Service Tax

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February 2016

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

Business Auxiliary Services

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

Reimbursement of sale promotion expenses received by an authorised service 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 vs. Premier Motor Garage (2015) 39 STR 490 (Tri.-Del.)].

Erection, Commissioning and Installation service

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. vs. CCE (2015) 39 STR 454 (Tri.-Ahmd.)].

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 were required to be borne by the contractor. In writ application before the High Court, the High Court held that –
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 for the service tax paid by him. It is the liability of the service provider to provide for collection of the same in the contract.

The argument that the benefit of Section 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.

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

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

Management, Maintenance or Repairs of Road

Services rendered in relation to widening of roads and maintenance thereof during the periods 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.)].

Renting of Immovable Property

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

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

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. vs. CCE (2015) 39 STR 443 (Tri.-Del.)].

Sale of space-ads in Almanac

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 vs. Media World Enterprises (2015) 39 STR 258 (Tri.-Mum.)].

Valuation

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. vs. CST (2013) 32 STR 49 (Tri.-LB) [Millennium Constructions Pvt. Ltd. vs. CST (2015) 39 STR 477 (Tri.-Del.) see also Capital Builders vs. CST (2015) 39 STR 478(Tri.-Del.)].

Demand

The explanation (c) to section 67(4) providing for liability to pay service tax on crediting/debiting any amount in the books of account by service provider in case of transactions with Associated Enterprises would be effective only from 10/5/2008 and not retrospective prior to that date [Sify Technologies Ltd vs. CCE (2015) 39 STR 261 (Tri.-Chennai)].

Revision of refund order – SCN necessary

Where the Commissioner had, u/s. 84 of the Act revised the order of granting refund passed by the adjudicating authority without issuing any show cause notice to the assessee, the Tribunal held that the same was not permissible since u/s. 73, issuing of SCN even for recovery of erroneously granted refund was necessary [Balaji Edibles Pvt. Ltd. vs. CCE&ST (2015) 39 STR 270 (Tri.-Del.)].

Condonation of delay

Delay of 26 days in filing appeal before CCE(A) held as condonable since it was due to bona fide reason viz., sickness of the appellant due to which he could not instruct the counsel of the firm for filing of appeal [Chandra Associates vs. CCE &C (A) (2015) 39 STR 353 (All.)

In this case the High Court held that delay was not condonable since the appeal was filed beyond the condonable period of limitation [Sturdy Industries Ltd. vs. Union of India (2015) 39 STR 422 (P&H)]

Where the Tribunal had rejected the condonation of a delay in filing appeal which was delayed on account of the reason that the consultant of the appellant was suffering from certain medical ailments, for which he had produced medical records, the High Court held that in the interest of justice, delay was condonable by the Tribunal [Maharaja Tourism Dev. P. Ltd. vs. Secy., Ministry of Finance (2015) 39 STR 384 (Mad.)]

Rectification of mistake

The Tribunal has no power to review its interlocutory order including an order of pre-deposit. Under section 35C(2), it can review only a final order passed by it u/s. 35C(1) [Avtar & Company vs. CCE 92015) 39 STR 245 (Tri.Del.)].

Remand

Section 85(4) of the Finance Act, 1994 is wider as compared to Section 35A(3) of the Excise Act, 1944 and would include the power to remand. Accordingly under service tax law, the CCE(A) has power to remand. [CCE vs. Goel International Pvt. Ltd. (2015) 39 STR 330 (Tri.-Del.)].

Refund of taxes consumed in SEZ

Where the assessee had claimed refund of service tax paid by it on input services which were wholly consumed within the SEZ, under Notification No. 9/2009 as amended by Notification No. 15/2009 (which specifically stated that refund would not be granted where services are wholly consumed within SEZ), it was held that refund of same was still permissible in view of exemption benefit granted under section 26(1)(e) of SEZ Act, 2005 read with overriding provisions contained in section 51 of the said act [Eon Kharadi Infrastructure Pvt. Ltd. vs. CCE (2015) 39 STR 267 (Tri.-Mum.)].

Rebate

In this case the Tribunal held that while considering the rebate claim in respect of tax on output services only thing that needs to be verified is whether the assessee has paid the tax or not. Denial of such rebate claim on the ground that input service does not have any nexus with the output service is not permissible [Textron India Pvt. Ltd. vs. CST (2015) 39 STR 468 (Tri.-Bang.)].

CENVAT Credit

(i) CENVAT Credit in respect of unregistered branches allowed.

(ii) Availment of credit by company’s head office at Bangalore in respect of branches credit allowed even without centralised registration since there is substantive adherence of law as service tax paid based on centralised registration.

(iii) Credit of service tax paid on renting of premises from where services are provided would be admissible since without the premises the services cannot be rendered.

[Nuance Transcription Services India Pvt. Ltd. vs. CST (2015) 39 STR 241 (Tri.-Bang.)].

Excess payment of service tax in a month can be adjusted against service tax liability of other months [General Manager BSNL vs. CCE (2015) 39 STR 278 (Tri.-Del.)].

(i) Credit of service tax paid on outdoor catering service availed by the manufacturer for its employees to the extent the cost of which is borne by him would be admissible.

(ii) Credit of service tax paid on guest house maintenance service would not be admissible since the same does not have a nexus with the manufacturing activities.

[CCE vs. Mahindra & Mahindra Ltd. (2015) 39 STR 298 (Tri.-Mum.)].

(i) Credit of service tax paid on courier services availed for dispatch of cheques to vendors/suppliers, invoices and purchase orders and other business related documents is admissible.

(ii) Credit of service tax paid on air ticketing services availed for travelling abroad in relation to procurement of inputs/ sale of final product is admissible.

(iii) Services rendered by a foreign language instructor to translate technical know-how and documents given in foreign language is an input service eligible for CENVAT credit.

(iv) Outward transportation services availed for delivering goods up to the buyers premises would be an input service eligible for CENVAT credit.

[CCE vs. Mindarika Pvt. Ltd. (2015) 39 STR 309 (Tri.-Del.)].

Credit of service tax paid on pandal or shamiana services availed for safeguarding of machines lying in open ground during installation of machinery is admissible [Dalmia Chini Mills vs. CCE (2015) 39 STR 310 (Tri.-Del.)].

Credit of service tax paid on car-insurance services on the cars which were used by the Directors of the company as well as for official purposes is admissible. [Technical Associates Ltd. vs. CCE (2015) 39 STR 312 (Tri.-Del.)].

Credit of service tax paid on input services like banking and other financial services, clearing and forwarding services, courier services, labour contract service, transportation service, telephone, repair and maintenance, insurance and professional consultancy service is admissible [CCE vs. J. K. Fabrics (Bangalore) Pvt. Ltd. (2015) 39 STR 315 (Tri.-Bang.)]

Services availed at residential colony of employees and for club and welfare activity of staff does not have any nexus with business of manufacturing of final product and hence CENVAT credit availed thereon is inadmissible. [Mahindra & Mahindra Ltd. vs. CCE (2015) 39 STR 316 (Tri.-Mum.)]

Where the appellant had maintained separate accounts for inputs in respect of excisable and exempted final products but in respect of input services reversed proportionate CENVAT credit taken on common input services, the Tribunal held that reversal of credit @ 5%, 8%, 1% of value of exempted final products is not warranted. [V.S.T. Tillers and Tractors Ltd. vs. CCE (2015) 39 STR 321 (Tri.-Bang.)]

CENVAT credit cannot be denied to the service recipient if the service provider has not paid service tax [Memories Photography Studio vs. CCE&ST, Vadodara (2015) 39 S.T.R. 331 (Tri.-Ahmd.)]

(i) Credit of service tax paid on construction services availed for construction (setting up) of factory building would be covered within the inclusive part of definition of input service and hence same is admissible.

(ii) Credit of service tax on rent-a-cab services availed for ferrying employees from residence to factory and for official purpose is admissible.

[CCE vs. Rane NKS Steering System Ltd. (2015) 39 STR 339 (Tri.-Del.) see also CCE vs. KML Molding (2015) 39 STR 348 (Tri.-Del.) – for admissibility of CENVAT credit availed of shed in factory].

Where the credit of service tax paid on insurance services was availed in the month of March, 2011 pertaining for the period April, 2011 – Sept., 2011 which was sought to be denied by the revenue on the ground that same was not permissible post 1/4/2011, the Tribunal held that since the consideration for same was also paid in March, 2011, as per POT Rules the services shall be deemed to have been provided in the month of March and hence CENVAT credit availed thereon was admissible. [CCE vs. Hindustan Petroleum Corp. Ltd. (2015) STR 350( Tri.-Bang.)]

CENVAT Credit allowed on debit notes

Where the debit notes raised by input service provider mentions all the information required to be mentioned in the invoice u/s. 4A of Service Tax Rules, 1994, the Tribunal held that availment of credit on such debit notes was permissible. [Jaguar & Co. Ltd vs. CST (2015) 39 STR 273 (Tri.-Del.)].