INDIRECT TAXES Service Tax Case Law Update

Transcription

1 CA Bharat Shemlani INDIRECT TAXES Service Tax Case Law Update 1. Services Cargo Handling Service 1.1 Jai Jawan Coal Carriers Pvt. Ltd. vs. CST, New Delhi 2015 (37) STR 509 (Tri.- Del.) The appellant in this case engaged in tipper loading, transportation and wagon loading of coal/mineral ore. The work orders prescribed for separate rates for tipper loading, transportation and unloading into railway wagons therefore contract to be treated as separate contract under one instrument. The Tribunal held that, coal/mineral ore loaded and unloaded meant for transportation to be treated as Cargo Handling Service. However, amount charged for transportation, is not chargeable to service tax as even if the activity is treated as GTA service, liability to pay service tax is on recipient of service. Since, the issue was under dispute before various Tribunals, longer period of limitation cannot be invoked. 1.2 CCE, Raigad vs. Maersk India Pvt. Ltd (37) STR 555 (Tri.- The assessee in this case provided storage and warehousing of export cargo in addition to normal cargo handling and classi ed the same as Cargo Handling Service for export. The Tribunal held that storage and warehousing of goods is a separate activity in itself and does not form part of cargo handling service. There is no evidence that storage and warehousing is a statutory requirement under any law governing container freight stations and the assessee provided the said service to selected customers on collection of separate charges. Hence, the classi cation under cargo handling service is not justi ed. It is further held that, assessee is operating under self assessment regime and if there is any material change in nature of terms and conditions of transaction, the same should have been brought to the notice of department, which is not done hence extended period of limitation is invocable. Business Auxiliary Service 1.3 Globe Forex & Travels Ltd. CCE, Jaipur-I 2015 (37) STR 513 (Tri.-Del.) The Tribunal in this case held that, activity of arranging visa is not covered under any clause of BAS and therefore activity is not taxable. Further it is held that, suo motu adjustment of service tax collected in respect of cancelled air ticket for discharge of service tax liability is permitted. It is also held that, no service tax is payable on cancellation charges on part of airfare received from person booking air tickets cancelled subsequently. 156 The Chamber's Journal

2 1.4 Sai Service Station Ltd. vs. CCEC & ST Kochi 2015 (37) STR 516 (Tri.-Bang.) The appellant in this case engaged in sale of used/pre-owned vehicles belonging to client. The Tribunal observed that, the activity is purchase and sale of old vehicles and refurbishing, repair and other activities are have been undertaken as value addition to get maximum returns and there is no element of service in the transaction. 1.5 CST, Mumbai vs. Exxon Mobile Co. India Pvt. Ltd (37) STR 591 (Tri.- The Tribunal in this case held that, BAS and STC services provided by the assessee to its holding and affiliated companies abroad and received convertible foreign exchange are services used outside India and therefore qualify as export of service. 1.6 Grey Worldwide (I) Pvt. Ltd. vs. CST, Mumbai 2015 (37) STR 591 (Tri.- The appellant in this case received incentives and volume discount from Media companies The department alleged that it is liable under BAS as promotion of business of print/ electronic media by canvassing/booking order on behalf of Media companies. The Tribunal held that, assessee is merely co-ordinating between media and advertiser and there is no contractual obligation for provision of service between both the parties, hence the amounts received are not liable to service tax under BAS. 1.7 Sharma ICE Factory vs. CCE, Jaipur-I 2015 (37) STR 660 (Tri.-Del.) The Tribunal in this case held that, process of chilling of milk to make it fit for long distance transportation without getting spoiled which does not bring into existence any change, is not liable to service tax under BAS. 1.8 GAP International Sourcing (India) Pvt. Ltd. vs. CST, Delhi 2015 (37) STR 757 (Tri.-Del.) The appellant in this case rendered services in relation to procurement of goods to GAP, USA, which was not having any branch or project or business establishment in India. The Tribunal held that, services covered by Rule 3(1)(iii) of ESR, 2005 as the same has been used by GAP, USA in relation to business located abroad. Therefore, services to be treated as delivered and used outside India and since payment is received in convertible foreign exchange, quali es as export of service. 1.9 Harshad Thermic Industries (P) Ltd. vs. CCE&C, Raipur 2015 (37) STR 808 (Tri.- Del.) The department in this case contended that, joining of two pieces of rail at site for Railways by thermite welding is activity covered under production or processing of goods not amounting to manufacture and therefore liable under BAS. The Tribunal held that, part of process of laying down of track making them fit for traffic movement do not result in any deliverable goods to railways and therefore no production or processing of goods not amounting to manufacture and therefore not liable to service tax. Commercial Training and Coaching Centre Service 1.10 Opportunités India Solutions Pvt. Ltd. vs. CST, Mumbai 2015 (37) STR 520 (Tri.- The appellant in this case imparted training recognized by State Board of Vocation Examination. The Tribunal held that, assessee providing training recognized by Board but certificates were issued by Board, therefore provided taxable service and hence liable to pay service tax. Penalties are set aside in view of bona fide belief of nontaxability. ML-369 The Chamber's Journal 157

3 Tangible Goods Supply Service 1.11 Greatship (India) Ltd. vs. CST, Mumbai-I 2015 (37) STR 533 (Tri.- The appellant in this case engaged in charter hire of drilling unit on time charter basis. The drilling rig along with personnel to operate the same on charter hire basis and payment for the service rendered is made on per day basis. The Tribunal held that, appellant has possession and effective control of the drilling rig and since both service provider and receiver are in India, the place of provision of service is in India. Merely because the oil rigs are deployed outside the Indian territorial waters but within the exclusive economic zone of India cannot be said provided outside India. Further, the service provided is composite service consisting of SOTG service and mining service. However, essential character is SOTG service, since 95% consideration is for supply of tangible goods for use and mining operations account only for about 5% of consideration received. It is further held that, though at the relevant time, there was no specific rule relating to place of provision of service one can usefully and gainfully adopt the provisions of PPSR, 2012 which is an internationally accepted concept in the matter of services. Renting of Immovable Property Service 1.12 Murli Realtors Pvt. Ltd. vs. CCE, Pune- III 2015 (37) STR 618 (Tri.- The department in this case, alleged to demand service tax on notional interest on security deposit. The Tribunal held that, security deposits have been taken to provide security in case of default in rent by lessee or default in payment of utility charges or for damages caused for leasing of property. In absence of any provision in law for providing for notional addition to value/price charged, question of addition notional interest on security deposit as consideration received for services rendered cannot be sustained. Further, in absence of evidence showing security deposit influencing price i.e. rent, impugned amount cannot form part of rent. Also there is no reason for adopting 18% p.a. as rate of interest as same is neither bank rate of interest for deposits or loans nor market rate of interest and adopting of arbitrary rate militates against concept of valuation. Commercial or Industrial Construction Service 1.13 Kedar Constructions vs. CCE, Kolhapur 2015 (37) STR 631 (Tri.- The appellant provided CIC services relating to transmission of electricity to various companies and claimed exemption under notification 45/2010-ST. The Tribunal held that, expression relating to under Noti cation No. 45/2010-ST is very wide in its amplitude and scope and all taxation services rendered in relation to transmission/distribution of electricity would be eligible for benefit of exemption under the said notification for the period prior to It is further held that, definition of transmission given in Electricity Act, 2003 covers very wide gamut of activities including sub-station and equipments DNS Contractor vs. CCE, Delhi-I 2015 (37) STR 848 (Tri.-Del.) The appellant in this case contended that since main contractor has deposited the entire amount of service tax on full construction value, they are not liable to pay service tax again on such value. The Tribunal held that, if the service tax liability stands discharged on full and complete value, the sub-contractor cannot be taxed again in respect of same services on that part of value in the services provided by them. This would amount to double taxation. 158 The Chamber's Journal

4 1.15 Afcons Infrastructure Ltd. vs. CST, Mumbai-I 2015 (37) STR 850 (Tri.- The appellant in this case constructed onshore Transport Terminal for loading of natural gas extracted from various wells, transported through pipe and it comprised centralized control room, and facilities like workshop, lounge, guesthouse, helipad etc. The Tribunal held that, there was no arrival from different destination and dispersal to different destination and only one item gas was transported in unidirectional and fixed manner. The said onshore terminal is not a transport terminal similar to air, sea or road. Transport terminal has to be given commonly understood meaning since it is preceded by airport, railways etc. and it would be imply similar things like bus and truck terminals. Rent-a-Cab Scheme Operator Service 1.16 CC&CE, vs. Sachin Malhotra 2015 (37) STR 684 (Uttarakhand) The High Court in this case held that, expression in relation to used in section 65(105)(o) though expands scope of taxation, any service which does not relate to renting of cabs, would be irrelevant for imposing service tax. Unless control of vehicle is made over to hirer and he is given possession for howsoever short a period, to deal with the vehicle, there would be no renting service. A person chooses to hire a car where owner of vehicle, who may or may not be the driver, offer his service while retaining control and possession of vehicle with himself is liable to pay service tax under Rent-a-Cab Scheme. Banking & Other Financial Service 1.17 HDFC Bank Ltd. vs. CST, Mumbai 2015 (37) STR 779 (Tri.- The appellant in this case received brokerage from sale of RBI tax saving bonds and contended that as per RBI letter dated , said bonds issued under section 2(2) of Public Debt Act, 1944 constituting government security issued for raising public loan and therefore no service tax liability on underwriting commission. The Tribunal held that, sale of RBI bonds amounts to statutory function and cannot be subjected to tax liability. Also refer to Enam Securities P. Ltd. vs. CST, Mumbai 2015 (37) STR 794 (Tri.- Programme Producers Service 1.18 BCCI vs. CST Mumbai-I 2015 (37) STR 785 (Tri.- The Tribunal in this case held that recording of cricket match images for and on behalf of the appellant by non-resident service provider is liable to service tax under Programme Producer service and the appellant is liable to pay service tax under RCM. It is further held that, booking of hotel accommodation and transport of personnel in connection with recording of cricket matches is not covered under Programme Producers service but under Business Support Service. 2. Interest/Penalties/Others 2.1 Nila Engineering Contractors vs. ACCE, Cuddalore 2015 (37) STR 475 (Mad.) In this case SCN was served at wrong address but its receipt and other communications from department at that address acknowledged by noticee with signature and stamp. Further, assessee also communicated to Department about their willingness to deposit the amount demanded. In view of the said facts it is held that, plea of assessee that, they had not received SCN is rejected. 2.2 Ahmednagar Merchants Co-op. Bank Ltd. vs. CCE&C, Aurangabad 2015 (37) STR 478 (Tri.- In the present case, the appellant received order on and filed appeal on ML-371 The Chamber's Journal 159

5 The department contended that the appeal is delayed as limitation for ling appeal to Commissioner(A) to be computed day wise and not month wise. The Tribunal held that, limitation period provided in section 85(3A) of FA, 1994 is to be computed month wise and not day wise as the month de ned in General Causes Act is British Calendar month. 2.3 Time Ads & Publicity vs. CCEC&ST 2015 (37) STR 506 (Tri.-Bang.) The Tribunal in this case held that, since the appellant has collected taxes and paid only when pointed out by the department, they cannot escape the penalty. 2.4 India Oil Corporation Ltd. vs. CST, Mumbai-I 2015 (37) STR 575 (Tri.- The appellant led refund claim on on the ground that assessees are integrated company subsequent to merger effective from The department rejected the same as time barred. The Tribunal held that, in light of decision is assessees own case in 2011 (23) STR 625 (Tribunal) date of merger with effect from ultimately decided vide amalgamation order dated issued by Ministry of Petroleum and refund is claimed within one year from , hence within time. 2.5 CCE&ST, Meerut-II vs. Krishna Swaroop Agarwal 2015 (37) STR 647 (Tri.-Del.) The assessee an authorised service station contended that value of spare parts/ accessories/consumables like lubricants and coolants etc. during provision of servicing of vehicle is sale and therefore to be excluded in value of taxable service. The Tribunal held that, the assessee established that, amount on which service tax has been demanded actually pertains to sale of spare parts/ accessories/consumables etc. by showing copies of VAT assessment orders and therefore benefit of Notification No. 12/2003-ST is available. 2.6 Jay Balaji Jyoti Steels Ltd. vs. CESTAT, Kolkata 2015 (37) STR 673 (Ori.) The High Court in this case held that, insertion of or by speed post with proof of delivery after words sending it by registered post with acknowledgement due in Section 37C(1)(a) of CEA, 1944 was procedural and clari catory amendment and hence had retrospective effect. The Post Office issues receipt for both i.e. registered post and speed post and hence both have to be treated as registered post in view of section 28 of Indian Post Act, 1898 read with rules made thereunder. 2.7 CST vs. Associated Hotels Ltd (37) STR 723 (Guj.) The High Court in this case held that, section 85(4) gives ample powers to the Commissioner while hearing and disposing of the appeal to pass such order it thinks t including orders for enhancing tax, interest or penalty and such powers inherently contain the power to remand a proceeding for proper reasons to the adjudicating authority. Thus, if proper enquiry is not conducted or the proceedings is decided ex parte, it would not be necessary in every case that the Commissioner(A) convert itself to the adjudicating authority and conduct the entire enquiry. 2.8 CC&CE, Alld. vs. Ashok Kumar Tiwari 2015 (37) STR 727 (All.) The High Court in this case held that, once the legislature has used the expression three months both in substantive part of section 85(3) and in its proviso, it would not be open for Courts to substitute the words three months by words ninety days and to do so would amount to rewriting of the legislative provision. 3. CENVAT Credit 3.1 CCE, Raipur vs. SKS Ispat & Power Ltd (37) STR 485 (Tri.-Del.) The department in this case disallowed CENVAT credit on the ground that assessee 160 The Chamber's Journal

6 did not clear goods in terms of invoices which were later on cancelled. The Tribunal held that, there is no provision in law relating to CENVAT credit for proportionate disallowance of CENVAT credit in such circumstances as no one to one correlation of input and output is to be established to claim CENVAT credit. It is further held that, CENVAT credit of pandal and shamiana service availed to preserve raw material is admissible and disallowance cannot be done on mere suspicion or assumption. 3.2 GTL Infrastructure Ltd. vs. CST, Mumbai 2015 (37) STR 577 (Tri.-Del.) The assessee in this case provided passive telecom infrastructure which was taxable under BAS. The department denied CENVAT credit on parts of Towers, BTS Cabins, etc. heavily relying on definition of input service under rule 2(k)(i) of CCR, 2004 and explanation thereunder. The Tribunal held that, assessee is providing output service therefore rule 2(k)(ii) is relevant and Towers/ BTS cabins undisputedly used for providing BAS hence credit cannot be denied. Facts of Bharti Airtel Ltd (29) STR 401 (T) are totally different hence not applicable in present case. It if further held that, reversal of wrong CENVAT credit before utilization does not attract interest liability. 3.3 Hindustan Zinc Ltd. vs. CCE, Jaipur 2015 (37) STR 608 (Tri.-Del.) The Tribunal in this case allowed CENVAT credit on insurance of plant & machinery, goods in transit, cash in transit and insurance of vehicles and laptops being an integral part of manufacturing business to be treated as input service in terms of rule 2(l) of CCR, 2004 as it existed prior to its amendment on Modern Insulators Ltd. vs. CCE, Jaipur-II 2015 (37) STR 625 (Tri.-Del.) The Tribunal in this case allowed CENVAT credit of service tax paid on transit insurance meant for risk cover of goods meant for transportation from one place to other as once the insurance cover is inseparable from the risk covered by it then CENVAT claimed is undeniable. 3.5 CCE vs. HCL Technologies 2015 (37) STR 716 (All.) The High Court in this case allowed CENVAT credit on following input services: Subscription for International Taxation for providing information and knowledge pertaining to International Taxation for tax compliance; Legal & Consultancy service in relation to ling of tax return in US; Medical group insurance for employees; and, Outdoor catering services except for consumption of alcoholic beverages. 3.6 Bhuruka Gases Ltd. vs. CCE,C&ST, Bengaluru-I 2015 (37) STR 818 (Tri.- Bang.) The Tribunal in this case held that, factually as proved from letters written by two agents, besides sales promotion, said agent helping in selling in products, in canvassing business, making their network available for expanding business and procuring of orders, which activity can be treated as sales promotion and therefore eligible for credit. ML-373 The Chamber's Journal 161