Service Tax

1. CLASSIFICATION OF SERVICE

ADVERTISING AGENCY

1. In this case held that

Advertising agency is agent of producer of goods or services, who is involved in planning and designing of advertisement. The definition of Advertising agency cannot be read literally and out of context so that every person some way connected with advertising agency will be advertising agency. Advertiser being a person wanting to advertise their goods/services alone can be treated as client.

The appellant, agent of foreign broadcaster soliciting advertisement for foreign broadcaster and getting paid by them and having no contract with advertiser cannot be termed as advertising agency providing service to advertisers/clients.

Agents of foreign satellite channels selling time slots, recovering service charges therefore and remitting same to their principals are liable to tax as broadcasting agency and they cannot claim themselves as to be liable as advertising agency since the broadcasting service was new service, which could not be covered by old service advertising agency.

Flashing of advertisement in electronic media or publishing them in print media is not liable to service tax as advertising agency.

Zee Telefilms Ltd. vs. CCE (A), Mumbai IV, 2006 (4) STR 289 (Tri-Mumbai)

Consulting Engineer

2. The after relying on judgment in the case of Daelim Industrial Co. Ltd. 2004 (170) ELT A181 (SC) held that contract for construction of solvent dewaxing/deoiling unit and hydro-treater amine treating unit is composite contract and not liable to tax under consulting engineers service.

CCEC, Vadodara vs. Larsen & Toubro Ltd. 2006 (4) STR 63 (Tri-Mumbai)

3. In this case appellant under MOU with ER & DCI jointly imparted training and other course material to participants and provided Faculties for training and shared the fees received from students. The held that service of providing training & coaching and sharing of fees was not covered under the category of consulting engineer as for that service provider should render services, which are in advisory capacity as an expert.
   
   IVL India Pvt. Ltd. vs. CCE, Thiruvananthapuram, 2006 (4) STR 151 (Tri-Bang.)
    

4. The expression ‘engineering firm’ used in the definition of consulting engineer in S. 65(31) of the Finance Act, 1994 whether includes ‘company’ was the issue under examination. Following the principles of interpretation of statute, it was held that when two views are possible and one leads to absurdity, the other possible view is to be accepted. The principle of beneficial interpretation in favour of the assessee does not come into play on face of absurdity. Providing taxable service being taxable event, the Legislature never intended to make distinction between ‘firm’ and ‘company’ for the purpose of definition of consulting engineer. ‘Person’ as defined in the General Clauses Act includes an individual, a company or an association of persons. A ‘person’ includes a juristic person. A company is a juristic person and is included in person or concern without qualification. The Circulars of the Ministry dated July 12, 1997 and that of July 3, 1997 were held as not contrary or inconsistent with the scheme and context of Service Tax.
   
   M. N. Dastur & Co. Ltd. v. UOI, (2006) 4 STR 3 (Cal.)
    

5. The in this case held that work of erection and commissioning is not coming within the ambit of consulting engineer service as held in Boards Circular No. 79/9/04-ST dated 13-5-2004.
   
   CCE, Belgaum vs. Karnataka Conveyors & Systems (P) Ltd. 2006 (4) STR 190 (Tri-Bang)
    

6. The appellant an agent of foreign company awarded a contract for design of bridge which included preparation of detailed designs and drawings for execution for various items of work involved, for temporary structure and arrangement required for execution of work and preparation of methodology of construction. The held that such services are liable to service tax under Consulting Engineer’s Service. It is further held that since the appellant is sub-consultant the liability to pay service tax is on main consultant and not on appellant.
   
   BBR (India) Limited vs. CCE, Bangalore-III, 2006 (4) STR 269 (Tri-Bang.)
    

7. The in this case held that the appellant being society, working on no profit basis under Ministry of Power and registered under Society Registration Act is not a firm and is not liable to tax under Consulting Engineers Service. It is further held that technical testing of instruments is not covered under Consulting Engineers Service.
   
   Central Power Research Institute vs. CCE, Bangalore-III, 2006 (3) STR 637 (Tri-Bang.)
    

8. In this case, the appellant had undertaken contract for design, development and supply of turbo power pack and spares and billing was done part by part at various stages as per terms and conditions. The appellant also paid excise duty on goods cleared. The department taxed the part of the said contract as service under Consulting Engineer’s Service. The held that in view of decided case laws the works contract cannot be vivisected to levy service tax on different activities.
   
   Turbotech Precision Engg. P. Ltd. vs. CCE, Bangalore-III, 2006 (3) STR 765 (Tri-Bang.)
    

9. In this case, Southern Railways awarded consultancy contract to IRCON and in turn IRCON awarded contract to Bureau BBR Ltd. of Switzerland. The Swiss company, under an agreement with its Indian agent BBR (India) Limited, got the work done for the client of IRCON, the Southern Railways. IRCON had paid fees to the Swiss company. Para 4.4 of the Trade Notice 53-C.E. (Service Tax)/97 of 4-7-1997 provided that in order to get covered by Service Tax, the services should be provided directly to the client and not in the capacity of sub-consultant or associate consultants. Since Southern Railway was not direct client of the appellant-agent of the Swiss company, only IRCON was held as prime consultant and the appellant having provided service to IRCON was allowed relief.
   
   BBR (India) Limited vs. CCE, Bangalore, III 2006(4) STR 269 (Tri. Bang.)

Clearing & Forwarding Service: Coverage

10. The appellant was engaged in providing clearing and forwarding service and was simultaneously providing the service of loading and unloading of cement bags on Railway platforms under a separate contract. For this, transportation charges were collected from the party, but no Service Tax was recovered or paid on the same under the contention that the said activity was covered under a separate category ‘Cargo Handing Services’ w.e.f. 16-8-2002. Since transport was provided under a separate contract, ratio of decision in case of E. V. Mathai & Co. vs. CCE, Kochi 2003 (157) ELT 101 (Tri-Bang.) was followed and contention of the appellant was upheld. Further, it was found that such expenditure was reimbursed from the service receiver, and therefore, the plea of the appellant that they had a bona fide belief that this charge is not to be added in the service of C & F agents was accepted.

Bhagyanagar Services vs. CCE, (2006) STR 22 (Tri-Bang.)

Mandap Keeper

11. In this case the appellant let out halls and stadiums for consideration for various social and official functions such as sports, garbas, educational programmes, cultural and religious programmes. The held that such activities are covered under the definition of Mandap Keeper.

Surat Municipal Corp. vs. CCE Surat 2006 (4) STR 44 (Tri-Del)

12. In the instant case, the trust provided the service of Mandap Keeper and permitted sale of toys, garlands, flowers, foods and other articles in their premises. Service Tax was demanded on the rent amount received by the trust from various sellers, prima facie it is not a taxable service covered under the category of Mandap Keeper service and therefore the demand was set aside.

Chatushrungi Seva Samitee vs. CCE, Pune (2006) 5 STT 226 (Mum.-CESTAT)

13. In this case, the appellant being a Mandap Keeper granted monopoly right to caterer for providing and decorating service to the hirer of Mandap and received consideration from caterer for granting such monopoly rights. The department taxed the consideration received under Mandap Keepers Service. The High Court held that the services were provided by the caterer to the hirer of Mandap and not by the appellant and consideration received by the appellant from caterer giving him monopoly rights cannot be construed as gross amount charged by the appellant from hirer and therefore not liable to service tax.

C.K.P. Mandal vs. CCE Mumbai-IV, 2006 (4) STR 183 (Bom)

Packaging

14. In this case, the held that bottling, labelling and sealing of liquor by pilfer proof cap of glass bottles of volume, provided by bottlers is independent activity and is not a part of process of manufacture of liquor as defined in section 2(f) of Central Excise Act and hence the said activity is liable to service tax under Packaging Activity.

Vindhyachal Distilleries Pvt. Ltd. vs. State of MP, 2006 (3) STR 723 (Tri-Del.)

Scientific and Technical Consultancy Services

15. In this case, the held that service provided in relation to chemical analysis and furnishing test results for pesticides is not liable to service tax under Scientific and Technical Consultancy Services.

Rallis India Ltd. vs. CCE, Bangalore, 2006 (4) STR 289 (Tri-Bang.)

Technical Testing and Analysis Services

16. The activity of running ‘blood sample collection centres’ on behalf of principals was considered business auxiliary service, and the contention that the services were exempted under the category ‘technical testing and analysis service’ was rejected. The appellants’ contention that once there is specific entry for an item in the Service Tax law, the same cannot be taken out of that specific entry and taxed under any other category was accepted, treating collection of blood samples as part of the testing and analysis service. Testing could not have been done without collection of samples.

Dr. Lal Path Lab (P) Ltd. vs. CCE, (2006) 5 STT 171 (New Delhi-CESTAT)

Tour Operator

17. The appellant operated several ropeways from Hardwar to Mansa Devi and Chandi Devi temples. The appellant also arranges the transit road journey between ropeway boarding points using maxicabs. The cost of road journey was included in the ropeway ticket. The SCN was issued on appellant demanding Service Tax, treating the appellant as a ‘tour operator’ for such transit road journey. The contention of the appellant was that the ropeway ride does not attract Service Tax and the road journey between the two ropeway boarding points is purely incidental to the tour to the temples. The lower authority took a view that the statutory definition makes it clear that distance is altogether irrelevant for the purpose of levy and the appellant is satisfying the other requirement of the statute, like tour being in a tourist vehicle, as well as tour being provided by a tour operator. The held that artificial meaning to word ‘tour’ should not be given and there being no ‘tour’ in a tourist vehicle as per legal provisions, duty demand was not sustainable.

Usha Breco Ltd. vs. CCE, Meerut-I, 2006 (4) STR 88 (Tri-Del.)

2. Valuation

18. The issue in the instant case is whether the reconnection charges received from the customer after the initial disconnection and wireless processing charges fee for providing continuous paging service would form part of taxable value for the purpose of payment of Service Tax. The decision of Escotal Mobile Communication Ltd. vs. Union of India, (2) STR 567 (Ker.) was relied upon and accordingly, both the selling of SIM card and the activation charges were considered chargeable under Service Tax.

DSS Mobile Communications Ltd. vs. CCE, Chennai 2006 (4) STR 203 (Tri-Chennai)

3. CENVAT

19. The respondent provided on-line information and database access or retrieval service, and against this, availed credit of Service Tax on input services of leased phone line provided by BSNL. The revenue reversed the said credit, on the ground that the input service and output service did not fall under the same category. The upheld the order of the Commissioner (Appeals), on the ground that in terms of the definition of ‘input service’ given in Service Tax Credit Rules, 2002, the input service of BSNL of leased line was required for providing output service of online information service. Since the interpretation of the Department defeated the purpose of providing input stage credit to service provider, the appeal of the Department was dismissed.

CCE Jaipur vs. Data Infosys Ltd., (2006) 4 STR 34 (Tri-Del.) and (2006) 5 STT 163 (New Delhi-CESTAT)

20. The assessee Internet Service Provider claimed service tax credit of tax paid leased phone lines. The department relying on rule 3(2) of the erstwhile Service Tax Credit Rules, 2002 denied the credit as input and output services were not falling in the same category. The observed that without leased phone lines the service provider cannot render his service and therefore entitled to service tax credit.

CCE Jaipur vs. Data Infosys Ltd., 2006 (4) STR 34 (Tri-Del.)

21. In this case the held that service tax paid on mobile phone is available as credit to eligible service providers of output service and manufacturers in absence of any express prohibition under CENVAT Credit Rules, 2004. It is further held that Boards Circular No. 59/8/2003-ST dated 20-06-2003 was relevant only under the erstwhile Service Tax Credit Rules, 2002 and cannot be made applicable to CENVAT Credit Rules, 2004.

Indian Rayon & Industries Ltd. vs. CCE Bhavnagar, 2006 (4) STR 79 (Tri-Mumbai)

22. In this case, the appellants received consulting engineers’ service from abroad and paid tax thereon u/s. 68(2) of the Finance Act, 1994 (Act) read with relevant rules – They also received indigenous taxable services – credit of tax paid on indigenous services was utilised for payment of tax on service received from abroad – the Commissioner did not accept availment of credit and held that the appellants received taxable services from abroad as well as within the country and all those services were prima facie input services and nothing other than a service provided by the appellants could be considered to be ‘output service’ and, hence, no prima facie case for waiver was made out.

Hyundai Motors (I) Ltd. vs. CCE, (2006) 6 STJ 238 (CESTAT-Chennai)

4. Penalty

23. In this case held that penalty under section 76 cannot be reduced to less than Rs. 100/- per day and therefore remanded the matter to Commissioner (A) for reconsideration.

CCE, Kanpur vs. Kemco Agencies, 2006 (4) STR 51 (Tri-Del)

24. The appellant was providing services of clearing and forwarding agents since October 1999, but it had neither taken registration, nor paid service tax. Service Tax was demanded and equivalent amount of penalty u/s. 78 was imposed. The appellant deposited complete liability of Service Tax with interest and penalty @ 25% within 30 days of the order. The issue was whether the appellant was eligible for the Amnesty Scheme, which was operational till 30-10-2004, for waiver of penalty imposed u/s. 76 and u/s. 75A. As the appellant discharged his liability before 30-10-2004, he was entitled to take the said benefit and not required to pay penalty u/s. 75A and u/s. 76.

Lake City Service Centre vs. CCE, Jaipur, (2006) 5 STT 220 (New Delhi-CESTAT)

5. Others

Non-collection of Service Tax

25. The Allahabad Court in this case held that though payer of service tax is entitled to realize service tax from its customers, yet it all depends upon contracts entered into between parties. Service providers are free to charge or not to charge the amount of tax from customers, but they have to pay service tax irrespective of its collection.

Thermal Contractors Association vs. Dir. Rajya Vidyut Utpadan Nigam Ltd. 2006 (4) STR 18 (All)

Condonation of delay in filing appeal

26. In this case there was delay in filing appeal as the lower staff did not bring to the notice of the responsible person the adjudication order. The rejected condonation application and held that inefficiency in appellant’s organization is not a sufficient cause for late filing of appeal.

Hexacom India Ltd. vs. CCE Jaipur, 2006 (4) STR 99 (Tri-Del)

Constitutional validity : Import of service : S. 66A

27. While examining the constitutional validity of S. 66A of the Finance Act, 1994 in a writ petition, the Delhi High Court did not find anything unconstitutional in the scheme of things.

M/s. Oriental Crafts Ltd. vs. UOI & Anr. (2006) TIOL 271 HC DEL-ST

Shifting of incidence of service tax to user of services

28. The issue in the instant case was whether service provider is entitled to collect tax from user of services and pay to the Government or the service provider himself is liable to pay Service Tax from his own pocket. In writ petition, it was held that the collection of Service Tax by telephone service provider from its telephone subscribers cannot be challenged on the ground that only a person rendering the taxable service is liable to pay service tax and not the beneficiary of the service. In terms of S. 12A and S. 12B of the Central Excise Act read with S. 83 of the Finance Act, 1994, the provider of service, who is an assessee u/s. 65 of the Finance Act, 1994, can collect Service Tax as shown in the bills raised on the users of their services.

All India Tax-Payers’ Welfare Association vs. Union of India, (2006) 5 STT 136 (Mad.) / (2006) 1 STR 14 (Mad.)

Applicability of service tax in case of co-operative society

29. The applicant was a co-operative society established not for earning profit. They arranged various kinds of employment to the ex-servicemen and charged only 5% service charges. The contention of the appellant was that they were not working on profit basis. Based on the decision in case of Kerala State Ex-Service League vs. CCE, 2004 (173) ELT 434 (Bang-CESTAT) the whole of the Service Tax sought to be levied was waived and stay was allowed.

Bharat Dholpur Purva Sainik Kalyan Sahakari Samiti Ltd. vs. CCE, (2006) 5 STT 219 (New Delhi-CESTAT) and 2006 (4) STR 86 (Tri-Del.)

30. The assessee registered co-operative society providing ex-servicemen for security purpose. They contended that though they were providing taxable service they may not be treated as a commercial concern. As issue of interpretation of law was involved, the upheld the order setting aside the penalty.

CCE, Jaipur-I vs. Sikar Ex-Serviceman Welfare Co-op. Society Ltd., 2006 (4) STR 213 (Tri-Del.)

State levy – Whether chargeable to service tax

31. Service Tax was sought to be levied on ‘supervision charge’ recovered as levy by the Excise Department of Madhya Pradhesh State under the provisions of the Madhya Pradesh Excise Act, 1915 on storage charges. The levy imposed under the State law on activities including storage was held as not comparable with storage and warehousing service. The order against the appellant was set aside allowing the appeal.

State of Madhya Pradesh vs. CCE, Gwalior, 2006 (4) STR 371 (Tri. Del.)

Refund of Service Tax

32. In the instant case, appellant received Consulting Engineer’s Services from abroad. Without knowing the fact that the foreign consultant has office in India, the appellant by mistake paid Service Tax under reverse charge mechanism. The show-cause notice was not issued on the service provider for payment of Service Tax and the reason for non issuance of SCN was not explained. The Commissioner (Appeals) rightly appreciated the provisions of Rule 2(1)(d)(iv) and granted refund to the appellant.

Ambuja Cement Eastern Ltd. vs. CCE, Raipur, 2006 (4) STR 123 (Tri. Del.)

6. Waiver of deposit

Business Auxiliary Service

33. The appellant, engaged in the business of marketing/selling home loans, personal and vehicle loans of Citi Bank, etc., pleaded exemption under Notification No. 25/2004 of 10-9-2004, for activity specified in the Notification [a service incidental or auxiliary to any activity specified in clauses (d)(i) to (iii) of the Notification] for the period 1-7-2003 to September, 2004. Prima facie the Notification was found to be applicable and stay was granted.

Car World Autoline vs. CCE, Kochi, 2006 (4) STR 375 (Tri. Bang.)

Reimbursement of expenses

34. The assessee received Consulting Engineer’s service from a foreign company for a consideration of Rs. 19 crores on which the assessee had paid Service Tax. The assessee additionally paid Rs. 7 crore as reimbursement of expenses for which no documentary evidence was available. Against the demand of Service Tax, pre-deposit of Rs. 10 lakhs was made at the first appellate stage. Stay was granted for the recovery of balance amount on the plea of financial hardship.

Institute for Water Studies vs. Commissioner of Central Excise, (2006) 5 STT 84 (Chennai-CESTAT)

Ship Management Service

35. The appellant was engaged in the business of supplying officers and crews for vessels and also rendered various ship management services under agreements with various shipping companies and thus was registered under the category of manpower recruiting agency service and had paid Service Tax accordingly, after consulting the Department about it. However, the Department issued SCN to the appellant, stating their service is appropriately covered under the category of management consultancy services. The SCN was subsequently confirmed by both the lower authorities. In spite of the contention of the appellant that they were more appropriately covered under new category of ship management service with effect from 1st May, 2006, pre-deposit of rupees eight lakhs was ordered waiving the balance.

Creative Marine Services vs. CCE, (2006) 4 STR 38 (Tri-Mumbai)