SERVICE TAX TODAY
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Vol. 12, Part 7, for the week of February15
–February 21, 2008
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CONTENTS
Magazine
q Controversy regarding rental services - An
analysis
security
agency
q Security agency services//T.K. Doctor and
Zankhana T. Doctor
telecommunication
services
q Telecommunication sector//B.N. Das
Reports
table of cases
Agarwal Trading
Amara Raja Batteries
Ltd. v. CCE (Bang. - CESTAT)
Anjali Foods v. CCE
(Chennai - CESTAT)
Brakes India Ltd. v.
CCE (Chennai - CESTAT)
CCE v. Adishiv
Forge (P.) Ltd. (Ahd. - CESTAT)
CCE v. Ferrous
Alloys Forgings (P.) Ltd. (Punj. & Har.)
CCE&C v. Industrial
Security Force (Kol. - CESTAT)
City Gold Metal (P.)
Ltd. v. CCE&ST (Kol. - CESTAT)
CMS (
CST v. BPL
Engineering Ltd. (Bang. - CESTAT)
CST v. Global Enterprises
(Kol. - CESTAT)
Diebold Systems (P.)
Ltd. v. CST (Chennai - CESTAT)
Imagic Creative (P.)
Ltd. v. CCT (SC)
India Cements Ltd. v.
CCE (Bang. - CESTAT)
Jai Steels (I) v. CCE
(
Khan Estate Agency v.
CCE (Mum. - CESTAT)
Kuppuswamy (R.) v. CCE
(Chennai - CESTAT)
Kusalava Finance Ltd. v.
CC,CE&ST (Bang. - CESTAT)
Pratik Marbles (P.)
Ltd. v. CCE (
Tidel Park Ltd. v. CST
(Chennai - CESTAT)
U.M. Thariath &
Co. v. CCE (Bang. - CESTAT)
Subject Index
Appellate
Tribunal
Appeals to
- Period from July, 2002 to September, 2003 -
Service tax was demanded from assessee along with interest treating it as a
‘Clearing and forwarding agent’ - Penalties under sections 76, 77 and 78 were
also imposed upon it - However, Commissioner (Appeals) vacated penalty imposed
under section 78 - Assessee, in appeal, challenged remaining penalties imposed
upon it but in memorandum of appeal it was found that thrust of assessee was on
challenging demand of tax and not penalties - Whether since assessee had
voluntarily paid service tax with interest, its challenge to demand of tax
could not be entertained - Held, yes - Anjali Foods v. CCE
(Chennai - CESTAT)
- Period from June, 2005 to March, 2006 -
Service tax was demanded from assessee and penalty was imposed upon it -
Whether assessee had a strong case in its favour as in a similar case of
assessee for an earlier period similar demand of service tax was set aside and,
therefore, there would be waiver of requirement of pre-deposit and stay of
recovery in respect of amounts of tax and penalty - Held, yes - CMS
(India) Operations & Maintenance Co. (P.) Ltd. v. CCE (Chennai -
CESTAT)
- Whether where assessee had paid entire amount
of service tax demanded by lower authorities, there would be waiver of
pre-deposit requirement and stay of recovery in respect of amounts of interest
on tax and penalty which remained to be paid - Held, yes - R.
Kuppuswamy v. CCE (Chennai - CESTAT)
- Whether there is no provision under section
86 for review of Tribunal’s order - Held, yes - Whether therefore,
application filed by revenue seeking review of Tribunal’s final order by which
appeal of assessee was allowed, was to be rejected - Held, yes - CST
v. BPL Engineering Ltd. (Bang. - CESTAT)
Banking
and other financial services
- Period from 16-7-2001 to 20-9-2005 - Revenue
issued a show-cause notice to assessee demanding service tax on ground that it
had received income on account of hire purchase scheme and also from lease of
machinery - Adjudicating authority confirmed demand of service tax along with
interest and also imposed penalty - Assessee contended that service rendered by
it was not of hire purchase scheme but was of hire purchase finance scheme
where ownership of vehicle lies with hirer and not with service provider who
finances purchase - Whether since instant case was squarely covered by decision
of Tribunal in case of Bajaj Auto Finance v. CCE [2007] 6 STT 322
(Mum. - Cestat), following ratio
of that decision assessee was not liable to pay service tax in respect of hire
purchase income - Held, yes - Whether, however, income on account of
leasing of machinery was liable to service tax - Held, yes - Whether
since actual split-up of income was not given in original order, same was to be
set aside and matter was to be remanded to original authority to compute
service tax liability only towards income on account of leasing of machinery - Held,
yes - Kusalava Finance Ltd. v. CC, CE & ST (Bang. -
CESTAT)
Charge
of tax
General
- Whether payments of service tax as also VAT
are mutually exclusive; therefore, they should be held to be applicable having
regard to respective parameters of service tax and sales tax as envisaged in a
composite contract as contradistinguished from an indivisible contract; it may
consist of different elements providing for attracting different nature of levy
- Held, yes - Appellant was an advertising agency engaged in creating
original concept and designing advertising material such as brochures, annual
reports, etc., for its clients - On basis of purchase order, it filed its
returns, both under Finance Act, 1994 and Karnataka Value Added Tax Act, 2003
for assessment year 2003-04 - Assessing authority completed assessment under
Karnataka Sales Tax Act, 1957 by excluding certain items of exempted turnover,
which included taxes, discount and service charges, design and art work charges
and advertisement charges collected by appellant in which no transfer of
property in goods was involved - After passing of said assessment order, a raid
was conducted and criminal proceeding was initiated against appellant and an
order was passed by Tribunal holding that sale of printed material with a
background of providing concept was an indivisible activity liable to tax at 4
per cent as a whole - High Court upheld Tribunals orderAppellant, in its
returns, made three categorical divisions in regard to its tax liabilities, viz.,
(1) amount of service tax on specific design and production; (2) amount of
Sales Tax on specified item on first sale; and (3) when certain items were
outsourced, tax payable on resale of said goods in terms of Sales Tax Act -
High Court upheld Tribunal’s order - Appellant submitted that High Court
committed a serious error in passing impugned judgment insofar as in event
contract was held to be an indivisible one, service element thereof being
subject to service tax, no sales tax could have been levied on incidental
transfer of goods unless such transfer falls within scope and ambit of one of
provisions contained in sub-clauses (a) to (f) of clause (29A)
of article 366 - On other hand, revenue submitted that entire transaction was a
composite one inasmuch as all that was transferred was document containing not only
value of goods but also soft skill involved therein; and taxable value of goods
was what buyer was buying and in view of fact that when by some creativity
value of goods was enhanced, entire value had rightly been held to be taxable -
Whether High Court was justified- Held, no - Imagic Creative (P.)
Ltd. v. CCT (SC)
Central
Excise Rules, 1944
Modvat credit
- Whether credit of duty is admissible to
inputs used in both, dutiable as well as exempted goods, when no separate
account has been maintained - Held, yes - CCE v. Ferrous
Alloys Forgings (P.) Ltd. (Punj. & Har.)
Central
Excise Rules, 1944
- Rule 57A
Cenvat
Credit Rules, 2004
Cenvat credit
- Obligation of manufacturer of dutiable and exempted
goods and provider of taxable and exempted services - Assessees were
manufacturing cold rolled patta and during manufacture of same, certain scrap
of stainless steel was generated which was exempted from duty - Assessees
availed credit of duty paid on inputs in manufacture of final products -
However, revenue held that assessees were liable to pay 10 per cent of value of
exempted goods - Assessees contested that demand on ground that waste generated
during manufacture of final product was not liable to duty - However, revenue
relying upon decision in case Rallies India Ltd. v. CCE 2007 (78)
RLT 117 contended that by-product which came into existence during manufacture
of final product was liable to prescribed amount of duty - Whether ratio of
decision in case of Rallies India Ltd. (supra) was applicable to
facts of instant case and, therefore, assessee had no case for waiver of
pre-deposit requirement of duties - Held, yes - Jai Steels (I) v.
CCE (New Delhi - CESTAT)
General
- Period from October, 2004 to December, 2004 -
Assessee had availed Cenvat credit on automotive parts manufactured and cleared
by it for export - Revenue sought recovery of said credit on ground that
assessee had procured inputs from job workers and exported them, as such, and inputs
did not undergo any process of manufacture - However, in assessee’s own case of
Brakes India Ltd. v. CCE [Final Order Nos. 639-640 of 2007, dated
28-5-2007] a finding of fact was recorded that assessee undertook major part of
manufacturing activity of casting pig iron/steel scrap into automotive parts in
its factory as well as finishing processes and it was held that assessee was
entitled to Cenvat credit availed as goods became fully manufactured goods only
in premises of assessee before they were exported - Whether following that
decision, impugned order seeking recovery of Cenvat credit availed by assessee
was to be set aside - Held, yes - Brakes India Ltd. v. CCE
(Chennai - CESTAT)
- Assessee was a manufacturer of excisable
goods - It availed goods transport agency (GTA) service for receiving raw
materials in factory as well as for sending finished goods from factory - In
some cases, assessee paid service tax on incoming consignments, and in some
cases, on outgoing consignments - Assessee took credit of tax paid and utilized
same in discharging liability of service tax and excise duty which original
authorities disallowed - Whether in respect of incoming consignment, assessee
continued to be recipient of GTA service and such service being input service,
assessee would be eligible to take credit of tax so paid - Held, yes -
Whether in respect of outgoing consignment, assessee would not be eligible to
take credit of tax paid because assessee paid tax only as consignor and not as
provider of GTA service - Held, yes - Whether assessee while paying
service tax on GTA service availed in connection with removal of its finished
goods from factory was entitled to utilize, for payment of service tax on such
service, credit of tax paid on input GTA service availed by it in connection
with receipt of inputs received in its factory - Held, yes - Whether
restriction envisaged in Notification No. 32/2004 about non-availment of Cenvat
credit should be in respect of service provider of GTA services and cannot be
applied to recipients of services merely because they were required to pay
service tax - Held, yes - Whether notwithstanding taking of credit of
service tax paid under goods transport operator/agency services in respect of
incoming consignments, respondent was eligible to avail benefit of Notification
No. 32/2004-ST, dated 3-12-2004 - Held, yes - CCE v. Adishiv
Forge (P.) Ltd. (Ahd. - CESTAT)
Cenvat
Credit Rules, 2004
- Rule 3
- Rule 6
Circulars
and Notifications
- Notification No. 32/2004-ST, dated 3-12-2004
- Notification No. 19/2003-ST, dated
21-8-2003
Clearing
and forwarding agent
- Period 2001-02 - Assessee was co-ordinating
execution of orders on behalf of a company - Service tax was demanded from
assessee under category of ‘Clearing and forwarding agent’ - Whether since
assessee was a mere co-ordinator who did not have any control over goods of
principal nor was it an agent, service tax could not be demanded from it under
category of ‘Clearing and forwarding agent’ - Held, yes - City Gold
Metal (P.) Ltd. v. CCE&ST (Kol. - CESTAT)
- Periods from 1-4-1999 to 30-11-2003 and
October, 2000 to March, 2003 - Assessee, a clearing and forwarding agent, had
collected on behalf of its principal commission on which service tax had been
paid by principal - Assessee had also spent certain amounts towards
loading/unloading, coolie, cartage, handling/portage, lorry freight, etc., for
which it got reimbursements - Revenue added such amount spent in assessable
value of clearing and forwarding agency service - Whether since issue was fully
covered in assessee’s favour in view of decision in cases of Mahavir
Generics v. CCE [2007] 6 STT 523 (Delhi - CESTAT); BSR
Refrigeration Ltd. v. CST 2006 - TIOL - 1541 (Bang. - CESTAT) and E.V.
Mathai & Co. v. CCE [2007] 7 STT 189 (Bang. - CESTAT), wherein
it was held that such collections were not liable to be added in assessable
value of clearing and forwarding agency service agent’s category, impugned
order was to be set aside - Held, yes - U.M. Thariath & Co.
v. CCE (Bang. - CESTAT)
Consulting
Engineer
- Assessee had paid royalty to its foreign
collaborator for supply of know-how - Revenue levied service tax on such
royalty payment by bringing it within ambit of ‘Consulting engineers’ service -
Whether since very issue came up for consideration in various judgments wherein
it was held that such royalty payment made to foreign collaborator for supply
of know-how cannot be brought within definition of ‘Consulting engineers’,
impugned order demanding service tax was to be set aside - Held, yes - Amara
Raja Batteries Ltd. v. CCE (Bang. - CESTAT)
Erection,
commissioning or installation
- Period July, 2003 to April, 2006 -
Assessee-company executed turnkey projects involving supply of Automated Teller
Machines (ATMs) to banks coupled with incidental activities of installation,
commissioning, etc. - Payments for those works were made by banks against
invoices raised by assessee, wherein gross value was mentioned without
segregation of price of ATM, installation/commissioning and other charges -
Such projects were found to be indivisible by lower authorities but service tax
was demanded from assessee - Whether since ATM-related services were introduced
for levy of service tax only with effect from 1-5-2006 and indivisible works
contracts, like one involved in instant case, came to be chargeable to service
tax only with effect from 1-6-2007, subject-matter of instant case did not
attract any of taxable services for any period prior to 1-5-2006 - Held,
yes - Whether therefore, impugned order was to be set aside - Held, yes
- Diebold Systems (P.) Ltd. v. CST (Chennai - CESTAT)
Finance
Act, 1994
- Section 65
- Section 73
- Section 76
- Section 77
- Section 86
Management,
maintenance or repair
- Period from June, 2005 to March, 2006 -
Assessee-company was receiving rent and operations/maintenance charges
separately from its tenants housed in its building complex with appurtenant
common facilities - Service tax was demanded from assessee under category of
‘Management, maintenance or repairs’ on amount collected by it towards
operation and maintenance charges of common facilities and shared areas for
maintenance and repairs of those areas - Assessee contended that common
facilities and shared areas could not be considered to be part of immovable
property and, therefore, amount collected was not taxable - Whether since in
lease deed entered into with each tenant operation and maintenance fee was
charged in similar manner as lease rent, operation and maintenance fee also
pertained to immovable property and, therefore, assessee was liable to pay
service tax on amount so collected - Held, yes - Tidel Park Ltd.
v. CST (Chennai - CESTAT)
Penalty
For contravention
of any provision for which no penalty is provided
- Whether just because penalty is imposable,
mere deviation from compliance with law by assessee shall not ipso facto
call for penalty - Held, yes - Whether where quantum of penalty involved
was very small and appellate authority, considering nature and conduct of
assessee, exonerated it from penalty, order of appellate authority was to be
upheld - Held, yes - CCE&C v. Industrial Security Force
(Kol. - CESTAT)
For failure to pay
service tax
- Assessee was rendering service of clearing
and forwarding agent and was liable to pay service tax - Since there was delay
in payment of service tax, penalties under sections 76 and 77 were imposed upon
it - However, Commissioner, on review, enhanced penalty amount on ground that
assessee had not been able to show any justifiable reason for delay in payment
of service tax - Whether since there was discrepancy in computing number of
days of delay in depositing service tax, impugned order was to be set aside and
matter was to be remanded to original adjudicating authority for recalculation
of penalty amount in terms of section 76 - Held, yes - Agarwal
Trading Co. v. CCE (Mum. - CESTAT)
- Assessee had discharged its service tax
burden belatedly and had also paid interest - Penalty was imposed upon assessee
under section 76 - On appeal, appellate authority waived penalty on ground that
payment of interest itself was penal in character - Whether such view of
appellate authority was not appreciable because interest and penalty are two
different consequences prescribed by statute - Held, yes - Whether
however, good conduct of assessee having been found on record by appellate
authority, imposition of penalty at initial stage of implementation of law was
a considerable hardship for assessee and, therefore, penalty imposed upon it
was rightly waived - Held, yes - CST v. Global Enterprises
(Kol. - CESTAT)
- Period from October, 1998 to June, 2003 -
Assessee delayed in payment of service tax and in filing returns which ranged
from three months to 58 months - Assistant Commissioner imposed penalty of Rs.
2,500 upon it under section 76 - On revision, Commissioner enhanced penalty
amount - Whether since enhanced penalty did not exceed Rs. 100 for every day
after due date, there was no reason to interfere with impugned order - Held,
yes - Khan Estate Agency v. CCE (Mum. - CESTAT)
Recovery
of service tax not levied or paid or short-levied or short-paid or erroneously
refunded
- Period from 16-11-1997 to 1-6-1998 - Whether
section 73 could be resorted to by revenue for recovery of service tax not paid
during relevant period in respect of goods transport operator’s service - Held,
no - Pratik Marbles (P.) Ltd. v. CCE (
- Period from July, 2003 to April, 2006 - A
show-cause notice dated 14-2-2005 was issued against assessee-company demanding
service tax under category of ‘Commissioning and installation agency’ along
with interest and penalty, invoking extended period of limitation -
Commissioner confirmed demand but acknowledged fact that assessee had a bona
fide doubt as to whether its activity attracted service tax and on that
basis he dropped proposal to impose penalties on assessee under sections 76 and
78 - Whether if assessee’s doubt was bona fide, as found by
Commissioner, no mala fides could be attributed to it and it could not be held
to have suppressed anything before department with intent to evade payment of
service tax - Held, yes - Whether therefore, larger period of limitation
was not invocable against assessee - Held, yes - Diebold Systems (P.)
Ltd. v. CST (Chennai - CESTAT)
Transport
of goods by road service
- Period from 16-11-1997 to 2-6-1998 - Service tax was demanded from assessee under category of ‘Goods Transport Operator’s Service’ for relevant period by a show cause notice issued after four and half years - However, Tribunal in assessee’s own case had set aside demand of service tax relying upon case of L.H. Sugar Factories Ltd. v. CCE [2007] 8 STT 295 (Delhi-CESTAT) wherein it was held that service tax would not be levied on such assessee if show-cause notice had not been issued prior to amendment made by Finance Act, 2003 - Whether since in instant case show-cause notice was issued after amendment made by Finance Act, 2003, demand was not sustainable in terms of decision of Tribunal in assessee’s own case - Held, yes - India Cements Ltd. v. CCE (Bang. - CESTAT)