Service tax case law update - July 2013

1. Services:

 

Advertising Service:

 

1.1  CCE, Chandigarh vs. Facinate Advertising & Marketing 2013 (31) STR 77 (Tri-Del.)

 

The Tribunal in this case held that, incentive received for appreciating performance is not liable to tax as the same is not known whether payable or not while providing service. It is further held that, there is no logic in inclusion of discount in value of service, as the same was not received and therefore, not liable to tax.

 

Works Contract Service:

 

1.2  Vistar Construction (P) Ltd. vs. UOI 2013 (31) STR 129(Del.)

 

The High Court in this case held that, CBEC Instruction F. No. 545/6/2007-TRU, dated 28/04/2008 stipulating that, for works contract service tax was chargeable on receipt of payment, irrespective of whether or  not services were performed, and rate applicable was one in force at time of Service Tax had become chargeable, and date on which services where agreed to be provided was irrelevant was wrong and invalid in view of Apex Court decision in Association of Leasing & Financial Service Companies 2010 (20) STR 417 (SC).  It is held that, taxable event for Service tax was rendition of service and hence rate of tax applicable was one on the date on which services were rendered and not the date on which payments were received.

 

Clearing & Forwarding Agent’s Service:

 

1.3  Suresh Kumar & Company vs. CCE, Jaipur-I 2013 (31) STR 146(Del.)

 

The appellant in this case engaged in sale of tea received from principals under their own invoices and also paid sales tax on such invoices. The department sought to tax them under C&F Agent service. The Tribunal after relying on decision in D. R. Polymer 2013 (29) STR 536 (Tri.), held that assessee in not C&F Agent.

 

Cargo Handling Service:

 

1.4  JAC Air Services Pvt. Ltd. vs. CST, Delhi 2013 (31) STR 155(Tri-Del.)

 

The appellant in this case had agreement with AAI for Cargo Handling Services at Delhi International Airport. They pleaded that, since tax is paid by main contractor they are not liable to pay any tax. The Tribunal observed that, various circulars and trade notices clarifying separate duty liability not to be carved out against assessee where principal service provider has discharged duty liability on entire value. It is held that, second time confirmation of duty cannot be upheld and therefore demand is set aside.

Sponsorship Service:

 

1.5  Hero Honda Motors Ltd. vs. CST, Delhi 2013 (31) STR 162(Tri-Del.)

 

The appellant in this case sponsored T-20 Cricket League matches to be held under auspice of BCCI. The sponsorship agreement conferred participative and associative rights in relation to IPL events likely to contribute to augmentation of assessee’s business. The Tribunal held that, service in relation to sports event has been specifically excluded from the definition of sponsorship service and the said clause admits no ambiguity, grammatical, syntactical or contextual. There is no restriction incorporated by legislature by enacting exclusion inapplicable to sport event for commercial purpose. In absence of limiting works or phrase in provision, adjudicating authority not to ingraft own policy choices and preferences to legislatively conferred immunity. The fundamental premises of adjudicating authority are misconceived and unsustainable and therefore, the Order-in-Original needs to be set aside. 

 

 

2. Interest/Penalties/Others:

 

2.1 CCE vs. Dineshchandra Agrawal 2013 (31) STR 5 (Guj.)                                           

 

In this case, there was failure to pay service tax dues for two years, however, entire amount paid prior to issuance of SCN and since the assessee was providing services to Central Excise assessee, service tax paid was available as Cenvat credit and hence, payment of tax was revenue neutral. It is held that, there was no deliberate intention to evade tax and penalty is set aside by invocation of Section 80.

 

2.2 CCE&C, Surat-I vs. ABG Shipyard 2013 (31) STR 11 (Guj.)                                      

 

The assessee in this case, claimed refund of commission paid/payable to commission agent located outside India not declared it in shipping bill, but deposited service tax on time. It is held that, it was only a technical error, and there was no effort to defraud revenue, hence exporter was entitled for its refund in terms of Notification No. 41/2007-ST.

 

2.3 BNP Paribas Equities India P. Ltd. vs. CST, Mumbai 2013 (31) STR 22 (Tri-Mumbai.)       

 

In this case, the penalty under section 76 has been revised and confirmed at Rs. 200/- per day or 2% of Service tax per month, whichever is higher. The Tribunal held that, it is well settled law that, punishment to be given on the basis of provisions of law prevailing at the time of occurrence of offence. During April, 2002 to September, 2002 penalty is leviable at Rs. 100/- per day which may extend to Rs. 200/- per day and adjudicating authority levied penalty at Rs. 100/- per day. Therefore, the Commissioner cannot go beyond provisions applicable at the time of occurrence of offence.

 

2.4 Spark Engg. P. Ltd. vs. CCE, Ghaziabad 2013 (31) STR 71 (Tri-Del.)                        

 

The appellant in this case filed refund claim under Notification No. 41/2007-ST of service tax on GTA services and export commission payment after expiry of limitation period of 60 days of export. The services tax was also deposited subsequent to exports on demand by Revenue. The appellant pleaded that, limitation of period of one year from date of deposit prescribed under Section 11B to be adopted. The Tribunal rejected the said plea on the ground of inability of Courts working within parameters of Excise Law to extend limitation period specifically prescribed by Notification No. 41/2007-ST.

 

2.5 Greenspan Agritech Pvt. Ltd. vs. CCE, Pune-I 2013 (31) STR 229(Tri-Mumbai.)      

 

The department in this case rejected refund claim for the period October, 2007 to February, 2008 filed on 18/11/2008 under Notification No. 41/2007-ST as time barred. The Tribunal observed that, the time limit of two months period provided in the said Notification has been amended to six months by Notification No. 32/2008-ST dated 18/11/2008 and further amended to one year by Notification No. 17/2009-ST dated 07/07/2009. It is held that, refund is time barred as it was beyond six months and one year time limit provided by Notification No. 17/2009-ST, dated 07/07/2009, did not have retrospective effect.

 

 

3. Cenvat Credit:

 

3.1 CC&CE, Guntur vs. Cholayil (P) Ltd. 2013 (31) STR 29 (Tri-Bang.)

 

The Tribunal in this case held that, Group Insurance and health insurance of employees, Rent-a-cab service, Air Travel Service etc. are covered under the definition of Input service and hence, credit is admissible. In case of Sodexo passes issued to employees which are exchangeable for purchase of food items and other household items, Cenvat credit is not admissible as nexus required to provide services is not established.

 

3.2 Cadmach Machinery Co. (P) Ltd. vs. CCE, Ahmedabad 2013 (31) STR 33 (Tri-Ahmd.)

 

The Tribunal in this case allowed Cenvat credit of service tax paid on outdoor catering service, valuation of immovable property, consulting engineer service, travel agent service, business exhibition, repair charges, photography service, labour charges etc. as the said services are related to manufacture. Further, in case of food services amount paid by workers/staff to assessee to be treated as exclusive of service tax and after deducting the said amount balance amount of service tax paid available as credit.   

 

3.3 CCE, Visakhapatnam vs. Aurobindo Pharma Ltd. 2013 (31) STR 38 (Tri-Bang.)

 

The Tribunal in this case observed that, though appellate authority has not discussed service-wise nexus between input service and manufacturing activity, nexus reasonably established from very description of input service. It is held that, Cenvat credit is admissible on service tax paid on annual maintenance contract, rent a cab service for transportation of employees, journal and periodicals acquired for research and information and outdoor catering service.

 

3.4 Sharavathy Conductors Pvt. Ltd. vs. CCE, Bangalore-I 2013 (31) STR 47(Tri-Bang.)

 

In this case, Cenvat credit of service tax was wrongly availed by one unit but utilized by two units reversed in wake of audit objections. The department sought to charge interest on the said reversal. The Tribunal observed that, intention to evade duty by Unit-I  was not proven as both units owned by assessee and credit reversed undisputedly available to Unit-II. It is held that as per view taken in Gokaldas Images Pvt. Ltd. 2012 (28) STR 214 ( Kar), if Cenvat credit in question is reversed, it amounts to not taking of credit at all. Hence no interest is imposable.

 

3.5 M. K. Industries vs. CCE, Daman 2013 (31) STR 59(Tri-Ahmd.)

 

The department in this case, denied credit for service tax paid for commission agent services as not having nexus with manufacture and clearance of goods from place of removal. The Tribunal relying on Coca Cola India Pvt. Ltd. – 2009 (15) STR 657 (Bom.) and Ultratech Cement Pvt. Ltd. 2010 (20) STR 577 (Bom) held that, sales promotion is necessary part of business activity and therefore credit is admissible.

 

3.6 Precision Wires India Ltd. vs. CCE, Vapi 2013 (31) STR 62 (Tri-Ahmd.)

 

The appellant’s manufacturing unit availed credit prior to ISD registration by Head Office. The department sought to deny the credit. The Tribunal observed that, there is no dispute regarding receipt of input service at HO and credit is admissible in view of decision in  Jindal Photo Ltd. 2009 (14)  STR 812 (Tribunal) and Samita Conductors Ltd. 2012 (278) ELT 492 (Tri-Ahmd).

 

3.7 Welspun Maxstel Ltd. vs. CCE, Raigad 2013 (31) STR 64(Tri-Mumbai)

 

The appellant in this case denied Cenvat credit of service tax paid on security services at pump house for pumping water from river, required as coolant in manufacturing operations. It is held that, pumping water was integrally connected to manufacturing process, and security services used therein were input service in term of rule 2(l) of CCR, 2004. It is further held that, it is not necessary to receive input service in factory premises and the only condition is that, they should be integrally connected with manufacturing activities.

 

3.8 BCH Electric Ltd. vs. CCE, Delhi-IV 2013 (31) STR 68(Tri-Del)

 

The Tribunal in this case held that, service tax paid on car parking services and club membership of IEEMA is admissible as Cenvat credit and Membership to India International Club is not an input service as unrelated to business activity. It is further held that, all ER-1 returns have been filed regularly and Excise officers were within powers to call for and examine records and there is no suppression of information, hence only normal period of limitation is applicable.

 

3.9 CCE, Daman vs. Paras Motor Mfg. Co. 2013 (31) STR 81(Tri-Ahmd.)

 

The Tribunal in this case after relying on decision in Cadila Healthcare Ltd. 2013(30) STR 3(Guj.) held that, service tax paid on commission paid to commission agent for sale of goods is ineligible for availment of Cenvat credit.

 

3.10 3M India Ltd. vs. CCE&ST, LTU, Bangalore 2013 (31) STR 110 (Tri-Bang.)

 

The appellant is registered under LTU. The department sought to recover Cenvat credit of service tax paid on management consultancy service received by corporate office of LTU without obtaining ISD registration and allotted to other registered manufacturing units under cover of challans. The Tribunal observed that, Rule 12A(4) of CCR, 2004 is applicable to LTU and permitted them to transfer the Cenvat credit from one registered unit to another registered unit under issue of transfer challans. It is held that, provisions governing ISD are inconsistent with Rule 12A of CCR, 2004 hence not applicable to LTUs and therefore the impugned order is required to be set aside. 

 

3.11 Everest Industries Ltd. vs. CCE, Meerut-I 2013 (31) STR 189 (Tri-Del.)

 

The appellant in this case claimed refund of service tax paid on inputs/input services used in final product supplied to SEZ unit. The Tribunal held that, Rule 5 of CCR, 2004 provides for refund of credit taken on final products cleared for export and supplies to SEZ not be treated as export for purpose of Rule 5 and therefore, the appellant is not entitled to claim refund.