CA. A. R. Krishnan & CA. Girish Raman
Rate of service tax on hire purchase
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. vs. CCE (2015) 39 STR 164 (Tri.-Ahmd.) relying on Art Leasing Ltd. vs. CCE (2007) 8 STR 162 (Tri.-Bang.)].
Maintenance and repair services
‘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. vs. CST (2015) 39 STR 170 (Tri.-Mum.)].
Renting of immovable property services
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:
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;
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;
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;
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.
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 vs. CCE&ST (2015) 38 STR 1062 (Tri.-Del.)
Reverse charge mechanism
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. vs. CST (2015) 39 STR 97 (Tri.-Ahmd.)].
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 –
The HO and the overseas branches as distinct entities u/s. 66A(2);
The overseas branches provided services to the HO in India;
The remittances made by the HO to overseas branches are consideration for provision of services.
The Tribunal dismissed the contention and held that:
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 –
Section 66A(1) above speaks of the service provider and service recipient as ‘persons’ which has to mean as different business persons.
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.
Similarly placed branches of the assessee undertaking similar activities in India will not be held so.
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.
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 vs. CST (2015) 39 STR 97 (Tri.-Ahmd.)].
Valuation – Reimbursement
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. vs. CCE (2015) 38 STR 1198 (Tri.-Mum.)].
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 vs. CCE (2015) 39 STR 33 (Tri.-Bang.)].
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.)].
Demands only on assessment
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 vs. UOI (2015) 38 STR 907 (Bom.)].
Demands to be based on SCN – O-I-O cannot differ from SCN
Where the SCN had been issued and O-I-O confirmed the demand under the category of ‘Business Support Services’ but the Commissioner (Appeals) agreed that the demand under ‘Business Support Service’ is not sustainable but however he had in O-I-A confirmed the demand under the category of ‘Business Auxiliary Services’, the Tribunal held that the Commissioner (Appeals) had travelled beyond the scope of SCN and hence the impugned order was bad in law. [Deepak & Co. vs. CCE (2015) 38 STR 1010 (Tri.-Del.)].
Interest on delayed payment of service tax – not payable if there is balance in cenvat credit
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. vs. CCE&ST (2015) 38 STR 867 (Tri.-Ahmd.)].
Rebate/Refund on Exports – time limit to be calculated from receipt of money
A service transaction in case of export of service would be complete when services have been provided to offshore client and payment for such services is recovered in convertible foreign exchange. Accordingly, the relevant date for filing of refund claim would be from the date on which payment is received in convertible foreign exchange. [Alan Infrastructures Pvt. Ltd. vs. CCE (2015) 38 STR 1087 (Tri.-Del.)].
Where the Tribunal had rejected the stay application filed by the department against the order of CCE(A) granting refund to the assessee, the High Court held that withholding of refund on the grounds that the appeal was yet to be decided on merits by the Tribunal was held to be incorrect [Madura Coats Pvt. Ltd. vs. CCE (2015) 39 STR 188 (Kar.)].
Where the assessee filed refund claim within the time limit but before a wrong authority and later filed the same with the correct authority after the period of limitation, the Tribunal held that the date of filing refund claim before the wrong authority could be taken as the date of filing for the purpose of determining limitation. Accordingly it was held that the refund claim was not barred by limitation [CCE&ST vs. Gimpex Ltd. (2015) 39 STR 143 (Tri.-Bang).].
Refund – Time Limit
In the present case the Tribunal held that –
With regard to the refund of unutilised cenvat credit under Notification No. 5/2006-CE (NT) dated an EOU has an option to file the refund claim either on a quarterly basis or on a monthly basis
Further since the said notification issued under Rule 5 of the Cenvat Credit Rules, 2004 does not link the refund procedure prescribed therein to provisions of section 11B of the CEA, 1944 nor does it specify any time limit within which the refund claims have to be filed, hence in such circumstances provisions of time limit specified
u/s. 11B would not be applicable to such refund claims.
[Quality BPO Services Pvt. Ltd. vs. CST (2015) 39 STR 230 (Tri.-Ahmd.)].
Revision u/s. 84 not permissible when matter is in appeal
The appellant claimed refund of service tax paid on input services used for exports which was partly allowed and partly rejected by the adjudicating authority. Against that part of the order of the adjudication authority rejecting the refund, the appellant preferred an appeal to the Commissioner (Appeals). During the pendency of the appeal the Commissioner initiated revision proceedings u/s. 84 against that part of the adjudicating authority’s order that allowed the refund and disallowed the refund. On appeal, the Tribunal held relying on CCE vs. Shiva Builders (2011) 22 STR 513 (P&H) that the during the pendency of the appeal before the Commissioner (Appeals) the power of revision cannot be exercised by the Commissioner even if it is in respect of any other issue [Nuware Systems Pvt. Ltd. vs. CST (2015) 134 (Tri-Bang.)].
Centralised Registration – (i) available as recipient of service, and also (ii) denial by letter is appealable
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 centralised registration. On appeal the Tribunal observed –
The letter communicating non-grant of centralised registration was an appealable order;
Even a recipient of service is entitled to obtain a centralised registration.
[CCE vs. Maharashtra State Bureau of Text Books Production & Curriculum Research (2015) 39 STR 235 (Tri.-Mumbai)].
Appeal – Commissioner (Appeals) to consider new grounds/facts and evidence
The powers of the Commissioner (Appeals) are co-extensive with the powers of adjudicating authority in view of the fact that the Commissioner (Appeals) has the power of enhancement of the demand and penalties and hence he has to consider new grounds/facts and evidence before passing his order [Ashirwad Sales Corporation vs. CCE (2015) 38 STR 1155 (Tri.-Mumbai)].
Pre-deposit compulsory post 6/8/2014
Post 6/8/2014 Tribunal cannot entertain an appeal unless the appellant has made a pre-deposit of 7.5 %/10% as the case may be [Netambit Infosource & E Services Pvt . Ltd. (2015) 38 STR 1177 (Tri.-Del.)].
In a writ challenging the constitutionality of the provisions of Section 35F which requires an assessee to make a pre-deposit of 7.5% in order to file an appeal before the CCE(A)/Tribunal and 10% in case of a second appeal before the Tribunal the High Court observed as follows:
The requirement of pre-deposit of 7.5% or 10% cannot be held as arbitrary or violative of Article 14 of the Constitution and hence the same was valid. However, the amended provision has not ousted the powers of High Court under Article 226 of the Constitution to dispense with the requirement of pre-deposit in appropriate cases;
As regards the assessee’s argument that since the lis in its case had commenced in 2013 by way of issuance of SCN i.e. much prior to the amendment of section 35F the High Court held that in view of the express language of section 35F of the Act pre-deposit of 7.5%/ 10% would be necessary in every appeal which have been filed after 6/8/2014. the only category to which the provisions will not apply would be those appeals which are pending before the appellate authority prior to the commencement of Finance (No. 2) Act, 2014.
[Ganesh Yadav vs. UOI (2015) 39 STR 177 (All.)]
No pre-deposit when the matter is remanded
The Tribunal while remanding the matter for fresh adjudication cannot ask for pre-deposit. [Suvidha Signs Studios Pvt. Ltd. vs. CCE (2015) 39 STR 196 (Del.)]
Cenvat credit cannot be denied on the ground that the invoices raised by the service provider did not give full details viz. description of the services, especially when there is no dispute of the fact of payment of service tax by the service provider and the fact of availment of service by the service recipient. [U. G. Sugar & Industries Ltd. vs. CCE (2015) 38 STR 852
Cenvat credit on ‘Outdoor catering services’ received before 1/4/2011 is admissible even if payment is made after April 2011 though such services were excluded from the definition of ‘input services’ w.e.f. 1/4/2011. [Hindustan Coca Cola Beverages Pvt. Ltd. vs. CCE&ST (2015) 38 STR 855 (Tri.-Del.)].
Cenvat credit on “business auxiliary services” received by a manufacturer of excisable goods prior to 10/9/2004 is not admissible in terms of Rule 3(1) of the Cenvat Credit Rules, 2004 even though the invoices were raised and payments were released post 10.09.2004 [Elecon Engineering Co. Ltd. vs. CCE (2015) 38 STR 874 (Tri.-Ahmd.)].
Where the assessee had availed cenvat credit on steel, racks, bolts etc procured by it for construction of mobile towers which were used by the assessee for providing “Passive Telecom Infrastructure” to other telecom companies (i.e. allowing the other telecom companies to put up their antenna on its towers), the Tribunal held that the said items would qualify as inputs under Rule 2(k)(ii) of the Cenvat Credit Rules and accordingly, the cenvat credit of duty paid thereon would be admissible to the assessee [Reliance Infratel Ltd. vs. CCE (2015) 38 STR 984 (Tri.-Mum.)].
Cenvat credit of service tax paid on ‘rent’, ‘stock insurance’ and ‘commission paid for sale of goods post clearance from the factory’ is admissible [Dhampur Sugar Mills Ltd. vs. CCE (2015) 38 STR 1004 (Tri.-Del.)].
Payment of amount specified u/s. 73A [service tax collected but not leviable] has to be made in cash and not through cenvat credit since Rule 3(4) of the cenvat credit rules does not provide for utilisation of cenvat credit for such payments [Jaipur Cricket Pvt. Ltd. vs. CST (2015) 38 STR 1193 (Tri.-Mumbai)].
Where the assessee has paid tax on exempted services it cannot be said that the assessee has provided any exempted services and hence restriction on availment of credit under Rule 6(2) was not applicable in its case. Assessee cannot be forced to avail the benefit of exemption notification [Deloitte Haskins & Sells vs. CCE (2015) 38 STR 1220 (Tri.-Mumbai)].
(i) Credit of service tax paid on rent-a-cab services availed prior to 1.4.2011 is admissible in view of the Board Circular No. 943/4/2011-CX dated 29/4/2011.
(ii) Credit of service tax paid on Air-travel agent’s services is admissible in view of the Tribunal decision in case of Goodluck Steel Tubes Ltd. (2015) 38 STR 1232 (Tri.-Mumbai).
[Innovasynth Technologies (I) Ltd. vs. CCE (2015) 38 STR 1232 (Tri.-Mumbai)].
Cenvat credit on Housekeeping and gardening services to maintain their factory premises in an eco-friendly manner is admissible. [CCE&ST vs. Rane Trw Steering Systems Ltd. (2015) 39 STR 13 (Mad.)]
(i) Cenvat credit on Manpower Recruitment Service cannot be denied merely because the name of the service was not mentioned since the category “Manpower recruitment agency” is mentioned in the invoice.
(ii) cenvat credit on outdoor catering service [authorised presumably, for supply of food to employees] for the period 1/4/2011 – 31/3/2012 was held as not admissible since it was excluded from the definition of input service w.e.f. 1/4/2011.
[Bajaj Motors Ltd. vs. CCE (2015) 39 STR 85 (Tri.-Del.)].
Where the appellant paid service tax on full value of transportation charges instead of 25% of the value of transportation charges as per Notification No.13/2008, the Tribunal held that cenvat credit of duty paid on full value would be allowed as per Rule 3 of Cenvat credit Rules and the contention of the department that cenvat credit on only 25% of the value should be allowed is not sustainable. [H. One India Pvt. Ltd. vs. CCE,C&ST (2015) 39 STR 87 (Tri.-Del.)].
Cenvat Credit on maintenance of photocopying machine used in the office was admissible being activity related to business [Nirma Ltd. vs. CCE (2015) 39 STR 145 (Tri.-Ahmd.)].
Cenvat credit on following services is admissible–
Renting of furniture for use by new recruits
Housekeeping services used for up-keep of the premises
Annual maintenance contract for maintenance of UPSs and computer networks
Food coupons for provision food to office staff during office hours
[C-Cubed Solutions Pvt. Ltd. vs. CCE, C&ST (2015) 38 STR 853 (Tri.-Bang.)].
Where the assessee had already been issued a show cause notice for non-payment of service tax under the category of Goods Transport Agency Services, Maintenance & Repair Services and Business Auxiliary Services, the rejection of declaration filed by him under the VCES, 2013, in respect of the same services for the subsequent period was held to be correct in view of the second proviso to section 106(1) of the said scheme which barred the assessee from making such declaration [Durgapur Diesel Sales & Services vs. Supdt. CCE (2015) 38 STR 1129(Cal.)]