Service Tax

1. Classification of Service

Advertising Agency

1. The appellant under agreement with foreign TV channels provided services such as collecting advertising materials, information regarding displays, collecting payments from advertisers and remitting to foreign companies. The Revenue sought to tax such activities under Advertising Agency services. The Tribunal relying on decisions in Zee Telefilms Ltd. 2006 (4) STR 349 (T) & Siticable Network P. Ltd. 2006 (4) STR 555 (T) held that the issue raised in present appeal is covered matter and appellant is not liable to tax as advertising agency.MTV Network India Pvt. Ltd. vs. CCE, Mumbai–I 2007 (5) STR 374 (Tri-Mumbai)
    

2. Assessee rendered service as a painter/writer of sign boards – Revenue considered assessee to be falling within category of advertising agency liable to Service Tax – it was found that appellant was not equipped for functioning as an advertising agency and service rendered by it did not partake of or include services, such as, designing, conceptualising, visualising, which are normally rendered by advertising agencies – The appellant could not be held as an advertising agency and service rendered by it was not advertising service so as to attract Service Tax. Extended definition of advertising agency cannot bring entirely alien and unconnected services or a manufacturing activity within scheme of levy of Service Tax. Ajanta Fabrication vs. CCE, (2007) 7 STT 116 (New Delhi – CESTAT)

Banking and other Financial Service

3. The appellants leased ATM machines to customer banks along with electronic connectivity for ‘facility charge’. It was held that since the appellant was a body corporate and service rendered by them was equipment leasing, falling within the definition of ‘banking and other financial service’ u/s. 65(11) of the Act, under which the appellant were registered for the period of dispute, they were liable to pay tax in respect of the services, even though ATM related services were introduced in the net of Service Tax only from 1-5-2006.India Switch Company Pvt. Ltd. vs. CST, (2007) 5 STR 342 (Tri-Chennai)

Business Auxiliary Services

4. The Tribunal held as under:

• Handling dematerialization of securities under well structured and codified agreement and SEBI regulations does not amount to customer care/promotion/marketing of services incidental or auxiliary support services liable to tax under Business Auxiliary services.
   

• Preparation of voter list is part of sovereign activity of State and it is not a business activity with an eye on profit and therefore not liable to tax under Business Auxiliary Service.CCE, Indore vs. Ankit Consultancy Ltd. 2007 (6) STR 101 (Tri-Del.)

Consulting Engineer

5. The assessee a manufacturer of petroleum products paid foreign exchange to consultant based abroad during the periods 1998-99 to 2001-02. The department sought to tax them under Consulting Engineer’s services as recipient of service. The Tribunal held that demand of service tax from recipient of services in the impugned case is sustainable only after 16-8-2002. CCE vs. Kochi Refineries Ltd. 2007 (6) STR 38 (Tri-Bang.)
    

6. After relying on judgments in CCC vs. Air Stream Systems Pvt. Ltd. 2006 (1) STR 133 (Tri) and other cases and CEBC Circular No. 79/9/2004-ST, dated 13-5-2004, it was held that activity of erection, installation and commissioning cannot be brought into the ambit of Consulting Engineer. CCE, Cochin vs. BPL Telecom Pvt. Ltd. 2007 (5) STR 349 (Tri-Bang.)

Consulting Engineer & Transfer of Technology

7. The appellant’s activity of transfer of technology could not be brought under ‘Consulting Engineer’, as it did not involve any consultancy in engineering. The demand accordingly was set aside.Prudent Communications System Pvt. Ltd. vs. CCE, (2007) 5 STR 264 (Tri-Bang.)
    

8. The appellant paid royalty for technical assistance and licence agreement for the period from 2002-04. Relying on the decision rendered in Araco Corporation, Navinon Ltd. and Bajaj Auto Ltd., it was held that such payment was not covered within the category of Consulting Engineer and the demand was set aside.
   Amara Raja Batteries Ltd. vs. CCE, (2007) 5 STR 268 (Tri-Bang.)

Clearing & Forwarding Agents Service

9. The Tribunal after relying on Larger Bench decision in the case of Larsen & Toubro Ltd. 2006 (3) STR 321 held that activities carried out by the appellant such as procuring orders for their principal and booking orders on payment of commission did not come within the ambit of C & F Agents services. Mitsun Steels Pvt. Ltd. vs. CCE, Bangalore–III 2007 (6) STR 115 (Tri-Bang.)
    

10. The Tribunal relying on judgment in Larsen & Toubro Ltd. & Others vs. CCE 2006 (3) STR 321 (Tri-LB) and CBEC Circular No. 59/8/2003-ST, dated 20-6-2003 held that the activities carried out by appellant of canvassing for and marketing of principals product on commission basis during the period of dispute (periods 1997 to 2003) is not covered under category of Clearing and Forwarding Agents service. Protec Laboratories P. Ltd. vs. CCE, Mumbai – I 2007 (5) STR 372 (Tri-Mumbai)

Courier Agency Services

11. The appellant asked for clarification from the department regarding taxability of transshipment of commercial cargo by air under Courier Agency services. The Additional Commissioner clarified that such activity was not liable to service tax. Later, the said clarification was withdrawn by the Commissioner through a letter. In appeal filed against that letter, the Tribunal held as follows:

• Clarification issued by Additional Commissioner is an order determining rights of appellant. Such order was passed on due consideration of representation of appellant.
   

• Letter issued by Commissioner, withdrawing such clarification and asking appellant to discharge service tax is appealable order, as rights and liabilities of appellant were affected and principle of natural justice violated as no notice was issued and no hearing was granted before passing order.TNT India Private Limited vs. CST, Bangalore 2007 (5) STR 410 (Tri-Bang.)

Erection and Commissioning Services

12. The Commissioner (Appeals) held as under: Erection of thermocol on outer surface of pipe line of plant/machinery for reducing heat generated by machinery/equipment popularly known as Thermal Insulation is liable to tax under Erection and Commissioning services and not under Interior Decorators services. In Re : Beardsell Ltd. (6) STR 76 (Commr. Appl)

Photography

13. The Tribunal held as under:

• Printing of photograph is liable to service tax. The contention that it is a sale transaction as the material cost is more than labour cost is not tenable.
   

• Cost of unexposed photography films, unrecorded magnetic tape or other storage device is to be excluded if sold during the course of providing taxable service. However such exclusion is subject to production of invoice / records regarding sale of such goods. Further, it is held that, each and every invoice for output service is not required to mention the value of such goods for claiming exclusion. Shilpa Colour Lab vs. CCE, Clicut 2007 (5) STR 423 (Tri-Bang.)

Tour Operator Services

14. The Tribunal held that, since the tour is not performed in tourist vehicle, no demand is sustainable under Tour Operator’s category.
    
    Usha Breco Ltd. vs. CCE, Meerut 2007 (6) STR 117 (Tri-Bang.)

Works Contract

15. The Revenue demanded service tax on labour component involved in erection, installation and commissioning of air conditioners system. The Tribunal relying on Larsen and Toubro Ltd. (2006 (4) STR (63) Tribunal) held that works contract cannot be vivisected and part of it cannot be subjected to service tax. Blue Star Ltd. vs. CCE, Hyderabad-II 2007 (5) STR 353 (Tri-Bang.)

2. Valuation

Clearing and Forwarding Agent’s Service

16. The appellant, a clearing and forwarding agent, was proceeded against for rent, electricity, telephone charges, handling charges, salary of employees, etc. paid by principals by adding these elements in their commission received. It was held, prima facie that in terms of S. 67, Service Tax was leviable only on commission and not on other elements, and accordingly, waiver of pre-deposit was granted.
    
    Alathur Agencies vs. CCE, (2007) 5 STR 383 (Tri-Bang.)
    
    Popular Cement Traders vs. CCE, (2007) 5 STR 384 (Tri-Bang.)

Out-of-pocket Expenses/Reimbursement

17. Recovery proceedings were initiated against the appellant, a real estate agent, in respect of two matters, viz., ‘out-of-pocket expenses/reimbursement’ received in addition to the commission income and payments yet to be received in foreign currency. It was held that Service Tax was not leviable in both the cases.
    
    Jones Lang Lasalle Property Consultants (I) Pvt. Ltd. vs. CCE, (2007) 5 STR 370 (Tri-Bang.)

3. Cenvat Credit

18. In the present case, assessee took 100% CENVAT credit on capital goods in the first year itself instead of 50%. They have reversed the credit on being pointed out by the department. The Tribunal observed that no misutilization is alleged in this case and therefore set aside the demand of credit, penalty and interest after verification on the ground that there was no revenue loss.
    
    CCE, Vadodara – II vs. Interplex (India) Pvt. Ltd. 2007 (6) STR 53 (Tri-Ahmd)
     

19. The appellant made pre-deposit of demand in cash. The refund of the same was granted by the department through credit in CENVAT credit account. The Tribunal held that credit of refund of pre-deposit in CENVAT credit account is not sufficient and it is required to be refunded in cash as the appellant had surrendered its Central Excise registration and was not working under CENVAT scheme.
    
    Shree Krishna Steel Industries Ltd. vs. CCE, Ahmedabad 2007 (6) STR 59 (Tri-Mum)
     

20. The Tribunal held as under:
    Duty paid on inputs such as oxygen and acetylene gases used for cutting the used liners in the raw mill and cement mill and refurbishing them; i.e., for repairs and maintenance of capital goods is not eligible for CENVAT credit.
    The Larger Bench decision has precedent value than Division Bench decision. A Bench larger than Larger Bench can overrule the decision of the said Larger Bench.
    
    J. K. Cement Works vs. CCE, Jaipur 2007(6) STR 60 (Tri-Del)
     

21. The supplier of inputs liable to pay duty @ 8%, however paid the duty @ 9.2%. The Tribunal held that, when revenue is not objecting to payment of duty @ 9.2% at the time of clearance of goods, CENVAT credit to the appellant, who are recipient of inputs, cannot be restricted to 8%.
    
    Nahar Industrial Enterprises Ltd. vs. CCE, Chandigarh 2007 (5) STR 385 (Tri-Del)
     

22. Criteria of use in manufacture was not accepted to consider a product as ‘input’ eligible for cenvat credit. It was held that the meaning attributable to word ‘input’ does not mean that the entire quantities of input are required to be used. The appellant would be entitled to claim rebate of duty on exports of inputs procured in excess and exported by them after paying duty. Merely because the appellant happens to be a manufacturer, he is not prevented from availing the benefit available to merchant exporter. (Board’s Circular No. 283/118/96-CX, dated 31-12-1996 relied on).
    
    Finolex Cables Ltd. vs. CCE, (2007) 5 STR 261 (Tri-Mumbai)
     

23. An issue before the Bench for consideration was whether ‘Input Service’ in terms of Rule 2(1) of Cenvat Credit Rules, 2004, covers outward transportation up to the place of customer’s premises. It was held that:

• Cenvat Credit covers cenvat credit of duty paid on input materials as well as tax paid on services used in or in relation to manufacture of final product.
   

• Therefore, extending the said credit beyond point of duty paid on removal of final product, would be contrary to the Scheme of Rules.
   

• Two clauses in Rule 2(1) take care to circumscribe input credit by stating that service used in relation to clearance from place of removal and service used for outward transportation up to place of removal are to be treated as input service.
   

• When these two clauses are read together, it becomes clear that transportation service cannot go beyond ‘transport up to place of removal’.
   

• Thus the Revenue was justified in holding that Service Tax credit is available only in respect of inward/outward transportation of final products up to place of removal and that where goods were removed for sale from factory, Service Tax paid on transportation cost from factory to buyer’s premises would not be available as credit.
  
  Gujarat Ambuja Cements Ltd. vs. CCE, (2007) 8 STT 122 (New Delhi – CESTAT)

4. Penalty

24. The appellant, a clearing and forwarding agent rendered taxable services but neither took a registration nor paid any taxes. Subsequently, they obtained registration and filed returns for subsequent period but failed to file returns for earlier period. The appellant contended that they were entitled for the benefit of ‘Extraordinary friendly scheme’ (amnesty scheme) with respect to penalty as they have obtained registration and paid taxes before 31-10-2004. The Tribunal held that scheme was not applicable to appellant as the registration was obtained before the scheme was made operational. Further, scheme was intended for instant registration of service providers for declaration of past liabilities of service tax and interest however, the appellant had not declared past liabilities of service tax and interest and hence the benefit of scheme could not be extended to them.
    
    Pankaj Oil Trading Corporation vs. CCE, Ahmedabad 2007 (6) STR 44 (Tri-Del)
     

25. The Tribunal held that financial crisis is not a reasonable cause for failure to pay tax especially when appellant was aware of its liability to pay tax. However, in view of facts that tax and interest was paid before issuance of SCN personal penalty was reduced.
    
    ETC Networks Ltd. vs. CCE, Mumbai–I 2007 (6) STR 54 (Tri-Mum). Also refer to Triton Communication Pvt. Ltd. vs. CCE, Mumbai–I 2007 (6) STR 58 (Tri-Mum)
     

26. The department imposed penalty after 14 years of the default. The Hon’ble Punjab & Haryana High Court held that power to impose penalty is to be exercised within reasonable period of time, where no time limit is prescribed under the statute for exercise thereof.
    
    Neeldhara Weav. Factory vs. DGFT, New Delhi 2007 (5) STR 404 (P&H)

5. Others

Advance Ruling

27. It was held that an advance ruling cannot be for an ongoing activity as it is allowed only for services proposed to be provided – plea that it was sought immediately on activity being brought in ambit of Service Tax and application thereof raised substantial question of law, rejected.
    
    In Re: Orissa Chrome Export and Mining Company Ltd. (2007) 6 STR 74 (AAR)

Condonation of delay

28. The appeal was filed belatedly by 225 days because of pendency of any similar case before any court. The Tribunal in this case held that a decision to file appeal against an appellate Commissioner’s order is to be taken independently by Commissioner of Service Tax and Chief Commissioner has nothing to do with this job. Application for condonation of delay is bereft of sufficient cause and therefore dismissed.
    
    CCE, Chennai–II vs. Sharda Motors Ind. Ltd. 2007 (6) STR 140 (Tri-Chennai)
     

29. The appellant filed appeal before Commissioner (Appeals) after 18 months of date of receipt of adjudication order. The Commissioner (Appeals) rejected the said appeal on the ground of limitation. Following the ratio of decision in Maithan Ceramic Ltd. 2002 (145) ELT 394 (Tri-LB) it is held that, Tribunal cannot condone delay, which was occurred in filing appeal before lower appellate authorities.
    
    Vijay Baburao Petkar vs. CCE, Ahmedabad 2007 (5) STR 376 (Tri-Mumbai)

Department Clarification – Applicability

30. The Apex Court held that a beneficial circular has to be applied retrospectively, while oppressive circular has to be applied prospectively. CCE vs. Mysore Electricals Inds Ltd., (2006) 204 ELT 517 (SC) followed.
    
    Suchitra Components Ltd. vs. CCE, (2007) 9 STJ 401 (SC)

Limitation

31. The Tribunal held as under:

• Department cannot invoke larger period of limitation (five years), in cases where suppression of facts/misstatement or fraud etc. was not alleged in show cause notice.
   

• Show cause notice to be issued in accordance with the provisions of law prevailing at the time of issuance. Demand cannot be confirmed in accordance with deleted provisions.
   

• Adjudicating authority cannot confirm demand under a category of service, which was not alleged in show cause notice.
  
  Mahakoshal Beverages Pvt. Ltd. vs. CCE, Belgaum 2007 (6) STR 148 (Tri-Bang.)

Power of Commissioner (Appeals)

32. The adjudicating authority demanded Service Tax without considering the Board’s Circular or relevant decisions. The matter was remanded and the said demand was challenged. It was held that the Commissioner (Appeals) is vested with the power to remand the matter while deciding the appeal. He could confirm, modify or annul the decision appealed against and make such remand and the appeal was dismissed.
    
    CCE vs. Amba Steels (2007) 5 STR 275 (Tri-Del.)

Refund — Unjust enrichment

33. Activity of commissioning and installation was made taxable from 13-5-2004, hence amount collected prior to that date was without authority of law to which unjust enrichment was not applicable. Holding the order passed by the Commissioner (Appeals) valid, the Revenue’s appeal was dismissed.
    
    CCE vs. Kirloskar Ebara Pumps Ltd. (2007) 5 STR 280 (Tri-Mum)
     

34. The appellant, manufacturer of cleaning products collected duty @20%, but paid to the Govt. @ 30%. The extra 10% payment was retained in the books of account as ‘receivable from Government’ pending settlement of classification and was shown as ‘current assets’. This was evidenced by Chartered Accountant’s Certificate and books of account whose authenticity was not rebutted by the authorities. The presumption of unjust enrichment under section 12B of CEA was successfully rebutted by the appellant and, therefore, claim for cash refund was allowed.
    
    Saralee Household & Bodycare (I) Pvt. Ltd. vs. CCE, (2007) 5 STR 381 (Tri-Chennai)
     

35. Bar of unjust enrichment applies to claim for refund in cases where original payments of duty were made under protest – Finance Act, 1944 – Section 83; Central Excise Act, 1994 – Section 11B.
    
    Claim for refund of duty (Section 11B of Central Excise Act, 1944). Assessee filed application for refund of excess duty paid. Original authority rejected claim. On appeal, Collector (Appeals) allowed refund claim of assessee. Despite several representation, no refund was given. Writ filed by assessee was also dismissed by High Court. Where department had raised plea of unjust enrichment before original authority but same was not raised before appellate authority, said plea could not again be raised before Supreme Court, only because assessee had subsequently filed an application for refund to be dealt with on administrative side. It was obligatory on part of concerned authorities to comply with order passed by Appellate Authority, and same having not been done, no plea could be raised that it was for assessee to prove that burden of duty had not been passed to customers.
    
    Triveni Chemical Ltd. vs. UOI, (2007) 7 STT 152 (SC)

Restoration of Appeal

36. The appellant made pre-deposit with remarks ‘under protest’ on challan, a month before the order of pre-deposit was made by the Tribunal. Since the endorsement could not be removed, it was held that payment be treated as made without protest for due compliance of S. 35F of the Central Excise Act and the appeal ordered to be restored.
    
    Carborandum Universal Ltd. vs. CCE, (2007) 5 STR 378 (Tri-Chennai)

Reverse charge – Effective date of applicability

37. Appellant was receiver of services from a foreign engineering consultant, who did not have an office in India – Appellant discharged tax for period October 2003 to November 2003 based on own understanding of law – By Notification 36/2004-ST, dated 31-12-2004 Government intended to tax service receiver from non-resident, w.e.f.
    1st January 2005 – As a corollary, no Service Tax was payable by this category prior to 1st January, 2005 – Appellant, thus, filed a refund claim which was rejected – Held, in this case, appellant received services from non-resident service provider before the aforesaid date and, thus, impugned order rejecting refund claim of appellant was not proper and was liable to be set aside.
    
    Refund is due to an assessee, if he pays an amount as tax which he is not liable to pay under misunderstanding of law – Government cannot keep with itself amount that is not due to it.
    Interpretation of statutes – Rules vis-à-vis Act – Rules are subservient to sections and if sections do not provide for discharge of tax by recipient of service from non-resident having no office, then it would be a futile exercise to rely upon rules to collect tax.
    
    Aditya Cement vs. CCE, (2007) 9 STJ 6 (CESTAT – New Delhi)

Show cause notice

38. Mere mention of a wrong section or a wrong Rule would not itself invalidate the exercise of power by the relevant authority, when in fact the charges against the respondent have been clearly spelt out and accordingly mentioned in the show-cause notice. Accordingly, restoring the order of original authority, the order of the Commissioner (Appeals) was set aside.
    
    CCE vs. Lanjekar Sales Corporation, (2007) 5 STR 272 (Tri-Mumbai)

6. Waiver of deposit

Clearing and Forwarding Agent

39. Proceedings initiated by the Department on the basis of gross value disclosed in P & L A/c without considering the plea of the appellant of deduction on account of non-taxable services like fax, photostat, courier service, etc. It was held, that there was no suppression of facts as the appellant filed ST-3 returns and disclosed all facts to the Revenue. Waiver of pre-deposit was granted.
    
    Jai Narayana Shipping Co. vs. CCE, (2007) 5 STR 396 (Tri-Bang.)

Practising Chartered Accountant

40. A ‘Practising Chartered Accountant’ is liable only for the activities covered under “Practising Chartered Accountant’s Services” and billing of electricity for Mescom was not considered an activity associated with Chartered Accountant’s Service. Stay was granted.
    
    Jaded Sidappa & Co. vs. CST, (2007) 5 STR 356 (Tri-Bang.)

Service tax liability on manufacturer

41. The appellant is a manufacturer; excise duty has been confirmed, on the ground that the assessee did not include drawings, design and development charges in the assessable value of goods manufactured. Service Tax is confirmed by holding that the assessee rendered taxable service, but failed to pay Service Tax. However, waiver of pre-deposit was granted as strong prima facie case was made out in the light of fact that the appellant was a manufacturer and not liable for Service Tax.
    
    Jai Hind Industries Ltd. vs. CCE, (2007) 5 STR 274 (Tri-Mumbai)

Stock broker

42. The Revenue added Turnover Tax collected by stock broker from clients to assessable value as brokerage for charging Service Tax – The Tribunal held that applicants were separately showing Turnover Tax in contract note issued to clients as Turnover Tax and this was to be deposited with recognized stock exchange where applicant was registered and was not part of brokerage and, thus, prima facie, applicant had a strong case in its favour and, therefore, pre-deposit of amount of Service Tax and penalties were waived.
    
    JSEL Securities Ltd. vs. CCE, (2007) 9 STJ 31 (CESTAT – New Delhi)