated component of air freight or ocean freight, not liable for service tax in case of logistics services of multimodal transport operator.

FACTS

The Appellant provides comprehensive logistics services which inter alia include import consolidation by air, handling of cargo, air and sea freight forwarding, multimodal transportation including door to door services, transportation and other incidental services. The current appeal relates to confirmed demand of Rs.5.25 crores of which the major demand in relation to ocean freight was dropped by the Commissioner. However, the department also filed appeal against some part of the dropped demand. During the course of logistics services, the appellant had entered into agreement with overseas service providers for handling cargo of their clients on their behalf at foreign ports. As per terms between them, the profit received by such Foreign Service providers is shared 50:50 basis in every transaction. The Appellant’s invoice on their customers has four parts, viz. freight, other charges – origin, other charges – destination and service tax. They paid service tax on the destination charges in case of imports but not on other components of freight and charges at origination. The confirmed demand mainly relates to profit share as it is considered a part of cargo handling service. According to the revenue, the Foreign Service providers are located outside India providing taxable services to the appellants and hence they are liable to pay service tax under reverse charge mechanism on the value of such services. Further, the revenue contended that appellant paid consideration for the actual freight, other charges, origin charges and the profit share to overseas service providers and which was much higher than the actual freight. Therefore, the excess amount collected is liable to be taxed. As against this, appellant contended that as a part of ocean or air freight, the overseas service provider receives invoices towards airline fuel surcharge, airline security fee and their revenue share. Since these are associated components of freight, air or ocean, they are not subject to service tax whereas on the other components of charges such as break bulk fee, charges collect fee etc. they had always paid due service tax including for transportation of goods by road. Reliance was placed inter alia on the cases of Greenwich Meridian Logistics, India Pvt Ltd vs CST, Mumbai 2016 (43) STR 215 (Tri-Mum), Satkar Logistics vs CST, Delhi  2021-TIOL-543-CESTAT-DEL and Tiger Logistics India Ltd vs CST, Delhi [2022 (2) TMI 455 (Cestat-New Delhi).

HELD

The primary issue involved in the matter being one of taxability of service tax on ocean freight and the liability of tax on profit / mark-up which is no more res-integra as it has been decided in a catena of decisions including the latest being the judgment in the case of M/s Tiger Logistics (supra), wherein it has been held that this activity is business in itself on account of the appellant and cannot be called a service at all. The space bought by appellant from shipping line is sold to customers against a House Bill of Lading. The Shipping line issues a Master Bill of Lading in favor of the appellant. The first leg is a contract between shipping line and the appellant and second leg is between appellant and its customers. Hence, profit earned from such business cannot be termed as consideration for services. Respectfully following inter alia Satkar Logistics (supra), it was held that appellant is not liable for service tax. The above having been held in Tiger Logistics (supra) and while also citing paras from Greenwich Meridian’s case (supra), the demand with interest and penalties are set aside and department’s appeal has been dismissed in toto.

Service Tax

I. HIGH COURT

1 Commissioner of CGST vs. Shriram General Insurance C. Ltd

Date of order: 19th January, 2022

Service Tax paid on re-insurance by the insurance company would be allowable as input service within the meaning of Rule 2(l) of the Cenvat Credit Rules, 2004

FACTS

The assessee, an insurance company, deposited service tax on the insurance services. It had claimed input service credit for re-insurance services availed from other insurance companies. The department challenged the input service benefit claimed by the assessee on the grounds that the transaction comes to an end after issuing the insurance policy by the insurer and the same would not depend on re-insurance policy. The Appellate Tribunal passed its decision in favor of the assessee and hence an appeal was filed by department against the decision passed by the Tribunal before Hon’ble Court.

HELD

The High Court held that re-insurance is a statutory obligation and not a voluntary requirement. The assessee was entitled to CENVAT credit on the service tax paid which was necessary for its business to avoid double taxation. Relying on the decision of the Tribunal, the credit availed on re-insurance policy was held eligible.

II. TRIBUNAL

2 SGS India Pvt Ltd vs. Commissioner of CGST, Thane

Date of order: 29th December, 2021

The appellant is not liable to reverse the CENVAT credit availed irregularly and not utilized, where he had compensated exchequer by interest payment.

FACTS

The appellant was engaged in providing various taxable services. It discharged service tax liability under Reverse Charge Mechanism and availed the CENVAT credit facility.

During audit, the department observed that the appellant had paid service tax on 6th of the following month and the entitlement to the credit for some months was available in the next month. Department initiated show cause notice proceedings since the appellant had availed the credit without payment of service tax. Service tax demand along with interest and penalty under sections 77 and 78 of Finance Act, 1994 was raised. The appellant filed an appeal before the Learned Commissioner (Appeals) and the same was rejected. Being aggrieved by the order, appeal was filed before the Tribunal.

HELD

It was held that the appellant had availed the CENVAT credit without payment of service tax, but credit availed irregularly was not utilized for the payment of service tax. The appellant also discharged the interest liability for the same. Hence proceedings initiated for denial of the CENVAT benefit and the recovery did not stand for judicial scrutiny. There was no fraud, collusion, wilful misstatement, etc. as mentioned in section 78 of the Finance Act, 1994 since irregular Cenvat credit taken, payment of interest thereon and availability of CENVAT credit in the books of accounts were known to the department.

Service Tax

TRIBUNAL

29. Lindstrom Services India Pvt Ltd vs.

CCE & ST Vadodara-1

2023-TIOL-97-CESTAT-AHM

Date of order: 23rd January, 2023

Whether services of leasing – workwear (uniform) liable for service tax when VAT is paid on the same.

FACTS

Appellant is in the business of leasing workwear (uniform) to the clients upon conditions mentioned in the agreement with the clients. The conditions inter alia included delivering, collecting for washing, and servicing individually customized with workwear of every worker’s size along with logo and label as specified. The appellant would own such uniforms and would have the exclusive right to wash and service them. Also, if the workwear was not usable on account of wear and tear, they were returnable to the appellant and the price was fixed for the customer to pay at a depreciated price as agreed upon. For replacement also, it was redeemed at an agreed price. VAT was charged on the rental charges charged by the appellant to their clients. In the scenario, the case of Revenue was that the contract involving the service of renting, using workwear, washing, maintenance, repairing, alteration, designing of workwear, etc. for use while transferring possession without transferring right was a service of “supply of tangible goods” as contained in section 65(105)(zzzzg) of the Finance Act, 1994 and/or a declared service post 1st July, 2011 i.e. in the negative list regime as the effective control over the workwear was not transferred.

According to the appellant, two benches of Chandigarh and Chennai respectively had taken a consistent view on an identical service agreement that the purported service was not taxable under service tax and hence the decision had to be followed; whereas the Revenue contended that against the two orders of Chennai Tribunal, the revenue had filed an appeal before Supreme Court. However, either side could not produce a stay order. In one of the appeals filed by the appellant, at the first appeal level, the demand was set aside. Hence, the Revenue filed the appeal against the said order. Both appeals are accordingly bunched here.

HELD

Hon. Division Bench went through and recorded excerpts from CESTAT Chandigarh Order No.60716 of 2nd August, 2019 and CESTAT Chennai’s final Order No. 40818 dated 29th October, 2020 and final Order No.42148 dated 25th August, 2021. In these cases, the judgments in the cases of Bharat Sanchar Nigam vs. UOI 2006 (2) STR 161 (SC), the case of Gimmco Ltd vs. CCE & ST, Nagpur 2017 (48) STR 476 (Tri.- Mum) as well as Andhra Pradesh High Court in the case of G S Lamba & Sons 2011-TIOL-49-HC-AP-CT were analysed to conclude that the workwear rented was always in the exclusive possession and control of the clients. Some of the activities such as maintenance and washing of workwear rented will not mean that effective control was retained by the appellant. The workwear could not be used by anyone else except the users and hence effective control and possession was always with the client and hence the transaction was one of “deemed sale,” and was not taxable as the service of supply of tangible goods or a declared service. Further, as for the appeals filed by the Revenue before Supreme Court, it was held that since either side could not produce any stay order staying the operation of the Chennai Tribunal’s order, the fact of mere filing of an appeal before the Supreme Court would not help the Revenue and the decision of two benches will be followed. Hence the appeal of the appellant was allowed and the order of the Commissioner (Appeals) was upheld.

30. Coface India Credit Management Services Pvt Ltd. vs. Commissioner of CGST & CE, Belapur

2023-TIOL-111-CESTAT-MUM

Date of order: 10th January, 2023

Rejection of refund application under Rule 5 of CCR on the grounds of the utilization of opening balance in the CENVAT register and inability to establish nexus of input service with output service set aside.

FACTS

The appellant filed a refund application under Rule 5 of CENVAT Credit Rules, 2004 (CCR) which was rejected because the opening balance of CENVAT register should not be taken into consideration for grant of refund and that some of the input services did not have nexus with the output services.

HELD

As for the issue of opening balance in the CENVAT register, CBE&C Circular No.120/01/16 clarifies that the closing balance of the previous quarter can be considered for the utilization towards export as the opening balance for the subsequent quarter. On the second issue of nexus between input services and export of services, it was noted that the department had not initiated any proceeding for the recovery of irregular credit under Rule 14 of CCR r.w.s 73 of the Finance Act, 1994. If availment of credit is not questioned at the material time, it cannot be questioned by the revenue at a later date. The said issue being a covered matter inter alia in the cases of Ness Technologies (I) Pvt. Ltd. vs. CST Division V Mumbai 2016. (41) STR 984 (Tri.-Mum) and M. Net Partner Technologies Pvt Ltd vs. Commissioner, CGST Mumbai at 2019-TIOL-3657-CESTAT-MUM, the department could not have any objection to the claim. The appeal was thus allowed.

31. Rajasthan State Board Development Construction Corporation Ltd vs. Commissioner CGST&CEX Jodhpur

Date of order: 31st May, 2022

Whether the appellant held Government Authority for the exemption Notification No.25/2012 dated
20th June, 2012.

FACTS

The appellant is a company registered under section 617 of the Companies Act, 1956, a Government company of which 100 per cent shares are held by the Rajasthan Government. They provided the service of laying fresh water pipeline by sub-contracting the said service which is a work entrusted to the municipality under Article 243W of the Constitution of India. Consequent upon an inquiry conducted on the subcontractor who provided the said service– a proprietary concern, it was found that the said proprietary concern from July 2012 to March 2015 provided works contract service to the appellant. Since there is a Reverse Charge Mechanism (RCM) applicable to the works contract service whereby a recipient has to pay 50 per cent of service tax liability vide Notification No.30/2012-ST dated 20th June, 2012, a show cause notice was issued to the appellant in this case for recovery of such 50 per cent service tax, being the recipient of the said service provided by subcontractor.

HELD

It was held that the appellant was set up by the State Government of Rajasthan having 100 per cent control in the hands of the State Government of Rajasthan, the appellant is a Government Authority. Since “Government Authority” is mentioned in sl. no.25 of the said exemption notification no. 25/2012-ST and further elaborated in the definition clauses that “Government Authority” means a Board or authority or any other body established with 90 per cent or more participation by way of equity or control by Government and set up by an Act of the Parliament or State legislation to carry out any function entrusted to a municipality under Article 243W of the Constitution. Hence, the appellant was entitled to the exemption and the appeal was thus allowed.

Service Tax

I. HIGH COURT

27 Mahindra & Mahindra Ltd vs. UOI
[2022] 144 taxmann.com 200 (Bombay)
Date of order: 15th September, 2022

The charging sections for the imposition of CVD and SAD or surcharge are section 90(1) of the Finance Act, 2000, section 3(1) and section 3A(1) of the Customs Tariff Act, 1975, respectively and not section 12 of the Customs Act, 1962. The Court held that section 3(6) and section 3A(4) of the Customs Tariff Act, 1975 do not provide for any interest or penalty. Neither does section 90 of the Finance Act, 2000 provide for the same. Therefore, no interest or penalty can be levied on the portion of payment pertaining to a surcharge, CVD and SAD.

FACTS

The petitioner is engaged in the manufacture of vehicles in India and filed four applications before the settlement commission against four show cause notices demanding differential customs duty. The Orders passed by the Settlement Commission were challenged before the High Court. The High Court quashed these orders and directed to pass fresh orders. The respondents re-heard the matter and passed the orders confirming the earlier orders and imposing interest and penalties.

The petitioner contended that section 90 of the Finance Act, 2000 related to a surcharge, section 3 of the Customs Tariff Act, 1975 related to an additional duty of customs equal to excise duty, and section 3A of the Customs Tariff Act, 1975 related to a special additional duty of customs and none of these provisions provided for the imposition of penalty or interest on the chargeable duty thereunder. Therefore, there was no power under the provisions of law to impose penalties or interest. It was also submitted that the basic customs duty with surcharge had already been paid and the penalty and interest has been levied only on the differential duty which the show cause notice alleged that the petitioner had evaded and since neither section 3 nor section 3A of the Customs Tariff Act, 1975 or the Finance Act, 2000 provided for the imposition of penalty or interest, there is no power under the Act to impose the same upon the petitioner.

HELD

The Hon’ble Court held that any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as substantive law and not adjectival law. The Court held that section 3 and section 3A of the Customs Tariff Act, 1975 are charging sections creating liability for CVD and SAD but do not provide for a penalty. The mere fact that there is a machinery for assessment, collection, and enforcement of tax and penalty under the Customs Act, 1962, it does not mean that the provision for penalty and interest in the Customs Act, 1962 is treated as applicable for penalty and interest under the Customs Tariff Act, 1975. The meaning of penalty or interest under the Customs Tariff Act, 1975 cannot be enlarged by the provisions of the machinery of the Customs Act, 1962 incorporated for working out the Customs Tariff Act, 1975. Referring to various judicial pronouncements the Court reiterated that when the penalty is an additional tax, the constitutional mandate requires a clear authority of law for imposition thereof. Where the Act has to be explained by referential legislation or legislation by incorporation levies penalty or not, it is better for the Court to lean in favour of the taxpayer. There is no room for the presumption in such cases.

The Court held that section 3(6) and section 3A (4) of the Customs Tariff Act, 1975 do not provide for any interest or penalty. Neither section 90 of the Finance Act, 2000 provides for the same. Therefore, no interest or penalty can be levied on the portion of payment pertaining to a surcharge, CVD and SAD. The Court also noted that unlike in the case of section 9A(8) of the Customs Tariff Act, where a specific amendment was made by section 76 of Finance (No.2) Act, 2004 by replacing the words, “relating to non-levy, short levy, refunds and appeals” with “relating to, the date for determination of rate of duty, non-levy, short levy, refunds, interest, appeals, offences and penalties”, no amendment is made to include interest and penalty in sub-section (6) of section 3 or sub-section (4) of section 3A of the Customs Tariff Act, 1975. Therefore, the intention of the legislature was very clear that it wanted to include interest and penalties only with regards to the anti-dumping duty on dumped articles and not for CVD, i.e., levy of additional duty equal to excise duty and SAD, i.e. special additional duty. No such insertion or amendment was made in section 90 of the Finance Act, 2000 relating to a surcharge. Therefore, interest and penalty cannot be levied on the portion of the demand pertaining to surcharge under section 90 of the Finance Act, 2000 or additional duty of customs under section 3 or special additional duty of customs under the Customs Tariff Act, 1975.

The Court also did not accept the contention of the Revenue that the charging section for the imposition of CVD and SAD or surcharge is section 12 of the Customs Act, 1962, and held that the charging sections for the imposition of surcharge, CVD and SAD are section 90(1) of the Finance Act, 2000, section 3(1) and section 3A(1) of the Customs Tariff Act, 1975, respectively.

II. TRIBUNAL

28 Devraj Luxury Hotels Pvt Ltd vs. Commr. of C Ex & CGST, Jaipur
2022 (67) G.S.T.L. 76 (Tri. – Del.)
Date of order: 16th June, 2022.

Extended period of limitation not available to the Revenue when demand is raised on the basis of audit where assessee had maintained records and availed the credit rightly.

FACTS

The appellant was engaged in rendering services of accommodation in hotel, banquet hall and restaurant service. The appellant paid the service tax under RCM on works contract services and legal services and availed Cenvat credit on the same. During the course of the audit, the department noticed that the credit availed on both services was ineligible and issued a show cause notice on 7th November, 2019. The Adjudicating Authority confirmed the demand vide Order-In-Original passed on 2nd July, 2020 for the denial of credit along with interest and penalty under Rule 15(3) r.w.s. 78 of the Finance Act, 1994. Being aggrieved by the impugned order, the appellant filed an appeal before Commissioner (Appeals) stating that all the transactions were properly recorded and the credit towards legal services and works contract services was taken based on the challan paid, and thus, pleaded that an extended period was not available to department. However, the Commissioner (Appeals) passed an impugned order holding that without an audit taking place, it would not have come to the notice of the department of ineligible credit taken pertaining to the works contract services and hence extended period of limitation was rightly invoked. Being aggrieved by the impugned order, the appellant filed an appeal before the Tribunal.

HELD

It was held that the demand raised by the Department alleging suppression of facts or contumacious conduct based on audit notes was not available as the appellant maintained the books of account and vouchers based on the transaction. Further, the credit on tax paid under RCM on legal services was allowed to the appellant and thus there was no suppression of facts. Consequently, invoking an extended period of limitation was not available to department. Accordingly, the impugned order was set aside.

Service Tax

TRIBUNAL

10 M/s Vodafone Idea Ltd vs. Commissioner of CGST and Central Excise
[2023-TIOL-354-CESTAT-KOL]
Date of order: 23rd February, 2023

Commission agent services used for collection of debts is allowable as CENVAT credit.

FACTS

The appellant has availed CENVAT credit on the services provided by the commission agent engaged in collection of debts from the various subscribers. The department placing reliance on the decision of the High Court of Gujarat in the case of Cadila Healthcare Ltd [2013 (30) STR 3 (Guj.)] has disallowed the said credit.

HELD

The Tribunal primarily noted that, in the present case, the commission agent is not rendering any service towards sale/sales promotion. He is engaged in the collection of debts from the subscribers. Therefore, the basis adopted for the issuance of the Notice relying on the decision in the case of Cadila Health Care is itself erroneous. Relying on the decisions in the case of Vodafone Essar Cellular Ltd [2018-TIOL-3889-CESTAT-MAD] and Bajaj Finance Ltd [2017-TIOL-4355-CESTAT-MUM] wherein charges paid to Bill Collection Agencies and Recovery Agents service was allowed, the Appeal is allowed.

11 M/s. Manashi Craft Pvt. Ltd vs. Commissioner of Service Tax
[2023-TIOL-400-CESTAT-KOL]
Date of order: 11th April, 2023

Interior Decorator service provided along with material is taxable as Works Contract service.

FACTS

The appellant is engaged in provision of interior decorator services. The services were provided along with materials. The Revenue is of the view that the entire activity is taxable under “Interior Decorator Service”.

 

HELD

Relying on the decision of the Hon’ble Supreme Court in the case of Larsen & Toubro Ltd 2015-TIOL-187-SC-ST and the decision of the Tribunal in the case of Spandrel vs. Commissioner of Central Excise, Hyderabad/Kochi 2010-TIOL-830-CESTAT-BANG, it was held that the appropriate classification of the said services is “Works Contract Service”. As there is no demand under “Works Contract Service” and the Appellant opted to pay service tax under composite scheme, the same has been taken on record. The Appeal is accordingly allowed.

 

12 The Commissioner of Central Excise and CGST, Udaipur vs. M/s Trinetra Cement Ltd [2023-TIOL-404-CESTAT-DEL]

Date of order: 18th April, 2023

Event management services used for award functions and programs for the dealers are eligible as CENVAT credit. Mandap Keeper services used for a business function are also allowable as CENVAT credit.

FACTS

The Assessee is a manufacturer of cement and clinker and availed CENVAT credit on inputs and input services including service tax passed by its head office through input service distributor invoices. CENVAT credit availed on advertising service, event management service, business auxiliary service, mandap keeper service and tour operator service is under dispute.

HELD

The Tribunal primarily noted that the CENVAT credit rules envisage recovery of irregularly availed credit from the one who has so availed it under Rule 14 and they have no mechanism to recover the same from the Input Service Distributor who merely passes the credit to its units. However, if the credit is availed on the strength of an excise invoice issued by the manufacturer who supplied the inputs or a service tax invoice issued by the provider of input service, the assessment of the excise duty or the service tax in such invoices cannot be examined or opened by the officers dealing with the CENVAT credit of the recipient of the input or input service as jurisdiction of the buyer is not the assessing officer of the supplier of the goods or services. With respect to advertising services it was noted that so long as the same is with respect to excisable goods sold the credit cannot be denied. It was also noted that there is no condition that the brand which is being advertised should be owned by the Assessee. With respect to business auxiliary service it was held that programs for gold distribution melas to marriage anniversary and food bills cannot be treated as sales promotion and therefore the credit is not allowable. Event management services availed for annual award functions and programs for dealers have a direct nexus to sales promotion and credit is admissible on such services. With respect to mandap keeper service it was noted that there is no evidence to justify that the food is for a private function and therefore the credit is allowable.
13 M/s Namakkal Agricultural producers Co-operative Marketing Society vs. Commissioner of Central Excise
Date of order: 25th April, 2023

There is a difference between ‘Auction’ and ‘Tender’. Marketing and other services provided to the farmers’ members through the tender process is not taxable under auctioneer service. The process of borrowing the money from the bank and lending to farmer members on interest is relatable only to its members and not to the bank therefore there is no service tax applicable under business support service. The Appellant is liable under goods transport agency services.

FACTS

The Appellant is a society created to provide services to the agriculturists who are members of the society for marketing of the agriculture produce, distribution of farm inputs, provision of produce pledge loans and processing and other value addition measures as possible. The society is involved in arranging facilities for storing, processing and marketing of the agricultural products. They provide marketing facilities such as auction yards, drying place and short-term storage facilities in the open yard and also rendering jewel loans to its members. The contention of the Department is that they are engaged in conducting auction of goods for monetary consideration, collecting appraising charges for sanction of jewel loans to its members and also making payment of freight for transport of goods thereby taxable under auctioneer’s service, GTA service and Business Support Service of the Finance Act, 1994.

HELD

The Tribunal noted that the marketing and other services rendered to farmer members in selling their agricultural produce through tender process would not be coming under “Auctioneer’s Service. The process of taking loans and utilising this money in providing jewel loans to their farmer members are relatable only to its members and not to the bank and the charges collected for appraising jewels before sanctioning of loans are in the nature of cost incurred for sanctioning of loans therefore, not taxable under business support service. Regarding Goods Transport Agency services it was noted that the Appellant has delivered the goods to the ration shops under the Public Distribution System and have failed to provide any evidence with respect to the value of the consignment to take the benefit of the exemption notification 34/2004-ST. Therefore, the same was held to be taxable.

Service Tax

I HIGH COURT

14. Blackberry India Pvt Ltd vs. Asstt. Central Excise & CGST
2023-TIOL-967-HC-DEL-ST
Date of order: 3rd August, 2023

The relevant date for interest payment under section 11BB of Central Excise Act is three months after the submissions of claim of refund and not the date of letter requesting for refund.

FACTS
Petitioner challenged the order to the extent it was denied interest under section 11BB of CE Act read with section 83 of Finance Act, 1994 on the amount of refund sanctioned. Adjudicating authority contended that the refund was sanctioned within a period of three months as they considered the dates of applications for refund as 7th February, 2023 instead of the date on which the applications were first made.

HELD
Following a settled issue by Supreme Court in the case of Ranbaxy Laboratories Ltd. 2011-TIOL-105-SC-CX, adjudicating authority proceeded on the basis that interest under section 11BB of the Excise Act would be payable after expiry of three months from the date of application of refund. However, while considering the date of applications, he erred in holding the date of the letter as the date of application for refund whereas petitioner had filed its applications in March 2013, March 2014 and June 2014 respectively. Hence interest is required to be calculated from the expiry of these relevant dates. Thus, allowing the petition, the High Court directed the adjudicating authority to process claims of interest.

II TRIBUNAL

15. Commissioner of Service Tax vs. M/s Net 4 Communications
2023-TIOL-615-CESTAT-KOL
Date of order: 26th June, 2023

Service of merely setting up network without involving providing information or data did not amount to providing service of OIDAR.


FACTS
Appellant inter alia provided services of system networking which involved linking of two or more computing devices together for the purpose of sharing data. This is done using mixture of hardware and software. Revenue in the show cause notice contended that the said service was Online Information and Database Access or Retrieval (OIDAR) service as contained in section 65(105)(zh) of the Finance Act 1994. Adjudicating authority dropped the demand observing that it is not so classifiable as neither generation of data or information was involved nor it involved providing it to clients. They set up network for transfer of data not provided by them in the period prior to 1st July, 2012. Hence, Revenue filed the appeal.

HELD
Perusing the definition of the service, it was observed that in order to be covered by the definition of OIDAR, (a) service must relate to providing data or information and could be retrieval or otherwise: (b) services must be provided in electronic form and (c) services must be provided through a computer network. The activity described above neither involves data / information generation nor are they providing data to the clients. Hence, the service of OIDAR is not provided and hence, the order dropping the demand SUSTAINS & revenue’s appeal was thus rejected.

16. Commissioner of GST and / central Excise vs. Vedanta Ltd
2023-TIOL-690-CESTAT-MAD
Date of order: 26th May, 2023

Onus to prove liability of service tax under RCM on the department when the assessee placed on record all relevant details that foreign institution had Permanent Establishment in India.

FACTS
The issue in the appeal relates to whether appellant was liable to pay service tax under Reverse Charge Mechanism (RCM) on the fees paid to foreign banks for External Commercial Borrowings (ECB). Appellant provided construction engineering services, GTA services, etc. During EA-2000 audit, it was observed that a sum of over Rs. 33 crore was paid to foreign financial institutions.

However, there was no evidence of payment of service tax on the said amount. Hence, a show cause notice was served. Original authority dropped the demand observing that service providers had a fixed establishment in India. Hence, RCM does not apply to the recipient. The Revenue filed an appeal against such order holding that the Commissioner ought not to have dropped the demand entirely, as respondents had not furnished evidence as to whether the foreign service providers had office in India. According to Respondent, the onus was on the department to prove the short levy and that the banks did not have permanent establishment in India. Further, the Commissioner had gone through the details furnished to demonstrate that the institutions had permanent establishments in India and the entire situation was any way revenue neutral.

HELD
The detailed information furnished by respondents demonstrated that foreign institutions had permanent establishment in India. Also, the department failed to produce that the amount sought to be taxed was subject to service or that the institutions do not have permanent establishments in India. Hence, the interference with the order of the original authority and the appeal of revenue was thus dismissed.

17. M. P. Audyogik Kendra Vikas Nigam (Indore) Ltd. vs. Principal Commissioner of C. Ex. & CGST, Indore
2023(8) Centax 219 (Tri.-Del.)
Date of order: 26th May, 2023

Demand of Service Tax under RCM based on difference between balance sheet and ST-3 returns was not legally valid

FACTS
Appellant was engaged in providing various taxable services. A letter was issued by department to pay service tax under RCM for expenses incurred on legal, professional and consultancy services as well as security services, wherein it was contended by the revenue that there was mismatch between figures as per balance sheet and ST-3 returns. It was clarified by appellant that service tax was already paid by service provider on certain expenses. Appellant also pointed out service tax notifications on the basis of which liability under RCM was not required to be paid. Without considering the clarifications provided by appellant, a SCN was issued for period 2012-13 till 2015-16 invoking extended period of limitation. Further, second SCN was issued on same allegations for subsequent period up to June 2017 demanding service tax along with interest and penalty. Both SCNs were adjudicated vide Order In Original and demand along with interest and penalty was confirmed. Further, Commissioner (Appeals) dismissed the appeal upholding the Order In Original. Aggrieved, an appeal was filed before the Tribunal.

HELD
It was held that the SCN was issued after comparing difference between balance sheet and ST-3 returns, which was totally illegal. Tax was demanded under RCM despite the appellant pointing out that service tax was already paid by the service provider. There was no provision in service tax law to raise a demand on the difference in figure of expenses in balance sheet and ST-3 returns. There was no element of fraud or suppression of facts where returns were filed on timely basis. Hence, extended period of limitation was not available to department. Service tax demand should have been calculated transaction-wise and invoice-wise. Impugned order was set aside.