1. GENERAL PRINCIPLES

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

   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.)]

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]

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)

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)].

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.)].

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 dated1.3.2006 (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.)].

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^th day 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.)].

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.)]

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)]

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.)]

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.)]

12. Rate of service tax applicable on hire purchase contracts would be the rate prevailing on the date when the contract is entered into even if the rate of tax increases during the period of the hire-purchase contract. [Jaylaxmi Credit Company Ltd. v. CCE (2015) 39 STR 164 (Tri- Ahmd.) relying on Art leasing Ltd. v. CCE (2007) 8 STR 162 (Tri-Bang.)].

2. Payment of service tax – associated enterprises

   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.)]

   2. The explanation (c) to section 67(4) providing for liability to pay service tax on crediting/debiting any amount in the books of accounts by service provider in case of transactions with Associated Enterprises would be effective only from 10.05.08 and not retrospective prior to that date[Sify Technologies Ltd v CCE (2015) 39 STR 261 (Tri.-Chennai)].

3. Point of Taxation

   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:

1. 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;

2. 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

   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.)].

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:

1. 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;

2. 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

   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.)].

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.)].

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)].

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. 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.)].

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]

7. On facts, the Tribunal held that service by branch to Head Office cannot be considered as a taxable service and hence not liable to tax. [CCE v Manugraph India Ltd (2015) 38 STR 648 (Tri-Mum)].

6. Service Tax - VAT

   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

   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.)]

   2. Where the main contractor had paid tax on the entire contract value, demand of service tax from the sub-contractor is not warranted [DNS Contractor vs CCE (2015) 37 STR 848 (Tri-Del)

   3. If main contractor has paid service tax, sub-contractor need not pay service tax but he has to prove that the main contractor has paid service tax [Sew Infrastructure Ltd. v. CCE (2015) 37 STR 984 (Chattisgarh)]

8. Receipt of revenue share not liable for service tax

   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.)]

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

1. 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;

2. 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.

3. 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

   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:

1. 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;

2. 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)].

2. Where the SEZ unit, in order to claim ab initio exemption from payment of service tax on services used by it for its authorized operations, had got an approval from the ‘Approval Committee’of the SEZ to the list of services used for authorized operations and had furnished a declaration in Form A-1 specified under notification no. 12/2013 dated 1.7.2013 verified by the SEZ officer to the jurisdictional Dy. CCE, the High Court held that –

   2. the Dy. CCE is obliged to issue the certificate in Form A-2 under the above notification to the SEZ unit without making any further enquiry.

   3. Refusal to issue of Form A-2 on the grounds that some of the claims made by the SEZ unit for refund had been rejected in the past or that the SEZ unit has not achieved Positive Net Foreign Exchange or some supplier of services to the SEZ unit did not pay service tax is unwarranted since mere issuance of Form A-2 by the department would not absolve the SEZ unit of its liability to pay the service tax and cesses alongwith interest on delayed payment if it is subsequently found that the SEZ unit has not used the services exclusively for authorized operations.

[Sai Wardha Power Company Ltd. v. UoI (2015) 39 STR 952 (Bom.)]

10. Benefit of Exemption

    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)].

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

    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

    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)].

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)].

Territorial jurisdiction for levy

3. The assessee had carried out sesmic surveys for its client ONGC on which it had not paid service tax on the grounds that the same was carried out by it beyond the designated areas of Continental Shelf and Exclusive Economic Zone as notified vide Notification No. 1/2002. The revenue contended that the said areas were subsequently notified as a designated area vide notification no. 21/2009 and that the said amendment was retrospective in effect and hence the assessee was liable to pay service tax. On appeal the Tribunal observed that the subsequent amendment not being a beneficial amendment would not be held to be retrospective in effect and further since the assessee had adduced evidence to substantiate that during the impugned period the services were rendered beyond the designated areas which was not countered by the revenue the assessee’s services would not be liable for service tax. Accordingly the Tribunal ordered refund of the service tax demand paid by the assessee under protest during the course of investigation [CGG Veritas Services Ltd. vs. CCE (2015) 38 STR 1139 (Tri-Mumbai)]

4. In this case the Hon’ble High Court held that providing services by the vessels of the appellant for the purpose of prospecting mineral oil is a service consumed in the seabed of the Continental Shelf of India, and would come into tax net only w.e.f. 27.2.2010. [Greatship (India) Ltd. vs. CST (2015) 39 STR 754 (Bom.)]

13. Circular

    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

    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

    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

    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.)].

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

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.)]

4. Service tax liability cannot be transferred
   The assessee, a service provider, can by way of a contract transfer the service tax burden on a third party but he cannot ask the Revenue to recover the tax dues from such third party or wait for discharge of the liability till the he has recovered the tax amount from such third party [Delhi Transport Corporation v. CST (2015) 38 STR 673 (Del.)]

5. Recipient’s Liability to bear service tax
   The assessee in the present case had entered into contract with Bihar State Electricity Board for carrying out certain works contract services (entered into prior to 1.6.2007). Subsequently, w.e.f. 1.6.2007, service tax was introduced on ‘Works Contract Services’. Pursuant to recovery of service tax from the assessee by the service tax department, the applicant claimed reimbursement of service tax paid by it from the Board who refused to pay the same on the grounds that under the terms of their contract, the price quoted by the contractor for carrying out the work taxes were required to be borne by the contractor. In writ application before the High Court, the High Court held that –

1. Under the Act, the liability for payment of service tax has been fixed upon the service provider. Though service provider has a right to collect service tax from the person to whom service is provided there is no provision in the Act for reimbursement to the service provider from the service recipient the service tax paid by him. It is the liability of the service provider to provide for collection of the same in the contract.

2. The argument that the benefit of Sec. 64A of the Sale of Goods Act, 1930 would be applicable for recovery of service tax is incorrect since the said provision is confined only to specified taxes viz., duties of customs, or excise or any other tax on sale or purchase of goods.

3. In any event under the terms of contract, all taxes were to be borne by the contractor [service provider].

[Multi Engg. & Scientific Corpn. v. Bihar State Electricity Board (2015) 39 STR 414 (Pat)]

6. Precedent
   It is incumbent upon the adjudicating authority to follow the decision of a Larger Bench of the Tribunal cited sby an assessee unless he distinguishes the factual situation in the assessee’s case from that of the Tribunal decision which calls for a different interpretation. [Muthoot Finance Ltd. v. UoI (2015) 40 STR 26 (Ker.)].

2. CLASSIFICATION

17. Classification

    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)]

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.)]

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 –

1. The above service is a service in relation to technical testing and analysis;

2. Testing in relation to human being is specifically excluded from this service and hence this service is not liable for service tax;

3. These services are not in the nature or same genre as any of the services in the definition of ‘business auxiliary services’

4. 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.

5. 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)]

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 –

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

2. 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)]

3. VALUATION

18. Valuation

    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.)].

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.)]

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.)]

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);

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.)].

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.)].

7. In this case the Supreme Court held –

1. 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 –

   1. 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;

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

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

2. 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)].

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:

1. 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.

2. 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.)]

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.)].

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.)]

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.)]

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)].

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.)]

14. In this case the Tribunal held -

1. 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

2. 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)]

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-

1. 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;

2. 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.)]

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)]

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. 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.)]

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.)]

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)].

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)]

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–

1. sale of food articles which are liable for sales tax; and

2. 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.)].

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)].

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.)].

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)].

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:

1. 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.

2. 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.)].

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.)]

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)].

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 –

1. 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;

2. the definition of Mandap Keeper nowhere covers the temporary occupation of hotel rooms for the purpose of boarding and temporary residence;

3. 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)]

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.)].

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

1. 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

2. 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.)

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)]

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)]

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.]

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.)]

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

1. The transactions involving only sale of spare parts should be excluded for the purpose of computation of service tax demand;

2. 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.)]

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.)].

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)]

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)]

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.)].

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)].

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].

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.)]

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)]

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)].

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.)]

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)]

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)]

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)]

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)]

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)]

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:

1. 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);

2. The valuation rules are subject to the provisions of sections 67;

3. 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.)]

53. The value of spare parts/accessories/consumables like lubricants and coolants etc. sold during the course of servicing the vehicles cannot be included in the gross value of authorized service station services. [CCE&ST v. Krishna Swaroop Agarwal (2015) 37 STR 647 (Tri.-Del.)]

54. Where the appellant a clearing and forwarding agent had sought to exclude the expenses such as Godown Rent, Charges for unloading from wagons and loading into trucks, Other misc. expenses, Charges for transportation from rail head to godown, Unloading and stocking at godown, Loading for onward movement, etc. reimbursed by the principals to the appellants from the taxable value of its services the Tribunal held that there was no legal obligation on the service recipient to incur such expenses hence the same cannot be excluded from the value of taxable services for the period April 2002 to September 2006 [Clearchem Agencies v CCEx,Indore (2015) 37 STR823 (Tri-Del) relying on Sri Bhagvathy Traders vs. CCE (2011) 24 STR 290 (Tri-LB)]

55. The assessee in the present case had entered into an agreement with its customers for operation and maintenance of air separation power plant. It had paid service tax on the charges received by it. The revenue had sought to include the value of electricity supplied by the customer for operation of air separation plant in the value of taxable services on the ground that electricity was an essential component for operation of power plant. On appeal, the Tribunal held –

1. Electricity supplied free for operation of plant was consumed in manufacture of oxygen which is used by appellant’s client and not by the appellant;

2. Appellant is not benefitted by the supply of electricity and hence the same cannot be considered as an additional consideration received by it for its services.

[Inox air products v. CCE (2015) 38 STR 90 (Tri. – Mum.)]

56. Where the assessee had a contract for repair of transformers which specified separately the rate of labour charges and the value of HV/LV Leg oil, transformer oil and supply items and the invoice issued also stated the value of the goods separately and VAT/ sales tax was paid on the value of goods, the Tribunal held that the assessee was entitled to the deduction of the value of goods supplied during repair and no service tax would be payable on the value of goods [Technocrate Transformers v. CCE (2015) 39 STR 996 (Tri- Del.)]

57. Valuation - Free Supplies
    The value of free material supplied by the customer for commercial or industrial construction service is not includible in the value of taxable service following Larger Bench decision in Bhayana Builders (P) Ltd. (2013) 32 STR 49 (LB) [Hindustan Steel Works Construction Co. Ltd. v. CCE (2015) 37 STR 1022 (Tri.-Del.) see also Ahluwalia Contracts (India) Ltd vs. CST (2015) 38 STR 38 (Tri-Del.)]

58. Where the assessee was engaged in repair of transformers and had shown the value of consumables like transformer oils, components and parts separately in its invoices and paid VAT on that, it was held that the same was excludible from the value of taxable service under Notification No. 12/2003-ST dated 20.6.2003 [CCE vs. Mahendra Engineering Ltd. (2015) 38 STR 233 (All)]

59. Where in case of repairs of transformers invoices disclosed value of goods [consumables like transformers oil, component parts like HV/LV coils] and service separately and on which VAT/sales tax was paid by them, the Tribunal held that the repair contract would have to be treated as split contract for sale of goods and provision of service and service tax could be charged only on service portion. Further the revenue’s argument that value of goods have to be included in taxable value in view of Rule 5(1) of the Valuation Rules was also rejected since the said Rule 5(1) had been struck down as unconstitutional in Intercontinental Consultants and Technocrats Pvt Ltd v Union of India (2015) 29 STR 9(Del) [Samtech Industries v CCE (2015) 38 STR 240 (Tri-Del)].

60. 
    

61. Inclusion of Reimbursements in the value of taxable services rendered by Customs House Agents on the grounds that the conditions prescribed for the exclusion from the value of taxable services under Rule 5(2) of the valuation rules had not been satisfied is incorrect since Rule 5(1) of the said valuation rules had been struck down as unconstitutional [Aashita International Ltd v CST (2015) 38 STR 246 (Tri-Ahmd)].

62. Incentive is a receipt for appreciation of performance of service provided. Since it is not known as to whether such incentive would be received or not while providing the taxable service, the same would not be liable to service tax [Oswal Cable Products v CST (2015) 38 STR 437 (Tri-Del) relying on CCE v Facinate Advertising &Marketing (2013) 31 STR 77 (Tri-Del)]

63. Valuation (Cum-tax benefit)
    In absence of any documentary evidence to show that amount received by the appellant from the service recipient was inclusive of service tax, cum tax benefit cannot be granted [CCE v Rudra Galaxy Channel Ltd (2015) 38 STR 445 (Tri-Mum) relying on Amrit Agro Industries Ltd v Cmmr (2007) 210 ELT 183 (SC)]

64. Appellant is a Share Transfer Agent (STA) and also acts as a Registrar to an Issue (RTA). A service tax demand of Rs. 4.62 Crores for the period 10.9.2004 to 31.7.2007 under STA/RTA service was levied by including the value of reimbursable expenses (on actual basis) viz. postage and other expenses incurred by the appellant in the taxable value. The Tribunal set aside the entire demand on the ground that-

1. The service of STA/RTA came into the tax net only w.e.f. 1.5.2006 and the demand for service tax on reimbursements under this category prior to this date is not sustainable even though service tax was paid on STA/RTA fees wrongly under the category of ‘Business Auxiliary services’.

2. The demand for service tax on reimbursement of postage and the stationery expenditure for the period 10.9.2004 to 31.7.2007 is not sustainable since –

1. ‘Postage’ is in the nature of a duty/tax charged under the Indian Post Office Act, 1898 and service tax cannot be levied on an amount charged as duty/tax since the same is not consideration for rendering any service.

2. The reimbursement of postage and cost incurred towards stationery is recovered from the service receiver on actual basis by the appellant in the capacity as a pure agent and hence not includible in the taxable value u/s 67.

3. Further, Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 has been declared as ultra vires and has been set aside by the Delhi High Court in Intercontinental Consultants & Technocrats Pvt. Ltd v. UOI (2013) 29 STR 9 (Del.) and hence there is no law subjecting reimbursements to tax.

[Link Intime India Pvt. Ltd. v. CCE (2015) 38 STR 705 (Tri.-Mumbai.)]

65. Where the assessee during the course of sale of certain spare parts also charged a ‘handling charge’ which were related to procurement of the inputs and the assessee had paid VAT on the handling charges by including the same in the value of goods, the handling charges cannot again be subjected to the levy of service tax. [Automotive Manufacturers P.Ltd v CCE&C (2015) 38 STR 1191 (Tri-Mum)].

66. Reimbursement of actual travelling expenses received by the appellant from its service recipients would not form part of the taxable value in view of the Tribunal decision in case of Reliance Industries Ltd. vs. CCE (2008) 12 STR 345 upheld by the Supreme Court in (2011) 23 STR J226 (SC) [Kirloskar Pneumatic Co. Ltd v CCE (2015) 38 STR 1198 (Tri-Mum)].

67. Where the assessee during the course of sale of certain spare parts also charged a ‘handling charge’ which were related to procurement of the inputs and the assessee had paid VAT on the handling charges by including the same in the value of goods, the handling charges cannot again be subjected to the levy of service tax. [Automotive Manufacturers P.Ltd v CCE&C (2015) 38 STR 1191 (Tri-Mum)].

68. Reimbursement of actual travelling expenses received by the appellant from its service recipients would not form part of the taxable value in view of the Tribunal decision in case of Reliance Industries Ltd. vs. CCE (2008) 12 STR 345 upheld by the Supreme Court in (2011) 23 STR J226 (SC) [Kirloskar Pneumatic Co. Ltd v CCE (2015) 38 STR 1198 (Tri-Mum)].

69. Value of free supplies of materials received from recipient of services for incorporation into the works contract cannot be included in the value of taxable services in view of Larger Bench decision of Bhayana Builders (p) Ltd v CST (2013) 32 STR 49 (Tri-LB) [Millennium Constructions Pvt Ltd v CST (2015) 39 STR 477 (Tri-Del) see also Capital Builders vs. CST (2015) 39 STR 478(Tri-Del)].

70. Gross amount charged by the provider for provision of construction service would not include component of consideration received for sale of immovable property [SPL Developers P. Ltd. vs. CST (2015) 39 STR 455 (Tri-Bang)]

71. Where the assessee had not paid service tax on out of pocket expense incurred by it such as travelling expenses, hotel expense, etc. since it entertained a bona fide belief based on the circulars and trade notices issued by the ministry as were prevalent during the relevant period of time, the Tribunal without examining the merits of the case held that in view of the bona fide belief entertained by the assessee, the extended period of limitation was not invocable [Jones Lang Lasalle Property Cons. (I) P. Ltd. v. CCE (2015) 39 STR 626 (Tri. - Bang.)]

19. Abatements

    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.)].

1. 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 -

1. 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.

2. 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.)]

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

    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 –

1. 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;

2. 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.)]

4. IMPORT AND EXPORT OF SERVICES

21. Import of Services

    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].

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 :

1. 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.

2. 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.

3. 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.)].

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.)]

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)].

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.)].

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.)].

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.)]

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 alsoDimension 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.)].

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)]

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 –

1. 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.

2. 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.)]

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

1. 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.

2. 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)

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:

1. 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;

2. 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.)]

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.)].

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)].

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 –

1. Classify the service provided by overseas CRS companies as “Online Information and Database Access and Retrieval Services”

2. 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 –

1. 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.

2. 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.

3. 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)].

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)]

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 –

1. Supply of technical know-how does not fall under the category of ‘Consulting Engineer’s Service’;

2. 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.

3. 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)]

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.)]

19. Exhibition services and Technical inspection and certification services are categorized under performance based category of Import of service rules and hence no liability to pay service tax in respect of payments made overseas towards the aforesaid services as the same has been carried out abroad [K.G. Denim Ltd. v. CST (2015) 37 STR 616 (Tri.-Chennai.)]

20. Information Technology Software Services received from overseas sub contractors by overseas branches –
    Where the overseas branches had received Information Technology and Software Services from the overseas sub contractor and the payments for the same was also made out of EEFC A/c., The Tribunal held that no service tax under reverse charge mechanism can be demanded from the Indian Head office since by virtue of Section 66A the overseas branch would be considered as a separate person and it is it who has received the sub-contractor’s services and not the Indian Head office [Infosys Ltd v CST (2015) 37 STR 862 (Tri-Bang)].

21. The service receiver in India was not liable to pay service tax respect of the services received from a service provider located outside India prior to the introduction of section 66A i.e. before 18.4.2006. [CCC&E v. Moser Baer India Ltd. (2015) 38 STR 687 (All.)].

22. The appellant, an exporter, received remittances from their customers through their banks abroad who charged some amount from the appellant’s Indian bank which in turn recovered the same charges from the appellant. The Tribunal held on the basis of facts narrated in the impugned order that the foreign banks did not charge any amount from the appellant directly and that it was the appellant’s bank who paid the charges of the foreign bank. Hence the appellant cannot be treated as service recipient and no service tax can be charged from them u/s 66A read with Rule 2(1)(d)(iv) of Service Tax Rules, 1994 in respect of the foreign bank’s charges especially considering that in the appellant’s own case for the previous period, no appeal was filed by the Department against the Commissioner(Appeal)’s order which had dropped the demand on the same issue. [Greenply Industries Ltd v CCE (2015) 38 STR 605 (Tri-Del.)]

23. The appellants, a pharmaceutical company, sold products to distributors abroad who in turn sold it in their respective countries. The appellant did not give any discount on the list price of the products to the distributors but reimbursed certain marketing costs (registration, staff related expenses, promotional costs, etc.) to the distributors. It was held that the reimbursement of the marketing costs was not in the nature of discount since it was also for the benefit of the appellant also. Further it was held that the sales promotion expenses were for services consumed by the appellant in India and service tax would be payable on such expenses by the appellant as a recipient of services [Torrent Pharmaceuticals Ltd v CST (2015) 39 STR 97 (Tri.-Ahmd.)].

24. The appellants, manufacturers of pharmaceutical products, had branches / representative offices abroad. These branches / offices did not stock the goods or sell the goods. They only facilitated the export business of the appellant. The branches / offices received services for which they incurred expenses towards salary, advertising, telecommunication expenses, etc. Such expenses were reimbursed by the appellants from its Head Office (‘HO’) in India. The Revenue raised a demand on the appellant’s HO under the reverse charge mechanism, contending that –

1. the HO and the overseas branches as distinct entities u/s. 66A(2);

2. the overseas branches provided services to the HO in India;

3. the remittances made by the HO to overseas branches are consideration for provision of services.

The Tribunal dismissed the contention and held that:

1. Section 66A(2) providing that the permanent establishments in India and abroad of a business person are to be treated as separate persons is only for making an identification to determine whether a service is provided and consumed in India or abroad. It is not for deeming the overseas ‘permanent establishment’ of an assessee as a service provider to its own HO in India especially considering that –

   1. Section 66A (1) above speaks of the service provider and service recipient as ‘persons’ which has to mean as different business persons.

   2. If the overseas ‘permanent establishment’ of an assessee is treated as a service provider to its own HO in India then it will amount to charging service tax on an activity provided to one’s own self and according to accepted legal position one cannot provide a service to one’s own self.

   3. Similarly placed branches of the assessee undertaking similar activities in India will not be held so.

2. the foreign branches/establishments while procuring services abroad have not acted as ‘facilitators’ and the appellant’s HO has not consumed those services in India, but the foreign branches / establishments have actually consumed those services abroad for which local VAT/GST of the respective foreign country has been paid.

3. Payment of local VAT abroad will be an indicator to decide whether a service is provided/ consumed outside India or within India. On a perusal of invoices it was noted that where the overseas service providers directly raised invoices on the appellant in India no VAT / GST was charged and the appellant paid service tax under reverse charge. But where the overseas service providers raised bills on the branch office for a service consumed abroad local VAT /GST applicable was charged and hence no service tax was paid by appellant as recipient of service.

Accordingly, it was held that service tax was not payable by the appellant’s HO in India on the remittances made to the foreign branches of the appellant [Torrent Pharmaceuticals Ltd v CST (2015) 39 STR 97 (Tri.-Ahmd.)].

22. Export of services

    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)]

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.)].

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.)].

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:

1. it cannot be said that the booking of orders indicate services being rendered in India;

2. since the orders were booked for a Singapore company the services were considered to be delivered only to the Singapore company;

3. 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;

4. 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.)]

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. 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.

2. 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.)]

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 –

1. 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

2. 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].

3. Even if there was condition for receiving the money in foreign exchange–

   1. 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.

   2. 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.)]

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 –

1. 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;

2. the services would be considered as used outside India since they benefited Western Union and its overseas customer (viz., the remitter);

3. 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.)].

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.)].

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)]

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.)]

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

1. 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
2. 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)]

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]

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.)].

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.)].

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)].

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:

1. 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.

2. 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’.

3. 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.

4. 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)

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)].

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

1. 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.

2. 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)].

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)]

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)]

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 –

1. 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;

2. 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. 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.)]

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.)]

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

1. offshore services viz., Analysis, design, development etc. which were carried out by the appellant in India; and

2. 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

1. 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.

2. 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)].

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]

26. The appellant had entered into a service support agreement with its foreign principal for rendering various services in relation to procurement of goods from India the consideration for which was received in convertible foreign exchange. The Tribunal held that there is export of service after observing that –

1. There is no dispute that – the services were in the nature of procurement of inputs and hence the same were classifiable under the category of Business Auxiliary Services falling under Rule 3(iii) of Export of Service Rules,2005

2. Service tax being a destination based consumption tax the services would be construed as delivered outside India if the consumption of the same / use thereof has taken place outside India notwithstanding that the service is performed in India.

3. The conditions of delivery outside India and the use of service outside India which were deleted w.e.f. 1.3.07 and 27.2.10 respectively has to be considered as to be a clarificatory amendment. The only condition to qualify as export is the services has been provided in relation to business/commerce to a person located outside India.

[GAP International Sourcing (India) Pvt. Ltd. vs. CCE (2015) 37 STR 757 (Tri-Del.)]

27. The assessee, a commission agent of a foreign vendor marketed their products in India but were paid their commission by the foreign vendor’s customers in India on their behalf in INR. The assessee claimed export exemption under Export of Service Rules, 2005 which the Revenue denied. The Tribunal allowing the export held that

1. The services of marketing of a product of foreign counterpart in India was consumed outside India.

2. Payment of commission on behalf of the foreign counterpart to the assessee must be construed as received in foreign country by the assessee relying on National Engineering Industries Ltd v CCE (2011) 24 STR 683 (Tri.Del)

[Pan Pharma & Allied Machinery Corporation Ltd v. CST, (2015) 37 STR 958 (Tri-Mum)]

28. Where the assessee was engaged in providing steamer agency services to foreign entities during the period 1.11.2003 to 19.11.2003 (when the exemption for receipts in foreign exchange was not in force) on which the revenue had sought to demand tax since no exemption was in force, the High Court relying on its own decision in the case of CST v. SGS India Pvt. Ltd. (2014) 34 STR 554 (Bom.) held that the since the recipient of the appellant’s services was located abroad and the consideration was received by the appellant in convertible foreign exchange the services would be considered as exports and accordingly the same would not be liable for service tax during the above period even in absence of the exemption notification [CST vs. Maersk India Pvt. Ltd. (2015) 38 STR 1121 (Bom)]

29. Where assessee had provided services to its principals located outside India by marketing their products in India, the Tribunal relying on its own decision in case of Vodafone Essar Cellular Ltd v CCE (2013) 31 STR 738 (Tri) held that since the recipient of services was located outside India, the services would be considered as exports in terms of Rule 3(1)(iii) of the Export of Service Rules, 2005[CST v Bayer Material Science P Ltd (2015) 38 STR 1206 (Tri-Mum)].

30. The appellant procured orders from Indian customers for overseas manufacturers. The overseas manufacturers made the supplies directly to the Indian customers who remitted the consideration to the overseas manufacturers for such supplies. The appellant received commission from the overseas manufacturers. On these facts, after relying on various judgments relating to export of services viz. GAP International Sourcing (India) Pvt. Ltd. v. CST (2015) 37 STR 757 (Tri-Del.), Microsoft Corporation (I) Pvt. Ltd. v. CST (2014) 36 STR 766 (Tri-Del.), Paul Merchant Ltd. v. CCE (2013) 29 STR 257 (Tri-Del.), Vodafone Essar Cellular Ltd. v. CCE (2013) 31 STR 738 (Tri-Mum.), it was held that the services provided by the appellant to the overseas manufacturers were not liable for service tax since the services cannot be considered as services provided in India. [A.T.E. Enterprises Pvt. Ltd. v CST (2015) 39 STR 81 (Tri-Mum)].

31. Where the assessee was engaged in soliciting of orders for its principal who was situated outside India the Tribunal observed that the services were rendered to the recipients abroad and used aboard and hence the same would qualify as exports and accordingly would be entitled to claim refund of cenvat credit paid on input services [Enervision Services Pvt. Ltd. vs. CST (2015) 39 STR 681 (Tri-Bang.)

32. When FIRC was in Indian rupees the Tribunal held that the condition of realisation of exports proceeds in convertible foreign exchange as required under Rule 3(ii) of the Export of Service Rules, 2005 was complied by the assessee since-

1. Under the Exchange Control Manual of RBI, FIRC is issued only on receipt of foreign exchange.

2. The Indian Rupees was received through the account of a bank situated in a foreign country as the payment in rupees shall be deemed to be repatriation and realization of foreign exchange in India.

[Sun-area Real Estate Pvt. Ltd. vs. CST (2015) 39 STR 897 (Tri-Mumbai)]

5. TAXABLE SERVICES

23. Advertising agency services

    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 –

1. 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”;

2. 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;

3. The activity of hiring space and providing the same to a person who uses it for advertisements will not attract service tax;

4. 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.)]

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 –

1. 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.

2. 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)].

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 :

1. 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.

2. 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”;

3. 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;

4. 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)]

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 Rs. 100/- was the tariff rate the media charged them Rs. 85/- plus 10.2% service tax. The appellants in turn charged the same Rs. 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 Rs. 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 –

1. 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.

2. 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.

3. 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)]

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:

1. sale of telecast right of cricket matches.

2. Permitting sponsors to use space for putting up of advertisement in stadium, and

3. 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:

1. 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.

2. 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.

3. If BCCI is not an advertising agency then BCCI’s activity would not attract service tax under ‘Advertising Agency Services’

4. 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.

5. 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.)]

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-

1. the appellants were not connected with making, preparing, displaying or exhibiting of any advertisements; and

2. 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.)]

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)]

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

    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)]

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.)].

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

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

1. 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.

2. 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.

3. 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

    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

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

1. 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.

2. no payment is received for the services from the customers.

3. 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))]

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)].

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.)].

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

1. Service tax is not payable on free services provided to customers of M/s. MUL since no amount is received from the customer;

2. 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.)

5. Where the assessee a service station authorized by motor vehicle manufacturer was engaged in carrying out servicing of motor vehicles of other manufacturers also, Tribunal held that the said services of servicing motor vehicles of other manufacturers would not be liable for service tax under the category of ‘authorized service station services’ [Sefeway Motors v CCE (2015) 38 STR 1005 (Tri-Mum)].

28. Banking and other financial services

    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)].

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.]

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.)].

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 :

1. The impunged provision viz., section 65(12)(a)(i) basically operates qua an activity of funding/ financing of equipment/ asset.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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)]

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.)]

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)].

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].

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)].

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)].

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:

1. 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.

2. 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.)].

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.)].

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)].

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.)].

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)]

15. Where on facts, it was fou.hat the assessee was in the business of leasing of aircraft parts/equipments for fixed monthly charges and the agreements:-

1. did not entitle or give an option to the lessee to own the asset at the end of the lease period;

2. did not transfer effective ownership of the asset and all the risks and rewards to the customers;

3. 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.)

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)]

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)]

18. When the appellant a bank had received brokerage form RBI for sale of tax savings bond, the Tribunal held that the service tax is payable on the brokerage on the basis that –

1. Brokerage on bonds – government securities was akin to underwriting commission received on underwriting of the Government securities which was not liable for service tax (as clarified by Board Circular No. 126/08/2010-ST dated 10.08.10).

2. lending and borrowing of money by Government is a sovereign function and sale of bonds by RBI is a statutory function

[HDFC Bank Ltd. vs. CST (2015) 37 STR 779(Tri-Mumbai); See also ENAM Securities P. Ltd. vs. CST (2015) 37 STR 794 (Tri-Mum)]

19. Where the appellant a manufacturer of industrial gases had entered into an agreement with its customer whereby it had supplied/ loaned to them insulated storage tanks for use for a term of 3 years for a fixed sum payable per month, it was held that the same cannot be classified as financial leasing services since the assessee was not a banking company or a financial institution or a body corporate or a commercial concern engaged in providing services in relation to banking and other financial services [Inox Air Products Ltd v. CCE (2015) 37 STR 1024 (Tri. – Mum) and Inox Air Products Ltd v. CCE (2015) 38 STR 191(Tri. – Mum)]

20. Where the appellant a stock broker registered with SEBI was dealing in shares bonds and securities on behalf of the client, the Tribunal held that it cannot be said to be a financial institution liable to pay service tax on the said activities under the category of ‘banking and other financial services’ [Parag Parikh Financial Advisory Services Ltd v C.S.T. Mumbai (2015) 38 STR 490 (Tri-Mum)]

21. Commitment charge levied by the banks on the customers who do not draw their sanctioned loan is to compensate itself for the loss of interest that would have been earned by it if the customer had drawn money from the loan account. Thus the same is integrally connected with the lending services and hence would be liable for service tax [Punjab National Bank v CCE &ST (2015) 38 STR 498 (Tri-Del)].

29. Broadcasting Agency

    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:

1. 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.

2. 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’.

3. The entire amount paid would be treated as value of taxable service.

4. 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.)]

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)].

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 –

1. 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

2. 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 –

1. (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.

2. 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.)]

4. M/s Star India Pvt Ltd (SIPL) is an independent representative in India of M/s. Star Ltd, Hong Kong (SHK) for soliciting television advertisements i.e selling of time slots and collecting and remitting the advertisement charges to SHK. The advertisers could make payment in INR to SIPL or USD to SHK directly. SIPL paid service tax on the INR payments received by it under the category of “broadcasting services” but did not pay service tax on the USD payments remitted directly to SHK during the disputed period i.e October 2002- June 2006. The department sought to make SIPL liable to tax on the INR equivalent of USD payments also. The appellant inter alia contended that – (a) They are not collecting the charges in case of USD payments and hence they are not liable; (b) The services are rendered to an ‘advertiser abroad’ in case of USD payments and hence the services being consumed abroad are not liable under Indian service tax law; (c) The receipts are in convertible foreign exchange and hence exempt under notification no. 6/99 dated 6.4.1999 as well as under the Export of Services Rules; and (d) The demand is barred by limitation. The Tribunal rejected the appellant’s contentions and held as under –

1. The statutory provisions in case of ‘broadcasting services’ envisage that so long as the radio or television programme is received in India and intended for listening / viewing by the Indian public such activity shall be a taxable service even if the beaming / encryption takes place outside India. Further in case of a foreign broadcaster who has a representative in India the activity of selling of time slots or obtaining sponsorships or collecting broadcasting charges on its behalf would attract the liability to service tax. On facts, the Tribunal found that the sale of time slots for advertisement has taken place in India for broadcast of the programmes for viewing / listening by the Indian public. Consequently, it was held that since SIPL was selling time slots on behalf of SHK as its representative in respect of programmes intended for listening/viewing by the public in India, SIPL was a broadcasting agency or organization u/s 65(16) and was liable for service tax under the category of “broadcasting services” u/s. 65(105)(zk).

2. The fact that payments were made directly in USD to SHK was held not to be material in the light of the statutory provisions. It was held that the mode of payment of consideration [in foreign currency] cannot be the criteria for determination of taxable event.

3. The amount received in USD by SHK is not exempt under notifications 6/99-ST dated 09.04.99 and 21/2003- ST dated 20.11.2003 (which exempted receipts in foreign exchange so long as they are not repatriated outside India) since no payment was received in India and even if assumed to be received in India, the same has been repatriated outside India.

4. The amount received in USD by SHK cannot be considered as ‘exports’ under Export of Services Rules, 2005 since the condition of receipt of convertible foreign exchange in India is not satisfied.

5. On facts, it was held that the SIPL was operating under self-assessment procedure and failed to declare in the said return the complete particulars with regard to the services rendered to foreign advertisers. Hence the extended period of limitation was held to be invocable. [Star India Pvt. Ltd. v CCE (2015) 38 STR 884 (Tri.-Mumbai) relying on Zee Telefilms Ltd v CCE (2006) 3 STR 252 (Tribunal)].

30. Business Auxiliary services

    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)]

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)]

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.)].

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.)]

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)].

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-

1. 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’.

2. 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)]

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)]

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)]

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);]

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)].

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.)].

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)].

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)]

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.)].

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’.

ii.  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.)

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)]

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)]

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.)].

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.)].

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)]

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.)]

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.)].

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)].

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)]

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)]

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 -

1. 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.

2. 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)]

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)]

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.)]

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. 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.)]

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 –

1. Such cars are not registered with the RTO on purchase; and

2. 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.)

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

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)]

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.)]

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.)]

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)]

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.

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.)]

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.)].

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)]

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)].

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.)]

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

1. 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.

2. 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.)].

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)].

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.)]

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)].

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:

1. 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

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

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

   3. 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

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

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

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)].

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.)]

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.)]

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.)]

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)]

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)].

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:

1. 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;

2. 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.)].

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)].

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”

2. 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)].

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.)].

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)]

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)]

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)].

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.)]

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.)]

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:-

1. 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.

2. 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)]

64. The appellant in the present c ase, 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)]

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)

66. The process of mere chilling of milk to temperature below 5’ Celsius for the purpose of its long distance transportation is not in the nature of an activity being production or processing of goods not amounting to manufacture and hence the same would not liable to service tax under the category of business auxiliary services. [Sharma Ice Factory v. CCE (2015) 37 STR 660 (Tri.-Del.)]

67. The Tribunal held that by carrying out the activity of joining two sections of rails at site for Railways by thermite welding no deliverable goods for railways came into existence and hence it cannot be said that the same was in the nature of production or processing of goods not amounting to manufacture. Accordingly no service tax would be payable by the appellant [Harshad Thermic Industries (P) Ltd v CCEx&C (2015) 37 STR 808 (Tri-Del)]

68. The process of grinding of wheat into wheat products such as maida, atta, suji and bran is in the nature of manufacture and accordingly not liable for service tax under the category of Business Auxiliary Services [Jayakrishna Flour Mills (P) Ltd. v. CCE (2015) 37 STR 1079]

69. Where the appellant had en tered into a high sea sale agreement for sale of napha and furnace oil imported by it for which it had charged an additional handling charge and facilitation charges to the buyer the Tribunal held that it was a transaction of sale of goods on principal to principal basis and hence demand of service tax on the charges received under the category of business auxiliary services was unsustainable [Indian Oil Corporation Ltd v CCE (2015) 38 STR 501 (Tri-Mum) relying on CST v Nahar Industrial Enterprises Ltd (2010) 19 STR 166 (P&H)]

70. Where the appellant had entered into service agreement with M/s Modi Xerox to undertake repair and maintenance services in respect of the Modi Xerox machines located at the customer’s premises and for which it billed the Modi Xerox who in turn directly billed the customers for the repairs and maintenance services, the Tribunal held that the appellant is providing services on behalf of client (i.e. Modi Xerox) and hence the same would be taxable only w.e.f. 10.9.2004 under the category of business auxiliary services (provision of service on behalf of the client) and not under Repairs and Maintenance Service [Kunjal Enterprises v CST (2015) 38 STR 518 (Tri-Mum)]

71. Where the assessee, a mandap keeper service provider had received donation from the decorator to whom it granted a monopoly right for decoration in its premises, the Tribunal held that the appellant has not rendered any service on behalf of the decorator and hence the donation received by it would not be liable to service tax as a commission agent under the category of ‘Business Auxiliary Services’ [CCE v Jain Kalar Samaj (2015) 38 STR 995 (Tri-Mum.)]

72. Trading profit on sale and purchase cannot be subjected to service tax [Rama Marketing v CCE (2015) 39 STR 475 (Tri.-Mum)].

73. Reimbursement of sale promotion expenses received by an authorized ser vice station from the vehicle manufacturer will be treated as consideration for provision of sales promotion services liable for service tax under the category of ‘Business Auxiliary services’ [CCE v Premier Motor Garage (2015) 39 STR 490 (Tri.-Del.)].

74. Commission received by the assessee – bank from Maharashtra Government through the Zilla Parishad for disbursing of Government Teachers salary on behalf of Zilla Parishad cannot be held to be “commission agent’s services” so as to fall under the category of business auxiliary services. [Janta Sahakari Bank Ltd. vs. CCE (2015) 39 STR 856 (Tri-Mumbai)]

75. The assessee an exporter of cashew kernels had paid service tax under reverse charge on overseas commission agent’s services and subsequently sought refund of the same on the ground that the said services being in relation to ‘agricultural produce’ would be exempt from payment of service tax under notification no. 13/2003-ST dated 20.6.2003. However, the Tribunal after analysing the process of getting cashew kernels from cashew nuts held that cashew kernels would not be considered as ‘agricultural produce’ as defined in the notification. Accordingly, the refund of tax paid on overseas commission agent’s services was denied. [Bola Surendra Kamath & Sons vs. CST (2015) 39 STR 824 (Tri-Bang.)]

31. Business Auxiliary Service/Business Support Service

    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

    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 –

1. 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

2. 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

    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:

1. 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.

2. 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.

3. 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)]

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.)]

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.)]

4. The appellants undertook management of distillery unit M/s Kolhapur Sugar Mills Ltd (KSML) for which it paid them Rs. 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.)]

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)]

6. The appellant, a unit of the Tamil Nadu Electricity Board, supplied fly ash to cement and asbestos companies for manufacturing cement, bricks, etc. and charged Rs.60/40 per tonne as “service charges” for dry / wet fly ash respectively. The department contended this to be taxable under “business support services”. The Tribunal after an exhaustive review of the Government Notifications / Orders held that the supply of fly ash to cement and asbestos companies cannot be considered as consideration for rendering any “business support services” to the said companies since the said companies have not outsourced any service from the appellant for use in their business. The consideration for supply of fly ash seems to be for sale of fly ash and not towards any services provided by the appellant to the said companies notwithstanding the name under which it is collected. [Mettur Thermal Power Station v. CCE&ST (2015) 38 STR 606 (Tri.-Chennai.)]

37. Support Services rendered by Government [Negative list – Section 66D(a)]
    On facts, the High Court held that providing/ maintaining security was a sovereign function of a state and hence is not taxable in the hands of the citizens. Only “support services” rendered by the Government are taxable [Secion 66D(a)(iv)]. [Mcleod Russel (India) Ltd v. UOI (2015) 39 STR 8 (Cal.)]

34. Cargo Handling services

    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.);

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)].

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 :

1. the dominant activity undertaken was movement of coal within the mining area, and loading and unloading was incidental;

2. ‘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)]

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:-

1. “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

2. 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)]

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 –

1. the activity of loading is incidental to mining and transportation; and

2. 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.)].

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:

1. the appellants are admittedly not understood in the common parlour as a cargo handling agency, inasmuch as they are admittedly airline company;

2. 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.)]

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 –

1. 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.

2. the strapping of steel items was part of production process and not for transportation and hence the item they packed were not ‘cargo’..

3. 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.)]

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)].

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.)]

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.)].

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.)].

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)]

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)]

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.)].

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)]

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)].

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)].

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

1. Loading of the coal into the dumpers in the mine;

2. Transportation of same to railway siding; and

3. 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 –

1. As regards the loading and unloading of coal, the activity would be liable for service tax under the category of cargo handling services.

2. 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.)]

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]

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)].

21. The appellant was awarded a contract by Ministry of Chemicals and Fertilizers (MOCF) for receiving, bagging, standardization and distribution of imported urea in various states. Under the contact the appellant had purchased the urea from MOCF on high seas sale basis and sold the same in retail at subsidized prices fixed by MOCF. MOCF had paid to the appellant a lumpsum amount as reimbursement of expenses incurred in providing the urea at subsidized rate. Revenue had sought to levy service tax on these amounts on the grounds that the same was providing cargo handling services to the Government. On appeal the Tribunal held that the appellant was buying and selling urea on its own. Further the appellant by carrying out the above activity was carrying on a sovereign function of Government of India. Hence no service tax could be demanded on the same [Gujarat Narmada Valley Fertilizers &Chem Ltd v CCE (2015) 37 STR 796 (Tri-Ahmd)]

22. The activity of loading and unloading of coal into tippers by deploying pay-loaders at the mining site is liable for service tax under the category of Cargo Handling Services [Shreem Coal Carriers (P) Ltd. v. CCE (2015) 37 STR 1067 (Tri.- Mumbai)]

23. • Barge (Shipping charges) collected towards transportation of imported goods from mother vessel to jetty where the goods were unloaded forms part of the transaction value of imported goods for the purpose of levy of Customs Duty under section 14 of the Customs Act, 1962 read with Customs Valuation Rules, 2007. Hence the same cannot be said to be a service liable for service tax under the category of cargo handling services. The question of rendering cargo handling service in respect of the goods can arise only after the customs transaction is completed.

• Where the contracts with the customer showed separately the rates or charges for shipping of goods from mother vessel to jetty and the cargo handling charges, the transportation charges for shipping of goods cannot be included in the taxable value of cargo handling services.

• The activity of transportation of goods along the coast would be classifiable for service tax under the category of coastal transportation of goods and not under the category of cargo handling services. Further since the goods transported were fertilizers, the same would be exempt from payment of service tax under Notification No. 30/2009-ST dated 31.8.2009.

[United Shippers Ltd. vs. CCE (2015) 37 STR 1043 (Tri-Mumbai)]

24. Loading, unloading, packing, unpacking, stacking, re-stacking and shifting of sugar bags for transportation from floor of the mill to the godown and from one godown to another within the factory and not outside the factory in a public road, ships, aeroplane or trucks for onward movement to a destination would fall as transportation of goods and not included in the definition of ‘cargo handling services’ [CCE v. Manoj Kumar (2015) 40 STR 35 (All.)].

35. ‘Cargo handling’ vs. ‘Packaging’

    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

    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)]

2. The appellant in the present case was engaged in running a container freight station (CFS) wherein it was rendering cargo handling services such as loading, unloading, arranging for and supervising of examination of cargo, stuffing and de-stuffing of cargo, movement of empty containers etc. However, in respect of some of its customers it had under the contracts agreed to provide in addition to the above services, earmarking of space in warehouses for fixed monthly rentals loading, unloading, provision of labour, security etc. It had not paid service tax on these storage and warehousing services on the grounds that the services were incidental to cargo handling service rendered in relation to export goods of the customers and hence not liable for service tax. On appeal Tribunal held the storage activities undertaken by the assessee in addition to normal activity of cargo handling was pursuant to specific clauses in agreement and for a specific consideration hence the same cannot be said to be incidental to cargo handling services. If storage was incidental to the activity of cargo handling the same would have been specifically mentioned so in the definition of cargo handling services. Further since the services were in the nature of storage and warehousing services, assessee would be liable to pay service tax on the said services under the category of storage and warehousing services [CCE v. Maersk India Pvt. Ltd. (2015) 37 STR 555 (Tri.-Mum.)].

37. Chartered Accountants Services

    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.)]

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

    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 also Sreenidhi 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.)]

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.);]

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)

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)].

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 –

1. 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;

2. 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.)].

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)]

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.)].

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.)]

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.)]

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.)]

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

1. the assessee received and stored the goods supplied by Cipla;

2. the assessee sold the goods as an “agent” of Cipla on a “commission” basis.

3. the price at which goods were to be sold were decided by Cipla after consultation with the assessee; and

4. 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:

1. 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)

2. 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.)]

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.)]

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 :

1. 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;

2. 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)]

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.)].

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)]

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)

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)]

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.)]

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.)].

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.)].

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)]

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)]

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)]

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]

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.)]

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)]

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)]

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)].

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.)]

29. Where the appellant was merely engaged in procuring orders from the Government departments for cars manufactured by M/s. Maruti Udyog Ltd. and also liasoning between them for facilitating the supply of cars for a commission, the Tribunal held that the activity cannot be said to be in the nature of service liable for service tax under the category of clearing and forwarding agent services. [CCE v. Amitdeep Motors (2015) 37 STR 637 (Tri.-Del.)]

30. The appellant carried out supervision of coal loading in railway wagons at the colliery on behalf of the coal purchasers which included the following activities: (a) following up the allotment of coal rakes by the Railways; (b) expediting and supervising the loading and labeling of rail wagons; (c) drawing the samples of coal loaded on the wagons; (d) complying with the formalities relating to payments for freight to the Railways; and (e) dispatching of rail receipts to the purchasing companies. The Supreme Court held that the main job of the appellant was supervision of coal loading which was not liable for service tax under “Clearing and Forwarding Agency services” since -

1. There was no clearing by the appellant since the goods are not under any legal detention from which they need to be freed by the appellant;

2. The destination of the goods was pre-determined and the railways transported the goods to the coal purchasers under mutual contracts. Hence there was no occasion to instruct the appellants to dispatch the goods to a particular destination. Further, at no stage custody of the coal was taken by the appellant or transportation of the coal, as forwarders, is ‘arranged’ by the appellant. Hence there was no forwarding.

[Coal Handlers Pvt. Ltd. vs. CCE (2015) 38 STR 897 (S.C.)].

31. 1.The assessee in the present case was a packing station which was mainly engaged in receiving cements in bulk and storing the same and distributing it as per instructions of ACC (assessee’s client). It had also entered into an arrangement with Indian Railways whereby it had made investment in 125 railway wagons for which the Railways had agreed to grant a rebate of 22.5% of the freight received by it from ACC for transportation of cements. Under the arrangement ACC was required to pay 77.5% of the freight to Railways and 22.5% of the freight to the assessee. The Revenue had sought to tax the amount of rebate received by it from ACC on the grounds that the same was in the nature of consideration received for providing clearing and forwarding services. On appeal the Tribunal held that the freight rebate payable to the assessee is on account of it investments in the railway wagons and the same is not for provision of any service to ACC. Merely because the amount is routed through ACC it cannot be said to be a consideration for clearing and forwarding services.

2.The assessee had received certain handling charges from ACC for making available certain facilities such as special wagons, specializing equipments for use of ACC. The revenue had sought to demand service tax on these charges under the category of clearing and forwarding services. On appeal the Tribunal negated the department’s contention by observing that only services rendered by way of clearing and handling of goods would be liable for service tax under the category of clearing and forwarding services. Since the assessee had only made available its facilities to ACC no service tax would be payable by it under the category of clearing and forwarding services.

[CST v. Bulk Cement Ltd. (2015) 39 STR 616 (Tri. - Mumbai)]

39. Clubs or Association services

    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.)]

2. Where the petitioner a co-operative society was engaged in maintaining common effluent treatment plant [CETP] for its member industrial units, the High Court held that no service tax could be demanded from the petitioner society for providing the facility of CETP under the category of club or association services since the relevant provisions viz., s. 65(105)(zzze) had been held to be unconstitutional in Sports Club of Gujarat v. UOI (2013) 37 STR 645(Guj) [Green Environment Services Co-op. Soc. Ltd. v. UOI (2015) 37 STR 961 (Guj.) see also National Assn. of Software & Service Co. (NASSCOM) (2015) 37 STR 1041 (Tri-Del)]

3. In an issue as to whether in case of a cricket club the subscription collected by it from its members be liable for service tax under the category of club or association service or would be excluded therefrom on the ground that the activity was in the nature of public service of a charitable nature, the Tribunal by majority order held that –

1. Promotion of a particular game/ sport is not a public service;

2. Promoting cricket cannot be considered an activity of charitable nature

Accordingly the appellant would be liable to pay service tax on the said subscription charges under the category of club or association services.
[Vidharbha Cricket Association v. CCE (2015) 38 STR 99 (Tri.-Mum.)]

4. Services rendered by member’s club to its members or by co-operative societies to its members would not be liable for service tax under the category of club or association services on the principle of mutuality as held in Ranchi Club Ltd. v. CC (2012) 26 STR 401 [Matunga Gymkhana vs. CST (2015) 38 STR 407 (Tri-Mumbai) relying on FICCI vs. CCE 2014-TIOL-701-CESTAT-DEL]

5. In this case the Tribunal held that –

• On facts considering the characteristics and the nature of activities carried out, the assessee organizations (FICCI & ECSEPC) the same were held to be having public service objectives and were of charitable nature and hence excluded from the definition of Club or Association Service;

• on application of the principle of mutuality, services provided by the appellants to their respective members would not fall within the ambit of “Club or Association” service nor the consideration whether by way of subscription/fee or otherwise received therefor be exigible to service tax. In any event the relevant provisions viz., Section 65(25a) and Section 65(105)(zzze) of the Act, to the extent these provisions purport to levy service tax in respect of services provided by a Club or Association to its members has been declared ultra vires by the Gujarat High Court in case of Sports Club of Gujarat;

• services provided by appellants to non-members is not liable under Club or Association services prior to 1.5.2011 but post 1.5.2011 the same may be liable but since SCN was not issued on the basis of amended provisions sustaining of demand for the period post 1.5.2011 was not permissible.

• so far as one of the assessees ECSEPC is concerned since it was an organization formed to effectuate the policy under the Foreign Trade (Development and Regulation) Act, 1992, and it also being an Export Promotion Council falling within the ambit of the Foreign Trade Policy, it was outside the purview of “Club or Association” as defined in 65(25a) as it excludes any body established or constituted by or under any law.

[Federation of Indian Chambers of Commerce & Industry v. CST (2015) 38 STR 529 (Tri-Del.)]

40. Commercial coaching and training

    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.)].

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 alsoDoon 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)]

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)].

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.

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)]

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:

1. imparting of training for consideration is only an incidental activity undertaken by the appellants.

2. The appellants were not carrying out the activity with an aim to make profit since they were –

   1. a Society registered under the Societies Registration Act, 1860;

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

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

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

3. 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.

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.)].

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.)]

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]

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)]

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)]

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 –

1. ‘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’.

2. 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)]

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)].

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].

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)].

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:

1. 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’.

2. 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”.

3. 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.)].

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 –

1. 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’.

2. 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.)

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)]

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)].

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)]

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)]

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 –

1. 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’.

2. 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)]

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.)]

24. Providing training for spoken English cannot be considered as a vocational training and hence would not be exempt from payment of service tax under Notification No. 9/2003 dated 20.06.2003 or Notification No. 24/2004-S.T. dated 10.9.2004 [Ulhas Vasant Bapat v. CCE (2015) 37 STR 1034 (Tri.- Mumbai)]

25. Where the assessee was engaged in conducting courses which imparted skills to the students in the field of practical accounting, auditing, etc which enabled them to get employment, the Tribunal held that the courses would be covered under the category of Finance Executive in non-engineering trades as notified by the Apprentices (Amendment) Act, 1961 and accordingly the same would be considered as vocational training eligible for exemption under Notification No. 24/2004 dated 10.09.2004 [CCE v. Act Careers P. Ltd. (2015) 39 STR 632 (Tri.-Mum.)]

41. Construction of Residential Complex service

    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 -

1. “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”.

2. 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”.

3. 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].

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)].

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:

1. 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.

2. 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)]

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)]

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.)].

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.)].

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 in Magus 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)]

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)]

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)]

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:

1. 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.

2. 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.

3. 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.

4. 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)]

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 -

1. 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.

2. 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)]

12. Where the assessee had constructed office buildings it was held that classification of the said activities under the category of ‘Construction of residential complex services’ was incorrect since only construction of residential complexes would be covered under said category of service [Singhania Enterprises v. CCE (2015) 37 STR 551 (Tri.-Del.)]

13. Where the appellant was engaged in only developing the land for township, by carrying out activities such as leveling, demarcation of plots/shops, construction of wall boundaries/roads/iron poles with lamps/underground cabling work/underground and overhead storage tanks, development of landscape lawns in earmarked areas etc, the Tribunal held that the same would not be liable for service tax under construction of complex service (for the period upto 30.05.07) or under works contract service (for the period w.e.f. 1.6.07) [ Alokik Township Corporation v CCE (2015) 37 STR 859]

42. Commercial or Industrial Construction service’

    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.)]

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)]

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.)]

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-

1. 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;

2. 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.

3. 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.)]

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)]

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)]

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.)]

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)].

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)]

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)]

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.) ]

12. ‘A’, a sub-contractor provided construction services to ‘B’, the main contractor who contracted with Government of India for building residential complexes for Delhi Police. The Tribunal held that the services provided by ‘A’ to ‘B’ would also not fall within the ambit of ‘commercial or industrial construction services’ since ‘A’ would also be considered as providing construction services in respect of a building which is not used or occupied for ‘commercial purposes’. Merely because the construction has been got done from a contractor/sub-contractor, it would not change the nature of the activity from non-commercial to commercial. [R.B. Chy Ruchi Ram Khattar &Sons v CST (2015) 38 STR 583 (Tri-Del.)].

13. In this case the Tribunal observed as follows –

1. Painting of buildings would be covered under the expression ‘completion and finishing services’ as defined in ‘construction of commercial complex’ services / ‘commercial or industrial construction services’. However, painting activity carried out for residential quarters which does not fall within the meaning of residential complex would not be liable for service tax;

2. Painting of buildings belonging to railways and bus-stands (transport terminals) would not be liable for service tax in view of the specific exclusion from the definition of commercial or industrial construction services;

3. Painting of plant and machinery belonging to Nashik Thermal Power Station used for generation of electricity would not be liable for service tax under commercial / industrial construction services since Nashik Thermal Power Station cannot be said to be engaged in commercial activity (Relying on Board Circular No. 80/10/2004-ST dated 17.9.2004.

4. Activity of laying drainage lines cannot be said to be in the nature of laying pipeline and hence the same would not be taxable under the category of commercial or industrial construction services

[P.B. Rathod vs. CCE (2015) 39 STR 650 (Tri-Mumbai)]

43. Construction Services vs. Works Contract Services

    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)].

Commercial or industrial construction services/construction of complex services

2. Pre-construction anti-termite treatment services is not covered under the category of ‘commercial or industrial construction service’ or ‘construction of complex service’ [Premier Pest Control Pvt Ltd v CST (2015) 38 STR 870 (Tri-Del)].

3. The assessee had undertaken repair and renovation work such as masonary work, plastering, false ceiling, painting, electrical & plumbing work in respect of an office premises on which the Revenue had sought to demand service tax under the category of commercial or industrial construction services. On appeal, the Tribunal rejected the contentions of the appellant by observing as follows –

1. As regards the contention that the appellant’s activities would not be covered under clause (c) of the definition of Commercial or Industrial Construction Services (“CICS”) on the grounds that only completion/finishing services undertaken in relation to new building/building under construction would be covered under the said clause is incorrect since the said clause does not specify that the same would not be attracted if the activities are undertaken in respect of an old building.

2. As regards the appellant’s contention that clause (c) and (d) of definition of CICS would come into play only if the activities are undertaken for the whole building and not in case where the activities are undertaken for a part/flat of the building, the Tribunal held that even a particular floor/unit of a building which encloses a space within its walls and is covered with a roof would come within the scope of the term building. Accordingly, in case of multi-storeyed building, each and every floor/unit therein would be considered as a building.

4. Accordingly the activities carried out by the appellant would be liable for service tax under the category of CICS [Kala Sagar v CCE (2015) 38 STR 1017 (Tri.- Mum)].

44. Consulting Engineer

    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.)]

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.)]

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 :

1. 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.

2. 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.

3. 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.

4. 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)]

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 –

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

2. the overseas service provider had not authorized the assessee to pay service tax on its behalf;

3. 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)]

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 –

1. the consideration is not for any consultancy service rendered;

2. it is for the transfer of intellectual property;

3. the relationship between the parties is not one of consultant and client, but seller and buyer of assets;

4. 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]

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)]

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.)]

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 –

1. The licencing of technical know is not a service and no service tax is leviable thereon;

2. 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.

3. 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)]

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)].

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.)]

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)]

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)].

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.)].

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.)]

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’ –

1. since services rendered by ‘companies’ were not liable prior to 1.5.2006 under this category;

2. 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)]

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 –

1. 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;

2. 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.

3. 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.)].

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.)]

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.)]

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)].

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)].

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)]

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.)].

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

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.)].

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)]

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.)]

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)].

28. Where on facts the appellant was merely engaged in providing data relating to drilling activities carried out by ONGC (its client) and did not provide any technical assistance / consultancy or analysis of the data collected by them and also where it was not a consulting engineer within the meaning of section 65(31) of the Act, [since they were neither technically qualified engineers nor are they an engineering firm] the Tribunal held that no service tax would be payable by them under the category of consulting engineering services [Halliburton Offshore Services Inc. v. CST (2015) 37 STR 634 (Tri.-Mum.)]

29. Consulting engineering services provided by Companies are liable for service tax only w.e.f. 1.5.2006 and not prior to that date [CCE vs. Shah Technical Consultants Pvt. Ltd. (2015) 39 STR 847 (Tri-Del.)]

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

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

1. Design;

2. Manufacture and supply; and

3. 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 –

1. The contract was a composite (divisible) contract for –

   1. Supply of goods [supply portion]; and

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

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

3. 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.)]

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

1. Pipelines are not “plant, machinery or equipment” and

2. 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

    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 –

1. it had provided the services of organizing the conference for itself; and

2. 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

    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 –

1. 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.

2. Notwithstanding the (i) above, the net amount is not liable under the category of ‘franchise services’ since –

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

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

   3. 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.)]

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

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

1. Charges collect fees received from the importers for collecting freight on import consignments;

2. 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.)]

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

    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

    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]

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

    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.)]

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:

1. After surveying all Board Circulars Tribunal held:

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

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

3. 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.

2. 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)]

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]

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)].

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)].

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)]

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)]

8. The appellant in the present case had rendered erection, commissioning and installation services. It had availed benefit of abatement under Notification No. 1/2006 and had also availed cenvat credit which was subsequently reversed by it. However, the revenue had sought to deny the benefit of abatement on the ground that the assessee had availed cenvat credit. On appeal the Tribunal considering the fact that assessee had reversed the cenvat credit held that the benefit of abatement under the above notification was admissible [U.B. Engineering Ltd v.CCE (2015) 37 STR 999 (Tri-Mumbai)]

9. The activity of fabrication of structures at clients premises results in emergence of excisable goods and hence is an activity which amounts to manufacture of goods. Accordingly no service tax would be payable on such activity under the category of ‘erection, commissioning and installation’ [Plus Tech Engineering (P) Ltd v CCE (2015) 39 STR 454 (Tri-Ahmd.)].

52. Works Contract vs. Erection commissioning and installation services

    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 –

1. 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).

2. 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.

3. 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.)]

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 –

1. both the the contracts were a single contract; and

2. 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

    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

    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)]

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.)]

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 -

1. The appellants did not receive any representational right from the Chinese company and did not grant any such right to the sub licencees;

2. 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.)]

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:

1. The other party was granted a right to establish a school representing the assessees name, motto and logo;

2. The assessee would provide its established concepts of imparting education, managerial expertise and operational techniques and standards of imparting education to the other party;

3. The other party was obliged to pay a fee to the assessee;

4. The other party was obligated not to establish or administer an English Medium School identified with any person other than the assessee;

5. 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.)]

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)]

6. On facts, where the assessee (‘Amway’) sold products through its distributors directly to the consumers without any sale in any shop or market and had collected certain subscription income from its distributors to sell the products identified with, the Tribunal after a detailed consideration of the relationship between the assessee and distributor and the business literature (viz., Amway Business Starter Guide, Code of Ethics, Rules of Conduct, Sales & Marketing plan, etc.) held that the distributor had been granted not merely a right to sell Amway products but a ‘representational’ right to sell its product and accordingly is liable to pay service tax on the subscription income under ‘franchise services’. [Amway India Enterprises Pvt. Ltd. v. CST (2015) 39 STR 1006 (Tri.-Del.)]

55. General Insurance Services

    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 –

1. owned by the government departments and commercial concerns; and

2. 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.)].

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

1. 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.

2. 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.

3. 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

    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)]

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)]

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.)].

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)]

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)]

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.)].

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.)].

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 -

1. 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.

2. 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.)]

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)]

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 –

1. 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.

2. 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

    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

    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:

1. Software, whether canned or customized, is goods;

2. Entry 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.

3. 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.

4. 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.)]

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.)]

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

    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 -

1. 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;

2. the services of reinsurance brokers were provided to the Indian insurance company. Hence its services cannot be considered to be exported out of India;

3. 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

    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.)].

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.)].

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.)]

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 –

1. 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;

2. since there was a permanent transfer of copyright and not a temporary transfer, the same would not constitute a service.

3. 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)]

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

    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

    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 -

1. 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’.

2. 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.)]

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

    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.)]

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

    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:

1. 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;

2. 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;

3. 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

    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 also Unipower 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)]

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.)].

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–

1. 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;

2. Services in relation to ‘horticulture’ is specifically kept outside the purview of ‘cleaning services’, a separate service;

3. 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.)]

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.)].

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.)]

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.)]

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.)]

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.)].

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.)].

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.)].

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.)].

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.)]

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 –

1. In the absence of a maintenance contract between the appellant and its client such services would not be liable;

2. 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.)]

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)]

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.)]

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)]

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.)].

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)]

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.)]

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.)]

21. ‘Software’ being goods as held by the Supreme Court in Tata Consultancy services vs. ,State of AP (2004) 178 ELT 22 (SC), it was held that software maintenance services were liable for service tax under the category of Maintenance and repair services [Choudhary International Pvt. Ltd. v. CST (2015) 39 STR 170 (Tri-Mum.)].

66. Management Maintenance and Repair service

    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 –

1. Period prior to 1.7.2012

1. 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.

2. 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.

2. 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)]

2. The demand under the category of ‘Management, maintenance and repair service’ for the service of maintenance and repairs of roads rendered by the Respondent to the National Highways Authority of India for the period 16.11.2005 to 31.3.2008 is not liable for service tax in view of the retrospective exemption granted vide section 97 of the Finance Act, 2012. [CCE&C v. Rajdeep Buildcon Pvt. Ltd. (2015) 38 STR 696 (Tri-Mum.)]

3. Services rendered in relation to widening of roads and maintenance thereof during the period 16.6.2005 and 26.7.2009 would be exempted from payment of service tax in view of the retrospective exemption granted u/s 97 of the Finance Act, 1994 [Khattar & Company Pvt. Ltd. vs. CST (2015) 39 STR 391(All)]

67. Management Consultancy services

    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 –

1. 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.

2. 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.

3. 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].

4. 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.)]

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)].

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.)]

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)]

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)].

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)].

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)]

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.)].

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)]

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)

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)]

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.)]

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-

1. 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

2. 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.)].

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)].

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)]

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.)]

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)]

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.)]

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)]

20. Where the appellant had rendered general support services (use of infrastructural / utility facilities, staff, fire fighting equipments etc.); operational services (assistance for waste disposal & use of sewerage system); and secretarial services it was held that the same was not in the nature of consultancy for management of a company and hence would not be liable for service tax under the category of “management consultancy” services [Konkan Synthetic Fibres v CCE (2015) 38 STR 403 (Tri-Mum)].

68. Mandap Keeper

    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 –

1. 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.

2. 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.)]

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

1. 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

2. 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

1. 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.

2. 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)]

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 :

1. 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;

2. 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.

3. 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.)]

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 Rs. 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 –

1. 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;

2. 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;

3. 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;

4. 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.)].

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.)]

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.)]

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.)]

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.)].

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)]

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:

1. Charges for use of mandap/hall;

2. Service charges for serving food & beverages to the guests.

3. 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:

1. 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.

2. 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.

3. 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)]

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)]

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.)]

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.)].

14. Marriage is a social function and not religious function. Hence the services in relation to use of mandap for conducting marriages would be liable for service tax under the category of mandap keeper services [CCE v. Central Panchayat (2015) 37 STR 1038 (Tri.- Mumbai)]

69. Manpower , Recruitment or Supply Agency Service

    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 –

1. 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

2. 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.)].

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.

1. 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;

2. The appellant’s skilled personnel were working under the supervision and control of the clients;

3. 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.

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)]

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.)] [SeeSatara 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)].

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) ]

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.)].

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]

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.)]

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)]

10. Where the appellant had entered into contract with sugar factories for providing services such as harvesting cane from the fields, loading them in the vehicles and delivering them at the factory site etc. the Tribunal held that the appellant cannot be said to be engaged in manpower recruitment and supply services [CCE vs. Godavari Khore Cane Transport Co. Ltd. (2015) 38 STR 468 (Bom)]

11. Where under the agreement entered into with sugar factories the appellant was responsible to cut the sugar cane from the fields of its members and non-members and to deliver the same at the sugar factory gate either by availing services of labour provided by sugar factory or the labour contractors, the Tribunal held that the appellant cannot be said to have rendered manpower recruitment supply agency services to the sugar factories. It has rendered services in relation to procuring or processing of goods belonging to client and accordingly the same would be liable for service tax under the category of ‘business auxiliary services’ [Shriram OOS Tod Majdoor Seva Sangh v CST (2015) 38 STR 1052 (Tri.-Mum)].

12. Where the appellant had entered into contract with sugar factories for providing services such as harvesting cane from the fields, loading them in the vehicles and delivering them at the factory site etc. the Tribunal held that the appellant cannot be said to be engaged in manpower recruitment and supply services [CCE v Shriram Sao TVS Ltd (2015) 39 STR 75 (Tri-Mum) relying on CCE vs. Godavari Khore Cane Transport Co. Ltd. (2015) 38 STR 468 (Bom.)]

70. Market Research Agency’s service

    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

    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 –

1. 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

2. 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.)].

2. The activity of mining of sand from river bed is liable for service tax under the category of ‘Mining Services’ [Shreem Coal Carriers (P) Ltd. v. CCE (2015) 37 STR 1067 (Tri.- Mumbai)]

72. Operation and maintenance contracts

    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 :

1. 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”.

2. 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”.

3. 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.

4. 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”.

5. 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

    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.)].

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)]

3. The appellant in the present case had a website containing a number of photographs which would be freely viewed but would be available for download for use in ad insertions etc., only on payment of the prescribed charges. The revenue had sought to levy service tax on these charges under the category of ‘Online information and database access or retrieval services’. The assessee contested the demand on the ground that it had got a copyright in the photographs and hence amount received by it were for use of copyright and hence would be outside the purview of service tax. On appeal the Tribunal held that –

1. The photograph could be downloaded for use in ads etc. only through computer network;

2. the appellant use to charge the viewer a fee for down loading the images;

3. The photograph contained in the website may be having a copyright but when the photograph is only available in the website for accessing and subsequent downloading, the copyright in such images becomes incidental and the main activity so far as the appellant’s client is concerned is making information available for retrieval.

Accordingly, the services would be liable under the category of ‘online information and database access or retrieval’ services [Photolibrary India P Ltd. v. CST (2015) 39 STR 637 (Tri.-Mumbai)]

74. Outdoor Caterer’s service

    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 –

1. 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.

2. Benefit of notification no. 12/2003 is squarely applicable to the appellant since the supply of food constitutes ‘sale of goods’.

3. 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]

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.)]

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.)]

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.)]

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.)]

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

    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:

1. ‘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.

2. 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

    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:

1. When a “pandal or shamiana” is used for marriage, it earns the status of social function as service component is involved.

2. 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)].

2. Supply / erection of temporary tents for ‘Magh Mela’, does not fall under ‘Mandap keeper services’ since it is not a ‘Mandap’ which is an immoveable property as defined under the Transfer of Property Act, 1882. Such services are ‘Pandal and Shamiana Services’. However, under the United Provinces Mela Act, 1938 Magh Mela is a ‘religious congregation’ and therefore pandal and shamiana services provided in relation such religious congregation is not liable for service tax under the category of Pandal and Shamiana services as clarified by the CBEC circular no. 80 dated 17.9.2004 (para 11.4) [Lalloo Ji and Sons v Officer in Charge Mah Mela (2015) 39 STR 941 (All.)].

77. Photography services

    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.)]

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

    1. In the present case the following issues were referred to the Larger Bench of the Tribunal viz.,-

1. 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;

2. 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;

3. 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:

1. 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.

2. 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.)].

3. 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)].

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.)].

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:

1. 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;

2. 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.)].

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)].

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.)]

6. In the present case the Tribunal held that the following revenues would not be liable under the category “port services:

1. 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.

2. 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.)]

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]

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.)]

9. The appellant in the present case (Mumbai Port Trust) had permitted ONGC to lay submarine pipelines beneath its land and sea bed within the port limits for enabling ONGC to transport goods (oil) through the pipelines. For this it had charged a compensation which was calculated on the basis of 50% of wharfage. Revenue had sought to demand service tax on these compensation under the category of port service. On appeal, the Tribunal held–

1. Only the services by a port in relation to vessel/ goods would be liable for service tax under the category of ‘port services’. The assessee had not rendered any service in relation to transportation of goods through pipeline as it did not have any control over the goods nor was it required to maintain, or repair the pipeline. Hence it cannot be said that assessee had rendered port service.

2. The compensation received by the assessee was for permission to use port area and not for receiving any service. It is in the form of lease rental which is outside the purview of port service.

3. The term used as ‘wharfage’ is merely to determine the measure of the compensation and not to determine the nature of the service rendered.

[CST v. Traffic Manager, Mumbai Port Trust (2015) 37 STR 993 (Tri-Mum)]

79. Programme Producer Service

    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.)]

2. Where the appellant had entered into agreements with various foreign entities who were required to make audio-visual coverage of the IPL cricket matches and uploaded the digitalized images for broadcasting to the viewers of the cricket match all over the world, it was held that the activities carried out by the non-resident service providers were in the nature of “Programme Producer’s Services” and accordingly the appellants were liable to pay service tax on the services under the reverse charge basis. However, the amounts paid to overseas entities for booking of hotel, accommodation and transportation services for personnel in connection with recording of cricket matches to be held outside India it would not be covered under the category of programme producer’s service, since the same is in the nature of support services [BCCI v CST (2015) 37 STR 785 (Tr-Mum)]

80. Rent a Cab

    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)]]

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)]

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)].

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)].

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.)].

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)]

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.)].

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)]

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)]

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.)].

11. On an issue as to whether service tax would be levied under the category of rent-a-cab services where there has been hiring of motor vehicle without hirer having possession of vehicle, the High Court by referring to section 75 of the Motor Vehicles Act, 1988 and the Rent-a-cab scheme framed there under held as under:

1. The fundamental difference between “rent a-cab” and hiring is that in case of hiring, the owner of the vehicle retains control and possession i.e he either drives the vehicle himself or employs somebody to drive the vehicle whereas, in case of rent a cab the person is enabled to take the vehicle wherever he pleases subject to the terms of contract between him and the owner and he uses the vehicle as his own subject to his paying the rent.

2. unless there is a transfer of control of vehicle and possession to the hirer, there cannot be said to be a transaction liable for service tax under the category of rent-a-cab services.

[CCC v Sachin Malhotra(2015)37 STR 684 (Uttarakhand)]

81. R e nting of Immovable property

    1. In this case the larger bench (3 judges) of the Delhi High Court held-

1. 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).

2. 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.

3. 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.

4. 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)

5. 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.)]

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.)]

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:

1. 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.

2. 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.

3. 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.)].

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)]

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)]

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)]

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)]

8. Where the assessee had received rental income from renting out of flats which were used as hostels or residential accommodation it was held that no service tax will be payable under the category of ‘Renting of Immovable property services’ since renting of buildings used solely for residential purpose were specifically excluded from definition of immovable property [Singhania Enterprises v. CCE (2015) 37 STR 551 (Tri.-Del.)]

9. The security deposit taken from the licensee of premises is to provide for security in case of default in rent or default in payment of utility charges and for damages if any caused to the leased property. The same cannot be c onsidered as consideration for leasing of property. The consideration for renting of immovable property is the amount of rent agreed upon between the parties. Thus where the revenue had sought to include the notional interest on security deposit within the value of taxable service of renting of immovable property but had failed to adduce evidence that the security deposit had influenced rent in any manner, the Tribunal held that inclusion of notional interest on security deposit in value of taxable service was incorrect [Murli Realtors Pvt. Ltd. v. CCE (2015) 37 STR 618 (Tri.-Mum.)].

10. The Tribunal in the present case while dealing with the issue of applicability of service tax on activities related to leasing / renting of vacant lands observed as follows:

1. Giving of vacant land on lease / licence for construction of building or temporary structure at a later date to be used for furtherance of business or commerce would be liable for service tax only w.e.f. 1.7.2010 and not prior to that date. Further service tax would be payable even in cases where the agreement for lease / licence has been entered prior to 1.7.2010 since the taxing event is the provision of service and not the event of entering into agreement for provision of services;

2. The service tax law does not make any distinction between long term lease and short term lease. Accordingly, the assessee’s contention that long term lease would not be liable for service tax under the category of renting of immovable property services is incorrect;

3. Premium paid by lessee to lessor is for transfer of interest in property. Since levy of service tax is on renting of immovable property i.e. continuous enjoyment of the property and not on transfer of property no service tax would be payable on lease premium;

4. Processing charges collected for allotment of land on lease basis would be liable for service tax under the category of ‘renting and immovable property’ services. However, the services like processing and approval of building plan, map revision, malba charges connected with building of structures on the land allotted on lease basis have no nexus with the renting of immovable property for business or commerce, and as such, the activities in relation to the construction of building on the vacant land allotted on lease basis i.e. the charges of map approval, validation, map revision, malba charges, etc. would not attract Service Tax.

5. Rent received from staff for letting out residential units or for giving of vacant land on lease for construction of residential complex not being for furtherance of business or commerce would not be liable for service tax under the category of renting of immovable property services.

Greater Noida Indl.Development Authority v CCE&ST (2015) 38 STR 1062 (Tri-Del.)

11. In this appeal the following issues were decided by the Tribunal –

1. Long term leases will also fall within ambit of renting of immovable property service.

2. Renting/leasing of vacant land for business or commercial purpose would fall within the ambit of service tax only w.e.f. 1.7.2010

[New Okhla Industrial Development Auth. v CCE (2015) 39 STR 443 (Tri-Del)].

82. Real Estate Agent Service

    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)]

2. Where the issue arising out of the Tribunal’s order was whether appellant’s activities would be considered as a service and if so whether a taxable service and under which category, the High Court held that appeal against the Tribunal order would lie before Supreme Court and not High Court since the issue has a direct and proximate relation to rate of service tax and value of service [CST v. Saumya Construction Pvt. Ltd. (2015) 38 STR 17 (Guj.)]

83. Sale of space or time for advertisement

    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.)]

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)]

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]

4. Selling of space for printing of advertisement in an Almanac (giving host of information in respect of religious, cultural and historical acts) which is in the nature of a book covered under the print media would be outside the ambit of service tax [CCE v Media World Enterprises (2015) 39 STR 258 (Tri-Mum)].

84. Scientific or Technical Consultancy

    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.)]

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)]

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)].

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)]

5. Where the appellant was engaged in undertaking exploration work and for which it receives 100% grant in aid from the Government as reimbursement of actual expenses incurred by it, the Tribunal held that –

1. the activity of location of mineral deposits and preparing detailed reports are in the nature of survey and exploration of mineral services liable for service tax only w.e.f. 10.9.2004 and not prior to that date under the category of scientific or technical consultancy services

2. the grant in aid received would not be liable for service tax since it was only a reimbursement of actual expenses incurred and not in the nature of fees for services. The exploration reports were kept by the appellant with itself and not given to the government.

3. It had paid service tax on the service charges received by it on the sale of reports to other customers

[Mineral Exploration Corporation Ltd v CCE (2015) 38 STR 421 (Tri-Mum).]

85. Security agency services

    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

1. 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”.

2. 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)]

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)

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

    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)]

    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)]

    3. Construction of civil structure for electricity board for the purpose of erection of transmission tower during the period May 2006 – May 2007 being in relation to transmission of electricity is exempt vide Notification No. 45/2010-ST dated 20.7.2010 [K . Shanmugavelu vs. CCE (2015) 39 STR 704 (Tri-Chennai)]

87. Short -term Accommodation Service

    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

    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:

1. 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.

2. 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)]

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.)].

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:

1. 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.

2. 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)]

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

    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

    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.) ]

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)].

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.)].

4. The assessee in the present case was engaged in providing services of horizontal drilling for passages of cables to various telecom companies. It contended that only such horizontal drilling as done by using machines would be covered within the ambit of service tax under the category of ‘site formation and clearance, excavation, earthmoving and demolition services’. On appeal the Tribunal negatived the above contention and held that horizontal drilling whether done with use of machines or manually both would be covered under the said category of service [CCE vs. Mittal Construction Co. (2015) 39 STR 848 (Tri-Del.)]

91. Sponsorship service

    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)

    2. Where the appellant had entered into a contract for sponsoring a cricket team the Tribunal held that the appellant would not liable to pay service tax under reverse charge mechanism on the sponsorship services since –

• on facts the sponsored team had paid service tax on the transaction under the category of business auxiliary services as a service provider and hence service tax cannot be demanded on the same transaction under the category of sponsorship services from the service recipient.

• sponsoring the cricket team would not be covered within the sponsorship services.

[Coca Cola India Pvt Ltd v CST (2015) 38 STR 497 (Tri-Del.)]

3. Sponsorship of IPL cricket tournament is in the nature of sponsorship of a sporting event and hence the same would not be liable for service tax under the category of Sponsorship Services (at the relevant time) [Citibank NA. vs. CST (2015) 38 STR 520 (Tri-Mumbai)]

92. Supply of tangible goods for use services

    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:

1. 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.

2. 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.)]

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 –

1. The effective control of the machinery even while the machinery was in use of the contractor was that of the company;

2. 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;

3. 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

    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.)]

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.

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

    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.)]

2. In this case the Tribunal held that -

1. 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.

2. 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.)]

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-

1. 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;

2. 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.

3. 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)]

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.)]

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)].

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:

1. 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’.

2. 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.)].

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)]

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)]

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)]

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.)]

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)]

12. The State Excise department had, in pursuance of one of the statutory functions entrusted to it, deputed its staff in the warehouses of the contractors who were engaged in storage of foreign liquor in order to supervise as to whether the contractors was complying with the various rules & regulations made under the state excise laws. For this it recovered charges from the contractors on which the revenue had sought to demand service tax under the category of storage and warehousing services. In appeal the High Court held that the state excise department was not providing any service on behalf of the Government to the liquor contractors or the persons who were storing liquor in the warehouses and the amount collected is only in the nature of fees levied for supervision to ensure proper functioning of warehouse and storage as per statutory requirement. Accordingly the demand of service tax on the charges recovered by it from the contractors would under the category “Storage and Warehouse services” is incorrect [CCE&E v State of Madhya Pradesh (2015) 38 STR 954 (M.P.)].

95. Survey or Map making services

    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

    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

    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.)]

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)]

98. Technical Inspection and certification services

    1. Software testing is not liable for service tax under the category of ‘Technical inspection and certification service’ since

1. it is an integral part of software development which is not liable for service tax;

2. 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.)]

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).]

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:

1. only ifnspections related with goods, materials or immovable property would be liable for service tax under the said category;

2. 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;

3. 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)]

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)].

5. The activity of technical inspection and certification of seeds produced by seed producers carried out under the provisions of Seeds Act, 1966 and the rules made there under would be liable for service tax under the category of Technical Inspection and Certification Services [Maharashtra State Seed Certification Agency v. CC&CE (2015) 37 STR 655 (Tri.-Mum.)]

6. Where the appellant was engaged in the activity of carrying out standard check of the vehicle for any manufacturing defects therein and carrying out rectification thereof on the basis of the vehicle data sheet provided by the manufacturer of vehicles the Hon’ble Tribunal held that the appellant’s activities would not be liable for service tax under the category of ‘technical inspection and certification’ services since the definition of ‘technical inspection and certification’ would not mean any check on functionality but would refer to checking the same as per any standards laid down in some statute or some guidelines [Antony Garages Pvt ltd vs. CCE (2015) 38 STR 49 (Tri-Mum)].

99. Technical testing and analysis

    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 –

1. the testing is ‘in relation to’ human beings or animals which is specifically excluded; and

2. 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)]

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)]

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

     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.)].

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)].

3. International Private Lease Circuit services are in the nature of telecommunication services. Hence when such services are received from a Service Provider located outside India no Service Tax would be payable on reverse charge basis since only telecommunication services provided by a person having a license under Indian Telegraph Act would only be liable for service tax and the overseas service provider is not a person licensed under the said Indian Telegraph Act [Infosys Ltd v CST (2015) 37 STR 862 (Tri-Bang)]

4. The assessee, a telegraph authority under the Indian Telegraph Act, 1885, provided the service of telephone connection to subscribers. The tariff plans for its services was fixed by the Telecom Regulatory Authority of India (TRAI). It marketed its services through its agent, M/s RIL. RIL was allowed to market assessee’s services along with RIL’s own products and services. RIL launched a scheme whereby the subscribers could become a member of a club called Dhirubhai Ambani Pioneer Club (DAPC) and avail the following privileges:

1. A sleek, feature rich digital handset (MRP Rs. 10,500/-) absolutely free or a colour screen handset (MRP Rs. 25,500/-) at a highly discounted rate of Rs. 15,000/- with 1 year warranty and 3 years insurance.

2. 400 minutes of outgoing calls per month @ 40 paise per minute.

3. Free incoming calls, free unlimited SMS, free CLIP & call waiting services.

4. Free subscription to R world.

5. Eligible to GSM handset exchange scheme.

6. 25% discounts on Web World membership.

7. Discount coupon worth Rs. 1,00,000/- on wide range of commonly used products and services.

RIL collected the following amounts from the subscribers which were shown separately in the offer scheme:

1. Rental and usage charges for telephone services

2. Club membership charges; and

3. Club privilege charges.

The amount collected by RIL towards approved tariff plans was remitted by RIL to the assessee who duly paid service tax on the said amount. RIL, however, retained ‘the club membership charges’ and ‘club privilege fees.’ The department contended that the club membership fees and club privilege charges would all be liable for service tax under telephone services since the term assessee as defined u/s 65(7) includes his agent and the charges are only incidental to the service of telephone connection and forms part of the assessee’s service of providing telephone connection. The adjudicating authority dropped the demand and on further appeal by the Department, the Tribunal upheld the order of the adjudicating authority, observing as follows:

1. One of the conditions to fall under the taxable service of “telephone connection” was that the service provider must be a “telegraph authority”. RIL who provided their own goods and services to the subscriber was not ‘a ‘telegraph authority’. On this ground alone the value of ‘club membership fees’ and ‘club privilege charges’ cannot be included.

2. The value of handsets supplied under the scheme is for supply of goods and the value of goods cannot be included in the value of service. The value of the telephone handset is discernible in this case and sales tax has also been paid on such transactions. Inadequacy of the value on which the sales tax has been imposed cannot be the ground for inclusion of the value of goods in the value of the service.

3. The privileges at point (b) and (c) were part of the approved tariff plan of the assessee on which service tax was already paid. Showing a paid service as a privilege of the DAPC could at the worst be an alluring and illusory advertisement. Such an advertisement cannot change the real character of the service. The remedy against the deceptive advertisements is not under the Act.

4. The privileges at points (d) to (g) above on their very face have no connection with the service of telephone connection and hence there is no question of including their value in the value of service relating to telephone connection.

In view of the above, the value of ‘club membership’ and ‘club privilege charges’ are not includible in the value of taxable services of telephone connection provided by the assessee. [CST v Reliance Infocomm Ltd (2015) 38 STR 558 (Tri-Mum)].

101. Tour operator

     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.)]

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:

1. The appellants were not engaged in the business of operating tours;

2. The vehicles used for transportation of employees is not a tourist vehicle

3. 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)]

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.)].

4. Where the appellants provided the following services:-

1. Operating point to point buses under contract carriage permits for transport of passengers;

2. Providing buses on lease to other companies; and

3. 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)].

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)].

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.)]

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)]

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.)]

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.)]

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)]

11. Where the assessee was engaged in the business of providing buses to various companies for transporting their employees from designated spots to the company and back on contract basis, the pickup and drop schedule being determined by the company, the Tribunal held that the assessee cannot be said to be liable for service tax under the category of ‘tour operator services’ –

1. For the period upto 10.9.2004 – since the buses used for transportation were not tourist vehicle but only contract carriage buses and the assessee was also not holding any tourist permit; and

2. For the period from 10.9.2004 onwards – for the same reason as mentioned in (i) above and also since the assessee was not engaged in planning, scheduling organizing of tours.

[Capricorn Transways Pvt. Ltd. v. CCE (2015) 37 STR 1027 (Tri.- Mumbai)]

102. Transmission / Distribution of Electricity

     1. Activities such as construction of sub-station and maintenance or repair of the sub-station undertaken by the appellant for transmission of electricity, though classifiable under the category of commercial or industrial construction services or works contract services the same would be exempt from payment of service tax as all taxable services rendered in relation to transmission and distribution of electricity have been exempted under Notification No. 45/2010-ST dated 20.7.2010 [Kedar Constructions v. CCE (2015) 37 STR 631 (Tri.-Mum.)]

103. Transportation of goods by pipeline

     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)].

     2. The appellant in the present case had undertaken the activity transportation of hazardous waste through pipeline for disposal. The revenue had sought to demand service tax on these activities under the category of transportation of goods through pipeline services. On appeal, the Tribunal held that the term ‘goods’ under the service tax law means goods as per Sale of Goods Act, 1930. Thus, every movable property which can fetch a price would be considered as goods. However since the waste effluent transported by the appellant through pipeline was not to be purchased by any person it cannot be said goods. Accordingly the appellant’s services cannot be said to be liable for service tax under the category of transportation of goods through pipeline/ conduit. [Gujarat State Fertilizers and Chemicals Ltd. v. CCE (2015) 37 STR 1076 (Tri.- Ahmd.)]

104. Travel Agency Service

     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)]

105. Underwriting vs. Banking and Other Financial Services

     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:

1. 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.

2. 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.

3. 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.)].

106. Visa Facilitation services

     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.)].

107. Works contract services

     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 in Nagarjuna 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

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 –

1. 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).

2. 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).

3. 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.

4. The contract cannot fall as ‘commercial or industrial construction service u/s. 65(25b) since –

1. Irrigation is a non-commercial end-use and only structures with commercial / industrial end-use fall under that category; and

2. 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.

5. The contract cannot be classified u/s. (97a) as ‘site formation, clearance, excavation, etc.’ since –

1. These activities are only minor preparatory activities to the execution of the project and would not determine the classification of the appellant’s service.

2. 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.

6. 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.

7. Notification no.41/2009 dated 23/10/09 exempting works contract in respect of canals is not retrospective and hence would not apply.

8. 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.

9. 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.)].

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.)].

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.)].

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.)]

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)]

7. Where the goods involved as a part of the service contracts are subjected to the levy of VAT / Sales Tax, the Tribunal held that the classification of service under the category of works contract services was proper and accordingly the assessee was entitled to payment of service tax under the works contract composition scheme [U.B. Engineering Ltd v.CCE (2015) 37 STR 999 (Tri-Mumbai)]

8. Where the construction services rendered by the appellant were more specifically classifiable under the category of “works contract services” though in respect of which appellant had paid service tax under the category of “construction of complex services” or “commercial or industrial construction services”, it was held that reclassification of the services under the new category of service was permissible. However, it would not be eligible to the benefit of payment of service tax under the composition scheme in view of the Supreme Court decision in Nagarjuna Construction Company Ltd. v. Government of India (2012) 28 STR 561 (S.C.) but benefit of Rule 2A of Valuation Rules would be available [Ahluwalia Contracts (India) Ltd vs. CST (2015) 38 STR 38 (Tri-Del.)]

9. Where the assessee had started paying service tax on the works contract services under the composition scheme and had disclosed the amount of tax paid in its returns but had failed to make a specific declaration as required under Rule 3 of the Works Contract Composition Rules, the Tribunal held that substantial benefit cannot be denied for procedural deficiency in delay in opting for the scheme especially considering the facts that no format for making declaration or the authority to whom declaration is to be made was prescribed and that the assessee had disclosed the quantum of tax paid by it in its returns [ABL Infrastructure Pvt Ltd v CCE (2015) 38 STR 1185 (Tri-Mum)]

10. In a batch of appeals, the larger bench of the Tribunal laid down the following propositions:

1. Laying of pipelines/conduits for lift irrigation systems for transmission of water or for sewerage disposal, undertaken for Government/Government undertakings and involving associated activities like trenching, soil preparation and filling, supporting masonry work, jointing of pipes, electro-mechanical works or pumping stations and like activity, is classifiable only under Commercial or Industrial Construction Service (CICS) for the period up to 1.6.2007 and not under Erection, Commissioning or Installation Service (ECIS) but they are excluded under CICS since these are not primarily for commercial or industrial purposes;

2.     i. Construction of canals for irrigation or water supply; construction or laying of pipelines/conduits for lift irrigation conceived and integrated into a dam project, must be classified as works contract “in respect of dam” and is thus excluded from the scope of “Works Contract Service” (WCS);

2. “Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects” mentioned in the definition of WCS [clause (e) of Explanation (ii) to Section 65(105)(zzzza)] is an enumeration of mode of execution of taxable services specified in clause (a) to (d) of Explanation (ii) to Section 65(105)(zzzza).

3. Construction of canals/pipelines/conduits to support irrigation, water supply or for sewerage disposal, when provided to Government/Government undertakings would be for non-commercial, non-industrial purposes, even when executed under turnkey/EPC contractual mode and would fall within the ambit of WCS [as being a contract for construction of a pipeline or conduit - clause (ii)(b) of Explanation to s. 65(105)(zzzza)] but would not be exigible to Service Tax since these are not primarily for commercial or industrial purposes; and

3. Whereunder an agreement, whether termed as works contract, turnkey or EPC, the principal contractor, in terms of the agreement with the employer/contractee, assigns the entire works wholly to a sub-contractor and the transfer of property in goods involved in the execution of such works passes on accretion to or incorporation into the works on the property belonging to the employer / contractee, the principal contractor cannot be considered to have provided WCS since the property has passed from the sub-contractor to the employer / contractee and it is the sub-contractor who has provided the WCS to the employer / contractee.

[Lanco Infratech Ltd v CC,CE&ST (2015) 38 STR 709 (Tri.-LB)].

11. Where the assessee had started paying service tax on the works contract services under the composition scheme and had disclosed the amount of tax paid in its returns but had failed to make a specific declaration as required under Rule 3 of the Works Contract Composition Rules, the Tribunal held that substantial benefit cannot be denied for procedural deficiency in delay in opting for the scheme especially considering the facts that no format for making declaration or the authority to whom declaration is to be made was prescribed and that the assessee had disclosed the quantum of tax paid by it in its returns [ABL Infrastructure Pvt Ltd v CCE (2015) 38 STR 1185 (Tri-Mum)]

12. Section 65(105)(zzzza) w.e.f. 1.6.2007 levied service tax on 5 types of works contracts: (a) erection, commissioning and installation of plant, machinery, etc. (b) construction of a new building or civil structure or part thereof or pipeline or conduit; (c) construction of new residential complex or part thereof; (d) completion or finishing services, repair, alteration, renovation, etc. in respect of contracts in (b) and (c) above; (e) turnkey contracts including engineering, procurement and construction or commissioning projects. Rule 2A of the Service Tax (Determination of Value Rules), 2007 w.e.f. 1.6.2007 provided for valuation of such works contracts by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. Further, a Composition Scheme was also notified in which service providers could opt to pay service tax at percentages ranging from 2 to 4% of the gross value of the works contract. The question before the Supreme court was whether service tax can be levied in respect of the 5 types of contracts referred to in section 65(105)(zzzza) prior to 1.6.2007. The Supreme Court held that service tax cannot be levied on such types of indivisible ‘works contracts’ prior to 1.6.2007, the date from which such ‘works contracts’ [section 65(105)(zzzza)] were expressly made liable for service tax. It laid down the following propositions:

1. ‘Works contract’ is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such and has to be taxed separately [para 17].

2. All the services referred to in section 65(105) [definition of ‘taxable service’] are service contracts simpliciter without any other element in them, such as for example, an erection, commissioning and installation contract. This is clear from the very language of Section 65(105) which defines “taxable service” as “any service provided” and section 67, which provides that the value of a taxable service is the gross amount charged by the service provider for such “service” rendered by him. [para 24].

3. In case of composite indivisible ‘works contracts’, such contracts can be taxed by Parliament as well as State legislatures. Parliament can tax only the service element contained in these contracts and States can tax only the transfer of property in goods element contained in these contracts [para 16].

4. The service tax charging section itself must lay down with specificity that the levy of service tax can only be on ‘works contracts’, and the measure of tax can only be on that portion of works contracts which contain a service element which is to be derived from the gross amount charged for the works contract less the value of property in goods transferred in the execution of works contract. This not having been done prior to 1.6.2007, the charge to tax under the five heads in section 65(105)(zzzza) would only be of service contracts simplicitor and not composite works contracts [para 15].

5. Prior to 1.6.2007, there was no charge or machinery to levy and assess service tax on indivisible composite works contracts and hence service tax cannot be levied on indivisible ‘works contracts’ prior to 1.6.2007.

[CCE & C, Kerala v. Larsen & Toubro Ltd. (2015) 39 STR 913 (SC) overruling G.D. Builders v. UoI (2013) 32 STR 673(Del.)].

6. REGISTRATION, PAYMENT OF TAX, ADJUDICATION, APPEALS, etc.

108. Registration

     1. Rule 4(5) of the Service Tax Rules, 1994, providing that the registration applied for shall be ‘deemed’ to have been grant ed 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 mustbe 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.)]

2. The assessee liable to pay service tax as a recipient under GTA service had made an application for grant of centralized registration which was rejected by the Department vide a simple letter. The assessee filed an appeal against the said letter before the CCE(A) which was allowed by CCE(A). The Revenue filed an appeal against the order passed by CCE(A) on the ground that department’s letter was not an appealable order and that a recipient of service is not entitled to the benefit of centralized registration. On appeal the Tribunal observed –

1. The letter communicating non grant of centralized registration was an appealable order;

2. Even a recipient of service is entitled to obtain a centralized registration.

[CCE v Maharashtra State Bureau of text Books Production & Curriculum Research (2015) 39 STR 235 (Tri.-Mumbai)]

109. Payment of tax

     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.)]

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:

1. 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.

2. 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.)]

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.)].

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 –

1. 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;

2. 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.)].

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.)]

6. Where the assessee had on account of its inability to correctly determine the service tax payable by it discharged its service tax liability on an estimated basis and thereafter adjusted the excess service tax paid by it against its tax liability for subsequent months which was denied by the department on the grounds that the adjustments were not in accordance with the prescribed procedures under the Service Tax Rules, the Tribunal held that substantial benefit of cenvat credit cannot be denied merely because the assessee has not followed the prescribed procedure. Further in absence of any mala fide the Tribunal held that imposition of penalty was also not warranted [General Manager, Telecom, BSNL vs. CCE (2015) 38 STR 1182 (Tri-Del.) See also Jubiliant Organosys Ltd. vs. CCE (2015) 38 STR 1230 (Tri-Del.)]

110. Payment of amount collected as service tax

     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.)]

111. Fee for late filing of return

     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:

1. 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

2. 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)]

112. Interest

     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.)]

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)]

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)].

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.)]

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)]

6. The assessee in the present case had paid tax under protest due to coercion. The revenue had issued letter asking the assessee to pay interest on the amount of tax paid by it and was also threatened that on failure to pay the same, recovery proceedings u/s 87 would be initiated. The said letter was challenged in a writ before the High Court wherein the High Court held that an amount can be held to be recoverable from the assessee only if the same has been assessed as payable by the Central Excise Officer under section 72 (Best Judgment Assessment) or under section 73 (in case of short levy/non-levy of tax). In the present case, since no such assessment as aforesaid was carried out, the High Court held that demanding of interest was not permissible within the four corners of the law [ICICI Bank v UOI (2015) 38 STR 907 (Bom.)].

7. Where the appellant paid part of service tax on quarterly basis instead of monthly basis through cenvat credit account, it was held that interest on service tax u/s 75 is not payable since sufficient balance was available in the Cenvat Credit Account on monthly basis. Further, it was also held that the limitation of time bar to issue the SCN for demanding service tax would also be applicable for demanding interest. [Oil and Natural Gas Corporation Ltd v CCE&ST (2015) 38 STR 867 (Tri-Ahmd)].

113. Adjustment of tax

     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)]

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)]

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.)]

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)]

5. On facts the Tribunal held that where advance payment of service tax has been made

1. There is no question of adjustment of excess tax paid since it is not excess payment of tax as per the rules;

2. No further proceeding need to be initiated.

[Dahej Harbour and Infrastructure Ltd. vs. CCE (2011) 24 STR 676 (Tri.-Ahmd.)]

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)]

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.)]

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)]

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)].

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)]

114. Service Tax Audit

     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:

1. 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.

2. 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.)]

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)]

115. Show cause notice

     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.)]

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.)]

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)]

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)]

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.)]

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.)]

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.)].

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)]

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.)].

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)].

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.)].

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.)].

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)]

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)]

14. The Show Cause Notice –

1. discussed the agreements and facts of the assessee’s business;

2. reproduced the definition of ‘business auxiliary services’ before and after 16.5.2005; and

3. 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 –

1. 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

2. 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.)]

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.)]

16. The assessee, a proprietary concern providing commercial training services was taken over by a private company. A show cause notice was issued to the private company after the takeover for a period prior to the takeover but order demanding service tax was made on the assessee. No SCN was issued on the assessee. The Tribunal held that in absence of SCN on the assessee, demand cannot be made on the assessee. [Narayana Coaching Centre v. CCE (2015) 39 STR 33 (Tri.-Bang.)].

116. Demand

     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.)]

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)].

3. The Tribunal laid down certain important propositions regarding demand as under:

1. SCN should be issued in accordance with the provisions of law existing at the time of issue of SCN.

2. 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.

3. 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)]

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)]

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)].

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)].

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.)]

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)

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.)].

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.)]

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)].

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)].

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.)].

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)].

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]

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 the proviso 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.)]

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.)]

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)]

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)]

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)]

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.)]

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)]

23. The Tribunal, following the ratio of the High Court decision in CCE & ST v. Janta Travels Pvt. Ltd. (2009) 13 STR 488 (P&H), set aside the demand holding that there is no ‘service’ rendered when commission received by the appellant is returned by him due to the fact that service could not be fully completed. [Agarwal Motors v. CCE (2015) 38 STR 775 (Tri-Del.)]

24. Different classification of the same activity of the appellant for different periods based on the mode of payment made by the service receiver shows total confusion on the part of the Revenue as to the ‘nature of tax’ and the ‘measure of tax’ and hence the demand was held liable to be set aside by the Tribunal on this ground alone before dealing with ofcourse the specific taxability issues which were also considered [Royal Western India Turf Club Ltd. v. CST (2015) 38 STR 811 (Tri-Mum.)]

117. Amounts collected as service tax

     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.)]

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 –

1. 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;

2. 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)]

118. SCN not specifying the taxable service - Demand not sustainable

     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.)]

2. In the present case, the Revenue had inter alia sought to demand service tax on

1. maintenance of computer software services rendered by the appellant under the category of management, maintenance or repair service and

2. 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 –

1. 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.

2. 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.

3. 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.)]

119. Demand when service tax already paid by client

     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:

1. tax on the entire commission has already been paid by B & C.

2. 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.)]

120. Demand on facts – raised on external evidence sustainable

     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)].

121. Limitation

     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)].

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 alsoCCE 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].

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)].

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)].

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.)].

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.)]

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)].

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.)].

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.)]

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.)]

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)]

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.)]

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.)]

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.)]

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.)]

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.).

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.)].

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.)]

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.)]

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.)].

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.)]

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.)].

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.)].

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)]

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)]

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.)]

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)]

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 –

1. 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;

2. 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.

3. 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)]

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.)].

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)].

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)].

32. On facts the Hon’ble Tribunal observed –

1. the word “suppression” itself denotes a mala fide mind, there can be no ‘suppression’ without an intent to evade payment of Service Tax;
2. 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
3. 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.)]

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.)].

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.)].

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.)].

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.)].

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.)].

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)].

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)].

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.)].

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.)].

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.)].

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.)].

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.)].

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.)].

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.)].

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);

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)]

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.)]

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.)]

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.

2. 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.)]

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.)]

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)]

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)]

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)]

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.)]

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.)]

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)]

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)].

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)]

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.)]

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.)]

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)]

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 313]

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.)]

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)]

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.)]

68. Where during the period of dispute there were existence of conflicting decisions based on which the assessee had entertained a bona fide doubt about the inclusion of reimbursable expenditure in the value of taxable service the Tribunal held that the extended period of limitation was not invocable and penalty u/s. 78 was also not imposable [Clearchem Agencies v CCEx,Indore (2015) 37 STR823 (Tri-Del)]

69. Where the assessee had not paid service tax by relying upon a Tribunal decision in similar case, the Tribunal held that the plea of bona fide belief of the assessee was acceptable and hence there being no suppression the extended period of limitation was not invocable [CCE v. Central Panchayat (2015) 37 STR 1038 (Tri.- Mumbai)]

70. The assessee in the present case had on persuasion of the department deposited an amount on 14.03.2001. It had on 07.06.2001 vide its letter requested the departmental officers to give them a copy of assessment order in respect of the above payment, to which it received no response from the department. Subsequently, when it had filed a refund claim which was rejected on the grounds that it was barred by time limit, the Tribunal held that since no demand was made under law by a demand or order, time bar of s. 11B would not apply and accordingly the amount was refundable alongwith interest [C.K.P.Mandal v. CST (2015) 38 STR 73 (Tri. – Mum.)]

71. Where the appellant’s records had been audited by the department on four occasions and where the DGCEI had itself after examining the documents come to the conclusion that there was no service tax liability payable by the assessee, the Tribunal held that issuance of show cause notice by invoking the extended period of limitation was not permissible [C.J. Shah & Co. (2015) 38 STR 152 (Tri-Ahmd.)]

72. In case of refund arising pursuant to an order of the Tribunal the time limit of one year has to be counted not from the date of payment of tax but from the date of the Tribunal order [CCE vs. Kusalva Finance Ltd. (2015) 38 STR 1163(Tri-Bang.)]

73. In case of refund arising pursuant to an order of the Tribunal the time limit of one year has to be counted not from the date of payment of tax but from the date of the Tribunal order [CCE vs. Kusalva Finance Ltd. (2015) 38 STR 1163(Tri-Bang.)]

74. The appellant in the present case had already been issued 3 Show Cause Notices, demanding service tax on non-inclusion of free materials, supplied by the Service Recipient to the petitioner under the category of works contract services. Subsequently when the Department issued a fourth Show Cause Notice for the same period by invoking extended period of limitation alleging incorrect payment of Service Tax under the category of ‘construction of complex’ services /’commercial or industrial construction’ services, the High Court held that since department already had knowledge about appellants activities in view of the earlier 3 Show Cause Notices issued to them, issuance of 4th Show Cause Notice by invoking extended period of limitation was not permitted [Simplex Infrastructures Ltd. vs. CST (2015) 39 STR 938 (Cal.)]

75. Where the revenue had conducted investigation during the period August 2008 to December 2008 but had issued show cause notice after a lapse of 1¾ years in September 2010 the Tribunal held that the extended period of limitation was not invocable [Shree Alloys Industries Pvt. Ltd. vs. CCE (2015) 39 STR 869 (Tri-Del.)]

122. Limitation and Penalty

     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 –

1. did not disclose the material facts regarding EPC projects to the department;

2. Obtained registration under works contract services and filed Service tax return under compulsion from department; and

3. 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.)].

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)]

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.)].

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)]

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.)]

6. Where there was prevalence of confusion about the scope of levy, the extended period of limitation was not invocable. Further where the issue involved was one relating to classification, imposition of penalties was not warranted [Shreem Coal Carriers (P) Ltd. v. CCE (2015) 37 STR 1067 (Tri.- Mumbai)]

123. Rectification of mistakes

     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 -

1. Where the ST-3 returns have been assessed, it cannot be said that there was error and non-production of records by the assessee;

2. 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.

3. 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).]

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)].

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.)]

124. Remand of Case

     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.)]

2. Commissioner(Appeals) has power to remand the matter to the primary authority [CCE v. Anard Colour Lab (2014) 36 STR 915 (Tri.- Del.)]

125. Penalty

     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.) ]

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.)]

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.)]

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) ]

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.)]

6. On facts, the Hon’ble High Court held:

1. 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

2. 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)]

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-

1. u/s. 73(3) show cause notice itself was not required to be issued; and

2. 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)]

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]

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.)]

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)]

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.)].

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.)]

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:

1. 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.

2. 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.)]

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.)]

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.

2. 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.)]

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.)].

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)].

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.)]

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.)]

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)]

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.)]

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.)]

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);]

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)]

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.)]

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 also Amiras 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)]

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)]

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)]

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.)]

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)].

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)]

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:

1. Once penalty u/s. 78 is imposed penalty u/s 76 is not imposable since they are mutually exclusive.

2. 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)]

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)]

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)]

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.)]

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.)]

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 –

1. 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

2. 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.)]