- Assessee, air travel agent, received commission on sale of air tickets and was discharging its service tax liability - On account of cancellations, wherever tax already paid became not payable, assessee was taking adjustments of tax paid on such cancelled tickets towards tax payable for subsequent periods - Revenue disallowed such adjustments and demanded tax along with penalties - Whether in view of Board’s circular dated 26-6-1997, which specifically permitted such adjustments, demand of tax and penalties was to be set aside - Held, yes - Janta Travels (P.) Ltd. v. CCE (New Delhi - CESTAT)

Business auxiliary service

- Period from 10-9-2004 to 31-3-2005 - Assessee was registered as a provider of various services including business auxiliary services - It executed turnkey projects apart from manufacturing and supplying industrial boilers - It had produced certain materials in course of carrying out turnkey projects of total energy system - It had collected certain amount towards services of transporting material to project sites - Service tax for period from 10-9-2004 to 31-3-2005 was demanded on ground that activity of providing material at project sites, which yielded a margin, was taxable service of ‘procurement of goods’ for assessee’s clients covered by business auxiliary service - Whether in view of decision in case of Daelim Industrial Co. Ltd. v. CCE [2007] 7 STT 184 (New Delhi - CESTAT), demand was prima facie not sustainable and, therefore, assessee would be entitled to complete waiver of pre-deposit and stay on recovery of amount involved - Held, yes - Cethar Vessels (P.) Ltd. v. CCE (Chennai - CESTAT)

- Period from July, 2003 to September, 2006 - Assessee was engaged in activity of providing bedrolls, on behalf of railways, to passengers travelling in AC-2 tier and 3 tier coaches of specified trains - It used to collect Rs. 20 per bedroll from railways for above service - In respect of first class passengers it was permitted to collect Rs. 20 per bedroll directly from them - Service tax was demanded from assessee on finding that it was rendering ‘Business auxiliary service’ in category of ‘customer care service provided on behalf of client’ - Whether prima facie service rendered by assessee on behalf of railway administration to AC-2 tier/3 tier passengers was in nature of a ‘customer care service’ inasmuch as, admittedly, passengers were customers of railways and for services rendered by assessee, it was rewarded by railways - Held, yes - Whether in regard to services rendered by assessee to first class passengers, revenue had yet to establish that it was a ‘customer care service provided on behalf of client’ and, therefore, assessee was to be directed to pre-deposit part of demand - Held, yes - Premier Garments Processing v. CST (Chennai - CESTAT)

Central Excise Act, 1944

Claim for refund of duty

- Period from July, 2001 to August, 2003 - Assessee paid service tax under a mistaken notion of law during relevant period - Later, realizing that service tax had been paid erroneously, it claimed refund of same - Original authority sanctioned entire refund - However, Commissioner initiated review proceedings and ordered recovery of part of sanctioned refund on ground that part of amount paid was barred by time - Assessee contested that demand on ground that in large number of decisions, it was held that when department collects any levy which is not authorized by law, same should be refunded and it will not be hit by provisions of section 11B - Whether assessee had prima facie a strong case on merits and, therefore, it was entitled to waiver of pre-deposit of amount demanded and stay on recovery till disposal of appeal - Held, yes - Mysore Leasing & Finance Ltd. v. CCE (Bang. - CESTAT)

Central Excise Act, 1944

- Section 11B

Cenvat Credit Rules, 2004

Cenvat credit

Documents and accounts

- Assessee had availed service tax credit on basis of photocopy of receipt which did not contain address of person receiving said service, description, classification and value of taxable service and registration number of service provider - Adjudicating authority found that document produced by assessee was not specified eligible document under sub-rule (1) of rule 9 for availment of Cenvat credit and, accordingly, disallowed credit and imposed penalty - On appeal, Commissioner (Appeals) having found no strong prima facie case on merit directed assessee to pre-deposit certain amount towards service tax and penalty - In spite of said order assessee sought to file modification application before Commissioner (Appeals) for modification of said pre-deposit direction - Whether since from order of Commissioner (Appeals) it was clear that assessee’s failure to pre-deposit directed amount would automatically result in dismissal of appeal, there was no inadequacy in order of Commissioner (Appeals) dismissing assessee’s appeal without considering modification application - Held, yes - Whether therefore, assessee was to be directed to pre-deposit amounts as directed by Commissioner (Appeals) towards service tax and penalty - Held, yes - Aanex Services v. CCE (New Delhi - CESTAT)

Input service

- Whether services referred to in inclusive definition of ‘input services’ under rule 2(l) have to be used in or in relation to manufacture of final product and inclusive definition only suggests that some services which may seemingly not appear to be used in relation to manufacture of final product would nevertheless be deemed to be so used - Held, yes - Whether plea that services referred to in inclusive definition of ‘input services’ under rule 2(l) need not be used in or in relation to manufacture of final product, prima facie, could not be agreed with - Held, yes - Whether once input service itself has been defined as being service used in or in relation to manufacture of final product, words ‘input service’ wherever it occurs will mean ‘service used in or in relation to manufacture of final product’ and not otherwise - Held, yes - Assessee had availed and utilized Cenvat Credit on certain common input services which were being used for manufacture of both dutiable as well as exempted product, e.g., advertisement services, market research services, manpower recruitment services, clearing house agent services, goods transport agency services, maintenance or repair services, etc. - Since assessee had not maintained separate account of services used in manufacture of dutiable final and exempted products nor it had paid 10 per cent of value of exempted goods, a show-cause notice was issued proposing to deny credit availed on common input service - Assessee submitted that common input services on which credit was sought to be denied were covered by inclusive definition of input services under rule 2(l) and, therefore, irrespective of fact whether they were used in or in relation to manufacture of final product, credit could not be denied - Whether assessee had not made out prima facie case for complete waiver of pre-deposit and, therefore, it was to be directed to deposit a part of amount of duty - Held, yes - Colgate Palmolive (I) Ltd. v. CCE (Mum. - CESTAT)

Cenvat Credit Rules, 2004

- Rule 2(l)

- Rule 9

Circulars & Notifications

- Notification No. 12/2002, dated 1-8-2002 and Notification No. 36/2004-ST, dated 31-12-2004

- Notification No. 9/2003-ST, dated 20-6-2003 and Notification No. 24/2004-ST, dated 10-9-2004

- CBEC’s Circular F. No. 137/71/2006-CX, dated 1-11-2006

- Notification No. 15/2007-ST, dated 4-4-2007

Commercial training or coaching

- Assessee had entered into an agreement with an international association to offer courses developed by that association for training of travel agents - Revenue considered training given by assessee as coming within category of commercial training and demanded service tax from assessee along with penalty - Commissioner had taken a view that assessee was not entitled to benefit of exemption Notification No. 9/2003-(ST), dated 20-6-2003 and Notification No. 24/2004-(ST), dated 10-9-2004, because that course was not ‘recognized course under any law in force in India’ - Whether since notification refers to course recognized in terms of law, assessee did not have a very strong case and, therefore, it was to be directed to pre-deposit a part of sum towards demand - Held, yes - Globe College of Travel & Tourism v. CST (Bang. - CESTAT)

- Period from 1-4-2004 to 31-7-2006 - Whether provision of education by an institution will attract service tax only if that institution is a commercial concern, which is run with sole object of making profit - Held, yes - Appellant, a charitable institution, was engaged in providing educational courses in management - Service tax was demanded from appellant under category of ‘Commercial training or coaching centre’ - However, it was found that there was no individual gain or profit in case of appellant and its Memorandum of Association clearly provided that if there was any surplus when company was wound up, it would be transferred to another institution run for same object as appellant or for some charitable object - Whether on facts, appellant was not a commercial concern and, therefore, training or coaching rendered by it was not liable to service tax under category of ‘Commercial training or coaching’ - Held, yes - Great Lakes Institute of Management Ltd. v. CST (Chennai - CESTAT)

- Period from April, 2004 to July, 2006 - Assessee-company, working in terms of section 25 of Companies Act, 1956, provided coaching to students registered with a foreign university - It collected fees from such students and applied its profits to its own infrastructural and other developments in terms of section 25 - Revenue by invoking larger period of limitation demanded service tax from assessee under category of ‘Commercial training and coaching centre’ - Assessee contended that its activity could not be termed as ‘commercial’ - It was found that Tribunal in similar cases of similar institutions had decided in favour of assessee - Whether therefore, assessee was entitled to waiver of requirement of pre-deposit and stay of recovery - Held, yes - Great Lakes Institute of Management Ltd. v. CST (Chennai - CESTAT)

- Period from July, 2003 to March, 2005 - Assessee-trust conducted coaching classes for students of a University - Service tax was demanded from it under category of ‘Commercial training or coaching centre on total amount of fees collected from students who attended coaching programme - Assessee, relying upon decision in case of Noble Institute (Education) (P.) Ltd. v. Union of India [2006] 5 STT 80 (Guj.) submitted that it was not liable to service tax - Whether since decision relied upon by assessee pertained to period prior to 1-7-2003 and same was not applicable to facts of instant case inasmuch as demand of tax on assessee was for a period from 1-7-2003 when levy of service tax on ‘Commercial training or coaching centre’ was introduced, assessee had not made out prima facie case against demand of service tax and, therefore, it was to be directed to pre-deposit service tax amount - Held, yes - JMC Educational & Charitable Trust v. CCE (Chennai - CESTAT)

Consulting engineer

- Period from July, 1997 to December, 2007 - Assessee-company was engaged in manufacture of mechanical engineering and electrical goods - In respect of certain buyers, assessee merely sold its products - However, in respect of certain buyers, at their request, assessee had undertaken certain activities like construction, civil works including installation, erection and commissioning of machinery at customer’s site - Revenue considering activity of assessee as consulting engineers service issued show-cause notice demanding service tax - Whether in view of facts that contract was one for design, manufacture, supply, storing, erection, testing and commissioning of complete electro-mechanical equipment on turnkey basis and terms and conditions of payment were as per progress of work and in view of Daelim Industrial Co. Ltd. v CCE [2007] 7 STT 184 (New Delhi - CESTAT), assessee was not liable to pay service tax as consulting engineer - Held, yes - Joyti Ltd. v. CCE (Ahd. - CESTAT)

Finance Act, 1994

- Section 65

- Section 68

Interior decorator

- Period from 1-10-2000 to 30-9-2005 - Assessee-firm had been brought within category of ‘Interior decorator’ for purpose of levy of service tax - Assessee’s contention was that it was carrying out activities of pest control, masonry work, wall preparations, etc., which activities would only come under category of ‘Commercial or industrial construction services’ brought into service tax net with effect from 16-6-2005 - Whether prima facie activities carried out by assessee were more akin to civil work in terms of definition of ‘Commercial or industrial construction services’, and, therefore, its offer to pre-deposit a part of sum was to be accepted - Held, yes - Spandrel v. CCE (Bang. - CESTAT)

Management consultant

- Period from 2000-01 to 2004-05 - Assessee was providing services to improve and develop suitable systems of management for different types of enterprises on financial considerations - Revenue came to a finding that assessee was providing taxable services of ‘Management consultant’ but was not paying tax thereon and, therefore, assessee was required to pre-deposit service tax in excess of Rs. 50 lakh along with like amount of penalty by invoking larger period - Assessee pleaded time bar in matter stating that it was sponsored by Kerala Government and had sought a clarification from Finance Ministry regarding its service tax liability and as soon as said clarification was received in revenue’s favour, it voluntarily paid service tax and, therefore, there was no intention to avoid tax so as to invoke larger period - Whether plea of time bar could be taken into consideration to grant assessee partial waiver and, therefore, it was required to pre-deposit Rs. 15 lakh and on such deposit, balance of service tax and penalty was to be waived and recovery stayed till disposal of appeal - Held, yes - Centre for Management Development v. CCE (Bang. - CESTAT)

Payment of service tax

- Service tax was demanded from assessee for receiving services from foreign service providers in India - It challenged said levy and contended that since Notification No. 36/2004, dated 31-12-2004, notifying taxable services for purposes of section 68(2) came into force on 1-1-2005, there was no liability on its part during period prior to coming into force of said notification -However, under an omnibus provision which was made by Notification No. 12 of 2002, dated 1-8-2002 by incorporating clause (iv) in rule 2(d), every service receiver became liable to pay service tax for any taxable service provided to a person in India by a non-resident who did not have any office in India - Whether statutory effect, so created cannot be reduced by reference to a subsequently issued notification, dated 31-12-2004 which repeated contents of clause (iv) under sub-heading (B) - Held, yes - Whether therefore, assessee was liable to pay service tax by virtue of clause (iv) of rule 2(d) and was to be directed to pre-deposit part of demand - Held, yes - Samcor Glass Ltd. v. CCE (New Delhi - CESTAT)

Security agency

- Assessee was providing security agency service to various offices of BSNL - Revenue demanded service tax on gross amount received by it from said client - Penalty was also imposed upon assessee - Assessee contended that it was liable to pay service tax only on amount of commission received by it from its client - However, revenue contended that in similar situation, Tribunal held that provider of service of security agency was liable to pay service tax on gross amount received from customer - Whether since issue was already covered by decisions of Tribunal relied upon by revenue, it was not a fit case for waiver of requirement of pre-deposit of amount of service tax - Held, yes - Whether, however, taking into consideration financial hardships pleaded by assessee, pre-deposit requirement of penalty amount was to be waived - Held, yes - Doon Security Services v. CCE (New Delhi - CESTAT)

Tour Operator

- Assessee was found to be engaged in providing taxable services as a ‘tour operator’ in ‘tourist vehicles’ covered by permits issued under section 88(9) of Motor Vehicles Act, 1988 - Service tax was demanded from assessee under category of ‘Tour Operator’ and penalty was imposed upon it - Assessee contended that, though it had obtained permit as tourist vehicle, yet said vehicles were actually used as ‘stage carriages’ and services rendered in that regard could not be made liable to service tax - Whether once concerned authorities had permitted assessee for using a particular vehicle as a ‘tourist vehicle’, having verified various parameters, such a vehicle by virtue of its being used otherwise cannot be declassified and treated as a ‘non-tourist vehicle’ - Held, yes - Whether therefore, there was no force in assessee’s contention that it was not covered under provisions of service tax law - Held, yes - Whether however, a notification was issued by Central Government granting exemption to services provided by a tour operator in relation to transport of passengers from one place to another, and said notification had not been part of proceedings before lower authorities, matter was to be remanded to adjudicating authority for re-quantification of tax/penalty after taking said notification into consideration - Held, yes - Pandit Motor Service v. CCE (New Delhi - CESTAT)

SERVICE TAX TODAY

Vol. 12, Part 6, for the week of February 8–February 14, 2008