CA. Bharat Shemlani INDIRECT TAXES Service Tax Case Law Update 1. Services Consulting Engineer Service 1.1 Institution of Valuers vs. UOI 2012 (27) STR 113 (Guj.) The High Court in this case observed that, syllabi of various universities for course of Master of Valuation shows that engineering subjects were limited and it was not mandatory for a person to be a graduate in engineering or to otherwise possess knowledge of civil, mechanical or electrical engineering to be eligible for course. In that view, person who was not an engineer Therefore it is held that, services of valuers are not liable to service tax under consulting engineers service. Erection, Commissioning or Installation Service 1.2 Lalit Constructions vs. CCE, Raigad 2012 (27) STR 138 (Tri-Mumbai) In this case, the appellant registered as Government Civil Contractor and engaged in activity of providing, lowering and laying of sewerage and water supply pipeline including construction of chambers, operation, maintenance and repair work to water supply distribution network, underground drainage work etc. to various Government bodies. The Tribunal held that, activities undertaken by assessee not covered under the category of Erection, Commissioning or Installation service. 1.3 Suzlon Infrastructure vs. CCE, Pune-III 2012 (27) STR 242 (Tri-Mumbai) The appellant in this case, provided composite services of erection, commissioning or installation (ECI) of Wind Turbine Generators (WTG) by using certain materials. It is held that, the main object of Agreement was to provide all services required for ECI of WTG and material provided in relation to electrical work were incidental thereto. By showing four separate invoices for (i) construction of civil foundation etc. (ii) supply and installation of transmission line from windmill to grid interconnection, (iii) erection and installation of windmill and it cannot be said that, assessee had executed four separate and distinct contracts with customers. It is further held that, benefit of Notification No. 19/2003-ST providing for deduction of value of materials sold for electrical installation could not be claimed as their supply was only incidental to services of ECI. It is also held that, extended period of limitation can be invoked as the bona fide belief is not established as there is nothing on the record to indicate that the appellant approached Service Tax Authorities to ascertain their liability to pay service tax. 134 ML-542
Business Support Service 1.4 Mundra Port & SEZ Ltd. vs. CCE, Rajkot 2012 (27) STR 171 (Tri-Ahmd.) The Tribunal in this case held as under; licensing under concessional agreement with State Government to handle business of container terminal cannot be said towards infrastructural support service under BSS. any infrastructural service to boost the business of service receiver. Similarly maintenance of assets of private parties did not amount to providing any business support service to railways. lessee alongwith facilities viz., dredged channel, marine and port facilities, access to main road etc. is neither a business support nor taxable services of renting of immovable property. 1.5 Air Liquide North India (P) Ltd. vs. CCE, Jaipur 2012 (27) STR 295 (Tri-Del.) The appellant in this case, supplied and installed storage tanks etc., at client s premises. The department sought to tax them under Business Support Service. The Tribunal held that, as per principle of Noscilur of sociis expression service in relation to Business or Commerce to get its colour from inclusive portion of definition under section 65(104c). Therefore, prima facie, support services to cover services only of supporting nature for main business. Hence, renting of machinery and equipment production or manufacture being services relating to manufacture of altogether different nature and not to be covered under BSS. Business Auxiliary Service 1.6 CCEC&ST, BBSR-II vs. Ores India (P) Ltd 2012 (27) STR 188 (Tri-Kolkata.) The Tribunal in this case held that, from no corner of stretch, the activity of excavation, picking, sorting, breaking, sizing and stacking, loading of ore into BG wagons at railway sidings and removal of rejects etc., falls under BAS. It is further held that, according to the provisions of Section 65A, the service is appropriately taxable during relevant period. 1.7 CC&CE, Nagpur vs. Akola District Central Co-op. Bank 2012 (27) STR 274 (Tri- Mumbai) The assessee in this case received commission from MSEB for maintaining their account for deposit of cash or cheque towards payment of bill. The Tribunal after relying on decision in Federal Bank Ltd. 2009-TIOL-775-HC-Ker, held that, such activity is not covered under Business Auxiliary Service. 1.8 Federation of Gujarat State Chemist & Druggist Assn. vs. CCE, Rajkot 2012 (27) STR 292 (Tri-Ahmd.) The appellant, association of chemist and druggists, collected advertisement charges from manufacturers for publication of details of medicines/products of manufacturers in monthly news magazine. The Tribunal observed that, the main purpose of publication to provide information regarding products prices and mere publication of names and price details does not amount to sales or promotion. It is held that, the activity is only sale of space in monthly news and therefore not covered under BAS. Cargo Handling Service 1.9 Gangadhar Bulk Movers Pvt. Ltd. vs. CCE, Nagpur 2012 (27) STR 258 (Tri-Mumbai) The appellant in this case engaged in activity of loading/unloading of coal. They have loaded coal on tipper and transported from one place to another place within mine area and thereafter coal is loaded. The Tribunal observed that, Work Order consists of two jobs, first job for ML-543 135
loading and unloading of coal and second part of contract is that of transportation of coal from one places to another with separate rates. It is held that, definition of cargo handling service place no restriction on loading or unloading by manual or mechanized method. Once the activity carried out, is found to be loading and unloading of cargo, such activity is covered by category of Cargo Handling Service. Cargo is not only goods transported by a vessel or by a aircraft but also goods transported by motor vehicle and, the tipper is motor vehicle. It is also held that, since the issue is one of interpretation of law and at the infancy stage of implementation of law there appears to have been confusion as to taxability the invocation of larger period of limitation is not sustainable. 2. Interest/Penalties/Others 2.1 CST, Delhi-I vs. ITC Hotels Ltd. 2012 (27) STR 145 (Tri-Del.) In this case High Court allowed the amalgamation of two companies with the parent company w.e.f. 1-4-2004 i.e. appointed date as per Amalgamation Scheme duly approved by two High Courts. Parent Company was paying service tax under the category of Management Consultants Services to Subsidiaries from 1-4-2004 till September, 2004. The Tribunal held that, appointed date as approved by the High Court i.e. 1-4-2004 is required to be taken as the date of amalgamation and not the date on which entire formalities were completed of Companies i.e. 23-3-2005 to be taken as relevant date for amalgamation. Therefore, service provided by assessee to be considered as provided to himself and hence no service tax would arise against them. 2.2 Manish Agarwal vs. CST, Ahmedabad 2012 (27) STR 155 (Tri-Ahmd.) The Tribunal in this case held that, location of service receiver is important and not a place of its performance. The phrase used outside India benefit of service should accrue outside India. In that view, it is possible that export of service may happen even when all relevant activities take place in India and place of performance being in India would not make the service taxable. The commission received by assessee from foreign client for sale of foreign goods in India was not liable to Service tax. 2.3 CST, Bangalore vs. Motor World 2012 (27) STR 225 (Kar.) The High Court in this case held that, stipulations of Sections 76, 78, 79 and 80 means honest belief founded upon reasonable grounds, of existence of state of circumstances, assuming them to be true, would reasonable lead any ordinarily prudent and cautious man, to come to conclusion that same was right thing to do. The initial burden to show it is on the assessee and thereafter, adjudicating authority has to consider it. If it is found frivolous, without substance or foundation, question of imposing penalty arises. It is further held that, penalty under section 76 and 78 both operate in a mutually exclusive area, and penalty cannot be imposed under both. This has been made clear by amendment introduced by Finance Act, 2008 w.e.f. 10/05/2008 and same is also applicable to periods prior to 10/05/2008 as the said amendment was clarificatory in nature. 2.4 Pioneer Services vs. CST, Chennai 2012 (27) STR 285 (Tri-Chennai.) The Tribunal in this case held that, CMC charges levied by computer centre for filing the bill of entry and shipping bill electronically is to be included in assessable value of taxable service provided by Customs House Agents. 3. CENVAT Credit 3.1 CCE, Bangalore vs. Graphite India Ltd. 2012 (27) STR 130 (Kar.) 136 ML-544
The High Court in this case held that, transportation service provided by assessee to their staff to pick up from the residence to the factory and vice versa is an input service and in or in relation to manufacturing activity. 3.2 Portal India Wireless Solutions P. Ltd. vs. CST, Bangalore 2012 (27) STR 134 (Kar.) The High Court in this case held that, refund of unutilised credit of service tax paid on input services used for export of software a nontaxable item is admissible on furnishing of particulars of tax paid by the appellant and same cannot be denied on ground of limitation under section 11B of CEA, 1944. It is further held that, registration with department is not a prerequisite for claiming the credit. 3.3 CCE, Delhi-III vs. Suzuki Powertrain India Ltd. 2012 (27) STR 141 (Tri-Del.) The Tribunal in this case held that, no law is providing that, for catering service to qualify as Input Service only if employee number exceeds 250. After applying ratio of decision in Ultratech Cement Ltd. 2010 (260) ELT 369 (Bom.) and Ferromatik Milacron India Ltd. catering facility provided to employees in factory therefore credit is admissible. 3.4 Madras Radiators & Pressings Ltd. CCE, Chennai 2012 (27) STR 163 (Tri-Chennai.) The Tribunal in this case allowed cenvat credit of service tax paid on expenses on transport of empty trolley used in relation to manufacture. 3.5 Harsha Engineers Ltd. vs. CCE, Ahmedabad 2012 (27) STR 164 (Tri- Ahmd.) In this case, it is held that, service tax paid on premium of insurance policy is relatable to business activity of the manufacturer, hence eligible for CENVAT credit as input service. 3.6 CCE, Hyderabad-I vs. Neuland Laboratories Limited 2012 (27) STR 168 (Tri-Bang.) The assessee in this case claimed cenvat credit of service tax paid on Stock Brokers services used for acquiring shares of another company with which the assessee entered MOU for purchase of electricity for the purpose of manufacture of excisable goods. The said MOU contained condition that, the other company shall supply electricity to the assessee subject to the condition that, the assessee would invest in former. The Tribunal held that, such an arrangement clearly brings out a nexus between the Stock Broker service and the manufacture of goods, hence service clearly falls within the ambit of input 3.7 JBM Auto Systems Pvt. Ltd. vs. CCE, Chennai 2012 (27) STR 170 (Tri-Chennai) The Tribunal in this case allowed cenvat credit of service tax paid on manpower recruitment and supply agency service for garden maintenance as permission of Tamil Nadu Pollution Control Board was mandatory for carrying out manufacture hence, the said service has nexus to manufacture and clearance of final products. 3.8 Tufropes Pvt. Ltd. vs. CCE, Vapi 2012 (27) STR 269 (Tri-Ahmd.) The Tribunal in this case allowed, cenvat credit of service tax paid on air travel on the basis of said expense as revenue expenditure relating to 3.9 Vidyut Metallics Pvt. Ltd. vs. CCE, Mumbai-III 2012 (27) STR 305 (Tri- Ahmd.) The Tribunal in this case allowed cenvat credit of service tax paid on services provided by Travel Agent for travelling of technicians and accountants as it is availed for manufacture of ML-545 137
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