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Judgements

1.      Services

Works Contract Service

1.1   CST vs. Ratan Singh Builders Pvt. Ltd. 2014 (33) STR 242 (Del.)

In this case service was rendered prior to 1-3-2008 when rate of service tax was 2% but payment received after 1-3-2008, when rate of service tax was 4%. The High Court held that, rate of service tax applicable would be that which was in force at the time of rendition of service and not which was in force at the time of receipt of payment. Taxable event being the rendition of service and such rendition having been completed prior to 1-3-2008, the applicable rate of tax would be 2% i.e. rate of tax prevalent prior to 1-3-2008.

Outdoor Catering Service

1.2   Indian Coffee Workers Co-op. Society Ltd. vs. CCE, Allahabad 2014 (33) STR 266 (Tri.-Del.)

The appellant in this case provided canteen service in service recipient’s premises under contract with NTPC and Lanco and received consideration from them. The Tribunal held that, the appellant has provided Outdoor Catering Service and adjudication order is impeccable and warrants no interference.

Event Management Service

1.3   CCE, Aurangabad vs. Lokmat Media Ltd. 2014 (33) STR 272 (Tri.-Mum.)

The assessee in this case advertised products by way of putting hoardings during Cricket Tournament. The department sought to tax the said activity under Event Management Service. The Tribunal held that, assessee has not organised tournament at the request of any franchisee or co-sponsors therefore no Event Management Service has been provided by the assessee.

Erection, Commissioning or Installation Service

1.4   Noida Power Co. Ltd. vs. CCE, Noida 2014 (33) STR 383 (Tri.-Del.)

The appellant in this case established power distribution network for providing connections to consumers and claimed immunity from tax on the basis of Exemption Notification No. 45/2010-ST. The Tribunal held that, in view of Exemption Notification No. 32/2010-ST and immunity Notification No. 45/2010-ST, all taxable services provided in relation to distribution of electricity energy are exempt from service tax liability. The expression “in relation to” is of wide import indicating all activities having direct and proximate nexus with distribution of electrical energy and distribution of energy cannot be effectively accomplished without installation of sub-stations, transmission towers and installation of meters.

Management, Maintenance or Repair Service

1.5   Financial Software Systems Pvt. Ltd. vs. CST, Chennai 2014 (33) STR 393 (Tri.-Chennai)

The Tribunal in this case after relying on Madras High Court judgment in Kasturi & Sons Ltd. 2011 (22) STR 129 (Mad.) held that, maintenance of computer software is not liable to service tax under Maintenance or Repair Service prior to 1-5-2006. It is also relied on apex court decision in Martin Lottery Agencies Ltd. 2009 (14) STR 593 (SC) holding that, explanation added to section 65(64) of FA, 1994 causing adverse consequences to taxpayers to have prospective effect.

It is further held that, certification of ATM is squarely covered by the definition of Technical Inspection and Certification Service and introduction of new service relating to ATM not to be interpreted that prior to date of notification of such service, certification of ATM was not liable to tax. Further, the appellants plea of bona fide belief of non-taxability was not based on legal position, hence no merit in prayer for non-invocation of extended period of time.

Tour Operator’s Service

1.6   A. Manimegalai vs. CCE(ST), Salem 2014 (33) STR 412 (Tri.-Chennai)

The Tribunal in this case held that, Government has granted retrospective exemption from Service Tax to tour operators plying buses, inter-State and intra-State, from point to point and therefore the appeal is allowed.

Mandap Keeper Service

1.7   CST, Del.05 vs. Safdarjung Club 2014 (33) STR 415 (Tri.-Del.)

The Tribunal in this case held that, in case where services have been provided by club to members the relationship of client and employer is absent and therefore activities carried out by Club do not appear to be taxable service.

Commercial or Industrial Construction Service

1.8   Radius Corporation Ltd. vs. CCE, Raipur 2014 (33) STR 416 (Tri-Del)

The Tribunal in this case held that, excavation of land (digging, extraction of core), preparation of earthen floor, soil stabilisation, raising/widening of bunds, plantation and increasing height of reservoir which supply water to Industrial Units is liable to service tax under Commercial or Industrial Construction Service.

Rent-a-Cab Service

1.9   Harjinder Singh vs. CCE, Chandigarh 2014 (33) STR 437 (Tri.-Del.)

The appellant was having contract with PEPSU Road Transport Corporation for providing buses for operation on various routes for which they have received payment on per day basis. The Tribunal held that, ratio of Deepak Transport Bus Service 2013 (27) STR 357 (T) is to be followed as factually the present case is identical and therefore, services are liable to tax under Rent-a-Cab Service.

Business Auxiliary Service

1.10 Prakash Pulversing Mills vs. CCE, Jaipur 2014 (33) STR 454 (Tri.-Del.)

The appellant was undertaking grinding of herbs on job work basis during the period 10-9-2004 to 15-6-2005. The Commissioner (A) passed order taking grinding as processing holding no production can take place without processing. The Tribunal observed that, ‘Processing’ has been included in BAS definition w.e.f. 16-6-2005 and therefore demand of service tax on activity of grinding prior to 16-6-2005 is illegal.

2.      Interest/Penalties/Others

2.1   Divya Tourism Pvt. Ltd. vs. CST, Ahmedabad 2014 (33) STR 249 (Tri.-Ahmd.)       

The appellant in this case claimed that, they have not received the Order-in-Original dated 29-12-2008 till 30-12-2010. In support they have filed an application made by them for providing the documents under RTI wherein the dispatch register extract showed no mention of appellant’s name in serial numbers entered for communication of Order-in Original. The appeal to First Appellate Authority held to be filed within time as per statute and no delay on part of the appellant.

2.2   CST Ahmedabad vs. Gujarat State Road Transport Corporation 2014 (33) STR 283 (Tri.-Ahmd.) 

In this case the assessee claimed refund tax paid under Courier Service though as per clarification issued by CBEC was not liable to pay service tax. They have filed refund claim on 1-7-2011 after three years from the date of payment i.e.
7-6-2008. The adjudicating authorities rejected the refund claim on the ground that refund was filed beyond the period of limitation provided under section 11B of CEA, 1944. However, the First Appellate Authority allowed the refund claim. The Tribunal held that, any refund claim has to be filed under section 11B within the prescribed time. Even if the service tax paid by the assessee is considered unconstitutional or non-leviable, recourse to assessee is to file a suit for recovery or file a writ petition as has been held by the Constitutional Bench of Apex Court in the case of
Mafatlal Industries Ltd. 1997 (89) ELT 247 (SC). In view thereof, the refund claim is liable to be rejected.

2.3   Aadishwar Motors (P) Ltd. vs. CST, Ahmedabad 2014 (33) STR 329 (Tri.-Ahmd.) 

The appellant claimed refund of amount deposited on directions of Investigative Authorities as the issue contested before higher judicial forums. The Tribunal held that, it is settled law that, dispute is said to be raised when assessee files appeal against amount deposited or confirmed against him and the judgments in Jayant Glass Inds. Pvt. Ltd. 2003 (155) ELT 188 (Tri.-LB) and Parle International Ltd. 2001 (127) ELT 329 (Guj.) are squarely applicable.

2.4   Soccer International Pvt. Ltd. vs. CCE, Ludhiana 2014 (33) STR 334 (Tri.-Del.)     

The appellant in this case paid service tax on overseas commission agent service in March, 2009 and export of goods taken place in October, 2008 to December, 2008. They have filed refund claim on 31-8-2009. The Tribunal held that, Notification No. 17/2009-ST issued in supersession of Notification No. 41/2007-ST providing for limitation period of one year from the date of let export order and as per CBEC instructions F. No. 354/25/2009-TRU dated 1-1-2010, new notification applicable to exports undertaken prior to its issuance. Therefore, impugned order disallowing refund is unsustainable and liable to be set aside.

2.5   CCE & ST (LTU) Bengaluru vs. Dell Intl. Services India P. Ltd. 2014 (33) STR 362 (Kar.) 

In this case, Committee of Commissioners first accepted the Order in Appeal but on second review on direction of Chief Commissioner, difference of opinion emerging amongst Committee, whereupon Chief Commissioner decided to file appeal. The High Court held that, decision of Committee was binding on Chief Commissioner, and there was no express provision for its review and since power of review has not been specifically provided, the Chief Commissioner is not empowered to exercise the same.

2.6   Syndicate Bottles vs. CST, Chennai 2014 (33) STR 389 (Tri.-Chennai)          

The appellant in this case made short payment of tax and also in certain cases late payment of tax however, they have paid tax before issue of SCN and interest and 25% penalty within 30 days of issue of notice and asked for benefit of sections 73(1) and 73(3). The Tribunal observed that, the contravention is detected in two-folds, (i) short payment due to certain extent and (ii) delayed payment after realisation of consideration. It is held that, contravention visible through audit books and not through disclosure and therefore element of suppression present and therefore not entitled to the benefit of section 73(3).

3.      Cenvat Credit

3.1   CCE, Ahmedabad vs. Ahmedabad Strips Pvt. Ltd. 2014 (33) STR 291 (Tri.-Ahmd.)

The Tribunal in this case held that, Cenvat credit of service tax paid on services for obtaining export incentives is related to manufacturing activity and therefore credit is admissible.

3.2   Seksaria Biswan Sugar Factory Ltd. vs. CCE, Lucknow 2014 (33) STR 292 (Tri.-Del.)

The department in this case disallowed Cenvat credit of service tax paid on commission agent service. The Tribunal held that, in catena of judgment it is held that, service tax paid on such services is available as credit, further as per CBEC Circular No. 943/4/2011-CX, dated 29-4-2011 even after deletion of expression ‘activities relating to business’ from definition of Input service, Service Tax paid on commission agent service is available.

3.3   Bajaj Hindustan Ltd. vs. CCE, Meerut-I 2014 (33) STR 305 (Tri.-Del.)

The Tribunal in this case allowed Cenvat credit of service tax paid on services such as setting up of labour hutments, kisan sheds for providing temporary residential facility to workers and cane growers as the appellant was under statutory obligation to provide these facilities and the facilities were in relation to business activity. It is further held that, raising new structure after dismantling of old structure for setting up of a factory is in relation to business activity. It is also held that, appellant has filed proper returns under rule 9(7) of CCR, 2004 and therefore limitation period cannot be invoked.

3.4   Chintamani Lamination vs. CST, Ahmedabad 2014 (33) STR 327 (Tri.-Ahmd.)

The appellant in this case having two factories with separate registration and the department denied credit of the ground that, services received by Unit-2, whereas credit was utilised by Unit-1. The Tribunal held that, as per definition of Input Service credit is available for setting up of factory also and credit can be taken in Unit-2 as the same to be used in or in relation to manufacture.

3.5   United Telecoms Ltd. vs. CCE, Bengaluru-I 2014 (33) STR 357 (Kar.)

The appellant in this case, manufacturer of telecom equipments and other related products, claimed Cenvat credit of service tax paid on Stock Broking Service for sale of shares, acquired as investment. The department sought to disallow the same. The High Court held that, incidental object of investing and dealing in shares did not relate to and form part of main business of the appellant and the plea by department that it was not carried on regular business scale and did not partake in business activity has been upheld. Hence, it is
held that, it was not input service on which company could have taken credit of service tax paid.

3.6   CCE, Lucknow vs. DSCL Sugar 2014 (33) STR 480 (Tri.-Del.)

The department in this case denied Cenvat credit of service tax paid on GTA service on the basis of Challan indicating payment of service tax. The Tribunal held that, when tax has gone into treasury, credit cannot be denied unless assessee is otherwise disentitled.

 

 

1.      Service provided by an authorised person or sub-broker to the member of recognised association or registered association in respect of forward contract

The Central Government directed that where no service tax was levied in respect of the services provided by an authorised person or sub broker to the member of a recognised association or a registered association, in relation to forward contract during the period September 2004 to 30th June, 2012, such authorised person or sub- broker is not required to pay service tax.

(Notification No. 3/2014 – ST dated 3-2-2014)

2.      Amendment in Mega Exemption Notification No. 25/2012 – ST dated 20-6-2012

The mega exemption notification no. 25/2012 – ST dated 20-6-2012 has been amended by inserting following exemption entries:

"2A. Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation."

The Services provided by cord blood banks, such as collection of umbilical cord blood, processing the same for segregation of stem cells, testing and cryo – preservation of stem cells, etc. are exempt w.e.f. 17-2-2014.

"40. Services by way of loading, unloading, packing, storage or warehousing of rice."

Services of loading, unloading, packing, storage or warehousing of rice are exempt w.e.f.
17-2-2014.

(Notification No. 4/2014 – ST dated 17-2-2014)

3.      Clarification on transportation of rice and milling of the paddy into rice

It is clarified that “foodstuff” includes the rice. Consequently, service tax on transportation of rice by rail or a vessel or by a goods transportation agency is exempt under Serial Nos. 20(i) and 21(d) of Notification No.25/2012 – ST dated 20-6-2012.

It is further clarified that milling of paddy into rice is an intermediate production process in relation to agriculture and hence, same is exempt under serial no. 30(a) of notification No. 25/2012 – ST dated 20-6-2012.

(Circular No. 177/03/2014 – ST dated 17-2-2014)

 

1.      Services

Clearing and Forwarding Agency Service

1.1     CCE, Salem vs. Salem Starch & Mfrs. Service Indl. Co-op. Society Ltd. 2014 (33) STR 16 (Mad.)

The assessee in this case a co-operative society formed for improvement of tapioca and sago, starch industry and economic condition of cultivators. The owners/principals brought consignment for sale to society’s premises for auction. After sale, goods were delivered to buyer at sales premises itself by owner/principal. Society prepared invoices on behalf of principal, for amount paid to them for storage, testing charges and other handling charges and they have also maintained records on receipt of the amount and the stock received and available after the sale. The High Court after observing facts held that, society was not doing forwarding service. Handling goods on receipt raising invoices on sale or maintaining of records as to stock availability, at the best, showed Society only as agency offering storage facility, which could not convert the transaction as that of C&F Agent. Incidental services offered in transaction in arranging transportation of goods to buyer could not decide the nature of transaction. Further, department itself was not certain about head under which transaction would fall and it attempted to hit at some clause to bring society somehow within the net of taxation.

1.2     Swagat Freight Carriers Pvt. Ltd. vs. CST, Mumbai 2014 (33) STR 81 (Tri.-Mumbai)

The Tribunal in this case after relying on decision in Gudwin Logistics 2012 (26) STR 443 (Tri.-Ahmd), Larsen & Toubro 2006 (3) STR 321 (Tri.-LB) etc. held that Freight Forwarders is distinct and different from Clearing & Forwarding Agency service.

Business Auxiliary Service

1.3     Interplex Electronics India P. Ltd. vs. CST, Bengaluru 2014 (33) STR 56 (Tri.-Bang.)

The Tribunal in this case held that elctropating of goods on job work with silver or gold amounts to manufacture hence appellant is not liable to pay service tax in view of specific exclusion in the definition of BAS. Further, the appellant has supplied goods to 100% EOU, who are eligible for exemption under Notification No. 24/2003-CE and since the said exemption is not an unconditional exemption the appellant has a case for elgibility for exemption under Notification No. 8/2005-ST also even if it is assumed that the process does not amount to manufacture.

1.4     Krishan Kumar vs. CCE, Chandigarh 2014 (33) STR 60 (Tri.-Del.)

The appellant in this case being contractors running the retail outlet for petroleum products of IBP/IOC and incurred expenses like Tea/Coffee/Consumables, salary of employees, handling losses of generator set, bank charges, electricity charges, etc. and claimed reimbursement of such expenses without levying service tax. The Tribunal held that, as per section 67 of FA, 1994 value of any taxable service is gross amount charged by service provider and it does not provide for any deduction therefrom. It is further held that, extended period of limitation is invocable as the assessee has neither paid service tax nor filed any ST-3 returns.

1.5     KPIT Cummins Infosystems Ltd. vs. CCE, Pune-I 2014 (33) STR 105 (Tri.-Mumbai)

The assessee provided software development and consultancy services through branches located abroad to overseas customers. They received proceeds for the same after deducting expenditure by branches. The Tribunal held that, prima facie provisions of section 66A of FA, 1994 are not attracted as consumption of services abroad and therefore question of subjecting activity to tax in India is unsustainable in law. Further, said services amounts to export of services under rule 3 of ESR, 2005 and not liable to service tax.

Marketing and Sale Support Service

1.6     Tandus Flooring India Pvt. Ltd. vs. CST, Bengaluru 2014 (33) STR 33 (AAR)

The applicant involved in promotion and marketing of products of Tandus US and Tandus China in India. The Authority held that, place of provision of service to be determined by rule 3 of POPs Rules, 2012, which is location of service recipient namely Tandus US and Tandus China. Further, the service provided is not figured in section 66D of FA, 1994, place of provision of service is outside India, payment is received in CFE and applicant and service recipient both are independent entities, therefore provision of rule 6A of STR, 1994 have been satisfied and services qualifies as export of service.

Consulting Engineer Service

1.7     Suzlon Windfarm Services Ltd. vs. CCE, Pune-II 2014 (33) STR 65 (Tri.-Mumbai)

The appellant in this case provided services of operation, maintenance and security of windmills sold by their clients to customers. The department sought to tax them under Consulting Engineers Service. The Tribunal held that, no advice, consultancy and technical assistance in any field of engineering is rendered and executionary services are not covered under Consulting Engineers Service. The ratio of Rolls Royce Industrial Power (I) Ltd. 2006 (3) STR 292 (T) is relevant and squarely applicable to the present case.

1.8     CST, Mumbai vs. Leibert Corporation 2014 (33) STR 161 (Tri.-Mumbai)

The Tribunal in this case held that, supply of technical know-how, licence, patents, trade secrets, process for manufacture of licensed products and consideration received thereof is not liable to service tax under Consulting Engineers Service as no advice, consultancy or technical assistance has been given.

1.9     CST, Mumbai vs. Fugro Geonics Pvt. Ltd. 2014 (33) STR 170 (Tri.-Mumbai)

The assessee in this case carried out positioning service, hydrographic survey, oceanographic survey, seismic survey, geophysical and geotechnical survey and engineering survey in connection with oil exploratory operations to be carried out by the client. The Tribunal held that since, no service relating to advice, consultancy or technical assistance has been given and the service merits classification under Survey and Exploration of Minerals Service. It is also held that, when activity covered under specific entry, which came later, service tax not to be demanded on same activity under different category for prior period.

Commercial or Industrial Construction Service

1.10   B. G. Shirke Construction Technology Pvt. Ltd. vs. CCE, Pune-III 2014 (33) STR 77 (Tri.-Mumbai)

The appellant in this case constructed a sports complex including Stadium, where the said Stadium was allowed to be used by public on payment of user charges. The Tribunal held that, Stadium is a public facility for recreation of public and merely because some amount is charged for usage, Stadium does not become commercial or industrial construction. Sport stadium is non-commercial construction therefore, not liable to service tax.

Erection, Commissioning and Installation Service

1.11   CST, Mumbai vs. Hyundai Heavy Industries Co. Ltd. 2014 (33) STR 111 (Tri.-Mumbai)

The Tribunal in this case held that, pipes or pipelines are not plant, machinery or equipment and the said activity is not liable to tax under ECI Service. Further, the laying of pipelines is specifically covered under Commercial or Industrial Construction Service.

Maintenance and Repair Service

1.12   Ketan Motors Ltd. vs. CC, CE &ST, Nagpur 2014 (33) STR 165 (Tri.-Mumbai)

The department in this case, sought to include value of spare parts sold in taxable value of service. The Tribunal held that, confirmation of demand on basis of value of spare parts as reflected in balance sheet is incorrect and question of levy of service tax does not arise where transaction involves sale of spare parts. Payment of VAT/Sales tax on transaction indicating transaction to be treated as sale of goods and hence matter remanded back for fresh consideration.

2.      Interest/Penalties/Others

2.1     R. V. Man Power Solution vs. CC&CE 2014 (33) STR 23 (Uttarakhand)    

The High Court in this case held that, amount mentioned in show cause notice is merely a demand and not even the tentative adjudication. Under section 87 of FA, 1994 any amount payable means that amount adjudged after hearing the show cause notice and section 87 is one of the methods of recovery of amount due and payable after adjudication is done. The order in appeal freezing the Bank accounts is not sustainable in the eye of law having been passed without any jurisdiction.

2.2     CCE, Ludhiana vs. Amarjit Aggarwal & Co. 2014 (33) STR 59 (Tri.-Del.)  

The department in this case denied benefit of exemption under Notification No. 6/2005-ST while determined value of Works Contract Service without excluding value of goods sold. The Tribunal held that, once value of goods sold excluded from value of works contract, taxable service falls below Rs. 4 lakhs for financial year entitling taxpayer to the benefit of Notification No. 6/2005-ST as small service provider.

2.3     ITC Ltd. vs. CST, Delhi 2014 (33) STR 67 (Tri.-Del.)         

The SCN issued to the appellant failed to specify specific clause under which activity falling nor activity characterised with reference to distinct attributes of any clause. The Tribunal held that, unless assessee put to notice, no opportunity to assessee to meet case against him. There is no scope for assuming ground implicit in issuance of SCN. Reason for issuance of SCN on the basis of prima facie assumption that assessee assessable to levy of Service tax for providing BAS not specified. Mere extraction of entire provision under section 65(19) of FA, 1994 not fulfils requirement. SCN is invalid, infirmity incurable and therefore quashed.

2.4     Zaheerkhan B. Khan 2014 (33) STR 75 (Tri.-Mumbai)      

In this case, the appellant provided promotion services however, tax liability thereon has been discharged by agent. The Tribunal observed that, agents appointed for negotiating with corporate and discharge of tax liability and in view of section 65(7) of FA, 1994 assessee means person liable to pay Service Tax and includes his agent and therefore discharge of tax liability by agent is sufficient compliance of law.

2.5     CST, Chennai vs. Sangmitra Services Agency 2014 (33) STR137 (Mad)  

The department in this case contended that, reimbursable expenses received by assessee to be added to the taxable value related to clearing and forwarding agent service. The High Court held that, in absence of any material to show the understanding between the principal and the client the commission payable by principal was all inclusive and it is difficult to hold that the gross amount of remuneration/commission would nevertheless include expenditure incurred by assessee providing the services. Thus, if a receipt is for reimbursing the expenditure incurred for the purpose, the mere act of reimbursement, per se, would not justify the contention of Revenue that same, having the character of the remuneration or commission deserves to be included in the sum amount of remuneration/commission.

3.      Cenvat Credit

3.1     Hindustan Zinc Ltd. vs. CCE, Jaipur-II 2014 (33) STR 71 (Tri.-Del.)

The Tribunal in this case held that, dismantling/handling and transportation of unusable material used for renovation and repair of factory machinery is covered under definition of Input Service and credit thereon is admissible.

3.2     KPMG vs. CCE, New Delhi 2014 (33) STR 96 (Tri.-Del.)

The appellant in this case providing Management Consultancy services, availed credit in respect of Management, Maintenance or Repair service, employee mediclaim insurance, car hire, car parking service for which department objected for. The Tribunal held that, department’s contention of functional utility and integral nexus of input to final product to be considered for entitlement of Cenvat credit, does not merit acceptance. Input and Input Service definition are distinct under CCR, 2004. Input service is defined illustratively, not restrictively; illustratively and not exhaustively as comprising inter alia the enumerating service. Expression ‘in relation to’ in the definition of Input service signifies broad expression indicating comprehensiveness having direct and indirect significance depending on context and expression ‘includes’ signifies an inclusive definition and meaning, is illustrative and not exhaustive.

It is further held that, on fair construction of definition of Input Service, any service used by provider of taxable service for providing output service including services used in relation to setting up, modernization, renovation or repairs of premises, procurement of inputs, activity relating to business to constitute input service.

3.3     CCE, Salem vs. Cheran Spinners Ltd. 2014 (33) STR 148 (Mad.)

The assessee in this case discharged service tax liability on GTA service through Cenvat credit. The department objected to such adjustment. The High Court after going through rules 2(l) and (p) of CCR, 2004 held that in payment of service tax liability by recipient of taxable service, such assessee are also entitled to make use of Cenvat credit to discharge their liability under Service Tax provisions.

3.4     Stovec Industries Limited vs. CCE, Ahmedabad 2014 (33) STR 155 (Tri.–Ahmd)

The Tribunal in this case allowed Cenvat credit of service tax paid on CHA services availed at port for export of goods. It is further held that, Commissioner (Appeals) is a departmental officer and is bound by Circular issued by Board.

3.5     Crossword Agro Industries vs. CCE, Rajkot 2014 (33) STR 185 (Tri.-Ahmd.)

The Tribunal in this case held that, Cenvat credit is not admissible on the services used with respect to traded goods when utilized only for export of such traded items, which were not used in the stream of manufacture.

2

 

1.      Service by way of sponsorship of sporting events – Exemption under NN 25/2012 – ST

In Clause 11(a) the exemption is provided to services by way of sponsorship of sporting events organised by a National Sports Federation, or its affiliated federations, where the participating teams or individuals represent any district, state or zone. The same is now extended to the participating teams or individuals representing the country also.

(NN. 1/2014 – ST dated 10-1-2014)

2.      Meaning of Governmental Authority

The meaning of “Governmental Authority” is now widened by replacing the definition in paragraph 2(s) of NN. 25/2012 – ST wherein any authority or a board or any other body with 90% of or more participation by way of equity control, set up by an Act of Parliament or a State legislature or Government to carry out any function entrusted to a municipality under Article 243W of the Constitution would be covered under the definition.

(NN. 2/2014 – ST dated 30-1-2014)

3.      Clarification regarding issue of discharge certificate under VCES and availment of Cenvat credit

As regards to availment of Cenvat credit of tax dues paid under VCES, it has been clarified that the declarant shall be eligible only after making full payment and obtaining discharge certificate under section 107(7) and not upon making part payment of tax dues. It has been clarified that the acknowledgement of discharge shall be issued within the seven working days from the date of furnishing of details of payment of tax dues in full along with interest, if any. The Chief Commissioners are advised that the discharge certificate should be issued promptly and not later than the stipulated period of seven working days from the date of tax dues in full along with interest, if any.

It has been reiterated that the eligibility of Cenvat credit shall be governed by the Cenvat Credit Rules, 2004 as already clarified in answer to question No. 22 of FAQ issued by CBEC dtd. 8-8-2013

(Circular No. 176/2014 – ST dated 20-1-2014)

4.      Clarification on exemption to Residential Welfare Association

The Central Board of Excise and Customs (CBEC) has issued a circular on levy of service tax on service provided by a Residential Welfare Association (RWA). According to the circular, if contribution exceeds Rs. 5000/- per member per month for sourcing goods or services from third person for common use of members of RWA, no exemption would be allowed and service tax would be payable on the aggregate amount on the monthly contribution of such members. However, the basic exemption of Rs. 10 Lakhs for service provided by RWA as per Notification No. 30/2012 – ST would be available. The aggregate value would not include the value of services exempt from service tax. Whenever RWA provides service as pure agent like in case of electricity, water charges for which the bill is raised by the utility service provider in the name of the apartment owner for consumption therein, the same would be excluded from the value of taxable service if the same is collected without charging any commission or consideration. In case of electricity, water charges for common use in the common area no exclusion is allowable. Further, Cenvat credit may be availed by RWA for use of common services in accordance with Cenvat Credit Rules.

Circular No (175 /01/2014 - ST, dated January 10, 2014)

5.      TDS not to be deducted on service tax component

The Central Board of Direct Taxes has issued a circular to the effect that that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

(Income Tax Circular No. 1/2014, dated 13-1-2014)

1. Services

Maintenance and Repair Service

1.1 CC&CE, vs. Balaji Tirupati Enterprises 2013 (32) STR 530 (All.)

The High Court in this case held that goods used during repair service are goods deemed to be sold in execution of works contract and therefore not in purview of levy of service tax.

1.2 Jagat Machinery Manufacturers P. Ltd. vs. CCE, Ghaziabad 2013 (32) STR 663 (Tri-Del.)

The appellant in this case, undertook job work of deshelling, reshelling and further processing of old and worn out sugar mill rollers and the period involved was July, 2003 to February, 2006. The department confirmed demand under Maintenance or Repair service. The Tribunal held that definition of maintenance or repair service amended w.e.f. 16-6-2005 and prior to 16-6-2005 it does not cover reconditioning and restoration service and said activity was liable to service tax w.e.f. 16-6-2005.

1.3 Hindustan Aeronautics Ltd. vs. CST, Bengaluru 2013 (32) STR 783 (Tri-LB)

The appellant in this case claimed exclusion of cost of goods sold or deemed to have been sold to service recipient. The department contended that benefit of Notification No. 12/2003-ST is confined to sale of goods, excluding ‘deemed sale’. The Tribunal observed that precedent decisions found to limit scope of section 67 of FA, 1994 only to ascertain value of service component, wherever complex transactions involving service and sale element including deemed sale were presented for valuation of transaction as taxable service. It is also observed that, jural basis of Larger Bench decision in Aggarwal Colour Advance Photo System 2011 (23) STR 608 (Tri-LB) was eclipsed by binding authority of other decisions of Supreme Court and Delhi High Court. In view thereof it is held that, as core dispute was settled by higher authority of Supreme Court and Delhi High Court, there was no need for Larger Bench to decide issued referred for its consideration and it is to be decided by regular Bench.

Clearing & Forwarding Agent’s Service

1.4 CST, Mumbai vs. Shah Coal Pvt. Ltd. 2013 (32) STR 568 (Tri-Mumbai)

The department sought to demand tax on supervision of loading and transportation of coal by road under Clearing & Forwarding Agent Service. The Tribunal held that section 65(25) of FA, 1994 does not define or describe ‘Clearing and Forwarding operations’. The Board Circular No. B-43/7/97-TRU, dated 11-7-1997 clearly specify functions undertaken by C&F Agent in normal course of business. The said circular was issued at the time of inception of levy to be given weightage in view of principles of ‘administrative construction’ of statute.

1.5 Karamchand Thapar & Bros. (Coal Sales) Ltd. vs. CST Kolkata. 2013 (32) STR 568 (Tri-Kolkata)

In this case, the appellant was appointed by clients to supervise and involve in movement of allotted quantity and quality of coal from collieries to their premises for its consumption, without interruption and delay and remuneration for such movement was fixed in accordance with quantity of coal received by principal at place of its consumption. The Tribunal held that it was not service of mere loading of coal in railway wagons by collieries and its automatic onward movement to pre-determined destination for consumption. The appellant was required to ascertain correct quality and quantity of coal through strict supervision before or at time of its loading in railway wagons, which indicated that they had requisite authority as agent for their principal to receive only agreed quantity of coal and reject coal which is not conforming to specifications. Though destination was already fixed, but all related services till coal reached its destination was rendered by appellant. Hence, services rendered by the appellant were connected with C&F operations and therefore liable to service tax.

It is held that, it is not necessary to undertake all activities/services narrated in Mumbai Commissionerate Trade Notice No. 8/97-ST. The activities/services mentioned in CBEC Circular No B/43/7/97-TRU dated 11-7-1997 are only illustrative in nature and not exhaustive. If person undertakes activities/renders services, not mentioned in aforesaid list of services, but satisfies all ingredients of definition of C&F Agent then he would fall within its scope.

Freight financing charges collected from customers includes services connected with C&F operations and therefore liable to service tax.

As per section 66 of FA, 1994 service tax is chargeable on value of taxable service received by assessee. Assessee’s registered office was at Kolkata, where their profit/loss account and balance sheet had been prepared on trial balance from respective branch offices. Hence there was centralised accounting system at Kolkata and Commissioner at Kolkata had jurisdiction to decide issue of non-payment of service tax on taxable value received by assessee for services rendered through various branches. Rules 4(2) and (3A) of STR, 1994 are designed for convenience of taxpayers, for easy administration of FA, 1994 and to avoid overlapping of jurisdiction and conflicting views in assessment of service tax of same assessee rendering services from different locations.

Construction Service

1.6 G. D. Builders vs. UOI 2013 (32) STR 673 (Del.)

The High Court in this case held as under:

  • The scope and ambit of Commercial or Industrial and Residential construction service cannot be read down on imposition of service tax on works contract, which covers contractor only supplying labour or undertaking construction service, whether with or without supply of material. The levy under construction services is valid, the only condition being that it should be on service element and not on materials or goods used, as power to levy Sales Tax or VAT is with State Government.

  • After 46th amendment to Constitution of India composite contracts can be bifurcated to compute the value of goods sold/supplied in contracts for construction of building with labour and material. Service portion of composite contracts can be subjected to Service Tax. Aspect doctrine can be applied for bifurcating/vivisecting the composite contract.

  • Notification providing for 67% abatement towards value of material used for computing service tax payable is to ensure that service element is taxable. It is alternative to otherwise subjective determination in each case, which may be cumbersome and require detailed examination for ascertainment of service element. It provides convenient, alternative, optional and hassle free method for exclusion of non-service element and payment of service tax provided requirements mentioned in the notification are satisfied.

  • Service tax can be levied on service element. Computation of this component is matter of detail and not relating to validity of imposition of service tax. It is procedural and matter of calculation and merely because no rules are framed for computation, it does not follow that no tax is leviable.

Erection, Commissioning or Installation

Service

1.7 Suvidha Engineers India Ltd. vs. CCE, Noida 2013 (32) STR 735 (Tri-Del.)

The appellant undertook and executed various turnkey projects which included activities of fabrication, installation and commissioning during period 1-7-2003 to 15-6-2005. The department demanded service tax under ECI service. The appellant contended that their activities brought under definition of Section 65(39a)(ii)(c) in relation to heating, ventilation, or air-conditioning w.e.f. 16-6-2005. The Tribunal held that, installation of plant, machinery or equipment covered in the definition from very beginning and it is very difficult to distinguish that heating system, ventilation system, and AC system is different from heating plant etc. and therefore activities of the appellant are taxable prior to 16-6-2005. It is further held that since appellant submitted monthwise details of payment received on 5-9-2005, the department was free to issue SCN within one year after details of value of taxable service was made available and there is no reason to invoke extended period of limitation.

Site Formation and Clearance, Excavation and Earth Moving and Demolition Service

1.8 Karamjeet Singh & Co. Ltd. vs. CCE, Raipur 2013 (32) STR 740 (Tri-Del.)

In this case the issue was regarding the value of diesel supplied by service recipient free of cost to assessee includible in gross amount for charging service tax. The Tribunal after relying on Delhi High Court decision in Intercontinental Consultants & Technocrats Pvt. Ltd. 2013 (29) STR 9 (Del.) held that rule 5(1) of Valuation Rules, 2006 is invalid and ultra vires the provisions of section 67 of FA, 1994. In view thereof, value of diesel supplied free of cost by service recipient to assessee for providing taxable service would not be a component of the gross value charged for service provided for computation of tax under section 67.

2. Interest/Penalties/Others

2.1 Vihar Aahar Pvt. Ltd. vs. CST, Ahmedabad 2013 (32) STR 563 (Tri-Ahmd.)

The department in this case, confirmed demand falling within jurisdiction of various other Commissionerates. The Tribunal held that, in absence of Notification or Board Circular authorising/directing Commissioner Ahmedabad-I to issue SCN and adjudicate demand for services rendered at Mumbai, Karnataka and Kanpur, the jurisdiction exercised for confirming demand is beyond jurisdiction.

2.2 Eastern Shipping Agency vs. CST, Ahmedabad 2013 (32) STR 630 (Tri-Ahmd.)

The appellant in this case filed refund claim subsequent to Order-in-Appeal reducing the appellant’s tax liability. The Tribunal held that First Appellate Authority’s finding that payment not shown as ‘receivables’ in balance sheet is not in consonance with Modi Oil & General Mills 2007 (210) ELT 342 (P&H) and not to carry Revenue’s case further. It is observed that Chartered Accountant certificate categorically certifying verification of books of account and upon verification amount certified to have not been passed to clients. The decision of Crane Betel Nut Powder Works 2010 (251) ELT 118 (Tribunal) and Mangal Textiles Mills Pvt. Ltd. 2004 (171) ELT 160 (Guj.) are directly applicable as CA certificate was undisputed.

2.3 WNS Global Services Pvt. Ltd. vs. CCE, Nashik 2013 (32) STR 657 (Tri-Mumbai)

In the present case, refund claim was rejected on the ground that service provided by telecom authorities by leasing of telecom lines not eligible as input service. The Tribunal held that exports undertaken electronically through dedicated lines from office premises to telecom authorities and without dedicated lines, the appellant cannot deliver output service, therefore leasing of telecom lines by telecom authorities is input service. It is further held that prior to 2006 there was no requirement for registration. If nexus can be established between input service and output service, the appellant is entitled for credit.

2.4 Kijiji (India) Pvt. Ltd. vs. CCE, Mumbai-I 2013 (32) STR 661 (Tri-Mumbai)
In this case, the appellant claimed refund of input service credit on office utilities, infrastructure support service for running office, chartered accountants service, management consultancy service, insurance auxiliary service, advertisement service and professional services. The department rejected refund on the ground that there is no direct nexus between input services received and output service rendered. The Tribunal held that, all the services are essential in running business of rendering of output service “BAS” and appellant has rightly entitled for refund of service tax paid on such services.

2.5 Havels India Ltd. vs. CCE, New Delhi 2013 (32) STR 668 (Tri-Del.)

The appellant in this case claimed refund under Notification No. 17/2009-ST in respect of exports made prior to issuance of such Notification. The Tribunal observed that CBEC Circular No. 354/256/2009-TRU dated 1-1-2010 clarified that new notification does not bar exports prior to issuance of Notification therefore scheme under Notification No. 17/2009-ST is applicable.

2.6 Kingfisher Airlines Ltd. vs. CST, Mumbai-I 2013 (32) STR 744 (Tri-Mumbai)

The department in this case provisionally attached 10 aircrafts belonging to assessee against default in payment of service tax dues. The Tribunal held that only orders passed under section 73 or 83 of FA, 1994 adjudging service tax liability or penalty are appealable before Tribunal. Section 73C does not empower officers to determine service tax liability or penalty and order passed thereunder is not appealable to Tribunal.

3. Cenvat Credit

3.1 Deepak Fertilizers & Petrochemicals Corpn. Ltd. vs. CCE, Belapur 2013 (32) STR 532 (Bom.)

The High Court in this case held that use of ‘directly or indirectly’ and ‘in or in relation to’ in the definition of Input Service are words of width and amplitude. The inclusive definition in rule 2(l) of CCR, 2004 is not restricted to input services used only for procurement and inward transportation of inputs. Input services utilised in relation to installation of ammonia storage tanks situated outside factory of production are admissible as input service.

3.2 Rajdhani Crafts vs. CCE, Jaipur 2013 (32) STR 607 (Tri-Del.)

The Tribunal in this case allowed Cenvat credit of service tax paid on transport of goods from factory to port, CHA service and terminal handling charges and similar other charges incurred within port area.

3.3 Aircel Cellular Ltd. vs. CST, Chennai 2013 (32) STR 618 (Tri-Chennai)

The appellant a mobile telecom operator has taken services of BSNL for connecting their customers to other persons located in areas by landlines of BSNL and claimed credit of service tax paid to BSNL. The Tribunal held that BSNL did not provide mere facility it was telecom service which was required by operator for providing output services to their customers and hence input service under rule 2(l) of CCR, 2004.

3.4 Nirma Ltd. vs. CCE&ST, Vadodara-I 2013 (32) STR 622 (Tri-Ahmd.)

The Tribunal in this case allowed Cenvat credit of service tax paid on pest control service, services for maintaining garden in factory premises and for construction of compound wall in view of the fact that the appellant was under obligation to maintain 33% of green area to mitigate effects of pollution as per direction of Ministry of Environment and Forests. Further, the construction of compound wall are input service as such construction is essential to demarcate registered factory premises and for protection of goods from pilferage and potential clandestine removal.

3.5 IFB Industries Ltd. vs. CCE, Bengaluru 2013 (32) STR 650 (Tri-Bang.)

The Tribunal in this case held that, outdoor catering service has nexus with manufacturing activity when it is provided by manufacturer in discharge of statutory obligation under section 46 of Factories Act, 1948 and it is factored into cost of production of final product. On facts of the present case, appellant has employed less than 250 workers during the period in dispute, they did not have statutory obligation to provide canteen service and hence it was not input service eligible for taking Cenvat credit.

Cenvat credit of service tax paid on repairs/maintenance of guest house is not admissible in absence of nexus with manufacturing activity.

3.6 Nectar Lifesciences Ltd. (Unit-I) vs. CCE, Chandigarh 2013 (32) STR 659 (Tri-Del.)

The Tribunal in this case held that, dismantling of plant is not input service resulting in any tangible output or intimately connected with manufacture and therefore Cenvat credit availed thereon is recoverable. Further, service tax paid on installation charges of door is not input service when door not proved to be capital goods under Central Excise Tariff.

3.7 Meghmani Dyes & Intermediates Ltd. vs. CCE, Ahmedabad 2013 (32) STR 671 (Tri-Ahmd.)

The Tribunal in this case allowed Cenvat credit of service tax paid on bank charges paid in relation to purchase of raw material and sale of finished goods as same are relatable to manufacture of final products.

3.8 CCE, Tirupathi vs. India Cements Ltd. 2013 (32) STR 672 (Tri-Bang.)

The Tribunal in this case allowed service tax paid on insurance premium, though paid by contractor as insurance of labourers being essential for smooth functioning and amount of premium reimbursed by the manufacturer from part of cost of cement.
 

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