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Indirect Taxes
Service Tax – Case Law Update
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Bharat Shemlani, |
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Chartered Accountant |
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Services
1.1 Philcorp Pte. Ltd. vs. CCE, Goa 2007 (7)
STR 266 (Tri-Mum.)
In this case Tribunal held as follows:
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Consultancy service provided by foreign company to Indian
company is not liable to tax prior to August, 2002 as provisions
making recipient of service liable to tax only inserted in
August, 2002. Hence, service tax cannot be recovered from
foreign service provider for period prior to August, 2002.
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Service Tax Law extends to whole of India except Jammu & Kashmir
and the same is also not applicable to a person or company
situated outside India having no business establishment in
India.
1.2 Euro RSCG Advertising Ltd. vs. CCE,
Bangalore 2007 (7) STR 277 (Tri-Bang.)
The Tribunal in this case held as under:
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Fixed commission received on monthly basis from Media on account
of prompt payment of bills to Media is not liable to service tax
as under advertising service amount received by service provider
from his client only is liable to service tax and not amounts
received from others; i.e., Media.
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Cash discount is an income from payment of bills in advance and
not from services rendered to clients and therefore does not
attract service tax.
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Target incentives received by the appellant from certain
publications after reaching certain targets of advertising
business are neither connected to service rendered to clients
nor billed to the client and hence not liable to tax.
1.3 Cochin Shipyard Ltd. vs. CCE, Cochin 2007
(7) STR 291 (Tri-Bang.)
The Tribunal in this case held that
repairing/maintenance of ships carried under repair contracts for
the period prior to 16-6-2005 is not liable to service tax as
during that period such services were required to be carried out
under maintenance contract.
1.4 Jetking Information Ltd. vs. CCE, Mumbai-I
2007 (7) STR 314 (Tri-Mum.)
In this case the Tribunal held that agreements
between appellant and their franchisees satisfy all four
requisites of definition of ‘Franchise’ and the appellant is
liable to pay service tax. It is further held that Notification
No. 9/2003- ST only exempts services provided as commercial
training and coaching and the expression ‘in relation’ to
appearing in notification is not of wide connotation and would not
include franchisees services. The said expression though of wide
sphere, however the same is to be extended only in relation to
commercial training or coaching services given by the Institute.
1.5 CMS (I) Operations & Maintenance Co. P.
Ltd. vs. CCE, Pondicherry 2007 (7) STR 369 (Tri-Chennai)
The appellant in this case maintained and
operated power plant for generation and supply of power on the
contract basis. On the facts of the case the Tribunal held as
follows:
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In
pith and substance the agreement is for operations and
maintenance of facility and production of electricity.
Maintenance of plant is incidental and ancillary functions and
no advice for improvement of organization is offered. Therefore
the activity is not covered under management consultant’s
service.
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Operation of plant on contract does not amount to service in the
nature of consultancy and technical assistance. Suggestions for
better running of plant not provided to owners or other, but to
self hence not liable to tax under consulting engineer’s
service.
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The activity of co-ordination of delivery of lignite with
transport agent for ensuring quality and quantity of fuel
supplied to run the plant is incidental function to primary
function of power generation and hence not become separate
service to be liable under C & F Agent’s services.
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Generation of electricity is manufacture u/s 2(f) of CEA Act,
1944 and the same is excluded from the definition of Business
Auxiliary Service.
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Goods and equipments are maintained or repaired by the suppliers
of the appellant under warranty or maintenance contract and the
appellant if any maintenance service is undertaken is provided
to self and therefore the activity is not covered under
maintenance or repair service.
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Operation and Maintenance (O & M) of electricity generation
plant is manufacturing activity and the same cannot be
vivisected to charge service tax on some activities. The
contract of O & M is for generation and supply of power and not
for rendering any service. Since taxable value under each
service is not given, tax cannot be levied when liability is not
determined under each taxable service.
1.6 Board of Control for Cricket in India vs. CST, Mumbai 2007 (7)
STR 384 (Tri-Mum.)
In this case the Tribunal held as under:
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The BCCI is charitable institution for control and promotion of
cricket and not a commercial concern to be liable under
Advertising agency for canvassing and sale of space for
advertisement.
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Sale of telecast rights of cricket matches and sale of space for
advertisement without having any connection with design or
preparation of advertisement is not covered under Advertising
Agency service.
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Introduction of new category of service implies coverage of new
area not taxable under previous entries. Sale of space or time
for advertisement and sponsorship service is liable to service
tax w.e.f. 1-5-2006 hence not covered under Advertising Agency
service.
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Definition is to be interpreted appropriate to phrase defined
and to general purpose of enactment. Literal and out of context
interpretation making all persons connected with advertisement
as advertising agency is not correct. Interpretation leading to
absurdity to be avoided. The expression ‘in relation to’ though
expansive but to be read in context and all remotely connected
activities cannot be covered under Advertising Agency service.
1.7 Renu Singh & Co. vs. CCCE, Hyderabad 2007
(7) STR 397 (Tri-Bang.)
In this case the appellant was supplying labour
for helping mechanized loading of cement. The Tribunal held that
supply of labour for carrying out such activity is not covered
under Cargo Handling Agency service but under Manpower Recruitment
and Supply Agency service.
1.8 Finolex Industries Ltd. vs. CCE, Pune 2007
(7) STR 408 (Tri-Mum.)
In this case it is held that unloading of LPG
from ship and transfer by pipeline to LPG tanks cannot fall under
category of unloading of Goods and Storage and Warehousing
Activities.
1.9 Bajaj Auto Finance Ltd. vs. CCE, Pune 2007
(7) STR 423 (Tri-Mum.)
The appellant in this case was engaged in the
business of hire purchase finance where agreement was executed
between appellant and hirer for part finance of vehicle purchased.
The title to goods vests with finance company in case of hire
purchase and with purchaser in respect of hire purchase finance.
The appellant was having control over goods in all hire purchase
finance agreement. The Tribunal held that hire purchase finance is
different from hire purchase and hire purchase finance is not
covered under Banking & Financial service.
1.10 Basti Sugar Mills Co. Ltd. vs. CCE,
Allahabad 2007 (7) STR 431 (Tri-Del.)
The appellant in this case manufacturer of
sugar took over the management of another sugar mill. The
Department sought to tax them under Management Consultant’s
service. The Tribunal held that appellant performing management
function being in-charge (manager) of operation of factory and the
manager of the factory is different than management consultant;
hence the appellant is not liable to tax under Management
Consultant’s service.
1.11 BPL Mobile Communications Ltd. vs. CCE,
Mumbai 2007 (7) STR 440 (Tri-Mum.)
The appellant in this case sold SIM cards and
paid sales tax thereon. The Tribunal held that providing SIM
card/telephone connection is transaction of sale of goods and
activity of providing SIM cards is not taxable service and
therefore not liable to service tax.
1.12 Cochin International Airport Ltd. vs. CCEC,
Kochi 2007 (7) STR 468 (Tri-Bang.)
In this case the appellant collected user fee
from outgoing international passenger not for any service rendered
but only to augment financial situation of the appellant. The
department sought to tax them under Airline Service. The Tribunal
observed that there is no nexus between the user fee collected
from passengers and services such as landing, parking, x-ray
baggage inspection facilities rendered to airlines and held that
service tax cannot be imposed on such user fees collected under
Airline services.
1.13 Silicon Honda vs. CCE (A), Bangalore 2007
(7) STR 475 (Tri-Bang.)
The Tribunal in this case held that money
received for lease of table space to the financial institutions
cannot be brought within the definition of business auxiliary
service.
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Interest/Penalties/Others:
2.1 Care Electronics Ltd. vs. CCE, Ahmedabad
2007 (7) STR 273 (Tri- Ahmd)
In this case, appellant pleaded for waiver of
penalty under Extra-ordinary Tax-payer Friendly Scheme as the
service tax along with interest was paid before 30-10-2004. The
Tribunal relying on CCE vs. Bharat Security Services and Worker
Contractors 2006 (3) STR 703 (Tri) held that scheme is
applicable to all assessees and therefore set aside the penalty.
2.2 Mehta Security & Detectives Services vs.
CCE, Jaipur 2007 (7) STR 287 (Tri- Del)
In this case appellant paid service tax
erroneously under Manpower Recruitment and Supply Agency service
for supply of manpower for the period prior to 16-6-2005. The
refund claimed by the appellant was allowed by the Tribunal on
facts of the case by observing that original payment of service
tax was erroneous and the doctrine of unjust enrichment is not
applicable as service tax was not passed on to the recipient of
service.
2.3 CCE, Mumbai vs. S. K. Services 2007 (7) STR
332 (Tri- Mum)
In this case, the Tribunal held that financial
problem cannot be a reason for non-payment of tax once the amount
is being regularly collected from customers but instead of
depositing in Government treasury, the same is being pocketed by
the assessee. Considering facts of the case, penalty enhanced from
Rs. 50,000/- to Rs. 1,50,000/-.
2.4 CCE, Pune-III vs. Sterlite Industries (I)
Ltd. 2007 (7) STR 333 (Tri- Mum)
The Tribunal in this case after relying in the
case of Air India Ltd. vs. CC 2005 (191) ELT 266 (Tri-Mum)
held that Order of Tribunal if not appealed against before higher
appellate forum, becomes final and any fresh appeal against the
same order is not entertainable.
2.5 CCE, Mumbai vs. Montage Securities Ltd.
2007 (7) STR 393 (Tri-Mum)
In this case it is inter alia held that
new plea of limitation can be raised any time even at
appellate stage.
2.6 Calvin Wooding Consulting Ltd. vs. CCE,
Indore 2007 (7) STR 393 (Tri- Del)
In this case, the Tribunal held that prior to
16-8-2002 non-resident service provider providing service in India
is liable to pay service tax either by himself or through
authorized agent according to the provisions of Rule 6 (applicable
at that time) of STR, 1994. Neither Act nor Rules granted any
immunity to the Foreign Service provider for payment of service
tax in respect of taxable service provided by them in India.
2.7 Foster Wheeler Energy Ltd. vs. CCEC,
Vadodara 2007 (7) STR 443 (Tri- Ahmd.)
In this case the appellant received consulting
engineer’s services for setting up of LNG terminal, partly in
India and partly from outside India. The Tribunal relying on CBEC
circular No. 36/4/2001 held that, Offshore services received prior
to 18-4-2006 are not liable to tax, however service received after
that are liable to service tax in view of insertion of section 66A
w.e.f. 18/4/2006
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CENVAT Credit
3.1 Magnet Industries (CAL) Pvt. Ltd. vs. CCE,
Kolkata-I 2007 (7) STR 302 (Tri-Kol)
The Tribunal after relying on Rule 3 of Cenvat
Credit Rules, 2004 held that credit cannot be denied merely for
the reason that it has not been claimed in appeal. Benefit
available to appellant cannot be denied, if such benefits are
legitimate and patent from record.
3.2 Universal Cables Ltd. vs. CCE, Bhopal 2007
(7) STR 310 (Tri-Del)
The Tribunal in this case held as under:
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Cenvat credit of tax paid on internet service cannot be denied
as internet services are utilized for information related to
manufacture, sale and dispatch instructions in the current age
of Information Technology.
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Cenvat credit of tax paid on courier service used for delivery
of finished goods to customer is not permissible as the said
service is akin to outward transportation and Cenvat credit is
not permissible on outward transportation of final products.
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Since the issue involved in the present appeal was of
interpretation of provisions, no mala fide intention to
avail ineligible Cenvat credit was shown and therefore, no
justification for imposition of penalty under Rule 15.
3.3 Excel Corp Care Ltd. vs. CCE, Ahmedabad
2007 (7) STR 451 (Tri-Ahmd)
In this case Tribunal held as follows:
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Service tax paid on Mobile phones is eligible for Cenvat credit.
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Custom House Agents services for exports not having nexus with
manufacture and clearance from factory, Cenvat credit of service
tax paid on such services is not admissible.
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Setting up of circles or gardens for display of sign boards is
not related to advertisement and therefore service tax paid on
such input service is not admissible as Cenvat credit.
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