Service Tax

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May 2016

CA. A. R. Krishnan & CA. Girish Raman

Business auxiliary services

• 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)]

• 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.)]

Pandal and Shamiana Contractors

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.)].

Transmission and Distribution of Electricity

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)]

Exports

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.)

Limitation

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.)]

Penalty

•Where the assessee had paid its service tax liability alongwith interest on being pointed out by the department but the department had issued a SCN for imposition of penalty almost 1½ years after the payment of tax the Tribunal held that in view of the provisions of section 73(3) no SCN ought to have been issued for imposition of penalty and accordingly set aside the SCN [S.K. Electro Engineers vs. CCE (2015) 39 STR 686 (Tri-Mumbai)]

• Where the assessee had correctly disclosed the value of taxable services rendered by it in its service tax returns but had not paid the service tax thereon due to financial crunch which liability was subsequently paid by it alongwith interest before issuance of SCN, the Tribunal held that there was no intention to evade payment of service tax and hence the assessee would be eligible for benefit of non-issuance of SCN for imposition of penalty u/s. 73(3) of the Act [Fortune Network Pvt. Ltd. vs. CST (2015) 39 STR 689 (Tri-Ahmd.)]

• Where the appellant collected service tax on his services in March 2008 though it was not required to be collected (since his services was not taxable) but paid the same on 15.11.2008 u/s. 73A, the Court held that -
(i) The appellant was not liable to pay service tax under the provisions of section 68 since he was not providing taxable service and hence no penalty u/s. 76 and section 78 would be imposable;
(ii) Futher, since the assessee collected tax by mistake on account of the new provisions and was not acquainted with the provisions of the statute there was no willful suppression of facts and penalty u/s 78 cannot be imposed.
[Ajay Kumar Gupta v. CESTAT (2015) 39 S.T.R 736 (P&H)].

• Where the assessee had paid service tax alongwith interest before the issuance of the show cause notice and where –
(i) there was no specific allegation in the SCN or in the order of the Commr. (Appeals) regarding suppression; and
(ii) the order of the original authority also had refrained from imposing penalty u/s.78 by invoking the provisions of section 80 (reasonable cause),
the Tribunal held that in view of Section 73(3) imposition of penalty u/s.78 was not warranted. [ITC Infotech India Ltd. vs. CST (2015) 39 STR 818 (Tri-Bang.) Where the assessee had discharged the entire service tax liability alongwith interest before the issuance of SCN and where no evidence was brought on record to prove that the assessee has an intention to evade payment of service tax the Tribunal held that by virtue of Section 73(3) of the Act issuance of SCN for imposing penalty was not warranted and also that the penalty could be condoned u/s.80 (reasonable cause) [Veriton Software Solutions Pvt. Ltd. vs. CST (2015) 39 STR 845 (Tri-Bang.)]

Refund

• Market support services for assessee\'s foreign principal – the recipient of services located outside India and consideration received in convertible foreign exchange –services considered as exports and accordingly cenvat credit paid on input services eligible for refund. [CST vs. Pulcra Chemicals (India) Pvt. Ltd.(2015) 39 STR 700 (Tri-Mumbai)]

• Refund of service tax on account of export – unjust enrichment not applicable [CST vs. Pulcra Chemicals (India) Pvt. Ltd.(2015) 39 STR 700 (Tri-Mumbai)]

• The assessee claimed refund of tax paid on financial services rendered to an overseas entity based on the fact that place of provision of service is outside India. The department rejected the same on the ground of time-bar (1 year) u/s 11B. The High Court, however, allowed the refund claim holding that -

(i) The amount was paid under mistake of fact and not mistake of law and hence has no colour of tax to attract levy of service tax.
(ii) For attracting section 11B the levy should have the colour of validity when it was paid and only consequent upon interpretation of law or adjudication, the levy is liable to be ordered as refund. When payment was effected, if it has no colour of legality, Section 11B is not attracted.
(iii) In the present case the levy is not in accordance with the provisions of the Service Tax and therefore, such payment cannot be taken as a payment made relatable to Section 11B of the Central Excise Act.
Hence refund is not barred by time limit u/s.11B [Geojit BNP Paribas Financial Services Ltd. v. C.C.E, CUS. & S.T., Kochi (2015) 39 S.T.R 706 (Ker.)]

Mode of Service of Order

Prior to 10.5.2013 service of orders was required to be mandatorily made through Registered Post with acknowledgment due. Thus, where the revenue had served the order on the assessee through ‘speed post\' and the assessee had disputed the date of receipt of the order at the time of filing appeal, the High Court held that service of order through speed post not being a recognized / approved mode of service of order the same cannot be treated as a valid service for reckoning the period of limitation and since the order was not served in the prescribed manner the date of receipt of the order as claimed by the assessee was to be considered for reckoning the limitation period for filing appeal [Primier Garment Processing vs. CESTAT (2015) 39 STR 812(Mad)].

Recovery of dues

Where the adjudication of SCN issued to the assessee is pending, the department cannot freeze the bank account of the assessee by invoking the recovery powers u/s 87(b) since section 87(b) would apply only after a proceeding under section 73 is concluded by an order determining the amount due and payable by the assessee. However, the High Court observed that during the pendency of adjudication of SCN the department can invoke the provisions of section 73C relating to provisional attachment of properties in order to protect the interest of the revenue [GSP Infratech Development Ltd. v. UoI (2015) 39 STR 945 (Kar.)]

Exemption in respect of services provided to SEZ Unit

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 –

(i) 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. (ii) 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.)]

Cenvat Credit

• There is no bar for claiming refund of unutilized credit pertaining to the previous quarters under Notification No. 5/2006-CE (NT) [Innor Solutions Pvt. Ltd. vs. CST (2015) 39 STR 698 (Tri-Del.)]

• Where the transportation cost had been added in the value of assessable goods sold on FOR basis the Tribunal relying on Board Circular No. 97/8/2007-ST dated 23.8.2007 held that cenvat credit availed on the said transportation services was admissible [Time Technoplast Ltd. vs. CCE (2015) 39 STR 690 (Tri-Del.)]

• Cenvat credit of service tax paid on manpower recruitment agency services, consultancy services availed for ISO certification and security services is allowable [Mainstay Teleservices Pvt. Ltd. vs. CST(2015) 39 STR 693 (Tri-Bang.)].

• On facts – following services allowed – Repairs and maintenance(including AMCs) of computer systems & software; Management or business consultancy services; Rent paid for the premises; manpower supply agencies services; company secretaries services; Business support and business auxiliary services and security agency services [CST vs. Yodlee Infotech (P) Ltd. (2015) 39 STR 695 (Tri-Bang.)]

• Cenvat credit of duty paid on cement and steel bought by the assessee and supplied to a contractor for construction of new jetties for the assessee (a port service provider) would be admissible even though construction services (of new jetties) provided by the contractor was an exempted service. [Mundra Ports & Special Economic Zone Ltd. v. C.C.E & CUS. (2015) 39 S.T.R 726 (Guj.)]

• The assessee had made an application requesting to be given permission for having only one registered premises since it was discharging its service tax liability in respect of all the services provided by it, including the services provided by it from its branch offices, through the said registered office. Subsequently it had got its registration centralised in 2013. During the intervening period it had received input services at its branch office, credit of which was sought to be denied by the Revenue on the ground that the said branch offices were not registered with the department. On appeal, the Tribunal, considering the facts of the case, held that since the receipt of the input services at the branch offices and its utilization for providing output services was not disputed denial of cenvat credit on account of non-registration of the branch offices was not warranted. [Ketan Motors Ltd. v. CCE (2015) 39 STR 858 (Tri.-Mum.)]

• Cenvat credit on telephone bills in the name of the Director but bearing address of the office premises cannot be disallowed. [Ketan Motors Ltd. v. CCE (2015) 39 STR 858 (Tri.-Mum.)]

(i) Where the assessee, a commercial coaching and tranining centre, organized celebrations for encouraging successful students who have completed their courses it was held that services of catering, photography and tents used for organizising the celebrations after the courses were over could not be considered as ‘used for providing output service\' and hence cenvat credit of service tax paid on services of catering, photography and tents is not admissible.
(ii) Cenvat credit on repair of motor vehicles and travelling expenses on business tours was held to be not admissible in absence of any nexus with the provision of commercial training and coaching services.
[Bansal Classes v. CCE & ST (2015) 39 STR 967 (Raj.)]