Service Tax

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March 2016

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


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.)].


Where assessee took registration under ‘Construction of residential complex services’ but during investigation proceeding contested the classification (as to be under ‘Works Contract Service’), the Tribunal on facts held that the adjudicating authority had to consider the assessee’s contention [SPL Developers P. Ltd. vs. CST (2015) 39 STR 455 (Tri.-Bang.)].

The assessee in the present case was engaged in affixing aluminium composite panels and carrying out cladding and coil cutting services. It had not paid service tax on the said services since in its view these activities carried out by it were in the nature of completion and finishing services in respect of civil structure (in the present case roads) and hence same would be specifically excluded from the category of ‘commercial or industrial construction’ services (CICS). The Revenue had sought to classify the said services under the category of Business Auxiliary Service (BAS) and had accordingly confirmed the demand under the said category without giving any finding or reasoning for such classification. On appeal, the Hon’ble Tribunal held that where a service is classifiable under more than one taxable service and Revenue assumes that the service provided falls into one taxable service, (namely BAS in the present case), and the assessee asserts that the service falls generically within another taxable service (CICS), it is obligatory on the part of the adjudicating authority to deal with the dispute of classification and record a finding as to why a service falls within a specified taxable service; and also the reasons for coming to such conclusion [Glaztech Alupenal Pvt. Ltd. vs. CCEx&ST (2015) 39 STR 507 (Tri.-Del.)].

Cenvat Credit

Prior to 16-6-2005 in absence of any rule prescribing document for availing of credit, credit of service tax paid under reverse charge in respect of Goods Transport Agency services, can be availed on the basis of TR- 6 challan. [CCE vs. Essel Propack Ltd. (2015) 39 STR 363 (Mum.)].

The appellant a manufacturer had availed cenvat credit of service tax paid on sales commission for procuring orders for supply of pre-heaters to cement manufacturing company. However, it had manufactured some portion of the sales order and balance portion of the sales order was procured by it from outside. It was held that since assessee had acted as a trader it was not entitled to avail portion of the cenvat credit on sales commission paid by it which was attributable to the trading of goods. [F. L. Smidth Pvt. Ltd. vs. CCE (2015) 39 STR 373 (Mad.)].

Where the assessee had availed cenvat credit on input services for discharging duty liability on clearances made from main unit but which services were used by it in other units, the Tribunal held that the same was permissible since unlike in case of inputs there is no such restriction in case of input services that the same would be allowed only when it is received within the factory premises [Expert Industries Pvt. Ltd. vs. CCE, C&ST (2015) 39 STR 465 (Tri.-Bang.)].

Credit of service tax paid on repair and maintenance services availed by a manufacturer for providing free services during warranty period is admissible since provision of free servicing during warranty period is a condition of sale and hence would be covered by the definition of input service as defined in Rule 2(l) of the Cenvat Credit Rules, 2004 being an activity relating to the business

[Leroy Somer India Pvt. Ltd. vs. CCE (2015) 39 STR 466 (Tri.-Del.)].

The assessee in the present case was a manufacturer and also a provider of business auxiliary services. It had in respect of clearances made by it availed full exemption from payment of duty under Notification No. 30/2004-CE in pursuance of which it had reversed the duty in respect of the inputs lying in its factory premises in the form of inputs/ WIP/ Finished goods and had utilised the balance of cenvat credit lying in its account for discharging its service tax liability. Revenue contended that in terms of the said notification credit would get lapsed. On appeal the Tribunal held that since after reversal of credit attributable to inputs balance was still there in its cenvat account, utilisation of the same for discharging its service tax liability was permissible since once the credit goes to the common pool it can be utilised for payment of excise duty or service tax [Sumita Tex Spin Pvt. Ltd. vs. CCE (2015) 39 STR 502 (Tri.-Ahmd.)].

Where the assessee had availed credit of service tax paid on Goods Transportation Agency services paid by the transporter which was sought to be denied on the ground that service tax on the said services was not paid by the service recipient (i.e. the assessee), the Tribunal held that denial of cenvat credit on such grounds was not permissible [Rucha Engineering Pvt. Ltd. vs. CCE (2015) 39 STR 518 (Tri.-Mum.)]

Denial of cenvat credit on input services received prior to obtaining of service tax registration on the ground that obtaining of registration is mandatory for availing cenvat credit is incorrect especially considering the fact that there is no provision to this effect in the Cenvat Credit Rules, 2004. Further credit of service tax paid on rent for cafeteria, maintenance of air-conditioners and gym-instructor services would be admissible being services in the nature of activity relating to business [CST vs. Verizon Data Services India P. Ltd. (2015) 39 STR 522 (Tri.-Chennai)].