Case Laws

Synopsis of Case laws

I. GENERAL PRINCIPLES

1 Time of Supply and rate of service tax (Prior to 1.4.2011 i.e. Point of Taxation Rules, 2011)

1.1 In respect of hire purchase contracts, the taxable event occurs upon entering into the contract. Therefore, the rate of service tax will be the rate prevailing on the date on which the contract is entered into. It is not a case where there is a continuous service during the term of the contract when the installments are paid. The payment of installments is only the obligation of the hirer. Hence contracts entered into prior to 14.5.2003 would be exigible to service tax @5% notwithstanding the contract continued post 14.5.2003 when the rate became 8%. [Art Leasing Ltd. vs. CCE (2007) 8 STR 162 (Tri. – Bang.). See also L.F.C. Hire Purchase Company Ltd. v. CCE & C (2008) 12 STR 320 (Tri. – Bang.)]

1.2 For determination of service tax liability, the relevant date is the date on which service is received by the service recipient and not the date on which payment is received by the service provider. [Lumax Samlip Industries v. CCE (2007) 8 STT 82 (CESTAT-Chennai) - Based on law prior to 16.6.2005]

1.3 The rate of tax applicable is the rate prevailing on the date of rendering of services and not the rate prevailing on the date of billing. [Reliance Industries Ltd. vs. CCE (2008) 10 STR 243 (Tri-Ahmd.) affirmed inCCE vs. Reliance Industries Ltd. (2010) 19 STR 807 (Guj.);See also [CST vs. Consulting Engineering Services (I) Pvt. Ltd. (2013) 30 STR 561 (Tri-Del) upheld in CST vs. Consulting Engineering Services (I) Pvt. Ltd. (2013) 30 STR 586 (Del)][Also see CST v. Epic India Pvt. Ltd., (2014) 35 STR 948 (Tri. – Del.) [See CST v. Union Bank of India (2014) 36 STR 470 (Tri- Mum)[See CST v. Lea Associates South Asia P.Ltd (2014)36 STR 909 (Tri-Del)

1.4 In a case where insurance premium was received in advance and policy was issued and thereafter the rate of service tax had increased the Tribunal held the enhanced rate of Service tax is not applicable to the policies, which were issued prior to the enhancement of the rate. [ Bajaj Allianz General Insurance Co. Ltd. v. CCE (2009) 13 STR 259 (Tri.- Mumbai)].

1.5 Where the appellant entered into an agreement with a foreign company in 19.11.90 (later modified on 19.5.2004) whereby the foreign company supplied know-how in consideration for royalty to be paid for a specific period, the Tribunal held that – (i) the services of supply of know-how being a one-time affair were provided in 1990, much before the introduction of service tax; and (ii) the services were not provided continuously inasmuch as no continuous information was supplied by the foreign company and the mode of payment whether in lump or periodic is not relevant. Accordingly, the Tribunal set aside the demand of service tax on the royalty paid [Modi-Mundipharma P. Ltd. v. CCE (2009) 15 STR 713 (Tri-Del.)].

1.6 Where the construction services were provided prior to 1.3.2006 though payment for the same was received after that date, it was held that the appellant was entitled to abatement under notification no. 18/2005 dated 7.6.2005 which provided for 67% abatement without the bar on availment of cenvat credit relating to input services, notwithstanding that the said notification was rescinded by notification no. 1/2006 dated 1.3.2006 (and prevalent when payment was received) which imposed a bar on taking cenvat credit for availing abatement [Santosh Associates v. CST (2009) 16 STR 87 (Tri-Ahmd.)].

1.7 Advance fee received by the assessee, a commercial training or coaching centre, prior to 01.07.03 (date on which its services were brought into the tax net), for the coaching to be given from 01.07.03 to 31.03.04, is taxable since the taxable event was provision of service and not receipt of fees. Hence, tax was held to be payable by 5^thday immediately following the month in which services are rendered. [CCE vs. Ashok Singh Academy (2010)17 STR 363 (Tri-Del); See also CCE v. P.T. Education &Training Services Ltd. (2009) 15 STR 453 (Tri.- Del.)].

1.8 The assessee, a commercial training and coaching centre, received an advance prior to 10.9.2004, on which date the rate of tax was increased from 8% to 10%, but paid service tax on the entire advance @ 8%. The revenue contended that tax @ 10% would be applicable on the advance to the extent it pertains to services provided post 10.9.2004. Noting that there are no provisions that provide for the relevant date for determining the rate of tax (which were introduced only on 1.4.11) and the fact that service tax is payable only on receipt of payment, the Tribunal held that “rate applicable at the time of receipt of value of service will apply in a case where the assessee chose to pay tax on the advance amount received”. [Vigyan Gurukul v. CCE (2012) 25 STR 459 (Tri. – Del.)]

1.9 The rate of tax applicable is the rate prevailing on the date of rendering of services and not the rate prevailing on the date of receipt of payments. Thus where services were rendered prior to 1.3.2008, the rate of service tax under the works contract composition scheme would be 2% although the payment was received after 1.3.2008 when rate of service tax was 4%. Circular No. F. No. 545/6/2007-TRU dated 28-04-2008 to the contrary was held to be invalid. [Vistar Construction (P) Ltd v. UOI (2013) 31 STR 129 (Del)]

1.10 In respect of Works Contract services where service tax is paid under Works Contract (Composition scheme for payment of service tax) Rules, 2007, service tax would be payable at the rate which was in force at the time of rendition of service and not at the rate which was in force at the time of receipt of payment. [CST v. Ratan Singh Builders Pvt. Ltd. (2014) 33 STR 242 (Del.)]

1.11 Prior to 18.5.2012, service tax was not payable on advances but only on rendition of services since the rate of tax applicable was the rate prevailing on the date of rendition of service and the rate would be known only on rendering the services. Only post 18.5.2012, Section 67A provided for the rate of tax to be determined when the service was provided or agreed to be provided.[Paharpur Cooling Towers Ltd. v. CCE&C (2015) 37 STR 550 (Tri.-Del.)]

2 Payment of service tax – associated enterprises

2.1 The appellant was a recipient of manpower supply services from its overseas parent for 2005-06 to 31.3.3008 on which it was liable to pay tax under reverse charge basis. The appellant debited the amounts in the respective financial years but paid it only in 2009 and accordingly paid service tax after payment of the value. The department sought to demand interest on the ground that an Explanation has been added ‘for the removal of doubts’, to Rule 6(1) of Service Tax Rules, 1994 w.e.f. 10.5.2008 making a person liable to pay service tax on transactions with overseas associated enterprises within the 5 ^th/ 6^th of the month/ quarter following the month/ quarter when the amounts are debited/ credited and hence there was delay in payment attracting interest. The Hon’ble Tribunal held that the Explanation cannot be given retrospective effect notwithstanding the use of the words “for removal of doubts” and hence the debit entries made during period prior to 10.5.2008 cannot be treated as payment to holding company and hence demand for interest is unsustainable [Gecas Services India Pvt. Ltd. v. CST (2014) 36 STR 556 (Tri.-Del.)]

3 Point of Taxation

3.1 Prior to 1.4.2012, the point of taxation (‘POT’) in case of the “Chartered Accountant’s Service” (‘CA’s Service’) was prescribed as the date of receipt of payment u/r.7(c) of the Point of Taxation Rules, 2011 (‘POT Rules’) and hence service tax was payable at the rate applicable on the date of receipt. However, pursuant to the Budget, 2012 (w.e.f. 1.4.2012) the rate of tax was increased changed to 12% from 10% and the erstwhile rule 7 of POT Rule was made inapplicable to the CA’s service w.e.f. 1.4.2012. An issue arose in case of a CA who had provided services and issued invoice invoices prior to 1.4.2012 but received the payment post 1.4.2012 – what could be the rate of service tax. To resolve this issue, the Board issued 2 circulars nos.154/5/2012-S.T. dated 28.3.2012 and 158/9/2012-S.T. dated 8.5.2012 and clarified that the POT in the present situation would be governed by the erstwhile rule 7(c) of the POT rules and service tax @ 12% would be payable on payment received post 1.4.2012. In a writ challenging the validity of these circulars, the High Court struck down the said circulars and observed as follows:

Both the circulars were erroneous and contrary to the law since they referred to the erstwhile rule 7(c) of the POT Rules which did not exist at the time of receipt of payment i.e. post 1.4.2012;
The present issue was squarely covered by Rule 4 (a) (ii) of the POT rules which prescribes the POT of service in case of changes in the rate of tax as the date of issuance of invoice.

Hence, the rate of service tax applicable to the present case was held to be 10% i.e. the rate of service tax applicable as on the date of issuance of invoice [Delhi Chartered Accountants Society (REGD.) vs. UOI (2013) 29 STR 461 (Del.)].

N.B: The survival of repealed Rule 7 in view of s. 38A(c) of the Central Excise Act, 1944 made applicable to service tax vide s. 83, as well as erstwhile Rule 5B of the Service Tax Rules, 1994 was not brought to the notice / considered by the High Court.

4 Sovereign activity not subject to service tax

4.1 Sovereign activities of inspection and certification of electrical installations done by Electrical Inspectorate, Government of Karnataka, a State Government Department, in terms of the Electricity Act is not subject to service tax being a statutory function. [ Electrical Inspectorate, Government of Karnataka v. CST (2008) 9 STR 494 (Tri-Bang.)].

4.2 The appellant company provided services for the issue of Electors Photo Identity Cards. The Revenue contended that such an activity is liable for service tax under the category of ‘Photography Services’. The Tribunal dismissed the contention and observed as follows:

Notification No. 141/52/95-CX, dated 14.8.1995 and 195/20/CX, dated 3.4.1996 clarified that Photo Identity Cards are required to be treated as “goods” and hence does not attract service tax;
Issue of Photo Identity Cards is a sovereign duty under the Constitution of India, to be treated as an activity of the State and not a service.

[CCCE vs. CMC Ltd. (2007) 7 STR 702 (Tri. – Bang.) relying on CCE vs. Ankit Consultancy Ltd. (2007) 6 STR 101 (T) and Circular no. 89/7/2006-ST dated 8.12.2006 – referred. See also CCCE v. C.S.Software Enterprises Ltd. (2008) 10 STR 367 (Tri-Bang); UTI Technology Services Ltd. vs. CST (2012) 26 STR 147 (Tri. -Mumbai) where the assessee was engaged in issuing PAN Cards on behalf of Income tax department]

5 Services rendered to self not liable

5.1 Services provided by one part of the company to another part of the same company is not liable for service tax as no service is being rendered by any “other person”. [Precot Mills Ltd v. CCE (2006) 2 STR 495 (Tri – Bang); Indian Oil Corporation Ltd. vs. CCE (2007) 8 STR 527 (Tri-Kolkatta) see also Chemplast Sanmar Ltd. vs. CCE (2010) 19 STR 424 (Tri. – Che.)].

5.2 No service tax is payable on services rendered by one constituent unit of an HUF to another constituent unit since they are part of the HUF which is one legal entity [CCE vs Universal Travels 2010 (18) STR 157 (Tri- Bang.)].

5.3 Where the subsidiary company (IBP) merged with its Holding company (IOCL) with retrospective effect from 1.4.04 pursuant to the order of Ministry of Petroleum dated 30.4.07 which was approved by the Registrar of Companies on 2.5.2007, the Tribunal held that the effect of the order is that from 1.4.04, IBP ceased to exist as a separate company and during the period between 1.4.04 to 30.4.07 any transaction between IBP and IOCL could not be treated as between a service provider and service recipient, and accordingly IOCL was entitled to claim refund of tax paid on storage and warehousing services provided to IBP during the period March 2006 – February 2007. [CCE v. IOC Ltd. (2011) 23 STR 625 (Tri- Chennai)].

5.4 For a service to be liable for service tax existence of two distinct parties’ viz. the service provider and service recipient is required. In absence of the same, it cannot be said that there has been any provision of service by one to another. Thus where the revenue had sought to demand service tax from the member’s club in respect of the mandap keeper’s service provided by the club to its members the High Court held that the same would not be liable for service tax based on the doctrine of mutuality. The High Court inter alia relied on the judgment of Supreme in Joint Commercial Tax Officer v. The Young Men’s Indian Association 1970 (1) SCC 462 where the Supreme Court in the context of Madras General Sales Tax Act, 1959 held that inspite of specific inclusion of the club in the definition of dealer and the term “sale” being defined to include any transfer of property by club to its members, in absence of two there cannot be transaction of transfer of property [Ranchi Club Limited v. CCE (2012) 26 STR 401 (Jhar.)].

5.5 In case of amalgamation of companies, the amalgamation takes effect not from the date the order sanctioning the scheme is filed with the ROC (popularly called “effective date”) but would relate back to the ‘transfer date’ as specified in the scheme of amalgamation (popularly called “appointed date”). Thus, where the appointed date was 1.4.04 for amalgamating A into B, and the order of the High Court sanctioning the scheme was filed with the ROC on 23.3.2005 (effective date), it was held that the services provided by the amalgamated company (B) to the amalgamating company (A) post 1.4.2004 would not be liable for service tax since the amalgamated company (B) would be deemed to have provided the services to itself [CST vs. ITC Hotels Ltd. (2012) 27 STR 145 (Tri. – Del.)].

5.6 SEZ unit and DTA units of a company are not separate legal entities in general law (even though invoices have been issued and agreements have been entered) or under the definition of ‘person’ under section 2(v) of the SEZ Act read with rule 19(7) of the SEZ Rules, and hence services provided by SEZ unit to DTA unit is not liable for service tax. [L&T Ltd v. CCE, Vadodara-II, 2013(32) STR 113]

6 Service Tax - VAT

6.1 The appellant an advertising agency while providing advertising services also created original concept, designed advertising material, brochures, annual report etc. and raised an invoice on the customers giving break up of service element and material. The appellant paid sales tax on value of materials and service tax on design and work charges. The sales tax department took a view that sales tax is payable on the entire amount charged from the customer including the amount of design and concept charges since the same went into the creation of the product which was ultimately sold. The Supreme Court held that the contract was a composite contract [as distinguished from an indivisible contract] for services and sale and accordingly sales tax would not be payable on the value of entire contract but only on the material component. [Imagic Creative Pvt. Ltd. vs. CCT (2008) 9 STR 337 (SC)].

7 No service tax on sub-contracted services prior to 23.8.2007

7.1 Where the appellant provided services as a sub-contractor to the main-contractor who in turn provided services to the client and paid the entire amount of service tax (including the charges of the sub-contractor), no service tax is payable by the sub-contractor on his services to the main contractor prior to the issue of CBEC Circular no 96 dated 23.8.2007.[Sunil Hi-Tech Engineers Ltd v CCE 2010(17) STR 121 (Tri-Mum); See also CCE vs. Shivhare Roadlines (2009) 16 STR 335 (Tri-Delhi); Urvi Construction vs. CST (2010) 17 STR 302 (Tri-Ahmd.)]

8 Receipt of revenue share not liable for service tax

8.1 Where CONCOR paid the appellant, its agreed revenue share in a transaction, and had discharged the service tax liability on the gross amount, the Tribunal held that service tax liability has been discharged by CONCOR and hence appellant would not be liable. [ India Gateway Terminal (P) Ltd. vs. CCE (2010) 20 STR 338 (Tri-Bang.)]

8.2 In this case, the Court held the following services of Cochin International Airport Ltd (CIAL) as not liable:

Air India rendered ground handling services to all airlines, collected charges from them, paid service tax on the said charges and paid a royalty to CIAL, which was held not liable since CIAL did not render any service to Air India and Air India had paid service tax on the gross collections of which the royalty was a part;
Rent or License charges for providing space in the airport to set up shops is not for any service rendered by CIAL and hence is not liable.
Collections for disposal of garbage represents value of materials sold and not for any service rendered and hence not liable for service tax.

[CCE v. Cochin International Airport Ltd, 2011 (24) S.T.R. 20 (Ker)]

9 SEZ Exemption

9.1 The appellants, provided containers to units located in SEZ for the purpose of carrying inputs into the SEZ and finished goods out of the SEZ, and had claimed exemption from payment of service tax under Notification No. 4/2004-ST dated 31.3.2004 which exempts taxable services provided to a unit of the SEZ “for consumption of services within the SEZ”. The revenue disallowed the claim contending that it is not ‘consumed within the SEZ’. The Tribunal held that the same would be exempt since:

A harmonious reading of the expressions “for consumption of services within the special economic zone” and “taxable services provided to a unit of the SEZ” mentioned in the said notification, would entitle the appellants to claim exemption;
In any case, exemption from payment of service tax on services rendered to a unit in the SEZ for the authorized operations is available under Section 26 of Special Economic Zones Act, 2005 and Rule 31 of Special Economic Zone Rules, 2006 without any restriction regarding the consumption of services

[Norasia Container Lines v. CCE (2011) 23 STR 295 (Tri-Del)].

10 Benefit of Exemption

10.1 Benefit of exemption can be claimed at any stage of the appeal proceedings, if the same was available to the assessee. [ Sahni Video Movies v. CCE (2011) 23 STR 299 (Tri- Del)].

10.2 Where the appellant claimed the benefit of an exemption at the time of filing a reply to the SCN and not prior to that, the Tribunal held that if the exemption is otherwise available, it cannot be rejected on the sole ground that the same is claimed belatedly. [CCE v. Suresh C. Nayi (2011) 24 STR 123]

11 Small Service Providers

11.1 Where the appellant was selling and marketing goods of his client as consignment agent and provided business auxiliary services to him, the Tribunal held that it cannot be considered that the appellant is providing taxable services under a brand name of another person and hence is eligible to avail the benefit of small service provider exemption [Fashion Square vs. CCE (2011) 24 STR 421 (Tri-Del)].

12 Territorial Jurisdiction of departmental officers

12.1 The Commissioner, in whose jurisdiction the registered office of the service provider is located is the competent authority to initiate proceedings in relation to service tax and has jurisdiction over the activities of the said service provider irrespective of the place where service is provided [ CCE vs. Helios Food Additives Pvt. Ltd. (2011) 24 S.T.R. 721 (Tri.-Mumbai)].

12.2 Where the assessee, a manufacturer at Ratnagiri, was registered for service tax in Mumbai and provided services in Mumbai, it was held that the Commissioner in whose jurisdiction the service tax registered office of the assessee is located shall have the jurisdiction over him irrespective of the place of rendering of service and hence the SCN issued by Asst. CCE, Ratnagiri demanding service tax is not sustainable in law as being without jurisdiction [CCE v. Helios Food Additives P. Ltd. (2012) 25 STR 107 (Tri-Mum)].

13 Circular

13.1 The circulars issued by CBEC shall come into effect from the date it is issued and not from the date when it is notified by way of public notice [ CCE v. Kedia Vanaspathi Ltd. (2012) 28 STR 308 (A.P.)].

14 Sale vs. Service

14.1 Supply of imported as well as indigenous designs and drawings which were assessed as goods liable to customs duty / excise duty, cannot be made liable to service tax [Mitsui & Co. Ltd. vs. CCST (2012) 28 STR 491 (Tri. – Kolkata)].

15 No service No service tax

15.1 Where on facts it was found that the appellant had neither provided any service nor received any consideration, no tax was payable merely because of entries passed in its books of accounts. Further, the Notification No. 19/2008 which deems debits / credits in the books as receipt of consideration is not retrospective and hence not applicable [Futura Polyester Ltd. vs. CCE (2013) 29 STR 371 (Tri-Chennai)]

16 Others

16.1 When as per the terms of the contract between the parties, service tax on fees for professional or technical services was to be paid separately, TDS was not required to be deducted on the service tax portion of the payment. [C.I.T.(TDS) v. Rajasthan Urban Infrastructure (2013) 31 STR 642 (Raj.)].

16.2 In a lumpsum contract for sale of goods and services the value of services alone would be considered for reckoning the threshold limit [₹4 lakhs as it stood then]. [CCE v. Amarjit Agarwal & Co. (2014) 33 STR 59 (Tri-Del.)]

16.3 When the lease deed mentions that the lessor (service provider) is liable to pay all the “other outgoings in respect of the property” leased, the Hon’ble High Court held that the service tax liability, in the absence of any specific clause in the lease deed about service tax, must also be borne by the lessor. As between the parties, it is the contract and not the nature of levy that will determine which party, the service provider or the service recipient, that will bear the Service tax. [Raghubir Saran Chaitable Trust v. Puma Sports India Pvt. Ltd. (2014) 35 STR 225 (Del.)]

II. CLASSIFICATION

17 Classification

17.1 Where the department had registered the appellants in respect of its activity under a particular category of service, the levy service tax in respect of same activities for prior periods under any other category of service was not justifiable. [Coromandel Fertilizers Ltd. vs. CCE (2009) 13 STR 542 (Tri-Chennai)]

17.2 Where the appellant rendered cash management services which during the impugned period was specifically excluded under the category of Banking and Other Financial Services, the Tribunal held that the services could not be taxed under the category of Business Auxiliary Services. [ Federal Bank v. CCE (2009) 15 STR 279 (Tri. - Bang.)]

17.3 The appellant, a blood collection center, draws / collects samples of blood and forwards the sample after certain processing (e.g. serum separation) to test laboratories who do the testing. On facts, the Tribunal held –

The above service is a service in relation to technical testing and analysis;
Testing in relation to human being is specifically excluded from this service and hence this service is not liable for service tax;
These services are not in the nature or same genre as any of the services in the definition of ‘business auxiliary services’
It is well settled that once there is a specific entry for an item in the tax code, the same cannot be taken out of that specific entry and taxed under any other entry. What is specifically kept out of a levy by the legislature cannot be subjected to tax by the revenue administration under another entry.
If the legislature had any intention to tax the testing or analysis in relation to human beings or animal at a different rate than other technical testing and analysis service, the legislature would have separately specified the levy. In the present case, clearly the intention of the legislature is not to impose any levy at all on testing or analysis of human beings or animals. Hence the said services cannot be taxed under ‘business auxiliary services’.

[Dr. Lal Path Lab Pvt. Ltd. v CCE (2006) 4 STR 527 (Tri-Del.) affirmed in CCE v. Dr. Lal Path Lab P. Ltd. (2007) 8 STR 337 (P&H); CCE v. Patient Service Centre (2008) 9 STR 229 (P&H)]

17.4 The appellant, a job-worker, manufactured goods for a company A by utilizing the raw materials supplied by A for a consideration. Under Notification 214/86- CE ‘A’ had undertaken to pay the excise duty liability on such goods. Revenue sought to levy Service Tax on the charges collected by the appellant under the category of Business Support Service. On appeal the Tribunal held that the activities carried out by the appellant would not be liable for service tax since –

(a) The appellant would be considered as ‘manufacturer of goods’ notwithstanding ‘A’ had undertaken to pay the excise duty in respect of such goods.

(b) Since the process amounting to manufacture has been specifically kept outside the levy of service tax under the category of business auxiliary services, the same cannot be brought under the service tax levy under the category of business support services.

[Jubilant Industries Ltd. vs. CCE (2013) 31 STR 181 (Tri-Del)]

III. VALUATION

18 Valuation

18.1 Where an agreement is a composite one viz., consisting of (i) transfer of technical know under a licence (which is non-taxable); and (ii) provision of technical assistance in implementation and use of the technical know how in India (which is taxable) the consideration would have to be bifurcated for the purpose of valuation and only that which is related to the taxable service would be liable [Indian Farmers Fertilizer Co-op. Ltd. v. CCE (2007) 5 STR 281 (Tri-Del.)].

18.2 When service tax is not separately collected from the clients, gross amount collected is to be considered as inclusive of service tax. The Explanation inserted to this effect in Section 67 of Chapter V of Finance Act, 1994 on 10.9.2004 only clarifies the general principle. [ Gem Star Enterprises Pvt. Ltd. v. CCE (2007) 7 STR 342 (Tri.-Bang.); See also Abirami Associates vs. CCE (2009) 14 STR 801 (Tri-Chennai); P. Jani & Co. vs. CST (2010) 20 STR 701 (Tri-Ahmd.); Niranjan Lal Agarwal vs. CCE (2012) 26 STR 457 (Tri-Del.);Professional Couriers v. CST (2013) 32 STR 348 (Tri-Mum.)]

18.3 Where the consideration for services was collected before the imposition of the levy in respect of services rendered after its imposition, the consideration collected can be considered to be cum-tax and computation and payment of tax on that basis is in order [CCE vs. Daswani Classess (2008) 11 STR 189 (Tri. – Del.)]

18.4 Unless the invoice mentions that invoice amount is inclusive of service tax it cannot be treated as cum-service tax price. [ Shakti Motors vs. CCE (2008) 12 STR 710 (Tri. – Ahmd);

18.5 Where the amounts invoiced on the clients did not include service tax, it was held that the demand must be computed after giving cum-tax benefit [ Mitul Engineering Services v. CCE (2011) 24 STR 323 (Tri-Del.)].

18.6 Where the assessee, a telecommunications company, sold pre-paid SIM cards to dealers and distributors at prices below the MRP and paid service tax only on the amount received, the Tribunal held that although the service rendered by the assessee by way of sale of SIM cards was ultimately received by the consumers / subscribers the value of taxable service is the gross amount charged which is the amount received by them from dealers / distributors and not the MRP value [BPL Mobile Cellular Ltd. v. CCE (2007) 82 RLT 920 (CESTAT - Che.)].

18.7 In this case the Supreme Court held –

The amount received by the cellular telephone company from its subscribers towards SIM card forms part of the taxable value of services for levy of service tax since –

they are part and parcel of the services provided and the dominant position of the transaction is to provide services and not to sell the material i.e. SIM card as goods independent from services provided which on its own but without the service would hardly have any value at all;

the value of SIM card forms part of the activation charges as no activation is possible without a valid functioning of SIM card;

there is no element of sale (of SIM card) involved in the transaction.

Even if sales tax is wrongly remitted on the value of SIM card it would not absolve the parties from paying service tax on the same if service tax is otherwise found payable and a liability accrues on the assessee.

[Idea Mobile Communication Ltd vs. CCE (2011) 23 STR 433 (SC)]See also [Bharati Tele-Ventures Ltd. v. CCE (2014) 33 STR 86 (Tri-Mum)].

18.8 On a question, whether the cost of goods and materials consumed in the course of rendering photography services can be excluded for the purpose of service tax, the Larger Bench of the Tribunal held as follows:

For the purpose of Section 67 of the Finance Act, 1994, the value of service in relation to photography would be the gross amount charged including cost of goods and material used and consumed in the course of rendering such service. The cost of unexposed film etc. would stand excluded in terms Explanation to Section 67 if ‘sold’ to the client.
The value of other goods and material, if ‘sold’ separately would be excluded under exemption Notification No. 12/2003 and the term ‘sold’ appearing there under has to be interpreted using the definition of ‘sale’ in the Central Excise Act, 1944 and not as per the meaning of ‘deemed sale’ under Article 366(29A)(b) of the Constitution.

The Tribunal also observed that on the aforesaid analysis of the legal position it can be said that the determination of value of taxable service of photography depends on the facts and circumstances of each case as the Finance Act, 1994 does not intend taxation of goods and materials sold in the course of providing all the taxable services. [Aggarwal Colour Advance Photo System v. CCE (2011) 23 STR 608 (Tri-LB.)]

18.9 Service tax is not leviable for the free service rendered by the authorised agency in respect of the cars sold by them. [AVG Motors Ltd. vs. CCE 2008 (10) STR 20 (Tri. – Bang.) see also Indus Motor Company vs. CCE (2008) 9 STR 18 (Tri. – Bang.); ASL Motors Pvt. Ltd. vs. CCE&ST (2008) 9 STR 356 (Tri. – Kol.)].

18.10 Income-tax deducted at source under the provisions of Income tax Act would form part of the gross amount charged for the purpose of charging service tax. [CCE vs. Louis Berger International Inc. (2009) 13 STR 381 (Tri-Del.)]

18.11 Wharfage charges collected by the Custom House Agents (CHA) and paid to the port being a reimbursable expense is not liable for service tax [ Alvares & Thomas vs. CCE (2009) 13 STR 516 (Tri-Bang.)]

18.12 Prior to 18.4.2006, expenses reimbursed by a service recipients to the service provider would be excludible from the value of taxable service only if the service recipient had a legal or contractual obligation to incur the expenses which the service provider incurred on behalf of the service recipient. Cost of input services and inputs used for providing services cannot be treated as reimbursable costs and excluded from the value of taxable service [ Sri Bhagavathy Traders v. CCE (2011) 24 STR 90 (Tri-LB)].

18.13 Where the assessee under a composite contract provided the services of a consignment agent including transportation of materials, the Tribunal observed that the entire value received would be liable as clearing and forwarding agency services and no deduction in respect of transportation charges would be allowed. [CCE vs. Metal Engineering & Forging Co. (2009) 14 STR 16 (Tri-Del.)]

18.14 In this case the Tribunal held -

Spare parts etc., used in the course of maintenance under any Annual maintenance contract are to be considered as ‘sold’ to the customer and the exemption in respect of value of goods and materials sold as provided in Notification No. 12/2003 dated 20.6.2003 is allowable
Adoption of 70% of the gross value as representing material component based on state VAT law is not arbitrary and is permissible.

[Wipro GE Medical Systems Pvt. Ltd. vs. CST (2009) 14 STR 43 (Tri-Bang.); See also PLA Tyre Works vs. CCE (2009) 14 STR 32 (Tri-Chennai); A.N. Palaniappan v CCE (2010) 20 STR 781 (Tri-Chennai)]

18.15 The appellant, a consignment agent, under a single contract with its principal, received goods from the principal’s factory, warehoused the same, arranged dispatch of the goods and invoiced the same on behalf of the principal. It also performed cutting, bending, straightening during the warehousing. It charged the client one single bill which included the cost of transportation, loading and unloading, cost of cutting, bending, etc. On the question of exclusion of transportation cost, loading and unloading cost and cost of cutting, bending, etc. for the purpose of charging service tax, the Tribunal held-

since there is one contract and the total consideration is also charged in one bill, the cost of transportation and loading or unloading cannot be excluded;
since the activities of cutting, bending, straightening cannot be said to be service provided by consignment agent, these charges are not to be included for charging service tax.

[Agra Steel Corporation Vs. CCE (2009) 15 STR 202 (Tri.- Del.)]

18.16 Where the appellant provided construction services to NTPC for the period 10.9.2004 – 31.3.2006 and paid sales tax on the material component and service tax on the labour component, the Tribunal held extended the benefit of notification no. 12/2003 dated 20.6.2003 which exempts value of goods ‘sold’ in the execution of taxable service and dismissed the revenue’s contention that there was no sale of goods which were used in the works contract. [Sunil Hi-Tech Engineers Ltd v CCE 2010(17) STR 121 (Tri-Mum)]

18.17 In-flight catering services is liable for service tax under the category of ‘outdoor catering services’ and where VAT has been paid on the value of foods and beverages sold the same cannot be included within the taxable value for levy of service tax. [Grand Ashok vs. CST (2009) 15 STR 344 (Tri-Bang.)].

18.18 Where the appellant has already paid VAT on the material component of the construction contract which as per the state VAT law was deemed as 70% and on the balance 30% paid service tax, the Tribunal held that the Revenue cannot collect service tax on the material component since it would violate the principles of fiscal federalism and mutuality of service tax and sales adopted in the Constitution. [Sobha Developers Ltd. v. CCE & ST (2010) 19 STR 75 (Tri. – Bang.)]

18.19 The optional hostel and mess charges charged separately and collected from the students who are interested in availing such facility by an assessee, a commercial coaching and training centre, is not includable in gross receipts for levy of service tax under commercial training or coaching services. [ Vikas Coaching Centre vs. CCE & ST (2011) 22 STR 650 (Tri. – Bang.)]

18.20 Where the appellant providing Commercial Training and Coaching services recovered the cost of books purchased from another company and supplied to the students in addition to the coaching fee, the Tribunal held that the cost of such books is excludible from the taxable value on the basis of Notification No. 12/2003-ST dated 20th June, 2003 which seeks to exempt value of goods/material sold during the course of provision of taxable service. The Tribunal also held that the exemption cannot be restricted only to ‘standard textbooks’ as was clarified by CBEC in Circular no. 59/8/2003 dated 20.06.2003 since the notification has not used expression “standard textbooks” [Pinnacle vs. CCE (2011) 24 STR 453 (Tri-Del); See also Chate Coaching Classes Pvt Ltd vs. CCE (2013) 29 STR 138 (Tri- Mum);Cerebral Learning Solutions Pvt. Ltd. v. CCE (2013)32 STR 379(Tri-Del)].

18.21 Retreading of rubber tyres is an activity liable for service tax under the category of ‘Management, Maintenance and Repair’ services. Further the value of materials like tread rubber, patches, bonding gum consumed in retreading of tyres cannot be said to be sold in the course of providing retreading services and accordingly the value thereof cannot be claimed as deduction from the value of taxable services under Notification No. 12/2003 – ST., dated 20.6.2003. [Safety Retreading Company (P) Ltd. vs. CCE (2012) 26 STR 225 (Tri-LB)]

18.22 An outdoor catering contract for supply of food and beverages to airlines and loading the food in the aircraft is a composite contract which falls under sub-clause (f) of clause 29A of Article 366 of the Constitution of India consisting of–

sale of food articles which are liable for sales tax; and
the service of bringing the food articles to a place designated by client which is liable for service tax.

No service tax would be payable on the value of food and beverages [CCE v. LSG Sky Chef India Pvt. Ltd. (2012) 27 STR 5 (Kar.)].

18.23 CMC charges levied by the computer centre for filing Bill of entry and shipping bills electronically would be includable in the taxable value of services provided by the Custom House Agent (CHA) even though recovered at actuals from the customer since the charges are incurred by the CHA in discharging their primary responsibility as a CHA [Pioneer Services vs. CST, Chennai (2012) 27 STR 285 (Tri. – Chennai)].

18.24 Where the appellant had a comprehensive maintenance contract (including supply of spares) for a single consideration, but the spares were directly imported from abroad by the service recipient, the Tribunal held that there was a ‘sale’ of those parts and allowed the deduction of the assessable value of the parts from the maintenance contract value under notification no. 12/2003 dated 20.6.2003 [CCE vs. GE Nuova Pignone (2012) 27 STR 380 (Tri. – Ahmd.)].

18.25 Where the price to be paid to the foreign service provider was stated in the contract to be ‘net of income tax’ the value of taxable service was held to include the income tax [T.V.S. Motor Co. Ltd. vs. CCE, Chennai – III (2012) 28 STR 150 (Tri. – Chennai)].

18.26 The assessee, a consulting engineer, charged his ‘fee’ and ‘out-of-pocket expense’ (OPE) such as air travel, hotel stay etc. separately and paid service tax only on his ‘fee’ and not on the OPE. When the revenue sought to initiate proceeding for recovery of service tax on out-of-pocket expenses, the High Court in a writ petition considering provisions of section 66 and 67 of the Act and the Valuation Rules held as follows:

The relevant provisions for valuation of taxable service [i.e. s. 66 read with s. 67(1)(i) of the Act] envisage that the value of taxable service is nothing more or nothing less than the “consideration” paid as quid pro quo for the service.
Rule 5(1) of the Valuation Rules which provides for including any expenditure or costs incurred by the service provider in the course of providing the taxable service in the value of the taxable service has gone beyond the charging sections (s. 66 r.w.s. s. 67) under the Act which is not permissible. Hence the said rule is unconstitutional.

[Intercontinental Consultants & Technocrats Pvt. Ltd. vs. UOI (2013) 29 STR 9 (Del.)].

18.27 Reimbursement of expenses incurred for marketing of the TV channels for overseas service recipients not liable for service tax in view of the decision in Intercontinental Consultants and Technocrats Pvt. Ltd. (2013) 29 STR 9 (Del.) which held that reimbursable charges for rendition of taxable services cannot form part of the gross amount. [ESPN Software India (P) Ltd. v. CST, (2014) 35 STR 927 (Tri. – Del.)]

18.28 “Turnover charges’, stamp duty, charges, SEBI fees, DEMAT charges, charged by a stockbroker to a client were not in the nature of “commission or brokerage” and hence was not liable for service tax for the period prior to 2004 [LSE Securities Ltd vs. CCE (2013) 29 STR 591 (Tri- Del)].

18.29 Where the revenue had sought to include the value of room rentals received by the assessee hotel company with the value of mandap keeper services provided by it to the persons who had stayed at the hotels, the Tribunal held that –

the renting of hotel rooms for organizing function in the hotel cannot be covered within the definition of ‘Mandap Keeper’ inasmuch as the hotel has an identity and function quite distinguishable from that of a mandap;
the definition of Mandap Keeper nowhere covers the temporary occupation of hotel rooms for the purpose of boarding and temporary residence;
the functions were not held at the hotel rooms.

Accordingly it held that inclusion of room rentals with the value of Mandap Keeper Service is not permissible [Rambagh Palace Hotels Pvt. Ltd v. CCE (2013) 31 STR 480 (Tri-Del)]

18.30 Reimbursement of expenses incurred to provide taxable services shall be part of the assessable value if such expenses are inseparable and integrally connected with performance of taxable services [CCE v. International Logistics (2013) 31 STR 563 (Tri. – Del.)].

18.31 In this case, the Larger Bench of the Tribunal held that-

(a.) The value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of the later expression in Section 67 of the Finance Act, 1994; and

(b.) For the purposes of computing the 67% abatement under Notification No 15/2003 read with Notification No 4/2005 although the term ‘gross amount’ charged specifically includes value of goods ‘supplied’, ‘provided’ or ‘used’ by the service provider for providing the service, the value of free supplies would not be included in the term “gross amount charged” since only the value of goods provided by the service provider for which the service recipient is charged would be covered in the inclusion.

[Bhayana Builders (P) Ltd. v. CST (2013) 32 STR 49 (Tri. – LB)] [See Bhayana Builders Pvt. Ltd. v. CCE (2015) 37 STR 525 (Tri.-Del.) See also Paharpur Cooling Towers Ltd. v. CCE&C (2015) 37 STR 550 (Tri.-Del.)

18.32 On the facts where storage of frozen goods in cold storage formed an inseparable part of assessee's 'Clearing and Forwarding' activity, the Tribunal held that amounts received towards the cold storage would be includable in the taxable value of Clearing and Forwarding agent' s services. [Monsanto Manufacturers Pvt. Ltd. v. CCE (2013) 32 STR 364 (Tri-Del)]

18.33 When the transfer of title to the goods sold is to be at the place of the seller, subsequent charges for transportation and installation of goods at the buyer’s place on which service tax has been separately levied and paid cannot be subjected to VAT/sales tax [ Prakash Retail P. Ltd v. Dy. Comm. Of Commercial Tax (Audit) (2013) 32 STR 388 (Kar)]

18.34 The value of diesel supplied free of cost by the service recipient to the assessee service provider for providing the taxable “site formation and clearance, excavation and earthmoving and demolition” service would not be a component of the gross value charged for the service provided, for computation of service tax. [Karamjeet Singh &Co Ltd v. CCE, 2013(32) STR 740 (Tri-Del)] [See Gurmehar Construction v. CCE (2014) 36 STR 545(Tri.-Del.]

18.35 Amount received by a clearing and forwarding agent towards reimbursement of expenditure incurred for their client would not be includible in taxable value of ‘clearing and forwarding agents service’ unless it has the character of the remuneration/ commission [erstwhile Rule 6(8)] [ CST v. Sangamitra Services Agency (2014) 33 STR 137 (Mad.)]

18.36 Value of spare parts sold not includible in value of Maintenance or Repair Service. In this case, the Tribunal held that –

The transactions involving only sale of spare parts should be excluded for the purpose of computation of service tax demand;
Even in case where the transaction involves [composite transaction] both sale of spare parts and also rendering of service, the value of spare parts should be excluded if sales tax/ VAT liability has been discharged on such sales as is evident from the invoices/ bills issued in this regard

[Ketan Motors Ltd. v. CCE (2014) 33 STR 165 (Tri. – Mum.)]

18.37 Notification No. 12/2003 dated 20.06.2003 exempts the value of goods and materials supplied to the client to the extent the same are supplied in rendering services on the condition of production of documentary proof indicating the value of goods and materials supplied. The High Court held that this condition does not in any manner mean that the goods have to necessarily be supplied by way of or under invoices and even if the appellant is able to show from the documents i.e. contract read with other documents including its R.A. Bills (Running Account Bills) and returns filed with the Sales Tax Authorities, the value of goods sold and supplied to the satisfaction of the authorities, it would be complying with the condition provided in Notification No. 12/2003 dated 20 June, 2003. [Space Age Associates v. Union of India (2014) 33 STR 372 (Bom.)].

18.38 In this case, it was held that the deduction made under Notification No.12/2003 cannot be given based on purely overall estimation/approximation but if documentary proof specifically indicating the value of goods and services are provided, the deduction is allowed. [Kalpik Interiors v CST (2014) 36 STR 1283 (Tri-Delhi)]

18.39 Reimbursement of out-of-pocket expenses incurred by an advertising agency is includible in the value of taxable services. The appellants were however granted cum-tax benefit. [J Walter Thompson v. CCE, 2014(33) STR 525 (Tri-Mum)]

18.40 Where the assessee a manpower supplier was also reimbursed the amounts payable by the assessee to the Provident Fund authorities, the Tribunal held that the same would also be included in the value of taxable service and accordingly be subjected to service tax [ Neelav Jaiswal & Brothers v CCE (2014) 34 STR 225(Tri.-Del.)].

18.41 The assessee, a telecom company, supplied SIM cards/recharge coupon for the value of talk time to its subscribers and also charged them an activation charge. It paid service tax on the activation charges but not value of SIM cards and recharge coupons contending that it is value of goods sold which is exempt under notification no.12/2003- ST dated 20.6.2003.The Tribunal held, the supply of SIM cards/ recharge coupons are not supply of “goods” and service tax alone can be levied on these supplies. Further, it was also held that the rate of tax at the time of rendering the service and not at the time of consideration is relevant. Hence the advance rentals received on post-paid cards used after the increase in the rate of tax and the talk time utilized on pre-paid cards after the increase in the rate of tax would be liable at the increased rate. [Bharati Tele-Ventures Ltd. v. CCE (2014) 33 STR 86 (Tri-Mum)].

18.42 Where the assessee repaired transformers it was held that service tax was payable only on labour charges and not on value of replaced material which was shown separately in contract and on which the assessee had also paid VAT [CCE v Shiv Engineering (2014) 34 STR 236(Tri.-Del].

18.43 To claim exemption respect of material under notification no.12/2003 it is not necessary that the invoice should indicate the value of goods separately. The assessee may put forth any evidence to prove value of goods sold to the service provider [Mehta Plast Corporation v CCE 2014(34) S.T.R. 401(Tri.-Del.)]

18.44 The appellant in the present case was engaged in the providing maintenance and repair services of aircraft for Ministry of Defence. It had paid service tax on the service portion of its contract and had also separately disclosed the value of materials and ATF supplied by it in its invoice. It had also not availed Cenvat credit on the material supplied by it. Thus where the department sought to include the value of materials for the purpose of levy of service tax, the Tribunal held that it had complied with the conditions of Notification No.12/2003 and hence value of materials and ATF was not includible for levy of service tax [Hindustan Aeronautics Ltd v. CST (2014) 34 STR 874 (Tri-Bang)]

18.45 Where the appellant, who was engaged in retreading of tyres had claimed deduction of value of materials under Notification No. 12/2003 dated 1.7.2003 for determining the value of taxable services by taking VAT paid portion of turnover i.e. 70% of the total invoice value as the value of material and paid service tax on the balance 30% of the invoice value, the Tribunal held that unless the invoice indicated the description and quantity of goods sold, its unit rate, the value of goods separately the conditions of the said notification would not be satisfied. Hence it was held that the assessee cannot claim deduction of value of materials under the said notification and was liable to pay service tax on the entire invoice value [Laxmi Tyres vs. CCE (2014) 36 STR 364 (Tri-Mumbai)].

18.46 Where the value of the goods and materials which are used for the repair of the transformers stand separately disclosed in the agreements and are also separately mentioned in the invoices raised by the appellants, the Tribunal held that the value of goods sold would not be includible in the value of taxable service in terms of Notification No.12/2013 dated 20.06.2003 and accordingly and no service tax can be demanded from the appellants on the value of the goods[J.P. Transformers v. CCE & ST (2014) 36 STR 471 (Tri-Del)].[See CCE v. Goverdhan Transformer Udyog Pvt Ltd (2015) 37 STR 161 (All.)]

18.47 The assessee, an instrumentality of the Government raised funds through issue of its own bonds and kept it in its public deposit account and not the Consolidated Fund of the State under Article 266 of the Constitution. The State Government guaranteed the repayment of the bonds and the funds were to be deployed in accordance with the direction of the State Government. The State Government reimbursed the administrative expenses incurred by the assessee for issuing bonds as a percentage of the loan raised which was sought to be taxed under the category of ‘Banking and Financial Services’ on the ground that the assessee acted as an intermediary for raising loans for the State Government by issuing bonds. However, the Hon’ble Tribunal held that since the bonds were issued in its own name and also deposited in its own public deposit account, there was no rendition of any taxable service by the assessee to the State Government and the administrative expenses reimbursed are in the nature of a grant for the financial stability of the assessee which is an instrumentality of the State. Hence, no service tax is payable on the administrative expenses reimbursed [ Rajasthan State Indl. Devel. & Investment Corp. Ltd. v. CCE (2014) 36 STR 653 (Tri.- Del)]

18.48 Where on facts, the assessee engaged in carrying out the activities of retreading of tyres had excluded the cost of rubber utilized towards retreading of tyres without indicating the value of such materials actually sold by it in its invoices, the Tribunal held that in absence of any documentary proof specifically indicating the value of material sold the assessee was not entitled to benefit of Notification No. 12/2003-S.T. However, on facts during the impugned period since a similar matter was pending before the Third Member on account of difference of opinion the Tribunal held that no penalty would be imposable in view of the provision of section 80 [CCE v. New Hindustan Rubber Works (2015) 37 STR 120 (Tri-Mum)]

18.49 The appellant in the present case was engaged in providing clearing and forwarding agency services to a cement company. It paid service tax on the consideration received by it for providing it’s clearing and forwarding agency services. In addition to the same it also arranged labours for loading and unloading on behalf of the company and were also receiving actual charges for loading and unloading which was paid over by it, without retaining any amount, to the labour board. On above facts the Hon’ble Tribunal held that the actual charges received for loading and unloading are not liable to be included for the purpose of levy of service tax in the taxable value of clearing and forwarding agency services. [CCE vs. J.A. Bindra C & F Agent (2014) 35 STR 376 (Tri-Mumbai)]

18.50 Where the appellant, a steamer agent, had collected extra amounts towards statutory levies reimbursable from the client, the Tribunal held that service tax is payable on such extra amount. [Chirspal Shipping V. CCE (2014) 35 STR 1000 (Tri-Mumbai)]

18.51 Cum-tax benefit - Where the appellant had not collected any service tax from the service recipient the Tribunal held that the entire consideration received by the appellant will have to be treated as cum-tax and the same needs to be apportioned between the taxable value and service tax [Landmark Eductaion India vs. CST (2014) 35 STR 537 (Tri-Mumbai)]

18.52 Where the assessee, who was engaged in providing works contract services, had paid service tax on the full rate after availing credit of duty paid on cement, channels, CTD/ TMT bars and other items of construction which was sought to be denied by the department on the grounds that the appellant ought to have discharged the service tax liability under the Service tax (Determination of Value) Rules, 2006 or Works Contract (Composition Scheme for payment of service tax) Rules, 2007 without availment of cenvat credit the Tribunal held as follows:

Value of taxable service has to be determined only as per section 67 and recourse can be had to valuation rules only if the value is not ascertainable as per the provisions of section 67(1)/(2)/(3);
The valuation rules are subject to the provisions of sections 67;
The composition scheme merely provides an option to the service provider to discharge the service tax liability vis-à-vis the option available under section 67 of the Act.

Hence the discharging the service tax liability on the full rate by the appellant was held to be correct and accordingly availment of cenvat credit on the inputs/ input services was held to be admissible. [S.V. Jiwani vs. CCE (2014) 35 STR 351 (Tri-Ahmd.)]

19 Abatements

19.1 Where the appellants provided commercial or industrial construction services and claimed abatement (67%) under notification no. 1/2006 dated 1.3.2006, the High Court held that for the purposes of computing the abatement, the term “gross amount” charged in the Explanation to the said notification shall not include the value of free material supplied by the clients of the appellants. [ERA Infra Engineering Ltd. vs. U.O.I (2008) 11 STR 3 (Del.); See also CEMEX Engineers vs. CST (2010) 17 STR 534 (Tri-Bang.)].

19.2 The assessee provided the services of commercial and industrial construction services for setting up power plants for its customers and claimed abatement in respect of certain contracts under Notifications No.15/2004 and 1/2006 without taking the benefit of cenvat credit but in respect of other contracts it paid service tax on the entire contract value and claimed credit of inputs and input services. The department enforced abatement on all contracts uniformly. The Tribunal held that -

The abatement notification no.15/2004 and 1/2006 used the term “in cases where” cenvat credit is taken, the abatement shall not apply. Hence assessee has the option to avail or not avail cenvat credit or abatement in a given contract.
There is no restriction in utilising accumulated cenvat credit of a given contract to discharge the service tax liability on the non-abated portion of the value of another contract. This utilization would not disentitle abatement.

[Bharat Heavy Electricals Limited v. CCE 2014 (34) S.T.R.430(Tri.-Mum.)]

19.3 The value of free supplies by service recipients need not be added to the amounts charged by the service provider for computing the abatement of 67% under Notification No.1/2006-ST [ATR Constructions Pvt. Ltd. v. CCE (2014)35 STR 92 (Tri-Del)]

20 Valuation & abatement

20.1 The assessee was engaged in laying of pipelines and registered under ‘Commercial or Industrial construction services’. The assessee claimed abatement of 67% of the “gross amount charged” under notification 15/2004 dated 10.9.2004 and 1/2006 dated 1.3.2006 and paid service tax on the 33% of the “gross amount charged” without including the value of pipes provided by the customer in the ‘gross amount charged’. The Tribunal held that the value of pipes supplied has to be included since –

the pipeline is essential component required for providing pipeline services and is to be treated as non-monetary consideration in terms of Rule 3 of Valuation Rules;
The notification defined the term ‘gross amount charged’ to include value of goods and materials supplied or provided or used by the provider of the construction service for providing such service. Since pipes are ‘used’ by the service provider for laying pipelines, the value of pipes would have to be included in the ‘gross amount charged’ for the purpose of computing the abatement.

[Jaihind Projects Ltd vs CST 2010 (18) STR 650 (Tri-Ahmd.)]

IV. IMPORT AND EXPORT OF SERVICES

21 Import of Services

21.1 Prior to 16.8.2002 services provided by a person or a company which is situated outside India having no business establishment in India is not liable for service tax especially considering that the rules were amended on 16.8.2002 to recover service tax in such cases from the recipient of the service. [ Philcorp PTE. Ltd. v. CCE (2007) 7 STR 266 (Tri – Mum) see contra Calvin Wooding Consulting Ltd. v. CCE (2007) 7 STR 411 (Tri-Del.) below].

21.2 In a batch of appeals, where certain foreign companies provided manpower recruitment services to an Indian company the department sought to tax such services and recover the tax in certain cases from the service recipient and in certain cases from the service providers. Upholding the department’s plea the Tribunal held as follows :

By Section 68 of the Act, it is provided that, every person providing taxable service to any person shall pay service tax at the rates specified in Section 66 in the manner and within such period, as may be prescribed by the Rules. Therefore, there is no distinction made between a foreigner and an Indian as regards the liability to pay Service Tax, when the taxable service is provided in India. There is no immunity to any foreigner from the applicability of the provisions of the said Act and foreigners and other non-residents were equally liable for the service tax when services were provided by them to a recipient in India. There is indeed no question of any extra-territorial operation of the statute involved in cases where service is provided by any person to a recipient of service in India.
The argument that the search for engineers was done abroad in Austria and France and hence they provided the services abroad is not tenable because the selection and recruitment was required to be made for the recipient which was in India and not for any other person abroad. It cannot, therefore, be said that the services were provided by these appellants abroad.
Prior to 16.8.2002, in respect of services provided by non-residents, the tax could be paid by the non-resident himself or by a person authorised by him. Since in certain cases the appellants although the recipients of the service had undertaken to discharge the obligation contractually they would be liable to pay tax and file returns. However, such an obligation cannot be inferred from a statutory obligation to deduct income-tax at source under the income-tax law.

[Calvin Wooding Consulting Ltd. v. CCE (2007) 7 STR 411 (Tri-Del.)].

21.3 Rule 2(1)(d)(iv) of Service tax Rules, 1994 which came into effect from 16.8.2002 fastened the liability for payment of service tax on the service recipient would not operate in respect of services provided prior to 16.8.2002 though the invoices were raised and payments made after 16.8.2002. [ Schott Glass India P. Ltd. vs. CCE (2007) 8 STR 407(Tri – Ahmd.).See also CCE vs. Schott Glass India Pvt. Ltd. (2009) 14 STR 146 (Guj HC.)]

21.4 In respect of taxable services provided by a person who is a non resident or is from outside India, who does not have any office in India, it is the recipient of the taxable service who is liable to pay service tax. Such service was notified in the Official Gazette, in exercise of the powers conferred by sub-section (2) of Section 68 of the Finance Act, 1994 only on 31.12.2004 with the issue of Notification 36/2004-ST which came into force on 1.1.2005. Hence for a period prior to such date the recipient of the service is not liable to pay service tax in such cases. [ISPAT Industries Ltd. v. CCE (2007) 8 STR 282 (Tri-Mum.) following Aditya Cement vs. CCE, Jaipur (2007) 7 STR 153 (Tri-Del.) approved in Hindustan Zinc Ltd. vs. CCE (2008) 11 STR 338 (Tri-LB)].

21.5 Prior to 1.1.2005, in respect of taxable services provided by a non-resident or a person from outside India who does not have an office in India to a person based in India, the recipient of the service is not liable to pay service tax notwithstanding that the recipient has agreed to bear the tax liability since the tax liability is a creature of the statute and governed by statutory provisions and cannot be determined or apportioned by an agreement between two private parties. [JCB India Ltd. vs. CST (2008) 12 STR 714 (Tri. – Del.).See also CCE vs. Nicholas Piramal India Ltd. (2009) 13 STR 383 (Tri. – Del.), Nahar Spinning Mills v. CCE (2009) 13 STR 255 (Tri. – Del.)].

21.6 The appellants provided consulting engineering services (project management consultancy) to its customer in respect of a project which involved offshore supply, offshore services, onshore supply, onshore services and construction & erection of a plant in India. The services were provided both in India and outside India. The agreement clearly specified the consideration for the onshore work and offshore work. The Tribunal after referring to circular no. 36/4/2001 dated 8.10.2001 and section 66A held that for a service to be taxable, the services must be provided “in India” and hence the consideration allocable to onshore services would alone be taxable and the consideration allocable to offshore services would not be liable for service tax prior to 18.4.2006 i.e. before the insertion of section 66A which broadly speaking deemed a service provided by a person based outside India to a person based in India as being provided by the recipient in India. [Foster Wheeler Energy Ltd. v. CCE & C (2007) 7 STR 443 (Tri-Ahmd.)].

21.7 Overseas agents who procured orders for the appellant, an Indian company, were held to have rendered their services abroad notwithstanding that they were in touch with the appellants for taking instructions in issues like prices, discounts, etc. Hence the appellant was not liable to pay service tax as a recipient of service on the overseas commission paid prior to 18.4.2006 i.e. before the insertion of section 66A. [Anant Spinning Mills vs. CCE (2009) 14 STR 184 (Tri-Del.)]

21.8 In respect of taxable services received outside India by a person who is resident in India from a person who is non resident or is from outside India would be liable for service tax only after enactment of Section 66A w.e.f. 18.4.2006. Prior to 18.4.2006, in respect of the said services the service recipient in India would not be liable for service tax. [Indian National Shipowners Association v. UOI (2009) 13 STR 235 (Bom.); Followed in Unitech Ltd. v. CST (2009) 15 STR 385 (Del.); CCE vs. EID Parry (2009) 16 STR 82 (Tri-Chenai);CST vs. SKF India 2010 (18) S.T.R 388 (Kar) See also Dimension Stone vs. CCE (2009) 16 STR 313 (Tri-Del.);Shardha Terry Products Ltd. vs. CCE (2009) 16 STR 605 (Tri-Chennai); Polyspin Exports Ltd. v. UoI (2011) 22 STR 9 (Mad); Kpit Commins Infosystems Ltd. vs.CCE (2011) 22 STR 215 (Tri. – Bang.); BHEL-GE Gas Turbine Services Pvt. Ltd. vs. CST (2010) 20 STR 679 (Tri-Bang.); Kansal Hosiery Exports Ltd. vs. CCE (2011) 22 STR 416 (Tri-Del); CCE & ST vs. Micro Labs Ltd. (2011) 22 STR 615 (Kar.);CST v. Quintiles Data Processing Centre (I) P. Ltd. (2011) 23 STR 15 (Guj); CST v. Metro Cash And Carry (2011) 23 S.T.R. 124 (Kar);Vardhman Spinning General Mills vs. CCE (2011) 23 STR 158 (Tri-Del); CST vs. Bosch Rexroth (I) Ltd. (2011) 23 STR 359 (Tri-Ahmd.)].

21.9 Section 66A as inserted by the Finance Act 2006 w.e.f 18-4-06 and the Taxation of Services (Provided from Outside India and received in India) Rules, 2006 are not unconstitutional on the ground of lack of legislative competence or extra territorial operation of laws. [Glyph Internatonal v. UOI (2012) 25 STR 209 (All)]

21.10 Where the appellant received technical know-how and assistance from five foreign entities and the Revenue contended that in terms of the second proviso to Rule 6(1) of the Service tax Rules, 1994 (as it stood prior to it amendment w.e.f. 16.8.2002) the recipient of service would be liable to pay service tax since the overseas entities by virtue of the agreement authorized the service recipient to pay tax, the High Court dismissed the contention of the Revenue and held –

Section 68 of the Finance Act casts the liability on the service provider to pay service tax. Hence in absence of any express provision in Act the rules casting the liability on the recipient of service would be contrary to the provisions in the Act and therefore, would not be sustainable.
The second proviso to rule 6(1) provides that if the service provider authorizes the service receiver, then the receiver of service can pay tax on behalf of the service provider. However, this would apply only if the service provider in the first place is liable. The provisions of the Act (as it stood then) are not applicable to non-resident service providers and hence there is no liability on their part to pay service tax. Hence the second proviso can also not be triggered.

[CST vs. Bharat Electronics Ltd. (2010) 20 STR 307 (Kar.)]

21.11 Where the appellant reimbursed certain coaching fees to its employees who availed and paid for the coaching services outside India the Tribunal held that no service tax is payable by the assessee (employer) since

the coaching services were received by the employees abroad in their individual capacity and the assessee merely reimbursed the costs and did not pay the coaching centres directly which is a basic requirement for levying service tax.
the issue involved is prior to 18.4.2006 i.e. prior to introduction of section 66A and hence service tax on the recipient cannot be levied on the recipient

[CCE v. Maersk India P. Ltd (2011) 22 STR 187 (Tri- Mum)

21.12 Consulting engineering services rendered by a ‘foreign company’ to the appellants during the period 1.4.99 to 31.3.01 is not liable for service tax, since:

Consulting engineering services provided by a ‘body corporate’ would be liable for service tax only w.e.f. 1.5.2006 and not prior to that date;
in any event no service tax would be payable on services provided from outside India prior to 18.4.2006 since s.66A of the Finance Act, 1994 was introduced only w. e. f. 18.4.06.

Accordingly the High Court held that the appellants would not be liable to pay service tax on the services provided by overseas foreign company. [ CST v. Toyoda Iron Works Co Ltd (2010) 19 S.T.R 802 (Kar) - relying on CCE vs. Araco Corporation (2010) 19 STR 169(Kar.) & CCE vs. SKF India Ltd. (2010) 18 STR 388 (Kar.) see also CCE vs. Araco Corporation (2010) 19 STR 169(Kar.)]

21.13 Where the appellant based outside India supplied designs, technical know-how, etc. prepared by them outside India to a company based in India who consumed the same in India the Tribunal held that such services would not be liable for service tax under the category of “consulting engineering services” since they were provided outside India. The Tribunal observed “The consumption of service in India is not taxable event. Situs of the tax would be where the taxable event occurs and not where the effect or the consequence thereof is felt. The taxable event has not occurred in India, inasmuch as the activity of development of technology, technical information & know-how, transfer of design, drawing etc has taken place in USA. The consumption of such services in India, when admittedly no such service stands provided by the appellant in India, cannot be held to be a taxable event.” [ Stone & Webster International Inc vs. CCE (2011) 22 STR 467 (Tri. – Ahmd.)].

21.14 No service tax would be payable for services received from foreign service provider for the period prior to 18.4.2006 even if the service provider has a liaison office in India [Mitsui & Co. Ltd. vs. CCST (2012) 28 STR 491 (Tri. – Kolkata)].

21.15 BA, U.K., an airline company, incorporated in U.K., had a branch in India (BA, India) through which it provided services of air transport in India. BA India was registered and paying service tax on such services. BA, India appointed IATA agents to book tickets on their behalf. BA, U.K. contracted with various overseas computer reservation system companies (CRS companies) which maintained an online real time database about flight schedules, fares, seat availability etc. of the flights operated by BA, U.K. all over the world. The CRS Companies were located outside India did not have any branch office or establishment in India. The IATA agents used this platform for booking tickets. BA, U.K. paid the CRS Companies outside India directly. The consideration payable to CRS companies was based on the number of tickets booked by IATA agents using the online database of the CRS companies. BA, India in its account also made an appropriate debit of CRS cost attributable to India ticketing operations. The revenue had sought to –

Classify the service provided by overseas CRS companies as “Online Information and Database Access and Retrieval Services”
Tax BA, India under the Reverse Charge Mechanism considering that it had also received a service from the overseas CRS companies to the extent of the CRS debit made in its accounts.

On appeal, the Hon’ble Tribunal held that –

The activity of the CRS companies is maintaining online information on real time basis about the flight schedules, fares, seat availability etc. of the flights operated by BA, U.K. all over the world, for which CRS companies have linkage with the computer system of BA, U.K. and provide access in respect of this information to the IATA agents appointed by BA which is used by them for selling of air tickets of BA. This activity of the CRS companies is covered by the definition of “Online Information and Database Access and Retrieval” service. The fact that the IATA agents access the information and databases of BA or that the data stored by the CRS companies belonged to BA is of no relevance.
S. 66A(2) read with Explanation 1 thereto provides that a permanent establishment in India and permanent establishment outside India of a person carrying on a business would be treated as separate person for the purpose of s. 66A. In view of the fact that BA U.K. has contracted with CRS companies and has paid the consideration to the overseas CRS companies outside India, BA India cannot be held to be a recipient of services so as to make it liable to pay service tax on reverse charge basis in terms of provision of s. 66A.
If BA India had paid service tax under reverse charge, cenvat credit would have been available to them for discharging their service tax liability on air transport services and demand would be revenue neutral and accordingly the extended period of limitation cannot be invoked

[British Airways v. CCE (2014) 36 STR 598 (Tri.- Del.)] (Third Member Bench decision)].

21.16 Where the appellants had paid charges towards “processing of textile materials for chemical wash” to service providers situated outside India, the Tribunal held that the services being in relation to textile processing were exempt from payment of service tax under Notification No. 14/2004- S.T. dated 10.9.2004. Accordingly, no service tax thereon was payable by the appellant under reverse charge basis [K.G. Denim Ltd v. CCE, Salem, 2015(37) STR 140 (Tri-Chennai)]

21.17 The demand raised by the Revenue on royalty for technical know-how paid by the Respondent to foreign service providers during the period 2001- 02 was set aside on the grounds that –

Supply of technical know-how does not fall under the category of ‘Consulting Engineer’s Service’;
Rule 6 of the Service Tax Rules, 1994 is not applicable as the foreign service provider has not authorized the Respondent to pay service tax on its behalf.
Section 68 of the Act r/w. Rule 6 of the Service Tax Rules, 1994 would apply only to services rendered in India by a non-resident service provider who does not have an office in India. ‘Rendering’ of service in India is distinct and different from ‘receipt’ of service in India. In the present case technical know-how that has been provided by foreign service provider is a service provided from abroad and received in India – receipt of service taxable only from 18.4.2006.

[CCE v. Gabriel India Ltd. (2014) 35 STR 967 (Tri-Mumbai)]

21.18 Where Insurance guarantee fee was paid by the overseas lender in respect of loan granted to an Indian company which is the appellant - held that, lender is the recipient of service and not the appellant though he maybe the beneficiary. Hence reverse charge not applicable to the appellant as he is not the recipient of service. [Kingfisher Airlines P. Ltd. v. CST (2015) 37 STR 358(Tri.-Mum.)]

22 Export of services

22.1 In the case of courier services involving delivery of articles abroad for consignors in India the Tribunal held that the service would be completed only when the courier is delivered outside India to the consignee abroad and hence part of the service being performed outside India the service is to be considered as performed outside India under Rule 3(2) of the Export of Services Rules, 2005 Accordingly the service would be considered as exported under rule 3(2) of the Export Rules and no service tax is payable in terms of Rule 4 of the said Rules. The argument that transportation is merely incidental in providing courier services is not correct especially considering that Cenvat Credit Rules, 2004 also provide that credit of duty paid on motor vehicles would be allowed to select service providers one of which are courier service providers. [TNT India Pvt. Ltd. V. CCE (2007) 7 STR 142 (Tri - Bang.). See also U.B.Xpress (South) Pvt. Ltd. vs. CCE&ST (2008) 12 STR 152 (Tri-Chennai)]

22.2 The appellant was an agent of a foreign company – GMC. It sourced contracts from the India Railways to GMC for a commission. The commission was denominated in USD but payable by GMC in INR through the Indian Railways. Thus, from the amount of USD payable to GMC by Indian Railways, the Railways deducted the USD equivalent of the commission payable to the appellant and remitted the net amount of USD to GMC and paid the commission in INR to the appellant. The department denied the export exemption on the basis that the commission was received in INR. The Tribunal allowed the exemption holding that the appellant was paid an amount in INR equivalent to the USD commission and correspondingly equivalent USD was not released to the Indian Railways for remittance to GMC. Hence, the requirements of earning in convertible foreign exchange was held to be satisfied interpreting the condition in accordance with its object and purpose. [National Engg. Industries Ltd. v. CCE (2008) 11 STR 156 (Tri. – Del.)].

22.3 Where the appellants were engaged in booking orders in India for their foreign principals and received commission for such services in convertible foreign exchange the Tribunal held that such services were in the nature of business auxiliary services provided from India and used outside India and hence would qualify as export of service under rule 3(2) of the Export of Service Rules, 2005. [Blue Star Ltd. vs. CCE (2008) 11 STR 23 (Tri-Bang.); CCE vs.Gleason Works (India) Ltd. (2011) 22 STR 607 (Tri-Bang.)].

22.4 Where the appellants booked orders in India for the sale of the goods manufactured by its subsidiary situated in Singapore for a commission, the Tribunal held that:

it cannot be said that the booking of orders indicate services being rendered in India;
since the orders were booked for a Singapore company the services were considered to be delivered only to the Singapore company;
when the recipient of the service is Singapore Company, it cannot be said that services is delivered in India and the benefit of services is derived only by the recipient company;
because of the booking of orders, the Singapore Company gets business therefore the services are also utilized abroad

Accordingly, the services of the appellant would be considered as export of services and not liable for service tax. [ABS India Ltd. vs. CST (2009) 13 STR 65 (Tri-Bang.)]

22.5 Commission received in convertible foreign exchange for procuring orders in India for the products manufactured by the company based in Germany would not attract service tax during the following periods :

1.7.03 to 20.11.03 – Commission agents for goods were exempted in terms of Notification no. 13/03-ST dated 20.6.03. Further, even based on Circular No. 56/5/03-ST dated 24.4.03 which clarified that service tax is a destination based consumption tax and would not be applicable to ‘export of services’ even after withdrawal of Notification no. 6/99-ST dated 9.4.99 (exemption for receipts in convertible foreign exchange), the said commission would not be liable for service tax.
15.3.05 to 30.11.06 – The services would be considered as ‘exports’ in terms of rule 3 of Export Rules. [based on Circular No. 111/5/09-ST dated 24.2.09 and ABS India Ltd. v. CST (2009) 13 STR 65 (Tri-Bang.) ; Blue Star Ltd. vs. CCE (2008) 11 STR 23 (Tri. Bang.)].

[Mapal India Pvt. Ltd. vs. CCE (2011) 22 STR 454 (Tri. – Bang.)]

22.6 The appellant provided services to clients based abroad. It got these clients through its agent in India. The consideration for its services was received first by its agent in foreign currency who after deducting its commission paid the balance to the appellant in INR. The Revenue denied refund of tax paid on inputs used for export of such services on the ground that the appellant had not received the consideration for services exported in convertible foreign exchange directly from service recipient. The Tribunal allowing the appeal of the appellant held –

The condition for receipt in foreign exchange was not applicable prior to 1.3.07 in respect of services falling under rule 3(3) [i.e. location of service recipient category] and the appellants claim was in respect of services exported prior to 1.3.07 and also in respect of services falling under rule 3(3) [i.e. location of service recipient category].
Even if there was condition for receiving the money in foreign exchange–

The appellant would be satisfying such a condition also by liberal interpretation since it is the appellant who have rendered the services directly to the recipient situated abroad and not the agents and the payment has been received in foreign exchange though by their agents.

The receipt of monies by an agent of the appellant in foreign exchange would be deemed to have been received by the appellant in foreign exchange for the purposes of export Rules.

[Nipuna Services Ltd vs. CCE (2009) 14 STR 706 (Tri. – Bang.)]

22.7 In the present case, the appellants were sub-representatives of one M/s. WFL which in turn was representative of Western Union, an overseas entity providing money transfer services to persons based abroad for transferring money to India. Western Union paid a commission to WFL and WFL in turn paid an amount to the appellant for completing the Indian leg of a transfer receive transaction i.e. where money is transferred from abroad to recipient in India. Department sought to levy service tax on the fee received by the appellant under the category of business auxiliary services for the period 1.7.03 – 31.1.06. On appeal, the Tribunal held as follows –

On a reading of the agreement it was held that the services was rendered by the appellant directly to the Western Union situated outside India and they were ultimate beneficiaries of the services;
the services would be considered as used outside India since they benefited Western Union and its overseas customer (viz., the remitter);
during the disputed period, there was no requirement that the money must be received in convertible foreign exchange.

Hence the services would be considered as exported and accordingly not liable for service tax [Muthoot Fincorp Ltd. vs. CCE (2010) 17 STR 303 (Tri-Bang.); See also Kerala State Financial Enterprises Ltd. v. CCE (2011) 24 STR 585 (Tri-Bang.)].

22.8 Where the appellant procured orders for foreign principals in consideration for a commission received in convertible foreign exchange, the Tribunal held that the appellant’s services are used outside India in view of the fact that the rendering of the service was complete only when the purchase orders canvassed by the appellant in India were received by the foreign companies and since these purchase orders were received abroad and acted upon abroad the benefit of the service accrued to the foreign companies abroad. Accordingly the appellant’s services were held to be exported and the appellant was held entitled to refund of tax paid on exports. [EM JAY Engineers v. CCE (2010) 20 STR 821 (Tri-Mum.)].

22.9 Where the assessee procured orders for foreign principals and received their consideration in foreign exchange, it was held that the assessee’s services were exported since it fulfilled all the conditions, including the condition of the service being “delivered outside India and used outside India” since the rendering of the service was complete only when the purchase orders canvassed by the assessee in India were received by the foreign companies and these purchase orders were received and acted upon by the foreign companies abroad. In other words, the benefit of the service provided by the appellant accrued to the foreign companies outside India and hence the service was “delivered outside India and used outside India”. [ KSH International vs. CCE 2010 (18) STR 404 (Tri-Mumbai)]

22.10 Where the assessee conducted clinical trials for foreign clients and delivered the report to them abroad it was held that the services are not complete until the reports are submitted to the client and in the present case since the reports were sent abroad the service was to be considered as partly performed abroad. Further, the services were also ‘delivered outside India and used outside India’. Hence assessee was entitled to claim export exemption.[CST vs. B.A. Research India Ltd. 2010 (18) S.T.R. 439 (Tri- Ahmd.)].Also see [C3i Consultants India Pvt. Ltd. vs. CCE (2014) 35 STR 556 (Tri-Bang.)] see [CCE v. Nestle India Ltd. (2014) 36 STR 563 (Tri.-Del.)]

22.11 The appellant provided technical testing and inspection services to their clients who were foreign importer to enable them to decide whether the goods imported by them from India conformed to the requisite specifications and standards and received their monies in convertible foreign exchange. For the period 1.7.03-19.11.03 when the exemption from service tax in respect of foreign currency receipts (Notification No 6/99 dated 9.4.99) was not in force, the department sought to demand tax. On appeal relying mainly on

Circular No 56/5/2003 dated 25.4.03 which clarified that ‘‘service tax is a destination based consumption tax and it is not applicable on export of service. Export of service would continue to remain tax free even after withdrawal of notification no.6/99 dated 9.4.99.”; and
the judgment of the Supreme Court which held that ‘Service tax is a destination based consumption tax’ the Tribunal held that the benefit of the service accrued to the foreign clients outside the Indian territory and hence the services in question would be considered “exported”. Since export of services has forever been tax free and never been affected by withdrawal of notification no 6/99 dated 2.4.99, no service tax was leviable on the appellant. [SGS India Pvt Ltd v. CST (2011) 24 STR 60 (Tri-Mumbai)]

22.12 Notification No. 41/2007 provides for exemption by way of refund of Service Tax paid on overseas commission agent’s services used for export of goods upto 2% of export value. Notification No 33/2008 dated 7.12.08 increased the limit to 10%. The Tribunal held that the 10% limit would apply only to refund claims where export is post 7.12.08 and the date of filing the refund claim is not relevant.[Arvind Ltd v. CCE (2011) 24 STR 222 (Tri- Ahmd]

22.13 Where tax was paid on overseas agent’s commission in December 2009, after the amendment in notification no. 41/2007 was made on 1.4.2008 whereby the restriction of allowing the exemption only upto 2% of the FOB value of the goods exported was removed, it was held that refund of the whole amount would be admissible even for the services rendered prior to the amendment [CCE v. ABG Shipyard Ltd. (2011) 24 STR 620 (Tri-Ahmd.)].

22.14 Notification no. 41/2007 requires a written agreement between the buyer and the exporter for testing and analysis of the goods as condition to the grant of refund of tax paid by the exporter on the technical testing and analysis services. It was held by the Tribunal that even in the absence of such an agreement, a term in the letter of credit opened by the exporter with the Bank requiring a technical testing report would meet the condition as a liberal view of the refund notification needs to be taken in the light of the principle that taxes cannot be exported [Texport Industries P. Ltd. v. CST (2011) 24 STR 553 (Tri-Mum.)].

22.15 Service tax paid on transportation of empty containers from yard to factory (from where they were stuffed and transported to port for export) being “in relation to transport of export of goods” is entitled to refund vide notification no. 41/2007 as amended by notification no. 3/2008 dated 19.12.2008 [ Balkrishna Industries Ltd. vs. CCE (2011) (24) STR 433 (Tri-Mum); CCE vs. R.A.K. Ceramics India Pvt. Ltd. (2013) 30 STR 609 (Tri-Bang)].

22.16 Western Union (WU) a company located abroad provided money transfer services to its clients abroad for remitting monies to intended recipients in India. WU appointed agents and sub-agents (assessees) in India, to give money to the intended recipients for a commission. The assessees also received reimbursement of expenses on advertisement and sales promotion activities. The department sought to deny the export exemption under the “Export of Services Rules”, 2005 (“Export Rules”), since the services were performed in India and hence were not delivered / used outside India. The Tribunal (by a 2:1 majority) allowed the export exemption and observed as follows:

The term "export" has not been defined either in Article 286 (l)(b) or in any of the article of the Constitution of India. The meaning of the term "export", with regard to export of goods, is not applicable for determining what constitutes “export” of services. The Export Rules are not in conflict with Article 286 (1) (b) of the Constitution of India. The Export Rules are in accordance with the Apex Court's ruling in the AIFTP case [(2007) 7 STR 625 (SC)] and Association of Leaing & Financial Services Companies case [(2010) 20 STR 417 (SC)] that service tax is a destination based consumption tax. There is nothing in the Export Rules contrary to the principle that a service not consumed in India is not be taxed in India. What constitutes export of service is to be determined strictly with reference to the provisions of the Export Rules.
The service being provided by the agents and sub-agents is delivery of money to the intended beneficiaries of the customers of WU abroad and this service is "business auxiliary service", being provided to Western Union more particularly covered in clause (vi) of s. 65(19), ‘provision of service on behalf of the client’.
The consumer and service recipient of the service provided by the Agents and sub-agents of WU in India is the Western Union, located abroad who use their services for their money transfer business not the persons receiving money in India. Since the service is provided in relation to business of Western Union located abroad, and the payment for the service has been received in India in convertible foreign currency, the same has to be treated as export of service. It is the person who requested for the service and is liable to make payment for the same who has to be treated a recipient of the service, not the person or persons affected by the performance of the service. Thus, when the person on whose instructions the services in question had been provided by the agents/ sub-agents in India and who is liable to make payment for these services, is located abroad, the destination of the services in question has to be treated abroad. The destination has to be decided on the basis of the place of consumption, not the place of performance of service.
Reimbursement of advertisement and sales promotion activities received from WU is not taxable as the same are for the services provided to WU, which are export of service.

[M/s. Paul Merchants Ltd. vs. CCE (2013) 29 STR 257 (Tri. – Del)][ See Microsoft Corporation (I) (P) Ltd v. CST (2014) 36 STR 766 (Tri-Del)

22.17 Dividend paid by the assessee company to its overseas parent out of disposable profits is payment for shares held and cannot be held as “repatriation of” or “sending outside India” of monies received in convertible foreign exchange for taxable services rendered so as to deny the exemption for receipts in convertible foreign exchange under Notification No. 6/99 dated 6.4.99 [Gillette India Ltd. vs CCE (2012) 26 STR 59 (Tri- Del.) see also Maersk India Pvt Ltd v. CST 2014(34) STR 894(Tri.-Mum)].

22.18 In case of in – bound roaming services, the assessee, a telecom company, entered into an agreement with foreign telecom service providers whereby the appellant agreed with them to provide services to their customers while they are in India. For this service, they charged the foreign telecom providers who paid them in convertible foreign exchange. It was held that

The service recipient was the “foreign telecom provider” since it was he who paid for the service rendered and who contracted to avail the service. The In-bound roamer located in India was not the service recipient. Hence the location of the service recipient was outside India.
Applying circular No. 111/5/2009 – ST dated 24.2.09 and the decision of the Larger Bench in Paul Merchant’s case [(2013) 29 STR 257 (Tri-LB)] it was held that such services would qualify as export of services.

[Vodafone Essar Cellular Ltd. v. CCE (2013) 31 STR 738 (Tri – Mumbai)].

22.19 Where the applicant proposed to engage itself in providing Marketing and Sales Support Services to a US and Chinese companies for sale of their products in India, for which it was to receive monies in convertible foreign exchange, the Authority on Advance Ruling held that the place of provision service to be provided by the applicant would be outside India since the location of the service recipient is in China and US respectively (vide rule 3 of the Place of Provision Rules,2012). Further, since the case met with the requirements of Rule 6A of Service Tax Rules, 1994, the applicants service would also be considered as “export” of service. [Tandus Flooring India Pvt Ltd v. CST 2014(33) STR 33 (AAR)]

22.20 Where the assessee provided advertising agency services to the foreign service recipients for advertisements displayed in India during the period 1.3.2003-19.11.2003(when the exemption for receipts in foreign exchange was not in force), it was held that the assessee is liable to pay service tax in absence of any exemption notification during the said period. [J Walter Thompson v. CCE, 2014(33) STR 525 (Tri-Mum)]

22.21 The assessee provided technical testing services to foreign entities during the period 1.7.2003 to 19.11.2003 (when the exemption for receipts in foreign exchange was not in force). The revenue had sought to demand tax since no exemption was in force. The High Court upholding the Tribunal’s order observed that –

Though the tests had been conducted in India and the reports may have been prepared in India the services were complete only when the reports were delivered to client abroad since delivery of report was an essential part of service. Hence the services would be considered as exports;
Service tax being a destination based consumption tax charged on the consumers it is leviable only on services provided within the country. Since service recipient was situated abroad no service tax would be payable during the relevant period.

[CST v. SGS India Pvt. Ltd. (2014) 34 STR 554 (Bom.)]

22.22 Where the appellant had provided the services of marketing of products of overseas principals in India and received their monies in convertible foreign exchange, the Tribunal held that services would be considered as ‘exported’ since the recipients are located abroad; the service is used outside India by the recipients for their business; and money was also received in convertible foreign exchange [CST v. Menon Associates (2014) 34 STR 793 (Tri.-Del.)]

22.23 Prior to 18.4.2006 the exports exemption under the Export Rules is available even if the amounts for the rendition of service were not received in foreign currency. [ESPN Software India (P) Ltd. v. CST, (2014) 35 STR 927 (Tri. – Del.)]

22.24 The appellants in the present case were engaged in providing Software Development services. The scope of services involved

offshore services viz., Analysis, design, development etc. which were carried out by the appellant in India; and
onshore services like requirement study, testing, implementation and upgradation and support which were undertaken at customer’s premises with the help of the appellant’s overseas branches/subsidiaries.

The appellant had paid service tax on reverse charge mechanism on the services received by it from its subsidiaries and claimed this service tax as input credit used for ‘onshore services’ on the basis that ‘onshore services’ are export of services and accordingly filed refund claim of input tax. The refund claim filed by it in respect of its unutilized cenvat credit (on account of export of services) was denied on the grounds that the said services cannot be said to have been exported under the Export of Service Rules, 2005. On appeal the Tribunal held that since the service provider (subsidiary of the appellant) was located outside India and the customer was also located outside India, the onshore services [output services] were performed outside India. Hence it cannot be said that the services have been provided from India and used outside India – a necessary condition for an output service to be considered as exports. This condition was omitted only w.e.f. 27.2.2010. Accordingly it was held that

in respect of services provided prior to 27.2.10 since the condition of export was not satisfied, the appellant would not be eligible for claiming refund.
in respect of services provided post 27.2.10, since the only condition for claiming exports, viz., receipt of consideration in Foreign exchange was satisfied, the appellant would be eligible to claim refund.

The Tribunal also did not consider the alternate submissions of the appellant that if their refund claim cannot be considered u/r. 5 of the Cenvat Credit Rules, 2004 then the same should be considered u/s. 11B of the Central Excise Act, 1944 on the basis that they have paid service tax on services rendered to them by their subsidiaries which is not liable for service tax. The Tribunal refused this claim on the grounds that the appellant should have made this claim before the lower authorities [Tech Mahindra Ltd v. CCE (2014) 36 STR 332 (Tri-Mum) affirmed in (2014) 36 STR 241 (Bom)].

22.25 Where the assessee, a subsidiary of an overseas holding company provided services of evaluating prospective customers in India, collection of information to enable the overseas parent to design product for the customer in India, advising holding company, tracking delivery schedules, etc. which are liable for service tax under ‘business support service’, the Hon’ble Tribunal held that the services being meant for use by overseas holding company which is the service recipient would be considered as export of services under Rule 3(1)(iii) of the Export of Service Rules, 2005 and hence would not be liable to service tax [Essar Projects Ltd v. CCE & ST (2014) 36 STR 681 (Tri-Ahmd]

V. TAXABLE SERVICES

23 Advertising agency services

23.1 The appellants booked space in Government buses and then contacted government departments for placing advertisements which was mainly in the nature of general awareness programmes. The advertisements were either readymade or at times prepared by the appellants. The Tribunal held that –

An advertisement is a public announcement which can be made by way of display of any hoardings or otherwise. Advertisement is used to awaken, enlighten and activate the public at large concerning matters that effect the society generally. The fact that such advertisements were public interest advertisements made no difference. Hence the materials displayed would be “advertisements”;
The appellants were an “advertising agency” inasmuch as they made profit out of the said activity of display of advertisements and accordingly were liable for service tax;
The activity of hiring space and providing the same to a person who uses it for advertisements will not attract service tax;
The expenses incurred for making the space available or rental charges paid for getting such space for advertisements are not includable in the value of taxable services.

[Prithvi Associates vs. CCE (2005) 70 RLT 483 (CESTAT-Mum.)]

23.2 Where the appellants were engaged in making of signages and hoardings including the painting and writing of advertisement on the signboards and hoardings, the Tribunal held that –

the appellants are not equipped for functioning as an advertising agency since the services provided by the appellants do not partake of or include the services of designing, conceptualizing, or visualizing the advertisements which are normally rendered by advertising agencies.
the extended definition of the term “advertisement” cannot bring an entirely alien or unconnected activity or a manufacturing service within the scheme of levy of service tax.

[Ajanta Fabrication v. CCE (2006) 4 STR 605 (Tri-Del.). See also Market Chase Advertising vs. CCE (2008) 10 STR 598 (Tri. – Chennai)].

23.3 The appellants solicited for and booked advertisements in foreign broadcasting channels for a consideration as their representatives in India. The revenue sought to tax this consideration of the appellants under the category of ‘advertising agency services’. The Tribunal negatived the contention of the revenue and held as follows :

The phrase “advertising agency” though defined in the statute as being a concern engaged in providing a service connected with the making, preparation, display or exhibition of advertisements must be construed in a normal sense and essentially must be a concern which specializes in providing services such as media selection, creative work, etc. Since the appellants in the present case were not performing any of these services they were not liable for service tax under the category of advertising agency.
A “client” is the person who wants to advertise his goods or services. The appellants had no contract with the advertisers but only with their principals. Their principals were broadcasting agencies and not “client” and hence there was no service to a “client”;
Where the legislation itself covered the activity of the appellants under the category of broadcasting services w.e.f 16.7.2001, the appellants could not be taxed as advertising agency prior to that date;
The Finance Bill, 2006 specifically introduced a category of “sale of space or time for advertisements” within the ambit of service tax but had excluded sale of time slots by a broadcasting agency since it was already taxed. Hence the activity of sale of time slots was not an advertising agency services.

[Zee Telefilms Ltd. v. CCE (2006) 4 STR 349 (Tri-Mum.) See also MTV Network India Pvt. Ltd. v. CCE (2007) 5 STR 374 (Tri.-Mumbai) and Siticable Network P. Ltd. v. CCE (2006) 4 STR 555 (Tri. Mumbai)]

23.4 The appellants were an advertising agency who provided advertising services to their clients and charged a fixed fee for its services. Their services consisted of booking slots in print and electronic media for the advertiser. The media billed the appellants @15% discount. If ₹100/- was the tariff rate the media charged them ₹85/- plus 10.2% service tax. The appellants in turn charged the same ₹85/- + 10.2% service tax to the advertisers, recovered the amount from them and paid it over to the media who paid the service tax of 10.2% on ₹85/- to the Exchequer. The appellants paid service tax on the fixed fee it received from their clients. Further, the appellants also received cash discounts (discount for prompt payment) and target incentives (incentive for achieving a certain level of business) from the media. The department sought to tax – (i) the discount of 15%; (ii) cash discount; and (iii) target incentives under the category “Advertising agency” services. Dismissing the department’s contentions the Tribunal held –

For an advertising agency it is the advertiser who is its ‘client’. Its client is not the media. It is only the amounts that are received from its clients which is taxable under the category of “Advertising agency” services and any amount received from media will not be liable for service tax.
The discount given by media is not an amount “received” by the advertising agency. It is only a “discount”. Further, the media is not the client of the advertising agency. Hence the discount is not taxable.
Both cash discounts and target incentives are not connected to the service rendered to the clients (advertisers) nor are they billed to the clients (advertisers). Hence these incomes earned by appellants are not liable for service tax under the category of “Advertising agency services”.

[Euro RSCG Advertising Ltd. v. CCE (2007) 7 STR 277 (Tri.-Bang.) See also Kerala Publicity Bureau vs. CCE (2008) 9 STR 101 (Tri-Bang)]

23.5 The appellants were a non-profit making organization registered under the Societies Registration Act and promoted and organized cricket tournaments. In earned its income inter alia from the following activities:

sale of telecast right of cricket matches.
Permitting sponsors to use space for putting up of advertisement in stadium, and
Permitting logos on clothing and clothing accessories of players.

The department sought to tax these activities under the category of “advertising agency services”. Dismissing the department’s contention the Tribunal held as under:

An advertising agency as defined in section 65(3) must be a “commercial concern” and BCCI is not a ‘commercial concern’ as held by the Supreme Court in Secy, Ministry of I&B v Cricket Assn. Of Bengal (1995) 2 SCC 161; further the fact that BCCI is a charitable institution in terms of the Income Tax Act would lend support to the BCCI’s plea that it is not an advertising agency.
A “definition” in a statute has to be interpreted, in a sense appropriate to the phrase defined and to the general purpose of enactment. The ordinary meaning of the term advertising agency is an office which plans, designs and manages advertising for other companies. The definition of advertising agency can not be read in isolation and out of context. Even if the services provided by the appellant is broadly covered by the expression "exhibiting" or "displaying" of advertisement, but when viewed in the context, would not convert BCCI into an advertising agency.
If BCCI is not an advertising agency then BCCI’s activity would not attract service tax under ‘Advertising Agency Services’
As regards the sale of telecast rights there is no advertisement when the performance rights of the match vested in BCCI is being sold for viewer ship of millions of people and there is no client to which such service in relation to advertisement is being provided. Hence sale of television/telecasting rights would not be covered by a taxable service in relation to advertisement.
What is being taxed is planning and expertise involved in making, preparing display or exhibiting the advertisement and not simply providing of a place or space to the advertiser. The expression "display" or "exhibit" does not mean the physical act of display and exhibit, but relates to the services rendered, as an expert body, to the client, for the purposes of display or exhibit. The same may involve the expertise of the provider of the services to advise the client as to in which manner, the advertisement should be displayed i.e. whether in the newspaper or on TV channel or by way of hoardings or a audio/video advertisement in air or any other medium on at what point of time the same should be exhibited. The fact that physical display or exhibition is not liable under advertisement agency service is also substantiated by the fact that "sale of space or time for advertisement and sponsorship services" were specific entries introduced for the purposes of service tax w.e.f. 1.5.06. Hence permitting sponsors to use space for putting up an advertisement and logo money is not liable for service tax under the category of “advertising agency services”.

[BCCI v. CST (2007) 7 STR 384 (Tri-Mum.)]

23.6 Where on facts it was found that the appellants were only engaged in buying the time slots from channels on commission basis and selling the same to the advertising agencies for the purpose of exhibiting the advertisement during those time slots, the Tribunal observed that the appellants would not be liable for service tax under the category of advertising agency services since-

the appellants were not connected with making, preparing, displaying or exhibiting of any advertisements; and
services of sale and purchase of time slots for advertisement was brought within the ambit of service tax only w.e.f. 1.5.2006 under the category of “sale of space or time for advertisements” and accordingly, the same would not be liable for service tax prior to that date under the category of advertising agency services.

[Needwise Advertising Pvt. Ltd. vs. CST (2011) 21 STR 229 (Tri-Ahmd.)]

23.7 Incentive received by an advertising agency as appreciation for performance cannot form part of the taxable value since it is not known at the time of provision of service. Similarly, it was held that bad debts and cash discounts, are not consideration received and hence not taxable. [ CCE v. Facinate Advertising & Marketing (2013) 31 STR 77 (Tri-Del)]

23.8 Mere shooting the programme prepared by the advertising agency is not connected with making, preparing, display or exhibition of advertisement and hence is not taxable under the category of advertising agency services [CST v. Mad Entertainment Ltd. (2014) 36 STR 1162 (Tri.- Mumbai)]

24 Airport Service

24.1 Admission ticket fee collected from the passengers and visitors at the airport for providing amenities and facilities therein is liable for service tax under the category of ‘airport services’. Further where the appellants were licensed and authorised by the airport authority to collect admission ticket fee, the Supreme Court held that the appellant steps into the shoes of airport authority for the services provided on the basis of authorisation and hence it is he who would be liable to pay service tax under airport services. [P.C. Paulose, Sparkway Enterprises vs. CCE (2011) 21 STR 353 (SC)]

24.2 User fee collected only from outgoing international passengers (not collected from domestic passenger or incoming international passengers) are not liable for service tax since the fee is only for enhancing the Airport’s revenue and not for any services rendered. [ CCE vs. Cochin International Airport Ltd (2009) 16 STR 401 (Ker.) confirming Tribunal’s decision of assessee’s own case in (2007) 7 STR 468 (Tri.)].

24.3 The assessee took a licence from the Airports Authority of India (AAI) for operating a lounge within the airport premises for a licence fee. They supplied food and drink in the lounge to ‘exclusive passengers’ of various airlines who produced lounge cards and in terms of the agreement with the airlines, they charged the airlines for supply of food and drink to the passengers. The Tribunal held that such services may more appropriately fall under the category of “Business Auxiliary Services” more specifically under section 65(19)(iii) i.e. “any customer service on behalf of the client” and not under the category of ‘Airport service’ under section 65(105)(zzm) as contended by the Revenue [Oberoi Flight Services vs. CCE (2012) 26 STR 41 (Tri- Del.)].

25 Air travel agent

25.1 In case of an air travel agent, it was held that –

The amount charged for arranging visa is not liable to service tax under the category of Business Auxiliary Services since the activity is not covered under any of the clause of the definition of service.
Where the appellant, an air travel agent, had suo motu adjusted the credit of service tax paid on account of cancelled tickets, the same is justifiable.
The cancellation charges collected from the person cancelling the ticket would not be liable for service tax under the category of Air Travel agency service since the amounts are not in the nature of commission received from the airlines and the same being in addition to the commission received from airline would be exempt in terms of notification no. 22/97 dated 26.6.1997.

[Globe Forex & Travels Ltd. v. CCE (2015) 37 STR 513 (Tri.-Del.)]

26 Automated teller machine operations, maintenance or management services

26.1 Cash replenishment services in an ATM is liable for service tax only from 1.05.2006 under ‘Automated teller machine operations, maintenance or management services’ and not under ‘business auxiliary services’. [NCR Corporation Pvt. Ltd. vs. CST (2008) 12 STR 68 (Tri-Bang.)]

27 Authorised service station services

27.1 ‘Free services’ rendered by automobile dealers in respect of vehicles sold are not liable for service tax since –

the value for such services have already been included in the price of the vehicle paid by the customer and has been subjected to payment of excise duty and sales tax.
no payment is received for the services from the customers.
there is no evidence that the vehicle manufacturers have specifically reimbursed any amount towards the said services.

[Hindustan Auto House (P) Ltd. vs. CCE (2009) 13 STR 190 (Tri-Del.). See also K.P.Authomobiles Pvt. Ltd vs. CCE (2009) 13 STR 389 (Tri-Del))]

27.2 Where the appellants were servicing / repairing of ‘light commercial vehicles’ during the warranty period for which they were reimbursed by the manufacturer it was held that ‘authorised service station’ services do not cover services in respect of ‘transport vehicles’ such as light commercial vehicles and hence the amount received from the manufacturer was not liable for service tax. [Popular Mega Motors (India) Ltd vs. CCE 2010(17) STR 373 (Tri-Bang)].

27.3 Where the assessee, an authorised service centre of General Motors, had provided services of repair, reconditioning or restoration of vehicles manufactured by other manufacturers for which it did not have authorization from the said manufacturers, the Tribunal held that the services provided in respect of other vehicles would not be liable for service tax under the category of service provided by authorised service station [ CCE, vs. Dynamic Motors (2012) 26 STR 145 (Tri. - Del.)].

27.4 In a case where the assessee is an authorised service station of M/s. MUL on facts, the Tribunal held that –

Service tax is not payable on free services provided to customers of M/s. MUL since no amount is received from the customer;
As regards reimbursement of salary of drivers of vans used for providing mobile services to the car owners received, it was held that since no service was provided to M/s. MUL such amount is not liable for service tax under the category of authorised service station service

[CCE v. Jabalpur Motors Ltd. (2014) 36 STR 1160 (Tri.- Del.)

28 Banking and other financial services

28.1 The appellants entered into an agreement whereby its customer identifies the vehicle that he wishes to purchase from the manufacturer/dealer thereof, makes a part payment to the seller of the vehicle, applies to the appellants for financing the balance, and once the financing is sanctioned, the customer enters into an agreement with the appellants and provides as security, right of repossession of the vehicle to the appellants in the event of his (customer’s) default in payment of instalments to the appellants. The customer becomes the owner of the vehicle - the title to the vehicle vests with him who is a purchaser and it is in his name that the vehicle stands registered and insured and the appellants are the nominees. The Tribunal held that such an agreement is a ‘hire purchase finance agreement’ which is different from ‘hire purchase agreement’ where the title to the goods remains with the finance company which bails the goods to the hirer in return for periodical payments and the title to the goods is transferred to the customer/hirer only if he exercises the option to purchase the same on full payment to the finance company. Having noted the distinction the Tribunal observed that only “hire purchase” and not “hire purchase finance” is covered under the category of “Banking or other financial services”. [Bajaj Auto Finance Ltd. v. CCE (2007) 7 STR 423 (Tri.-Mum.) affirmed by Supreme Court in (2008) 10 STR 433 (SC). See also Kausalva Finance Ltd. vs. CCE&S (2008) 10 STR 150 (Tri-Bang)].

28.2 Where the appellant gave an extrusion machine on a lease of 35 months extendable to another period of 2 years for a monthly ‘user charge’ without an option to transfer the asset at the end of the term, the Tribunal, relying upon the ICAI Accounting Standard 17 defining ‘Financial lease’, held that the lease was for a short period without any relation to the economic life of the asset and the risks and rewards incidental to ownership was not transferred to the lessee. Accordingly, the lease was not a ‘financial lease’ liable for service tax under the category of ‘Banking and other Financial Services’.[ CCE vs. G.E. India, Industries (P) Ltd. (2008) 12 STR 609 (Tri-Ahmd.)][ see Vidarbha Iron & Steel Corporation Ltd v. CCE (2014) 36 STR 324 (Tri-Mum) [see Flex Industries Ltd, v. CCE (2014) 36 STR 659 (Tri- Del) wherein it was held that it was a transaction of renting of immovable property (plant and machinery) liable for service tax under renting of immovable property services.]

28.3 The very nature of business and transaction under the Chits as per the provisions of the Chit Funds Act stands on its own as a class. It does not have any parlance or similarity to that of normal transactions as one understood in law or commercially. Hence in absence of specific definition of ‘cash management’ or ‘asset management’ in the statute governing service tax Circular No. 96/7/2007-ST dated 23.8.2007 clarifying Chit funds business to be within ambit of service tax as being in the nature of cash management is incorrect and liable to be set aside. [ A.P. Federation of Chit Funds vs. UOI (2009) 13 STR 350 (A.P.)].

28.4 The Supreme Court upheld the legislative competence of the Parliament to impose service tax under Entry 97, List I of the Seventh Schedule to the Constitution on transactions covered under section 65(12)(a)(i) of the Act defining ‘Banking and other financial services’, more particularly, “financial leasing, including equipment leasing and hire-purchase”. In this regard the Supreme Court observed as under :

The impunged provision viz., section 65(12)(a)(i) basically operates qua an activity of funding/ financing of equipment/ asset.
In a ‘finance lease’, it is the lessee who selects the equipment to be supplied by the dealer or the manufacturer and takes delivery, but the lessor [finance company] provides the funds, acquires the title to the equipment, accepts the invoice and pays for it and allows the lessee to use it for its expected life. During the period of the lease the risk and rewards of ownership are transferred to the lessee who bears the risk of loss, destruction and depreciation or malfunctioning. Equipment Leasing/ Hire-Purchase finance are long term financing activities of equipment/ asset.
The above transactions are different and distinct from operating lease/ hire-purchase transactions in the classical sense. A hire-purchase agreement is a hiring agreement coupled with an option to purchase, i.e., to say that the owner lets out the chattel on hire and undertakes to sell it to the hirer on his making certain number of payments. There is no contract of sale until the hirer has made the required number of payments and he remains a bailee till then. However, the bailment which underlies finance leasing is only a device to provide the finance company with a security interest [its reversionary right]. If the lease is terminated prematurely, the lessor is entitled to recoup its capital investment [less the realizable value of the equipment at the time] and its expected finance charges [less an allowance to reflect the return of the capital]. It is not a contract of bailment but is merely a financing transaction.
there are two different and distinct transactions, viz., the financing transaction and the equipment leasing/hire-purchase transaction. The former is exigible to service tax under Section 66 of Finance Act, 1994 (as amended) whereas the latter would be exigible to local sales tax/VAT.
As far as the taxable value in case of financial leasing including equipment leasing and hire-purchase is concerned, the amount received as principal is not the consideration for services rendered. Such amount is credited to the capital account of the lessor/ hire-purchase service provider. It is the interest/ finance charge which is treated as income or revenue and which is credited to the revenue account. Such interest or finance charges together with the lease management fee/ processing fee/ documentation charges are treated as consideration for the services rendered and accordingly they constitute the value of taxable services on which service tax is made payable.
The above transactions covered under section 65(12)(a)(i) are leviable to service tax which is within the legislative competence of the Parliament under Entry 97 of List I of Seventh Schedule to the Constitution. The transactions are not hire-purchase transactions under article 366 (29A)(d) i.e. a ‘transfer of right to use goods’ read with Entry 54, List II of the Seventh Schedule.

[Association of Leasing & Financial Service Companies vs. UoI (2010) 20 STR 417 (SC)]

28.5 In respect of financial leasing services, service tax is leviable on lease management fee/ processing fee and documentation charges and on finance /interest charges and not on the principal amount. [ITW India Ltd. vs. CCE (2011) 23 STR 159 (Tri-Ahmd.)]

28.6 In a writ challenging the constitutionality of levy of service tax on hire purchase and leasing transactions, the High Court held that in such transactions the financer (petitioner) in addition to the interest and the principal amount of loan advanced by them also collects certain service charges towards services rendered from the hire purchaser. In such circumstances, relying on the Supreme Court decision in BSNL (2001) 2 STR 161 (SC), the High Court held that sales tax can be levied on sale of goods involved in transaction and service tax can be levied on the service charges. Hence, the levy of service tax on such transaction under the category of Banking and other financial services was not unconstitutional [ Kerala Non Banking Finance Com. v. UOI (2015) 37 STR 41 (Ker)].

28.7 Foreclosure of loan is not a service rendered by the financial institution and the foreclosure premium is only a kind of compensation received by the bank for possible loss of interest revenue on loan amount returned by the customers. Accordingly, the activity of foreclosure of loan is not liable for service tax under the category of ‘banking and other financial services’ [Small Industries & Development Bank of India vs. CCE (2011) 23 STR 392 (Tri-Del.) See Contra Housing & Dev. Crporation Ltd. (HUDCO) vs. CST (2012) 26 STR 531 (Tri. – Ahmd.) wherein pre-payment charges recovered at time of foreclosure of loan and resetting charges recovered at time of restructuring of loans has been held to be liable for service tax under the category of banking and other financial services].

28.8 “Interchange income” received by an ‘issuing bank’ of credit card [i.e. the bank that issues credit cards to the customers for buying goods and services in merchant establishments (ME) on credit] from the ‘acquiring bank’ (i.e. the bank that has a contract with the MEs for settlement of dues incurred by the cardholders at the MEs for a consideration called ‘ME discount’) which is paid by the ‘acquiring bank’ out of the ME discount earned is liable for service tax under the category of “Banking and other financial services” w.e.f. 16.7.2001 [more particularly, under the erstwhile Clause (ii) of section 65(12)(a) ‘credit card services’] since the issuing bank had issued the credit cards to its customers and the use of the card by the cardholder (customer) at the MEs gave rise to the share of Interchange fee from the acquiring bank [ABN Amro Bank v. CCE (2011) 23 STR 529 (Tri.-Del)].

28.9 Profit on dealing in foreign exchange is not liable for service tax under the category of Banking and other Financial Services. [ State Bank of Bikaner & Jaipur vs. CCE (2011) 24 STR 425 (Tri-Del)].

28.10 On the question whether a co-operative society engaged in business of banking would be covered in any of the classes of service providers during the relevant period viz., “banking company or a financial institution including a non-banking financial company or any other body corporate or any person”, the Tribunal observed that it would be covered within the phrase ‘any other person’ on the following grounds:

A Co-operative society is specifically excluded from the definition of ‘body corporate’ as defined under s. 2(7) of the Companies Act, 1956 but that exclusion cannot be read as exempting co-operative societies.
Co-operative society fall under the category “any other person”. They cannot be excluded from that expression by applying the principle of ‘ejusdem generis’ to say that the expression must be understood in the same manner as the other expressions so as to include only companies since:
1. The specific exclusion u/s. 2(7) of the Companies Act would show that a co-operative society is of the same genus as a company and was excluded from the tight controls of the Companies Act, 1956.
2. Circular no. 83/2006-ST dated 4.7.2006 which clarified that the term ‘any other person’ must be read ejusdem generis with the other terms so as to exclude services rendered by a post office like maintaining savings bank accounts and issuing money orders cannot be applied to co-operative society since the Department of posts is a department of government providing very limited services in relation to banking; does not provide loans and advances and are perceived differently from banks by the customers.

[Madhav Nagrik Sahkari Bank Ltd. vs. CCE (2012) 27 STR 352 (Tri. – Del.)].

28.11 Under s. 21 & 21A of the RBI Act, 1934, RBI has the right to transact Government business in India and u/s. 45 of the said Act, it has a right to appoint Nationalised banks/SBI as its agent for such purposes. The appellant bank was appointed as such an agent for a consideration. It was held that, if RBI had undertaken transaction of Government business, it would have been exempted under notification no. 22/2006 dated 13.4.2006 which exempts taxable services rendered by RBI; therefore, since the appellant is an ‘agent’ of RBI, it steps into the shoes of RBI, and hence the benefit of exemption available to RBI would also be available to its agent viz., the appellant bank [Canara Bank v. CST (2012) 28 STR 369 (Tri.-Ahmd.)].

28.12 Where the assessee-bank was engaged in providing bill collection services to various telephone companies for a fee, it was held that Collection of receivables rendered by bank is a ‘cash management service’. Further it was held that though in a broad sense cash management is a business auxiliary service the services rendered by the assessee bank would not be liable under the category of business auxiliary services more particularly under clause (vii) of S.65(1) since clause (vii) of section 65(19) is with reference to services covered under clause (i) to (vi) which do not specifically cover banking and other financial services. It is more appropriately covered under the category of banking and other financial services which excluded cash management services upto 31.5.2007. Accordingly bill collection services provided by the assessee- bank were held not taxable until 31.05.07 [ CCE vs. Federal Bank Ltd (2013) 29 STR 554 (Ker)].

28.13 ‘Chit funds’ are in the nature of cash management services which were brought within the ambit of service tax under the category of banking and other financial services w.e.f. 1.6.2007 in view of the deletion of the exclusion of cash management services from the fund management services which were included within the definition of banking and other financial services [All Kerala Association of Chit Funds vs. UOI (2013) 29 STR 557 (Ker) departing from A.P. Federation of Chit Funds vs. UOI (2009) 13 STR 350 (A.P.)].

28.14 Services of foreman of chit business being a form of transaction in money falls under the exclusionary part of the definition of service u/s 65B(44) hence is not liable for service tax.[Delhi Chit Fund Association v. UOI (2013) 30 STR 347 (Del)]

28.15 Where on facts, it was found that the assessee was in the business of leasing of aircraft parts/equipments for fixed monthly charges and the agreements:-

did not entitle or give an option to the lessee to own the asset at the end of the lease period;
did not transfer effective ownership of the asset and all the risks and rewards to the customers;
did not show that they covered more that 75% of the estimated economic life of the asset; it was held that the services of the assessee would not be liable for service tax as “financial leasing including equipment leasing or hire purchase” under the category of “Banking & Financial Services”. [CST v. Lufthansa Technik Service P. Ltd. (2013) 31 STR 730 (Tri – Del.)

28.16 Where the appellant had leased/ licenced their plant to its customer for a rent payable per month with no element of financing involved in the agreement , it was held that the agreement is purely an agreement of renting of immovable property (plant & machinery) which became taxable under section 65(105)(zzzz) w.e.f. 1.6.2007 and cannot be classified under the category of ‘Banking and Financial Services’ as ‘financial leasing including equipment leasing or hire purchase’ [Flex Industries Ltd, v. CCE (2014) 36 STR 659 (Tri- Del)]

28.17 Interest earned on bill discounting cannot be excluded as interest on loans since lending and bill discounting are two distinct services. However, it will be exempted as interest earned on discounting of bills, bills of exchange or cheques under Notification No. 29/2004-S.T. Interest on overdraft and cash credit facility would be considered as exempted service for the purpose of reversal of credit under Rule 6(3A) (c) of the Cenvat Credit Rules, 2004 [ UCO Bank v. CST (2014) 36 STR 1169 (Tri. - Kolkata)]

29 Broadcasting Agency

29.1 The appellants in this case were engaged in selling time slots and obtaining sponsorships for the programme, events, etc. to be played out by foreign broadcasting organizations like ATL / EXPAND and STAR which are located outside India. The foreign broadcasting organizations like STAR beamed signals from outside India which were received in India by Multi System Operators and Cable TV Operators. Hence it was contended that the appellants are not engaged in the activity of broadcasting and broadcasting done by ATL / EXPAND and STAR are from outside India and hence no service tax is payable. Rejecting the contention, the Delhi Tribunal held as follows:

When the programmes and advertisements are telecast outside India but are received in India through MSOs and Cable TV Operators, they would come within the definition of ‘broadcasting’ under section 2(c) of Prasar Bharti Corporation Act, 1990 and accordingly within the definition of ‘broadcasting’ as per section 65(13) of Chapter V of the Finance Act, 1994 (“Act”) even as it stood before the amendment by Finance Act, 2002.
After the amendment by the Finance Act, 2002 also the appellant’s activity would be treated as ‘broadcasting’ and the appellant would be treated as a ‘broadcasting agency’.
The entire amount paid would be treated as value of taxable service.
Considering the nature of dispute which related to a legal issue regarding interpretation of provisions of different Statutes and also taking into account the conduct of the appellants in taking out registration and submitting returns under protest, the Tribunal set aside the imposition of penalty under section 76.

[Zee Telefilms Ltd. v. CCE (2004) 166 ELT 34 (Tri. Del.)]

29.2 Where the appellant, a cable operator, was engaged in disseminating viewables through cable, the Tribunal held that the same would amount to broadcasting service liable for service tax w. e. f. 16.7.2001. However, in view of Notification no. 8/2001 – ST dated 9.7.2001 granting exemption to cable television operators the same would not be liable for service tax during the period 16.7.2001 to 9.7.2004 [Moon Network Pvt. Ltd. vs. CCE (2011) 24 STR 723 (Tri.-Del)].

29.3 The appellant, a subsidiary / associate of overseas foreign based T.V. broadcasting companies [T.V. Companies], made substantial payments to the T.V. companies towards –

Distribution rights of TV channels / programmes in India pursuant to which the appellants permitted the Multi System Operator (MSO) / Direct To Home (DTH) operators the right to receive communication signals; and
Purchase of Advertising Time Inventory which was resold.

Since the appellant was deemed to be a branch office / subsidiary / representative / agent in India of the T.V. Companies it paid service tax on its gross income under the category of ‘Broadcasting service’ as it was considered to be as a Broadcasting agency. The Revenue sought to levy service tax under reverse charge on the payments made by the appellant to the T.V. companies. The Hon’ble Tribunal rejected the contention of the Revenue on the grounds that –

(a) The programmes/channels uplinked on the foreign satellite by the foreign broadcasters are directly downlinked by the MSO/DTH operators in India and not by the appellants and hence, technically the MSO/DTH operators are the service recipients and not the appellants.
(b) The appellant is deemed to be a Broadcasting agency providing broadcasting services in the capacity of branch office / subsidiary / representative / agent in India and hence is a service provider and not a service receiver.
Granting distribution rights to the appellants is not covered under the definition of ‘Broadcasting’.

[ESPN Software India (P) Ltd. v. CST, (2014) 35 STR 927 (Tri. – Del.)]

30 Business Auxiliary services

30.1 Sale of SIM cards is a sale of goods and cannot be considered as an auxiliary service for the purpose of service tax. [BPL Mobile Communications Ltd v. CCE (2007) 80 RLT 351 (CESTAT-Mum.) following Idea Mobile Communications Ltd. v. CCE (2006) 4 STR 132 (Tri.-Bang.) see also Karakkattu Communications v. CCE (2007) 8 STR 164 (Tri. – Bang.); South East Corporation vs. CCE 2007(8) STR 405 (Tri – Bang); R.B.Agencies vs. CCE (2008) 11 STR 124 (Tri- Bang.); Vallamattam Communication v. CCE (2008) 12 STR 267 (Tri. – Bang.); R. Venkataramanan vs. CCE (2009) 13 STR 187 (Tri – Chena)]

30.2 Where the legislation itself covered the services of share transfer agent and registrar to an issue under service tax w.e.f 1.5.2006, the said services would not be liable for service tax under the category of business auxiliary services prior to that date. [CCE vs. Sathguru Management Consultants Pvt. Ltd. (2007) 7 STR 654 (Tri. – Bang.) See also Karvy Consultants Ltd. vs. CCE (2008) 10 STR 166 (Tri-Bang.) Cameo Corporation Services Ltd. v. Commissioner of Service Tax (2008) 11 STR 161 (Tri. – Chennai)]

30.3 Services of generating various MIS reports in pre-defined formats using input supplied by the client fall within the realm of ‘computerised data processing’ and accordingly would not be liable to service tax under the category of ‘Business Auxiliary services’ since ‘information technology services’ is specifically excluded. [Dataware Computers vs. CCE (2008) 12 STR 121 (Tri – Bang.)].

30.4 Where the assessees were merely engaged in feeding of the data provided by their clients in the computer network system with the help of software specifically developed by them for their clients and generating bills and other reports for the client the Tribunal held that appellants’ work of data processing using custom made software deserves to be considered as ‘information technology services’ and since the same had been specifically excluded from the definition of business auxiliary services during the relevant period of time it would not be liable for service tax under the category of ‘business auxiliary services’. [CCE vs. Galaxy Data Processing Centre (2011) 23 STR 375 (Tri-Del.)]

30.5 The appellants in the present case were engaged in the activities of beneficiation of coal i.e. a process whereby the coal extracted from the mines is crushed into pieces and thereafter washed to remove its impurities and ash content so as to make it fit for sale. The Revenue raised a demand on the ground that the said activity would liable for service tax under business auxiliary services as “production or processing of goods for or on behalf of the client”. On appeal, the Tribunal referring to a number of enactments and cases with regard to mining of coal, held that beneficiation of coal is an integral part of ‘mining’ and liable under the category of ‘mining services’ which came into effect only from 01.06.2007 and not under ‘business auxiliary services’ [Aryan Energy (P) Ltd. vs. CCCE (2009) 13 STR 42 (Tri-Bang)].

30.6 Where a company NBCC contracted to render site formation services to NTPC and in turn sub-contracted the work to two companies – SAC & APR, the Tribunal held-

NBCC’s supervision of their own sub-contracted job to SAC &APR cannot be considered as rendering ‘business auxiliary services’ to SAC & APR (provision of service to NTPC on behalf of SAC & APR) and the margin retained by them cannot be treated as consideration notionally received from SAC & APR towards the said ‘business auxiliary services’.
SAC & APR also cannot be regarded as rendering business auxiliary services to NBCC (provision of service to NTPC on behalf of NBCC) since the services are essentially provided by them to NBCC and not to NTPC. The sub-contracted service is also in the nature of site formation services provided to main contractor NBCC. Further, the tax was not paid by SAC & APR on the basis of Board’s clarification dated 14-9-97 (that sub-contracted services are not liable for service tax if the main contractor has paid the same) and if the tax was paid by the sub-contractors the same was available as credit to NBCC and therefore, it is a case of revenue neutrality. Therefore, no tax is demandable from the sub-contractors – SAC & APR.

[National Building Construction Corporation Ltd v. CCE & ST (2011) 23 STR 593 (Tri. Kol)]

30.7 Where the appellants entered into a contract for installation of a system at its client’s premises on a turnkey basis for which it procured certain components, such procurement of materials is not liable under the category of ‘business auxiliary services’ since the procurement was only for the purpose of installing the machines and even if it were to be considered as a service the service was rendered to the appellants themselves and not to its clients. [Cethar Vessels Pvt. Ltd. vs. CCE (2009) 14 STR 234 (Tri-Chennai)]

30.8 Purchase of SIM cards and recharge coupons from BSNL at a discount and sold by the assessee to its customers at the MRP is transaction of purchase and sale of ‘goods’ and sales tax is attracted. The discount allowed is not in the nature of commission attracting service tax under the category of business auxiliary services. [JR Communications & Power Controls vs. CCE (2009) 14 STR 379 (Tri-Chennai). See also Chetan Traders vs. CCE (2009) 13 STR 419 (Tri-Del.); CCE v. Moradabad Gas Service (2013) 31 STR 308 (Tri- Del)]

30.9 The activity of purchase and sale of SIM card belonging to BSNL, where BSNL has discharged the Service Tax on the full value of the SIM cards does not amount to providing business auxiliary services and confirmation of demand on the distributors for the second time is not called for. [Daya Shanker Kailash Chand v. CCE & ST (2013)30 STR 428 (Tri-Del) G.R. Movers vs. CCE (2013) 30 STR 634 (Tri-Del);]

30.10 Prior to 16.6.2005, the appellant’s activity of powder coating, bending, drilling of components and machinery parts done for a consideration cannot be said to be liable for service tax as ‘production of goods on behalf of the client’ under the category of business auxiliary services since the activities were done for themselves for a fee and not on behalf of any other person. [Auto Coats v. CCE (2009) 15 STR 398 (Tri-Chennai)].

30.11 Since coal is an excisable product (attracting Nil rate of duty) the activity of ‘mining’ coal would fall under business auxiliary services more particularly under clause (v) of section 65(19) viz., ‘production of goods for the client’ but would be excluded from it being an activity amounting to ‘manufacture’ as defined in section 2(f) of the Central Excise Act, 1944 in respect of assessee’s activities for the period 10.7.2004 to 15.6.2005. However, post 1.6.2007 it would be liable for service tax under the category of “mining services”. [Avian Overseas Pvt. Ltd. v. CCE (2009) 15 STR 540 (Tri-Kol.)].

30.12 Where the assessee supplied heated oil (which was in excess of their own consumption) to neighbouring companies for a heating charge, the Tribunal held that there was no question of rendering any service and the supply cannot be considered as ‘procurement of goods or services which are inputs for the client’ inasmuch as they have not procured it through a third person for supply directly to the companies [General Precured Treads Pvt. Ltd. v. CCE (2009) 15 STR 724 (Tri-Chennai)].

30.13 Where, during the period 01.07.2003 to 31.03.2005, the appellant provided services of spot billing and data processing to Andhra Pradesh Central Power Distribution Company, the Tribunal held that it would fall under the definition of “Information Technology Services” and consequently excluded from ‘Business Auxiliary Services’. Further the service is more appropriately classifiable as business support services w.e.f 01.05.06 since it is an outsourced activity and accordingly not liable under Business auxiliary service prior to that date. [ Gandhi & Gandhi Chartered Accountants vs.CCE (2010) 17 STR 25 (Tri – Bang)]

30.14 Where the appellant, a co-operative society, collected electricity bills for its clients it was held that the service provided by the appellant falls under ‘any customer care services provided on behalf of the client’ and also under ‘provision of service on behalf of client’ and hence liable for service tax under the category of ‘business auxiliary service’ [Kota Pensioners Hitkari Sahakari Samiti Ltd. v. CCE (2013) 30 STR 184 (Tri.-Del.)].

30.15 (i) The activity of denting and painting of bus bodies for its customers (who manufactured bus bodies) being essential for completion of manufacture of bus bodies, falls within the definition of ‘manufacture’ u/s. 2(f) of the Central Excise Act, and accordingly not liable for service tax under ‘business auxiliary services’.

The activity of shifting of goods within the factory premises would not amount to ‘production or processing of goods for or on behalf of the client’ and therefore not liable for service tax under the category of ‘business auxiliary service’.

[Sharwan Kumar v. CCE (2013) 30 STR 176 (Tri.-Del.)

30.16 Where the appellant was engaged in buying goods from M/s MGL and thereafter selling the same to the buyers on principal to principal basis and had not provided any services of marketing the goods of M/s. MGL no service tax could be demanded from the appellant only on the grounds that its trade margin was shown as commission in its invoices [Bharat Petroleum Corporation Ltd v. CST (2014) 36 STR 433 (Tri-Mum)]

30.17 The activity of fabrication of steel storage tanks, dozers, settlers, steel structures, platforms, railing, foundation frames etc and their erection and installation in the factory amounts to manufacture and the same would not be liable for service tax under the category of Business Auxiliary Services CCE v. Shri Shanker Engineering Works (2014) 36 STR 436 (Tri-Del)]

30.18 Where the appellant acted as a sub-broker for a main stock broker but was not registered with SEBI as a ‘sub-broker’, the appellant was held not to be a ‘stock broker’ as defined in the service tax law [s. 65(101)] and his services were held to be liable for service tax under the category of ‘business auxiliary service’ [Paramount Wire & Cable Ltd. v. CCE (2013) 30 STR 188 (Tri.-Del.)].

30.19 A ship broker acts only as an ‘intermediary’ between a vessel owner and a charterer and helps in negotiating the terms of the charter and does not act ‘on behalf of’ i.e. as an agent of either. Hence he cannot be classified as ‘commission agent’ since the essential ingredient of a ‘commission agent’ viz., acting ‘on behalf of’ i.e. as an agent of a principal is absent. Thus, the Tribunal held that the service provided by a ship broker is not liable for service tax under the category of ‘business auxiliary service’ [Interocean Shipping Co. v. CST (2013) 30 STR 244 (Tri.-Del.)].

30.20 Where the revenue had failed to establish the fact that National Highway Authority of India (NHAI), to whom the assessee had provided toll collection services, was a business or a commercial concern engaged in any business activity, the Tribunal held that taxing the assessee’s services to NHAI under the category of business auxiliary services was inconceivable and accordingly the Revenue’s appeal was dismissed. [ CST vs. Intertoll ICS CE CONS O &M P. Ltd.(2013) 31 STR 477 (Tri-Del)]

30.21 Where on facts it was found by the Tribunal that the assessee purchased liquor from various distilleries and sold it to retail outlets as its ‘own property’, and did not act as an agent of the distilleries, it was held that the since the goods (liquor) belonged to the appellant, it cannot be said that the appellant provided services to promote the sale of goods (liquor) belonging to its client (distilleries) and accordingly would not be liable for service tax under the category of business auxiliary services.[K.S.B. (MGF. & MKT.) CORPN. v. CCE, (2013) 31 STR 565 (Tri. – Bang.)]

30.22 Where on facts, the appellant was granted an exclusive privilege to carry on wholesale trade in liquor but never had the ownership/ title in the liquor supplied to it by the distilleries the Tribunal held that the appellant was providing services in relation to marketing/ sale of goods belonging to the distilleries (and not purchase and sale of liquor) and accordingly the same would be liable for service tax under the category of business auxiliary services. [Rajasthan State Beverages Corpn. Ltd. v. CCE (2013) 32 STR 329 (Tri-Del.)].

30.23 Where the appellant was engaged in using their infrastructure, staff and expertise to market the service of banks (their customers), it was held that they were liable to pay service tax under the category of business auxiliary services since 1-7-2003 as being ‘promoting and marketing of services provided by client’ [Ace Credit v. CCE (2013) 32 STR 407 (Tri-Bang)].

30.24 On facts it was held that activity of placement of channels of different broadcasters at desired frequency and carrying the channel to the users through own cable network in consideration for a ‘carriage fee’ is liable for service tax under the category of ‘business auxiliary service’ [Indusind Media & Communications Ltd. v. CCE (2013) 32 STR 418 (Tri-Del)]

30.25 The activity of the appellant providing comprehensive sanitation assistance to Municipal Corporation cannot be liable under Business Auxiliary Services since Municipal Corporation was not doing business of providing sanitation work to be supported by auxiliary service. [ Global Waste Management Cell v. CCE,, 2013(32) STR 734 (Tri-Del)]

30.26 Where the appellant did electroplating of electrical contacts on Job-work basis and supplied the same to its clients an EOU unit, the Tribunal held that the services of the appellant not liable for service tax under the category of ‘business auxiliary services’ since -

The process amounted to manufacture [in view of note no. 6 to Section 16 of the Central Excise Tariff and as held by the Tribunal in Modison Metal Refiners v. CCE (1996) 88 ELT 292 (T)] and process amounting to manufacture is specifically excluded from Business auxiliary services.
The appellant is also entitled to exemption under notification no.8/2005 which exempts goods supplied to principal manufacturer on job- work basis who uses such goods for further manufacture and pays ‘appropriate duty of excise’ on the final products. The term ‘appropriate duty of excise’ excludes Nil rate of duty or duty wholly exempt. The EOU availed exemption under notification no.24/2003–CE dated 31.3.2003 which exempted goods manufactured in an EOU provided the goods are not brought to any other place in India. However, in spite of the exemption to the EOU, the Tribunal held that the exemption envisaged in the definition of ‘appropriate duty of excise’ in notification no.8/2005 is an unconditional exemption and since the EOU exemption was not an unconditional exemption the EOU would be deemed as having paid ‘appropriate duty to excise’ Hence the appellant is entitled for exemption under Notification No 8/2005 even if it is assumed that the process does not amount to manufacture.

[Interplex Electronics India Pvt Ltd v. CST 2014(33) STR 56 (Tri- Bang)]

30.27 Prior to 9.7.2004, service tax is not payable by a commission agent (broker) dealing with Mutual Funds i.e. marketing of mutual funds [ CCE v. Yogesh J. Shah (2014) 33 STR 163 (Tri. - Mum)]

30.28 ‘Grinding’ of raw herbs on job work basis for a client is not liable for service tax under the category of ‘Business Auxiliary service’ prior to 16.6.2005.[Prakash Pulversing Mills v. CCE (2014) 33 STR 454 (Tri-Del.)]

30.29 The assessee sold meal/gift coupon vouchers to its customers who could use them to purchase goods or services at specified business establishments (restaurants, shops, etc.). When the customers present the vouchers / coupons at the establishments it is accepted as a payment towards goods or services purchased by them. The establishment in turn present the coupon to the assessee who after deducting certain amount as their service charge make payment for the face value of the voucher to the establishments. The Revenue had sought to tax the service charges retained by the assessee under the category of ‘Business Auxiliary services’ on the ground that the assessee promoted the goods or services of the business establishment. The Tribunal held that since the user cannot approach any other business establishment other than the specified ones to purchase goods or services against the voucher, the assessee definitely helps in promoting sale of goods and services of the establishment and accordingly is liable for service tax on the service charges under the category of Business Auxiliary Service. [Sodexho Pass Services India P. Ltd v. CST, 2014(33) STR 561 (Tri. – Mum)]

30.30 The Tribunal held that re-rubberisation of old, worn out rubberised rollers was equally classifiable under ‘business auxiliary services’ [s.65(105)(zzb)](as being processing of goods for the client) as well as ‘maintenance and repair services’ [s.65(105)(zzg)](as being reconditioning or restoration of goods). Further it was also observed that s.65A(a) [specific over general test] and s.65A(b) [essential character test] could not resolve the classification issue. Hence the Tribunal applied section 65A(c) according to which service is classifiable under the sub-clause of clause (105) of section 65 which comes first. Since business auxiliary service comes first under clause 65(105)(zzb), the Tribunal held that service is classifiable under the business auxiliary service and not under maintenance or repair services as contended by the Revenue. [ Zenith Rollers Ltd v. CCE 2014 (33) S.T.R. 678 (Tri.-Del.)]

30.31 The margin on sale and purchase of used cars by dealer would not be liable for service tax under the category of Business Auxiliary services notwithstanding that –

Such cars are not registered with the RTO on purchase; and
Some repairs/services is carried on such cars on purchase, since the said transaction is a sale as the price has been received and the property has been delivered and the aspect of registration not being relevant. The repair/service is done for one self on its own purchased cars. (Sai Service Station v. CCE,C&ST (2015) 37 STR 516 (Tri.-Bang.)

30.32 Call centre Services: A call centre for an electricity company which is engaged in registration of complaints on behalf of the electricity board and monitoring the same till complaints are resolved, was held as not providing any ‘assistance, help or information’ to the customer, and accordingly not entitled to exemption under Notification no. 8/2003 dated 20.6.2003. So also a Customer Service Centre and Computerised Collection Centre which collected cheques from the customer, accounted the same, remitted it to the bank and maintained a proper database was held not be a ‘call centre’ under the aforesaid notification. The Tribunal also held that the activities are liable under Business Auxiliary Services and not Business Support Services since the said services involved interaction with the customers on behalf of the service providers whereas in case of business support services that would not

30.33 Billing and accounting: The service of generating electricity bills based on meter reading and accounting the same for electricity companies is in the nature of transaction processing and would be liable for service tax under the category of “Business Support Services”.

Energy Audit & Consumer Indexing: The services of finding differences between the energy received by the electricity companies and supplied to the customers (energy audit) and the services of compilation of data, assets owned by the electric utility on a map for electricity companies (consumer indexing) are in the nature of “management of distribution and logistics” of electricity supplies and accordingly liable for service tax under the category of “Business Support Services”.

[Phoenix IT Solutions Ltd. vs. CCE (2011) 22 STR 400 (Tri. – Bang)]

30.34 The assessee a dealer in motor vehicles let out table space in its premises to a financial institution which provided financial assistance to customers of the assessee, for a consideration and the assessee also informed the vehicle buyer about the various types of loans available and directed them to the financial institutions. On these facts the Tribunal held that the assessee was not promoting or marketing the services of the financial institution and hence assessee would not be liable for service tax under the category of “Business auxiliary services”. [Tribhuvan Motors Ltd. vs. CST (2010) 17 STR 281 (Tri-Bang.) relying on Silicon Honda v. CCE (2007) 7 STR 475 (Tri.-Bang.); See Contra City Motors and Financial Services v. CCE (2012) 25 STR 449 (Tri. – Del.); South City Motors Ltd. v. CST (2012) 25 STR 483 (Tri. – Del.) and Brij Motors Pvt. Ltd. v. CCE (2012) 25 STR 489 (Tri. – Del.)]

30.35 On facts, where the appellants contracted to mine iron ore, process the ore and supply it to its client it was held that it was a composite contract of mining liable for service tax under ‘mining’ services w.e.f. 1.6.2007 and not under ‘business auxiliary services’ prior to that date. [CCE vs. SVM NettProject Solution Pvt Ltd.(2010) 17 STR 298 (Tri-Bang.)]

30.36 Activities such as processing and assembling jeans buttons with metal inserts and nylon inserts and processing needle threader being in the nature of ‘processing of goods’ is liable for service tax under the category of business auxiliary services only w.e.f. 16.6.2005 and not prior to that date. [ N. K. Fasteners vs. CCE(2010) 20 STR 689 (Tri-Chennai)]

30.37 In this case the Tribunal relying on Board Circular No. 249/1/2006 – CX dated 27.10.2008 held that the activity of manufacturing alcohol based perfumes and pharmaceutical products though not liable for Central excise duty amounts to ‘manufacture’ as defined under s. 2(f) of the Central Excise Act, 1944, and accordingly would not be liable for service tax under the category of ‘business auxiliary services’. [ Rubicon Formulations Pvt. Ltd vs. CST (2010) 19 STR 515 (Tri-Mumbai) See also Tilaknagar Industries Ltd v. CCE (2011) 22 S.T.R. 284 (Tri-Mum)]

N.B : The above case is prior to the amendment in the definition of Business Auxiliary services from 7.7.09.

30.38 Where the assessee was engaged in encrypting data of products / services of various clients in their computer system for a consideration and provided the data on products / services to the persons who enquired with them, the Tribunal held that the services provided by the assessee was in the nature providing assistance, help or information through telephone to a caller on behalf of various parties (i.e. its clients) and thus the assessee would be considered as “Call Center” entitled to exemption from service tax under notification no. 8/2003-ST dated 20.6.2003. [ CST vs. Citizen Info-Line Ltd. (2011) 21 STR 20 (Tri. – Ahmd.)]

30.39 Where the appellant is engaged in electroplating (gold plating) of watch straps for various parties on job work basis the Tribunal held that the appellant’s activity would not be liable for service tax under the category of Business Auxiliary Services as being production of goods ‘on behalf of’ a client since an activity would be considered as being performed ‘on behalf of’ the client if there are three parties to the transaction and in the appellant’s case there were only two parties to the transaction. Hence, the appellant had not undertaken any job work on behalf of its client. [ Sonic Watches Ltd. vs. CCE (2011) 21 STR 34 (Tri. – Ahmd.)].

30.40 Where the assessee, an authorised dealer, received overriding commission from the manufacturer on the sales made directly by the manufacturer in the territory of the dealer, the Tribunal on facts observed that such commissions are paid mainly as a compensation for the dealer’s effort in popularizing the products in the territory; for the opportunity loss of not being able to get the dealers margin on the said sales; for the dealer’s efforts to procure order; and for realization of sale proceeds. The dealer was held not to be an agent of the manufacturer and his services could not be considered as services provided by a commission agent. Hence the commission is not eligible for exemption under notification 13/2003 -ST. dated 20.6.2003 [ CCE vs. Krishna Automobiles (2011) 23 STR 57(Tri – Delhi)]

30.41 Activity of harvesting of sugar cane from the farmer’s fields and its transportation to sugar factory carried out on a commission basis is exempt from Service tax under Notification No. 13/2003- S.T. which exempts commission agent’s services in relation to sale of agriculture product. [Dnyaneshwar Trust v. CCE (2013) 31 STR 328 (Tri-Mum)].

30.42 The process of cutting paper into sheets though does not amount to ‘manufacture’, does form part of ‘production’ and accordingly would be liable for service tax under the category of business auxiliary services as being ‘production of goods on behalf of client’.[Orient Packaging Ltd. vs. CCE (2011) 23 STR 167(Tri – Delhi.)]

30.43 The following incomes of the appellant were held not liable for service tax under the category of business auxiliary services:

Earnings from NTBCL (the owner and constructor of the Delhi – Noida bridge under BOT ) as a percentage of toll for – (a) collection of toll from the users of the bridge; (b) managing the bridge by ensuring that the facility is available to the public at all times, would not be liable under clause (iii) viz., ‘customer care services on behalf of the client’, prior to 10.9.2004 or under cl. (vi) ‘provision of service on behalf of the client’ or Cl. (vii) ‘incidental or auxiliary support services’ post 10.9.2004 since the users of the bridge could not be said to be the customers of NTBCL or the appellants. Further, the said services would be more appropriately liable for service tax under the category of ‘management, maintenance and repair services’ (of immoveable property) w.e.f 16.6.2005 and not under business auxiliary services prior to that date.
Remuneration earned from M/s. Banas Sands who had right to collect toll from users and sub-contracted to the appellant the work of collection of toll levied by the Municipal Corporation of Delhi, was not liable for service tax since it was exempt under notification no. 13/2004 dated 10.9.2004 as being a service in relation to collection of duties and taxes levied by the Government.

[Intertoll India Consultants (P) Ltd. v. CCE (2011) 24 STR 611 (Tri-Del.)].

30.44 Where a Chartered Accountant provided the services to a bank consisting of verification of contact point verification of addresses of residence and offices of its customers, the Tribunal held that such services cannot amount to a service equivalent to promotion or marketing of services provided by the client or evaluation of prospective customers and hence, is not liable for service tax under the category of business auxiliary service [ Rakesh Porwal & Associates vs. CCE (2011) 24 STR 408 (Tri-Del)].

30.45 Where the appellant was engaged in arranging documents for the bank to evaluate creditability, eligibility and financial status of prospective customer for funding by the bank, the Tribunal held that appellant was acting as a catalyst in connecting the bank with the borrower and hence was promoting the funding business of the bank. Accordingly the appellant was liable to pay service tax under the category of business auxiliary service [ S.K.Jalendra & Associates vs. CCE (2012) 26 STR 135 (Tri-Del.)]

30.46 Where the appellant who purchased ingots from a supplier did some grinding and annealing operations to the ingots as they were defective and recovered the costs from the supplier, the Tribunal held that the appellant has not rendered any service to its supplier and hence, the question of assessee being liable to service tax does not arise [Bay Forge Ltd. vs. CCE (2011) 24 STR 434 (Tri-Chennai)].

30.47 Discounts or incentives received by an Advertising Agency from print media is not liable for service tax under the business auxiliary services in view of the following:

Since discounts/incentives are received by the assessee for providing advertising agency services and was held as not be liable to service tax under the category of advertising agency services by the Tribunal in

Kerala Publicity Bureau [2008(9) STR 101 (Tri-Bang)];

Euro RSCG Advertising Ltd. [2008 (7) STR 277 (Tri-Bang);

Marketing Consultants & Agencies Ltd. [2006 (4) STR 136 (Tri-Bang)]; the same cannot be considered for the purpose of taxability under the category of business auxiliary services; and

the amounts are discounts and incentives and are not the charges for services

[P. Gautam & Co. vs. CST (2011) 24 STR 447 (Tri-Ahmd)].

30.48 The activity of affixing colour yoke with picture tube by way of yamming process and then adjusting them electronically to keep proper light rays on screen amounts to manufacture and hence not liable for service tax under the category of business auxiliary service [Hotline CPT Ltd vs CCE (2011) 24 STR 687 (Tri-Del) relying on Weston Electronics Ltd vs. CCE (2001) 130 ELT 451 (Tri-LB)].

30.49 A company CIDBI entered into a contract with NHAI for construction operation and maintenance of certain stretches of National highways on a Build, Operate and Transfer (BOT) basis. It assigned the contract to a special purpose vehicle, STPL (the appellants). The department alleged that STPL collected toll on behalf of CIDBI and hence was liable to pay service tax on the toll collected by them under the category of business auxiliary services. The Tribunal held, on facts that STPL was collecting toll in the capacity of a concessionaire of NHAI and not as an agent of CIDBI and hence the entire basis of the SCN collapsed and accordingly the demand failed. [Swarna Tollway (Pvt.) Ltd. vs. CCE (2011) 24 STR 738 (Tri.-Bang.)]

30.50 Purchase agents i.e. commission agents for procurement of inputs would not be liable for service tax under the category of “Business Auxiliary Services” prior to 10.9.2004 [New Quest Corp. Ltd. (2012) 25 STR 441 (Tri. – Del.)]

30.51 If on the services of mutual fund distributor, where rule 2(1)(d)(vi) provides that it is the mutual fund or the asset management company paying the commission to the distributor that is liable to pay service tax, the service tax has not been paid by the mutual fund, the liability to pay tax cannot be transferred to the mutual fund distributor. [Raj Ratan Castings Pvt. Ltd. v. CCCE (2012) 25 STR 481 (Tri. – Del.)]

30.52 The activity of grinding and smoothening the edges, called fettling of the rough castings on job work basis amounts to processing of goods on behalf of client and hence would be liable for service tax under the category of business auxiliary services only w.e.f. 16.6.2005 and not prior to that date [ Rathour Engg Works v. CCE (2012) 27 STR 37 (Tri-Del)]

30.53 Activities like excavation, picking, sorting, breaking, sizing and stacking, loading of ore in to BG wagons at railway sidings and removal of rejects are liable for service tax under the category of mining services and not under the category of business auxiliary services [ CST vs. Ores India (P) Ltd. (2012) 27 STR 188 (Tri. – Kolkata)].

30.54 The appellant an association of chemists and druggists collected advertisement charges from manufacturers of medicines for publishing details such as name of the company, product, packing details, category, VAT payable, stockist price, retailer price, MRP of the medicines manufactured in the “Chemist News”. These were held not to be liable under the category of “Business Auxiliary Services” by the Tribunal on the basis of the following:

Mere publication of the above details is not for promoting or marketing the products but is only to provide information on products and prices to chemists and druggists. The products are generally promoted through representatives and other means;
The above service if at all would be more appropriately covered under the category of ‘sale of space for advertisements’ and not under the category of ‘business auxiliary services’

[Federation of Gujarat State Chemist and Druggist vs. CCE(2012) 27 STR 292 (Tri.–Ahmd.)].

30.55 Commission received by the bank from MSEB (an account holder) for providing services of collecting payments towards electricity bills raised by MSEB on its customers and crediting the same to its account would not be liable for service tax under the category of ‘Business Auxiliary Services’ [CC&CE vs. Akola District Central Co-Op. bank Ltd (2012) 27 STR 274 (Tri. – Mumbai)].

30.56 (i) Referral fees received by the appellant, a dealer of motor vehicles, from various banks for recommending customers is liable for service tax under the category of “business auxiliary services”

(ii) Where the appellant, a dealer in motor vehicles identified customers for an insurance company and also incurred cost of advertisement, sales campaign, souveniers, etc. which cost was reimbursed in part by the insurance company, it was held that the reimbursement was a consideration for marketing the services of the insurance company and hence liable for service tax under the category of “Business Auxiliary Services”

[TVS Motor Co. Ltd. vs. CCE (2012) 28 STR 127 (Tri. – Chennai)].

30.57 Where distributors purchased lottery tickets at a discounted price from the promoter/organiser of the lottery and sold them to retailer sharing the discount with them who in turn sold the tickets to the ultimate consumers who are the purchasers, the High Court held that the discount/commission received by the distributors as well as the retailers for marketing the lottery tickets is nothing but consideration for service rendered to the promoter or organizer of lottery and is liable for service tax u/s. 65(19)(ii) read with the Explanation introduced by the Finance Act, 2008 as being ‘service in relation to promotion or marketing of a service provided by the client’. Further, it was also held that the Explanation is not unconstitutional [ P. Muraleedharan v. UOI (2012) 28 STR 344 (Ker.)].

30.58 Sales/Target incentives received by the assessee, a dealer in motor vehicles, from the manufacturer from whom he purchased the vehicles were in the nature of trade discount not liable for service tax under the category of business auxiliary services. However, incentive from banks for promoting their car loan products was liable for service tax under business auxiliary services. But where the latter incentives were received from manufacturer of vehicles who had already paid the tax on the same it was held that demanding duty on the same amounted to double taxation and hence not payable by the assessee [CST vs Sai Service Station Ltd. (2014) 35 STR 625 (Tri-Mum)]

30.59 The respondents are working subagents of M/s AFL Ltd, Mumbai who in turn work as a principal representative of M/s Western Union Money Transfer Services, Ireland. The main function of the respondents is delivery of money to the ultimate beneficiary in India as per directions given by their principal representative for which the respondents get commission. Relying on Paul Merchants Ltd case the Tribunal held that advertisement and sale promotion by agent/sub agent as also delivery of money to the ultimate beneficiary in India. is to be treated as export of service and therefore not liable to service tax.[CCE v. Ashu Forex Pvt Ltd, (2014) 35 STR 776 (Tri-Del)]

30.60 Where the appellant had entered into a Management Agreement with its principal whereby it was to undertake activities designing, managing and operating showroom, receiving goods on stock on transfer basis, undertaking sales promotion activities and collecting the sale proceeds on behalf of the principal, the Tribunal held that the activities would not fall within the purview of “Commission agent" as defined in Notification No.13/2003 and accordingly would not be exempted from payment of service tax [Provincial Lifestyle Retail services v. CCE (2014) 36 STR 305 (Tri-Mum)].

30.61 The activity of fabrication of steel storage tanks, dozers and settlers, steel structures, steel platforms, railing, foundation frames, etc. and their erection and installation in the factory was not liable to service tax under the category of business auxiliary services since it did not fall under any of the sub-clauses of the definition [CCE v. Kunal Fabricators & Engineering Works (2014) 36 STR 549 (Tri.-Del.)]

30.62 Where the Hon’ble Tribunal found that the appellant, a well known actress promoted her clients products/ services by appearing in her clients advertisements and promotional events/ activities, it was held that the assessee was providing the service of promoting a brand i.e. “Brand Ambassador Services” liable for service tax w.e.f. 1.7.2010 and not marketing or promotion of some particular goods or services of the client and her services would not be liable for service tax under the category of ‘Business Auxiliary Service’ prior to 1.7.2010 [CST v. Shriya Saran (2014) 36 STR 641 (Tri.-Del.)]

30.63 On facts, where the agreement between M/s SKF, Sweden and the appellants provided for development, maintenance and installation of software systems by the foreign entity to the appellant which also included supply of information, data providing training etc in the IT software field, the Tribunal held that:-

the services were liable under the category of IT software services which was liable only wef 16.05.2008; and IT software services was specifically excluded from the scope of business auxillary service. Hence the Revenue’s contention that the same was taxable under Business Auxillary Services was incorrect.
In any case, the services are not taxable under Business Auxillary Services as “customer care services” as alleged by the Revenue since in respect of customer care service, there would be three persons involved, the principal service provider, the customer and the intermediary in between who undertakes the service on behalf of the principal, the service provider. In the present case, on perusal of the agreement, it is seen that there are only two parties involved, SKF Sweden and SKF India and there is no third party involved. Further, the service received by the SKF India, the appellant herein, is for its own use and not for providing any service to any other party. Therefore the argument of the Revenue that the services received would fall within the ambit of ‘customer care’ is totally bereft of any logic and devoid of any merit.

Further, on facts, the Tribunal also held that the various expenditure incurred by the appellant towards foreign currency purchase, professional management fees, group management programmers, engineering software services etc does not fall under ‘Business Auxiliary Service or ‘Customer Care service’ [SKF India Ltd v. CCE (2015)37 STR 245 (Tri-Mum)]

30.64 The appellant in the present case, had entered into an agreement with Maharashtra Knowledge Corporation Ltd (“MKCL”), a company created by Government of Maharashtra for conducting certificate program courses on Information Technology duly recognized by the State Technical Education Board. Scope of the appellant’s activities involved creation of authorized training centres, supervising the same, collection of course fee and remitting the same to MKCL. The Revenue contended that the appellant’s activities liable for service tax under Business Auxiliary Service since it undertook promotion of business of MKCL. On appeal, the Tribunal held that the appellant’s activities were in the nature of incidental/ auxiliary activites in relation to education and hence would be exempted from service tax under Notification No. 14/2004 – S.T. dated 10.9.2004 [Sun beam Infocomm Pvt Ltd v. CCE (2015) 37 STR 129 (Tri-Mum)]

30.65 Where the appellant, a motor vehicle dealer had provided table space to the banks and received a commission from the banks where the vehicles sold by the appellant was financed by the bank which was sought to be taxed by the revenue on the grounds that the appellant had provided business auxiliary services to the bank, the Tribunal held that in absence of any evidence of provision of business auxiliary services, the appellant cannot be said to have provided business auxiliary services to the bank [Jaika Motors Ltd. v. CCE, (2014) 35 STR 417 (Tri-Mum)

31 Business Auxiliary Service/Business Support Service

31.1 Services provided by the appellants to ICICI and IDBI banks for verification of information furnished by the loan seekers is liable to service tax under the category of ‘business auxillary service’ defined u/s 65(19)(iv) as ‘any incidental or auxillary support service’. However the appellants are not liable to pay service tax under Business Auxiliary Service for the period post 10.09.2004 since the services are not incidental or auxillary to any activity mentioned in clause (i) to (vi). The Tribunal also imposed penalty u/s78 but granted cum tax benefit. [Credentials v. CCE ( 2015) 37 STR 235 (Tri-Mum)].

32 Business auxiliary services / Storage and warehousing services

32.1 Where on facts it was found by the Tribunal that the assessee purchased liquor from various distilleries and sold it to retail outlets as its ‘own property’, and did not act as an agent of the distilleries, it was held that the since the goods (liquor) belonged to the appellant, it cannot be said that the appellant provided services –

(i) to promote the sale of goods (liquor) belonging to its client (distilleries) and accordingly would not be liable for service tax under the category of business auxiliary services; or

(ii) of storage and warehousing of goods (liquor) to another person and accordingly would not be liable for service tax under the category of storage and warehousing services.

[Kerala State Beverages (Mfrg. & Mktg.) Corpn. v. CCE (2011) 23 STR 640 (Tri-Bang.)]

33 Business Support Services

33.1 In this case the Tribunal observed that the following amounts received by the assessee, a developer of a port, is not liable for service tax under the category of Business Support Service:

The royalty received from a sub-licencee in consideration for conferring on them the right and authority to develop, design, finance, construct, operate and maintain a container freight station would not be liable for service tax under the category of business support services as being “infrastructural support services”, since it was essentially a sub-licence.
The assessee had entered into an agreement with Railways wherein the assessee had agreed to incur the cost of laying down the railways lines and the Ministry of Railways would operate the railway, recover its cost of operation and pay the balance to the assessee. The revenue sought to tax the share received by the appellant from the railways as consideration for providing infrastructural support services. However, the Tribunal held that the share received by the assessee was a payment towards the cost of investment made by the assessee and not for providing any infrastructural facility to the railways.
Amounts received under the agreements for allowing various lessees the use of vacant plots in the port so as to have access to their area of work alongwith facilities of water and electricity connection was held to be excluded from the ambit of service tax under the category of renting of immovable property services and accordingly the same would not be liable for service tax under the category of business support services.

[Mundra Port & Special Economic Zone Ltd. vs. CCE (2012) 27 STR 171 (Tri-Ahmd)]

33.2 Where the assessee was providing the service of supplying tractor trailers along with trained drivers to undertake transportation of containers within the terminal, it was held that the services would be classifiable under the category of ‘Supply of Tangible Goods for use’ and not under ‘Business Support Services’ and accordingly the demand is not sustainable in law [Srinivasa Transports v. CCE&ST (2014) 34 STR 765 (Tri.-Bang.)]

33.3 Where the assessee had entered into an agreement with electricity distribution companies / departments for providing spot billing services like reading of meters and generating bills, the High Court observed that the billing and accounting done by the assessee company was not on behalf of the electricity distribution companies but for them and there is no interaction with customer of electricity distribution companies. Further the services being in the nature of transaction processing activities, the same would be covered under the service tax net only w.e.f. 1.5.06 under the category of business support service and not prior to that date under the category of business auxiliary services [CCE v. Phoenix IT Solutions Ltd. (2014) 35 STR 314 (A.P.)]

33.4 The appellants undertook management of distillery unit M/s Kolhapur Sugar Mills Ltd (KSML) for which it paid them ₹30 lakhs per annum but the profit/ loss was on account of the appellant. KSML were also paying service tax under the category of “franchise service” as directed by revenue since 2006. On these facts the Hon’ble Tribunal held that the appellants have not provided any support service to KSML and cannot be made liable under “Business Support Services” [Karan Agencies v.CCE (2014) 36 STR 667 (Tri-Mum.)]

33.5 Ocean freight even if charged by a shipping logistic company is not liable to service tax [APL Logistics India Pvt Ltd v CCE (2014) 36 STR 1310(Tri-Chennai)]

34 Cargo Handling services

34.1 In this case, the appellants provided labour for managing various points in the mechanized process of packing and loading of cement bags. The processes of packing, loading were automatic and mechanized. The role of manpower was to supplement and oversee and guide the activity. On facts, the Tribunal held that the appellant were merely supplying manpower and not providing cargo handling services. [M/s. J & J Enterprises vs. CCE (2005) 186 ELT 189 (Tri – Del) See also KK Appachan v. CCE (2007) 80 RLT 714 (CESTAT – Bang.); C. Krishnakumar vs. CCE&S (2008) 10 STR 162 (Tri-Bang.); S.N.Uppar & Co. vs. CCE (2008) 11 STR 34 (Tri-Bang.);

34.2 Where as per the terms of contract the contractors were to make arrangement for the transportation of goods which incidentally included loading and unloading of goods it was held that the activity of loading and unloading would not be liable as cargo handling services. [Dalveer Singh vs. CCE (2008) 9 STR 491 (Tri-Del)].

34.3 Mechanical transfer of coal from coal face to tippers and subsequent transportation of coal within the mining area would not constitute as cargo handling services since :

the dominant activity undertaken was movement of coal within the mining area, and loading and unloading was incidental;
‘Cargo’ in common parlance means something which is carried as freight in a ship, plane, rail or truck while in the present case the coal was merely moved within the mining area.

[Sainik Mining & Allied Services Ltd. vs. CCEC & S (2008) 9 STR 531 (Tri-Kolkata) See also Modi Construction Co. vs. CCE (2008) 12 STR 34 (Tri-Kolkata) affirmed in CCE v. Modi Construction Company (2011) 23 STR 6 (Jhar); Gaytri Construction Co v. CCE (2012) 25 STR 259 (Tri-Del); Anupama Coal Carriers Pvt. Ltd v. CCE 2013(32) STR 41 (Tri-Del)]

34.4 On facts the Tribunal held that the respondent’s activity comprising of excavation, transportation and filling of iron ores to the crusher plant are primarily in the nature of mining activities and not ‘cargo’ handling services since:-

(a) “Cargo” is commercially known to be something which is carried as freight in a ship, air plane, rail or truck for freight while in the present case what is carried cannot commercially be called ‘cargo’; and

(b) The incidental activities of loading and unloading cannot give the contracted activities (mining of ores) the character of cargo handling services.

[CCE & C vs. B.K.Thakkar (2008) 9 STR 542 (Tri-Kolkata); Thriveni Earthmovers Pvt. Ltd. v. CCE (2009) 15 STR 393 (Tri-Chennai)]

34.5 Where the assessee had undertaken a series of activities from mining to the delivery of limestone to designated places, the Tribunal rejected the Department’s contention that the amount attributable to loading charges should be treated as liable under cargo handling services since –

the activity of loading is incidental to mining and transportation; and
the same is rendered to the assessee himself in completing the entire work assigned to it by the contract.

[CCE vs. Giriraj Brothers (2008) 10 STR 549 (Tri. – Del.); See also CCE vs. Laxmi Trading Co. (2008) 10 STR 620 (Tri. – Del.)].

34.6 Where the appellants neither collected cargo from the consignor’s premises nor delivered the same at the consignee’s premises but merely undertook transportation of cargo by air from air cargo station at source location to air cargo station at destination location the Tribunal observed that the services of loading and unloading of goods rendered by the appellants is an integral part of the transportation services. Further relying on decision in Asian Paints India Ltd. vs. CCE (1988) 35 ELT 3 (SC) the Tribunal held that:

the appellants are admittedly not understood in the common parlour as a cargo handling agency, inasmuch as they are admittedly airline company;
the contract entered into between the appellant and their customer is not for rendering cargo handling services but is for transportation of appellant’s cargo by air.

Accordingly, the same cannot be subjected to tax under the category of ‘cargo handling services’. [Jet Airways (India) Ltd. vs. CST (2008) 11 STR 645 (Tri-Ahmd.)]

34.7 The appellants in this case were engaged in strapping of various steel items in the production line in steel companies. Revenue sought to levy service tax on the activities of the appellants under the category of cargo handling services. On appeal the Tribunal dismissing the contention of the revenue held that –

the appellants merely undertook packaging which was a apart of the manufacturing process on which excise duty was being paid by the manufacturers. Hence no service tax was payable on the packing charges.
the strapping of steel items was part of production process and not for transportation and hence the item they packed were not ‘cargo’..
the services of the appellant being in the nature of packaging services would not be liable for service tax prior to 16.6.05 since the packaging services came into the service tax net only w.e.f. 16.6.05.

[ITW India Ltd. vs. CCE (2009) 14 STR 826 (Tri-Bang.)]

34.8 ‘Loading and unloading’ coal within the mining area would not be liable for service tax under the category of ‘cargo handling services’ while loading and unloading outside the mining area would fall within the said category [Avian Overseas Pvt. Ltd. v. CCE (2009) 15 STR 540 (Tri-Kol.);See Contra Gangadhar Bulk Movers Pvt. Ltd. vs. CCE (2012) 27 STR 258 (Tri. – Mumbai); Dilip Construction v. CCE (2013)30 STR 668 (Tri-Mum)].

34.9 In the present case the Tribunal relying on Modi Construction Co. v. CCE (2008) 12 STR 34 (Tribunal) held that mere transportation will not amount to ‘cargo handling” unless loading, unloading, packing or unpacking of cargo and handling of such cargo is the primary object of the contract. [ CCE & C vs. Scrap Material Handling Co. (2009) 16 STR 68 (Tri. – Del.)]

34.10 Where the appellant was engaged in loading of coal into railway wagons using pay loaders and where they were compensated based on the quantity of coal loaded by them into the wagons, the Tribunal, on facts, held that appellant would be liable for service tax under the category of cargo handling agency services. Further, the Tribunal also observed that since the coal was loaded into railway wagons for transport the same would be considered as ‘cargo’ [Niranjan Lal Agarwal v. CCE (2012) 26 STR 457 (Tri-Del.)].

34.11 (i) Crushing, screening and sieving of dolomite boulders in mining area and movement of the end product from site of one activity to site of second activity within the mining area would not amount to providing ‘Cargo Handling Services’.

(ii) The activity of loading of finally processed dolomites in railway sidings for further transportation, by using pay loaders and tippers is liable for service tax under the category of ‘Cargo Handling Services’

[Singh Transporters VS. CCE (2012) 27 STR 488(Tri. – Del.)].

34.12 In this case the respondent was an individual and the board circular had clarified that an individual undertaking the activity of loading/unloading of cargo would not come under the purview of Service Tax as Cargo Handling services. Further the activity of handling the goods within the factory premises does not fall under the definition of Cargo Handling services which includes loading unloading packing or unpacking of cargo on a truck, aircraft, ship. This activity could not be termed as service activity. [CCE v. Abbas J. Chavda (2013) 30 STR 387 (Tri- Ahmd)]

34.13 Where the assessee was engaged in loading/unloading/handling of coal into tipper trucks and its transportation from coal face surfaces to coal stock yard, the Tribunal held that the services were in the nature of handling of cargo and accordingly the same would be liable for service tax under the category of cargo handling services and not mining services as contested by the assessee. [CCE v. Gayatri Carriers Pvt. Ltd. (2013)32 STR 367 (Tri-Del)]

34.14 Where the assessee contracted to mine lignite for its client in consideration for a remuneration based on per MT of saleable lignite mined by them and its scope of work involved clearing the site for mining, excavation of top soil and its dumping at a specified place, removal of the over burden and raising of saleable lignite, it was held that the assessee’s services were liable for service tax under the category of “mining services” w.e.f. 1.6.07 and not under the category of cargo handling services/site formation services prior to that date since the nature of the contract was for mining and loading/site formation were only ancillary activities [National Construction Company v. CCE (2014) 34 STR 739 (Tri.-Del.)].

34.15 Where the appellant had provided cargo handling services in respect of export cargo which had been excluded from the scope of cargo handling services the Tribunal held that subjecting the same for service tax under the category of port services was not permissible [J.M Baxi & Company v. CCE (2013) 31 STR 453 (Tri-Mum)]

34.16 Handling of the goods in the factory or godown or removing of garbage not being an activity adjunct to transportation of ‘goods’ (cargo), the same would not be liable for service tax under Cargo Handling Services [CCE v. Prempal Singh (2014) 35 STR 136 (Tri-Del)].

34.17 Where the assessee was engaged in loading, unloading and shifting of sugar bags from floor to mill house to godown and from one godown to another, the Tribunal held that these activities would not be liable for service tax under the category of ‘cargo handling service’ [CCE v. Surender Kumar (2014)36 STR 327 (Tri-Del)].

34.18 The appellant had entered into a contract to undertake the activities of –

Loading of the coal into the dumpers in the mine;
Transportation of same to railway siding; and
Unloading the same into railway wagon

The contract stipulated a separate price for each of the above activities. However the department had sought to tax the entire activities under the category of cargo handling service. On appeal, the Tribunal held that since separate prices was prescribed for each of the above activities, there were two different contracts viz., for transportation of coal /ore and for loading and unloading of coal/ore though, under one instrument. Accordingly, the Tribunal held that –

As regards the loading and unloading of coal, the activity would be liable for service tax under the category of cargo handling services.
As regards the activities of transportation of coal, the services were in the nature of goods transportation agency services. However, no service tax would be payable since the liability to pay service tax in respect of these service was on the recipient of service.

[Jai Jawan Coal Carriers Pvt. Ltd. v. CST (2015) 37 STR 509 (Tri.-Del.)]

34.19 Where the assessee a container freight station (CFS) (i) recovered from the clients by way of separate bills for Cargo Handling Service and Goods transportation services, [transportation charges on actual basis] (ii) Charged and paid service tax on cargo handling charges separately (on actual basis) (iii) Discharged Service tax on GTA services provided by its vendor transporters as recipient of services, the Tribunal held that the question of leviability of Service Tax on the whole amount under one taxable service of Cargo handling is not sustainable in law. [Balmer Lawrie & Co Ltd v. CCE,Raigad, (2014) 35 STR 800]

34.20 Where the assessee was engaged in loading, unloading and shifting of sugar bags from floor to mill house to godown and from one godown to another, the Tribunal held that these activities would not be liable for service tax under the category of ‘cargo handling service’ [CCE v. Surender Kumar (2014)36 STR 327 (Tri-Del)].

35 ‘Cargo handling’ vs. ‘Packaging’

35.1 ‘Palletizing’ cargo i.e. packing of cargo on a wooden platform (pallet), which could be lifted and loaded to the container by using forklift, crane, etc., is classifiable as “cargo handling service” [s. 65(23)] and not as “packaging service” [s.65(76b)] since ‘packaging’ covered u/s. 65(76b) is basic packing of products either in the course of manufacturing or subsequent to manufacturing for marketing and ‘packing’ covered by the broad definition of “cargo handling service” is the group packing of cargo for easy handling. The cargo, in the present case being export cargo, it was held as not to be liable for service tax since export cargo handling is excluded u/s. 65(23)(b). The High Court also observed that the conclusion is in line with the object and purpose of granting service tax exemption for handling of export cargo viz., the reduction of cost to exporters thereby making the Indian goods competitive in the international markets. [Beena Pradeep vs. Government of India (2013) 29 STR 225]

36 Cargo handling / storage and warehousing services

36.1 Income from sale of abandoned cargo (after meeting all expenses of sale, etc.) received by a container freight station would not be liable for service tax under the category of Cargo handling / storage and warehousing services [Maersk India Pvt Ltd v. CST (2013) 29 STR 170 (Tri- Mum)]

37 Chartered Accountants Services

37.1 Notification no. 59/1998 dated 16.10.1998 exempted all services provided by Chartered Accountants other than accounting, auditing and certification services. Notification No. 15/2002 dated 1.8.2002 amended the said exemption by inserting an explanation to the effect that where the services fall under any other service category such as management consultancy or manpower recruitment services, such services would be liable. The department contended that the notification would have retroactive operation from 16.10.98. However, the Tribunal held considering the language of the notification, in absence of a specific stipulation regarding its date of effect, the amendment has to be held effective only from the date of issue of this notification.[ Sridhar & Santhanam vs. CCE (2009) 14 STR 756 (Tri. – Che.)]

37.2 Transfer Pricing certification / report under section 92E of the Income-tax Act, 1961 would be considered as ‘auditing’ services and accordingly not entitled for exemption under notification no. 59/98-ST dated 16.10.98 (whereby all services except accounting, auditing and certain certification services were exempt).[Price Waterhouse vs. CST (2010) 19 STR 63 (Tri. – Che.)]

38 Clearing and forwarding agent

38.1 In this case the appellants a clearing forwarding agent were also a del credere agent [i.e. an agent who undertook the liability for compensating his principal in case his principal’s customers defaulted in payment] for certain services. The Tribunal held that the services as a del credere agent would not come within the purview of clearing and forwarding operations, even though he may be a clearing and forwarding agent for other activities. [Raja Rajeshwari Intl. Polymers Pvt. Ltd. v. CCE (2005) 180 ELT 448 (Tri-Bang.) See alsoSreenidhi Polymers Pvt. Ltd. v. CCE (2005) 186 E.L.T. 195 (Tri.), Gemini Associates v. CCE (2007) 5 STR 304 (Tri-Bang.); CCE & ST vs. Shah Polymers (2007) 7 STR 646 (Tri. – Bang.)]

38.2 The activity of financing the purchase of coal, and arranging for its transportation by paying the freight, arranging insurance and R/R etc. is not liable for service tax under the category of ‘Clearing and Forwarding Agent Services’ [Kaveri Coal Suppliers v. CCE (2011) 23 STR 35 (Tri-Del)relying on Hanuman Coal Co v. CCE (2011) 22 STR 350 (Tribunal); See also R.K. Paliwal vs. CCE (2012) 26 STR 567 (Tri. – Del.);]

38.3 Where the assessee was engaged in procuring orders from the customers, for their principal and also guaranteeing the payment, the Tribunal held that the said activity would not be covered under the category of ‘Clearing and Forwarding agent service’ since clearing and forwarding agent services mainly comprised of receiving the goods on behalf of principal, storing them and thereafter delivering the same at the instruction of the principals. [ CCE v K.K.Polymers (2011) 23 STR129 (Tri-Del)][See Malhotra Distributors Pvt. Ltd. v. CCE (2014) STR 93 Tri Mum)

38.4 Where the assessee was engaged in the activity of promoting sale of their principal’s products by identifying buyers the Tribunal held that the said activity would not be covered under the category of ‘Clearing and Forwarding agent service’ [Susheel Yarn Pvt. Ltd. vs. CCE (2011) 23 STR 130 (Tri –Delhi)].

38.5 Mere procuring or booking of orders for the principal by an agent on payment of commission would not amount to providing services as “clearing and forwarding agent” within the meaning of the definition of that expression under section 65(25) of the Finance 1994 since –

The activity of mere procurement of orders for a principal on a commission basis is an activity of a “commission agent” which falls under business auxiliary services and the Legislature has treated this activity as separate from the activities of a clearing and forwarding agent;
An agent only for procuring purchase orders for vendors on a commission basis does not engage in any clearing and forwarding operations “ directly or indirectly” “in any manner”. These [italicized] expressions occurring in the definition of clearing and forwarding agent cannot be isolated from the activity of clearing and forwarding operations which has a very specific connotation in the context of movement of goods from the supplier to their destination. The agents undertaking clearing and forwarding operations may never have been concerned with procurement of orders for the goods which are cleared and forwarded or vice versa.

[Larsen & Toubro Ltd. v. CCE 2006(3) STR 321 (Tri-LB) overruling Prabhat Zarda Factory P. Ltd. v. CCE (2002) 145 ELT 222 (T) See also Acer India P Ltd v. CCE (2007) 6 STR 380 (Tri.-Bang.); Tehri Pulp and Paper Ltd. vs. CCE (2007) 8 STR 453 (Tri- Del); Harinagar Sugar Mills Ltd. vs. CCE (2008) 9 STR 128 (Tri. – Kol); Patwari Forgings Pvt. Ltd. vs. CCE (2008) 10 STR 52 (Tri-Kolkata); CCE vs. Shivangi Steel Pvt. Ltd. (2011) 24 STR 701 (Tri.- Del); Paras Advertising & Marketing Services Pvt. Ltd. vs. CST (2013) 30 STR 603 (Tri-Ahmd.)].

38.6 The appellants are engaged in the activity of marketing and selling of the products manufactured by their principal by procuring purchase orders for their principal. The goods are being dispatched by the principal directly to their customers and for introducing the customers to the principal – manufacturer the appellants were getting commission. The said activity is not covered under the category ‘Clearing and Forwarding Agents service during the impugned period of 2000 to 2003 [Weikfield Products Co (India)Pvt Ltd v. CCE (2013)30 STR 431 (Tri- Mum)]

38.7 Pre-delivery inspection to ensure that the product is without defect and is in good condition for sale and dispatch does not form part of clearing and forwarding operation which is subsequent to the inspection. Hence such services are not liable for service tax under the category of clearing and forwarding services. The person assuming the risk during transport would also not make him a C&F agent though the risk cover is in relation to clearing, forwarding and transport since it is a completely separate activity. [Larsen & Toubro Ltd. v. CCE (2006) 4 STR 466 (Tri-Del.)].

38.8 Dealers/distributors who purchased and sold goods of prominent manufacturers would not be considered as clearing & forwarding agent. Their activities such as promoting the sales, advertisement and maintaining trained salesman were activities in their own interests and formed part of their job. These activities cannot be treated as services rendered to the manufacturers. Any discount given by the manufacturer to such dealers cannot be taken as service charges for the above activities. [Pratap Singh & Sons v. CCE (2007) 5 STR 389 (Tri. – Mumbai); See also Coir Board vs. CCE (2011) 22 STR 646 (Tri. – Bang.)]

38.9 On facts the Tribunal held that receipt of goods from the principal, storing them, selling the goods to the customers and pursuant to the sale making despatches of goods to the customer for a commission on sale proceeds would not be liable for service tax under the category of “clearing and forwarding” since the appellant is in substance a commission agent earning commission on sale and the activities of receipt of goods, storage and effecting despatches are merely incidental to the sale. Its services would more specifically be covered under business auxiliary services as “commission agent” and be exempt upto 9.7.04 vide notification no. 13 dated 20.6.03 which exempts commission agents in respect of goods. [CCE v. Chandan Chemicals (2007) 7 STR 578 (Tri-Del); V.S.Distributors vs. CCE. (2010) 17 STR 530 (Tri-Del) – Per Rakesh Kumar – Member(T) Contra: CCE vs. ADH Agencies (2007) 7 STR 660 (Tri. – Del.)]

38.10 In order for a service to be covered under the category of ‘clearing and forwarding’ services, the service provider must provide both clearing “and” forwarding services and not only clearing “or” forwarding. [CCE v. Kuldip Medicines (P) Ltd. (2009) 14 STR 608 (P&H)overruling Medpro Pharma Pvt. Ltd. v CCE (2006) 3 STR 355 (Tri. – LB)].See also[ Narottam & Company v. CCE (2014) 33 STR 472 (Tri.-Del.)]

38.11 By an agreement between the assessee and Cipla Ltd., the assessee was appointed as a “consignment agent” of Cipla under the following terms :

the assessee received and stored the goods supplied by Cipla;
the assessee sold the goods as an “agent” of Cipla on a “commission” basis.
the price at which goods were to be sold were decided by Cipla after consultation with the assessee; and
the assessee was authorized to appoint stockists / dealers / distributors with the approval of Cipla.

On the question whether the assessee would be considered as a “clearing and forwarding agent” u/s. 65(16) which includes a “consignment agent” the High Court held as follows:

The agreement with the principal clearly states that the assessee is a “consignment agent” and hence would be covered under the inclusive limb of definition of “clearing & forwarding agent” u/s. 65(16)
The assessee in the present case doesnot stop at rendering only the commission agency service [i.e. mere procurement of purchase orders] but his duties extend beyond that involving activities such as price determination, appointment of stockists / dealers / distributors, etc.

[CCE v. Mahaveer Generics (2010) 17 STR 225 (Kar.)]

38.12 Where the assessee procured customers for its principal (Maruti Udyog Ltd.) for purchase of cars on commission basis and in that connection arranged documentary requirements; liaisoned with the customers for timely delivery; delivered vehicles; sent provisional receipts and inspection notes from consignee to the principal and arranged various permits required for dispatch of the vehicles etc, the High Court held that the assessee’s main work was to sell cars on behalf of its principal and carrying out the above work in that connection would not make them a ‘Clearing & Forwarding Agent’.[ CCE vs. Amitdeep Motors (2010) 17 STR 514 (All.)]

38.13 Where the appellant was engaged in the activity of transmission of natural gas through pipelines for its clients (who were either suppliers or users of natural gas) from the source point to the point of utilisation pursuant to a Gas Transmission Agreement the Tribunal held that the appellant is not liable under the category of Clearing and Forwarding services since :

the relationship between the appellant and its client (suppliers/ users) cannot be termed to be that of principal and agent and hence the essential ingredient of a Clearing and Forwarding agent’s services was not fulfilled;
the appellant’s activities are more aptly covered within the category of ‘Transport of goods through pipeline or other conduit service’ which is effective from 16.6.2005 and hence cannot be taxed under the category of ‘clearing and forwarding agent services’ prior to that date.

[Gujarat State Petronet Ltd. vs. CST (2010) 20 STR 502 (Tri. – Ahmd)]

38.14 Where the petitioners were engaged in liasoning, co-ordination and supervision of coal loading at mines to ensure that proper indents are placed, requisite quality of coal is loaded and wagons are loaded to full capacity and thereby facilitated movement of coal to plants and factories of their customers, the High Court held that the petitioners prima facie would not be liable for service tax under clearing and forwarding services. [ Karamchand Thapar & Bros. (Coal Sales) Ltd. v. UoI (2010) 20 STR 3 (Cal.)].

38.15 The activity of cutting of sugarcanes and its loading and transportation upto the sugar factories does not amount to ‘clearing and forwarding agent’ services. [Ajinkyatara Sahakari Krishi Audyogik Otvs Ltd. vs. CCE (2010) 19 STR 285 (Tri-Mumbai)]

38.16 Where the assessee was involved only in canvassing of orders for his principal without any involvement in material handling, it was held that the assessee is not liable for service tax under the category of clearing and forwarding agent’s services [CCE v. Risansi Industries Ltd. (2011) 24 STR 575 (Tri-Del.)][See CCE, v. Hoganas India Ltd, (2015)37 STR 240 (Tri-Mum)

38.17 Where the assessee was appointed as consignment stockiest by his client and agreed to arrange at his own cost suitable godowns for warehousing the products and also arrange for insurance of the goods in the joint name with the client for which he was entitled to annual commission on the basis of volume of sales, the Tribunal held that the assessee was not dealing at the arms length as a buyer and seller with his client and was liable for service tax under the category of Clearing and Forwarding Agents service [PSA Polymers Ltd. v. CCE (2012) 25 STR 94 (Tri-Del)]

38.18 On facts, it was held that the assessees were not acting as a clearing and forwarding ‘agent’ but as an independent businessman qua their principals and are selling the products of their principal to their own clients without any interference of the principal and accordingly not liable for service tax under the category of ‘Clearing and Forwarding agency service’ [Kamal Auto Finance Ltd. vs. CST (2012) 26 STR 46 (Tri- Del.)]

38.19 Activities like facilitating clearances of export/ import cargo, freight booking of ocean going vessels, shifting empty containers from container yard to CFS, facilitating freight required for agro product, employing labourers for stuffing of cargo in containers, co-ordinating with shipping lines and Custom House Agent, would not fall within the ambit of clearing and forwarding agent services [Gudwin Logistics v. CCE (2012) 26 STR 443 (Tri. – Ahmd.)].

38.20 Where on facts, the High Court found that the assessee as per an agreement with the manufacturer / vendor purchased goods at a discount and sold them on his own account although at prices decided by the manufacturer / vendor, the nature of activities performed by the assessee would not amount to providing ‘clearing and forwarding services’ to the manufacturer / vendor [CCE&C vs. Trade Tek Corporation (2013) 29 STR 23 (Guj.)].

38.21 Where the service provider charged service tax on 'documentation charges' under the category of 'Clearing and Forwarding Agency Service', the Tribunal held that refund of same to the service recipient under Notification No. 17/2009-S.T. cannot be denied by its jurisdictional officers on the ground that the said charges would not be covered under the category of 'clearing and forwarding agent services' [Jollyboard Ltd. v. CCE (2013) 32 STR 357 (Tri- Mumbai)]

38.22 The assessee society was receiving the goods from its member-manufacturers at its doorstep for auction sale to member merchants. It stored the products, tested its quality, provided a finance facility for the manufacturers by way of advances, sold the products on auction whereafter the buyer took delivery of the goods. The Court held that in absence of any responsibility to collect the goods from the manufacturer’s premises nor to arrange for dispatch to the buyer, the assessee cannot be held to be a clearing and forwarding agency. [CCE Salem v. Salem Starch & MFR’s Service Indl Co-op Society Ltd, 2014 (33) STR 16 (Mad)]

38.23 Freight forwarding is distinct and different from “Clearing & Forwarding Agency Service”as defined in law and hence not liable for service tax under the category of “Clearing & Forwarding Agency” service. [Swagat Freight Carriers Pvt Ltd v. CST, Mumbai, 2014(33) STR 81 (Tri- Mum)]

39.1 Where the appellants were receiving the goods from M/s Ford India Ltd, warehousing these goods , receiving dispatch orders, arranging dispatch of these goods, and maintained records of incoming shipments and deliveries, it was held that the appellant is liable for service tax under the category of ‘clearing and forwarding agent’s services’. [Talera Logistics Pvt Ltd v. CCE, 2014 (33) STR 514]

38.24 The activity of supervision and loading of coal at the collieries and arranging for transportation of coal by rail or road to client’s plant/factory does not fall within the scope of “clearing and forwarding agent’s service”. [CST v. Shah Coal Pvt. Ltd. (2013) 32 STR 568 (Tri- Mum.)]

38.25 Where the appellant provided services for movement of coal from collieries to their client’s premises (purchasers of the coal), by co-ordinating with the collieries and railways (as agents of their clients), it was held that services provided by the appellant were liable for service tax under the category of “Clearing and Forwarding Agency services”. [Karamchand Thapar & Bros. (Coal Sales) Ltd. v. CST (2013) 32 STR 577 (Tri-Kolkata)]

38.26 Where the appellant had entered into an agreement with TATA Motors for transporting their vehicles by railway rakes in course of which they were required to stock the vehicles in their stockyard till availability of rakes with the railway, the Tribunal held that the appellants were engaged in transportation services and were not undertaking clearing and forwarding agent services. Accordingly no service tax would be payable by them under the category of clearing and forwarding agents services [Kishore Transport Services (P) Ltd v. CCE (2014) 34 STR 842 (Tri-Mum)]

38.27 The assessee provided Clearing & Forwarding services to its customer inter alia by ‘arranging for’ loading / unloading and transport. On facts, it was held that the assessee has acted only as a agent of its customer for the said activities and the demurrage / wharfage charges and local transport expenses reimbursed to the assessee at actuals would not form part of the value of taxable services provided by them [CCE v. Surya Tranport Co. (2014) 35 STR 115 (Tri-Del)].

38.28 An activity would be taxable under the category of ‘clearing’ and ‘forwarding’ agency services only when both – clearing and forwarding activities are done. Mere distribution of goods sent by another company to the assessee cannot be taxed under clearing and forwarding agency services [ CCE v Fenner (India) Ltd. (2014) 36 STR 503 (Mad.)]

39 Clubs or Association services

39.1 There has to be a quid pro quo between the members and the association/club. This has to be established before levying service tax on the fees or subscription or any other amount received by any association. Thus, membership fees received by the appellant were held not taxable under the category of “club or association” services since no specific service was provided to its members. [Ahmedabad Management Association vs. CST (2009) 14 STR 171 (Tri- Ahmd.)]

40 Commercial coaching and training

40.1 Students trained in ‘private / parallel colleges’ in Kerala are trained in subjects such as humanities, language, commerce, etc. where they are allowed to write university examinations without completing “course study” since it is not a requirement as per University Regulations. However, University Regulations prescribe a “course-study” for subjects such as science etc. which a student must as a pre-condition to write university examinations, complete in an ‘affiliated college’. The affiliated college grants a course completion certificate to students to make them eligible to write the examinations in terms of the university regulations. Drawing the above distinction between a parallel college and an affiliated college, the Kerala High court held that the affiliated college therefore confer an “educational qualification” recognized by law and hence are specifically excluded from the definition of “commercial coaching and training” while the services of coaching and training rendered by parallel colleges would be liable for service tax. However, considering the special facts of the case and also the fact that the curriculum, the examinations written and the degrees obtained from the university are one and the same for students undergoing training in parallel colleges and students undergoing training in affiliated colleges, the High Court held that the levy of service tax on parallel colleges in Kerala is discriminatory and violative of article 14 of the Constitution of India and hence prohibited the department from demanding registration for service tax [Malappuram District Parallel College Association v. Union of India (2006) 3 STT 90 (Ker.)]. Following the above case, in yet another case, the Kerala High court laid down the general proposition that an educational institution conducting any course which is a requirement to write examination to obtain degree or certificate awarded by any agency created by law are specifically excluded from the definition of “commercial coaching and training” [St. Antony’s Educational and Charitable Society v. Union of India (2006) 1 STR 137 (Ker.)].

40.2 Notification no. 7/2003 dated 1.7.2003 exempted – (i) vocational training institute (ii) computer training institute and (iii) recreational training institute from the category of commercial coaching and training from 1.7.2003 – 30.6.2004. Thereafter, Notification no. 24/2004 dated 10.9.2004 exempted only “vocational training institute” and “recreational training institute” and this notification was amended on 16.6.2005 to provide that computer training institutes are excluded from the purview of vocational training institutes. However, in the interim period between 10.9.04 – 15.6.05 the Tribunal held that computer training institutes would qualify as vocational training institutes since such training imparts skill to the trainee to undertake self-employment or seek employment after such training and accordingly be exempt. [Sunwin Technosolutions Pvt. Ltd. vs. CCE, Ranchi 2007 (7) STR 700 (Tri. – Kolkata) see also Doon Institute of Information Tech. Ltd. vs. CCE (2008) 12 STR 459 (Tri-Del.) CCE, v. Doon Institute of Information and Techno P. Ltd, (2014) 35 STR 711 (Uttarakhand)]

40.3 The appellants who provided coaching and training in business management and fashion technology, advertising, graphic design, media studies to the students who achieve skills to seek employment or undertake self employment directly after such training or coaching are eligible for exemption as a “vocational training institute” under notification no. 9/2003-S.T. dtd. 20-6-2003 and the exemption cannot be denied on the mere ground that it was not registered with AICTE as a ‘vocational Institute’. [Wigan & Leigh College (India) Ltd. vs. Jt. Com(2007) 8 STR 475(Tri-Bang)].

40.4 Where the appellants were conducting diploma or post graduation course in management but were a non-profit organisation under the Companies Act and a Public Charitable trust under the Income tax Act, 1962 and there were also restrictions on distribution of profits or dividends to their members, the Tribunal held that no service tax would be leviable under the category of commercial training or coaching service since the appellants were not providing “commercial” training with a sole object of making profit. [Great Lakes Institute of management Ltd. vs. CST (2008) 10 STR 202(Tri-Chennai).See also Magnus Society vs. CCCE (2009) 13 STR 509 (Tri-Bang.); Shri. Chandraprasad Desai Memorial Foundation vs. CST (2009) 16 STR 442 (Tri- Ahmd.); CCE v. Institute of Insurance and risk management (2010) 20 STR 836 (Tri- Bang.);]

N.B. :The above judgment may not hold good post enactment of Finance Act, 2010 wherein the definition of ‘commercial training or coaching centre’ has been amended (retrospectively w.e.f. 1.7.2003) to include all centres or institutes where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust or a society or similar other organisation under any law for the time being in force and carrying on its activity with or without profit motive.

40.5 The explanation to Section 65(105)(zzc) inserted w.r.e.f. 1.7.2003 by the Finance Act, 2010 had clarified that profit motive is not an essential ingredient for bringing a centre or institute within the fold of "commercial training or coaching centre". However, where non-profit organizations provided management courses or other post graduate courses (not recognized by law) an issue remained as to whether they would be considered as in the nature of "education" and not "training" or "coaching" and hence not liable for service tax. The matter was referred to 'the Larger Bench of the Tribunal and the Larger Hench held the taxable services of "commercial training or coaching" occurs when any institute or establishment is engaged in the activity of imparting skill, knowledge or lessons on any subject or Field (excluding sports), irrespective of whether such imparting of skill, knowledge or lessons is in respect of particular discipline or a broad spectrum of disciplines/ academic areas; irrespective of the nomenclature or description of the institute or establishment, as a coaching or training centre or an educational institution; regardless of whether an institute or establishment is incorporated or registered under any law; and irrespective of distinctions on the basis of curriculum, course content, teaching methodology, course duration or otherwise. [Great Lakes Institute of Management Ltd. vs. CST (2013) 32 STR 305 (Tri-LB)]

40.6 Where the appellants who were a non-profit making organisation engaged in doing research in advanced computing also provided training in certain aspects of advanced computing for a consideration the Tribunal held that the appellants would not be considered as a commercial training or coaching centre for the following reasons:

imparting of training for consideration is only an incidental activity undertaken by the appellants.
The appellants were not carrying out the activity with an aim to make profit since they were –

Society registered under the Societies Registration Act, 1860;

exempted under the Income-tax Act being a charitable organisation;

a scientific society recognized by the Ministry of Science & Technology of Government of India

ploughing back all incomes for the purpose of research and not distributing any dividends to its members.

the intellectual level in the activity imparted by the appellant is of very high order as against a case of coaching or training centre where the level of intellectual activity is not of a very high order but very repetitive like a drill.

Hence it could not be considered as a ‘commercial training or coaching centre’.

[Centre for Dev. Of Advanced Computing vs. CCE (2009) 14 STR 165 (Tri-Bang.); See also Inst. Of Chartered Fin. Analysts of India vs. CCE (2009) 14 STR 220 (Tri-Bang.) the appellant is in the activity of education and not coaching or training; Ahmedabad management Association vs. CST (2009) 14 STR 171 (Tri-Ahmd.); Indian School of Business vs C.C.E.C 2010(17) STR 83 (Tri-Bang)]

N.B. :The above judgment may not hold good post enactment of Finance Act, 2010 wherein the definition of ‘commercial training or coaching centre’ has been amended (retrospectively w.e.f. 1.7.2003) to include all centres or institutes where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust or a society or similar other organisation under any law for the time being in force and carrying on its activity with or without profit motive.

40.7 In section 65(105) (zzc) defining “taxable service” in the context of “commercial training or coaching centre”, read with section 65(26) and 65(27) defining ‘commercial training or coaching’ and ‘commercial training or coaching centre’ respectively, the word ‘commercial’ qualifies the ‘coaching or training centre’. It doesn’t qualify ‘coaching or training’. It qualifies the centre. Thus, where the appellants, a society registered under Societies Registration Act, 1860 and also exempt from income tax as a charitable organization conducted various training programmes for professional people in service in all fields of administration and management, the Tribunal held that as long as the institute is registered under Societies Registration Act and is also exempted from income-tax, it cannot be considered as ‘commercial’ centre and accordingly not liable under the category of “Commercial training or coaching” services. [Administrative Staff College Of India vs. CCE (2009) 14 STR 341 (Tri-Bang.)].

40.8 Providing training to candidates, sponsored by various insurance companies to appear for examinations conducted by IRDA which are required to be cleared to work as an insurance agent would be considered as a vocational training entitled for exemption from service tax under Notification No. 9/2003 – S.T. [Pasha Educational Training Inst. vs. CCE (2009) 14 STR 481 (Tri-Bang.)]

40.9 Where the appellants provided ‘abacus’ training that made learning arithmetic / math enjoyable, the Tribunal held that the appellants provided ‘recreational training’ in terms of notification no 9/2003 dated 20.06.2003 and accordingly exempt [FAST Arithmetic vs ACEST (2010) 17 STR 158 (Tri-Bang.)]. See also Abacus Brain Study(P) Ltd v CCE (2013) (30) STR 401]

40.10 Coaching provided by parallel colleges, having memorandum of understanding with the University, to the students registered under the distance education programme of University leading to issuance of certificate or diploma or degree recognized by law is not liable for service tax. [JMC Educational Charitable Trust vs. CCE (2011) 21 STR 421 (Tri-Chennai) relying onMalappuram District Parell College Association vs. UOI (2006) 2 STR 321 (Ker.); See also Trichy Inst of Management Studies (P) Ltd v. CCE (2011) 22 STR 533 (Tri- Chennai)]

40.11 On facts, the tribunal held that, where the appellant imparted computer training to educated unemployed youth under Yuva.com programme (announced by the Government of Karnataka) and the said training equipped the candidates with skill and competence to set up their ventures, the appellant would be considered as ‘vocational training centre’ and would qualify to claim exemption under notification no. 24/04-ST dated 10.9.2004. [ Svenpa Systems vs. CCE (2010) 19 STR 891 (Tri-Bang)]

40.12 Notification no. 7/2003 dated 20.6.03 exempted – (i) vocational training institute; (ii) computer training institute; and (iii) recreational training institute for the period 1.7.03 – 30.6.04. This notification specifically defined the scope of the three types of institutes. This notification was withdrawn from 1.7.04 and another Notification no. 24/2004 dated 10.9.04 was issued granting exemption to ‘vocational training institute’ and ‘recreational training institute’. Further, on 7.6.2005 the Government issued another notification no. 19/2005 w.e.f. 16.6.05 amending the 2004 notification to the effect that exemption shall not apply to computer training institutes. On the question whether the appellant, a computer training institute, is liable for service tax from 10.09.04 – 15.6.05, the Supreme Court held –

‘computer training institute’ was consciously excluded from purview of notification no. 24/2004 dated 10.09.04 so as to restrict the benefit of exemption to only ‘vocational training institutes’ & ‘recreational training institutes’.
Amendments to notification of 2004 vide Notification. No 19/2005 dated 7.6.05 was only in the nature of clarification.

Accordingly, computer training institutes are liable to pay tax during the period 10.09.04 to 15.6.05. [CST v. Sunwin Technosolution P.Ltd. (2011) 21 STR 97 (SC)]

40.13 Abacus training imparted to students being in the nature of ‘recreational training’ is exempt from payment of service tax under Notification no. 24/2004 - ST dated 10.9.2004.Similiarly Abacus training imparted to teachers that enable the teachers to either get employment in a Franchisee or open their own training centre (self employment) being in the nature of a ‘vocational training’ is also exempt under the above notification [ K.K Academy Pvt. Ltd. vs. CST (2011) 24 STR 702 (Tri.-Chennai)].

40.14 An institute imparting training in export-import merchandising and retail management enabling students to take employment or undertake self employment after the training would qualify as a “vocational training institute” and the exemption cannot be denied on the ground that “vocational training” would mean only training in skills like carpentry, smithy, making of gem and jewellery etc. which are skills meant for people with relatively low levels of education and training imparted to a person with education upto 12th Standard [Ashu Export Promoters (P) Ltd. v. CST (2012) 25 STR 359 (Tri – Del) See also WLC College India Ltd. (2012) 27 STR 377 (Tri.-Del.) wherein providing training in the field of business, fashion, technology, advertisement and graphic design, media, hospitality and hospital administration has been held as vocational training].

40.15 Where the assessee had sent its employees to its overseas parent company for training, which training was imparted without charging any fee, for which the assessee had incurred expenditure in foreign exchange for travel, accommodation and other expenses incurred by its employees while staying abroad and not for training it was held that the assessees were not liable to pay any service tax under reverse charge mechanism as they had not paid any remuneration for training. If at all any charges were paid for training outside India then the same would not be liable for service tax as per provisions of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 [CST vs. Heidelberg India Pvt Ltd. (2013) 29 STR 620 (Tri-Chennai)].

40.16 Institute of Chartered Financial Analysts of India (ICFAI) and ‘ICFAIAN Foundation’, which were societies registered under the Societies Registration Act, 1860 and BIFT, IIRM and IBS which were companies incorporated under the Companies Act, 1956, were offering various courses in finance and management and were issuing certificates generally in the name of “ICFAI University”. On an issue whether these services would be liable for service tax under ‘commercial, coaching or training’ services after the retrospective amendment by Finance Act, 2010, the Tribunal held as follows:

The argument that they are providing ‘education’ (which is not liable for service tax) and not ‘training’ or ‘coaching’ cannot be accepted since ‘education’ is a result of study, instruction, training, coaching and a line cannot be drawn to separate the two. The fact that entities awarding ‘educational qualification recognized by law’ are specifically excluded would show that they would have otherwise fallen into the ambit of a ‘commercial, training or coaching centre’.
The fact that they were a non-profit making organization and hence were not commercial would not make a difference in view of the retrospective amendment that “any training or coaching imparted for consideration” by an entity irrespective of profit motive is regarded as a “commercial, training or coaching centre”.
Such establishments cannot be regarded as awarding “a certificate / diploma / degree / educational qualification recognized by law” since neither ‘ICFAI University’ is a legally constituted body to issue the same nor is the degree ‘recognised by law’. Acceptance of any such degree / certificate / diploma by any varsity or other institution abroad cannot mean recognition thereof by Indian law.

Thus, the appellant were providing ‘training or coaching’ to students and hence liable for service tax under the category of ‘commercial, training or coaching service’ [I.C. Financial Analysts of India v. CC & CE (2013) 30 STR 273 (Tri.-Bang.)].

40.17 The petitioner, an Aircraft Maintenance Engineering (AME) Training School provided AME training. The school and the course were approved by the DGCA under the Aircraft Act / Rules and the Civil Aviation Requirements (CAR) issued by the DGCA under the Aircraft Rules. The candidates completing the course were by law required to be issued a ‘course completion certificates’ in an approved format of DGCA. However, the candidates were required to pass an examination conducted by DGCA to render services of aircraft repair and maintenance whether or not they took training from an AME training school. Training centres and establishments issuing a ‘certificate’ / degree / diploma / educational qualification ‘recognized by law’ were excluded from the ambit of service tax upto 30.4.2011 and w.e.f. 1.5.2011, training / coaching leading to grant of a ‘certificate’ / degree / diploma / educational qualification ‘recognized by law’ was exempt. In a writ, the High Court held that the ‘course completion certificate’ issued by the petitioner school was ‘recognized by law’ and therefore the petitioner school is excluded from the ambit of service tax upto 30.4.11 and the AME training lead to the grant of a ‘certificate recognized by law’ and therefore exempt w.e.f. 1.5.2011 in view of the following –

the expression ‘recognized by law’ is a wide expression and even if a certificate is not a product of a statute but has some kind of approval in the law it would be considered as ‘recognized by law’. Having regard to the Aircraft Act / Rules / CAR the High Court held that ‘course completion certificate’ issued by the petitioner was a ‘certificate recognized by law’.
The mere fact that the candidates completing the course are required to clear an examination conducted by DGCA to obtain a licence to render aircraft maintenance services would not make the ‘course completion certificate’ anytheless ‘recognized by law’.

[Indian Institute of Aircraft Enginering v. UoI (2013) 30 STR 689 (Del.)See ,CCE v. Garg Avaiations Ltd. (2014) 35 STR 441 (All.)

40.18 Courses like fashion designing, graphic arts, media communication, digital communication, etc. are in the nature of vocational courses eligible for exemption under notification no. 24/2004-S.T., dated 10.9.2004. [B.D.Somani Inst. Of Art & Fashion Technology v. CST – I, Mumbai, (2013) 31 STR 601 (Tri. – Mumbai)]

40.19 Where the assessee was engaged in imparting skills in areas relevant to journalism, print or audio-visual and documentary film making and had claimed exemption as a 'vocational training centre' under notification nos. 9/2003-S.T and 24/2004-S.T. it was held that the exemption cannot be denied on the ground that there was no evidence of employment / self employment by trainee after completion of course as was sought to be done by the Revenue [IILM Film & Media School v. CST (2013) 32 STR 321 (Tri-Del)].

40.20 Where the appellants conducted training programme for various bank officials and also post-graduate diploma for the students in Banking Management, for which it charged a lumpsum amount from the participants or sponsors, the Tribunal held that the appellant's activity would be covered under the category of 'Commercial Coaching or Training' services and accordingly would be liable for service tax [National Institute of Bank Management v. CCE( 2013)32 STR 340 (Tri-Mum)]

40.21 Where the appellant conducted a two year course titled ‘post graduate diploma in management’ which was essentially theory oriented and academic in nature covering a broad spectrum of subjects as economics, business communication, psychology and organizational behaviour, etc., the Tribunal held that the appellant did not provide any vocational training that imparted skills to seek employment or undertake self-employment after such training and hence was not entitled to exemption under Notification No.24/2004-ST dated 10.9.2004 (for vocational training institutes). [Sadhana Educational & People Dev Services Ltd v. CCE, 2014(33) STR 575 (Tri-Mum)]

40.22 Where the appellant was engaged in imparting training in specified courses in fields of information technology and management which it contended was in the nature of education, the Tribunal held that –

since the course conducted by the appellant imparted specific skills and training in specific areas the activities will come under the category of ‘training or coaching’.
since every education results in enhancement of skill and entails training or coaching there cannot be a distinction between training and coaching & general education.

Accordingly the appellant were liable for service tax under the category of commercial training or coaching services. [I2IT Pvt. Ltd. v CCE (2014) 34 S.T.R. 214(Tri.-Mumbai)]

40.23 Where the appellant were engaged in providing computer training recognized by Maharashtra State Board of Vocational Examination but the certificate in respect of the course was issued by the State Board (and not by the appellant), the Tribunal held that the benefit of exclusion from the definition of Commercial Training and Coaching Centre service would not be available to the appellants. [Opportunities India Solutions Pvt. Ltd. v CST (2015) 37 STR 520 (Tri.-Mum.)]

41 Construction of Residential Complex service

41.1 Where the petitioners were engaged in development and sale of residential flats to various purchasers who booked such flats on payment of an advance under an agreement for sale which was executed and registered during the course of construction and the title to which passed after the completion of the construction the High Court held -

“service” is an act of doing something useful, rendering assistance or help. Service does not involve supply of goods; “service” rather connotes transformation of use/user of goods as a result of voluntary intervention of “service provider” and is an intangible commodity in the form of human effort. To have “service”, there must be a “service provider” rendering services to some other person(s), who shall be recipient of such “service”.
Under the Finance Act, 1994, “service tax” is levied on “taxable service” only and not on “service provider”. A “service provider” is only a means for deposit of the “service tax” to the credit of the Central Government. Although the term “service receiver” has not been defined in the Finance Act, 1994, the “service receiver” is a person, who receives or avails the services provided by a “service provider”.
The petitioners were not engaged in rendering any services of construction of residential complex to the prospective purchasers but were merely undertaking the construction activities for its own self and any advance, made by a prospective buyer, or deposit received by the petitioner-company, is against consideration of sale of the flat/building to such prospective buyer and not for the purpose of obtaining any “service” from the petitioner-company. Accordingly amounts received from prospective purchasers were not liable for service tax.

[Magus Construction Pvt. Ltd. vs. UOI (2008) 11 STR 225 (Gau.). Also refer circular no.108/2/09 dated 29.1.09].

41.2 Construction and transfer of individual residential units would not be liable for service tax under the category of “Construction of residential complex services” since the service is not for construction of a residential complex comprising of more than 12 residential units. [ Macro Marvel Projects Ltd. vs. CST (2008) 12 STR 603 (Tri-Chennai); See also A. S. Sikarwar vs. CCE (2012) 28 STR 479 (Tri. – Del)].

41.3 In the present case the petitioners challenged the validity of Explanation inserted to section 65(105)(zzzh) [construction of complex services] on the grounds that the explanation widens the scope of levy beyond the concept of ‘service’ by including therein sale of flats and taxing of such sale and purchase was beyond the legislative competence of Union Legislature. Dismissing the above contention, the Hon’ble High Court held as follows:

the levy of tax is on service and not on service provider and construction services are certainly provided even when a constructed flat is sold.
Taxing of such transaction is not outside the purview of the Union Legislature as the same does not fall in any of the taxing entries of State list.

Hence the Explanation inserted by the Finance Act, 2010 is constitutional.

[G.S. Promoters v. Union of India (2011) 21 S.T.R. 100 (P& H)]

41.4 Where the appellant constructed residential quarters for the CPWD (Government of India) to rent the same to the employees of Income Tax Department (Government of India), the Tribunal held that since the complex was intended for “personal use” within the meaning of clause (a) of Explanation to s. 65(91a) of the Act which includes permitting the complex for use as residence by another person for rent the appellant’s services would fall within the exclusion part of the definition of ‘residential complex’ and accordingly would not be liable for service tax. [Khurana Engineering Ltd v. CCE (2011) 21 STR 115 (Tri-Ahmd)]

41.5 Where the respondent Co-op. Housing Society had availed the services of Contractor for constructing the residential units for its members it was held by the High Court relying upon the High Court judgment in the case of M/s Sujal Developers that the housing society is not liable to pay service tax since the society cannot be said to have supplied any services to its members (it being a service to oneself). Further, the explanation inserted in sub-clause (zzzb) of section 65(105) of Finance Act, 1994 w. e. f. 1.7.2010 would also not be applicable since it was introduced in the statute book long after the taxing event in the present case had arisen and there was no indication in the amendment to make it retrospective or clarificatory in nature. [ CST v. Shrinandnagar – IV Co-op Housing Society Ltd. (2011) 23 STR 439 (Guj);CST v. Sujal Developers, (2013) 31 STR 523 (Guj.)].

41.6 The explanation to Section 65 (105) (zzzh) added by the Finance Act, 2010 w.e.f. 1.7.2010 which had sought to tax sale of under construction flats where monies are received from the buyers before completion of construction is not retrospective in nature [CCE vs. Skynet Buildres, Developers, Colonixer (2012) 27 STR 388 (Tri. – Del.); See also CCE v. Amar Nath Aggarwal Builders P. Ltd. (2012) 28 STR 364 (Tri.-Del.); CCE vs. Green View Land & Buildcon Ltd. (2013) 29 STR 527 (Tri. – Del.)].

41.7 Where the assessee was engaged in construction of residential complexes on its own land and had and entered into agreement for sale of residential units with the customers and also took advances from them but had not paid service tax thereon, the Tribunal relying on the Gauhati High Court decision inMagus Construction Pvt. Ltd. v. Union Of India (2008) 11 STR 225 (Gau.) held that no service tax is payable by the assessee [ CCE vs Vee Aar Developers Pvt. Ltd. (2013) 30 STR 564 (Tri-Del)]

41.8 Construction activity on own plot of land and sale thereof to prospective buyers is not taxable as there is no service provided. [CCE v. Bee Gee Construction Co. (2013) 31 STR 86 (Tri-Del)]

41.9 Notification No.15/2004 dated 10.09.2004 allowed 67% abatement on construction services subject inter alia to the condition that no cenvat credit on inputs and capital goods are taken. This notification which was in effect upto 28.02.2006 was rescinded by Notification No.1/2006 dated 01.03.2006 which allowed an abatement of 67% but subject to an additional condition that no cenvat credit on input services is taken. Where the assessee in respect of a single construction contract claimed benefit of abatement upto 28.02.2006 and the benefit of cenvat credit with effect from 01.03.2006 (without claiming abatement), it was held that in absence of any restriction that the benefit under Notification No.15/2004 dated 10.09.2004 has to be availed during the entire currency of the contract, the assessee’s stand was correct. [CCE v Prasad & Company 2014 (33) S.T.R. 665 (Tri.- Delhi)]

41.10 In a challenge to the validity of imposition of service tax on “commercial or industrial construction services” [S.65(105)(zzq)] and “construction of (residential) complex services” [S.65(105)(zzzh)], the petitioners contended that in construction contracts which involved supply of labour and materials (“composite contracts”), service tax cannot be imposed under the aforesaid two taxing entries and the first time such composite contracts became taxable was when the taxing entry of “works contracts services” [S.65(105)(zzzza)] was introduced w.e.f. 1.6.2007. The petitioners also contended that the notification nos. 15/2004-S.T. dated 10.9.2004, 19/2005 dated 7.6.2005, 18/2005-ST dated 7.6.2005 and 1/2006-ST dated 1.3.2006 granting abatements of 67% in respect of taxing entries u/s 65(105)(zzq) and section S.65(105)(zzzh) are also unconstitutional. Rejecting the contention of the petitioners, the High Court held:

Introduction and imposition of Service Tax on “works contract services” by Finance Act, 2007 does not mean that the scope and ambit of “commercial and industrial construction” service or “construction of (residential) complexes” services needs to be read down as excluding composite contracts and covering only labour contracts. The aforesaid taxing entries would cover pure labour contracts as well as composite contracts. The levy of service tax on composite contracts under sections 65(105)(zzh) and 65(105)(zzq) is valid.
Service Tax can be levied and imposed only on the “service” element and not levied and charged on material or goods used, as the power to levy sales tax or value added tax on the sales of goods is with the State Governments.
The notifications in question dated 10th September, 2004, 7th June, 2005 and 1st March, 2006 granting abatement of 67% towards the value of the material used for computing the Service Tax payable ensure that only the service element is taxable. It is an alternative to an otherwise subjective determination in each case, which may be cumbersome and require a detailed examination for ascertainment of the service element. The formula prescribed is not mandatory or compulsory. Further, it will apply at the option of an assesee. It will be applicable only when the required parameters are met and is not illegal and ultra vires the Act, i.e. the Finance Act, 1994. It is also not contrary to the charging section/provisions of the Finance Act imposing levy of Service Tax.
Merely because no rules are framed for computation of the service component, it does not follow that no tax is leviable. An assessee can state that the service component of a composite contract should be computed in a fair and reasonable manner and accordingly taxed.

[G.D. Builders v. UOI, 2013(32) STR 673 (Del)]

41.11 The assessee, a developer of residential complex had paid service tax on the amounts received by it from the prospective flat purchasers during the period December ‘05 to October ‘06, in respect of which it had subsequently claimed refund. The refund claim was rejected by the Department. On appeal, the Tribunal held -

(a) Since the construction activities was carried out by the assessee themselves or by appointing contractor who had paid service tax on his services, the construction carried out by the assessee would not be liable for service tax in view of Board Circular No.332/35/2006-TRU dated 1.8.06. Such services were brought within the ambit of service tax only w.e.f. 1.7.10.

(b) As regards department’s contention of unjust enrichment in absence of any evidence regarding collection of service tax from customers, the claim of refund would not be hit by bar of unjust enrichment.

[Krishna Homes v. CCE (2014) 34 STR 881 (Tri-Del)]

42 Commercial or Industrial Construction service’

42.1 Construction of a driveway in a petrol pump is excludible from the ambit of ‘commercial or industrial construction services’ as being construction of ‘roads’ and it is irrelevant whether the road is for public utility purpose or is part of a commercial complex [ CST vs. Shilpa Constructions Pvt. Ltd. (2010) 19 STR 830 (Tri. – Ahmd.)]

42.2 Construction of warehousing complexes for the Central Warehousing Corporation, an undertaking of Government of India, which rents these warehouses and earns revenue is liable for service tax under the category of ‘Commercial or industrial construction service’, it being a commercial construction for the Government. [A. B. Projects Pvt. Ltd. vs. CCE (2010) 19 STR 886 (Tri. –Mum)]

42.3 Laying of pipelines for Gujarat Water Supply and Sewerage Board (GWSSB) for supply of drinking water to gram panchayats and nagar panchayats would not be liable under ‘commercial or industrial construction services’ [which includes construction of pipeline or conduit] since the pipelines were not laid to facilitate any commercial or industrial activity of GWSSB. [Nagarjuna Construction Co. Ltd. vs. CCE (2010) 19 STR 259 (Tri-Bang.)relying on Indian Hume Pipe Co. Ltd. vs. CCE (2008) 12 STR 363 (Tri) See also Larsen & Toubro Ltd. vs. CST (2011) 22 STR 459 (Tri. – Ahmd.)]

42.4 Where the appellant was engaged in laying of long distance pipe lines for the Gujarat Water Supply and Sewerage Board (GWSSB), the Tribunal held that the ‘pipelines’ were not used by GWSSB primarily for commerce or industry since-

the sale of water was not the primary function of GWSSB. GWSSB was established for rapid development and proper regulation of drinking water supply and sewerage services in the state of Gujarat;
GWSSB was established by the State for the purpose of fulfilling the basic requirement of the people i.e. supply water at the nominal rates.
The water was sold at the subsidized rate i.e. even below the operating cost.

Hence, the appellant was not liable for service tax under the category of “Commercial or Industrial Construction services”. [ Dinesh Chandra Agarwal Infracon P. Ltd. vs. CCE (2010) 21 STR 41 (Tri. – Ahmd.)]

42.5 Prior to insertion of explanation to section 65(105)(zzq) w.e.f. 1.7.2010 services provided by the builder to the buyer would not be liable for service tax in view of the Board Circular dated 29.01.2009 as the property would belong to the builder till the completion of transaction. Accordingly the services would be in the nature of self-service and hence not liable for service tax. [R.F.Properties & Trading Ltd. v. CCE (2013) 31 STR 578 (Tri. – Del.)] See Also[CCE v. U.B.Construction (P) Ltd , 2013(32) STR 738 (Tri-Del)]

42.6 Sports Complex Stadium constructed for the purpose of holding games which was allowed to be used by the public later on, on payment of user charges is a public facility for the recreation of the public and it does not come under the category of commercial or industrial construction merely because some amount is charged for using the facility. Hence construction of sports stadium being a non - commercial construction is not liable for service tax under the category of “Commercial or Industrial Construction service”. [B.G.Shirke Construction Technology Pvt Ltd v. CCE, 2014(33) STR 77 (Tri-Mum)]

42.7 Whereon facts the tribunal found that the appellant was engaged in the construction of major ground balancing reservoirs, for raising the height of existing ground balancing reservoirs and for protection work of existing ground balancing reservoirs and extension of secondary reservoirs and these reservoirs were used for the supply of water to industrial units or commercial terms it was held that the services of appellant were liable to service tax under the category of Commercial or Industrial Construction Services [Radius Corporation v. CCE (2014) 33 STR 416 (Tri.-Del.)]

42.8 Where the assessee constructed a hostel for residence of students studying in a medical institute, it was held that the hostel was not used for an activity of commercial or industrial nature, in view of CBEC Circular No 80/10/2004-ST dated 10.09.2004 and accordingly the appellants were held as not liable to pay service tax [Anand Construction Co v. CCE (2013) 32 STR 451 (Tri-Mum)].

42.9 The appellant’s in service of laying long distance pipeline /conduit for Gujarat Industrial Development Corporation was held to be for commercial or industrial purpose and accordingly liable for Service Tax under the category of ‘commercial or industrial construction services’[ Graphite India Ltd v. CCE( 2014)36 STR 948(Tri-Mumbai)]

42.10 Where on facts (perusal of work order), the appellant’s activities of repair, alteration, renovation or restoration were pertaining to an existing building or civil structure, it was held that the appellant’s activities were classifiable under s. 65(25b)(d) viz., repair, alteration, renovation or restoration services and not under s. 65(25b)(c) viz., completion and finishing services [since these dealt with new construction] and hence they were eligible for the benefit of abatement under Notification No. 1/2006-S.T. [The Carpenters v. CCE&ST (2014) 36 STR 1137 (Tri.- Mumbai)]

42.11 Construction services in respect of embassy building and its staff quarters provided not being meant for commercial or industrial use is not liable for service tax under commercial or industrial construction services.[Bhayana Builders Pvt. Ltd. v. CCE (2015) 37 STR 525 (Tri.-Del.) See also Paharpur Cooling Towers Ltd. v. CCE&C (2015) 37 STR 550 (Tri.-Del.) ]

43 Construction Services vs. Works Contract Services

43.1 Where the appellant was registered as works contractor under the state sales tax law and paid sales tax on the construction contracts executed by it, the Tribunal held that the services of the appellant would be liable for service tax only w.e.f. 1.6.2007 under the category of “works contract services” and not under commercial or industrial construction / construction of complex services prior to that date [Soma Enterprises Ltd. vs. CCE (2009) 15 STR 559 (Tri-Bang.); See also CEMEX Engineers vs. CST (2010) 17 STR 534 (Tri-Bang.). Contra Sunil Hi-Tech Engineers vs. CCE (2010) 17 STR 121 (Tri-Mumbai)].

44 Consulting Engineer

44.1 M/s. Indian Oil Corporation Ltd. awarded a contract for construction of a diesel hydro-desulphurisation plant to the appellants on a lumpsum turnkey basis. The contract involved “residual process design, detailed engineering, procurement, supply, construction, fabrication, erection, installation, testing, commissioning and mechanical guarantee”. The department sought to tax the residual process design and detailed engineering, commissioning of plant under the category of consulting engineers. After noting various clauses of the contract the Tribunal held that “Thus, a perusal of the clauses of the contract leaves no doubt that the appellant contract with IOC was a work contract on turnkey basis and not a consultancy contract. It is well settled that a work contract cannot be vivisected and part of it subjected to tax. The impugned orders have proceeded to do precisely that. Therefore, they are required to be set aside”. Thus, in case of works contract, the contract cannot be split into a services / labour component and material component in order to levy service tax on the service / labour component. [M/s. Daelim Industrial Co. Ltd. v. Commissioner of Central Excise (2003) 155 ELT 457 (Tri-Del.)See also Larsen & Toubro Ltd. vs. CCE – 2004 (174) ELT 322 (Tri.-Del),CCE v. Shapoorji Pallonji and Co. Ltd. (2006) 1 STR 164 (Tri-Del.), CCE v. Flex Engineering Ltd. (2006) 1 STR 208 (Tri-Del.), CCE v. Larsen & Toubro Ltd. (2006) 4 STR 63 (Tri-Mum.), Kerala State Electronics Dev. Corpn. Ltd. v CCE(A) (2007) 8 STR 163 (Tri. – Bang.), Orissa Sponge Iron Ltd. v.CCE (2007) 82 RLT 808 (CESTAT – Kol.), Transformers & Electricals Kerala Ltd. vs. CCE (2008) 9 STR 285 (Tri. – Bang.), Jyoti Limited vs. CCE (2008) 9 STR 373 (Tri. – Ahmd.), Air Liquid Engg. India Pvt.Ltd. vs. CCE (2008) 9 STR 486 (Tri-Bang), CCE vs. Ishikawajima-Harima Heavy Ind. Co. Ltd. (2009) 13 STR 650 (Tri-Ahmd.)]

44.2 The appellants who provided services to the owner of a plant under an operation & maintenance agreement were fully autonomous and responsible for the performance of operation and maintenance. Engineering issues if any were also attended to by the appellants, during the course of the operation of the plant. They were not required to render any advice or take any orders from the owner of the plant. On these facts the Tribunal held that the appellants are not liable for service tax under the category of Consulting Engineers, since service tax is attracted only in a case involving rendering of engineering consultancy and in the present case there are no two parties, one giving advise and the other accepting it. [Rolls Royce Indus. Power (I) Ltd. vs.CCE 2004 (171) E.L.T. 189 (Tri. - Del.)]

44.3 In the present case the appellants paid an amount of royalty for technical know how, equipment, skill, expertise and services for production of VAT dyes to M/s. Ciba Geigy Ltd., Switzerland. The lower authorities sought to tax the appellants in respect of the amounts paid by them under the category of consulting engineering services. The Tribunal quashed the demand, set aside the penalties and held as follows :

During the period under dispute, the person liable to pay tax in respect of services provided by non-residents or persons from outside India was such person or his authorized representative. Since the fact that the appellants were authorized representatives of Ciba Geigy Ltd. was not forthcoming from the records the appellants could not be fastened with the tax liability.
Since royalty is a share profit reserved by the owner for permitting the use of his property, payment of royalty for the use of technology and know how cannot be equated with any services to be provided by Ciba Geigy Ltd. Payment of royalty is not payment for a service. Hence such royalty payments are not liable for service tax.
The reliance on the agreement with Ciba Geigy Ltd. which stipulates that payment to be made by the appellants are subject to withholding tax cannot be a reason for fastening service tax liability on the appellants.
The recipient of services cannot be made liable for service tax for the period prior to the amendment in rule 2(1)(d) in August 2002. The said amendment provides that in respect of services provided by non-residents or persons from outside India who do not have an office in India it is the person who receives the services in India who is liable for payment of service tax.

[Navinon Ltd. vs. CCE 2004 (172) E.L.T. 400 (Tri.-Mumbai) See also Bajaj Auto Ltd v/s CCE (2005) 179 ELT 481 (Tri-Chennai);CCE v. Leibert Corporation (2014) 33 STR 161 (Tri. -Mum)]

44.4 The assessee had obtained technical know-how and consultancy services from abroad and paid royalty on such services. Revenue had demanded service tax on such services received by the assessee by invoking Rule 6 of the Service Tax Rules, 1994 as it then stood (which stated that in respect of services provided by non-resident in India, the service tax thereon shall be paid by any person in India authorized by such non-resident). On appeal the Tribunal held that –

(i) supply of technical knowhow and payment of royalty thereon does not fall under the taxable category of ‘Consultancy Engineer Service’;

(ii) the overseas service provider had not authorized the assessee to pay service tax on its behalf;

(iii) the services were received from abroad which would be taxable only w.e.f. 18.04.2006 i.e. after enactment of section 66A which enables the Government to levy service tax on such services under reverse charge basis, and not prior to that date.

[CCE & Cus v. L& T Ltd. (2015) 37 STR 156 (Tri-Mum)]

44.5 By a Technical Collaboration Agreement M/s. Yamaha Co. Ltd., Japan granted the right to use Technical information (including Intellectual Property Rights such as designs, patents, utility models, etc.) and the use of their Trademarks to M/s. Yamaha Motor India Pvt. Ltd. for the manufacture of YBX model motorcycles in India. As part of the agreement certain teaching services which covered personal instruction and training was also to be given by the Japanese company.The lower authority sought to tax the transaction under the category of Consulting Engineering services. Allowing the appeal the Tribunal held –

the consideration is not for any consultancy service rendered;
it is for the transfer of intellectual property;
the relationship between the parties is not one of consultant and client, but seller and buyer of assets;
the value of incidental advice, if any, cannot be cut out and subjected to service tax.

[Yamaha Motors (I) Pvt. Ltd. v. CCE (2005) 186 E.L.T. 161]

44.6 The Tribunal observed “advice” and “consultancy” services in a discipline of engineering envisage an intangible service. Further, the words “technical assistance” which follows the words “advice” and “consultancy” are required to be interpreted ejusdem generis with “advice” and “consultancy” and would also mean an intangible service. Thus, services of repairs and maintenance of machines which is a tangible service inasmuch as they are physically carried out would not be liable for service tax under the category of consulting engineering services. These services became taxable only from 1.7.2003. [ Roots Multiclean Ltd. v. CCE (2006) 1 STR 17 (Tri-Chennai) see also Lakshmi Automatic Loom Works Ltd. v. CCE (2007) 7 STR 435 (Tri-Chennai)]

44.7 On facts, where the assessee supplied manpower to its client which worked under the instructions of the client for successful completion of pre-commissioning, commissioning, operation and maintenance of plant it was held that such services are not liable for service tax under the category of ‘Consulting Engineer Service’ since the assessee cannot qualify as a ‘Consulting Engineer’ and the activities undertaken by the assessee cannot be considered as ‘advice’, ‘consultancy’ or ‘technical assistance’ in nature [Reliance Industries Ltd. vs. CCE (2011) 23 STR 555 (Tri-Ahmd.)]

44.8 Where the appellant entered into an agreement with a foreign company for – (i) transfer of technical know under a licence; and (ii) provision of technical assistance in implementation and use of the technical know how in India, and the consideration for each of the above components was separately specified, the Tribunal observed that –

The licencing of technical know is not a service and no service tax is leviable thereon;
The ‘utility’ of the technical information was first targeted in India in the plant of the appellant where the services would be considered to be received and hence there is no substance in the contention that services were not rendered in India.
The amount paid in respect of provision of technical assistance in implementation and use of the technical know how in India would however be distinct and different from the licence and be liable for service tax under the category of consulting engineering services.

[Indian Farmers Fertilizer Co-op. Ltd. v. CCE (2007) 5 STR 281 (Tri-Del.) See also Prudent Communications Sys P. Ltd. v. CCE (2007) 5 STR 264 (Tri-Bang.) for proposition (i)]

44.9 Services of supervising installation and commissioning equipments constituting an ‘oxygen plant’ would not be liable for service tax under the category of consulting engineering services but only under commissioning and installation services which is taxable w.e.f. 1.7.2003 [ Southern Iron & Steel Co. v. CCE (2008) 12 STR 725 (Tri-Chennai)].

44.10 Services of installation and commissioning of machinery are liable for service tax only w.e.f. 1.7.2003 under the category of ‘errection, commissioning and installation’ services and not prior to that date under the category of ‘consulting engineering’ services. [ CCE vs. Gleason Works (India) Ltd. (2011) 22 STR 607 (Tri-Bang.)]

44.11 Where the appellants activities viz., testing and inspection of materials, machinery, designs etc., were classifiable under the category of ‘technical inspection and certification services’ w.e.f. 1.7.2003 the Tribunal held that the services rendered prior to 1.7.2003 would not be liable for service tax under the category of consulting engineer services. [Indian Institution Of Quality Assurance vs. CCE (2009) 14 STR 40 (Tri-Chennai)]

44.12 Where the agreement was mainly for transfer of technical know-how/ intellectual property for manufacture of cots and aprons but also included technical advice, technical assistance, training, etc. the Tribunal held that technical advice, technical assistance, training, etc. is not liable for service tax under the category of consulting engineering services since they are incidental in the process of achieving the dominant objective of manufacturing of licenced product as per the agreement and hence cannot be identified as constituting consulting engineer service. [Day International Inc. vs CCE (2009) 14 STR 333 (Tri- Chennai); See also B.E.Gelb Consultancy Services vs. CCE (2009) 14 STR 241 (Tri-Chennai)].

44.13 Prior to 16.6.2005, soil testing and survey work would not be liable for service tax under the category of consulting engineering services since post 16.6.2005, they are specifically covered under “site formation and clearance, excavation and earthmoving and demolition” and “survey and map-making services” respectively [Geo Foundations & Structures Pvt. Ltd. v. CCE (2009) 15 STR 408 (Tri-Bang.)].

44.14 Property valuation by an individual architect is not liable under the category of consulting engineering services. [CCE v. Sthapatya Rachana (2009) 15 STR 438 (Tri.- Ahmd.)]

44.15 Where the assessee company executed a works contract of design, development, commissioning etc., of an oil free compressor system for its client during the period 1997–2001 it was held that the assessee is not liable under ‘consulting engineering services’ –

since services rendered by ‘companies’ were not liable prior to 1.5.2006 under this category;
since the assessee company’s service fall under works contract services which was brought into the ambit of service tax only w.e.f. 1.6.2007.

[CST vs. Turbotech Precision Engineering Pvt Ltd, (2010) 18 STR 545 (Kar)]

44.16 The appellant entered into a contract with IOCL for construction of a storage tank and certain utilities which involved drawing, designing and detailed engineering etc., and separate prices were demarcated for such activities. The department contended that the activities of drawing, design etc. were liable under the category of ‘Consulting engineering services’ since after the 46^th amendment to the Constitution a works contract can be vivisected and the service component of it could be subjected to service tax under the relevant entries. Dismissing this contention the Tribunal (Third Member bench) held that –

The ruling in Daelim’s case [(2006) 3 STR 124 (Tri-Del.)] given by a division bench of the Tribunal holding that a works contract cannot be vivisected and part of it be subjected to service tax and consistently followed by co-ordinate Benches in numerous subsequent cases is still binding on co-ordinate benches;
The 46^th amendment to the constitution was made with an intent to enable the States to levy sales tax on the sale component of a works contract. It did not purport to enable the central excise authorities to levy any tax on the service component of a works contract.
Service portion of the works contract is subject to service tax levy only post 1.6.07 and not prior to 1.6.07

[CCE vs Indian Oil Tanking Ltd 2010 (18) STR 577 (Tri-Mumbai) relying substantially on INSA vs UoI 2009 (14) STR 289 (Bom.)].

44.17 When Article 366(29-A)(b) to the constitution has made indivisible works contracts divisible to find out goods component and value thereof, it can be unambiguously be stated that the remnant part of the contract may be attributable to the scope of service tax under the provisions or Finance Act, 1994. Thus, turnkey contracts can be vivisected and discernible service elements involved therein can be segregated and classifiable as well as valued for levy service tax under Finance Act, 1994 provided such services are taxable services as defined by that Act and depending on the facts and circumstances of each case, service by way of advice, consultancy or technical assistance in the case of turnkey contract shall attract service tax liability. [ CCE vs BSBK Pvt. Ltd 2010 (18) STR 555 (Tri-LB) overruling Daelim’s case 2006 (3) STR 124 (Tri-Del.)]

44.18 Where an engineering college providing technical assistance to the needy in respect of technical aspects by its engineering faculty was held not liable for service tax under the category of “Consulting engineer services” since service tax being levied on the value of economic services which are commercially feasible and are consumed by the recipient with a clear object to pay for the commercial services. The appellant’s institute not serving such purpose was not an engineering consultant to provide engineering consultancy service. [Punjab Engineering College vs. CCE (2011) 22 STR 421 (Tri. – Del.)]

44.19 Supply of technical know-how in consideration for a royalty is not liable for service tax under the category of Consulting Engineering service [ Kinetic Engineering Ltd. v. CCE (2012) 25 STR 26 (Tri-Mum)].

44.20 Limited companies were not covered under the category of Consulting Engineer service prior to 01.05.2006 [ Simplex Engineering & Foundry Works P. Ltd. v. CCE (2012) 25 STR 106 (Tri-Del)].

44.21 The consideration (a running royalty and one time lumpsum payment) received by foreign corporation from a Indian Company for transfer of technical know how (for manufacture of cars) would not be liable for service tax under the category of ‘Consulting Engineer Services’. [ CST v. Suzuki Motor Corporation (2012)25 STR 266 (Tri-Del)]

44.22 ‘Valuation services’ rendered by professionally qualified engineers or any other person would not be liable for service tax under the category of consulting engineering services since the services are not in the nature of advice, consultancy or technical assistance in any one or more disciplines of engineering [Institution of Valuers vs. UOI (2012) 27 STR 113 (Guj.) disagreeing with Dr. V. Shanmugharel v. CCE (2006) 2 STR 466(Mad.)].

44.23 Supply of technical know-how cannot be taxed under Consulting Engineering Services [Futura Polyester Ltd. vs. CCE (2013) 29 STR 371 (Tri-Chennai)]

44.24 The appellant was providing technical consultancy services to government bodies in respect of their water projects. As per the contract the services were divided into various stages and each stage was an independent stage and could be terminated independent of the other and the fee was based on the stage completed. It was held that only services that are technical would fall within the ambit of consulting engineering services and services that are non - technical would not fall under the category of consulting engineering services .[Vashushilpi Projects & Consultants (P) Ltd. v. CCE (2013) 31 STR 712 (Tri – Del.)].

44.25 The activity of operation and maintenance of windmills not being in the nature of rendering any advice, consultancy or technical assistance in any field of engineering, is not liable for service tax under the category of “Consulting Engineer Service’.. [Suzlon Windfarm Services Ltd v. CCE, 2014(33) STR 65(Tri-Mum)]

44.26 Supply of technical know-how consisting of patents, secret information, licence to use trade mark, etc. liable for service tax under the category of Intellectual Property Rights Services w.e.f. 10.9.2004 and do not come under the category of Consulting Engineer Services [ Duraline Corporation v. CCE (2014) 34 STR 398 (Tri- Mum.)]

44.27 Prior to 01.05.2006, Companies (i.e. body corporate) were not covered under the definition of Consulting Engineer as defined in section 65(13). Accordingly, it was held that prior to 1.5.2006 no service tax was payable by the company in respect of consulting engineering services rendered by it. Further the Tribunal relying on Trade Notice No. 53-CE, Service Tax/97 dated 4-7-1997 also held that where the appellant had rendered services to the primary consultant as a sub consultant, no service tax are required to be paid by it [ Crompton Greaves Ltd v. CCE (2014) 36 STR 358 (Tri-Mum) relying on Simplex Engineering & Foundry Works P. Ltd. v. CCE (2012) 25 STR 106 (Tri-Del)].

45 ‘Consulting Engineering services’; ‘Errection, commissioning and installation services’ vs. Works Contract Services

45.1 On facts, where the contract between the assessee and its client was for –

Design;
Manufacture and supply; and
Erection, testing and commissioning of train control, signalling and telecommunication system with milestone payments specified for each component (viz., design, supply and erection), the Tribunal held that –

The contract was a composite (divisible) contract for –

Supply of goods [supply portion]; and

Provision of services [i.e. design and erection components] and not an indivisible works contract;

The design portion is liable under ‘consulting engineer’ services and the erection portion is liable under “erection, installation and commissioning” services.

Since the definition of “work contract” is only for the purpose of clause 65(105)(zzzza) which came into force w.e.f. 1-6-07, it is valid only for the period w.e.f. 1-6-07 and for the types of contracts mentioned in it. Therefore, for the period prior to 1-6-07, the meaning of ‘Works Contract’ as commonly understood i.e. a contract for work and labour and in other words, a service contract has to be adopted, and it would not be correct to treat a works contract as something different from a service contract. If such a work contract is an indivisible service contract, whether or not involving use of goods which get consumed or get passed on to service receiver either as such or in changed form, and that service is taxable, the works contract will attract service tax and if the work contract is a composite contract involving sale of goods and one or more services and those service are taxable, the service tax will be chargeable on the value of these services. Thus a contract for erection, installation and commissioning, even if involving transfer of property in goods on which state VAT/Sales Tax is paid, would attract service tax even for the period prior to 1-6-07. Similarly a divisible contract involving consulting Engineer’s service (preparation of drawings/designs, preparation of operation manuals, or other technical assistance), procurement of goods, erection, installation and commissioning would attract Service Tax on Engineering Consultancy component and erection installation and commissioning component even prior to 1-6-07. This is so since there is nothing in Sec. 65(105) and Section 66 of the Finance Act, 1994 from which it can be inferred that the taxable services defined in various clauses of Section 65(105) have to be standalone services and will not attract tax, if they are provided along with other services or providing of the service involves supply/use of goods on which VAT or Sales Tax is payable. Hence the appellant’s contention that the service of designing erection, installation & commissioning alongwith supply of goods, provided as a turnkey works contract could be subjected to tax only w.e.f. 1-6-07 under Section 65(105)(zzzza) of the Finance Act, 1994, read with Rule 2A of the Service Tax (Determination of Value) Rules, 2006 as “Work Contract Service” and this being a new entry, during the period prior to 1-6-07 no service tax could be charged in respect of such contracts, is incorrect.

[Alstom Projects India Ltd. vs. CST (2011) 23 STR 489 (Tri-Del); See also Instrumentation Ltd. vs. CCE (2011) 23 STR 221(Tri-Del.)]

45.2 The laying of pipeline for the period 1.7.2003- 31.3.2004 does not fall under the category of “Commissioning or Installation Service”, since

Pipelines are not “plant, machinery or equipment” and
Such services were specifically brought under ‘Commercial Construction Service’ w.e.f. 16.6.2005.

[CST v. Hyundai Heavy Industries Co Ltd 2014(33)STR 111(Tri-Mum)]

46 Convention Services

46.1 Where the appellant had organized a meeting for educational discussion at its college premises and had collected some money from each of the delegates for making arrangement for the mutual benefit of the delegates in the conference the Tribunal held that the appellant would not be liable to pay service tax on the delegate fee under the category of convention services since –

(i) it had provided the services of organizing the conference for itself; and

(ii) the delegates who had attended the conference were not clients of the appellant.

[Mayo College v. CST (2012) 27 STR 53 (Tri-Del)]

47 Courier Services

47.1 The appellant, a courier agency had engaged several agents named as ‘Franchisees’ for collection of articles from customers and who collected service charges alongwith service tax from the customers and paid the tax under the category of ‘courier service’ in their own registration. The entire service charges were fully paid over to the appellant and appellant shared a fixed amount with the ‘franchisees’. On these facts, the High Court held that the appellant is not liable to pay any further service tax on the service charges retained after payment to the franchisee under the category of ‘franchise service’ since –

The service tax on the entire amount of charges received from the customers having been paid by the franchisees (agents) under ‘courier services’, the net amount cannot again be taxed in the hands of the appellant under ‘Franchisees services’ since there is no provision in the Finance act, 1994 to tax the very same service charges twice under two heads.
Notwithstanding the (i) above, the net amount is not liable under the category of ‘franchise services’ since –

the franchisee is acting only as an agent of the appellant;

apart from appointing the franchisee the appellant is not providing any service to them.

the franchisees do not make any payment to the appellant unlike in case of franchise where a franchisor provides a service to the franchisee for a fee paid by the franchisee. Infact it is franchisee who are paid for work done for the franchisor (the appellant) i.e. acting as an agent for rendering courier service to the customers.

[Speed and Safe Courier Service v. Commissioner (2010) 18 STR 550 (Ker.)]

47.2 The appellant through its network of branches provided money transfer services. If the remitter at one branch deposited cash to be given to an intended recipient outside the city, the branch would instruct its closest branch at the recipients end to dispense cash to the recipient from its corpus. In such a scenario there is no actual transportation of cash from the branch by another, and hence such services would not be liable for service tax under the category of “courier services” [C.C.C. vs. Patel Vishnubhai Kantilal & Co. (2012) 28 STR 113 (Guj.)].

48 Custom House Agent’s (CHA) services

48.1 The function of a CHA mainly relates to the documentation part for the clearance of goods from the customs for import/export. Thus, -

Charges collect fees received from the importers for collecting freight on import consignments;
import console handling charges for deconsolidation of cargo on arrival to India, are charges relating to transportation of goods and not clearance of goods from customs and accordingly not liable for service tax under the category of CHA services. Further, delivery order fees is with regard to delivery of cargo and is not CHA service. Hence these services are also not liable under the category of CHA services. [Lee & Muir Head Pvt. Ltd. vs. CST (2009) 14 STR 348 (Tri- Bang.)]

48.2 Service charges received for liaisoning with customs authorities for collection of duty drawback is within scope of CHA’s service in relation to export of goods, and accordingly are liable for service tax [CCE vs. Kochi Logistics Services Pvt. Ltd (2012) 26 STR 30 (Tri-Bang.)].

49 Dredging Services

49.1 Where the appellant was engaged in the activity of dredging of the river for the purpose of drainage and flood control, the Tribunal held that ‘dredging service’ has been defined in an inclusive manner to include the appellant’s activities and the purpose for which the dredging is undertaken in the river whether it is for the navigational purpose or for any other purpose is irrelevant. [Mackintosh Burn Ltd. vs. CST (2010) 19 STR 682 (Tri. – Kol.)]

50 Electricity Transmission

50.1 Activities of the appellant, a electricity transmission company, like installation of electricity meters and testing the same were held to be services relating to the transmission and distribution of electricity and hence exempt from service tax vide notification no. 45/2010-ST dated 20.7.2010 [Paschimanchal Vidyut Vitran Nigam Ltd. v. CCE (2012) 28 STR 412 (Tri.-Del.)]. See also [Purvanchal Vidyut Vitran Nigam Ltd. v. CCE (2013) 30 STR 259 (Tri.-Del.)].[See M.Chadsacharam v CCE (2015)37 STR 268 (Tri-Chennai]

50.2 Where the appellant, a distribution licensee under the Electricity Act, 2003, installed and erected transmission towers, connectors and meters a recovered the charges periodically, it was held that the activity of the appellant being ‘in relation to’ (i.e. having a direct and proximal nexus with) distribution of electrical energy, was exempt vide notification no. 32/2010 dated 22.6.2010 and 45/2010-S.T. dated 20.7.2010 [ Noida Power Co. Ltd. v. CCE, (2014) 33 STR 383 (Tri. – Del.)]

51 Erection, Commissioning or Installation

51.1 Where the appellants, who were engaged in manufacture and sale of medical equipments, had paid excise duty on the manufacture of the equipments including the charges for training, erection and installation of the equipments at the buyers premises and had not charged any separate amounts towards erection and installation of the equipments the Tribunal held that no service tax would be levied on erection / installation of the equipments. [ Allengers Medical Systems Ltd. vs. CCE (2009) 14 STR 235 (Tri-Del.); See also ABB Ltd v. CST (2011)24 STR 199 (Tri-Bang); Alidhara Texspin Engineers vs. CCE (2010) 20 STR 315 (Tri-Ahmd.)]

51.2 Where the appellant was engaged in fabrication of structures at the customer’s site the Tribunal held that this service was not covered under erection, commissioning and installation services in view of the following:

After surveying all Board Circulars Tribunal held:

Structures were not intended to be covered under Plant, Machinery or Equipments.

Erection refers to civil work for installation / commissioning of a plant & machinery.

Erection, commissioning or installation of structures whether fabricated or not was not covered by the definition of Erection, Commissioning or Installation service prior to 1-5-2006.

The activity undertaken by the appellant is fabrication of structures and this was not covered under erection of Plant, Machinery, or Equipments as no civil work was undertaken by the appellant. Accordingly, the process of pre-fabrication of structures was not covered under the “Erection, Commissioning & Installation Service” prior to 1-5-2006.

The activity undertaken by the appellant is covered under Section 2(f) of Central Excise Act as manufacturing activity. Hence the appellants are not liable to pay the service tax on the activities undertaken by them.

[Neo Structo Construction Ltd. vs. CCE & C (2010) 19 STR 361 (Tri. – Ahmd)]

51.3 Laying of pipelines is not covered under the category of “Erection, Commissioning or Installation” service and hence not liable for service tax [ A. Sekar v. CCE (2010) 19 STR 82 (Tri. – Chennai) relying on Indian Hume Pipe Co.Ltd. v. CCE (2008) 12 STR 363 (P&H)][See CCE v. Surindra Engineering Co. Ltd. (2014) 36 STR 1191 (Tri.-Mumbai) wherei it was held that the same would be liable under the category of commercial or industrial construction services]

51.4 Laying the pipes in wall/roofs/floors for crossing of wires, fixing the junction box, MS box, Wooden box, fixing the cable trays would not amount to installation or commissioning of plant, machinery or equipment and therefore would not be liable for service tax under ‘Erection, Commissioning or Installation service’ during the relevant point of time. [CCE vs Rajeev Electricals Works 2010 (18) STR 705 (P & H)].

51.5 Civil construction services necessary for the commissioning of petrol pump (without actually installing/commissioning the petrol pumps) would not be liable for service tax under the category of “Commissioning and Installation services” [Subhash Khandelwal & Sons vs. CCE 2011 (24) STR 461 (Tri-Del)].

51.6 Where the assessee had contracted with M/s Larsen & Toubro Ltd. for the job of laying coated pipes for water supply projects run by Gujarat Water Supply and Sewerage Board (“GWSSB”), the Tribunal observed that since the purpose of laying pipeline was to supply water to the needy citizens the construction was not primarily to be used for commerce or industry and hence the assessee would not be liable to pay service tax under the category of “Erection, Commissioning and Installation services”. [CCE v. PSL Ltd, (2013) 31 STR 570 (Tri. – Ahmd)]

51.7 The activities of executing heating, ventilation and air conditioning projects on turnkey basis are chargeable to Service Tax under Commissioning or Installation/Erection service, w.e.f. 1.7.2003. [Suvidha Engineers India Ltd v. CCE, 2013(32) STR 735 (Tri-Del)]

52 Works Contract vs. Erection commissioning and installation services

52.1 A company PG, intending to set up a power plant, accepted the bid of a Swedish Company ABB and as requested by the bidder entered into 3 contracts – one with ABB (Sweden) for off-shore supply of equipment; another with ABB(India) for on-shore supply of equipment and a third again with ABB(India) for on-shore services including errection, commissioning etc. All the above contracts were interlinked and the overall responsibility for successful completion of all the 3 contracts was on ABB(Sweden). The revenue sought to tax the ‘on-shore service contract’ under the category of ‘errection, commissioning and installation services’. On appeal the Tribunal held that –

three agreements were interlinked to each other and a combined reading of the 3 contracts taken together for the purpose of executing the turnkey project for PG, would satisfy the definition of ‘works contract’ under section 65(105)(zzzza).
the agreement had been subjected to state VAT / Sales tax as a ‘works contract’ and sales tax was also deducted from the payments made to the appellants under the sales tax law.
Accordingly the appellants would be liable for service tax only w.e.f. 1.6.2007 and not prior to that date under errection, commissioning or installation services.

[ABB Ltd. vs. CST (2010) 20 STR 610 (Tri-Bang.)]

52.2 The appellants were prior to 07.07.2009 awarded two types of contracts from Power Grid Corporation of India Ltd , one for supply of towers and the other for erection and installation. The appellant treated the supply of towers as sale and not liable for service tax and paid service tax under Works contract Composition Scheme, 2007 on the contract for erection and installation. The Revenue took a stand that –

both the the contracts were a single contract; and
contract for erection and installation is not a works contract but a labour contract since the materials get consumed.

On facts, the Tribunal observed that the nature of contract involves supply of material as well as labour and the appellants had paid sales tax/VAT on the material involved in the erection and installation contract. Hence it is a works contract. The Tribunal also held that the value of transmission towers cannot be included in the value of erection and commissioning contracts by virtue of the Explanation inserted w.e.f. 7.7.2009 since the contracts commenced prior to 07.07.2009 and by virtue of the proviso to the Explanation such an inclusion cannot be made [Gammon India Ltd v CCE&ST (2015) 37 STR 225 (Tri-Mum)].

53 Event Management Service

53.1 Where the assessee had organized a cricket tournament and had granted commercial rights to ‘franchisees’ or ‘co-sponsors’ of the tournament for advertising their product by way of putting hoardings during the tournament for a consideration, the Tribunal held that the assessee had not organized the cricket tournament at the request of any franchisee or co-sponsor but on its own and hence they were not taxable under the category “Event Management Service”. [CCE v. Lokmat Media Ltd. (2014) 33 STR 272 (Tri – Mum)]

54 Franchise service

54.1 Where the appellant conducted ‘computer software courses’ not by himself but by franchisees all over India and received a one time fee on execution of the agreement (on which Service Tax was paid) and also a ‘royalty’ of 25% of the course fees paid by each participant (on which no tax was paid) the Tribunal held that the 25% royalty is liable for service tax under the category of “Franchise” services.[CMC Ltd v. CCE (2011) 23 STR 586 (Tri-Bang)]

54.2 Where on facts, it was noted that the assessee, (jewellery company) granted a licence to various retail shops (franchises) to sell jewellery of its brand / trademark, and the license to use was not exclusive (i.e. to the exclusion of the assessee who retained the right to licence others also), it was held that the consideration / royalty for transfer of right to use the trademark is not liable for sales tax as a deemed sale under article 366(29A)(d), but was a service liable for service tax under the category of “Franchise Services” [Malabar Gold Pvt. Ltd. v. CTO (2013) 32 STR 3 (Ker.)]

54.3 The appellants imported technology from a Chinese company for production of cotton in the form of mother seeds containing “Fusion BT” genes, multiplied the same and gave it to its customers with a sub-licence for further multiplication of the seeds and onward sale of seeds to farmers in consideration for a royalty. The sub-licencees sold the seeds in packages containing the mark “Fusion BT”. The Revenue contended that the appellants are liable for service tax on the royalty received from the sub-licencees under the category of “franchise services” since they granted the sub-licencees a representational right to sell their products. The Tribunal observed that -

The appellants did not receive any representational right from the Chinese company and did not grant any such right to the sub licencees;
The mark “Fusion BT” only denoted technology and did not identify the product with the appellant.

Hence it held that the royalty would not be liable for service tax under the category of “franchise services”. [Global Transgene Ltd v. CST 2013(32) STR 86 (Tri-Mum.)]

54.4 The assessee in the present case had entered into agreement (termed as joint venture agreements) with distinct entities to establish and manage school and provide quality education in different areas under its brand name. Under the terms of the agreement:

The other party was granted a right to establish a school representing the assessees name, motto and logo;
The assessee would provide its established concepts of imparting education, managerial expertise and operational techniques and standards of imparting education to the other party;
The other party was obliged to pay a fee to the assessee;
The other party was obligated not to establish or administer an English Medium School identified with any person other than the assessee;
All assets and liabilities including the entire financial responsibility was that of the other party.

The revenue sought to levy service tax on fees received by the assessee under the category of franchise services which was challenged by the assessee. On appeal the Tribunal observed as follows:

1. the assessee’s contention that it had entered in to a Joint Venture agreement with the other party and hence the service provided by the assessee is to itself is not acceptable since under the agreement the entire burden of establishing and maintaining the school, including the liability to fund the entire capital and non capital expenditure, underwriting the entire financial liability, liability arising out of any obligation was on the other party and not the assessee. Further on determination of the agreements, all available and remaining assets too would revert to the other party alone. Also the inherence of risk and reward is on the franchisee and not the assessee. Hence regardless of the description of the arrangement as a Joint Venture or a collaborative arrangement, the same would not tantamount to a joint venture arrangement. The facts that the assessee was remunerated for services provided to the other party clearly showed that there is a service provided by the assessee to the other party for consideration.

2. the agreement in the present case satisfied all the conditions of franchise agreement and hence the services were in the nature of franchise services.

3. the contention that the services rendered by the appellants are in the nature of Intellectual Property right services is not acceptable since the assessee apart from merely allowing the use or enjoyment of the assessee’s intangible property (in its name/ motto/ logo) provided several services for management and administration of the schools and considered as a whole, its services more appropriately fall under ‘Franchise Services’ and not under intellectual property right services.

Accordingly the Tribunal held that the appellant would be liable for service tax under the category of franchise services [ Delhi Public School Society v. CST (2013) 32 STR 179 (Del.)]

54.5 The appellant, a beer brand owner got its beer manufactured by a contract manufacturer who was responsible for bottling, packing and dispatch of appellant’s brand of beer as per the appellant’s specification and formula. The contract manufacturer charged a price fixed by the appellant from the buyers sourced by the appellant, retained a fixed amount and remitted balance to the appellant. The risk of manufacture and sale was borne by the appellant. On facts, the Tribunal held that the appellant had not rendered any Franchise service or IPR service to the contract manufacturer. [SKOL Breweries Ltd. vs. CCE (2014) 35 STR 570 (Tri-Mumbai)]

55 General Insurance Services

55.1 The Insurance department of the Government of Karnataka who were holding registration u/s 3 of the Insurance Act, 1938, and were engaged in insurance of vehicles –

owned by the government departments and commercial concerns; and
in which the government had financial interest or for which the government has advanced money, are liable for service tax under the category general insurance services and that the insurance business carried out by it was not in the nature of a sovereign activity or statutory function carried out for a fee to entitle them the benefit of Circular No. 89/7/2006 – ST dated 18.12.2006 [ Karnataka Govt. Insurance Dept. v. ACCE (2012) 26 STR 521 (Kar.)].

55.2 The following services of the Kerala State Insurance Department was held to be taxable/non-taxable by the Court:

Providing life insurance coverage to the employees of the state government under rule 22A of Part I of Kerala Service Rules, is part of a ‘statutory obligation’ and hence not a ‘taxable service’ so as to attract service tax liability.
General Insurance provided in case of assets owned by the State Government is not liable for service tax as no service is being extended to anybody else, but to self.
General insurance extended to commercial institutions/ individuals including Government companies are liable for service tax as no statutory duty is involved, unless it is exempted u/s. 93 of the Act.

[Kerala State Insurance Department v. Union of India (2012) 28 STR 337 (Ker.)].

56 Goods transport operators / Agencies

56.1 Service tax is leviable only on the services provided by a commercial concern engaged in the transportation of the goods. Hence, where the appellants who have received goods directly from their suppliers, who have themselves undertaken the deliveries of the goods at the appellants’ door-steps, it cannot be said that the appellants received the services of any commercial agency. The said suppliers cannot be held to be transporters. Hence payment of transport charges to the suppliers will not attract service tax. [Kesoram Spun Pipes & Foundries Vs. CCE (2002) 146 ELT 475 (Tri. – Kolkata)]

56.2 The appellants had availed service of transportation by goods carriages not operated by GTA and hence are not liable under GTA services. [Caps & Prints (P) Ltd v CST( 2013) 30 STR 426 (Tri-Kolkata)]

56.3 Where the consignment agent paid the freight charges as well as service tax payable thereon as a payer of freight and deducted the same from the sale proceeds payable to the appellant manufacturer the Tribunal held that the appellant is not liable to pay service tax on freight charges deducted by the consignment agents since it is the consignment agent who is liable to pay service tax on the goods transport agency services as it is he who pays the freight charges [Rajalakshmi Paper Mills Pvt. Ltd. vs. CCE (2011) 22 STR 635 (Tri. – Che.)].

56.4 Where the service tax on GTA services was paid by the transporters, the Tribunal held that tax in respect of the same services cannot be demanded again from the service recipient. [Navyug Alloys Pvt. Ltd. vs. CCE (2009) 13 STR 421 (Tri-Ahmd.); See also Mandev Tubes v. CCE (2009) 16 STR 724 (Tri. – Ahmd.); CST v. Geeta Industries P. Ltd. (2011) 22 STR 293 (Tri-Del)]

56.5 Where the appellants imported yarn from Nepalese suppliers who charged the appellant in two invoices – one, for the cost of goods and transport upto Nepal border; and another, for the transport from Indo-Nepal border to the appellant’s factory, the Tribunal held that the appellant’s contract with the Nepalese suppliers was a contract for supply of goods and the arrangement of transportation is merely incidental to the supply of goods and not a provision of service. Since the appellants did not engage a transporter nor was there any evidence that the suppliers engaged transporters as agents of the appellant, the appellant is not liable to pay service tax on the transportation charges reimbursed to the suppliers under GTA services. [ Sumangalam Suitings (P) Ltd. v. CCE (2010) 19 STR 809 (Tri- Del)]

56.6 The term ‘vegetables’ in the notification no. 33/2004 dated 3.12.2004 exempting services provided by goods transport agency services in relation to transport of ‘fruits, vegetables, eggs or milk’, is not be understood in a technical or botanical sense but must be understood as in common parlance i.e. green vegetables plucked and sold in the market without any processing done thereto. Hence transport of ‘Canned mushrooms’ (which is obtained after processing fresh mushrooms) cannot be construed to be transport of ‘vegetables’ qualifying for exemption [Agro Dutch Industries Ltd. v. CCE (2011) 24 STR 355 (Tri-Del.)].

56.7 Where on facts it was found that the assessee had hired vehicles from its vendors and they were not responsible for transporting the goods and no consignment note was issued by them, the Tribunal held that no ‘Goods Transport Agency Services’ was provided to the assessee and hence the assessee was not liable to pay service tax as a payer of freight [Birla Ready Mix vs. CCE (2013) 30 STR 99 (Tri. – Del.)].

56.8 Where the appellant claimed refund of tax paid by them on goods transport agency services availed from private trucks owners/operators on the ground that the private trucks owners/operators did not issue consignment notes to them, it was held that -

the refund is not admissible since the appellant would still be liable to pay service tax though the provider has defaulted on issuance of a consignment note.
However the contention of the revenue that the appellant should have challenged its own assessment before filing the refund claim is expecting the impossible since a person cannot challenge his own assessment and a question may arise before whom it may be challenged. Hence this ground of rejection of refund was held unsustainable.

[Coromandel Agro Products & Oils Ltd. v CCE 2014 (33) S.T.R. 660 (Tri. - Bang.)]

56.9 TISCO paid service tax on GTO services availed by it as payer of freight but the Supreme Court subsequently in the case of Laghu Udyog Bharti v. UoI (2006) 2 STR 276 (SC) held the levy of service tax on the recipient of GTO services as unconstitutional and ordered refund of the service tax paid to such service recipients. However, the present appellants, applied and received refund of service tax paid by TISCO as its agents. Thereafter, the Finance Act, 2000 nullified the ruling of the Supreme Court and pursuant to such validation the department demanded service tax from the appellants (GTO). The applicant argued that it is not the person liable to pay the tax and hence tax cannot be demanded from it. On appeal, the High Court observed that since the amounts were returned to the assessee in its capacity as an agent of TISCO (person liable to pay) the refunds could also be demanded from it. Further, it was also held that in view of the specific provision of Section 117 of the Finance Act, 2000 the assessee was liable to pay interest @ 24% from the expiry of 30 days from the date of enactment of the Finance Act, 2000. [OTS Ltd. vs. CCE (2013) 30 STR 577 (Jhar)]

56.10 The appellants in the present case (sugar manufacturers) had availed services of transportation of sugarcane from its collection centre to its factory. The transporters were individual truck owners who did not issue any consignment note (as prescribed u/r 4B of Service Tax Rules), goods received note, billties etc. but only issued fortnightly bills to the appellants. The revenue demanded service tax from the appellant on the grounds that it had availed goods transport agency (GTA) services. On appeal, the Tribunal held that –

In respect of GTA services provided in relation to transportation of goods the agency not only undertakes the service of transportation of goods but also undertakes delivery of goods to the consignee and temporary storage of goods till its delivery to the consignee.
Fortnightly bills are not consignment notes and in absence of issuance of consignment note by GTA in terms of rule 4B of Service Tax Rules, 1994, representing the liability to transport the consignment handed over to it as a GTA, the truck owners cannot be considered as goods transport agency. It has merely provided services of transportation of goods in a motor vehicle.

Accordingly, it held that no service tax is payable by the appellants as a recipient of goods transport agency services[Nandganj Sihori Sugar Co. Ltd v. CCE (2014) 34 STR 850 (Tri-Del)].

57 Health and Fitness Service

57.1 Where the appellant a trust registered under the Maharashtra State to teach the art of yoga undertook the activity of treating particular ailments by combination of yoga and medicine it was held that the appellants are liable for service tax under the category of ‘Health and Fitness service’ [ Manav Sansadhan Vikas Ani Sansodhan Manch v. CCE (2014) 36 STR 385 (Tri-Mum)]

58 Information Technology software services

58.1 Where the petitioners, an association of companies engaged in the business of reselling of the computer software products under an “End User Licence Agreement” challenged the legislative competence of the Parliament to impose service tax on ‘information technology software services’ [Section 65(105)(zzzze)] the Hon’ble High Court dismissing the petition observed as under:

Software, whether canned or customized, is goods;
ntry 97 of List I of Schedule VII of the Constitution of India being a residuary entry the Parliament has legislative competence to make law for service tax under the said entry.
For the reason that software is goods, all transactions in relation to software need not necessarily amount to a sale and whether a transaction is a sale or service depends on the individual transaction and on that ground the vires of section 65(105)(zzzze) cannot be questioned.
The transaction between the members of petitioner association and the ultimate customer (end user) is not of a sale of software (goods) as such but is only allowing the right to use the contents of the data stored in the software (goods) which would amount only to a service. Further, the transaction would also not be considered as deemed sale under Article 366(29A)(d) of the Constitution of India i.e. ‘transfer of right to use any goods’ since the right to use the software (goods) as such is not transferred.

[Infotech Software Dealers Association vs. UOI (2010) 20 STR 289 (Mad.)]

58.2 On facts, it was held that, services of maintenance of various softwares provided by the appellant would be liable for service tax w.e.f. 1.6.2007 on insertion of Explanation to the definition of repair and maintenance services clarifying that “goods” to include “software”. However, the Explanation would not have a retrospective effect. [Phoenix IT Solutions Ltd. vs. CCE (2011) 22 STR 400 (Tri. – Bang.)]

58.3 Where the appellant was engaged in managing and monitoring the modernization and computerization of various operations conducted by the Department of Company Affairs and in acquisition and installation, commissioning and system integration of IT systems, hosting facilities for central site, preparation and issue of NSSN cards to the members of EPFO, the Tribunal held that the activities would be liable for service tax under the category of “Information Technology Software Services” w.e.f. 16.5.2008 and not prior to that date under the category of Management Consultancy Services [ UTI Technology Services Ltd. vs. CST (2012) 26 STR 147 (Tri. -Mumbai)]

59 Insurance Auxiliary Services

59.1 The appellants, reinsurance brokers, arranged reinsurance for certain Indian insurance companies. The overseas reinsurance companies paid the Indian insurance companies a ‘reinsurance commission’ – 50% of which was paid to the appellants and 50% to the Indian insurance companies. The department sought to tax the appellant’s remuneration under the category of “insurance auxiliary services” for the period from 16.7.2001 to 30.6.2005. On appeal based on the facts the Tribunal held that -

a contract of reinsurance is essentially a contract of insurance and the definition of term ‘insurer’ as defined in section 65(58) was wide enough to include the services of ‘reinsurer’. The amendment made by the Finance Act, 2006 w.e.f. 1.5.06 to expressly include a “reinsurer” within the definition of “insurer” was a clarificatory amendment;
the services of reinsurance brokers were provided to the Indian insurance company. Hence its services cannot be considered to be exported out of India;
in absence of physical receipt of convertible foreign exchange the appellants could not claim exemption under notification no. 6/99 or 21/2003.

[Suprasesh G.I.S. & Brokers P. Ltd. vs. CST (2009) 13 STR 641 (Tri-Chennai)].

60 Intellectual Property Service

60.1 An agreement for permitting the use of a trademark for a consideration is liable for service tax under the category of ‘Intellectual Property Right services’ notwithstanding that the ‘trademark’ was registered only in connection with some products and the permission to use the trademark was given in respect of products not ‘registered’. [Hero Honda Motors Ltd. vs. CST (2012) 27 STR 409 (Tri. – Del.)].

60.2 On facts, the Tribunal held that permitting a person to use the trademark of the assessee in perpetuity for a consideration is liable for service tax under the category of ‘intellectual property right’ services [Eicher Good Earth Ltd. v. CST (2012) 28 STR 279 (Tri.-Del.)].

60.3 Cartoon characters are ‘artistic work’ covered under section 2(c) of the Copyright Act, 1957 and not a ‘trademark’ under the Trade Mark Act, 1999 and hence the fees received by the appellant for sub-licensing the copyrights in such cartoon characters is not taxable under IPR services since ‘copyright’ is specifically excluded from the definition of IPR service. [ESPN Software India (P) Ltd. v. CST, (2014) 35 STR 927 (Tri. – Del.)]

60.4 The appellant in the present case had obtained information which were trade secrets/ confidential information under US law of another company. In an appeal the US Court restrained the appellant from utilizing the said technology in India. To overcome these adverse legal decision the appellant entered into an out of court settlement agreement with other company whereby it paid a compensation of USD 3.8 crore to other company and became a co-owner of the technology. The revenue had sought to demand service tax on these payments under the category of intellectual property right (“IPR”) services. On appeal the Tribunal held that –

in absence of any law in India governing trade secrets and confidential information, the same would not be considered as IPR under the service tax law;
since there was a permanent transfer of copyright and not a temporary transfer, the same would not constitute a service.
Payment received towards out-of-court settlement would not be considered as towards supply of taxable service.

Accordingly no service tax would be payable by the appellant on the above payments under the reverse charge basis under the category of IPR services. [ Thermax Ltd. vs. CCE (2014) 36 STR 318 (Tri-Mumbai)]

60.5 The appellant has been permitted to use the property in the name and likeness of the legendary martial artist “Bruce Lee” embodied in visual images supplied to them for which the appellant has paid consideration to the foreign service provider by royalty. The property embodied in visual images would come squarely within the definition of artistic work as defined in section 14(c) of the Copyright Act. Since copyright is specifically excluded from the IPR service during the relevant period the question of levy of service tax on copyrights is not sustainable. [Indiagames Ltd v. CST (2015)37 STR 299 (Tri-Mum)]

61 Copyright Services

61.1 In a writ petition challenging the vires of the provision of section 65(105) (zzzzt) of the Finance Act, 1994 which defines taxable service in the context of temporary transfer or permitting the use or enjoyment of any copyright as defined under the Copyright Act, 1957, the Hon’ble High Court of Madras after analysing various agreements between producers and distributors and distributors and sub-distributors/ exhibitors/theatre owners held that there is only a temporary transfer of copyright or permission to use or enjoy copyright of the film for a consideration and the producer retains the effective control over the film such as the right to deal with and dispose of the rights to any third parties, right to screen the picture over the satellite channels, Doordarshan channels, etc. Such transaction would not amount to “transfer of the right to use the copyright” by the producer to the distributor or distributor to exhibitor so as to amount as “sale” within the meaning of Article 366(29A)(d). It is only the permanent transfer of copyright (by assignment or otherwise) which will not amount to rendering of service and would be excluded from the purview of service tax. Accordingly the High Court held that the temporary transfer of copyrights or the permission to use or enjoy the copyright would not fall either under Entry 54 of List II or Entry 92A of List I but is well within the legislative competence of the Parliament for levying service tax under Entry 97 of List I [ AGS Entertainment Pvt. Ltd. v. Union of India (2013) 32 STR 129 (Mad.)].

62 Interior Decorator services

62.1 Activities such as false ceiling, partitioning, flooring, providing modular systems, painting, carpeting, electrical connections; supply and fixing or various furniture, etc. would not be liable for service tax under the category of ‘Interior Decorator Services’ since -

The said activities are in the nature of ‘execution of work’ and not in the nature of advice, consultancy and technical assistance or planning and designing and hence would not fall under ‘Interior Decoration Service’.
The appellant’s works are more aptly covered / included under the category of ‘Commercial or Industrial Construction services’ w.e.f. 16.6.2005. Thus, the appellant’s services were not liable to service tax under the category of ‘Interior Decoration Service’ prior to 16.6.2005.

[Spandrel v. CCE (2010) 20 STR 129 (Tri. – Bang.)]

62.2 Contract for landscaping which includes beautification by way of plantation of trees, shrubs in factory area and also maintenance of lawns is not liable for service tax under the category of interior decorator service since these are execution of works and cannot be considered as advisory or consultancy or technical assistance [Shobha P. Bhopatkar v. CCE (2014) 35 STR 78 (Tri-Mum.)].

63 Leased Circuit Services

63.1 Interconnection Usage Charges collected by one telecom authority from another telecom authority is not liable for service tax prior to 1.6.2007. [ Bharti Airtel Ltd. v. CST (2008) 12 STR 565 (Tri-Ahmd.)]

63.2 Where the asseessee had received and paid for international private leased circuit services from foreign telecom service providers who were not ‘telegraph authorities’ as defined in section 65(111) of the Finance Act,1994, it was held that the assessee cannot be made liable for payment of service tax as a recipient of services since the service received was not a taxable service as the service provider was not a telegraph authority. [TCS E-Serve Ltd v. CST 2014(33) S.T.R.641 (Tri.-Mumbai)]

64 Lottery Services

64.1 In a writ challenging the demand of service tax post 1.7.2012 u/r. 6(7C) of Service Tax Rules from the petitioner who was engaged in the business of acting as a sole purchaser of lottery tickets issued by the Government of Sikkim at discounted price and selling them to the customers through its agents and stockiest, the High Court held as follows:

Lottery being an actionable claim would be excluded from the definition of service. In any event the service of betting, gambling or lottery was included in the negative list;
Since the petitioner purchased the lottery tickets in bulk from the state government at a discounted price and sold the same to the customer and in absence of any privity of contract between the Government and customer it cannot be held that petitioner was acting as an agent of the government in selling and promoting the lottery tickets but it is buying and selling transaction;
Lottery being a scheme for distribution of prizes by lot or chance, there is no element of service in a lottery. Further, in absence of any provision in the service tax law (Finance Act, 1994) for imposing service tax on lottery, Rule 6(7C) of the Service Tax Rules, 1994 which prescribes the machinery for payment of service tax by the distributor of lottery tickets is ultra vires.

[Future Gaming Solutions India Pvt. Ltd. v. UOI (2014) 36 STR 733 (Sikkim)] [See Tashi De Lek Gaming Solutions Pvt. Ltd. v. UOI (2014) 36 STR 964 (Sikkim [Also see Future Gaming Solutions India Pvt. Ltd. v. UOI (2015) 37 STR 65 (Sikkim) – wherein the constitutionality of 65(105)(zzzzn) was challenged.]

65 Maintenance & Repair

65.1 Prior to 16.6.2005 any maintenance services carried out under any contract other than a pure maintenance contract would not be liable for service tax under the category “Maintenance and Repair Services”. Hence maintenance and repair of a ship in absence of a maintenance contract was held not liable for service tax. [Cochin Shipyard Ltd. v. CCE (2007) 80 RLT 484 (CESTAT-Ban.) see alsoUnipower Systems Ltd. v. CCE (2007) 7 STR 590 (Tri- Bang.); Raj Trans Stampings (P) Ltd. vs. CCE (2011) 23 STR 394 (Tri-Del.); CCE v. S.B. Reshellers Pvt. Ltd. (2014) 34 STR 605 (Tri. – Mumbai)]

65.2 Where only repair work was undertaken by the appellants without a maintenance contract, maintenance and repair being distinct (maintenance is prevention from failure, repair is restoration after failure), such repair services were not liable to service tax prior to 16.6.05. [ CCE vs. Bhiwadi Cylinders Pvt. Ltd. (2008) 11 STR 37 (Tri. – Del.)].

65.3 The assessee’s activities of maintenance of green belt (Horticulture and Landscaping) which comprised of activities like growing of grass, plants, trees or fruits, vegetables, regular mowing of lawns, pruning and trimming of shrubs and cleaning of garden etc. was held not liable for service tax under the category of maintenance of immovable property for the following reasons–

The CBEC Circular no. B1/6/2005 – TRU dated 27.7.2005 refers to maintenance of civil/electrical and construction work of park and green belt and not maintenance of grass, plants trees or shrubs;
Services in relation to ‘horticulture’ is specifically kept outside the purview of ‘cleaning services’, a separate service;
The expression “immovable property” as defined under section 3 of the Transfer of Property Act, 1882 does not include standing timber, growing crops or grass.

[CCE vs. ANS Constructions Ltd. (2010) 17 STR 549 (Tri-Del.)]

65.4 It was held that activity of tyre retreading is neither ‘repair’ nor ‘maintenance’ but a ‘reconditioning’ activity to give economic life to the tyre retreaded and hence would be liable for service tax only w.e.f 16.6.05 when reconditioning activity was brought under tax net. [ CCE vs Balwinder Singh 2010 (18) STR 70 (Tri-Del.); See also Stallion Rubbers Ltd. vs. CCE (2011) 23 STR 380 (Tri-Del.)].

65.5 ‘Software Maintenance’ services provided in respect of application software already licensed and installed in the computer systems of the clients (banks) during the period 9.7.04 to 30.4.06 would be covered under the category of ‘information technology software services’ w.e.f. 16.5.2008 and not prior to that date under the category of ‘maintenance or repair services’ [EBZ Online Pvt. Ltd V. CCE (2011) 22 STR 185 (Tri- Mum); See also SAP India Pvt. Ltd. vs. CCE (2011) 21 STR 303 (Tri-Bang.)]

65.6 Notification No. 24/2009 dated 27.7.2009 which grants exemption from levy of service tax to road maintenance or repair is not retrospective.[ Karvembu & Co. vs. Under Secretary, Dept. of Revenue (2010) 20 STR 591 (Mad.); R. Devarajan v Union of India (2010) 20 STR 758(Mad.)]

65.7 Where the appellants were engaged in erection and commissioning of pre-fabricated structures at site and also did maintenance and repair work under various work orders at pre-determined prices, the Tribunal held on facts, that there is no finding/evidence/ observation flowing from the agreement that both parties intended repair / maintenance is a separate part and has to be treated as such. Thus, in the absence of any maintenance & repair contract, the demand based on rate or value contract work is not sustainable prior to 16.6.05. [Neo Structo Construction Ltd. vs. CCE & C (2010) 19 STR 361 (Tri. – Ahmd); See also Basant Enterprises v. CCE 2011 (24) STR 352 (Tri-Del.)]

65.8 On facts, it was held that capital, routine and breakdown maintenance of ash handling plant under a contract was held liable under the category of maintenance and repair services [Mitul Engineering Services v. CCE 2011 (24) STR 323 (Tri-Del.)].

65.9 Where the contract required the assessee to – (i) transport faulty transformers; and (ii) repair them, each for a distinct price, the Tribunal affirmed the decision of the CCE(A) holding that there were two distinct services and the value of transportation of faulty transformers would not be liable for service tax under the category of maintenance and repair services [CCE vs. Technical Associates (2011) 24 STR 567 (Tri-Del.); CCE v. Technical Associates Ltd, (2013) 31 STR 538 (All.)].

65.10 Gas turbines which were affixed to the earth are immoveable property and hence maintenance service provided in respect thereof prior to 10.4.2006 (should be 1.5.06) would not be liable to service tax since the relevant entry did not cover immoveable property [CCE vs. GE Nuova Pignone (2012) 27 STR 380 (Tri. – Ahmd.)].

65.11 The services of Management, maintenance and repair of roads would not be liable for service tax for the period 16.6.05 to 26.7.09 (both days inclusive) by virtue of section 97(1) of the Finance Act, 2012. [J.K. Constructions vs. CCE (2012) 27 STR 507 (Tri. – Chennai) and K. Seerangan vs. CCE (2012) 27 STR 522 (Tri. – Chennai.)].

65.12 Repairs and maintenance work carried out by the appellant in respect of property of municipality is not taxable under the category of “management maintenance or repairs services” since municipal roads are not immovable properties under the Transfer of Properties Act. [Manjit Singh v. CCE (2013) 32 STR 624 (Tri-Del.)]

65.13 The activity of reconditioning old and worn out shells of sugar mills is not liable for service tax under the category of “management, maintenance and repair services” since –

In the absence of a maintenance contract between the appellant and its client such services would not be liable;
Further, the activity of ‘reconditioning’ and ‘restoration’ was liable to service tax under the category of maintenance or repair service only w.e.f 16.6.2005 and hence a service tax demand on such activity prior to 16.6.2005 is not sustainable.

[Jagat Machinery Manufactures P. Ltd. v. CCE (2013) 32 STR 663(Tri- Del.)]

65.14 ‘Runways’ (i.e. a strip of land over which aircrafts land or take off) was held not to be ‘road’ (which is a path or a way between two different places) and therefore maintenance or repair of runways was held to be liable for service tax under the category of Management, Maintenance and Repair services since the exemption in respect of Management, Maintenance and Repair services of roads will not be applicable in the case of runways. [ D. P. Jain & Co. Infrastructure Pvt. Ltd. v. CCE 2014(33) S.T.R. 668(Tri.-Mumbai)]

65.15 The explanation to section 65(105)(zzg) that specifies that goods includes computer software was operative as a charging provision from 1.6.2007 and the same cannot be applied retrospectively and hence the appellant providing software maintenance services would not be brought to the ambit of tax for the period prior to 1.6.2007. [VGL Softtech Ltd. v. CCE (2013) 31 STR 123 (Tri-Del.)]

65.16 The definition of ‘maintenance and repair’ during the period of dispute i.e. July to December 2003 covered only those activities that were carried under a maintenance contract or agreement or where the assessee was a manufacturer of the goods or a person authorised by such manufacturer. Since the appellant had not entered into any maintenance contract or agreement with its client nor was he a manufacturer or a person authorised by him, their activity was not taxable under the category of “maintenance and repair services”. [Jain & Co. v. CCE (2013) 31 STR 85 (Tri-Del)]

65.17 Where the assessee has entered into a rate contract with manufacturer of transformer for repairing the damaged transformers in consideration of which it received payments, the Tribunal held that appellants activity would clearly be liable for service tax under the category of maintenance or repair services [CCE v. Anand Transformers (P) Ltd. (2014) 33 STR 314 (Tri. – Del.)].

65.18 Maintenance of computer software is not liable for service tax under the category of “Management, Maintenance and Repair services” prior to 1.5.06. [Financial Software Systems Pvt. Ltd. v. CST (2014) 33 STR 393 (Tri. – Chennai)]

65.19 Where the assessee repaired parts of motor vehicles like engines, etc. brought to its workshop by other authorized service stations (where the motor vehicle was brought by the customer), the High court held, that during the relevant period when repair of “motor vehicles” was excluded from the definition of ‘maintenance and repair services’, even repairs to motor vehicle parts would be excluded since without the individual parts it does not become a motor vehicle and such parts can only be used for a motor vehicle and normally fitted to the same vehicle. [ Kuttukaran Trading Ventures v CCE (2014) 35 STR 481 (Ker.)]

65.20 Services provided under the category of the repair and maintenance during the period 10.09.2004 to 31.3.2006 were liable to service tax only when they were conducted in terms of a contract or an agreement. In absence of any findings in the order of the Commissioner (Appeals) to this effect, the demand was set aside [CCE v. Kunal Fabricators & Engineering Works (2014) 36 STR 549 (Tri.-Del.)]

66 Management Maintenance and Repair service

66.1 The appellant, a statutory corporation established by the Government under a statute viz. Maharashtra Industrial Development Act, 1961 [MID Act] for securing the rapid and orderly establishment and organization of industries, was held not liable to pay service tax under the category of Management Maintenance and Repair service on the service charges collected for provision of common amenities (like roads, street, streetlights, drains etc) to plot holders to whom the appellant had leased out land for industrial development on the ground that –

Period prior to 1.7.2012

Appellant is discharging a statutory function as per the provisions of the MID Act and Rules framed thereunder and hence the benefit of Circular no. 89/7/2006 dated 18.12.2006 is available to them.

Notwithstanding the above, section 97 of the Finance Act, 1994 and notification no. 24/2009 dated 27.7.2009 exempt the services of maintenance and repairs of roads.

Period post 1.7.2012

Since the demand for the period post 1.7.2012 was raised on the basis of the definition of ‘maintenance and repair service’ as it stood prior to 1.7.2012, the demand for the period post 1.7.2012 is not maintainable

[Maharashtra Industrial Development Corporation v. CCE (2014) 36 STR 1291 (Tri-Mumbai)]

67 Management Consultancy services

67.1 The appellants, engaged in the business of manufacture and sale of drugs, recovered certain amounts towards ‘staff costs’ and ‘other expenses’ from a group company which was sought to be taxed by the lower authorities under the category of Management Consultancy Services. Allowing the appeal the Tribunal held –

The plea of the appellant of being in the business of manufacture and sale of drugs & not belonging to a profession, trade or calling, would not ipso facto exempt them from service tax since it is the rendering of service that is taxed and not belonging to a profession, trade or calling. Similarly, the fact that the service is provided at cost or at profit is not relevant as taxable event will determine the Tax and not the compensation thereof.
Recovery of ‘other expenses’ such as publicity, freight, traveling, power and fuel, rent, and miscellaneous expenses are not for management consultancy services. Further, service tax is in any case not payable on reimbursement /out of pocket expenses charged on actuals as per the clarifications & Trade Notices of the department.
Recovery of ‘Staff Costs’ which comprised of staff costs incurred for 8 teams in marketing exclusively working for the group company, was for conducting executory functions and not advisory functions and hence not liable for service tax under the category of management consultancy services [CBEC circular dated 27.7.2001 noted].
The recovery of staff costs incurred for 8 teams in marketing working exclusively for the group company were more appropriately covered under the category of business auxiliary services. The Tribunal stated that when an existing Tariff definition remains the same, then the introduction of new Tariff entry would imply that the coverage under the new Tariff for purpose of Tax is an area not covered by the earlier entry. The new entry of business auxiliary services is extension of the scope of coverage of Service Tax and not carving out of a new entry, from the erstwhile entry of "Management Consultancy Service".

[Glaxo Smithkline Pharmaceuticals Ltd. v. CCE (2005) 188 ELT 171 (Mum.)]

67.2 Where the assessee trained his customers in computer programming which is not related to their basic business activity it was held that the activity of the assessee would not be liable for service tax under the category of management consultancy services [CCE v. Aisco Engineering Pvt. Ltd. (2006) 1 STR 324 (Tri - Mumbai)].

67.3 Tata Technologies Ltd. (TTL) entered into an agreement with SAP India whereby SAP India granted a licence to use SAP software for 5000 users of the Tata group. The agreement also provided for annual maintenance services. Each member of the Tata group entered into a tripartite agreement with TTL and SAP India for provision of software and annual maintenance services. SAP India provided the software and annual maintenance services directly to the relevant Tata group entity. TTL collected the amounts for licence fee and AMC charges and paid it over to SAP India. On these facts, it was held by the Tribunal that TTL acted as a payment conduit and did not provide any service to the Tata group companies and accordingly the amount collected from them was held as not liable for service tax [Tata Technologies Ltd. v. CCE (2007) 82 RLT 673 (CESTAT-Mum.)]

67.4 Enterprise Resource planning software implementation services would only be liable for service tax under “IT Software service” w.e.f. 16.5.2008 and not under the category of Management Consultancy Services prior to that date more so in view of the specific exclusion of same from the category of ‘consulting engineer’ services. [IBM India Pvt. Ltd. vs. CST (2010) 17 STR 317 (Tri- Bang)]

67.5 Where the main object of the appellant’s activity was to find investment proposal/to explore possibility of investment involving fund allocation, the Tribunal held that the appellant was not providing the service of management consultancy [Punjab Venture Capital Ltd. vs. CCE (2011) 24 STR 410 (Tri- Del)].

67.6 Where the appellant had only rendered services in the nature of compliance with statutory requirement such as applying for and obtaining approvals from Government bodies, liaison with Government departments, filing of requisite documents with the Registrar of Companies, and other statutory authorities, carrying out local statutory requirements and other registrations under various laws and statutes such as registration under Service Tax, Custom, Central Excise Act, Export-Import Policy etc., the Tribunal held that the same would not be liable for service tax under the category of ‘management consultant services’ since the services did not involve any change / improvement in management of organisation and also did not require any specialised knowledge of management consultant [CCE vs. Futura Polysters Ltd. (2011) 24 STR 751 (Tri.-Chennai)].

67.7 The activity of organizing short term courses on various topics relating to forestry management, environment for the Indian Forest Service, an autonomous body under the Ministry of Environment and Forest, to improve the skills and knowledge level of the officers attending the courses, cannot be called as rendering advice, directly or indirectly, in connection with management of any organization, and hence would not be liable to pay service tax under the category of ‘management consultancy service’. [Indian Institute of Forest Management v. CCE (2012) 25 STR 245 (Tri-Del)]

67.8 Market research done by an assessee company for its overseas parent cannot be considered as ‘Management Consultancy Services’ especially since during the period there was a separate entry for “Market Research Services” [Gillette India Ltd. vs CCE (2012) 26 STR 59 (Tri- Del.)].

67.9 A firm rendering legal compliance services such as filing documents and obtaining approvals under various statutes for its clients was held as not rendering ‘Management Consultancy Services’[Ernst & Young Pvt. Ltd. vs. CST (2012) 27 STR 462 (Tri. – Del)]

67.10 Where the assessee liaised with different telecom operators on behalf of its client to identify suitable partners for its client and also take steps for concluding agreements with them, the Tribunal held that the ‘liaison work’ conducted by the appellant would not fall under ‘management or business consultancy service’ as it covers only consultancy and advisory service and not all activities got done by management through others. ‘Liaisoning’ not being in the nature of any consultancy or advice is not liable under this category [Bharti Televentures Ltd. v. CCE (2013) 30 STR 148 (Tri.-Del.)].[See Tata Autocomp Systems Ltd v. CCE, Pune , 2015(37) STR 252 (Tri-Mum)

67.11 The assessee provided services to their parent company which included observation of business activities of the associate companies and licensees of parent company, cultivation of contacts with associate companies, attending to the personnel of parent company delegated to India and other visitors, entering into contract with new applicants for licensees etc. The above functions do not fall within the ambit of the definition of Management Consultant. [CST v. Robert Bosch (India) Ltd. (2013)30 STR 410 (Tri- Bang)]

67.12 Private placement of unlisted shares would not be liable for service tax under the category of Management Consultancy Services since no advice or technical assistance relating to conceptualising, devising, development, modification, rectification or upgradation of any working system of any organisation is rendered. Moreso, when there was no dispute was raised by the department that post 2001 such services will be taxable under banking and other financial services as being merchant banking services [CLSA India Ltd. v. CST (2014) 34 STR 407 (Tri- Mum.)]

67.13 Service provided in the nature of consultancy or advice for improving the management of a business entity will only be covered by the definition of ‘management or business consultancy service’. Thus, in the case of chartered accountancy firm, it was held that-

(i) Services relating to representation of clients before various government authorities being exempted from service tax vide notification no. 25/2006-ST would not be covered under ‘management or business consultancy service’; and

(ii) Services provided for complying with the laws of the country being executory in nature and not in the nature of consultancy or advice, would not be covered under ‘management or business consultancy service’

[B.S.R. & Co. v. CST (2013) 30 STR 242 (Tri.-Del.)].

67.14 A, acted as a managing director of BCS Ltd and BBI Ltd. and spent 80% of his time for BCS and 20% for BBI for separate remuneration. BBI paid its share of remuneration to BCS Ltd which paid over such amount to A alongwith its share of remuneration. The revenue sought to tax the amounts received by BCS from BBI under 'Management Consultancy services'. On appeal, the Tribunal on facts held that, BCS cannot be made liable under the 'Management Consultancy services' and if at all any consultancy services were rendered service tax demand can only be fastened on A and not on BCS. Further, A had not rendered any consultancy services since he only functioned as the Managing Director and hence the remuneration is also not liable under the category of 'Management Consultancy services' in terms of Board's Circular no. 115/9/2009-S.T dated 31.7.2009 [Bosch chassis Systems India Ltd. v CCE. (2013)32 STR 301 (Tri- Mum)].

67.15 Where the assessee provided advice relating to the financial restructuring relating to business of various clients it was held that its services would be liable for service tax under the category of ‘Management Consultancy services’ prior to 16.7.2001 even though the said services may be liable for service tax under the category of “Banking and Other Financial Services” post 16.7.2001. [HSBC Securities & Capital Markets (I) P. Ltd. v. CST , 2014 (33) STR 530 (Tri. – Mum)]

67.16 Where the assessee was providing consultancy to various member milk unions being an apex state society and nodal agency, the High Court confirmed the Tribunal’s order which had held that assessee did not provide management consultancy service mainly on the ground that the assessee is not conducting any commercial activity in a matter of consultancy service. [CCE v. MP State Co-op Dairy Federation (2014) 35 STR 446 (M.P.)]

67.17 Where the appellant M/s GSPL had entered into an agreement with M/s BWIL for integration and jointly carrying out day to day functions such as commercial, marketing, corporate personnel, quality assurance etc., and for sharing the cost incurred towards the same and in absence of any evidence of the appellant having provided any consultancy services in the field of management, the Tribunal held that appellant cannot be said to have provided management consultancy services to M/s BWIL. Accordingly no service tax can be demanded from it under this category of Management Consultancy Service [ Glaxo Smithkline Pharmaceuticals Ltd v. CST (2014)36 STR 349 (Tri-Mumbai)]

67.18 The services of monitoring and review of performance of subsidiaries, providing technology upgradation, research and development, etc. are clearly taxable under the category of management consultancy services [CCE v. Bharat Yantra Nigam Ltd. (2014) 36 STR 554 (Tri.-Del.)]

67.19 Where the appellant a merchant banker registered as such with the Securities Board of India had rendered the services of private placement of equity shares which was sought to taxed by the revenue under the category of management consultancy services the Tribunal relying on the Board clarification no. BII/I/2000-TRU dated 9.7.2001 held that the impugned services were in the nature of merchant banking services. Further since merchant banking services rendered by body corporate were liable for service tax only w.e.f. August, 2002 the impugned services rendered during the month of January, 2000 would not be liable for service tax under the category ‘management consultancy services’. [Triumph International Finance India Ltd. v. CST (2014) 35 STR 338 (Tri-Mum)]

68 Mandap Keeper

68.1 In this case, the appellants let out their premises / complex for holding trade fairs to various parties and also to the Election Commission for arranging for voting, storing boxes, counting votes etc. for a rent. The revenue sought to tax the rental receipts under the category of Mandap Keeper. Negativing the Revenue’s contention the Tribunal held that –

In order to be a “mandap keeper” a person must allow temporary occupation of a mandap for organizing official, social, or business “functions”. The appropriate meaning of the word “function” in this context would be a ceremony. The levy thus extends to temporarily organized official, social or business functions i.e. ceremonies and not to official, social or business activities.
A Trade fair is nothing but a temporary market place because what goes on at the fair is business as usual and not a business function. Likewise the letting out of stalls to Election Commission for storing election material etc. is letting out to carryout its official activities and not to organize official functions / ceremonies.

Accordingly the Tribunal held that none of the above activities of the appellant would be liable for service tax under the category of “mandap keepers”. [ India Trade Promotion Organization V CCE 2004 (60) RLT 268 (CESTAT-Del.)]

68.2 In the present case, service tax levied on services rendered by Mandap–Keeper was challenged on two grounds:

That it amounts to the tax on land and therefore by reason of Entry 49 of List 2 (State List) of the Seventh Schedule to the Constitution, only the State Government is competent to levy such tax; and
Insofar as it levies a tax on catering services, it amounts to a tax on sale and purchase of goods and, therefore, is beyond the competence of Parliament, particularly in view of the definition of tax on sale and purchase of goods contained in Article 366(29A)(f) of the Constitution.

Repelling the contentions of the appellants and upholding the judgment of the Madras High Court [133 ELT 36 (Mad.)] the Supreme Court in a landmark judgment made the following observations:

Tax on services provided by a Mandap Keeper is not a “tax on land”
In order to constitute a “tax on land” under Entry 49 of List 2 [State List] of Seventh Schedule [Tax on Land and Buildings] to the Constitution the tax must be directly a tax on land and tax on income from the land does not come within the purview of this entry. Therefore the tax on services provided by a Mandap Keeper is within the “legislative competence” of the Parliament.
Tax on catering services does not amount to tax on sale or purchase of goods

For a tax to amount to a tax on sale of goods, it must amount to a sale according to the established concept of sale in the law of contract or more precisely the Sale of Goods Act, 1930. Article 366(29A)(f) of the Constitution only permits the State to impose a tax on the supply of food and drink by whatever mode it may be made. It does not conceptually or otherwise include the supply of services within the definition of sale and purchase of goods. The fact that there is a tax on sale of goods involved in a catering service under article 366(29A)(f) of the Constitution does not mean that service tax cannot be imposed on the service aspect of catering.
Making available a premise for a period of few hours for the specific purpose of being utilized as a Mandap whether with or without other services would itself be a service and cannot be classified as any other kind of legal concept. The services provided by a mandap keeper cannot be termed as a hire-purchase agreement or a right to use goods or property. The services provided by a mandap keeper are professional services which he alone by virtue of his experience has the wherewithal to provide. The manner in which services is provided assumes predominance over the providing of food in such situations which is a definite indicator of the supremacy of the service aspect.

A tax on services provided by a mandap keeper is therefore in pith and substance a tax on services and not a tax on sale or purchase of goods or on hire purchase activities.

[Tamil Nadu Kalyana Mandapam Association v. Union of India, (2004) 167 ELT 3 (SC)]

68.3 The petitioners a ‘members’ club’ sought a writ from the High court for a declaration that the petitioner is not a mandap keeper within the meaning of Chapter V of the Finance Act, 1994 and no service tax would be payable for the facilities / amenities provided to its members. Upholding this contention the High laid down the following propositions :

A writ would not be entertained if there is an alternative efficacious remedy. Though in this case there was an alternative efficacious remedy, the court entertained the writ since interim relief had already been granted earlier and to nip litigation at its bud;
There should be existence of two sides / entities for having transaction. The ‘Members’ and the ‘club’ both are the same entity, one is the principal and the other is the agent and therefore a transaction between themselves cannot be regarded as a service.
The ratio of the judgments in income tax and sales tax would also be applicable to service tax in such a case and a transaction between the members and the club cannot be recorded as income, sale or service.

[Saturday Club Ltd. v. Asst. CCE (2005) 180 ELT 437 (Cal.)]

68.4 CKP, a charitable trust, let out its halls to several of its clients for official, social or business functions on the condition that the hirer shall, if catering or decoration service is required, avail them only from M/s. SCD. CKP entered into two separate contracts with SCD, giving them an exclusive monopoly right for rendering the services of catering and decoration to the hirers using the said halls for a consideration of ₹8.35 lakhs and 9.8 lakhs paid to them in instalments during the period spanning from 1997 – 2002. The question was whether these amounts are chargeable for service tax under the category of mandap keepers? The High Court reversing the judgment of the Tribunal held that the amounts are not liable for service tax under the category of “mandap keeper” since –

The hirers were the “clients” of CKP and the charges received from the hirers for use of the halls for organizing official, social or business functions is alone taxable;
There is no relationship of mandap keeper and client between CKP and SCD since SCD is not the person who has hired the halls for organizing any official, social or business function;
The consideration received from SCD is not an amount charged by CKP from the hirer but is for giving them monopoly rights to provide catering and decoration services to the hirers;
By giving SCD monopoly rights to provide catering and decoration services to the hirers it cannot be said that catering services are provided “indirectly” to the hirer (client) by CKP since CKP has not charged the hirer of the halls on that account.

[CKP Mandal v. CCE (2006) 4 STR 183 (Bom.)].

68.5 Where the appellants, a hotel which let out its halls for functions as well as conferences / meetings but registered itself only under mandap keeper services and not under convention services, the Tribunal held that the assessee is required to register under both as mandap keeper services and convention services and should classify the service each time either as convention or mandap keeper depending upon whether the hall is let out for organizing official, social or business function, or for formal meetings / conferences and discharge service tax appropriately. [Welcome Hotel vs. CCE (2009) 13 STR 375 (Tri-Ahmd.)]

68.6 “Breakfast” and “High Tea” (which in social context is used in replacement of dinner) would be considered as ‘substantial and satisfying meal’ within the meaning of Notification no. 21/97-S.T. dated 26.6.1997 and an assessee providing them whether on fixed menu basis or unlimited basis alongwith mandap keeper services would be entitled to abatement under the said notification. In order to claim exemption each and every invoice disclosing as to whether the supplied item was only tea or coffee or the same was inclusive of how many number of snacks etc. so as to fulfill the meaning of ‘substantial and satisfying meal’ is not required to be gone through. It would be sufficient if the mandap keeper has provided catering services and has disclosed the same as ‘inclusive of catering charges’ in the invoices raised by him. [Welcome Hotel vs. CCE (2009) 13 STR 375 (Tri-Ahmd.)]

68.7 In a “members club” the members and club both are the same entities. One maybe called as ‘principal’ and other may be called as ‘agent’. The members have formed the club to service themselves mutually and for this purpose, members are paying for such user and any amount of receipt and expenditure of the clubs is enjoyed and / or incurred by the members alone and not by third party. Thus, applying the principle of mutuality, the facility of use of premise by the members of the club cannot be termed as “letting out” nor the members of the club using such facilities can be termed to be “client”. In the absence of two entities the transactions between the club and its members would not be a service and consequently no service tax would be imposable. [ Karnavati Club v. UoI (2010) 20 STR 169 (Guj.) See also Sports Club of Gujarat Ltd. v. UoI (2010) 20 STR 17 (Guj.)]

68.8 In view of the principle of mutuality, the High Court declared the provisions of section 65(25a), section 65(105)(zzze) and section 66 of the Finance (No. 2) Act, 1994 as incorporated/amended by the Finance Act, 2005, to be ultra vires to the extent that the said provisions purport to levy service tax in respect of services provided by a club to its members. [Sports Club of Gujarat Ltd. v. Union of India (2013) 31 STR 645 (Guj.)].

68.9 Any service provided by a mandap-keeper ‘in relation to’ the use of a mandap is liable for service tax under the category of mandap-keeper services. Thus where the appellant had made available parking space to the clients, who had availed the services of the appellant’s Mandap, and had separately recovered parking charges from them, the Tribunal held that the service of car parking was in relation to the use of Mandap and hence would be liable for service tax under the category of mandap-keeper services. [Desert Inn Limited v. CCE (2011) 23 STR 254 (Tri –Del)]

68.10 The appellant, a hotel, served food and beverages to the guests of its customer to whom it had allowed the use of a banquet hall with all its facilities like decoration, lighting, stage, music etc. It split its bill into 3 parts:

Charges for use of mandap/hall;
Service charges for serving food & beverages to the guests.
Value of food and beverages sold

It paid service tax on (a) & (b) above and VAT/sales tax on (c) above. It claimed exemption from payment of service tax under Notification 12/2003 dated 20.6.03 (i.e exemption for goods ‘sold’ in the course of providing a service) on (c) above, which the department disallowed on the ground that there was no ‘sale’ of food. Upholding this contention the Tribunal held as follows:

The deeming fiction under article 366(29A) (f) by which the supply of food and drink by way of or as part of service is considered to be a ‘sale’ for the purpose of charging sales tax does not extend to service tax and hence the expression ‘sold’ (or Sale) occurring in notification No.12/2003 cannot be construed to include such a deemed sale.
The contract of the Mandap keeper with its customers is to allow use of Mandap with all its facilities like decoration, lighting, stage, music, catering service etc. for some consideration for organizing some official, social or business function. The catering service provided is a service incidental and ancillary to the service in relation to use of Mandap and though it involves supply of food and beverages, it is essentially a service contract, not for sale of food and beverages. Supply of food & beverages by a mandap keeper in the course of providing mandap keeper services (i.e use of a mandap) is not “sale” of goods as defined in section 2(h) of the Central Excise Act,1944 (i.e transfer of possession in goods) since the food and beverages served to the guests get consumed by them without there being a ‘transfer of possession’ of food and beverages from the mandap keeper to his customer for some consideration notwithstanding the fact that the invoice shows a specified amount as value of food and beverages.
The plea that Service tax cannot be levied on the portion of value of Mandap Keeper Service which represents the value of food and beverages served is incorrect.

[Sayaji Hotels Ltd v. CCE (2011) 24 STR 177 (Tri-Del)]

68.11 Where the assessee leased out its premises to a hotel in consideration for an interest free deposit, it was held that the said transaction does not come under the purview of ‘Mandap Keeper Service’ under Section 65(67) of the Finance Act, 1994 since the premise is not given for temporary occupation. [Acharya Jialal Vasant Sangeet Niketan v. CCE, 2014(33) STR 550 (Tri. – Mum)]

68.12 Services provided by club to its members are not taxable service as Mandap Keeper because the relationship of client and employer is absent. [ CST v. Safdarjung Club, (2014) 33 STR 415(Tri.-Del.)]

68.13 Where the assessee provided mandap keeper services including catering and split the bill into two parts – one part for hall charges on which service tax was charged and the other part for supply of food on which no service tax was paid on the ground that it was sale of food, the Tribunal held, relying on Sayaji Hotels Ltd. v. Commissioner (2011) 24 STR 177 (Tri-Del.), that the entire amount of consideration was liable for service tax under the category of mandap keeper services and there was no sale of food since catering was only incidental [Hotel Amarjit Pvt. Ltd. v. CCE (2014) 35 STR 140 (Tri-Mum.)].

69 Manpower, Recruitment or Supply Agency Service

69.1 Where the appellants conducted examinations for recruitment of clerks, officers and specialist officers in banks, financial institutions and other organisations with the object to plan, promote and provide for competent, well qualified and efficient cadres of personnel at various levels to banks and financial institutions in the country, and also collected fees for rendering similar services to persons other than Banks and Financial Institutions, the Tribunal held that the appellant is not a “commercial concern” (whose primary aim is to earn profit) and hence not liable to pay service tax on such fees since –

the activity undertaken by the appellants was within its object clause and was only with a view to minimise costs / fees charged to member banks; and
the profit earned from the aforesaid activity was ploughed back and used for the objects of the organisation itself and not for distributing the profits to its members. [Institute of Banking Personnel Selection vs. CST (2007) 8 STR 579 (Tri. – Mum.)].

69.2 The appellant’s employees were working on the client’s site. The clients were software companies. The issue was whether the appellant was providing a service or had only deputed personnel at the client’s disposal. The appellants contended that he provided a service viz., ‘Consulting engineering service’ or ‘Information technology service’ and the department contented that the appellant provided ‘Manpower Recruitment or Supply Agency Service’. The Tribunal observed that as per the actual operations the appellants are providing the skilled personnel to the client and hence would be liable under ‘Manpower Recruitment or Supply Agency Service’ based on the following reasons.

There was no evidence to show that the software project undertaken by the clients are sub-contracted to the appellant or that the appellants were working on any such project on their own;
The appellant’s skilled personnel were working under the supervision and control of the clients;
The contract provided that in case where the appellant’s skilled personnel leave the job they are to be replaced by suitably trained personnel as substitutes thus indicating that the number of skilled persons supplied was important from the point of view of the client. If the appellants were actually to deliver the software projects, the clients would have nothing to say how many personnel the appellants engage to complete the project or who they employ.

[Future Focus Infotech India (P) Ltd. vs. CST (2010) 18 STR 308 (Tri. – Chen.)]

Contra : In a similar case, in Cognizant Tech Solutions (I) Pvt Ltd vs CCE 2010 (18) STR 326 (Tri-chennai) on facts it was held that services were in the nature of “IT software services” and not “Manpower recruitment services” since the work force recruited and retained by the appellants were required to work under a project manager appointed by the appellants who had to act as a single point of contact being responsible for overall management of the project and the nature of services required to be provided by the appellants were in the nature of information technology services as the same related to data management.

69.3 Where the assessee was an academic institution, and not a ‘commercial concern’ the Tribunal held that receipts from various business organizations for the campus recruitment programme conducted by them would not be liable for service tax under the category of ‘manpower, recruitment and supply agency’ services prior to 01.05.2006, since at that point of time only service rendered by a ‘commercial concern’ was liable for service tax. [ CST vs. Indian Institute of Management (2011) 23 STR 132 (Tri – Bang)]

69.4 The appellants (trusts / co-operative societies of farmers), entered into an agreement with farmers for harvesting and transportation of sugarcane and were paid based on tonnage of sugarcane supplied. It distributed amounts received to the labourers after retaining a supervision charge. It was held, on facts, that the services are not liable for service tax as ‘Manpower Recruitment and Supply Agency Service’. It was further held that though the appellants did not procure sugar (input) for sugar factories they rendered a service incidental or ancillary to such procurement, and hence their activity more appropriately fell under Business Auxiliary Service [65(19)(vii)] [Bhogavati Janseva Trust v. CCE (2014) 34 STR 410 (Tri- Mum.)] [See Satara Sahakari Shetu Audyogik Oos Todani Vahtook Society v. CCE (2014) 36 STR 123 ( Tri - Mum) see aslo Samarth Sevabhavi Trust v. CCE (2014) 36 STR 83 (Tri- Mum); Amrit Sanjivani Sugarcane Transport Co. P. Ltd. vs. CCE (2014) 36 STR 360 (Tri-Mumbai)].

69.5 The activity of crushing of stones and supplying the same to their customers under a rate contract agreement would not be liable for Service Tax under the category of “Manpower Supply service”. [Seven Hills Construction v. CST, (2013) 31 STR 611 (Tri. – Mumbai) relying on Divya Enterprise v .Commissioner – 2010 (19) S.T.R. 370 (Tribunal) ]

69.6 On facts, where the appellant had acted as a job worker to manufacture goods for his customers in terms of a contract which inter alia involved deployment of manpower, the Tribunal after consideration of the agreement in totality and not on a piece – meal basis held that the appellant is essentially manufacturing goods for their customers and not engaged in supplying manpower and hence cannot be taxed under “manpower supply service” [Shiv Narayan Bansal v. CCE (2013) 31 STR 747 (Tri – Del.)].

69.7 Where the appellant, a composite textile mill engaged in manufacture of fabrics and garments, had deputed its employees to group companies for stipulated work for a limited period of time and thereafter the employees were repatriated back to the appellant company in consideration for which it received certain amounts from the group companies, it was held that appellant would not be liable for service tax under Manpower Recruitment and Supply Agency Service since it was not a commercial concern engaged primarily in recruitment or supply of manpower [Arvind Mills Ltd. v. CST (2014) 34 STR 610 (Tri. – Ahmd.) relying on Paramount Communication Ltd. v. Commissioner 2013-TIOL-37-CESTAT-DEL]

69.8 Where the U.S. based holding company of the appellant had deputed its staff to the appellant in India which paid their salaries after deducting income tax at source and had also reimbursed the social security contribution made by the U.S. company on behalf of the employees, the Tribunal relying on the decision in Paramount Communication Ltd. (2013) 29 STR 317 (Tribunal) & Volkswagen India Pvt. Ltd. (2014) 34 STR 135 (Tribunal) held that just because the social security contribution in respect of the expatriate employees was paid by the holding company, the expatriate employees cannot be treated as the employees of the holding company provided to the appellant company on manpower supply basis and accordingly the appellant would not be liable to pay service tax on the same under Reverse charge mechanism. [Bain & Co. India Pvt. Ltd. vs. CST (2014) 35 STR 553 (Tri-Del.)][See CCE v. Computer Sciences Corporation India P. Ltd. (2015) 37 STR 62 (All.)]

69.9 Where the appellant had deputed personnel such as executives, secretaries and receptionist to group companies in consideration for which it had received service charges from the said companies the Tribunal held the said services would be liable for service tax only w.e.f. 16.6.2005 under the category of manpower recruitment or supply agency service and not prior to that date under the category of management consultancy services[ Mahindra &Mahindra Contech Ltd. vs. CCE (2014) 35 STR 634 (Tri-Mumbai)]

70 Market Research Agency’s service

70.1 ‘Product promotion service’ and ‘market development service’ under ‘Market Assistance Agreement’ provided by the assessee to their clients whereby the assessee developed prospective customers, provided growth plans for its client’s products, assisted in formulating market strategies, customer service and pricing policies etc. could not have been accomplished without ‘market research’ and therefore the amount collected by the appellant under the agreement is liable under ‘Market Research Agency’s service’. [Kopran Ltd v CCE (2011) 23 STR 627 (Tri-Mumbai)]

71 Mining Service

71.1 The appellant entered into contracts with its customers for beneficiation / washing of raw coal at its washery (which included bringing the coal to its washery) and supply of washed coal to its customers. The appellant charged his customers for washing and handling separately. The Revenue sought to tax the washing charges, under ‘business auxiliary services’ and handling charges under the category of ‘cargo handling services’. On appeal, the Tribunal held –

The activity of beneficiation / washing of raw coal is liable for service tax under the category of ‘mining services’ w.e.f 1.6.2007 and not under the category of ‘Business Auxiliary Services’ prior to 1.6.2007
The activity of handling coal for bringing it to the washery is an integral part of mining services. It is not handling provided to any other person but only to self. Hence, handling charges are not liable for service tax under ‘cargo handling services’

[Aryan Coal Benefications Pvt. Ltd. vs. CST (2013) 29 STR 74 (Tri. – Del); See also Spectrum Coal & Power Ltd. vs. CCE (2012) 28 STR 510(Tri. – Del.)].

72 Operation and maintenance contracts

72.1 The appellants operated and maintained a power plant for the owner of the plant and were responsible for generation of electricity and selling it to TNEB which had an agreement with the owner. The appellants received a fixed monthly remuneration from the owners. The department sought to tax the remuneration under the categories of Management Consultancy services, consulting engineering services, clearing and forwarding services, business auxiliary services, maintenance and repair services. The Tribunal dismissed the department’s contentions and held as follows :

In order to fall within the ambit of “management consultancy services” a person must provide advice in applying management principles for efficient functioning of an organization. In the present case the appellant was not offering any advice for improvement of owner’s organization. Its primary function was to generate and transfer power to TNEB including carrying out incidental and ancillary functions such as maintaining the plant with its team of experts including engineers. Accordingly, its services are not liable for service tax under the category of “Management consultancy services”.
As the plant is run by the appellants, it cannot be held that they had rendered any engineering consultancy to owner or anybody else. Accordingly its services are not liable for service tax under the category of “Consulting engineering services”.
Ensuring quality of the fuel and its availability to run the plant without interruption are functions incidental to the operation of the plant for generating power and therefore coordinating the delivery of lignite with the transporting agency and ensuring that the fuel of required specification is supplied cannot be held as a separate service rendered by it and such activities are not liable for service tax under the category of “Clearing & Forwarding Agent” as contended by the department.
As per the definition of “Business auxiliary services” any activity involving manufacturing of any goods within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944 is specifically excluded. Generation of electricity being “manufacture” would therefore not be liable for service tax under the category of “business auxiliary services”.
The services provided by the appellants could not be considered as maintenance and repair since maintenance and repair are only incidental and ancillary functions to generation of power which was its primary function. Here these services could at the most be considered as services rendered to themselves and not to another person. Accordingly, their services are not liable for service tax under the category of “Maintenance and repair services”.

The Tribunal concluded that the O&M contract is a works contract and it is bad in law to vivisect it and tax certain activities covered by the contract. It held that the contract was intended to ensure generation and supply of power as per the power purchase agreement and not for rendering any service to the owner. It also observed that tax cannot be levied when the liability of the assessee is not determined precisely with respect to each of the taxable services found to have been rendered. No tax can be levied without specifying taxable value. [CMS (I) Operations & Maintenance Co. P. Ltd. v. CCE (2007) 7 STR 369 (Tri-Chennai) See also Basti Sugar Mills Co. Ltd. v. CCE (2007) 7 STR 431 (Tri.-Del.); GVK Power & Infrastructure Ltd. vs. CCE (2008) 10 STR 146 (Tri-Bang.)].

73 Online Information and Database Access or Retrieval service

73.1 Providing online computer courses through the medium of internet is in the nature of “commercial training and coaching services” and not “online information and database access or retrieval services” since, the essential character of the services involves providing education through the medium of internet i.e. providing online lessons on computer hardware and software, online interaction with the faculty, students and experts, online test, etc. and not merely providing online access to data or information. However, computer training institutes being exempt vide notification no. 9/2003 dated 20.6.2003, the appellants were not liable for service tax. [Dewsoft Overseas Pvt. Ltd. vs. CST (2008) 12 STR 730 (Tri. – Del.)].

73.2 The appellant (SBI) entered into a contract with M/s Equant Pte Ltd for providing Virtual Private Network which enables SBI and SBI branches to retrieve data from the data centre maintained by the appellants in different countries abroad. The very description of the contract proves that M/s Equant only enables connectivity. It does not provide any data for access or retrieval. The ownership of data is with the SBI foreign offices which provide access and retrieval of data. The responsibility of Equant is to ensure that network VPN functions properly. The services provided by Equant will fall under telecommunication service if provider is licensed under Telegraph Act. Hence SBI has not received any Online Information and Database access or retrieval services from foreign service providers. [State Bank of India v. CST 2015(37) STR 340 (Tri-Mum)]

74 Outdoor Caterer’s service

74.1 The appellant supplied food, beverage and dry stores to air lines; prepared two separate invoices – one for supply of food and another for service charges. It paid VAT on supply of food and service tax on the service charges after availing benefit of notification no. 12/2003. The department denied the benefit of notification no. 12/2003 on the ground that there is no ‘sale of goods’ but granted abatement of 50% of the total amount (supply of food + service charges) under notification no. 20/2004 dated 10.9.04. The Tribunal setting aside the order of department held that –

In view of the Article 366(29A) read with provisions of Karnataka VATAct, 2005 the supply of food would be deemed as sale of goods. Further, since VAT has been paid on such supply of goods service tax is not payable on the same value.
Benefit of notification no. 12/2003 is squarely applicable to the appellant since the supply of food constitutes ‘sale of goods’.
Where benefit under two notifications is available to the assessee, he has an option to choose more beneficial notification.

[Sky Gourmet Pvt. Ltd. Vs. CST (2009) 14 STR 777 (Tri. – Bang.); See also LSG Sky Chefs (India) Pvt Ltd. vs CST 2010 (18) STR 37]

74.2 Mere preparation and serving food items to the employees of the company using the facilities such as canteen, stores, furniture, utensils, gas, electricity, etc. provided by the company itself, is not covered under outdoor catering service. [Rajeev Kumar Gupta vs. CCE (2009) 16 STR 26 (Tri. – Del.)]

74.3 Where the assessee was engaged in preparation of food and serving the same to the employees of its customer at the customer’s premises for a consideration received from the customer, the Tribunal held the same was liable for service tax and under the category of outdoor catering service. [ Indian Coffee Workers Co-op Society Ltd. v. CCE, (2014) 33 STR 266 (Tri. – Del.)]

74.4 Where the appellant was engaged by NTPC and LANCO as a caterer for running and maintenance of the canteen in their premises, it was held by the High Court that the appellant’s activities fall under the category of outdoor catering services. The fact that assessee may have paid VAT on sale of food and beverages would not absolve the assessee from its liability to pay service tax on the said taxable services [ Indian Coffee Workers’ Co-op Society Ltd. V. CCE&ST (2014) 34 STR 546 (All.)]

74.5 An outdoor catering service consists of two components – (i) sale of food articles which is liable for sales tax leviable by the state legislature; and (ii) the service of bringing the food articles to the place designated by the client (including the cost of transporting food articles) which alone would be liable for service tax [CST v. The Grand Ashok, (2013) 31 STR 528 (Kar.)]

74.6 Outdoor Catering Service provided by a NGO even though on no profit-no-loss basis liable for service but entitled to exemption vide ad hoc exemption order No. 2/2/2011-ST dated 8-8-2011. [Naandi Foundation v. CCE, Jaipur, (2014) 35 STR 775 (Tri-Del)]

75 Packaging Service

75.1 Packaging and bottling of country made liquor would not be liable for service tax under the category of ‘packaging service’ since the same is in the nature of a manufacturing process as defined under Section 2(f) of the Central Excise Act, 1944 for the following reasons:

‘Manufacture’ includes any process which is incidental or ancillary to the completion of manufactured product such as ‘bottling’. Further, it is not necessary that the manufacturing process referred to in section 65(76b) of the Finance Act must result in excisable goods.
Bottling of liquor cannot be considered as a process distinct from manufacturing of liquor so as to levy service tax thereon.

[Maa Sharda WineTraders vs. UOI (2009) 15 STR 3 (M.P)]

76 Pandal and shamiana Service

76.1 Section 65(77a) defines a “Pandal and Shamiana” as a place specially prepared for organizing an official, social or business function and the Explanation provides that a social function includes marriage. The High court dismissed the writ petition for considering the Explanation to section 65(77a) as unconstitutional on the contention that Hindu marriage is sacred institution and not a social function in view of the following:

When a “pandal or shamiana” is used for marriage, it earns the status of social function as service component is involved.
The statute itself postulates that marriage is to be regarded as a social function and full effect has to be given to the same.

[All India Tent Dealers Welfare Organisation vs. UoI (2011)24 STR 385 (Del)].

77 Photography services

77.1 Goods and materials during the course of providing photography services is not includable in the value of taxable service for the purpose of charging service tax. Further, the Circular F.No.233/2/2003-CX-4 dated 3.3.2006 clarifying otherwise is not in accordance with the judgment of the Supreme Court in BSNL case. [Shilpa Color Lab v. CCE (2007) 5 STR 423 (Tri.-Bang.) Contra S.R.Gupta & Sons. Vs. CCE (2012) 27 STR 501 (Tri. – Del.)]

77.2 Colour photo laboratories which are merely engaged in receiving exposed negatives/ rolls, developing the same and printing the photographs of desired size are liable for service tax under the category of photography service.[Colorway Photo Lab vs. UOI (2009) 15 STR 17 (M.P.)]

78 Port Services

78.1 In the present case the following issues were referred to the Larger Bench of the Tribunal viz.,-

Whether any provisions other than clause (q) of Section (2) of the Major Port Trust Act, 1963 or any provisions other than clause (4) of Section (3) of the Indian Ports Act, 1908 are applicable to interpretation of “port service” defined under section 65(82) of the Finance Act, 1994;
Whether stevedoring in a major or minor port is a “port service” within the meaning of this expression defined under Section 65(82) of the Finance Act, 1994;
Whether activities like intercarting (transportation of cargo after its unloading from a vessel to a place of storage within the port area), storage of cargo in plots allotted by the port, blending of different grades of coal in the port area and any other kind of cargo handling in the port area can be held to be services ancillary to stevedoring and whether they can be classified as port services?

The Larger Bench of the Tribunal answered the reference as follows:

The Finance Act, 1994, is a legislation enacted for the purpose of taxation whereas Major Port Trust Act, 1963 (“MPT Act”), and the Indian Ports Act, 1908 (“IP Act”), are enacted for setting-up and administration of ports. In absence of legislative mandate except the definition of the term “port” or “other port” as defined in the two acts, any other provisions of the said Acts cannot be used for interpretation of the “port services” as defined under section 65(82) of the Finance Act, 1994. Accordingly, “port services” would mean any service which is provided by a port or other port or any authorised person in relation to vessel or goods.
The definition of ‘port services’ brings any service provided by port or other port in relation to vessel or goods within the service tax net. Hence the facilities provided by a port to render the stevedoring service performable brings the stevedoring service under the category of ‘port service’ [Following Karnataka High court judgement in CCE vs. Konkan Marine Agencies (2009) 13 STR 7 Kar.)].
A service which is attributable or inevitable or indispensable for the functioning of the “port” or “other port” and advances the object of setting up the ports, such service is said to have been provided by a ‘port’ or ‘other port’. The expression ‘any service’ encompassed by the term ‘port services’ does not exclude any service provided by a port or other port to serve the purpose of the port. Hence the activities like intercarting (transportation of cargo after its unloading from a vessel to a place of storage within the port area), storage of cargo in plots allotted by the port, blending of different grades of coal in the port area and any other kind of cargo handling in the port area can be held to be services ancillary to stevedoring and classified as port services.

[Western Agencies Pvt. Ltd. vs. CCE (2011) 22 STR 305 (Tri-LB)].

78.2 Railway siding charges received by the appellants, a port trust, from the Railways for allowing them to utilise their railway marshalling yard for construction and maintenance of railway sidings are not services in relation to vessels or goods and accordingly not liable for service tax under Port Services. [New Mangalore Port Trust vs. CCE (2008) 9 STR 235 (Tri. – Bang.)].

78.3 The appellants, a minor port, provided various port services and registered for service tax with effect from 1.7.2003. It raised separate bills for wharfage, storage, etc. The department contended that the storage charges are liable for service tax under the category of “Storage and Warehousing Services” w.e.f. 16.8.02. Dismissing the contention of the department the Tribunal held that storage charges was not liable for service tax under “storage and warehousing services” but under “port services” since:

(i) Storage & Warehousing is not a separate service but were an essential, integral and core part of the port service and were performed for the better enjoyment of the port service;
(ii) Port services were subsequently introduced w.e.f. 1.7.03 without making a change in the definition of Storage and Warehousing service thus indicating that the two services were distinct and separate services.

[Gujarat Chemical Port Terminal Company Ltd. v. CCE (2008) 9 STR 386 (Tri. – Ahmd.)].

78.4 Where the appellants holding licences as a stevedoring agent were providing cargo handling services but such services were not rendered on behalf of the port authorities - the Tribunal held that the appellant’s services are Cargo handling services and not port services [H.K. Dave Ltd. v. CCE (2008) 12 STR 561 (Tri-Ahmd.) See also CCE vs. Konkan Marine Agencies (2009) 13 STR 7 (Kar)].

78.5 (i) In a case where the appellant conducted an auction of the cargo not cleared by the importers and appropriated the proceeds towards terminal /port charges, the Tribunal held that ‘conducting of auction’ of cargo is not a service rendered to importers and hence the service tax is not payable.

(ii) Fees collected for making available the infrastructure facility for examination of the cargo by customs authorities before the goods enter into the port area is not liable for service tax under the category of port services.

[India Gateway Terminal (P) Ltd. vs. CCE (2010) 20 STR 338 (Tri-Bang.)]

78.6 In the present case the Tribunal held that the following revenues would not be liable under the category “port services:

Royalty received by the appellant [Cochin Port Trust (“CPT”)] from India Gate Terminal Pvt. Ltd. (IGTPL) to develop & operate a terminal named the Rajiv Gandhi Container Terminal (RGCT) in the port area is not a consideration for providing any port services (i.e. a service in relation to vessels or goods). Further, if at all IGTPL pays service tax as demanded the same will be available to it as cenvat credit to pay its output tax. Hence demand on this count under the category of the “Port Services” is not sustainable.
the rent collected from individuals / agencies for allowing them to construct and operate jetties, cannot be considered as consideration towards port services.

[Cochin Port Trust vs. CCE .(2011) 21 STR 400 (Tri-Bang.) see also Cochin Port Trust vs. CCE (2011) 21 STR 25 (Tri. – Bang.)]

78.7 Ship repairs undertaken by shipchandlers in port area under a licence from the port is liable for service tax under the category of ‘Port Services’. The argument that the scope of ‘port services’would only include those services which the port under a statutory obligation under Major Port Trusts Act, 1963 or other statute is entitled to perform itself or ‘authorise’ others to do, is incorrect. The ‘authorisation’ need not necessarily be in respect of only those functions which the Port itself was required to perform under the Act [ Kandla shipchandlers and ship repairers association v. Union of India (2013) 29 STR 233 (Guj.) – Homa Engineering Works v. Commissioner (2007) 7 STR 546 (Tri.) overruled]

78.8 Prior to 1.7.2010, the levy of service tax on port service was with reference to the services rendered by minor port, major port or any person authorized by the port. The expression ‘authorized by the port’ has a specific connotation under the Major Port Trust Act or the Maritime Board Act issued by the State Government for governing minor ports. Only those persons who are authorized by the port within in the meaning of the relevant Act viz., Major Port Trust Act or Maritime Board Act to perform services in relation to vessels/ goods can be taxed under the category of ‘Port services’. Thus where the appellant was carrying out stevedoring services (loading/ unloading of export cargo) and lighterage services (sea transportation from the location where the mother vessel is anchored till the jetty and vice versa) at minor port in Gujarat under the licences granted to them by the Gujarat Maritime Board Act which was not an authorization by the port in term of s. 32(3) of the Gujarat Maritime Board Act, the Hon’ble Tribunal held that the appellant would not be liable for service tax under the category of ‘Port Services’. The Hon’ble Tribunal rejected the contention of the department that the expression ‘authorised by the port’ has to be taken as per the dictionary meaning on the ground that the expression ‘authorised by the port’ can have no other meaning other than that what has been given to it under the laws governing ports in India [ Shreeji Shipping v. CCE & ST (2014) 36 STR 569 (Tri.- Ahmd.)]

79 Programme Producer Service

79.1 Where the scope of work involves provision of pre-production, production and post production services and the fees for the same are shown in the invoice as pertaining to ‘Production Services rendered’, the activity is classifiable under ‘Programme Producer services’ and not under ‘business support services’ as contended by the appellant. [ESPN Software India (P) Ltd. v. CST, (2014) 35 STR 927 (Tri. – Del.)]

80 Rent a Cab

80.1 Where the appellants provided the service of transportation of passengers of the Indian Oil Corporation to destinations fixed by the Corporation, in a “matador”, for a consideration fixed per trip depending on the distance, time, etc. and during the time of the operation the vehicles continued to be with the appellant and the vehicle was not leased out to the Corporation for use according to its discretion, the Tribunal held that the appellants were not a liable for service tax under the category of “rent-a-cab scheme” operator. [Kuldip Singh Gill v. CCE Jalandhar (2005) 186 ELT 373 (Tri-Del.) see also [Vijay Travels vs. CST (2010) 19 STR 671 (Tri-Ahmd)]]

80.2 Where the appellants had rented out two of its vehicles having seating capacity of less than 6 and 6-12 passengers for hire, the Tribunal held that the activity of the appellants would be covered under “rent-a-cab services” since all vehicles with the relevant seating capacity used for transportation of passengers would fall within the definition of ‘cab’, ‘motor cab’ and ‘maxi cab’ for the purpose of service tax notwithstanding that other requirements of Motor Vehicles Act with respect to the vehicles have not been complied to consider it as motor cab or maxi cab. [Neeraj Construction vs. CCE (2009) 13 STR 145 (Tri-Del)]

80.3 Providing a cab on hire on monthly basis in different shifts of 8/12/16 hours and limit of maximum kilometres per month as well as maximum hours per day was fixed is liable for service tax under the category of ‘rent a cab’ service [Lok Priya Travels v. CCE (2012) 25 STR 49 (Tri-Ahmd), see also Gopal Singh Chundawat v. CCE (2012) (25) STR 86 (Tri-Del)].

80.4 ‘Ambulances’ not being meant for carrying passengers on hire would not be liable for service tax under rent a cab services [ CCE v. Surya Bhan Tripathi (2012) 25 STR 65 (Tri-Del)].

80.5 Where the assessee had entered into a long term contract with various units of Indian Army for making available on hire basis various means of transportation such as taxis, mini buses, deluxe and non deluxe buses at fixed rates but had not put the vehicles at the disposal of army for any fixed duration, the Tribunal held that the said services would not be covered under the category of ‘Rent-a-cab’ services [CCE vs. Sapan Mehrotra (2012) 26 STR 219 (Kar.)].

80.6 On facts, where the assessee transported ONGC’s personnel from point to point under the directions of ONGC for a specified period, but the control over the vehicles and drivers were always with the assessee and it was he who bore the cost of fuel, maintenance, etc. and got paid based on the kilometers travelled, it was held that the assessee’s services were that of ‘transportation’ and not ‘renting a cab’ so as to be liable for service tax [ Shree Gayatri Tourist Bus Service vs. CCE (2013) 29 STR 499 (Tri. – Ahmd)]

80.7 Where the assessee had contracted to provide cab on call basis and at scheduled rates and not on term basis without any exclusive control to the customer, the Tribunal held that its services were in the nature of transportation and would not be liable for service tax under ‘Rent-a-cab Service’ [ CCE vs. Singh Travels (2013) 30 STR 96 (Tri.-Del.)].

80.8 Rent-a-cab service availed by the assessee for the transportation of its employees from city to the factory in a village where no proper transport facility is available is not a welfare measure but a necessity to ensure that manufacture takes place properly. Hence credit on the said service is allowable [CCE v. Schot Glass India Pvt. Ltd. (2013) 30 STR 219 (Tri.-Ahmd)] See also[Thiru Arooran Sugars Ltd v. CCE (2013) 32 STR 435 (Tri-Chennai)]

80.9 Where the assessee supplied vehicles of specified description alongwith drivers to their clients and charged a flat rate on per kilometer basis for different kinds of vehicles, it was held that the assessee would be liable to service tax under the category of rent-a-cab services.[ Transport Solution Group v CCE 2014(33) S.T.R. 683(Tri.-Mumbai)]

80.10 The appellant entered into contracts with PRTC (a Punjab State Government Undertaking) under which they put their buses at the disposal of PRTC and also bore the cost of diesel, maintenance and driver for which they received an amount on a per day basis. The conductors of the bus were that of PRTC which operated the buses as a stage coach and the proceeds on sale of tickets also belonged to PRTC. On these facts, it was held that the appellants were liable to service tax under the category of Rent-a-Cab Service. [Harjinder Singh v CCE. (2014) 33 STR 437 (Tri.-Del.)].

81 R enting of Immovable property

81.1 In this case the larger bench (3 judges) of the Delhi High Court held-

When premise is taken for commercial purpose, it is basically to subserve the cause of facilitating commerce, business and promoting the same. Therefore, there can be no trace of doubt that an element of value addition is involved and once there is a value addition, there is an element of service. Hence the imposition of service tax on renting is not a tax on land and building under Entry 49 of List II (State List).
The provisions, namely, Section 65(105)(zzzz) and Section 66 of the Finance Act, 1994 and as amended by the Finance Act, 2010, are intra vires the Constitution of India.
The decision rendered in the first Home Solution case does not lay down the correct law as there is value addition when the premises is let out for use in the course of or furtherance of business or commerce and it is, accordingly overruled.
As the first Home Solution case is overruled, the provisions would operate from 2007 and the amendment brought by the Parliament is by way of ex abundanti cautela.(i.e as a matter of abundant caution)
The retrospective amendment made by Finance Act, 2010 is constitutionally valid.

[Home Solutions Retails (India) Ltd v. Union of India (2011) 24 STR 129 (Del-LB) overruling Home Solutions Retail India Ltd. vs. UOI (2009) 14 STR 433 (Del.)]

81.2 Letting out the property (air-conditioned space) where the customer airlines install and operate their x-ray machines would be liable for service tax under the category of ‘renting of immovable property services’. [Kerala State Industrial Enterprises Ltd. vs. CST (2011) 21 STR 423 (Tri-Bang.)]

81.3 In a petition seeking declaration of the provisions relating to service tax on renting of immoveable property as ultra vires, the Constitution, the Punjab and Haryana High Court held as follows:

It cannot be held that renting of property did not involve any service. Renting of property for commercial purposes is certainly a service and has value for the service receiver.
service tax on the service of renting of property is not a “tax on land and building” covered by Entry 49 List II which is the subject of the State Legislatures but is on the service element in renting transaction which is within the legislative competence of the Parliament under Entry 92C read with Entry 97 of List I.
The amendment made by the Finance Act, 2010 retrospectively from 1.6.2007 is constitutionally valid.

[Shubh Timb Steels Ltd. v. Union of India (2010) 20 STR 737 (P&H) See also Utkal Builders Ltd. vs. UOI (2011) 22 STR 257 (Ori.)].

81.4 A tenant not being the ‘service provider’ has no locus standi to challenge the imposition of service tax on ‘renting’. [Devyani International Ltd. vs. UOI & Ors. (2011) 22 STR 262 (Kar.) See also Mohan Clothing Company Pvt. Ltd. v. UOI (2013) 30 STR 236 (Kar)]

81.5 On facts of the case, where the appellants rented out immovable property to tenants and also recovered electricity charges separately from them, the Tribunal held that electricity is ‘goods’ Chargeable to excise duty (nil rate) under the Central Excise Act, 1944 and Maharashtra Value Added Tax Act, 2005 and accordingly the electricity charges collected from the tenants would not be liable for service tax under the category of “renting of immovable property services” [ICC Reality (India) Pvt. Ltd v. CCE (2013) 32 STR 427 (Tri-Mum)]

81.6 The renting of buildings for a hotel is excluded from the definition of ‘immovable property’ under Explanation 1 clause (d) and hence would not be liable for service tax under the category of ‘renting of immovable property services’ [Jai Maha Hotels Pvt Limited v. CCE (2014) 36 STR 669 (Tri-Del)]

81.7 Returnable security deposit, collected at the time of renting of immovable property cannot be considered as a part of consideration for service and hence no service tax would be payable on such security deposits. Further where the rent agreement clearly stipulated that the service tax would be recovered separately in addition to rent, the contention of the appellant that the benefit of cum-tax value should be given in respect actual rent received by it not sustainable. However, on facts, since the assessee had paid tax on cum-tax value basis the Tribunal held that no penalty should be imposed on the assessee [Samir Rajendra Shah v. CCE (2015) 37 STR 154 (Tri-Mum)]

82 Real Estate Agent Service

82.1 The appellant (M/s SRL) in the present case was engaged in acquiring/ obtaining lease land suitable for wind farm project identified by its associate company SEL and subsequently selling or sub-leasing the lands to the customers of SEL who would put up wind turbine generators on the said land. The agreement between the appellant and SEL mentioned that on sale/ sub-lease of land by SRL to the customers of SEL, SRL would recover the cost of acquisition of land and the incidental expenses incurred by it alongwith commission of 11% on cost, which infact was the profit that would be earned by SRL on sale/ sub-lease. The department sought to tax the said commission on the ground that the appellant had rendered Real Estate Agent Services to SEL. On appeal, the Hon’ble Tribunal observed that since the land was purchased by the appellant in its own name and all the incidental cost thereof was also borne by it and subsequently the same was also sold/ leased by it to the customer of SEL on which account it earned profit, the appellant was carrying out buying and selling of land and had not rendered any real estate agent services to SEL. Hence no service tax was payable by it on the profits earned by it under the category of real estate agent’s services [Sarjan Realties Ltd. v. CCE (2014) 36 STR 877 (Tri-Mum)]

83 Sale of space or time for advertisement

83.1 The appellant’s services of soliciting clients for sale of space in newspapers would be considered as a service ‘in relation to’ sale of space and more aptly covered within the category of ‘sale of space or time for advertisement’ which is effective from 1.5.2006 and not under the category of ‘business auxiliary services’ prior to that date. [Margadarsi Marketing Pvt. Ltd. vs. CCE & ST (2010) 20 STR 195 (Tri. – Bang.)]

83.2 Display / flashing of advertisements in websites would be liable for service tax under the category of sale of space or time for advertisement services only w.e.f. 1.5.2006 and not prior to that date under the category of Business auxiliary services. [CCE vs. EBAY India Pvt. Ltd. (2014) 35 STR 590 (Tri-Mumbai)]

83.3 The appellants (State Government undertaking) provider of sale or time for advertisement service entered into an agreement which provided that the service tax would be borne by the service recipient of service and therefore failed to register and pay tax and file returns, the Tribunal held that any private agreement cannot transfer the legislative mandated liability from the appellants (service provider) to the service recipient (advertisers) and hence the appellants are liable to pay service tax [Delhi Transport Corporation v. CST (2014) 36 STR 693]

84 Scientific or Technical Consultancy

84.1 ‘Grants-in-aid’ received by the assessee from the Central and State Governments for implementing various social welfare schemes for the benefit of various sections of the society such as minorities, poor villagers, etc. is not liable for service tax under the category of ‘scientific and technical consultancy services’ since the assessee only acted as an implementing agency and did not render any ‘service’ to the Government and hence there was no service provider-client relationship between the assessee and the Government. [APITCO Ltd. Vs CST (2010) 20 STR 475 (Tri. –Bang.)]

84.2 Agreements for transfer of brandnames/trademarks and knowhow by the appellant for a consideration are not liable for service tax under the category of ‘Scientific or technical consultancy’services. These transactions involve permanent transfer of intellectual property and are covered under ‘intellectual property service’, which was not taxable during the period of dispute.[Kopran Ltd v CCE (2011) 23 STR 627 (Tri-Mumbai)]

84.3 Where the appellants were engaged in carrying out advanced research & development projects in Maritime Transportation sector mainly in relation to ship design and production the Tribunal held that the same is liable for service tax under the category of ‘scientific and technical consulting’ services and not under the category of ‘consulting engineer’ services [CCE vs. National Ship Design & Research Centre (2011) 24 STR 716 (Tri.- Bang)].

84.4 Where the respondent had provided services in the nature of digitization of maps, IRS PAN images, computerization of land plan, and vectorisation of village maps it was held that the services were not liable for service tax under the category of ‘scientific or technical consulting services’ as it had not provided any advice consultancy or technical assistance in any discipline of science or technology [CCE v. ADCC INFOCAD Pvt. Ltd. (2014) 35 STR 421 (Tri-Mum)]

85 Security agency services

85.1 The appellants were a corporation formed under the Punjab Ex-Servicemen Corporation Act, 1978 with an objective of welfare and rehabilitation of Ex-Servicemen. As a part of their objectives they were engaged inter alia in providing security agency services. They contested the levy of service tax on the grounds that they were not a commercial concern engaged in business and hence their activities would not be liable for service tax. Further in any case no service tax would be payable on the amount of salaries paid by it to its security personnel. On appeal the Tribunal dismissing the above contentions observed that

i) for levy of service tax the nature of activity is relevant and not the objectives. The test for determining as to whether a concern is a “commercial concern” would be as to whether it charges fully commercial price for the goods or services sold by it and monitors its commercial performance by preparing Annual balance sheets and profit and loss account. From mere objectives of an organisation – like welfare of ex-servicemen or other sections of the society requiring help, promotion of sports etc. it cannot be concluded that it is not a commercial concern. Since the appellants charged full commercial price for the services rendered by it and used to monitor its commercial performance by preparing Balance sheets and Profit and loss account it was held to be a “commercial concern”.

ii) the assessable value of the security agency services shall include the salaries of the security personnel provided.

[Punjab Ex-Servicemen Corpn. vs. CCE (2009) 13 STR 529 (Tri-Del.) affirmed in Punjab Ex-Servicemen Corporation v. UOI (2012) 25 STR 122 (P&H)]

85.2 On facts the Tribunal held that an Association which was a co-operative society or organizations whose object was to serve ex-servicemen and look after the welfare activities of their families was not a “commercial concern” so as to make them liable to service tax prior to 18.04.2006 under the category of security agency service [Bhootpurva Sainik Society v. CCE & ST (2012) 25 STR 39 (Tri-Del)]. See also Bhilwara Zila Ex-Servicemen Wel. Soc. Ltd. v. CCE 2013 (30) STR 299 (Tri-Del);Rajputana Ex-servicemen Co-op Society v. CCE (2013)31 STR 248 (Tri-Del)

85.3 Service tax is imposed upon the person to whom service is being provided and the same service provider is merely a collecting agency. Thus, where the agreement did not contain terms for payment of service tax by the service recipient and the service provider was made to pay service tax by the department, the High Court held that service provider was eligible to be reimbursed by the service recipient. [Bhagwati Security Services (Regd.) v. UOI, (2013) 31 STR 537 (All.)]

86 Services in relation to transmission and distribution of electricity

86.1 Where the assessee was engaged in providing services like manning and maintenance of sub-stations; erection of sub-stations; transportation of failed/ repaired transformers and other goods by road; establishing of customer service centers for the electricity distribution companies and supply of manpower for maintenance of sub-divisions of electricity companies the Tribunal held that no service tax would be payable since Notification no. 45/2010 –ST dated 20.7.2010 exempts services provided in relation to transmission and distribution of electricity for the period upto 26.2.2010.[ Shri Ganesh Enterprises v. CCE, (2014) 35 STR 348 (Tr- Bang)]

86.2 Where the appellant was engaged in preparation of spot bills by taking reading of electricity consumption, distribution of bills, verifying malfunctioning of meters, theft of power etc. which activities were sought to be taxed under the category of business auxiliary services the Tribunal held that the services rendered being in relation to distribution of electricity the same would be exempt under Notification No. 45/2012 dated 20.7.2010 upto 21.6.2010 [Sterling Transformers v. CCE, (2014) 35 STR 396(Tri- Bang)]

87 Short -term Accommodation Service

87.1 The services of providing accommodation to pilgrims in guest houses would be liable for service tax under the category of ‘Short-term Accommodation Service’ [Tirumala Tirupati Devasthanams vs. Superintendent (2013) 30 STR 27 (A.P.)].

88 Services provided by restaurants/ hotels

88.1 The Kerala High Court held the levy of service tax on services provided by restaurants [clause (zzzzv)] and accommodation services provided by hotels, inns, guest house, club or campsite [sub clause (zzzzw)] as unconstitutional on the following grounds:

As regards services provided by restaurants, the Court held that supply of food or beverages “by way of or as part of any service”, is deemed to be a ‘sale’ under article 366(29-A)(f) and hence the State Government alone has the legislative competence to enact the law for imposing a tax on the service element forming a part of sale of such goods under entry 52 of the state list (i.e. tax on sale or purchase of goods) and the Central Government in exercise of the residuary power under entry 97 of List I of the Constitution cannot impose service tax.
As regards services provide by hotels or guest house, the Court held it to be within the exclusive legislative function of the State under entry 62 of List II (i.e. tax on luxuries).

The High Court also allowed the petitioners to seek refund of the tax (if any) paid by them on the said services.

[Kerala Classified Hotels and Resorts Association v. UOI (2013) 31 STR 257 (Ker.)][See Union Of India v Kerala Bar Hotels Association(2014)36 STR 1205(Ker)]

88.2 In a writ challenging the constitutional validity of Section 65(105)(zzzzv) of the Finance Act, 1994 which levies service tax on the services provided by a air-conditioned restaurants holding license to serve alcoholic beverages on the ground that supply of food and beverages by a restaurant has been subjected to levy of sales tax under Entry 54 of the State List of the Constitution read with article 366(29A)(f) and hence the Parliament was not competent to levy service tax, it was held by the Hon’ble High Court that when a restaurant supplies food or drink to its customers, sales tax on the sale of goods aspect (food or drink) can be levied by the States and service tax can be levied by the Union on service aspect of catering. While imposing such a tax the Parliament does not transgress or encroach upon the State’s power to levy Sales Tax. Accordingly, the High Court dismissed the writ and upheld the Constitutional validity of the above provisions [Indian Hotels and Restaurant Association v. Union of India (2014) 34 STR 522 (Bom.)].

88.3 In a writ challenging the constitutional validity 66E(i) of the Finance Act 1994 which levies service tax on service portion in an activity of supply of food or drink on the ground that such an activity is a sale under article 366(29A)(f) of the Constitution, the Hon’ble High Court held that:

The said article does not indicate that the service part is subsumed in the sale of food but it rather separates the sale of food and drinks from service.
Section 66E(i) only charges service tax on service part and not on the sales part.

Accordingly the High Court held that S66E(i) is intra vires the constitution. [Hotel East Park v. Union of India (2014) 35 STR 433(Chattisgarh)]

88.4 Where in a transaction involving supply of food and beverages the element of service has been bought under the service tax and the Service tax (Determination of Value) Rules, 2006 vide rule 2C has provided that 40% of bill amount is liable to service tax, no value added tax can be imposed on the said 40% of the value. [Valley Hotel & Resorts v. CCT (2014) 35 STR 28 (Uttarakhand)]

89 Steamer Agent’s service

89.1 Where the assessee, a steamer agent, did not pay service tax for the period 1.11.2003 to 19.11.2003 on services provided to their foreign principals for which they received their consideration in convertible foreign exchange, the Tribunal upheld the stand of the assessee on the ground that the benefit of the clarification issued by CBEC vide its circular no. 56/5/2003-S.T. dated 25.2.2003 (which clarified that service tax is a destination based consumption tax) would be available to the assessee and no service tax would be payable on the services exported by the assessee. [ Maersk India Pvt. Ltd. v. CST 2013 (32) STR 546 (Tri. – Mum.)]

90 Site formation and clearance, excavation and earth moving and demolition Services

90.1 Where the appellants under a contract with APMDCL were required not only to remove the overburden but to extract Barytes Ore the Tribunal held that the essential character of the activities of the appellants were in the nature of mining services and site formation (i.e. removal of overburden) was only incidental. Since mining services were liable to service tax only w.e.f. 1.6.2007 the demand for a period prior to 1.6.2007 is not payable. Further, the Tribunal also observed that the contract for mining being comprehensive in nature cannot be vivisected for the purpose of levying service tax on the portion of activity relating to site formation services.[M. Ramakrishna Reddy vs. CCE&C (2009) 13 STR 661 (Tri-Bang.); See also CCE vs. Vijay Leasing Company (2011) 22 STR 553 (Tri-Bang.) ]

90.2 Where the appellant had entered into an agreement whereby it undertook activities like excavation and removal of overburden wastes and also undertook mining of ores, demand of service tax on excavation and removal of overburden wastes under the category of Site Formation, Cleaning, Excavation, Earthmoving and Demolition Services was held to be incorrect [Associated Soapstone Distributing Co. P. Ltd v. CCE( 2014) 34 STR 865 (Tri-Del)].

90.3 Activities of reclamation of land by constructing diaphragm wall, anchor slab and retention wall alongwith the banks of the river are in the nature of Site Formation and Clearance, Excavation and Earthmoving and Demolition Service. However, since the activities are in relation to a river (i.e. a water body) it would be specifically excluded from the definition “Site Formation and Clearance, Excavation and Earthmoving and Demolition Service” [ ITD Cementation India Ltd. v. CST (2014) 36 STR 897 (Tri.-Mum.)].

91 Sponsorship service

91.1 ‘IPL matches’ being “sports events” would be excluded from the category of “sponsorship services” and accordingly the appellant who was one such sponsor would not be liable to pay service tax as a recipient of service. [Hero Honda Motors Ltd v. CST (2013)31 STR 162 (Tri-Del)] See also Hero Motorcorp Limited vs. CST (2013) 32 STR 371 (Tri-Del)

92 Supply of tangible goods for use services

92.1 The petitioner supplied various types of vessels (offshore drilling rigs, off-shore support vessels, harbour tugs and construction barges) on ‘time charter basis’ to various oil and gas producers to carry out off-shore exploration and production activities. The department contended that the services are in the nature of services ‘in relation to’ mining and hence liable under the category of ‘mining services’ w.e.f. 1.6.07, while the petitioners contended that it would be liable for service tax under the category of ‘supply of tangible goods for use’ without transferring effective control and possession w.e.f. 16.05.08. Upholding the contention of the petitioners the High Court observed:

(i) When a new entry is introduced and certain services are included in that entry, it would presuppose that there was no earlier entry covering the said services. Since the services of the petitioner are squarely covered by the entry 65(105)(zzzzj) i.e. service in relation to supply of tangible goods, prior to introduction of the said entry, the services rendered by the petitioners were not liable.

(ii) The services rendered by a person must have a direct or proximate relation to the subject matter of the taxing entry and the context in which the words ‘in relation to’ are used has to be borne in mind to judge the extent of the scope of an entry which may be of wide amplitude. Thus, in the present case, services having remote connections cannot be included in entry (zzzy) i.e. service in relation to mining of mineral, oil or gases on the strength of the words “in relation to”.

[Indian National Shipowners vs. UOI (2009) 14 STR 289 (Bom.)]

92.2 On facts, where a company, a steel project owner, supplied machinery to its contractors for executing various jobs for the project for which it received hire charges from the contractors, the Supreme Court held that there was no ‘transfer of right to use goods’ and accordingly no sales tax under section 5E of the Andhra Pradesh General Sales Tax Act, 1957 would be leviable since –

The effective control of the machinery even while the machinery was in use of the contractor was that of the company;
The contractor was not free to make use of the machinery for the works other than the project work of the company or move it out during the period the machinery was in his use;
The condition that the contractor would be responsible for the custody of the machinery while it was on the site did not militate against company’s possession and control of the machinery.

[State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd, (2013) 31 STR 513 (S.C)].

93 Stock broker services

93.1 In a case where assessee was registered as a stock broker with SEBI but working as a sub-broker the Tribunal held that the assessee was providing taxable services as a stock broker and is covered by the definition of stock broker. Accordingly service tax recovered from the customers is liable to be deposited u/s. 11D of the Central Excise Act, 1944. [U.S. Bengali vs. CCE&C (2008) 12 STR 71 (Tri-Ahmd.)]

93.2 Services provided by a sub-broker to a stock broker viz., of getting prospective investors for sale or purchase of securities is liable for service tax post 10.9.04 under the category of “stock broker services”. [Unique Investment Centre vs. CCE (2009) 13 STR 158 (Tri-Del.) Decision in Vijay Shantha v. CCE (2007) 7 STR 518 (Tri-Del.) held per incurium]

Note: As per Finance (No. 2) Act, 2009 services provided by sub brokers are excluded from service tax under the category of stock broking services w.e.f. 1.9.2009.

93.3 Delayed payment charges recovered by stock broker from its customers for delaying its payments by debiting the running account after raising separate debit notes cannot be a consideration received for providing stock broking services and accordingly would not be liable for service tax under the said category[Religare Securities v. CST (2014) 36 STR 937 (Tri.- Del.)].

94 Storage and Warehousing services

94.1 Where the appellants, who were engaged in manufacturing of sugar, were required by Government of India to maintain a specific quantity of free sale sugar for a specified period to comply with the provisions of Sugar development Fund Act, 1982 for which they were compensated by way of reimbursement of expenses towards interest, storage and insurance, the Tribunal held that they would not be treated as providing of ‘storage and warehousekeeping services’ to Government and accordingly would not be subjected to service tax on the said reimbursement received from the Government.[ Nawanshahr Co-op. Sugar Mills vs. CCE (2008) 12 STR 176 (Tri-Del.)]

94.2 In this case the Tribunal held that -

Terminal charges collected by the custodian at the air cargo complex for providing services such as stacking, unloading and facilitation for x-raying of export cargo being incidental to the provision of storage services is liable for service tax under the category of storage and warehousing services.
Demurrage charges collected by the appellant for storing unaccompanied passenger baggage is liable for service tax under the category of storage and warehousing services.

[Kerala State Industrial Enterprises Ltd. vs. CST (2011) 21 STR 423 (Tri-Bang.)]

94.3 In this case the High Court held that subsidy received from the Government towards interest, storage and insurance for maintenance of a specific quantity of free sale sugar for a specified period (buffer stock) under the provisions of Sugar Development Fund Act, 1982 is not liable under the ‘storage and warehousekeeping services’ after making the following observations-

Nobody can provide service to himself – the appellant stored the goods owned by himself for a specified period and after the expiry of the period he was free to sell the same;
Subsidy received was not on account of services rendered to Government but is received as compensation on account of loss of interest, cost of insurance etc. incurred on account of maintenance of stock.
Just because the storage period of free sale sugar had to be extended at the behest of Government of India, neither the sugar mills becomes ‘Storage and Warehouse Keeper’ nor the Government of India become their client in this regard.

[CCE vs. Nahar Industrial Enterprises Ltd. (2010) 19 STR 166 (P&H)]See also [CCE v. Kumbhi Kasari SSK Ltd, 2014(33) STR 539 (Tri-Mum)]

94.4 The Karnataka State Warehousing Corporation, whose services are requisitioned by the State Government for storing of essential commodities like fertilizers on payment of a charge, does not perform a “statutory function”, and is liable for service tax under storage and warehousing services [ Karnataka State Warehousing Corporation Ltd. v. CCE (2010) 19 STR 32 (Tri-Bang.)]

94.5 The Apex Court in case of R.D.Saxena v. Balram Prasad Sharma AIR 2000 SC 912 held that the ‘case files’ of banks retained by an advocate would not be considered as ‘goods’ as they are not ‘saleable’ and do not have any marketability. The Tribunal relying on the aforesaid judgment held that the service of storage of old records and files provided by the assessee to various banks and corporate houses would not be considered as storage and warehousing of ‘goods’ and hence not liable for service tax under the category of ‘storage and warehousing service’ [ CST v. P.N. Writer & Co. Ltd. (2012) 28 STR 264 (Tri.-Mumbai)].

94.6 On the question whether ‘terminal charges’ charged by an assessee, owning an air cargo terminal, from airlines for providing the facility for x-raying, security check, completion of custom-formalities and short duration safe custody of goods and passenger baggage for transit to the plane within a cut-off period of 48 hours from the arrival of the cargo/baggage is liable for service tax under the category ‘storage and warehousing service’, the High Court held as follows:

Where standard rates are charged based on quantity, volume, nature of handling, etc. irrespective of the time taken within the cut-off period of 48 hours then such charges are not liable for service tax under the category ‘storage and warehousing services’.
Where additional charges are levied over the standard rates for handling and clearance of goods within 48 hours, then such additional charges can be treated as attributable to storage & warehousing and service tax can be levied.

[Kerala State Indl. Enterprises Ltd. v. CCE, C&ST (2012) 28 STR 574 (Ker.)].

94.7 The appellant, under a contract with its client drew crude oil from subsea wells, processed it in a ‘floating production unit’ (FPU) and transported it to fleets. It engaged a foreign company for provision of operations personnel, maintenance, spare parts, supplies and all other resources necessary for operation at FPU. The department contended that the foreign company provided ‘storage and warehousing’ services to the appellant and hence the appellant liable for service tax as a recipient of services. On facts, the Tribunal held that the foreign company cannot be treated as ‘storage and warehouse keeper’ providing storage services [Aban Loyd Chiles Offshore Ltd. v. CST (2012) 28 STR 622 (Tri.-Chennai)]

94.8 The appellant a manufacturer of gases had paid to the overseas supplier of such gases rentals for use of vacuum insulated tanks used for transportation of liquid helium imported by it from the supplier. The revenue had sought to demand service tax from the manufacturer on the ground that overseas exporter had provided storage and warehousing services to the appellant by invoking the reverse charge mechanism. On appeal the Tribunal observed that during transportation the overseas supplier had no control over the tanks and hence it failed to satisfy the essential test of ‘storage & warehouse keeper services’ viz., providing for security of goods, stacking, loading/unloading of the goods in the storage area. Accordingly, it held that the overseas supplier of helium cannot be held to be a storage and warehouse keeper and hence no service tax could be demanded from the appellant under the reverse charge mechanism[Inox Air Products Ltd v. CCE (2014)36 STR 391(Tri-Mum)]

94.9 Where the appellant had provided shipping vessels to its client on charter hire basis which were used as a temporary storage and the primary object was transportation of crude oil from the place of production i.e. in the High Sea to the refineries in India, it was held that the appellant’s services were not liable for service tax under the category of “Storage and Warehousing services’ especially since the appellant did not provide security, stacking, loading or unloading of the goods in the storage area. [Shipping Corporation of India (SCI) v. CCE & ST(LTU), 2014(33) STR 552 (Tri-Mum)]

94.10 The assessees are manufacturers of various gases including medical grade liquid oxygen which was supplied to Kailash Hospitals and Research Centre (KHRC). It was held that though the gases were stored in the tank supplied by the assessee, there was no storage and warehousing services provided by the assessee since such tank was in the custody of KHRC and was wholly maintained by them and the assessee cannot be termed as a ‘storage or warehouse keeper’ [CCE v. Goyal M. G. Gases (Pvt.) Ltd. (2014) 36 STR 1165 (Tri.- Del.)]

94.11 Where the appellant was engaged in leasing out their Petroleum Products Outlets [equipment plus land] owned by them to dealers who were purchasing the products, storing them and selling the same from the outlets the Tribunal held that the appellants were only leasing out its facilities to the dealers and was not providing any “storage and warehousing service” to the dealers. Accordingly the service tax demand on the licence fees received by it from the dealers would not be liable for service tax under the category of ‘storage and warehousing services’[Indian Oil Corporation Ltd. v. CCE, (2014) 35 STR 431 (Tri- Mum)]

95 Survey or Map making services

95.1 Where the appellants undertook detailed engineering survey, cadastral survey (collection of records related to land), soil investigations (testing of soil samples), drawing and submissions of maps the Tribunal held that the said activities would be liable for service tax under the category of ‘survey or map making services’ w.e.f 16.6.2005 and not consulting engineering services. [CCE vs Mascon Multiservices & Consultants P. Ltd. (2009) 14 STR 190 (Tri-Ahmd.)]

96 Sub Contractor services

96.1 Post introduction of the Service Tax Credit Rules,2002 / Cenvat credit Rules, 2004, a sub contractor is not exempt from payment of service tax even when the main contractor has discharged service tax liability on the entire value of services including on the value of services rendered by the sub-contractor [Sunil Hi tech Engineering Ltd. Vs. CCE (2014) 36 STR 408 (Tri-Mumbai)]

97 Services provided in Jammu & Kashmir

97.1 Where a stockbroker had appointed sub-broker in State of Jammu and Kashmir for rendering services to customers located therein, the Hon’ble Tribunal held that since services were rendered in Jammu and Kashmir no service tax could be demanded on such services merely on the ground that accounts for such services were maintained by the stockbroker in taxable territory [Religare Securities v. CST (2014) 36 STR 937 (Tri.- Del.)]

97.2 The insurance auxiliary agents provided insurance auxiliary service for the clients/assets of the appellant’s branches located in the State of Jammu and Kashmir which means the place of provision of service is Jammu and Kashmir. Since the service provider and service recipient are located in Jammu and Kashmir the recipient of service i.e the branches of the appellants is not liable for service tax. [Bajaj Allianz General Insurance Co. Ltd v. CCE, Pune-III, 2015(37) STR 316 (Tri-Mum)]

8 Technical Inspection and certification services

98.1 Software testing is not liable for service tax under the category of ‘Technical inspection and certification service’ since

it is an integral part of software development which is not liable for service tax;
it has ben specifically brought under ‘Technical testing & Analysis’ w.e.f. 16.5.08 and hence not liable prior to that date.

[Relq Software Pvt. Ltd. vs. CST (2009) 14 STR 799 (Tri-Bang.)]

98.2 Licencing of standard mark popularly known as ‘ISI’ mark to be affixed in products (such as cement bags etc.) which is granted after drawal of sample, testing, etc. by the Burueau of Indian Standards (“BIS”) in consideration for a marking fee is liable for service tax under ‘technical inspection and certification services’. [Grasim Industries Ltd. v. CCE (2009) 15 STR 734 (Tri-Chennai).]

98.3 The Tribunal in the present case held that the activities carried out for certification of quality management systems practiced by clients for ISO 9001:2000 certification requirements, would not come within the purview of ‘Technical inspection and certification services’ after making the following observation:

only ifnspections related with goods, materials or immovable property would be liable for service tax under the said category;
the word ‘process’ used in the definition clause would keep company with the words ‘goods’, ‘materials’ or ‘immovable property’ on the principle of ejusdem generis;
the word ‘process’ would relate only to physical and chemical process and would not extend to include ‘management process’ which is in relation to human beings;

[American Quality Assessors (I) Pvt. Ltd. vs. ACST (2009) 16 STR 413 (Tri Bang)]

98.4 The services of certifying the security and reliability of software used by Automated Teller Machines is liable for service tax under Technical Inspection and Certification services for the period 1.7.03 to 30.4.06 [Financial Software Systems Pvt. Ltd. v. CST (2014) 33 STR 393 (Tri. – Chennai)].

99 Technical testing and analysis

99.1 Clinical testing of drugs is not liable for service tax under the category of “Technical testing and analysis” for the period prior to 1.5.2006 since –

the testing is ‘in relation to’ human beings or animals which is specifically excluded; and
The Explanation to section 65(106) inserted w.e.f 1.5.2006 which specifically included within the definition of “Technical Testing and Analysis”, clinical testing of drugs and formulations but excluded diagnostic testing w.e.f. 1.5.2006 expanded the scope of the definition of Technical Testing and Analysis service and hence cannot considered as clarificatory in nature despite the use of the words “For the removal of doubts, it is hereby declare that” and accordingly the said Explanation would not have retrospective effect i.e. prior to 1.5.2006.

[B. A. Research India Ltd. vs. CST (2010) 18 STR 604 (Tri. – Ahmd.); See also Synchron Research Services P. Ltd. vs. CST (2011) 24 STR 654 (Tri.-Ahmd)]

99.2 Technical testing and analysis of Information technology software, being specifically included in the ambit of Technical testing and analysis services with effect from 16.5.2008, is not liable for service tax prior to 16.5.2008 under the category of “Technical Testing and Analysis services.” [ CCE v. Aztecsoft Ltd, (2014) 33 STR 257 (Tri-Mum)]

99.3 The appellants entered into agreements with pharmaceutical companies for the development, manufacture and sale of their products jointly developed by the appellant for carrying out research and development work. The appellants are manufacturing the medicines as per the formulae developed either by them or by their principal and during the manufacture the appellants are undertaking certain test to find out whether the products are as per the formulae but the appellant cannot be said to be technical testing and analysis agency so as to be covered under service tax. [Midas Care Pharmaceuticals Pvt Ltd v. CCE, Aurangabad, (2015)37 STR 346 (Tri-Mumbai)]

100 Telecommunication Services

100.1 Leasing out bandwidth available on a network by a telegraph authority to another telegraph authority would not be liable for service tax under the category of ‘leased circuit services’ as it was defined prior to 1.6.07 [Power Grid Corporation of India Ltd. v. CST (2011) 24 STR 307 (Tri-Del.)].

100.2 Leased lines capable of providing voice communication are covered under the “telephone service” even prior to 16.07.2001. However, leased lines capable of providing only data communication are covered under ‘Leased circuit Services” only from 16.07.2001 and cannot be brought under “telephone service” prior to 16.07.2001 [BSNL vs. CCE (2011) 24 STR 435 (Tri-Del)].

101 Tour operator

101.1 Services like arranging guide services, monument visit services, porter services, food services, general assistance services etc. provided by the assessee to Principal Tour operators who offered package tours to tourists are liable for service tax even before 10.9.2004 since they are services “in relation to” to a tour. However, amounts paid as advances by the principal tour operators to be paid to tour escorts and inter-branch billing would not be liable. [Touraids (I) Travel Services vs. CCE (2008) 12 STR 452 (Tri-Del.)]

101.2 Where the appellants used its buses for transportation of its employees the Tribunal on facts held that appellants would not be liable for service tax under the category of Tour operator service since:

The appellants were not engaged in the business of operating tours;
The vehicles used for transportation of employees is not a tourist vehicle
The vehicles do not have a permit under the Motor Vehicles Act to conduct tourism business.

[Prakash & Poonam Tours & Travels vs. CCE (2009) 16 STR 452 (Tri-Del)]

101.3 The appellant arranged ‘package tours’ in the State of Andhra Pradesh and charged abated rate of service tax on the net amount i.e. gross collection less the value of ‘supplementary services’ viz., train fare, tirumala tirupathi devasthanam darshan ticket charges, ramoji film city entry fee, hill transportation charges and waterfleet charges contending that such charges could not be taxed since ‘tour’ means a ‘journey’ from one place to another and any consideration received for such journey is liable and not the above charges. It also contended that these are in the nature of ‘reimbursements’ not includable in taxable value. The Tribunal dismissed the contention holding that the phrase ‘in relation to a tour’ in the definition of taxable service in the context of ‘tour operators’ is wide enough to cover such ‘supplementary services’ and the amounts collected from tourists for supplementary services rendered by the appellant cannot be termed as ‘reimbursements’ as the amounts collected are towards the service provided by the appellant and not towards expenditure incurred on behalf of the client [Andhra Pradesh Tourism Devl. Corpn. Ltd. v. CCE (2012) 28 STR 595 (Tri.-Bang.) Relying on Touraids (I) Travels Services v. Commissioner (2008) 12 STR 452 (Tri.)].

101.4 Where the appellants provided the following services:-

Operating point to point buses under contract carriage permits for transport of passengers;
Providing buses on lease to other companies; and
Booking bus tickets for other tour operators,

it was held that the service in Sl. No. (i) and (ii) are not taxable under the head ‘tour operator services’ since the appellants were eligible for exemption under Notification No. 20/2009 which exempts the service provided by a tour operator having a contract carriage permit for inter-state or intra-state transportation of passengers, excluding tourism, conducted tours, charter or hire service. With regard to service in Sl. No. (iii), it was held that the same was taxable under ‘business auxiliary service’ as they were in the nature of promoting the services of other operators [ Sharma Transports vs. CST (2013) 29 STR 249 (Tri. – Bang)].

101.5 Where the appellant was operating ropeway licensed to it by the Municipality on which the revenue sought to levy service tax under the category “Tour operator services’, the Tribunal by a majority held that the appellant was not carrying out any planning, scheduling, organising or arranging of tours for the person using the ropeway facility and hence the appellants would not be considered as “tour operator” within the meaning of Section 65(115) of the Act. Accordingly it held that no service tax would be payable by the appellant under the category of tour operator services [ Shail Shikhar Associates v. CCE (2013) 31 STR 433(Tri-Del)].

101.6 Renting of vehicles by assessee was held not taxable since they cannot be said as person engaged in the business of planning, scheduling, organizing or arranging tours and thereby cannot be termed as “Tour Operators” [Divisional Controller v. CCE (2014) 33 STR 168 (Tri – Mum.)]

101.7 The appellants were operating two ropeways from Hardwar to some temples on the hills around Hardwar. There was a small in-transit road link between the boarding points of the two ropeways. Though it was not in dispute that the travel charges on the ropeway attracted no service tax, the appellants were asked to pay service tax on the amount charged for the in-transit travel by road treating the travel as a tour since ‘tour’ was defined as ‘a journey between one place to another irrespective of the distance between such places’. The High Court upheld the Tribunal’s decision holding that the travel by road is only incidental link and the tour in the present case is the journey to the temples performed in the ropeway Gondola and not tourist vehicle contemplated in the statute so as to attract levy. [CCE v Usha Breco Ltd 2014(33) S.T.R. 619 (Uttarakhand)]

101.8 The appellant, a tour operator, entered into contracts with various Principal Tour Operators (‘PTO’). The PTOs provided package tour services (i.e. tours including transport services alongwith supplementary services like air and rail tickets, fooding and lodging, guide services etc.) to tourists. The appellant provided the PTOs transport and supplementary services (like guide, monument visit, etc.). The appellant paid service tax on transport services but not on supplementary services. The Hon’ble High Court upheld the demand on Supplementary services and held as follows –

1. The contention of the appellant that since PTOs were paying service tax on the entire amount collected on package tours and hence no tax is payable by them was rejected due to lack of evidence being adduced by the appellant to prove that tax was actually paid on the entire amount by the PTOs.

2. The taxable service not only means mere providing of car, taxies, contract carriages on a temporary basis but it would also include other facilities supplied in relation to tour as a whole. Hence the amount paid to the appellant towards supplementary services, apart from the payments received towards transport services are liable to be included in the gross amount and are the value of taxable service which are liable to service tax.

On facts, the High court also upheld the invocation of the extended period of limitation but remitted the matter to the Commissioner for fresh consideration with regard to the penalty. [Touraids (I) Travel Services v. CCE (2014) 35 STR 234 (All.)]

101.9 Where the assessee was engaged in operating contract carriage buses from Hyderabad to Shirdi and also conducting tours subject to availability of vehicles and willingness of tourist the Tribunal held that the appellant’s services would be liable for service tax under the category of tour operator services [SVR Tours & Travels vs. CCE (2014) 35 STR 378 (Tri-Bang.)]

101.10 With effect from 10.09.04 tour operator service has two facets viz., (i) the business of planning, scheduling, organizing or arranging tours by any mode of transport (including arrangements for accommodation, sightseeing or other similar services) and (ii) Operating of tours in a tourist vehicle covered by a permit granted under the provisions of the 1988 Act. The assesses operates and facilitates outbound tours whereby Indian tourists are provided services in relation to tourism outside the Indian territory, to visit foreign locales. Thus the appellant’s activity of outbound tourism consist of operating tours but not in a tourist vehicle a necessary requirement to come within the ambit of service tax under Tour Operator Services. Hence outbound tourism is not liable for service tax since it is clearly outside the locus of the definition of ‘Tour operator.’ Cox&Kings India Ltd v. CST,New Delhi, (2014) 35 STR 817 (Tri-Del)]

102 Transportation of goods by pipeline

102.1 Where the appellants was merely engaged in operation and maintenance of fly ash handling system (a system through which the fly ash generated in thermal plant was transported through pipeline) but did not own or possess the system the Tribunal held the activity in the contract was partially operation of fly ash handling system owned by client and partially maintenance and repair of the system and the appellant cannot be held to be doing the service of transporting fly ash through pipeline. Hence the appellant’s activities would not be liable for service tax under the category of ‘transportation of goods by pipeline services’[Macawber Beekay Pvt. Ltd. vs. CCE (2011) 23STR 354 (Tri-Del)].

103 Travel Agency Service

103.1 The respondents were engaged in the activity of booking of tickets and making travel arrangements for passengers, under an agreement with another travel agency in consideration for a commission paid to it by the other travel agency. It was held that the services rendered by the respondent is essentially liable for service tax under the category of “travel agency service” w.e.f. 10.9.04 and not liable for service tax under the category of “business auxiliary services’.[CCE v. Shabeer Travels (2011) 24 STR 171 (Ker)]

104 Underwriting vs. Banking and Other Financial Services

104.1 The appellant issued Foreign Currency Convertible Bonds (FCCBs) in overseas markets and appointed overseas Merchant Bankers/Lead Managers who were paid – (1) 1.15% of the principal amount of bonds as ‘underwriting commission’ [for guaranteeing subscriptions]; and (2) 0.10% of the principal amount as ‘management fee’ [for organizing the issue]. The appellant paid service tax as a service recipient on the management fee under the category of “Banking and Financial Services” [which fell under location of service recipient criteria] but not on the underwriting commission on the ground that the underwriting service fell in the performance based criteria and since the services were performed abroad it was not taxable. The Revenue contended that underwriting is part of a composite agreement for ‘merchant banking services’ which falls under the category of ‘banking and other financial services. On appeal, the Tribunal observed as follows:

The lead manager’s services involved organizing the issue of FCCBs whereas underwriter’s services involved financial risks and separate remuneration was fixed for each service. Hence, there were two distinct services and it cannot be considered as bundled services.
Further, even if it is considered as a single bundled service the dominant nature is not the lead manager’s services but it was only a minimal part since the underwriting fee was the major component of remuneration and the entire issue was first subscribed by the lead managers and then the bonds were sold.
Even going by s.65A(2)(c), which provides that the category which occurs first needs to be taken where the service cannot be classified based on specific over general principle or essential character principle, the category of underwriting would be the relevant category since it occurs before banking and other financial services.

Thus, it was held that the underwriting fee was paid for a separate underwriting services and underwriter’s services provided by a foreign service provider would be liable to service tax only if the same is being performed in India as provided u/r.3(ii) of the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006, which is not so in the present case, the appellant is not liable to pay service tax on the underwriting fee [ Jubilant Life Sciences Ltd. vs. CCE (2013) 29 STR 529 (Tri. -Del.)].

105 Visa Facilitation services

105.1 Commission received by visa facilitators for providing services of obtaining passport and visa would not be liable for service tax in view of Board Circular No. 137/6/2011 – ST dated 20.4.2011[Green Channel Travel Services P. Ltd. v. CST (2012) 26 STR 527 (Tri.- Ahmd.); Good Wind Travels Pvt. Ltd. v. CCE, (2013) 31 STR 598 (Tri. – Ahmd.)].

106 Works contract services

106.1 Where the appellant had an on-going works contract as on 1.6.07 (the date on which service tax on “works contract services” were introduced) but had paid service tax on payments received prior to 1.6.07 inter alia under the category of “construction services” the High Court held that the assessee would not be entitled to avail the benefits of the Composition Scheme [payment of 4% on the gross contract value] since the election to opt for the composition scheme is to be made before service tax is paid in respect of the works contract. [Nagarjuna Construction Company Ltd. vs. Government of India (2010) 19 STR 321 (AP) Affirmed inNagarjuna Construction Company Ltd. vs. Government of India (2012) 28 STR 561 (S.C.)].[See Essar Projects Ltd v. CCE & ST (2014) 36 STR 681 (Tri-Ahmd

106.2 Where the appellant’s contract with the Government of Andra Pradesh was for - survey, design, engineering and construction of earth dams / barrages and canal system meant for irrigation including maintenance during warranty period and beautification of the sites, for a lumpsum amount (billed based on running bills submitted) without separate charge for each activity, the Tribunal held that –

The contract is a ‘turnkey’ EPC (engineering, procurement and construction or commissioning) project squarely covered by clause(e) of the definition of “works contract” u/s. 65 (105) (zzzza).
The contract for construction of earth dams / barrages is not construction of “dams” which are gigantic RCC structures built across rivers and hence is not excluded from 65 (105) (zzzza).
The contract cannot be described as ‘construction of a new building or civil structure or pipeline or conduit’ falling under clause (b) of S.65 (105) (zzzza) since it does not encompass the entire gamut of service provided by the appellant.
The contract cannot fall as ‘commercial or industrial construction service u/s. 65(25b) since –

Irrigation is a non-commercial end-use and only structures with commercial / industrial end-use fall under that category; and

The category u/s.65(25b) envisages no transfer of property in goods liable to VAT / sales tax which is not so in the present case.

The contract cannot be classified u/s. (97a) as ‘site formation, clearance, excavation, etc.’ since –

These activities are only minor preparatory activities to the execution of the project and would not determine the classification of the appellant’s service.

The category u/s.65(97a) envisages no transfer of property in goods liable to VAT / sales tax which is not so in the present case.

Hence the exclusion pertaining to ‘site formation, clearance, excavation etc.’ services for irrigation is not applicable to the present case.

Though the contracts were awarded prior to 1.6.07 (before ‘works contract service’ came into existence) since the contracts were executed and payments received post 1.6.07, they are liable for service tax under the said category.
Notification no.41/2009 dated 23/10/09 exempting works contract in respect of canals is not retrospective and hence would not apply.
The ‘gross amount charged’ under the composition scheme can be considered as cum-tax value. Consequently, the appellant can deduct service tax element from ‘gross amount charged’ and arrive at the taxable value.
The amount of “retention money” is only a deferred payment of consideration and includible in the ‘gross amount charged’ for ‘works contract service’

[Ramky Infrastructure Ltd. vs. CST (2013) 29 STR 33 (Tri. –Bang.)].

106.3 The services rendered in relation to execution of works contract in respect of railways is specifically excluded from the definition of ‘works contract service’ and would not be liable for service tax [B.M.R. Corporation Ltd. vs. GOI (2013) 29 STR 469 (Kar.)].

106.4 The assessee had entered into two contracts dated 24.08.07 with its customer- one for the supply of indigenous equipment and materials (supply contract) and the other for the construction/erection/installation of plant (construction contract). Further, the service recipient had also bought some imported equipment and materials which was supplied to the assessee for completing the construction contract. The Revenue had sought to consider the two contracts as one for the purpose of computing service tax. However, the Tribunal, on facts, held that the two contracts are independent of each other and service tax has to levied only on the value of the construction contract. Further, since the contract commenced prior to 7.7.2009, free of cost supplies could not be added to compute the gross amount on which tax was payable under the Works Contract (Composition Scheme) Rules, 2007. [ Essar Projects (India) Ltd v CCE & ST 2014(33) S.T.R. 696 (Tri.- Ahmd.)].

106.5 Goods which were deemed to be sold in the execution of a works contract shall be outside the ambit of service tax. [ CCE v. Balaji Tirupati Enterprises 2013 (32) STR 530 (All.)]

106.6 Services of civil or industrial construction or erection, installation and commissioning provided as a single indivisible contract would attract service tax even for the period prior to 1-6-07 i.e. the date on which works contract services were introduced [CCE v. Gopal Enterprises (2014) 36 STR 674 (Tri-Del)]

VI. REGISTRATION, PAYMENT OF TAX, ADJUDICATION, APPEALS, etc.

107 Registration

107.1 Rule 4(5) of the Service Tax Rules, 1994, providing that the registration applied for shall be ‘deemed’ to have been granted if the Superintendent does not grant registration within 7 days from the date of application is applicable only to registrations granted by the Superintendent and not to Centralised Registration under rule 4(2) granted by the Commissioner of Central Excise for whom there is no time stipulation. However, Centralised Registration must be granted within reasonable time. 7 days may be considered reasonable time. But this time is o nly directory not mandatory. Further, registration would have to be granted so long as the form is completely and properly filled and cannot be refused. It cannot even be granted under a category other than that applied for nor can it be granted by the department on its own without application. [ Karamchand Thapar & Bros. (Coal Sales) Ltd. v. UoI (2010) 20 STR 3 (Cal.)]

108 Payment of tax

108.1 Where the appellant had admittedly paid education cess alongwith the excise duty under the accounting head of basic excise duty, the Tribunal held that the appellant cannot be again held liable for payment of education cess. [Guala Closure (India) Pvt. Ltd. vs. CCE (2009) 16 STR 536 (Tri. – Ahd.); See also BAS Engineering (P) Ltd. vs. CCE (2011) 23 STR 145 (Tri-Del.)]

108.2 The contract between the service provider and the recipient mentioned the service provider shall bear all taxes and duties in respect of the services provided by him. Under the law, the service recipient was liable to pay service tax under the reverse charge. The service recipient deducted the tax so paid from the service provider’s bills. On appeal by the service provider object to the deduction, the Supreme Court observed:

the service tax requiring the service recipient to pay the tax as an assessee is only relevant between the service recipient and tax authorities and not relevant to determine the rights and liabilities contractually agreed between the service provider and service recipient.
under the contract, the service recipient cannot be faulted for deducting the service tax from the service provider’s bill since it was his liability to bear the tax.

[Rashtriya Ispat Nigam Ltd. CE v. Dewan Chand Ram Saran (2012) 26 STR 289 (S.C.)]

108.3 On facts, where the Tribunal found that the assessee paid service tax on ‘maintenance and repair services’ wrongly under ‘erection, installation and commission services’ based on Board’s Circular no. 58/7/2003-ST dated 20.5.2003, the Tribunal allowed adjustment of service tax payment paid under the wrong service code in the correct accounting code and dropped the penalties [CCE&ST v. Veena Industries Ltd. (2013) 30 STR 318 (Tri.- Ahmd.)].

108.4 The appellant provided modelling services to various clients who paid her agent, M. M paid service tax on the receipts under the category of ‘Advertising agency services’ on behalf of the appellant and paid the balance to the appellant. Where the department alleged non – payment of service tax by the appellant under the category of “Business Auxiliary services”, the Tribunal held that –

The Department cannot issue a show a cause notice on the appellant for non-payment of service tax since as per Section 65(7) an assessee includes his agent and the appellant had discharged her liability through her agent, M;
Mere payment of service tax by M under the wrong head (Advertising agency services instead of Business Auxiliary services) would not mean that no payment has been made.

[Katrina R. Turcotte v. CST (2013) 31 STR 670 (Tri - Ahmd.)] .See also[Zaheerkhan B. Khan v. CST (2014) 33 STR 75 (Tri - Mum.)].

108.5 Where the assessee had paid excess service tax in 2006 but had sought to adjust it u/r 6(4A) r.w. 6(4B) in June 2007 without satisfying the conditions (viz., adjustment in the succeeding month or quarter and intimation to Superintendent), the Tribunal disallowed the adjustment on the ground that procedure prescribed by the legislation has to be followed strictly and in that fashion only unless the assessee can adduce reasonable explanation [ JCT Electronics Ltd. v. CCE&ST (2014) 34 STR 778 (Tri.-Ahmd.)]

109 Payment of amount collected as service tax

109.1 The assessee, an authorized service station, provided services to customers of M/s HHM (a vehicle manufacturer), charged service tax on the customers and paid it to the Government. M/s HHM reimbursed 50% of the tax to the assessee. The revenue contended that the amount collected from HHM must be paid to the Government u/s 11D of the Central Excise Act, 1944 made applicable to service tax. On appeal, the Tribunal held that u/s 11D only excess amounts collected from the buyer of goods had to be paid to the credit of the government. Since in the present case, the tax was collected from the manufacturer (M/s HHM) and not the buyer section 11D did not apply and the assessee was not liable to pay such amount to the Government. [ Nagappa Motors vs. CCE (2011) 21 STR 503 (Tri. – Che.)]

110 Fee for late filing of return

110.1 Where the assessee belatedly filed its ‘NIL’ service tax returns, the Tribunal held that late fee under Rule 7C of the Service tax Rules, 1994 would not be payable in view of the following:

Board Circular No. 97/8/2007-ST dated 23.8.2007 had clarified that in the event no service is rendered there is no requirement to file ST–3 returns; and
there was a fit case for the Central Excise Officer to waive imposition of late fee due to existence of ‘sufficient reasons’ under third proviso to Rule 7C.

[Suchak Marketing Pvt. Ltd. vs. CST (2013) 30 STR 593 (Tri-Kolkatta); See alsoAmrapali Barter Pvt Ltd v. CST (2013) 32 STR 456(Tri-Kolkata)]

111 Interest

111.1 Where the assessee paid service tax by incorrectly debiting CENVAT credit account instead of payment in cash but later, corrected the error by making payment in cash the Tribunal held that there was no failure to make payment but only adoption of an incorrect method of payment and hence no interest is payable. [CCE v. Sterlite Industries (I) Ltd. (2011) 21 S.T.R. 534 (Tri- Che.); See also Topland vs. CCE (2012) 28 STR 177 (Tri. –Ahmd.)]

111.2 Interest can be recovered only when the duty liability has been finally determined. Thus where the assessee had challenged the liability to duty in an appeal before the Tribunal, it was held that interest in respect of said duty liability could not be recovered from the assessee. [ CCE vs. Needle Industries (India) Pvt. Ltd. (2011) 23 STR 278 (Tri-Chennai)]

111.3 When the appellant paid service tax belatedly on maintenance and repair of roads for 2008-09 without interest which was subsequently exempted retrospectively, it was held that the demand for interest cannot be sustained since the tax itself was not due [Sree Infra Tech v. CCE (2014) 35 STR 128 (Tri-Chennai)].

111.4 In case of provisional assessment under Rule 6(4) of the Service Tax Rules, 1994 the assessee is liable to pay interest on the amount of shortfall in the provisional payments only on the completion of the final assessment by the Department and in case no final assessment order has been passed and the shortfall in tax is paid before the final assessment then interest u/s 75 of the Act is not payable.[Canara Bank V. CST (2014) 35 STR 981 (Tri-Bang.)]

111.5 The assessee paid service tax on 15-2-2007 by debit in the Cenvat Credit account whereas the due dates for payment of service tax were 5-9-2006 and 5-2-2007. The Tribunal held that there was a delay of 102 days and 10 days in payment of service tax and the assessee is liable to pay interest for these delays notwithstanding that it had sufficient CENVAT credit balance on 05.09.2006/05.02.2007 since the date of payment is the date of debit in the cenvat credit account. [CST v. Toyo Engineering Corporation Ltd, (2015)37 STR 238 (Tri-Mum)]

112 Adjustment of tax

112.1 Where service tax was collected and paid by the assessee on Commissioning and installation services prior to 01.07.03 (date of introduction of service tax on the said services) but was refunded to the customers by way of credit notes and the amount paid was adjusted against tax liability of July’ 03 onwards, the Tribunal allowed the adjustment of tax. The Tribunal dismissed the Revenues contention that such adjustment was not permissible under Rule 6(3) since the assessee has refunded only the service tax amount and not the value of taxable service on the ground that rule 6(3) was not applicable to the present case at all since rule 6(3) is applicable only when service rendered is taxable and not where service is not taxable . [CCE vs. Aurore Trust 2010(17) STR 376 (Tri-Chennai)]

112.2 Where the assessee had adjusted the excess service tax paid for services rendered to SEZ against its subsequent liabilities the Tribunal held that such adjustment was permissible [CCE vs. SRC Projects Ltd. (2010) 20 STR 687 (Tri-Chennai)]

112.3 Where the assesee adjusted the service tax liability for the month of January, 2008 – February, 2008 against the excess service tax paid in the month of October, 2007 and had intimated the same to the department but not within the prescribed period of 15 days the Tribunal held that the non-intimation of adjustment within 15 days was only a technical default and accordingly allowed the adjustment. [CCE vs. Rajdeep Buildcom Pvt. Ltd. (2011) 21 STR 663 (Tri. – Mum.)]

112.4 The appellant had excess paid service tax for the period 2005-06 in the month of Feb/March 2007 and adjusted the same towards its subsequent service tax liability for the period 2006-07. The SCN for denying this adjustment and demanding service tax was issued in December, 2008. On appeal, the Tribunal relying on CCE vs. Sentinel Security Pvt. Ltd. (2006) 2 STR 520 (Tribunal) and CCE vs. Powercell Battery India Ltd. (2010) 19 STR 400 (Tribunal) held that the adjustment is in order [Sopariwala Exports Pvt Ltd v. CST (2014)36 STR 802 (Tri- Ahmd)]

112.5 On facts the Tribunal held that where advance payment of service tax has been made

There is no question of adjustment of excess tax paid since it is not excess payment of tax as per the rules;
No further proceeding need to be initiated.

[Dahej Harbour and Infrastructure Ltd. vs. CCE (2011) 24 STR 676 (Tri.-Ahmd.)]

112.6 Excess payment of service tax adjusted under rule 6(4A) on the basis that the assesee was having a centralized registration need not be recoverd since the payment of excess service tax not being disputed by the department. The irregularity of not having a centralized registration is only of a technical nature and could not jeopardize the adjustment [Gujarat NRE Coke Ltd. vs. CCE (2012) 27 STR 372 (Tri – Ahmd)]

112.7 If excess payment of tax in a month is on account of inability of the assessee to exactly determine the total amount collected during the month against the bills raised (i.e. clerical), it was held that since the above is not on account of reasons involving interpretation of law, taxability, classification, valuation or applicability of exemption notification such excess can be adjusted against the tax liability of subsequent months even if the assessee does not have centralized registration under Rule 4(2) during the period prior to 01.03.2008. Refusal of adjustment would amount to collection of tax without the authority of law which is contrary to Article 265 of Constitution of India [See General Manager (CMTS) v. CCE (2014) 36 STR 1084 (Tri.-Del.)]

112.8 Where the appellants had paid excess service tax in the month of October 2006 owing to payment of tax without receipt of monies, and only in June 2007 when the customer settled for a lesser sum, they suo motu took credit of the excess service tax and disclosed in the returns, the Tribunal allowed the excess adjustment although technically it was allowable only in the ‘succeeding’ month (i.e. November, 2006) and that too after intimation to the department (which was not done), which infractions were considered to be minor [Siemens Ltd vs. CCE (2013) 29 STR 168 (Tri-Chennai)]

112.9 Where the appellants, a recipient of GTA services, overpaid service tax on 31^st March, 2005 and 31^st March, 2006 and adjusted the excess service tax in April, 2006 and April, 2007 the tribunal held that the excess tax paid was adjustable u/r. 6 (3)[ Tamilnadu Newsprint & Papers Ltd vs. CCE (2013) 29 STR 197 (Tri. – Chennai)].

112.10 Where the appellant had paid excess service tax during the period 2001 to 2002 he was allowed to adjust the excess payment against the liability for subsequent period October 2002 – March 2003 under Rule 6(3) of the Service Tax Rules since excess payments were not collected from the customers [B4U Television Network (I) P Ltd v. CST (2014)35 STR 88 (Tri-Mum)]

113 Service Tax Audit

113.1 The petitioners filed a writ challenging the vires of rule of 5A(2) of the Service Tax Rules,1994 as being inconsistent with section 72A of the Finance Act,1994, inasmuch as - it empowered the central excise officers to call for and audit the records of the assessee; the impugned rule is totally arbitrary and without specifying the period for conducting the special audit; qualification and manner in which audit will be conducted has not been defined anywhere; there is no provision to provide the audit report to the assessee; and the audit manual,2011 is exclusively meant for the departmental use, but, petitioners-assessee was asked to fill up certain forms. The department’s counsel argued that the audit will not be done by any officer or on his behalf. The audit will be performed by a qualified Chartered Accountant. So, the reference to the Audit Manual, 2011 for the Department is valid. Asking the petitioners-assessees for filing up certain forms, is just to facilitate the audit, which is to be carried out, as per law. Further during the course of arguments, learned Addititonal Solicitor General of India also assured that the audit will be performed by a qualified Chartered Accountant and as per accounting standard and after the audit, the assessee will get the copy of the audit report, as per law. Based on the above arguments, the High Court dismissed the writ holding that:

Under Section 72A, in certain situations, the Commissioner may appoint a Chartered Accountant or Cost & Works Accountant to audit the records of the assessee and the audit report would be submitted to the said commissioner. A copy of the Audit Report may also be made available to the assessee and a proper opportunity of being heard may be given to the assessee, if the material gathered in the audit is proposed to be used in any proceeding against the asseessse.
Under Rule 5A(2) of Service Tax Rules,1994 the audit will be performed only by a Chartered Accountant in case of a private assessee or in the case of government autonomous body, it would be conducted by the Comptroller and Auditor General of India. However, the material for the purpose of the audit can be collected either by the officer authorized by the Commissioner or by the auditor himself. (Hence even under this rule the audit would not be performed by the Commissioner).

Hence there is no inconsistency in Rule 5A(2) and Section 72A. [A.C.L. Education Centre (P) Ltd. v. Union of India 2014 (33) S.T.R. 609(All.)]

113.2 The assessee challenges a letter dated 7.11.2012 issued by the respondent commissioner u/r 5A(2) of Service Tax Rules,1994 seeking records for the period 2007-08 till 2011-12 for scrutiny of audit. The parent statute under Finance Act, 1994 itself does not authorize a general audit of the type envisaged under Rule 5(2) and only stipulates special audit can be undertaken if the circumstances outlined in Section 72A are fulfilled. Hence Rule 5(2) is ultravires the Finance Act 1994, the law on Service Tax and accordingly the CBEC circular issued providing clarification on Rule 5A(2) was quashed and the letter dated 7/11/2012 was set aside. [Travelite (India) v. UOI, (2014) 35STR 653 (Del)]

114 Show cause notice

114.1 Where the appellants had discharged the service tax liability along with interest before issuance of SCN and informed the department about the payment as well as bona fide belief they entertained as to their non-taxability, the Tribunal held that the SCN should not have been issued in view of section 73(3) and accordingly no penalties would be imposable. [V.S.T. Tillers Tractors vs. CCE (2009) 14 STR 159 (Tri-Bang.)]

114.2 Where the show cause notice failed to indicate the specific category of service under which the department proposed to levy service tax the Tribunal held the SCN to be defective and demand not sustainable [Coromandel Fertilizers Ltd. vs. CCE (2009) 13 STR 542 (Tri-Chennai); See also United Telecoms Ltd. vs. CST (2011) 22 STR 571 (Tri-Bang.)]

114.3 Where the show cause notice did not contain any allegation as to how certain charges received by the appellant were liable for service tax under a particular category of service, the Tribunal held that the demand of service tax thereon was not sustainable [Ruchi Infotech Ltd v. CCE (2015) 37 STR 131(Tri-Del)]

114.4 Where the assessee had centralised billing system at Vijaywada, Andhra Pradesh falling under the jurisdiction of Guntur commissionerate and rendered ‘site formation’ etc. services at Bilaspur falling under jurisdiction of Chindwan division of Bhopal commissionerate and took a separate registration at Madhya Pradesh and did not opt for centralised registration, it was held that a show cause notice issued by Guntur commissionerate on services rendered by assessee at Bilaspur, Madhya Pradesh is without jurisdiction. [CCE vs. Integral Construction Company 2010(17) STR 380 (Tri-Bang)]

114.5 Where the show cause notice had sought to deny Cenvat credit on the ground that the said input services were not taxable at all but the department at the time of argument before the Tribunal contended that the input services had no nexus with the manufacturing activity of the appellant, the Tribunal held that the department’s contention is beyond the scope of show cause notice [Ultratech Cement Ltd v CCE (2011) 22 STR 289 (Tri-Mum)] See also[AIA Engineering Ltd. v. CCE (2013) 32 STR 610 (Tri-Ahmd.)]

114.6 Where the show cause notice had sought to deny credit on the ground that the services availed were not ‘input services’, but the Commissioner (Appeals) had sought to disallow credit on a ground that the appellant had exported certain exempted products and hence cannot claim Cenvat credit, the Tribunal held that the order of the Commissioner (Appeals) is beyond the show cause notice and hence not sustainable [MTR Foods Ltd. vs. CCE (2011) 22 STR 342 (Tri-Bang.)]See also [Samruddhi Cement Ltd. v. CCE (2014) 34 STR 592 (Tri.- Del.)]

114.7 Where the show cause notice and the O-I-O did not quantify and reason out why each of the several distinct activities of the appellant were liable for service tax under the proposed categories, the Tribunal set aside the demand observing that a “show cause notice is basic foundation of proceedings which may give rise to different consequences of law. Composite show cause notice issued left the matter in dark.” [O.P.Khinchi vs. CCE (2011) 24 STR 579 (Tri-Del.)].

114.8 Where the show cause notice did not show how a ‘carrier’ without seats could be considered as a ‘cab’ or for what purpose – transportation of goods or passengers – were the vehicles used, the Tribunal set aside the demand observing that an ill founded show cause notice not giving rise to a specific charge neatly is fatal to adjudication [CCE vs. Shemco India Transport (2011) 24 STR 409 (Tri-Del)]

114.9 Where the SCN had been issued demanding service tax on money received from renting out land and open ground under the category of Mandap keeper’s services but had failed to clearly bring out – the nature of use of the immovable property (i.e. as to whether any official, social or business functions were performed over the immovable property) and whether such activity brought the assessee into the fold of law, the Tribunal held that demand under the said SCN is not sustainable [CCE vs. Municipal Council (2011) 24 STR 705 (Tri.-Del.)].

114.10 If service tax is paid along with interest before the issue of SCN and there is no intent to evade payment of service tax, then a SCN cannot be issued in respect of the service tax so paid. But, there is no bar on issuance of SCN to impose penalty. To this extent, the Board’s Clarification No. 137/167/2006 – CX - 4 dated 3.10.2007 was held to be incorrect [CST v. Gowri Computers (P) Ltd. (2012) 25 STR 380 (Tri – Bang)].

113.1 Mere mention of wrong section number in the show cause notice does not invalidate the notice so long as the acts comprising the offence are explained and they constituted offence within meaning of the correct section that was in force at time of issue of the notice [ CCE vs. Ajmer Automobiles P(Ltd) (2012) 26 STR 19 (Tri-Del.)].

114.11 Where the assessee has billed Rs.1,00,000/- in March, 2004 and disclosed the same in ST-3 return for the half year ended March’04 but the payment was realised in March’05 on which no service tax was paid, the period of 1 year / 5 years for issue of SCN needs to be reckoned from date of filing the ST–3 return pertaining to the period in which short payment occurred i.e. March 2005 and not from the date on which information regarding billing is furnished i.e. March, 2004 since service tax is paid when value is realised and not when value is billed [Indfos Industries Ltd. vs. CCE (2012) 26 STR 129 (Tri. – Del.)].

114.12 Where Show Cause Notice was issued and adjudicated in favour of the assessee on an issue, against which no appeal was filed by the revenue, there is no scope for subsequently issuing a second show cause notice on the same issue [Tamilnadu Newsprint & Papers Ltd vs. CCE ( 2013) 29 STR 197 (Tri. - Chennai)]

114.13 Where the Show cause notices did not specify the specific clauses in the definition of Business Auxiliary services where the activity of assessee falls nor has characterized the activity with reference to the distinct attributes of any clause the Tribunal quashed the SCNs and the adjudication orders holding that the defect in the SCNs are incurable. However, the Tribunal granted liberty to the Revenue to initiate proceedings afresh by issuing new SCNs with reasons. [ITC Ltd.v.CST, (2014) 33 STR 67 (Tri-Del)]

114.14 The Show Cause Notice –

discussed the agreements and facts of the assessee’s business;
reproduced the definition of ‘business auxiliary services’ before and after 16.5.2005; and
alleged that the activities were liable to service tax under the category of ‘business auxiliary services’ though without specifically mentioning the clause of the definition of ‘business auxiliary services’ which the SCN sought to trigger.

The commissioner heard the assessee and confirmed the demand under clause (vi) and (vii). The Hon’ble Tribunal set aside the demands on a preliminary ground that the SCN did not specify the precise sub-clause (but not on merits) with a liberty to the revenue to proceed to act in accordance with law. On appeal, the High Court held –

anyone reading the said sub-clauses alongwith the assertions made in the notice would understand that reference was with regard to sub-clauses (vi) and (vii); and
the assessee was not in dark or unaware as to what he had to answer and argue. The ambiguity in such circumstances would have to be removed at the time of oral hearing.

Hence the High Court held that the SCN did not suffer from any vice and remanded the case back to the Tribunal to decide on merits [ CST v. ITC Ltd. (2014) 36 STR 481 (Del.)]

114.15 The appellant was a direct marketing agent for ICICI Bank and was liable to pay service tax under business auxiliary services for period relating to 1.7.03 to 1.7.04 but were neither registered nor paid tax nor filed returns. A show cause notice dated 26.5.2005 was issued u/s. 73 to recover the demand during this period invoking the extended period of limitation. The Hon’ble Tribunal held that extended period of limitation is invocable on the ground that it is only w.e.f. 10.9.2004 that s. 73 was substituted by a new s. 73 in which the invoking of extended period of five years from the relevant date is linked with the existence of fraud, wilful mis-statement, suppression of facts and deliberate contravention of rules on part of the assessee. Prior to 10.9.2004 (which was the period of dispute in the present case) What was required was reason to believe on the part of the Assistant / Deputy Commissioner that on account of omission or failure on the part of the assessee to file return u/s. 70 for any prescribed period or to disclose wholly or truly all the material facts required for verification of assessment u/s. 71, some value of the taxable service has escaped assessment or has been under-assessed or service tax has not been paid or has been short-paid or any sum has erroneously been refunded. In this case during the period of dispute the appellant were not filing any return and had not even taken any registration and hence in terms of s. 73(1)(a) as it stood during that period, longer limitation has been correctly invoked [Masicon Financial Services Pvt. Ltd. v. CCE (2014) 36 STR 630 (Tri.-Del.)]

115 Demand

115.1 The tribunal in this case held that where the show cause notice is only for imposition of penalty and for levy of interest no demand can be made in the absence of any specific demand for service tax in the show cause notice. [Bayer Diagnostics India Ltd. vs. CCE (2005) 182 ELT 487 (Tri-Mum.)See also Marked Oil & allied industries v. CCE (2002) 146 E.L.T. 466 (Tri–Del.); Gujarat Containers Ltd.v. CCE (2003) 157 E.L.T. 67 (Tri.-Mumbai) and L.H. Sugar factories v. CCE (2004) 165 E.L.T. 161, Diamond Cables Ltd. v. CCE (2005) 180 ELT 444 (Tri-Mum.)]

115.2 Where the SCNs did not specify the period of demand nor quantify it, the Tribunal held that the demands cannot be sustained. [Praseetha Suresh v. CCE (2006) 3 STR 777 (Tri-Bang.). Following Coolade Beverages Ltd. v. CCE (2004) 172 ELT 451 (All.); Bayer Diagnostics India Ltd. v. CCE (2005) 182 ELT 487 (T)].

115.3 The Tribunal laid down certain important propositions regarding demand as under:

SCN should be issued in accordance with the provisions of law existing at the time of issue of SCN.
In view of the above, the larger period of limitation cannot be sustained without invoking in the SCN, the ingredients of the proviso to Section 73 (i.e. fraud, collusion, willful misstatement, etc.) which was enacted by the Finance Act, 2004 though the demand pertained to a period prior to the enactment.
The Adjudicating Authority cannot confirm demand under a different category of service other than the one alleged in the SCN as this leads to a change in the character of the SCN.

[Mahakoshal Beverages Pvt. Ltd. v. CCE (2007) 6 STR 148 (Tri. – Bang.)]See also I.S.E. Securities & Services Ltd. v. CST (2013)32 STR 442,[CCE v Mahakoshal Beverages Pvt Ltd 2014(33) S.T.R 616(Kar)]

115.4 Where the show cause notice only demanded ‘interest’ on credit wrongly utilised [and subsequently paid], an order confirming the demand of ‘credit’ wrongly utilised is incorrect since it travels beyond the Show Cause Notice. [C.C.E vs. Jagatjit Industries Ltd 2010 (17) STR 137 (Tri-Del)]

115.5 Recovery of demand from the partners of a firm, in respect of service tax payable by the firm, is not permissible merely by marking a copy of the SCN to the partners of the firm [G. Govindaraj vs. CCE (2010) 17 STR 529 (Tri-Chennai)].

115.6 Where the SCN did not identify the documents based on which it raised the demand, the Tribunal held that there was a violation of principles of natural justice and accordingly the demand is not sustainable [V. S. Distributors vs. CCE. (2010) 17 STR 530 (Tri-Del) – Per D. N. Panda – Member (J)].

115.7 The respondents provided Pandal or Shamiana services which was liable for service tax w.e.f. 10.9.2004. They declared certain undisclosed incomes which they stated pertained prior to 10.9.2004 during a survey conducted by the Income tax Department on 6.1.2006. The Service tax department sought to tax the entire undisclosed income. On appeal the Tribunal held that the demand cannot be sustained without enquiry as to whether the undisclosed income is earned post 10.9.2004. [CCE vs. Bindra Tent Service (2010) 17 STR 470 (Tri-Del.)]

115.8 Show Cause notice issued after 10.9.2014 (when provisions changed) in respect of a period prior 10.9.2004, under the erstwhile provisions for issuing a show cause notice [73 (i)(a)], it was held that the demands were unsustainable [CST v. The Peoples Choice (2014) 36 STR 10 (Kar)

115.9 Income voluntarily disclosed to the income-tax authorities cannot be added to value of taxable services in absence of any evidence that such income disclosed was part of taxable service. [CCE v. Ramesh Studio & Colour Lab (2010) 20 STR 817 (Tri-Del.)].

115.10 Where the assessee registered and paid service tax in respect of charges received from banks and financial institutions for storing their vehicles (repossessed from loan defaulting customers) under the category of ‘business auxiliary services’ w.e.f 1.6.2006 and the Revenue did not dispute this, and having accepted it, it was held that the Revenue cannot tax the assessee under the category of Storage & Warehousing services prior to 1.6.06. [ CCE v. Devika Security Services (2011) 23 STR 606 (Tri-Del.)]

115.11 The provisions of Finance Act, 1994 does not extend to any place outside India. Thus, where the revenue had issued a SCN by invoking the larger period of limitation to the assessee company, located in France who had provided IPR services under the technology transfer agreement, the Tribunal held that since the assessee being situated outside India was not under an obligation to take out registration / file return the allegation of suppression is not maintainable and hence the confirmation of demand by invoking the extended period of limitation is not sustainable [ CCE vs. Institut Francais Du Petrole (IFP) (2011) 24 STR 696 (Tri.-Del)].

115.12 Where the service tax demand had been confirmed under a category of service different from the one alleged in the SCN the Tribunal held that the same is not permissible and accordingly confirmation of demand of interest and penalty is also not sustainable [Prabhudas Kishordas vs. CST (2011) 24 STR 711 (Tri.- Ahmd)].

115.13 The Tribunal relying on judgment in case of Unison Metals Ltd. v. Commissioner (2006) 4 STR 491 (Tri.-LB) held that where the appellant had already paid the service tax amount collected from the customers to the revenue through Cenvat Credit, no service tax needs to be deposited once again in cash in case of proceedings u/s. 73A [Sangam India Ltd. v. CCE (2012) 28 STR 627 (Tri.-Del.)].

115.14 The CBEC circular No 137/6/2011-ST dated 20-4-2011 stated that the service provided by the visa facilitator in the form of assistance to individuals to obtain a visa does not fall under any of the taxable services under Section 65(105) of the Finance Act, 1994.The appellants are providing the same services hence they are not taxable u/s 65(105) Finance Act, 1994.[VFS Global Services Pvt Ltd v. CST 2013(30) STR 411 (Tri-Mum)].

115.15 Confusion prevailed about the classification of said services whether they were taxable under the category of ‘business auxiliary services’ or ‘business support services’. In such a case, the demand beyond the normal period of limitation is not sustainable. The benefit u/s 80stand extended to the assessee. Revenue’s appeal is rejected [Krishna Financial Service v CCE (2013) 30 STR 434]

115.16 Where the assessee had deposited the entire amount of service tax alongwith interest and had also paid a penalty of 25% of the service tax liability before the issuance of SCN the Tribunal held that the proceedings in respect of the assessee would be deemed to have been concluded in view of theproviso to section 73(1A) and accordingly no further penalty u/s 76 and 78 of the Finance Act, 1994 was imposable. [CST v. Manan Motors Pvt. Ltd, (2013) 31 STR 535 (Guj.)]

115.17 A sub-contractor rendering services to a main contractor is liable to pay service tax on the services rendered to the main contractor notwithstanding that the main contractor would have paid tax on the services provided to the client. Clarification in the Board Circulars dated 6.6.1997, 7.10.1998, 17.12.2004 and 23.8.2007 that a sub-contractor is not liable to pay service tax where the main service provider has paid the same are incorrect [Engineers India technical services v. CCE (2014) 34 STR 358 (Tri-Del.)]

115.18 Where M/s. Airport Authority of India (AAI) had paid service tax on cargo handling services provided to various airlines, the Tribunal exonerated the appellant who was a sub-contractor of AAI from payment of tax, interest & penalties. [Jac Air Services Pvt Ltd v. CST (2013) 31 STR 155 (Tri-Del)]

115.19 Where service tax on consideration for GTA services had already been deposited, appropriation of income out of such consideration between the appellant and the truck owner would not again be subjected to service tax under the category of business auxiliary services [Jai Shree Road Lines v. CCE (2013)31 STR 226 (Tri-Del)]

115.20 Where the Show Cause notice had been issued seeking to levy service tax on the appellant’s activity of laying of cables under the category of Repairs and Maintenance services without mentioning therein the description, scope and details of work undertaken by the assessee, the Tribunal held that confirmation of demands, under such show cause notice was incorrect. [CCE v. Sanjeev Kumar Jain (2014) 33 STR 312 (Tri-Del)]

115.21 Where the Department was aware (by correspondence) that the assessee had not paid service tax on certain services provided to its customer, it was held that the extended period of limitation u/s. 73(1) cannot be invoked since there was no ‘suppression’ of facts. The Tribunal’s decision on this count was upheld. However, having come to the conclusion that the demand was time barred, the High Court held that, the Tribunal cannot enter upon the merits of the case, and the act of the Tribunal to decide the merits was held to be outside its jurisdiction. [CCE & ST v. Monsanto Manufacturer Pvt. Ltd. (2014)35 STR 177 (All.)]

115.22 Where the liability of a person to pay service tax along with interest was confirmed post his death on a limited company which had succeeded to his business the Tribunal held that the same was not permissible under section 11 of the Central Excise Act, 1944. [B.H.H Securities Ltd. v. CST (2014) 35 STR 391 (Tri- Mum)]

116 Amounts collected as service tax

116.1 The appellant a developer of residential properties had carried out construction activities during the period 2006 to 2009. In view of the confusion prevailing as to the applicability of service tax on construction services, the appellant had collected the amount of service tax that would be payable by it on the said construction services from the flat purchasers and deposited the same in an escrow account (to be returned to flat purchasers/ paid to the Central Government). The revenue initiated proceedings u/s.73A(2) of the Act on the grounds that the appellant should have deposited the said amounts with government. On appeal, the Tribunal held that the provisions of section 73A(2) of the Act would be attracted only in case where the amount representing service tax has been ‘collected’ by the service provider as service tax. Since the amounts were deposited in escrow account which were to be disbursed to the person who was eligible to get the same (i.e. the flat purchasers / Central Government) when the issue attained finality, it cannot be said that the said amounts had been ‘collected’ by the appellant as service tax. Accordingly, same was not payable by the appellant under the provisions of section 73A(2) of the Act.[Sliverline Estates vs. CST (2014) 35 STR 425 (Tri-Bang.)]

116.2 The appellant, a builder had due to prevalence of confusion (created by DGST Circular dated 16.2.2006) as to the leviability of service tax on construction of flats collected sums from prospective buyers representing as contingent liability towards service tax if any payable to the department but had refunded the same alongwith interest to the buyers in pursuance of a Board Circular no. 108/2/2009-ST dated 29-1-2009 the Tribunal held that provisions of section 73A(2) would not be attracted since –

The amount was collected in pursuance of DGST Circular dated 16.2.06 and he cannot be blamed for believing that it was required to be collected;
The amounts were collected as deposit towards contingent liability and not as ‘service tax’ per se.

[Neel Sidhi Enterprises v. CST (2014) 36 STR 346 (Tri-Mum)]

117 SCN not specifying the taxable service - Demand not sustainable

117.1 Where proceedings initiated by proposing to tax the amounts under three different categories viz., Coal Handling and Loading service, Manpower Recruitment or Supply Agency Services and Cleaning Services without indicating how much of the amount is attributable to each of taxable service, the demand is not sustainable [CCE v. Bishambar Lal Arora (2014) 36 STR 1050 (Tri. - Del.)]

117.2 In the present case, the Revenue had inter alia sought to demand service tax on

maintenance of computer software services rendered by the appellant under the category of management, maintenance or repair service and
on technical support charges received by it under the category of Scientific Technical Consultancy Services by invoking extended period of limitation.

On appeal, the Tribunal held as follows –

As regards the demand of service tax on maintenance of computer software services, the reasoning of the appellant that it entertained a genuine belief that no service tax was payable on such services is acceptable since the very fact that the Government had w.e.f. 11.05.2007 inserted an Explanation for removal of doubts in the definition of ‘Management, maintenance and repair’ clearly establishes that even the Government acknowledged that there was genuine confusion/ ambiguity with respect to the applicability of service tax on repair of computer software under the said category of service.
As regards the technical support charges received by the appellant the Tribunal held that the bonafide belief entertained by the appellant that only the service provided by scientist or technocrat or science or technology institution or organization would only be liable for service tax under the said category of service and the appellant being a body corporate and not a science/ technology institution/ organization would not be covered under this category of service is also acceptable. Also the said activities became taxable under the category of Information Technology Services w.e.f. 15.5.2008 much later.
Further, where the show cause notice nowhere brought out any factors as to how the appellant’s bonafides was suspected or which indicated the existence of an intent to evade payment of tax, the Tribunal held that alleging suppression of facts merely on the basis of non-registration and non-filing of service tax returns is incorrect.

Accordingly, the extended period of limitation was not invokable [Ruchi Infotech Ltd v. CCE (2015) 37 STR 131(Tri-Del.)]

118 Demand when service tax already paid by client

118.1 Two companies ‘B’ and ‘C’ respectively facilitated sale of insurance policies and finance to purchasers of vehicles of their parent company ‘M’ and received commission from Insurance companies and finance companies on which they paid tax under ‘Insurance Auxiliary services’ and ‘Business Auxiliary Services’ respectively. They shared part of the commission with the appellant ‘A’, a dealer in vehicles manufactured by ‘M’, for recommending buyers to avail Insurance and finance from those companies of which B & C were agent/brokers. On these facts, it was held that no separate tax was required to be paid by ‘A’ on part of the commission received from B & C based on the following reasons:

tax on the entire commission has already been paid by B & C.
If tax was paid by A, B & C would be eligible for input credit thereby making the impugned demand revenue neutral.

[Popular Vehicles & Services Ltd. vs CCE, 2010 (18) STR 493 (Tri-Del.); See also CCE vs. Ajmer Automobiles P Ltd. (2012) 26 STR 19 (Tri-Del.)]

119 Demand on facts – raised on external evidence sustainable

119.1 The Revenue in the present case sought to tax the appellants (cable operators) on amounts by adopting the number of the subscribers given in the agreements entered into by the appellant with the broadcasters. The Hon’ble Tribunal held that once the figures are taken from a written contract, which is in pursuance to a statute, namely, Telecom Regulatory Authority of India Act, 1997 and the regulations made thereunder, the same is beyond challenge [ Intermedia Cable Communication P. Ltd. v. CCE (2014) 36 STR 1091 (Tri. - Mumbai)].

120 Limitation

120.1 Where the assessee had failed to obtain service tax registration, since it bona fide believed that its activities were not liable for service tax but had subsequently on being pointed out by the department obtained the service tax registration and discharged its service tax liability, the High court held that the extended period of limitation could not be invoked [CST v. Karnataka State Warehousing Corporation (2011) 23 S.T.R. 126 (Kar)].

120.2 Where there was a doubt as to whether advisory services on mergers and acquisitions would be liable for service tax under the category of management consultancy services [the scope for doubt being established by the fact that the Bombay High Court in a writ directed the CBEC to clarify the position] the Tribunal held that the extended period of limitation cannot be invoked since there was no suppression of facts with an intention to evade tax and hence a Show Cause Notice dated September, 2001 seeking to recover tax for the period 16.10.98 to 31.3.99 is barred by limitation [ CCE v. DSP Merrill Lynch Ltd. (2007) 7 STR 59 (Tri.-Mumbai); See also CCE vs. Abharan Motors Pvt Ltd. (2011) 23 STR 72 (Tri-Bang); CCE vs. Vivekram Bajaj (2011) 23 STR 136 (Tri-Chennai);Reliance Industries Ltd v CCE (2011) 23 STR 555 (Tri-Ahmd); Aadishwar Motors Pvt Ltd v. CST (2011) 24 STR 81].

120.3 Where the departmental authorities were not clear as to the nature of activities rendered by the assessee and had taken different views at different points of time the extended period of limitation cannot be invoked. [Nexcus Computers (P) Ltd. vs. CCE (2008) 9 STR 34 (Tri. – Chennai)].

120.4 Where service tax is not paid as a result of confusion prevailing in the field as regards the liability of service tax it was held that the benefit of doubt is to be extended to the assessee and the extended period of limitation is not invokable. [Dalveer Singh vs. CCE (2008) 9 STR 491 (Tri-Del)].

120.5 Where there were conflicting tribunal decisions on the issue whether a consignment agent would be liable for service tax under the category of “clearing and forwarding agents”, an SCN dated 2.7.2002 seeking to demand tax from the assessee under the above category on the same issue for the periods 16.7.1997 – 31.8.1999 is barred by limitation [Bharat Aluminium Co. Ltd. v. CCE (2007) 8 STR 27 (Tri-Del.) See also Sunil Metal Corporation vs.CCE (2009) 16 STR 469 (Tri-Ahmd.); Padam Chand Mutha & Co. v. CCE (2009) 16 STR 721 (Tri-Del.)].

120.6 Where the appellants had filed the memorandum and articles with the department at the time of registration specifying the activities carried out by company it was held that there was no suppression of facts and the extended period of limitation cannot be invoked. [ Karvy Consultants Ltd. vs. CCE (2008) 10 STR 166 (Tri-Bang.)]

120.7 The department in the year 2000 asked the appellants to register and pay service tax on security services w.e.f. 16.10.1998. The appellants replied vide letter dated 3.4.2000 claimed exemption under notification no. 58/2002-ST. The department did not pursue the matter until 2002 and finally issued a SCN on 22.1.2004 demanding service tax for the period 16.10.1998 to 30.9.2002. The Tribunal held that the department was aware of the relevant facts and hence the SCN being beyond the one year limitation period the demand is time-barred [Dolphine Detective Agency v. CCE (2006) 4 STR 25 (Tri-Bang.); Suvidha Engineers India Ltd v. CCE, 2013(32) STR 735 (Tri-Del)].

120.8 Where the issue involved legal interpretation as to whether the appellant could be considered as clearing and forwarding agents it can be safely concluded that the appellants were under a bona fide belief and the extended period of limitation is not invokable [NRC Ltd. v. CCE (2007) 5 STR 308 (Tri-Mum.); See also Lanxess Abs Ltd. vs. CCE (2011) 22 STR 587 (Tri-Ahmd.)].

120.9 Where the department had earlier issued a show cause notice for an issue, the department being aware of the appellant’s activities, cannot invoke the extended period for issuing a second show cause notice. [Cairn Energy (I) Pvt. Ltd. vs. CCCE (2008) 11 STR 632 (Tri-Bang.)]

120.10 Where the assessee had suo-motu assessed and paid the tax and reflected their income in the balance sheet and income tax returns for the impugned period the Tribunal held that the extended period of limitation cannot be invoked. [ Om Sai Professional Detective & Sec. Ser. P. Ltd. vs. CCE (2008) 12 STR 79 (Tri-Bang.)]

120.11 Where an order was issued u/s. 11C dated 4.4.2007 of the Central Excise Act under which the Government acknowledged that there was a general practice of not levying service tax in respect of vehicles used as stage carriages and accordingly granted exemption for the period 1.4.2000 to 4.2.2004, it was held that a show cause notice dated 13.6.2005 invoking longer period of limitation to demand tax for the period 1.4.2001 to 31.3.2004 is time barred. [Mangalwardhini Travels vs. CCE (2009) 13 STR 51 (Tri-Del)]

120.12 Where the SCN is based on the information disclosed in balance sheet and other documents maintained by the appellants and the appellants have been regularly paying tax and filing returns the Tribunal held that there is no suppression of facts with an intent to evade tax and hence larger period of limitation cannot be invoked. [Rolex Logistics Pvt. Ltd. vs. CST (2009) 13 STR 147 (Tri-Bang.)]

120.13 Where the department had issued an SCN to include erection, commissioning and installation charges in the assessable value for charging excise duty, a subsequent SCN on the assessee seeking to invoke the larger period of limitation for charging the said charges to service tax is not permissible since the department is deemed to be aware of the facts and there was no suppression of the facts.[Kirlburn Engg. Ltd. vs. CCE (2009) 13 STR 285 (Tri- Ahmd.)]

120.14 Where the appellants had been regularly furnishing the ST-3 returns which was assessed and finalized by the department larger period of limitation cannot be invoked. [Alvares & Thomas vs. CCE (2009) 13 STR 516 (Tri-Bang.)]

120.15 Where the assessee was a PSU of the Govt of India, no mala fide intention to evade tax could be attributed to it and hence extended period of limitation cannot be invoked. [BSNL vs. CCE (2009) 14 STR 359 (Tri- Ahmd.)]

120.16 Where no objections were raised by the department as regards valuation when the appellant firm filed returns regularly during its existence nor when they surrendered their registration certificate on dissolution of the firm, the Tribunal held that extended period of limitation cannot be invoked to confirm a demand prior to dissolution. [CCE & ST v. P.V. Narayana Reddy (2009) 14 STR 701 (Tri-Bang.).

120.17 Where the appellant could take Cenvat credit on payment of tax on ‘Goods Transport Agency’ (GTA) services availed by him, non-payment of service tax on GTA services (as a payer of freight) cannot be said to be with an ‘intent to evade service tax’ since it would be revenue neutral. Accordingly it was held that the extended period of limitation cannot be invoked [Dineshchandra R. Agarwal Infracon Pvt Ltd. vs CCE 2010 (18) STR 39 (Tri-Ahmd.)].

120.18 The law as it stood on the date of issuance of show cause notice is relevant for applying the provision of limitation under section 73 [ Viking Tours & Travels (2011) 22 STR 69 (Tri. – Che.)]

120.19 Where the appellant bonafide believed himself to be entitled to exemption, the extended period of limitation is not invokable and the fact that the appellant did not approach the Revenue for clarification and did not disclose the activities undertaken by them, cannot be made a reason for alleging any suppression or mis-statement on the assessee. [Aditya Birla Nuvo Ltd. vs. CCE (2011) 22 STR 41 (Tri. – Ahmd.)]

120.20 Where the original refund claim (under notification no. 41/2007) was filed within the prescribed time limit but before a wrong authority, a subsequent filing before the appropriate authority even though after the prescribed period cannot be held to be barred by limitation. [ CCE vs. AIA Engineering Ltd. (2011) 21 STR 367 (Guj.)].

120.21 Where the Revenue had invoked the larger period of limitation, in a case where the assessee who was earlier registered for service tax but had subsequently surrendered the same under the belief that his services were not liable for service tax, the Tribunal observed that the revenue having failed to adjudge the activities of the appellant and their subsequent liability to pay service tax under any category of service at the time of surrender of the registration certificate could not subsequently question the assessee’s intention and his belief that his activities were not liable for service tax.[ Needwise Advertising Pvt. Ltd. vs. CST (2011) 21 STR 229 (Tri-Ahmd.)]

120.22 Where the appellant surrendered his certificate of registration on 19.6.05 on the ground that his turnover was less than the threshold limit and hence exempt, a show cause notice dated 30.4.2008 demanding service tax for the period 10.9.04 – 31.1.08 was held to be barred by limitation since on surrender, the onus was on the department to investigate the cause for surrender within a year of surrender and a surrender of certificate of registration cannot be considered as for evading payment of service tax [Amalner Co-operative Bank Ltd. vs. CCE (2011) 24 STR 618 (Tri-Mum.)].

120.23 Income voluntarily disclosed to the income-tax authorities cannot be added to value of taxable services in absence of any evidence that such income disclosed was part of taxable service. [CCE v. Ramesh Studio & Colour Lab (2010) 20 STR 817 (Tri-Del.)].

120.24 Where the department issued the first show cause notice for a period 1.4.00 to 31.3.01 on 20.10.05 and subsequently issued another show cause notice for the period 1.4.01 to 31.3.04 on 31.8.2006 on the same issue invoking the extended period of limitation the Tribunal held that the second show cause notice would be barred by limitation. [Vijay Travels vs. CST (2010) 19 STR 671 (Tri-Ahmd)]

120.25 Where the appellants, challenged the constitutional validity of levy of service tax on tour operators, was upheld by the High Court vide order dated 30.4.01, tax on tour operators became payable 1.4.2000. However , the appellants paid tax only from 1.5.01. On the facts the Tribunal held that a show cause notice issue to the appellant in the year 2005 seeking to levy service tax for the period 1.4.2000 – 30.4.01 is barred by limitation. The extended period of limitation cannot be invoked since the facts were already known to the department. [Travel Aid vs. CST (2010) 19 STR 570 (Tri-Chennai)]

120.26 The appellant, a hotel, was registered for service tax under the category of ‘Mandap Keeper’ services and filed its returns regularly from 1997-2007 but had stopped paying service tax under mandap keeper services from 2002 claiming exemption under notification no. 12/2001 dated 20.12.2001. The department issued a SCN dated 30.1.2007 seeking to reclassify the services under ‘Convention Services’ to deny the exemption for the period 1.2.2002 – 13.7.2004. The Tribunal held that the extended period of limitation cannot be invoked on the ground of suppression of facts since the assessee was regularly filing its returns and the department could have asked for further details as they were aware of the appellant’s activities. [ CCE vs. Casino Hotel (2010) 19 STR 425 (Tri. – Bang.)]

120.27 Where the appellant a service recipient, who received services from foreign companies did not pay service tax for the period 18-4-06 to June 2006 though it had disclosed the transactions to the department it was held that the SCN issued on 5.12.07 cannot invoke the extended period of limitation. However, the Tribunal did not accept the plea of revenue neutrality to uphold the bar of limitation. [ABB Ltd vs. CCE,, 2010 (18) S.T.R.433 (Tri-Bang)]

120.28 Where the department issued a show cause notice in sequel to an audit to deny Cenvat credit invoking the extended period of limitation on the ground that the appellant had not disclosed the details of Cenvat credit availed nor enclosed copies of invoices with its return and hence had suppressed the facts from the department which could be discovered only after conduct of departmental audit, the Tribunal held that the extended period of limitation could not be invoked since –

The appellant had disclosed the quantum of Cenvat credit availed in its ER-1 return and there was no requirement to either disclose the details of Cenvat credit availed nor to enclose the copy of invoices alongwith the returns;
under the self assessment system once the return has been filed by the assessee, the central excise officers are supposed to scrutinize the same and since the quantum of credit was disclosed the officers were always free to enquire about the details and satisfy themselves about the correctness.
The fact that the Department held a different view as to the admissibility cannot be a ground concluding ‘an intent to evade tax’ in absence of evidence to substantiate the same.

[CCE v. Pushp Enterprises (2011) 22 STR 299 (Tri-Del); See also CCE v. Medicaps Ltd. (2011) 24 STR 572 (Tri-Del.);Bajaj Hindusthan Ltd. v. CCE (2014) 33 STR 305 (Tri-Del)]

120.29 The extended period of limitation cannot be invoked on the ground that the appellant had not made enquiries with the department about its obligation to pay duty / tax on the activity undertaken by them unless there is a evidence that such lapse was on account of mala fide intention. [Stone & Webster International Inc vs. CCE (2011) 22 STR 467 (Tri. – Ahmd.) Contra - Phoenix IT Solutions Ltd. vs. CCE (2011) 22 STR 400 (Tri. – Bang.)].

120.30 Failure to obtain registration and pay service tax cannot be equated with deliberate suppression with an intent to evade payment of duty. A positive act on the part of assessee is imperative to invoke the extended time limit [CCE vs. Global Software Solutions (P). Ltd. (2011) 24 STR 707 (Tri.- Chennai) See also I2IT Pvt. Ltd. v CCE (2014) 34 STR 214 (Tri.-Mumbai)].

120.31 If law does not require certain details to be disclosed in returns etc., then non-disclosure of the same cannot lead to suppression or misstatement of facts in order to invoke the extended period of limitation [Parekh Plast (India) Pvt. Ltd. v. CCE (2012) 25 STR 46 (Tri-Ahmd)].

120.32 On facts the Hon’ble Tribunal observed –

the word “suppression” itself denotes a mala fide mind, there can be no ‘suppression’ without an intent to evade payment of Service Tax;
non-intimation to department can be without a mala fide but a suppression has to be always with mala fide. Hence non-disclosure of a fact cannot be equated with suppression; and
if non-payment of tax itself is made a ground by attributing mala fide to an assessee, the limitation period would never be applicable in any case of non-payment and in the resultant confirmation of demand.

Accordingly the Tribunal held that the extended period of limitation cannot be invoked [Religare Securities Ltd. v. CST (2014) 36 STR 937 (Tri. - Del.)]

120.33 Where the penalties levied under Section 76, 77 and 78 of the Finance Act, 1994 had been dropped on the grounds that there was a bonafide doubt regarding the applicability of service tax on the assessee’s activities, the High Court held that non-payment of service tax would not fall within any of the circumstances mentioned in the proviso to subsection (1) of Section 73 and accordingly the extended period of limitation was not invocable. [ CCE vs. Indian Institute of Chemical Technology (2012) 26 STR 97 (A.P.)].

120.34 Where the assessee had not paid tax due to the prevalence of conflicting decisions passed by the Tribunals, the High Court held that the same would amount to bonafide doubt and hence there being no intent to evade payment of tax the extended period of limitation was not invocable [UOI vs. Bharat Aluminium Co. Ltd. (2012) 26 STR 101 (Chhattisgarh); See also Mundra Port & Special Economic Zone Ltd. vs. CCE (2012) 27 STR 171 (Tri-Ahmd); Gargi Consultants Pvt. Ltd. v. Commissioner of Central Excise (2013) 32 STR 654 ( Tri- Del.)].

120.35 Where the appellant had not paid tax due to prevalence of confusion during the relevant point of time, the Tribunal held that there was no suppression with intent to evade payment of tax. Accordingly the extended period of limitation was not invocable [Niranjan Lal Agarwal v. CCE (2012) 26 STR 457 (Tri-Del.)].

120.36 Where the assessee did not pay service tax on certain receipts, it was held that, the fact that the appellant was a wholly owned government company would not mean they had no intention to evade tax, if they did not seek a clarification from the department or obtain a legal opinion or disclose the receipts in the ST-3 returns or intimate the department [Housing & Dev. Corporation Ltd. (HUDCO) v. CST (2012) 26 STR 531 (Tri.- Ahmd.)].

120.37 Where the revenue had demanded interest beyond the limitation period of 1 year, the High Court held that the same is not sustainable since the period of limitation that applies to claim the principal amount would also be applicable for claim of interest thereon [ Kwality Ice cream Company v. UOI (2012) 27 STR 8 (Del.)].

120.38 Where the Tribunal found that the assesses’s did not pay service tax on an issue that involved interpretation of law and CBEC also had issued circulars, the Tribunal did not invoke the extended period of limitation observing that‘at the infancy stage of implementation of law there appears to have been confusion as to taxability’.[ Gangadhar Bulk Movers Pvt. Ltd. vs. CCE (2012) 27 STR 258 (Tri. – Mumbai)].

120.39 When assessee did not pay service tax on ‘legal compliance services’ rendered to its clients under the category of ‘management consultancy services’ on the basis of CBEC circulars, the extended period of limitation cannot be invoked [Ernst & Young Pvt. Ltd. vs. CST (2012) 27 STR 462 (Tri. – Del)].

120.40 Where the appellant had not paid service tax on the transportation of processed dolomites under the category of ‘cargo Handling Service’, the invocation of extended period of limitation and imposition of penalty were set aside in view of complicated issue involving legal interpretation of the definition of various services [Singh Transporters VS. CCE (2012) 27 STR 488 (Tri. – Del.)].

120.41 Where, the bonafide belief was established due to prevalence of decisions in favour of the appellant during the relevant period which were later overturned by a larger bench decision, the extended period of limitation was held not invocable and penalty u/s 76 were set aside by the Tribunal [ S.R.Gupta & Sons. vs. CCE (2012) 27 STR 501 (Tri. – Del.)].

120.42 Where the original adjudicating authority in his order did not impose penalty on the ground of ‘reasonable cause’ by invoking s. 80, it was held that presence of a ‘reasonable cause’ means absence of mala fide and hence the extended period of limitation is also not invocable [R.N. Singh v. CCE (2012) 28 STR 13 (Tri. – Del.)].

120.43 The Tribunal relying on judgment in case of Nizam Sugar Factory v. CCE(2008) 9 STR 314 (SC) held that the extended period of limitation cannot be invoked where a show cause notice on the same ground and on the basis of same facts was issued for the previous period [ Bhavana Motors v. CCE (2012) 28 STR 268 (Tri.-Del.)].

120.44 Extended period of limitation could not be invoked where there was ample correspondence with the department on the issue under consideration and several tribunal decisions in favour of the appellant during the relevant period.[Universal Enterprises vs. CCE (2012) 28 STR 466 (Tri. – Del.)].

120.45 On facts, where it was found that there was continuous correspondence with the department on the issue and conflicting interpretation of statutory provisions and notifications, the extended period of limitation cannot be invoked [Andhra Pradesh Tourism Devl. Corpn. Ltd. v. CCE (2012) 28 STR 595 (Tri.-Bang.)].

120.46 The appellant had neither obtained registration nor filed ST-3 returns for the fees / charges collected from the students and also had not paid service tax. The department became aware of the fact only during the course of investigation. Hence the plea of ‘bonafide belief’ by the appellant has no substance since there were no decisions of the Tribunal / High Court / Supreme Court in support of the appellant’s view that fees / charges collected from the students are not leviable to service tax under the category of ‘commercial, training or coaching service’ and therefore the extended period has been rightly invoked [I.C. Financial Analysts of India v. CC & CE (2013) 30 STR 273 (Tri.-Bang.)].

120.47 Where the appellant was regularly filing returns and the department could have called for records to verify the veracity of the appellant’s claim, mere detection by the department during the course of audit of any defaults by the assessee cannot be a ground for invoking extended period of limitation. [BCH Electric Ltd. v.CCE (2013) 31 STR 68 (Tri-Del);

120.48 Where the revenue had become aware through correspondence about the fact that the appellant was not discharging service tax liability on cold storage charges received by it during the course of providing clearing and forwarding agent's services in year 2002, the Tribunal held that issuance of SCN in year 2006 by invoking the extended period of limitation is not permissible. [Monsanto Manufacturers Pvt. Ltd. v. CCE (2013)32 STR 364 (Tri-Del)]

120.49 Where the issue involved was one of legal interpretation, the assessee cannot be held guilty of suppression or mis-statement of facts and the extended period of limitation is not invokable. [CCE v. Bali Industries (2013) 31 STR 105 (Tri-Chennai.)]

120.50 Where the assessee had through its letter made known to the department about the nature of its contract with its customers and the manner of payment of service tax it has adopted, the extended period of limitation cannot be invoked. [Vashushilpi Projects & Consultants (P) Ltd. v. CCE (2013) 31 STR 712 (Tri – Del.)]

120.51 (i) Extended period of limitation u/s 73 is not invocable when the reasons for invoking the same are not disclosed by the officer issuing the show cause notice and the issue whether service tax is payable or not involves a question of law. Mere contravention of the provisions of the Act or Rules does not entitle the tax authorities to invoke the extended period of limitation.

(ii) It is well settled that existence of an alternative remedy is not in itself a bar to entertaining a writ petition. A writ petition can certainly be entertained when a notice is impugned as without jurisdiction. There can be no dispute that a question of limitation is a question of jurisdiction and that the Commissioner has no authority to issue notice after the period of limitation prescribed in the Finance Act, 1994.

[Infinity Infotech Parks Ltd. v. Union of India (2013) 31 STR 653 (Cal.)]

120.52 When dutiable and exempted products were produced by the assessee and the assessee took cenvat credit in respect of input services utilized for both without maintaining separate records, the Tribunal sustained the demand of the adjudicating authority even for the extended period of limitation but deleted the penalty with a passing observation that there was no intention to evade tax. On appeal the Hon’ble High Court held that the fact that the Hon’ble CESTAT deleted the penalty based on the said passing observation, will not nullify or negate the fact that the principal finding of the adjudicating authority [invocation of extended period] has been confirmed by the Tribunal and that no substantial question of law arises [ R.R.Paints Pvt. Ltd. vs. CCE (2014) 33 STR 156 (Bom.)]

120.53 Where the adjudicating authority had dropped part of the demand on the ground that extended period of limitation is not invokable since the records of the appellant were audited and there was no suppression of facts, the balance demand for the same period cannot be sustainable by invoking extended period of limitation.[Bharati Televentures Ltd v. CCE 2014(33)STR 86 (Tri- Mum)]

120.54 In a case where the SCN made a mere allegation without any reference to specific evidence showing wilful misstatement or suppression of facts and where the appellant had a bonafide belief based on Board Circulars, extended period of limitation was held to be not invocable. [ Karamchand Thapar & Bros. (Coal Sales) Ltd. v. CST (2013) 32 STR 577 (Tri-Kolkata)]

120.55 Where there were divergent views regarding taxability of reimbursable expenses, the extended period of limitation was held to be not invokable. [J Walter Thompson v. CCE, 2014(33) STR 525 (Tri-Mum)]

120.56 Where the appellant had failed to pay service tax as a recipient of service under section 66A of the Act on the grounds that the constitutional validity of said section was challenged before many courts, the Tribunal held that the same cannot be considered as a bonafide belief entertained by it and accordingly imposition of penalty was held to be justified [Rikin Industries v CST (2014) 34 STR 252 (Tri.-Ahmd.)]

120.57 The appellant were carrying on the activity of reconditioning of old worn out rollers which was taxable only w.e.f. 16.6.2005. The demand pertaining to the period 16.6.05 to Feb’ 06 was sought to be raised by a show cause notice dated 27.4.2007. It was held that the extended period of limitation is not invocable as there was no suppression of facts by the appellant as the appellant had written several letters to the department intimating to them that they have reversed the Cenvat credit pertaining to reconditioning activity and this fact was also reflected in their RG-1 (Stock) register and returns. [Jagat Machinery Manufactures P. Ltd.v. CCE (2013) 32 STR 663(Tri- Del.)]

120.58 Where availment of Cenvat credit was reflected by the assessee in their periodical returns, the Tribunal held that the same was sufficient to prove the bona fides of the assessee. It further observed that in absence of any requirement to furnish to the department the documents on which credit was availed, non-placement of the documents cannot be considered as ground to allege malafides on the part of the assessee. Accordingly, it held that the extended period or limitation was not invocable. [CCE v. Plastichemix Industries (2013) 32 STR 383 (Tri-Ahmd)]

120.59 When earlier order had attained finality, reopening the same issue at a later point of time for the different period is not sustainable in law [ Danmet Chemicals Pvt. Ltd. v. CCE (2013) 30 STR 308 (Tri.-Mumbai)].

120.60 Where the SCN did not contain any allegation as to suppression of facts for non-payment of service tax on lease premium, but was only based on the audit report of the CERA team which in itself appeared to be illegal and unsustainable, it was held that the extended period of limitation cannot be invoked. [Infinity Infotech Parks Ltd. v. Union of India (2014) 36 STR 37 (Cal)]

120.61 The longer limitation period for demand of non-paid service tax under proviso to Section 73(1) would not be invocable since the assessee is a public sector undertaking and the allegation of the wilful misstatement, suppression of facts or deliberate contravention of the rules to evade the payment of service tax cannot be made [CCE v. Bharat Yantra Nigam Ltd. (2014) 36 STR 554 (Tri.-Del.)]

120.62 Where there was a dispute since 2004 whether the activity of providing place, seating arrangement, etc. to the finance institutions by automobile dealers on commission basis falls under the category of Business Auxiliary Services which litigation travelled upto the Hon’ble Tribunal, extended period of limitation is not invocable [CCE v. Raj Auto (2014) 36 STR 566 (Tri. - Mum.)]

120.63 Mere non registration, non filing returns or non payment of service tax are not sufficient for sustaining the allegation of suppression of facts for invocation of extended period of limitation. There has to be some act of omission or commission which points towards an intent to evade payment of service tax. [ M.P Laghu Udhyog Nigam Ltd v. CCE, Bhopal, 2015(37) STR 308 (Tri-Del)]

120.64 Extended period cannot be invoked on the basis that when in doubt the appellant should have approached the department for clarification since there is no such statutory provision for an assessee to seek advisory opinion from departmental officers. This is a misconception that has no legislative basis. [Affinity Express India Pvt Ltd vs CCE (2015) 37 STR 333]

120.65 When the adjudicating officer himself had interpreted the provisions in the favour of assessee and dropped the demand, the Tribunal observed that the provisions are capable of two interpretations and hence there was no mala fide intention on the part of the assessee. Accordingly, the extended period of limitation was not invocable.[IFB Industries Ltd. v. CCE (2015) 37 STR 529 (Tri.-Del.) See also Jai Jawan Coal Carriers Pvt. Ltd. v CST (2015) 37 STR 509 (Tri.-Del.)]

120.66 The respondent assessee services have shown availment of cenvat credit in Part IV and V of ER-1 returns filed by it. In absence of material to indicate suppression on the part of the respondent assessee extended period of limitation not invocable. [Commissioner v. Dynamic Industries Ltd, 2014(35) STR 674 (Guj)]

120.67 In absence of any column in the return for showing the nature of input services, the Tribunal held that invoking the extended period of limitation on the grounds of suppression of the nature of input credit is not justifiable. [Saboo Coatings Ltd. vs. CCE (2014) 36 STR 447 (Tri-Del.)]

121 Limitation and Penalty

121.1 Where one of the venturers of the appellant (a joint venture), executing similar turnkey / EPC projects as that of the appellant was registered for service tax under works contract service, paid service tax and regularly filed service tax returns, it was held that the appellant cannot be said to have entertained a bona fide belief that it was not liable to do so. Further, on facts, the Tribunal found that the appellant –

did not disclose the material facts regarding EPC projects to the department;
Obtained registration under works contract services and filed Service tax return under compulsion from department; and
did not disclose material particulars or reasons for exemption claimed in the service tax returns and hence held that the extended period of limitation is invokable and penalty u/s. 78 is rightly imposable [Ramky Infrastructure Ltd. vs. CST (2013) 29 STR 33 (Tri. –Bang.)].

121.2 Where the assessee did not pay service tax and file returns on time but later on, on their own ascertainment paid service tax, filed the returns and informed the department, then in such a case show cause notice is not required to be issued as per S.73(3) and Board Circular no. 137/167/2006–CX–4 dated 3.10.07. Accordingly, no penalty is imposable. [Gupta Coal Field & Washeries Ltd v. CST (2013) 29 STR 166 (Tri-Mum)]

121.3 When the issue under consideration involved taxability of two services and the appellant had pursuant to the audit conducted by the department paid service tax in respect of one of them and also reported the same in the service tax return, the extended period of limitation cannot be invoked in respect of the other service [Jubilant Life Sciences Ltd. vs. CCE (2013) 29 STR 529 (Tri. -Del.)].

121.4 Where the appellant was under a bona fide belief that the reimbursable expenses are not to be included in the assessable value, in view of the provisions of Section 80 of the Finance Act, the penalties were set aside. [J Walter Thompson v. CCE, 2014(33) STR 525 (Tri-Mum)]

121.5 Where the appellant had disclosed the amount of cenvat credit availed by it in its statutory records and returns filed by it and where the issue involved was one of interpretation of law the Tribunal held that there being no suppression/ mis-statement of facts extended period of limitation was not invokable and accordingly no penalties were imposable [New Allenberry Works vs. CCE (2014) 35 STR 544 (Tri-Del.)]

122 Rectification of mistakes

122.1 The Superintendent of Service tax assessed the quarterly and half yearly returns from September 97 to March 99 without any demand. The Deputy Commissioner reopened the assessment u/s 74 on the ground that there was mistake apparent from records and made demand and imposed penalties. On appeal, the Tribunal held -

Where the ST-3 returns have been assessed, it cannot be said that there was error and non-production of records by the assessee;
Where assessment of ST-3 returns has become final under section 71 i.e. no appeal is filed within the time allowed u/s 85, it cannot be reopened by invoking s. 74 on the ground that there is “mistake apparent from record” so as to circumvent the provisions of s. 85.
S. 74 can be invoked only by the Superintendant who passed the order of assessment and not by Deputy Commissioner

[Onkar travels Ltd v.CCE, 2006, (3) S.T.R 164 (Tri-Del).]

122.2 An order of the Tribunal concluded contrary to a decision of a superior court (High Court or Supreme Court) rendered “subsequent” to the order of the Tribunal would be amenable to rectification as involving an error apparent from records even though the Tribunal had decided the order “prior to” the judgement of the superior court since the subsequent decision does not “enact” the law but “declares” the law as it always was [ Hindustan Lever Ltd. vs. CCE (2008) 10 STR 91 (Tri. – LB)].

122.3 In case where core issue was considered but the issues were not argued and no findings were recorded the Tribunal held that there was an error apparent on the face of the record and appeal was restored [Correctech International Pvt. Ltd. v. CST (2014) 36 STR 1088 (Tri.- Ahmd.)]

123 Remand of Case

123.1 Where the Commissioner (Appeals) held that the appellant was entitled to cenvat credit in principle but directed the original authority to merely quantify the refund, it was held that there was no ‘remand’ of the case by the appellate authority [CCE vs. Mavenir Systems Ltd. (2012) 27 STR 510 (Tri. – Bang.)] See also [CCE v. Outsource Partners Interational P. Ltd. (2014) 34 STR 399 (Tri- Bang.)]

123.2 Commissioner(Appeals) has power to remand the matter to the primary authority [CCE v. Anard Colour Lab (2014) 36 STR 915 (Tri.- Del.)]

124 Penalty

124.1 Where the breach flowed from a bonafide belief that the assesses were not liable for service tax; they paid the tax alongwith interest and also co-operated with the investigating authorities, the Tribunal held that they had reasonable cause under section 80 and accordingly set aside the penalties imposed under section 76 and 77.[ETA Engineering Ltd. v. CCE – 2004 (174) ELT 19 (Tri-Larger Bench) See also CCE v. Sikar Ex-Serviceman Welfare Co-op. Society Ltd. (2006) 4 STR 213 (Tri-Del.); Jagdeep Singh Saluja v. CCE (2008) 12 STR 309 (Tri. – Del.);Amman Steel Corporation vs. CCE (2011) 22 STR 563 (Tri-Chennai); CST v. Vinayaka Travels (2011) 23 STR 5 (Kar)][NI Associates v. CST (2013) 30 STR 416(Tri-Mum)][Prasad Corporation Ltd vs. CST (2013) 30 STR 571 (Tri-Chennai); R.B.Knit Exports v. CCE, (2013) 31 STR 625 (Tri. – Del.)]

124.2 A subsequent amendment in the statue with retrospective effect cannot bring about penal consequence on the assessee. [ Mahalakshmi Sugar Mills Co. Ltd. v. CCE (2006) 1 STR 121 (Tri. – Del.)]

124.3 Once it was found by the original authority that there was reasonable cause for the failure of the assessee to pay service tax in time, the proposal to impose penalties on them u/s. 76 and 77 should be dropped inasmuch as the assessee had, by showing such reasonable cause for the failure to pay tax in time, established a case for exoneration from penalty u/s. 80. Once the adjudicating authority forms his satisfaction on reasonable cause for commission of the offence it is not open to Commissioner (Appeals) to substitute his ‘satisfaction’ for the ‘satisfaction’ recorded by the lower authority for purposes of s. 80 of the Finance Act. [Sre Venkateswara Hi-Tech Machinery v. CCE (2007) 6 STR 139 (Tri. - Chennai); See also CST v. Competent Automobiles Co. Ltd. (2011) 24 STR 561 (Tri-Del.)]

124.4 Where the assessee was bona fide labouring under a mistake as to the extension of an exemption notification and had also disclosed the receipts in his books indicating that he had no intention to evade tax, the Tribunal held that there is a reasonable cause u/s. 80 for failure to pay the service tax and accordingly no penalty u/s 76 and 78 is impossible. [Ace Computer Education v. CCE (2007) 6 STR 361 (Tri.-Del.); See also CMC Ltd v. CCE (2011) 23 STR 586 (Tri-Bang) ]

124.5 Penalty under Rule 15 of Cenvat Credit Rule was waived by the Tribunal since issues involved in this case were a question of interpretation of the provisions. Since there could have been two possible interpretations, the appellant cannot be visited with a penalty, as there was no malafide intention to avail ineligible Cenvat Credit on these two services. [Universal Cable Ltd V. CCE (2007) 80 RLT 821 (Tri. – Del.)]

124.6 On facts, the Hon’ble High Court held:

a. The Tribunal cannot entertain an appeal on merits where the appeal has been rejected by the lower adjudicating authorities on account of non-compliance with the requirement of pre-deposit; and

b. Penalty imposable u/s. 76 of the Finance Act, 1994, in absence of reasonable cause, cannot be reduced below the minimum amount prescribed in that section. It can, however, be completely dispensed with (not reduced below prescribed minimum) if reasonable cause is shown by the assessee.

[UoI vs. Aakar Advertising (2008) 11 STR 5 (Raj.).See also CCE vs Bhakya Beauty Parlour (2008) 12 STR 44 (Tri-Chennai)]

124.7 Where the service tax was paid before the issuance of show cause notice and the assessee also had a bona fide doubt as to the taxability of their activity, the Tribunal held that penalty u/s. 78 is not imposable since-

u/s. 73(3) show cause notice itself was not required to be issued; and
there was ‘reasonable cause’ u/s. 80 for not imposing penalty.

[Bhoruka Aluminium Ltd. v. CCE (2008) 11 STR 163 (Tri. – Bang.). See also Tidewater Shipping Pvt.Lt. vs. CST (2008) 11 STR 475 (Tri-Bang.); Haiku Motors Pvt Ltd. vs CST (2009) 14 STR 410 (Tri-Bang); see also Majestic Motorbikes Pvt. Ltd. vs. CST (2008) 11 STR 609 (Tri- Bang.); Reach Event Managements vs CCE 2009 (14) STR 251 (Tribunal)]. [Phoenix Engineering v. CCE (2013) 30 STR 399 (Tri-Chennai);CCE v. OTS Advertising Pvt. Ltd. (2013)32 STR 303 (Tri-Bang)]

124.8 If the asseesee pays the service tax and interest before service of SCN, no SCN can be served on him. Penalty u/s 76 is set aside. [MD Engineers v. CCE (2013) 30 STR 389 (Tri-Ahmd)] [Section 73(3) & Para 9.1 of Master Circular No 97/8/2007-ST, dated 23-8-2007]

124.9 Where the appellants, bonafide believed that only services provided by cable operators who were receiving signals directly from the satellite, and not from multi system operator, were liable under cable operator service, the Tribunal held that there was a reasonable cause for waiver of penalty u/s. 80. [Krishna Satellite Cable Network vs. CCE (2008) 12 STR 605 (Tri-Del.)]

124.10 Though the plea of bona fide belief was not specifically raised before the lower authorities the fact that the appellant had been resisting the demand of service tax on the premise that his activity is not liable for service tax led the Tribunal to believe that the appellants were entertaining bona fide belief of not being liable to pay service tax. Accordingly the penalties u/s. 76, 77 and 78 was waived on the reasonable cause ground. [Prodorite Anticorosive Ltd. v. CCE (2008) 12 STR 618 (Tri-Chennai)]

124.11 When the original authority waived the penalty exercising the discretion vested in him u/s. 80 the Tribunal held that such order cannot be revised by the Commissioner. [Solomon Foundry v. CCE (2008) 12 STR 750 (Tri-Chennai) following the Karnataka High Court judgement in CCE vs. Sunitha Shetty (2006) 3 STR 404 (Kar.); Handiman Services Ltd vs. CST (2008) 12 STR 765 (Tri. – Bang.); Ganesh Tours and Travels vs Commissioner of service tax 2010 (18) STR 171 (Tri-Bang.)].

124.12 In absence of malafide intention for delay in payment of tax, penalties u/s.76, 77, 78 and 79 must be waived under section 80 on the ground of “reasonable cause” instead of merely reducing the penalties.[M.R. Coatings Pvt. Ltd. vs. CCE (2009) 13 STR 79 (Tri-Ahmd.) see also Pawnar Satellite vs. CCE (2011) 22 STR 14 (Tri. – Del.)]

124.13 On a question as to whether the benefit of immunity from penalty under the Extraordinary Tax Payer Friendly Scheme communicated vide D.O. Letter dated 20.9.2004 would be available to the assessees who have registered themselves prior to the communication of Scheme, The Hon’ble High Court observed:

the amnesty scheme is an administrative instruction issued for the benefit of both the service providers and the Revenue and is not an instruction envisaged under section 37B of the Central Excise Act. Thus it would not be considered as having a statutory force.
The scheme is issued with an intention to provide immunity to defaulters who chose to deposit arrears of tax and interest before the cut off date and hence immunity should not be denied to persons who have already got themselves registered prior to the communication of the Scheme.

[UOI vs. Amit Kumar Maheshwari (2009) 13 STR 119 (Raj.)]

124.14 Where there is no intent to evade tax and prevalence of confusion as to taxability at the infancy stage of implementation of the law the Tribunal waived the levy of penalties u/s. 76, 77 & 78. [Gajanand Agarwal vs. CCE (2009) 13 STR 138 (Tri-Kolkata); See also Mitul Engineering Services v. CCE (2011) 24 STR 323 (Tri-Del.);CCE v. International Logistics, (2013) 31 STR 563 (Tri. – Del.)]

124.15 (a) It is a settled principle that show cause notice gives rise to civil and penal consequences. Thus where there was no proposition in the show cause notice for levy of penalty under section 78 but the same had been imposed by the adjudicating authority the Tribunal held that there was no opportunity of rebuttal granted to the appellant and hence the same is not imposable.

(b) Existence of several controversies at the infancy stage of law is a reasonable cause u/s. 80 for non-imposition of penalties.

[BAS Engineering (P) Ltd. vs. CCE (2011) 23 STR 145(Tri-Del.)]

124.16 Where the provisions of S. 73(1A) were in existence at the time of issuance of SCN, proceedings shall be deemed to be concluded on voluntary payment of service tax, interest and 25% of penalty u/s. 73(1A) even if the demand pertains to the period prior to the introduction of section 73(1A). [ Aneja Property Dealer v. CCE (2009) 13 STR 266 (Tri. – Del.)].

124.17 Where the assessee had paid service tax alongwith interest before the issuance of the show cause notice and claimed waiver from the issue of SCN and penalties u/s 73(3) [which grants such waiver where there is no intent to evade] the Tribunal granted the claim and also held that there was no requirement to pay 25% of penalty alongwith tax and interest which was only required under 73(1A) of the Act [which covers cases where there was an intent to evade tax.] [CST v. Independent News Services P. Ltd. (2011) 23 STR 23 (Tri-Del)].

124.18 Where the appellants had reflected their income from services in their financial statements and had collected it by raising invoices the Tribunal observed that there was no attempt to on the part of appellant to suppress or hide the fact from the revenue. Further in view of the prevalence of divergent view with regard to the interpretation of law during the relevant point of time the Tribunal held that the larger period of limitation was not invokable. [Steelcast Ltd. vs. CCE (2009) 14 STR 129 (Tri-Ahmd.) affirmed in (2011) 21 STR 500 (Guj.) See also R. R. Construction Company vs. CCE (2008) 11 STR 53 (Tri-Del.)]

124.19 Where non-payment of service tax was on account of confusion with regard to the liability to pay service tax the Tribunal held that there was a reasonable cause as envisaged u/s. 80 for waiver of penalties. [Life Insurance Corporation of India vs. CCE (2009) 14 STR 495 (Tri-Del.)]

124.20 The appellant having not registered with the service tax department paid the service tax alongwith interest on being pointed out by the department. The appellant being a small taxpayer was not aware of the provisions of the service tax law, the service tax being a new levy of tax, after taking a lenient view and giving the benefit of section 80 penalty demand has been waived. [Prince Thermal India Pvt Ltd v. CCE (2013) 30 STR 394 (Tri- Mum)]

124.21 Enhancement of penalty by way of revising the order of adjudicating authority during the pendency of appeal before CCE(A) is not sustainable. [ Agarwal Color Lab vs. CCE (2009) 14 STR 547 (Tri-Del.)]

124.22 In this case the question before the Hon’ble bench was – Can the penalty levied u/s. 78 of the Finance Act, 1994 be reduced below the statutory minimum envisaged in the said section by invoking the provisions of section 80. The Tribunal observed that on invoking of section 80 of the Finance Act, no penalty was imposable. On the other hand where section 78 was invoked the penalty imposable cannot be less than the amount of service tax not levied or paid. If at all, section 80 is invoked no penalty can be imposed. Accordingly, it held that the quantum of penalty leviable u/s. 78 cannot be reduced below the statutory minimum envisaged by invoking the provisions of section 80. [CCE vs. Riya Travels & Tours (I) Pvt. Ltd. (2009) 15 STR 124 (Tri-Mumbai); See contra in CCE vs. Madhuri Travels (2009) 15 STR 241 (Bom.)]

124.23 In this case the appellant sought waiver of the deposit of penalty levied under section 76 of the Finance Act, 1994 since they had deposited the amount of service tax alongwith interest before the issuance of SCN. The Tribunal granted stay of recovery of penalty u/s. 76 distinguishing the case of UOI vs. Dharmendra Textile Processors (2008) 231 ELT 3 (SC) which dealt with penalty u/s. 11AC of the Central Excise Act by distinguishing that penalty u/s. 11AC is not comparable with section 76 since section 11AC provided for penalty on defaulter of Central Excise duty, whose default arises on account of fraud, suppression of facts or contravention of provisions of law with intent to evade payment of duty. [ Deccan Mechanical & Chemical Industry Pvt. Ltd. vs. CCE (2009) 16 STR 263 (Tri-Mumbai);]

124.24 Mere detection by the department does not amount to non – payment with an intent to evade payment of service tax. Department ought to bring out clear facts that appellant was in the know that service tax was payable but still chose not to pay tax inorder to evade the same. Accordingly, the Tribunal held that no penalty u/s. 78 for suppression of facts was imposable. [Sands Hotel Pvt. Ltd. vs. CST (2009) 16 STR 329 (Tri-Mumbai)]

124.25 Where the appellants had paid duty on the bearings manufactured and supplied to the Railways but failed to discharge the service tax payable on their installation the Tribunal held that since the department was well aware that installation flows from the supply there cannot be case for suppression of material fact and accordingly no penalties were imposable.[National Engineering Industries vs. CCE (2009) 16 STR 340 (Tri-Del.)]

124.26 Where appellants had paid the service tax alongwith interest and had also paid the differential amount of tax on being pointed by the department the Tribunal observed that there was no need to issue show cause notice u/s. 73 of the Finance Act for recovery of tax and interest. Further, where no show cause notice was required to be issued u/s. 73, issue of show cause notice for recovery of penalty u/s 76 does not arise. Accordingly, the Tribunal held that no penalty u/s. 76 was imposable.[U.B.Engineering Ltd vs. CCE (2009) 16 STR 457 (Tri-Ahmd.) see alsoAmiras Enterprises vs. CCE (2010) 20 STR 631 (Tri-Ahmd.); Ratindranath K. Kanungo vs. CCE (2010) 20 STR 636 (Tri-Ahmd.);Lajpat Rai Jindal vs. CST (2010) 20 STR 645 (Tri-Del.); P. Jani & Co. vs. CST (2010) 20 STR 701 (Tri-Ahmd.); Nischint Engineering Consultants Pvt. Ltd. vs. CCE (2010) 19 STR 276 (Tri-Ahmd.),[Prasad Corporation Ltd vs. CST (2013) 30 STR 571 (Tri-Chennai)]

124.27 The appellants in the present case had paid service tax alongwith interest as a recipient of service on royalty payments made abroad for the period October, 2004 to March 2006. The Revenue contended to impose penalties u/s. 76,77 and 78. The Tribunal relying on the decision of High Court in Indian National Ship Owners Association vs. UoI (2009) 13 STR 235 (Bom.) held that since the services provided from outside India were held to be liable for service tax only w.e.f. 18.4.06 no service tax was payable by the assesse. Accordingly, where the liability to pay tax was absent no penalty u/s. 76,77 and 78 was held imposable. [Jet Audio Pvt. Ltd. vs. CCE (2009) 16 STR 497 (Tri-Mumbai)]

124.28 Where, the assessee had paid service tax as recipient of services from overseas providers prior to 16.8.2002 although it was not liable to pay the same, there can be no claim from the assessee in respect of interest and penalty for any delay in payment. [CCE v. Sundaram Textils Ltd. (2014) 36 STR 30 (Mad) see also Sadhana Electricals & Technical Works Macs Ltd. v. CST (2014) 36 STR 77 (Tri –Bang)]

124.29 Where the department had not imposed penalty u/s. 78 on the ground that there was no suppression of facts by the assessee it cannot impose penalty u/s. 76 & 77 on the ground that there is no “reasonable cause”. [Sanghi Industries Ltd. v. CCE (2009) 16 STR 696 (Tri. – Ahmd.)]

124.30 Penalty u/s 78 is not imposable for wrong availment of cenvat credit. [C.C.E vs. Jagatjit Industries Ltd (2010) 17 STR 137 (Tri-Del)].

124.31 Mere failure to apply for registration and failure payment of tax and file the returns cannot be construed as suppression with intent to evade payment of duty [CCE vs. Star Crane Service (2010) 17 STR 576 (Tri-Ahmd.)]. There has to be some act of omission or commission which points towards an intent to evade payment of service tax. [M.P Laghu Udhyog Nigam Ltd v. CCE, Bhopal, 2015(37) STR 308 (Tri-Del)]

124.32 Where service tax was paid with interest before the issue of SCN and the adjudicating authority imposed penalties u/s. 76 and 78 the Tribunal held that:

Once penalty u/s. 78 is imposed penalty u/s 76 is not imposable since they are mutually exclusive.
Penalty u/s 78 is to be reduced to 25% of the service tax in view of the first proviso to section 78 which provides that where the service tax as determined under Section 73(2) and the interest payable thereon under Section 75 is paid within 30 days from the date of communication of the order of the Central Excise officer determining the tax, amount of the penalty liable to pay shall be 25% of the Service tax so determined.

[Safe Test Enterprises vs CCE 2010 (18) STR 172 (Tri-Chennai)]

124.33 Where the lower appellant authority did not impose penalty u/s. 76 & 77 on the reasonable cause ground by invoking the provisions of the Section 80, the Tribunal held that the penalty u/s. 78 (which was imposed ) would also stand deleted on the same ground [Anil Kumar Yadav vs. CCE (2011) 22 STR 20 (Tri. – Che.); See also Jayadasa Engineering & Exports P. Ltd. v. CST (2012) (25) STR 102 (Tri-Che)]

124.34 Where the appellant has paid service tax alongwith interest and filed its returns and on the basis of these returns an SCN was issued seeking to impose penalties u/s 76, the Tribunal held that no penalty is imposable u/s. 76. [Inland Mines & Minerals Pvt. Ltd. vs. CCE (2011) 21 STR 630 (Tri. – Ahmd.) see also Jay Dwarkadish Engg. & Electricals Contractor vs. CCE (2011) 21 STR 631 (Tri. – Ahmd)]

124.35 Section 80 confers a discretion on the authorities to condone imposition of penalty u/s. 76 and 78. Such discretion includes imposition of penalty less than that is prescribed under law depending upon the reasonable cause to be shown for failure to pay the tax. Further, the appellate authority also has jurisdiction to reduce the penalty imposed by the assessing officer. [CCE vs. Tiger Service Bureau (2011) 21 STR 364 (Kar.)]

124.36 Where the appellant voluntarily registered and paid service tax alongwith interest when he came to know about his liability and the department thereafter started proceedings for confirmation of the demand and imposition of penalties, the Tribunal held that there is no intent to evade payment of tax and accordingly no penalty u/s. 76 and 78 is imposable. [Ascent Communication vs. CST (2010) 20 STR 655 (Tri-Ahmd.)]

124.37 Where the appellant paid tax on C&F agency services but took cenvat credit of the tax so paid on the belief that the tax was not payable, instead of claiming refund the Tribunal held that –

penalty u/r. 15(4) of the Cenvat Credit Rules, 2004 is not imposable in absence of an allegation of fraud, collusion, etc. in the SCN; and
penalty u/s. 76 and 77 is not imposable since the default does not concern delay / non-payment of tax or infraction of any provisions of the Finance Act, 1994.

[Sudhakar Plastic Ltd. v. CCE (2010) 20 STR 792 (Tri-Bang.)]

124.38 Where the assessee paid excess tax in March 2007 and adjusted the same in subsequent months, the Tribunal held that the assessee has in a way paid tax in advance and as such penalty no penalty u/s. 76 is imposable since it applies only to cases of failure to pay service tax. [ Chettinad Cement Corporation Ltd. v. CCE (2010) 20 STR 815 (Tri- Chennai)]

124.39 Where the appellant voluntarily registered and paid service tax alongwith interest when he came to know about his liability and the department thereafter started proceedings for confirmation of the demand and imposition of penalties, the Tribunal held that there is no intent to evade payment of tax and accordingly no penalty u/s. 76,77 and 78 is imposable. [Star Energy Systems vs. CST (2010) 20 STR 479 (Tri. – Ahmd.); See also Hajarilal Jangid vs. CCE&ST (2011) 24 STR 510 (Tri-Mum)]

124.40 On a question whether the penalty u/s.76 can be reduced below the limit prescribed by section 76, the Gujarat High Court held that –

the quantum of penalty has been specified in Section 76 by laying down minimum and maximum limits with further cap insofar as the maximum limit is concerned. Hence it is not possible to read any further discretion, than the discretion provided by the legislature when legislature has prescribed minimum and maximum limits. Thus, section 76 does not give any discretion to the authority to reduce the penalty below the minimum prescribed.
Section 80 says no penalty is imposable once the assessee establishes reasonable cause. The provision does not say that even upon establishment of reasonable cause a reduced quantum of penalty is imposable.

Therefore on a conjoint reading of Section 76 and 80 of the Act it is not possible to envisage discretion as being vested in authority to levy a penalty below the minimum prescribed limit. The High Court disagreed with several other High Court judgments whose citations are - (a) 16 STR 19 (P&H); (b) 9 STR 348 (Bom.); (c) 14 STR 145 (P&H); (d) 15 STR 241 (Bom.); (e) 16 STR 135 (P&H); (f) 9 STR 123 (Bom); (g) 17 STR 8 (P&H); (h) 9 STR 350 (Bom.); (i) 14 STR 9 (Kar.); & (j) 7 STT 372 (Raj.) on the ground that in none of the judgments have the provisions of either Section 76 or Section 80 of the Act been analyzed and dealt with. [CCE vs. Port Officer (2010) 19 STR 641 (Guj.); See also CCE vs. V.M. Constructions (2011) 22 STR 520 (Guj.);CCE vs. Ashish Amand & Co. (2014) 33 STR 153 (Guj.)]

124.41 Penalties u/s. 76 & 78 cannot be imposed simultaneously for the same default viz, default in payment of service tax.[ CCE vs. City Motors (2010) 19 STR 486 (P& H); See also CCE v Krishna automobiles (2011) 23 STR 57 (Tri- Del); CCE vs Pendharkar Constructions (2011) 23 STR 75 (Tri-Mumbai); CCE v. Pannu Property Dealers (2011) 24 STR 173 (P&H); CST vs. Motor World (2012) 27 STR 225 (Kar.); [CCE v Merino Industries Ltd. (2013) 30 STR 413(Tri-Del) See Contra Bajaj Travels Ltd. v. CST (2012) 25 STR 417 (Del.);]

124.42 Where the Commissioner had enhanced the penalty by way of a revisonary order passed u/s. 84 during the pendency of appeal before the Commissioner (Appeals) the Tribunal held that the revisionary order u/s. 84 was not sustainable. [K.T.V. Oil Mills vs. CCE (2010) 19 STR 587 (Tri-Chennai)]

124.43 Where the appellants had collected the service tax but had not deposited the same with the Central Government, but disclosed the said amounts as service tax liability in its returns and had deposited the same alongwith interest before the issuance of show cause notice the Tribunal held that there being no suppression of facts by the assessee no penalty u/s. 78 was imposable but upheld the penalty imposed u/s. 76 of the Act. [ RNS Infrsatructure Ltd. vs. CCE (2011) 22 STR 347 (Tri-Bang.)]

124.44 Where the issue involved in the case was one relating to interpretation of statute, the Tribunal held that it was a fit case for invoking Section 80 of the Finance Act, 1994, to waive imposition of penalty.[Orient Packaging Ltd. vs. CCE (2011) 23STR 167 (Tri – Delhi)]

124.45 Where the failure to pay service tax was for the period August 2001 – October 2002 when penalty u/s. 76 was ₹100/- to ₹200/- per day during which such failure continues but the CCE(A) had vide order dated 21.1.06 imposed penalty u/s. 76 @ ₹100/- per day u/s. 76 which provision came into force from 10.9.04, the High Court held that penalty under the revised provision would be imposable only for the period post 10.09.2004 and not for the period prior to the said date [CCE vs. Dee Pee En Corporation (2011) 23 STR 345 (Kar.)]

124.46 Where the assessee-manufacturer was under a bonafide belief that in the light of provisions of EXIM Policy, they were not liable to service tax on the commission paid to agents as a recipient of services even post 18.4.06, but paid the tax on being pointed out by the department prior to issue of show cause notice [and the interest before adjudication] penalty was set aside especially since the assessee would have been entitled to take Cenvat credit.[ Paradigm International v. CCE (2011) (24) STR 69 (Tri-Chennai)]

124.47 Section 73(3) provides that no notice could be served on the assessee if tax alongwith interest has been paid before the issue of SCN and there was no willful statement or suppression of facts on the part of the assessee. Thus, where the assessee suo motu discharged their service tax liability alongwith interest and also filed a return after payment of late fee much before the issue of the SCN, penalties u/s. 76, 77 and 78 were set aside based on section 73(3). [Saraswati Engineering v. CST (2011) 24 STR 298 (Tri- Mumbai)]

124.48 Where the appellant a sole proprietor bona fide believed based on the advice of his clients that he was not liable for service tax on the rent-a-cab services provided and paid almost 90% of the tax on being pointed out before the issue of SCN and was also ready to pay the balance amount, the Tribunal set aside the penalty u/ss. 76, 77 & 78 there being a ‘reasonable cause’ u/s. 80 [K. Prabhakar Reddy v. CCE (2011) 24 STR 330 (Tri-Bang.)].

124.49 Where the assessee was under the bonafide belief that no service tax is payable on

free services provided by them as an authorized dealers for which they are getting reimbursed from the manufacturers; and
the commission/incentive received from the financial institutions for introducing customers for loans, and the circular of the Board also mentioned that there was confusion in the taxability of the aforesaid receipts, the Tribunal waived the imposition of penalties on reasonable cause ground. [C.R. Scooters v. CCE (2012) 25 STR 177 (Tri.-Ahmd.)]

124.50 If proviso to section 73(1) of the Act is not invoked (extended period of limitation due to fraud, etc.), then penalty u/s 78 is not imposable [ CST v. Gowri Computers (P) Ltd. (2012) 25 STR 380 (Tri – Bang)].

124.51 Where the appellant had entertained a bonafide belief with regard to the admissibility of Cenvat credit on expenses such as maintenance and security of guest house, fees related to business seminars, share related expenses, due to existence of two different views, but had subsequently agreed to pay the tax alongwith interest the Tribunal held that no penalty was imposable especially since they had Cenvat credit balance in their account throughout the period. [Adani Enterprises Ltd. vs.CCE (2012) 27 STR 13 (Tri. – Ahmd)]See also [ Indian Coffee Workers’ Co-op Society Ltd. V. CCE&ST (2014) 34 STR 546 (All.)]

124.52 The penalty had been imposed Rule 15(2) of CCR Rules, 2004 read with Section 11AC of Central Excise Act, 1944. Rule 15(2) covered only input and capital goods during the relevant period. The appropriate section is rule 15(3) which covered input services and there is no mechanism to invoke section 11AC nor section 78 under this rule. The levy of penalty of Rs 10,000/ was justified under the circumstances of the case. [Balrampur Chini Mills Ltd v. CCE (2013)30 STR 384 (Tri-Del)]

124.53 As soon as the assessee was informed that the credit taken in respect of services provided prior to 10-9-04 is not admissible, they paid the service tax along with interest even prior to the issuance of SCN. There was no suppression or fraud or mis-declaration of facts since there is no dispute about the payment of service tax by the service provider and receiver and credit was take on proper documents.[ Astral Pharma Ltd v. CCE, Vadodara (2013) 30 STR 397 (Tri-Ahmd)]

124.54 The Karnataka High Court in a landmark case laid down several proposition with regard to imposition of penalties under the service tax law:

Requisites for imposing penalty

The sine qua non for the authority to impose penalty is as follows:-

Existence of ingredients mentioned in Sections 76, 77 and 78;

Failure on the part of the assessee to comply with the requirements of the said provisions;

Absence of “reasonable cause” for the failure to comply with the requirement of law.

First, the authority has to find out whether in the facts of the given case whether the ingredients mentioned in sections 76, 77 or 78 exist.
Secondly, once it is held that those ingredients exist and the provisions are attracted, then if the language used in the said provisions do not leave any discretion in the authority in the matter of imposition of penalty, penalty is to be imposed in terms of the said provision. However, if any discretion is left (as in section 78 which states that ‘he may direct’ the imposition of penalty), then the said quasi judicial discretion is to be exercised reasonably.
Thirdly, before levying penalty, the authority is required to find out whether the failure referred to in the concerned provision was without a “reasonable cause”. “Reasonable cause” means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinarily prudent and cautions man, to come to the conclusion that the same was the right thing to do. It cannot be said that there is any intention to avoid payment of tax by such taxpayers who bonafide believe that their activity is not liable to service tax.
The initial burden is on the assessee to show that there existed reasonable cause, which was the reason for the failure referred to in the concerned provision. Thereafter the authority has to consider the explanation offered by the assessee for failure and whether it constitutes a reasonable cause. Only if it found to be frivolous, without substance or foundation, the question of imposing penalty would arise.

Quantum of penalty

(vi) When the statute stipulates the minimum penalty to be imposed and the maximum penalty to be imposed, an authority cannot exercise its discretion to impose penalty either less than the minimum or in excess of the maximum that is prescribed by the Statute. In this regard no discretion is left to the adjudicating authority. The discretion is only within those two parameters. What exactly is the quantum of penalty to be imposed is a matter left to the authority having regard to the facts of that particular case.

[CST vs. Motor World (2012) 27 STR 225 (Kar.)]

124.55 Section 73(3) provides that no notice could be served on the assessee if tax alongwith interest has been paid before the issue of SCN and there was no willful statement or suppression of facts on the part of the assessee. Thus, where the assessee pursuant to an investigation carried by the department more than three years before the issue of SCN had discharged their service tax liability alongwith interest, penalties u/s. 76 and 78 were set aside based on section 73(3) holding no SCN should have been issued in the present case[VirTeja Road Lines vs. CCE (2012) 27 STR 290 (Tri.-Ahmd.)].[See Bipco Industries (Tools) Pvt. Ltd. CCE, (2014) 35 STR 394 (Tri- Ahmd)

124.56 The Tribunal imposed penalty u/s 76 as the appellant who had originally paid service tax stopped paying service tax based on the new interpretation of law which was not warranted. However based on judgment in case of First Flight Couriers Ltd. (2011) 22 STR 622 (P&H), penalty u/s. 78 was waived since penalty was levied u/s. 76 [Madhav Nagrik Sahkari Bank Ltd. vs. CCE (2012) 27 STR 352 (Tri. – Del.)].

124.57 Where, the appellant a 100% EOU didn’t initially pay service tax on commission paid to overseas agents but paid it before the O-I-O, the Tribunal considering that the said tax would be available as credit which can be claimed as refund in terms of rule 5 of Cenvat Credit Rules, 2004, condoned the levy of -

penalty u/s. 78 since on account of revenue neutrality there was no ‘intent to evade tax’;
penalty u/s. 76 since there was ‘reasonable cause’ u/s. 80 on account of revenue neutrality.

[CCL Products (India) Ltd. vs. CCE & ST(Appeals) (2012) 27 STR 342 (Tri.- Bang.)].

124.58 In case where the appellant had defaulted in payment of service tax and filing of the return, penalties u/s 76 and 78 were set aside since these obligations were complied alongwith payment of interest before any reminder from the revenue and before the issuance of the Show Cause notice [ Kishan M. Mehta & Co. vs. CST (2012) 27 STR 481 (Tri. – Ahmd.)].

124.59 Where the assessee in spite of having service tax registration did not pay the service tax due to financial difficulties but on being pointed out by the department paid the service tax alongwith interest before issuance of show cause notice and informed the department the Tribunal held that penalty u/s. 76 & 78 was not called for in view of the provisions of section 73(3) [CCE v. Mukesh Jain (2012) 28 STR 277 (Tri.-Del.)].

124.60 Where, the appellant on being pointed out by the department during the course of investigation paid service tax alongwith interest on GTA service and overseas commission, the Tribunal waived penalty u/s 78 of the Act as the appellant is entitled to take credit of the same and no extra benefit was earned on account of suppression [India Trimmings Pvt. Ltd. v. CCE (2012) 28 STR 401 (Tri.-Chennai)]See also [ Century Rayon v CCE (2014) 33 STR 427 (Tri.-Mum)]

124.61 Where the assessee had paid the entire tax liability alongwith interest on being pointed out by the audit team of the service tax department the Tribunal held that since there was no active suppression on the part of the assessee no notice for imposition of penalty ought to have been issued to the appellant in view of Section 73(3)of the Act [Shriram EPC Ltd. vs. CST (2014) 35 STR 564 (Tri-Chennai)]

124.62 The Tribunal relying on judgment in case of Commissioner v. Motorworld (2012) 27 STR 225 (Kar.) deleted the penalty u/s. 76 since the show cause notice is issued post amendment in section 78 w.e.f. 10.5.2008 which provided for non-imposition of penalty under section 76 if penalty under section 78 is imposed [Jivant Enterprise v. CST (2012) 28 STR 582 (Tri.-Ahmd.)].

124.63 Where the appellant utilized cenvat credit in excess of prescribed limit even though it had provided taxable and exempt services and did not disclose the same in its returns, the Tribunal justified the invocation of the extended period and imposition of penalty u/s. 78 observing as follows:

(i) When the return contains a declaration as to the self assessment particulars stating that the assessee had paid service tax correctly in terms of provisions of the Act and Rules made thereunder such declaration becomes faulty if tax is held to be not so paid, in absence of bona fide statement either on the return or made through a letter accompanying the return.

(ii) Failure to make disclosure in return or submitting entire fact by any letter accompanying the return appears to be a case of wilful suppression.

(iii) Suppression does not vanish by mere passage of time to issue show cause notice and contravention of law gets no immunity from penal consequences. Suppression corroborated by an untrue declaration in the return filed calls for levy of penalty.

The High Court agreed with the above observation of the Tribunal. [Vodafone Digilink Ltd. v. CCE (2013) 29 STR 229 (Raj.)]

124.64 Where the assessee had bonafide believed that the drawings and designs imported were liable to customs duty and not to service tax but later on paid the service tax alongwith the interest prior to the issuance of the show cause notice and did not dispute the liability, the court upheld the order of the Tribunal holding that there was a reasonable cause for failure to pay service tax and hence penalties u/s.76, 77 and 78 were not imposable [ Commissioner vs. Welspun Gujrat Sthal Rohren Ltd. (2013) 29 STR 471 (Guj.)].

124.65 Where the assessee wrongly availed cenvat credit on rent-a-cab services used for transportation of employee’s children to school / tution centres, the Tribunal held that the issue involved was of interpretation of provisions of the Cenvat Credit Rules,2004 and hence the penalty u/s.78 was set aside [ Hindustan Zinc Ltd. vs. CCE (2013) 29 STR 492 (Tri-Del.)].

124.66 Even if extended period of limitation is invoked in the show cause notice (‘SCN’) no penalty u/r. 15 (4) of the Cenvat Credit Rules, 2004 for wrong availment of cenvat credit would be imposable unless the willful misstatement or suppression of facts etc. with an intent to evade payment of tax for imposing the said penalty is alleged in the SCN [Inox Air Products Ltd. vs. CCE (2013) 30 STR 47 (Tri. – Bang.)].

124.67 Where the assessee under a bona fide belief did not pay service tax on handling / storage of empty containers and the adjudicating authority while setting aside penalty levied u/s. 78 had also recorded that there was no mala fide intention to evade tax, penalty imposed u/s. 76 was also set aside by the Tribunal on the ground of “reasonable cause” [Balmer Lawrie & Co. Ltd. vs. CST (2013) 30 STR 75 (Tri. – Kolkata)].

124.68 Penalty is imposable if appellant having collected the service tax had failed to deposit the same. Moreover, benefit under s. 80 also cannot be invoked since after collection of service tax, appellant had neither opted for registration nor filed the returns [Gokul Associates v. CCE (2013) 30 STR 306 (Tri.-Ahmd.)].

124.69 Where the assessee had discharged the service tax liability along with interest before issuance of SCN the Tribunal held that the SCN should not have been issued in view of section 73(3) and accordingly no penalty u/s. 76 would be imposable [M.R. Coatings Pvt. Ltd. vs. CCE (2013) 30 STR 76 (Tri. – Ahmd.)].

124.70 The appellants were providing manpower recruitment or Supply Agency service and had not paid service tax during the period June 2005 to June 2009. The service tax liability on the Manpower Supply services was introduced w.e.f. 16.6.2005.The definition of Man power Supply service has under gone change twice. All these confusions may have created a situation wherein the assesee may not be aware of exact service tax liability. Hence it is a fit case for invoking section 80. Penalty set aside. [Jashbhai v. CCE (2013) (30) STR 444(Tri-Ahmd)]

124.71 Where the assessee had incorrectly availed excess amount of Cenvat Credit on certain invoices for discharging its service tax liability, which had been subsequently made good by the appellant on its own by adjusting and debiting the amount in the Cenvat Credit account balance available with it and by reflecting the same in its service tax returns, the Tribunal held that there being no intention to evade the service tax liability, it was a fit case for invoking the provisions of Section 80 and accordingly no penalty u/s. 76 and u/s. 78 were imposable [Central Warehousing Corporation v. CST (2013) 30 STR 556 (Tri-Ahmd)].

124.72 Where the assessee had correctly reflected its service tax liability in its ST–3 return but had only delayed payment of service tax which was subsequently paid by them alongwith interest, the Tribunal held that there being no malafide intention on the part of assessee to evade payment of tax, and hence imposition of penalty was not warranted. [CST v. Consulting Engineering Services (I) P. Ltd. (2013) 30 STR 561 (Tri-Del)]

124.73 Where the appellant delayed payment of service tax the Tribunal held that no penalty is imposable u/s. 78 since –

mere delay in payment of tax cannot be constructed as suppression or mis-declaration of facts with an intent to evade payment of tax. The delay happened due to confusion as to provisions of valuation which were bona fide;
The appellant suo motu registered as soon as it became liable on account of change in law;
the entire receipts from repair and retreading of tyres had been reflected by the assessee in its audited balance sheets.

[Midnapore Tyre Retreading Factory v. CCE (2013) 30 STR 569 (Tri-Kol)]

124.74 Post 1.4.2008, credit of service tax paid on outward transportation would not be admissible. However, where the assessee had taken credit during the period April, 2010 to March, 2011 on the basis of the Tribunal Larger Bench decision in ABB Ltd. vs. CCE which was subsequently reversed by High Court in January 2011 the Tribunal held that the assessee cannot be alleged to have committed either suppression / fraud and accordingly imposition of penalty was unwarranted.[Welspun Maxsteel Ltd. vs. CCE (2013) 30 STR 614 (Tri-Mumbai)]

124.75 The quantum of penalty to be imposed would be as per the provisions prevailing at the time of occurrence of offence and not at the rates prevailing on the date of review of order by the Commissioner in his review proceedings. [BNP Paribas Equities India P. Ltd. v. CST (2013) 31 STR 22 (Tri-Mum)].

124.76 Prior to 27.2.2010 imposition of penalty under under Rule 15(1) and Rule 15(2) of the Cenvat Credit Rules, 2004 for wrong availment of cenvat credit on input services is not admissible since said rules did not cover wrong availment of input service credit. [Oil & Natural Gas Corporation Ltd v. CCE (2013) 31 STR 214 (Tri-Mum)]

124.77 An assessee is required to be informed about the benefit of paying 25% of the Service Tax demand as penalty u/s 78 within 30 days from the date of communication of adjudication order. Thus where the department had failed to inform the assessee about the above benefit and where the assessee had paid the entire Service Tax demand before the issuance of Show Cause Notice, the High Court held that the Tribunal’s order giving an option to the assessee to deposit 25% of the penalty in terms of second proviso to section 78 was correct. [CCE v City Cables (2013) 31 STR 279 (P & H)]

124.78 Where there was a Board Circular which clearly clarified that the activities undertaken by the appellant were liable for service tax and it had not sought any clarification from the department on entertaining a doubt about the applicability of service tax, the Tribunal held that penalties u/s 78 was imposable but was reduced to 25% if paid within 30 days of communication of order. However, in view of the Karnataka High Court decision in Motorworld, penalty u/s 76 was dropped. [Khandelwal Earth Movers v. CCE (2015) 37 STR 530 (Tri.-Mum.)]

124.79 Where the assessee had on being pointed out by the audit party paid the service tax alongwith interest before the issue of show cause notice, and where there was no evidence of suppression, fraud or collusion the Tribunal held that

(i) mere non- payment of service tax would not amount to suppression of facts; and

(ii) issuance of SCN for imposition of penalty under section 76 and 78 was not warranted.

[R.K.Trading Co. v. CST, (2013) 31 STR 615 (Tri. – Ahmd.)]

124.80 Where the appellant on their own had paid in cash, the Cenvat credit which according to them was wrongly utilized by them and suo motu took credit of the equivalent amount of Cenvat credit, the department argued that there was no provision in law warranting the act of the appellant and imposed a penalty. The Tribunal held the act of the appellant to be valid but upheld the penalty imposed on account of procedural violation on part of the appellant. [Vodafone Essar Digilink Ltd. v. CCE (2013) 31 STR 751 (Tri – Del)].

124.81 Where SCN had sought to impose penalties under section 76, 77, 78 but the adjudicating authority had confirmed penalties only under section 77 and 78 against which an appeal was filed before the CCE (A), the Tribunal held that there was no bar for the reviewing authority to initiate proceedings for imposition of penalty under Section 76. [Professional Couriers v. CST (2013) 32 STR 348 (Tri-Mum.)]

124.82 An interpretational error by the appellant without any malafide intent does not warrant a levy of penalty. [ Nectar Lifesciences Ltd.(Unit –I) v.CCE (2013) 32 STR 659( Tri-Del.)]

124.83 In this case, the appellants who are franchisees of Hindustan Lever Ltd. had provided beauty parlour services on behalf of Hindustan Lever Ltd. and had not discharged the service tax liability. Further on investigation, the amount of service tax alongwith interest was discharged. The Delhi Tribunal in this case held as follows:

Payment of service tax alongwith interest before issue of show cause notice but after investigation does not indicate suo moto payment and therefore it will attract provisions of section 73 and penalty will be applicable.
If the penalty is not paid within one month of receipt of the order the benefit of 25% of tax amount as penalty is not given.
Prior to 10.5.2008 (i.e. before the amendment to s. 78), penalties u/s. 76 and 78 could simultaneously be levied since section 76 (penalty for failure to pay service tax) and 78 (penalty for suppressing value of taxable service) operated in distinct and separate fields even if the offences are committed in the course of same transactions or arise out of the same act.

[Care & Cure Pvt. Ltd. vs. CCE (2014) 33 STR 176 (Tri. – Del.)] [See CCE vs. Om Sai Engineering Works (2014) 35 STR 531 (Tri-Ahmd.)

124.84 Where the appellant a service recipient had discharged its service tax liability alongwith interest post receipt of SCN but before adjudication and where the credit of service tax paid on such services was available to the appellant as cenvat credit for discharging duty liability on its final products, the Tribunal held that imposition of penalties was not warranted [Matrix Telecom P. Ltd v. CCE (2013) 32 STR 423 (Tri-Ahmd)]

124.85 Where the assessee had misinterpreted the provisions and had not paid service tax on the repair services provided by it under a rate contract on the belief that only maintenance contract were liable for service tax under the category of Maintenance and Repair Services and where there had been Tribunal decisions upholding such view, the Tribunal held that there was a reasonable cause as envisaged u/s. 80 and hence no penalty u/s. 76 or 78 was imposable. [ CCE v. Anand Transformers (P) Ltd., (2014) 33 STR 314 (Tri. – Del.)]

124.86 Where the assessee had not obtained service tax registration or made payment of service tax since it bona fide believed, based on its own interpretation, that it was covered under a particular exemption notification, the Tribunal held that the said conduct of assessee cannot be treated as deliberate violation of the provisions of the Act and hence no penalty u/s. 78 was imposable. Further, in view of the above fact there being a reasonable cause u/s. 80, imposition of penalty u/s. 77 was also not warranted [CCE v. JAS Enterprises (2014) 33 STR 340 (Tri. – Del.)]

124.87 Where the appellants paid service tax before the issuance of show cause notice, the Tribunal relied upon the judgment of Auto World [2010 (18) STR 5(All)] deleted the penalty u/s 76 and 78 [BAS Engineering Pvt. Ltd. v. CST, (2014) 33 STR 452 (Tri.-Del.)]

124.88 Where the assessee had paid service tax alongwith interest prior to issuance of show cause notice and which was recovered by it from the service recipient who had also claimed credit of such tax paid, the Tribunal held that it was not a case of willful suppression and hence the assessee was eligible for the benefit of non-imposition of penalty by virtue of section 73(3) [Commissioner v. Tejas Agency (2014) 34 STR 803 (Guj)]

124.89 Confirmation of demand by invoking the extended period of limitation [where there is an ‘intent to evade’ payment of tax] and a waiver of penalty u/s 80 on ‘reasonable cause’ ground can co-exist. [Daurala Organics v CCE 2014 (35) STR 214 (All.)]

124.89

124.90 Penalty u/s 76 cannot be reduced below the minimum prescribed limit by invoking section 80 [waiver of penalty on a ‘reasonable cause’ ground] since the latter only permits complete waiver of penalty and not reduction in penalty [CCE&C v. V.M. Engg. Works 2014 (35) STR 220 (Guj.)

124.91 Where the issue involved was debatable involving interpretation of law and definition of input service imposition of penalty was held to be unwarranted. [IBM India Pvt. Ltd. vs. CCE (2014) 35 STR 384 (Tri-Bang.)]

124.92 Where the issue involved was one of interpretation of statute and there were several decisions based on which the appellant entertained a bona fide belief that it was not liable for service tax under the category of commercial training or coaching services which was subsequently clarified by insertion of an explanation with retrospective effect by Finance Act, 2010 the Tribunal held that there was no contumacious conduct or active disregard of the provisions of law and accordingly imposition of penalties was not warranted [Landmark Education India vs. CST (2014) 35 STR 537 (Tri-Mumbai)].

124.93 The SCN had sought to impose penalty u/s 76 and 78 but the Commissioner (Appeals) upheld the penalty only u/s 78. However, though no appeal was preferred by revenue for not imposing penalty u/s 76, the Tribunal held that the assessee is liable to pay penalty u/s 76. The High Court upheld the order of the Tribunal in view of the wide powers conferred on the Tribunal vide section 35C of central Excise Act, 1944 [Professional Investment Corporation v. CCE (2014) 36 STR 59 (Mad)]

124.94 Where the appellant paid service tax as a recipient of services for the period December 2008/ January 2009 immediately on being pointed out by the audit team, the Tribunal held that –

Penalty u/s 76 is not imposable as the O-I-O had imposed penalty u/s 78 and the fifth proviso to section 78 provided that penalty u/s 76 would not apply if penalty u/s 78 is levied.
In view of the facts that -

the appellant had paid the service tax alongwith interest immediately on being pointed out;

the transactions were reflected in the balance sheet without any intention to supress any information with department; and

the appellant would have got cenvat credit and therefore the demand would be revenue neutral, penalty u/s 77 and u/s 78 were also dropped.

[Caldery’s India Refactories Ltd. v. CCE (2014) 36 STR 102 (Tri- Mum)]

124.95 Non filing of returns and non-payment of service tax, in spite of collecting the same from the customers, clearly convey mala fide on the part of the appellant making them liable to penalty under Section 78 of the Finance Act, 1994. [ Ketan Engineering Services Pvt. Ltd. v. CCE & ST., (2014) 36 STR 196 (Tri. – Ahmd.)]

124.96 Prior to Finance Act, 2008 where demand was for April 2000-March 2004 penalty could be imposed under both sections i.e Section 76 and section 78 and it is for the appellant /assessee to convince the authorities concerned by evidence that they are not liable to pay service tax. [Lawson Travels & Tours (I) (P) Ltd v. CCE & ST (2015) 37 STR 183 (Ker) Relying on Krishna Poduval’s case]

124.97 The appellants were under a bonafide belief that they are not liable to pay service tax on provident fund received from the recipient of the service to whom manpower supply services were provided. The appellant had deposited the service tax along with interest prior to the adjudication order. There was no fraud, collusion, wilful misstatement or suppression of facts or contravention with an intent to evade payment of service tax. Hence penalty was condoned u/s Section 80 (reasonable cause). [H.M. Singh and Co v. CCE & ST 2015(37) STR 172 (All)].

125 Refunds

125.1 The assessee billed its clients at an amount less discount but paid tax on the gross amount before discount. On realizing that service tax is payable only on the amounts after discount it issued credit notes for return of the excess service tax and claimed refund from the department. The lower authorities rejected the refund claim on the ground that the issue of credit note cannot be considered to conclude that the burden of the duty has not been passed on to the buyers or ultimate customers. On appeal, the Tribunal allowing the refund held that since service tax is payable only on the amount realized and not on the amount billed the decisions in the context of Central Excise duty laying down that once invoice is issued it is conclusive proof that the incidence of duty is passed on notwithstanding subsequent issue of credit notes would not apply to service tax considering that the service tax recognizes post clearance transaction by way of refund of value of taxable service and the tax paid thereon [rule 6(3)]. [ Prachar Communications Ltd. V. CCE (2006) 2 STR 492 (Tri. – Mum) followed in Standard Charted Bank v.CCE (2007) 7 STR 449 (Tri-Mum)]

125.2 The assessees, engaged in providing telephone services, inadvertently paid service tax on the MRP mentioned on the recharge vouchers instead of the discounted price [i.e. on the net monies received] and on certain vouchers distributed free. The vouchers were distributed by their agents. The assessees filed refund claims which were rejected by the lower authorities on the time bar, eligibility and unjust enrichment. However, the Tribunal allowed the refund observing as follows:

As regards time-bar the department had returned back the refund claim for insufficiency of documents and thereafter re-submitted by the assessees. The department contended that the date of re-submission is relevant and the refund claim was time barred. The Tribunal held that even if a refund claim is incomplete or is not substantiated by documentary evidence it cannot be retuned back by the adjudicating authorities. It is incumbent upon the authorities to make an order on such refund claim. Hence the re-submitted refund claim is in continuation of the original refund application and thus not hit by limitation.
As regards the eligibility for refund the department had contested that the invoices were issued by the assessee’s agent and hence the assessee would not be eligible. The Tribunal disagreed and held that the agent issued invoices “on behalf of” the assessees, collected the monies and paid to the assessees. Further, the Tribunal held that the assessee is the service provider and having paid service tax on the entire MRP they are eligible for the refund of service tax on the amounts not realised by them.
As regards unjust enrichment, though the issue was raised in the show cause notice and replied by the assessee the lower authorities did not record any adverse finding in the Order-in-Original nor was it challenged before the CCE(A) who relied upon the Chartered Accountant’s Certificate and the invoices and found that doctrine of unjust enrichment did not arise. The Tribunal concurred with CCE(A)’s findings though it observed that the said question cannot be raised before it.

[CST vs. Reliance Communication Ltd. (2008) 11 STR 258 (Tri-Mumbai)]

125.3 The assesee DTIPL provided services to DT, USA for preparation and filing of US Federal, State and local tax returns, and property tax returns, as well as for computing advance Tax estimates, wage card processing and transfer pricing planning and execution which involved data entry, data processing, and such other incidental and support services. They paid service on the said services under the category of “Business Auxiliary Services”. Further they also claimed input credit on – (i) Equipment hiring charges; (ii) Professional Consultation Service; (iii) Recruitment Services; (iv) Security Services; (v) Telephone Services; (v) Transport Services; (vi) Training Services; (vii) Facility Operation Service; (viii) Courier Services; (ix) Cafeteria Services; (x) Other input services like advertisement service. They claimed refund of input credit on the basis that their services were exported. The Department denied refund on the ground that –

The services were in the nature of information technology service not liable under business auxiliary services and accordingly input credit cannot be taken;
Notwithstanding (a) above, the input services were not used for providing output services;
The input credit pertained to services exported prior to 14.3.2006 Tribunal dismissed the Revenue’s contention and held as follows –

The services are not information technology services since the use of computer or computer programme for their services is only secondary and the primary activity that of is business-related services. Hence their services would be liable as “Business Auxiliary Services”.

The services on which credit has been claimed are necessary for providing output services and fall within the definition of input services u/r. 2(l) of Cenvat Credit Rules, 2004 which has defined the scope of an input service quite widely.

Rule 5 of the Cenvat Credit Rules alongwith Notification no. 5/2006 dated 14.3.2006 provides for refund of credit on input services used for exports. This rule would apply even in cases where the claim for refunds are filed on or after 14.03.06 but the exports in respect of which were made prior to that date.

[CCE vs. Deloitte Tax Services India Pvt. Ltd. (2008) 11 STR 266 (Tri –Bang.)].approved by[CCE vs. Deloitte Tax Services India Pvt. Ltd. (2014) 33 STR 129 (A.P.)].

125.4 Any amount including interest (though not forming part of duty), wrongly collected, is refundable by the Government. The department cannot refuse refund on the ground that it is not provided under the statutory provisions of the refund. However, the refund is subject to the bar of unjust enrichment [ Mothersons Sumi Systems Ltd. v. CCE (2007) 5 STR 16 (Tri-Del.)].

125.5 Documents produced in a Compact Disc (CD) is admissible evidence for the purpose of sanction of refund in view of the provisions of the section 4 of the Information Technology Act, 2000 and Rule 5(1) of the Service Tax Rules, 1994 which provides that the records including computerized data as maintained by the assessee shall be accepted. [Standard Chartered Bank v. CCE (2007) 7 STR 449 (Tri-Mum)]

125.6 The appellants initially collected and paid service tax on the assumption that they are liable to pay service tax but on discovery of the error they returned the service tax to their clients by way of cheques as well as by credit notes and claimed refund from the department. The department sought to disallow the refund on the ground of unjust enrichment since the issue of credit note does not alter the fact of unjust enrichment. The Tribunal allowed the refund and held that issue of credit note is also a form of payment as held in Mohd. Ekram Khan and Sons (2004) 6 SCC 1083 and accordingly there was no unjust enrichment since the assessee had returned the service tax to their clients. [Shiva Analysticals (India) Ltd.v.CCE (2007) 80 RLT 112 (CESTAT – Bang.)]See also CCE & ST v. Modest Infrastructure Ltd. (2013) 31 STR 650 (Guj.)

125.7 Refund of service tax paid by a merchant exporter on –

(i) storage and warehousing services for storage of export goods;

(ii) insurance charges on such goods;

(iii) transportation charges for such goods;

(iv) terminal handling charges for such goods

is admissible since such goods have been exported [See Vijay Cotton & Fibre Co. v. CST (2014) 36 STR 1164 (Tri.- Mumbai)]

125.8 Where refund is granted by the Assistant Commissioner pursuant to the order of the Tribunal, the CCE cannot revise the Assistant Commissioner’s order merely because the order of the Tribunal has been appealed against by the department unless a competent court stays the operation of the Tribunal’s order. [Bharati Hexacom India Ltd. v. CCE (2007) 7 STR 438 (Tri-Del.)].

125.9 The assessee debited excess amount to their Cenvat credit account and made an application vide letter dated 12.6.01 to take credit of the same. On advise of the Revenue they filed a refund claim although after a year. The Revenue claimed time bar. The Tribunal allowed the refund claim after holding:

It is a simple arithmetical mistake meriting adjustment;
If at all a refund claim is required to be made the letter dated 12. 6.01 must be considered as the refund claim
The amount paid should be considered as a deposit and not duty.
The denial of the refund claim for the excess amount paid on account of clerical error is unjust.

[Motorola India Pvt. Ltd. V. CCE (2007) 7 STR 613 (Tri-bang.)].

125.10 The appellants collected certain amounts from the customers from April, 2000 to January, 2005 and paid service tax under the category of Real Estate Agent’s services, filed returns and accepted assessments for the said period. However, when the services of Management, Maintenance and Repair of immovable property was notified w.e.f. 16.6.2005, the assessee claimed refund for the said period arguing that the amount paid was not “tax” but “money simplicitor” and must be refunded unaffected by the provisions of Section 11B. The authorities refunded the amount paid for the period March, 2004 – January, 2005 (which was within 1 year limitation period provided u/s. 11B) but rejected the refund claim for the previous period. On appeal, the Tribunal, on facts, dismissed the appeal of the assessee and held that the amount paid was “tax” and not “money simplicitor” especially considering that the assessee had paid tax, filed returns and also accepted the refund for 2004-05 for which he submitted a CA certificate that the tax was not collected from the customers. Accordingly, the provisions of S. 11B were held to be applicable and the amount for the period April 2000 – March 2004 was held time barred. [ Campus Service (India) Pvt. Ltd. vs. CCE (2008) 9 STR 259 (Tri. – Chennai)].

125.11 Where the order of the Tribunal granting refund to the appellants was pending adjudication before the Supreme Court and show cause notice was issued to nullify the order and to withhold the amount of refund the Tribunal observed that in the absence of any interim order by Supreme Court the department was bound to implement the orders of the Tribunal. [CCE vs. Diamond Cement (2008) 10 STR 183 (Tri-Del.)]

125.12 Where on the facts the amount of service tax paid by the assessee could not be recovered from the customers and a claim for refund of the amount paid in excess was made it was held that the principle of unjust enrichment would not apply to such refund since it is just money which the assessee is entitled as the same was paid by assessee in excess. [CST vs. Standard Chartered Bank (2008) 10 STR 6 (Kar) affirming CCE & ST v. Standard Chartered Bank (2006) 3 STR 751 (Tri-Bang.);]

125.13 Appellant was issuing invoices for their taxable services showing service tax amount separately. For their non-taxable services they issued invoices without collecting service tax but pursuant to a SCN demanding service tax on such non- taxable service, the appellant paid a service tax of ₹21,102/- out of their own pocket. Subsequently, the SCN proceedings were dropped and the appellant filed a refund claim. The Tribunal held that there was no unjust enrichment and the appellant was entitled to a refund inspite of the fact that the service tax paid was shown as ‘expenditure’ and not shown as ‘receivable’ [Ranade & Co. v. Commissioner of Service tax (2013) 32 STR 613 (Tri- Ahmd.)]

125.14 Where the appellant had initially paid service tax ‘under protest’ during adjudication and claimed refund later when part of the demand was dropped and the refund was sought to be disallowed on the ground that it was not shown as ‘receivables’, the Tribunal upheld the claim since it was substantiated by a Chartered Accountant’s certificate which stated that the appellant had not passed on the duty to any other person. [Eastern Shipping Agency v. CST (2013) 32 STR 630 (Tri-Ahmd.)]

125.15 Rule 5 of the Cenvat Credit Rules alongwith Notification no. 5/2006 dated 14.3.2006 provides for refund of credit on input services used for exports. This rule has been held to apply even in cases where the claim for refunds are filed on or after 14.03.06 but the exports in respect of which were made prior to that date. [Caliber Point Business Solutions Ltd. vs. CCE (2008) 11 STR 15 (Tri. – Mum.); See also CST vs. WNS Global Service (P) Ltd. (2011) 22 STR 609 (Bom.)].

125.16 Where the appellants have not challenged the order of assessment passed by the Superintendent, no refund claim is maintainable after the order has become final notwithstanding that the Superintendent had no jurisdiction to pass the assessment order.[Malwa Cotton Spinning Mills Ltd. vs. CEGAT (2008) 11 STR 82 (P&H)].

125.17 Where locational exemptions to units located at Jammu was granted by a Notification by allowing refund of “duty of excise or additional duty of excise” paid by such units, it was held that the exemption also extended to “education cess” since cess is also excise duty as per section 93 of the Finance Act, 2004. [Sun Pharmaceutical Industries vs. CCE (2008) 11 STR 93 (Tri. – Del.) relying on T.T.K.-LIG Ltd. vs. Commissioner (2006) 193 ELT (169) (Tribunal – LB)].

125.18 The assessee was granted refund pursuant to the Tribunal’s order. The assessee subsequently also asked for interest u/s. 11BB of the Central Excise Act. However, the department instead of paying the interest issued another SCN seeking to recover the refund already granted on the ground that the Revenue appealed against the Tribunal’s order to the High Court. The assessee made a miscellaneous application to the Tribunal which held that, in absence of stay against the order of the Tribunal, refusing to pay the interest u/s. 11BB is illegal and issue of SCN for recovering refund already granted amounts to contempt of the Tribunal. [Toyota Kirloskar Motor Ltd. vs. CCE (2008) 11 STR 551 (Tri-Bang.)]

125.19 Amounts paid by mistake cannot be termed as duty. Accordingly the limitation u/s. 11B would not apply for seeking refund of such amounts. [ CCE vs. Motorola India Pvt. Ltd. (2008) 11 STR 555 (Kar)].

125.20 In this case the Tribunal held:

Where the assessee paid service tax on amounts not received from the customers, it is not necessary for the CCE(A) to examine each and every entry to overrule the plea of unjust enrichment. Further, the question of unjust enrichment would not arise in such a case [7 STR 449 (Tri-Mum.); 3 STR 751 (Tri-Bang.); 10 STR 6 (Kar) relied on];
Boards instruction No. 137/50/2007 CX 4 dated 16.3.2007 clarifying that in the event of centralized registration obtained by the assessee, the rebate refund claim shall be dealt with the Service tax Commissionerate having jurisdiction over the centralized registration of the assessee is not applicable to refunds pertaining to the period prior to 16.3.2007.

[CCE v. Standard Chartered Bank (2008) 88 RLT 440 (Tri-Bang.)]

125.21 Where the assessee erroneously paid service tax on pilotage services rendered in minor ports, under the category of Management consultancy services instead of ‘minor port’ services which came into effect from 1.07.2003 and claimed refund of tax for the period 1.10.99 to 30.09.2002 on 9.10.2003 the Tribunal rejected the refund claim as barred by limitation after observing that payment on account of mis-construction, mis-application or wrong interpretation of the provisions of law would not change the character of the amounts from tax to deposit, and accordingly the refund claim being filed beyond the statutorily prescribed period (of 1 year) would be barred by limitation. [Karnik Maritime Pvt. Ltd. vs. CCE (2008) 12 STR 145 (Tri-Mumbai);Elgi Equipments Ltd. v. CCE, (2013) 31 STR 583 (Tri. – Chennai)]

125.22 Passing an assessment order is contemplated only when a notice u/s.73 is issued. Otherwise, there is no provision for assessment. Thus, where the assessee deposited excess services tax and claimed refund (which was rejected by the lower authorities for certain reasons), the rejection of the refund claim by the Tribunal on the ground that the assessee had not challenged the assessment by filing a statutory appeal is not sustainable since no order capable of being appealed against had ever been passed. [Central Office Mewar Palace Org. v. Union of India (2008) 12 STR 545 (Raj.) See also CCE v. Noble Grain India Pvt. Ltd. (2009) 14 STR 617 (Tri. – Mumbai); CCE vs. Vijay Leasing Company (2011) 22 STR 553 (Tri-Bang.)]

125.23 The appellants claimed refund on the ground that service tax was not recovered from the client at the time of receipt of the value of services. It produced evidence in the form of CA certificate, invoices and books of account where the amount of service tax was shown as receivable. The department contended that service tax might have been recovered after the issue of CA certificate. The Tribunal allowed the refund claim and held that as the tax was not paid or recovered at the time of payment of value of services the Revenue’s contention is in the realm of assumption and presumption. [ CCE vs. Gujarat Chemical Port Terminal Co. Ltd. (2008) 12 STR 564 (Tri-Ahmd.); See also CCE v. Shrinathji Dyg (2011) 24 STR 108]

125.24 Refund arising due to the order of the Tribunal is refundable even if SLP has been filed by the department and the matter is pending before the Supreme Court. [Jai Bhagwati Impex Pvt. Ltd. vs. UoI (2009) 13 STR 24 (Bom.)]

125.25 Where the revenue contended that since goods exported out of country were exempted from payment of duty and therefore, the amount paid by the respondent manufacturer cannot be treated as “duty” paid and he is not entitled to rebate on account of duty paid on goods removed from factory / authorised warehouse for export out of India, the High Court held that -

If no duty was leviable and the assessee was not required to pay the duty but still he has paid the duty the Government cannot retain the same on any ground and must refund the amount received from the assessee as on their own showing. It has not received the amount by way of duty which could be appropriated by them nor to which Section 11B applies.
If on the other hand, the assessee is entitled to remove such goods on payment of duty in ordinary course he is entitled to claim rebate thereon because the goods were exported out of country on payment of excise duty.

In either case the refund is admissible. [CCE vs. Suncity Alloys Pvt. Ltd. (2009) 13 STR 86 (Raj.)]

125.26 Claim for refund of service tax not required to be paid under the law (“illegal levy”), [in the present case – interest on loans which is not subject to service tax], would also fall within the corners of section 11B and the claim has to be preferred within the statutory period, else it would be barred by limitation. [Mysore Leasing & Finance Ltd. vs. CCE (2009) 14 STR 54 (Tri-Bang.)]

125.27 Refund claim filed by the service recipient is maintainable [Chandigarh Vayu Bharti Co-op. Society vs. CCE (2009) 14 STR 161 (Tri-Del.)] [See Indian Farmer Fertiliser Co-op. Ltd. v. CCE 2014 (35) STR 422 (Tri.-Del.) affirmed in CCE vs. Indian Farmer Fertiliser Co-op. Ltd.(2014) 35 STR 492 (All.)

125.28 Refund of service tax paid under TR-6 challan cannot be denied merely on the ground that the same was not a prescribed document at the relevant point of time especially when the payment of service tax has not been denied; the objection of the revenue pertains more to the form rather than substance.[CCE vs. Nitin Spinners Ltd. (2009) 14 STR 527 (Tri – Del.)]

125.29 Where the appellants, the service provider, had made excess payment of service tax on which Cenvat credit was also availed by the service recipient, but subsequently, they returned the service tax to the service recipient by way of credit notes on which the Cenvat credit availed was also reversed by the service recipient alongwith interest, the Tribunal allowed the refund claim filed by the appellants holding that there was no unjust enrichment. [ Professional International Couriers (P) Ltd. vs. CST (2009) 15 STR 295 (Tri-Chennai)]

125.30 Even in respect of refund of amounts paid in excess due to clerical error, the provisions of section 11B would be applicable and hence the refund application filed beyond the period of one year from the relevant date would be considered as time barred. [General Manager, B.S.N. L vs. CCE (2009) 14 STR 250 (Tri-Bang.); See also CCE vs. Beharay & Rathi Constructions (2009) 14 STR 246 (Tri-Mumbai)]

125.31 Where the appellant, an exporter of services, claimed rebate of tax paid on various ‘input services’ like telephone, fax, management consultancy, real estate agent, security agency, etc. under notification no. 12/2005 dated 19.4.2005 but filed a declaration only prior to the date of refund and not prior to the date of export as required by the notification, the Tribunal held –

(i) On facts, the various services qualified as ‘input services’ and accordingly the tax paid on them qualified for rebate;

(ii) The belated filing of declaration is only a procedural lapse for which the substantive benefit of rebate should not be denied.

[CST v Convergys India Pvt. Ltd. (2009) 16 STR 198 (Tri- Del.) see also Manubhai & Co. vs. CST (2011) 21 STR 65 (Tri. – Ahmd.);Kothari Infotech Ltd v. CCE (2013) 31 STR 170 (Tri-Ahmd)].

125.32 Where the appellant claimed refund of tax paid as a recipient of services on reimbursement of expenses to foreign technicians the Tribunal disallowed the refund claim holding as follows.

The tax paid was on ‘reimbursements’ and not on consideration for ‘services’, and hence the tax paid is not in the nature of service tax and accordingly would not qualify for cenvat credit. Thus, clause (c) of the proviso to Section 11B(2) of Central Excise Act, 1944 which provides that the bar of unjust enrichment would not apply to refund of cenvat credit would not be applicable.
the appellant has debited the said tax payments to its Profit and Loss Account which implied an increase in the cost of finished goods sold. Hence the appellant had passed on incidence of such duty to another person and accordingly the refund claim would be hit by the bar of unjust enrichment.

N.B.: The above judgment reiterates the point that if an assessee claims refund of any tax it should appear in the ‘current assets’ and should not have been written off.

[Keihin Fie Pvt. Ltd. vs. CCE (2009) 16 STR 71 (Tri. – Mum.)].

125.33 Where tax has been erroneously paid on an activity which is not liable (architectural activity in Sri Lanka), what is paid is not “Service tax” and consequently, a refund claim filed (on 20.09.2006) even beyond a period of one year from the date of payment of tax (on 04.07.2005) is not barred by the limitation u/s 11B of the Central Excise Act, 1944 [Natraj andVenkat Associates vs.ACST 2010 (17) STR 3(Mad.); See also K.V.R Constructions vs CCE 2010 (17) STR 6 (Kar.)]. See contra [Andrew Telecom (I) Pvt. Ltd. v. CCE (2014) 34 STR 562 (Bom.)]

125.34 A refund of tax on notified services such as Port services, Goods transport services, Custom house agent services, technical testing and analysis services etc., used for the export of goods under Notification no. 41/2007 dated 17.9.07 cannot be denied to the service recipient on the basis that a part of the services of the service providers would not fall in the notified service categories without first revising the assessment of service providers. [CCE vs Anant Commodities Pvt. Ltd. 2010 (18) STR 214 (Tri-Del.)].

125.35 Supply of goods to SEZ unit cannot be considered as “export” for the purpose of Rule 5 of the Cenvat credit Rules, 2004. “Export” means physical export out of the country. Thus, the assessee was held not entitled to refund of Cenvat credit on supplies to SEZ units. [Everest Industries Ltd v.CCE (2013)31 STR 189 (Tri-Del)]

125.36 Refund of service tax paid on terminal handling charges used for export of goods is admissible since the tax for the said service was paid under the category of ‘port service’ and ‘port service’ is a notified service in notification no. 41/2007-ST [Angiplast Pvt. Ltd. v. CCE (2013) 30 STR 186 (Tri.-Ahmd.)]. [See CCE vs. Spentex Industries Ltd. (2014) 35 STR 562 (Tri-Mumbai) - wherein refund of service tax paid on Documentation charges, shut out costs, amendment charges was allowed]

125.37 Refund of tax paid on “port services” availed is allowable under Notification No. 41/2007 being a notified service, even though the port charged service tax under the category of renting of immovable property services which was not a notified service. [Sesa Goa Ltd. vs. CCE (2014) 35 STR 558 (Tri-Mumbai)]

125.38 Refund of service tax paid on Terminal Handling Charges received in relation to the export of goods under Notification No 41/2007 is admissible even if the said services are not specifically mentioned in the said notification [CCE v. Pratap Re-Rolling Pvt. Ltd,(2014) 34 STR 868 (Tri-Mum.)]

125.39 (i) Notification 11/2005 grants rebate of service tax paid on services exported out of India. Though the said Notification does not prescribe any specific time limit within which the assessee is required to file the rebate claim, the period of limitation prescribed u/s.11B of Central Excise Act would be applicable.

The principles of unjust enrichment would not be applicable to export transactions in view of the specific provisions of section 11B.

[Vodafone Cellular Ltd v.CCE (2014) 34 STR 890 (Tri.-Mum.)]

125.40 The appellant claimed refund of service tax paid on acquisition of residential unit since no tax was payable. The revenue rejected the refund on the ground that it was barred by limitation. The Tribunal held that the amount of service tax paid was a deposit and not tax and hence the provisions of Section 11B would not apply. [Jyotsana D. Patel v. CCE 2014(35) STR 77 (Tri-Mum) following KVR Constructions (2010) 17 STR 6 (Kar.)]

125.41 Service tax paid on detention charges of the containers incurred prior to completion of transportation of export goods held to be “in relation to transportation of the export goods” and hence eligible for refund [Vippy Industries Ltd. v. CCE (2013) 30 STR 238 (Tri.-Del.) relying on CCE v. Tata Coffee Ltd. (2011) 21 STR 546 (Tri.)].

125.42 Bar of unjust enrichment would not be applicable to pre-deposit made during pendency of appeal since pre-deposit amount is not payment of duty. [ CCE vs. Sam Industries (2009) 16 STR 382 (Tri-Mumbai)]

125.43 Where the assessee filed refund claim for the period July 2002 to June 2003 on 29.8.2003 but on the department pointing out certain defects and deficiencies it filed a revised claim on 17.3.2004, the Tribunal held that the date of the filing the refund claim was 29.8.2003 and accordingly only part of the refund claim was held time-barred i.e. tax paid on 16.08.2002 [CST v. HMA Udyog Pvt. Ltd. (2010) 20 STR 827 (Tri-Del.); See also CCE vs. Motherson Sumi Systems Ltd. (2011) 22 STR 496 (Tri – Mum.)].

125.44 Notification no. 41/2007 – ST dated 6.10.07 which provided for refund of tax paid on specified input services used for exports initially provided for a time limit of two months from the end of the quarter to which the refund relates for claiming refund of the said quarter. The time limit was extended to six months vide notification no. 32/08 – ST dated 18.11.08 by ‘substituting’ the word “six” for the word “two”. The Tribunal held that the amendment is retrospective and hence a claim for December, 2007 quarter filed on 27.5.2008 is within the time limit [CCE v. Essar Steel Ltd. (2010) 20 STR 769 (Tri-Ahmd.) See contra Kalyanihayes Lemmerz Ltd. vs. CCE (2013) 30 STR 71 (Tri. – Mumbai)]

125.45 Where the assessee paid service tax on advance received for construction services to be provided but did not provide the service due to cancellation of contract and returned the same alongwith service tax to their clients, the Tribunal held that the assessee is entitled to refund and the time limit of 1 year from the date of payment of service tax would not be applicable, there being no service provided there is no liability to pay tax and consequently the amount of tax paid earlier would be treated as deposit with the department liable to be refunded without invoking the provisions of Section 11B of the Central Excise Act, 1944 [CCE v. Pratibha Constn. Engnr & Contr (I) P. Ltd (2011) 22 STR 182 (Tri- Mum)]

125.46 Where the appellant- manufacturer reimbursed service tax on services used by the merchant exporter through whom he exported goods and filed a refund claim under the notification no. 41/2007 dated 6.10.07 with respect to service tax so paid by him the Tribunal denied the refund claim observing that the refund can be claimed only by the exporter of goods and not by the appellant-manufacturer who did not export the goods. [ Noble Grain India Pvt Ltd v. CCE (2011) 22 STR 189 (Tri-Mum)]

125.47 ‘Relevant date’ for reckoning the due date of one year for filing the refund claim of service tax paid on input services used for export of services is the date when the assessee has received the payment for service exported and not the date of invoice[CCE v. Eaton Industries P.Ltd 2011 (22) S.T.R. 223 (Tri – Mum)][See Clearpoint Learning Systems (I) P. Ltd. v. CCE (2015) 37 STR 149(Tri-Mum

125.48 Where the appellant, a stock-broker, refunded brokerage with service tax to his clients on the basis that the clients had reached a certain turnover of business with him, and claimed refund of the excess tax after a period of one year from the date of payment of tax ( to the Government), the Tribunal held that the refund claim was barred by limitation and the proper course for him was to avail the facility of provisional assessment for payment of tax. [ H. Nyalchand Financial Services Ltd v. Comm of S T , 2011 (21) S.T.R. 669 (Tri- Ahmd)]

125.49 The New Delhi branch of Bank of Tokyo raised a debit note with service tax on its Tokyo Branch for transferring funds of Suzuki Motor Corporation, Japan to Suzuki Motor Cycles India Pvt. Ltd. in India on the advice of the Tokyo Branch. It also paid the tax on the same to the Government. Subsequently, on the advice of its Tokyo branch it reversed the debit note and filed refund claim of service tax paid. The revenue denied the refund on ground of unjust enrichment. On appeal, the Tribunal allowed the refund on the following grounds :

that New Delhi Branch and Tokyo Branch of Bank of Tokyo both were branches of the same legal entity. Thus, even if any services are provided between them it would be considered as self-service and hence would not be liable for service tax.
Notwithstanding, there is no service to third party the services, if any, rendered by New Delhi Branch would qualify as export of services and accordingly refund would be allowed without reference to unjust enrichment.

[Bank of Tokyo – Mitsubishi Ufj Ltd. vs. CST (2010) 20 STR 509 (Tri. – Del.)].

125.50 Refund of credit of tax paid on input services used for exports under rule 5 of Cenvat Credit Rules, 2004 is not deniable on the ground that the credit pertained to a month in which there was no exports [Fine Care Bio-systems vs. CCE (2010) 20 STR 193 (Tri. – Ahmd) relying on Philco Exports v. CCE (2009) 234 ELT 568 (Tri. Del) wherein it was held that the time lag between date of receipt of inputs, date on which they were used and date of export are not relevant.; See also CCE v. Chamundi Textiles (Silk Mills) Ltd. (2010) 20 STR 219 (Tri.- Bang.)]

125.51 Refund granted to the assessee by an order passed by the Asst. CCE can be recovered by the department as being “erroneously refunded” by issuing a show cause notice u/s 73 without the department filing an appeal before CCE(A) against the refund order of Asst. CCE. [ Ogilvy & Mather Pvt Ltd vs CST 2010 (18) 502 (Tri-Bang.)]

125.52 Where an assessee paid tax on a misinterpretation of the statutory provisions, it was held that refund claim filed after 1 year from the payment of service tax would be time-barred. [CCE vs Manorath Builders (p) Ltd. 2010 (18) STR 453 (Tri-Del.)]

125.53 ‘Amount deposited’ during investigation not found payable on adjudication is only a deposit refundable to the assessee and the claim for refund of such deposit made within one year from the date of order of adjudication was held as within the prescribed time limit. The Tribunal further held that there was no unjust enrichment since tax was paid as deposit much later than the issue of invoices. [ Wazir Singh Swaran Singh Consignment Stockist (P) Ltd. vs CCE 2010 (18) STR 468 (Tri-Del.)]

125.54 Where duty was paid by the assessee during investigation and contested in subsequent fora which finally ended in a favourable order the duty is deemed to have been paid under protest and the bar of limitation for claiming refund would not be applicable. [CCE vs. Crompton Greaves Ltd. (2011) 22 STR 380 (Tri-Mumbai); See also CST vs. Wardes Pharmaceuticals Pvt. Ltd. (2011) 22 STR 274(Mad.)].

125.55 Refund of service tax paid on input services [Cenvat credit] availed by the assessee in relation to export of its services is permissible even if the refund claim pertained to the period prior to the date of the assesseee obtaining registration. [CST vs. E-Care India Pvt. Ltd. (2011) 22 STR 529 (Tri – Chennai)]

125.56 Where although at the time the duty was paid on the directions of the Central Excise Officers, no protest was specifically recorded, yet the payment was considered to be made under protest since-

The duty was paid on the directions of the preventive officers; and
The assessee contested the demand when SCN was issued

Hence there was no time bar for refund.

[Star Coolers & Condensers Pvt Ltd v. CCE (2011) 24 STR 110 (Tri); See also Mangalam Cements vs. CCE (2011) 24 STR 699 (Tri-Del)]

125.57 Where the amount received by the service provider is inclusive of all taxes and the service provider claimed a refund of the tax paid out of that amount, the Tribunal held that there was no unjust enrichment as the price was fixed and the service provider paid the tax out of the consideration offered by the service recipient. [CST v. V.S. Infrastructure Capital Ltd. (2012) 25 STR 170 (Tri. – Del.)]

125.58 Refund of service tax paid on transportation of empty containers to the factory premises for stuffing of export goods and on detention charges is admissible under Notification No. 41/2007-ST dated 6.10.07 since the same would fall within the expression “in relation to” transportation of goods [Inox India Ltd. vs. CCE (2012) 26 STR 120 (Tri-Ahmd);Vippy Industries Ltd.v. CCE (2013) 32 STR 213 (Tri- Del)].

125.59 The assessee in the present case had mistakenly paid service tax on certain construction services provided by it which were not liable for service tax. Accordingly it filed a refund claim though beyond the period of limitation prescribed under Section 11B of Central Excise Act, 1944. The Revenue had not disputed the assessees liability to pay service tax. However, it denied the refund claim on the ground that the same was barred by limitation by virtue of Section 11B of the Act. The issue before the High Court was whether the provision of Section 11B would be applicable even in cases where the amount of tax has been paid under mistaken notion. The High Court observed as follows.

Since the assessee was not liable to pay Service Tax on the construction services rendered by it, the revenue could not have demanded payment of such tax from the assessee. Hence it lacked the authority to levy and collect the said tax amount from the assessee and retain it.
In absence of the authority, payment made by the assessee as service tax would not partake the character of service tax liable to be paid by them. Mere nomenclature will not be an embargo on the right of assessee to demand refund of payment made under mistaken notion.

Accordingly, the High Court held that provision of Section 11B would not be applicable in such circumstances since it is not a duty as referred to in s. 11B and hence refund was admissible

[CCE. vs. KVR Construction (2012) 26 STR 195(Kar.)].See contra [M.C.I Leasing (P) Ltd v. CCE, 2014(33) STR 497(Kar)]

125.60 Notification No. 41/2007 – ST dated 6.10.2007 had been amended on 19.2.2008 allowing refund of service tax paid on goods transport agency services (“GTA services”) for transport of export goods from place of removal to the port. The Tribunal allowed refunds to tax paid on GTA services even for goods exported prior to 19.2.08 but refund claims whereof was filed post 19.2.08 since on the date of filing the claims the requirement of notification had been satisfied [East India minerals Ltd. vs. CST (2012) 27 STR 18 (Tri. – Kolkata)].

125.61 Where the appellant, who was eligible for the benefit of small service provider exemption under Notification No. 6/2005, had made payment of service tax without availing the exemption and subsequently claimed refund of the tax paid the Tribunal held that –

(i) the refund claim cannot be disallowed on the ground that the appellant had by paying service tax not exercised the exemption option available under the said notification since amount deposited in government account becomes payment towards service tax only when return is filed and the assessee had not shown the amount in the return as paid towards tax, the amount paid was only a remittance of higher amount to the bank for credit of service tax account;

(ii) neither has the tax paid been passed on to the customer. Hence unjust enrichment is not involved and the amount is refundable to the appellant

[Nandan Kumar Goila v. CCE (2012) 27 STR 33 (Tri. – Del.)].

125.62 The appellant in the present case were rejected the refund claim made by them under Notification No. 9/2009-S.T. on the grounds that the service tax was paid on the input services on the basis of ‘debit notes’ which was not a specified document under Rule 4A of the Service Tax Rules, 1994. On appeal the Tribunal held that where the debit note contained all the information required under Rule 4A of the Service Tax Rules, 1994 and where the appellant had fulfilled all the conditions of the notification the denial of refund on the mere ground that the name of document was ‘Debit Note’ was not warranted [Mission Pharma Logistics(I) Pvt Ltd v.CCE(2012) 27 STR 60 (Tri-Ahmd)].

125.63 Where the appellant claimed refund of certain service tax amounts which it had debited as expenditure in its Profit & Loss account, the Tribunal held that by debiting as expenditure, value of output services was inflated and hence the incidence was passed on to that extent and accordingly the refund claim was held to be barred by unjust enrichment. [A.A.Memon & Company vs. CCE (2012) 27 STR 41 (Tri-Ahmd.)].

125.64 (i) Refund of service tax paid on input ‘port services’ cannot be denied at the service recipient’s end on the ground that the services provided by service provider was not classifiable as under the category of ‘port’ services.

In absence of written agreement with the buyer refund of service tax paid in respect of technical testing and analysis services is not allowable under Notification No. 41/2007-ST [Cadila Pharmaceuticals Ltd. vs. CCE (2012) 27 STR 160 (Tri. – Ahmd)].

125.65 (i)Refund of service tax paid on input ‘port services’ and ‘CHA services’ cannot be denied at the service recipient’s end on the ground that the service provider was not classifiable as under the category of ‘port / CHA’ services.

Service tax paid on services of commission agent located abroad for sales promotion is admissible as credit and hence refund claim thereof is also admissible.

[Bodal Chemicals Ltd. vs. CCE (2012) 27 STR 276 (Tri. – Ahmd.)].See also CCE v. Turbo Energy Ltd, (2013) 31 STR 573 (Tri. – Chennai)

125.66 Service tax paid on transportation of empty containers from yard to factory (for stuffing of export goods) and from factory to port of export being “in relation to transport of export goods” is entitled to refund vide notification no. 41/2007 as amended by notification no. 3/2008 dated 19.12.2008 [Garware Polyester Ltd. vs. CCE (2012) 27 STR 288 (Tri-Mumbai)].See also [Vippy Industries Ltd. v. CCE (2013) 30 STR 238 (Tri.-Del.)]

125.67 Where the appellant debited the cenvat credit account for discharging duty liability though on wrong advice of the departmental officers suo moto re-credit of the same was held to be inadmissible in law and only a refund claim was held permissible. However, it was further held that the refund claim if any also would be time barred since more than 1 year had elapsed since debiting the Cenvat credit account [ Vighnahar SSK Ltd. vs. CCE (2012) 28 STR 219 (Tri. – Mumbai)].

125.68 The appellant, a manufacturer and exporter of excisable goods, claim refund of service tax paid on input services viz., inland haulage charges, terminal handling charges, bill of lading charges, processing fee, terminal services etc. under notification no. 41/2007 dated 6.10.2007 on which the service provider had charged service tax under the category of ‘port services’. The department denied refund on the ground that the said services are not classifiable under ‘port services’. The Tribunal upheld the refund claim on the basis of the following:

The person rendering the service to the appellant was registered for rendering ‘port service’ and bill was issued classifying the service as ‘port service’. The classification of the service cannot be changed at the service recipient’s end.
The opening para of the notification does not make any reference to ‘classification’ [column (2)]but only to the ‘nature of the service’ i.e. ‘service provided for export of said goods’[column (3)] which seems to be a serious lacuna, the omission cannot be supplied by the Tribunal which only interprets a notification. Thus, the situation is to be judged with reference to the expressions actually used.
Subsequent amendment in the definition of ‘port service’ to cover any service rendered in the port area shows the intention of the government in this regard. Though it operates prospectively a beneficial notification must be construed liberally.

[Max India Ltd. v. CCE (2012) 28 STR 248 (Tri.-Del.)].

125.69 The appellant, a merchant exporter, had applied for refund of service tax paid (as payer of freight) on GTA service used for export of food items under n/n. 17/2009-ST, though service tax on such transportation was exempt vide n/n. 33/2004-ST. The department denied refund on the ground that the services were exempt. The Tribunal held that there is no provision barring payment of service tax on an exempt service like s. 5A(1A) of Central Excise Act, 1944 which bars payment of excise duty on an exempt product. Hence the refund claim of the appellant cannot be denied [ Crown Products Pvt. Ltd. v. CCE (2012) 28 STR 406 (Tri.-Mumbai)].

125.70 Refund of service tax paid on input services used for export of goods was held to be allowable on the basis of certified copies of invoices instead of original invoices, in view of Board’s Circular no. 112/6/2009 – ST dated 12-3-2009 [CCE vs. Gokul Refoils & Solvents Ltd. (2012) 28 STR 488 (Tri. – Ahmd.)].

125.71 Refund of service tax paid on fumigation charges i.e. specialised cleaning charges incurred for containers carrying agricultural products for export was disallowed in absence of written agreement between the buyer and seller [CCE vs. Gokul Refoils & Solvents Ltd. (2012) 28 STR 488 (Tri. – Ahmd.)].

125.72 For claiming refund of service tax paid on scientific testing services used in export of goods, there is no need to establish correlation between the samples tested and consignment exported under Notification no.17/2009 dated 7.7.2009 [Trident Ltd. vs. CCE (2012) 28 STR 505 (Tri. – Del.)].

125.73 For claiming refund of service tax paid on transportation service vide notification no.17/2009 dated 7.7.2009, it is sufficient that invoice issued by the exporter indicate that the goods were exported through the Inland Container Depot (ICD) concerned and it is not material that the receipt issued for the said service could not be correlated with the consignments exported [Trident Ltd. vs. CCE (2012) 28 STR 505 (Tri. – Del.)].

125.74 Refund of amount deposited during investigation as payment under protest – unjust enrichment not possible when demand dropped since it is refund of deposit towards duty and not refund of duty [CCE vs. Krypton Industries (2012) 28 STR 555 (Tri. – Kolkata)]

125.75 Where the appellants, had initially paid tax but had challenged the same before the CCE(A) who held in the assesse’s favour, the Tribunal held that the payment made by it would amount to payment under protest and the relevant date for claiming refund u/s. 11B of the said tax paid would be the date of the order of the CCE(A). Hence refund claim filed within a year of the order of CCE(A) was held not time barred. Further, it was also held that though the appellants had paid service tax on cum-tax basis it had not collected the same from the customers which was substantiated by a Chartered Accountant's certificate. Hence bar of unjust enrichment was also not applicable. Accordingly, the Tribunal allowed the refund claim [ Karur Gayathri Finance Ltd. CCE (2013) 29 STR 373 (Tri. – Chennai)][Also see CCE vs. Roopa Ram Suthar (2014) 35 STR 583 (Tri-Del.)]

125.76 Where the appellants, a unit in the SEZ, had obtained a list of ‘taxable services’ as are required for its authorized operations approved by the Approval Committee of the SEZ (in which the jurisdictional Commissioner of Central Excise is also a member) the adjudicating authorities cannot disallow exemption/ refund in respect of services as mentioned in the said list, on the basis that there was no direct nexus between those services and the operations of the SEZ unit. Accordingly, the refund claim of the SEZ unit was allowed [Tata consultancy Services Ltd. vs. CST (2013) 29 STR 393 (Tri Mumbai)]

125.77 Where the appellant had paid service tax on the residential flats sold by it in respect of which it had subsequently claimed refund in view of the Board Circular No. 108/2/2009-ST dated 29.1.2009 the Tribunal held that since the amount was erroneously paid the department cannot retain the same and accordingly the bar of limitation u/s. section 11B would not be applicable in its case. Accordingly the refund of tax paid was permissible [Shravan Banarsilal Jejani vs. CCE (2014) 35 STR 587 (Tri-Mumbai) relying on CCE v. KVR construction (2012) 26 STR 195 (Kar.); See also PSL Ltd. vs. CCE (2014) 35 STR 591 (Tri-Ahmd.)]

125.78 Under Notification No. 9/2009 dated 3.3.2009, services ‘wholly consumed’ in an SEZ unit were entitled to upfront exemption. In respect of other services, the SEZ unit had to pay the service tax to its suppliers and thereafter claimed refund. The appellant paid service tax on ‘wholly consumed’ services to its suppliers and claimed refund. The department denied the refund on the ground that the notification does not prescribe the refund procedure for ‘wholly consumed’ services. On appeal, the Tribunal allowed the refund claim observing that –

Though in the case of services which are wholly consumed within the SEZ, there is no necessity to discharge the service tax liability ab initio, that does not mean that in a case where service tax liability has been discharged, the appellant is not eligible or not entitled for refund of the service tax paid under the provisions of Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. If the appellant is eligible for refund under Section 11B, then the same cannot be denied on the ground that the claim was made under Notification No.9/2009-S.T.
Services provided to a SEZ unit are exempt under Rule 31 of the Special Economic Zone Rules, 2006. And, s. 51 of the Special Economic Zone Act, 2005 provides that the provisions of the SEZ Act and Rules would prevail over other legislations. Thus, even if the appellant was not entitled to refund of service tax paid on services ‘wholly consumed’ within the SEZ under Notification No. 9/2009 they were entitled to refund u/s. 11B of the Central Excise Act

[Tata consultancy Services Ltd. vs. CST (2013) 29 STR 393 (Tri Mumbai)]

125.79 The appellant had claimed refund of penalties that were initially paid but which were set aside in appeal proceedings. The department denied the refund claim on the ground that the principle of ‘unjust enrichment’ applies and appellant had debited the penalty as its expenditure in its Profit & Loss account. On appeal the Tribunal allowed the refund holding that —

Principle of unjust enrichment is not applicable to refund of penalties; and
In view of the presumption in law that penal liability can never be passed on to another person who has not committed the offence, the burden to show that penalty has been passed on to another cannot be discharged merely by looking at the balance sheet and the profit & loss A/c.

[Shree Perfect Security Services (India) P. Ltd. vs. CST (2013) 29 STR 389 (Tri. - Ahmd.)].

125.80 Where the assessee-club had paid tax on the entry fee received from non-members on cum-tax basis and later claimed refund of the tax paid on the ground that fees from non-members are not liable, the Tribunal allowed the refund claim holding that there was no unjust enrichment as the fees was fixed and the service provider paid the tax out of the consideration offered by the service recipient [CST v. Sun-N-Step Club Ltd. (2013) 29 STR 521 (Tri. – Ahmd.) see also Alstom Projects India Ltd v. CST, 2013 (29) S.T.R 618 (Tri- Chennai);]

125.81 Where the appellant, a call centre BPO was continuously exporting its services (every call attended was an export), considering the nature and peculiarities of the business, the High Court held that, the description, value, service tax payable on input services actually required to be used in providing the taxable service to be exported are not determinable prior to the date of export so as to comply with the ‘prior declaration’ formality as per para 3 of Notification no.12/2005-ST dated 19.4.2005 to claim rebate of tax paid on input services used for export of services. In such cases it was held that after the export if such particulars are furnished to the service tax authorities within a reasonable time along with the necessary documentary evidence so that their accuracy and genuineness may be examined, and if those particulars are not found to be incorrect or false or unauthenticated or unsupported by documentary evidence, the rebate claims must be allowed [Wipro Ltd vs.UOI (2013) 29 STR 545 (Del)].

125.82 When the assessee claims refund under specific exemption notification then the time limit prescribed therein for filing the claim would be applicable and not the one prescribed under Section 11B of the Central Excise Act, 1944. Hence, where the notification time limit was exceeded the claim was held to be time barred [Aaryan Mines and Minerals Corpn. vs. CCE (2013) 30 STR 78 (Tri. –Ahmd.)].

125.83 Service tax paid on detention charges of the containers incurred prior to completion of transportation of export goods held to be “in relation to transportation of the export goods” and hence eligible for refund [Vippy Industries Ltd. v. CCE (2013) 30 STR 238 (Tri.-Del.) relying on CCE v. Tata Coffee Ltd. (2011) 21 STR 546 (Tri.)].

125.84 (i) For a company employing more than 400 workers, rent paid on car park, cafeteria and terrace of the building form part and parcel of the business premises and therefore service tax paid on the said services are ‘input services’ used for exports and tax paid on such services is eligible for refund.

(ii) Outdoor Catering service, training services and the professional services availed by the assessee are treated as ‘input services’ used in relation to exports and tax paid on such services is eligible for refund.

[CST v. Mercedes Benz Research & Devlp. India (P) Ltd. (2013) 30 STR 257 (Tri.-Bang.)].

125.85 The assessee is eligible for exemption benefit under notification no. 6/2005-ST (threshold exemption of ₹4 lakhs) even though Cenvat Credit was initially availed but reversed without being utilized for payment of service tax. Hence the assessee was held to be eligible for refund of service tax paid on value of taxable services for which the exemption was available [CCE v. Cool Collections (2013) 30 STR 303 (Tri.-Del.)].

125.86 Where the High Court had in a Writ filed by the assessee held that members of the assessee club cannot be considered as a customers of the club on the grounds of mutuality and hence the mandap keeper services provided by the club to its members cannot be said to be liable for service tax, the Tribunal held that the bar of unjust enrichment would not be applicable to the assessee while refunding the amount of service tax paid by the assessee club under protest[Karnavati Club Ltd v. CST (2013)31 STR 445].

125.87 Notification No. 41/2007-ST exempted by way of refund services used for export of goods provided the exporter claimed refund within 6 months from the date of export. The said notification was superseded by Notification No.17/2009-ST dated 7.7.2009 provided for a period of 1 year to claim refund. The Tribunal mainly relying on Trade Notice No. 7/2010 dated 4.3.2010 held that the period of one year under Notification No. 17/2009 – ST would apply even to refund claims made in respect of services received prior to the coming into force of that notification even though they were made beyond 6 months from the date of export. [Sandoz Polymers Pvt. Ltd. vs. CST (2013) 30 STR 527 (Tri –Ahmd) See alsoAdani Enterprises Ltd. vs. CST (2013) 30 STR 543 (Tri-Ahmd.); Havells India Ltd. v. CCE (2013) 32 STR 668 (Tri-Del); Soccer International Pvt. Ltd. v. CCE (2014) 33 STR 334 (Tri-Del.)]

125.88 Notification No.17/2009-ST dated 7-7-2009 did not prescribe any condition that the refund claims should be filed quarterly or on a periodical basis. Hence in such circumstances the refund claims would be governed by the provisions of Section 11B of the Central Excise Act, 1944 as applicable to service tax. Accordingly the time limit for making the application is one year from the relevant date (i.e. the date of let export order passed) [Gimpex Ltd v. CCE & S.T (2014) 36 STR 480 (Tri-Bang)]..

124.1 Where the department had rejected the refund claim of the appellant filed under Notification No 9/2009, on the ground that the appellant’s manufacturing activity in the SEZ was not inter-related or connected with the services received under the category of scientific and technical consultancy services, the Tribunal held that credit on clinical testing services availed prior to commencement of commercial production is allowable in view of the fact that the final product could be manufactured only after obtaining regulatory approval of the clinically tested samples and therefore such services were directly related to the manufacture of the final product. The department’s plea that unless goods reaches commercial production stage cenvat credit was not admissible was rejected. Accordingly, the refund claim was held to be admissible. [Zydus Tech Ltd v. CST (2013) 30 STR 616 (Tri- Ahmd) relying on Cadilla Healthcare Ltd. vs. CCE (2010) 17 STR 134 (Trib.Also see [CST vs. Zydus Technologies Ltd. (2014) 35 STR 515 (Guj)]

125.89 Mere non-mention of the commission paid to an agent outside India by the exporter on the shipping bill was only a technical error and would not disentitle the assessee from claiming refund in terms of Notification No. 17/2008-S.T. [CCE & C v. ABG Shipyard Ltd. (2013) 31 STR 11 (Guj.)]

125.90 When a notification [41/2007 dated 6.10.07] exempts “whole of service tax”, it implies that Education Cess and Secondary & Higher Secondary Education Cess on the same are also exempted. [Cauvery Coffee Traders v. CCE (2013) 31 STR 126 (Tri-Bang.)]

125.91 Refund of service tax paid on renting of rooms in a hotel by mistake of law would attract the bar of limitation u/s 11B [ Ambience Constructions India Ltd. v. CST (2013) 31 STR 343 (Tri-Bang)]

125.92 The appellants in this case filed the refund claim within the time stipulated in Notification No. 41/2007, dated 6.10.2007 but filed the supporting document (Certificate from port trust) at a later date as it was received from the Port Trust authorities after a considerable delay, it was held that the denial of refund as being time barred is unwarranted. [Hari & Co. v. CCE (ST) (2013) 31 STR 681 (Tri - Chennai)]

125.93 Where the Courier Agency had failed to specify the import–export number of the exporter on the receipt/ invoices issued by them, the Tribunal held that refund of Service Tax paid on the said input services under Notification No. 17/2009-S.T., was not admissible since there was a non-fulfillment of the conditions mentioned in the said Notification [Magsons Exports v. CST (2013) 32 STR 222 (Tri. – Del.)]

125.94 Where the appellant, a 100% Export Oriented unit, had exported during the period 2007-08, software maintenance service (taxable service) and software development/ Software consultancy service (exempted service) it was held that refund of the unutilized credit under Rule 5 of the Cenvat Credit Rules, 2004, is permissible even though software development/ consultancy services were exempt. [M/s KPIT Cummins Infosystems Ltd. v. CCE 2013(32)S. T.R. 356 (Tri-Mumbai)]

125.95 Recipient of Goods Transport agency Service being the person liable to pay service tax would be considered as an assessee and accordingly he is entitled to the benefit of adjustment of any excess payment of service tax as envisaged under rule 6(3) of Service tax Rules, 1994. [Inox Air Products Ltd. v. CCE 2013(32) S. T.R. 336 (TriChennai)]

125.96 Notification no. 9/2009-ST dated 3.3.09 read with 15/2009-ST dated 20.5.2009 allowed upfront exemption from payment of tax to the service provider where the services are consumed wholly within the SEZ unit. However, the appellant (an SEZ unit) paid the service tax to the provider and claimed refund which was disallowed by the adjudicating authority on the ground that refund of service tax paid on services wholly consumed within the SEZ is not allowed under the notification. On appeal, the Tribunal held that the overarching provisions of section 7, 26 & 51 of the SEZ Act, 2005 provide immunity from service tax on services provided to an SEZ unit. Therefore, rejection of refund of service tax paid on services consumed wholly within the SEZ by a service recipient is not sustainable. [Intas Pharma Ltd. v CST (2013) 32 STR 543 (Tri –Ahmd.)]

125.97 In absence of any statutory provision in the Cenvat Credit Rules, 2004, requiring mandatory registration for claiming refund of unutilized Cenvat credit under Rule 5 of the said rules, denial of refund on account of non-registration is incorrect. [CST v. Aviva Global Services (Bang) P.Ltd (2014) 33 STR 270 (Tri-Bang)]

125.98 Where the appellant had paid tax during the period September, 2007 to May, 2008 under the category of courier agency services which was subsequently clarified by the CBEC as not liable, a refund claim filed in July, 2011 in respect of the tax paid was held to be barred by limitation [ C.S.T. v. Gujarat State Road Transportation Corporation (2014) 33 STR 283 (Tri-Ahmd)]

125.99 In case of claiming refund of service tax paid on exports under Notification No. 41/2007, the conditions [viz., time limit and drawback conditions] prevailing on the date of filing of refund claims are to be considered and not the conditions prevailing on the date of export. Further the Tribunal observed that non–mentioning of commission amount in shipping bill being only procedural lapse the refund claims cannot be rejected in case the documentary evidence substantiating the said payment is available [Faizan Shoes Pvt. Ltd. v CST (2014) 34 STR 205(Tri.-Chennai)]

125.100 The appellant, an exporter of goods, claimed refund of service tax paid on overseas commission [on reverse charge basis] under Notification No 41/2007-S.T. read with Notification No. 32/2008-S.T. on time but his claim was returned for not submitting the proof of service tax payment along with bank realization certificate. Subsequently on another date the appellant submitted these documents along with the refund claim which date was beyond the time period for filing the refund claim. The Tribunal allowed the refund claim saying the date of first filing of refund claim is to be reckoned which was on time. It further observed that instead of returning the refund claim, the lower authorities could have asked the assessee to file bank realization certificate and proof of payment of service tax which would have been compiled by the appellant and in that case refund claim was well within the time. [ R.L Fine Chem v. CCE (Appeals), Bangalore, (2014) 35 STR 814 (Tri-Bang)

125.101 The appellant in the present case had not disclosed the value of service and service tax in its invoice separately and had paid service tax on a cum-tax basis. Subsequently it filed a refund claim which was rejected on the grounds of unjust enrichment. On appeal to the Tribunal, it was held that S.12A and 12B of Central Excise Act are applicable to refund claims and accordingly by virtue of S.12A the assessee was required to indicate the amount of service tax forming part of value of taxable service and in absence of same by virtue of S.12B the assessee will be deemed to have passed full incidence of tax to the recipient. Hence denial of refund by department was held to be correct [Trade Vision India Pvt. Ltd. V CST (2014) 34 STR 280(Tri.-Bang.)]

125.102 The appellant had during the course of adjudication paid the amount of duty demanded under protest through cenvat credit. Subsequently, on appeal when the demand was dropped it claimed refund of the tax paid in cash since by then it had surrendered its registration. On the above facts the Tribunal held that under the scheme of cenvat credit there is no provision for granting cash refund of accumulated cenvat credit & hence denial of refund in cash was justified [Lavkush Textiles v CCE (2014) 34 STR 313(Tri.-Del.)].

125.103 Refund claim u/r. 5 of Cenvat Credit Rules, 2004 in respect of input services used for exports is to be preferred within one year from the date of exports and in case of export of services, export is completed on receipt of foreign exchange in India. Hence where the appellant had filed the refund claim within 1 year from the receipt of foreign exchange in India, the refund claim was held as not time barred. [Bechtel India Pvt. Ltd. v. CCE 2014 (34) S.T.R.437 (Tri.-Del.)]

125.104 Where the appellant had on account of cancellation of the agreement returned the advance payment of value of taxable service and service tax thereon by the customer, it was held that rejecting the refund claim only on the ground that the same was not being reflected as receivable from revenue in its balance sheet is incorrect and hence refund was admissible [Radico Khaitan Ltd. v. CST (2014) 34 STR 586 (Tri. - Del.)]

125.105 The assessee provided Technical Testing services to overseas companies (exempted services) and Business Auxiliary services to overseas clients (taxable services that were exported) and claimed refund of entire unutilized Cenvat Credit. The revenue sought to deny proportionate refund of credit attributable to exempted services. The Tribunal relying on Zenta Pvt. Ltd. v. CCE (2012) 27 STR 519 (Tri.-Mum.) allowed the entire refund holding that-

since no exempt service has been provided in the domestic tariff area, the exempt services turnover is to be added to export turnover; and
the logic of giving cash refund of taxes used for export of services is to ‘Zero rate’ exports.

[Quintiles Technologies (India) Pvt. Ltd. v CST (2014) 34 STR 753 (Tri. - Ahmd.)]

125.106 The appellants, a Mandap Keeper, had paid tax on advances received from its customers but had refunded the amounts along with service tax to the customers since the service could not be provided. The appellants filed a refund claim u/s 11B for refund of the said tax which was rejected as being barred by limitation. However, on appeal the Tribunal observed that the assessee’s case would be covered by provisions of Rule 6(3) of the Service Tax Rules, 1994 and since there is no time limit indicated in the provisions of Rule 6(3) for the appellant to utilize or take credit of excess tax paid by them, the Tribunal allowed the appellant to avail credit of such excess service tax paid by it against future liability.[Aakash the Place to Celebrate v. CST (2013)31 STR 251 (Tri- Ahmd)

125.107 The appellant had provided its property on rent to CESTAT, Mumbai for the period 2007-2008 and paid service tax on the rent received. Subsequently, on realizing that the said services were not liable for service tax, it filed a refund claim. However, when the department rejected the refund claim pertaining to the period beyond time limit of one year on the grounds of time-bar [Section 11B], the Hon’ble Tribunal held that the provisions of section 11B of the Central Excise Act, 1944 are not applicable since there was no liability to pay tax and hence refund claim was admissible. [ Jubilant Enterprises P. Ltd. v. CCE, (2014) 35 STR 430 (Tri- Mum)]

125.108 Refund of tax paid by the assessee a developer of residential units was allowed where the assessee proved that he had not collected service tax from the flat purchasers and had also produced certificates from them evidencing non-payment of service tax to it. [ Vyankatesh Real Estate Developers vs. CCE (2014) 35 STR 589 (Tri-Mumbai)]

125.109 The issue in this case was whether service provider providing various services to the exporter having registration of only one service can claim for refund. Notification 41/2007 grants refund to exporters on taxable services used for export and does not require verification of registration certificate of the supplied service. Therefore refund granted. [Commissioner v.Adani Enterprise Ltd, (2014) 35 STR 741 (Guj)]

125.110 In the first round of litigation the Commissioner (Appeals) granted refund to the appellant and the same was not agitated further by the Revenue and hence the adjudicating authority granted the entire refund. Against the order of the adjudicating authority granting such refund the Revenue filed an appeal before the Commissioner (Appeals) who vide the impugned order rejected the refund. The Hon’ble Tribunal held the impugned order as not maintainable since the issue had already attained finality in the first round of litigation itself in the absence of any appeal by the Revenue against the order of the Commissioner (Appeals). [Arkay Glenrock (P) Ltd, Unit – II v. CCE, (2014) 35 STR 953 (Tri. – Chennai)]

125.111 The Appellant had paid commission to agents abroad during October to March 2007 for marketing their finished goods that were exported and the had paid service tax under reverse charge on such commission on 2.4.2008 for which they filed a refund claim on 19.3.2009 which was rejected by the Revenue on the ground of time bar. The Hon’ble Tribunal allowing the refund claim held that the period of one year for filing the refund claim should be reckoned as per Clause (f) of Explanation to section 11B of the Central Excise Act, 1944 viz., from the date of payment of service tax i.e. 2.4.2008. [ K.K.S.K Leather Processors (P) Ltd. v C.C., C. Ex &ST (2014) 35 STR 956 (Tri-Chennai)]

125.112 Exemption from payment of service tax under notification no. 18/2009 dated 7.7.2009 which inter alia exempted services rendered by overseas commission agent for the period after 7.7.2009 is applicable only for exports after July, 2009. Prior to this exemption, service tax was required to be paid and refund claimed within 60 days of export as provided in notification no. 41/2007 dated 6.10.2007. Thus where an assessee had paid the tax on commission paid to overseas commission agent for exports for the period April, 2008 to July, 2009 on 31.8.2009 and had claimed refund in November/December 2009 u/s 11B of Central Excise Act, 1944 within one year from the date of payment of duty but beyond 60 days from the date of export, it was held that the refund is not admissible. [Addi Industries Ltd. v. CCE (2014) 36 STR 27 (Tri- Del)]

125.113 Where on facts the total consideration under the work order between the parties was inclusive of service tax and no separate service tax was collected by them, it was held that the assessee’s claim for refund would not be barred by unjust enrichment even if the agreement was inclusive of service tax [CCE v. J. R. Transformers Pvt. Ltd. (2014) 36 STR 1167 (Tri.- Del.) following CCE v. Modest Infrastructure Ltd. 2011 (24) STR 369 (Tri-Ahmd.)]

125.114 Any amount of service tax paid by mistake on import of service under reverse charge mechanism on royalty paid for use of intellectual property prior to 18.04.2006 is to be refunded to the assessee and cannot be credited to the Consumer Welfare Fund [Madhura Coats Pvt. Ltd. V. UOI (2014) 3 STR 1004 (Kar)]

125.115 Refund sanctioned cannot be adjusted against unconfirmed demand [Bharat Sanchar Nigam Ltd. V. CCE (2014) 36 STR 1054 (Tri.- Del.)]

125.116 The test of Bar of unjust enrichment would be applicable even in cases where the amount has been deposited during the course of investigation proceedings [CST v. Amol Agarwal (2015) 37 STR 142 (Tri. Mumbai)]

125.117 Insurance Auxiliary Services provided by an insurance agent in the State of Jammu & Kashmir is not taxable and hence the service tax erroneously paid by the insurance company under reverse charge is entitled for refund and the credit of such tax taken by appellant is nothing but refund of service tax and accordingly allowable. [Bajaj Allianz General Insurance Co. Ltd. v. CCE (2015) 37 STR 316 (Tri.-Mum.)]

125.118 Where the appeal and the stay application filed against the O-I-O was pending for disposal before the Tribunal and the revenue had sought to adjust the export rebate sanctioned to the assessee against the demands confirmed in the said O-I-O, the High Court held that the said act of the revenue was incorrect and accordingly directed them to refund the amount, in excess of the amount required to be pre-deposited by the appellant pursuant to the Tribunal order, to the assessee.[Solvay Specialities India Pvt. Ltd. v. Union of India (2015) 37 STR 465 (Guj.)]

126 Export Rebate

126.1 Rebate of excise duty due to the assessee cannot be adjusted against alleged service tax dues recoverable from him during the pendency of the stay applications before the Tribunal without giving him a reasonable opportunity of being heard. [ Arunachala Gounder Textile Mills Pvt. Ltd. v. CCE (2013) 31 STR 6 (Mad.)]

126.2 Where the expenses incurred by the exporter on services were such that the export could not have been occasioned without them, the Tribunal allowed the refund of service tax paid on such services even though the services are not mentioned in the registration certificate of the exporter since the legislative intention was not to permit export of taxes. [CCE v. Sigma Vibracoustic (India) Pvt Ltd, 2013(31) STR 207(Tri-Mum)]

126.3 An appeal against an order of the CCE(A) relating to rebate/refund claims of service tax is maintainable before the Customs, Excise & Service Tax Appellate Tribunal (“CESTAT”) though section 35EE of the Central Excise Act,1944 (providing for revision application to be made to the Central Government against such an order) is made applicable to service tax vide Section 83 of the Finance Act,1994 - Appellate remedy available [ Glyph International Ltd. v Union of India (2014) 34 STR 727(Del.)]

126.4 On the issues whether the appellant as SEZ unit would be entitled to claim exemption under Notification No. 9/2009 – ST dated 3.3.2009 in respect of the following services viz., –

services which were received prior to issuance of notification No. 9/2009-ST dated 3.3.2009 but the payment for which was made post 3.3.2009; and
services received by its registered office which is situated away from SEZ unit. the Tribunal observed that –

In terms of para 3 of the Notification, the only requirement for claiming refund is that service tax on services should have been paid on or after 3.3.2009 and that the time of provision of services was irrelevant. Hence in respect of services mentioned in (a) above refund would be admissible.

The preamble of the notification makes it abundantly clear that irrespective of the place where the services are rendered, whether inside or outside the unit, so long as the services are rendered in relation to authorized operations SEZ unit is entitled to claim refund subject to the satisfaction of other conditions stipulated in the notification. In the present case since services were utilized in relation to authorized operations refund was admissible.

[Wardha Power Co Ltd v. CCE (2013) 30 STR 520 (Tri-Mum)]

126.5 Transportation of empty containers from yard to factory for stuffing of export goods would be covered within the expression “in relation to transport of export goods” appearing in Notification No. 41/2007-ST and hence service tax paid thereon would be eligible for refund under the said notification [CCE vs. R.A.K. Ceramics India Pvt. Ltd. (2013) 30 STR 609 (Tri-Bang)]

127 Interest on Delayed Refund

127.1 The liability of revenue to pay interest on delayed refund u/s. 11BB of the Central Excise Act commences from the date of expiry of 3 months from the date of receipt of application for refund u/s. 11BB and not on the expiry of period of 3 months from the date on which order of refund is made [ Ranbaxy Laboratories Limited vs. UOI (2012) 27 STR 193 (SC)].

127.2 In case where defect memo had been issued in respect of refund claim filed by the assessee which was rectified by the assessee and pursuant to which refund was granted, the Tribunal in respect of claim for interest on refund held that interest u/s. 11BB would be payable from the date of receipt of refund application after removal of deficiency till the receipt of refund [State Bank of India v. CCE (2014) 34 STR 579 (Tri.- Mumbai)].

128 Interest on refund of pre-deposit

128.1 Where the assessee made a pre-deposit on 21.11.2002 in terms of a Tribunal order and succeeded in the appeal in terms of a final order dated 31.12.2003 and the amount was refunded without interest on 14.9.04, the Tribunal relying on section 35FF (which came into effect from 10.5.08) ordered interest from 1.4.2004 (3 months from the date of communication of the Tribunal’s order) to 14.9.2004. [CCE v. Kamdeep Marketing Pvt. Ltd. (2012) 25 STR 199 (Tri.- Del.)]

129 Revision

129.1 Where the original authority had exercised his discretion under section 80 of the Finance Act, after recording proper reasons, the matter cannot be reopened to enhance the penalty by the Commissioner in the Order-in-Revision. [VEE AAR Secure vs. CST (2009) 14 STR 50 (Tri-Bang.)see also Paramount Corporate Network Ltd v. CST (2011) 21 STR 542 (Tri – Bang.); CST vs. Handimann Services Ltd. (2011) 24 STR 641 (Kar.); CST vs. Motor World (2012) 27 STR 225 (Kar.)]]

129.2 The show cause notice and order in revision issued by the Commissioner in exercise of its revisional power cannot go beyond the original show cause notice.[Sands Hotel Pvt. Ltd. vs. CST (2009) 16 STR 329 (Tri-Mumbai); See also Aero Products vs. CST (2011) 22 STR 522 (Tri-Bang.) wherein the Tribunal held that Making a new case under the revisionary proceedings is not permissible.; Brij Mohan Surinder Kumar v. CCE (2012) 25 STR 58 (Tri-Del)]

129.3 The revision order dated 16.12.08 being passed two years after the date of passing the original order dated 14.12.06.(although issued on 28.12.06) is time-barred u/s 84 (5) [Paramount Corporate Network Ltd v. CST (2011) 21 STR 542 (Tri – Bang.)]

129.4 Revision of adjudicating authority’s order by the commissioner after appeal decided by the Commissioner of Central Excise (Appeals) is bad in law [ SMP Steel Corporation vs. CCE (2011) 22 STR 56 (Tri. – Che.)]

129.5 Where an appeal has been preferred before the Commissioner (Appeals) against the order of the adjudicating authority, suo-motu revision of the adjudicating authority’s order by the Commissioner u/s.84 for increasing the liability during the pendency of the appeal was held to be not permissible even though the appeal before the Commissioner(Appeals) was only as to the validity of the adjudicating authority’s order since u/s. 35A(3), the CCE(A) is also empowered to increase the liability and hence the issue of higher liability was also an issue before the CCE(A) [ CCE v. Shiva Builders (2011) 22 STR 513 (P& H)]

129.6 The Joint Commissioner (JC) in his order dropped the demand of 1.66 lakhs but confirmed a demand of ₹2.43 lakhs against which the assessee went in appeal and the CCE (A) allowed the appeal. Thereafter the Commissioner reviewed the JC’s order insofar as the demand of ₹1.66 lakhs was dropped and raised the said demand of ₹1.66 lakhs. It was held, by the Tribunal that the review order was not maintainable since the JC’s order was already set aside by the CCE (A) on the same subject matter [CCE vs. Ajmer Automobiles P (Ltd) (2012) 26 STR 19(Tri-Del.)].

129.7 Where the CCE(A) allowed the assessee’s claim for benefit of deduction of value of materials by a reasoned order but remanded the case to the adjudicating authority for re-quantification of demand and no appeal was filed against the order of the CCE(A), the Tribunal held that since the department had not appealed against the order of CCE(A), the order of the adjudicating authority re-quantifying the demand by allowing the benefit of deduction cannot be interfered with by the CCE by issuing a SCN for revision of the order passed by the adjudicating authority. [ Pentagon Intex Pvt. Ltd. vs. CCE (2013) 30 STR 685 (Tri-Bang)].

129.8 Where the appellant, a charitable trust, was providing coaching and training services, it was held by the Additional Commissioner that it was not liable for service tax on the ground that -

(i) The assessee were not commercial organisation.

(ii) They were vocational training institute exempt under notification no. 24/2004 dated 10.9.2004.

However, where the commissioner had sought to revise the Additional Commissioner’s order, without any finding that they were ineligible for exemption under notification no. 24/2004, it was held that the order passed in revision is not sustainable.[Everest Educational Charitable Trust v CST (2014) 36 STR 79 (Tri.-Chennai)]

130 Stay of demand

130.1 The department issued notices for recovery of amount stayed by the Tribunal on the grounds that stay order passed by the Tribunal stands vacated on expiry of 180 days. On appeal the Tribunal held that there was no requirement to pass any order extending stay already granted since the order of stay of recovery shall remain valid till final disposal of appeal.[A. Mohammed Mubarrac vs. CCE (2009) 16 STR 385 (Tri-Chennai)]

130.2 (i) Even in the absence of express provisions conferring power to the Tribunal to pass stay order the power of granting stay is incidental and ancillary to its appellate jurisdiction.

Under the first proviso to section 35C(2A) of the Central Excise Act, where in an appeal, the Tribunal has granted a stay, it is obligatory on the Tribunal to dispose the appeal within 180 days from the date of the stay order. If the appeal is not so disposed, the second proviso to section 35C(2A) provides that the stay order shall stand vacated. However, even in the absence of express provisions, the Tribunal has the power to extend the stay order beyond 180 days.
But, the extension of stay order is not automatic. The assessee has to make proper application before the Tribunal for extension of stay order otherwise the stay order granted comes to an end at the expiry of 180 days.
When an application is filed for extension of stay, the Tribunal has to apply its mind to find out for what reasons, the appeal is not disposed within statutory period of 180 days. If the assessee’s conduct is not the cause for the appeal not being disposed of, then the assessee cannot be denied the benefit of extension of the stay order.

[CCE vs. Indian Oil Corporation (2010) 20 STR 458 (Kar.)]; PML Industries Ltd. vs. CCE (2013) 30 STR 113 (P&H); J.P.Transformers v CCE (2014) 34 STR 207(Tri.-Del.)]

130.3 On facts, the High Court held that where an application for extension of stay order made after 6 months from the date of the original stay order is pending, and the department recovered the adjudicated demands, by debiting the bank account u/s. 87(b) during the pendency, the recovery becomes non est and invalid once the stay is extended since it would operate during the intervening period also and the money recovered u/s. 87(b) is to be refunded back. [Chhotelal Virendra Kumar Jain v. Union of India (2014) 36 STR 495 (Raj.)]

131 Review

131.1 Where an appeal against the order of the adjudicating authority has been preferred before the CCE(A), the CCE has no power to review the order of the adjudicating authority under section 84 of the Finance Act, 1994. [Alpha Polyproplylene vs. CCE (2013) 32 STR 352 (Tri-Ahmd.)]

132 Appeals

132.1 New pleas such as relating to coverage under service tax is a legal plea and can be raised at any stage of the appeal proceedings. [ Siddhi Travels v. CCE (2006) 2 STR 132 (Tri-Mum)]. Similarly, question of limitation is a question of law and can be raised for the first time even at the stage of second appeal. [Euro Advertising (P) Ltd. V. CCE (2006) 2 STR 38 (Tri-Kol.)].

132.2 Section 85(4) does not authorise the Commissioner (Appeals) to issue any fresh show cause notice of the nature contemplated under section 73 of the Act for recovery of service tax. It only empowers the Commissioner (Appeals) to issue show cause notice for enhancing the service tax, interest or penalty. Thus, were the original show cause notice u/s. 73 alleged that the appellants were liable for service tax under the category of consulting engineering services, the Commissioner (Appeals) u/s. 85(4) cannot issue a notice alleging that the assessee is liable under other categories . [ Autolite (India) Ltd. v. CCE (2006) 2 STR 343(Tri.-Del.)]

132.3 Where the issues before the Commissioner (Appeals) against the order-in-original were only grant of refund by way of cheques and relief in respect of the amounts rejected by the lower authority on account of time-bar he was not expected to go into matters such as unjust enrichment which were not raised before him. Hence an appeal by the department before the Tribunal is not maintainable on a ground which is entirely new and it is not permissible for the Tribunal to consider a case laid for the first time in appeal. [CCE & ST v. Standard Chartered Bank (2006) 3 STR 751 (Tri-Bang.)].

132.4 Dispatch of adjudication order by speed post / registered post would not amount to a valid service in absence of proof of actual delivery of the speed post [Triveni Glass Ltd. v. CCE (2007) 5 STR 41 (Tri-Del.); Amidev AgroCare Pvt. Ltd v. Union of India (2012) 26 STR 299 (Bom)].

132.5 Rule 20 of the CESTAT (Procedure) Rules, 1982 which provides for restoration of the appeal disposed of ex-parte where the “appellant” afterwards shows sufficient cause for non-appearance, is not applicable to a case where the Revenue’s appeal has been upheld and none appeared for the assessee who was only a respondent. [CCE v. Yamuna Bardana Trading (2007) 6 STR 150 (Tri. – Del.)]

132.6 The miscellaneous application signed by a person having a vakalatnama is not valid. It has to be signed by the appellant. [ SBEC Sugar Ltd. vs. CCE (2008) 9 STR 573 (Tri-Del)]

132.7 Appeal to Commissioner (Appeals) - additional grounds can be added by filing an addendum before the hearing [CCE vs. Tata SSL Ltd. (2008) 9 STR 579 (Tri-Mumbai)].

132.8 Amounts pre-deposited at the time of pendency of appeal before the Tribunal is required to be refunded to the appellants on success notwithstanding that department had filed a reference before the High Court, in absence of stay by the High Court. [ Morargee Goculdas Spg. & Wvg. Mills Co. Ltd. vs. CCE (2008) 11 STR 444 (Tri-Mumbai)]

132.9 Where a compendious order was passed by lower authorities disposing of two SCNs there was no need to file as many number of appeals as the SCNs before the higher authority – a single appeal would be in order. [Escorts vs. CCE (2008) 11 STR 532 (Tri-Del.)]

132.10 Where the respondents had failed to avail the opportunity of agitating before the Tribunal by filing a cross objection, they were not allowed to raise new grounds at a later stage.[ CCE vs. Delta Elastometal Compound Pvt. Ltd. (2008) 11 STR 534 (Tri-Mumbai)].

132.11 Where the appeal was dismissed on account of non-compliance of pre-deposit and its restoration on compliance was refused by the CCE(A) the Hon’ble High Court held that it was not permissible to refuse the restoration of appeal on compliance of the pre-deposit requirement. [ Scan Consultancy vs. UOI (2008) 12 STR 108 (Guj.) see also D.K Mishra v. CCE (2011) 22 STR 241 (Tri-Del)]

132.12 The Tribunal need not decide all the grounds raised in the memo of appeal if the authorised person has appeared and argued only some of grounds therein.[CCE vs. Kothari Products (2008) 12 STR 5 (All.)]

132.13 An appeal filed even after the statutory period for which delay can be condoned by the CCE(A) is barred by limitation and cannot be saved even by Section 5 of the Limitation Act,1963, since:

the provisions of Limitation Act, 1963 apply only to courts or the forums that has trappings of the court;
under the provisions of Central Excise Act, CCE(A) is only an executive authority performing quasi judicial functions but he cannot be considered as a court or a forum having trappings of the court;
the application of Limitation Act must be held to be expressly excluded by virtue of the specific provisions in section 35 of Central Excise Act which have provided a maximum period for which delay can be condoned.

[Navinon Ltd.vs. UOI (2008) 12 STR 84 (Bom.)]

132.14 Where additional evidence was not adduced before the Tribunal by filing an application in writing to that effect under r. 23 of CESTAT (Procedures), Rules, 1982 it was held by the High Court that the order of the Tribunal rejecting the additional evidence and upholding the order of lower authorities was correct. [Kay Iron Works Pvt. Ltd. vs. CCE (2009) 13 STR 87 (Bom.)]

132.15 Appeals filed before the High Court u/s. 35G of the Central Excise Act, 1944 beyond the prescribed period of limitation in terms of section 35G(2)(a) [180 days from the date of receipt of the order] would be barred by time and the High Court would have no jurisdiction to condone the delay and entertain the appeal after the said period of limitation. Further, the language of the provisions [especially section 35G(9) – opening words] seen in conjunction with the legislative intent and the objects of expeditious disposal sought to be achieved would exclude the application of section 5 of the Limitation Act, 1963 (which provides for condonation of delay on sufficient reasons) by necessary implication. [CCE vs. Shruti Colorants Ltd. (2009) 13 STR358 (Bom)].

132.16 Appeal filed inadvertently in the office of Dy. CCE, a month in advance of the due date, which is in the same premise as that of the CCE(A), in whose office it should have been filed cannot be rejected as time-barred. [Global Telecom v. CST (2009) 14 STR 634 (Tri. – Mum.)]

132.17 Where, while passing ‘orders’, the CESTAT members differed in their opinion on some points and referred the matter to a Third member but did not give their findings on several points raised by the petitioner for which the petitioner made an application for rectification of ‘order’ before the CESTAT, which application was resisted by the Revenue on the ground that no ‘order’ came to be passed since the matter was pending before the Third member, the High Court allowed the application and held –

Orders made by the CESTAT though differing in opinion are nevertheless ‘orders’ and not merely ‘opinions’ though they may not be enforceable ‘orders’ due to absence of majority;
the rectification application before the CESTAT is maintainable and should be heard first before disposing of the reference to the Third member.

[Suzlon Infrastructure Ltd. v. Union of India (2009) 15 STR 529 (Bom.)].

132.18 The question whether a member’s club is liable for service tax on the amounts received from its members is a question ‘having a relation to the rate of service tax’ and accordingly an appeal against the order of the CESTAT would lie to the Supreme Court and not the High Court u/s. 35L of the Central Excise Act, 1944 read with section 83 of the Finance Act, 1994.[CST v. Delhi Gymkhana Club Ltd. (2009) 16 STR 129 (Del.) see also CST vs. Atria Convergence Technologies P. Ltd. (2011) 21 STR 209 (Kar.)].

132.19 Where the appellant initially did not intend to challenge the impugned order but on pronouncement of favourable decision by the Larger bench in a similar matter filed an appeal against the impugned order with a delay of more than 73 days, the Tribunal considering the same to be a sufficient cause for delay in filing the appeal condoned the delay. [Daman Polyfab vs. CCE (2010) 17 STR 276 (Tri-Ahmd.)]

132.20 Though there is no limitation of time to file an application for restoration of appeal, such an application cannot be prolonged inordinately. The Tribunal observed, since the original period for filing the appeal is itself three months, the application for restoration will have to be filed within the maximum period of three months from the dismissal of the appeal. In any case, any application filed beyond such period has to disclose cause for the delay. Thus, where the appeal was dismissed on 5.11.07 and an earlier restoration application was also dismissed on 25.6.08, a second application for restoration made on 29.8.08 without disclosing sufficient cause for delay was dismissed by the Tribunal. [KirtiKumar J. Shah v. CCE, (2011) 22 STR. 246 (Tri- Mumbai)]

132.21 In case of appeals against rejection of refund claims filed before the Tribunal, in absence of demand of duty or levy of penalty, the appellant is required to pay a minimum fee of Rs.1,000/- only under sub-section (6) of Section 35C of the Central Excise Act, 1944 [which is similar to sub-section (6) of Section 86 of the Finance Act, 1994]. The quantum of fees payable is not determinable based on the amount of refund involved. [ Morarjee Textiles Ltd. vs. CCE (2011) 22 STR 371 (Tri-Mumbai)]

132.22 The department filed an appeal before the Tribunal against the CCE(A) order on merits. The CCE(A) had without deciding on the stay application passed an order on merits since the department did not contest the assessee’s stay application. The Tribunal remanded the matter on the ground that CCE (A) was not correct in passing an order on merits without deciding the stay application. On appeal, against the Tribunal’s order remanding the case, the High Court held that the remand was incorrect since -

the department had not contested application filed by the appellant for waiver of pre-deposit before the CCE(A) and hence it is not open to them to contest it before the Tribunal; and
The sec. 35F clearly empowers the CCE (A) to dispense with pre-deposit.
Where appeal is preferred on merits, the order cannot be set aside on extraneous grounds than on merits.

The matter was remanded to the Tribunal for deciding on merits. [Annapoorna Re-rolling (P) Ltd. vs. CESTAT (2011) 22 STR 481 (Mad.)]

132.23 Appeals against the Tribunal’s order involving questions of classification of service rendered lies before the Apex Court by virtue of section 35L of the Central Excise Act, 1944, and not before the High Court u/s 35G of the said Act. [CCE v. S.S. Maritime (2011) 23 STR 114 (Kar) See also CST vs. John Flower (I) Ltd. (2012) 26 STR 301 (Kar); CST vs. Shah Polymers (2012) 26 STR 513 (Kar.)].

132.24 With regard to the question whether the assesse’s activities fall within the category of ‘clearing and forwarding agent’ services an appeal would be only before the Apex Court u/s. 35L of the Central Excise Act, 1944 and not before the High Court u/s. 35G since it is involves the determination of a question having relation to the ‘rate of duty or value of goods for the purposes of assessment’. [CST vs. Siddarth Polymers (2011) 23 STR 209 (Kar.); See also CCE vs. Rai Associates (2011) 23 STR 210 (Kar.) - question whether activity liable under CA services or business auxiliary services?; See also Prakash Freight Pvt. Ltd. (2011) 23 STR 220 (Kar.)]

132.25 In this case the High Court analysed the meaning of the expression “determination of question relating to rate of duty of excise or value of goods for the purpose of assessment” mentioned in s. 35G and 35L of the Central Excise Act, 1944 made applicable to service tax and laid out the broad disputes emanating from the order of the Tribunal wherein an appeal would lie before the Supreme Court and not before the High Court. The court further observed that the expression “rate of tax” does not mean only the rate at which tax is payable or fraction thereof but is much beyond. The disputes wherein appeal would lie to Supreme Court are as follows:

Dispute relating to the service tax payable on any service / taxable service;
The value of table service for the purpose of assessment;
A dispute as to the classification of services;
Whether those services are covered by exemption notification or not?;
Whether the value of services for the purpose of assessment is required to be increased or decreased?;
The question of whether any services are taxable service or not;
Whether any activity is a service rendering activity or not, so as to attract levy of service tax?;
Whether a particular service falls within which heading, sub-heading of Section 65(105) of the Finance Act, 1994 which defines “taxable service?”

Further it also observed that matters other than what is set above, which relates to refunds, duty drawbacks, rebates, etc., which relate to a particular manufacturer falls within the jurisdiction of the High Courts’. [CST vs. Scott Wilson Kirkpatrick (I) Pvt. Ltd. (2011) 23 STR 321 (Kar.); See also[CCE v. Chadha Auto Agencies (2013) 32 STR 265 (Kar.);]

132.26 Appeal against an order of the Tribunal holding service tax not recoverable based on the income shown in the income tax returns being a question relating to valuation, is maintainable only before the Supreme Court and not the High Court. [CST v. ALP Management Consultants P. Ltd. (2011) 24 STR 287 (Kar.)]

132.27 An appeal before the CCE(A) by a manufacturer against an adjudication order disallowing cenvat credit on input services used for payment of excise duty is to be preferred u/s. 35 of the Central Excise Act, within a period of 2 months and not u/s. 85 of the Finance Act, 1994 within a period of 3 months from the date of receipt of the order and an appeal filed beyond the said period of 2 months was held to be time barred [ Hi Tech Arai Ltd. vs. CCE & ST (2011) 24 STR 577 (Tri-Chennai)].

132.28 Power of remand is available to the Commissioner (Appeals) in cases where the assessee had no opportunity to even reply to the show cause notice and in absence of any material before the Commissioner (Appeals), it was not possible for the Commissioner (Appeals) to decide the case on merits.[ CST vs. World Vision (2011) 24 STR 650 (Del)]

132.29 Appeal against the orders of Tribunal involving questions relating to rate of duty of excise or value of goods for the purpose of assessment lies before the Supreme Court under Section 35L of the Central Excise Act, 1944 and not before the High Court [ CST. vs. Maini Material Movement Pvt. Ltd. (2012) 26 STR 106 (Kar)].

132.30 Where an appeal against the orders of Tribunal involving questions relating to levy of duty of excise or value of goods for the purpose of assessment lies before the Supreme Court under Section 35L of the Central Excise Act, 1944, appeal in respect of validity of penalty would also lie before the Supreme Court and not before the High Court [CCE v. T. D. Power Systems Pvt. Ltd. (2012) 26 STR 481 (Kar.); See also CST vs. Jindal South West Steel India Ltd. (2012) 27 STR 201 (Kar.)].

132.31 Where the issue involved was whether the appellant was required to reverse the credit on the Capital Goods removed as such or to pay the duty on the transaction value the High Court held that the same being a question relating to determination of rate of duty, the appeal in respect thereof would lie before the Supreme Court and not High Court [CCE v. Jalansarshini Pipes Pvt. Ltd. (2012) 26 STR 594 (Kar)].

132.32 Appeal against the order of Tribunal involving questions such as whether the assessee is liable to pay service tax under a particular agreement on reverse charge basis, being a question relating to rate of duty / tax appeal against the same lies before the Supreme Court and not the High Court [ CST vs. Siemens VDO Automotive Ltd. (2012) 27 STR 11 (Kar.)].

132.33 An appeal against a CESTAT order involving the question whether service of ‘testing and analysis’ is partly performed outside India and therefore qualifies as ‘exports’ is a question having a relation to the rate of service tax to be applied, and hence the appeal is not maintainable before the High Court but is to be filed directly before the Supreme Court. [CCE v. B.A. Research India Ltd. (2013) 31 STR 663 (Guj.)].

132.34 Where an appeal against the order of the Tribunal involving questions relating to rate of duty has been filed before the Supreme Court, the question of bar of limitation as well as setting aside of penalty being dependant on the question of leviability of excise duty would also lie before the Supreme Court and not the High Court. [CST vs. Jindal South West Steel India Ltd. (2012) 27 STR 201 (Kar.)].

132.35 Where the Commissioner (Appeals) held that there was a clear nexus, between input and output services and allowed cenvat credit, a mere assertion of the absence of nexus between Input and Output service without any effort to substantiate by the revenue the claim is not sufficient [ CCE vs. Mavenir Systems Ltd. (2012) 27 STR 510 (Tri. – Bang.)].

132.36 Section 84 which provided for revision of orders by the Commissioner was omitted w.e.f 19.8.2009, and in its place a new section 84 enabling the department to file an appeal to the CCE(A) against an order of the adjudicating authority was enacted. Simultaneously, on 19.08.2009 the remedy of the assessee to file an appeal before CESTAT u/s 86 against a revision order passed by the Commissioner was deleted. However, Explanation to new sec 84(3) protected the assessee’s remedy before CESTAT in respect of revision orders passed before 19.8.09. An issue arose whether in respect of revision proceedings initiated before 19.8.09 where the Commissioner passes an order u/s 84 after 19.8.09, the assessee’s remedy before the CESTAT is protected? Answering the question in the affirmative, the Tribunal held:

A Commissioner of Central Excise as revisionary authority under the old section 84 of the Finance Act,1994, could continue beyond 19-8-2009 to revise any order passed immediately before the said date by any adjudicating officer subordinate to him;
The order passed by the Commissioner in such revision proceedings under the old Section 84of the Act would be appealable to this Appellate Tribunal as if the words and figures “or section 84” had not been omitted from sub-section (1) of Section 86 of the Act;
The finding at (ii) above is based on the established premise that the lis between the Department and the assessees commenced on the dates of institution of the revision proceedings and the law prevailing on such dates would govern the maintainability of appeals against the orders-in-revision and also based on the principles laid down by the Hon’ble Supreme Court in Garikapati Veeraya’s case (AIR 1957 SC 540) coupled with the provisions of Section 6 of the General Clauses Act,1897.

[T.A. Pai Management Institute vs. CCE (2013) 29 STR 577 (Tri-Bang)]

132.37 The order of Tribunal dealt with both issues on valuation and limitation. The issue of valuation being in favour of the revenue and one on limitation being against it. On appeal to High Court , the court held that the mere fact that the appellant is aggrieved by the decision of the CESTAT on the point of limitation would not make an appeal from the impugned order maintainable before the High Court because it is not the issues raised in the appeal which are material but it is the nature of the order which is appealed against that is relevant for the purpose of determining whether an appeal would lie before the High Court or not. Since the order passed by the Tribunal which is impugned before the High Court also deals with the determination of value of the taxable service , an appeal from such an order would not lie to the High Court. [CST v. Bharti Airtel Ltd. (2013)30 STR 451 (Del)]

132.38 Where the assessee is paying excise duty as well as service tax and availing Cenvat credit on input services, inputs and capital goods, an appeal relating to any dispute involving cenvat credit must for administrative convenience be, treated as appeal filed under Central Excise. [ Wadpack Pvt. Ltd. v. CCE (2013) 31 STR 24 (Tri-Bang)].

132.39 Post 1.11.2004 no filing fees would be payable to the Tribunal in respect of appeals involving matter relating to refund or rebate [ Glyph International Ltd. v. CCE (2013) 31 STR 430 (Tri- LB)]

132.40 Dismissal of an appeal by the Tribunal for non-compliance of its stay order where an appeal by the appellant against the stay order was pending before the High Court was held to be incorrect [Saswad Mill Sugar Factory Ltd.v. CCE (2013) 32 STR 177 (Bom)].

132.41 Appeal cannot be filed in the High Court by the Revenue if the amount involved is less than 10 lakhs in view of the C.B.E. & C. Circular no. F. No. 390/Misc./163/2010-JC dated 17.08.2011. [CCE v. Fine Care Bio Systems, (2014) 33 STR 237 (Guj.)]

132.42 There is no provision for appeal to Tribunal against a revision order passed after 19.08.2009 by the Commissioner of Service Tax under section 84 of the Finance Act, 1994 [Arjun Tours & Travels Pvt. Ltd. v. CST (2014) 33 STR 413(Tri.)].

132.43 Though there is no period of limitation prescribed for filing application for restoration of Appeal, it should be filed within the maximum period of 3 months from the dismissal of appeal. [Bharati Airtel Ltd v. CCE, 2014(33) STR 524 (Tri-Chennai)]

132.44 The Commissioner (Appeals) by a stay order dated 20.06.2011 directed pre-deposit of service tax in a appeal filed before him by the assessee which the assessee did not comply. Consequently the Commissioner (Appeals) dismissed the appeal for non-compliance of pre-deposit vide order dated Dec’2012. In an appeal to the Tribunal against the order of the Commissioner (Appeals) dated Dec’2012, the Tribunal held:

The appellant is bound to pre-deposit the amount as directed and if the appellant fails to comply with the order of pre-deposit as directed his appeal is liable to be rejected for non-compliance in view of the provisions of Sec.35F of Central Excise Act.
If the appellant is aggrieved by the order of the lower appellate authority (directing pre-deposit), the assessee must seek remedy elsewhere other than this Tribunal including perhaps in judicial review but if not done so, the consequence in (i) must follow.

[Aakash Cable TV Network v. CCE 2014(33) S.T.R. 674 (Tri.-Del.)]

132.45 On a question whether an appeal against an order of CCE(A) directing pre-deposit is maintainable before the Tribunal, the Tribunal laid down the following principles –

The CCE(A) must consider an application for waiver of pre-deposit on a careful, good faith and critical analysis of prima facie merits of the case, financial hardships, irreparable injury, etc. as enunciated in ITC vs. CCE (2005) 184 ELT 347 (All.) and CCE vs. Chaitanya Educational Committee (2011) 22 STR 135 (AP).
The CCE(A) has the power to entertain an application for rectification and modification of pre-deposit ordered by him but only for rectification of an error on the face of the record.
An appeal to the Tribunal is maintainable against an order of CCE(A) –

Directing pre-deposit [“interlocutory order”] ; and

Dismissing an appeal for failure to pre-deposit [“Final order”]

While considering an appeal against the final order of CCE(A) referred to in (iii)(b) above, the Tribunal can consider the correctness of the interlocutory order passed by CCE(A) and set aside the order if found incorrect; pass an appropriate order as to pre-deposit; and remit the matter to CCE(A) for de novo consideration. It cannot adjudicate upon the merits of the appeal.

[Girnar Transformers Pvt. Ltd. v. CCE (2014) 35 STR 97 (Tri-Del.)]

132.46 Commissioner (Appeals) cannot condone a delay in filing of appeal beyond a period of 6 months from the date of service of the impugned order. [Plaza v. Jt. CCE, 2014 (35) STR 212 (Ker.)]

132.47 Even prior to 28.5.2012, appeal against an order passed by the Commissioner (Appeals) in respect of a rebate claim is not maintainable before the Tribunal. However, the Tribunal directed the registry to transfer the papers to the Joint Secretary, Government of India, Revisional authority, New Delhi to consider the same [(2014) 35 STR 76 (Tri-Mum.)

Additional Ground

132.48 An additional ground pertaining to lack of jurisdiction in issuance of the show cause notice which was neither raised at the time of adjudication nor before the lower appellate authority cannot be entertained. [Chirspal Shipping V. CCE (2014) 35 STR 1000 (Tri-Mumbai)]

Additional evidence

132.49 The presentation of brochure meant for sale first time before the Commissioner (Appeals) in order to justify availability of cenvat credit on the expenditure towards brochure cannot be held to be an additional evidence so as to be hit by Rule 5 of Central Excise Appeals Rules, 2001 [ Saboo Coatings Ltd. vs. CCE (2014) 36 STR 447 (Tri-Del.)].

132.50 A summons issued by an investigating authority under provisions of Section 14 of Central Excise Act,1944 cannot be considered to be in the nature of a decision or order as mentioned in Section 35 of the said Act and hence no appeal can be filed against the same on the ground that conduct of enquiry by Revenue is illegal and arbitrary.[Neesa Leisure Ltd. v. CCE&ST (2015) 37 STR 482 (Tri.-Ahmd.)]

133 Appeal cannot be dismissed for want of prosecution

133.1 The Tribunal cannot dismiss the appeal for want of prosecution but it must decide the appeal on merits even if appellant or its counsel is not present when appeal is taken up [Balaji Steel Re-Rolling Mills v CCE&C(2014)36 STR 1201 (SC)]

134 Pre-deposit

134.1 Where there is a composite order demanding tax and penalty, the Tribunal cannot order pre-deposit of any portion of the penalty since penalty proceedings can be initiated only after assessment of tax is final. The pre deposit can be only of tax. The pre-deposit of penalty will arise only where penalty alone is under challenge. [Spandana Spoorthy Financial Limited v. CCE&ST 2014 (35) STR 183 (AP)]

134.2 If certain amount already paid was not taken into account throughout the proceedings till the matter reached the Tribunal, there is no harm in taking such amount into consideration for determining whether the appellants have made the pre-deposit as per the order or not subject to verification by Jurisdictional Commissioner [Ramky Enviro Engineers Ltd v CCE,C&ST(2014) 36STR1278(Tri-Bang)]

135 Misc. Application

135.1 When the miscellaneous application filed for additional evidence was listed for hearing, the Tribunal took up the stay application before considering the Miscellaneous Application causing grave prejudice to the petitioner and therefore the order passed by the Tribunal was set aside [ SCV Cable Net vs. CESTAT (2014) 33 STR 144 (A.P.)]

136 Appeals – Letter from Commissioner appealable?

136.1 Pursuant to a clarification sought by the respondent-assessee the Addl. CCE vide letter dated 23.12.2004 clarified that service tax was not payable on international door-to-door courier service but the Commissioner vide letter dated 9-1-2006 stated that the clarification of the Addl. CCE was not in accordance with a Board Circular and directed the payment of service tax. On appeal, the CESTAT held that the Commissioner’s letter dated 9.1.2006 was an order but was bad in law since it did not give an opportunity to the assessee of being heard / showing cause either under section 73 or section 84. The High Court affirmed the order of the CESTAT. [Chief Commissioner, LTU,Bangalore vs.TNT India Pvt. Ltd 2010 (19) STR 5 (Kar)]

136.2 The assessee had reversed Cenvat Credit at the instance of the department but wanted to agitate the matter and requested the Asst CCE to issue a SCN which request was denied by letter dated 17.3.09. The appeal on 1.5.09 of the assessee against the said letter before the CCE(A) was rejected as time barred. On appeal, the Tribunal held that the Asst CCE’s letter dated 17.3.09 refusing to issue SCN created civil consequences and an appeal filed within 2 months from that date is not time barred u/s 35 of the Central Excise Act, 1944. [Koya & Co. Construction Pvt. Ltd v. CCE (2011) 24 STR 120 (Tri-Bang)]

136.3 Refund claim can be rejected even without issuing a show cause notice simply by issuing a letter and there would not be a violation of natural justice since the remedy to appeal against such rejection i.e. the letter is available to the assessee [Aaryan Mines and Minerals Corpn. vs. CCE (2013) 30 STR 78 (Tri. –Ahmd.) relying on CCE vs. U.P. Sheet & Metal Containers Pvt. Ltd. (1991) 51 ELT 90 (Tribunal)].

137 Appeals – Pre-deposit from Cenvat Credit

137.1 Amount debited to Cenvat credit account pursuant to adverse adjudication order is to be considered “pre-deposit” even though no stay application was filed alongwith appeal and no order for pre-deposit was made. On success in appeal recredit of pre-deposit made out of cenvat credit account cannot be denied either on the ground that credit was availed on the basis of the appellate order which is not a prescribed document for taking credit or on the ground that the appellate order did not contain the words “consequential relief”. [Samtel Electronic Devices vs. CCE (2012) 26 STR 125 (Tri. - Del.)].

138 Appeal against provisional attachment of order

138.1 The order passed under Section 73C for provisional attachment would not be appealable before the Appellate tribunal. [ Kingfisher airlines Ltd v. CST, 2013(32) STR 744 (Tri-Mum)]

139 Condonation of Delay

139.1 Where section 85 provided that the time limit for filing an appeal before CCE(A) was 3 months and the CCE(A) was empowered to condone the delay for a further period of 3 months (“condonation period”), an appeal filed beyond the condonation period would be barred by limitation, and section 5 of the Limitation Act, 1963 which provides for condonation of delays if ‘sufficient cause’ is shown without an outer limit would not apply since the provisions of the Finance Act, 1994 would override the general law governing the law of limitation. The High Court further held that in case of appeal before the Tribunal u/s 86, in absence of any express provision for condoning the delay in filing the appeal, u/s 86 the provision of Section 5 of the Limitation Act, 1963 would apply whereby the Tribunal can on ‘sufficient cause’ condone a delay without any outer limit. [Director of Mines and Geology v. C.C.E (2013) 31 STR 275 (Kar)].

139.2 Delay of 285 days and 250 days in filing two appeals respectively was condoned by the Hon’ble Tribunal considering the fact that an appeal on a similar issue of the applicant was already allowed by the Tribunal and there was no gross negligence or deliberate inaction on the part of the applicant to delay the filing of the appeal. [ARR Enterprise V. CCE, (2014) 35 STR 1004 (Tri-Chennai

139.3 In respect of refund claim filed pursuant to clause 2(f) of Notification no. 9/2009 dated 3.3.2009 available to SEZ units, the Tribunal held that since the appellants were eligible for refund claim the condonation of delay by CCE(A) was valid and the fact that it was initial period of implementation of new procedure for claiming of refund was also considered. [CCE vs. Divis Laboratories (2014) 36 STR 398 (Tri-Bang.)]

140 Rectification of CCE(A) orders

140.1 Section 35C(2) of the Central Excise Act permits only rectification of mistake in the ‘Final Order’, and not a ‘Miscellaneous Order’ passed pursuant to a Rectification Application.[C.S.T. v. Mahavir Coconut Industries (2013) 31 STR 697 (Tri – Bang.)]

141 Rectification of Tribunal orders

141.1 When the finding given in Tribunal order is after due consideration of all the issues raised, it is not open to the revenue to reargue the matter or call upon the Tribunal to review the basis of decision on the ground of non-citing of an existing judgement and failure to make enquiries. Hence the application for rectification of mistakes not tenable. [CCE v. Victor Gaskets India Ltd. (2008) 12 STR 341 (Tri. – Mumbai)]

141.2 The Tribunal held that in the absence of any express statutory provision for filing application for rectification in orders in service tax appeals disposed of by the Tribunal, such an application for rectification of tribunal order cannot be made. [CCE vs. Fairline Worldwide Express (2011) 24 STR 411 (Tri-Chennai)].

141.3 If once the order regarding the pre-deposit of duty is not complied with, the Tribunal has no power or discretion but to reject the appeal and such an order would be a final order. Also, the Tribunal cannot entertain an application for rectification of mistake in this regard for recalling its order dismissing the appeal. [V. Ramkrishna Rao v. CCC (2012) 25 STR 395 (Mad.)]

141.4 Where the Tribunal rejected the application for condonation of delay in filing rectification application as the delay was beyond 6 months as stated in section 35C(2) of the Central Excise Act, 1944, the High court held in the absence of any express reference to section 5 of the Limitation Act in the Central Excise Act or a power to condone the delay in filing a rectification application, the Tribunal cannot be considered to have committed any irregularity in rejecting an application for condonation of delay in filing rectification application on the ground that it is time barred [ CCE v. Sree Chamlundeswari Sugars Ltd. (2012) 25 STR 400 (Kar)]

142 Authority on advance ruling

142.1 Having regard to the provisions of section 96A(a) and (b), the Authority held that it is only an applicant who is yet to commence his business activity who can take the benefit of an advance ruling and not a person who has an ongoing business or an undertaking which has already commenced the business [McDonald’s India Pvt. Ltd. (2004) 165 ELT 404 (A.A.R.)].

142.2 The Authority on Advance ruling refused to modify its ruling in the applicant’s case on the ground that there was no mistake of law or fact. It held that since the Authority had recorded its findings based on the material before it there was no mistake of law or fact which is a sine qua non for modification of an advance ruling. The authority further observed that a modification in a ruling cannot be made – (i) for addressing a question [relating to quantum] which is not the subject matter of the question of the original ruling [relating to exigibility]; or (ii) due to a change in approach of the CBEC on the subject; or (iii) for clarification of some positions of the ruling which the applicant fears would be misinterpreted [In Re : Google Online India P. Ltd. (2007) 5 STR 69 (AAR)].

142.3 The applicants, ‘A’ was a subsidiary of B which in turn was a subsidiary of C, a Government Company. ‘A’ sought an advance ruling on an issue which was identical with a question in respect of B which was pending before the CESTAT. Considering that a ruling in such a case could lead to incompatible decisions concerning the same question being rendered by two different authorities, the Authority on Advance Ruling rejected the application in exercise of the discretion vested in it u/s 96D(2) of the Act [Re: GSPL India Transco LTD. 2013(29) STR 642 (A.A.R)].

143 Adjudication Order –cannot confirm demand on classification different from SCN

143.1 Where the SCN was issued seeking to demand service tax on the appellants activity under the category of ‘transportation of goods by air service’ but the adjudicating authority had confirmed the demand under the category of ‘cargo handling services’, the Hon’ble Tribunal held the impugned order had travelled beyond the scope of the show cause notice and hence the same was liable to be set aside [DHL Logistics v. CST (2014) 36 STR 874 (Tri.- Mum)].

144 Prosecution & Search

144.1 (i)In absence of any specific provision in the Finance Act, 1994, only criminal courts are competent to try the offence punishable under Section 89 of the Finance Act, 1994 in accordance with the parent Act i.e. the Code of Criminal Procedure, 1973 and not by the Commissioner, Central Excise or officers of the Central Excise Department.

Additional Advocate Generals /Public or Assistant public prosecutors/ panel lawyers of State cannot appear for the accused-assessee since administration of criminal justice has been entrusted to the office of the Advocate General.
Considering that out of Rs 2.17 crores collected and not paid, Rs 87 lakhs has been deposited and post dated cheques clearing the balance dues within 3 months has been given, the Court granted a conditional and temporary bail to the appellant subject to conditions.

[Sandeep Nair v. Union of India (2014) 33 STR 7 (Chattisgarh)]

144.2 Where the petitioner had challenged the validity of the search conducted by the Service tax Coimbatore Commissionerate when the petitioner was registered for service tax in the state of Orissa and West Bengal on various grounds the Hon’ble Madras High Court held as follows:

As regards the petitioner’s contention that the search can be conducted by the central excise authorities under which the petitioner is registered and not any other central excise officer it was held that –

it was not necessary that the search warrant can be issued only by jurisdictional authorities where the person is registered for Service tax.

a search warrant u/s. 82 can be issued by a Joint Commissioner of Central Excise or any Central Excise Officer higher in rank to him.

An order for search can be passed by the authority if it has some material based on which it believes that the person must have secreted documents relevant for the purpose of investigating the matter related to alleged evasion of service tax. It is not open for the court to examine whether the material before the authority was sufficient to reach such a conclusion.

[Chitra Construction Co. vs. Addl. CCE (2013) 31 STR 385 (Mad.)]

145 Departmental clarifications

145.1 The following propositions with respect to departmental circulars was laid by the larger bench of the Supreme Court:

Circulars and clarifications issued by the board are binding on the authorities under the respective statute but are not binding upon the courts.
When the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that Circular should be given effect to and not the view expressed in a decision of the Supreme court or the High Court.
Circulars issued by the board which run contrary to the statutory provisions have no existence in law.
The revenue can lodge an appeal taking a ground contrary to a circular if it runs counter to the decision of a court.

[CCE vs. Ratan Melting & Wire Industries (2008) 12 STR 416 (SC)]

146 Binding effect of precedents

146.1 Once the Court lays down the law that the recipient of the service is not liable for paying service tax, that law is binding on all Tribunals and Authorities functioning within the jurisdiction of the said court [A.C.Nealsen Org-marg Pvt. Ltd. vs. UOI (2009) 16 STR 259 (Bom)]

146.2 Where the Revenue challenged a decision of the Tribunal in a case before the High Court, though it had not challenged the Tribunal’s decision in another case involving a similar issue, it was held by the High Court that the Revenue is not precluded from taking such a contrary / different stand where –

there is a “just cause”; or
it is in public interest to do so; or
when a pronouncement of the higher court is different and / or divergent views are expressed by the Tribunals or High Courts (other than jurisdictional high court).

[Shiva Taxfabs Ltd. vs. UoI (2011) 24 STR 525 (Del.)]

146.3 A Board circular treating a decision of the Tribunal as being relevant only to the facts of that case and not a binding precedent is incorrect and liable to be struck down [Shiva Taxfabs Ltd. vs. UoI (2011) 24 STR 525 (Del.)].

147 Recovery

147.1 The revenue cannot proceed to recover dues if the stay application for waiver of pre-deposit of the said dues is pending before the Tribunal. [FCM Travel Solutions(India) Pvt. Ltd. vs Commissioner of service tax 2010 (18) STR 24 (Tri-bang.); See also Malu Sleepers Pvt. Ltd. v. CCE (2011) 22 STR 364 (Tri-Bang)]

147.2 The department has no authority to use coercive measures to collect any amount of tax in advance at the time of raid. It can legitimately do so only at the time of recovery proceedings when tax liability has been ascertained by following the procedure of issue of show cause notice and not before that. Thus where the assesee had to make a compulsory payment towards tax in advance at the time of raid and in absence of any show cause notice issued by the department, the Hon’ble High Court held that the department had no right to do so and accordingly ordered the amount to be refunded.[ Naresh Kumar & Co. vs. UOI (2010) 19 STR 161 (Cal.);Chitra Builders P. Ltd. v. CCE (2013) 31 STR 515 (Mad.)]

147.3 Where the department had issued notice to ONGC u/s. 87(b)(i) of the Finance Act, 1994, for recovery of service tax on services provided by certain manpower supply agencies to ONGC without passing assessment orders crystallising the service tax liability of the manpower supplying agencies the High Court held that, only after an assessment order has been passed and the assessees have defaulted in payment of assessed tax, the department has powers to issue notice to ONGC u/s. 87 and not before that.[O.N.G.C. Ltd. vs. DyCCCEST (2010) 19 STR 164 (A.P.)]

147.4 The Delhi High Court held that no proceedings can be initiated by the department against assessee for payment of tax on renting of immovable property where the matter is in appeal before the Supreme Court (by the department) and there is no order passed by the Supreme Court staying the operation of the High Court order in appeal. [SSIPL Retail Ltd vs. UOI (2010) 18 S.T.R. 262 (Del.)]

147.5 In a writ petition challenging the validity of Circular No. 967/01/2013-CX, dated 1-1-2013 which mandates the department to initiate recovery proceedings inter alia in the following situations–

where appeal alongwith the stay application is filed with the appellate authority [CCE(A) or CESTAT] and no stay is granted within 30 days after filing; and
immediately on confirmation of demand by the Commissioner (Appeals) or Tribunal or High court although the time-limit of filing further appeal alongwith stay application has not expired, the High Court held as follows:

As regards situation (1), it was held that recovery proceedings cannot be initiated where the assessee’s application for stay has remained pending for reasons beyond his control such as unavailability of the officer concerned before whom the stay application is filed, absence of bench before CESTAT for decision of stay application etc. However, if application for stay has remained pending for more than a reasonable period, due to default/improper conduct of an assessee, recovery proceedings can well be initiated.

As regards situation (2), it was held that recovery proceedings cannot be initiated unless the specific time limit prescribed by the law for filing the further appeal alongwith with the stay applications does not expire.

Further, the Court also suggested the Finance Ministry to keep track of stay applications and other adjudication/appellate proceedings by use of modern technology so as to dispose of the appeals /stay applications expeditiously.

[Larsen & Toubro Ltd. vs. UOI (2013) 29 STR 449 (Bom.)] See also [PML Industries Limited v. CCE (2013) 30 STR 113 (P&H)],[Metlife India Insurance Co. Ltd. v. UOI (2013) 30 STR 234 (Kar)],[Manglam Cement Ltd. v. Superintendent of CE (2013) 30 STR 225 (Raj.]

147.6 Where the department freezed the bank accounts of the assessee after the issue of SCN but before adjudication the court held -

Section 87 is one of the methods of recovery of the amount due and payable only after adjudication is done and the amount due and payable by the assessee is quantified and not at the Show Cause Notice stage.
There is no power to freeze the Bank accounts u/s 87 (b). At the most, the money due payable after adjudication can be claimed from the bank.

[ R.V. Man Power Solution v. CCE, 2014(33) STR 23 (Uttarakhand)] [ See Technomaint Contractors Limited v. Union of India (2014) 36 STR 488 (Guj.)

148 Reimbursement of service tax under a contract not conditional upon payment by the service provider

148.1 In case where the service recipient contended that he would pay service tax only upon the service provider first paying the service tax the court dismissing his contention directed –

the service recipient to pay the service tax along with interest @ 18%; and
the service provider to deposit the service tax amount with the department.

Further, this fact was considered as reasonable cause for not depositing the service tax in time and accordingly penalty proceedings were quashed. [ Introspective Detective Pvt. Ltd vs BSNL 2010 (18) STR 3 (All.)]

149 Voluntary Compliance Encouragement Scheme (VCES)

149.1 The VCES declaration of the petitioner was rejected since there was a small shortfall in the 50% tax dues payable by 31.12.2013. The petitioner prayed for restoring the VCES declaration on his paying the shortfall with interest. The Court held that the VCES scheme makes no difference between tax dues which are short paid due to bonafide error and one which flows from deliberate inaction. There is no power for waiving or relaxing the condition of depositing 50% tax dues by 31^st December, 2013 u/s 107.Courts have no jurisdiction in this matter and accordingly the petition was disposed. [Ramilaben Bharatbhai Patel v.UOI, 2014(35) STR 695 (Guj)]

149.2 ‘Declaration’ under VCES requires 2 conditions :

The proceedings for declaration or recovery of ‘tax dues’ should not be pending as on 1.3.2013;
Tax should not have been deposited before that date.

Thus, where assessee pursuant to an investigation started on 8.3.2013 paid certain amounts on 15.4.2013 though before the promulgation of VCES on 10.5.2013, it was held that the declaration of VCES for such amounts were valid. [Sadguru Construction Co. v. Union of India (2014) 36 STR 3 (Guj)]

149.3 Where summons were “issued” on 26.02.2013 and 28.02.2013 though they were served after 01.03.2013, an enquiry would be said have been “initiated and pending” on 01.03.2013 u/s 106(2) of Finance Act, 2013 (VCES) and accordingly the assessee’s declaration under VCES is liable to be rejected [Sweta Sales Corporation v.UOI (2015)37 STR 167 (Guj.)]

149.4 An order under the VCES passed by the Deputy Commissioner is appealable under Section 86 of the Act to the Tribunal [Barnala Builders & Property Consultants v. Dy. CCE & ST (2014) 35 STR 65 (P&H)]

VII CENVAT CREDIT

150 Cenvat credit

General

150.1 Even if a job-worker’s services to a manufacturer are exempt under notification no 8/2005-ST, where a job-worker has forgone exemption and paid service tax, the manufacturer is eligible for Cenvat credit in respect of service tax paid to the job-worker [ CCE vs Laxmi Metal Pressing works Pvt. Ltd. 2010 (18) STR 149 (Tri-Mumbai.)].

150.2 Where there was no dispute as regards the receipt of services and payment of service thereon, Cenvat credit cannot be denied on the ground that invoices were not in accordance with rule 9 of Cenvat Credit Rules, 2004 read with rule 4A of Service Tax Rules, 1994 as it stood during the period under consideration i.e. prior to 1.03.2007. [Electrotherm (India) Ltd. v. CCE (2013) 31 STR 43 (Tri-Ahmd)]

150.3 Cenvat credit can be utilized by a manufacturer of excisable goods to pay service tax that is payable by him as a service receiver on the goods transport services availed by him. [CST v. Nova Petrochemicals Ltd. (2013) 31 STR 735 (Tri – Ahmd.)].

150.4 Credit of service tax paid on outward transportation of final product from the place of removal till it is delivered to the customer is admissible as being a service in relation to ‘clearance of final product from the place of removal’ prior to 1.4.2008.[Commissioner v. Ellora Time Ltd (2014) 34 STR 801 (Guj)]

150.5 As per Rule 4(7) of Cenvat Credit Rules, 2004, the Cenvat credit shall be allowed, on or after the day on which payment is made of the value of input service and the service tax paid or payable as per the invoice. There is no requirement that the service tax should have been deposited by the service provider before the availment of the credit. If the service provider has not deposited the service tax with the department on due date, Revenue’s remedy lies at the end of the service provider for recovery of the service tax along with interest. [General Manager B.S.N.L v. CST (2014) 36 STR 445 (Tri- ) On Similar facts it was held that the cenvat credit cannot be reduced if service provider deposits lesser amount of tax into the credit of Government(Kiran Motors Ltd. Vs. CCE (2014) 36 STR 172 (Tri-Ahmd)].

Capital Goods

150.6 Where the capital goods were installed in the factory premises and were in a position to be used at any time, Cenvat credit on the capital goods cannot be denied for the mere reason that the said capital goods could not be made functional. [CCE vs. Seat Metal Components India (P.)Ltd. (2008) 10 STR 108 (Tri-Bang)]

150.7 Where on facts it was found that, the fly-ash extraction plant situated away from the factory was neither a captive plant nor was the fly ash exclusively used by them, the Cenvat Credit of duty paid on capital goods used in the flyash extraction plant would not be admissible. [ India Cements Ltd v. CCE (2011)24 STR 94)]

150.8 Where duty paid capital goods purchased by the assessee were destroyed by fire and the insurance company paid compensation equivalent to the value of the goods and excise duty paid thereon, there is no need to reverse credit availed and utilized in respect of the capital goods destroyed [ CCE v. Tata Advanced Materials Ltd. (2012) 26 STR 600 (Kar)].

150.9 Where the appellants had availed Cenvat Credit on capital goods which while in use were destroyed by flood and thereby cleared as scrap on payment of duty on the amount realised [as per the provisions of rule 3(5A) as it stood then], no demand could be raised either on the ground that the duty was payable on the insurance compensation received by treating it as the value of capital goods or on the basis of ‘depreciation method’ which was introduced only in 2011 [Total Oil India Pvt. Ltd. vs. CCE (2013) 29 STR 334].

150.10 Availment of credit of countervailing duty paid on purchase of capital goods prior to issuance of service tax registration certificate (though application was made before purchase) cannot be denied in absence of specific provisions denying such credit. [GlobalDigital ColorLab v. CCE (2013) 31 STR 382 (Tri-Del)]

150.11 Cenvat credit on installation charges of doors is not admissible when such doors were not proved to be capital goods under any tariff entry under the Central Excise tariff Act, 1985. [Nectar Lifesciences Ltd.(Unit –I) v.CCE (2013) 32 STR 659( Tri-Del.)]

Inputs

150.12 Where the appellants entered into two agreements with a contractor - one for supply of components and parts and the other for erection at the appellant’s site, the Tribunal held that credit of duty paid on parts and components which were used in setting up of the plant at the appellant’s site was fully admissible and the department’s contention that the components and parts were inputs of the contractor who supplied and assembled them at the manufacturer’s site since it is he who used it to manufacture the plant is incorrect. [Rajarambapu Patil SSK Ltd. v. CCE (2008) 11 STR 437 (Tri-Mumbai)]

150.13 Where the inputs (viz. brake assemblies) purchased by a manufacturer of automobiles were directly transported to the processor (to save costs) for being fitted with rear/front axels, and thereafter received in the factory of the manufacturer, Cenvat credit cannot be denied on the inputs merely because it was not received physically in the factory. [CCE v. Hindustan Motors Ltd. (2012) 25 STR 292 (Tri-Del)]

150.14 Where the duty charged by the supplier of inputs and paid to him by the purchaser (assessee) was in excess of the amount payable on the said inputs, the High Court held that in absence of refund of such excess duty to the supplier of inputs, the assessee – purchaser of inputs would be eligible to claim credit of entire duty paid [V.G. Steel Industry v. CCE (2012) 27 STR 94 (P&H)].

150.15 Bought out tool kits sold alongwith manufactured two wheelers are ‘accessories’ of final product i.e. Motor Vehicles especially since rule 138 (4) (b) of Central Motor Vehicle Rules, 1989 mandates every driver to carry a tool kit and accordingly would qualify to be ‘input’. Accordingly, cenvat credit on bought out tool kits would be available [Hero Motocorp Ltd. vs. CCE (2012) 27 STR 473 (Tri. – Del.)].

150.16 Cenvat Credit availed on inputs used for manufacturing activities can be utilized for payment of service tax on GTA services, there being no bar / legal restriction in the Cenvat Credit Rules in this regard prior to 1.3.08 [Panchmahal Steel Ltd v. CE& ST (2014) 34 STR 351 (Tri-LB)]

150.17 (a)Where the SCN denied cenvat credit on paints, thinners and welding electrodes alleging that the same would not qualify as inputs, but the demand was confirmed on the grounds that assessee has not produced evidence with regards to its use, the Tribunal held that, confirmation of demand being beyond the scope of SCN, the same was not permissible. Further, relying on the judgment of the Chattisgarh High Court in Ambuja Cement Eastern Ltd. [256 ELT 690] and Hindustan Zinc Ltd. [228 ELT 517], the Tribunal allowed credit on welding electrodes which could either be used for fabrication of paints or for repairs and maintenance.

(b) Cenvat credit on H.R. coil, M.S.Bar, M.S.Plate, G.C.Sheets, M.S.Angles, Channels and steel items to the extent they have been used in fabricationof supporting structure would not be admissible and to the extent it has been used in fabrication of machinery or its parts would be admissible.[ DSM Sugar vs. CCE (2013) 31 STR 210 (Tri-Del)]

Inputs / Capital Goods

150.18 Excise duty paid on ‘Tippers’ used for providing excavation, site formation, etc., services is not available since -

Tippers are not ‘capital goods’ for the assessee since -

they are classifiable under Chapter 87 and not under Chapter 82, 84, 85, 90 or other goods specifically included in the definition of ‘capital goods’ as per rule 2(a); and

he is not one of the service providers for whom ‘motor vehicles’ qualifies as capital goods as per rule 2(a).

Tippers are not ‘inputs’ since ‘motor vehicles’ are specifically excluded from the definition of inputs.

[Ganta Ramanaiah Naidu vs CCE 2010 (18) STR 10 (Tri-Bang.)].

150.19 Cenvat credit of excise duty paid on cement and TMT Bars used for construction of warehouses by the assessee, a storage & warehouse keeper, would be admissible since without a storage facility, storage and warehousing services could not be provided by the assessee [ CCE vs. Sai Sahmita Storages (P) Ltd. (2011) 23 STR 341 (AP)]

150.20 The Tribunal relying on judgment in case of Spenta International Ltd. v. Commissioner (2007) 216 ELT 133 (Tri.-LB) held that eligibility of Cenvat credit on capital goods is to be determined with reference to the taxability of the output service on the date of receipt of such capital goods. Thus, Cenvat credit on capital goods received on 5.5.2005 for providing ‘construction services’, which subsequently became taxable w.e.f. 16.6.2005, cannot be allowed [CCE v. Aneri Construction (2012) 28 STR 578 (Tri.-Ahmd.)].

150.21 The assessee, a cellular telephone services provider had availed Cenvat Credit of duty paid on: (i) ‘Towers’ built for supporting antennas including parts thereof; (ii) ‘Prefabricated buildings’ (PFBs) which housed transmission equipments; (iii) Printers; and (iv) Office chair. The claim was made on the basis that the above would be eligible as ‘capital goods’ or ‘inputs’. The revenue denied credit. On appeal, the Tribunal denied the claim of the appellants by observing as follows:

1. ‘Towers’ including parts thereof:

The assessee contended that the ‘site’ (called ‘cell-cite’) where the towers were erected including the PFBs together formed an integrated system classifiable under chapter 8525 of the Central Excise Tariff Act and therefore were ‘capital goods u/r. 2(a)(A)(i). Hence the ‘towers’ being ‘components’ of ‘cell-site’ are capital goods u/r. 2(a)(A)(iii). The Tribunal dismissed this contention on the basis that the site is an ‘immovable property’ – a non-excisable item, and hence not capital ‘goods’.
The ‘towers or its parts’ also cannot be considered as ‘component’ of the ‘antennas’ [which are capital goods u/r. 2(a)(A)(i)] since a ‘component’ means something which enters the composition of another article or its constituent part. Towers do not enter the composition of antennas nor are they a constituent part of the antennas and hence would not be capital goods u/r. 2(a)(A)(iii).
The towers or parts thereof cannot be considered as an ‘accessory’ of the antenna since an ‘accessory’ is generally understood to be a supplementary, subordinate, additional or extra thing that is added to make something more useful, effective and convenient. It is absurd to hold that a huge gigantic immovable structure like tower is an accessory of small equipment (antenna) that is placed on its top. Further, the expression ₹component, spares and accessories' used in Rule 2(a)(A)(iii) should be understood as standing for movable goods only and ‘towers’ being immoveable property would not qualify.
Further, towers being an ‘immovable property’ – a non-excisable item cannot be held as ‘goods’ (i.e. moveable property) and hence cannot be classifiable as ‘inputs’ u/r. 2(k) used for providing output services.
Further, the Explanation 2 to rule 2(k) which includes within the ambit of ‘inputs’, goods used in the manufacture of captively used capital goods by a ‘manufacturer’ but excludes cement, angles, CTD / TMT bars, etc. used for construction of factory shed or for building or laying foundation or making of structures for support of capital goods is applicable only to ‘manufacturers’ and not to ‘service providers’. Hence this Explanation is not relevant to the present case.

2. PFBs, pirnters and Office Chairs:

Since PFBs and Office chairs are classifiable under Chapter 94 which has not been specified in Rule 2(a)(A)(i) the same cannot be considered as ‘capital goods’ under rule 2(a)(A)(i) or (iii). As regards printers, though they are classifiable under Chapter 84 (a specified chapter) since there was no sufficient nexus between printers and the cellular telephone service provided by the assessee, they could not be regarded as ‘capital goods’.
Further, printers and office chairs could also not be regarded as ‘inputs’ in absence of nexus between them and the cellular telephone service provided by the assessee.

Hence cenvat credit on the above items was held to be inadmissible [Bharti Airtel Ltd. vs. CCE (2013) 29 STR 401 (Tri. — Mumbai)][Also see Bharti Airtel Ltd. v. CCE, (2014) 35 STR 865 (Bom.)

150.22 Removal of inputs from the factory premises for providing output services does not warrant reversal of cenvat credit in view of the proviso to sub-rule (5) of Rule 3 of the Cenvat Credit Rule, 2004 [Protech Galvanizers & Fabricators Pvt. Ltd. v CCE (2013) 31 STR 298 (Tri- Del)]

Input Services

150.23 Where the assessee used internet services in its factory at Satna but the bill was addressed to and paid by its head office at Mumbai, the Tribunal held that the internet services were used for information relating to manufacture, sale and dispatch instructions and hence the input credit is not deniable. [Universal Cable Ltd V. CCE (2007) 80 RLT 821 (Tri.-Del.); See also CCE v.DNH Spinners (2009) 16 STR 418 (Tri.-Ahmd.)

150.24 The appellants generated power in their power plants situated 200 kms away from their factory and supplied the same to Gujarat Electricity Board in consideration whereof they were permitted to withdraw electricity for their factory from the power grid on payment of fixed wheeling charge. On the question whether credit of service tax paid on maintenance and repair services consumed in their power plants would be admissible the Tribunal observed that the transaction of delivering power to the grid and sale of power from the grid are two distinct transactions and there was no direct nexus between the services received within the power plant and goods manufactured within the factory by the appellants and hence credit was not admissible. { Ellora Times Ltd. vs. CCE (2009) 13 STR 168 (Tri-Ahmd.) See Contra Rajratan Global Wires Ltd. vs. CCE (2012) 26 STR 117 (Tri. – Del.) [wherein in a similar circumstance the Tribunal held that credit would be admissible since – (i) the windmill though situated at a distance from the factories of the appellant were in the nature of captive power plant; and (ii) there was a clear nexus between the electricity generated by wind mills of the appellant and that used for running factories of the appellant]; Hindalco Industries Ltd. vs. CCE (2012) 27 STR 401 (Tri. – Del.) wherein [the Tribunal allowed credit holding that the power plant was a captive power plant as per section 2(8) of the Electricity Act, 2003 and based on the judgment in case of Vikrant Cement vs. CCE (2006) 197 ELT 145 (SC) the power plant supplying power exclusively to its manufacturing unit will be treated as one integrated unit and cenvat credit of service tax paid on insurance policies concerning power plant situated would be allowable]; Maharashtra Seamless Ltd. v. CCE (2012) 25 STR 167 (Tri – Mumbai)}.

150.25 The definition of input service has been expanded by the words “and includes” basically for the reason that the service which are enumerated after the words “and includes” are those services which may not be as directly or indirectly relatable to manufacture but yet the intention is to provide the benefit of credit of service tax paid on such services as Cenvat Credit. Thus, service tax paid on services relating merger (which is basically for financing), issuance of NOC by the bank for borrowing, custody fees (relating to share registry) and maintenance of fax machines at the residences of company’s executives are all covered by the inclusive clause of the definition. [Aditya Birla Nuvo Ltd. v. CCE (2009) 14 STR 304 (Tri.-Ahmd.)]

150.26 Though the contents of advertisements made by the appellants, a manufacturer of ‘concentrates’, essentially featured the ‘bottle of aerated waters’, the bottles being the final products manufactured by bottlers and not the appellants, the High Court held that the credit on advertising services received by the appellant cannot be denied on the ground that the advertisement is not of the final product of the appellants viz., ‘concentrates’ but is of ‘aerated waters’ which are manufactured by bottlers. The High Court laid down the following propositions –

so long as the manufacturer can demonstrate that the advertisement services availed have an effect or impact on the manufacture of the final product and establish the relationship between the input service and the manufacture of final product, credit must be allowed. In the present case, Court held that the advertisement of soft-drink enhanced the marketability of the concentrate [ Pepsi Foods Ltd. v. CCE (2003) 158 ELT 552 (SC); Philips India Ltd. v. CCE (1997) 91 ELT 540 (SC) ; and Explanatory Notes to HSN – heading 21.06 relied on].
The definition of “input service” which is expressed in the form of ‘“means” … and “includes”…..’, would cover even those services in the ‘inclusive’ part which otherwise would not come within the ambit of the ‘means’ part.
The phrase “activities relating to business such as accounting, auditing, financing,....” are words of wide import. The expression ‘such as’ is illustrative and not exhaustive of services related to ‘business’. The word ‘business’ is also of wide import and cannot be given a restricted definition to say that business of a manufacturer is to manufacture final products only. In the present case, the business of the appellant would include apart from manufacture of concentrates, also entering into franchise agreements with bottlers, permitting use of brand name, promotion of brand name, etc. The expression ‘relating to further widens the scope of the expression ‘activities relating to business’ and therefore all activities (essential or not) in relation to a business would fall within the ambit of input service and in the present case all activities having a relation with the manufacturer of a concentrate would fall within the definition of input service.
Service tax is a value added tax and a consumption tax and the burden of service tax must be borne by the ultimate consumer and not by any intermediary i.e. the manufacturer or service provider. In order to avoid the cascading effect cenvat credit on input stage goods and services must be allowed as long as a connection between the input stage goods and services is established. Conceptually as well as a matter of policy, any input service that forms a part of value of final product should be eligible for the benefit of cenvat credit. In the present case, since the advertising cost forms part of the assessable value the assessee is eligible to take credit of tax paid on advertising services.
The definition of ‘input service’ under rule 2(l) can be conveniently divided into the following five independent limbs :

Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products,

Any service used by the manufacturer whether directly or indirectly, in or in relation to clearance of final products from the place of removal,

Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory,

Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,

Services used in relation to activities relating to business and outward transportation upto the place of removal.

Each of the above limbs of the above definition is an independent benefit/concession. If an assessee can satisfy any one of the above, then credit on input service would be admissible even if the assessee does not satisfy the other limbs.

[Coca Cola India Pvt. Ltd. v. CCE (2007) 15 STR 657 (Bom.);NTF (India) Pvt. Ltd. v. CCE (2013) 30 STR 575 (Tri-Del); Delta Energy Systems v. CCE (2013) 31 STR 684 (Tri - Del.); ].

150.27 Where an assessee was engaged in the business of manufacturing cement and claimed credit on outdoor catering services availed by it for the purpose of provision of canteen facility to the workers of the factory, the Bombay High Court allowed the credit holding as follows:

The definition of “input service” as per Rule 2(l) of Cenvat Credit Rules, 2004 (insofar as it relates to the manufacture of final product is concerned), consists of three categories of services. The first category, covers services which are directly or indirectly used in or in relation to the manufacture of final products. The second category, covers the services which are used for clearance of the final products up to the place of removal. The third category, includes the following services :

Services used in relation to setting up, modernization, renovation or repairs of a factory,

Services used in an office relating to such factory,

Services like advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs;

Activities relating to business such as, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit relating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal.

Thus, the definition of ‘input service’ not only covers services, which fall in the substantial part, but also covers services, which are covered under the inclusive part of the definition.

The definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product.
The expression “activities in relation to business” in the definition of “input service” postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufacture of final product, the service would not qualify to be an input service under Rule 2(1) of the Cenvat Credit Rules, 2004 .
The judgment of the Apex Court in Maruti Suzuki Ltd. (supra) would not apply in its entirety because unlike the definition of ‘input’, which is restricted to the inputs used directly or indirectly in or in relation to the manufacture of final products, the definition of ‘input service’ not only means services used directly or indirectly in or in relation to manufacture of final products, but also includes services used in relation to the business of manufacturing the final products.
The assessee carried on the business of manufacturing cement by employing more than 250 workers and mandatorily required under the provisions of the Factories Act, 1948 to provide canteen facilities to the workers. Failure to do so entails penal consequences under the Factories Act, 1948. To comply with the above statutory provision, the assessee had engaged the services of a outdoor caterer. Thus, in the facts of the present case, use of the services of an outdoor caterer has nexus or integral connection with the business of manufacturing the final product viz., cement. Hence, the assessee is entitled to the credit of service tax paid on outdoor catering service. However, credit of service tax would not be allowable to a manufacturer in cases where the cost of the food is borne by the worker.

[CCE v. Ultratech Cement (2010) TIOL 745 (Bom.) / (2010) STR 577 (Bom) See also CCE vs. Hindustan Coco Cola Beverages Ltd. (2012) 27 STR 440 (Tri. – Del.);]

150.28 Any service to be construed as “input service” must satisfy the main part of the definition that it should be ‘used for the manufacture’ including those that are specifically mentioned in the inclusive part of the definition. The Tribunal further held that –

credit of tax paid by the appellant, a manufacturer of steel, on the membership of Sponge Iron Manufacturers Association would not be entitled to credit
credit on tax paid by the appellant on – (i) security services at railway siding where the raw materials were loaded / unloaded; (ii) rent-a-cab services and (iii) mobile telephone services would not be available to the appellant on the ground that the appellant did not adduce any evidence that the said services were used for manufacture of products.

[Vikram Ispat v. CCE (2009) 16 STR 195 (Tri – Mum.)]

150.29 Cenvat credit on “input services” cannot be denied on the ground that they are incurred outside the factory premises. [CCE vs H.E.G Limited 2010 (18) STR 56 (Tri-Del.)].

150.30 Cenvat credit of service tax paid on Rent-a-cab services, Outdoor catering, Air Travel agent services, and Telephone/mobile services and Steamer agent services was held allowable as being ‘activity relating to business’. [Semco Electrical Pvt. Ltd. vs CCE 2010 (18) STR 177 (Tri-Mum.) relying on Coca cola India Pvt. Ltd vs CCE (2009) 15 STR 657 (Bomb);Maruti Suzuki vs CCE (2009) 240 ELT 641 (SC) distinguished].See also Emcon Technologies India Pvt Ltd v. CCE (2013)31 STR 441 (Tri- Bang)

150.31 Where the appellant, a manufacturer, had received the taxable services prior to 10.09.04 [before the Cenvat Credit Rules, 2004, (“Credit Rules”) came into force] but had paid the service tax thereon to the input service provider post 10.09.04 and availed cenvat credit the Tribunal held that the same was not permissible since –

under Rule 3(1) of the Credit Rules, a manufacturer of final product shall be eligible for credit on only those input services which are received on or after 10.09.04; and
credit of Service tax in terms of the transitional provision of sub-rule (1) of Rule 11would also not be admissible since input service credit was available only to service providers and not to manufacturers.

[Ajay Poly Pvt. Ltd. vs. CCE (2011) 22 STR 535 (Tri-Del.)].

150.32 Credit of service tax paid on a reverse charge basis on the marketing fees paid to foreign service providers who had been engaged for promotion of assessees products abroad is admissible [Syntel International Pvt Ltd v. CCE (2013)30 STR 679 (Tri-Mum); See also CCE v. Hindalco Industries Ltd. (2013) 30 STR 535 (Tri-Ahmd.)]

150.33 The appellant, a manufacturer of cigarettes, supplied tobacco seeds free of cost to the farmers and under an agreement with a third party, paid the third party for providing expert supervisory and advisory services to the farmers for cultivation of Tobacco. On the issue whether cenvat credit on the services provided by the third party was available to the appellants, the Tribunal held that –

The appellant who entered into the agreement, paid for it and included the cost of such service in their cost of production was the recipient of services.
the service had a nexus with the manufacturing of cigarettes.

Accordingly the Tribunal allowed cenvat credit on the above services [VST Industries Ltd. v. CCE (2013) 31 STR 357 (Tri- Bang)].

150.34 Where the appellants engaged in the manufacture of carbonated beverages and aerated water had availed architectural services for putting in place rain water harvesting system for harnessing water, which was an important input in its manufacture activity, the Tribunal held that the architectural services had nexus with the business activities of the appellant and hence the appellants were eligible for taking Cenvat credit on the architectural services. [Pepsico Holdings Pvt Ltd v. CCE (2013)31 STR 499 (Tri-Bang)]

150.35 Where the department denied Cenvat credit availed on the strength of insurance policy, the Tribunal observed as follows

according to Rule 4A of Service Tax Rules, 1994, in case of banks, financial institutions and NBFCs, an invoice includes ‘any document’ by whatever name called whether or not serially numbered whether or not containing address of the person receiving taxable service but containing other information in such document as required under sub-rule 4A of the Service tax Rules; and
The terms ‘Invoice’, ‘bill’ or ‘challan’ have not been defined but the statute only provides for the details that are required to be given in such documents. Therefore what is required to be seen is whether the document on the basis of which the credit has been taken, shows all the necessary details or not. And where the document does not contain all the details, whether it is covered by provisions which empower the proper officer to allow the credit even when there are deficiencies in such documents.

Since the Tribunal found that the insurance policy contained serial no., service tax and cess credit it was held that credit could not be denied.

[CCE v. Shree Khedut Sahakari Khand Udyog Mandli Ltd, (2013) 31 STR 555 (Tri. – Ahmd.)]

150.36 The appellant had paid service tax on input services as a receiver of service and also availed cenvat credit on the same. However, it was later on decided that they were not liable to pay service tax and consequently the lower authorities disallowed the cenvat credit. Matter went in appeal to the Tribunal where it was held that at the relevant time, the Revenue was of the view that service tax was to be paid as a receiver of service and thus credit taken in such cases cannot be disallowed in view of a subsequent decision to the contrary. [Aksh Technologies v. CCE (2013) 31 STR 700 (Tri – Del.)].

150.37 The appellant, extracted oil with associated gases from oil wells and transferred it to offshore “well platforms” (connected to the oil wells through pipelines) and then to offshore “process platforms” (connected to well platforms) for processing. The crude (oil and gas) at this point which was in a semi–stabilized condition was an exempted product which was partly sold to other refineries and partly transferred to its on–shore plant (connected to process platforms) to obtain downstream excisable products. The assessee availed Cenvat credit of input services received in its offshore locations (well heads, well platforms, process platforms, etc.) which was denied by the Revenue on the ground that the input services were exclusively used for manufacture of exempt products viz., crude oil and gas in a semi-stabilised condition. On appeal, the High Court relying on Escorts Ltd. vs. CCE (2004) 171 ELT 145 and CCE vs. Solaris Chemtech Ltd. (2007) 214 ELT 481 (SC) held that –

Manufacture of dutiable products at the on–shore plant is fundamentally premised on the manufacturing process that commenced at the off–shore plants;
The input services used at the off–shore plants is used by the appellant manufacturer “directly or indirectly in or in relation to” manufacture of dutiable products at its on–shore plant.

Accordingly, the High Court allowed Cenvat credit on input services but subject to the qualification that it would be required to comply with the discipline and rigour of Rule 6 and would be entitled to take Cenvat Credit only on the quantity of input service which is used in the manufacture of the ultimate dutiable product. [ONGC v. CST, 2013(32) STR 31 (Bom)]

150.38 Where the appellant had proposed to enter into manufacturing of herbal products, for which they had availed R&D services but due to business exigencies had to abandon the venture it was held that since the definition of “input services” and “final products”, both require the “use” of input services to manufacture of final products, the credit of service tax paid on R&D services which did not materialize into manufacture of excisable products would not be available. Further interest u/s 75 would also be payable for wrong availment of cenvat credit in view of the judgement of the Supreme Court in Ind-Swift Laboratories Ltd. (2011) 265 ELT 3(SC). However penalty u/r 15 was held to be not imposable. [Lyka Labs Ltd v. CCE, Surat, 2013(32) STR 79]

150.39 In this case the Tribunal held as follows:

Cenvat Credit availed on Input services such as lawn mowing, garbage cleaning, maintenance of swimming pool, collection of household garbage, harvest cutting, weeding etc., which were availed by the assessee company for maintenance of the residential staff colony of the assessee company situated in a remote location, is admissible as being directly and intrinsically linked to the manufacturing activity of the assessee company since in absence of provision of accommodation to its employees it was not feasible for the assessee company to carry out its manufacturing activity.
The assessee company engaged in the manufacture of paper and paper boards had distributed saplings grown in its in-house plantation department to the farmers for cultivation so as to buy back the same when fully grown into trees for using it in its manufacturing activity. It had availed cenvat credit on maintenance services used in relation to maintenance of –his plantation which was denied on the ground that same was not an activity relating to manufacture of its final product. On appeal the High- Court held that since the assessee could not acquire its own land for cultivation and wood being an important input for the manufacture of final product, the assessee's activity of distributing sapling cannot be said to be activity unconnected with the manufacturing activity of the assessee and hence cenvat credit on maintenance of plantation was held to be admissible.

[CCE. V. ITC Limited (2013)32 STR 288 (A.P)]

150.40 Cenvat Credit of service tax paid by the assessee manufacturer on services for dismantling and handling of unusable material used for repair or renovation of factory machinery and pipes is admissible being specifically covered in the definition of input service. [Hindustan Zinc Ltd v. CCE, 2014(33) STR 71(Tri-Del)]

150.41 No Cenvat credit is permissible in respect of services utilized only in the activity of trading of components and on services which are utilized only for export of such traded items which were not used in the stream of manufacture [Crossword Agro Industries vs. CCE (2014) 33 STR 185 (Tri. – Ahmd.)]

150.42 Cenvat credit of service tax paid on professional and liaison fees incurred for claiming export incentive under the EXIM policy is admissible since the export incentives are taken into account for determining the cost of goods manufactured for export and hence the same can be considered as activity relating to manufacture [CCE v. Ahmedabad Strips Pvt. Ltd. (2014) 33 STR 291 (Tri-Ahmd)]

150.43 Where, the assessee manufactured, erected and installed machines for their clients providing a 6-8 month warranty, it was held that repair services availed by the assessee for repairing the machines of its customers during the warranty period is an input service and credit of service tax paid on such services is admissible [Zinser Textile Systems Pvt. Ltd. v. CCE (2014) 33 STR 301( Tri-Ahmd)]

150.44 Where the appellant was under a statutory obligation under Uttar Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1953 to provide shelter and other facilities to its workers, cenvat credit on various services used in relation to civil construction work of labour hutments, Kisan Shed or dismantling of old structures, etc. was held to be admissible [Bajaj Hindusthan Ltd. v. CCE (Meerut-I ) (2014) 33 STR 305 (Tri-Del)]

150.45 The appellant in the present case had availed Cenvat credit on works contract services and consultancy services of civil engineer used for setting up of its Unit No. 2 and utilized the same for discharging the liability of its Unit No. 1. On facts, the Tribunal held that though credit in respect of setting up of factory could have been available to Unit No. 1, since the appellant had obtained separate registration in respect of Unit No. 2 cenvat credit on above services ought to have been taken only in Unit No. 2. Further, since even after reversal of credit, sufficient balance was available in cenvat credit account and in view of the fact that the assessee was not required to intimate the details of such utilization to the department, the Tribunal held that there being no suppression of facts the extended period of limitation was not invokable.[Chintamani Lamination v. CCE (2014) 33 STR 327 ( Tri-Ahmd)]

150.46 Where the department had sought to deny credit of service tax paid by the appellant as recipient of services on warehousing services availed abroad the Tribunal held that no service tax can be levied and collected on such services rendered and received abroad and since tax was not payable, the appellants merely have taken credit of what was not payable by them and accordingly the denial cannot be justified. [Sundaram Clayton Ltd. v. CCE (2014) 33 STR 414(Tri.-Chennai)]

150.47 (i)Cenvat credit on the service of dismantling a plant is not admissible as such input service does not give rise to any tangible output.

(ii)Cenvat credit on services in relation to laying of roads is not admissible since no intimate connection with manufacture was clearly brought out. [Nectar Lifesciences Ltd.(Unit –I) v.CCE (2013) 32 STR 659( Tri-Del.)]

150.48 The definition of input services is wide enough to include the services of arranging Finance for running business. Credit allowed. [ Rico Castings Ltd v. CCE (2013) 30 STR 374 (Tri-Del)]

150.49 When the invoice clearly shows the name of the appellants and the amounts has been paid on their behalf, there is no dispute that the Cargo Handling Services has been received by them. Credit is admissible. [Royal Touch Aluminium Pvt. Ltd v. CCE (2013) 30 STR 375 (Tri-Ahmd)].

150.50 Where the revenue had sought to disallow Cenvat credit on input services used by the assessee at its head office on the ground that such services were not availed at its place of manufacture, the Tribunal allowed credit on the ground that –

the definition of input service does not restrict itself to the services availed for manufacturing activities only but gets extended to the services used relating to business; and
there was no stipulation that input services must be provided or received in the Factory of manufacturer.

[National Engineering Industries Ltd v. CCE (2013) 30 STR 511 (Tri-Del)].

150.51 The availability of the Cenvat Credit in respect of duty paid by the job worker has already been considered by the Tribunal in the case of Multi-Organic Pvt Ltd which held that the job worker is entitled to the exemption under Notification No 8/2005 and if he has not availed the exemption the service tax credit is admissible to the person who availed the services of the job-worker.[Royal Touch Aluminum Pvt. Ltd v. CCE (2013) 30 STR 375 (Tri- Ahmd)]

150.52 The respondents were entitled to treat CHA service as ‘input services’ under rule 2(l) of the CCR 2004 as these services were used for clearance of excisable goods from the ‘place of removal’[CCE v. Pokarna Ltd. ( 2013)30 STR 379 (Tri-Bang)]

150.53 Credit of service tax paid on outward transportation of final product from the place of removal till it is delivered to the customer is admissible as being a service in relation to ‘clearance of final product from the place of removal’ prior to 1.4.2008.[Commissioner v. Ellora Time Ltd (2014) 34 STR 801 (Guj)]

150.54 Credit of service tax paid on transportation of goods from factory to depot (place of removal) is admissible. The Court concurred with Tribunal’s observation that the submission of the Revenue that the CENVAT credit cannot be allowed for service if the value thereof does not form part of the value subjected to excise duty runs counter to the fundamental concept of Service Tax laid down in All India Federation of Tax Practitioners’s case. [ CST v. Grey Gold Cements Ltd. (2014) 34 STR 809(AP)

150.55 Where the assessee rented a premises and provided the same to its job-worker (a separate entity), it was held that cenvat credit on the rent paid is not admissible since it is not a service used by the assessee in relation to its business. [New Allenberry Works vs. CCE (2014) 35 STR 544 (Tri-Del.)]

150.56 Where the assessee who was a manufacturer as well as commission agent, had utilized the cenvat credit availed on inputs for payment of service tax liability on its output services which was disallowed by the Revenue, the Tribunal held that the same was permissible and was in accordance with Cenvat Credit Rules, 2004 [CCE v. Thangavel & Sons (P) Ltd. (2015) 37 STR 144 (Tri-Chennai)]

150.57 Cenvat credit in respect of expenditure incurred on inputs such as CHA services, airport services, port services, etc. allowed in case of export since for exports, place of removal is port [Ballarpur Industries Ltd. v. CCE (2014) 36 STR 1122 (Tri. – Mumbai)]

Air Travel Agent Service

150.58 Credit of service tax paid on Air ticket service charges (air travel agent services) since it is used for the company’s business. [ CCE v. Fine Care Biosystems (2009) 16 STR 701 (Tri. – Ahd.)]

150.59 Credit of service tax paid on air travel fare incurred for the purpose of company’s business is admissible. [CCE v. DCW Ltd (2011) 22 STR 214 (Tri-Chennai)]

150.60 (i) Cenvat credit on Travel Agent’s services availed by the officers of the assessee company in connection with the company business is admissible.

Services of maintenance of the head office being an activity relating to manufacturing business of the assessee, Cenvat credit thereon is admissible.

[Jindal Pipes Ltd. v. CCE, (2013) 31 STR 588 (Tri. – Del.)] See also [Goodluck Steel Tubes Ltd. v CCE 2013(32) STR 123 (Tri-Del)]

Broad casting Service

150.61 Where the revenue had sought to deny credit of service tax paid on broadcasting services availed by the assessee on the grounds that the broadcasting company were engaged by the advertising agency appointed by the appellant and the payment of the services were also made by the advertising agency, the Hon’ble Tribunal observed that the invoices of Broadcasting company clearly mentioned appellant as the advertiser and the advertising agency acted on behalf of the appellant and also that in the subsequent period the Commissioner has allowed the Cenvat Credit on broadcasting and hence the Tribunal held that cenvat credit thereon was admissible to the appellant [Indian Oil Corporation Ltd v. CCE (2014) 36 STR 833 (Tri-Del)]

Business Auxilary Services

150.62 Cenvat credit of service tax paid under business auxiliary services on follow-up services for installation of captive power plant is allowed being ‘services in relation to setting up or modernization of factory’ which are specifically covered in the input service definition. [ Monnet Ispat & Energy Ltd. vs. CCE (2010) 19 STR 417 (Tri. – Del.)]

150.63 Credit of service tax paid on business auxiliary services availed for preparation of pre-shipment and post-shipment documents in respect of export of final products is admissible [Ucal Fuel Syestem Ltd v. CCE (2011) (23) STR 276 (Tri-Chennai)].

150.64 Where nexus has been established between business auxiliary services received from foreign and domestic commission agents and clearance of goods from the ‘place of removal’. Business auxiliary services are input services.[CCE v. Pokarna Ltd (2013) 30 STR 379 (Tri-Bang)]

150.65 Commission paid for selling activity is part of sales promotion and credit is admissible under the broad category of sales promotion – specifically covered in definition of input services. [CCE v. Remi Metals Gujarat Ltd., (2014) 36 STR 158 See also CST v. Shree Kamrej Vibhag Khand Udyog Sahakari Mandli Ltd. (2014) 36 STR 814 (Tri- Ahmd)].

150.66 Where the appellant a commission agent of liquor products of various manufactures also undertook promotional activities, provided infrastructural support and also performed clearing and forwarding agent’s services to some of the manufacturers the Tribunal held that the services were in the nature of business auxiliary services and hence cannot be considered as commission agent’s services exempt under Notification No. 13/2003-ST dated 20.6.2003 [Anupama Wine Distributors v. CCE, (2014) 35 STR 392 (Tri- Bang)]

Chartered Accountant’s services

150.67 Cenvat credit on Chartered accountants services availed for verification of stock of final product lying with the distributors for the purpose of giving quantity discounts to the distributors is admissible as cenvat credit [CCE v. Hindustan Coca-Cola Bevrages Ltd. (2011) 23 STR 268 (Tri-Del)]

150.68 Credit of service tax paid on Chartered Accountant’s service accounting and auditing of the transactions of the assessee is admissible since auditing and accounting has been specifically included in the definition of input service [Utopia India Pvt. Ltd v. CST (2011) 23 STR 25 (Tri- Bang)]

150.69 Credit on Chartered Accountant’s services is admissible since accounting and auditing is specifically covered under the scope of input service as provided under Rule 2(l) of Cenvat Credit Rules. [CCE v. DRP Malleables Pvt Ltd, 2014(33) STR 521 (Tri-Del)]

Clearing and forwarding agent’s services:

150.70 Where the goods exported have been sold on FOB/CIF basis the Tribunal held that the load port would be the “place of removal” and accordingly, credit of service tax paid on CHA services availed for facilitating clearance of goods from the place of removal (i.e. load port) would be admissible. [ CCE vs. Adani Pharmachem P. Ltd. (2008) 12 STR 593 (Tri-Ahmd) See also Beekay Engg. & Castings Ltd. (2009) 16 STR 709 (Tri. – Del.); Adani Pharmachem (P) Ltd. vs. CCE (2010) 20 STR 386 (Tri-Ahmd.);Stovec Industries v. CCE (2014) 33 STR 155 (Tri.Ahmd)].

150.71 Credit of service tax paid on clearing and forwarding agent’s services availed for clearance of final product from the factory to port for export is admissible. [Heera Overseas (P) Ltd. v. CCE (2012) 26 STR 545 (Tri. – Bang.) relying on Rawmin Mining and Indus. Ltd. v. CCE (2009) 13 STR 269 (Tri. – Ahmd.)].

150.72 Clearing and Forwarding Agency service provided in connection with the export of goods being exempt from payment of service tax, credit of service tax paid thereon is eligible for refund.[Semco Electric Pvt. Ltd. v. CCE (2013) 30 STR 572 (Tri- Mum)]

Cargo handling services

150.73 Credit of service tax paid on cargo handling services utilized for the export of final product from the place of removal (port in this case and not the factory gate) till the goods left India from the port is admissible as being a service in relation to ‘clearance of final product from the place of removal’ [Central Excise v. Inductotherm India P. Ltd. (2014) 36 STR 994 (Guj.)]

Cleaning Services

150.74 Cleaning services undertaken in the factory premises provides hygienic atmosphere which is a pre-requisite for manufacturing activity and is also integrally connected with the manufacturing activity. Hence Cenvat Credit of service tax paid on the said service is allowable [ Paper Products Ltd. v. CCE (2013) 30 STR 310 (Tri.-Mumbai)].

Services of clubs or associations

150.75 Cenvat Credit of service tax paid by the appellant on club membership fee for its Directors (who individually were members of the club) is not admissible in absence of any evidence that they hold their business meetings in the club for which the directors took membership of the club. [ Jai Corporation Ltd v. CCE (2011) 22 STR 222 (Tri – Mum)]

Commission Agent’s services

150.76 Services of commission agent being in the nature of sales promotion, cenvat credit of service tax paid thereon is admissible as input credit. [ CCE vs. Bhilai Auxiliary Industries (2009) 14 STR 536 (Tri-Del.); See also Lanco Industries Ltd vs. CCE 2010(17) STR 350 (Tri-Bang);Cadila Healthcare Ltd vs C.C.E 2010(17) STR 134 (Tri-Ahmd); CCE vs. Rightway Fabrics Pvt. Ltd. 2011 (24) STR 505 (Tri-Del);Vishal Pipes Ltd v. CCE (2013)30 STR 378 (Tri-Del);M.K. Industries v. CCE (2013) 31 STR 59 (Tri-Ahmd.);Seksaria Biswan Sugar Factory Ltd. v . CCE (2014) 33 STR 292 (Tri-Del)]

150.77 Credit of service tax paid on Commission Agent’s services is allowed as input credit in full. The services cannot be split so as to allow credit on pre-clearance activities (procuring of orders) and disallow credit on post-clearance activities (collection of monies). [ Pan Asia Corporation vs. CCE (2009) 16 STR 587 (Tri-Mumbai)]

150.78 Credit of service tax paid on the services received from commission agent for selling DEPB scrips is not allowed since no nexus exists between the service availed for selling DEPB scrips and the manufacture of pharmaceutical products. [Shasun Chemicals & Drugs Ltd v. CCE (2011) 21 STR 536 (Tri- Che.)]

150.79 Cenvat credit on commission paid to agents for sales was allowed as being in the nature of “sales promotion” which is expressly mentioned in the inclusive part of the definition of ‘input service’ [Wadpack Pvt. Ltd. vs. CCE (2013) 30 STR 51 (Tri. – Bang.) relying on Commissioner vs. Ultratech Cement Ltd. (2010) 20 STR 577 (Bom.)].

150.80 Cenvat credit on service tax paid on commission to the commission agents is inadmissible in view of the Gujarat High Court judgement inCadila Healthcare Ltd. Penalty cannot be imposed if the assessee had a bona fide belief that Cenvat credit was admissible. [ CCE v. Paras Motors Mfg. Co. (2013) 31 STR 81 (Tri-Mum);CST v. Astik Duestuff P. Ltd. (2013) 31 STR 459 (Tri-Ahmd)]

150.81 Credit of service tax paid in respect of Business Auxiliary Service provided by Commission Agent is admissible. [CCE v. DRP Malleables Pvt Ltd, 2014(33) STR 521 (Tri-Del)]

150.82 Service of commission agent availed by manufacturer for procuring sales orders is in the nature of ‘sales promotion’ which is specifically covered in the inclusive part of ‘input service’ definition and is also an activity related to business of manufacturer and hence eligible for Cenvat Credit [ Birla Corporation Ltd. v. CCE (2013) 30 STR 320 (Tri.-Delhi)].

150.83 Commission Agent Service used for canvassing and procuring orders being in the nature of sales promotion, credit of service tax paid thereon is admissible. [Bajaj Hindustan Ltd v. CCE (2013)30 STR 675 (Tri-Del)]

150.84 Where the appellant manufacturer had paid service tax as a recipient of foreign commission agent services used for procuring export orders, the Tribunal held that Cenvat credit of service tax paid on commission paid to overseas commission agents is admissible [Century Rayon v CCE (2014) 33 STR 427 (Tri.-Mum)]

150.85 Input service Credit of commission paid for procuring sales orders is eligible-

Prior to 01.04.2011- as procuring sales was an activity in relation to the business of manufacture of final products ; and
Post 01.04.2011 – since it is covered under the term “advertisement or sales promotion” appearing in the definition of input service [Reliance on Circular No. 943/4/2011- CX dated 29.04.2011].

[Birla Corporation Ltd. v. CCE (2014) 35 STR 977 (Tri-Del.)]

150.86 Credit of service tax paid on brokerage to brokers/ commission agent appointed for sale of finished goods is admissible since the assessee has availed services of brokers before clearance of goods from factory. [CCE vs. Indorama Synthetics (I) Ltd. (2010) 20 STR 626 (Tri-Mumbai); See also CCE vs. Ambika Forgings (2010) 20 STR 662 (Tri-Del.)]

150.87 Credit of service tax paid on commission paid to the overseas agent for the purpose of canvassing and procuring order is admissible being sales promotion activities. Since the tax was paid as a recipient of services the appellant is correct in taking credit on the basis of TR-6 challans in terms of rule 9(1)(e) of the Cenvat Credit Rules, 2004. [CCE vs. Ambika Overseas (2010) 20 STR 514 (Tri. – Del.)]See also [CCE v Forgings & Chemicals Industries (2014) 34 STR 238(Tri.-Del.); Klipco Pvt. Ltd. vs. CCE (2014) 34 STR 461 (Tri-Mum)]

150.88 Input credit in respect of services of procuring sales order and collecting payment from customers was held to be eligible being “activity relating to business” and hence covered by the definition of input services. [Nav Bharat Tubes Ltd. vs CCE 2010 (18) STR 470 9Tri-Del.)].

Construction services

150.89 Input credit of tax paid on ‘construction services’ for construction of compound wall around the factory is admissible since on facts the compound wall is an integral part of the factory. [CCE vs Raymond Zambaiti Pvt Ltd 2010 (18) STR 734 (Tri-Mumbai)]See also [ Nirma Ltd. v. CCE& ST (2013) 32 STR 622 (Tri- Ahmd.)]

150.90 Cenvat credit of tax paid on Construction services availed for construction of workers quarters and ‘Vastuwall’ within the factory premises would not be admissible since the same does not have any relationship with the manufacturing activity of the appellants. However, construction services availed for construction of godowns within the factory premises for storing of inputs and finished goods being an activity relating to business, cenvat credit of tax paid thereon is admissible [Polylink Polymers (P) Ltd v. CCE (2013)31 STR 457 (Tri-Ahmd)]

150.91 Cenvat credit on construction services used for construction of coal shed in the factory premises for storing of coal which is used in manufacturing of final product viz., sponge iron is held to be an input service [Hi Tech Power & Steel Ltd. v CCE (2014) 34 STR 276 (Tri.-Del.)]

150.92 The appellant had availed cenvat credit on construction services used for construction of factory building, installation of plant and machinery etc. during the period Feb 2010 to Dec 2010. The bills for the above services and the payment in respect thereof were made prior to 01.04.2011 but the credit was taken on 28.4.2011. The department sought to deny credit on the basis of 2 grounds –

post 1.4.2011 input services specifically excluded construction services; and
the services received were neither directly or indirectly related to manufacture of final product.

Since the services were received prior to 1.4.2011, the Tribunal held that cenvat credit on the same was allowable in view of the Board Circular No. 943/04/2011-CX dated 29.4.2011. It also held that the construction activity supports manufacture both directly and indirectly [ISMT Ltd v. CCE (2015) 37 STR 148 (Tri-Mum)]

Courier (inward freight)

150.93 Credit of service tax paid on courier (inward freight) is allowed [CCE v. Beekay Engg. & Castings Ltd. (2009) 16 STR 709 (Tri. – Del.); See also Cadila Healthcare Ltd vs C.C.E 2010(17) STR 134 (Tri-Ahmd)].

150.94 Credit of service tax paid on Courier Services used for placing orders, filing quotations for procurement as well as marketing, dispatch instructions, issuing cheque for procurement, sending stock transfer documents to depots, receiving dispatch instructions from marketing, depots, head office etc. is admissible since the services have been used in relation to manufacture and clearance of final product as well in relation to its business activities.[CCE vs. Apar Industries Ltd. (2010) 20 STR 624 (Tri-Ahmd.); See also Meghachem Industries vs. CCE (2011) 23 STR 472 (Tri- Ahmd.);Hindalco Industries Ltd v. CCE (2013) 32 STR 433 (Tri-Ahmd)]

150.95 Where the appellant had taken cenvat credit on courier services used for sending documents, demand drafts, etc and not for dispatch of final product, the Tribunal held that the same was admissible [Meghmani Organics Ltd. v. CCE (2012) 26 STR 555 (Tri-Ahmd.)].

150.96 Cenvat Credit on courier services used for sending samples to the customers and correspondence with the head office is admissible being activities related to the manufacturing business [CCE vs. Parle International Pvt. Ltd. (2012) 28 STR 111 (Tri.-Ahmd.) See also CCE v. Topworth Steels Pvt Ltd (2012) 26 STR 420 (Tri. – Del.)].

150.97 Cenvat Credit of service tax paid on courier services used for sending samples to the customer or for correspondence between HO and factory is admissible [Parle International v CCE (2014) 33 STR 477(Tri.-Ahmd.)]

150.98 Goods which are cleared under specific rate of duty or in terms of MRP declaration the place of removal would be factory and cenvat credit on service tax paid on courier services for despatch of their goods to the customers from the factory is not admissible [Hero Motorcorp Ltd. v. CCE (2014) 36 STR 1128 (Tri.-Del.)]

Custom House Agents Services

150.99 Custom house agent’s services availed for clearance of goods exported does not have any nexus with the manufacturing and clearance of the final products from the factory and hence tax paid on custom house agent services is not eligible for cenvat credit. [Nirma Ltd. vs. CCE (2009) 13 STR 64 (Tri-Ahmd.)]

150.100 Where the goods have been exported by the appellant on FOB basis retaining ownership till the delivery of goods on board the vessel, the ‘load port’ would be the place of removal and hence CHA service upto sea port would be treated as input service (being services used for clearance of goods upto the ‘place of removal’) [Fiamm Minda Automotive Ltd v. CCE, (2011) 22 STR 210 (Tri- Del) see also Leela Scottish Lace Pvt. Ltd.. vs. CCE. (2010) 19 STR 69 (Tri. – Bang.); CCE vs. Fourrts (I) Laboratories Pvt. Ltd. (2010) 19 STR 86 (Tri. – Che.); MTR Foods Ltd. v. CCE (2011) 22 STR 342(Tri – Bang); Meghachem Industries vs. CCE (2011) 23 STR 472 (Tri- Ahmd.)].[Also see Commissioner v. Dynamic Industries Ltd, 2014(35) STR 674 (Guj)] See Ballarpur Industries Ltd. v. CCE (2014) 36 STR 1122 (Tri. – Mumbai)

150.101 Cenvat Credit on Overseas Commission Agent’s Service not allowable following Commissioner v. Cadila Healthcare Ltd 2013(30) S.T.R. 3(Guj). [Commissioner v. Dynamic Industries Ltd, 2014(35) STR 674 (Guj)]

150.102 Cenvat credit in respect of Custom House Agent service used for clearance of imported inputs used in the manufacture of dutiable finished goods is admissible. [Nelsun Paper Mils Ltd. vs CCE 2010 (18) STR 648 (Tri-Chennai)]

150.103 The appellants had availed credit on basis of debit notes issued by Customs House Agent to the appellant in respect of service tax paid by the Cargo Handling Agency to Kandla Dock Labour Board/ Kandla Port Trust on behalf of the appellant. There was no documentary evidence or contract to the effect that CHA was working as an agent of the appellant. There was no mention in the debit note that service is being provided by the CHA for the appellant. Hence, since the appellant has not directly availed services from Kandla Dock Labour Board/ Kandla Port Trust the Tribunal held the credit was not admissible. [Friends & Friends Shipping Pvt Ltd v. CE &ST, Rajkot, 2014(35) STR 811 (Tri-Ahmd)]

150.104 (i) Cenvat Credit on Clearing charges paid to Customs House Agent by a manufacturer for clearing his export goods [where place of removal is the port] is admissible.

Credit of service tax paid on Commission Agent’s Services, Material Handling Charges, Terminal Handling Charges, Bank Commission Charges, Aviation charges and Courier Services by a manufacturer in the course of its business activity is admissible.

[JSW Steel Ltd v. CCE (2014) 36 STR 801 (Tri-Mumbai) see also Jotindra Steel and Tubes Ltd v. CCE (2014) 36 STR 672(Tribunal)]

Dry Cleaning Services

150.105 Wearing of clean uniforms / clothing is mandatory under Drugs and Cosmetics Act for personnel engaged in the manufacturing of medicaments or drugs. Hence, said services are relating to business and cenvat credit of tax paid on same is allowed [CCE vs. Fourrts (I) Laboratories Pvt. Ltd. (2010) 19 STR 86 (Tri. – Che.)]

Expenditure for employees entertainment

150.106 On facts, the Tribunal held that ‘event management services’ availed for celebration by employees on expansion of plant cannot be said to ‘activity related to business’ in the absence of evidence to prove that the event was organised for sales promotions/advertisements and hence input credit of service tax paid on such services is not eligible. Before the above conclusion the Tribunal observed that “any expenses incurred relating to business activity would be treated as input service cannot be accepted, unless it is established by evidence that the service was rendered for the purpose of business include advertisement or sale promotion….” [Hindustan Zinc Ltd vs CCE 2010 (18) STR 33 (Tri-Del.)].

150.107 Credit on services used for organizing employee picnics would not be allowable, since they do not have any nexus with the business activity. [ L’oreal India Pvt. Ltd. vs. CCE (2011) 22 STR 89 (Tri. – Mum.)]

Expenses of employees’ residential colony

150.108 Where the appellant’s factory for manufacture of cements was located at remote places without any facilities for accommodation and stay of their employees, and the appellants had constructed residential colonies for its employees so that their employees are available to them on the spot in order to maintain continuity of manufacture it was held that management, maintenance or repair services used by the appellants in the residential colonies are “input services” being relatable to business of the assessee and service tax paid on such maintenance and repair services is entitled to input credit. [ Manikgarh Cement vs. CCE&C (2008) 9 STR 554 (Tri-Mumbai)].

150.109 Credit of service tax paid on security agency services engaged by the appellants with regard to the residential colony of its employees which is in proximity to the factory is admissible. [GHCL Ltd. vs. CCE (2009) 16 STR 588 (Tri-Ahmd.) relying on Manikgarh Cement vs. CCE (2008) 9 STR 554 (Tribunal); See also CCE v. Hindustan Zinc Ltd. (2009) 16 STR 704 (Tri. – Bang.). Contra CCE vs. Ultra Tech Cements Ltd. vs. CCE (2009) 16 STR 611 (Tri-Mumbai) – In this case the Tribunal disallowed the Cenvat Credit on security agency services engaged by the appellants with regard to the residential colony of its employees on the following grounds –

(i) Services mentioned in the inclusive part of the definition of “input service” have also to satisfy the parameters laid down in the main (general) part of the definition. The two parts are not independent of each other.

(ii) Provision of security in a residential colony is not one of the activities relating to business of the appellant and, in any case, no nexus between the security and the business of manufacturing excisable products has been established.

See also CCE vs. Gujarat Heavy Chemicals Ltd. (2011) 22 STR 610 (Guj.); CCE v. Ultratech Cement Ltd, 2014(33) STR 501 (Guj)]

150.110 On facts, the tribunal held that, where the appellant owing to business exigencies maintained a residential colony for staff (sale and purchase of land in the vicinity of the factory being prohibited), all the services availed for maintaining the staff colony would qualify as input service being “activities relating to business”. [ITC Ltd vs C.C.E 2010 (17) STR 146 (Tri-Bang)]

150.111 Where an assessee engaged in the business of manufacturing cement claimed credit of service tax paid on account of repairs, maintenance and civil construction services used in the residential colony of the assessee on the ground that the said services were ‘activities relating to the business’, the Bombay High Court denied the credit and held as follows :

(i) the expression ‘activities relating to business’ in Rule 2(l) of CENVAT Credit Rules, 2004 refers to activities which are integrally related to the business activity of the assessee and not welfare activities undertaken by the assessee;

(ii) rendering taxable services at the residential colony established by the assessee for the benefit of the employees, is not an activity integrally connected with the business of the assessee.

[CCE vs. Manikgarh Cement (2010) 20 STR 456 (Bom.)]See contra[Shree Cement Ltd v. CCE (2013) 32 STR 416 (Tri-Del)].

150.112 Cenvat credit of service tax paid on construction of staff quarters is allowed on the ground that staff quarters are premises of the bank and input services include services used in the premises of output service provider [The Lakshmi Vilas Bank Ltd. vs. CCE (2010) 19 STR 40 (Tri.-Che)]

150.113 Credit of service tax paid on inspection charges for constructing staff quarters admissible. [Port Officer, Gujarat Maritime Board vs. CCE (2010) 19 STR 282 (Tri-Ahmd.); See also Ultratech Cement Ltd. Vs. CCE (2011) 22 STR 578 (Tri-Ahmd.)]

Garden Maintenance

150.114 In absence of even a remote nexus between the manufacture of excisable goods and garden maintenance service and since the same was not used either directly or indirectly in relation to the manufacture or clearance of final product cenvat credit paid thereon was inadmissible. [ GKN Sinter Metals Ltd. vs. CCE (2009) 16 STR 615 (Tri-Mumbai) see also Kirloskar Oil Engines Ltd. v. CCE (2009) 241 ELT 474 (Tri. Mum.); H.E.G Ltd vs CCE 2010 (17) STR 178 (Tri-Del); Stanadyne Amalgamations Pvt. Ltd v. CCE (2011) 22 STR344 (Tri-Chennai)]. However,per contra cenvat credit of service tax paid on garden maintenance services was allowed as being activity relating to business’ relying onCoca Cola case. Further, the Tribunal dismissed the argument of Revenue that Maruti Suzuki case had impliedly overruled the Coca Cola case, since in Maruti Suzuki case the court was considering the definition of “input” which in the inclusive part also contains the condition that the inputs must be “used in relation to manufacture of final products” and hence the definition of “input” is not inpart materia with that of “input sevices”. [ISMT Ltd. v. CCE & C – 2010-TIOL-27-CESTAT-Mum; See alsoMillipore India Ltd. vs. CCE (2009) 13 STR 616 (Tri-Bang.) Affirmed in CCE vs. Millipore India Ltd. (2012) 26 STR 514 (Kar.); L’oreal India Pvt. Ltd. vs. CCE (2011) 22 STR 89 (Tri. – Mum.); Rane TRW Steering Systems Pvt. Ltd. vs. CCE (2010) 19 STR 251 (Tri-Chennai); CCE v. Nutrine Confectionery Co. Ltd. (2012) 26 STR 556 (Tri-Bang.); Biesse Manufacturing Co. Ltd. v. CCE (2012) 26 STR 546 (Tri-Bang.);Nirma Ltd. v. CCE& ST (2013) 32 STR 622 (Tri- Ahmd.)]

150.115 Cenvat credit of service tax paid on garden maintenance services is allowable being activity relating to business. [I.S.M.T.Ltd. v. C.C.E&C (2010) 20 STR 68 (Tri. – Mumbai). Maruti Suzuki case [240 ELT 641(SC)] was held not applicable since in Maruti Suzuki case the court was considering the definition of “input” which in the inclusive part also contains the condition that the inputs must be “used in relation to manufacture of final products” and hence the definition of “input” is not in pari materia with that of “input services”. See also Kirloskar Oil Engines Ltd. v. C.C.E (2010) 20 STR 30 (Tri. – Mumbai)]

150.116 Cenvat credit availed on the garden maintenance service and repair of freezer installed in canteen is admissible being input services used ‘in relation to the manufacture of final product’ or ‘in relation to the business activity’. The Tribunal further held that since there are no contrary decisions there is no need to refer the issue to a Larger Bench. [Reliance Industries Ltd v. CCE (2010) 19 STR 823 (Tri-Mum). Case law analysis: (i) ISMT Ltd v. CCE (2010) TIOL 27 (Tri-Mum) and SEMCO Electricals v. CCE (2010) 18 STR 177 (Tri-Mum) relied on . (ii) Kirloskar Oil Engineers Ltd.v. CCE (2009) 247 ELT 734 (Tri-Mum) being set aside by Bombay High Court and remanded back to the Tribunal, held, cannot be followed. (iii) Vikram Ispat v. CCE (2010) 19 STR 52 (T ri-Mum) only follows Kirloskar case and hence cannot be followed. (iv) CCE v. Manikgarh Cements (2010) 18 STR 275 held not on same facts. Consequently, the matter was not referred to Larger Bench]

150.117 Credit of Service tax paid on insurance premium for insurance of company’s vehicles used by the company’s senior officials for company’s work and for commuting between the residence and the factory is admissible since it is an activity related to business. [DCM Engineering Products v. CST, 2014(33) STR 522 (Tri-Del)]

150.118 Cenvat credit of service tax paid on manpower recruitment services used for maintenance of garden within the factory premises using treated industrial and domestic sewage water, was held to be admissible where it was a statutory requirement under the consent given by the Karnataka State Pollution Control Board (KSPCB).[Brakes India Ltd. vs. CCE (2010) 19 STR 524 (Tri-Bang.)]

150.119 Credit of service tax paid to interior decorator towards garden development and to manpower supplier for supply of manpower for gardening activity is admissible [CCE vs. Nirma Ltd.(2010) 20 STR 346 (Tri-Ahmd.) relying on Millipore India Ltd. vs. CCE (2009) 13 STR 616 ₹(Tri-Bang.)]See also[Murugappa Morgan Thermal Ceramics Ltd. vs. CCE (2014) 33 STR 181 (Tri-Ahmd.)]

150.120 Jungle cutting service availed by the appellant for the purpose of keeping the environment bacteria free in the surroundings of the factory is a service for their business of manufacturing and accordingly credit of tax paid on the jungle cutting service is allowable. [L’oreal India Pvt. Ltd. vs. CCE (2011) 22 STR 89 (Tri. – Mum.)]

150.121 A garden creates a better atmosphere and environment which increases the working efficiency and hence credit of service tax paid on garden maintenance is allowable. [Balkrishna Industries Ltd vs CCE 2010 (18) STR 600 (Tri-Mumbai)]

150.122 Where the assessee was allowed to manufacture goods and discharge the effluents within his factory premises subject to maintenance of a green belt (garden), the cenvat credit of service tax paid on garden maintenance services utilized by the assesseee was held allowable. [ CCE vs. Voith Turbo Pvt. Ltd. (2011) 21 STR 52 (Tri. – Bang.)]

150.123 Cenvat credit of service tax paid on landscaping services would not be admissible relying on Tyco Sanman [CCE v. Chemplast Sanmar Ltd. (2011) 24 STR 71(Tri- Chennai)]

Goods Transport Agency Services

150.124 “Input service” is defined as any service used by a manufacturer whether directly or indirectly “in or in relation to” -

“manufacture” of final products; and
“clearance” of final products from the place of removal, and includes amongst other things “outward transportation upto the place of removal”. On a question whether “transportation services” availed by a manufacturer for transporting his goods from his factory to the customer’s premises would be “input services”, the Tribunal answered in the negative and held as follows:
1. Such transportation services cannot be said to be used “in or in relation to the manufacture” of the goods since ‘‘manufacture” completed in the factory is an anterior process to such transportation.
2. Such “transportation” starts from where “clearance” ends. The term “clearance” under the relevant provisions of the Central Excise Act or under common parlance does not include “transportation”. Hence such transportation is not a service used directly or indirectly “in the clearance” of final products from the place of removal.
3. A service can be said to be used, directly or indirectly, “in relation to the clearance” of final products when the service has at least remotely aided the clearance of the final products or when the clearance of the final products would have been facile in the absence of the service. Outward transportation of final products from factory (i.e. the place of removal), being an activity posterior to the clearance of the goods cannot be said be used directly or indirectly “in relation to the clearance” of final products from the place of removal. Had the “place of removal” of final products been other than factory say a depot, the transportation of the goods out of the factory upto the depot (place of removal) would have qualified to be “input service” for in such a situation, transportation is anterior to clearance from the place of removal.
4. The services specified in the inclusive part of the definition of “input service” pertain to activities performed either in relation to manufacture of final products or in relation to clearance of such goods. They can, definitely, be of aid to the determination of the scope of the expression, “in relation to”, used in the main part of the definition. This is not to say generally that the inclusive part of the definition is expansive or restrictive. But one thing which can be said with certainty is that, insofar as transportation of final products is concerned, the inclusive part of the definition is restrictive as it permits such transportation upto the place of removal only as input service. Hence where the place of removal is the factory the transportation from the factory to the customers premises would not fall within this clause.

[India Japan Lighting Pvt. Ltd. vs. CCE (2007) 8 STR 124 (Tri. – Chennai) see also CCE v. N.H.K Springs Ltd. (2007) 7 STR 63 (Tri.-Del.); Gujarat Ambuja Cements Ltd. v. CCE (2007) 6 STR 249 (Tri-Del.); reversed in ABB Ltd. v. CCE (2009) 15 STR 23 (Tri- LB) – see below]

150.125 The Larger Bench of The Tribunal holding that outward transportation of final product from the factory (place of removal) to customer’s door-step would be considered as “input service” under the Cenvat Credit Rules, 2004 laid down the following propositions:

The definition of ‘input service’ under rule 2(l) can be conveniently divided into the following five independent limbs :

Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products,

Any service used by the manufacturer whether directly or indirectly, in or in relation to clearance of final products from the place of removal,

Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory,

Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,

Services used in relation to activities relating to business and outward transportation upto the place of removal.

Each of the above limbs of the above definition is an independent benefit/concession. If an assessee can satisfy any one of the above, then credit on input service would be admissible even if the assessee does not satisfy the other limbs.
Transportation of goods to customer's premises is “an activity relating to business”. The term ‘business’ is of a wide import. Further, the word ‘relating to’ further widens the scope of the expression ‘activities relating to business’. It is not essential that the activity should be relating to main/ essential activity. It is an integral part of the business of a manufacturer to transport and deliver goods manufactured. If services like advertising, market and research which are undertaken to attract a customer to buy goods of a manufacturer are eligible to credit, services which ensure physical availability of goods to the customer, i.e. services for transportation should also be eligible to credit.
Though “outward transportation upto the place of removal” is specifically mentioned in the inclusive part the Tribunal held that the principle of specific over general does not apply to such provisions just as it does not apply to exemption provisions where an assessee can successfully claim exemption if brings his case within any one notification notwithstanding he does not satisfy others.
The use of the expression ‘outward transportation' in the inclusive clause of the definition is by way of abundant caution so as to avoid any dispute being raised on the “means clause” which refers to clearance from the place of removal thereby resulting in transportation upto the place of removal not being eligible for credit. Credit in respect of transportation within the factory is available under the inclusive part.
Credit on outward transportation is admissible even if freight does not form part of value since the definition of input service has no connection with the definition of value under the Central Excise Act.

[ABB Ltd. vs. CCE (2009) 15 STR 23 (Tri-LB); See also wherein the High Court held that the above conclusion of the Tribunal is incorrect though the ultimate order passed by the Larger Bench (allowing credit) would not suffer from any infirmity (since the issue was pertaining to the period pre-1.4.2008) CCE vs. ABB Ltd (2011) 23 STR 97 (Kar).; CCE v. Parth Poly Wooven Pvt. Ltd. (2012) 25 STR 4 (Guj) relied upon in Thiru Arooran Sugars Ltd. vs. CCE (2009) 16 STR 404 (Tri-Chennai); Daman Polyfab vs. CCE (2010) 17 STR 276 (Tri-Ahmd.); CCE vs. Vasavadatta Cements Ltd. (2011) 24 STR 542 (Kar.);Pooja Forge Lab v. CCE (2013) 30 STR 371 (Tri-Del), Rohit Surfactant Pvt. Ltd. vs. CCE (2014) 33 STR 194 (Tri. - Del)]

150.126 The appellants in the present case had availed credit of service tax paid on transportation charges in case of ‘FOR Sales’. The department sought to disallow such credit. On appeal the Hon’ble High Court observed that the customer’s doorstep would be considered as “place of removal” u/s.4(3)(c) of the Central Excise Act, 1944 which inter alia considers “any other place or premises from where excisable goods are to be sold …..” as “place of removal” since -

the ownership of the goods remained with them till the delivery thereof since the sales were ‘FOR’ basis;
they bore all the risk of loss or damage during the transit substantiated by the fact that they took insurance; and
the freight charges were integral part of price in a FOR Sale.

[Ambuja Cements Ltd. vs. UOI (2009) 14 STR 3 (P&H) - CBEC Circular No. 96/6/2007 – ST dated 23.8.2007 referred.See also CCE Vs. Colour Synth Industries P. Ltd (2009) 14 STR 309 (Tri- Ahmd.); Inox Air Products Ltd. v. CCE & C (2009) 16 STR 411 (Tri. – Mum.); CCE v. Fine Care Biosystems (2009) 16 STR 701 (Tri. – Ahd.); CCE v. A. D. F. Foods Ltd (2009) 16 STR 564 (Tri. – Ahmd.); Cauvery Stones Impex Pvt. Ltd. vs CCE. (2010) 18 STR 73 (Tri-Chennai); Hindustan Coca Cola Beverages Pvt Ltd v CCE 2010(17) STR 140 (Tri-Bang) – Circular No. 96/7/2007-ST dated 23.08.07 held clarificatory and applicable for prior period also.]

150.127 Service tax paid on goods transport agency services availed for transportation of goods from the factory to the consignment agent’s premises is entitled to cenvat credit since consignment agent’s premises is also defined as a place of removal and the property in the goods never passes to a consignment agent. [CCE vs. Rajhans Metals P. Ltd. (2008) 12 STR 597 (Tri-Ahmd.)]

150.128 Goods transport services used for transporting iron, steel and cement for construction of new plant is eligible as input services as the said service is used in relation to setting up, modernization, renovation or repairs of a factory. [CCE v. Videocon Industries Ltd. (2009) 14 STR 692 (Tri. – Ahmd.)

150.129 Empty containers are used for packing final products and hence can be treated as inputs used by the manufacturer in relation to manufacture of final products. Accordingly, credit of service tax paid on freight for moving empty containers called for export of goods is held to be admissible. [ CCE vs. Nitin Spinners Ltd. (2009) 16 STR 323 (Tri-Del.)

150.130 Cenvat credit of service tax paid on Goods Transport Agency services used for transportation from the factory of inputs / capital goods removed as such is not reversible though the credit of duty paid on such inputs/ capital goods is reversible under rule 3(5) of the Cenvat Credit Rules, 2004 [J.S.Khalsa Steels (P) Ltd. vs. CCE (2010) 17 STR 517 (Tri-Del.) relying onChitrakoot Steel and Power Pvt. Ltd. vs. CCE (2008) 10 STR 118 (Tribunal) where the Tribunal held that credit of service tax oninward transportation of inputs/ capital goods removed as such is not reversible see also A.R. Casting (P) Ltd v. CCE 2010(19) S.T.R. 384 (Tri-Del)].

150.131 The appellant, a dealer in motor cycles and also a service station, paid service tax on Goods Transport agency service for transporting new motor cycles from the manufacturer’s factory to its showroom (where it would be sold) and took credit of the service tax paid on such GTA services and utilised the same for payment of service tax on ‘Authorised service station’ services. The credit was denied on the ground that GTA services are related to sale of vehicle and not for providing output services. The Tribunal allowed the credit holding that unless vehicles are received and sold there cannot be any servicing of the same. [CCE vs.Shariff Motors (2010) 18 STR 64 (Tri-Bang.)]

150.132 The main issue in this case was whether tax paid for transport of empty containers from yard to factory for stuffing export goods is eligible for refund. The Tribunal held that the expression ‘in relation to transport of export of goods’ is wide enough to cover transport of empty containers from the yard to the factory for stuffing of export goods. [CCE v. Tata Coffee Ltd. (2011) 21 STR 546 (Tri – Chennai);]

150.133 Where the appellant availed GTA services for transportation of goods from the factory to the consignment agent’s premises from where the goods are sold to the customers the Tribunal held that such premises of consignment agent would be treated as ‘place of removal’ and credit of tax paid on GTA services would be allowed. [Anmol Bakers Pvt. Ltd. vs. CCE (2010) 19 STR 656 (Tri. – Del.)]

150.134 Cenvat credit of service tax paid by the assessee on goods transport agency services availed by them for transportation of empty cylinders from its factory premises to the supplier for procuring liquid chlorine, which was an essential input used in manufacture of its final product is admissible being ‘service used for procurement of inputs’ [Kerala Minerals and Metals Ltd. vs. CCE (2010) 19 STR 505 (Tri-Bang.)]

150.135 Where the goods are sold on F.O.R. basis the Tribunal held that credit is admissible on outward transportation upto the buyers’ premises based on CBEC Circular dated 23.08.2007 and Ambuja Cements Ltd. v .UoI (2009) 14 STR 3 (P & H). The Tribunal made the following significant observations -

Since a value added tax operates by taxing input goods and services and output goods and services with provisions for credit of tax paid on input goods and services which can be utilized for payment of tax on output goods services, the present system of levy of central excise duty on manufactured goods and levy of service tax on certain services with facility of credit being available of the central excise duty paid on inputs capital goods and of service tax paid on input services, which can be utilized towards payment of central excise duty on finished goods or for payment of service tax on output service, has the character of a value added tax. Since basic principle of a value added tax is that while subjecting a finished product to tax, credit of tax paid on all input goods, capital goods and input service is allowed which can be utilized towards payment of tax on the finished product, a corollary to this principle would be that in an indirect tax of the nature of value added tax, when a finished product is taxed, credit of duty paid on all input goods, capital goods and input services has to be allowed.
When the assessable value of the goods under Section 4 of the Excise Act is not confined to the manufacturing cost and manufacturing profit but includes all the components like marketing and selling organization expenses, advertisement expenses, after sales service, storages upto time of removal etc. which have contributed to the value of the goods and in case of FOR destination sales at the customer’s premises, all expenses including transport expenses upto the customer’s premises are includible in the assessable value for charging duty, the input duty credit cannot be confined only to the services used in the completion of manufacturing process. Therefore, while interpreting the scope of “input services” as defined in Rule 2(l) of Cenvat Credit Rules, 2004, clause (xvia) and (xviaa) of subsection (2) of Section 37 of the Excise act should not be looked at in isolation and it is the entire Central Excise Act containing the scheme of levy and collection of central excise duty which has to be taken into account. In view of the above, there is no conflict between the provisions of Rule 2(l) of the Cenvat Credit Rules, 2004 and clause (xvia) and (xviaa) of Section 37(2) of the Excise Act.
Credit cannot be denied just because the duty on the goods has been paid on the assessable value determined under Section 4A of the Central Excise Act i.e on the value determined with reference to declared MRP minus abatment instead of transaction value under section 4 of Central Excise Act.
The appellant’s sales are on FOR destination basis and the three conditions in this regard mentioned in the Board’s Circular dated 23-8-07 are satisfied, that is, ownership and property in the goods remains with the appellant till delivery of the goods in acceptable condition to the customers at their door steps, the appellant bear the risk of loss or damage to goods during transit upto the destination and freight charges are integral part of the price of the goods.

[L.G. Electronics (India) Pvt. Ltd. vs. CCE (2010) 19 STR 340 (Tri. – Del.). See alsoAutomobile Corporation of Goa Ltd. vs. CCE (2010) 19 STR 518 (Tri-Mumbai); [Lumax Automotives Systems Ltd. v. CCE (2013) 32 STR 526 (Tri - Del]].

150.136 Where goods are exported on FOB/CIF basis, Cenvat credit of service tax paid on outward transportation from factory to port of shipment is admissible. [Modern Petrofils vs CCE 2010 (18) STR 625 (Tr-Ahmd.); See also Oriental Containers Ltd. v. CCE (2012) 28 STR 397 (Tri.-Mumbai);Ashirvad Pipes Pvt. Ltd. v. CCE (2013) 31 STR 693 (Tri – Bang.)].

150.137 Where the appellants, manufacturers of ‘Instant Coffee’ required metal tins for packing their final product and to procure the metal tins, it transported plastic pallets to metal tin suppliers it was held that ‘Goods Transport Agency’ (“GTA”) services used for transport of plastic pallets to and from suppliers is an input service being a service in relation to ‘procurement of inputs’ or alternatively as ‘activities relating to business’ and hence service tax paid on such GTA services is eligible for credit.[CCE vs. CCL Products (India) Ltd. 2010 (18) STR 430 (Tri- Bang)].

150.138 Credit of service tax paid on goods transport agency services used for delivery of goods to the customers’ premises on FOR basis is not eligible for input credit. [Lafarge India Pvt. Ltd. vs. CCE (2011) 22 STR 603 (Tri-Del.)]

150.139 Where the sale of goods were not on FOR basis (i.e. a sale where during the transit the ownership of, and risk of loss or damage to, goods remains with the seller and freight is an integral part of value of goods on which excise duty is paid) and the assessee had paid excise duty on the price at the factory gate and the transportation from the factory gate to the customer’s premises was not part of the assessable value of the goods for payment of excise duty, the Tribunal held that the cenvat credit of tax paid on transportation services from the factory / depot to the customer’s premises is not allowable for the period 1.2.2006 to 31.3.2006 since credit was allowable on transportation of final products only upto the ‘place of removal’ which in the present case was factory / depot. [CCE v. Radix Impex P. Ltd. (2011) 24 STR 374 (Tri-Del.)].

150.140 Where the appellant had paid service tax on goods transport agency services by making a debit in Cenvat Credit account and had availed credit of the same for discharging duty liability on goods manufactured by them the Tribunal held that the same was permissible since –

u/r 9(1) of the Cenvat Credit Rules, 2004, credit can be taken on the basis of documents evidencing payment of service tax; and
A debit entry made in the Cenvat credit account on the basis of a lorry receipt is a proof of payment of service tax.
The lorry receipt shows all details viz., name of the consignor & consignee, serial no. etc.

[CCE v. Rajasthan Spinning & Weaving Mills (2012) 26 STR 466 (Tri. – Bang.)].

150.141 The cenvat credit in respect of GTA services used for clearance of final product from the place of removal to customers premises would be allowed only for the period prior to 1.4.08 and not for the period post 1.4.08 due to amendment in the definition of ‘input service’[ Madras Cements Ltd. vs. CCE (2012) 27 STR 470 (Tri. – Bang.)].

150.142 Since the definition of ‘output service’ [Rule 2(p) of Cenvat Credit Rules, 2004] specifically excluded GTA services w.e.f. 1.3.08, the appellant was held to be liable to pay service tax towards GTA services by making payment in cash only and not by utilising the cenvat credit [ Topland vs. CCE (2012) 28 STR 177 (Tri. –Ahmd.)].

150.143 Cenvat credit of service tax paid on GTA service used for transporting raw material from the place of supplier to job worker’s premises without bringing them into the assessee’s premises is allowable [CCE v. KEC International Ltd. (2012) 28 STR 399 (Tri.-Del.)].

150.144 Goods Transport Agency service availed for bringing of raw materials and capital goods into the factory for carrying out, production activity being an integral part of the manufacturing activity credit of service tax paid thereon is admissible as input credit. [Semco Electric Pvt. Ltd. v. CCE (2013) 30 STR 572 (Tri- Mum)]

150.145 Where the appellant had discharged service tax liability on Goods Transport Agency Services by utilizing cenvat credit and on being pointed out during audit paid the same in cash, the Tribunal allowed suo motu taking of credit utilized earlier without the need to follow provisions of refund Section 11B. [Ratnamani Metals & Tubes Ltd v. CCE&ST (2014) 35 STR 111 (Tri-Ahmd.)]

150.146 In the case of sale at the place of destination, an assessee can claim cenvat credit paid on GTA services only if the amount paid for the service formed integral part of the price of the goods [Circular No 97/8/2007 dated 23.08.2007.] Since the amount paid for GTA service did not form part of the goods credit not allowed. [Lafarge India Ltd v. CCE, (2014) 35 STR 645 (Chhattisgarh)]

150.147 Cenvat Credit can be availed on service tax ‘paid’ by the assessee on GTA services availed and accordingly cenvat credit would be eligible in a case where service tax though not payable by the assessee was actually paid by him. [Sarda Energy & Minerals Ltd. v. CCE, (2014) 35 STR 946 (Tri-Del.)]

150.148 Cenvat credit of service tax paid on outward transportation of goods upto railway station (where goods sold on FOR basis) and upto port (where goods sold on FOB basis) is admissible.[TK Warana SSK Ltd. v. CCE (2015) 37 STR 499 (Tri.-Mum.)]

Goods Transport Operator (GTO) services

150.149 Cenvat credit of service tax paid by consignor (supplier) of goods on GTA services on behalf of the consignee (buyer) and recovered from the buyer is allowable to the buyer in terms of C.B.E.&C. Circular No.97/8/2007, dated 23.08.2007 [Rathi Bars Ltd. v. CCE (2014) 34 STR 799 (Tri.-Del.)]

150.150 Cenvat credit on GTA services used for outward transportation of goods beyond place of removal would be admissible since freight is part of the price on which duty has been discharged.[CCE v. Jamuna Auto Industries Ltd, (2013) 31 STR 587 (Tri. – Del.) relying on Circular No. 97/8/2007 dated 23.08.07] See also Bhilai Engineering Corpn. Ltd.v. CCE, (2013) 31 STR 631 (Tri. – Del.)

150.151 Where the assessee provided after sales services (business auxiliary services) and authorized service station services in respect of vehicles manufactured by its customer (manufacturer), Cenvat Credit of service tax paid on GTA services used to transport vehicles and spares from its customer’s premises to the assessee’s premises would be allowed [Badrika Motors (P) Ltd v. CE & ST (2014) 34 STR 349 (Tri-Del)]

150.152 Credit of service tax paid on transportation charges for bringing cement inside the mines for repair and renovation of cavities therein is admissible since mine being treated as a part of factory area the services would be considered as used in relation to setting up, modernization, renovation, repair of factory [CCE v. Hindustan Zinc. Ltd. (2014) 34 STR 609 (Tri.- Del)]

150.153 Cenvat credit on freight paid in relation to removal of goods from the place of removal is admissible. [Bhilai Engineering Corpn. Ltd.v. CCE, (2013) 31 STR 631 (Tri. – Del.)]

Guest house maintenance expenditure

150.154 Credit on maintenance services of guest house which is used in connection with the business would be allowed as being ‘activities related to business’. [CCE v. Hindustan Zinc Ltd. (2009) 16 STR 704 (Tri. – Bang.)]

150.155 Cenvat credit on outdoor catering services and house keeping services availed at the guest house by the appellant is allowable except to the extent of recoveries made from the guests since the guest house has been maintained by the appellant for business activity and not for any welfare of the society.

150.156 Credit of service tax paid on security agency services engaged by the assessee (manufacturer) in the company’s guest house is not admissible since it does not have any nexus with the activity of manufacture of final product. [Kilburn Chemicals Ltd. vs. CCE (2011) 22 STR 637 (Tri. – Che.)]

150.157 Cenvat credit in respect of Cable TV Services and Repair & Maintenance Services received in guest house of the appellants is not admissible since the same does not have any nexus with the manufacture of the finished goods [Hindustan Zinc Ltd v. CCE (2011) 23 STR 274 (Tri- Del)].

150.158 (i) Cenvat credit on ‘outdoor catering service’ for providing food to its workers in a case where the appellant was not required by any law to provide such facility is not admissible.

Cenvat credit on repairs and maintenance of guest house where the appellant claims that the guest house was used to accommodate business guests and conducting business meetings is not admissible in the absence of any positive evidence substantiating such claim.

[IFB Industries Ltd. v. CCE (2013) 32 STR 650(Tri-Bang.)]

House Keeping services

150.159 Credit of tax paid on house keeping services vital for keeping factory in good condition is allowable. [ Rotork Control (India) Pvt.Ltd. v.C.C.E (2010) 20 STR 29 (Tri.- Chennai)]

150.160 Plant house keeping services are essential and related to manufacturing activity and accordingly the cenvat credit of service tax paid on house keeping service is admissible.[ Balkrishna Industries Ltd vs CCE 2010 (18) STR 600 (Tri-Mumbai)]

150.161 Cenvat credit in respect of housekeeping/ cleaning services, legal services and event management services [event for honoring outstanding employees] is admissible [Delphi Automobile System Pvt. Ltd. v. CCCE&ST (2014) 36 STR 1089 (Tri. – Del.)]

Insurance Services

150.162 Insurance on plant and machinery is an expenditure which goes into costing and, therefore, the credit of service tax on the same cannot be denied. Further following Excel Corp Care v. CCE (12) STR 436 (Guj.) & CCE v. GTC Industries (2008) 12 STR 468 (Tri.-LB) credit on mobile phone services and catering services were allowed. [Finolex Cables Ltd. v. CCE (2009) 14 STR 303 (Tri-Mumbai); Grasim Industries Ltd.v CCE (2013) 32 STR 256 (Tri-Del)]

150.163 Service tax paid on medical and personal accident insurance policies of employees and catering services would be entitled to input credit since these costs are included in the cost of final product in terms of CAS-4. Further, in view of the broad definition of input services, cenvat credit on the services of landscaping the surrounding of the factory premises was held to be admissible especially in the present day conditions where much importance is given to keeping the environment in a proper manner. [Millipore India Ltd. vs. CCE (2009) 13 STR 616 (Tri-Bang.)Affirmed in CCE vs. Millipore India Ltd. (2012) 26 STR 514 (Kar.); CCE v. Nutrine Confectionery Co. Ltd. (2012) 26 STR 556 (Tri-Bang.); Biesse Manufacturing Co. Ltd. v. CCE (2012) 26 STR 546 (Tri-Bang.)]

150.164 Credit of service tax paid on insurance premium for losses due to fire, machinery breakdown, cash handling, group gratuity and group accident policy is allowed [CCE v. Beekay Engg. & Castings Ltd. (2009) 16 STR 709 (Tri. – Del.) See also H.E.G Ltd vs CCE (2010) 17 STR 178 (Tri-Del);J.K. Cement v. CCE (2013) 31 STR 687 (Tri - Del.)].

150.165 Where the goods have been exported by the appellant on FOB basis retaining ownership till the delivery of goods on board the vessel, the ‘load port’ would be the place of removal and hence transit insurance upto sea port would be treated as input service (being services used for clearance of goods upto the ‘place of removal’) [Fiamm Minda Automotive Ltd v. CCE, (2011) 22 STR 210 (Tri- Del) see also Somaiya Organo Chemicals v. CCE, (2011) 21 S.T.R. 114 (Tri – Mum].

150.166 Credit of service tax paid on insurance charges of company vehicles being availed in relation to manufacture of final products is admissible. [ CCE v. DCW Ltd (2011) 22 STR 214 (Tri-Chennai) See also CCE v. Topworth Steels Pvt Ltd (2012) 26 STR 420 (Tri. – Del.)]

150.167 Cenvat Credit on group insurance and health policy for the employees and workers is admissible [Fiamm Minda Automotive Ltd v. CCE, (2011) 22 STR 210 (Tri- Del) contra Tangence Solutions (India) Pvt. Ltd. vs. CCE (2011) 21 STR 504 (Tri. – Del.)]See also CST v. Team Lease Services Pvt. Ltd. (2014) 36 STR 543 (Kar.) relying on Stanzen Toyotetsu India (P) Ltd. (2011) 23 STR 444 (Kar.)]

150.168 Insurance of workers in the factory has an integral connection with the manufacture and hence cenvat credit allowable on the premises Binani Cement Ltd v. CCE & ST (2014) 36 STR 676 (Tri-Del)]

150.169 Credit of service tax availed by an insurance company on Reinsurance services is admissible since –

reinsuring a specified percentage of sum assured with another insurance company is a statutory obligation under the Insurance Act, 1938;
reinsurance being co-terminus with the insurance policy it has to be considered as having a nexus with the output service of insurance.

[PNB Metlife India Insurance Co. Ltd v. CST (2014) 36 STR 891 (Tri-Bang.)]

150.170 Credit of service tax paid on insurance taken by the appellant, a port service provider for individual employees working in port area is admissible. [India Gateway Terminal (P) Ltd. vs. CCE (2010) 20 STR 338 (Tri-Bang.)]

150.171 Credit of service tax paid on Group Mediclaim Policy and Workmen’s accident policy would be considered as input services since they are part of manufacturing cost as per Cost Accounting Standard – 4 issued by the ICWAI and accordingly credit of the same is admissible. [CCE & C vs. Endurance Systems India Pvt. Ltd. (2010) 20 STR 267 (Tri. – Mum); See also CCE v. Stanzen Toyotetsu India (P) Ltd. (2011) 23 STR 444 (Kar) wherein the High Court held that the said insurance was relating to an business activity and hence was admissible; CCE v. Mahamaya Steel Industries (2011)(24) S.T.R. 124 (Tri-Del); CST v. Micro Labs Ltd. (2011) 24 STR 272 (Kar.); CCE & ST. vs. Micro Labs Ltd. (2012) 26 STR 383 (Kar.)]

150.172 (i) Marine inland transit insurance : Cenvat credit of service tax paid on insurance of captive power plant during its transportation was allowed on the ground that since the ‘input service’ definition specifically covers ‘inward transportation of input and capital goods’, it also covers insurance during such transportation.

(ii) Insurance for money in transit : Cenvat credit of service tax paid on insurance of money in transit is allowed being ‘activity relating to the business’.

(iii) Accident Insurance of personnel: Cenvat credit of service tax paid on accident-insurance on personnel working in the appellant’s factory is allowed being activity relating to the business even if they relate to workers supplied by the contractors since as per the provisions of the Facties Act, the appellant asa principal employer has a vicarious liability for any compensation in the case of injury etc. to even contract workers

[Monnet Ispat & Energy Ltd. vs. CCE (2010) 19 STR 417 (Tri. – Del.) See also Samruddhi Cement Ltd. v. CCE (2014) 34 STR 592 (Tri.- Del.)]

150.173 Cenvat credit in respect of service tax paid on

insurance of capital goods in factory or in transit;
group personnel accident insurance; and
Group Health Guard policy of the workers and staff was held admissible.

[CCE vs Raipur Rotocast Ltd 2010 (18) STR 466 (Tri-Del.)]

150.174 Credit of service tax paid on General insurance service availed for insuring the premises (from where the output service is provided) and the equipments (which are used in providing the output services) is admissible since the same is an activity related to its business. [ Utopia India Pvt. Ltd v. CST (2011) 23 STR 25 (Tri- Bang)]

150.175 Cenvat credit of service tax paid on insurance of vehicles registered in the name of director of company was allowed subject to verification that vehicle was figuring as asset in the balance sheet of the company and its expenditure were met by the company [Valco Industries Ltd. vs. CCE (2012) 28 STR 457(Tri. – Del.)].

150.176 (i) Where mediclaim insurance & accident insurance to employees is required under statutory provision like Factories Act, labour laws, etc. (and not taken as welfare measure), the credit of service tax paid on such insurance premium would be eligible as input credit.

(ii) Insurance of plant & machinery, goods in storage, cash in transit. Goods in transit on FOR basis being activities integrally connected with the manufacturing business of the assessee Cenvat credit paid thereon is admissible.

[Oudh Sugar Mills Ltd v CCE (2014) 34 STR 309(Tri.-Del.)]See also [Sundaram Brake Linings v. CCE (2014) 34 STR 583 (Tri.- Chennai)]

150.177 Cenvat credit on input services like Group Insurance of Employees, Health Insurance of Employees, Rent-a-cab, Air Travel Services, sodexo passes issued to employees etc. It was held that Cenvat credit on all these services except on sodexo passes is admissible. [CC&CE v. Cholayil (P.) Ltd. (2013) 31 STR 29 (Tri-Bang.)]

150.178 Credit of service tax paid on group insurance policy including the family members of employees is admissible (relying on Karnataka High Court decision in Micro Labs (2012) 26 STR 383 (Kar) & Stanzen Toyotetsu (2011) 23 STR 444(Kar) Tri-Mumbai) [PTC Software India Pvt. Ltd. vs. CCE (2014) 35 STR 632(Tri-Mumbai)]

Management and Consultancy service

150.179 Management and Consultancy service availed in respect of foreign exchange risk management and amalgamation and merger of the units of the assessee, being services in relation to ‘business activity’, the same would be eligible as input service [Semco Electric Pvt. Ltd. v.CCE (2013) 30 STR 572 (Tri- Mum)]

150.180 Service related to advice and consultancy in the form of sales, planning, marketing, management, human resource, financial planning and analysis, logistic management, customer services, operation management, tax consultancy are more appropriately classifiable under the category of ‘management consultancy services’ and not under the category of ‘Business support service’. Thus when the above services were received by the appellant from abroad the Tribunal held that the appellant is rightly entitled to avail 100% cenvat credit of the service tax paid on these services and is not required to reverse any portion thereof as attributable to exempt services provided by it since the services being in the nature of management consultancy services were covered under Rule 6(5) of the Cenvat Credit Rules, 2004 [Federal Express Corporation v. CST (2014) 36 STR 375 (Tri-Mum)]

Maintenance & Repairs for warranty obligation

150.181 The assessee was under legal obligation to provide repair and maintenance services during the warranty period with regard to the products sold by it, but had outsourced the same to another service provider and had availed credit of service tax paid to such service provider and adjusted credit against the excise duty payable. The Tribunal allowed the cenvat credit taking into consideration that –

it was a legal obligation to provide the services during warranty period;
the warranty cost is included in the assessable value of the products; and
these activities are relating to sale of goods and hence are ‘activities relating to business’.

[CCE vs. Danke Products (2009) 16 STR 576(Tri-Ahmd.)]

Maintenance and Repair services .

150.182 Cenvat credit on Repair and Maintenance of photo copier, Air conditioner, water cooler etc. is admissible.[Cadila Healthcare Ltd vs C.C.E (2010) 17 STR 134 (Tri-Ahmd) see also CCE v. DCW Ltd (2011) 22 STR 214 (Tri-Chennai)]

150.183 Credit of service tax paid on repair and maintenance services undertaken in relation to air cooler, pay loader, dumper and changing of damaged asbestos is admissible.[ CCE vs. H.E.G. Ltd. (2010) 20 STR 312 (Tri-Del)]

150.184 Cenvat credit of tax paid on services of maintenance of water coolers installed in the factory of the assessees is allowed, installation of water coolers being an essential requirement under the provisions of the Factories Act. [Rotork Control (India) Pvt.Ltd. v.C.C.E (2010) 20 STR 29 (Tri.- Chennai) see also Reliance Industries Ltd v. CCE (2010) 19 STR 823 (Tri-Mum).]

150.185 Services used for maintenance of an effluent treatment plant, keeping of which was mandated by the Pollution Control Board, were held to be ‘activities relating to business’, and accordingly, the credit on such services was held admissible. [Anar Chemicals Pvt Ltd v. CCE (2011)(24) S.T.R. 32]

150.186 Cenvat Credit of Service Tax paid on repair and maintenance services used for air-conditioning plant situated in the office space of the factory is admissible since –

the definition of input service specifically includes the services used in relation to setting up, modernization, renovation or repairs of a factory or premises of provider of output service or office relating to such factory or premises; and
the same has to be treated as activities having nexus with the manufacturing business of the appellant.

[Bry Asia Pvt Ltd v. CCE (2012) 26 STR 333(Tri-Del)]

150.187 Cenvat credit of duty paid on HR plate / coil, jointing sheet & M. S. Stud and welding electrodes used for maintenance and repair of plant and machinery is admissible [J.K.Sugar Ltd v. CCE [(2012) 26 STR 391 (Tri-Del)].

150.188 Cenvat Credit of service tax paid on maintenance/repair of company owned vehicles being activity related to business is admissible [ J.K.Sugar Ltd v. CCE (2012) 26 STR 391 (Tri-Del)]

150.189 Cenvat credit of service tax paid on maintenance of aircraft used by the managing director of company was allowed subject to verification that the aircraft was used for business activity [Lakshmi Machine Works Ltd. vs. CCE (2013) 30 STR 98 (Tri. – Chennai)].

150.190 Maintenance and Repair service undertaken in respect of the office equipment installed in the factory of the appellant being a service in relation to the manufacture of exported final products, Cenvat credit thereon is admissible. [Semco Electric Pvt. Ltd. v. CCE (2013) 30 STR 572 (Tri- Mum)]

150.191 Where the assessee manufactured and installed diesel sets for their clients and also provided warranty, it was held that repair services availed by the assessee for repairing the diesel sets of its customers during the warranty period is an input service and credit of service tax paid on such services is admissible [Gujarat Forging Ltd. v. CCE (2014) 36 STR 677 (Tri.- Ahmd.)]

150.192 Cenvat credit allowed in the following cases –

Outdoor catering services since providing of canteen facility for the factory workers is mandatory;
Maintenance of lawns and gardens – since condition imposed by Pollution Board
Maintenance of cycle stand – necessary requirement
Maintenance of guest house – adjacent to factory premises – necessary business requirement as factory is outside city limits

[DCM Shriram Consolidated Ltd. v. CCE (2014) 36 STR 1120 (Tri.- Del.)]

Mandap Keeper Services

150.193 Credit on mandap keeper services incurred for stockists-meet held for promoting sale of final product allowed since it is used in relation to business [Jaypee Rewa Plant v CCE (2009) 16 STR 707 (Tri. Del.); See also H.E.G Ltd vs CCE 2010 (17) STR 178 (Tri-Del)]

150.194 Mandap Keeper’s services utilized by the assessee a Del credere consignment agent registered under Business Auxiliary Service, for advertising and publicizing the products is an ‘input service’ and Cenvat credit of service tax paid on such services is admissible. [ Tradex Polymers Pvt Ltd v. CCE (2011)24 STR 82 (Tri-Ahmd)]

150.195 Credit on services of the Mandap Keeper availed to celebrate the ‘Annual Day’ function of the company which was attended by the employees and their families is an integral part of the business activity and hence is admissible. [Endurance Technologies Pvt Ltd v. CCE,Aurangabad, 2013(32) STR 95 (Tri-Mum)]

Manpower Recruitment or Supply services

150.196 Credit of service tax paid on manpower supply services used for operation and maintenance of power plant set up by manufacturers for generating electricity (not excisable) which is used to produce excisable goods is admissible. [Sanghi Industries Ltd. vs. CCE (2009) 13 STR 167 (Tri-Ahmd.)]

150.197 Credit of service tax paid on Manpower recruitment and supply service availed by the assessee for recruiting qualified personnel (skilled engineers engaged in data retrieval) to render its output service (data retrieval) is admissible. [Utopia India Pvt. Ltd v. CST (2011) 23 STR 25 (Tri- Bang)]

150.198 Manpower Supply services availed for plantation, maintenance of lawn, etc. that are necessary for compliance with the statutory permissions subject to which the manufacturing activity had been allowed is eligible for Cenvat Credit [Hindustan Zinc Ltd. v. CCE (2013) 30 STR 324 (Tri.-Del.)].

Market research and credit rating services:

150.199 Credit Rating of customers is relatable to sales promotion and business manufacture. The activity is specifically included in the definition of input service. The assesee is entitled to the credit of service tax paid on such services.[Gujarat Reclaim & Rubber Products Ltd v. CCE (2013) 30 STR 446 (Tri- Ahmd)]

Mobile Phone Services

150.200 Credit of service tax paid on mobile phones was held allowable where mobile phones were used in “activities relating to business”. [Grasim Industries vs. CCE 11 STR 168 (Tr. – Del.); CCE vs. Axiom Impex International Ltd. (2009) 16 STR 309 (Tri-Mumbai) see also J.K.Sugar Ltd. vs CCE (2012) 26 STR 391 (Tri– Del)]

150.201 Credit of service tax on mobile phones used by staff of output service provider is admissible. [CST vs. STIC Travels Pvt. Ltd. (2007) 8 STR 495 (Tri- Del) See also CCE vs. Excel Corp Care Ltd. (2008) 12 STR 436 (Guj.); Muscat Polymers Pvt. Ltd. vs. CCE (2012) 26 STR 122 (Tri. – Ahmd)].

150.202 Service tax paid on cell phone bills of Individuals (presumably employees) would be allowable subject to verification that phones are being used for attending calls of the appellant’s customers. [Wiptech Peripherals Pvt. Ltd. vs. CCE (2008) 12 STR 716 (Tri-Ahmd.)]

150.203 Credit of service tax paid on mobile phones which are standing in the name of the company and are used by the employees in relation to work cannot be denied only on the ground that the same has been incidentally used for personal work. [CCE vs. Conzerv Systems (Pvt.) Ltd. (2009) 13 STR 638 (Tri-Bang.); See also CCE vs. Brakes India Ltd. (2009) 13 STR 684 (Tri-Chennai); CCE vs. Steelcast Ltd. (2009) 13 STR 696 (Tri-Ahmd); CCE v. Stanzen Toyotetsu India (P) Ltd. (2009) 13 STR 289 (Tri.- Bang.); CCE v T. G. Kirloskar Automotive (P) Ltd. (2009) 14 STR 743 (Tri. – Bang); CCE v. Beekay Engg. & Castings Ltd. (2009) 16 STR 709 (Tri. – Del.) - in this case it was also observed that there is no specific provision in Cenvat Credit Rules that mobile phone should be used exclusively in relation to the manufacturing process in business activities.]

150.204 Credit of service tax paid in respect of Mobile phones provided to its employees for official purposes i.e. in relation to manufacture of excisable goods cannot be disallowed on the ground that phones are not installed in the factory premises [CCE vs. Showa Engineering Ltd. (2009) 14 STR 840 (Tri. – Che.) See also ITC Ltd. vs. CC & E (2009) 14 STR 847 (Tri. – Che.) CCE & C v. Ultratech Cement Ltd. (2009) 16 STR 702 (Tri. – Mum.) Jaypee Rewa Plant v. CCE (2009) 16 STR 707 (Tri. – Del.)]

150.205 Credit of service tax paid on mobile phones supplied to employees during the financial year 2006-07 is allowable under the Cenvat Credit Rules, 2004. Further the Board Circular No. 59/8/2003, dated 20.06.03 issued under the erstwhile Service tax Credit Rules, 2002 which clarified that credit on mobile phones is not allowable would not apply to Cenvat credit Rules, 2004 in absence of a provision like the erstwhile rule 3(6) which specifically provided that credit in respect of services in relation to telephones shall be allowable only if such telephone connections are installed in the premises from where output services are provided. [CCE vs. Ultratech Cement (2010) 20 STR 589 (Bom.)]

150.206 Credit of service tax paid on mobile phones which are standing in the name of the company and are used by the employees in relation to business purpose cannot be denied as the department failed to produce enough evidence that the mobile phones are not used for business purposes. [ Sidel India Pvt. Ltd. vs. CCE (2010) 18 STR 273 (Tri. – Mum.)]

150.207 Cenvat credit of mobile services used by director would be allowable subject to reduction of cenvat credit attributable to factory located in exempted area [Valco Industries Ltd. vs. CCE (2012) 28 STR 457(Tri. – Del.)].

150.208 The refund of service tax paid on mobile telephone/telephones installed at the residence of the employers is admissible to the extent borne by the appellants.[Semco Electric Pvt. Ltd. v. CCE (2013) 30 STR 572 (Tri- Mum)]

Outdoor Catering Services

150.209 Allowing the credit of service tax paid on outdoor catering for providing canteen facilities to employees in factory premises the Tribunal held as follows:

The meaning assigned to “input service” is divided in two parts. The first part giving the specific meaning and the second part gives the inclusive meaning of the same. In the second part, an inclusive meaning is given to “input service”, which otherwise would not have been covered in the main first part.
The expression “such as” contained in the phrase “activities ‘relating to’ the business such as accounting, auditing, financing, ………..” means that the stipulated activities that follow the said expression in the definition are only illustrations and not limitations.
The expression “relating to” occurring in the above phrase is to be given a wide construction.
Canteen facility although not specifically stated in the list of activities in the definition of “input service” is an “activity relating to the business” of the appellants.
Canteen facility is beneficial for the workers as they are served food at concessional rates and it is they who are engaged in the business of the appellants which is nothing but manufacture of goods. Hence the manufacturer can be said to be using the canteen facility indirectly for manufacture of goods.
The following facts fortify that canteen expenditure is an ‘activity relating to business’. (a) maintenance of a canteen is a statutory requirement u/s. 46 of the Factories Act, 1948; (b) the appellants have paid fringe benefit tax [which is a tax on business expenditure] on canteen related expenses under the Income Tax Act; (c) credit of service tax paid on repairs and maintenance of residential colonies provided to employees is allowed. [ Manikgarh Cement v. CCE (2008) 9 STR 554 (T)]; (d) credit on mobile phones are allowed [CBEC Circular No. 97 dated 23.8.2007]; (e) expenditure on restoration of buildings and residential quarters as well as expenditure on maintenance of transit quarters for accommodating outstation employees have been held to be business expenditure under the Income-tax Act, 1961.

[Victor Gaskets India Ltd. v. CCE (2008) 10 STR 369 (Tri. – Mumbai) See also Indian Card Clothing Co. Ltd. v. CCE (2008) 11 STR 175 (Tri. – Mum); CCE vs. GTC Industries Ltd. (2008) 12 STR 468 (Tri-LB) relied upon in Thiru Arooran Sugars Ltd. vs. CCE (2009) 16 STR 404 (Tri-Chennai);GKN Sinter Metals Ltd. vs. CCE (2009) 16 STR 615 (Tri-Mumbai) see also CCE vs. Ferromatic Milacron India Ltd. (2009) 21 STR 8 (Tri-Guj.); CCE v. Hindustan Coca-Cola Bevrages Ltd. (2011) 23 STR 268 (Tri-Del);CCE v. Stanzen Toyotetsu India (P) Ltd. (2011) 23 STR 444 (Kar); Paramount Communication Ltd vs. CCE (2013) 29 STR 146 (Tri-Del)’ CCE v. GTC Industries Ltd, (2013)30 STR 673 (Tri-Mum)]

150.210 Where the Factories Act stipulates that any Company employing more than 250 workers have to maintain the canteen facility and also provides punishment for violation of the stipulation the Tribunal held that availing outdoor catering services for provision of canteen to employees would be considered as integrally connected to the manufacture of the finished excisable goods and accordingly entitled to Cenvat credit. [Samsung Electronics (I) Pvt. Ltd v. CCE (2011) 22 STR 200 (Tri-Del); [Semco Electric Pvt. Ltd. v. CCE (2013) 30 STR 572 (Tri- Mum)]See Contra CCE vs. Suzuki Powertrain India Ltd. (2012) 27 STR 141 (Tri.- Del.); IFB Industries Ltd. v. CCE (2013) 32 STR 650(Tri-Bang.); ADC India Communications Ltd. V. CCE (2014) 34 STR 637 (Tri. – Bang.)]

150.211 Cenvat credit of service tax paid on outdoor catering services availed by the various assessee – manufacturers for providing canteen facilities to their employees would not be admissible for the following reasons:

credit of duty / tax in respect of inputs or input services is permitted only when the same is used “in, or in relation to manufacture of excisable goods”.
Cenvat credit would not be available merely on the basis that the value of input / input services is included in the value of finished excisable goods;
Use of the input service must be integrally connected with the manufacture of the final product. The input service must have nexus with the process of manufacture. It has to be necessarily established that the input service is used in or in relation to the manufacture of the final product. One of the relevant test to determine the availability of credit would be – “can the final product emerge without the use of the input service in question?” Since Outdoor Catering is not integrally connected with the manufacture of final product it is not an “input service”.

[CCE vs. Sundaram Brake Linings (2010) 19 STR 172 (Tri-Chennai), departing from CCE v. GTC Industries Ltd (2008) 12 STR 468 (Tri-LB) in view of the Supreme Court decision in Maruti Suzuki Ltd. vs. CCE (2009) 240 ELT 641 (SC)]

150.212 Credit of service tax paid on outdoor catering service availed for the staff of the company, to the extent borne by the assessee, is admissible. [ Utopia India Pvt. Ltd v. CST (2011) 23 STR 25 (Tri- Bang)]

150.213 CENVAT Credit of service tax on outdoor catering service would not be admissible to the extent the cost is borne by the employees [ CCE v. Bosch Chassis Systems India Ltd. (2012) 25 STR 175 (Tri. – Mumbai)].

150.214 Cenvat credit of service tax paid on outdoor catering services availed for providing canteen facilities to the employees is admissible since the same has been utilised directly or indirectly in or in relation to the manufacture of final product [CCE & ST. vs. ACE Designers Ltd. (2012) 26 STR 193(Kar.) relying on CCE vs. Stanzen Toyotetsu India Pvt. Ltd. (2011) 23 STR 444(Kar.)].

150.215 Cenvat of Outdoor Catering Service is allowed even if assessee has no obligation to provide canteen facility since a canteen is for welfare of employees as it assists in better performance which has direct nexus with the production of goods. [Resil Chemicals Pvt. Ltd v. CCE (2014) 36 STR 1260 (Kar.)]

150.216 Outdoor catering services availed for providing lunch / dinner to customers is a part of business promotion for increasing the sale of manufactured goods. It is an activity relatable to manufacture of goods and hence Cenvat credit thereon is admissible. [Heubach Colour Pvt. Ltd. v. CCE (2013) 32 STR 225 (Tri. – Ahmd.)]

150.217 Where the revenue sought to deny the cenvat credit on the grounds that the services ought to have been classified under different category of services by the service provider the Tribunal held that what is required to be considered at the service recipient’s end is whether service tax was paid or not and whether it was covered under the definition of input service. Further the Tribunal held that cenvat credit on outdoor catering services, convention services, event management services etc. received in connection with business promotion and sales promotion of the asseessee’s business was admissible[ IBM India Pvt. Ltd. vs. CCE (2014) 35 STR 384 (Tri-Bang.)]

150.218 Where the revenue sought to deny the cenvat credit on the grounds that the services ought to have been classified under different category of services by the service provider the Tribunal held that what is required to be considered at the service recipient’s end is whether service tax was paid or not and whether it was covered under the definition of input service. Further the Tribunal held that cenvat credit on outdoor catering services, convention services, event management services etc. received in connection with business promotion and sales promotion of the asseessee’s business was admissible[IBM India Pvt. Ltd. vs. CCE (2014) 35 STR 384 (Tri-Bang.)]

Photostat service:

150.219 Photostat services being necessary input service cenvat credit admissible [Punjab Alkalies & Chemicals Ltd v. CCE&ST (2014) 36 STR 688 (Tri-Del)]

Rent – a – cab services

150.220 Rent-a-cab services availed for transportation of employees to factory premises is an “input service” since -

it may be considered as being used indirectly in relation to manufacture of goods; or
as part of business activity for promoting the business since any facility given to the employees will result in greater efficiency and promotion of business.

Accordingly, service tax paid on rent-a-cab scheme services would be entitled to cenvat credit. [CCE. v. Cable Corporation of India Ltd. (2008) 12 STR 598 (Tri. – Mumbai); See also CCE v. Hindustan Zinc Ltd. (2009) 16 STR 704 (Tri. – Bang.); CCE v. Beekay Engg. & Castings Ltd. (2009) 16 STR 709 (Tri. – Del.);T.G.Kirloskar Automotive Pvt Ltd. vs. CCE 2010(17) STR 359 (Tri-Bang); Sundaram Fasteners Ltd v. CCE (2011) 22 STR 272 (Tri- Chennai); CCE v. Stanzen Toyotetsu India (P) Ltd. (2011) 23 STR 444 (Kar); Disa India Ltd. vs. CCE (2011) 24 STR 507 (Tri-Bang); C. J. Gelatine Products Ltd. v. CCE (2012) 25 STR 109 (Tri-Del); CCE vs. Tata Auto Comp Systems Ltd. (2012) 27 STR 338 (Kar.);Ashirvad Pipes Pvt. Ltd. v. CCE (2013) 31 STR 693 (Tri – Bang.)].

150.221 Credit of Service tax paid on rent-a-cab services used for transporting its employees to factory and back and on outdoor catering services used for providing food to the employees in factory is admissible since they are activities relating to the business and they are part of cost of production. [Bell Ceramics Ltd. vs. CCE (2011) 21 STR 417 (Tri-Bang.) relying on Coca Cola India Pvt. Ltd. vs. CCE (2009) 15 STR 657 (Bom.); See also CCE vs. Graphite India Ltd. (2012) 27 STR 130 (Kar); Paramount Communication Ltd vs. CCE (2013) 29 STR 146 (Tri-Del); Hindustan Zinc Ltd. vs. CCE (2013) 29 STR 492 (Tri-Del.)]

150.222 Cenvat Credit of service tax paid on Rent-a-cab services used for procurement of inputs is admissible [J.K.Sugar Ltd v. CCE (2012) 26 STR 391 (Tri-Del)].

150.223 Rent-a-cab services availed for transportation of employee’s children to school / tution centres though being a welfare activity would not amount to ‘input service’ and hence, credit of service tax paid thereon is not admissible [Hindustan Zinc Ltd. vs. CCE (2013) 29 STR 492 (Tri-Del.) relying on Comm v. Manikgarh Cement (2010) 20 STR 456 (Bom)].

150.224 Cenvat credit availed on rent-a-cab service availed prior to 1.4.2011 would be allowable in view of Board Circular No.943/4/2011-CX, dated 29.4.2011. [Prayas Engineering Ltd. v. CCE&ST (2015) 37 STR 508 (Tri.-Ahmd.)]

Renting of immovable property

150.225 Credit of Service tax paid on input service as ‘management, maintenance and Repair Services’, ‘advertising agency services’, ‘general insurance service’, ‘life insurance service’, ‘security service’, ‘telecommunication service’, ‘pandal and shamiyana contractor’s service’, ‘management or business consultancy services’ availed by assessee engaged in providing renting of immovable property services is admissible being activities relating to business [ Agriculture Products Market Committee v. CCE (2013) 30 STR 558 (Tri-Ahmd)]

150.226 In this case the properties had been rented by the appellant for display of their final product i.e. vitrified tiles. As these services were directly or indirectly used for the purpose of their business, credit cannot be denied. [Oracle Granito Ltd v. CCE (2013) 30 STR 357 (Tri- Ahmd)]

150.227 Cenvat credit on lift/ air conditioner maintenance, renting of cafeteria area, sale of foreign currency is allowable [ CST v. Verizon Data Services (I) (P) Ltd. (2014) 36 STR 846 (Tri.-Chennai)]

150.228 Credit of service tax paid on car parking rentals is admissible since car parking is a part of the business premises [PTC Software India Pvt. Ltd. vs. CCE (2014) 35 STR 632(Tri-Mumbai)]

Security agency services

150.229 Credit of service tax paid on security services to guard the premises from where the output service is provided is admissible. [Utopia India Pvt. Ltd v. CST (2011) 23 STR 25 (Tri- Bang); see also CCE v. Hindustan Coca-Cola Bevrages Ltd. (2011) 23 STR 268 (Tri-Del); C. J. Gelatine Products Ltd. v. CCE (2012) 25 STR 109 (Tri-Del)]

150.230 Cenvat credit on security service availed for securing safe custody of inputs is admissible. [Triveni Engineering & Industries Ltd. v. CCE, (2013) 31 STR 632 (Tri. – Del.)]

150.231 Credit on security services at the guest house maintained by the assessee for use of the employees is not allowable due to an element of personal use involved. [MRF Ltd. v. CCE. & ST (LTU) (2013) 31 STR 689 (Tri - Chennai)].

150.232 The Tribunal negatived department’s contention that credit on security and maintenance services were not allowable since the services were not provided at the assessee’s premises and they have no nexus with manufacture and clearance of final products and the services were received beyond the place of manufacture and clearance of final product. [CCE v. Siemens health care diagnostics ltd., (2014) 36 STR 192(Tri. – Ahmd.)]

Technical testing and analysis services

150.233 Technical testing and analysis services availed by a manufacturer of medicaments for trial manufacture and R&D conducted in respect of drugs which did not reach the stage of commercial production or the market is to be considered as ‘input service’ since they were part of manufacturing process and business activity and accordingly cenvat credit is admissible. [Cadila Healthcare Ltd vs C.C.E 2010(17) STR 134 (Tri-Ahmd)]

150.234 Credit of service tax paid on Technical inspection service availed to assess the credentials in order to qualify for grading ISO 9001 2000 is admissible since –

(a) the certification enables the assessee to market its services successfully; and

(b) the services are akin to ‘credit rating’ services specifically covered under the definition of input service

[Utopia India Pvt. Ltd v. CST (2011) 23 STR 25 (Tri- Bang)]

150.235 Technical Testing and Analysis service availed in respect of the goods exported being an eligible input service without which the export of goods cannot take place, the same would be eligible as an input service.[Semco Electric Pvt. Ltd. v. CCE (2013) 30 STR 572 (Tri- Mum)]

Telephones Services

150.236 Credit not deniable in absence of allegation that landline Telephones installed in the residence of staff was not used in relation to business activity. [H.E.G Ltd vs CCE (2010) 17 STR 178 (Tri-Del) see also CCE vs. Andhra Pradesh Paper Mills Ltd. (2011) 22 STR 126 (Tri. – Bang.); CCE v. DCW Ltd (2011) 22 STR 214 (Tri-Chennai);Bharat Petroleum Corporation Ltd v. CCE (2013)31 STR 455 (Tri-Mum)]

150.237 Cenvat Credit on telephone services in respect of telephone installed at General Manager’s residence and Guest house are not allowed in absence of evidence that these services are in relation to manufacturing business. [Monnet Ispat & Energy Ltd. vs. CCE (2010) 19 STR 417 (Tri. – Del.)]

150.238 Telephone is used by the appellant for the day to day business operation and hence cenvat credit of service tax paid on the same is allowed. [CCE vs. Fourrts (I) Laboratories Pvt. Ltd. (2010) 19 STR 86 (Tri. – Che.); See also Agsar Paints Pvt. Ltd. vs. CCE (2011) 24 STR 422 (Tri- Chennai);Thiru Arooran Sugars Ltd v. CCE (2013) 32 STR 435 (Tri-Chennai)]

150.239 Cenvat credit on telecommunication services (interconnection services) availed by a telecom service provider from another telecom provider for servicing its customers located in areas serviced by the other telecom provider is admissible. [ Aircel Cellular Ltd. v. Commissioner of Service Tax (2013) 32 STR 618 (Tri- Chennai)]

Tour operator services

150.240 Credit of service tax paid on Tour operator services used for picking up and dropping the staff of the assessee to the factory being services in relation to business activities is admissible. [CCE vs. Hyderabad Industries Ltd. (2010) 20 STR 704 (Tri-Chennai)]

Others

150.241 In this case the Tribunal held as follows:

(i) Cement and steel used in construction of a jetty of a port does not fall within the definition of term ‘inputs’ as defined under Rule 2(k) of the Cenvat Credit Rules, 2004 since it cannot be said that they are “used for providing” port services and accordingly credit of duty paid on cement and steel is inadmissible.

(ii) Mobile phone services, Custom house agent’s services, Surveyor’s services and rent-a-cab services availed for hiring cars for port officers are “used for providing output services” and credit of service tax paid on these services is admissible.

(iii) Credit of service tax paid on club house fees meant for recreation of workers being not directly connected with rendering of port services would be inadmissible.

(iv) Credit of duty paid on air—conditioners being capital goods falling with the definition of term capital goods is fully admissible.

[Mundra Port & Special Economic Zone Ltd. vs. CCE (2009) 13 STR 178 (Tri-Ahmd.)]

150.242 The appellants (an Indian Company) were agents appointed by BBC U.K. in India for marketing of time slots, collection of broadcasting charges and remitting the amounts to BBC U.K. in consideration for a commission. They obtained service tax registration under ‘Broadcasting agency services’ and paid service tax on the broadcasting charges collected by them on behalf of BBC U.K. They also obtained registration under ‘business auxiliary services’ and paid service tax on the commission received by them. They utilised the credit of service tax paid by them under business auxiliary services for paying service tax under broadcasting agency services on the ground that the business auxiliary services is an input service for BBC U.K. and they are paying service tax under ‘Broadcasting agency services’ on behalf of BBC U.K. However, the Tribunal dismissing this contention held that

(i) the appellants being agents in India appointed by BBC U.K. would be covered within the definition of Broadcasting agency and appellants would be considered as service providers and hence the service tax paid by them is not on behalf of BBC U.K. but on their own behalf.

(ii) Since the broadcasting charges collected by them as well as commission earned by them are their output services liable for service tax credit of service tax paid under the category of business auxiliary services cannot be utilized for making payment in respect of service tax under broad casting services.

[BBC World (I) Pvt. Ltd. vs. CST (2009) 14 STR 152 (Tri-Del.)]

150.243 Where the assessee sold machineries ex-factory and also charged the customer for erection and commissioning at the customer’s site, the Tribunal allowed credit in respect of service tax paid on erection, commissioning and installation services availed by the assessee from third party contractors on the following grounds:

The process of erection and commissioning is incidental to manufacture and hence is in continuation of the manufacturing activity which can be said to be complete only upon erection and commissioning. Hence, the said service is used in relation to manufacture.
The stand of the Revenue that the credit would not be allowed since the service is provided at the buyer’s premises is incorrect since the credit rules do not require the service to be rendered at the factory for the purpose of eligibility to credit.
Once the entire transaction of manufacture, erection and supply is considered as a single transaction and excise duty paid on whole transaction value, services rendered in the completion of this whole transaction has to be treated to have been rendered in or in relation to the manufacture.
The above services cannot be said to be provided to the buyer of machinery, since the responsibility for erection and commissioning is with the manufacturer and the agency was nominated by them for erection and commissioning.

[CCE v. Alidhara Textool Engineers Pvt. Ltd. (2009) 14 STR 305 (Tri- Ahmd.)]

Note : It is to be noted that the period involved in the present case was 30.12.2002 – 7.6.2005. However, it is to be noted that erection and commission services were introduced into the service tax levy only from 1.7.2003. Hence prior to 1.7.2003 how service tax was levied is not clear. Further, prior to 10.9.2004, manufacturers were not eligible for credit of service tax paid by them against the excise duty.

150.244 Where the premise viz., Secondary Switching Area (SSA) of the appellant received capital goods from its Central Stores Department (CSD), although not under cover of an invoice, as a “first stage dealer” the Tribunal allowed credit holding that -

(i) the CSD is strictly speaking not a first-stage dealer since it does sell goods for a consideration;

(ii) the appellant had satisfied the substantive conditions of the goods being -

(a) duty paid; and

(b) used for output services.

Hence the substantive benefit of cenvat credit should not be denied on a technical ground of non-registration of the CSD as a first stage dealer. [ BSNL v. CCE (2009) 14 STR 699 (Tri.-Chennai)]

150.245 Cenvat credit of service tax paid on amounts paid to Airport Authority for allowing the appellants to park their aircraft, used for the business purposes, in the airport, is allowable in absence of evidence that the aircraft had not been used for business purposes. [Force Motors Ltd. vs. CCE (2009) 13 STR 692 (Tri-Mumbai)].

150.246 Cenvat credit of service tax paid on canteen services, transportation and group insurance health policy for the employees/workers in factory are allowable being “activity related to business”. [Stanzen Toyotetsu India Pvt. Ltd. vs. CCE, (2009) 14 STR 316 (Tri- Bang.); CCE & ST. vs. Micro Labs Ltd. (2012) 26 STR 383 (Kar.)]

150.247 On facts, the Tribunal held that service tax paid on rent-a-cab services, repair and maintenance services for vehicles, cellular telephone services and photography services are used directly / indirectly in relation to manufacture of final product and cenvat credit thereon is allowable.[ CCE vs. J.K.Cement Works (2009) 14 STR 538 (Tri-Del.)]

150.248 Credit of service tax paid on insurance premium, repair of vehicles, AMC charges on telecom and courier charges being availed in relation to manufacture of final products is admissible.[CCE vs. CCL Products (India) Ltd. (2009) 16 STR 305 (Tri-Bang.)] See also Federal Mogul Goetze (India) Ltd. v. CCE, (2013) 31 STR 628 (Tri. – Del.);

150.249 Credit of service tax paid on -

repair and maintenance services received for staff colony;
gardening services;
security services in wind farms;
maintenance of swimming pools; and
civil works undertaken at auditorium and shopping complex

is inadmissible since the same does not have any nexus with the manufacturing of finished goods.[CCE vs. Grasim Industries (2011) 21 STR 378 (Tri-Chennai)]

150.250 Where the appellant had availed credit of service tax paid on services received prior to 1.1.2005 from non-resident service provider, the Tribunal held that the assessee cannot be asked to reverse the credit on the ground that appellant was not liable to pay service tax during the said period under the reverse charge mechanism since these was a revenue neutral situation.[Rajratan Global Wires Ltd. vs. CCE (2011) 21 STR 383 (Tri-Del.)]

150.251 (i) Credit of service tax paid on bank charges, courier and clearing charges, professional service charges, computer maintenance, clearing charges and insurance charges is admissible since the same are being incurred in relation to manufacture of final product i.e. the business of the assessee.

(ii) credit of service tax paid on rental charges for premises which are used for manufacturing of goods is admissible.

(iii) credit of service tax paid on repair and maintenance of vehicles which are used for shifting of semi-finished goods from one premises to another for next level of production is admissible.

[Jeans Knit P. Ltd. vs. CCE (2011) 21 STR 460 (Tri-Bang.)]

150.252 Where the appellant being 100% EOU were availing services for transporting goods from the factory to airport, loading them to the aircraft and making all documentation for the transportation by air the Tribunal held that such services were availed by the appellant till the goods are loaded into the aircraft for export and not thereafter. Therefore, the place of removal in such cases would be the airport and accordingly, credit of service tax paid on such services for facilitating export of goods from the place of removal (i.e. airport) would be admissible. [Fine Care Bio-systems vs. CCE (2010) 20 STR 193 (Tri. – Ahmd)].

150.253 The Tribunal held as follows :

Credit of tax paid on invoices in the name of the ‘pure agent’ of the assessee is allowable.
Credit of tax paid by the appellant, a manufacturer and exporter of silk fabrics, on CHA services and servicing of cars is admissible.
Credit of tax paid by Bangalore Head Office of the appellant on input invoices addressed to it, but services in respect of which was for Mysore factory is admissible.
Credit of tax paid on inputs used for manufacture of goods sold to SEZ is admissible.

[CCE v. Chamundi Textiles (Silk Mills) Ltd. (2010) 20 STR 219 (Tri.- Bang.)].

150.254 Cenvat credit on (i) Vehicle maintenance; (ii) Transportation, installation and maintenance of coolers; (iii) Marketing and publicity services and (iv) Calibration services and Systems maintenance services are allowed on ground that these are ‘activities relating to the business’ of the appellant. [Hindustan Coca Cola Beverages P. Ltd. vs. CCE & ST (2010) 19 STR 356 (Tri. – Bang.)]

150.255 Cenvat Credit of tax paid on ‘shifting of household goods of employees’ is not allowed since it not in any way connected with the appellant’s business activity. [Hindustan Coca Cola Beverages P. Ltd. vs. CCE & ST (2010) 19 STR 356 (Tri. – Bang.)]

150.256 The assessee manufactured & sold ‘rebar coils’ from their factory and from its Branch Sales Offices (BSOs) and paid excise duty on such sales. It had appointed C&F agents to receive, stock & sell the products at its BSOs. On specific requests from its customers, in a few cases, the C&F agents did cutting, bending & straightening before selling the goods and charged the assessee certain processing charges. The assessee took credit of the tax paid on such charges. The department denied the credit contending that the process of cutting, bending etc. does not amount to manufacture and hence the service is not ‘used in relation to manufacture’. The Tribunal dismissed the contention and held that cenvat credit is allowable since the said service is an ‘activity relating to business’ of the assessee which is an independent limb available to the assessee to claim credit. [ Rashtriya Ispat Nigam Ltd v. CCE [2010 (19) S.T.R. 389 (Tri – Bang) relying on Coca Cola India Pvt. Ltd. V. CCE (2009) 15 STR 657 (Bom.)].

150.257 CENVAT credit of service tax paid on repair / maintenance, insurance, surveys, technical inspection certification services and manpower recruitment services all relating to vessels, viz., tugs and barges which were used for the purpose of transporting raw materials and final products from / to ships anchored at sea to/from the appellant’s factory was disallowed by the Tribunal on the ground that none of the above mentioned services would be considered as input services since the quintessential requirements of “input service” laid down in the main part of the definition have not been established by the appellant i.e. a nexus between the services in question and manufacture / clearance of excisable goods by the appellant.[Vikram Ispat vs. CCE (2010) 19 STR 52 (Tri. – Mumbai)]

150.258 Rent-a-cab, air travel and servicing of motor vehicle services were considered as activities relating to business and cenvat credit of service tax paid on those services were allowed [Dr. Reddy’s Lab. Ltd. vs. CCE (2010) 19 STR 71 (Tri. – Bang.); Tufropes Pvt. Ltd. vs. CCE (2012) 27 STR 269 (Tri. – Ahmd.)]

150.259 Cenvat credit of service tax paid on mediclaim policy, Security services, vehicle insurance, Car rentals, Pest control activities are allowed on the ground that the said services are all related to the business activity of the appellant. [Hindustan Coca Cola Beverages P. Ltd. vs. CCE (2010) 19 STR 93 (Tri. – Bang.)]

150.260 The assessee, a pharmaceutical company, was held eligible to take Cenvat credit of duty paid on Industrial washing machines used for washing of employees’ uniforms since they are ‘capital goods’ being -

(i) goods falling under chapter 84; and

(ii) used in the factory of manufacturer to provide clean uniforms to employees which is a mandatory requirement under the Drugs and Cosmetics Act.

[CCE vs Micro Labs Ltd 2010 (18) STR 771 (Tri-Bang.)]

150.261 Cenvat credit is admissible in respect of -

Security services availed by the assessee for ensuring safety of goods stored in godown.
Pest control services availed to ensure clean and healthy environment in the factory premises. being ‘activities relating to business’.

[CCE vs Hindustan Coca-Cola Beverages Pvt Ltd. 2010 (18) STR 500 (Tri Bang.)]

150.262 Where the assessee removes inputs as such it was held that Rule 3(5) of Cenvat Credit Rules, 2004 only requires him to reverse the amount of the Cenvat credit availed on such “inputs” or “capital goods” but not the credit of service tax availed by him on GTA services which were used for transporting the said goods into his factory. [CCE vs. Punjab Steels (2011) 21 STR 5 (P&H) see also A.R. Casting (P) Ltd v. CCE 2010(19) S.T.R. 384 (Tri-Del)]

150.263 The Tribunal held that the following services were directly or indirectly used for purpose of appellant’s business and accordingly Cenvat credit of service tax paid on the said services are allowed:

Architect Services and interior decorator services availed for construction of BFW Tech Center which is used for marketing and demonstration of the appellants product;
Authorised Service Station services availed towards repairs and maintenance of vehicle used by executives involved in production, marketing, administration and finance;
Rent paid on premises used for operation and marketing offices;
Stock Broker Services availed for operating DEMAT account for business

[Bharat Fritz Werner Ltd. vs. CCE (2011) 22 STR 429 (Tri. – Bang.)]

150.264 Cenvat Credit of service tax paid on the following services availed by a telecom company were held allowable as being ‘activity relating to business’ :

insurance services availed for the transit of valuables (laptops, vehicles, etc.) and the transit of cash from collection centres to the bank is admissible.
Services of customer care and attending to customer complaint.
Hiring conference room for the purpose of providing training courses for staff and business development.

However, the Tribunal disallowed credit where the invoice did not indicate:

whether the invoice is for service or sale of goods; and
service tax element in it.

[Ideal Cellular Ltd. vs. CCE (2011) 22 STR 450 (Tri. – Del.)]

150.265 Use of JCBs in compost yard (situated 2 km away from factory) for treating waste generated in manufacturing activity being part of effluent treatment is an ‘activity relating to business’ and hence Cenvat Credit of service tax paid on hire of JCBs is admissible. [2010 (17) STR 211 (Tri)] [ CCE v. Chemplast Sanmar Ltd. (2011) 24 STR 71(Tri- Chennai)]

150.266 Where the appellant had availed cenvat credit on pandal or shamiana services and photography services availed in connection with the celebration of Karnataka Rajosthava Day, a State Function which it had organised in its factory premises for the welfare of the employees of the industry, in order to maintain industrial peace, the High Court held that the same is admissible since –

the services fall within the ambit of the expression ‘activities relating to business’; and
the services have a nexus or integral connection with the manufacture of final product as well as the business of manufacture of final product.

[Toyota Kirloskar Motor Pvt. Ltd. vs. CCE (2011) 24 STR 645 (Kar)].

150.267 The Cenvat Credit of service tax paid on transportation of ‘empty trolleys’ required for packaging the final products is admissible. [ Madras Radiators & Pressings Ltd. vs. CCE(2012) 27 STR 163 (Tri – Chennai)]

150.268 Where the Pollution Control Board had consented to manufacture goods subject to the condition of gardening the plant premises and where the appellant had availed manpower supply services for undertaking garden maintenance work, the Tribunal held that credit of service tax paid on manpower supply service was admissible [JBM Auto Systems Pvt. Ltd. vs. CCE (2012) 27 STR 170 (Tri.–Chennai)].

150.269 Cenvat credit on inputs like red lead chemical/ primer/ red-oxide and m-seal which are received in the factory and used for painting of pipes and machinery is admissible [U.G. Sugar & Indus. Ltd. vs. CCE (2012) 27 STR 214 (Tri.- Del.)].

150.270 Where the assessee purchased shares of another company pursuant to an MOU for supply of electricity by that company to the assessee; and the electricity was used in the manufacture of final products, the Tribunal held that Cenvat credit of service tax paid on stock brokers services used for purchasing the other company’s shares would be admissible [CCE v. Neuland Laboratories Ltd. (2012) 27 STR 168 (Tri. – Bang)].

150.271 Cenvat credit of service tax paid on insurance taken to meet workmen’s compensation liability is an activity related to the business, and hence would be allowed [Surani ceramics Ltd. vs. CCE (2012) 27 STR 270 (Tri. – Ahmd.)].

150.272 Cenvat Credit of services tax paid on maintenance of windmills used to generate electricity usedfor manufacture of final products is admissible and cannot be denied on the ground that the windmills are located far away from the factory since there is no stipulation that input services (unlike inputs) must be received in the factory [Endurance Technologies P. Ltd. vs. CCE (2012) 27 STR 320 (Tri. – Mumbai)].

150.273 (i) Cenvat Credit of service tax paid on hotel rent by the assessee for the purpose of stay of its Chief Executive to attend business and client meeting is admissible.

Cenvat credit of service tax paid on decorator’s service forming part of expense for event management service provided by the appellant to its clients clearly shows the nexus between the input and output service, and hence is admissible.

The Tribunal by invoking s. 80 set aside the penalties levied as there was no intent to evade tax [ One Advertising & Communication Services Ltd. vs. CST (2012) 27 STR 344 (Tri. – Ahmd.)].

150.274 Cenvat Credit availed on consultancy engineering services used for modernisation of the power plant used for manufacturing paper (dutiable product) cannot be denied merely on the ground that the modernisation was done using technology that resulted in earning carbon credits/ Certified Emission Reduction Sale (CERS) income which is not liable to excise duty/service tax [Shree Bhawani Paper Mills Ltd. v. CCE (2012) 28 STR 409 (Tri.-Del.)].

150.275 Cenvat credit availed by an exporter on clearing, commission on export sales, material handling, terminal handling, bank commission and aviation charges would be allowable since these services are availed in the course of business of manufacturing [JSW Steel Ltd. vs. CCE (2012) 28 STR 557 (Tri. – Mumbai)].

150.276 Cenvat credit availed on insurance of vehicles, finished goods in godown located inside and outside factory, finished goods in transit, cash in box/counters, cash in transit and personal insurance of cashier would be allowed since it is necessary to make the assessee risk free for carrying out its manufacturing operations and other activities related thereto [DSCL Sugar vs. CCE (2012) 28 STR 559 (Tri. – Del.)].

150.277 Credit of service tax paid on —

advertisement services used for recruitment of manpower;
security agency services used for securing the office premises;
services of hiring furniture which were used in office premises;
housekeeping services; and
clearing and forwarding services used in relation to import of equipments

is admissible as input credit

[C. Cubed Solutions Pvt. Ltd. vs. CCE (2013) 29 STR 385 (Tri-Bang);

150.278 In this case the Tribunal held as follows:

The definition of input service specifically covered (during the relevant period) service used in relation to setting up modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises. Hence construction services used for construction of office rooms in the factory premises for the factory would be specifically covered within the definition of ‘input service’.
Housekeeping services used for keeping the factory premises neat and clean in order to comply with the statutory requirement of Section 11 of the Factories Act, 1948 is to be treated as services used in relation to manufacture of final product and hence credit of service tax paid thereon would be allowable.

[NTF (India) Pvt. Ltd. v. CCE (2013) 30 STR 575 (Tri-Del)]

150.279 Ambulance services availed by the assessee for carrying sick employees to the hospital for treatment being an activity having nexus with production of final product, credit of service tax paid thereon is admissible [Hindustan Zinc Ltd. vs. CCE (2013) 29 STR 492 (Tri-Del.); Hindustan Zinc Ltd. v. CCE, (2013) 31 STR 575 (Tri. – Del.)].

150.280 The following credits on input services were held by the High court to be admissible / inadmissible to a company engaged in manufacture of drugs:

Credit on clinical testing services availed prior to commencement of commercial production was allowed in view of the fact that the final product could be manufactured only after obtaining regulatory approval of the clinically tested samples and therefore such services were directly related to the manufacture of the final product. The department plea that unless goods reaches commercial production stage cenvat credit was not admissible was rejected.
Service tax paid (as a recipient of service) on commission paid to foreign agents for ‘sale of final products’ was held inadmissible since –

They are not services directly or indirectly in relation to manufacture of final products or clearance of final product from the place of removal;

The services are not in relation to ‘sales promotion’ but are for actual sales of goods on behalf of the principal;

They are not ‘activities related to business’ “such as” (meaning of the same nature) accounting, auditing, financing share registry etc. since it is not of the same nature.

Cenvat credit on courier services used for transportation of goods outside factory would be admissible for the period prior to 1.4.2008, being service used in relation to clearance of final products from the place of removal.
Cenvat credit in respect of clearing and forwarding agent’s service would be admissible for the period prior to 1.4.2008 as being services used in relation to clearance of final products from the place of removal
(a) Cenvat credit on repair and maintenance of copier machine,

air – conditioner and water cooler are admissible being services necessary for the factory building as well as for activities relating to business and therefore, integrally connected with the business of the manufacturer.

(b) The services of interior decorator and commercial or industrial construction being services used in relation to repair / renovation of factory would fall under the inclusive part of the definition of ‘input services’ and cenvat credit on the same would be admissible.

Notwithstanding the above, cenvat credit on the above services and services of a management consultant would be admissible since the said services are specifically mentioned as input services u/r. 6(5) of the Cenvat Credit Rules, 2004 and all services mentioned in rule 6 (5) are essentially ‘input services’ as defined in rule 2(l).

Note: The rule 6(5) of CCR, 2004 allows cenvat credit on specified input services which are not used exclusively in relation to manufacture of exempted product. However, the said rule has been omitted vide notification no.3/2011-C.E. (N.T.) w.e.f. 1-4-2011.

Credit on Technical inspection and certification services availed for calibration and checking of measurement instrument used for manufacture of products is admissible as being a service in relation to manufacture of final products.

[CCE vs. Cadila Healthcare Ltd. (2013) 30 STR 3 (Guj.)].

150.281 Cenvat credit of service tax paid on travel agent service, custom house agent service, tour operator service, telephone, insurance, courier, testing services, etc. used mainly in manufacturing of water treatment plants and its erection and installation, is eligible for availment as the services are used directly or indirectly in relation to the output service [Doshion Ltd. v. CCE (2013) 30 STR 240 (Tri.-Ahmd.)].See also[Golden Tobacco Ltd v. CCE (2013) 32 STR 474 (Tri-Mum);Jindal Pipes Ltd. v. CCE, (2013) 31 STR 588 (Tri. – Del.)]

150.282 Audit and accounting services, repair and maintenance services, packaging services, legal services etc. being integrally connected with the business of manufacturing, credit of service tax paid thereon is admissible.[Golden Tobacco Ltd. vs. CCE (2013) 30 STR 594 (Tri-Mumbai)]

150.283 Credit of service tax paid on the service of ‘dismantling’ of existing structure is admissible since the same would be covered under the expression “renovation” mentioned in the definition of ‘input service’ since ‘renovation’ admittedly involves dismantling of the existing structure on which a new structure can be erected [CCE v. Jindal Pipes Ltd.(2013)30 STR 686 (Tri-Del)].

150.284 A company ‘A’ which was a job-worker for company ‘B’, a manufacturer, was issued a SCN for confirming a demand on services provided by A to B invoking the extended period of limitation. During the course of proceedings A paid the service tax and B claimed credit. Where the Revenue sought to be deny credit to B invoking the extended period of limitation, the Tribunal held that since during the relevant period such a provision for denying credit was prevalent only for excise duty and not made applicable to service tax, B could entertain a bona fide belief that it was entitled to Cenvat Credit and hence the demand against B was barred by limitation. [Electrotherm (India) Ltd. v. CCE (2013) 31 STR 43 (Tri-Ahmd)]

150.285 Where the appellant, a manufacturer of cast iron pipes, at the behest of the buyer, arranged for inspection of the goods manufactured by him and recovered the cost of inspection separately from the buyer and did not include the said charges in the assessable value of the goods, the Tribunal held that Cenvat Credit on the said inspection charges cannot be claimed. [Kapilansh Dhatu Udyog Pvt. Ltd. v. CCE (2013) 31 STR 50 (Tri-Mum)]

150.286 Cenvat credit on royalty charges paid to owner of the brand name for manufacturing and clearing plywood bearing such brand name is admissible. [Century Plyboards (I) Ltd. v. CCE (2013) 31 STR 58 (Tri-Kolkata)]

150.287 Cenvat credit on Club Membership fees is admissible provided such membership has a nexus with the business. Cenvat credit on rent paid on car parking space used by the appellant’s officers is admissible. [BCH Electric Ltd. v.CCE (2013) 31 STR 68 (Tri-Del)]

150.288 A Large Taxpayer Unit(LTU) is not required to obtain ISD registration to transfer Cenvat credit from one registered unit to the other in view of Rule 12A(4) of the Cenvat Credit Rules. [3M India Ltd. v. CCE & S.T. (2013) 31 STR 110 (Tri-Bang.)]

150.289 Where the department had sought to recover proportional CENVAT credit attributable to the amount of bad debts written off by the appellant on the ground that no Service Tax was realized on the output services in which such input services has been used, the Tribunal held that the same was not permissible since:

On facts there was no dispute as to the eligibility of availment of Cenvat credit and about the receipt and utilization of input services for providing output service;
It is a settled law that there cannot be one-to-one co-relation in availing of Cenvat credit of the input service and provision of output service; and
There is no provision in the Cenvat credit rules to deny proportional credit on the inputs which were used in providing the output services realization of which are pending.

[CST vs. Krishna Communication (2013) 31 STR 285(Tri-Ahmd.)]

150.290 Where the appellant hired JCB machine for uprooting trees to get charcoal required in manufacture of calcium carbide, cenvat credit of service tax paid on hire of JCB machines was held to be admissible. [DCM Shriram Consolidate Ltd v. CCE 2013 (32) STR 440 (Tri-Del)]

150.291 The appellant is a job worker manufacturing biscuit on behalf PBPL was clearing biscuits by paying excise duty on MRP basis. Cenvat credit on transportation charges incurred by it for transportation of biscuits to PBPL’S depots was held as allowable since as per the contract the place of removal was PBPL’s depots and accordingly the credit of outward transportation upto PBPL’S depots was admissible [M.P.Biscuits Pvt. Ltd. v CCE (2014) 34 STR 318 (Tri.-Del.)].

150.292 Cenvat credit of service tax paid on services of removal of coal fly ash from captive power plant which is used for generation of power which in turn is consumed for manufacture of excisable goods is allowable even though coal fly ash is exempt, since removal of coal fly ash is a necessity for operation of captive power plant which again is a necessity for manufacture of final product [Ultratech Cement Ltd. v. CCE (2014) 34 STR 426 (Tri.- Del.)]

150.293 Where the service receiver paid its input service provider after retaining some portion of the billed value towards performance guarantee (which was subsequently paid) but took credit of the entire amount of service tax charged by service provider, the Tribunal allowed full cenvat credit since the service provider had paid the entire service tax to the government at the time of billing and it was not the department’s case that the amount withheld was never paid [CCE v. Hindustan Zinc 2014 (34) S.T.R.440 (Tri.-Del.)]

150.294 Cenvat credit availed on techno feasibility study conducted by SBI Capital Markets pursuant to the order of BIFR (Board for Industrial and Financial Reconstruction) for finalizing the rehabilitation package is admissible since the same had nexus with the manufacturing business and would be covered by the term activities relating to business [Jenson & Nicholson (India) Ltd. v. CCE (2014) 34 STR 596 (Tri.- Del.)]

150.295 (i) Prior to 11.5.2007 availment of Cenvat Credit on any input, value in respect of which has been written off in financial accounts was admissible. However, post 11.5.2007 by virtue of Rule 3(5B) credit on such inputs was liable to be reversed. Hence where the assessee had in Mar, 07 written off value of inputs received by it, it was held that cenvat credit thereon was not liable to be reversed relying on Philips Electronics India Ltd. V. Commr. (2011) 274 ELT 311 (Tri. – Mum.)]

Cenvat credit is admissible on pest control services, annual maintenance contract (AMC) for (i)sewage treatment plant; (ii) air conditioners for instrumentation room (used for testing the products); (iii) computers is admissible since the same had nexus with the activity of manufacture and clearance of excisable goods.
Credit of service tax paid on air travel agents services was not admissible in absence of documentary evidence to show that employees had travelled in connection with business/ marketing of its product.
Credit of service tax paid on online auction services used for disposal of scrap generated in course of manufacture cleared on payment of excise duty is admissible.

[ADC India Communications Ltd. V. CCE (2014) 34 STR 637 (Tri. – Bang.)]

150.296 In this case, the Tribunal laid down that the services in inclusive part of the definition of input service need not satisfy the condition of the main part of the definition and

Canteen services used for supply of food to employees (mandatory under the Factories Act);
Valuation of Immovable Property services used for knowing life of factory and for depreciation purposes
Consulting Engineer service used for machinery
Air Travel Agent service used for travel
Tour Operator service used for business – client’s travel
Business Exhibition service used for sales promotion
Motor car repairing charges
Photography service used for sales promotion
service tax paid on job work
service tax paid on Authorized Service Station

are used in relation to the business of manufacture and hence Cenvat credit on the same is admissible. [Cadmach Machinery Co. (P) Ltd. v. CCE (2013) 31 STR 33 (Tri-Ahmd.) See also CCE v. Aurobindo Pharma Ltd. (2013) 31 STR 38 (Tri-Bang.)]

150.297 Cenvat credit on security service utilized at the pump house for pumping water from the river and supplying it to the factory is admissible though the input service is received outside the factory. The pumping of water is integrally connected to the manufacturing business [Welspun Maxsteel Ltd. v. CCE (2013) 31 STR 64 (Tri-Mum)].

150.298 The appellants were engaged in production of crude oil at the oilfield of Mumbai offshore on which they paid cess under Oil Industry ( Development ) Act, 1974 and then transported the same to their Uran plant through a pipeline and used it to manufacture dutiable final products. It had availed Cenvat credit on input services used for manufacture of crude oil to set-off the excise duty payable on products manufactured at the Uran plant. Revenue denied credit on the ground that input services were used in manufacture of “exempted goods”. On appeal, the Tribunal upheld the Revenue’s contention and held –

Crude oil manufactured at Mumbai offshore is an “exempted product” and the fact that they are paying Cess leviable under Oil Industry (Development) Act, 1974, is not relevant since the words “duty of excise” referred to in the definition of “exempted goods” and “excisable goods” refers to only duty of excise as specified in section 3 of the Central Excise Act, 1944.
The Mumbai offshore unit is not an integral part of Uran plant and the crude oil cannot be said to be an intermediate product so as to allow Cenvat credit of input services used in an exempt intermediate product which in turn is used for manufacture of dutiable final product since the crude oil manufactured at Mumbai offshore unit is a separate saleable commodity and in fact was partly being sold by the appellant at Mumbai offshore.

[Oil & Natural Gas Corporation Ltd v. CCE (2013) 31 STR 214 (Tri-Mum)]

150.299 Cenvat credit on security services utilized at the premises of the job worker to guard inputs sent for processing would be allowed since –

the definition of input services nowhere specifies that they must be utilized inside the factory and
Rule 3 of Cenvat Credit Rules specifically allows credit on services utilized by a job worker availing benefit of Notification No. 214/86 - C.E.

[MRF Ltd. v. CCE. & ST (LTU) (2013) 31 STR 689 (Tri - Chennai)].

150.300 Cenvat Credit of service tax paid on input services such as infrastructure support service , chartered accountant’s service, pay roll processing service, management consultancy services, insurance auxiliary services used for providing business auxiliary services is admissible being essential in running their business and accordingly refund of credit under rule 5 was allowed. [Kijiji (India) Pvt. Ltd. v. CCE (2013) 32 STR 661 (Tri- Mum.)]

150.301 Cenvat credit on input services utilized for installation of ammonia storage tanks situated outside factory of production is allowable on the ground that use of ammonia was an intrinsic part of the manufacturing of final product and there is no stipulation that the input services must be received in the factory. [Deepak Fertilizers and Petrochemicals Corporation Ltd. v. CCE 2013 (32) STR 532 (Bom.)]

150.302 Cenvat credit on banking charges paid in relation to purchase of raw material and sale of finished goods is admissible since such expenditure is relatable to the business of the manufacturer. [Meghmani Dyes & Intermediaries Ltd .v. CCE (2013) 32 STR 671( Tri-Ahmd.)]

150.303 Cenvat credit on management consultant’s services in relation to merger of other companies into the appellant company is admissible as being for the business of manufacturing [Cable Corporation Of India Ltd v. CCE (2013) 32 STR 434 (Tri-Mum)]

150.304 Where the appellant was a provider of management consultancy services, credit of service tax on-

Management, maintenance or repair service of common areas of the business premises of the appellant;
Employee Mediclaim Insurance
rent-a-cab service for transportation of employees
Car Parking rentals to provide parking space to its employees who use their own cars was held to be admissible.

[KPMG v. CCE,New Delhi, 2014(33) STR 96 (Tri-Del)]

150.305 Credit of service tax paid on stockbroker’s services for disposal of shares held by the assessee in another company was not allowed since the nexus of how the sale proceeds were applied in the business of the company was not established. [United Telecom Ltd. v. CCE, (2013) 31 STR 636 (Tri-Bang)]confirmed in[United Telecoms Ltd. v. CCE (2014) 33 STR 357 (Kar.)]

150.306 Cenvat credit of service tax paid on transportation of waste to the treatment plant can be taken as the transportation service forms part of the appellant’s business. [Lupin Ltd. v. CCE & ST, LTU (2013) 31 STR 744 (Tri – Mumbai)].

150.307 Cenvat credit of service tax paid on storage and warehousing services incurred at the depot viz., the place of removal is allowable [ Danmet Chemicals Pvt. Ltd. v. CCE (2013) 30 STR 308 (Tri.-Mumbai)].

150.308 Cenvat credit on outward transportation of goods sold on FOR basis allowed since place of removal gets extended upto the buyer’s premises. [New Allenberry Works v. CCE 2015(37) STR 303 (Tri-Del)]

Refund on Cenvat Credit

150.309 Expenses incurred on fumigation of containers used for export of goods in compliance with the requirement of international regulation of packing prepared by ‘International Plant Protection Convention’ are in the nature of packing expenses and hence credit of service tax paid thereon is allowable under the Cenvat Credit Rules, 2004[Venus Wire Industries Pvt. Ltd v. CCE (2014) 36 STR 475 (Tri-Mum)]

150.310 Cenvat credit on capital goods and input services used for setting up a factory is allowable and cannot be denied for want of registration [ Beico Industries Pvt. Ltd. v. CCE&ST (2014) 36 STR 551 (Tri.-Ahmd.)]

150.311 Where the decision of the Tribunal, ordering refund of unutilized Cenvat credit to the assessee who had surrendered its registration due to the closure of the company was challenged, the High Court held that claim for refund cannot be rejected relying on r. 5 of Cenvat Credit Rules, 2002 when the assesee company has been closed and the assesee has opted out of the Modvat scheme. [Union of India vs. Slovak India Trading Co. Pvt. Ltd. (2008) 10 STR 101 (Kar.)]

150.312 Unutilized balance lying in cenvat credit account is refundable where the assessee’s factory had been closed down and he was not in a position to utilize the said balance. [CCE v. Kores (India) Ltd. (2011) 22 STR 361 (Tri-Bang)]

150.313 Refund can be claimed in respect of unutilised cenvat credit on input services used in the manufacture of excisable goods exported even if they are otherwise ‘exempt’ or subject to ‘nil’ rate of duty.[Noble Grain India Pvt Ltd vs C.C.E 2010 (17) STR 128 (Tri-Del)]

150.314 Where the revenue rejected the refund of Cenvat credit on input services used for exports by the appellant, a 100% EOU, on the ground that the services in respect of which credit had been taken in a particular quarter, cannot be linked to goods exported in that particular quarter the Tribunal held that once the credit is held to be admissible, there is no restriction of having one to one correlation between the goods exported and cenvat credit availed and hence the appellants are entitled for refund of the same.[Capiq Engineering Pvt. Ltd. vs. CCE (2011) 22 STR 366 (Tri-Ahmd.)]

150.315 Service tax paid on transportation of export goods (which are sold on FOB basis) from factory to port would qualify as ‘input service’ and consequently refund is admissible under Rule 5 of Cenvat Credit Rules, 2004. [CCE vs. Stangl Pickles & Preserves (2011) 22 STR 396 (Tri-Chennai)].

150.316 Refund of credit of tax paid on input services used for exports under rule 5 of Cenvat Credit Rules, 2004 is not deniable on the ground that the credit pertained to a month in which there was no exports [CCE vs. Chamundi Textiles (Silk Mills) Ltd. (2012) 26 STR 498 (Tri-Bang)]

150.317 The Tribunal held that the refund claim of cenvat credit of tax paid on input services used for export of software was admissible under rule 5 of the Cenvat Credit Rules, 2004 even though the output was not a taxable service and the limitation period of 1 year prescribed u/s. 11B of the Central Excise Act, 1944 was also not applicable for refund of accumulated cenvat credit, but denied the refund on the ground that the appellant was not registered with the department. On appeal, the High Court held that registration with the service tax department is not a mandatory condition for availing refund of accumulated cenvat credit [M. Portal India Wireless Solutions P. Ltd. vs. CST (2012) 27 STR 134 (Kar.); Amdocs Business Services v. CCE, 2013(31) STR 249(Tri-Mum)].

150.318 The appellant made pre-deposit pursuant to the Tribunal’s order by debit to their Cenvat Credit account. Subsequently, the Tribunal disposed the appeal by way of remand and by setting aside the order of the lower authority. Consequently, the appellant became eligible for refund of pre-deposit amount for which it duly applied but insisted on refund in cash since by then the appellant had opted out of Modvat Credit scheme and was unable to utilize the credit. The department sought to refund the pre-deposit by credit to Cenvat Credit account. On appeal, the Tribunal relying on the Jharkhand High Court judgment in Ashok ARC (2006) 199 ELT 399 (Jhar.) ordered refund of pre-deposit in cash. [Raymond Ltd. vs. CCE (2012) 27 STR 447 (Tri.-Mumbai)].

150.319 Where the appellant provided Business Process Outsourcing services which were exempt vide notification no. 8/2003-ST, to overseas entities it was held that the assessee would be eligible to claim refund of Input Service Credit availed for providing the said services in terms of Rule 5 of Cenvat Credit Rules, 2004 [Zenta Pvt. Ltd. vs. CCE (2012) 27 STR 519 (Tri. – Mumbai) relying on Dell International Services India Pvt. Ltd. vs. CCE (2010) 17 STR 540 (Tri. – Bang)]

150.320 The Tribunal relying on judgment in case of Well Known Polyesters Limited vs. CCE (2012) 25 STR 411 (Tribunal) held that the appellant after obtaining service tax registration would be eligible to avail cenvat credit of input service tax paid prior to obtaining such registration. It further held that refund of such credit could also be claimed if it remains unutilized [C. Metric Solution Pvt. Ltd. vs. CCE (2012) 28 STR 460 (Tri. – Ahmd.)].

150.321 The refund of Cenvat Credit on inputs/input services used for manufacture of goods exported under Rule 5 of Cenvat Credit Rules, 2004 r/w notification no. 5/2006-C.E. (N.T.) and section 11B of the Central Excise Act, 1944, must be claimed within one year from the date on which final products are cleared for exports [CCE v. GTN Engineering (I) Ltd. (2012) 28 STR 426 (Mad.)].

150.322 The appellants, a 100% EOU, had availed cenvat credit on inputs & input services on which credit was denied by the Revenue, but later held as admissible by CCE(A) vide order dated 28.1.2009. The appellant thereafter filed a claim for under Notification no. 5/2006 on 13.8.2009 and 5.11.2009 for the period April 2007 to Mar 2008 which was rejected by the revenue as time barred. On appeal, the Tribunal allowed the claim and held that the relevant date for the purpose of filing the claim would be the date of settlement of dispute i.e. 28.1.2009 [India Trimmings Pvt. Ltd. vs. CCE (2013) 29 STR 383 Tri-Chennai)]

150.323 Where the appellant had paid service tax on job charges for grooving, but was denied Cenvat credit on the ground that the job charges were exempt from tax and he was not required to pay the tax at all, the Tribunal hold that once the service tax has been paid and service has been used in or in relation to the manufacture of the final products of the appellant, the appellant is rightly entitled to avail Cenvat credit and the question whether he was not required to pay the tax at all since the activity was exempt was irrelevant for the jurisdictional officers at the service recipient’s end [YG1 Industries (India) P. Ltd. v. CCE (2013) 30 STR 146 (Tri.-Mumbai)].

150.324 In this case the Tribunal held that –

Refund of Cenvat Credit on input services received after the period of export would not be admissible u/r 5 of Cenvat Credit Rule 2004 since the same has not been consumed in providing exported output services.
Cenvat credit on outdoor canteen services would be admissible only if the service tax amount has been borne by the assessee and same has not been recovered from the employees.

[BNY Mellon International Operations (I) Pvt. Ltd. v. CCE (2013) 30 STR 567 (Tri-Mumbai)]

150.325 The appellant had claimed drawback of duty paid on inputs and also filed claim for refund of service tax paid on cargo handling service availed by it for exporting such goods. Revenue had denied the same on the ground that granting benefit under the two claims was not permissible. On appeal the Tribunal noted that there was a distinction between the two claims, one being drawback in respect of duty paid on inputs, whereas the other being refund claim in respect of input services availed after clearance of final product and hence the Tribunal held that both the claims were admissible. [ CST v. Orient Craft Ltd. (2015) 37 STR 481 (Tri.-Del.)]

150.326 Where the assessee was not able to substantiate with evidence that service tax paid by it on Terminal Handling Charges, marine insurance and railway freight was in respect of export goods eligible for refund in terms of Notification No.40/2007-S.T. and 41/2007-S.T (i.e. listed in the notification), the Tribunal held that refund of same was not permissible.[Shree Agencies Pvt. Ltd. v. CCE (2015) 37 STR 494 (Tri.-Del.)]

Interest on Refund

150.327 Where the appellant had paid service tax alongwith interest on reverse charge basis on overseas payments made prior to 18.4.2006 (though not liable); took Cenvat Credit of the tax paid but claimed refund of the interest, the Tribunal rejected the refund claim relying on judgment in case of CCE v. SKF India Ltd. (2009) 239 ELT 385 (S.C.) on the ground that when the appellant had admitted the service tax liability by not claiming refund and taking credit of the same, interest on delayed payment is payable by the appellant and cannot be refunded [ Skoda Auto India Pvt. Ltd. v. CCE (2012) 28 STR 391 (Tri.-Mumbai)].

Availment of Credit

150.328 Where the assessee took full credit based on the supplier’s invoice but subsequently received discounts from the supplier which effectively reduced the invoice price, the Tribunal held that, the assessee was not required to reverse proportionate credit on receipt of discounts unless the supplier had obtained a refund of duty from the Government. [Kedia Electricals Ltd. vs. CCE (2008) 11 STR 197 (Tri. - Bang.)].

150.329 Once the service tax has been paid by the supplier of services credit cannot be denied to the receiver by contending that service tax was not required to be paid by the supplier on the said service. [Maersk India Pvt. Ltd. vs. CCE (2008) 12 STR 150 (Tri-Mumbai); See also H.E.G Ltd vs CCE 2010 (17) STR 178 (Tri-Del); CCE v. Carborandum Universal Ltd. (2009) 16 STR 181 (Tri- Chennai); Ultratech Cement Ltd v CCE (2011) 22 STR 289 (Tri-Mum); Manikgarh Cement vs. CCE (2011) 22 STR 471 (Tri. – Mum.); Ultratech Cement Ltd v CCE (2011) 22 STR 289 (Tri-Mum); Sterlite Industries Ltd. v. CCE (2012) 25 STR 66 (Tri-Che)]

150.330 In this case the Tribunal held that:

Where the appellants had paid the service tax as a recipient of the service they were entitled to take/avail the credit of the same. Such credit can be availed/taken for tax paid even before the appellant become registered as an output service provider since the tax is paid as a “deemed” output service provider.
Where there is no dispute as regards the fact that services have been received and payment of tax on the services so received denial of credit was not justifiable on the ground of non production of original invoice.
Where the service tax had been wrongly paid as a recipient of service under consulting engineers services instead of intellectual property right services at the instance of the department the availment of credit cannot be denied.
Credit of tax paid as an a recipient of services even before registering as an output service provider was available to be set off against output tax liability arising post registration.

[Jindal Steel & Power Ltd. vs. CCE (2009) 14 STR 68 (Tri-Del)]

150.331 Where the appellant initially claimed abatement (67%) on construction services and also availed the cenvat credit on input services [violating the condition in notification no. 1/2006 dated 1.3.2006] but subsequently reversed the cenvat credit on being pointed out, it was held that the appellant being entitled to the benefit of abatement, no penalty is imposable. [CST vs. Amola Holdings Pvt. Ltd Pvt. Ltd. (2009) 16 STR 46 (Tri. – Ahmd.)].

150.332 There is no time limit for taking cenvat credit. [Pierlite India Pvt. Ltd. vs. CCE (2010) 17 STR 237 (Tri-Ahmd.)relying on M/s. Coromandel Fertilizers Ltd. vs. CCE (2009) 239 ELT 99 (Tri-Bang.)]See also[ Central Bank of India v. CCE & ST (2013) 32 STR 525]

150.333 Denial of credit of service tax paid on input service on the ground that the services were not received within the factory premises of the assessee is not sustainable. [CCE vs. Ultratech Cement Ltd. (2010) 20 STR 683 (Tri-Mumbai)]

150.334 Transfer of capital goods by the appellant to a job worker does not warrant any reversal of cenvat credit availed on said capital goods since the goods processed by the job-worker are received from the job-worker for further use in manufacture and the appellant always had option to avail the credit on capital goods as and when he receives back the Capital Goods [Rule 4(5)] thus, resulting in revenue neutrality. Further, service tax paid on telephone and security services of by job-workers would not be available for credit by the appellant. [Zenith Machine Tools Pvt. Ltd. vs. CCE ( 2010) 20 STR 554 (Tri. – Bang.)].

150.335 Cenvat Credit cannot be denied by questioning the assessment of service provider since it is beyond the jurisdiction of the authorities in-charge of the service recipient. [Hindustan Coca Cola Beverages Pvt. Ltd. vs. CCE (2010) 19 STR 280 (Tri-Del.)]

150.336 Penalty u/s 76 & 77 is not attracted for wrong availment of Cenvat credit. Further penalty under rule 15(4) of the credit Rules can be imposed only if Cenvat credit is taken wrongly by reason of fraud, collusion etc., with an intent to evade payment of service tax. [ Sudhakar Polymers Ltd vs CCE 2010 (18) STR 635 (Tri-Bang.)]

150.337 Cenvat credit of service tax paid on input services is not conditional upon actual payment of tax/duty by the supplier and can be taken when the assessee has paid for the value and service tax. [Lason India Pvt. Ltd vs CST 2010 (18) STR 626 ( Tri-Chennai)]

150.338 The appellant manufacturer availing SSI exemption is allowed to avail the credit of input services since the exemption notification does not provide for bar on taking credit on input services as in the case of input goods. [Vallabh Vidyanagar Concrete Factory vs. CCE & C (2010) 18 STR 271 (Tri. – Ahmd.)]

150.339 Provision of technical know-how by foreign collaborator is an ‘input service’ since the required quality of final product could not have been manufactured without the technical know-how. Further, the credit can be taken on the basis of TR-6 challan which evidenced the payment of service tax by the service recipient (prior to 15.6.2005) even though TR-6 challan was not a prescribed document under Rule 9 of the Cenvat Credit Rules since the substantial benefit of cenvat credit cannot be denied on the basis of procedures which cannot be implemented [ CCE v. Sonasomic Lemforder Components (2012) 26 STR 338 (Tri- Del)].

150.340 The service of loading and unloading of finished goods at the transshipment point after removal of goods from the factory gate viz. place of removal is not an activity relating to manufacturing business and hence not eligible for Cenvat Credit [ Hindustan National Glass & Indus Ltd. v. CCE (2013) 30 STR 322 (Tri.-Del.)].

150.341 The cenvat credit in respect of construction service and other services availed for construction of a mall whose units are subsequently rented out is admissible as being used for providing output services, since without utilization of the said input services the construction of mall and its renting would not have been possible [ Navaratna S.G. Highway Prop. Pvt. Ltd. vs. CST (2012) 28 STR 166 (Tri.- Ahmd.) relying on CCE vs. Sai Samita Storages (P) Ltd. (2011) 23 STR 341 (A.P.); See also Venus Investments vs. CCE (2013) 29 STR 72 (Tri. – Ahmd.)].

150.342 Where the appellant, a manufacturer of excisable goods, had short paid service tax under reverse charge on services received from overseas marketing agents prior to 18.4.2006 but took credit of the tax actually paid, the Tribunal held that –

Prior to 18.4.2006, no service tax is payable by the service recipient for services received from abroad as the provisions of rule 2(1)(d)(iv) were ultra vires the provisions of Finance Act, 1994, and hence the demand of the service tax short paid is not sustainable.
As per rule 9(1) of Cenvat Credit Rules, 2004, the criterion for availing Cenvat Credit is with reference to the date of the invoice (which must be after 10.9.2004) and not the date on which service is provided. Hence the departments contention for denying credit on the ground that the services pertained to a period prior to 10.9.2004 is not sustainable

[H.R. International v. CCE (2012) 28 STR 580 (Tri.-Del.)].

150.343 (i) Cenvat Credit of service tax paid on ‘outdoor catering service’ is eligible for input credit if the cost is not recovered from the employees.

Travel and car service used by the staff of the appellant for official visits is eligible for input credit.
Repairs and maintenance of the factory premises viz., place of manufacture is eligible for input credit.

[Zydus Nycomed Healthcare Pvt. Ltd. v. CCE (2013) 30 STR 197 (Tri.-Mumbai);Hindustan Zinc Ltd. v. CCE, (2013) 31 STR 575 (Tri. – Del.)

150.344 Cenvat credit can be taken on Goods Transport Agency services and Business Auxiliary Services by a job-worker who cleared excisable goods to a manufacturer who paid duty on the goods even though the job-worker neither paid duty nor service tax [Western India Forging P. Ltd. v. CCE 2014 (36) STR 637 (Tri.-Mum.) where assessee referred to Sterlite Industries (I) Ltd. v. CCE (2005) 183 ELT 353 (Tri.- LB)]

150.345 TR6 challan representing credit of service tax paid under reverse charge admissible if paid after detection by the department since such disallowance is applicable only post 01.04.2011 vide Notification No. 13/2011 [CCE v. Sakthi Sugars Ltd. (2014) 36 STR 1125 (Tri.-Chennai)]

150.346 Where on facts the full value of input service invoiced was not paid to the input service provider on account of discounts but the service tax payable thereon as indicated in the invoice was paid in full, the Tribunal held that denial of cenvat credit attributable to discounted portion of the invoice value was not permissible in view of Board Circular No. 877/15/2008-CX, dated 17.11.2008 and Board Circular No. 122/3/2010-ST dated 30.4.2010. [Patel Air Freight vs. CCE (2014) 35 STR 529 (Tri-Ahmd.)

Utilisation of cenvat credit

150.347 Where a manufacturer of goods who does not provide any output service, but is liable to pay service tax on Goods Transport Agency services as payer of freight, such goods transport agency services shall be deemed to be “output service” as per the Explanation to section 2(p) until 19.4.2006 and accordingly credit of service tax paid on any input service and/or credit of duty paid on any input or capital goods can be validly utilised for discharging service tax on such goods transport agency services. [R. R. D. Tex Pvt. Ltd. vs. CCE (2007) 8 STR 186 (Tri. – Chennai)relying on CCE v. Nahar Industrial Enterprises Ltd. (2007) 7 STR 26 (Tri-Del.) affirmed inCCE v. Nahar Industrial Enterprises Ltd. (2012) 25 STR 129 (P & H); See alsoAndhra Pradesh Paper Mills Ltd. vs. CCE (2007) 8 STR 166 (Tri. – Bang.); CCE v. Visaka Industries Ltd. (2007) 82 RLT 559 (CESTAT – Mum.); Ambattur Petrochem Ltd. & Ors. v. CCE (2007) 82 RLT 922 (CESTAT – Del.); Soundararaja Mills Ltd. ‘E’ Mills vs. CCE (2008) 9 STR 183 (Tri. – Chennai); Bhushan Power & Steel Ltd. vs. CCE (2008) 10 STR 18 (Tri-Kolkata); CCE vs. Flowserve Microfinish Valves Pvt. Ltd. (2008) 10 STR 21; Nagammai Cotton Mills (P) Ltd. vs. CCE (2008) 10 STR 77 (Tri-Chennai) (Tri-Bang); CCE vs. Gupta Steel (2008) 12 STR 101 (Guj.); Scan Synthetics Ltd. vs. CCE (2008) 12 STR 766 (Tri. – Del.); CCE vs. Arvind Fashions Ltd. (2009) 13 STR 544 (Tri-Bang.);Mahindra Ugine Steel Co. Ltd. vs. CCE (2008) 12 STR 159 (Tri-Mumbai.); Iswari Spinning Mills v. CCE (2011) 22 STR 549 (Tri-Chennai); CST vs. Hero Honda Motors Ltd. (2013) 29 STR 358 (Del); CCCE & ST vs. Aster Teleservices (P) Ltd. (2013) 29 STR 475 (Tri – Bang.) (These cases pertain to period prior to 19.4.2006); Shree Rajasthan Syntex Ltd vs.CCE (2011) 24 STR 670 (Tri-Del);G.R.Corporation v. CCE (2013)31 STR 204 (Tri-Del);CCE v. Spendex Industries Ltd. (2013)31 STR 472 (Tri-Del); CCE v. Deepak Spinners Ltd. 2013 (32) STR 531 (H.P.);CCE vs. Cheran Spinners Ltd. (2014) 33 STR 148 (Mad)]

150.348 In the present case, the issue before the Tribunal was whether the goods transport agency (“GTA”) services received by the appellant during the period April’05 to March’07 could be treated as an output service and the service tax thereon could be discharged through Cenvat credit. The Tribunal held that-

For the period prior to 19.4.06(i.e. before the deletion of explanation to r. 2(p) of the Cenvat Credit Rules, 2004) though by virtue of the explanation the GTA services received by the appellant were deemed to be their output services yet the appellants would not be eligible to discharge the service tax liability in respect thereof by using cenvat credit since by virtue of r. 3(1) of the credit rules cenvat credit on inputs/capital goods /input services can be taken only if the same has been received and used in provision of services or for manufacture of final products. Since the assessee was neither engaged in provision of services nor in manufacture of final products it could not avail Cenvat credit on any input services and consequently cannot utilize such credit for discharging its service tax liability in respect of goods transport agency services received by it.
For the period post 19.4.06 after the deletion of explanation to r. 2(p) only services actually provided by assessee could be treated as output service. Hence irrespective of the fact whether or not the assessee was manufacturing any final products or providing taxable output services service tax on goods transport agency services was required to be paid by the assessee in cash and not through cenvat credit.

[ITC vs. CCE (2011) 23 SRT 41(Tri –Bang); CCE vs. Echjay Forgings Pvt. Ltd. (2013) 31 SRT 375(Tri –Mumbai)]

150.349 Prior to 19.4.2006 by virtue of explanation to rule 2(p) of the Cenvat Credit Rules, 2004 (which defined output service) service tax liability as a recipient of goods transport agency services could be discharged through Cenvat credit only by those persons who did not provide any taxable service or manufactured any final product. The appellants in the present case were engaged in manufacturing activities. Further the goods transport agency services which is received by the assessee is specifically covered by the definition of “input services” and the same service cannot be considered as “input service” as well as “output service”. Hence the goods transport agency services received by the assessee cannot be treated as their “output service”. Accordingly, the Tribunal held that the appellants could not discharge their service tax liability in respect of goods transport agency services by availing Cenvat credit.[CCE vs. B.P.L. Display Devices Ltd. (2011) 23 STR 356 (Tri-Del.)]

150.350 Where the appellants were engaged in manufacture of goods the Tribunal held that they were not entitled to treat the goods transport agency services obtained by them as an output service and utilise the balance in cenvat credit account for payment of service tax on goods transport agency services taking recourse to the erstwhile Explanation to section 2(p) of the Cenvat Credit Rules, 2004. [Alstom Projects India Ltd. vs. CCE (2008) 12 STR 23 (Tri-Chennai).

150.351 Cenvat credit in respect of basic excise duty can be utilised for payment of education cess under rule 3(7) of the Cenvat Credit Rules, 2004. [ Sun Pharmaceutical Industries vs. CCE (2008) 11 STR 93 (Tri. – Del.)].

150.352 Service tax payable on the goods transport agency services by a service recipient can be paid by way of debit to cenvat credit account since GTA is deemed to be an output service [Selvakumar Spinners Pvt. Ltd. v. CCE (2009) 16 STR 406 (Tri. – Chen)].

150.353 Unutilized balance of service tax credit as on 10.9.2004 earned under the Service tax Credit Rules, 2002 can also be utilised towards payment of excise duty (and not only service tax) by virtue of the transitional provision envisaged under Rule 11 of the Cenvat Credit Rules, 2004. [Uttam (Bharat) Electricals (P) Ltd.vs. CCE (2010) 17 STR 240 (Tri-Del.); See also Idea Mobile Communications Ltd. v. CCE (2012) 25 STR 385 (Tri – Del) ]

150.354 Where the assessee was a manufacturer and a service provider, (renting services), the cenvat credit availed on inputs, capital goods and input services used for manufacturing final products can also be utilized for payment of tax on output services since the Cenvat credit account is a common pool and there was no requirement under the Cenvat credit rules to maintain separate Cenvat accounts – one for the payment of excise duty and other for discharging service tax liability. [CCE v. Lakshmi Technology & Engineering Indus Ltd. (2011) 23 STR 265 (Tri- Chennai)]

150.355 Construction services provided to a SEZ Unit are ‘exempt services’ and not ‘export services’ under the Export of Service Rules, 2005. However, the ‘exemption’ under notification no. 4/2004, dated 31st March, 2004 read with section 26 of the SEZ Act, 2005 and rule 31 of the SEZ Rules, 2006 is a ‘conditional exemption’ and in view of the judgments in Bajaj Tempo v. CCE (1994) 69 ELT 122 (Tri-Mum.) and Sterlite Industries Ltd. v. CCE (2005) 183 ELT 353 (Tri-LB) the provisions of rule 6 of the Cenvat Credit Rules, 2004 disallowing credit of tax paid on input services for providing exempt services would not apply since Rule 6(1) is applicable only in case the exemption is without conditions. [Sobha Developers Pvt. Ltd. v. CCE (2012) 25 STR 136 (Tri. – Bang.)]See also [JBF Industries v.CST (2014)34 STR 345 (Tri-Ahmd.)]

150.356 The Tribunal relying on judgment in case of Shree Rajasthan Syntex Ltd. v. CCE (2011) 24 STR 670 (Tri.-Del.) held that the appellant is entitled to utilise Cenvat Credit for payment of service tax on commission paid to an overseas agents under the reverse charge [ Indian Acrylic Ltd. v. CCE (2012) 28 STR 354 (Tri.-Del.);Kansara Modler Ltd. v. CCE (2013) 32 STR 209 (Tri.–Del.)].

150.357 Rule 6(3)(c) – pre 1.4.2008: The appellant, a telephone service provider, provided taxable services (such as basic telephone connection) as well as exempt services (such as interconnection services to other telephone operators) and took credit of entire duty / tax paid (including duty paid on capital goods) on input services (including input services specified in rule 6(5) of the Cenvat Credit Rules, 2004). The department alleged excess utilisation of credit and restricted the credit to 20% of the output tax payable under the erstwhile rule 6(3)(c) of the Cenvat Credit Rules, 2004. The Tribunal held–

the expression ‘exempted services’ covers not only the services taxable under Section 66 of the Act, which are fully exempt from service tax by some exemption notification issued under Section 93, but also those services which are not taxable under Section 66 of the Act. Hence interconnectivity services provided to other telephone operators is an exempt service even if it is otherwise not taxable and hence the appellant was providing taxable and exempt services thus attracting Rule 6(3)(c).
Rule 6(3)(c) of the Cenvat Credit Rules, 2004 i.e. restriction of 20% would not be attracted in case of credit availed on capital goods and input services mentioned in Rule 6(5).
If during certain months, the credit utilisation for payment of service tax was less than the 20% ceiling specified in Rule 6(3)(c) of Cenvat Credit Rules, 2002, the unutilised credit of those months can be adjusted against utilization in excess of the 20% ceiling, in other months.

[Idea Cellular Ltd. v. CCE (2009) 16 STR 712 (Tri. – Del.) See also Vijayanand Roadlines Ltd. vs. CCE (2007) 80 RLT 831 (CESTAT-Ban.)]

Rule 6(3)

150.358 Where the assessee provided taxable services as well as was engaged in trading activity, and availed Cenvat Credit on input services used for taxable services as well as trading activity, the Tribunal held that –

Trading activity is nothing but purchase and sales and cannot be called a service and therefore it cannot be considered as exempted service.
Rule 6(2) and 6(3) of the Cenvat Credit Rules, 2004 only deal with a situation where service provider is providing taxable and exempted ‘services’. Since trading activity is not an exempted service rule 6 cannot be applied to such a situation.
The only obvious solution which would be legally correct appears to be to ensure that once in quarter or once in six months, the quantum of input service tax credit attributed to trading activity according to standard accounting principles is deducted and the balance only availed for the purpose of payment of service tax of output service. This proposition is not against the law in view of the fact that there are several decisions of various High Courts and also of the Tribunal wherein a view has been taken that subsequent reversal of credit amounts to non-availment of credit.

[Orion Appliances Ltd. vs. CST (2010) 19 STR 205 (Tri-Ahmd.)]See also[Gulf Oil Corpn. Ltd. v. CCE, (2014) 33 STR 298 (Tri-Ahmd)].

150.359 Where the assessee was a manufacturer as well as a trader (import and sale) of motor vehicles and availed cenvat credit on certain input services which are common to manufacturing and trading activities such as advertising, event management, Business Auxiliary and Business Support Services which are essentially for sales promotion of their cars and took entire cenvat credit relating to such services, the Hon’ble Tribunal held that –

Trading is not a service and therefore cannot be considered as exempt service prior to 1.4.2011.
The Explanation to Rule 2(e) defining ‘exempt services’ which provides that ‘for removal of doubts it is hereby clarified that’, exempted services includes trading, will have only prospective effect from 1.4.2011 notwithstanding the use of the expression ‘for removal of doubts’.
Since trading is not considered as an ‘exempted service’, demanding 6% of the trading turnover under Rule 6(3)(i) of the Cenvat Credit Rules, 2004 is incorrect.
Credit on common input service used in manufacture and trading, cannot be entirely allowed since all input services had to have an integral connection with the business of manufacturing dutiable final products.
Considering the nature of services which were common to manufacturing and trading activities such as advertising, event management, business auxiliary and business support services, it was held that it would be appropriate to apportion the credit in the ratio of turnover of manufactured cars and traded cars rather than in the ratio of turnover of manufactured cars and margin of traded cars.
Clause (c) of Explanation 1 added w.e.f. 1.4.2011which prescribes that value of ‘exempted service’ in case of trading would be the sale price minus purchase price (i.e. margin) cannot be used to apportion credit attributable to ‘trading activity’ for the period prior to 1.4.2011 since the substantive provision that trading is ‘service’ and hence can be considered as ‘exempted service’ itself did not exist before the said date.

[Mercedes Benz India Pvt. Ltd. v. CCE (2014) 36 STR 704 (Tri.- Mum.)]

150.360 Where the appellant had reversed the entire credit on common input services which were used for manufacture of both dutiable as well as exempted goods, before adjudication the Tribunal held that the same was a sufficient compliance under Rule 6(3) of the Credit Rules as retrospectively amended by the Finance Act, 2010, and hence the appellant would not be liable to pay 10% of the value of the exempted goods. However, interest @ 24% was held to be payable [Standards Intl. Precision Engineers P. Ltd. vs. CCE (2011) 22 TSR 594 (Tri-Bang.)].

150.361 The appellant manufactured sponge iron (dutiable), during the course of which ‘iron ore fines’ were generated as a ‘waste product’ and cleared without payment of duty in terms of exemption notification no. 4/2006. The appellant used input services for such manufacture on which it took credit. The tribunal, relying on Rallis India Ltd. (2009) 233 ELT 301 (Bom.) held that the appellant need not reverse any credit u/r. 6 (3) since the ‘waste’ cannot be considered as ‘final products’ exempt from duty [CCE vs. Devi Iron Power Ltd. (2013) 29 STR 172 (Tri. – Del.)].

150.362 Where the assessee was a dealer in motor vehicles as well as authorised service station, the cenvat credit on goods transport service availed for transporting the vehicles from the supplier’s premises to their premises was not allowed as input services since it pertained to dealing / trading activity [Asst. Comm. C,CE&ST v Sree Siva Sankar Automobiles (2014) 34 STR 797 (Tri.-Bang.)]

150.363 Cargo handling service excluded handling of export cargo but such exclusions would also be considered as exempted service for the purpose of Cenvat Credit and there is no requirement for an exemption notification to be issued as long as the activity is a service and it is not taxable, such services are ‘exempted service’ [Prathyusha Associates Shipping P. Ltd. v. CCE&ST (2014) 36 STR 1145 (Tri.-Bang.)]

150.364 The appellant had taken on lease premises admeasuring 5152 sq ft and rented out an area admeasuring 998 sq ft. It had availed and utilized credit of service tax paid on Common Maintenance services in respect of the property rented out by it for discharging the service tax liability on its renting of immovable property services which was disallowed by the department. On appeal the Tribunal held that Cenvat Credit on common maintenance services attributable to the area of 998 sq ft let out by the appellant would only be admissible as being used for providing taxable output services. In respect of cenvat credit on common maintenance services attributable to balance area the same would not be admissible as the assessee had not provided any output services from such area [Treat Convenience Foods v. CE&ST, (2014) 34 STR 854 (Tri-Del)].

150.365 Cenvat credit on input services used for providing exempted output services is not admissible [UCO Bank v. CST (2014) 36 STR 1169 (Tri. - Kolkata)]

Cenvat Credit – SEZ Units

150.366 Where the appellant provided taxable and exempted services i.e. (services to SEZ units/SEZ developers) and availed cenvat credit on inputs/input services without maintaining separate accounts as per Rule 6(2) of Cenvat Credit Rules, 2004, it was held that the appellant was not liable to pay an amount of 8%/6% of the amount of exempted services under Rule 6(3) for period April’08 to September’09 since:

Section 144 of the Finance Act, 2012, made a retrospective amendment to the provisions of Rule 6(6A) of Cenvat Credit Rules,2004 w. e. f. 10.02.2006 to provide inter alia that the provisions of Rule 6(3) of Cenvat Credit Rules,2004 shall not be applicable in case the taxable services are provided, without payment of service tax, to a unit in a Special Economic Zone. Therefore, there is no need to reverse any Cenvat Credit taken on inputs/input services if such inputs/input services were used in rendering of output services to SEZ unit/SEZ developer.
Relying on Repro India Ltd vs. UOI (2009) 235 E.L.T 614(Bom.), it was held that services provided to SEZ unit/SEZ developer was deemed as “exports” and therefore there was no requirement to reverse cenvat credit

[Tata Consulting Engineers Ltd. v. CST 2014(33) S.T.R. 655 (Tri.-Mumbai)]

150.367 Services provided to SEZ units/ developer would not be subjected to provisions of Rule 6(3) of the Cenvat Credit Rules, 2004 in view Rule 6(6A) of the credit rules which was given retrospective effect vide section 144 of the Finance Act, 2012 [Hewlett Packard India Sales Pvt. Ltd. v. CCE (2014) 35 STR 410 (Tri-Bang)]

150.368 A Circular that is beneficial to the assessee would have a retrospective effect in view of the Hon’ble Supreme Court decision in M/s. Suchitra Components Ltd v. Commissioner, (2008) 11 STR 430 (S.C.) and hence benefit of Circular no. 868/6/2008-C.X. dated 9.5.08 clarifying that export services were not ‘exempted services’ for the purpose of cenvat credit was available to the exports for the period June to October 2007. [L & T Sargent & Lundy Ltd. v. CCE, (2014) 35 STR 945 (Tri. – Ahmd.)

Reversal of credit and re-credit thereof

150.369 Recredit of wrongly reversed credit is admissible. [CCE & C v. Radha Krishna Synthetics Pvt. Ltd. (2007) 8 STR 190 (Tri. – Ahmd.)]

150.370 Where the respondent had voluntarily reversed the amount of credit at the instance of the department the Tribunal held that the Original reversal is a kind of deposit of disputed amount which needs to be confirmed by a formal order. As no further actions were initiated against the reversed amount the appellant was eligible to re-credit the amount of cenvat or refund. [CCE vs. Intricast Pvt. Ltd. (2008) 11 STR 107 (Tri-Mumbai)].

150.371 Where the appellant had availed cenvat credit on Goods Transport Agency services for inward transportation of inputs but thereafter retuned some of the inputs received by it, since they were sub-standard, the Tribunal held that the credit of service tax and education cess availed on the Goods Transport Agency services utilised for inward transportation need not be reversed proportionately under rule 3(5) of the Cenvat Credit Rules, 2004 when some of the inputs were subsequently returned since the said rule applies only to inputs and capital goods and not to input services. [ Seven Star Steels Ltd v. CST (2013) 30 STR 532 (Tri-Kolkata)].

Abatement and Cenvat Credit

150.372 Where the appellant initially claimed the benefit of abatement under the notification no. 1/2006 dated 01.03.2006 and also availed Cenvat credit in violation of the condition stipulated for availing the benefit of abatement but subsequently, reversed such Cenvat credit, the Tribunal held that the benefit of the abatement cannot be denied to the assessee since reversal of wrongly availed credit along with interest has the effect of not having availed the credit at all [Khyati Tours & Travels Vs. CCE 2011 (24) STR 456 (Tri-Ahmd)].

Transfer of Cenvat credit

150.373 Where the appellants transferred their factory from one place to another, the input credit can be allowed to be transferred to the new place without actual physical transfer of the inputs. [CCE vs. Smithkline Beecham Consumer Healthcare Ltd. (2008) 11 STR 446 (Tri-Chennai)]

150.374 Unutilised Cenvat credit on inputs and capital goods of a company which was merged with the appellant company is available to the appellant and no prior permission from the Deputy Commissioner was required under rule 10 of the Cenvat Credit Rules, 2004. [Kiran Pondy Chems Ltd. vs. CCE (2011) 22 STR 119 (Tri. – Che.)]

150.375 In this case the Tribunal held that where the appellant firm was converted into a Private Limited company no formal permission from the Central Excise Officers was required by the company to avail the unutilized balance of Cenvat credit lying with the firm. [Flex Art Foil Pvt. Ltd. vs. CCE (2011) 22 STR 591 (Tri-Ahmd.)]

150.376 Where there had been only a change in the name of the assessee company without any change in the Constitution, the Tribunal held that the unutilized Cenvat credit standing in the old name of the company can be transferred in the new name of the company [ CCE vs. Sri Varahiamman Steels (P) Ltd. (2011) 23 STR 91 (Tri-Chennai)]

150.377 CENVAT Credit cannot be denied merely based on the facts that the input service invoices were received in an earlier name of the company which had since got changed. [Showa India (P) Ltd. v. CCE (2012) 25 STR 152 (Tri- Del.)].

150.378 Where only the people controlling the affairs of the assessee company had changed but the assessee company continued to be the owner of factory, the Tribunal held that provisions of Rule 8 of Cenvat Credit Rules, 2002, (Corresponding to Rule 10 of the 2004 Rules) which mainly deals with transfer of cenvat credit on account of shifting of factory to another site or change in the ownership in certain specified circumstances, would not apply [ Auora Foam Pvt. Ltd. v. CCE (2012) 26 STR 603 (Tri – Del.)]..

Adjustment of service tax deposited under wrong regn. code

150.379 Where the assessee a proprietor had mistakenly deposited his service tax liability under a wrong registration code (pertaining to a dissolved partnership firm wherein the assessee was one of partners) the Tribunal held that adjustment of tax deposited under the wrong registration code against the tax liability under the correct registration code was permissible. [CCE v. K.K.Kedia (2014) 35 STR 383 (Tri- Del)]

Denial of credit on account of procedural lapses

150.380 Prior to 16.6.2005, credit in respect of service tax paid on Goods Transport Agency services can be availed on the basis of TR-6 challans if no document was prescribed for taking credit especially when the service tax was paid and the assessee is otherwise entitled to credit. [ CCE vs. Essel Pro-Pack Ltd. (2007) 8 STR 609 (Tri. – Mumbai); See also Gaurav Krishna Ispat (I) Pvt. Ltd. vs. CCE (2009) 13 STR 629 (Tri-Del.); CCE v. Shree Sidhbali Steel Ltd. (2009) 13 STR 284 (Tri. – Del.); CCE v. Hindustan Coco Cola Beverages (P) Ltd. (2011) 22 STR 292 (Tri-Del); Dharampur Sugar Mills Ltd. vs. CCE (2011) 22 STR 598 (Tri-Del.)]

150.381 Credit taken on the basis of the photocopy of the invoices is inadmissible. [CCE vs. Vandana Energy & Steel Pvt. Ltd. (2008) 9 STR 31 (Tri. - Del.) See also CCE vs. Chamundi Textile (Silk Mills) Ltd. (2012) 26 STR 498 (Tri-Bang)].

150.382 Cenvat credit on inputs cannot be denied merely on the ground of non-mentioning of registration number in the invoice where the receipt and consumption of goods and discharge of duty liability thereon is not in dispute. [Agarwal Industries vs. CCE (2008) 12 STR 223 (Tri-Del.)]

150.383 Where the assessee availed Cenvat credit in respect of services availed at premises not mentioned in the Registration Certificate [but which were subsequently endorsed in the Registration Certificate], the Tribunal held that the credit is not deniable. [Raaj Khosla & Co. Pvt. Ltd. vs. CST (2008) 12 STR 627 (Tri. – Del.)].

150.384 Credit of service tax availed on the basis of TR-6 challans cannot be denied since no document was prescribed for taking credit during the relevant point of time especially when the payment of service tax has not been denied. [Centaur Phamaceuticals P. Ltd. vs. CCE. (2009) 13 STR 171 (Tri. – Mumbai); See also Cosmos Castings India Ltd. vs. CCE (2011) 23 STR 144 (Tri-Del.)].

150.385 Credit cannot be denied merely on failure to comply with the procedural requirements of mentioning the registration number of the Head office as Input service distributors [ISD] on the invoice especially when the rules for ISD were being implemented. [CCE vs. Jindal Photo Ltd. (2009) 14 STR 812 (Tri-Ahmd.);Precision Wires India Ltd. v. CCE (2013) 31 STR 62 (Tri-Ahmd.)]

150.386 Credit availed on the basis of debit notes is inadmissible since u/r. 9(1) of the Cenvat Credit Rules, 2004, Cenvat Credit can be availed only on the basis of an invoice, supplementary invoice, challan or bill of entry. [Godrej Consumer Products Ltd. vs. CCE (2010) 20 STR 609 (Tri-Del.); See contra CCE vs. Grasim Industries Ltd. (2011) 24 STR 691 (Tri-Del)]

150.387 Where the appellant had availed credit on the basis of invoices which were not in the name of their factory but in the name of head office the Tribunal held that in absence of any dispute about the receipt of services by the factory to whom credit has been passed the omission of the name of the factory in the invoice becomes a curable defect and is condonable. Hence credit is admissible. [Modern Petrofils vs. CCE (2010) 20 STR 627 (Tri-Ahmd.) relying on CCE vs. DNH Spinners (2009) 16 STR 418 (Tribunal); See also Parekh Plast (India) Pvt. Ltd. v. CCE (2012) 25 STR 46 (Tri-Ahmd); CCE vs. Chamundi Textile (Silk Mills) Ltd. (2012) 26 STR 498 (Tri-Bang)]

150.388 Where the appellant’s head office was discharging the entire service tax liability including the liability of its branch office, the denial of credit on input services invoices which was received and addressed to its branch office was held to be incorrect especially where the appellant had produced a certificate from the service provider clarifying that address in the invoice may be read as addressed to the appellants head office [ Rajasthan Diesel Sales & Services v. CCE (2014) 36 STR 832 (Tri-Del)]

150.389 Where the appellant has centralised registration (centralized billing/ centralized accounting system) credit cannot be denied even if invoices of input services are issued in the name and address of its branches especially when the appellant has been discharging the entire service tax liability from its registered premises and has also made the payment from its registered premises for the value of input services received by its branch offices. [ Manipal Advertising Services Pvt. Ltd. vs. CCE (2010) 19 STR 506 (Tri-Bang.)]

150.390 The assessee availed taxable services from service providers who were not registered and invoices raised by them did not bear any registration number. However, the service providers registered themselves subsequently and assessee paid service tax on the supplementary invoices issued by them. It was held that credit cannot be denied on the basis that at the time of receipt of input services, the service providers were not registered where there was no dispute that the input services were received and used for providing output services. [Secure Meters Ltd. vs CCE 2010 (18) STR 490 (Tri-Del.)]

150.391 Where the inputs were entered in the stock record; were used in the manufacture of final product; and the transporters of inputs were paid by cheques; the Tribunal held that the denial of credit solely on the ground that the vehicle numbers on which inputs were transported to the assessee were not genuine, is incorrect.[CCE v. Parmatma Singh Jatinder Singh Alloys P.Ltd, (2012) 25 STR 281]

150.392 A manufacturer of automobile components registered for central excise on 28.11.2006 but claimed credit of construction services on invoices/services prior to the date of registration. The Revenue denied Cenvat credit on the ground that the appellants were not registered as an input service distributor. The Tribunal upheld the Revenue’s contention holding as follows:

though under Cenvat Credit Rules, 2004 there is no provision regarding registration, section 69 of the Finance Act, 1994 requires every person liable to pay tax to get registered. Being so, the payment of service tax is directly related to requirement of registration. Hence in order to enable the party to avail cenvat credit in relation to service tax paid on input services, a person has to get registered in terms of Finance Act, 1994 read with rules framed thereunder.
rule 3 of the Service Tax (Registration of Special Category of Persons) Rules, 2005 requires registration of an input service distributor within 30 days from the date of ‘commencement of business’. The term ‘commencement of business’ would commence from the time the preparation commences for the establishment of manufacturing unit and not only when actual production starts as the party is entitled to avail credit even prior to actual commencement of production.

[Showa India (P) Ltd. v. CCE (2012) 25 STR 152 (Tri- Del.); Contra in Well Known Polyesters Ltd. v. CCE (2012) 25 STR 411 (Tri – Ahmd)], [Dagger Forst Tools Ltd. v. CCE (2013) 30 STR 206 (Tri.-Mumbai)].

150.393 Where the assessee availed credit of inut services before payment of value and tax thereon to the supplier the Tribunal held that since subsequently payment was made and the supplier was a genuine supplier, the credit need not be denied but held that interest was payable from the time credit was taken till the time the amounts were paid to the supplier. [Praveen Jain & Co. Pvt. Ltd. v. CST (2012) 25 STR 196 (Tri. – Del.)].

150.394 Where the appellants had taken the credit of duty paid on capital goods in the month of November, 2005 when in fact the capital goods were received in the factory on 22-12-2005 the Tribunal held that the credit was not deniable since the appellants were entitled to take credit after 22-12-2005. [ Hot Sport Colour Lab v. CCE (2012) 26 STR 336 (Tri-Del)]

150.395 Where the bills of entry contained the name of the importer (head office) but the goods were received at the factory unit, the Tribunal held that credit on said bills of entry was admissible. Further credit cannot be denied on the grounds that the assessee had failed to take credit immediately on the receipt of inputs. [SGS India Pvt. Ltd. v. CCE (2012) 26 STR 395 (Tri-Mumbai)]

150.396 The assessees factory in New Delhi had cleared goods to its sister unit at Bangalore without payment of duty since it believed that the said goods were not liable for excise duty. However, at the instance of the department, it deposited the said amount of which its unit at Bangalore had taken credit. The revenue denied Cenvat credit to the Bangalore unit on the grounds that the duty was not paid at the time of clearance of goods. On appeal the High Court held that though the duty was not deposited by the assessee in accordance with the rules but once the same has been deposited its Bangalore unit is entitled to take credit and utilize the same. [CCE vs. Himalaya Drug Co. Ltd. (2012) 26 STR 386 (Kar.)].

150.397 Credit availed on the basis of photocopy of the bill of entry and photocopy of challan is not allowable [CCE v. Survoday Blending (P) Ltd. (2012) 28 STR 104 (Tri.- Ahmd.)].

150.398 The Cenvat credit taken by the appellant’s factory was allowed even though the invoices were raised in the name of registered office, in view of the fact that the appellant had only one factory and there was no allegation in the show cause notice that the said factory had not received the input services [Bloom Dekor Ltd. vs. CCE (2012) 28 STR 182 (Tri. – Ahmd.)].

150.399 Cenvat Credit cannot be disallowed on the ground that the assessee did not maintain separate accounts of Cenvat Credit used for payment of excise duty on final product manufactured and service tax paid on output service since there is no such provision in Cenvat Credit Rules, 2004 [ Jyoti Structures Ltd. v. CCE (2012) 28 STR 380 (Tri.-Mumbai)].

150.400 Invoices raised in the ‘brand name’ or ‘earlier name’ of the company would be eligible documents for claiming cenvat credit in view of proviso to Rule 9(2) of Cenvat Credit Rules, 2004 [Valco Industries Ltd. vs. CCE (2012) 28 STR 457(Tri. – Del.)].

150.401 Where the CHA, acting on behalf of the assessee, paid certain expenses (e.g. port charges, etc.) clearing import consignments for the assessee and claimed reimbursement under a separate invoice attaching the original invoice of the service provider, the Tribunal held that if the bills of the other agencies (e.g. port) are directly linked to the imports made by the assessee and the CHA was only acting as an intermediary the benefit of credit of service tax paid by the other agencies cannot be denied even if the said invoices are in the name of the CHA [Chandra Engineers vs. CCE (2013) 30 STR 699 (Tri-Del.)

150.402 Cenvat credit on banking services availed by the appellant based on debit advices issued by the bank containing all the particulars required under rule 4A of the Service Tax Rules, 1994 is admissible and cannot be denied on the ground that debit advices were not issued by the bank within the time limit prescribed under Rule 4A. [MPI Machines Ltd. v. CCE (2013) 31 STR 103 (Tri-Del.)]

150.403 The assessee received capital goods in its premises [Secondary Switching Areas (SSAs)] from its Central Stores Department (CSD) which purchased goods centrally and intimated the SSAs by an Advice of Transfer Debit [ATD] supported by xerox copies of original invoices, based on which the SSAs took credit. The Department denied credit on the ground that ATD is not a document for claiming credit. The Tribunal allowed the credit holding that –

Existence of original invoice and its genuineness is not disputed by the revenue;
The duty involved has been paid; and
There is no dispute that the equipment in question has been used at the sites where credits were taken.

[Bharat Sanchar Nigam Ltd v. CCE, (2014) 34 STR 378 (Tri- Chennai)]

150.404 Service tax paid as a recipient of GTA service by utilizing cenvat credit must be reversed and paid by debiting the PLA / TR – 6 challan. However, for such procedural error causing no loss of revenue to the department interest and penalty cannot be imposed. [U.M. Cables Ltd. v. CCE (2013) 32 STR 635 (Tri-Ahmd.)]

Interest

150.405 Interest would be payable only if wrongly taken credit is utilised and not where the credit remains unutilised. [ C.C.E vs. Jagatjit Industries Ltd 2010 (17) STR 137 (Tri-Del) affirmed in CCE vs. Jagatjit Industries Ltd. (2011) 22 TSR 518 (P& H); See also Ganta Ramanaiah Naidu vs CCE 2010 (18) STR 10 (Tri-Bang.); CCE vs. Gokaldas Images (P) Ltd. (2012) 28 STR 214 (Kar.)] See also Gurmehar Construction v. CCE (2014) 36 STR 545(Tri.-Del.)

150.406 Where the assessee had reversed the entire credit taken before utilising the same the High Court held that no interest would be payable for taking credit in terms of rule 14 of the Cenvat credit Rules, 2004 read with section 11AB of the Central Excise Act, 1944 since –

if amount credited in Cenvat account but is not utilised in making payment of excise duty on final products there would be no consequences since neither the assessee gets any advantage nor the revenue suffers any loss since it does not amount to improper or non-payment of duty.
if credit is reversed before utilisation it amounts to not taking credit [CCE vs. Bombay Dyeing and Manufacturing Company Ltd. (2007) 215 ELT 3 SC)]. Once credit is reversed before its utilization it does not amount to taking credit. Accordingly Rule 14 of the Cenvat Credit Rule read with Section 11AB would not be attracted.

[CCE vs. Asoka Metal Decor (P) Ltd. (2011) 21 STR 469 (All.)]

150.407 Interest under Rule 14 of the CENVAT Credit Rules, 2004 is applicable from the date of wrong availment of CENVAT Credit and not from the date of utilization of the credit. [UOI v. Ind-Swift Laboratories Ltd. (2012) 25 STR 184 (SC)]

150.408 The assessee in the present case had wrongly taken Cenvat Credit in their cenvat account without the actual receipt of capital goods. However, on being pointed out it accordingly reversed the credit. The revenue sought to recover the interest u/r 14 of the Cenvat Credit Rules, 2004 for wrongly taking the Cenvat credit. On appeal, the High Court held that –

Crediting of excise duty in the Cenvat credit register is only a book entry. Credit is actually taken only at the time when stage for payment of excise duty/ service tax is reached. Further credit is said to be utilized only when it is adjusted / set off against the duty payable by making a debit entry in the Cenvat credit register. If entry has been reversed in the register before utilization, it amounts to not taking credit. Accordingly there would be no credit taken/ utilized wrongly and hence no interest is payable.
Interest being compensatory in nature, the same would be imposable only when the assessee by taking credit had not paid the duty/ tax which is legally due to the government on due date. If there is no liability to pay duty/ tax, there is no liability to pay interest. Further, both section 11AB of the CEA, 1944 and Section 75 of the Finance Act, 1994 do not stipulate payment of interest from the date of book entry showing entitlement of Cenvat Credit.

[CCE & ST, vs Bill Forge Pvt Ltd. (2012) 26 STR 204(Kar.);].

150.409 Where Cenvat Credit was taken by Unit – I of the appellant and utilized by Units – I & II and later was reversed by Unit – I pursuant to an audit conducted in Unit - I, the Tribunal held that credit should be considered as not taken at all and hence interest thereon is not payable [Sharvathy Conductors Pvt. Ltd. v. CCE (2013) 31 STR 47 (Tri-Bang)]

150.410 The High Court relying on the judgment in case of CCE & ST LTU vs. M/s. Bill Forge Pvt. Ltd. (2012) 26 STR 204 (Kar.) held that as the respondent had reversed the Cenvat Credit availed on inputs used in exempted product before utilisaton, no interest would be leviable [ CCE vs. Pearl Insulation Ltd. (2012) 27 STR 337 (Kar.)].

150.411 The appellant had paid service tax on commission paid to foreign agents under reverse charge mechanism and took cenvat credit of the same. Subsequently, on realizing that the said services were not liable for service tax it reversed the cenvat credit availed by it and filed a refund claim which was sanctioned by the department. However, when the department sought to recover interest u/r. 14 of the credit rules on account of wrong availment of cenvat credit, the Tribunal on facts held that there is no wrong availment of cenvat credit and hence no interest u/r. 14 was payable. [ Steelco Gujarat Ltd v. CCE (2013) 32 STR 448 (Tri- Ahmd)]

150.412 Following Union of India v. Ind - Swift Laboratories Ltd. , the Tribunal held that interest is payable on irregular availment of credit from the date of wrong availment of credit till the date of payment of tax to the service provider in terms of Rule 4(7) of the Cenvat Credit Rules, 2004. [Ballarpur Industries Ltd. v. CCE, C & ST (2013) 31 STR 745 (Tri – Kolkata)]

Input Service Distributor

150.413 Where the Head office of the assessee company paid for certain input services consumed in unit ‘A’ it was held that the Head Office can validly distribute the credit on such services even to unit ‘B’ in absence of a specific prohibition in rule 7 of the Cenvat Credit Rules, 2004 [ ECOF Industries Pvt. Ltd. vs. CCE (2010) 17 STR 515 (Tri-Bang.) affirmed in CCE vs. ECOF Industries Pvt. Ltd. (2011) 23 STR 337 (Kar); See also CCE vs. ECOF Industries Pvt. Ltd. (2012) 26 STR 100 (Kar)].

150.414 Where the appellant, a manufacturer, had availed the credit of tax paid by its depot at Jaipur against the tax liability of its manufacturing unit at Kolkata, the Tribunal held that in absence of registration of its Jaipur depot as an input service distributor the credit of service tax availed on services received by Jaipur depot could not be set-off against the tax liability of unit at Kolkata. [Khaitan Electricals Ltd v. CCE (2011) 21 STR 184 (Tri-Kolkata)]

150.415 Where the appellant had a single EOU unit, in respect of which he claimed refund of unutilised cenvat credit availed on invoices issued in the name of its head office which refund was denied on the ground that the head office was not registered as an input service credit distributor u/r. 7 of the Cenvat Credit Rules, 2004, (“Credit Rules”), the Tribunal allowed the refund and held that Rule 7 of the credit rules would be applicable only if the assessee wishes to get himself registered as input service credit distributor and in absence of more than one manufacturing unit there was no compulsion on him to register under Rule 7 of the credit rules.[Durferrit Asea Pvt. Ltd. vs. CCE (2011) 22 STR 583 (Tri-Bang.)].

150.416 The registration of an input service distributor (ISD) was made mandatory w.e.f. 16.6.05 under Notification no. 27/05 dated 7.6.05 which provided that the ISD shall make an application for registration within 30 days from the date of commencement of business or 16.6.05 whichever is later. Thus, where an existing entity made an application for registration on 13.7.05 i.e. within 30 days from 16.6.05 and got its registration on 18.7.05, the Tribunal allowed the distribution of credit vide invoice dated 1.7.05 (i.e. prior to the date of its registration). [CC & CE vs. Grasim Industries (2010) 20 STR 513 (Tri. – Del.)]See also[CCE v. Plastichemix Industries (2013)32 STR 383 (Tri-Ahmd)]

150.417 Where Madurai office of BSNL procured capital goods and transferred to Kumbakonam office of BSNL which claimed the Cenvat credit of duty paid based on the invoice received by Madurai office, the Tribunal held that Cenvat credit is admissible even though the Madurai office was registered only later since there is no dispute that the duty was paid by the appellant and receipt and use of capital goods was for authorised purposes [BSNL vs. CCE (2011) 22 STR 628 (Tri. – Che.)]

150.418 Cenvat Credit of input services received in a factory can be taken on the basis of bill addressed to the headquarters (H.Q.) without the H.Q. obtaining registration as Input Service Distributor [Valco Industries Ltd. vs. CCE (2012) 28 STR 457(Tri. – Del.)].

150.419 The sales office of the authorised distributor of vehicles can be registered as an ‘input service distributor’ and the registration cannot be denied on the ground that it was not a service provider unit [CCE vs. Varun Motors (2013) 30 STR 31 (Tri. – Bang.)].

150.420 (i)If the conditions as mentioned in rule 7 of Credit Rules with regard to distribution of input service credit by input service distributor are satisfied, the credit distributed by the input service distributor cannot be denied.

The Hon’ble Tribunal relying on judgment in case of CCE v. Ultratech Cement Limited (2010) 20 STR 577 (Bom.) held that denial of Cenvat Credit on the ground that no credit is admissible after the place of removal of the goods is untenable and hence credit of service tax paid on advertising agency services, business auxiliary services, business support services, management and consultancy services, online information and data base access service, port service, management, maintenance and repair service, consulting engineer’s service, security agency service and storage and warehousing service is allowable.

(iii)‘Event management service’ for promotion of goods and ‘technical inspection services’ for quality verification etc. is directly related to the business of manufacturing and hence cenvat credit is allowable.

[Castrol India Limited v. CCe (2013) 30 STR 214 (Tri.-Ahmd.)].

150.421 Where the appellant the Zonal Audit Head office of the Bank, which was registered with service tax department for Banking and Financial services but not as an Input Service Distributor (ISD), had taken credit on invoices addressed to it and distributed the same to its branches which were actually engaged in providing banking services and were also separately registered for service tax and had also disclosed the distribution of such credit in its ST-3 returns the Tribunal held that the distribution of credit by the appellant without obtaining ISD registration was admissible [ Punjab National Bank CCE (2014) (34) STR 278(Tri.-Del.)].

150.422 Where the appellant – unit (one of the two units of the assessee) had taken the entire credit based on invoices that were in the name of the head office located at Mumbai which was not registered as an input service distributor, cenvat credit was allowed relying on Doshion Ltd. v. CCE (2013) 288 ELT 291 (Tri.-Ahmd.) & Modern Petrofils v. CCE (2010) 20 STR 627 (Tri.-Ahmd.) [Demosha Chemicals Pvt. Ltd. v. Comm. CST (2014) 34 STR 758 (Tri.-Ahmd.)]

150.423 Input service invoices were addressed to the head office but credit was taken by another unit, though head office was not registered as an input service distributor. Credit was allowed in absence of any dispute about receipt and use of the services and payment of service tax on the same. The Tribunal held that ‘procedural violation cannot result in denial of substantive right of Cenvat Credit’ [Anand Nishikawa Co. Ltd. v. CCE (2014) 34 STR 751 (Tri.-Del.)]

150.424 Where the manufacturing unit of the company at Mangalore took Cenvat Credit of Banking Financial Services provided by Corporation Bank, on the strength of the invoices issued by the bank to the Mumbai office of the Company, which was effectively the service recipient, it was held that this was not permissible without registering the Mumbai office as an Input Service Distributor and issuing invoices in terms of sub-rule (2) of Rule 4A of the Service Tax Rules,1994 since these provisions were specific provisions for distribution of credit. [Mangalore Refinery & Petrochemicals v. CCE (2013)30 STR 475 (Tri-Bang)]

150.425 Availment of cenvat credit on various input services on the basis of invoices issued by the Head office of the assessee company cannot be denied on the ground that the Head Office was not registered as Input Service Distributor, since during the relevant period of time i.e. prior to June 2005 there was no requirement for the head office to be registered as Input Service Distributor [CCE v. Plastichemix Industries (2013)32 STR 383 (Tri-Ahmd)]

150.426 Demand for recovery of cenvat credit cannot be raised against input service distributor under Rule 14 of the Cenvat Credit Rules, 2004. It can be raised only from the unit manufacturing or providing output service who have claimed it. [Indian Oil Corporation Ltd. v. CCE (2014) 35 STR 411 (Tri-Del)]

150.427 Where the appellant had taken cenvat credit on rent paid for its premises used for storage of its records and also of the input services used at such premises, the Tribunal held that since the premises were not registered with service tax authorities as a service provider or as input service distributor, availment of cenvat credit on such input services was not permissible [Market Creators Ltd v. CST (2014)36 STR 386 (Tri-Ahmd)].

150.428 Where the Head office of the assessee company registered as an Input Service Distributor (ISD) took credit for certain input services of EOU Unit and used it to set off duty payable on DTA unit, the Tribunal held that there was no bar to avail cenvat pertaining to EOU unit by the DTA unit prior to insertion of clause (c) in Rule 7 of Cenvat Credit Rules, 2004 vide Notification No.18/2012-CE (N.T) [Praj Industries Ltd v. CCE (2014) 36 STR 1273 (Tri-Mumbai)]

150.429 Credit cannot be denied merely because service tax on advertisement charges was paid by Unit-1 for the advertisement of product of Unit-II since both units are under the umbrella of the same company though the units were at different places. [Greaves Cotton Ltd v.CCE 2015(37) STR 395 (Tri- Chennai)]