|
SERVICE TAX
TODAY |
|
Vol. 13, Part 7,
for the week of April 18 – April 24, 2008 |
Magazine
finance
bill, 2008
q Budget 2008-09 proposals : Analysis of taxable
services//Smita Mishra
q Authority of Advance ruling//B.N. Das
exemptions
q Services provided to SEZ//V.S. Datey
export
of service
q Export of services//Shashank Bijapur &
Tulika Sinha
Reports
table of cases
Apex Colour Lab v. CCE
(New Delhi - CESTAT)
Arvind Motors v. CCE
(New Delhi - CESTAT)
Bax Global India Ltd. v.
CST (Bang. - CESTAT)
Bonfiglioli
Transmissions (P.) Ltd. v. CCE (Chennai - CESTAT)
CCE v. Ashok
Security Services (Chennai - CESTAT)
CCE v. Chintamani
Mangal Karyalaya (P.) Ltd. (Mum. - CESTAT)
CCE v. Gujarat
Borisil Ltd. (Ahd. - CESTAT)
CCE v. Nesamony
Tours & Auto Consultant Travels (Chennai - CESTAT)
CCE v. Rai
Associates (Bang. - CESTAT)
CCE v. Surya
Sands (P.) Ltd. (Chennai - CESTAT)
CCE v. Synthetics
& Polymers (P.) Ltd. (New Delhi - CESTAT)
CST v. Vrajlal
Thakker & Co. (Mum. - CESTAT)
General Precured
Treads (P.) Ltd. v. CCE (Chennai - CESTAT)
Kataria Transport
Corpn. v. CCE (New Delhi - CESTAT)
M.L. Yarns (India)
(P.) Ltd. v. CCE&C (Mum. - CESTAT)
Maraketforce (Chennai)
(P.) Ltd. v. CST (Chennai - CESTAT)
Naveen Advertisers v.
CST (Chennai - CESTAT)
Noida Catering Service
v. CCE (New Delhi - CESTAT)
Sekhar Sales Syndicate
v. CCE (Chennai - CESTAT)
Soundararaja Mills
Ltd. v. CCE (Chennai - CESTAT)
Speed and Safe Courier
Service v. CCE (Bang. - CESTAT)
Synchron Research
Services (P.) Ltd. v. CST (Ahd. - CESTAT)
World Eye
Communication v. CCE (New Delhi - CESTAT)
Subject Index
Advertising
Agency’s Services
- Period April 2003 to March 2006 - Assessee
had obtained licence under an agreement from a transport corporation for
display of advertisements on specified portions on body of buses - During
material period, assessee allotted such space on buses to its own clients for
display of their advertisements against payment of rent - Service tax was
demanded from assessee under category of ‘Advertisement service’ and penalty
was imposed upon it - Assessee submitted that said service was introduced for
purpose of levy of service tax with effect from 1-5-2006 only and, therefore,
it had no liability to honour above demand for period in question - Whether
since assessee had made a prima facie case against demand, pre-deposit
requirement was to be waived and recovery was to be stayed in respect of
service tax and penalty amounts - Held, yes - Naveen Advertisers
v. CST (Chennai - CESTAT)
Appellate
Tribunal
Appeals to
- Commissioner passed review order under
section 84 - Tribunal set aside order of Commissioner on ground that same was
passed without giving opportunity of personal hearing to assessee and, thus,
case was remanded to Commissioner for de novo decision - Revenue filed
instant application contending since period of two years within which review
order could be passed by Commissioner had already expired, Commissioner could
not pass any review order in terms of section 84(1) and, as such, de novo
adjudication as directed by Tribunal would be ultra vires of provisions
of section 84(1) - Revenue also contended that personal hearing in instant case
would not serve any fruitful purpose - Whether grounds taken by revenue were
nothing but review of Tribunal’s own order which was not permissible in law - Held,
yes - Whether, therefore, there was no mistake in final order of Tribunal - Held,
yes - Apex Colour Lab v. CCE (New Delhi - CESTAT)
Application
of certain provision of Act 1 of 1944
- Whether pre-deposit of service tax is
mandatory in terms of section 35F unless same is waived partly or fully by
appellate forum - Held, yes - Synchron Research Services (P.) Ltd.
v. CST (Ahd. - CESTAT)
Business
auxiliary service
- Assessee was engaged in manufacture of
precured tread - It procured thermal fluid, heated it, and produced hot fluid -
It supplied hot fluid to similar two units and collected charges for heat
energy shared with its neighbouring units - Whether sharing of thermal fluid
with units similar to assessee and charging them for heat energy could not be
brought under definition of ‘procurement of goods or services’ which were input
for clients - Held, yes - Whether in circumtances prima facie
demand was not sustainable and pre-deposit requirement was to be waived - Held,
yes - General Precured Treads (P.) Ltd. v. CCE (Chennai -
CESTAT)
Cargo
handling service
- Service tax was demanded from assessee on
ground that it was providing business auxiliary service and cargo handling
service - Assessee’s case was that it was a transporter and receiving goods
booked for destination by other transporters and other transport agency was
paying service tax on entire freight amount, and it was collecting freight
amount at destination and was retaining amount related to service provided by it
and returning remaining amount to original transporter - Whether since original
transport agency which entered into an agreement with client regarding freight
upto final destination had discharged its service tax liability as a goods
transport agency on entire freight amount, prima facie assessee had a
strong case in its favour and, therefore, pre-deposit requirement of amount of
service tax and penalty was to be waived - Held, yes - Kataria
Transport Corpn. v. CCE (New Delhi - CESTAT)
Central
Excise Act, 1944
Claim for refund of
duty
- Assessee claimed refund of excess service tax
paid by it - Commissioner (Appeals) after verifying records, allowed assessee’s
claim - Whether since Commissioner (Appeals) had not clearly spelt out as to
what kind of verification was done by him and had passed impugned order without
any reasoning, his order was to be set aside and matter was to be remanded to
him to reconsider issue afresh and pass a speaking order - Held, yes - CST
v. Vrajlal Thakker & Co. (Mum. - CESTAT)
Central
Excise Act, 1944
- Section 11B
Cenvat
Credit Rules, 2004
Cenvat Credit
General
- Whether Cenvat Credit can be utilized for
payment of Service Tax on ‘Goods Transport Services’ by service recipient - Held,
yes - CCE v. Synthetics & Polymers (P.) Ltd. (New Delhi -
CESTAT)
Obligation of
manufacturer of dutiable and exempted goods and provider of taxable and
exempted service
- Period 1-6-2001 to 30-10-2006 - Whether where
a manufacture of final product has not opted to maintain separate inventory and
accounts in respect of inputs intended to be used in manufacture of dutiable
final product and those intended to be used in manufacture of exempted final
product and has opted to pay to revenue, such amount (being a percentage of
sale price of exempted goods) as prescribed under sub-rule (3) of rule 6 of
CENVAT Credit Rules, 2001/2002/2004, it shall not be necessary for him to
reverse any CENVAT credit taken on inputs which were used in manufacture of the
exempted final product - Held, yes - Bonfiglioli Transmissions (P.)
Ltd. v. CCE (Chennai - CESTAT)
Output service
- Period October 2005 to March 2006 - Assessee,
a manufacturer of polyester yarn, had availed services of goods transport
agency - It had paid service tax on such service availed by it by utilizing
credit of duty paid on inputs and, capital goods and credit of service tax paid
on input services - Revenue objected to such utilization of credit and lower
authorities confirmed demand of service tax on assessee - Whether in view of
decisions of Tribunal in R.R.D. Tex (P.) Ltd. v. CCE [2007] 10
STT 255 (Chennai - CESTAT) and M.M.S. Steels Ltd. v. CCE 2007 -
TIOL-1317 (CESTAT - Mad.), impugned order demanding service tax from assessee
was to be set aside - Held, yes - Soundararaja Mills Ltd. v.
CCE (Chennai - CESTAT)
Cenvat
Credit Rules, 2004
- Rule 2(p)
- Rule 3
- Rule 6
Chartered
accountant
- Adjudicating authority had confirmed demand
of service tax on services provided by assessee-chartered accountants under contract
to an electricity supply company ‘M’ for various items of work, viz., opening
ledger accounts; preparation of monthly bills, etc., on ground that those were
taxable services of accounting provided by a practising chartered accountant in
his professional capacity and Notification No. 59/1998, ST, dated 16-10-1998
includes such a service of accounting for attracting levy of service tax -
Commissioner (Appeals) set aside said order holding that contract in question
was not a contract for availing professional accounting services of a chartered
accountant but it was mainly a contract for outsourcing operations of ledger
maintenance relating to billing activities of ‘M’ where the assessee was
obliged to provide the semi skilled manpower and take responsibility of
maintaining true and proper accounts in accordance with given plans and
specifications - On similar facts, Tribunal in Jaded Siddappa & Co.
by Final Order Nos. 1146 to 1148/2007, dated 26-9-2007 has held that,
activities of outsourcing of meter reading billing and ledger posting do not
come within ambit of professional activity of a chartered accountant - Whether
in view of decision of Tribunal in Jaded Siddappa & Co. v. CCE
[Final Order Nos. 1146 to 1148 of 2007, dated 26-9-2007], order of Commissioner
(Appeals) was justified - Held, yes - CCE v. Rai Associates
(Bang. - CESTAT)
Circulars
& Notifications
- Notification Nos. 3/2001 - CE, 6/2002 - CE
and 6/2006-CE
- Notification No. 59/1998-ST, dated
16-10-1998
Custom
house agent
- Period 2000 to 2004 - Assessee was a custom
house agent and discharged service tax on services provided by it - Apart from
activity of custom house agent, assessee had also undertaken work as freight
forwarders and other activities related thereto and collected charges for that,
viz., air freight, cartage revenue, MSIL/JWG charges, due carrier,
documentation charges, etc. - In all these cases, services were rendered by
third party and assessee initially made payment for these activities on behalf
of clients and later collected amount from them - Revenue demanded service tax
on all such charges collected by assessee - Assessee’s case was that it had
already paid service tax on amounts collected by it towards rendering services
of Customs House Agents; and it could not be asked to pay tax on amounts
collected by it for other activities which did not fall under category of CHA
service - Whether since charges collected by assessee for activities undertaken
by it were not related to activity of CHA, assessee was not liable to pay
service tax - Held, yes - Bax Global India Ltd. v. CST
(Bang. - CESTAT)
Finance
Act, 1994
- Section 65
- Section 73
- Section 76
- Section 77
- Section 80
- Section 83
- Section 86
Franchise
service
- Period 1-7-2003 to 31-12-2004 - Assessee was
providing ‘courier service’ through its designated franchisees - Service tax
was demanded from it on amounts received from franchisees under category of
‘Franchise service’ - Assessee contended agreement between it and franchisees
could not be strictly called Franchise agreement; and its franchisees had
collected amounts for rendering courier service from their clients, and
discharged appropriate service tax liability after taking their commission in
terms of agreement with it and remitted balance to it and, therefore, demanding
service tax from it under category of ‘Franchise service’ amounted to double
taxation - On reading of Franchise agreement in question, it was found that
assessee had entered into franchise agreement with various clients for
providing courier service; and amount which was received by assessee as
franchiser was obviously receipt for rendering franchise service - Whether in circumstances
assessee was clearly liable for discharging service tax liability on this
service - Held, yes - Speed and Safe Courier Service v. CCE
(Bang. - CESTAT)
Penalty
For failure to
furnish prescribed return
- Assessee was a service provider who filed its
service tax return belatedly and paid service tax and interest thereon on
16-7-2004 - Revenue issued a show-cause notice on 6-9-2004 for imposition of
penalty on assessee - Adjudicating authority, accordingly imposed penalties on
assessee - However, Board vide extraordinary scheme dated 23-9-2004 had granted
immunity from penal proceedings to those taxpayers who had not registered
themselves under service tax law but had come forward to register themselves
and had paid service tax and interest thereon before 30- 10-2004 - Whether
since assessee had paid service tax liability before issuance of show-cause
notice and before expiry of date specified by scheme, there could not be any
penal action against it - Held, yes - World Eye Communication v.
CCE (New Delhi - CESTAT)
For failure to pay
service tax
- Period July 2003 to May 2004 - Revenue
demanded service tax from assessee and imposed penalties under sections 76 and
77 - Assessee contended that it being new to tax had failed to comply with
provisions of law and delay in making monthly payment had occurred owing to its
ignorance of statutory provisions and procedures - Whether since there was no mala
fide intention on part of assessee in making late payment of service tax
and assessee had already paid service tax due, it was to be directed to pay an
amount of Rs. 20,000 under section 76 and Rs. 500 under section 77 - Held,
yes - Maraketforce (Chennai) (P.) Ltd. v. CST (Chennai -
CESTAT)
- Assessee, a clearing and forwarding agent,
did not pay service tax within prescribed time - Adjudicating authority imposed
penalty upon assessee and same was paid by it - However, Commissioner, on
revision, enhanced penalty amount - Whether since there was variance between
penalty amount worked out by assessee and that imposed by Commissioner which
was due to fact that Commissioner had not considered actual days of delay in
making payment of service tax, impugned order was to be set aside and matter
was to be remitted to lower authority for reconsideration - Held, yes - M.L.
Yarns (India) (P.) Ltd. v. CCE&C (Mum. - CESTAT)
- Period from 16-11-1997 to 1-6-1998 - Assessee
had availed services of goods transport operators but had failed to pay service
tax on that - In November 2002, a show-cause notice was issued to assessee by
invoking section 73 demanding service tax along with interest and penalties
under sections 76 and 77 - Assessee paid service tax along with interest and
penalty imposed under section 77, but challenged penalty imposed under section
76 - Commissioner (Appeals) following decision of Tribunal in L.H. Sugar
Factories Ltd. v. CCE [2007] 8 STT 295 (Delhi), deleted penalty
imposed under section 76 - Whether since assessee’s conduct was consistent with
interpretation of legal provisions by Supreme Court in Laghu Udyog Bharati
v. Union of India [2006] 4 STT 322 and could not be held to attract any
penalty under statute, there was no reason to interfere with order of
Commissioner (Appeals) - Held, yes - CCE v. Surya Sands (P.)
Ltd. (Chennai - CESTAT)
Not to be imposed
in certain cases
- Assessee was engaged in grinding of Dead
Burnt Magnesite (DML) lumps into powder for its customers and collected charges
for this services - Assessee neither took registration nor paid service tax - However,
it sought clarification from department as regards its liability to pay service
tax, which it received only during July 2005 - On receipt of same, assessee
paid service tax on 11-7-2005 before issuance of show-cause notice - However,
in adjudication, original authority imposed penalties under sections 76, 77 and
78 on assessee - Commissioner (Appeals), on finding that there was no
suppression by assessee, vacated penalty imposed under section 78 and also
reduced penalty imposed under section 76 - Whether since non-payment of service
tax due by assessee had occurred due to its ignorance of scope of new levy,
‘Business Auxilliary Service’, under which grinding of DMB for a fee was
classified by department, there existed sufficient cause, which prevented
assessee from paying tax due in time and it deserved benefit of provisions
contained in section 80 - Held, yes - Whether, therefore, penalty
imposed under section 76 was to be set aside - Held, yes - Sekhar
Sales Syndicate v. CCE (Chennai - CESTAT)
- Period 16-10-1998 to 31-8-2003 - Assessee had
provided security service to various parties during relevant period - However,
it had neither been registered with department, nor had filed returns -
Original authority confirmed demand of service tax on it along with interest
and penalties under sections 76 and 78 - Commissioner (Appeals) confirmed
demand of service tax but reduced penalties imposed under sections 76 and 78 on
finding that assessee was not fully aware of statutory provisions prevalent at relevant
time and assessee had not evaded payment of service tax intentionally - Whether
Commissioner (Appeals) was justified - Held, yes - CCE v.
Ashok Security Services (Chennai - CESTAT)
- Period 1-7-2003 to 22-2-2006 - Whether
provisions of section 80 do not have any parallel in section 11AC of Central
Excise Act, 1944 - Held, yes - Assessee was authorised dealer of a car
manufacturer and was also providing service in relation to promoting and
marketing various car loan schemes of banks and financial institutions -
Revenue demanded service tax from it under category of ‘Business auxiliary
service’ however penalties under sections 75A, 76 and 78 were imposed -
Commissioner (Appeals) following decision of Punjab & Haryana High Court in
CCE v. Machino Montell (I) Ltd. 2006 (202) ELT 398 which was in
relation to section 11AC of Central Excise Act, 1944 held that penalty equal to
tax was to be imposed on assessee under provisions of section 76 - Whether
since Commissioner (Appeals) instead of considering issue - Whether reasonable
cause for failure was made out as contemplated in section 80, resorted to
stringency of section 11AC of the Central Excise Act, 1944, as reflected in
decision of Machino Montell (I) Ltd. (supra), impugned order was
to be set aside and matter was to be remanded to Commissioner (Appeals) for a
fresh consideration - Held, yes - Arvind Motors v. CCE
(New Delhi - CESTAT)
- Commissioner (Appeals) after taking into
consideration facts and circumstances of instant case and ratio of Tribunal’s
decision in CCE v. S.B. Gopalakrishna [2007] 7 STT 93 (Bang. -
CESTAT) reduced penalties imposed on assessee by original authority under
sections 76 and 78 - Whether there was no reason to interfere with impugned
order of Commissioner (Appeals) - Held, yes - CCE v. Nesamony
Tours & Auto Consultant Travels (Chennai - CESTAT)
- Assessee was providing outdoor catering
services - On being summoned by department in month of August 2005, it
immediately got registered with department and paid service tax along with
interest and penalty for non-filing of returns and non-taking of registration -
However, adjudicating authority imposed penalty under section 78 on assessee -
Assessee contended that levy of service tax on outdoor caterer was new levy; it
was not aware of same; and that on being pointed out that by revenue, it paid
tax along with interest and penalty and, therefore, no penalty under section 78
was imposable - Whether since levy of service tax was introduced on outdoor
catering service only with effect from 10-9-2004; first time assessee was
summoned in month of August 2005, and immediately assessee paid amount of
service tax along with interest and penalty, it could not be said that
assessee’s action or inaction was with an intent to evade payment of duty - Held,
yes - Whether in these circumstances and in view of section 80 as assessee had
shown reasonable cause for not taking registration or not filing returns,
penalty imposed under section 78 was not sustainable - Held, yes - Noida
Catering Service v. CCE (New Delhi - CESTAT)
- Assessee was providing Mandap Keeper service
- It got itself registered under that category and paid service tax along with
interest only on being pointed out by department - Adjudicating authority
imposed penalties under sections 76 and 77 on it - Whether since service tax
levy on mandap keeper was a new levy and assessee was unaware that services
rendered by it were covered under service tax net, Commissioner (Appeals) was
right in invoking provisions of section 80 for setting aside penalties - Held,
yes - CCE v. Chintamani Mangal Karyalaya (P.) Ltd. (Mum. -
CESTAT)
Recovery
of service tax not levied or paid or short-levied or short-paid or erroneously
refunded
- Period 16-11-1997 to 1-6-1998 - Revenue by
issuing a show-cause notice dated 23-7-2004 demaned service tax from assessee,
recipient of Goods Transport Operator’s (GTO’s) services, under section 73 for
relevant period - Original authority confirmed demand along with penalty and
interest - However, Commissioner (Appeals) set aside demand on ground that
there was no provision under section 73 to demand service tax from assessee who
was liable to file return under section 71A and who had failed to pay tax by
due date - Whether in view of decision of Supreme Court in CCE v. L.H.
Sugar Factories Ltd. [2005] 2 STT 282 Commissioner (Appeals) was justified
- Held, yes - CCE v. Gujarat Borisil Ltd. (Ahd. -
CESTAT)
Technical
testing and analysis service
- Assessee was engaged in activity of clinical research, testing and analysis for various pharmaceutical companies - Revenue demanded service tax from assessee under category of ‘Technical testing and analysis service’ - Commissioner relying upon definition/literature from contents of a website concluded that testing of drugs in any manner was included under head of ‘Technical testing and analysis services’ and confirmed said demand - Assessee’s case was that impugned order had been passed in violation of natural justice, as contents of website relied upon by Commissioner had not been disclosed to it, and that from 1-5-2006, amendment to section 65(106) by way of adding Explanation states that technical testing analysis includes testing and analysis undertaken for purpose of clinical testing of drugs and formulations, and, therefore, services undertaken by it could not be brought under tax prior to that date - Whether since Commissioner had relied on definition/literature from contents of a website like referring to contents of a dictionary and nothing was submitted by assessee to say that contents of website were incorrect, there was prima facie no violation of principles of natural justice by Commissioner - Held, yes - Whether definition of services for ‘Technical testing and analysis’ as it existed prior to 1-5-2006 prima facie covered services undertaken by assessee and Explanation inserted in section 65(106) is only clarificatory in nature - Held, yes - Whether in such circumstances it could be said that assessee had not made a strong case for total waiver of pre-deposit - Held, yes - Synchron Research Services (P.) Ltd. v. CST (Ahd. - CESTAT)