Service tax Case law update - March 2013

1. Services:

 

Rent – a – Cab Service:

 

1.1  Shree Gayatri Tourist Bus Service vs. CCE, Vadodara 2013 (29) STR 499 (Tri-Ahmd.)

 

The appellant in this case had contract with client inter alia stipulating that, (i) vehicles were required for transportation of personnel and delegates of client, under their instructions/directions, (ii) vehicles may have to move on official duty to outstation, depending upon exigencies of client work, for which no other extra charges was to be paid, (iii) vehicle would be provided normally for 12 hours duty in a day, (iv) hiring charges are to be calculated for actual number of working days on pro rata basis, (v) maintenance, behavior, discipline of driver was responsibility of assessee, (vi) for maintaining, refueling, repair etc. of vehicle no extrac charges was to be paid , (vii) asseseee was required to maintain log book duly sgned by officer using the vehicle, and at end of the month, submit bills to client along with copies thereof, (viii) assessee was to be paid minimum fix charges per vehicle per month. The department wanted to levy service tax on service provided under Rent-a-Cab service. The Tribunal on the basis of facts and contracts held that, vehicles were not rented to client and therefore not liable to service tax under Rent-a-Cab Service.

 

Clearing & Forwarding Agent Service:

 

1.2  CCE, Delhi vs. D. R. Polymers 2013 (29) STR 536 (Tri-Del.)

 

When the arrangement between the service provider and the principal being for causing sale on behalf of the principal and not for dispatching the goods as per directions of the principal and the service provider himself issued the invoices, no liability on the service provider is attracted to pay service tax under C&F Agents Service.

 

Banking & Other Financial Service:

 

1.3  CCE, vs. Federal Bank Ltd. 2013 (29) STR 554 (Ker.)

 

The High Court in this case held that, since cash management services (Collection of telephone bills) have been specifically excluded from purview from Banking & Other Financial Service until 31/05/2007, same cannot be made liable to service tax under any other taxable service including Business Auxiliary Service. 

 

Stock Brokers Service:

 

1.4  LSE Securities Ltd. vs. CCE, Ludhiana 2013 (29) STR 591 (Tri-Del)

 

The Tribunal in this case held that, clause (a) of explanation to Section 67 of FA, 1994 stipulates that aggregate of commission or brokerage charged by broker on sale or purchase of securities including commission or brokerage paid by the stock broker to any sub-broker is liable to service tax. It cannot be expanded to levy tax on receipt by implication or inference. Turnover charges, Stamp duty, BSE Charges, SEBI fees and Demat charges collected by the appellant cannot be included in assessable value to be taxed on the ground that, they were received by stock broker. These are not commission or brokerage. They are recoveries from investors to make payment to respective authorities in accordance with statutory provisions of Indian Stamp Act, 1899 and SEBI guidelines.

Section 67 providing for valuation cannot be expanded to have artificial measure of levy bringing a receipt by implication or inference running counter to charging provision. It is the intrinsic value of service which should be taxed without any hypothetical rule of computation of value of taxable service.

 

2. Interest/Penalties/Others:

 

2.1 Larsen & Toubro Ltd. vs. UOI 2013 (29) STR 449 (Bom.)                                           

 

The Bombay High Court on CBEC Circular No. 967/1/2013 dated 01/01/2013 with regard to recovery of dues, held that, if failure of Appellate Authorities to dispose of appeal or stay is not due to default of assessee or their dilatory tactics, to initiate recovery by coercive measure in meantime, unjustified, arbitrary, travesty of justice and violative of Article 14 of Constitution of India. It is penalty on assessee for inability of judicial/quasi judicial authority to dispose of stay application within thirty days period. Fact that, thirty days period was allowed to lapse after filing of appeal, was immaterial as Commissioner (Appeals)/CESTAT may not be able to decide on stay application within that period.

It is further held that, the said Circular is in terrorem. It  deprives assessee even a reasonable time to exercise remedy provided to them under law of moving, as the case may be, CESTAT, High Court or Supreme Court, apply for stay and waiver of pre-deposit. Also, there is no justification to commence recovery immediately following order-in-appeal where period of limitation has been laid down for challenging it.

 

2.2 Delhi Chartered Accountants Society (Regd.) vs. UOI 2013 (29) STR 461 (Del.)        

 

The Delhi High Court in this case held that, CBEC Circular Nos. 154/5/2012-ST dated 28/03/2012 and 158/9/2012-ST dated 08/05/2012, prescribing for eight specified services, levy of enhanced rate of 12% in respect of invoices issued on or before 31/03/2012 but payment was received thereafter, on ground that point of taxation was date of payment, were liable to be quashed as they were contrary to Finance Act, 1994 and Point of Taxation Rules, 2011 (POTR, 2011).

 

It is further held that, Circular No. 158/9/2012-ST is erroneous in prescribing that eight specified services, including services of Chartered Accountant, if payment is received/made after 01/04/2012, needs to pay 12% since new rule 7 of POTR, 2011 does not cover services earlier referred to in Rule 7(c) of POTR, 2011 existed up to 31/03/2012. These kind of situations are governed by rule 4(a)(ii) of POTR, 2011, which is continued after 01/04/2012, and prescribes that, where service has been provided and invoice has been issued prior to change in effective rate of tax, but payment is received thereafter, the date of issuance of invoice is deemed to be date on which service was rendered.

 

2.3 CST, Ahmedabad vs. Sun-N-Step Club Ltd. 2013 (29) STR 521 (Tri-Ahmd.)             

 

The assessee in this case claimed refund of service tax paid erroneously on entry fee received from non-members, by working backwards from gross fee. The Tribunal observed that, in invoices they had not charged service tax and the lower authorities found that, the assessee was not liable to service tax on non-members under Club & Association Service. In that view it is held that, assessee is entitled to refund and there could be no unjust enrichment, as fee was fixed, and service tax was paid out of total consideration received.

 

2.4 Wipro Ltd .vs. UOI 2013 (29) STR 545 (Del.)                                                                

 

The High Court in this case held that, filing of declaration for claiming rebate under Notification No. 12/2005-ST, after date of export of service is not such a non-compliance as to disentitle exporter from rebate. Nature of service is such that they are rendered seamlessly, on continuous basis without any commencement or terminal points and it is difficult to comply with requirement “prior” to date of export, except for description of service.

It is further held that, service tax and cess paid on cost of providing Call Centre/business process outsourcing service is eligible for rebate under Rule 5 of ESR, 2005.

It is also held that, conditions imposed by notification must be capable of being complied with and if it impossible of compliance, then there is no purpose behind it.

 

3. Cenvat Credit:

 

3.1 CCCE&ST, Hyderabad vs. Aster Teleservices (P) Ltd. 2013 (29) STR 475 (Tri-Bang.)          

 

The Tribunal in this case held that, the assessee being liable to pay service tax on GTA service, he was doing so as an output service and therefore he was entitled utilize Cenvat credit for payment of such tax. It is also held that, there is no legal bar on utilization of Cenvat credit for the purpose of payment of Service Tax on GTA service by the deemed service provider thereof.

 

3.2 Hindustan Zinc Ltd. vs. CCE, Jaipur - I 2013 (29) STR 492 (Tri-Del.)                       

 

The Tribunal in this case allowed Cenvat credit of service tax paid on Rent-a-Cab service availed in bringing employees to the factory and dropping them back and in relation to ambulance service, however not allowed Rent-a-Cab service availed in transportation of employee’s children to school/tuition centers. Further, penalty is waived as the issue regarding admissibility of the credit is related to interpretation of the provisions of CCR, 2004.

 

3.3 Pearl Insulations Pvt. Ltd. vs. CCE Bangalore 2013 (29) STR 640 (Tri-Bang.)          

 

The department in this case demanded interest on wrongly availed Cenvat credit, though the appellant reversed the same without utilization. The Tribunal held that, section 11AB of CEA, 1944 has to be read down to mean that interest liability arises when wrongly availed credit has been utilized and not when only availed.