Service Tax Case Law Update - January 2013

1. Services:

Construction Service:
1.1  Narne Construction P. Ltd. vs. UOI 2013 (29) STR 3 (SC.)

In this case the appellant was engaged in offering of plots for sale with assurance of lay-out approvals, development of infrastructure/amenities etc. as part of package of fully developed plot. The Supreme Court held that, this kind of transaction involved much more than a simple transfer of a piece of immovable property. It was not a case of mere sale of property with all advantages and/or disadvantages on “as is where is” basis and it is service within the meaning of section 2(1)( c ) of Consumer Protection Act, 1986 and any deficiency/defect therein was amenable to jurisdiction of forum established there under.

 

Clearing & Forwarding Agent Service:

 

1.2  CCE&C vs. Trade Tek Corporation 2013 (29) STR 23 (Guj.)

 

The High Court in this case held that, activity which neither involves clearing of goods nor forwarding of goods but purchase and sale of goods to customers on their own invoices not covered under the scope of Clearing & Forwarding Agent Service. Goods purchased availing quantity discount and not commission and then sold to customers on their own invoices under a contract on pre-decided prices but with embargo on charging higher prices, with liability to pay sales tax and reach a certain minimum turnover of such sales for renewal of contract cannot be equated to task performed by Clearing and Forwarding Agent.

 

Business Auxiliary Service:

 

1.3  Aryan Coal Benefications Pvt. Ltd. vs. CST, New Delhi 2013 (29) STR 74 (Tri-Del.)

 

The Tribunal in this case after relying on decision in Spectrum Coal and Power Ltd. 2012 (28) STR 510 and Aryan Energy Pvt. Ltd. 2009 (13) STR 42 held that, service tax is not leviable on beneficiation of coal for period prior to 01/06/2007.

Further it is also held that, activities of loading, transportation, and unloading at washery are part of entire contract with customers and cannot be segregated or held different as Cargo Handling Agency service.

 

Franchise Service/Intellectual Property Rights Service:

 

1.4  Malabar Gold Pvt. Ltd. vs. CTO, Kozhikode 2013 (29) STR 119 (Ker.)

 

In this case the assesee transferred right to use Trade Mark to franchisees for use, against agreed royalty. The Court upheld, Tribunal’s decision that it is deemed sale liable to tax under Kerala Value Added Tax Act, 2003. The Court rejected assessee’s plea that VAT on such transfer was illegal as they were paying Service Tax on royalty received and Service tax and VAT are mutually exclusive.  It is held that, introduction of service tax on franchise agreement was inconsequential and legality of levy of service tax on royalty was not before the Court and had to be challenged in appropriate proceedings.

 

Legal Consultancy Service:

 

1.5  Revenue Bar Association vs. UOI 2013 (29) STR 126 (Mad.)

 

The Court in this case granted interim injunction restraining Department from compelling Members of Revenue Bar Association from registering themselves with Service Tax Authorities under Legal Consultancy Service.

 

Commercial Training and Coaching Services:

 

1.6  Chate Coaching Classes Pvt. Ltd. vs. CCE, Aurangabad 2013 (29) STR 138 (Tri-Mumbai)

 

The assessee in this case claimed deduction for value of study material provided to students under Notification No. 12/2003-ST. The Tribunal observed that, CBEC Circular No. 59/8/2003-ST dated 20/06/2003 stating exemption applicable only if material is ‘standard textbook’ is not used in Notification and in the present case the study material was purchased from third party. In view thereof, it is held that, there is no reason to deny benefit under the said Notification.

 

Storage & Warehousing Services:

 

1.7  Maersk India Pvt. Ltd. vs. CCE&C, Raigad 2013 (29) STR 170 (Tri-Mumbai)

 

The Tribunal in this case held that, income from auction i.e. sale of uncleared/abandoned cargo by custodian is not liable to service tax in view of CBEC Circular No. 11/01/2002-TRU dated 01/08/2002 and decision in Mysore Sales International Ltd. 2011 (22) STR 30 (T) and India Gateway Terminal Pvt. Ltd. 2010 (20) STR 338 (T). 

 

Air Travel Agent’s Services:

 

1.8  British Airways PLC vs. CST, New Delhi 2013 (29) STR 177 (Tri-Del)

 

The Appellant in this case collected levies and charges imposed by authorities but not paid any tax thereon. The Tribunal held that, impugned charges and fees form part of gross amount of air tickets and there is no provision to exclude charges from taxable value. Rule 5(1) of Valuation Rules, 2006 clearly stating that any expenditure or cost incurred by service provider in providing taxable service to be treated as consideration for taxable service.

It is further held that, service provider required to make tax payment on taxable service provided on or after 01/05/2006, when it was made taxable. At time of journey levy of Service tax is in force therefore tax payable on tickets sold prior to impugned date.

 

 

 

2. Interest/Penalties/Others:

 

2.1 Intercontinental Consultants & Technocrats Pvt. Ltd. vs. UOI 2013 (29) STR 9 (Del.)          

 

The High Court in this case observed that rule 5(1) of Valuation Rules, 2006 providing for inclusion of expenditure/cost, such as travel, hotel, stay, transportation etc. incurred by service provider in the course of providing taxable service, purports to tax not what is due from service provider under charging section 66 of FA, 1994. The said rule is ultra vires the section 67, which quantifies the charge of service tax both before and after its amendment of 01/05/2006. In these sections phrase “for such service” is important. Such expenditure/costs cannot be considered as amount charged by Service provider “for such service” provided by him.

Power to make rules cannot exceed or go beyond Section which provides for charge or collection of Service Tax. Apart from being ultra vires, the Rule 5(1) may also result in double taxation, if expenses like air travel tickets, had already been subjected to Service tax.

Harmonious reading of section 66 and 67(1)(ii) of FA, 1994 indicates that, valuation of taxable service is only a consideration paid as quid pro qua for service can be brought to charge.

In the present case, where assessee is Consulting Engineer expenditure/costs such as air travel, hotel stay etc. incurred for service are not includible in gross taxable value of service and only value of service rendered as consulting engineer could be brought to charge.

 

2.2 Hamdard (Wakf) Laboratories vs. State of UP 2013 (29) STR 99 (All.)                       

 

The Revenue in this case, despite stay granted by Tribunal till disposal of appeal, acted in haste for recovering amount by coercive process. The High Court in this case held that, it was arbitrary action of authorities which would shake confidence of law abiding dealers and adversely affect development and industrial growth.

 

3. Cenvat Credit:

 

3.1 Shree Cement Ltd. vs. CCE, Jaipur-II 2013 (29) STR 77 (Tri-Del)                             

 

The department in this case denied Cenvat credit of service tax paid on debit notes. The Tribunal held that, three items i.e. invoice, bill and Challan used in impugned rule and substance is more important than format and therefore there is no scope to deny relief if service tax realized through impugned notes deposited in to treasury.

 

3.2 Paramount Communication Ltd. vs. CCE, Jaipur 2013 (29) STR 146 (Tri-Del)        

 

The Tribunal in this case allowed Cenvat credit of service tax paid on Outdoor catering services for providing food to their employees and on running a cab service for transportation of employees from home to factory and back to home as they are input service.