- Service tax demand from assessee included value of camera, photo frames, etc., sold by it - Assessee paid part of demand but contested inclusion of value of cameras, photo frames, etc., in taxable service - In support of its claim, assessee failed to produce any invoice but produced chartered accountant’s certificate indicating that value included materials sold - Whether since assessee had not made out a prima facie case for complete waiver of balance amount, it was to be directed to deposit a further sum of Rs. 2 lakhs and recovery of balance amount was to be stayed till disposal of appeal - Held, yes - Gokhatak Enterprises Ltd. v. CCE&C (Mum. - CESTAT)

Business auxiliary service

- Whether activity of assessee Custom House Agent in rendering services of arranging shipment of export cargo and negotiating same with shipping lines on behalf of clients would fall under definition of Business auxiliary services - Held, no - Whether more specific category for coverage of such type of activities will be steamer agent’s service - Held, yes - Bhuvaneswari Agencies (P.) Ltd. v. CCE (Bang. - CESTAT)

Business support services

- Period prior to 1-5-2006 - Assessee was appointed by bank to verify correctness, fairness and authenticity of informations furnished by those seeking bank loans - Whether verification of details given by loan seekers could not be treated as promoting bank’s business and, hence, could not be treated as ‘Business auxiliary service’ - Held, yes - Whether, services rendered by assessee would be covered under category of ‘Business support service’ which was taxable with effect from 1-5-2006 - Held, yes - Whether, however, since service was rendered prior to 1-5-2006, assessee was not liable to pay service tax - Held, yes - S.R. Kalyanakrishnan v. CCE (Bang. - CESTAT)

Cargo handling service

- Whether cargo in commercial parlance has a definite connotation, which is carried as freight in a ship, plane, rail or truck - Held, yes - Whether activity of mere mechanical transfer of coal from coal face to tippers and, subsequent, transportation of coal within mining area, does not come under purview of cargo handling service - Held, yes - Sainik Mining & Allied Services Ltd. v. CCE,C&ST (Kol. - CESTAT)

Central Excise Act, 1944

Claims for refund of duty

- Period 16-11-1997 to 2-6-1998 - Whether where assessee paid service tax on self-assessment basis, same was valid collection of tax and assessee was not entitled for its refund - Held, yes - Uni Deritend Ltd. v. CCE (Mum. - CESTAT)

Central Excise Act, 1944

- Section 11B

Cenvat Credit Rules, 2004

Cenvat credit

General

- Period April 2005 to October 2005 - Assessee, manufacturer of drugs, obtained certain inputs for its final product - It did not avail Cenvat credit on these inputs as final product was exempted - Later assessee was compelled by business exigencies and had to clear a part of intermediate product on payment of duty - Assessee availed this duty as Cenvat credit - Revenue disallowed Cenvat credit on ground that assessee had not followed proper procedure as at initial stage no Cenvat credit was taken - Whether since lapse committed by assessee was merely a technical one being procedural irregularity, a substantive benefit like Cenvat credit could not be denied - Held, yes - Whether since assessee had cleared intermediary product on payment of duty, it was entitled to Cenvat credit - Held, yes - Aurobindo Pharma Ltd. v. CCE (Bang. - CESTAT)

Output service

- Assessee, manufacturer of excisable goods, was paying service tax as a recipient of goods transport agency (GTA) service - It availed Cenvat credit of such service tax paid towards payment of next instalment of service tax on GTA services - Original authority denied Cenvat credit on ground that assessee was not provider of taxable services but a person responsible for making payment of service tax - However, in similar cases of CCE v. Nahar Industrial Enterprises Ltd. [2007] 10 STT 117 (CESTAT - Delhi) and India Cement Ltd. v. CCE [2007] 7 STR 569 (CESTAT - Mad.) it was held that GTA service received for clearance of product from factory is deemed output service by virtue of Explanation under rule 2(p) and, therefore, Cenvat credit can be utilized for payment of service tax on such output service - Whether in view of said decisions, assessee would be entitled to utilize Cenvat credit for payment of service tax on GTA services - Held, yes - CCE v. Flowserve Microfinish Pumps (P.) Ltd. (Bang. - CESTAT)

Cenvat credit Rules, 2004

- Rule 2(p)

- Rule 3

Circulars & Notifications

- Notification No. 28/2004-ST, dated 17-9-2004; Notification No. 10/2005-ST, dated 3-3-2005; Notification No. 29/2005-ST, dated 15-7-2005 ; Notification No. 9/2005-ST, dated 3-3-2005 and Notification No. 28/2005-ST, dated 7-6-2005

- Notification Nos. 6/99-ST and 21/2003-ST

- Notification No. 56/98-ST, dated 7-10-1998

Clearing and forwarding agent

- Period from April, 2001 to March, 2004 - Service tax along with penalties was demanded from assessee-applicant on ground that it had rendered services as ‘Clearing and forwarding agent’ - Whether since no strong prima facie case for total waiver had been made out by assessee, in light of Tribunal’s decision in Super Poly Fabriks Ltd. v. CCE [Final Order No. 363 of 2006, dated 25-9-2006 and 26-9-2006] in which Larger Bench’s decision in case of Larsen & Toubro Ltd. v. CCE [2006] 4 STT 231 (New Delhi - CESTAT) relied upon by assessee, was distinguished on facts, assessee was to be directed to pre-deposit Rs. 2 lakh and on such deposit, pre-deposit requirement of balance amount of service tax and penalties would stand waived and recovery thereof would be stayed pending appeal - Held, yes - Kishore Transport Services (P.) Ltd. v. CCE (Mum. - CESTAT)

- A show-cause notice for recovery of service tax was issued against assessee after retrospective amendment brought to Act, to cover services of clearing and forwarding agent - Assessee contended that in terms of decision in case of CCE v. L.H. Sugar Factories Ltd. [2005] 2 STT 282 (SC), demands could not be confirmed, as show-cause notice had not been issued prior to said amendment - Whether since issue was prima facie covered by above judgment, stay application was to be allowed granting waiver of pre-deposit requirement and stay on recovery - Held, yes - Narang Plastics (P.) Ltd. v. CCE (Bang. - CESTAT)

- Period from 1-1-2003 to 30-11-2003 - Assessee was manufacturer and exporter of pharmaceutical goods - It appointed a Bangladeshi company as a promoting agent to market products in Bangladesh - Whether since assessee acted as an exporter of its own manufactured goods and had not acted as an agent of any manufacturer to lift goods, clear them and forward same to customers, it could not be treated as a clearing and forwarding agent - Held, yes - Glaxo Smith Kline Pharmaceuticals Ltd. v. CST (Bang. - CESTAT)

Export of service

- Period from 1-10-2000 to 14-3-2005 - Notification Nos. 6/99-ST and 21/2003-ST exempt service tax in case payment is received in India in convertible foreign exchange for rendering taxable service - Proviso to said notifications provide that only if entire payment so received, is repatriated from India, benefit will be denied - Assessee declared dividend and remitted it in foreign exchange to shareholders outside India - Whether since dividend was paid out of net income of company which was determined after taking into consideration income from all sources, including payment received in India for rendering taxable services abroad, prima facie assessee would not be hit by mischief of proviso to notifications and, hence, stay on pre-deposit requirement was to be granted - Held, yes - Maersk India (P.) Ltd. v. CST (Mum. - CESTAT)

Finance Act, 1994

- Section 65

- Section 80

- Section 86

Mandap keepers

- Assessee let out a non-commercial auditorium owned by it on payment of nominal charges for various social events - Whether assessee was liable to pay service tax - Held, yes - Manager, Ravindra Kalakestra v. CCE (Bang. - CESTAT)

Penalty

Not to be imposed in certain cases

- Service tax was demanded from assessee and penalty was imposed upon it under sections 76 and 77 - Assessee contended that levy of service tax was totally new and matter was in debate before various fora, being a new concept in economy, and that as soon as it came to understand that it had to discharge its liability it had done so, though belatedly - Whether since delay in discharge of tax liability was neither deliberate nor wilful or a knowable breach of law, penalty imposed upon assessee was to be waived - Held, yes - CST v. Peekay & Co. (Kol. - CESTAT)

Photography service

- Period September 2003 to March 2005 - Assessee was rendering photography service and paid service tax on amount collected from its clients as consideration for such service - Department demanded differential amount of service tax from assessee on ground that cost of materials employed for purpose of rendering service should also have been added to ‘gross amount’ under section 67 - Earlier in a similar case, Division Bench of Tribunal found prima facie case in favour of a party and directed Commissioner (Appeals) for fresh decision without insisting on pre-deposit requirement - Whether following this, instant case was also to be remanded to Commissioner (Appeals) with a direction to take a decision on merits without insisting on any pre-deposit requirement - Held, yes - M.M. Colour Labs v. CCE (Chennai - CESTAT)

Port service

- Period July 2001 to March 2004 - Assessee-port trust had its railway yard and sidings - Railways collected from users of yards charges on behalf of assessee and remitted same to assessee - Whether since railway siding charges collected for use of infrastructure put up by assessee were not in relation to vessels or goods and assessee also did not collect these charges from users, these charges did not represent money received by assessee for port service rendered by it - Held, yes - Whether, therefore, demand of service tax from assessee-port trust in respect of railway siding charges was not in accordance with law - Held, yes - New Mangalore Port Trust v. CST (Bang. - CESTAT)

Security agency’s services

- Period 2000-01 to 2004-05 - Assessee rendered security services to two Government entities - Assessee contended that department imposed penalties solely on basis of records maintained by it, especially on basis of income-tax returns in which it had shown inflated revenue in order to obtain a bank loan - Assessee further claimed that services provided by it were exempted from service tax in terms of Notification No. 56/98-ST, dated 7-10-1998 - Whether since assessee had rendered service to State Government owned entities, it was possible to make a proper verification as regards services rendered by it and gross amounts collected by it, instead of going by income-tax records which it had never admitted to be correct - Held, yes - Whether further, since exemption was claimed in terms of notification, matter was to be remanded to original authority for examining assessee’s claim - Held, yes - Siva Sakthi Security Detective and Stipulation of Manpower v. CCE (Chennai - CESTAT)

Telecommunication service

- Period July 2003 to February 2004 - Whether since law prescribes that value of taxable service to be gross amount charged by service-provider, service tax can be levied on that amount only - Held, yes - Assessee was a telephone service provider - It sold pre-paid SIM cards to its dealers/distributors at a price below MRP and dealers/distributors, in turn, sold cards to subscribers at MRP - Whether since amount charged by assessee, service-provider was amount received by it from dealers/distributors and no extra amount was charged, assessee had to pay service tax on that amount received by it and not on amount of MRP - Held, yes - Whether, therefore, assessee was not liable to pay differential tax and any penalty - Held, yes - BPL Mobile Cellular Ltd. v. CCE (Chennai - CESTAT)

Transport of goods by road service

- Period from 16-11-1997 to 2-6-1998 - Whether assessee, receiver of goods transport operator’s services, was liable to pay service tax by virtue of retrospective amendment in section 68 which made recipient of services liable to pay tax - Held, yes - Uni Deritend Ltd. v. CCE (Mum. - CESTAT)

Transport of goods by air service

- Period from 15-3-2005 to 23-6-2005 - Assessee was providing services of ‘transport of cargo by air’ and was receiving payments for said service in Indian currency - Service tax was demanded from assessee for relevant period - Notification No. 28/2005-ST, dated 7-6-2005, amended rule 3(2) of Export of Service Rules, 2005 by providing that payment for taxable service specified under rule should be received by service provider in convertible foreign exchange - Said amendment came into force on 16-6-2005 and assessee, after realizing fact that payments received by it in Indian currency from service recipients were chargeable to service tax, started paying tax from 24-6-2005 - Whether since there was no payment of service tax by assessee from 16-6-2005 to 23-6-2005, it was to be directed to pre-deposit service tax amount for that period - Held, yes - Srilankan Airlines Ltd. v. CST (Chennai - CESTAT)

SERVICE TAX TODAY

Vol. 12, Part 8, for the week of February 22 - February 28, 2008