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Indirect Taxes
Service Tax – Case Laws Update
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Consulting Engineer Service provided by Non-resident is
not liable to tax in the hands of recipient of service prior to 16-8-2002
Cadbury India Ltd. vs. CCE Mumbai 2005 (188) ELT 166
(Tri-Mumbai)
Facts
The appellant received technical know-how in the form of
specifications, recipes and procedures from Foreign Company during the period
July 1997 to September, 2001. The department sought to tax them under the
category of Consulting Engineers Services and also imposed penalty. The
Commissioner (Appeals) confirmed the order of lower authority.
Decision
The Tribunal after going through case records, held that
period of dispute is prior to amendment of Rule 2(1)(d). Since only through
this amendment liability to pay tax was fastened unto a service recipient and
the said amendment is prospective, the appellant cannot be made to pay service
tax for the above said period. Therefore the impugned demand and penalty
cannot be sustained. In view of foregoing, the other contention as to whether
technical know-how received by the appellants, amounts to consulting engineers
services or not is not considered.
Cases/Circulars referred/relied
Navinon Ltd. vs. Commissioner 2004 (172) ELT 400 (Tri-Mum.)
Bajaj Auto Ltd. vs. Commissioner 2005 (179) ELT 481
(Tri-Mum.)
[See also Pfizer Ltd. vs. CCE, Mumbai 2005 (188) ELT 456
(Tri-Mumbai)]
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Management Consultants Amounts recovered from Group
Company towards Staff Cost & Other expenses and shared services are not liable
to tax under Management Consultants Service
Glaxo Smithkline Pharmaceuticals Ltd vs. CCE Mumbai 2005
(188) ELT 171 (Tri-Mumbai)
Facts
The appellant was engaged in the business of manufacturing
and sale of drugs, pharmaceuticals, fine chemicals etc. The appellant incurred
joint operation cost for group company as per an agreement and recovered
certain amounts towards 'Staff Cost' and Other expenses and shared services
during the period 16-10-1998 to 31-12-2000 from the said group company. The
'Other expenses' were on account of publicity, freight, travelling, rent etc.
The revenue taxed the amounts recovered by the appellant from group company
under Management Consultancy Services (MCS) and demanded tax along with
penalties. The Commissioner (Appeals) confirmed the order of lower authority.
Decision
The Tribunal with regard to 'Other expenses' held that
Service tax is in any case not payable on reimbursement/out of pocket expenses
charged on actual as per the clarification & Trade Notices issued by the
department. With regard to 'Staff Cost" it is held that the nature of the
Executory services provided by the Marketing Team Staff would more
appropriately fall under 'Business Auxiliary Service' (BAS) and not under
'MCS' as the definition of MCS remains the same even after the levy of service
tax on BAS. When an existing Tariff definition remains the same, then the
introduction of new Tariff entry would imply that the coverage under the new
Tariff for purpose of tax is an area not covered by earlier entry. The new
entry is extension of the scope of coverage of service tax and not carving out
of a new entry from erstwhile entry of MCS. The Tribunal set aside the order
in its entirety.
Cases/Circulars referred/relied
Kerala Colour Lab Association vs. UOI 2003 (156) ELT 17 (Ker.)
Parasmal Bam vs. Commissioner 2002 (146) ELT 717 (Tri.)
CBEC Circular dated 27-7-2001
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Interest and penalty
3.1 Jupiter Sea & Air Services
vs. CCE, Chennai 2005 (188) ELT 285 (Tri-Chennai)
Facts
The appellant provider of taxable services committed
default in payment of tax and filing half yearly returns for the period
1998-2001. The adjudicating authority imposed penalty of Rs. 3,45,293/- and Rs.
3,000/- under sections 76 and 77 respectively. The Commissioner (Appeals)
reduced quantum of penalty u/s 76 to Rs. 1.00 lakh. Still aggrieved assessee
filed appeal before the Tribunal.
Decision
The Tribunal after considering submission made by the
appellant observed that, the only explanation offered by the appellant is that
they had financial difficulties and hence happened to pay tax belatedly. A
plea of financial hardship cannot by itself be a satisfactory cause of delayed
payment of service tax. Financial difficulty is not a circumstance beyond
one's control and it is something for which remedies are available in the
commercial world. What section 80 envisages is a cause or reason which is
beyond the assessee's control and could satisfy the quasi-judicial authority.
Since the revenue is not aggrieved by the exercise of discretion by
Commissioner (Appeals) in reducing penalty u/s 76, no further remission is
warranted for. Penalty u/s 77 has been reduced to Rs. 2,000/- .
(See also Trans (India) Shipping Pvt. Ltd. vs. CCE Chennai
2005 (188) ELT 445 (Tri-Chennai))
3.2 M. Madhuri vs. CCE, Guntur 2005 (188) ELT 287
(Tri-Bang.)
Facts
The appellant was carrying on the business of Kalyana
Mandapam. During the period
1997-98 to 1999-2000 they had collected rent for letting out marriage and
function hall and godown. The revenue sought to levy tax on entire rent
received for hall and godown. The appellant contended that they are not liable
to tax for rent received for letting out godown and with regard to penalty
they were under bona fide belief that they were exempted from service tax. The
Commissioner (Appeals) confirmed lower authorities order.
Decision
The Tribunal after considering documents produced by the
appellant observed that, they had produced detailed income statement for each
year duly notarized and supported by an affidavit. There is no reason to
disbelieve this financial statement. Therefore service tax has to be levied on
income earned from marriage and function hall and not on the godown rent.
Since, the service tax liability is
reduced, the Tribunal has reduced penalty to Rs. 5,000/-
Cases/Circulars referred/relied
Commissioner vs. Impress Ad-Aids and Displays 2004 (173)
ELT 137 (Tri.)
Hindustan Steel Ltd. vs. State of Orissa 1978 (2) ELT J159
(SC)
Smitha Shetty vs. Commissioner 2003 (156) ELT 84 (Tri.)
3.3 Laxmi Colour Pvt. Ltd. vs. CCE, Jaipur 2005 (188) ELT
400 (Tri-Del.)
Facts
The appellant engaged in the business of developing and
printing of photographs. During the period 16-7-2001 to 31-3-2003 they had
collected service tax but failed to deposit the same on time and also failed
to file ST-3 Return. The department confirmed the service tax demand along
with interest and levied penalty u/ss 76 and 77. The Commissioner (Appeals)
upheld the demand of tax and interest but set aside penalties imposed u/ss 76
and 77.
Decision
The Tribunal held that the appellant is covered under the
provisions of service tax w.e.f. 16-7-2001 under the category of Photography
services and also upheld levy of interest u/s 75.
3.4 CCE, Delhi-I vs. J.S. Architect Pvt. Ltd. 2005 (188)
ELT 455 (Tri-Del.)
Facts
The assessee defaulted in depositing the service tax and
filing half yearly return in ST-3. The revenue imposed penalties u/ss 76 and
77. The assessee contended that delay was due to cancer treatment of a close
relative of Director during the relevant period of dispute, and they had paid
service tax though belatedly along with interest. The Commissioner (Appeals)
set aside the penalties imposed u/ss 76 and 77. The department filed appeal
before the Tribunal against the said order.
Decision
The Tribunal after considering the submission of the
assessee held that the Commissioner (Appeals) has set aside the penalty after
examining the documents furnished by the assessee regarding the treatment of
close relative of the Director for cancer in Mumbai and Delhi during the
period of default and this is a fit case where provisions of section 80 are
attracted and rejected the appeal filed by the department.
Cases/Circulars referred/relied
ETA Engineering Ltd vs. CCE, Chennai 2004 (174) ELT 19
(Tri.)
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