Service Tax Case Law Update- December 2012

1. Services:

Construction of Residential Complex Service:

1.1  A. S. Sikarwar vs. CCE, Indore 2012 (28) STR 479 (Tri-Del.)

The Tribunal in this case held that, definition of Residential Complex under section 65(91a) of FA, 1994 is applicable to both category of services i.e. Construction of Residential Complex and Works Contract Service. Further, levy of service tax under this service is inapplicable to compound having many buildings of not more than 12 residential units.

Consulting Engineers Service:

1.2 

Mitsui & Co. Ltd. vs. CCE&ST, Jamshedpur 2012 (28) STR 491(Tri-Kolkata)

In this case, the assessee treated imported and indigenously procured drawing and designs as Goods assessable under Customs Act, 1962 and Central Excise Act, 1944. The Tribunal held that, under such circumstances value of such designs and drawings is not subjected to service tax.

Business Auxiliary Service:

1.3  Spectrum Coal & Power Ltd. vs. CCE, Raipur 2012 (28) STR 510(Tri-Del.)

In this case, the Tribunal after relying on decision in Aryan Energy Pvt. Ltd. 2009 (13) STR 42 (Tribunal) held that, benefication/washing raw coal at washery is part of mining service liable to service tax w.e.f. 01/06/2007.

Supply of Tangible Goods Service:

1.4  In Re: Hardy Exploration & Production (I) Inc. 2012 (28) STR 513(Commr. Appl.)

The Tribunal held that, activity under Mining Service is restricted to actual extraction of oil or gas from beneath the earth. Supply of impugned rigs for post-extraction activity without transferring possession and effective control is liable to service tax under Supply of Tangible Goods service.

It is further held that, time prescribed under section 11B of CEA, 1944 for refund of tax is applicable to tax collected as permitted by Statute and not applicable to tax collected without authority.

Cargo Handling Service:

1.5  In Re: Freight Systems (India) Private Limited 2012 (28) STR 521(Commr. Appl.)

In this case it is held that, transportation of household articles not to be equated with cargo or goods handling. Cargo itself suggests handling of cargo in bulk and goods suggest some goods/items in commercial quantity. The household items cannot be equated with bulk cargo or goods. Therefore, cannot be brought to tax under Cargo Handling Service.

1.6  I.A. Dhas vs. CCE, Raipur 2012 (28) STR 630 (Tri-Del.)

The Tribunal in this case held that, loading, unloading, transportation and stacking of various iron and steel products within stockyard of M/s SAIL cannot be held to be covered by the activity of Cargo Handling Service.

Storage and Warehousing Service:

1.7  In Re: Sical Distriparks Ltd. 2012 (28) STR 525(Commr. Appl.)

The assessee a container freight station retained auction proceeds of abandoned cargo by importers in lieu of storage and warehousing charges due from importers. It is held that, the assessee is a custodian of goods and transfer of title of goods during auction is to be treated as sale. The auction proceeds received do not represent storage and warehousing charges hence no service tax is payable. 

1.8  Kerala State Indl. Enterprises Ltd. vs. CCEC& ST Kochi 2012 (28) STR 574(Ker.)

The appellant in this case allowed terminal building to Airlines for handling both Air Cargo as well as passenger baggage. They allowed Airlines, 48 hours to lift cargo without any liability for storage and warehousing charges. The High Court held that, charges collected are liable to service under storage and warehousing only when retention of Air cargo or passenger baggage was beyond 48 hours. Other they were not liable to Service tax since exclusion from Cargo Handling service.

It is further held that, what is specifically excluded from levy could not be brought to tax under another charging entry and if this is permitted, it will frustrate exclusion clause.

1.9  Abban Lloyd Chiles Offshore Ltd. vs. CST, Chennai 2012 (28) STR 622(Tri-Chennai)

The appellant in this case as a Floating Production Unit (FPU) engaged in offshore for drawing crude oil from subsea wells in sea and processes and transfers processed crude oil through a buoy into a vessel called Floating Storage and Offloading Unit (FSO) through which the crude is further transported to fleets. The appellant paid certain amounts to foreign company PROSAFE for provision of operations personnel, maintenance, spare parts, supplies and all other resources necessary for operation of FSO. The department sought to tax these services under Storage and Warehousing under reverse charge mechanism. The Tribunal held that, PROSAFE was a part of operating team for processing and transferring crude oil and being an agent of the process of production it was not a storage or warehouse keeper.

Works Contract Service:

1.10          Nagarjuna Constructions Co. Ltd. vs. GOI 2012 (28) STR 561(SC.)

The Supreme Court in this case held that, CBEC Circular No. 98/1/2008-
ST 04/01/2008 stipulating that it was not permissible to vivisect single composite service to classify it under two different taxable services depending upon time of receipt of consideration. It is held that, circular merely explained Rule 3(3) that option to pay service tax in respect of works contract must be exercised before payment of service tax and it was not discriminatory. Even if the circular was set aside, Rule 3(3) would remain in the Statute. Thus, works contract composition scheme was not applicable to ongoing contracts as on 01/06/2007.

Tour Operators Service:

1.11          Andhra Pradesh Tourism Devl. Corpn. Ltd. vs. CCE, Hyderabad 2012 (28) STR 595(Tri-Bang.)

In this case, the Tribunal held that, components of taxable value of package tour operators services have to be decided based on definition of tour, tour operator and tour operators service. Meaning of ‘package tour’ in common parlance was recognized in CBEC Circulars issued prior to 23/08/2007 and same concept was incorporated in Notification No. 38/2007-ST. Also definition of taxable service under Section 65(105)(n) at all time had room for including supplementary services within ambit of ‘any service provided in relation to tour’.

Exemption Notification could not be used to construe statutory provisions, and in case of inconsistency between the two, latter prevail. Further, absence of words ‘other similar services’ in definition of ‘package tour’ prior to 23/08/2007 in Notification could not mean that, charges for supplementary services were not to be included in taxable value for period prior to that date. On facts, taxable value found to include costs of supplementary services viz. Darshan Fee, Entry fee, cruise/water fleet charges, hill transportation charges and cost of railway segment of tour as these charges cannot be classified as ‘reimbursement’. The appellant is entitled to claim abatement on gross taxable value under Notification Nos. 39/97-ST, 1/2006-ST and 38/2007-ST.

Management Consultants Service:

1.12          In Re: Pricewaterhousecoopers Pvt. Ltd. 2012 (28) STR 659(Commr. Appl.)

 

The department in this case denied benefit of exemption notification no. 4/2004-ST to internal audit and indirect support services to SEZ units on the ground of non-consumption of services within SEZ. It is held that, services rendered ultimately consumed by SEZ and fact of utilization of services by SEZ is undisputed by lower authorities. Also by virtue of section 51 of SEZ Act, 2005 it has overriding effect over Notification No. 4/2004-ST.

 

2. Interest/Penalties/Others:

2.1 In Re: Sundaram Auto Components Ltd. 2012 (28) STR 545 (Commr. Appl.)             

In this case department demanded service tax on Tax deducted at source (TDS) borne by the assessee in case of foreign remittances. It is held that, the foreign company is entitled to receive fixed net amount payable in four installments and any tax liability is to be borne by the assessee, therefore the consideration received by service provider is independent of TDS amount. This is not a case where Tax is deducted from gross amount charged and service tax paid on net amount. Therefore, in the present case, TDS is not to be included in taxable value for discharging service tax.

2.2 Mohendra Construction vs. CCE, Allahabad 2012 (28) STR 632 (Tri-Del) 

In this case the Commissioner (A) reproduced submission contained in memo of appeal and confirmed demand giving an impression of admission of duty liability by the assessee. The Tribunal held that, style of approach and passing of order shakes faith of public in judicial remedy. The Commissioner (A) being First Appellate Authority expected to go through facts and grounds raised, record submission and give own findings. Disposal of appeal with distorted reproduction of assesses submission and mere endorsement of original authority’s order cannot be appreciated at all. The OIA is set aside and matter remanded for fresh decision.

3. Cenvat Credit:

3.1 Valco Industries Limited vs. CCE, Chandigarh 2012 (28) STR 457 (Tri-Del) 

The Tribunal in this case allowed Cenvat credit in following cases;

·        Service tax paid on Insurance for vehicle in personal name of the Directors as the vehicle is used in interest of business of the company.

·        Transfer of bills from HO to factory does not amount to distribution of service. Credit is admissible at factory on the basis of duty paying document addressed to HO, even without HO registered as ISD.

·        Mobiles phones used by Directors of Assessee Company.

·        Credit on invoices in the name of brand name and registered name of the assessee company cannot be denied in view of proviso to Rule 9(2) of CCR, 2004.

3.2 C. Metric Solution Pvt. Ltd. vs. CCE, Ahmedabad 2012 (28) STR 460 (Tri-Ahmd)            

The Tribunal in this case after relying on earlier decision of Tribunal in Well Known Polyesters Limited 2012 (25) STR 411 (Tribunal) held that, Cenvat credit of service tax paid on input services received prior to registration is admissible.

3.3 In Re: DBS Cholamandalam Securities Ltd. 2012 (28) STR 529 (Commr. Appl.)             

In this case, the appellant authority allowed Cenvat credit of service tax paid on stock exchange service, employee insurance, food charges, subscription/books/periodicals and travelling expenses as services were utilized during course of business activity.

It is further held that, in Debit Note all the relevant information/details as mentioned in any Invoice are available hence, credit is allowed on debit notes.

3.4 CCE, Surat vs. Aneri Construction 2012 (28) STR 578 (Tri-Ahmd.)           

In this case, the assessee availed Cenvat credit of duty paid on air compressor used for output service taxable under ‘Commercial and Industrial Construction service’ but received it before the said services became taxable. The Tribunal held that, decision of Gujarat Propack 2009 (234) ELT 409 (Guj.) is distinguishable as factually different and after relying on decision in Spenta International Limited 2007 (216) ELT 133 (Tri-LB) held that, credit eligibility is to be determined with reference to dutiability on date of receipt of goods.