Service Tax

1. Classification of Service

Advertising Agency

1. The appellant – BCCI is a Society with the main object of promotion of game of cricket in India. The Revenue demanded Service Tax in respect of amount received towards sale of television rights, sponsorships money and logo money, holding the same as covered by advertising agency.

The Tribunal held that the BCCI was not established with the purpose of making profit. Further that what is being taxed under the category of advertising agency, is planning and expertise involved in making, preparation, display or exhibiting the advertisement. Selling the rights to various channels did not mean an advertising service. Further, selling of space and receiving sponsorship, etc. also did not involve any advertising service. The Tribunal relying on Glaxo SmithKline Pharmaceuticals Ltd. 2005 (188) ELT 171/1 STT 37 (Tri.-Mum) and Zee Telefilms Ltd. (2006) 5 STT 182 (CESTAT-Mum) held that selling of space was covered not by advertising agency service and also that separate taxing entries of ‘sale of space or time for advertisement’ and ‘sponsorship service’ stood created at a later date.

Board of Control for Cricket in India (BCCI) vs. Commissioner of Service Tax, Mumbai (2007) 9 STT 399 (CESTAT – Mum.)

Airline Service

2. In this case the appellant collected user fee from outgoing international passenger not for any service rendered but only to augment financial situation of the appellant. The department sought to tax them under Airline Service. The Tribunal observed that there is no nexus between the user fee collected from passengers and services such as landing, parking, x-ray baggage inspection facilities rendered to airlines and held that service tax cannot be imposed on such user fees collected under Airline services.

Cochin International Airport Ltd. vs. CCEC, Kochi 2007 (7) STR 468 (Tri-Bang.)

Authorised Service Station

3. The Revenue demanded Service Tax on handling charges recovered by the appellant on sale of spare parts. The Tribunal held that prima facie, the Revenue was not able to show that handling charge was in the nature of repair charge, whereas the Commissioner (Appeals) had found that they pertained to sale and not services. Application of Revenue for staying operation of the order of the Commissioner (Appeal) was rejected.

CCE, Nagpur vs. Seva Automobiles Pvt. Ltd., 2007 (7) STR 276 (Tri. Mum.)

Banking and other financial service

4. The appellant in this case was engaged in the business of hire purchase finance where agreement was executed between appellant and hirer for part finance of vehicle purchased. The title of goods vests with finance company in case of hire purchase and with purchaser in respect of hire purchase finance. The appellant was having control over goods in all hire purchase finance agreement. The Tribunal held that hire purchase finance is different from hire purchase and hire purchase finance is not covered under Banking & Financial Service.

Bajaj Auto Finance Ltd. vs. CCE, Pune 2007 (7) STR 423 (Tri-Mum.)

Business Auxiliary Services

5. The Commissioner (A) held that: Call centres services being services provided by a person on behalf of a client, falls under Business Auxiliary Service and exempted under Notification No. 8/2003 ST.

There is no bar in allowing rebate of duties and taxes paid on inputs/input services used for providing such exempted output service (exported), as rebate is granted under Export of Service Rules, 2005 under a separate procedure prescribed in the Notification, which is independent of CENVAT Credit Rules, 2004.

In re: I. Seva Systems Pvt. Ltd. 2007 (7) STR 242 (Commr Appl.)

6. The Tribunal in this case held that money received for lease of table space to the financial institutions cannot be brought within the definition of Business Auxiliary Service.

Silicon Honda vs. CCE (A), Bangalore 2007 (7) STR 475 (Tri-Bang.)

Cargo Handling Agency Service

7. In this case the appellant was supplying labour for helping mechanized loading of cement. The Tribunal held that supply of labour for carrying out such activity is not covered under Cargo Handling Agency service but under Manpower Recruitment and Supply Agency service.

Renu Singh & Co. vs. CCCE, Hyderabad 2007 (7) STR 397 (Tri-Bang.)

Consulting Engineer

8. In this case, transfer of technology by Korean company to the appellant effected in May 1997, but royalty for such services paid in September 2002. The Tribunal considering the above facts held that such transfer is not liable to tax under Consulting Engineer Service.

Lumax Samlip Industries vs. CST, Chennai 2007 (6) STR 417 (Tri-Chennai)

9. The Tribunal in this case held that, there is no element of consultancy in agreement for transfer of exclusive licence, technical information and assistance for manufacture and sale of CNG Internal Grinding Machine and its variance and hence not liable to service tax under ‘Consulting Engineer service’ and service tax paid thereon has been refunded.

Micrometic Grinding Technology Ltd. vs. CCE, Noida 2007 (6) STR 329 (Tri-Del)

10. The Tribunal in this case held that charges for erection, installation and commissioning are not covered under category of Consulting Engineer’s service in view of Boards Circular No. 79/9/2004-ST, dated 13-5-2004.

Hari Machines Ltd. vs. CCE, Bhubaneswar 2007 (7) STR 203 (Tri-Kolkata)

11. In this case, the Tribunal held that Technology transfer agreements with foreign companies are not falling within the scope of Consulting Engineer’s Service. It is further held that Judicial discipline demands that Commissioner cannot take a different view than one already expressed by Tribunal in identical situation.

Biocon Ltd. vs. CCE, Bangalore 2007 (7) STR 214 (Tri-Bang.)

12. In this case the appellant received Consulting engineer’s services for setting up of LNG terminal, partly in India and partly from outside India. The Tribunal relying on CBEC Circular No. 36/4/2001 held that, offshore services received prior to 18-4-2006 are not liable to tax, however service received after that are liable to service tax in view of insertion of section 66A w.e.f. 18-4-2006.

Foster Wheeler Energy Ltd. vs. CCEC, Vadodara 2007 (7) STR 443 (Tri-Ahmd.)

13. The appellant was engaged in the business of ‘software sales, development, maintenance, training and consultancy’. Though the appellant was registered in the category of ‘Consulting Engineer’, the Department wanted to include the stated services in the category of ‘Management Consultancy’. The Tribunal held that:

• The licensing / sale of software, inter alia, involved advice related to software engineering;

• Scope of ‘Consulting Engineers’ is not limited to only traditional branches of engineering; and

• The exemption provided vide Notification dated 28-2-1999 to services rendered by ‘Consulting Engineers’ in relation to ‘software’, clearly indicates that the Government has recognised software engineers as ‘Consulting Engineers’.

Therefore, the stated services are classifiable as ‘Consulting Engineer’s Services’.

M/s. SAP India Systems vs. Commissioner of Service Tax, Bangalore (2007) TIOL 772 (CESTAT-Bang.)

Clearing & Forwarding Agents Service

14. In this case, the appellant was engaged in procuring orders from Government department and semi-government agencies for Principal. Department sought to tax them under C & F Agent’s services. The Tribunal relying on the case of Larsen & Toubro Ltd. 2006 (3) STR 321 (Tri-LB) held that mere booking of orders for principal on commission basis is not taxable under C & F agent services.

C.S. Survana vs. CCE, Mumbai 2007 (7) STR 174 (Tri-Mumbai)

15. The appellant in this case maintained and operated power plant for generation and supply of power on the contract basis. The Tribunal held as follows:

Maintenance of plant is incidental and ancillary functions and no advice for improvement of organization is offered. Therefore the activity is not covered under Management Consultant’s service.

Operation of plant on contract does not amount to service in the nature of consultancy and technical assistance. Suggestions for better running of plant not provided to owners or other, but to self hence not liable to tax under consulting Engineer’s service.

The activity of co-ordination of delivery of lignite with transport agent for ensuring quality and quantity of fuel supplied to run the plant is incidental function to primary function of power generation and hence not become separate service to be liable under C & F Agent’s services.

Goods and equipments are maintained or repaired by the suppliers of the appellant under warranty or maintenance contract and the appellant if any maintenance service is undertaken is provided to self and therefore the activity is not covered under Maintenance or Repair service.

Operation and Maintenance (O & M) of electricity generation plant is manufacturing activity and the same cannot be vivisected to charge service tax on some activities. The contract of O & M is for generation and supply of power and not for rendering any service. Since taxable value under each service is not given, tax cannot be levied when liability is not determined under each taxable service.

CMS (I) Operations & Maintenance Co. P. Ltd. vs. CCE, Pondicherry 2007 (7) STR 369 (Tri-Chennai)

Franchise Service

16. The appellant was in the business of setting up and operating centres for vocational training in relation to computers and also operated through franchisees. Service Tax was demanded on non-refundable deposits received from franchisees and recurring franchise fees received during July 2003 and January 2004. While rejecting appellant’s plea that the activity carried out by franchisees was exempt under Notification No. 9/2003-ST of 20-6-2003, the Tribunal held that:

• The Notification exempted the services of commercial training and coaching and it cannot be extended to franchise service. The expression ‘in relation to’ used in the Notification would be interpreted to include any services in relation to commercial coaching services of the institute.

• All the conditions laid down under the statutory provisions of franchise service were present in the arrangement of the appellant with its franchisees to construe the arrangement as ‘franchise service’.

Jetking Information Ltd. vs. CCE, Mumbai-I, 2007 (7) STR 314 (Tri. Mum.)

Leased Circuit Services

17. Appellant, licensed mobile telephone service provider having own communication network and subscribers, paying Service Tax on call charges collected from subscribers – Arrangement amongst different telecom authorities to share facilities and also expenses and income – interconnectivity between basic / cellular operators for transit or termination of calls – link used by subscribers of both companies – charges for calls emanating from appellant’s subscribers to subscribers of others payable to others by appellant and vice versa – charges not merely for using connected circuit between two telecom authorities – interconnect usage charges collected by one telecom authority for calls terminating to subscribers under them, emanating from other telecom authorities, cannot be treated for use of leased circuit.

Telecom authority’s link to another telecom authority cannot be considered as link to a subscriber.

Fascel Ltd. vs. CST (2007) 7 STR 29 (Tri – Ahd.)

Management Consultant’s Service

18. The appellant, a manufacturer of sugar, took over the management of another sugar mill. The Department sought to tax them under Management Consultant’s service. The Tribunal held that appellant performing management function being in-charge (manager) of operation of factory and the manager of the factory is different than management consultant; hence the appellant is not liable to tax under Management Consultant’s service.

Basti Sugar Mills Co. Ltd. vs. CCE, Allahabad 2007 (7) STR 431 (Tri-Del.)

Mandap Keepers Services

19. The appellant, a registered society permitted its members to use premises for consideration. The Tribunal relying on decisions in Dalhousie Institute 2006 (3) STR 311 (Cal) and Saturday Club 2006 (3) STR 305 (Cal) held that use of premises by members of club cannot be considered as letting out and members are not clients of club and therefore the appellant is not liable under Mandap Keepers Services.

India International Centre vs. CCE, Delhi 2007 (7) STR 235 (Tri-Del.)

Port Services

20. The appellant in this case is engaged in the business of repairing, chipping, cleaning & painting the vessels of Coast Guard, Naval Dock, ONGC, etc. at dry docks. The Department initiated recovery proceedings for the period 16-7-2001 to 30-6-2003 treating the services of the appellants as Port services. The appellant had sought registration under the category of ‘Maintenance and repair services’, which was made liable to Service Tax with effect from 1-7-2003.

The Department contended that it could be covered under residuary entry, ‘any other service in respect of vessels’.

The Tribunal observed that S. 42 provides for authorization of the Board for various services at the rate specified by that port in the Official Gazette. Repairing of vessels and its consideration would depend upon quantity of work, which would be different in every case and therefore it would be in terms of contract between the parties and for this reason, it cannot be held as port services.

The Tribunal also held that since the maintenance and repair service was introduced as a specific category of service, the activity of the appellant could not be covered as a port service for the past period.

Lastly, it was also categorically held that the issue involved was of bona fide interpretation of provisions of law and therefore the appellant had enough reason to entertain a bona fide belief that their services were not covered by ‘port services’ and there being no positive allegation of suppression or misstatement, the extended period of limitation was not available to the Revenue and the demand was also barred by limitation.

Homa Engineering Works vs. CCE-Mumbai (2007) TIOL 769 (CESTAT-Mum)

Repairing /Maintenance

21. The Tribunal in this case held that repairing / maintenance of ships carried under repair contracts for the period prior to 16-6-2005 is not liable to service tax as during that period such services were required to be carried out under maintenance contract.

Cochin Shipyard Ltd. vs. CCE, Kochi 2007 (7) STR 291 (Tri-Bang.)

Real Estate Agent

22. The appellant helped a builder to procure orders and arranged payments. They pleaded that in order to be covered as real estate agent, they should be engaged in rendering services in relation to sale, purchase, lease or renting of real estate or one should be a real estate consultant. Relying on the agreement between the builder and the appellant, it was held that the service was taxable as real estate agent and real estate consultant.

Indus Tubes Ltd. vs. CCE, Ghaziabad, 2007 (7) STR 238 (Tri.Del.)

Tour Operator Services

23. The Tribunal in this case held that, engagement of taxi by Government officers who were not provided with car although eligible to engage taxi in terms of service contract cannot be said to be covered within the category of ‘Tour Operator’.

CCE, Mangalore vs. Sunil Kotian 2007 (6) STR 379 (Tri-Bang.)

24. In the present case, the appellant hired vehicles to other company for transporting latter’s employees. The Commissioner (A) observed that:

• Tour operator’s services are provided only if vehicles used are tourist vehicles.

• Amendment in definition of ‘tour operator’ w.e.f. 10-9-2004 removing limitation regarding transportation by tourist vehicles is with reference to package tour operators. Levy on tour operators engaged in operating tours in tourist vehicle remained as such.

• Since the vehicles hired by appellant are not tourist vehicles demand of tax, interest and penalty is not justified.

Gayatri Enterprises 2007 (6) STR 280 (Commr. Appl.)

Works Contract

25. Sales tax – computation of taxable value – Design, fabrication, installation and commissioning of air-conditioning plant – tax on sale of goods only – Value of items held as deductible, in Gannon Dunkerley & Co. (1993) 1 SCC 364, to be excluded from value of entire works contract – deduction not restricted to labour charges – all charges / amounts deductible except value of goods sold in execution of works contract – value of goods sold alone taxable under Sales Tax – impugned judgment upheld – S. 21 of Bihar Sales Tax Act – Rule 13A of Bihar Sales Tax Rules.

State of Jharkhand vs. Voltas Ltd., (2007) 7 STR 106 (SC)

26. The appellant, a consulting engineer, had challenged the First Appellate order which had held that the appellant had not executed works contract, but executed an independent service contract and therefore was not entitled to the benefit of judgment in the case of Daelim Industrial Company Ltd. vs. CCE, 2006 (3) STR 124. The appellant contended that they being Indian co-obligent of the Chinese principal contractor, could not be isolated from the total turnkey contract of setting up a sinter plant. Rendering of service by the appellant was part and parcel of the project of setting up the said plant. Rendering engineering consultancy being a secondary object of setting up of plant, the appellant was not disentitled to get the benefit of judgment in Daelim’s case (supra) – Held.

Orissa Sponge Iron Ltd. vs. CCE, Bhubaneswar-II, 2007 TIOL 1091 CESTAT BHUW (Circuit Bench)

2. Valuation

Advertising Agency

27. The appellant, an advertising agency, charged fixed monthly fee to its clients for media insertions. Irrespective of number of advertisements released and recovered, only the exact amount was charged by media from them. Service tax was demanded on the difference passed on to the customers, treating it as commission received from media. It was held that no tax could be recovered on amount not received by the agency, as due Service Tax was paid on the monthly fees received. The Tribunal observed that the term ‘commission’ used for the ‘discount’ given by the media was misleading.

In the second case, Service Tax was demanded on amount received as (a) cash discount and (b) target incentives from the media. Since the discount and incentive received did not relate to services provided by the advertising agency to the clients (advertisers) and were received from media, no tax was found leviable.

EURO RSCG Advertising Ltd. vs. Commissioner of Service Tax, Bangalore, 2007 (7) STR 277 (Tri. Bang.)

Clearing and Forwarding Agent’s Service

28. The Tribunal in this case held that in case of valuation of C & F Agency services, elements required to be added to value of taxable service are restricted to amounts received by the assessee for carrying on services of C & F Agent only. Elements such as loading, unloading charges, etc. not related to C & F Agent service are not to be added to value of taxable service.

Sri Sastha Agencies Pvt. Ltd. vs. Asstt. CCEC, Palakkad 2007 (6) STR 185 (Tri-Bang.)

29. In this case the Tribunal held that, elements not forming part of taxable services such as godown rent, staff salary etc. cannot be included in the value of taxable services under C & F Agent service.

S. Jayashree vs. CCE, Mangalore 2007 (6) STR 389 (Tri-Bang.)

30. In this case, the Tribunal held that service tax under C & F agent service is applicable on amounts received for rendering services towards C & F operations and other elements like godown rent and salary paid to clerks are required to be excluded from the valuation.

K. D. Associates vs. CCE, Belgaum 2007 (7) STR 6 (Tri-Bang.)

Photography

31. The appellant paid service tax on the service after deducting cost of paper and material used in providing photography service. The Tribunal observed that in each credit memo issued, backward working was done to exclude cost of material provided along with photographic services. The Revenue relied on clarificatory instructions of the Board dated 9-7-2001 that cost of unexposed photographic films sold may be excluded if it was shown separately in the invoices and that no other cost such as photographic paper, chemicals, etc. was excludible. The said instructions were reiterated vide Board’s instructions dated 3-3-2006, where it was also clarified that goods consumed while providing photography service was not entitled for benefit under Notification No. 12/2003-ST. Though plethora of judgments such as Adlabs, 2006 (2) STR 121 (Tri. Bang.), Shilpa Colour Lab vs. CCE, Calicut, 2007 (5) STR 421 3 (Tri. Bang.) and Bharat Sanchar Nigam vs. UOI, 2006 (2) STR 161 (SC) were cited, the Tribunal took the view that tax demanded was required to be pre-deposited as none of the judgements squarely covered the facts of the case.

Roopkala Photo Gallery vs. CCE, Bhopal, 2007 TIOL 1119 (CESTAT-Del.)

3. CENVAT Credit

32. In this case the appellant had taken CENVAT credit to the extent of 50% of the duty paid on capital goods in the first year and availed depreciation on the balance 50% of the duty paid on which they had not taken CENVAT credit; i.e., simultaneous availment of credit and depreciation on duty element. The Tribunal held that there is no violation of the provisions of CENVAT Credit Rules, 2004 and set aside the Order-in-Appeal.

Suprajit Engineering Ltd. vs. CCE, Bangalore 2007 (6) STR 170 (Tri-Bang.)

33. In the present case, the assessee shifted a part of their factory viz., their spinning plant. The Tribunal held that Rule 8 of CENVAT Credit Rules, 2002 (Rule 10 of CCR, 2004) does not permit transfer of CENVAT credit if only a part of factory is shifted.

CCE, Mumbai IV vs. Ruby Mills Ltd. 2007 (6) STR 178 (Tri-Mumbai)

34. The Tribunal denying the credit of service tax paid on outward transportation of finished goods from factory or depot to buyers premises and observed as follows:

• Credit of tax is admissible up to the point of removal. Transportation is different activity from manufacture.

• Main clause of input service definition does not mention transport service and in second clause the credit is available for transport service up to the place of removal.

• Excise Act deals with tax on manufacture and extending credit beyond point of duty paid removal of final products is contrary to the scheme of CENVAT Credit Rules.

Gujarat Ambuja Cements Ltd. vs. CCE, Ludhiana 2007 (6) STR 249 (Tri-Del.)

35. In this case, the Tribunal held Input service viz., ‘port service’ and output service viz. ‘steamer agent service’ does not fall under same sub-clause of clause 90 of section 65 hence, the appellant is not entitled to claim service tax credit under erstwhile Service Tax Credit Rules, 2002.

V. S. Dempo & Co. Pvt. Ltd. vs. CCE, Goa 2007 (6) STR 313 (Tri-Mumbai)

36. Relying on Large Bench decision in Piaggio Greaves Vehicles Ltd. vs. CCE, Pune 2001 (127) ELT 614 (Tri-LB), it is held that penalty under section 11AC is not attracted on wrong availment of CENVAT credit, but not utilized and reversed at insistence of Revenue before issuance of Show Cause Notice.

CCE, Pune vs. Mahatma Phule MSSG Ltd. 2007 (6) STR 336 (Tri-Mumbai)

37. In this case, the Tribunal observed that Service tax on Goods Transport Agency by the recipient of service can be paid through CENVAT credit account. There is no restriction on utilization of CENVAT Credit by manufacturing unit towards payment of service tax as service provider as per CBEC manual of supplementary instructions. Commissioner (A) decision that assessee entitled for CENVAT credit of manufacturing activity for utilization towards payment of service tax was upheld by the Tribunal.

CCE, Chandigarh vs. Nahar Industrial Enterprises Ltd. 2007 (7) STR 26 (Tri-Del)

38. The Tribunal in this case held that:

• Outward transportation up to place of removal is an input service however, outward transportation beyond place of removal is not an input service and therefore service tax paid on such service is not eligible for CENVAT credit.

• Services referred in inclusive part of definition of input service to be used in relation to manufacture and clearance of final products to qualify as input service.

• Penalties imposed by adjudicating authorities have been set aside.

CCE, Indore vs. N. H. K. Springs Ltd. 2007 (7) STR 63 (Tri-Del)

39. In this case it is held that service tax paid through TR-6 on Goods Transport Agency service during the period 1-1-2005 to 15-6-2005, though not specified as specified documents for availing credit in Rule 9 of CCR, 2004 is eligible for CENVAT Credit. The amendment in Rules is applicable even for the service tax paid during earlier period and CENVAT credit based on TR-6 challans, evidencing payment of tax cannot be denied.

In re: Krishna Electrical Industries Ltd. 2007 (7) STR 76 (Commr. Appl.) Indore

40. In this case, the appellant paid service tax in cash even though had input credit available from May 2003 to March 2004. However, subsequently utilized the CENVAT credit for the period November, 2003 to March, 2004 to the extent of 35% of tax liability during the relevant period. The Tribunal held that there is no question of lapse of credit legally taken and there is no rule that credit accumulated during the month should be used in same month.

Vijayanand Roadlines Ltd. vs. CCE, Belgaum 2007 (7) STR 219 (Tri-Bang.)

41. The Tribunal after relying on Rule 3 of CENVAT Credit Rules, 2004 held that credit cannot be denied merely for the reason that it has not been claimed in appeal. Benefit available to appellant cannot be denied, if such benefits are legitimate and patent from record.

Magnet Industries (CAL) Pvt. Ltd. vs. CCE, Kolkata-I 2007 (7) STR 302 (Tri-Kol)

42. The Tribunal in this case held as under:

• CENVAT credit of tax paid on internet service cannot be denied as internet services are utilized for information related to manufacture, sale and dispatch instructions.

• CENVAT credit of tax paid on courier service used for delivery of finished goods to customer is not permissible as the said service is akin to outward transportation.

Universal Cables Ltd. vs. CCE, Bhopal 2007 (7) STR 310 (Tri-Del)

43. In this case Tribunal held as follows:

• Service tax paid on Mobile Phones is eligible for CENVAT credit.

• Custom House Agents services for exports not having nexus with manufacture and clearance from factory, CENVAT credit of service tax paid on such services is not admissible.

• Setting up of circles or gardens for display of sign boards is not related to advertisement and therefore service tax paid on such input service is not admissible as CENVAT credit.

Excel Corp Care Ltd. vs. CCE, Ahmedabad 2007 (7) STR 451 (Tri-Ahmd.)

44. Input Service – Appellant as recipient of Goods Transport Agency and Intellectual Property services, paid Service Tax through debit in Cenvat account. Impugned entitlement not barred for deemed service provider – Restriction of utilization to result in payment in cash and credit availment thereof – Revenue neutral – Credit utilization upheld – S. 68 of the Act Rules 2(1), 2(p) and 3 of Cenvat Credit Rules, 2004.

Supreme Industries Ltd. (2007) 7 STR 86 (Com. Appl.) Nashik

45. Duty paying documents – Credit of Service Tax paid on Goods Transport Agency service through TR-6 Challans – Amendment in the Cenvat Credit Rules, 2004 by Notification No. 28/2005-C.E., dated 7-6-2005 (effective from 16-6-2005), whereby TR-6 Challan was also prescribed as a document for taking credit in respect of Goods Transport Service, cannot be interpreted to mean prior to 16-6-2005, if payment of Service Tax made under TR-6 Challans, credit cannot be availed based on such challans – Amendment in the rules applicable even for the tax paid during earlier period – Cenvat credit based on TR-6 Challans, evidencing payment of tax cannot be denied – Rule 9 ibid.

Re: Krishna Electrical Industries Ltd. (2007) 7 STR 76 (Commr. Appl.) Indore

4. Penalty

46. Relying on Board’s Circular F. No. 332/82/97-TRU, dated 24-9-1997, it is held that, dance, drama, music, etc. comes within the ambit of social functions and letting out the premises for these activities is liable to service tax under Mandap Keeper’s Services. Further, the appellant was under bonafide belief that they were not liable to service tax and penalties imposed upon them have been set aside.

ADA Rangamandira Trust vs. CCE, Bangalore-III 2007 (6) STR 381 (Tri-Bang.)

47. The Tribunal in this case held that penal provisions in terms of section 76 of Finance Act, 1994 proposing to levy penalty of Rs. 100/- per day of failure to pay tax came into effect only on 10-9-2004 and the said provision is not applicable to period prior to 10-9-2004.

CCE, Mangalore vs. Dee Pee En Corporation 2007 (6) STR 264 (Tri-Bang.)

48. In this case, appellant pleaded for waiver of penalty under Extraordinary Tax-payer Friendly Scheme as the service tax along with interest was paid before 30-10-2004. The Tribunal relying on CCE vs. Bharat Security Services and Worker Contractors 2006 (3) STR 703 (Tri) held that scheme is applicable to all assessees and therefore set aside the penalty.

Care Electronics Ltd. vs. CCE, Ahmedabad 2007 (7) STR 273 (Tri-Ahmd)

49. (i) The appellant had a bona fide belief that they did not have Service Tax liability as they had not collected Service Tax. On learning about the legal flaw in their understanding, they made a spot payment of Rs. 1 lakh, which was naturally before the issue of show-cause notice. It was held that penalty both u/s. 76 and u/s. 78 did not sustain.

(ii) The appellant, did not dispute the tax liability, but pleaded to treat their receipts as cum tax amount and re-compute the duty liability as they had not collected Service Tax on their services. According to the Commissioner (Appeals), Explanation-II to S. 67, which provided for treating gross amount received as inclusive of tax when no tax was separately collected, was inserted only from 10-9-2002, and therefore did not apply to the instant case which involved period prior to this date. However, relying on the decision in the case of Maruti Udyog Ltd., 2002 (141) ELT 3 (SC), the Tribunal held the view that the explanation only clarifies the general principle and since the principal was applicable even in excise cases, the duty liability had to be computed treating the sale value as inclusive of tax.

Gem Star Enterprises Pvt. Ltd. vs. CCE & Cus., (Calicut), 2007 (7) STR 342 (Tri. Bang.)

50. In this case, the Tribunal held that financial problem cannot be a reason for non-payment of tax once the amount is being regularly collected from customers but instead of depositing in Government Treasury, the same is being pocketed by the assessee. Considering facts of the case, penalty enhanced from Rs. 50,000/- to Rs. 1,50,000/-.

CCE, Mumbai vs. S. K. Services 2007 (7) STR 332 (Tri-Mum)

5. Others

Condonation of delay

51. An appeal was filed after a delay of 197 days. Appellant pleaded corporate restructuring on resignation of Executive Director and taking over by new person as reasons for delay. Affidavit of Executive Director stated ignorance of rules and regulations.

It was observed that appellant being incorporated company would have advocates to whom papers ought to have been handed over for filing appeal. Delay of 197 days was found to be enormous and no explanation to warrant condonation offered. Gross negligence patent on record – steps not taken to file appeal, despite being aware of order. Hence sufficient reasons not available and no grounds for condonation exist – delay not condoned and appeal dismissed – S. 86 of Finance Act, 1994 (Act).

Sembcorp Infrastructure (I) P. Ltd. vs. CCE, (2007) 7 STR 45 (Tri – Bang.)

Export of Services

52. The appellant being a courier agency delivered various parcels abroad. Relying on the Export of Services Rules, 2005, Rule 3(2) that if such a taxable service is partly performed outside India, it shall be considered to have been performed outside India, and therefore it would be considered export of service. No other condition was prescribed in the said Rule. Accordingly, this was considered ‘exports’ made without payment of Service Tax. Service Tax was demanded on courier charges collected on the above. The Commissioner, relying on Board’s Circular F. No. 341/34/2005-TRU dated 3-10-2005, which provides that where both the service provider and the service recipient are in India and the service is provided in India, they are required to discharge the Service Tax. The appellant’s counsel drew attention to Board’s Circular No. 56/5/2003-ST of 25-4-2003, wherein it is provided that Service Tax is destination based consumption tax and it is not applicable to export of services. The Tribunal held that the Board’s Circular relied on by the Commissioner did not help the Revenue as the service recipient in the instant case was out of India and prima facie there was export of services and no tax was leviable on the same. Full waiver of pre-deposit was granted and recovery was stayed.

TNT India Pvt. Ltd. vs. Commissioner of Service Tax, Bangalore, 2007 (7) STR 207 (Tri. Bang.)

53. The appellant, a General Selling Agent (GSA) of a foreign airline received overriding commission as percentage of fares of tickets sold in India for the period from July 2003 to November 2004 in Indian currency. The appellant did not collect service tax on the ground that the receipt was towards exported service in view of Board’s Circular
    No. 56/5/2003, dated 25-4-2003 and further, that commission received from foreign client in Indian currency be treated as receipt in convertible foreign exchange and therefore eligible for exemption in terms of Notification No. 21/2003-ST of 20-11-2003. After discussing provisions of FEMA as regards the definition of export, J. B. Boda & Co’s case [J. P. Boda & Co. Pvt. Ltd. vs. CBDT, (1997) 223 ITR 271 (SC)] the agreement of the appellant with the Malaysian Airlines and the mode of payment made by the airlines at great length, the Tribunal concluded that:

• The cases cited did not advance the appellant’s case. The commission was paid by the airline’s Indian office from ‘QA22’ Account and this did not tantamount to inward remittance of convertible foreign exchange for the purposes of Notification No. 21/2003-ST and therefore could not be considered exempt.

• Plea of longer period of limitation also was rejected, on the ground that the appellants and the airlines circles were fully aware of their obligation and this was evident from their employee’s statements on record.

ETA Travel Agency Pvt. Ltd. vs. CCE, Chennai, 2007 (9) STT 370 (CESTAT – Chennai)

Limitation

54. Issue involved was whether advisory service on merger and acquisition of companies as a service provided by management consultants, clarified by C.B.E. & C. Circular dated June, 2001. Held that it cannot be said that assessee knew or must have known that their rendering of financial advisory services for merger and acquisition of companies was in nature of management consultancy services during relevant period – No suppression of facts – Extended period of limitation not applicable – Proviso to S. 73 of the Act.

CCE vs. DSP Merrill Lynch Ltd., (2007) 7 STR 59 (Tri – Mumbai)

Non-resident Service Provider

55. In this case, the Tribunal held that prior to 16-8-2002 non-resident service provider providing service in India is liable to pay service tax either by himself or through authorized agent according to the provisions of Rule 6 (applicable at that time) of STR, 1994. Neither Act nor Rules granted any immunity to the Foreign Service provider for payment of service tax in respect of taxable service provided by them in India.

Calvin Wooding Consulting Ltd. vs. CCE, Indore 2007 (7) STR 393 (Tri-Del)

Power of Commissioner (Appeals)

56. In this case, the Joint Commissioner issued SCN invoking extended period of limitation under section 11A of CEA without obtaining permission from Commissioner. The Tribunal held that SCN is without jurisdiction and was also issued belatedly after a lapse of several years. Further the Tribunal held that Commissioner (Appeals) is bound to follow Apex Court judgment and Tribunal’s ruling and he cannot take his own view although it may be, in his opinion, a correct view.

Pals Micro Systems Ltd. vs. CCE, Mangalore 2007 (6) STR 205 (Tri-Bang.)

Refund — Unjust enrichment

57. In the present case the Tribunal held as follows:

• Erroneous payment of tax on non-taxable service does not relate to payment of tax and principle of unjust enrichment is not applicable for refund of such amount.

• In case of erroneous payment of tax, limitation period commences from the date of discovery of error as prescribed by section 17 of Limitation Act, 1963 and the period prescribed by section 11B is not applicable.

Karnik Maritime Pvt. Ltd. vs. CCE, Mumbai-I 2007 (6) STR 314 (Tri-Mumbai)

58. The Tribunal after relying on the decisions in Jayant Glass Inds. (P) Ltd. vs. CCE 2003 (155) ELT 188 (Tri-LB) and Parle International Ltd. vs. UOI 2001 (127) ELT 329 (Guj) held that the amount paid during investigation was not an amount of duty paid but it is only deposit. Such deposit is required to be refunded when duty is not liable to be paid.

Suresh Steel Tubes Pvt. Ltd. vs. CCE, Bangalore – I 2007 (6) STR 351 (Tri-Bang.)

59. In this case appellant erroneously paid service tax under Scientific and Technical Consultancy Service. They had returned service tax collected to clients by credit notes or cheques. The Tribunal observed that in service tax matters it is easy to identify service provider and client and also as who has borne the tax incidence. Issue of credit notes also amounts to payment. Unjust enrichment not arises when service provider returns service tax collected by credit notes and cheques and appellant is entitled to refund having borne the service tax burden.

Shiva Analyticals (I) Ltd. vs. CCE, Bangalore 2007 (7) STR 35 (Tri-Bang.)

60. The appellant in this case paid service tax on commission received for sale of mutual fund units during October 2003 to March 2004 and then filed refund claim for Service Tax paid making a plea that under Notification No. 13/2003-ST, dated 20-6-2003, exemption was available for commission received on sale of ‘goods’ and ‘mutual funds units’ were goods for the purpose of Finance Act, 1994 – [S. 65(50)] which adopts definition of ‘goods’ as per S. 2(7) of the Sale of Goods Act, 1930, refund should be made for the Service Tax paid. The Department relied on Circular No. 66/15/2003-ST, dated 5-11-2003, which clarified that commission received on sale/distribution of units of mutual fund did not qualify for exemption under Notification No. 13/03 (supra) as the same was not goods. Since the lower authority had not recorded any finding as to why mutual fund cannot be regarded as ‘goods’, the case was remanded back to the adjudicating authority for fresh decision on the specific plea.

Aknam Finvest Pvt. Ltd. vs. Commissioner of Service Tax, Mumbai, 2007 (7) STR 267 (Tri. Mum.)

Restoration of Appeal

61. The Tribunal in this case after relying in the case of Air India Ltd. vs. CC 2005 (191) ELT 266 (Tri-Mum) held that Order of Tribunal if not appealed against before higher appellate forum, becomes final and any fresh appeal against the same order is not entertainable.

CCE, Pune-III vs. Sterlite Industries (I) Ltd. 2007 (7) STR 333 (Tri-Mum)

Show-cause Notice

62. In this case, the Tribunal held that Voluntary Disclosure Scheme dated 23-9-2004 is not applicable in the instant case as the service tax was paid after receipt of show cause notice.

Lovely Dish Centre vs. CCE, Bhopal 2007 (6) STR 237 (Tri-Del.)

63. The Commissioner (A) observed that the object of Extraordinary Tax-payer friendly scheme was to nullify punitive treatment as matter of public policy in order to galvanize tax-payer’s public conscience and make them pay taxes with greater scruple and efficiency. It is held that since the appellant paid entire amount of service tax along with interest long before issue of show cause notice and took out registration in April, 2004; i.e., before 30-10-2004, penalty imposed under sections 75A and 76 is set aside.

In re: Manorath Services Pvt. Ltd. 2007 (7) STR 91 (Commr Appl.)

64. In the order under appeal, the Adjudicating Authority had demanded Service Tax for the period July 2003 to March 2005 under proviso to S. 73(1) of the Finance Act, 1994. The appellant received commission with regard to the services provided by them to publishers. The Department sought to classify the same as ‘advertising services’, but the same was denied by the appellant. Further, the appellant had registered itself, under the category ‘business auxiliary service’, but also had claimed exemption provided vide Notification No. 13/2003-ST dated 20-6-2003.

The Adjudicating Authority in its order had given a finding that the appellant cannot be considered as a ‘commission agent’ and also could not come within the purview of the Notification (supra). The Tribunal noted that this finding was in contradiction with the show-cause notice, which had stated that the investigation revealed that the appellant had been providing business auxiliary service as a commission agent.

Held, invocation of a longer period under proviso to S. 73(1) is not justified.

M/s. Margadarsi Marketing Pvt. Ltd. vs. Commissioner of Central Excise, Hyderabad (2007) TIOL 773 (CESTAT-Bang.)

Others

65. In this case, the department demanded duty under revision order passed on the basis of subsequent circular, whereas the assessment was completed on the basis of earlier circular. The Tribunal held that subsequent revision of view by Board and issue of fresh circular cannot be applied to assessment completed on the basis of earlier circular.

Metascan Electronics & Communications P. Ltd. vs. CCE, Hyderabad 2007 (6) STR 196 (Tri-Bang.)

66. The Tribunal in this case held that:

• Recipient of Service from non-resident engineering consultant for the period October, 2003 to November, 2003 is not liable to service tax (prior to 1-1-2005). The Rules are subservient to sections and if section does not provide for discharge of tax by recipient of services from non-resident having no office, then it would be a futile exercise to rely upon the rules to collect the tax from the recipient of service.

• Government cannot keep with itself the amount that is not due to it and amount paid as tax inadvertently by the appellant liable to be refunded to them.

Aditya Cement vs. CCE, Jaipur-II 2007 (7) STR 153 (Tri-Del.)

67. In Writ Petition filed, the Karnataka High Court held that Notification No. 1/2006 (granting ad hoc abatement) provides exemption to the extent of difference between tax liability in terms of notification and actually payable. The exemption is applicable if method of determination of liability as per notification is less than actual liability. Option for CENVAT credit or exemption under the said notification is legal. It was further held that notification providing for exemption subject to conditions to be examined and understood as a whole and not in piecemeal.

Shriram Properties Ltd. vs. CCE, Bangalore 2007 (7) STR 3 (Kar)

68. In this case the appellant, recipient of service paid service tax on services received and claimed its refund later. The Tribunal observed that agreement between foreign consultants and appellant provided that local taxes were to be borne over and above the consultation fees and the appellant deposited tax amounts directly to Government Treasury instead of remitting it to foreign consultants. It is held that such payments can only be treated as payments made on behalf of foreign consultants, who are liable to deposit the amount and amount, which is validly paid as service tax cannot be refunded.

Vikram Cement vs. CCE, Indore 2007 (7) STR 40 (Tri-Del.)

6. Waiver of pre-deposit

69. The appellant provided assistance to the representative of Vasavdatta Cement – Gulbarga, in receiving warehousing and forwarding consignments of cement sent by the manufacturer. They received reimbursements in addition to remuneration for expenses like loading, unloading, freight, stationery, telephone charge, rent, wharfage, etc. Prima facie, the expenditure incurred by the appellant was found to be not forming part of taxable value, stay was provided.

The Jus Badri and Jatin Badri & Company vs. CCE, Salem, 2007 (7) STR 269 (Tri. Chennai)

70. Amount for services falling under category of ‘Commercial Training or Coaching Centre’ as defined in clause (26) of S. 65 of the Act, collected in advance before 1-7-2003 and services rendered thereafter – High Court in similar case held that till CESTAT decides matter finally, petitioner not constrained to pay Service Tax – Prima facie case made out for waiver of pre-deposit of Service Tax and penalties – stay granted – S. 35F of Central Excise Act, 1944 as applicable to Service Tax vide S. 83 of the Act.

Sandipani Academy vs. CST (2007) 7 STR 9 (Tri – Ahd.)

71. Issue before the Court was whether in regard to Abatement Exemption under Notification No. 1/ 2006-S.T., Value of goods supplied by recipient of service, was to be included for eligibility to abatement under notification ibid – Prima facie explanation to Sl. No. 7 of Notification – It was found that Notification does not require inclusion of value of goods supplied by service recipient – interim stay granted – Article 226 of the Constitution of India – S. 67 of the Act.

Larsen & Toubro Ltd. vs. UOI (2007) 7 STR 123 (Mad.)