SERVICE TAX CASE LAWS UPDATE - AUGUST 2013

1. Services:

 

Restaurant and Accommodation Service:

 

1.1  Kerala Classified Hotels and Resorts Association vs. UOI 2013 (31) STR 257 (Ker.)

 

The High Court in this case held that, service tax on serving of food or beverages, including alcoholic beverages, was beyond the legislative competence of Parliament as transaction were covered by Entry 54 of List II of Seventh Schedule of Constitution of India, and within exclusive competence of State Legislature. Under deeming provision of Article 366(29A)(f) of the Constitution of India, incidence of tax was on supply of any goods by way of or as part of any service and when food or alcoholic beverages were supplied as part of any service, such transfer was deemed to be sale.

It is further held that, service tax on hotel, inn, guest house, club or camp-site by whatever named called, for providing accommodation for continuous period of less than three month trenched on legislative function of State. It is tax on services on which State Legislature had enacted Kerala Tax on Luxuries Act by exercising their legislative power under Entry 62 of List II of Constitution of India, hence Government of India cannot  impose any service tax on it in exercise of its residuary power of Entry 97 of List I of Constitution of India.  

 

Management, Maintenance or Repair Service:

 

1.2  Roller Centre vs. CCE, Ahmedabad 2013 (31) STR 293 (Tri-Ahmd.)

 

The Tribunal in this case held that, issue regarding service tax levy on construction of road during the period between 16/06/2005 to 26/07/2009 under Management, maintenance or repair service is covered by section 97 of FA, 2012 and therefore, order demanding tax is unsustainable and required to be set aside.

 

Business Auxiliary Service:

 

1.3  Dnyaneshwar Trust vs. CCE. Mumbai 2013 (31) STR 328 (Tri-Mum.)

 

The appellant in this case undertook activity of harvesting sugarcane and its transportation to sugar factory from the fields of farmers and claimed exemption under Notification No. 13/2003-ST. The Tribunal held that, activity is in relation to sale of sugarcane by farmers and purchase of sugarcane by the sugar factory and service provided of a commission agent and therefore the appellant is entitled for the benefit of Notification No. 13/2003-ST.

 

1.4  Ideal Road Builders Pvt. Ltd. vs. CST, Mumbai 2013 (31) STR 350 (Tri-Mum.)

 

The appellant in this case, constructed highways and collected toll charges from road users. For financing the project special purpose vehicle was formed as a result of agreement between NHAI or State Authority and Concessionaire under BOOT arrangement. The Tribunal held that, CBEC circular no. 152/3/2012-ST dated 22/02/2011 clarified that contractor authorized to collect toll charges and service tax is not leviable thereon. Further, construction of roads, specifically excluded from Commercial or Industrial Construction service and Work Contract service and Repair and Maintenance of road is exempted from service tax retrospectively. Therefore, service tax is not leviable on toll collection charges under Business Auxiliary Service.

 

Also refer to decision of CC&CE, Guntur vs. Swarna Tollway (P) Ltd. 2013 (31) STR 419 (AP)

 

1.5  CST, Delhi vs. Intertoll ICS CE Cons O& MP Ltd. 2013 (31) STR 477 (Tri-Del.)

 

The Tribunal in this case held that services rendered to NHAI is not liable to service tax under BAS as NHAI is not a business or commercial concern engaged in business activity.

 

 

Tour Operator Service:

 

1.6  Shail Shikhar Associates vs. CCE. Meerut-I 2013 (31) STR 433 (Tri-Del.)

 

In this case, the appellant has taken Ropeway belonging to Municipality on license for continuous running between two fixed points during working hours to transport tourists who choose to use the ropeway for their journey and come on their own volition. The Tribunal held that, Tourists only availed facility of ropeway provided by assessee and they were neither beneficiary nor dependent on assessee for planning, scheduling, organizing or arranging their journey. Also movement of trolley with aid of power from one fixed point to another could not be said to be a mode of transport. It was more in nature of entertainment and fun industry. Hence, assessee had not acted as tour operator within the meaning of section 65(115) of FA, 1994. 

 

Port Service:

 

1.7  J. M. Baxi & Company vs. CST (Adj.) Mumbai-I 2013 (31) STR 453 (Tri-Mum.)

 

The appellant in this case claimed that handling of export cargo excluded from scope of Cargo Handling Service and Port Service therefore, not liable to service tax. The Tribunal held that, Cargo Handling Service excludes handling of export cargo hence, the same not to come within purview of Port Service. Matter remanded for verification.

 

Mandap Keeper Service:

 

1.8  Rambagh Palace Hotels Pvt. Ltd. vs. 2013 (31) STR 480 (Tri-Del.)

 

The department in this case sought to include renting charges of rooms booked for marriage, conference and meeting under composite contract. The Tribunal held that, activity of giving hotel rooms for organizing function in hotel entirely different from Mandap Keeper activity and Mandap Keeper definition nowhere covers temporary occupation of hotel rooms for boarding, temporary residence, hence the order holding inclusion of impugned rent in value of services rendered is unsustainable.

 

 

2. Interest/Penalties/Others:

 

2.1 Director of Mines and Geology vs. CCE (Appeals-II), Bangalore 2013 (31) STR 275 (Kar.) 

 

The High Court in this case held that in case of appeals to Commissioner (Appeals), condonation of delay cannot exceed three months in addition to three months for filing of appeal. As express provision has been made for period of limitation and condonation of delay, it overrides the Limitation Act, 1963 which is general law. Hence, even if there is sufficient cause for condition of delay beyond additional three months, delay cannot be condoned.

It is further held that, in case of appeals to Tribunal, in absence of provision of condonation of delay, section 5 of Limitation Act, 1963 is applicable.

 

2.2 CCE, Ludhiana vs. City Cables 2013 (31) STR 279 (P&H)                                          

 

The High Court in this case held that, an assessee is required to be informed to avail the benefit of second proviso to section 78 providing for reduced penalty if paid within 30 days of the order, so that he can deposit 25% of the penalty amount. In the present case, adjudicating authority has not given such an option but since the amount of duty was already paid even before issue of SCN, the direction to deposit 25% of the penalty amount in terms of second proviso to section 78 is fair, reasonable and meets the ends of justice.

 

2.3 Chowgule & Co. (Salt) Pvt. Ltd. vs. CCE, Rajkot 2013 (31) STR 334 (Tri-Ahmd.)     

 

In this case, the appellant claimed refund claim of service tax paid on Stevedoring and Documentation charges. The department rejected refund claim on the ground that, stevedoring and documentation charges have not been specified in the Notification No. 17/2009-ST and service of stevedoring fall under the category of Cargo Handling Service and not under Port Service and service tax under Cargo Handling Service is exempt in respect of export cargo. The Tribunal in this case held that, while sanctioning the refund claim, what is to be examined is whether service tax has been paid under the category of services which is notified under the notification or not. Port service is one of the services notified under Notification No. 17/2009-ST and since service tax has been paid under category of port service, denial of refund cannot be sustained.

 

2.4 Ambience Construction India Ltd. vs. CST, Hyderabad 2013 (31) STR 343 (Tri-Bang.)        

 

The appellant in this case claimed refund of service tax paid under mistake of law on renting to immovable property to hotel, which is non-taxable. It is pleaded that, refund to be allowed without limitation. The Tribunal held that, such plea is not acceptable as contrary to dictum repeatedly laid down by Supreme Court. The limitation provided under section 11B of CEA, 1944 is applicable even to refund of service tax paid under mistake of law.

 

2.5 Delhi Chartered Accountants Society (Regd.) vs. UOI 2013 (31) STR 429 (Del.)        

 

The High Court in this case held that, CBEC Circular dated 08/05/2012 clarifying that, rate of service tax on invoices issued prior to 01/04/2012 when rate of tax increased from 10% to 12% but payment received after 01/04/2012 to be paid at 12% is in violation of Rule 4 of POTR, 2011.

 

2.6 Glyph International Ltd vs. CCE&ST, Noida 2013 (31) STR 430 (Tri-LB.)                

 

The Larger Bench in this case held that, in respect of appeal relating to refund and rebate of taxes, no fees is payable under section 86(6) of FA, 1994.

 

2.7 Karnavati Club Ltd. vs. CST, Ahmedabad 2013 (31) STR 445 (Tri-Ahmd.)                

 

The appellant in this case claimed refund of service tax paid under protest under Mandap Keeper Services for rendering Health and Fitness service to members upon insistence of lower authorities. The Tribunal held that, there was categorical conclusion that members not to be seen separately as client or customers and mandap or club one and the same. Since demand set aside at SCN stage incidence of tax liability not passed to members. It is also held that, service rendered to self cannot be equated with services rendered to client or customer. Since, provision of section 12B of CEA, 1944 are not applicable the question of producing evidence supporting non-passing of service tax liability not required.

 

 

3. Cenvat Credit:

 

3.1 CCE, Ahmedabad vs. Krishna Communication 2013 (31) STR 285 (Tri-Ahmd.)

 

In this case, department sough to reverse proportionate credit on amounts written as bad debts alleging wrongful availment of credit as service tax not received on the impugned amounts. The Tribunal observed that, eligibility of availment of credit by service provider and discharge of service tax liability by service provider is undisputed and also services were utilized for providing output services. It is held that, department trying to co-relate input service to output service which is against the settled law that, one to one correlation in availment of credit on input services to output service is not possible. The reasoning given by first appellate authority that, availment is not wrongful and rule 14 of CCR, 2004 does not envisage recovery of credit where service tax recovery is pending or written off as bad debts, is correct and in accordance with law held by Higher Judicial Forum.

 

3.2 VST Industries Ltd. vs. CC.,CE&ST (Appeal-II), Hyderabad 2013 (31) STR 357 (Tri-Bang.)

 

The Tribunal in this case allowed Cenvat credit of service tax paid on advice to farmers to grow good quality of tobacco as the cost of such services were included by assessee in the cost of production of cigarettes and not recovered from farmers. 

 

3.3 Global Digital Color Lab vs. CCE, Jaipur 2013 (31) STR 382 (Tri-Del.)

 

The appellant in this case availed Cenvat credit of CVD paid on machines imported prior to date of issue of registration certificate. The lower authorities denied credit on the ground that, credit entries in Cenvat credit register not to be earlier than date of granting registration. The Tribunal held that, the department failed to point out provision providing that credit cannot be taken on machine procured prior to date of issue of Registration certificate.

 

3.4 Emcon Technologies India Pvt. Ltd. vs. CCE, Bangalore 2013 (31) STR 441 (Tri-Bang.)

 

The Tribunal in this case allowed Cenvat credit of service tax paid on Rent a cab service used for transportation of employees between the factory and prefixed points away from it and on Air Travel Agents services availed to enable the company executive to undertake air travel for business purpose.

 

3.4 Bharat Petroleum Corporation Ltd. vs. CCE, Mumbai-II 2013 (31) STR 455 (Tri-Mumbai)

 

The Tribunal in this case held that, telephones installed at the residence of the officials which are integrally connected with the business of the manufacture of final product of the appellant and the same is covered under rule 2(1) of CCR, 2004.

 

3.5 CCE, Surat-II vs. Astik Dyestuff P. Ltd. 2013 (31) STR 459 (Tri-Ahmd.)

 

The Tribunal after following Gujarat High Court decision in Cadila Healthcare case 2013 (30) STR 3 (Guj.) held that, service of commission agent is not being analogous to activities mentioned in definition of Input Service and not covered by expression activities relating to business.

 

3.6 Pepsico India Holdings Pvt. Ltd. vs. CCE, Bangalore 2013 (31) STR 499 (Tri-Bang.)

 

In this case department denied Cenvat credit of service tax paid on architectural services for putting in place rain water harvesting system. The Tribunal held that, as the appellant is manufacturer of sweetened carbonated beverages and aerated water, water is an important input and therefore