Service Tax Case Law – Update – August, 2011

1. Services:

1.1  CCE, Ranchi vs. Modi Construction Co.2011 (23) STR 6 (Jhar.)

In the present case, the assessee was engaged in handling and shifting of unfinished and finished goods in factory premises of customer. The High Court observed that Cargo handling service means loading, unloading, packing or unpacking of cargo and Cargo according to dictionary means cargo loaded or unloaded on truck, aircraft and ship. It is held that definition of Cargo handling service does not cover handling of goods within factory premises.

1.2  Kaveri Coal Suppliers vs. CCE, Kanpur 2011 (23) STR 35 (Tri.-Del.)

The appellant in this case was engaged in activity of making payment of price of coal for various persons and arranging transportation by paying freight and arranging insurance, R/R etc and received commission from clients to whom finance was provided. The Tribunal after relying on CBEC Order 37B No. 2/1/2002-ST dated 20/04/2002 held that financing of coal is not included as service of C&F Agent.

1.3  CCE, Jaipur vs. K. K. Polymers 2011 (23) STR 129 (Tri.-Del.)

In this case assessee was engaged in procuring purchase orders from prospective buyers for their principals and dispatches the goods to the prospective buyers. They also own the responsibility and guarantee of payment towards sale of such goods. The Tribunal held that activity undertaken by assessee is not covered under the category of Clearing and Forwarding Agency service.

1.4  CST, Bangalore vs. Indian Institute of Management 2011 (23) STR 132 (Tri.-Bang.)

The Tribunal in this case held that assessee an educational institution solely engaged in imparting education and at time facilitates recruitment on their campus through interviews which is incidental or ancillary to their main objective cannot be called as commercial concern, as they are not engaged in trade or commerce. It is further held that prior 01/05/2006 Manpower Recruitment or Supply Agency service rendered by the assessee which is not a commercial concern would not fall under the service tax net.

1.5  ITW India Limited vs. CCE, Vapi 2011 (23) STR 159 (Tri.-Ahmd.)

The Tribunal in this case held that service tax in case of financial leasing services is leviable only on lease management fee/processing fees and documentation charges and not on principal amount. Since the service tax is confirmed on entire principal amount, the impugned order set aside and matter remanded to original authority for re-quantification of demand.

1.6  Orient Packaging Ltd. vs. CCE, Meerut-I 2011 (23) STR 167 (Tri.-Del)

The Tribunal in this case held that process of cutting paper into sheets is not manufacture but production of goods. Processing of goods is integral part of production and intention of legislation while inserting word “production” in the definition of Business Auxiliary service was to levy tax on activity of production/processing. Further, penalty is waived as the issue involved is interpretation of statute.

2. Interest/Penalties/Others:

2.1 CST, New Delhi vs. Independent News Services P. Ltd. 2011 (23) STR 23 (Tri.-Del.)

In this case, the assessee collected service tax but not remitted to the Government. However, on being pointed out deposited entire service tax with interest before issue of SCN. The Revenue challenged dropping of SCN for penalty under section 76 and 77 of FA, 1994 and contended that penalty equal to 25% of tax not paid hence assessee is not entitled to any immunity from payment of penalty. The Tribunal held that Section 73(3) does not envisage payment of penalty once tax paid in full with interest. It is further held that after making provision in law, the Revenue should respect the provision made rather than feel aggrieved that the provision is too lenient.

2.2 CCE, Raipur vs. Shyam Enterprises 2011 (23) STR 29 (Tri.-Del.)

In this case department issued SCN on the basis that assessee rendered Manpower Recruitment and Supply service. Assessee contended that they have rendered erection and commissioning of tower parts done through engagement of employees/workers of company and not covered under Manpower Recruitment and Supply service. The Tribunal held that SCN is not providing foundation for levy in respect of activity carried out and therefore revenues appeal is to be dismissed.

3. CENVAT Credit:

3.1 Utopia India Pvt. Ltd. vs. CST, Bangalore 2011 (23) STR 25 (Tri.-Bang.)

The Tribunal in this case allowed cenvat credit on the following input services;

• Chartered Accountants services for accounting and auditing of transactions.
• Manpower recruitment and supply service availed for supply of qualified personnel to provide output service.
• Outdoor catering service for staff to the extent incurred by the appellant.
• Insurance for assets such as computers, equipments, building etc.
• Security staff employed to guard premises from where output service provided.
• Technical inspection service to assess its credential to qualify for grading ISO 9001 2000.

3.2 CCE, Chennai vs. Areva T &D India Ltd. 2011 (23) STR 33 (Tri.-Chennai)

The assessee in this case a manufacturer and also provided taxable services. The Tribunal held that no separate account is required to be maintained for credit of duty taken on inputs and input service as cenvat credit is common kitty. Credit taken on excise duty could be used for payment of service tax on services provided by assessee.

3.3 CCE, Coimbatore vs. Sri Varahiamman Steels (P) Ltd. 2011 (23) STR 91 (Tri.-Chennai)

In this case, there was change in the name of assessee without change in its constitution. The department rejected credit on the ground that the order allowing credit was in previous name. The Tribunal held that credit allowed under its previous name can be transferred to assessee in its new name.

3.4 CCE & ST. LTU, Bangalore vs. ABB Limited. 2011 (23) STR 97 (Kar.)

The High Court in this case held that till 01/04/2008, transportation charges incurred by manufacturer for clearance of final product from place of removal included in main part of the definition of Input service. Further, it is held that finding of Tribunal to the effect that transportation charges are also covered under “activities relating to business” is entirely unnecessary and unsustainable.