Monday, 2 December 2013

Service Tax Case Law – Update – December, 2013


1. Services:

 

Management & Consultancy Service:

 

1.1  Bosch Chassis Systems India Ltd. vs. CCE, Pune-I 2013 (32) STR 301 (Tri-Mumbai)

 

The appellant’s Managing Director employed in same capacity on part time basis with other company paid salary through the appellant. The appellant credited the salary to MD’s account without retaining any part thereof.  The Tribunal held that, if advisory activity has been undertaken by MD, then service tax demand is to be made on MD and not on appellant. There is no evidence showing MD rendering consultancy/advisory services, hence the appellant is not liable to pay service tax.

 

Clearing and Forwarding Agent Service:

 

1.2  Monsanto Manufacturers Pvt. Ltd. vs. CCE, Ghaziabad 2013 (32) STR 364 (Tri-Del)

 

The appellant in this case had agreement with HLL for providing cold storage of goods for storing and forwarding frozen products and they have to maintain specific temperature for storage before dispatch. In these circumstances, the Tribunal held that, storage of goods in cold storage indispensable part of Clearing & Forwarding Agent Service and therefore charges thereof to be added in taxable value of C&F Agent service. Further, the fact of non-payment of duty on cold storage known to department in 2002, hence extended period of limitation is not invocable. 

 

Cargo Handling Service:

 

1.3  CCE, Raipur vs. Gayatri Carriers Pvt. Ltd. 2013 (32) STR 367 (Tri-Del)

 

The Tribunal in this case, held that loading, unloading and handling of coal into tipper trucks and transportation from coal face surface to coal stock yard, is liable to service tax under Cargo Handling Service.

 

Sponsorship Service:

 

1.4  Hero Motocorp Limited vs. CST, Delhi 2013 (32) STR 371 (Tri-Del)

 

The appellant in this case, sponsored GMR owned cricket team ‘Delhi Daredevils’ and claimed immunity from service tax as sponsorship of sports events not liable to service tax. The department sought to demand tax on the same. The Tribunal held that, several rights accruing under sponsorship agreement clearly indicates sponsorship of team in relation to participation in IPL T-20 Cricket Tournament. The agreement was for sponsorship of T-20 sport event and not owner of Delhi Daredevils or BCCI-IPL and therefore squarely falls within exclusionary clause and the appellant is immune to service tax charge. Further, it is held that, it is settled principle of statutory construction that, phrase ‘in relation to’ is indicative of expansive intention.

 

Commercial Training or Coaching Centre Service:

 

1.5  Great Lake Institute of Management Ltd. vs. CST, Chennai 2013 (32) STR 305 (Tri-LB)

 

The Larger Bench of Tribunal in this case held that, the taxable service of “Commercial training or coaching service” occurs when any institute or establishment is engaged in the activity of imparting skill, knowledge or lessons on any subject or field (excluding sports) irrespective of whether such imparting of skill, knowledge or lessons is in respect of particular discipline or a broad spectrum of discipline/academic areas; irrespective of the nomenclature or description of the institute or establishment, as a coaching or training centre or an educational institution; regardless of whether an institute or establishment is incorporated  by a or registered under any law; and irrespective of distinctions on the basis of curriculum, course content, teaching methodology, course duration or otherwise. Activities of imparting skills, knowledge, lessons on any subject or field or when provided by any entity, institution or establishment which is excluded by a specific and legislated exclusionary clause would alone be outside the fold of the taxable activity.

 

 

1.6  Cerebral Learning Solutions Pvt. Ltd. vs. CCE, Indore 2013 (32) STR 379 (Tri-Del)

 

The appellant in this case claimed benefit of Exemption Notification No. 12/2003-ST for value of course material supplied to students. The department relying on CBEC Circular No. 59/8/2003-ST dated 20/06/2003 providing for inapplicability of Exemption Notification where goods and materials sold as part of service which material does not answer description of priced standard textbook denied benefit of exemption. The Tribunal held that, documentary evidence indicating separate value of course material, therefore entitlement to exemption is undisputed. The clarification relied upon by the Department is misconceived, clearly illegal and contrary to Exemption Notification. 

 

 

Business Auxiliary Service:

 

1.7  Ace Credit vs. CCE, Mangalore 2013 (32) STR 407 (Tri-Bang.)

 

The assessee in this case engaged in sale of Banks products by using infrastructure, staff and expertise to market impugned products. The Tribunal held that, Bank products are nothing but bank service and covered within “Promotion or marketing of services provided by client” under BAS w.e.f. 01/07/2003. It is further held that, limitation period can be invoked however, since registration and tax paid under “Extra Ordinary Taxpayer Friendly Scheme” benefit of section 80 extended to set aside penalties.

 

1.8  Indusind Media & Communications Ltd. vs. CCE, Delhi 2013 (32) STR 418 (Tri-Del.)

 

The Tribunal in this case held that, carriage fee charges for providing desired frequency for broadcasting channels signals is covered under Business Auxiliary Service as the same facilitates better quality view of channels thereby enhancing viewership. The matter has been remanded back for examining aspect of invocation of extended period and imposition of penalty.

 

Works Contract Service:

 

1.9  Larsen & Toubro Ltd. vs. CST, Delhi 2013 (32) STR 410 (Tri-Del.)

 

The Tribunal in this case, referred the matter to Larger Bench on following issue in view of conflicting decisions;

 

“Whether composite contracts involving transfer of property in goods and services of execution of works contract which become taxable only from 01/06/2007 under Works Contract Service or whether for period prior to 01/06/2007 such contract could be vivisected and service components subjected to tax under pre-existing taxable services such as Commercial or Industrial Construction service, Erection, Installation or Commissioning service or Construction of Residential Complex service?”

 

Commercial or Industrial Construction Service:

 

1.10          Anand Construction Co. vs. CCE, Kolhapur 2013 (32) STR 451 (Tri-Mumbai)

 

In this case, assessee constructed a hostel for boys and girls, who were getting education from one of the educational institution. Demand confirmed as no evidence was produced to that effect. The Tribunal held that, since the building is constructed as hostel for the residence of students studying in medical institute and there being no allegation that, the building is being used for any other purpose and in view of CBEC Circular No. 80/10/2004-ST dated 10/09/2004, assessee is not liable to service tax.

 

2. Interest/Penalties/Others:


 

2.1 Kone Elevator India Pvt. Ltd. vs. Secretary, Ministry of Finance 2013 (32) STR 262 (Mad.) 

 

The appellant in this case applied for condonation of delay due to ill health of General Manager (Taxation )/Company Secretary on the basis of medical certificate of doctor attending dispensary in premises of the appellant as prescribed by law, diagnosing illness as Hepatitis and advising complete bed rest to him. The High Court held that, such medicate certificate cannot be rejected on the ground that, doctor who gave it was skin specialist. The CESTAT not being expert in examining medical certificate could not reject it.

 

2.2 CCE, Belgaum vs. Chadha Auto Agencies 2013 (32) STR 265 (Kar.)                         

 

The High Court in this case held that, High Court does not have jurisdiction to entertain a question that, whether the activity carried on by assessee falls within the Business Auxiliary Service or Business Support Service.

 

2.3 CC, CE&ST, Guntur vs. OTS Advertising Pvt. Ltd. 2013 (32) STR 303 (Tri-Bang.)  

 

The Department in this case contended that, section 73(3) providing for waiver of penalty is not applicable to habitual offenders. The Tribunal held that, section 73(3) does not differentiate between habitual and non-habitual defaulters, therefore, the departments contention is liable to be rejected. 

 

2.4 Inox Air Products Ltd. vs. CCE, Pondicherry 2013 (32) STR 336 (Tri-Chennai)       

 

The Tribunal in this case held that, benefit of rule 6(3) of STR, 1994 is also available to service receiver as the assessee is defined in section 65(7) as person liable to pay service tax and recipient of service is a person liable to pay service tax.

 

2.5 Jollyboard Ltd. vs. CC&CE, Aurangabad 2013 (32) STR 337 (Tri-Mumbai)              

 

The department in this case defined refund of service tax paid on documentation charges under Notification No. 17/2009-ST on the ground that same are not taxable service. The Tribunal held that, suppliers invoice reveal discharge of service tax under “Clearing and Forwarding Agency Service” and denial of refund of service tax on documentation charges is not sustainable in law.  It is further held that, officer in-charge of factory receiver input service has no jurisdiction to deny service tax paid by service provider.

 

2.6 Professional Couriers vs. CST, Mumbai 2013 (32) STR 348 (Tri-Mumbai)                

 

The Tribunal in this case held that, as assessee has not collected service tax from recipient of services, entire consideration received has to be treated as cum-tax.

 

2.7 KPIT Cummins Infosystems Ltd. vs. CCE, Pune-I 2013 (32) STR 356 (Tri-Mumbai)           

 

The Tribunal in this case held that, refund of unutilized Cenvat credit used for export of exempt service is admissible as Rule 6(3) of CCR, 2004 is not applicable and there is no bar on availing full credit for such services during relevant period. The Exim policy of Government of India is to promote export of goods and not to place tax burden on such exports to render them uncompetitive.

 

2.8 Prakash Retail P. Ltd. vs. DCCT (Audit), Udupi 2013 (32) STR 388 (Kar)                 

 

The appellant in this case a trading house held articles manufactured by other companies, whose price list specified that, prices were exclusive of installation charges and they have raised invoices by specifying that prices of goods were ex-showroom and transfer of title in goods happened at place of seller. The High Court held that, sale price of goods at ex-showroom price attracted sales tax and subsequent to transfer of title of goods at place of seller, the appellant has acted as agent of customer for transportation and installation of goods and charges for same did not become part of sale of goods. When transfer of title in goods is a place of buyer, then all charges incidental thereto like transport and installation and other expenditures incurred by seller would become part of amount for which goods are sold by seller to buyer. However, if transfer of title of goods is to be at place of seller then such charges do not form part of amount for which goods are sold. If the sale agreement specifies all obligation on the part of seller to transport goods as incidental to sale, then it becomes part of amount for which goods are sold. 

 

2.9 C. C. Patel & Associates Pvt. Ltd vs. UOI 2013 (32) STR 392 (Guj)                            

 

The appellant in this case deposited service tax on billing basis instead of actual collection. The adjudicating officer found that, on one hand assessee had paid excess service tax and on other hand short paid matching amount in following quarter and on that basis raised demand of short paid service tax. The High court held that, assessee was entitled to refund of excess paid service tax as the adjudicating authority on artificial basis could not have held that he ought to have deposited same amount once all over again in following quarter. Otherwise also it would amount to collecting tax from assessee twice which is not permissible in law. Further, before raising demand, the adjudicating authority should have granted adjustment of service tax already paid by assessee towards their liability and limitation and doctrine of unjust enrichment is not applicable.

 

2.10 ICC Reality (India) Pvt. Ltd. vs. CCE, Pune-III 2013 (32) STR 427 (Tri-Mumbai)  

 

In this case, the appellant claimed deduction for reimbursement of electricity charges received from tenants. The Tribunal held that, electricity is goods and chargeable under Central Excise Tariff and under Schedule A-20 of MVAT Act, 2002, therefore amounts to sale of goods and supply of service. Further, Notification No. 12/2003-ST exempts value of goods supplied by service provider to service recipient. In view thereof reimbursement of electricity does not form part of assessable value.

 

2.11 Amrapali Barter Pvt. Ltd. vs. CST, Kolkata 2013 (32) STR 456 (Tri-Kolkata)          

 

The assessee registered with service tax department have not provided any service and also not filed ST-3 returns on time. The Department sought to levy fees for late filing of Nil returns. The Tribunal held that, in view of the Circular dated 23/08/2007 and Rule 7C of STR, 1994 this is a fit case to invoke the proviso to Rule 7C and waive the late fees relating to the Nil returns filed.

 

 

3. Cenvat Credit:


 

3.1 CC&CE, Hyderabad-III vs. ITC Limited 2013 (32) STR 288 (AP)

 

The High Court in this case held as under;

 

·         Maintenance of residential colony of employees by the assessee is input service as if accommodation is not provided by the assessee to its employees at remote location, then it would not be feasible for it to carry on its manufacturing activity. The staff colony provided by the assessee is directly and intrinsically linked to its manufacturing activity.

 

·         Activity of distributing saplings to the farmers in the vicinity and buying back the fully grown trees from them cannot be said to be an activity unconnected with the manufacture of its final products. Plantation activity undertaken by the assessee for ensuring steady supply of raw material (wood) cannot be excluded from the definition of input service.  

 

3.2 CCE, Vadodara-II vs. Plastichemix Industries 2013 (32) STR 383 (Tri-Ahmd)

 

The assessee in this case availed Cenvat credit in the month of March, 2005 on the basis of invoices issued by HO as Input Service Distributor which was not registered. The Tribunal held that, legal requirement for getting HO registered as ISD came into force in June, 2005, whereas assessee availed credit in March, 2005, hence departments objection is unsustainable. Further, the fact of availing credit has been disclosed in periodical returns filed with Department hence, extended period of limitation is not invocable.

 

3.3 Shree Cement Ltd. vs. CCE, Jaipur 2013 (32) STR 416 (Tri-Del.)

 

The Tribunal in this case held that, Cenvat credit of service tax paid on commissioning, installation and manpower recruitment for construction of staff quarters, canteen and residence of Executive Director of company located outside factory premises is not admissible as the said services are not mentioned in list of activities eligible as input services.

 

3.4 Hindalco Industries Ltd. vs. CCE, Vapi 2013 (32) STR 433 (Tri-Ahmd)

 

The Tribunal in this case allowed Cenvat credit of service tax paid on courier service since same is used for sending documents to head office and customers and therefore definitely relatable to manufacture.

 

3.5 Cable Corporation of India Ltd. vs. CCE, Mumbai-IV 2013 (32) STR 434 (Tri-Mumbai)

 

The Tribunal in this case allowed Cenvat credit of service tax paid on management consultant service used for merger of firms.

 

3.6 Thiru Arroran Sugars Ltd. vs. CCE, Tiruchirapalli 2013 (32) STR 435 (Tri-Chennai)

 

The Tribunal in this case allowed Cenvat credit of Rent-a-cab service utilized to bring workers or executives to factory by observing that, if there is no management by corporate office, a manufacturing organization cannot survive, finance cannot be procured, raw materials cannot be purchased, and manufactured goods cannot be sold and so on. Further, in the matter of extending Cenvat credit to Rent-a-cab service, contract bus service and telephone service, no distinction can be made between the factory and corporate office going by the provisions of CCR, 2004. Also where the expenditure is incurred by the company in books of account there is presumption in favour of appellant that service is availed in relation to their business.

 

 

3.7 DCM Shriram Consolidated Ltd. vs. CCE, Jaipur 2013 (32) STR 440 (Tri-Del)

 

In the present case, the Tribunal allowed Cenvat credit of service tax paid on hiring of JCB/Cranes used for uprooting trees for use and get charcoal required in manufacture of calcium carbide.

 

3.8 Golden Tobacco Ltd. vs. CCE, Mumbai-V 2013 (32) STR 474 (Tri-Mumbai)

 

The Tribunal in this case allowed Cenvat credit of service tax paid on mobiles/telephones installed at the residence of Director or Senior employees as the same are having nexus with the manufacturing of company.

 

3.9 Bank of Rajasthan Ltd. vs. CCE, Jaipur 2013 (32) STR 475 (Tri-Del)

 

The Tribunal in this case observed that, RBI guidelines displayed at the branch disclose phone number to which customers can make call proving that the telephones were used for providing output service and therefore Cenvat credit is admissible thereon.

 

3.10 Telco Construction Equipment Co. Ltd. vs. CCE&C, Belgaum 2013 (32) STR 482 (Tri-Bang.)

 

The Tribunal in this case held that, the expression “activities relating to business” requires integral connection between activity/service and business of manufacturing of final product. Mere relation with business is not sufficient. The Bombay High Court decision in Coca Cola India Pvt. Ltd. 2009 (15) STR 657 (Bom.) did not analyse scope of this expression, whereas later decision in Ultratech Cement Ltd. 2010 (20) STR 577 (Bom) did analyse the same and also clarified Coca Cola decision, and hence required to be followed as precedent.

 

3.11 Gujarat State Petronet Ltd. vs. CC&CE, Ahmedabad 2013 (32) STR 510 (Tri-Ahmd.)

 

The appellant in this case adopted EPC model, for laying of oil and gas transmission pipelines and for this purpose they granted several turnkey contracts to various EPC contractors involving fabrication, assembly with equipments and devices, installation and commissioning of pipeline system for the movement of oil and gas. They have claimed Cenvat credit of duty paid on pipe supplied free of cost to contractors. The Tribunal held that, appellant had not used pipes for providing any output service but have supplied them for construction of pipeline to EPC contractors. Being a free supply material, if its value was not included in pipeline system by output service provider, question of availment of credit also could not arise. The appellant was not eligible for taking credit on pipes either as capital goods or inputs or input service.

 

3.12 Central Bank of India vs. CCE&ST, Coimbatore 2013 (32) STR 525 (Tri-Chennai)

 

The Tribunal in this case held that, no time limit has been prescribed for taking credit either in CCR, 2004 or CEA, 1944, therefore the lower authority’s observation that, credit to be taken within one year is incorrect and unacceptable.

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