Recent Judgements

Service tax
From Feb 2008 to Feb 2011
Arranges from latest to oldest

Business Auxiliary Services

Where the assessee was engaged in encrypting data of products / services of various
clients in their computer system for a consideration and provided the data on products /
services to the persons who enquired with them, the Tribunal held that the services
provided by the assessee was in the nature providing assistance, help or information
through telephone to a caller on behalf of various parties (i.e. its clients) and thus the
assessee would be considered as “Call Center” entitled to exemption from service tax
under notification no. 8/2003-ST dated 20.6.2003. [CST vs. Citizen Info-Line Ltd. (2011)
21 STR 20 (Tri. – Ahmd.)].
Where the appellant is engaged in electroplating (gold plating) of watch straps for various
parties on job work basis the Tribunal held that the appellant’s activity would not be
liable for service tax under the category of Business Auxiliary Services as being
production of goods ‘on behalf of’ a client since an activity would be considered as being
performed ‘on behalf of’ the client if there are three parties to the transaction and in the
appellant’s case there were only two parties to the transaction. Hence, the appellant had
not undertaken any job work on behalf of its client. [Sonic Watches Ltd. vs. CCE (2011)
21 STR 34 (Tri. – Ahmd.)]
Commercial or Industrial Construction service
Where the appellant was engaged in laying of long distance pipe lines for the Gujarat
Water Supply and Sewerage Board (GWSSB), the Tribunal held that the ‘pipelines’ were
not used by GWSSBprimarily for commerce or industry since- (i) the sale of water was
not the primary function of GWSSB. GWSSB was established for rapid development and
proper regulation of drinking water supply and sewerage services in the state of Gujarat;
(ii) GWSSB was established by the State for the purpose of fulfilling the basic
requirement of the people i.e. supply water at the nominal rates.
(iii)The water was sold at the subsidized rate i.e. even below the operating cost. Hence,
the appellant was not liable for service tax under the category of “Commercial or
Industrial Construction services”. [Dinesh Chandra Agarwal Infracon P. Ltd. vs. CCE
(2010) 21 STR 41 (Tri. – Ahmd.)]
Commercial Training or Coaching services
Notification no. 7/2003 dated 20.6.03 exempted – (i) vocational training institute; (ii)
computer training institute; and (iii) recreational training institute for the period 1.7.03 –
30.6.04. This notification specifically defined the scope of the three types of institutes.
This notification was withdrawn from 1.7.04 and another Notification no. 24/2004 dated
10.9.04 was issued granting exemption to ‘vocational training institute’ and ‘recreational
training institute’. Further, on 7.6.2005 the Government issued another notification no.
19/2005 w.e.f. 16.6.05 amending the 2004 notification to the effect that exemption shall
not apply to computer training institutes. On the question whether the appellant, a
computer training institute, is liable for service tax from 10.09.04 – 15.6.05, the Supreme
Court held –
(i) ‘computer training institute’ was consciously excluded from purview of notification
no. 24/2004 dated 10.09.04 so as to restrict the benefit of exemption to only ‘vocational
training institutes’ & ‘recreational training institutes’.
(ii) Amendments to notification of 2004 vide Notification. No 19/2005 dated 7.6.05 was
only in the nature of clarification.
Accordingly, computer training institutes are liable to pay tax during the period 10.09.04
to 15.6.05. [CST v. Sunwin Technosolution P.Ltd. (2011) 21 STR 97 (SC)]
Construction of Residential Complex service
In the present case the petitioners challenged the validity of Explanation inserted to
section 65(105)(zzzh) [construction of complex services] on the grounds that the
explanation widens the scope of levy beyond the concept of ‘service’ by including therein
sale of flats and taxing of such sale and purchase was beyond the legislative competence
of Union Legislature. Dismissing the above contention, the Hon’ble High Court held as
follows:
(a) the levy of tax is on service and not on service provider and construction services are
certainly provided even when a constructed flat is sold.
(b) Taxing of such transaction is not outside the purview of the Union Legislature as the
same does not fall in any of the taxing entries of State list. Hence the Explanation
inserted by the Finance Act, 2010 is constitutional. [G.S. Promoters v. Union of India
(2011) 21 S.T.R. 100 (P& H)] Where the appellant constructed residential quarters for the
CPWD (Government of India) to rent the same to the employees of Income Tax
Department (Government of India), the Tribunal held that since the complex was
intended for “personal use” within the meaning of clause (a) of Explanation to s. 65(91a)
of the Act which includes permitting the complex for use as residence by another person
for rent the appellant’s services would fall within the exclusion part of the definition of
‘residential complex’ and accordingly would not be liable for service tax. [Khurana
Engineering Ltd v. CCE (2011) 21 STR 115 (Tri-Ahmd)]
Consulting Engineer services vs. Commercial Training or Coaching services
Where the assessee, manufacturer of certain sophisticated equipments, also provided
training to the customers to whom theequipments were sold on how to operate the
equipments the Tribunal held that –
(i) training imparted to employees of a customer to operate a system or machinery
installed at their premises could not be termed as ‘technical assistance’ provided by a
consulting engineer since the assessee was a manufacturer of those equipments.
(ii) the appellant’s activities would more appropriately fall under the category of
‘commercial training or coaching services’ w.e.f. 1.7.03 and not be liable for service tax
for the period prior to 1.7.03 under the category of ‘consulting engineering services’;
Accordingly the tax paid by the appellant for the period prior to 1.7.2003 under the
category of consulting engineering service was held to be refundable. [CCE v. Yokogawa
Blue Star Ltd (2011) 21 STR 161 (Tri- Bang)]
Port Services
In the present case the Tribunal held that the following revenues would not be liable
under the category “port services: (i) Royalty received by the appellant [Cochin Port
Trust (“CPT”)] from India Gate Terminal Pvt. Ltd. (IGTPL) to develop & operate a
terminal named the Rajiv Gandhi Container Terminal (RGCT) in the port area is not a
consideration for providing any port services (i.e. a service in relation to vessels or
goods). Further, if at all IGTPL pays service tax as demanded the same will be available
to it as cenvat credit to pay its output tax. Hence demand on this count under the category
of the “Port Services” is not sustainable. (ii) Upfront amount received from IGTPL
towards the transfer (sale/lease) of the appellant’s equipments to IGTPL cannot be
considered as received towards port services rendered. (iii) rental amounts collected for
renting out various jetties to other persons and granting them a licence to put up
structures within the administrative jurisdiction of the appellant, cannot be considered as
consideration towards port services. (iv) Estate rentals received from IGTPL for leasing
out of immovable property for permitting it the use of the site belonging to CPT is more
appropriately covered under the category of renting of immovable property service liable
for service tax w.e.f. 1.6.2007 and hence demand under port services needs to be set
aside. [Cochin Port Trust vs. CCE (2011) 21 STR 25 (Tri. – Bang.)]
Limitation
Where the Commissioner (Appeals) set aside the penalty u/s.78 on the ground that the
revenue had failed produce evidence to show that there was any fraud, willful
misstatement or suppression of facts, etc. on the part of the appellants with the intent to
evade tax the Tribunal held that the extended period of limitation is also not invokable
since the ingredients for invoking the extended period of limitation is the same and hence
the demand was time barred. Further, since the appellant had paid the tax and undertook
not to claim it back interest u/s. 75 and penalty u/s. 76 were waived [Royal Travels vs.
CCE (2011) 21 STR 31 (Tri. – Ahmd.)] The extended period of limitation is not
invokable to demand the wrong availment of cenvat credit since – (i) the appellant had
regularly filed the monthly returns disclosing the availment of cenvat credit (which
included the alleged incorrect credit). Thus, there was no suppression or misstatement
with an intent to evade duty by the appellant (ii) the issue being one of interpretation of
law and the Commissioner (Appeals) having dropped the penalties on this ground the
appellant cannot be held to have any mala fide intention for availing cenvat credit. [Asian
Tubes Ltd. vs. CCE (2011) 21 STR 58 (Tri. Ahmd.)] Where the appellant entertained a
bonafide belief that the services rendered by it were not liable for service tax and the
agreement with client also stipulated that the tax liability if any would be borne by the
service recipient, the tribunal held that there being no reason for resorting to suppression
or mis-declaration extended period oflimitation cannot be invoked. [Khurana Engineering
Ltd. vs. CCE (2011) 21 STR 115 (Tri-Ahmd.)].
Refund
The appellant had registered for service tax for the first time on 20.11.07 and paid service
tax on commission of 20 Lakhs received from the client on 12.8.07 without considering
the basic threshold exemption of 8 Lakhs under Notification no. 6/2005-ST dated
1.3.2005 but subsequently, filed a refund claim (to the extent of tax on Rs. 8 Lakhs)
which was rejected by the department on the ground that the appellant had not exercised
to opt for the exemption as per condition in clause 2(1) of the said notification and hence
was not entitled to refund. On appeal, the Tribunal held that since the appellant registered
for service tax for the first time there was no question of opting for exemption under the
said notification in advance. Hence, the condition in clause 2(1) of the said notification
was held not applicable to the appellant and accordingly he was held entitled to refund.
[Cancio E.P.Mascarenhas vs. CCE (2011) 21 STR 17 (Tri. – Mum.)]
Rebate
Where the appellant filed a refund claim of service tax paid on input services used for the
purpose of services exported by him under the Notification No. 12/2005-ST dated
19.4.2005 but failed to file the declaration stating the description, value, and service tax
payable on the input services used for export before the export of services as required
under the said notification and instead filed it after the export, the Tribunal held that the
lapse was only a procedural lapse (since the said requirement was mentioned under
heading ‘procedure’ in the notification) and accordingly the appellant cannot be denied
the substantive benefit of refund. [Manubhai & Co. vs. CST (2011) 21 STR 65 (Tri. –
Ahmd.)]
Cenvat Credit
Where the assessee removes inputs as such it was held that Rule 3(5) of Cenvat Credit
Rules, 2004 only requires him to reverse the amount of the Cenvat credit availed on such
“inputs” or “capital goods” but not the credit of service tax availed by him on GTA
services which were used for transporting the said goods into his factory. [CCE vs.
Punjab Steels (2011) 21 STR 5 (P&H)]
Where canteen services were mandatorily required to be provided by the manufacturer
u/s. 46 of the Factories Act, 1948 it was held that outdoor catering services availed for the
purpose of supplying food to assessee’s employees in the canteen, is an “input service”
which means a service “used directly or indirectly in or in relation to manufacture of final
product” and Cenvat credit on the same is admissible. [CCE vs. Ferromatic Milacron
India Ltd. (2009) 21 STR 8 (Tri-Guj.)]
On facts, where the show cause notice had sought to disallow the credit of service tax
availed on landline telephone not installed in factory premises without bringing evidence
on record to indicate that the telephones were used for non-business purposes [like
examining the allowance under Income-tax Act] and without examining the definition of
input service under rule 2(l) of the Cenvat Credit Rules, 2004 the Tribunal allowed the
credit. [Hindustan Zinc Ltd. vs. CCE (2011) 21 STR 50 (Tri. – Del.)].
Where the assessee was allowed to manufacture goods and discharge the effluents within
his factory premises subject to maintenance of a green belt (garden), the cenvat credit of
service tax paid on garden maintenance services utilized by the assesseee was held
allowable. [CCE vs. Voith Turbo Pvt. Ltd. (2011) 21 STR 52 (Tri. – Bang.)]
Credit of Service tax paid on insurance services for transportation of goods from factory
to port of export is admissible. [Somaiya Organo Chemicals v. CCE, (2011) 21 S.T.R.
114 (Tri – Mum]
Where the appellant, a manufacturer, had availed the credit of tax paid by its depot at
Jaipur against the tax liability of its manufacturing unit at Kolkata, the Tribunal held that
in absence of registration of its Jaipur depot as an input service distributor the credit of
service tax availed on services received by Jaipur depot could not be set-off against the
tax liability of unit at Kolkata. [Khaitan Electricals Ltd v. CCE (2011) 21 STR 184 (Tri-
Kolkata)]
Business auxiliary services
Activities such as processing and assembling jeans buttons with metal inserts and nylon
inserts and processing needle threader being in the nature of ‘processing of goods’ is
liable for service tax under the category of business auxiliary services only w.e.f. 16-6-
2005 and not prior to that date. [N. K. Fasteners vs. CCE(2010) 20 STR 689 (Tri-
Chennai)]
CargoHandling Services
Where the appellants were merely engaged in loading and unloading and shifting of sugar
bags from floor of the mill house to godowns and from one godown to another, relying
on [Modi Construction Co. vs. CCE (2008) 12 STR 34 (Tri-Kolkata)] the Tribunal held
that the said activities would not be liable to service tax under the category of cargo
handling services. [CCE vs. Surinder Kumar (2010) 20 STR 678 (Tri-Del)]
Commercial Training and Coaching services
Where the appellant, a non-profit organisation registered u/s. 25 of the Companies, Act,
1956 and section 12AA of the Income-tax Act as a Charitable Institution, conducted
diploma courses in Insurance, the Tribunal after considering the objects as mentioned in
the memorandum and the above factors and relying on the decision of [Great Lakes
Institute of Management Ltd. vs. CCE (2008) 10 STR 202 (Tribunal)] concluded that the
appellant was not a ‘commercial concern’ and hence was not liable for service tax under
the category of “commercial coaching and training”. [CCE vs. Institute of Insurance and
risk management (2010) 20 STR 836 (Tri- Bang.)]
Management, Maintenance or Repair services
Notification No. 24/2009 dated 27-7-2009 which grants exemption from levy of service
tax to road maintenance or repair is not retrospective.[Karvembu & Co. vs. Under
Secretary, Dept. of Revenue (2010) 20 STR 591 (Mad.); R. Devarajan v Union of India
(2010) 20 STR 758(Mad.)]
Renting of immoveable property services
In a petition seeking declaration of the provisions relating to service tax on renting of
immovable property as ultra vires, the Constitution, the Punjab and Haryana High Court
held as follows:
(i) It cannot be held that renting of property did not involve any service. Renting of
property for commercial purposes is certainly a service and has value for the service
receiver.
(ii) service tax on the service of renting of property is not a “tax on land and building”
covered by Entry 49 List II which is the subject of the State Legislatures but is on the
service element in renting transaction which is within the legislative competence of the
Parliament under Entry 92C read with Entry 97 of List I.
(iii) The amendment made by the Finance Act, 2010 retrospectively from 1-6-2007 is
constitutionally valid.
[Shubh Timb Steels Ltd. v. Union of India (2010) 20 STR 737 (P&H)].
Works Contract vs. Erection commissioning and installation services
A company PG, intending to set up a power plant, accepted the bid of a Swedish
Company ABB and as requested by the bidder entered into 3 contracts – one with ABB
(Sweden) for off-shore supply of equipment; another with ABB(India) for on-shore
supply of equipment and a third again with ABB(India) for on-shore services including
erection, commissioning etc. All the above contracts were interlinked and the overall
responsibility for successful completion of all the 3 contracts was on ABB(Sweden). The
revenue sought to tax the ‘on-shore service contract’ under the category of ‘erection,
commissioning and installation services’. On appeal the Tribunal held that –
(i) three agreements were interlinked to each other and a combined reading of the 3
contracts taken together for the purpose of executing the turnkey project for PG, would
satisfy the definition of ‘works contract’ under section 65(105)(zzzza).
(ii) the agreement had been subjected to state VAT / Sales tax as a ‘works contract’ and
sales tax was also deducted from the payments made to the appellants under the sales tax
law.
(iii) Accordingly the appellants would be liable for service tax only w.e.f. 1-6-2007 and
not prior to that date under erection, commissioning or installation services.
[ABB Ltd. vs. CST (2010) 20 STR 610 (Tri-Bang.)]
Import of services
Services received outside India prior to 18-4-2006 would not be liable to service tax.
[BHEL-GE Gas Turbine Services Pvt. Ltd. vs. CST (2010) 20 STR 679 (Tri-Bang.)]
Export of Services
Where the appellant procured orders for foreign principals in consideration for a
commission received in convertible foreign exchange, the Tribunal held that the
appellant’s services are used outside India in view of the fact that the rendering of the
service was complete only when the purchase orders canvassed by the appellant in India
were received by the foreign companies and since these purchase orders were received
abroad and acted upon abroad the benefit of the service accrued to the foreign companies
abroad. Accordingly the appellant’s services were held to be exported and the appellant
was held entitled to refund of tax paid on exports. [EM JAY Engineers vs. CCE (2010)
20 STR 821 (Tri-Mum.)].
Valuation
Where the appellant had not collected tax separately the Tribunal held that in view of
provisions of section 67 of the Finance Act, 1994 the amount received has to be treated as
inclusive of tax.[P. Jani & Co. vs. CST (2010) 20 STR 701 (Tri-Ahmd.) relying on CCE
vs. Advantage Media Consultant (2008) 10 STR 449(Tribunal)]
Exemption in respect of value of materials such as patches, etc. consumed in the process
of retreading of tyres (liable under maintenance and repair services) is available under
notification no. 12/2003 dated 20.6.2003 [A.N. Palaniappan vs. CCE (2010) 20 STR 781
(Tri-Chennai)].
Demand
Where the SCN sought to allege non-payment of service tax on the presumption that the
assessee is a security agency on the sole ground that the assessee was registered for PF as
a security agency for the year 2003-04 and did not investigate the assessee’s service
recipients to ascertain the nature of the service, the Tribunal set aside the demand and
penalties when the assessee produced a letter from one of hismajor customers (85%
valuewise) that the assessee merely supplied manpower and did not provide security
agency services [Karna Security & Housekeeping Services vs. CST (2010) 20 STR 807
(Tri-Ahmd.)].
Income voluntarily disclosed to the income-tax authorities cannot be added to value of
taxable services in absence of any evidence that such income disclosed was part of
taxable service. [CCE vs. Ramesh Studio & Colour Lab (2010) 20 STR 817 (Tri-Del.)].
Limitation
In this case the Tribunal observed that plea of limitation being a legal plea can be raised
even at the subsequent stages of appeal. Further where the department had failed to
discharge the burden of establishing that the assessee was guilty of suppression the
Tribunal held that invoking of extended period of limitation was unwarranted. [V. Mohan
vs. CCE(ST) (2010) 20 STR 686 (Tri-Chennai)]
Penalty
Where the assessee had paid service tax alongwith interest much before issuance of show
cause notice the Tribunal held that no show cause notice was required to be issued in
view of Section 73(3) of the Finance Act, 1994 and accordingly no penalty is imposable.
[Amiras Enterprises vs. CCE (2010) 20 STR 631 (Tri-Ahmd.); Ratindranath K. Kanungo
vs. CCE (2010) 20 STR 636 (Tri-Ahmd.); Lajpat Rai Jindal vs. CST (2010) 20 STR 645
(Tri-Del.); P. Jani & Co. vs. CST (2010) 20 STR 701 (Tri-Ahmd.)]
Where the assessee had wrongly availed credit of service tax paid on input services
during the month of March, 2006, while availing abatement under Notification No.
1/2006 dated 1-3-2006 the Tribunal held that no penalties would be imposable since –
(i) the assessee availed credit due to a bona fide mistake that the condition of non-
availment of service tax credit would be effective only from April, 2006. Hence there was
a reasonable cause for nonimposition of penalty u/s.76 of the Finance Act.
(ii) the assessee had declared the fact of availment of credit of service tax paid alongwith
the benefit of exemption under Notification No. 1/2006 in its service tax returns for the
half year ended March, 2006 and it was only on the scrutiny of the said return the show
cause notice was issued to the assessee. Hence there was no element of wilful
suppression of facts, fraud,mis-statement etc. with an intent to evade payment of service
tax and accordingly penalty u/s. 78 was also not imposable.
[CCE vs. Era Construction (I) Ltd. (2010) 20 STR 633 (Tri-Del.)]
Where the assessee was already registered for service tax but had paid the tax and filed its
half yearly return belatedly the Tribunal held that the assessee’s contention that it was not
well conversant with the service tax procedure being a new levy is not acceptable. Hence
penalty u/s. 76 & 77 is imposable but the Tribunal on facts reduced the penalty
[H.R.Shah vs. CST (2010) 20 STR 637 (Tri-Ahmd.); See also Gujarat Industrial Security
Force Society vs. CST (2010) 20 STR 640 (Tri-Ahmd.)]
Under the first and second provisos to section 78, where the assessee pays the tax
alongwith interest and 25% of the tax towards penalty u/s. 78, within 30 days of the date
of communication of the order, the penalty u/s. 78 would stand reduced to 25% of the tax.
However, where the assessee had paid service tax (alongwith interest) even before issue
of the SCN and the orders of the original and appellate authorities sought to impose
penalty u/s. 78 equal to the amount of tax involved without any specific mention of the
option to reduce the penalty to 25% of the tax by paying such amount within 30 days of
the date of receipt of the order, the Tribunal gave the option to the assessee at the
appellate stage by stating that if the penalty equal to 25% of the tax was paid within 30
days of the Tribunal’s order, the penalty u/s. 78 would stand reduced as aforesaid. [Kakda
Steels Pvt. Ltd. vs. CST (2010) 20 STR 651 (Tri-Del.)]
Where the appellant voluntarily registered and paid service tax alongwith interest when
he came to know about his liability and the department thereafter started proceedings for
confirmation of the demand and imposition of penalties, the Tribunal held that there is no
intent to evade payment of tax and accordingly no penalty u/s. 76 and 78 is imposable.
[Ascent Communication vs. CST (2010) 20 STR 655 (Tri-Ahmd.)]
Where the appellant bona fide believed that no service tax was payable on fabrication and
dismantling charges charged by it in addition to erection, commissioning and installation
charges on which the appellant had been paying service tax the Tribunal held that there
was a reasonable cause u/s. 80 for non-imposition of penalty u/s. 76 of the Finance Act.
Further, no penalty u/s. 78 was held to be imposable since –
(i) the department failed to produce positive evidence of deliberate mis-declaration of
value of taxable service with an intent to evade payment of service tax;
(ii) the appellants had recorded all the transactions in its books of accounts and other
financial records and the said records had been produced to the departmental auditors for
examination.
[ESS ESS Engineering vs. CCE (2010) 20 STR 669 (Tri-Del.)]
Where the benefit of section 80 has been extended to the assessee, no penalty would be
imposable. A mere reduction of penalty is incorrect.[N. K. Fasteners vs. CCE (2010) 20
STR 689 (Tri-Chennai)]
The fact that the appellants were unaware of the changes in law but had on the advise of
the department took registration and paid service tax alongwith interest, showed their
bona fides and accordingly the Tribunal held that no penalty u/s. 78 was imposable
especially since the benefit of section 73(3) was available. Further in view of the newly
introduced tax and nature of the appellant there was reasonable cause u/s. 80 for non-
imposition of penalty u/s. 76. [P. Jani & Co. vs. CST (2010) 20 STR 701 (Tri-Ahmd.)]
Where the assessee, an outdoor caterer, merely prepared and served food athis customer’s
premises (the customer providing the entire cooking infrastructure), did not pay service
tax on his charges but duly paid the same alongwith interest on receipt of the SCN, the
Tribunal held that no penalty is imposable u/s. 78 since the assessee was under a bona
fide belief that he was not liable which belief was further strengthened by the Tribunal
decision in [Rajeev Kumar Gupta vs. CCE (2009) 16 STR 26 (T)] where the Tribunal
held that such an assessee is not liable for service tax under the category of “outdoor
catering services”. [Kalsis Kitchenette v. CCE (2010) 20 STR 772 (Tri-Mum.)].
Where the assessee paid the tax alongwith interest much before the issue of SCN
proposing to levy a penalty u/s. 76, the Tribunal held that no penalty u/s. 76 is leviable in
view of the provisions of section 73(3) which provides that where the assessee pays the
service tax alongwith interest before issue of notice and there is no fraud, collusion,
wilful mis-statement, etc. no SCN needs to be issued. [Jay Shipping vs. CCE (2010) 20
STR 774 (Tri-Ahmd.)]. Where the appellant paid tax on C&F agency services but took
CENVAT credit of the tax so paid on the belief that the tax was not payable, instead of
claiming refund the Tribunal held that –
(i) penalty u/r. 15(4) of the CENVAT Credit Rules, 2004 is not imposable in absence of
an allegation of fraud, collusion, etc. in the SCN; and
(ii) penalty u/s. 76 and 77 is not imposable since the default does not concern delay / non-
payment of tax or infraction of any provisions of the Finance Act, 1994.
[Sudhakar Plastic Ltd. v. CCE (2010) 20 STR 792 (Tri-Bang.)]
Where the assessee paid excess tax in March 2007 and adjusted the same in subsequent
months, the Tribunal held that the assessee has in a way paid tax in advance and as such
penalty no penalty u/s. 76 is imposable since it applies only to cases of failure to pay
service tax. [Chettinad Cement Corporation Ltd. vs. CCE (2010) 20 STR 815 (Tri-
Chennai)]
Where the assessee did not contest the demand but paid the service tax alongwith interest
before the issue of SCN and also paid 25% penalty (presumably u/s. 78) within 30 days
of the adjudication order, the Tribunal waived penalty u/s. 76 in view of the fact that
appellant was not interested in litigation and wanted to abide by the law [K.G.
Corporation vs. CST (2010) 20 STR 832 (Tri-Ahmd.)].
Adjustment of tax
Where the assessee had adjusted the excess service tax paid for services rendered to SEZ
against its subsequent liabilities the Tribunal held that such adjustment was permissible
[CCE vs. SRC Projects Ltd. (2010) 20 STR 687 (Tri-Chennai)]
Refund
Notification no. 41/2007 – ST dated 6-10-07 which provided for refund of tax paid on
specified input services used for exports initially provided for a time limit of two months
from the end of the quarter to which the refund relates for claiming refund of the said
quarter. The time limit was extended to six months vide notification no. 32/08 – ST dated
18-11-08 by ‘substituting’ the word “six” for the word “two”. The Tribunal held that the
amendment is retrospective and hence a claim for December, 2007 quarter filed on
27.5.2008 is within the time limit [CCE vs. Essar Steel Ltd. (2010) 20 STR 769 (Tri-
Ahmd.)].
Where the assessee filed refund claim for the period July 2002 to June 2003 on 29-8-
2003 but on the department pointing out certain defects and deficiencies it filed a revised
claim on 17-3-2004, the Tribunal held that the date of the filing the refund claim was 29-
8-2003 and accordingly only part of the refund claim was held time-barred i.e. tax paid
on 16-08-2002 [CST vs. HMA Udyog Pvt. Ltd. (2010) 20 STR 827 (Tri-Del.)].
CENVAT Credit
Credit of service tax paid on mobile phones: Credit of service tax paid on mobile phones
supplied to employees during the financial year 2006-07 is allowable under the CENVAT
Credit Rules, 2004. Further the Board Circular No. 59/8/2003, dated 20.06.03 issued
under the erstwhile Service tax Credit Rules, 2002 which clarified that credit on mobile
phones is not allowable would not apply to CENVAT credit Rules, 2004 in absence of a
provision like the erstwhile rule 3(6) which specifically provided that credit in respect of
services in relation to telephones shall be allowable only if such telephone connections
are installed in the premises from where output services are provided. [CCE vs. Ultratech
Cement (2010) 20 STR 589 (Bom.)]
(I) CENVAT credit on Custom House Agent services for clearance of import & export
consignments is allowable.
(ii) CENVAT credit on telephones installed at the residences of executives of the
company is not allowable since –
(a) there was no evidence of the phone being exclusively used for business purpose;
(b) the Board had (in the context of Rule 3(6) of the Cenvat Credit Rules, 2002) clarified
vide Circular No. 59/8/2003 dated 20-06-2003 that credit onmobile phones would not be
allowed.
[Mileen Engineers vs. CCE (2010) 20 STR 668 (Tri-Mumbai)]
N.B.:- The disallowance of credit on telephone services may be justifiable on ground (a)
but not on ground (b) as held in CCE vs. Ultratech Cement (2010) 20 STR 589 (Bom.)
Credit of service tax paid on Courier Services used for placing orders, filing quotations
for procurement as well as marketing, dispatch instructions, issuing cheque for
procurement, sending stock transfer documents to depots, receiving dispatch instructions
from marketing, depots, head office etc. is admissible since the services have been used
in relation to manufacture and clearance of final product as well in relation to its business
activities.[ CCE vs. Apar Industries Ltd. (2010) 20 STR 624 (Tri-Ahmd.)]
Credit availed on the basis of debit notes is inadmissible since u/r. 9(1) of the CENVAT
Credit Rules, 2004, CENVAT Credit can be availed only on the basis of an invoice,
supplementary invoice, challan or bill of entry. [Godrej Consumer Products Ltd. vs. CCE
(2010) 20 STR 609 (Tri-Del.)]
Credit of service tax paid on brokerage to brokers/commission agent appointed for sale of
finished goods is admissible since the assessee has availed services of brokers before
clearance of goods from factory. [CCE vs. Indorama Synthetics (I) Ltd. (2010) 20 STR
626 (Tri-Mumbai); See also CCE vs. Ambika Forgings (2010) 20 STR 662 (Tri-Del.)]
Where the appellant had availed credit on the basis of invoices which were not in the
name of their factory but in the name of head office the Tribunal held that in absence of
any dispute about the receipt of services by the factory to whom credit has been passed
the omission of the name of the factory in the invoice becomes a curable defect and is
condonable. Hence credit is admissible. [Modern Petrofils vs. CCE (2010) 20 STR 627
(Tri- Ahmd.) relying on CCE vs. DNH Spinners (2009) 16 STR 418 (Tribunal)]
Denial of credit of service tax paid on input service on the ground that the services were
not received within the factory premises of the assessee is not sustainable. [CCE vs.
Ultratech Cement Ltd. (2010) 20 STR 683 (Tri- Mumbai)]
Credit of service tax paid on Tour operator services used for picking up and dropping the
staff of the assessee to the factory being services in relation to business activities is
admissible. [CCE vs. Hyderabad Industries Ltd. (2010) 20 STR 704 (Tri-Chennai)]
Banking and other financial Services
The Supreme Court upheld the legislative competence of the Parliament to impose
service tax under Entry 97, List I of the Seventh Schedule to the Constitution on
transactions covered under section 65(12)(a)(i) of the Act defining ‘Banking and other
financial services’, more particularly, “financial leasing, including equipment leasing and
hire-purchase”. In this regard the Supreme Court observed as under :
(i) The impunged provision viz., section 65(12)(a)(i) basically operates qua an activity of
funding/ financing of equipment/ asset.
(ii) In a ‘finance lease’, it is the lessee who selects the equipment to be supplied by the
dealer or the manufacturer and takes delivery, but the lessor [finance company] provides
the funds, acquires the title to the equipment, accepts the invoice and pays for it and
allows the lessee to use it for its expected life. During the period of the lease the risk and
rewards of ownership are transferred to the lessee who bears the risk of loss, destruction
and depreciation or malfunctioning. Equipment Leasing/ Hire-Purchase finance are long
term financing activities of equipment/ asset.
(iii) The above transactions are different and distinct from operating lease/ hire-purchase
transactions in the classical sense. A hire-purchase agreement is a hiring agreement
coupled with an option to purchase, i.e., to say that the owner lets out the chattel on hire
and undertakes to sell it to the hirer on his making certain number of payments. There is
no contract of sale until the hirer has made the required number of payments and he
remains a bailee till then. However, the bailment which underlies finance leasing is only a
device to provide the finance company with a security interest [its reversionary right]. If
the lease is terminated prematurely, the lessor is entitled to recoup its capital investment
[less the realizable value of the equipment at the time] and its expected finance charges
[less an allowance to reflect the return of the capital]. It is not a contract of bailment but
is merely a financing transaction.
(iv) there are two different and distinct transactions, viz., the financing transaction and
the equipment leasing/hire-purchase transaction. The former is exigible to service tax
under Section 66 of Finance Act, 1994 (as amended) whereas the latter would be exigible
to local sales tax/VAT.
(v) As far as the taxable value in case of financial leasing including equipment leasing
and hire-purchase is concerned, the amount received as principal is not the consideration
for services rendered. Such amount is credited to the capital account of the lessor/ hire-
purchase service provider. It is the interest/ finance charge which is treated as income or
revenue and which is credited to the revenue account. Such interest or finance charges
together with the lease management fee/ processing fee/ documentation charges are
treated as consideration for the services rendered and accordingly they constitute the
value of taxable services on which service tax is made payable.
(vi) The above transactions covered under section 65(12)(a)(i) are leviable to service tax
which is within the legislative competence of the Parliament under Entry 97 of List I of
Seventh Schedule to the Constitution. The transactions are not hire-purchase transactions
under article 366 (29A)(d) i.e. a ‘transfer of right to use goods’ read with Entry 54, List II
of the Seventh Schedule.
[Association of Leasing & Financial Service Companies vs. UoI (2010) 20 STR 417
(SC)]
Clearing and Forwarding Agents
Where the appellant was engaged in the activity of transmission of natural gas through
pipelines for its clients (who were either suppliers or users of natural gas) from the source
point to the point of utilisation pursuant to a Gas Transmission Agreement the Tribunal
held that the appellant is not liable under the category of Clearing and Forwarding
services since :
(i) the relationship between the appellant and its client (suppliers/ users) cannot be termed
to be that of principal and agent and hence the essential ingredient of a Clearing and
Forwarding agent’s services was not fulfilled;
(ii) the appellant’s activities are more aptly covered within the category of ‘Transport of
goods through pipeline or other conduit service’ which is effective from 16.6.2005 and
hence cannot be taxed under the category of ‘clearing and forwarding agent services’
prior to that date.
[Gujarat State Petronet Ltd. vs. CST (2010) 20 STR 502 (Tri. – Ahmd)].
Erection, Commissioning and installation service
Where the assessee a manufacturer of textile machineries had charged excise duty on the
entire contract value inclusive of the charges for installation and commissioning of
machinery the Tribunal held that since the commissioning and installation activity were
so integrally connected with the activity of manufacture of machinery and excise duty
had been paid on the entire value of contract including the installation and
commissioning charges, no service tax was separately payable on the installation and
commissioning charges. [Alidhara Texspin Engineers vs. CCE (2010) 20 STR 315 (Tri-
Ahmd.)]
Information Technology software services
Where the petitioners, an association of companies engaged in the business of reselling of
the computer software products under an “End User Licence Agreement” challenged the
legislative competence of the Parliament to impose service tax on ‘information
technology software services’ [Section 65(105)(zzzze)] the Hon’ble High Court
dismissing the petition observed as under:
(i) Software, whether canned or customized, is goods;
(ii) Entry 97 of List I of Schedule VII of the Constitution of India being a residuary entry
the Parliament has legislative competence to make law for service tax under the said
entry.
(iii) For the reason that software is goods, all transactions in relation to software need not
necessarily amount to a sale and whether a transaction is a sale or service depends on the
individual transaction and on that ground the vires of section 65(105)(zzzze) cannot be
questioned.
(iv) The transaction between the members of petitioner association and the ultimate
customer (end user) is not of a sale of software (goods) as such but is only allowing the
right to use the contents of the data stored in the software (goods) which would amount
only to a service. Further, the transaction would also not be considered as deemed sale
under Article 366(29A)(d) of the Constitution of India i.e. ‘transfer of right to use any
goods’ since the right to use the software (goods) as such is not transferred.
[Infotech Software Dealers Association vs. UOI (2010) 20 STR 289 (Mad.)]
Port Services
(i) In a case where the appellant conducted an auction of the cargo not cleared by the
importers and appropriated the proceeds towards terminal /port charges, the Tribunal held
that ‘conducting of auction’ of cargo is not a service rendered to importers and hence the
service tax is not payable.
(ii) Fees collected for making available the infrastructure facility for examination of the
cargo by customs authorities before the goods enter into the port area is not liable for
service tax under the category of port services.
[India Gateway Terminal (P) Ltd. vs. CCE (2010) 20 STR 338 (Tri-Bang.)]
Scientific or Technical Consultancy
‘Grants-in-aid’ received by the assessee from the Central and State Governments for
implementing various social welfare schemes for the benefit of various sections of the
society such as minorities, poor villagers, etc. is not liable for service tax under the
category of ‘scientific and technical consultancy services’ since the assessee only acted as
an implementing agency and did not render any ‘service’ to the Government and hence
there was no service provider-client relationship between the assessee and the
Government. [APITCO Ltd. Vs CST (2010) 20 STR 475 (Tri. –Bang.)]
Receipt of revenue share not liable for service tax
Where CONCOR paid the appellant, its agreed revenue share in a transaction, and had
discharged the service tax liability on the gross amount, the Tribunal held that service tax
liability has been discharged by CONCOR and hence appellant would not be liable.
[India Gateway Terminal (P) Ltd. vs. CCE (2010) 20 STR 338 (Tri-Bang.)]
Import of Services
Where the appellant received technical know-how and assistance from five foreign
entities and the Revenue contended that in terms of the second proviso to Rule 6(1) of the
Service tax Rules, 1994 (as it stood prior to it amendment w.e.f. 16.8.2002) the recipient
of service would be liable to pay service tax since the overseas entities by virtue of the
agreement authorized the service recipient to pay tax, the High Court dismissed the
contention of the Revenue and held –
(i) Section 68 of the Finance Act casts the liability on the service provider to pay service
tax. Hence in absence of any express provision in Act the rules casting the liability on the
recipient of service would be contrary to the provisions in the Act and therefore, would
not be sustainable.
(ii) The second proviso to rule 6(1) provides that if the service provider authorizes the
service receiver, then the receiver of service can pay tax on behalf of the service provider.
However, this would apply only if the service provider in the first place is liable. The
provisions of the Act (as it stood then) are not applicable to non-resident service
providers and hence there is no liability on their part to pay service tax. Hence the second
proviso can also not be triggered.
[CST vs. Bharat Electronics Ltd. (2010) 20 STR 307 (Kar.)]
Limitation
Where the show cause notice had failed to raise the allegation of suppression of facts the
Tribunal held that sustaining of demand for the extended period by adjudicating authority
was not permissible. [Sudhakar Plastic Ltd. vs. CCE (2010) 20 STR 332 (Tri-Bang.)]
Interest
Interest would be payable only if wrongly taken credit is utilised and not where the credit
remains unutilised. [Zenith Machine Tools Pvt. Ltd. vs. CCE (2010) 20 STR 554 (Tri-
Bang.)]
Penalty
• Where the larger period of limitation was not invoked and the appellant had paid service
tax together with interest prior to the issuance of show cause notice the Tribunal held that
all the proceedings including the proceedings for imposition of penalties stood concluded
in view of the proviso to section 73(1).[Service Care vs. CST (2010) 20 STR 344 (Tri-
Chennai)]
• Where the appellant voluntarily registered and paid service tax alongwith interest when
he came to know about his liability and the department thereafter started proceedings for
confirmation of the demand and imposition of penalties, the Tribunal held that there is no
intent to evade payment of tax and accordingly no penalty u/s. 76,77 and 78 is imposable.
[Star Energy Systems vs. CST (2010) 20 STR 479 (Tri. – Ahmd.)].
Appeals
Where the SCN was issued invoking the provisions of the Cenvat Credit Rules, 2004,
section 73 of the Finance Act, 1994 (service tax law) and section 11AC of the Central
Excise Act, 1944 but the adjudicating authority confirmed the demand under Rule 14 of
the Cenvat credit Rules, 2004 and proviso to section 11A of the Central Excise Act, 1944,
the Tribunal held that the demand was confirmed under the Central Excise Act and hence
the appeal to the CCE(A) should be preferred under section 35 of the Central Excise Act,
1944 which provides for a limitation period of 2 months and not under section 85 of the
Finance Act, 1994, which provides for a limitation period of three months for filing an
appeal. Hence the assessee’s appeal being filed under section 85 of the Finance Act, 1994
(beyond the 2 months period) was dismissed. [Balasore Alloys Ltd. vs. CCE (2010) 20
STR 350 (Tri-Kolkata)]
Stay order
(i) Even in the absence of express provisions conferring power to the Tribunal to pass
stay order the power of granting stay is incidental and ancillary to its appellate
jurisdiction.
(ii) Under the first proviso to section 35C(2A) of the Central Excise Act, where in an
appeal, the Tribunal has granted a stay, it is obligatory on the Tribunal to dispose the
appeal within 180 days from the date of the stay order. If the appeal is not so disposed,
the second proviso to section 35C(2A) provides that the stay order shall stand vacated.
However, even in the absence of express provisions, the Tribunal has the power to extend
the stay order beyond 180 days.
(iii) But, the extension of stay order is not automatic. The assessee has to make proper
application before the Tribunal for extension of stay order otherwise the stay order
granted comes to an end at the expiry of 180 days.
(iv) When an application is filed for extension of stay, the Tribunal has to apply its mind
to find out for what reasons, the appeal is not disposed within statutory period of 180
days. If the assessee’s conduct is not the cause for the appeal not being disposed of, then
the assessee cannot be denied the benefit of extension of the stay order.
[CCE vs. Indian Oil Corporation (2010) 20 STR 458 (Kar.)]
CENVAT Credit
• In this case, the Tribunal held as follows : Repair & maintenance of Power Plant: Credit
of service tax paid on repair and maintenance services of plant for generation of steam
and electricity (exempt product) which were being used within the factory is admissible.
Insurance of Vehicles: Credit of service tax paid on insurance premium of vehicles is
admissible since it is in relation to maintenance related activities of the vehicle.
Repair and maintenance services: Credit of service tax paid on repair and maintenance
services undertaken in relation to air cooler, pay loader, dumper and changing of
damaged asbestos is admissible.
Security Services: Credit of service tax paid on security services used in places other than
the factory which did not have any direct nexus with the manufacture and clearance of
products is not admissible.
Rent-a-cab services: Credit of service tax paid on rent–a–cab services utilized by the
executives of the assessee in relation to procurement of raw materials, sale of finished
goods and connected business activities is admissible.
Commission agent’s services: Procurement of order for sale of finished goods being a
part of business activity credit of service tax paid to commission agent for procurement of
orders is admissible.
Mobile Phones services: Credit of service tax paid on mobile phones is admissible.
[CCE vs. H.E.G. Ltd. (2010) 20 STR 312 (Tri-Del)]
• Gardening services :Credit of service tax paid to interior decorator towards garden
development and to manpower supplier for supply of manpower for gardening activity is
admissible [CCE vs. Nirma Ltd.(2010) 20 STR 346 (Tri-Ahmd.) relying on Millipore
India Ltd. vs. CCE (2009) 13 STR 616 (Tri-Bang.)]
• Credit of service tax paid on clearing and forwarding agent services availed by 100%
EOU at the port for export of goods is admissible in view of the fact that place of removal
in case of exports would be the load port. [Adani Pharmachem (P) Ltd. vs. CCE (2010)
20 STR 386 (Tri-Ahmd.)
• Credit of service tax paid on insurance taken by the appellant, a port service provider
for individual employees working in port area is admissible. [India Gateway Terminal (P)
Ltd. vs. CCE (2010) 20 STR 338 (Tri-Bang.)]
• Where an assessee engaged in the business of manufacturing cement claimed credit of
service tax paid on account of repairs, maintenance and civil construction services used in
the residential colony of the assessee on the ground that the said services were ‘activities
relating to the business’, the Bombay High Court denied the credit and held as follows :
(i) the expression ‘activities relating to business’ in Rule 2(l) of CENVAT Credit Rules,
2004 refers to activities which are integrally related to the business activity of the
assessee and not welfare activities undertaken by the assessee;
(ii) rendering taxable services at the residential colony established by the assessee for the
benefit of the employees, is not an activity integrally connected with the business of the
assessee.
[CCE vs. Manikgarh Cement (2010) 20 STR 456 (Bom.)]
• Credit of service tax paid on commission paid to the overseas agent for the purpose of
canvassing and procuring order is admissible being sales promotion activities. Since the
tax was paid as a recipient of services the appellant is correct in taking credit on the basis
of TR-6 challans in terms of rule 9(1)(e) of the CENVAT Credit Rules, 2004. [CCE vs.
Ambika Overseas (2010) 20 STR 514 (Tri. – Del.)].
• The registration of an input service distributor (ISD) was made mandatory w.e.f.
16.6.05 under Notification no. 27/05 dated 7/6/05 which provided that the ISD shall make
an application for registration within 30 days from the date of commencement of business
or 16.6.05 whichever is later. Thus, where an existing entity made an application for
registration on 13/7/05 i.e. within 30 days from 16/6/05 and got its registration on
18.7.05, the Tribunal allowed the distribution of credit vide invoice dated 1.7.05 (i.e.
prior to the date of its registration). [CC & CE vs. Grasim Industries (2010) 20 STR 513
(Tri. – Del.)]
• Transfer of capital goods by the appellant to a job worker does not warrant any reversal
of cenvat credit availed on said capital goods since the goods processed by the job-
worker are received from the job-worker for further use in manufacture and the appellant
always had option to avail the credit on capital goods as and when he receives back the
Capital Goods [Rule 4(5)] thus, resulting in revenue neutrality. Further, service tax paid
on telephone and security services of by job-workers would not be available for credit by
the appellant. [Zenith Machine Tools Pvt. Ltd. vs. CCE ( 2010) 20 STR 554 (Tri. –
Bang.)]
Refund
• The appellant had paid service tax on certain transactions under the category of
consulting engineering services pursuant to an audit at the instance of the department.
Subsequently, the appellant received show cause notice proposing to demand tax, interest
and penalties, which were confirmed in adjudication by the Assistant Commissioner. On
appeal, the Commissioner (Appeals) held that the appellant was not liable for service tax
but denied refund on the ground of limitation (1 year from date of payment of tax). On
appeal, the Tribunal allowed the refund claim and held that the payment of service tax
and interest thereon at the instance of the department was not an assessment of tax by the
department and would be considered as deposit with the department pending completion
of investigation and adjudication. Hence, such payments cannot be considered as
payment of duty to attract the provisions of Section 11B. [Foods, Fats and Fertilisers Ltd.
vs. CC, CE & ST (2010) 20 STR 482 (Tri.-Bang.) contra Mahalakshmi Cable Industries
vs. CCE (2010) 20 STR 387 (Tri-Del.) wherein the Tribunal held that refund of tax paid
during the investigation would also be governed by the provisions of section 11B and
therefore the claim for refund is required to be made within 1 year from the date of
payment]
• Exporter cannot claim refund of Education Cess paid on input services used for the
purpose of export of goods under the Notification No. 41/2007-ST dated 6.10.2007 since
the said Notification only exempts tax and not education cess and there are no specific
notifications exempting education cess. [Balashore Alloys Ltd. vs. CCE, C & ST (2010)
20 STR 506 (Tri. – Kol.)].
• The New Delhi branch of Bank of Tokyo raised a debit note with service tax on its
Tokyo Branch for transferring funds of Suzuki Motor Corporation, Japan to Suzuki
Motor Cycles India Pvt. Ltd. in India on the advice of the Tokyo Branch. It also paid the
tax on the same to the Government. Subsequently, on the advice of its Tokyo branch it
reversed the debit note and filed refund claim of service tax paid. The revenue denied the
refund on ground of unjust enrichment. On appeal, the Tribunal allowed the refund on the
following grounds :
(i) that New Delhi Branch and Tokyo Branch of Bank of Tokyo both were branches of
the same legal entity. Thus, even if any services are provided between them it would be
considered as self-service and hence would not be liable for service tax.
(ii) Notwithstanding, there is no service to third party the services, if any, rendered by
New Delhi Branch would qualify as export of services and accordingly refund would be
allowed without reference to unjust enrichment.
[Bank of Tokyo – Mitsubishi Ufj Ltd. vs. CST (2010) 20 STR 509 (Tri. – Del.)].
Business Auxiliary Services
Where the appellant was engaged in the activity of promotion of newspapers of his client
the Tribunal held that such services would be squarely covered within the definition of
‘business auxiliary services’ as incidental or auxiliary to promotion or marketing or sale
of goods belonging to the client since the newspapers are considered as ‘goods.’
[Margadarshi Marketing Pvt. Ltd. vs. CCE & ST (2010) 20 STR 195 (Tri. – Bang.)].
Clearing and Forwarding Agents
‘Del credere agents’ are not liable for service tax under the category of ‘Clearing &
forwarding agents’ since they have been specifically covered under the category of
Business Auxiliary Services post 16.6.05. [CST vs. N. K. Agencies Pvt. Ltd. (2010) 20
STR 176.(Kar)]
Where the petitioners were engaged in liasoning, co-ordination and supervision of coal
loading at mines to ensure that proper indents are placed, requisite quality of coal is
loaded and wagons are loaded to full capacity and thereby facilitated movement of coal to
plants and factories of their customers, the High Court held that the petitioners prima
facie would not be liable for service tax under clearing and forwarding services.
[Karamchand Thapar & Bros. (Coal Sales) Ltd. vs. UoI (2010) 20 STR 3 (Cal.)].
Interior Decorator Services
Activities such as false ceiling, partitioning, flooring, providing modular systems,
painting, carpeting, electrical connections; supply and fixing or various furniture, etc.
would not be liable for service tax under the category of ‘Interior Decorator Services’
since -
(i) The said activities are in the nature of ‘execution of work’ and not in the nature of
advice, consultancy and technical assistance or planning and designing and hence would
not fall under ‘Interior Decoration Service’.
(ii) The appellant’s works are more aptly covered / included under the category of
‘Commercial or Industrial Construction services’ w.e.f. 16.6.2005. Thus, the appellant’s
services were not liable to service tax under the category of ‘Interior Decoration Service’
prior to 16.6.2005. [Spandrel vs. CCE (2010) 20 STR 129 (Tri. – Bang.)]
Mandap Keeper Services
In a “members club” the members and club both are the same entities. One maybe called
as ‘principal’ and other may be called as ‘agent’. The members have formed the club to
service themselves mutually and for this purpose, members are paying for such user and
any amount of receipt and expenditure of the clubs is enjoyed and / or incurred by the
members alone and not by third party. Thus, applying the principle of mutuality, the
facility of use of premise by the members of the club cannot be termed as “letting out”
nor the members of the club using such facilities can be termed to be “client”. In the
absence of two entities the transactions between the club and itsmembers would not be a
service and consequently no service tax would be imposable. [Karnavati Club vs. UoI
(2010) 20 STR 169 (Guj.) See also Sports Club of Gujarat Ltd. vs. UoI (2010) 20 STR 17
(Guj.)]
Sale of space or time for advertisement
The appellant’s services of soliciting clients for sale of space in newspapers would be
considered as a service ‘in relation to’ sale of space andmore aptly covered within the
category of ‘sale of space or time for advertisement’ which is effective from 1.5.2006 and
not under the category of ‘business auxiliary services’ prior to that date. [Margadarsi
Marketing Pvt. Ltd. vs. CCE & ST (2010) 20 STR 195 (Tri. – Bang.)]
Registration
Rule 4(5) of the Service Tax Rules, 1994, providing that the registration applied for shall
be ‘deemed’ to have been granted if the Superintendent does not grant registration within
7 days from the date of application is applicable only to registrations granted by the
Superintendent and not to Centralised Registration under rule 4(2) granted by the
Commissioner of Central Excise for whom there is no time stipulation. However,
Centralised Registration must be granted within reasonable time. 7 days may be
considered reasonable time. But this time is only directory not mandatory. Further,
registration would have to be granted so long as the form is completely and properly
filled and cannot be refused. It cannot even be granted under a category other than that
applied for nor can it be granted by the department on its own without application.
[Karamchand Thapar & Bros. (Coal Sales) Ltd. vs. UoI (2010) 20 STR 3 (Cal.)]
Interest
Interest would be payable only if wrongly taken credit is utilised and not where the credit
remains unutilised [CCE vs. Superfil Products (2010) 20 STR 279 (Tri. – Che.)]
Penalty
Where the revenue had not discharged the burden of proof that the appellant had
suppressed the facts with intent to evade payment of service tax no penalty imposable
u/ss. 76, 77 & 78 of the Act. [Nath Cold Retreads vs. CCE (2010) 20 STR 211 (Tri. –
Mum)]
Appeals
Under section 85(4) of Chapter V of the Finance Act, 1994 (“Act”) the CCE(A) has the
power to remand the matter to lower adjudication authorities unlike section 35A(3) of the
Central Excise Act, 1944 which does not contain a power to remand. [CST vs. World
Vision (2010) 20 STR 49 (Tri. – Del.)].
CENVAT Credit
Cenvat credit of tax paid on services of maintenance of water coolers installed in the
factory of the assessees is allowed, installation of water coolers being an essential
requirement under the provisions of the Factories Act. Similarly, credit of tax paid on
house keeping services vital for keeping factory in good condition is allowable. [Rotork
Control (India) Pvt.Ltd. vs. C.C.E (2010) 20 STR 29 (Tri.- Chennai)]
CENVAT credit of service tax paid on garden maintenance services is allowable being
activity relating to business. [I.S.M.T.Ltd. vs. C.C.E&C (2010) 20 STR 68 (Tri. –
Mumbai). Maruti Suzuki case [240 ELT 641(SC)] was held not applicable since in
Maruti Suzuki case the court was considering the definition of “input” which in the
inclusive part also contains the condition that the inputs must be “used in relation to
manufacture of final products” and hence the definition of “input” is not in pari materia
with that of “input services”. See also Kirloskar Oil Engines Ltd. vs. C.C.E (2010) 20
STR 30 (Tri. – Mumbai)].
Refund of credit of tax paid on input services used for exports under rule 5 of CENVAT
Credit Rules, 2004 is not deniable on the ground that the credit pertained to amonth in
which there was no exports [Fine Care Bio-systems vs. CCE (2010) 20 STR 193 (Tri. –
Ahmd) relying on Philco Exports vs. CCE (2009) 234 ELT 568 (Tri. Del) wherein it was
held that the time lag between date of receipt of inputs, date on which they were used and
date of export are not relevant.; See also CCE vs. Chamundi Textiles (Silk Mills) Ltd.
(2010) 20 STR 219 (Tri.- Bang.)].
Where the appellant being 100% EOU were availing services for transporting goods from
the factory to airport, loading them to the aircraft and making all documentation for the
transportation by air the Tribunal held that such services were availed by the appellant till
the goods are loaded into the aircraft for export and not thereafter. Therefore, the place of
removal in such cases would be the airport and accordingly, credit of service tax paid on
such services for facilitating export of goods from the place of removal (i.e. airport)
would be admissible.[Fine Care Bio-systems vs. CCE (2010) 20 STR 193 (Tri. – Ahmd)].
Credit of service tax paid on Group Mediclaim Policy and Workmen’s accident policy
would be considered as input services since they are part of manufacturing cost as per
Cost Accounting Standard–4 issued by the ICWAI and accordingly credit of the same is
admissible. [CCE & C vs. Endurance Systems India Pvt. Ltd. (2010) 20 STR 267 (Tri. –
Mum)]
The Tribunal held as follows :
(i) Credit of tax paid on invoices in the name of the ‘pure agent’ of the assessee is
allowable.
(ii) Credit of tax paid by the appellant, a manufacturer and exporter of silk fabrics, on
CHA services and servicing of cars is admissible.
(iii)Credit of tax paid by Bengaluru Head Office of the appellant on input invoices
addressed to it, but services in respect of which was for Mysore factory is admissible.
(iv)Credit of tax paid on inputs used for manufacture of goods sold to SEZ is admissible.
[CCE vs. Chamundi Textiles (Silk Mills) Ltd. (2010) 20 STR 219 (Tri.- Bang.)].
Clearing&Forwarding agent services
Where the appellant received the goods already cleared by the manufacturer and
forwarded the same to buyers the Tribunal held that the activities were not liable for
service tax under the category of Clearing and Forwarding Agents services [ABT Ltd. vs.
CST (2010) 19 STR 767 (Tri. – Che.); V.N.S.S. Textiles vs. CCE (2010) 19 STR 785
(Tri. – Che.) following CCE vs. Kulcip Medicines Pvt. Ltd.(2009) 14 STR 608 (P&H)
where the High Court held that in order for a service to be covered under the category of
‘clearing and forwarding’ services, the assessee must do both the operations viz,
‘clearing’ and‘forwarding’]
Commercial or Industrial Construction service
Construction of a driveway in a petrol pump is excludible from the ambit of ‘commercial
or industrial construction services’ as being construction of ‘roads’ and it is irrelevant
whether the road is for public utility purpose or is part of a commercial complex [CST vs.
Shilpa Constructions Pvt. Ltd. (2010) 19 STR 830 (Tri. – Ahmd.)]
Construction of warehousing complexes for the Central Warehousing Corporation, an
undertaking of Government of India, which rents these warehouses and earns revenue is
liable for service tax under the category of ‘Commercial or industrial construction
service’, it being a commercial construction for the Government. [A. B. Projects Pvt. Ltd.
vs. CCE (2010) 19 STR 886 (Tri. –Mum)]
Commercial Training or Coaching service
On facts, the tribunal held that, where the appellant imparted computer training to
educated unemployed youth under Yuva.com programme (announced by the Government
of Karnataka) and the said training equipped the candidates with skill and competence to
set up their ventures, the appellant would be considered as‘vocational training centre’ and
would qualify to claim exemption under notification no. 24/04-ST dated 10.9.2004.
[Svenpa Systems vs. CCE (2010) 19 STR 891 (Tri-Bang)]
Dredging Services
Where the appellant was engaged in the activity of dredging of the river for the purpose
of drainage and flood control, the Tribunal held that ‘dredging service’ has been defined
in an inclusive manner to include the appellant’s activities and the purpose for which the
dredging is undertaken in the river whether it is for the navigational purpose or for any
other purpose is irrelevant. [Mackintosh Burn Ltd. vs. CST (2010) 19 STR 682 (Tri. –
Kol.)]
GTA services
Where the appellants imported yarn from Nepalese suppliers who charged the appellant
in two invoices – one, for the cost of goods and transport upto Nepal border; and another,
for the transport from Indo-Nepal border to the appellant’s factory, the Tribunal held that
the appellant’s contract with the Nepalese suppliers was a contract for supply of goods
and the arrangement of transportation is merely incidental to the supply of goods and not
a provision of service. Since the appellants did not engage a transporter nor was there any
evidence that the suppliers engaged transporters as agents of the appellant, the appellant
is not liable to pay service tax on the transportation charges reimbursed to the suppliers
under GTA services. [Sumangalam Suitings (P) Ltd. v. CCE (2010) 19 STR 809 (Tri-
Del)]
Rent a Cab Service
Where on facts, the Tribunal found that as per the contract with Gujarat Secondary
Education Board (“GSEB”)-
(i) the appellants were paid for operating trips to various places on kilometer basis and
not for supply of stipulated number of vehicles; and
(ii) the management of the vehicles continued to be with the appellant during
transportation the Tribunal held that the appellant actually provided transportation
services and were not a liable for service tax under the category of “rent-a-cab scheme”
operator. [Vijay Travels vs. CST (2010) 19 STR 671 (Tri-Ahmd)].
Date of determining service tax rate
Service Tax shall be payable at the rate prevailing on the date of rendering the service
and not at the rate prevailing at the time of billing and receipt of payment. [CCE v.
Reliance Industries Ltd (2010) 19 STR 807 (Guj)]
Import of Services
Consulting engineering services rendered by a ‘foreign company’ to the appellants during
the period 1.4.99 to 31.3.01 is not liable for service tax, since:
(i) Consulting engineering services provided by a ‘body corporate’ would be liable for
service tax only w.e.f. 1.5.2006 and not prior to that date;
(ii) in any event no service tax would be payable on services provided from outside India
prior to 18.4.2006 since s.66A of the Finance Act, 1994 was introduced only w. e. f.
18.4.06.
Accordingly the High Court held that the appellants would not be liable to pay service tax
on the services provided by overseas foreign company. [CST v. Toyoda Iron Works Co
Ltd (2010) 19 S.T.R 802 (Kar) - relying on CCE vs. Araco Corporation (2010) 19 STR
169(Kar.)& CCE vs. SKF India Ltd. (2010) 18 STR 388 (Kar.)]
Limitation
Where the department issued the first show cause notice for a period 1.4.00 to 31.3.01 on
20.10.05 and subsequently issued another show cause notice for the period 1.4.01 to
31.3.04 on 31.8.2006 on the same issue invoking the extended period of limitation the
Tribunal held that the second show cause notice would be barred by limitation. [Vijay
Travels vs. CST (2010) 19 STR 671 (Tri-Ahmd)]
Penalty
On a question whether the penalty u/s.76 can be reduced below the limit prescribed by
section 76, the Gujarat High Court held that –
(i) the quantum of penalty has been specified in Section 76 by laying down minimum and
maximum limits with further cap insofar as the maximum limit is concerned. Hence it is
not possible to read any further discretion, than the discretion provided by the legislature
when legislature has prescribed minimum and maximum limits. Thus, section 76 does not
give any discretion to the authority to reduce the penalty below the minimum prescribed.
(ii) Section 80 says no penalty is imposable once the assessee establishes reasonable
cause. The provision does not say that even upon establishment of reasonable cause a
reduced quantum of penalty is imposable.
Therefore on a conjoint reading of Section 76 and 80 of the Act it is not possible to
envisage discretion as being vested in authority to levy a penalty below the minimum
prescribed limit. The High Court disagreed with several other High Court judgments
whose citations are - (a) 16 STR 19 (P&H); (b) 9 STR 348 (Bom.); (c) 14 STR 145
(P&H); (d) 15 STR 241 (Bom.); (e) 16 STR 135 (P&H); (f) 9 STR 123 (Bom); (g) 17
STR 8 (P&H); (h) 9 STR 350 (Bom.); (i) 14 STR 9 (Kar.); & (j) 7 STT 372 (Raj.) on the
ground that in none of the judgments have the provisions of either Section 76 or Section
80 of the Act been analyzed and dealt with. [CCE vs. Port Officer (2010) 19 STR 641
(Guj.)]
Cenvat Credit
Where the appellant availed GTA services for transportation of goods from the factory to
the consignment agent’s premises from where the goods are sold to the customers the
Tribunal held that such premises of consignment agent would be treated as ‘place of
removal’ and credit of tax paid on GTA services would be allowed. [Anmol Bakers Pvt.
Ltd. vs. CCE (2010) 19 STR 656 (Tri. – Del.)]
Cenvat credit availed on the garden maintenance service and repair of freezer installed in
canteen is admissible being input services used‘in relation to the manufacture of final
product’ or ‘in relation to the business activity’. The Tribunal further held that since there
are no contrary decisions there is no need to refer the issue to a Larger Bench. [Reliance
Industries Ltd v. CCE (2010) 19 STR 823 (Tri-Mum). Case law analysis:
(i) ISMT Ltd v. CCE (2010) TIOL 27 (Tri-Mum) and SEMCO Electricals v. CCE (2010)
18 STR 177 (Tri-Mum) relied on.
(ii) Kirloskar Oil Engineers Ltd.v. CCE (2009) 247 ELT 734 (Tri-Mum) being set aside
by Bombay High Court and remanded back to the Tribunal, held, cannot be followed.
(iii) Vikram Ispat v. CCE (2010) 19 STR 52 (Tri-Mum) only follows Kirloskar case and
hence cannot be followed.
(iv) CCE v. Manikgarh Cements (2010) 18 STR 275 held not on same facts.
Consequently, the matter was not referred to Larger Bench].
Airport Service
Admission ticket fee collected by the airport authorities from passengers entering the
airport is liable for service tax under the category of airport services. If the right to collect
the said fee has been licenced by the airport authority to any person then the said person
would be liable to pay service tax under this category. [CCE vs. P. C. Paulose (2010) 19
STR 487 (Ker.)]
N.B. : The Kerala High Court in CCE v.Cochin International Airport Ltd. (2009) 16 STR
401(Ker.) had held that user fee collected from outgoing international passengers was not
for a service and hence not taxable. The present decision appears to be contrary to the
CIAL case.
Business Auxiliary Services
In this case the Tribunal relying on Board Circular No. 249/1/2006 – CX dated
27.10.2008 held that the activity of manufacturing alcohol based perfumes and
pharmaceutical products though not liable for Central excise duty amounts to
‘manufacture’ as defined under s. 2(f) of the Central Excise Act, 1944, and accordingly
would not be liable for service tax under the category of ‘business auxiliary services’.
[Rubicon Formulations Pvt. Ltd vs. CST (2010) 19 STR 515 (Tri-Mumbai)]
N.B : The above case is prior to the amendment in the definition of Business Auxiliary
services from 7.7.09.
Erection, Commissioning or installation service
Where the appellant was engaged in fabrication of structures at the customer’s site the
Tribunal held that this service was not covered under erection, commissioning and
installation services in view of the following:
(i) After surveying all Board Circulars Tribunal held:
(a) Structures were not intended to be covered under Plant, Machinery or Equipments.
(b) Erection refers to civil work for installation / commissioning of a plant & machinery.
(c) Erection, commissioning or installation of structures whether fabricated or not was
not covered by the definition of Erection, Commissioning or Installation service prior to
1-5-2006.
The activity undertaken by the appellant is fabrication of structures and this was not
covered under erection of Plant, Machinery, or Equipments as no civil work was
undertaken by the appellant. Accordingly, the process of pre-fabrication of structures was
not covered under the “Erection, Commissioning & Installation Service” prior to 1-5-
2006.
(ii) The activity undertaken by the appellant is covered under Section 2(f) of Central
Excise Act as manufacturing activity. Hence the appellants are not liable to pay the
service tax on the activities undertaken by them.
[Neo Structo Construction Ltd. vs. CCE & C (2010) 19 STR 361 (Tri. – Ahmd)]
Management Maintenance or Repair services
Where the appellants were engaged in erection and commissioning of pre-fabricated
structures at site and also did maintenance and repair work under various work orders at
pre-determined prices, the Tribunal held on facts, that there is no finding/evidence/
observation flowing from the agreement that both parties intended repair / maintenance is
a separate part and has to be treated as such. Thus, in the absence of any maintenance &
repair contract, the demand based on rate or value contract work is not sustainable prior
to 16.6.05. [Neo Structo Construction Ltd. vs. CCE & C (2010) 19 STR 361 (Tri. –
Ahmd)]
Manpower Recruitment or Supply Agency service
Where the entire tenor of the contract was for execution of a lumpsum work of loading,
unloading, bagging, stacking, de-stacking etc. with the customers the Tribunal held that
the activity would not fall under the category of Manpower Supply Agency services.
[Divya Enterprises vs. CCE (2010) 19 STR 370 (Tri. – Bang.) and S. S. Associates vs.
CCE (2010) 19 STR 438 (Tri. – Bang.)]
Inter-Unit Services Not Taxable
Where the one unit of corporate entity providing the services to other unit of the same
corporate entity the Tribunal held that the different units of a corporate entity will not
make them separate legal entities for the purpose of leviability of service tax and when
one renders service to one self service tax is not leviable. [Chemplast Sanmar Ltd. vs.
CCE (2010) 19 STR 424 (Tri. – Che.)]
Valuation
In respect of goods transport agency services, the liability to pay service tax is fixed on
the payer of freight and hence the abatement of 75% in terms of Notification No. 32/2004
dated 3.12.2004 would be available to such payer of freight. [Andhra Pradesh Paper Mills
Ltd. vs. CCE (2010) 19 STR 557 (Tri-Bang.)]
Limitation
Where the appellants, challenged the constitutional validity of levy of service tax on tour
operators, was upheld by the High Court vide order dated 30.4.01, tax on tour operators
became payable 1.4.2000. However , the appellants paid tax only from 1.5.01. On the
facts the Tribunal held that a show cause notice issue to the appellant in the year 2005
seeking to levy service tax for the period 1.4.2000 – 30.4.01 is barred by limitation. The
extended period of limitation cannot be invoked since the facts were already known to the
department. [Travel Aid vs. CST (2010) 19 STR 570 (Tri-Chennai)].
The appellant, a hotel, was registered for service tax under the category of ‘Mandap
Keeper’ services and filed its returns regularly from 1997-2007 but had stopped paying
service tax under mandap keeper services from 2002 claiming exemption under
notification no. 12/2001 dated 20.12.2001. The department issued a SCN dated 30.1.2007
seeking to reclassify the services under ‘Convention Services’ to deny the exemption for
the period 1.2.2002 – 13.7.2004. The Tribunal held that the extended period of limitation
cannot be invoked on the ground of suppression of facts since the assessee was regularly
filing its returns and the department could have asked for further details as they were
aware of the appellant’s activities. [CCE vs. Casino Hotel (2010) 19 STR 425 (Tri. –
Bang.)].
Penalty
Penalties u/s. 76 & 78 cannot be imposed simultaneously for the same default viz,
default in payment of service tax.[CCE vs. City Motors (2010) 19 STR 486 (P& H)].
Once the provisions of Section 76 stand invoked against the assessee, the penalties have
to be imposed in terms of the said section and cannot be lowered taking aid of Section 80.
Section 80 only empowers the adjudicating authority to set aside the penalties in toto and
not lower them. [CCE vs. Bajrangbali Coke Indus. Pvt. Ltd. (2010) 19 STR 567 (Tri-
Ahmd.)]
Where the Commissioner had enhanced the penalty by way of a revisonary order passed
u/s. 84 during the pendency of appeal before the Commissioner (Appeals) the Tribunal
held that the revisionary order u/s. 84 was not sustainable. [K.T.V. Oil Mills vs. CCE
(2010) 19 STR 587 (Tri-Chennai)]
Where the appellant has voluntarily paid service tax alongwith interest suo motu before
the issue of show cause notice no penalty u/s. 76 is imposable. [Varsana Ispat Ltd. vs.
CCE (2010) 19 STR 359 (Tri. – Ahmd); Geotechnical Engg. Research Laboratory vs.
CST (2010) 19 STR 407 (Tri- Ahd)]
Cenvat Credit
Cenvat credit of service tax paid by the assessee on goods transport agency services
availed by them for transportation of empty cylinders from its factory premises to the
supplier for procuring liquid chlorine, which was an essential input used in manufacture
of its final product is admissible being ‘service used for procurement of inputs’ [Kerala
Minerals and Metals Ltd. vs. CCE (2010) 19 STR 505 (Tri-Bang.)].
Where the appellant has centralised registration (centralized billing/ centralized
accounting system) credit cannot be denied even if invoices of input services are issued in
the name and address of its branches especially when the appellant has been discharging
the entire service tax liability from its registered premises and has also made the payment
from its registered premises for the value of input services received by its branch offices.
[Manipal Advertising Services Pvt. Ltd. vs. CCE (2010) 19 STR 506 (Tri-Bang.)]
Cenvat credit of service tax paid on manpower recruitment services used for maintenance
of garden within the factory premises using treated industrial and domestic sewage water,
was held to be admissible where it was a statutory requirement under the consent given
by the Karnataka State Pollution Control Board (KSPCB).[Brakes India Ltd. vs. CCE
(2010) 19 STR 524 (Tri-Bang.)]
Where the goods are sold on F.O.R. basis the Tribunal held that credit is admissible on
outward transportation upto the buyers’ premises based on CBEC Circular dated
23.08.2007 and Ambuja Cements Ltd. v .UoI (2009) 14 STR 3 (P & H). The Tribunal
made the following significant observations -
(i) Since a value added tax operates by taxing input goods and services and output goods
and services with provisions for credit of tax paid on input goods and services which can
be utilized for payment of tax on output goods services, the present system of levy of
central excise duty on manufactured goods and levy of service tax on certain services
with facility of credit being available of the central excise duty paid on inputs capital
goods and of service tax paid on input services, which can be utilized towards payment of
central excise duty on finished goods or for payment of service tax on output service, has
the character of a value added tax. Since basic principle of a value added tax is that while
subjecting a finished product to tax, credit of tax paid on all input goods, capital goods
and input service is allowed which can be utilized towards payment of tax on the finished
product, a corollary to this principle would be that in an indirect tax of the nature of value
added tax, when a finished product is taxed, credit of duty paid on all input goods, capital
goods and input services has to be allowed.
(ii) When the assessable value of the goods under Section 4 of the Excise Act is not
confined to the manufacturing cost and manufacturing profit but includes all the
components like marketing and selling organization expenses, advertisement expenses,
after sales service, storages upto time of removal etc. which have contributed to the value
of the goods and in case of FOR destination sales at the customer’s premises, all expenses
including transport expenses upto the customer’s premises are includible in the assessable
value for charging duty, the input duty credit cannot be confined only to the services used
in the completion of manufacturing process. Therefore, while interpreting the scope of
“input services” as defined in Rule 2(l) of Cenvat Credit Rules, 2004, clause (xvia) and
(xviaa) of subsection (2) of Section 37 of the Excise Act should not be looked at in
isolation and it is the entire Central Excise Act containing the scheme of levy and
collection of central excise duty which has to be taken into account. In view of the above,
there is no conflict between the provisions of Rule 2(l) of the Cenvat Credit Rules, 2004
and clause (xvia) and (xviaa) of Section 37(2) of the Excise Act.
(iii) Credit cannot be denied just because the duty on the goods has been paid on the
assessable value determined under Section 4A of the Central Excise Act i.e on the value
determined with reference to declared MRP minus abatment instead of transaction value
under section 4 of Central Excise Act.
(iv) The appellant’s sales are on FOR destination basis and the three conditions in this
regard mentioned in the Board’s Circular dated 23-8-07 are satisfied, that is, ownership
and property in the goods remains with the appellant till delivery of the goods in
acceptable condition to the customers at their door steps, the appellant bear the risk of
loss or damage to goods during transit upto the destination and freight charges are
integral part of the price of the goods.
[L.G. Electronics (India) Pvt. Ltd. vs. CCE (2010) 19 STR 340 (Tri. – Del.). See also
Automobile Corporation of Goa Ltd. vs. CCE (2010) 19 STR 518 (Tri-Mumbai)]
Cenvat credit on (i) Vehicle maintenance; (ii) Transportation, installation and
maintenance of coolers; (iii) Marketing and publicity services and (iv) Calibration
services and Systems maintenance services are allowed on ground that these are
‘activities relating to the business’ of the appellant. [Hindustan Coca Cola Beverages P.
Ltd. vs. CCE & ST (2010) 19 STR 356 (Tri. – Bang.)]
Cenvat Credit of tax paid on ‘shifting of household goods of employees’ is not allowed
since it not in any way connected with the appellant’s business activity. [Hindustan Coca
Cola Beverages P. Ltd. vs. CCE & ST (2010) 19 STR 356 (Tri. – Bang.)].
(i) Marine inland transit insurance : Cenvat credit of service tax paid on insurance of
captive power plant during its transportation was allowed on the ground that since the
‘input service’ definition specifically covers ‘inward transportation of input and capital
goods’, it also covers insurance during such transportation.
(ii) Insurance for money in transit : Cenvat credit of service tax paid on insurance of
money in transit is allowed being ‘activity relating to the business’.
(iii) Follow-up services : Cenvat credit of service tax paid under business auxiliary
services on follow-up services for installation of captive power plant is allowed being
‘services in relation to setting up or modernization of factory’ which are specifically
covered in the input service definition.
(iv) Residential and Guest House Telephones : Cenvat Credit on telephone services in
respect of telephone installed at General Manager’s residence and Guest house are not
allowed in absence of evidence that these services are in relation to manufacturing
business.
(v) Accident Insurance of personnel: Cenvat credit of service tax paid on accident-
insurance on personnel working in the appellant’s factory is allowed being activity
relating to the business even if they relate to workers supplied by the contractors since as
per the provisions of the Facties Act, the appellant asa principal employer has a vicarious
liability for any compensation in the case of injury etc. to even contract workers.
[Monnet Ispat & Energy Ltd. vs. CCE (2010) 19 STR 417 (Tri. – Del.)]
Where the assessee removed inputs ‘as such’ the Tribunal held that while the assessee on
such removal is required to reverse the Cenvat Credit of ‘excise duty’ availed in respect
of such inputs, under rule 3(5), the cenvat credit of ‘service tax’ on GTA services availed
for inward transportation of such inputs need not be reversed [A.R. Casting (P) Ltd v.
CCE 2010(19) S.T.R. 384 (Tri-Del)]
The assessee manufactured & sold ‘rebar coils’ from their factory and from its Branch
Sales Offices (BSOs) and paid excise duty on such sales. It had appointed C&F agents to
receive, stock & sell the products at its BSOs. On specific requests from its customers, in
a few cases, the C&F agents did cutting, bending & straightening before selling the goods
and charged the assessee certain processing charges. The assessee took credit of the tax
paid on such charges. The department denied the credit contending that the process of
cutting, bending etc. does not amount to manufacture and hence the service is not ‘used
in relation to manufacture’. The Tribunal dismissed the contention and held that cenvat
credit is allowable since the said service is an ‘activity relating to business’ of the
assessee which is an independent limb available to the assessee to claim credit. [Rashtriya
Ispat Nigam Ltd v. CCE [2010 (19) S.T.R. 389 (Tri – Bang) relying on Coca Cola India
Pvt. Ltd. V. CCE (2009) 15 STR 657 (Bom.)].
Cenvat credit of service tax paid on overseas commission agent’s services is allowed on
the ground that service of the commission agent is in relation to the business activity of
the appellant. [CCE vs. Nilkamal Crates & Bins (2010) 19 STR 431 (Tri. – Ahmd)].
Works contract services – Composition scheme
Where the appellant had an on-going works contract as on 1.6.07 (the date on which
service tax on “works contract services” were introduced) but had paid service tax on
payments received prior to 1.6.07 inter alia under the category of “construction services”
the High Court held that the assessee would not be entitled to avail the benefits of the
Composition Scheme [payment of 4% on the gross contract value] since the election to
opt for the composition scheme is to be made before service tax is paid in respect of the
works contract. [Nagarjuna Construction Company Ltd. vs. Government of India (2010)
19 STR 321 (AP)]
Business Auxiliary Services
Where the appellant, a CHA, arranged containers for their clients who were exporters of
goods through steamer agents for a brokerage paid by the steamer agents, the Tribunal
held that the brokerage was not taxable under ‘Business Auxiliary Services’ since the
assessee’s services were in the nature of ‘secondary services’ which ultimately got
consumed with the primary services [presumably steamer agent service] that were
exported and by virtue of CBEC Circular No. 56/5/2003 dated 25/4/2003 such secondary
services are ‘exports’ and not taxable. [Ruth Shipping Agencies Pvt. Ltd. vs.CCE (2010)
19 STR 39 (Tri- Che.)]
Cargo Handling services
Where the assessees arranged loading and unloading of consignments of fertilizers and
charged the clients with a 15% margin compared to the amount paid to the contractors it
was held that the assessees provided cargo handling services to the client. [Karnataka
State Warehousing Corporation Ltd. vs. CCE (2010) 19 STR 32 (Tri-Bang.)]
Clearing and forwarding
The activity of cutting of sugarcanes and its loading and transportation upto the sugar
factories does not amount to ‘clearing and forwarding agent’ services. [Ajinkyatara
Sahakari Krishi Audyogik Otvs Ltd. vs. CCE (2010) 19 STR 285 (Tri-Mumbai)]
Commercial or industrial construction service
Laying of pipelines for Gujarat Water Supply and Sewerage Board (GWSSB) for supply
of drinking water to gram panchayats and nagar panchayats would not be liable under
‘commercial or industrial construction services’ [which includes construction of pipeline
or conduit] since the pipelines were not laid to facilitate any commercial or industrial
activity of GWSSB. [Nagarjuna Construction Co. Ltd. vs. CCE (2010) 19 STR 259 (Tri-
Bang.) relying on Indian Hume Pipe Co. Ltd. vs. CCE (2008) 12 STR 363 (Tri)]
Erection, Commissioning or Installation
Laying of pipelines is not covered under the category of “Erection, Commissioning or
Installation” service and hence not liable for service tax [A. Sekar v. CCE (2010) 19 STR
82 (Tri. – Chennai) relying on Indian Hume Pipe Co.Ltd. v. CCE (2008) 12 STR 363
(P&H)]
Practicing Chartered Accountant’s services
Transfer Pricing certification / report under section 92E of the Income-tax Act, 1961
would be considered as ‘auditing’ services and accordingly not entitled for exemption
under notification no. 59/98-ST dated 16.10.98 (whereby all services except accounting,
auditing and certain certification services were exempt).[Price Waterhouse vs. CST
(2010) 19 STR 63 (Tri. – Che.)]
Storage and Warehousing services
In this case the High Court held that subsidy received from the Government towards
interest, storage and insurance for maintenance of a specific quantity of free sale sugar
for a specified period (buffer stock) under the provisions of Sugar Development Fund
Act, 1982 is not liable under the ‘storage and warehousekeeping services’ after making
the following observations-
(i) Nobody can provide service to himself – the appellant stored the goods owned by
himself for a specified period and after the expiry of the period he was free to sell the
same;
(ii) Subsidy received was not on account of services rendered to Government but is
received as compensation on account of loss of interest, cost of insurance etc. incurred on
account of maintenance of stock.
(iii) Just because the storage period of free sale sugar had to be extended at the behest of
Government of India, neither the sugar mills becomes ‘Storage and Warehouse Keeper’
nor the Government of India become their client in this regard.
[CCE vs. Nahar Industrial Enterprises Ltd. (2010) 19 STR 166 (P&H)]
Ø The Karnataka State Warehousing Corporation, whose services are requisitioned by
the State Government for storing of essential commodities like fertilizers on payment of a
charge, does not perform a “statutory function”, and is liable for service tax under storage
and warehousing services [Karnataka State Warehousing Corporation Ltd. v. CCE (2010)
19 STR 32 (Tri-Bang.)]
Tour operator services
Transporting staff of client from work place to their residence and back in a vehicle
would not be liable for service tax under the category of “tour operator services” since
the appellant was neither engaged in transporting the staff in ‘tourist vehicle’ nor his
activity involved planning, scheduling, organizing, arrangement of tours using his vehicle
[Remanan Travels vs. CST (2010) 19 STR 83 (Tri. – Bang.)] .
Import of Services
Consulting engineering services rendered by a ‘foreign company’ to the appellants during
the period Nov. 98 to December, 2000 is not liable for service tax, since:
(i) Consulting engineering services provided by a ‘body corporate’ would be liable for
service tax only w.e.f. 1.5.2006 and not prior to that date;
(ii) in any event no service tax would be payable on services provided from outside India
prior to 18.4.2006 since s.66A of the Finance Act, 1994 was introduced only w. e. f.
18.4.06.
Accordingly the High Court held that the appellants would not be liable to pay service tax
on the services provided by overseas foreign company. [CCE vs. Araco Corporation
(2010) 19 STR 169(Kar.) relying on CCE vs. SKF India Ltd. (2010) 18 STR 388 (Kar.)]
Valuation
SIM card is not a ‘goods’ sold to the customer by a mobile service provider but is
supplied as part of telecommunication service and it has no intrinsic value other than
receiving mobile telephone service from the service provider. Consequently, the value of
SIM card is includible in the value of taxable service. [CCE vs. Idea Mobile
Communications Ltd. (2010) 19 STR 18 (Ker.)]
Where the appellant has already paid VAT on the material component of the construction
contract which as per the state VAT law was deemed as 70% and on the balance 30%
paid service tax, the Tribunal held that the Revenue cannot collect service tax on the
material component since it would violate the principles of fiscal federalism and
mutuality of service tax and sales adopted in the Constitution. [Sobha Developers Ltd. v.
CCE & ST (2010) 19 STR 75 (Tri. – Bang.)]
Demand
Where the revenue had raised the demand based on the differences between the amounts
shown in ST-3 return and the balance sheet, bank book & ledger and where it had failed
to consider the explanation for the differences given by the assessee at the time of
investigation the Tribunal held that the demand was not in accordance with law and
hence not sustainable since the entire demand was based on assumptions and
presumptions and the department had failed to establish the demand based on evidence.
[CST vs. Purni Ads Pvt. Ltd (2010) 19 STR 242 (Tri-Ahmd.)]
Limitation
Where the assessees were registered under storage and warehousing services as early as
8.3.2004 but did not pay service tax, a show cause notice issued on 21.3.2006 for
demanding service tax for the period 16.8.2002 to 31.3.2005 pursuant to a visit of the
departmental officers on 14.2.2005, cannot invoke the longer period of limitation and the
demand beyond the normal period of limitation is not sustainable. [Karnataka State
Warehousing Corporation Ltd. vs. CCE (2010) 19 STR 32 (Tri-Bang.)]
Where the department had already issued a show cause notice on 28.3.2003 seeking to
tax the assessee under ‘clearing and forwarding services’ for the period 1997-98 to 2000-
01, a second show cause notice dated 9.11.2004 seeking to tax the same activity under
‘goods transport services’ is barred by limitation since the department was already aware
of the facts. [Ajinkyatara Sahakari Krishi Audyogik Otvs Ltd. vs. CCE (2010) 19 STR
285 (Tri-Mumbai)]
Penalty
Where penalty u/s. 78 was not proposed to be imposed in the show cause notice (the
foundation stone of the case) the revenue cannot impose the same by exercising the
revisionary jurisdiction. Further, where the adjudicating authority imposed a penalty of
only Rs. 100/- u/s. 76, the High Court held that the Commissioner in exercise of his
revisionary jurisdiction cannot increase the penalty to Rs. 1.5 lakhs since the assessee
being a Government Undertaking there was no intention of evasion of tax and the
assessee had also explained the reason of non-payment and had immediately deposited
the tax on being pointed out. [CCE vs. Punjab Small Industries & Export Corpn. Ltd.
(2010) 19 STR 16 (P&H)]
In the present case the appellant has deposited the service tax on the service of renting of
immovable property provided by him belatedly. The adjudicating authority imposed
penalty u/s 76. The Tribunal held that the penalty u/s. 76 is not imposable since the
appellant was under a bona fide belief for not depositing the service tax in time and there
was no allegation that the tax was collected from service receivers but not paid. [Taradevi
Bafna vs. CCE (2010) 19 STr 73 (Tri. – Mum)]
Where the assessee had paid service tax and interest before the issuance of Show Cause
Notice, the Tribunal held that in view of the CBEC Circular No. 137/167/2009-CX.4
dated 3.10.07 no show cause notice was required to be issued. Accordingly no penalties
were imposable.[Nischint Engineering Consultants Pvt. Ltd. vs. CCE (2010) 19 STR 276
(Tri-Ahmd.)]
Refund
The place of removal in case where the goods are exported on FOB basis would be the
port and accordingly, credit of service tax paid on CHA services in respect of excisable
goods at the port area i.e. place of removal would be admissible and accordingly refund
of service tax paid on CHA service which is used as input for export of final product
would be allowed. [Leela Scottish Lace Pvt. Ltd.. vs. CCE. (2010) 19 STR 69 (Tri. –
Bang.)]
Where the assessee paid service tax on auctioneer services, under the category of
business auxiliary services even before the introduction of service tax on auctioneeer’s
services w.e.f. 1.5.2006 the Tribunal allowed the refund claim for the amount of service
tax paid by it under the category of business auxiliary services holding –
(i) Auctioneer services are liable only w.e.f. 1.5.2006 and not prior to that date and hence
the assessee was eligible for refund of such tax;
(ii) Section 11B of the Central Excise Act, 1944 would not apply to such cases, and
accordingly the limitation bar of 1 year would not be applicable.
(iii) The assessee had not collected the service tax from its clients evidenced by the
Balance Sheet (amount disclosed as ‘receivables’) and Chartered Accountant’s
Certificate. Hence the bar of unjust enrichment would also not be applicable.
[CCE vs. Shankar Ramachandra Auctioneers (2010) 19 STR 222 (Tri – Mumbai)]
Where the appellant paid Rs. 37,960/- as service tax during 2006–07 but claimed refund
of such tax on 21.1.2008 on the ground that the total value of taxable services for the year
2006 – 07 was below the exemption limit [Rs. 4 lakhs], the Tribunal held that the refund
was not permissible since the exemption has to be claimed in advance and once claimed
cannot be withdrawn for a financial year. [L.G. Marwadi vs. CCE (2010) 19 STR 279
(Tri-Mumbai)]
Appeals – Letter from Commissioner appealable?
Pursuant to a clarification sought by the respondent-assessee the Addl. CCE vide letter
dated 23.12.2004 clarified that service tax was not payable on international door-to-door
courier service but the Commissioner vide letter dated 9-1-2006 stated that the
clarification of the Addl. CCE was not in accordance with a Board Circular and directed
the payment of service tax. On appeal, the CESTAT held that the Commissioner’s letter
dated 9.1.2006 was an order but was bad in law since it did not give an opportunity to the
assessee of being heard / showing cause either under section 73 or section 84. The High
Court affirmed the order of the CESTAT. [Chief Commissioner, LTU,Bangalore vs.TNT
India Pvt. Ltd 2010 (19) STR 5 (Kar)]
Recovery of amounts
The department has no authority to use coercive measures to collect any amount of tax in
advance at the time of raid. It can legitimately do so only at the time of recovery
proceedings when tax liability has been ascertained by following the procedure of issue
of show cause notice and not before that. Thus where the assesee had to make a
compulsory payment towards tax in advance at the time of raid and in absence of any
show cause notice issued by the department, the Hon’ble High Court held that the
department had no right to do so and accordingly ordered the amount to be
refunded.[Naresh Kumar & Co. vs. UOI (2010) 19 STR 161 (Cal.)]
Where the department had issued notice to ONGC u/s. 87(b)(i) of the Finance Act, 1994,
for recovery of service tax on services provided by certain manpower supply agencies to
ONGC without passing assessment orders crystallising the service tax liability of the
manpower supplying agencies the High Court held that, only after an assessment order
has been passed and the assessees have defaulted in payment of assessed tax, the
department has powers to issue notice to ONGC u/s. 87 and not before that.[O.N.G.C.
Ltd. vs. DyCCCEST (2010) 19 STR 164 (A.P.)]
CENVAT credit
CENVAT credit of service tax paid on construction of staff quarters is allowed on the
ground that staff quarters are premises of the bank and input services include services
used in the premises of output service provider [The Lakshmi Vilas Bank Ltd. vs. CCE
(2010) 19 STR 40 (Tri.-Che)]
CENVAT credit of service tax paid on repair / maintenance, insurance, surveys, technical
inspection certification services and manpower recruitment services all relating to
vessels, viz., tugs and barges which were used for the purpose of transporting raw
materials and final products from / to ships anchored at sea to/from the appellant’s
factory was disallowed by the Tribunal on the ground that none of the above mentioned
services would be considered as input services since the quintessential requirements of
“input service” laid down in the main part of the definition have not been established by
the appellant i.e. a nexus between the services in question and manufacture / clearance of
excisable goods by the appellant.[Vikram Ispat vs. CCE (2010) 19 STR 52 (Tri. –
Mumbai)]
Rent-a-cab, air travel and servicing of motor vehicle services were considered as
activities relating to business and CENVAT credit of service tax paid on those services
were allowed [Dr. Reddy’s Lab. Ltd. vs. CCE (2010) 19 STR 71 (Tri. – Bang.)]
(i) CHA Service : The load port would be the “place of removal” and accordingly, credit
of service tax paid on CHA services availed for facilitating clearance of goods from the
place of removal (i.e. load port) would be admissible as activity relating to business.
(ii) Dry Cleaning Services : Wearing of clean uniforms/clothing is mandatory under
Drugs and Cosmetics Act for personnel engaged in the manufacturing of medicaments or
drugs. Hence, said services are relating to business and CENVAT credit of tax paid on
same is allowed.
(iii)Telephone Service : Telephone is used by the appellant for the day to day business
operation and hence CENVAT credit of service tax paid on the same is allowed.
[CCE vs. Fourrts (I) Laboratories Pvt. Ltd. (2010) 19 STR 86 (Tri. – Che.)]
CENVAT credit of service tax paid on mediclaim policy, Security services, vehicle
insurance, Car rentals, Pest control activities are allowed on the ground that the said
services are all related to the business activity of the appellant. [Hindustan Coca Cola
Beverages P. Ltd. vs. CCE (2010) 19 STR 93 (Tri. – Bang.)]
Cenvat credit of service tax paid on outdoor catering services availed by the various
assessee – manufacturers for providing canteen facilities to their employees would not be
admissible for the following reasons:
(i) credit of duty / tax in respect of inputs or input services is permitted only when the
same is used “in, or in relation to manufacture of excisable goods”.
(ii) Cenvat credit would not be available merely on the basis that the value of input /
input services is included in the value of finished excisable goods;
(iii) Use of the input service must be integrally connected with the manufacture of the
final product. The input service must have nexus with the process of manufacture. It has
to be necessarily established that the input service is used in or in relation to the
manufacture of the final product. One of the relevant test to determine the availability of
credit would be – “can the final product emerge without the use of the input service in
question?” Since Outdoor Catering is not integrally connected with the manufacture of
final product it is not an “input service”.
[CCE vs. Sundaram Brake Linings (2010) 19 STR 172 (Tri-Chennai), departing from
CCE v. GTC Industries Ltd. (2008) 12 STR 468 (Tri-LB) in view of the Supreme Court
decision in Maruti Suzuki Ltd. vs. CCE (2009) 240 ELT 641 (SC)]
Credit of service tax paid on garden maintenance being an activity relating to business is
admissible. [Rane TRW Steering Systems Pvt. Ltd. vs. CCE (2010) 19 STR 251 (Tri-
Chennai) relying on Millipore India Ltd. vs. CCE (2009) 13 STR 616 (Tri)]
Credit of service tax paid on inspection charges for constructing staff quarters
admissible.
Credit of service tax paid on Mobile Phones admissible.
[Port Officer, Gujarat Maritime Board vs. CCE (2010) 19 STR 282 (Tri-Ahmd.)
CENVAT Credit cannot be denied by questioning the assessment of service provider
since it is beyond the jurisdiction of the authorities in-charge of the service recipient.
[Hindustan Coca Cola Beverages Pvt. Ltd. vs. CCE (2010) 19 STR 280 (Tri-Del.)]
Where the assessee provided taxable services as well as was engaged in trading activity,
and availed CENVAT Credit on input services used for taxable services as well as trading
activity, the Tribunal held that –
(i) Trading activity is nothing but purchase and sales and cannot be called a service and
therefore it cannot be considered as exempted service.
(ii) Rules 6(2) and 6(3) of the CENVAT Credit Rules, 2004 only deal with a situation
where service provider is providing taxable and exempted ‘services’. Since trading
activity is not an exempted service rule 6 cannot be applied to such a situation.
(iii) The only obvious solution which would be legally correct appears to be to ensure
that once in quarter or once in six months, the quantum of input service tax credit
attributed to trading activity according to standard accounting principles is deducted and
the balance only availed for the purpose of payment of service tax of output service. This
proposition is not against the law in view of the fact that there are several decisions of
various High Courts and also of the Tribunal wherein a view has been taken that
subsequent reversal of credit amounts to non-availment of credit.
[Orion Appliances Ltd. vs. CST (2010) 19 STR 205 (Tri-Ahmd.)]
Consulting Engineer Service
Where the assessee company executed a works contract of design, development,
commissioning etc., of an oil free compressor system for its client during the period
1997–2001 it was held that the assessee is not liable under ‘consulting engineering
services’ –
(I) since services rendered by ‘companies’ were not liable prior to 1.5.2006 under this
category;
(ii) since the assessee company’s service fall under works contract services which was
brought into the ambit of service tax only w.e.f. 1.6.2007.
[CST vs. Turbotech Precision Engineering Pvt Ltd, (2010) 18 STR.545 (Kar)]
The appellant entered into a contract with IOCL for construction of a storage tank and
certain utilities which involved drawing, designing and detailed engineering etc., and
separate prices were demarcated for such activities. The department contended that the
activities of drawing, design etc. were liable under the category of ‘Consulting
engineering services’ since after the 46th amendment to the Constitution a works contract
can be vivisected and the service component of it could be subjected to service tax under
the relevant entries. Dismissing this contention the Tribunal (Third Member bench) held
that –
(i) The ruling in Daelim’s case [(2006) 3 STR 124 (Tri-Del.)] given by a division bench
of the Tribunal holding that a works contract cannot be vivisected and part of it be
subjected to service tax and consistently followed by co-ordinate Benches in numerous
subsequent cases is still binding on co-ordinate benches;
(ii) The 46th amendment to the constitution was made with an intent to enable the States
to levy sales tax on the sale component of a works contract. It did not purport to enable
the central excise authorities to levy any tax on the service component of a works
contract.
(iii) Service portion of the works contract is subject to service tax levy only post 1.6.07
and not prior to 1.6.07
[CCE vs Indian Oil Tanking Ltd 2010 (18) STR 577 (Tri-Mumbai) relying substantially
on INSA vs UoI 2009 (14) STR 289 (Bomb.)].
When Article 366(29-A)(b) to the constitution has made indivisible works contracts
divisible to find out goods component and value thereof, it can be unambiguously be
stated that the remnant part of the contract may be attributable to the scope of service tax
under the provisions or Finance Act, 1994. Thus, turnkey contracts can be vivisected and
discernible service elements involved therein can be segregated and classifiable as well as
valued for levy service tax under Finance Act, 1994 provided such services are taxable
services as defined by that Act and depending on the facts and circumstances of each
case, service by way of advice, consultancy or technical assistance in the case of turnkey
contract shall attract service tax liability. [CCE vs BSBK Pvt. Ltd 2010 (18) STR 555
(Tri-LB) overruling Daelim’s case 2006 (3) STR 124 (Tri-Del.)]
Courier Services
The appellant, a courier agency had engaged several agents named as ‘Franchisees’ for
collection of articles from customers and who collected service charges alongwith service
tax from the customers and paid the tax under the category of ‘courier service’ in their
own registration. The entire service charges were fully paid over to the appellant and
appellant shared a fixed amount with the ‘franchisees’. On these facts, the High Court
held that the appellant is not liable to pay any further service tax on the service charges
retained after payment to the franchisee under the category of ‘franchise service’ since –
(i) The service tax on the entire amount of charges received from the customers having
been paid by the franchisees (agents) under ‘courier services’, the net amount cannot
again be taxed in the hands of the appellant under ‘Franchisees services’ since there is no
provision in the Finance act, 1994 to tax the very same service charges twice under two
heads.
(ii) Notwithstanding the (i) above, the net amount is not liable under the category of
‘franchise services’ since –
(a) the franchisee is acting only as an agent of the appellant;
(b) apart from appointing the franchisee the appellant is not providing any service to
them.
(C the franchisees do not make any payment to the appellant unlike in case of franchise
where a franchisor provides a service to the franchisee for a fee paid by the franchisee.
Infact it is franchisee who are paid for work done for the franchisor (the appellant)
i.e. acting as an agent for rendering courier service to the customers.
[Speed and Safe Courier Service v. Commissioner (2010) 18 STR 550 (Ker.)]
Erection, Commissioning or Installation service
Laying the pipes in wall/roofs/floors for crossing of wires, fixing the junction box, MS
box, Wooden box, fixing the cable trays would not amount to installation or
commissioning of plant, machinery or equipment and therefore would not be liable for
service tax under ‘Erection, Commissioning or Installation service’ during the relevant
point of time. [CCE vs Rajeev Electricals Works 2010 (18) STR 705 (P & H)].
Technical testing and analysis
Clinical testing of drugs is not liable for service tax under the category of “Technical
testing and analysis” for the period prior to 1.5.2006 since –
(ii) the testing is ‘in relation to’ human beings or animals which is specifically excluded;
and
(iii) The Explanation to section 65(106) inserted w.e.f 1.5.2006 which specifically
included within the definition of “Technical Testing and Analysis”, clinical testing of
drugs and formulations but excluded diagnostic testing w.e.f. 1.5.2006 expanded the
scope of the definition of Technical Testing and Analysis service and hence cannot
considered as clarificatory in nature despite the use of the words “For the removal of
doubts, it is hereby declare that” and accordingly the said Explanation would not have
retrospective effect i.e. prior to 1.5.2006.
[B. A. Research India Ltd. vs. CST (2010) 18 STR 604 (Tri. – Ahmd.)]
Valuation
Photography service is a works contract involving both the elements of sale and service
and the value of sale portion cannot be included in the value of service and subjected to
service tax. [CCE vs. Vahoo Colour Lab (2010) 18 STR 548 (P&H.)]
Valuation & abatement
The assessee was engaged in laying of pipelines and registered under ‘Commercial or
Industrial construction services’. The assessee claimed abatement of 67% of the “gross
amount charged” under notification 15/2004 dated 10.9.2004 and 1/2006 dated 1.3.2006
and paid service tax on the 33% of the “gross amount charged” without including the
value of pipes provided by the customer in the ‘gross amount charged’. The Tribunal held
that the value of pipes supplied has to be included since –
(a) the pipeline is essential component required for providing pipeline services and is to
be treated as non-monetary consideration in terms of Rule 3 of Valuation Rules;
(B) The notification defined the term ‘gross amount charged’ to include value of goods
and materials supplied or provided or used by the provider of the construction service for
providing such service. Since pipes are ‘used’ by the service provider for laying
pipelines, the value of pipes would have to be included in the ‘gross amount charged’ for
the purpose of computing the abatement. [Jaihind Projects Ltd vs CST 2010 (18) STR
650 (Tri-Ahmd.)]
Cenvat Credit
Garden maintenance: A garden creates a better atmosphere and environment which
increases the working efficiency and hence credit of service tax paid on garden
maintenance is allowable.
Plant House Keeping: Plant house keeping services are essential and related to
manufacturing activity and accordingly the cenvat credit of service tax paid on house
keeping service is admissible.
[Balkrishna Industries Ltd vs CCE 2010 (18) STR 600 (Tri-Mumbai)]
Cenvat credit in respect of Custom House Agent service used for clearance of imported
inputs used in the manufacture of dutiable finished goods is admissible. [Nelsun Paper
Mils Ltd. vs CCE 2010 (18) STR 648 (Tri-Chennai)]
Penalty u/s 76 & 77 is not attracted for wrong availment of Cenvat
credit. Further penalty under rule 15(4) of the credit Rules can be imposed only if Cenvat
credit is taken wrongly by reason of fraud, collusion etc., with an intent to evade payment
of service tax. [Sudhakar Polymers Ltd vs CCE 2010 (18) STR 635 (Tri-Bang.)]
Cenvat credit of service tax paid on input services is not conditional
upon actual payment of tax/duty by the supplier and can be taken when the assessee has
paid for the value and service tax. [Lason India Pvt. Ltd vs CST 2010 (18) STR 626 ( Tri-
Chennai)].
Where goods are exported on FOB/CIF basis, Cenvat credit of
service tax paid on outward transportation from factory to port of shipment is admissible.
[Modern Petrofils vs CCE 2010 (18) STR 625 (Tr-Ahmd.)].
The assessee, a pharmaceutical company, was held eligible to take Cenvat credit of duty
paid on Industrial washing machines used for washing of employees’ uniforms since they
are ‘capital goods’ being -
(i) goods falling under chapter 84; and
(ii) used in the factory of manufacturer to provide clean uniforms to employees which is
a mandatory requirement under the Drugs and Cosmetics Act.
[CCE vs Micro Labs Ltd 2010 (18) STR 771 (Tri-Bang.)]
Input credit of tax paid on ‘construction services’ for construction of compound wall
around the factory is admissible since on facts the compound wall is an integral part of
the factory. [CCE vs Raymond Zambaiti Pvt Ltd 2010 (18) STR 734 (Tri-Mumbai)].
Clearing and forwarding agents
‘Del credere agents’ are not liable for service tax under the category of ‘Clearing &
forwarding agents’. [CST vs. Sreenidhi Polymers (P) Ltd. 2010 (18) STR 385.(Kar); See
also CST vs. Raj Rajeshwari International Polymers (P) Ltd. 2010 (18) STR 390 (Kar)]
Where the appellant’s services were in the nature of consignment agent, the court held
that it is not liable for service tax under the category of clearing and forwarding agent
services. [ADH Agencies vs. CCE (2010) 18 S.T.R. 259 (P& H) relying on CCE vs
Kulcip Medicines (p) ltd 2009 (14) STR 608 (P&H)]
Manpower Recruitment or Supply Agency Service
The appellant’s employees were working on the client’s site. The clients were software
companies. The issue was whether the appellant was providing a service or had only
deputed personnel at the client’s disposal. The appellants contended that he provided a
service viz., ‘Consulting engineering service’ or ‘Information technology service’ and the
department contented that the appellant provided ‘Manpower Recruitment or Supply
Agency Service’. The Tribunal observed that as per the actual operations the appellants
are providing the skilled personnel to the client and hence would be liable under
‘Manpower Recruitment or Supply Agency Service’ based on the following reasons.
(i) There was no evidence to show that the software project undertaken by the clients are
sub-contracted to the appellant or that the appellants were working on any such project on
their own;
(ii) The appellant’s skilled personnel were working under the supervision and control of
the clients;
(iii) The contract provided that in case where the appellant’s skilled personnel leave the
job they are to be replaced by suitably trained personnel as substitutes thus indicating that
the number of skilled
persons supplied was important from the point of view of the client. If the appellants
were actually to deliver the software projects, the clients would have nothing to say how
many personnel the appellants
engage to complete the project or who they employ.
[Future Focus Infotech India (P) Ltd. vs. CST (2010) 18 STR 308 (Tri. –Chen.)].
Contra In a similar case, in Cognizant Tech Solutions (I) Pvt Ltd vs CCE 2010 (18) STR
326 (Tri-chennai) on facts it was held that services were in the nature of “IT software
services” and not “Manpower recruitment services” since the work force recruited and
retained by the appellants were required to work under a project manager appointed by
the appellants who had to act as a single point of contact being responsible for overall
management of the project and the nature of services required to be provided by the
appellants were in the nature of information technology services as the same related to
data management.
Import of services
Following Indian National Ship Owners Association v. UoI (2009) 13 STR 235(Bom.) it
was held that in respect of import of services, recipient of taxable service was not liable
prior to 18.4.06 [CST vs. SKF India 2010 (18) S.T.R 388 (Kar)]
Export of Services
Where the assessee procured orders for foreign principals and received their
consideration in foreign exchange, it was held that the assessee’s services were exported
since it fulfilled all the conditions, including the condition of the service being “delivered
outside India and used outside India” since the rendering of the service was complete
only when the purchase orders canvassed by the assessee in India were received by the
foreign companies and these purchase orders were received and acted upon by the foreign
companies abroad. In other words, the benefit of the service provided by the appellant
accrued to the foreign companies outside India and hence the service was “delivered
outside India and used outside India”. [KSH International vs. CCE 2010 (18) STR 404
(Tri-Mumbai)]
Where the assessee conducted clinical trials for foreign clients and delivered the report to
them abroad it was held that the services are not complete until the reports are submitted
to the client and in the present case since the reports were sent abroad the service was to
be considered as partly performed abroad. Further, the services were also ‘delivered
outside India and used outside India’. Hence assessee was entitled to claim export
exemption.[CST vs. B.A. Research India Ltd. 2010 (18) S.T.R. 439 (Tri- Ahmd.)]
Demand when service tax already paid by client
Two companies ‘B’ and ‘C’ respectively facilitated sale of insurance policies and finance
to purchasers of vehicles of their parent company ‘M’ and received commission from
Insurance companies and finance companies on which they paid tax under ‘Insurance
Auxiliary services’ and ‘Business Auxiliary Services’ respectively. They shared part of
the commission with the appellant ‘A’, a dealer in vehicles manufactured by ‘M’, for
recommending buyers to avail Insurance and finance from those companies of which B &
C were agent/brokers. On these facts, it was held that no separate tax was required to be
paid by ‘A’ on part of the commission received from B & C based on the following
reasons:
(i) tax on the entire commission has already been paid by B & C.
(ii) If tax was paid by A, B & C would be eligible for input credit thereby making the
impugned demand revenue neutral.
[Popular Vehicles & Services Ltd. vs CCE, 2010 (18) STR 493 (Tri-Del.)]
Recovery of tax during pendency of appeal
The Delhi High Court held that no proceedings can be initiated by the department against
assessee for payment of tax on renting of immovable property where the matter is in
appeal before the Supreme Court (by the department) and there is no order passed by the
Supreme Court staying the operation of the High Court order in appeal. [SSIPL Retail
Ltd vs. UOI (2010) 18 S.T.R. 262 (Del.)]
Limitation
Where the appellant a service recipient, who received services from foreign companies
did not pay service tax for the period 18-4-2006 to June 2006 though it had disclosed the
transactions to the department it was held that the SCN issued on 5.12.07 cannot invoke
the extended period of limitation. However, the Tribunal did not accept the plea of
revenue neutrality to uphold the bar of limitation. [ABB Ltd vs. CCE,, 2010 (18)
S.T.R.433 (Tri-Bang)]
Refund
Refund granted to the assessee by an order passed by the Asst. CCE can be recovered by
the department as being “erroneously refunded” by issuing a show cause notice u/s 73
without the department filing an appeal before CCE(A) against the refund order of Asst.
CCE. [Ogilvy & Mather Pvt Ltd vs CST 2010 (18) 502 (Tri-Bang.)]
Where an assessee paid tax on a misinterpretation of the statutory provisions, it was held
that refund claim filed after 1 year from the payment of service tax would be time-barred.
[CCE vs Manorath Builders (p) Ltd. 2010 (18) STR 453 (Tri-Del.)]
‘Amount deposited’ during investigation not found payable on adjudication is only a
deposit refundable to the assessee and the claim for refund of such deposit made within
one year from the date of order of adjudication was held as within the prescribed time
limit. The Tribunal further held that there was no unjust enrichment since tax was paid as
deposit much later than the issue of invoices. [Wazir Singh Swaran Singh Consignment
Stockist (P) Ltd. vs CCE 2010 (18) STR 468 (Tri-Del.)]
CENVAT Credit
CENVAT Credit is admissible in respect of -
(a) Security services availed by the assessee for ensuring safety of goods stored in
godown.
(b) Pest control services availed to ensure clean and healthy environment in the factory
premises. being ‘activities relating to business’.
[CCE vs Hindustan Coca-Cola Beverages Pvt Ltd. 2010 (18) STR 500 (Tri Bang.)]
The assessee availed taxable services from service providers who were not registered and
invoices raised by them did not bear any registration number. However, the service
providers registered themselves subsequently and assessee paid service tax on the
supplementary invoices issued by them. It was held that credit cannot be denied on the
basis that at the time of receipt of input services, the service providers were not registered
where there was no dispute that the input services were received and used for providing
output services. [Secure Meters Ltd. vs CCE 2010 (18) STR 490 (Tri-Del.)]
Input credit in respect of services of procuring sales order and collecting payment from
customers was held to be eligible being “activity relating to business” and hence covered
by the definition of input services. [Nav Bharat Tubes Ltd. vs CCE 2010 (18) STR 470
9Tri-Del.)].
Cenvat credit in respect of service tax paid on
(i) insurance of capital goods in factory or in transit;
(ii) group personnel accident insurance; and
(iii) Group Health Guard policy of the workers and staff was held admissible.
[CCE vs Raipur Rotocast Ltd 2010 (18) STR 466 (Tri-Del.)]
No service (taxable event)
No service tax is payable on services rendered by one constituent unit of an HUF to
another constituent unit since they are part of the HUF which is one legal entity [CCE vs.
Universal Travels 2010 (18) STR 157 (Tri- Bang.)].
Convention Service
Where the appellants, a hotel, paid Value Added Tax/sales tax on the value of food and
beverages supplied to customers in the course of providing them 'convention services', it
was held that no service tax would be payable by them on the value of food and
beverages. [Daspalla Hotels Ltd. vs. CCE (2010) 18 STR 75 (Tri-Bang.)]. See also LSG
Sky Chefs (India) Pvt Ltd. vs. CST 2010 (18) STR 37 for the same proposition in the
context of 'Outdoor catering services'].
Management, Maintenance and Repair
It was held that activity of tyre retreading is neither 'repair' nor 'maintenance' but a
'reconditioning' activity to give economic life to the tyre retreaded and hence would be
liable for service tax only w.e.f 16.6.05 when reconditioning activity was brought under
tax net. [CCE vs. Balwinder Singh 2010 (18) STR 70 (Tri-Del.)].
Manpower recruitment or supply agencies
On facts, the Tribunal held that the assessee has entered into a contract for execution of
the work of loading, unloading, stacking, bagging etc., and not for the supply of
manpower for the execution of work and hence would not be covered under the category
of 'Manpower recruitment and supply agency services'. [Ritesh Enterprises vs. CCE 2010
(18) STR 17 (Tri- Bang.)]
Limitation
Where the appellant could take CENVAT credit on payment of tax on 'Goods Transport
Agency' (GTA) services availed by him, non-payment of service tax on GTA services (as
a payer of freight) cannot be said to be with an 'intent to evade service tax' since it would
be revenue neutral. Accordingly it was held that the extended period of limitation cannot
be invoked. [Dineshchandra R. Agarwal Infracon Pvt Ltd. vs. CCE 2010 (18) STR 39
(Tri-Ahmd.)]
Interest
No interest is payable on a mere wrong availment of CENVAT credit when such credit
has not been utilised.[Ganta Ramanaiah Naidu vs. CCE 2010 (18) STR 10 (Tri-Bang.)]
Penalty
A revision order passed by the Commissioner cannot impose penalties under sections 76
and 78 where the penalty was not imposed in the order of adjudication. [Ganesh Tours
and Travels vs. Commissioner of Service Tax 2010 (18) STR 171 (Tri-Bang.)].
Where service tax was paid with interest before the issue of SCN and the adjudicating
authority imposed penalties u/ss. 76 and 78 the Tribunal held that :
(i) Once penalty u/s. 78 is imposed penalty u/s 76 is not imposable since they are
mutually exclusive.
(ii)Penalty u/s 78 is to be reduced to 25% of the service tax in view of the first proviso to
section 78 which provides that where the service tax as determined under section 73(2)
and the interest payable thereon under section 75 is paid within 30 days from the date of
communication of the order of the Central Excise officer determining the tax, amount of
the penalty liable to pay shall be 25% of the Service tax so determined.
[Safe Test Enterprises vs CCE 2010 (18) STR 172 (Tri-Chennai)]
Recovery
The revenue cannot proceed to recover dues if the stay application for waiver of pre-
deposit of the said dues is pending before the Tribunal. [FCM Travel Solutions(India)
Pvt. Ltd. vs. Commissioner of Service Tax 2010 (18) STR 24 (Tri-bang.)]
Reimbursement of service tax under a contract not conditional upon payment by the
service provider
In case where the service recipient contended that he would pay service tax only upon the
service provider first paying the service tax the court dismissing his contention directed –
(a) the service recipient to pay the service tax along with interest @ 18%; and
(b) the service provider to deposit the service tax amount with the department.
Further, this fact was considered as reasonable cause for not depositing the service tax in
time and accordingly penalty proceedings were quashed. [Introspective Detective Pvt.
Ltd vs. BSNL 2010 (18) STR 3 (All.)]
CENVAT Credit
The appellant, a dealer in motor cycles and also a service station, paid service tax on
Goods Transport Agency service for transporting new motor cycles from the
manufacturer's factory to its showroom (where it would be sold) and took credit of the
service tax paid on such GTA services and utilised the same for payment of service tax
on 'Authorised service station' services. The credit was denied on the ground that GTA
services are related to sale of vehicle and not for providing output services. The Tribunal
allowed the credit holding that unless vehicles are received and sold there cannot be any
servicing of the same. [CCE vs. Shariff Motors (2010) 18 STR 64 (Tri-Bang.)]
Clearance of goods to 100% Export Oriented Unit is to be treated as 'export' and refund
of credit on input used in manufacture of such goods is admissible under Rule 5 of the
CENVAT Credit Rules, 2004. [Cauvery Stones Impex Pvt. Ltd. vs. CCE. (2010) 18 STR
73 (Tri-Chennai) relying on CCE vs Shilpa Copper Wire Industries 2008 (226) E.L.T 228
and Sanghi Textiles Ltd vs CCE 2006 (206) ELT 854].
Service tax paid on transportation of export goods (which are sold on FOB basis) from
factory to port would qualify as 'input service' in terms of CBEC's Circular No. 97/6/2007
S.T dated 23/08/07 and consequently refund is admissible under Rule 5 of CENVAT
Credit Rules, 2004. [Cauvery Stones Impex Pvt. Ltd. vs. CCE. (2010) 18 STR 73 (Tri-
Chennai)].
Cenvat credit on “input services” cannot be denied on the ground that they are incurred
outside the factory premises. [CCE vs. H.E.G. Limited 2010 (18) STR 56 (Tri-Del.)].
CENVAT credit on canteen services (Out door catering) and rent-a-cab services held
allowable. [Hindustan Coca-Cola Beverages Pvt. Ltd. vs. CCE 2010 (18) STR 57 (Tri-
Bang.)]
On facts, the Tribunal held that 'Event management services' availed for celebration by
employees on expansion of plant cannot be said to 'Activity related to business' in the
absence of evidence to prove that the event was organised for sales
promotions/advertisements and hence input credit of service tax paid on such services is
not eligible. Before the above conclusion the Tribunal observed that “any expenses
incurred relating to business activity would be treated as input service cannot be
accepted, unless it is established by evidence that the service was rendered for the
purpose of business include advertisement or sale promotion….” [Hindustan Zinc Ltd.
vs. CCE 2010 (18) STR 33 (Tri-Del.)].
Excise duty paid on 'Tippers' used for providing excavation, site formation, etc., services
is not available since -
(a) Tippers are not 'capital goods' for the assessee since -
(i) they are classifiable under Chapter 87 and not under Chapters 82, 84, 85, 90 or other
goods specifically included in the definition of 'capital goods' as per rule 2(a); and
(ii) he is not one of the service providers for whom 'motor vehicles' qualifies as capital
goods as per rule 2(a);
(b) Tippers are not 'inputs' since 'motor vehicles' are specifically excluded from the
definition of inputs.
[Ganta Ramanaiah Naidu vs. CCE 2010 (18) STR 10 (Tri-Bang.)].
Even if a job-worker's services to a manufacturer are exempt under Notification No.
8/2005-ST, where a job-worker has forgone exemption and paid Service Tax, the
manufacturer is eligible for Cenvat credit in respect of service tax paid to the job-worker
[CCE vs. Laxmi Metal Pressing works Pvt. Ltd. 2010 (18) STR 149 (Tri-Mumbai.)].
CENVAT credit of service tax paid on Rent-a-cab services, Outdoor catering, Air Travel
Agent services, and Telephone/mobile services and Steamer agent services was held
allowable as being 'activity relating to business'. [Semco Electrical Pvt. Ltd. vs CCE 2010
(18) STR 177 (Tri-Mum.) relying on Coca cola India Pvt. Ltd vs CCE (2009) 15 STR
657 (Bomb);Maruti Suzuki vs. CCE (2009) 240 ELT 641 (SC) distinguished].
Refund
A refund of tax on notified services such as Port services, Goods transport services,
Custom house agent services, Technical testing and analysis services etc., used for the
export of goods under Notification No. 41/2007 dated 17/09/07 cannot be denied to the
service recipient on the basis that a part of the services of the service providers would not
fall in the notified service categories without first revising the assessment of service
providers.[CCE vs. Anant Commodities Pvt. Ltd. 2010 (18) STR 214 (Tri-Del.)].

Clearing & Forwarding Agent services

Where the assessee procured customers for its principal (Maruti Udyog Ltd.) for purchase
of cars on commission basis and in that connection arranged documentary requirements;
liaisoned with the customers for timely delivery; delivered vehicles; sent provisional
receipts and inspection notes from consignee to the principal and arranged various
permits required for dispatch of the vehicles etc, the High Court held that the assessee’s
main work was to sell cars on behalf of its principal and carrying out the above work in
that connection would not make them a ‘Clearing & Forwarding Agent’. [CCE vs.
Amitdeep Motors (2010) 17 STR 514 (All.)]
Where the appellants were neither involved in clearing activity nor in forwarding activity
but merely received, stored and sold goods on behalf of their principals for a commission,
they would not be liable for service tax under the category of clearing and forwarding
agent services [V.S.Distributors vs. CCE. (2010) 17 STR 530 (Tri-Del) – Per Rakesh
Kumar – Member(T)]
Management, Maintenance or repair services
The assessee’s activities of maintenance of green belt (Horticulture and Landscaping)
which comprised of activities like growing of grass, plants, trees or fruits, vegetables,
regular mowing of lawns, pruning and trimming of shrubs and cleaning of garden etc.
was held not liable for service tax under the category of maintenance of immovable
property for the following reasons –
(i) The CBEC Circular no. B1/6/2005 – TRU dated 27.7.2005 refers to maintenance of
civil/electrical and construction work of park and green belt and not maintenance of
grass, plants trees or shrubs;
(ii) Services in relation to ‘horticulture’ is specifically kept outside the purview of
‘cleaning services’, a separate service;
(iii)The expression “immovable property” as defined under section 3 of the Transfer of
Property Act, 1882 does not include standing timber, growing crops or grass.
[CCE vs. ANS Constructions Ltd. (2010) 17 STR 549 (Tri-Del.)]
Works contract services vs. Commercial or Industrial construction / Construction of
complex services
Where the appellant was registered as works contractor under the state sales tax law and
paid sales tax on the construction contracts executed by it, the Tribunal held that the
services of the appellant would be liable for service tax only w.e.f. 1.6.2007 under the
category of “works contract services” and not under commercial or industrial
construction / construction of complex services prior to that date [CEMEX Engineers vs.
CST (2010) 17 STR 534 (Tri-Bang.)].
Valuation
In respect of commercial or industrial construction services and construction of complex
services an abatement of 67% of the “gross amount charged” is available [Notification
Nos. 15/2004 dated 10.9.2004; 18/2005 dated 16.6.2005 and 1/2006 dated 1.3.2006]. The
notification provided that the term ‘gross amount charged’ shall include value of goods
and materials supplied or provided or used by the provider of the construction service for
providing such service. The revenue included the value of materials supplied by the client
for determining the ‘gross amount charged’. On appeal, the Tribunal held that value of
goods supplied by the client cannot be included for the purpose of calculating gross
amount [CEMEX Engineers vs. CST (2010) 17 STR 534 (Tri-Bang.)].
Demand
Recovery of demand from the partners of a firm, in respect of service tax payable by the
firm, is not permissible merely by marking a copy of the SCN to the partners of the firm
[G. Govindaraj vs. CCE (2010) 17 STR 529 (Tri-Chennai)].
Where the SCN did not identify the documents based on which it raised the demand, the
Tribunal held that there was a violation of principles of natural justice and accordingly
the demand is not sustainable [V. S. Distributors vs. CCE. (2010) 17 STR 530 (Tri-Del)
– Per D. N. Panda – Member (J)].
The respondents provided Pandal or Shamiana services which was liable for service tax
w.e.f. 10.9.2004. They declared certain undisclosed incomes which they stated pertained
prior to 10.9.2004 during a survey conducted by the Income tax Department on 6.1.2006.
The Service tax department sought to tax the entire undisclosed income. On appeal the
Tribunal held that the demand cannot be sustained without enquiry as to whether the
undisclosed income is earned post 10.9.2004. [CCE vs. Bindra Tent Service (2010) 17
STR 470 (Tri-Del.)]
Limitation
Where the department had knowledge of the fact that one of the partners of the firm
rendering rent-a-cabs services had neither obtained service tax registration nor paid the
service tax liability thereon way back in December, 2001, the Tribunal held that demand
raised by show cause notice issued in October 2005 for the period 2000-01 to 2003-04
was barred by limitation [G. Govindaraj vs. CCE (2010) 17 STR 529 (Tri-Chennai)].
Penalty
Mere failure to apply for registration and failure payment of tax and file the returns
cannot be construed as suppression with intent to evade payment of duty [CCE vs. Star
Crane Service (2010) 17 STR 576 (Tri-Ahmd.)].
Cenvat Credit
Where the Head office of the assessee company paid for certain input services consumed
in unit ‘A’ it was held that the Head Office can validly distribute the credit on such
services even to unit ‘B’ in absence of a specific prohibition in rule 7 of the Cenvat
Credit Rules, 2004 [ECOF Industries Pvt. Ltd. vs. CCE (2010) 17 STR 515 (Tri-Bang.)].
Cenvat credit of service tax paid on Goods Transport Agency services used for
transportation from the factory of inputs / capital goods removed as such is not reversible
though the credit of duty paid on such inputs/ capital goods is reversible under rule 3(5)
of the Cenvat Credit Rules, 2004 [J.S.Khalsa Steels (P) Ltd. vs. CCE (2010) 17 STR 517
(Tri-Del.) relying on Chitrakoot Steel and Power Pvt. Ltd. vs. CCE (2008) 10 STR 118
(Tribunal) where the Tribunal held that credit of service tax on inward transportation of
inputs/ capital goods removed as such is not reversible].
Taxable event
Advance fee received by the assessee, a commercial training or coaching centre, prior to
01-07-2003 (date on which its services were brought into the tax net), for the coaching to
be given from 01-07-2003 to 31-03-2004, is taxable since the taxable event was provision
of service and not receipt of fees. Hence, tax was held to be payable by 5th day
immediately following the month in which services are rendered.[CCE vs. Ashok Singh
Academy2010(17) STR363 (Tri-Del)].
Authorised service station
Where the appellants were servicing / repairing of ‘light commercial vehicles’ during the
warranty period for which they were reimbursed by the manufacturer it was held that
‘authorised service station’ services do not cover services in respect of ‘transport
vehicles’ such as light commercial vehicles and hence the amount received from the
manufacturer was not liable for Service tax. [Popular Mega Motors (India) Ltd vs. CCE
2010(17) STR373 (Tri-Bang)].
Business Auxiliary Services
The assessee a dealer in motor vehicles let out table space in its premises to a financial
institution which provided financial assistance to customers of the assessee, for a
consideration and the assessee also informed the vehicle buyer about the various types of
loans available and directed them to the financial institutions. On these facts the Tribunal
held that the assessee was not promoting or marketing the services of the financial
institution and hence assessee would not be liable for service tax under the category of
“Business auxiliary services”. [Tribhuvan Motors Ltd. vs. CST (2010) 17 STR 281 (Tri-
Bang.) relying on Silicon Honda v. CCE (2007) 7 STR475 (Tri.-Bang.)]
In the present case, the appellants were sub-representatives of one M/s. WFL which in
turn was representative of Western Union, an overseas entity providing money transfer
services to persons based abroad for transferring money to India.Western Union paid a
commission to WFL and WFL in turn paid an amount to the appellant for completing the
Indian leg of a transfer receive transaction i.e. where money is transferred from abroad to
recipient in India. Department sought to levy service tax on the fee received by the
appellant under the category of Business Auxiliary Services for the period 1-7-2003 –31-
1-2006. On appeal, the Tribunal held as follows –
(i) On a reading of the agreement it was held that the services was rendered by the
appellant directly to the Western Union situated outside India and they were ultimate
beneficiaries of the services;
(ii) the services would be considered as used outside India since they benefitedWestern
Union and its overseas customer (viz., the remitter);
(iii) during the disputed period, there was no requirement that the money must be
received in convertible foreign exchange.
Hence the services would be considered as exported and accordingly not liable for
service tax.[Muthoot Fincorp Ltd. vs. CCE (2010) 17 STR 303 (Tri-Bang.)]
Business Auxiliary Services vs.Mining Services
On facts, where the appellants contracted to mine iron ore, process the ore and supply it
to its client it was held that it was a composite contract of mining liable for service tax
under ‘mining’ servicesw.e.f. 1-6-2007 and not under ‘business auxiliary services’ prior
to that date. [CCE vs. SVM NettProject Solution Pvt Ltd.(2010) 17 STR298 (Tri-Bang.)]
Clearing & Forwarding Agent services
By an agreement between the assessee and Cipla Ltd., the assessee was appointed as a
“consignment agent” of Cipla under the following terms:
(i) the assessee received and stored the goods supplied by Cipla;
(ii) the assessee sold the goods as an “agent” of Cipla on a “commission” basis.
(iii) the price at which goods were to be sold were decided by Cipla after consultation
with the assessee; and
(iv) the assessee was authorized to appoint stockists / dealers / distributors with the
approval of Cipla;
On the question whether the assessee would be considered as a “Clearing and
Forwarding agent” u/s. 65(16) which includes a “consignment agent” the High
Court held as follows:
(i) The agreement with the principal clearly states that the assessee is a “consignment
agent” and hence would be covered under the inclusive limb of definition of
“Clearing&Forwarding agent” u/s. 65(16)
(ii) The assessee in the present case does not stop at rendering only the commission
agency service [i.e., mere procurement of purchase orders] but his duties extend beyond
that involving activities such as price determination, appointment of stockists/dealers/
distributors, etc.
[CCE vs.Mahaveer Generics (2010) 17 STR225 (Kar.)]
Where the assessees received the goods already cleared by the manufacturer, stored the
goods and forwarded the same to buyers the Tribunal held that the activities were not
liable for service tax under the category of Clearing and Forwarding Agents services.
[CCE vs. Pondicherry Agro Services & Indus. Corpn. Ltd. (2010) 17 STR 246 (Tri-
Chennai) following CCE vs. Kulcip Medicines Pvt. Ltd.(2009) 14 STR 608 (P&H) where
the High Court held that in order for a service to be covered under the category of
‘clearing and forwarding’ services, the assessee must do both the operations viz,
‘clearing’ and ‘forwarding’]
Commercial Training or Coaching services
Where the appellant provided training to its own employees and also collected a deposit
in the nature of a bond from them at the time of their joining the company which was
repaid back to them over the period of 3 years during their employment the Tribunal held
that the activities would not be liable for service tax under the category of commercial
training or coaching services.[IVL India (P) Ltd. vs. CCE (2010) 17 STR292 (Tri-Bang.)]
Information Technology Software Services
Enterprise Resource planning software implementation services would only be liable for
service tax under “IT Software service” w.e.f. 16-05-2008 and not under the category of
Management Consultancy Services prior to that date more so in view of the specific
exclusion of same from the category of ‘consulting engineer’ services. [IBM India Pvt.
Ltd. vs. CST (2010) 17 STR 317 (Tri- Bang)]
Port Services
Where the assessee, by virtue of a registration certificate granted by the New Manglore
port provided loading, unloading cargo, handling services etc within the port premises, it
was held that the assessee’s services are not liable for service tax under ‘Port service’
since he was neither a port nor a person authorised by the port and the certificate/licence
issued by the port cannot be regarded as ‘authorisation from port’ to carry out these
activities on behalf of the port. [S.S.Maritime vs. CCE 2010(17) STR 346 (Tri-Bang)]
Sub-contracting
Where the appellants, a sub-contractor, had rendered commercial or industrial
construction services to a main contractor who had discharged the entire service tax
liability, the Tribunal held that no service tax would be payable by the appellants [for the
period prior to 23-08-2007]. [Urvi Construction vs. CST (2010) 17 STR 302 (Tri-
Ahmd.)] YARD
Business Auxiliary Services
Where, during the period 1-7-2003 to 31-3-2005, the appellant provided services of spot
billing and data processing to Andhra Pradesh Central Power Distribution Company, the
Tribunal held that it would fall under the definition of “Information Technology
Services” and consequently excluded from‘Business Auxiliary Services’. Further the
service ismore appropriately classifiable as business support services w.e.f 1-5-06 since it
is an outsourced activity and accordingly not liable under Business auxiliary service prior
to that date.[Gandhi&GandhiCharteredAccountants vs.CCE 2010 (17) STR25 (Tri –
Bang)]
Commercial training or coaching centre
The appellants in the present case were an educational institute which conducted various
management courses for which it charged fees. The department contended that activities
of the appellants would be liable for service tax under the category of commercial
training or coaching services.On appeal, dismissing this contention, the Tribunal held as
follows:
(i) the appellantweremainly imparting “education”which is the development of human
personality and notmerely ‘commercial training or coaching’which is very narrow.
(ii) the appellant cannot be held be carrying on a ‘commercial’ activity since:
(a) the appellant is a ‘not for profit’ company incorporated under section 25 of
Companies Act 1956.
(b) the main object of the appellant as indicated in its memorandumof association is to
promote management education, research etc and not to earn profit. Further any surplus
earned also goes only into the furtherance of its objects and a surplus on dissolution also
does not go to the members but to an association of a similar kind.
(c) the appellants were registered u/s 12 of the Income-tax Act, 1971 as a charitable
institution indicating that the primary objective of the appellant institution is not
commercial.
(iii) all institutions imparting knowledge and conducting courses at fairly high level such
as post graduate level, cannot be just termed as ‘commercial training or coaching centre’
and subjected to service tax under this category immaterial of whether the degrees
offered by themare recognized by lawor not.
[Indian School of Business vs C.C.E.C. 2010(17) STR83 (Tri-Bang)].
Where the appellants provided ‘abacus’ training that made learning arithmetic / math
enjoyable, the Tribunal held that the appellants provided ‘recreational training’ in terms
of notification no 9/2003 dated 20.06.2003 and accordingly exempt [FAST Arithmetic vs
ACEST 2010 (17) STR158 (Tri-Bang.)].
Construction Services vs.Works Contract services
Where the appellant provided construction services to NTPC for the period 10-9-2004 –
31-3-2006 and paid sales tax on the material component and service tax on the labour
component, the Tribunal held that a demand of service tax on the material component
could not be avoidedmerely on the ground that the services were later covered under the
category of ‘Works Contract Services’ w.e.f. 1-6-2007 and hence not under construction
services prior to that date. However, the Tribunal extended the benefit of Notification No.
12/2003 dated 20.6.2003 which exempts value of goods ‘sold’ in the execution of taxable
service and dismissed the revenue’s contention that there was no sale of goods which
were used in the works contract. [Sunil Hi-Tech Engineers Ltd v CCE 2010(17) STR 121
(Tri-Mum)]
Port Services
Where the appellant, aCustomhouse agent, was also undertaking various activities inside
the port on behalf of the client such as loading, unloading, stevedoring etc. based on
stevedoring licence issued by port, it was held that merely because the activity is
undertaken inside the port it cannot be treated as ‘Port services’ and appellant is not a
person authorised by port as per section 42 of theMajor Port Trust Act, 1963.
Accordingly, the services of the appellant were not liable under ‘Port services’.[South
India Corporation (Agencies) Ltd vs C.C.E 201017) STR 170 (Tri-Bang) relying on
Konkan Marine Agencies vs CCE (2007) 8 STR 472( Tri.-Bang) affirmed inCCE vs
Konkan Marine Agencies (2009)13 STR7 (Kar)]
Sub-contracted services prior to 23-8-2007
Where the appellant provided services as a sub-contractor to the main contractor who in
turn provided services to the client and paid the entire amount of service tax (including
the charges of the sub-contractor), no service tax is payable by the sub-contractor on his
services to themain contractor prior to the issue of CBEC Circular no. 96 dated 23-8-
2007.
[Sunil Hi-Tech Engineers Ltd vsCCE 2010(17) STR121 (Tri-Mum)]
CENVAT Credit
Refund can be claimed in respect of unutilised CENVAT credit on input services used in
the manufacture of excisable goods exported even if they are otherwise ‘exempt’ or
subject to ‘nil’ rate of duty. [NobleGrain India Pvt.Ltd .vsC.C.E 2010 (17) STR128 (Tri-
Del)]
Credit cannot be denied to the recipient of input services on the ground that the input
service was not liable for service tax where tax was actually paid on it by the input
service provider. [H.E.G Ltd vsC.C.E. 2010 (17) STR178 (Tri-Del)]
Maintenance of staff colony: On facts, the Tribunal held that, where the appellant owing
to business exigencies maintained a residential colony for staff (sale and purchase of land
in the vicinity of the factory being prohibited), all the services availed for maintaining the
staff colony would qualify as input service being “activities relating to business”. [ITC
Ltd vs C.C.E. 2010 (17) STR146 (Tri-Bang)]
Plantation services: The appellants were manufacturers of paper and paper boards with
soft wood from trees as raw material. They used services for cloning of seedlings which
were sold to farmers for growing trees and which trees were bought back fromthe farmers
under buy-back arrangements. It was held that all services used for plantation activities
were ‘input services’ since they had a nexus with the manufacturing activity not with
standing that the entire produce of the farmers were not sold back to the appellant.
[ITCLtd vs C.C.E 2010 (17) STR146 (Tri-Bang)].
(i) Landline Telephones installed in the residence of staff: Credit not deniable in absence
of allegation that landlinewas not used in relation to business activity.
(ii) Cleaning & Maintenance of Gardens: Credit not deniable if it is in relation to business
activity.
(iii) Pandal and Shamiana services used for certain business activities is an input service
eligible for credit.
(iv) Group personal insurance policies ofemployees: Credit allowed.
[H.E.GLtd vs CCE 2010 (17) STR 178 (Tri-Del)]
(i) Technical testing and analysis services availed by a manufacturer of medicaments for
trialmanufacture and R&D conducted in respect of drugs which did not reach the stage of
commercial production or themarket is to be considered as ‘input service’ since they were
part of manufacturing process and business activity and accordingly CENVAT credit is
admissible.
(ii) C&F services and foreign commission agent’s services availed by a manufacturer of
medicaments is an input service being a service in relation to ‘sales promotion’.
(iii)Courier services :CENVAT credit admissible
(iv) Repair and maintenance of photo copier, air conditioner, water cooler etc.: CENVAT
credit admissible.
[Cadila Healthcare Ltd vs C.C.E 2010(17) STR 134 (Tri-Ahmd)]
Where the goods are sold on F.O.R. basis credit is admissible on outward transportation
up to the buyers’ premises based on CBEC Circular dated 23-8-2007 even for period
prior to the circular since it is clarificatory in nature and hence will be applicable with
retrospective effect. [Hindustan Coca Cola Beverages Pvt Ltd vs CCE 2010(17) STR 140
(Tri-Bang)].
Demand
Where the show cause notice only demanded ‘interest’ on credit wrongly utilised [and
subsequently paid], an order confirming the demand of ‘credit’ wrongly utilised is
incorrect since it travels beyond the SCN. [C.C.E vs. Jagatjit Industries Ltd. 2010 (17)
STR 137 (Tri-Del)]
Interest
Interest would be payable only if wrongly taken credit is utilised and not where the credit
remains unutilised. [C.C.Evs. Jagatjit Industries Ltd. 2010 (17) STR137 (Tri-Del)]
Penalties
Penalty u/s 78 is not imposable for wrong availment of CENVAT credit. [C.C.E vs.
Jagatjit Industries Ltd. 2010 (17) STR137 (Tri-Del)].
Refund
Where tax has been erroneously paid on an activitywhich is not liable (architectural
activity in Sri Lanka), what is paid is not “Service tax” and consequently, a refund claim
filed (on 20.09.2006) even beyond a period of one year from the date of payment of tax
(on 04.07.2005) is not barred by the limitation u/s 11B of the Central Excise Act, 1944..
[Natraj and VenkatAssociates vs.ACST 2010 (17) STR 3(Mad.); See also K.V.R
Constructions vs CCE 2010 (17)STR 6 (Kar.)]
Airport Services
User fee collected only from outgoing international passengers (not collected from
domestic passenger or incoming international passengers) are not liable for service tax
since the fee is only for enhancing the Airport’s revenue and not for any services
rendered. [CCE vs. Cochin International Airport Ltd (2009) 16 STR 401 (Ker.)
confirming Tribunal’s decision of assessee’s own case in (2007) 7 STR 468 (Tri.)].
Clearing and Forwarding Agent
In this case the appellant did not attend to ‘clearing’ of goods manufactured by the
principal and hence would not be covered under the category of ‘clearing and
forwarding’ services. [Fenner India Ltd. vs. CCE (2009) 16 STR 433 (Tri-Chennai)].
Commercial Training or coaching
The appellants in the present case were a Public charitable trust which undertook various
English speaking courses, computer courses etc. for poor sections of the society. The
department contended that activities of the appellants would be liable for service tax
under the category of commercial training or coaching services. On appeal, dismissing
this contention, the Tribunal held that the appellants would not be considered as a
commercial training or coaching centre since:
(i) the appellant is not a commercial concern.
(ii) activities of the appellants were not in the nature of commercial training or coaching.
[Shri Chandraprasad Desai Memorial Foundation vs. CST (2009) 16 STR 442 (Tri-
Ahmd.)]
Mandap keeper service
Where the Hotel Rooms with gardens were rented out and service tax was paid on garden
rent, service tax is not payable in respect of the charges recovered for renting of the
hotels. [Merwara Estates vs.CCE (2009) 16 STR 268 (Tri-Del.)]
Security Agency Services
In the present case the Tribunal held that the “bird scaring services” i.e. to scare the birds
by periodical firing at specified places provided by the security agency under the contract
with the airport authority for a lumpsum consideration is not covered within the statutory
definitions of “Security Agency Services” hence the contention of the revenue that the
such activity would fall under security of property is not sustainable. [Ex-Servicemen
Industrial Guards Pvt. Ltd. vs. CCE (2009) 16 STR 421 (Tri. – Bang.)]
Stock Broker service
Where the appellant merely provided facilities to the members of Madras Stock
Exchange (MSE) to trade with the members of Mumbai Stock Exchange such provision
of facilities are not liable for service tax under the category of “stock broker services”
since MSE was not involved in the sale and purchase of securities. [Madras Stock
Exchange Financial Services Ltd. vs. CCE (2009) 16 STR 438 (Tri. – Che.)]
Sub-Contractor services
Prior to 23-8-07 when the Master Circular was issued service tax is not payable by the
sub-contractor if the principal contractor has paid the service tax.
Technical inspection and certification services
The Tribunal in the present case held that the activities carried out for certification of
quality management systems practiced by clients for ISO 9001:2000 certification
requirements, would not come within the purview of ‘Technical inspection and
certification services’ after making the following observation:
(i) only inspections related with goods, materials or immovable property would be liable
for service tax under the said category;
(ii) the word ‘process’ used in the definition clause would keep company with the words
‘goods’, ‘materials’ or ‘immovable property’ on the principle of ejusdem generic;
(iii) the word ‘process’ would relate only to physical and chemical process and would not
extend to include ‘management process’ which is in relation to human beings; [American
Quality Assessors (I) Pvt. Ltd. vs. ACST (2009) 16 STR 413 (Tri- Bang)] Conducting
test /inspection and issue of certificate to the customers are the pre-requisite for the
activity to be qualified as Technical Inspection and Certification services. In the present
case, the appellant does not engage in such activity therefore no service tax liability arises
on the appellant. [CCE vs. Bay Forge Ltd. (2009) 16 STR 407 (Tri. – Che)]
Tour operator services
Services of booking tickets on behalf of principal tour operator was brought within the
ambit of service tax only w.e.f. 10-9-04. Accordingly for the period prior thereto no
service tax would be payable under the category of Tour operator services [CCE vs.
Kalpana Travels Pvt. Ltd. (2009) 16 STR 444 (Tri-Del)]
Where the appellants used its buses for transportation of its employees the Tribunal on
facts held that appellants would not be liable for service tax under the category of Tour
Operator service since:
• The appellants were not engaged in the business of operating tours;
• The vehicles used for transportation of employees is not a tourist vehicle
• The vehicles do not have a permit under the Motor Vehicles Act to conduct tourism
business.
[Prakash & Poonam Tours & Travels vs. CCE (2009) 16 STR 452 (Tri-Del)]
Import of Services
Where the provisions for recovery of tax from the service recipient with regard to the
services provided from outside India was brought in the statute book only w.e.f. 18-4-06
the Tribunal held that revenue cannot bring the appellant within the ambit of service tax
as a recipient of service where the impugned period pertains prior to 18-4-06.
Dimension Stone vs. CCE (2009) 16 STR 313 (Tri-Del.)]
Once the Court lays down the law that the recipient of the service is not liable for paying
service tax, that law is binding on all Tribunals and Authorities functioning within the
jurisdiction of the said court.
[A.C. Nealsen Org-marg Pvt. Ltd. vs. UOI (2009) 16 STR 259 (Bom)]
Where the appellant received intellectual property services from foreign company for the
period 10-9-04–30-9-2004, the Tribunal, following Hindustan Zinc Ltd vs. CCE (2009)
11 STR 338 (Tri - LB.), held that the appellant is not liable to pay service tax as a
recipient during the said period. [Bajaj Auto Ltd. vs. CCE, C & ST (2009) 16 STR 430
(Tri. -Mum.); Similar proposition laid down in Hitech Arai Ltd. vs. CCE (2009)16 STR
460. (Tri-Chennai)].
Payment of tax
Where the appellant had admittedly paid education cess along with the excise duty under
the accounting head of basic excise duty, the Tribunal held that the appellant cannot be
again held liable for payment of education cess. [Guala Closure (India) Pvt. Ltd. vs. CCE
(2009) 16 STR 536 (Tri. – Ahd.)]
Demand
In this case the Tribunal observed that when there are favourable or contradictory
decisions holding the field, entertaining bona fide belief by an assessee cannot be faulted
upon. Accordingly, the extended period of limitation cannot be invoked and imposition of
penalties u/s. 78 cannot be justified. [Sunil Metal Corporation vs.CCE (2009) 16 STR
469 (Tri-Ahmd.)]
Where the appellants had approached the department long ago with regard to the
applicability of service tax on their activities, the Tribunal observed that there being no
suppression of facts, misstatement or fraud with an intent to evade payment of tax
invocation of longer period of demand was not sustainable. [American Quality Assessors
(I) Pvt. Ltd. vs. ACST (2009) 16 STR 413 (Tri- Bang)]
Limitation
Where the appellants who organized local tours, monuments visits etc. had excluded
certain amounts from the value of taxable services on the ground that the service tax on
the said amounts was payable by principal tour operators and had also mentioned this fact
in its ST-3 returns which were subjected to a detail scrutiny by the revenue, the Tribunal
observed that when all the records as required by the department had been produced for
scrutiny of the ST-3 returns there was no wilful misstatements, suppression of facts etc.
Accordingly, the demand was held to be barred by limitation.
[CCE vs. Taj Tours &Travels (2009) 16 STR 273 (Tri-Del.)]
Penalty
In this case the appellant sought waiver of the deposit of penalty levied under section 76
of the Finance Act, 1994 since they had deposited the amount of service tax along with
interest before the issuance of SCN. The Tribunal granted stay of recovery of penalty u/s.
76 distinguishing the case of UOI vs. Dharmendra Textile Processors (2008) 231 ELT 3
(SC) which dealt with penalty u/s. 11AC of the Central Excise Act by distinguishing that
penalty u/s. 11AC is not comparable with section 76 since section 11AC provided for
penalty on defaulter of Central Excise duty, whose default arises on account of fraud,
suppression of facts or contravention of provisions of law with intent to evade payment of
duty. [Deccan Mechanical & Chemical Industry Pvt. Ltd. vs. CCE (2009) 16 STR 263
(Tri-Mumbai);]
Where the appellants, under bonafide belief, had taken credit of excess amount of service
tax paid by them to the department and had also paid the adjudication levies, the Tribunal
held that imposition of penalties under Rule 15 of CENVAT Credit Rules, 2004 was not
justifiable.[Meka Industries vs. CCE (2009) 16 STR 319 (Tri-Bang.)]
Mere detection by the department does not amount to non-payment with an intent to
evade payment of service tax. Department ought to bring out clear facts that appellant
was in the know that service tax was payable but still chose not to pay tax inorder to
evade the same. Accordingly, the Tribunal held that no penalty u/s. 78 for suppression of
facts was imposable.
[Sands Hotel Pvt. Ltd. vs. CST (2009) 16 STR 329 (Tri-Mumbai)]
Where the appellants had paid duty on the bearings manufactured and supplied to the
Railways but failed to discharge the service tax payable on their installation the Tribunal
held that since the department was well aware that installation flows from the supply
there cannot be case for suppression of material fact and accordingly no penalties were
imposable. [National Engineering Industries vs. CCE (2009) 16 STR 340 (Tri-Del.)]
Where the appellants were ignorant about the provisions of service tax law and had no
malafide intention in not depositing the tax in time but had discharged their service tax
liability along with interest on being pointed out by the Revenue authorities before the
issuance of show cause notice the Tribunal held that where the appellant had maintained
proper records of transactions, responded to the summons and disclosed relevant details
when called for there was a reasonable cause
for waiver of penalties u/s. 80 of the Finance Act. [CCE vs. Pradeep Enterprises (2009)
16 STR 419 (Tri-Del.)];
Where appellants had paid the service tax alongwith interest and had also paid the
differential amount of tax on being pointed by the department the Tribunal observed that
there was no need to issue show cause notice u/s. 73 of the Finance Act for recovery of
tax and interest. Further, where no show cause notice was required to be issued u/s. 73,
issue of show cause notice for recovery of penalty u/s 76 does not arise. Accordingly, the
Tribunal held that no penalty u/ss. 76 was imposable. [U.B.Engineering Ltd vs. CCE
(2009) 16 STR 457 (Tri-Ahmd.)]
Where the assesse had deposited the entire amount of tax alongwith interest and had
maintained proper documents and records with regard to its activities the Tribunal on the
facts of the case held that the assesse acted under bona fide belief and hence there was a
reasonable cause u/s. 80 for non-imposition of penalties u/s. 76, 77 and 78. [CCE vs.
J.R.Singh (2009) 16 STR 484 (Tri-Del.)]
The appellants in the present case had paid service tax along with interest as a recipient of
service on royalty payments made abroad for the period October, 2004 to March 2006.
The Revenue contended to impose penalties u/ss. 76,77 and 78. The Tribunal relying on
the decision of High Court in Indian National Ship Owners Association vs. UOI (2009)
13 STR 235 (Bom.) held that since the services provided from outside India were held to
be liable for service tax only w.e.f. 18.4.06 no service tax was payable by the assessee.
Accordingly, where the liability to pay tax was absent no penalty u/ss. 76, 77 and 78 was
held imposable. [Jet Audio Pvt. Ltd. vs. CCE (2009) 16 STR 497 (Tri-Mumbai)]
Refund
In the present case the appellant had paid service tax on certain activities under the
category of clearing and forwarding activity. Later on the appellant filed refund claim on
the ground that such activities are not liable for service tax. However, the department
denied the claim on appeal the Tribunal following the decision of High Court in CCE vs.
Kulcip Medicines (2009) 14 STR 608 (P&H) held that the appellant were receiving and
storing the goods and selling them to the ultimate
consumers but he is not clearing the same from the principal’s premise thus, appellant’s
services were not liable for service tax under the category of “Clearing and forwarding
services” and allowed the refund claim. [Vijay Traders vs. CCE (2009) 16 STR 424 (Tri.
– Bang.)]
Refund of pre-deposit
Bar of unjust enrichment would not be applicable to pre-deposit made during pendency
of appeal since pre-deposit amount is not payment of duty. [CCE vs. Sam Industries
(2009) 16 STR 382 (Tri-Mumbai)]
Revision of orders
The show cause notice and order in revision issued by the Commissioner in exercise of
its revisional power cannot go beyond the original show cause notice.[Sands Hotel Pvt.
Ltd. vs. CST (2009) 16 STR 329 (Tri-Mumbai)]
In case the Commissioner, does not an agree with an order of the adjudicating authority
lower to him he should revise the order u/s. 84 instead of directing for filing an appeal
before the lower appellate authority.[CCE vs. Advent Multiservices Pvt. Ltd (2009) 16
STR 300 (Tri-Kolkata)]
Stay of demand
The department issued notices for recovery of amount stayed by the Tribunal on the
grounds that stay order passed by the Tribunal stands vacated on expiry of 180 days. On
appeal the Tribunal held that there was no requirement to pass any order extending stay
already granted since the order of stay of recovery shall remain valid till final disposal of
appeal.
[A. Mohammed Mubarrac vs. CCE (2009) 16 STR 385 (Tri-Chennai)]
It is incumbent upon the lower appellate authorities either to ensure that either the entire
demand of duty and penalty is deposited or the requirement of the same has been waived
before taking up the appeal for decision on merit.
[New Tobaco Co. Ltd. vs. CCE (2009) 16 STR 393 (Tri-Kolkata)
CENVAT Credit
Credit of service tax paid on insurance premium, repair of vehicles, AMC charges on
telecom and courier charges being availed in relation
to manufacture of final productsis admissible.
[CCE vs. CCL Products (India) Ltd. (2009) 16 STR 305 (Tri-Bang.)]
Where the credit of service tax paid on mobile phone service, which was used by the
workers in assessee’s premises for the purposes connected with manufacture/clearance of
final product, was denied the Tribunal observed that any service as may be shown to be
connected with the business activity of output service provider or a manufacturer would
qualify to be “input service”. Accordingly, credit was held to be admissible.[CCE vs.
Axiom Impex International Ltd. (2009) 16 STR 309 (Tri-Mumbai)]
Empty containers are used for packing final products and hence can be treated as inputs
used by the manufacturer in relation to manufacture of final products. Accordingly, credit
of service tax paid on freight for moving empty containers called for export of goods is
held to be admissible.
[CCE vs. Nitin Spinners Ltd. (2009) 16 STR 323 (Tri-Del.)
The Tribunal in the present case allowed the credit of service tax paid –
• on outward transportation of final products from place of removal holding it as input
service u/r. 2(1)(ii) relying on Larger Bench decision in ABB Ltd. & Others v CCE
(2009) 15 STR 23 (Tri. LB.)
• on outdoor catering services availed for the purpose of supplying food to assessee’s
employees in the canteen, held as input service related to business relying on Larger
Bench decision in CCE vs. GTC Industries Ltd. (2008) 12 STR 468 (Tri. LB)
[Thiru Arooran Sugars Ltd. vs. CCE (2009) 16 STR 404 (Tri.- Che.)]
Where the appellant vested with the ownership of finished goods upto the point of
delivery of the goods to the customer and the transportation charges are borne by the
appellant himself then the service tax paid on GTA services would qualify as input
services and credit of the same available. [Inox Air Products Ltd. vs. CCE & C (2009) 16
STR 411 (Tri. – Mum.)
Where the assessee used services in its factory at Silvassa but the bill was addressed to
and paid by its office situated at Mumbai, the Tribunal held that the substantive benefit
cannot be denied on the procedural grounds particularly in a case where there is no
dispute as to whether
services qualify as input service or not. [CCE vs.DNH Spinners (2009) 16 STR 418 (Tri.-
Ahmd.)]
Service tax payable on the goods transport agency services by a service recipient can be
paid by way of debit to CENVAT credit account since GTA is deemed to be an output
service [Selvakumar Spinners Pvt. Ltd. vs. CCE (2009) 16 STR 406 (Tri. – Chen)].
Taxable Event
Where the construction services were provided prior to 1-3-2006 though payment for the
same was received after that date, it was held that the appellant was entitled to abatement
under notification no .18/2005 dated 7-6-2005 which provided for 67% abatement
without the bar on availment of CENVAT credit relating to input services, not with
standing that the said notification was rescinded by notification no. 1/2006 dated 1-3-
2006 (and prevalent when payment was received) which imposed a bar on taking
CENVAT credit for availing abatement
[Santosh Associates vs. CST (2009) 16 STR 87 (Tri-Ahmd.)].
Business Auxiliary Services and Authorised Service Station services
The appellants were servicing / repairing of ‘light commercial vehicles’during the
warranty period for which they were reimbursed by the manufacturer. The department
contended that the amounts are liable under business auxiliary services. The appellant
contended that such services were more appropriately liable under ‘authorised service
station’ services and not ‘business auxiliary services’ but it is excludible from ‘authorised
service station’ services as they do not cover ‘transport vehicles’ such as light
commercial vehicles. The Tribunal agreed with the appellant’s contention that the
appellant’s services are not liable for service tax under the category of ‘authorised service
station’ services [Focuz Motors vs. CCE & Cus & S.T. (A) Kochi (2009) 16 STR 42 (Tri.
– Bang.)].
Cargo Handling Services
In the present case the Tribunal relying on Modi Construction Co. vs. CCE (2008) 12
STR 34 (Tribunal) held that mere transportation will not amount to ‘cargo handling”
unless loading, unloading, packing orunpacking of cargo and handling of such cargo is
the primary object of the contract. [CCE & C vs. Scrap Material Handling Co. (2009) 16
STR 68 (Tri. – Del.)]
Consulting Engineering services vs. Commercial Training or coaching services.
Where the appellant was engaged in imparting training in computer software or and
networking, the Tribunal held that the services would fall under the category of
“Commercial Training or Coaching Services” w.e.f. 1-7-2003 and impugned period being
prior to that date, the services would not be liable under “consulting engineering
services”. [Micro Academy (India) Pvt. Ltd. vs CST (2009) 16 STR 28 (Tri. – Bang.)]
Outdoor Catering Service
Mere preparation and serving food items to the employees of the company using the
facilities such as canteen, stores, furniture, utensils, gas, electricity, etc. provided by the
company itself, is not covered under outdoor catering service. [Rajeev Kumar Gupta vs.
CCE (2009) 16 STR 26 (Tri. – Del.)]
Import of services
The appellant, an Indian company, receiving services of procurement of purchase orders
from foreign companies liable for service tax under ‘business auxiliary services’, is not
liable to pay service tax on the same as a recipient of services prior to 16-6-2005. [CCE
v. EID Parry (2009) 16 STR 82 (Tri-Chennai) – INSA vs. UoI (2009) 13 STR 235
(Bom.) followed].
Valuation
Value of materials used in ‘retreading of tyres’ eligible to be deducted from the value of
taxable services especially where the appellants had disclosed the material value
separately in the invoice and also paid VAT / sales tax on the material value [Chakita
Ranjini Udyam vs. CCE (2009) 16 STR 172 (Tri – Bang.)].
CENVAT Credit
Where the assessee had paid the service tax (on its input service which the supplier
charged under ‘business auxiliary services’) and taken credit on the basis of valid
documents, its eligibility cannot be questioned on the basis that the assessment of the
service by the department at the end of the service provider was incorrect [CCE vs.
Carborandum Universal Ltd. (2009) 16 STR 181 (Tri- Chennai)].
Any service to be construed as “input service” must satisfy the main part of the definition
that it should be ‘used for the manufacture’ including those that are specifically
mentioned in the inclusive part of the definition. The Tribunal further held that –
(a) credit of tax paid by the appellant, a manufacturer of steel, on the membership of
Sponge Iron Manufacturers Association would not be entitled to credit;
(b) credit on tax paid by the appellant on – (i) security services at railway siding where
the raw materials were loaded / unloaded; (ii)rent-a-cab services and (iii) mobile
telephone services would not be available to the appellant on the ground that the
appellant did not adduce any evidence that the said services were used for manufacture of
products.
[Vikram Ispat v. CCE (2009) 16 STR 195 (Tri – Mum.)]
Abatement / CENVAT credit
Where the appellant initially claimed abatement (67%) on construction services and also
availed the CENVAT credit on input services [violating the condition in notification no.
1/2006 dated 1-3-2006] but subsequently reversed the CENVAT credit on being pointed
out, it was held that the appellant being entitled to the benefit of abatement, no penalty is
imposable. [CST vs. Amola Holdings Pvt. Ltd Pvt. Ltd. (2009) 16 STR 46 (Tri. –
Ahmd.)].
Appeal
The question whether a member’s club is liable for service tax on the amounts received
from its members is a question ‘having a relation to the rate of service tax’ and
accordingly an appeal against the order of the CESTAT would lie to the Supreme Court
and not the High Court u/s.35L of the Central Excise Act, 1944 read with section 83 of
the FinanceAct, 1994.[CST vs. Delhi Gymkhana Club Ltd. (2009) 16 STR 129 (Del.)].
Export rebate
Where the appellant, an exporter of services, claimed rebate of tax paid on various ‘input
services’ like telephone, fax, management consultancy, real estate agent, security agency,
etc. under notification no. 12/2005 dated 19-4-2005 but filed a declaration only prior to
the date of refund and not prior to the date of export as required by the notification, the
Tribunal held –
(i) On facts, the various services qualified as ‘input services’ and accordingly the tax paid
on them qualified for rebate;
(ii) The belated filing of declaration is only a procedural lapse for which the substantive
benefit of rebate should not be denied.
[CST vs. Convergys India Pvt. Ltd. (2009) 16 STR 198 (Tri- Del.)].
Refund
Where the appellant claimed refund of tax paid as a recipient of services on
reimbursement of expenses to foreign technicians the Tribunal disallowed the refund
claim holding as follows.
(i) The tax paid was on ‘reimbursements’ and not on consideration for ‘services’, and
hence the tax paid is not in the nature of service tax and accordingly would not qualify
for CENVAT credit. Thus, clause (c) of the proviso to Section 11B(2) of Central Excise
Act, 1944 which provides that the bar of unjust enrichment would not apply to refund of
CENVAT credit would not be applicable.
(ii) the appellant has debited the said tax payments to its Profit and Loss Account which
implied an increase in the cost of finished goods sold. Hence the appellant had passed on
incidence of such duty to another person and accordingly the refund claim would be hit
by the bar of unjust enrichment. N.B.: The above judgment reiterates the point that if an
assessee claims refund of any tax it should appear in the ‘current assets’ and should not
have been written off.
[Keihin Fie Pvt. Ltd. vs. CCE (2009) 16 STR 71 (Tri. – Mum.)].
Penalty
Where the appellants had not paid service tax on the basis of Board’s instruction that
created a doubt whether commercial concern would also include the individual but did
not contest the service liability, no penalty is imposable. [Infinity Credit vs. CCE (2009)
16 STR 61 (Tri. – Del.)].
Where the Tribunal found that the appellant (an air travel agent) deliberately suppressed
the value of taxable service in their returns and made a short payment of service tax but
paid the short payment alongwith interest before the issue of adjudication order, the
Tribunal held that –
(i) Penalty u/s. 77 would not be applicable since no instance of nonfiling of the returns
was brought on record;
(ii) Penalty u/s. 76 (for delay in payment of tax) would be imposable notwithstanding that
penalty u/s. 78 (for suppression of value of taxable service) is levied. Accordingly
penalty u/s. 76 of Rs. 100/- per day of delay was upheld;
(iii) Penalty u/s. 78 was reduced to 25% of the tax amount considering that the appellant
paid the tax along with interest before adjudication.
[Bajaj Travels Ltd. v. CCE (2009) 16 STR 183 (Tri- Del.)].
Business auxiliary services
Since coal is an excisable product (attracting Nil rate of duty) the activity of‘mining’ coal
would fall under business auxiliary services more particularly under clause (v) of section
65(19) viz., ‘production of goods for the client’ but would be excluded from it being an
activity amounting to ‘manufacture’ as defined in section 2(f) of the Central Excise Act,
1944 in respect of assessee’s activities for the period 10.7.2004 to 15.6.2005. However,
post 1.6.2007 it would be liable for service tax under the category of“mining services”.
[Avian Overseas Pvt. Ltd. vs. CCE (2009) 15 STR 540 (Tri-Kol.)].
Where the assessee supplied heated oil (which was in excess of their own consumption)
to neighbouring companies for a heating charge, the Tribunal held that there was no
question of rendering any service and the supply cannot be considered as ‘procurement of
goods or services which are inputs for the client’ inasmuch as they have not procured it
through a third person for supply directly to the companies [General Precured Treads Pvt.
Ltd. vs. CCE (2009) 15 STR 724 (Tri-Chennai)].
Cargo handling services
‘Loading and unloading’ coal within the mining area would not be liable for service tax
under the category of ‘cargo handling services’ while loading and unloading outside the
mining area would fall within the said category [Avian Overseas Pvt. Ltd. vs. CCE
(2009) 15 STR 540 (Tri-Kol.)].
Construction Services vs.Works Contract services
Where the appellants constructed a rawwater reservoir and its lining package for NTPC
and charged and paid sales tax on the transfer of materials considering the same as a
‘works contract’ in accordance with the provisions of the contract, the Tribunal held that
the services being in the nature of ‘works contract’ would be liable for service tax only
w.e.f. 1.6.2007 and since the period impugned was prior to 1.6.2007 the said service
would not be liable for service tax under ‘commercial and industrial construction’
services [SomaEnterprise Ltd. vs.CCE (2009) 15 STR 559 (Tri. – Bang.)].
Technical inspection and certification services
Licencing of standard mark popularly known as ‘ISI’ mark to be affixed in products
(such as cement bags etc.) which is granted after drawal of sample, testing, etc. by the
Burueau of Indian Standards (“BIS”) in consideration for a marking fee is liable for
service tax under ‘technical inspection and certification services’. [Grasim Industries Ltd.
vs. CCE (2009) 15 STR 734 (Tri- Chennai).]
Date of provision of intellectual property services
Where the appellant entered into an agreement with a foreign company in 19.11.90 (later
modified on 19.5.2004) whereby the foreign company supplied know-how in
consideration for royalty to be paid for a specific period, the Tribunal held that – (i) the
services of supply of know-howbeing a one-time affair were provided in 1990, much
before the introduction of service tax; and (ii) the serviceswere not provided continuously
inasmuch as no continuous information was supplied by the foreign company and the
mode of payment whether in lump or periodic is not relevant. Accordingly, the Tribunal
set aside the demand of service tax on the royalty paid [Modi- Mundipharma P. Ltd.
vs.CCE (2009) 15 STR 713 (Tri-Del.)].}
Penalties
Where the appellant ran a canteen in a factory and believed that he was not liable to pay
service tax under the category of ‘outdoor caterer’ since he was not a caterer as ordinarily
understood and further that any tax charged would be available as credit to the factory,
the Tribunal held that he was under a bona fide belief and condoned the penalties u/s. 78.
[Krunal Catering Service vs. CCE (2009) 15 STR 716 (Ti-Ahmd.)]
Appeal
Where,while passing ‘orders’, the CESTATmembers differed in their opinion on some
points and referred the matter to a Third member but did not give their findings on
several points raised by the petitioner for which the petitioner made an application for
rectification of ‘order’ before the CESTAT, which application was resisted by the
Revenue on the ground that no ‘order’ came to be passed since the matter was pending
before the Third member, theHighCourt allowed the application and held –
(i) Orders made by the CESTAT though differing in opinion are nevertheless ‘orders’ and
not merely ‘opinions’ though they may not be enforceable ‘orders’ due to absence
ofmajority;
(ii) the rectification application before the CESTAT is maintainable and should be heard
first before disposing of the reference to the Third member.
[Suzlon Infrastructure Ltd. vs.Union of India (2009) 15 STR 529 (Bom.)].
CENVAT Credit
Though the contents of advertisements made by the appellants, a manufacturer of
‘concentrates’, essentially featured the ‘bottle of aerated waters’, the bottles being the
final productsmanufactured by bottlers and not the appellants, the High Court held that
the credit on advertising services received by the appellant cannot be denied on the
ground that the advertisement is not of the final product of the appellants viz.,
‘concentrates’
but is of‘aeratedwaters’ which are manufactured by bottlers. The High Court laid
downthe following propositions –
(i) so long as the manufacturer can demonstrate that the advertisement services availed
have an effect or impact on the manufacture of the final product and establish the
relationship between the input service and the manufacture of final product, credit must
be allowed. In the present case, Court held that the advertisement of soft-drink enhanced
the marketability of the concentrate [Pepsi Foods Ltd. v. CCE (2003) 158 ELT 552 (SC);
Philips India Ltd. vs. CCE (1997) 91 ELT 540 (SC) ; and ExplanatoryNotes toHSN–
heading 21.06reliedon].
(ii) The definition of “input service” which is expressed in the form of‘“means”…and
“includes”…..’, would cover even those services in the‘inclusive’ part which otherwise
would not come within the ambit of the ‘means’ part.
(iii) The phrase“activities relating tobusiness such as accounting, auditing, financing,....”
are words of wide import. The expression ‘such as’ is illustrative and not exhaustive of
services related to ‘business’. The word ‘business’ is also of wide import and cannot be
given a restricted definition to say that business of a manufacturer is to manufacture final
products only. In the present case, the business of the appellant would include apart from
manufacture of concentrates, also entering into franchise agreements with bottlers,
permitting use of brand name, promotion of brand name, etc. The expression ‘relating to
further widens the scope of the expression ‘activities relating to business’ and therefore
all activities (essential or not) in relation to a business would fall within the ambit of
input service and in the present case all activities having a relation with the manufacturer
of a concentrate would fall within the definition of input service.
(iv) Service tax is a value added tax and a consumption tax and the burden of service tax
must be borne by the ultimate consumer and not by any intermediary i.e. the
manufacturer or service provider. In order to avoid the cascading effect cenvat credit on
input stage goods and services must be allowed as long as a connection between the input
stage goods and services is established. Conceptually as well as a matter of policy, any
input service that forms a part of value of final product should be eligible for the benefit
of cenvat credit. In the present case, since the advertising cost forms part of the
assessable value the assessee is eligible to take credit of tax paid on advertising services.
(v) The definition of ‘input service’ under rule 2(l) can be conveniently divided into the
following five independent limbs :
a. Any service used by the manufacturer, whether directly or indirectly, in or in relation
to themanufacture of final products,
b. Any service used by the manufacturer whether directly or indirectly, in or in relation to
clearance of final products from the place of removal,
c. Services used in relation to setting up, modernization, renovation or repairs of a
factory, or an office relating to such factory,
d. Services used in relation to advertisement or sales promotion, market research, storage
upto the place of removal, procurement of inputs,
e. Services used in relation to activities relating to business and outward transportation
upto the place of removal.
Each of the above limbs of the above definition is an independent benefit/concession. If
an assessee can satisfy any one of the above, then credit on input service would be
admissible even if the assessee does not satisfy the other limbs.
[Coca Cola India Pvt. Ltd. vs. CCE (2007) 15 STR 657 (Bom.)].
Import of services
Where the appellant received architectural services from non-resident architects for the
period 1-1-2005 – 15-6-2005, the Delhi High Court, following INSA vs. UoI (2009) 13
STR 235 (Bom.), held that the appellant is not liable to pay service tax as a recipient
during the said period. [Unitech Ltd. vs. CST (2009) 15 STR 385 (Del.).
Business Auxiliary Service
The activity of the appellants i.e. arranging car loans for the banks/financial institutions is
liable under the category of business auxiliary service. The Tribunal further held-
(i) Such services are not exempt under Notification No.13/03- ST since this point was not
raised before the Asst. Commissioner and secondly, also because the notification exempts
only commission agent for goods and not services.
(ii) Tax is payable on the gross amount received from the bank and not the net amount
[Cross Road Auto Pvt. Ltd. vs. CCE (2009) 15 STR 181 (Tri- Del.)].
Prior to 16-6-2005, the appellant’s activity of power coating, bending, drilling of
components and machinery parts done for a consideration cannot be said to be liable for
service tax as ‘production of goods on behalf of the client’ under the category of business
auxiliary services since the activities were done for themselves for a fee and not on behalf
of any other person. [Auto Coats vs. CCE (2009) 15 STR 398 (Tri-Chennai)].
Banking and Other Financial Services
Where the appellant rendered cash management services which during the impugned
period was specifically excluded under the category of Banking and Other Financial
Services, the Tribunal held that the services could not be taxed under the category of
Business Auxiliary Services. [Federal Bank vs. CCE (2009) 15 STR 279 (Tri. - Bang.)]
Clubs or Association services
There has to be a quid pro quo between the members and the association/club. This has to
be established before levying service tax on the fees or subscription or any other amount
received by any association. Thus, membership fees received by the appellant were held
not taxable under the category of “club or association” services since no specific service
was provided to its members. [Ahmedabad Management Association vs. CST (2009) 14
STR 171 (Tri- Ahmd.)]
Commercial training and coaching services
Advance amounts collected by the assessee, a commercial training and coaching centre,
before 1-7-2003 for services that were rendered even post 1-7-2003 would be liable for
service tax on pro rata basis i.e. to the extent they pertain to services post 1.7.03. [CCE
vs. P.T. Education &Training Services Ltd. (2009) 15 STR 453 (Tri.- Del.)]
The appellants in the present case were charitable trust which undertook various
management courses for which it charged fees. The department contended that activities
of the appellants would be liable for service tax under the category of commercial
training or coaching services. On appeal, dismissing this contention, the Tribunal held
that the appellants would not be considered as a commercial training or coaching centre
since:
(i) the appellant is not a commercial concern since whatever income is earned by it is
ploughed back into the association for the public purpose.
(ii) activities of the appellants were not in the nature of preparing candidates for an
examination but were in the nature of continuing education.
[Ahmedabad Management Association vs. CST (2009) 14 STR 171 (Tri- Ahmd.)]
Consulting Engineering Services
Prior to 16.6.2005, soil testing and survey work would not be liable for service tax under
the category of consulting engineering services since post 16.6.2005, they are specifically
covered under “site formation and clearance, excavation and earthmoving and
demolition” and “survey and map-making services” respectively [Geo Foundations &
Structures Pvt. Ltd. vs. CCE (2009) 15 STR 408 (Tri-Bang.)].
Property valuation by an individual architect is not liable under the category of consulting
engineering services. [CCE vs. Sthapatya Rachana (2009) 15 STR 438 (Tri.- Ahmd.)]
Mining vs. Cargo Handling
Where the appellants undertook loading and transportation of limestone and rejects to
crusher and reject dump respectively in the mines area, the Tribunal held that the services
of the appellant are in the nature of ‘mining’ within the meaning of Mines Act, 1952 and
hence would be covered under the category of ‘mining services’ w.e.f. 1.6.2007 and
cannot be taxed prior to 1.6.07 under the category of cargo handling services. The
Tribunal also observed that transport of ‘limestone’ and ‘rejects’ within the mining area
cannot be treated as transport of ‘cargo’. [Thriveni Earthmovers Pvt. Ltd. vs. CCE (2009)
15 STR 393 (Tri-Chennai)].
Valuation
The appellant, a consignment agent, under a single contract with its principal, received
goods from the principal’s factory, warehoused the same, arranged dispatch of the goods
and invoiced the same on behalf of the principal. It also performed cutting, bending,
straightening during the warehousing. It charged the client one single bill which included
the cost of transportation, loading and unloading, cost of cutting, bending, etc. On the
question of exclusion of transportation cost, loading and unloading cost and cost of
cutting, bending, etc. for the purpose of charging service tax, the Tribunal held-
(i) since there is one contract and the total consideration is also charged in one bill, the
cost of transportation and loading or unloading cannot be excluded;
(ii) since the activities of cutting, bending, straightening cannot be said to be service
provided by consignment agent, these charges are not to be included for charging service
tax.
[Agra Steel Corporation vs. CCE (2009) 15 STR 202 (Tri.- Del.)]
In-flight catering services is liable for service tax under the category of ‘outdoor catering
services’ and where VAT has been paid on the value of foods and beverages sold the
same cannot be included within the taxable value for levy of service tax. [Grand Ashok
vs. CST (2009) 15 STR 344 (Tri-Bang.)]
Demand - limitation
The appellant, an institute constituted by Government of Madhya Pradesh, provided
services to Government bodies in the area of research/project work. It was a registered
society with no profit motive and undertook activities to help the Government. The
Commissioner (Appeals) had set aside penalties u/s 80 as there were no sufficient facts to
prove intent to evade payment of tax. Based on the facts the Tribunal held that demand
for extended period of limitation is not sustainable [M.P. Water & Power management
Institute vs. CCE (2009) 15 STR 164 (Tri-Del.)].
Penalty
Under section 80, the authority has power on showing reasonable cause not only to not
impose penalty but also to reduce the amount of penalty [CCE vs. Madhuri Travels
(2009) 15 STR 241 (Bom.)]
Refund
Where the appellants, the service provider, had made excess payment of service tax on
which Cenvat credit was also availed by the service recipient, but subsequently, they
returned the service tax to the service recipient by way of credit notes on which the
Cenvat credit availed was also reversed by the service recipient alongwith interest, the
Tribunal allowed the refund claim filed by the appellants holding that there was no unjust
enrichment. [Professional International Couriers (P) Ltd. vs. CST (2009) 15 STR 295
(Tri-Chennai)]
Even in respect of refund of amounts paid in excess due to clerical error, the provisions
of section 11B would be applicable and hence the refund application filed beyond the
period of one year from the relevant date would be considered as time barred. [General
Manager, B.S.N. L vs. CCE (2009) 14 STR 250 (Tri-Bang.); See also CCE vs. Beharay
& Rathi Constructions (2009) 14 STR 246 (Tri-Mumbai)]

BusinessAuxiliary services
Where the SIM cards were being sold by the appellants to the subscribers for a
commission and the service tax on activation charges was being paid by the telephone
service providers, the Tribunal observed that sale of SIMcards would be considered as
sale of goods and hence the appellants would be considered as commission agents
entitled to the benefit of exemption notification No. 13/2003 – S.T. 20.6.03 for the period
1.7.2003 – 30.6.2007.[CCE vs.Garage Tools Corporation (2009) 14 STR 824 (Tri-Del.)]
Cargo handling / packaging services
The appellants in this case were engaged in strapping of various steel items in the
production line in steel companies. Revenue sought to levy service tax on the activities of
the appellants under the category of cargo handling services. On appeal the Tribunal
dismissing the contention of the revenue held that –
i. the appellants merely undertook packaging which was a apart of the manufacturing
process on which excise duty was being paid by the manufacturers. Hence no service tax
was payable on the packing charges,
ii. the strapping of steel items was part of production process and not for transportation
and hence the item they packed were not ‘ 'cargo’.
iii.the services of the appellant being in the nature of packaging services would not be
liable for service tax prior to 16-6-05 since the packaging ervices came into the service
tax net only w.e.f. 16-6-05. [ITWIndia Ltd. vs. CCE (2009) 14 STR 826 (Tri-Bang.)]
CharteredAccountants Services
Notification No. 59/1998 dated 16-10-1998 exempted all services provided by Chartered
Accountants other than accounting, auditing and certification services. Notification No.
15/2002 dated 1-8-2002 amended the said exemption by inserting an explanation to the
effect that where the services fall under any other service category such as management
consultancy or manpower recruitment services, such services would be liable. The
department contended that the notification would have retroactive operation from
16.10.98. However, the Tribunal held considering the language of the notification, in
absence of a specific stipulation regarding itsdate of effect, the amendment has to be held
effective only from the date ofissue of this notification. [Sridhar & Santhanam vs. CCE
(2009) 14 STR 756(Tri. – Che.)]
Note: The author (Mr. A.R.Krishnan) had in his article titled ‘Service tax on CAs – Two
Burning Issues – A View’ published byWIRC in its Newsletter for October 2002 had
taken a viewwhen the Explanationwas brought in August 2002 that the said amendment
(Explanation) would not have retrospective effect.
Clearing and forwarding agents services
A clearing and forwarding agent is liable to pay service tax only on commission received
in respect of consignments received and forwarded by them and not in respect of
commission where the principal had directly sent the consignments to the buyers.
[Abirami Associates vs. CCE (2009) 14STR 801 (Tri-Chennai)]
Consulting engineer services
Where the appellants supplyied machinery manufactured by them and also rendering
services of commissioning and installation, the Kerala High Court after noting the
findings of the Tribunal held that the contract is a divisible contract and hence the fee
charged for ‘design and engineering’ service would attract service tax under the category
of “Consulting engineer services”. [Transformers & Electricals Kerala vsCCE (2009) 14
STR 737 (Ker)]
Transfer of technology would not be liable for service tax under the category of
‘consulting engineer’ services.[CCE vs. Indore Composite Pvt. Ltd.(2009)15 STR 91
(Tri-Del.)]
Packaging service
Packaging and bottling of country made liquor would not be liable for service tax under
the category of ‘packaging service’ since the same is in the nature of a manufacturing
process as defined under section 2(f) of the Central Excise Act, 1944 for the following
reasons:
i. ‘Manufacture’ includes any process which is incidental or ancillary to the completion
of manufactured product such as ‘bottling’. Further, it is not necessary that the
manufacturing process referred to in section 65(76b) of the Finance Act must result in
excisable goods.
ii. Bottling of liquor cannot be considered as a process distinct from manufacturing of
liquor so as to levy service tax thereon.
[Maa ShardaWineTraders vs.UOI (2009) 15 STR 3 (M.P)]
Photography service
Colour photo laboratories which are merely engaged in receiving exposed negatives/
rolls, developing the same and printing to photographs of desired size are liable for
service tax under the category of photography service.[ColorwayPhotoLab vs.UOI (2009)
15 STR 17 (M.P.)] Photography service is a works contract involving both the elements
of sale and service and the value of sale portion cannot be included within the value of
service and subjected to service tax.[Sood Studios Pvt Ltd. vs. CCE (2009) 15 STR 93
(Tri-Del.) Following Deluxe Color Lab (P) Ltd. vs. CCE (2009) 13STR 605 (Tri-Del.)]
Outdoor Caterer Services
The appellant supplied food, beverage and dry stores to airlines; prepared two separate
invoices – one for supply of food and another for service charges. It paid VAT on supply
of food and service tax on the service charges after availing benefit of Notification No.
12/2003. The department denied the benefit of notification No. 12/2003 on the ground
that there is no ‘sale of goods’ but granted abatement of 50% of the total amount (supply
of food + service charges) under Notification No. 20/2004 dated 10-9-04. The Tribunal
setting aside the order of department held that –
• In view of the Article 366(29A) read with provisions of Karnataka VAT Act, 2005 the
supply of food would be deemed as sale of goods.Further, since VAT has been paid on
such supply of goods service tax is not payable on the same value.
• Benefit of Notification No. 12/2003 is squarely applicable to the appellant since the
supply of food constitutes ‘sale of goods’.
• Where benefit under two notifications is available to the assessee, he has an option to
choose more beneficial notification [SkyGourmet Pvt. Ltd. vs. CST (2009) 14 STR 777
(Tri. – Bang.)]
Repair andMaintenanceServices
Where only repair work was undertaken by the appellants without a maintenance
contract, maintenance and repair being distinct (maintenance is prevention from failure,
repair is restoration after failure), such repair services were not liable to service tax prior
to 16-6-05. [Universal CylindersLtd. vs. CCE(2009)14 STR 745 (Tri. – Del.); See
alsoTexcitySales & Services(P) Ltd. vs. CCE (2009) 14 STR 823 (Tri-Chennai)].
Technical Inspection and certification services
Software testing is not liable for service tax under the category of ‘Technical inspection
and certification service’ since
a. it is an integral part of software development which is not liable for service tax;
b. it has ben specifically brought under ‘Technical testing & Analysis’w.e.f. 16-5-08 and
hence not liable prior to that date. [Relq Software Pvt. Ltd.vs.CST (2009) 14 STR 799
(Tri-Bang.)]
TourOperator Services Where the appellants transported employees of BHEL from
various points in the town to the factory and back as well as transported groups of people
tochoice destinations in vehicles that were not ‘tourist vehicles’ as defined in section
2(43) of the Motor Vehicles Act, 1994, the Tribunal held that the appellants were not tour
operators since they did not engage in planning,scheduling, organizing or arranging tours
but only provided transport. [T. N.State Trans. Corpn. (Kumbakonam) Ltd. vs. CCE
(2009) 14 STR 760 (Tri. –Che.)]
Valuation
The benefit of cum-duty calculation introduced w.e.f. 10-9-04 by way of explanation to
section 67 was held as a clarification of principle always valid and applied. Hence the
benefit would be available even prior to that date. [AbiramiAssociates vs.CCE (2009) 14
STR 801 (Tri-Chennai)] Where the appellant, a dealer of motor cars, provided free after
sales service to the customers towhomcars were sold by them without being
reimbursedby the manufacturer for the cost of free service, the Tribunal relying on
decision in ASL Motors Pvt. Ltd. vs. CCE (2008) 9 STR 356 (Tri. – Kol.) held that the
dominant intention of the appellant was to sell the cars and not to provide free service,
which was merely incidental and intended to promote the sale of cars and hence the entire
amount including the dealers’margin was rightly charged to sales tax and no service tax
can be levied on the amount representing dealers’ margin or any part of it. [Pillai & Sons
Motor Co. vs CCE (2009) 14 STR 844 (Tri. – Che.)].
Export
The appellant was an agent of a foreign company – GMC. It sourced contracts from the
Indian Railways to GMC for a commission. The commission was denominated in USD
but payable by GMC in INR through the Indian Railways. Thus, from the amount of US
D payable to GMC by Indian Railways, the Railways deducted the US D equivalent of
the commission payable to the appellant and remitted the net amount of USDto GMCand
paid the commission in INR to the appellant. The appellant claimed refund of tax paid on
the commission contending that its services would be considered as “exported”. The
department denied the export claim on the basis that the commission was received in
INR. On appeal the Tribunal allowed the appellant’s claim and held-
i. the condition of receipt in convertible foreign exchange was applicable during the said
period (April 5 – June 5) only if the foreign service recipient had a commercial or
industrial establishment or office in India. Since GMC did not have an office or
establishment in India,services provided by appellant would be held as export even if
money was not received in foreign exchange.
ii.the requirement of earning in convertible foreign exchange was held to be satisfied in
the appellant’s own case [(2008) 11 STR 156 (Tri. –Del.)]insimilar circumstances
[National Engg. Industries Ltd. vs.CCE (2009) 15 STR 68 (Tri. – Del.)].
Interest
The due date for payment of service tax is to be reckoned from the date of receipt of
‘value of taxable service’ from the client and if there is a delay if payment of tax interest
is mandatory. The plea that the tax was paid before issue of SCN or that the tax amount
was not received does not absolve the liability of the assessee to pay interest.[Bholanath
Oberoi & Sons vs. CCE(2009) 15 STR 61 (Tri-Kolkata)],
Penalty
Revision order enhancing penal liability of the assessee is not sustainable when the
adjudicating order is pending disposal before CCE(A). [Capital Color Lab vs. CCE
(2009) 14 STR 785 (Tri-Chennai)] Where the appellant had discharged the service tax
liability along with interest on the lapse being pointed out by the revenue authorities the
Tribunal relying on the decision in Majestic Motorbikes Ltd. vs. CCE (2008)11 STR 609
(Tribunal) held that imposition of penalty u/ss. 76 & 78 was not warranted. [Rupinder
Kaur vs.CST (2009) 14 STR 796 (Tri- Bang.)] Where the appellants had not disputed the
leviability of service tax and had paid the same alongwith interest during the course of
investigations and also there was no intention to evade payment of service tax since the
appellants bona fide believed that they would not be liable for service tax, the Tribunal
noting CBEC Circular No. 137/167/2006/CX-4 dated 3-10-2007 and other Tribunal
judgments held that issuance of show cause notice u/s. 73(3) was not warranted and
imposition of penalties u/ss. 76, 77 and 78 was not justifiable. [C.Ahead Info
Technologies India P. Ltd. vs. CCE(A) (2009) 14 STR 803 (Tri-Bang.)] Where there has
been no suppression of facts and where matter involved interpretation of law larger
period of limitation was not invokable. [ITWIndia Ltd. vs. CCE (2009) 14 STR 826 (Tri-
Bang.)] Where the appellant had paid the entire amount of demand alongwith interest and
a penalty equal to 25% of service tax within 30 days of issue of SCN but the revenue
sought to impose a penalty u/s. 76 and 78 Tribunal heldthat all proceedings initiated
against the person were deemed to be concluded u/s. 73(1A) and hence imposition of
penalty u/s. 76 and 77 was not justifiable.[KSL Industries vs.CCE (2009) 14 STR 839
(Tri-Ahmd.)] Where the adjudicating authority did not impose any penalty u/s. 78 by
exercising his discretion u/s. 80 (reasonable cause) and did not give a finding of fraud,
collusion, misrepresentation etc., the Commissioner in his revisional jurisdiction cannot
impose penalty u/s. 78 considering that there is no evidence was produced before
revisional authority to prove fraud, collusion, misrepresentation etc. so as to attract the
application of section 78 of the Act. [CCEvs.Darmania Enterprises (2009) 14 STR 741
Where there was existence of confusion in the industry regarding the liability for
payment of service tax and where the appellants had paid the entire amount of tax along
with interest before the issuance of show cause notice the Hon’ble Tribunal held that
there was a reasonable cause u/s. 80 for waiver of penalties.[Alstom Projects (I) Ltd. vs.
CST (2009) 15 STR 63 (Tri-Del.)] In this case the question before the Hon’ble bench was
– Can the penalty levied u/s. 78 of the Finance Act, 1994 be reduced below the statutory
minimum envisaged in the said section by invoking the provisions of section 80. The
Tribunal observed that on invoking of section 80 of the Finance Act,no penalty was
imposable. On the other hand where section 78 was invoked the penalty imposable
cannot be less than the amount of service tax not levied or paid. If at all, section 80 is
invoked no penalty can be imposed. Accordingly, it held that the quantum of penalty
leviable u/s. 78 cannot be reduced below the statutory minimum envisaged by invoking
the provisions of section 80. [CCEvs. Riya Travels & Tours (I) Pvt. Ltd. (2009) 15 STR
124 (Tri-Mumbai)]
Refund
Where there were no contrary findings to the effect that the calls made from the mobile
phones were not relatable to business of the assessee the Tribunal relying onCCEvs.
Excel Corp Care Ltd. (2008) 12 STR 436 (Guj.) held that the refund claim cannot be
denied merely on the ground that the said phones were not installed in the factory
premises.[URSS Tech Services Pvt.Ltd. vs. CCE (2009) 14 STR 797 (Tri-Del.)]
Rule 5 of the Cenvat Credit Rules along with Notification no. 5/2006 dated 14.3.2006
provides for refund of credit on input services used for exports.
This rule has been held to apply even in cases where the claim for refunds are filed on or
after 14-3-06 but the exports in respect of which were made prior to that date. [Fibres &
Facbrics International P. Ltd. vs. CC(A) (2009) 14STR 809 (Tri-Bang.); See also Elappa
Granite vs. CCE (2009) 14 STR 845 (Tri.– Che.)] Passing an assessment order is
contemplated only when a notice u/s.73 is issued. Otherwise, there is no provision for
assessment. Thus,where the assessee was sanctioned refund by way of re-credit which
was objected by the revenue on the ground that the assessee had not challenged the self –
assessment by filing a statutory appeal, the Tribunal held that since no order capable of
being appealed against had ever been passed the order sanctioning the refund was
sustainable. [CCE vs. Repol Plastics Ltd. (2009)14 STR 837 (Tri-Mumbai)] Where the
revision order was passed in respect of a period based on the CBEC circular issued later
and no demand notice was issued before revisionof the order, the Tribunal held that the
revision order was not sustainable.[HTMedia vs. CCE (2009) 15 STR 55 (Tri-Kolkata)]
CENVAT Credit
Credit cannot be denied merely on failure to comply with the procedural requirements of
mentioning the registration number of the Head office as Input service distributors [ISD]
on the invoice especially when the rules for ISD were being implemented. [CCE vs.
Jindal Photo Ltd. (2009) 14 STR 812(Tri-Ahmd.)]
Credit of service tax paid in respect of Mobile phones provided to its employees for
official purposes i.e. in relation to manufacture of excisable goods cannot be disallowed
on the ground that phones are not installed in the factory premises [CCE vs. Showa
Engineering Ltd. (2009) 14 STR 840 (Tri. – Che.) see alsoITCLtd. vs.CC& E (2009) 14
STR 847 (Tri. – Che.)] Credit of service tax paid on mobile phones which are standing in
the name of the company and are used by the employees in relation to work was allowed
in spite of Revenue’s plea that mobile has been incidentally used for personal work.
[CCE vs T. G. Kirloskar Automotive (P) Ltd. (2009) 14 STR 743(Tri. – Bang)] The
Larger Bench of The Tribunal holding that outward transportation of final product from
the factory (place of removal) to customer’s door-step would be considered as “input
service” under the CENVAT Credit Rules,2004 laid down the following propositions:
i. The definition of ‘input service’ under rule 2(l) can be conveniently divided into the
following five independent limbs :
a. Any service used by the manufacturer, whether directly or indirectly, in or in relation
to the manufacture of final products,
b. Any service used by the manufacturer whether directly or indirectly, in or in relation to
clearance of final products from the place of removal,
c. Services used in relation to setting up, modernization, renovation or repairs of a
factory, or an office relating to such factory,
d. Services used in relation to advertisement or sales promotion,market research, storage
upto the place of removal, procurementof inputs,
e. Services used in relation to activities relating to business and outward transportation
upto the place of removal.
ii. Each of the above limbs of the above definition is an independent benefit/concession.
If an assessee can satisfy any one above,then credit on inputservice would be admissible
even if the assessee does not satisfy the other limbs.
iii.Transportation of goods to customer’s premises is “an activity relating to business”.
The term ‘business’ is of a wide import. Further, the word relatingto’ further widens the
scope of the expression ‘activities relating to business’. It is not essential that the activity
should be relating to main/essential activity. It is an integral part of the business of a
manufactureto transport and deliver goods manufactured. If services likeadvertising,
market and research which are undertaken to attract a customer to buy goods of a
manufacturer are eligible to credit,services which ensure physicalavailability of goods to
thecustomer,i.e. services for transportation should also be eligible to credit.
iv. Though “outward transportation up to the place of removal” is specifically mentioned
in the inclusive part the Tribunal held that the principle of specific over general does not
apply to such provisions just as it does not apply to exemption provisions where an
assessee can successfully claim exemption if brings his case within any one notification
notwithstanding he does not satisfothers.
v. The use of the expression ‘outward transportation’ in the inclusive clause of the
definition is by way of abundant caution so as to avoid any dispute being raised on the
“means clause” which refers to clearance from the place of removal thereby resulting in
transportation up to the place of removal not being eligible for credit. Credit in respect of
transportation within the factory is available under the inclusive part.
vi. Credit on outward transportation is admissible even if freight does not form part of
value since the definition of input service has no connection with the definition of value
under the Central Excise Act. [ABB Ltd. vs. CCE (2009) 15 STR 23 (Tri-LB)]
CARGO HANDLING SERVICES
On facts, where the appellants were engaged in unloading of coal from railway wagons
and discharging the same to the conveyor belt through the track hopper the Tribunal held
that the appellant’s activities would be liable for service tax under the category of cargo
handling services.[Singh Brothers vs. CCE (2009) 14 STR 552 (Tri-Del.)]
CLEARING AND FORWARDING AGENT
In order for a service to be covered under the category of ‘clearing and forwarding’
services, the service provider must provide both clearing “and” forwarding services and
not only clearing “or” forwarding. [CCE v. Kulcip Medicines (P) Ltd. (2009) 14 STR 608
(P&H) overruling Medpro Pharma Pvt. Ltd. v CCE (2006) 3 STR 355 (Tri. – LB)].
COMMERCIAL TRAINING OR COACHING CENTRE SERVICES
Providing training to candidates, sponsored by various insurance companies to appear for
examinations conducted by IRDA which are required to be cleared to work as an
insurance agent would be considered as a vocational training entitled for exemption from
service tax under Notification No. 9/2003 – S.T. [Pasha Educational Training Inst. vs.
CCE (2009) 14 STR 481 (Tri-Bang.)]
CONSULTING ENGINEERING SERVICES
Supply of drawings and designs as per the technical requirements ofthe client which
would attract the provisions of the Customs Act, 1962 would amount to sale of goods and
not rendering of consulting engineering services. [Solitz Corporation v. CST (2009) 14
STR 642 (Tri-Del.)]
MANAGEMENT CONSULTANCY SERVICES
On facts, the Tribunal held that the appellants by providing on going technical services
were engaged in rendering advice, consultancy or technical assistance in the working
system of the manufacturing facility of their client and accordingly would be liable for
service tax under the category of ‘Management consultancy services’.[Shervani
Indus.Syndicate vs. CCE (2009) 14 STR 486 (Tri-Del.)] The services of deputing
personnel to sister concerns to engage in day to day activities is not liable under
Management Consultancy services.[Daurala Organics v CCE (2009) 14 STR 620 (Tri. –
Del.)]
IMPORT OF SERVICES
The Larger Bench of the Tribunal affirmed its decision in Hindustan Zinc Ltd. vs. CCE
(2008) 11 STR 338 (Tri-LB) and held that recipient of services imported would not be
liable for service tax prior 1.1.2005.[Molex (India)Lltd vs. CCE(A). (2009) 14 STR 616
(Tri-LB.)]
VALUATION
In case of photography services, the portion of value attributable to sale of photography
materials would not be included for the purpose of levy of service tax. [CCE vs. Ajanta
Color Labs. (2009) 14 STR 468 (Tri-Del.)] Handling charges recovered from customers
for giving physical delivery of scrips and certificates (a system which prevailed prior
to2001), not being in the nature of commission or brokerage is not includible in the value
of taxable services which in terms of Section 67(a) is the aggregate of the commission or
brokerage charged by a stock broker on the sale or purchase of securities from the
investors and includes the commission or brokerage paid by the stock broker to any sub-
broker. [Steel City Securities Ltd. vs. CCE (2009) 14 STR 479 (Tri –Bang.)]Note : This
decision is as per the law prior to 16.7.2001 Commission received by mandap-keeper
from decorators for providing them the client for the purpose of decoration would have to
be excluded for the purpose of calculating service tax under the category of mandap
keeper services. [Anand Associates vs. CST (2009)14 STR 504 (Tri-Ahmd.)]
LIMITATION
Where the appellants had registered for service tax since September,2004 but bona fide
believed that their activities would not be liable prior to 16.6.05 and they had also
informed the department as far back as in 1998 about their activities the Tribunal held
that since the department was made aware of the activities of the appellant in 1998, there
was no suppression of facts and hence the larger period of limitation was notinvokable.
[CST vs. P.J. Margo Pvt. Ltd. (2009) 14 STR 477 (Tri-Bang.)
Demand-Limitation
Where no objections were raised by the department as regards valuation when the
appellant firm filed returns regularly during its existence nor when they surrendered their
registration certificate on dissolution of the firm, the Tribunal held that extended period
of limitation cannot be invoked to confirm a demand prior to dissolution.[CCE & ST v.
P.V. Narayana Reddy (2009) 14 STR 701 (Tri-Bang.)
PENALTY
Where non-payment of service tax was on account of confusion with regard to the
liability to pay service tax the Tribunal held that there was a reasonable cause as
envisaged u/s. 80 for waiver of penalties. [Life Insurance Corporation of India vs. CCE
(2009) 14 STR 495 (Tri-Del.)] Enhancement of penalty by way of revising the order of
adjudicating authority during the pendency of appeal before CCE(A) is not sustainable.
[Agarwal Color Lab vs. CCE (2009) 14 STR 547 (Tri-Del.)]
REFUND
Refund of service tax paid under TR-6 challan cannot be denied merely on the ground
that the same was not a prescribed document at the relevant point of time especially when
the payment of service tax has not been denied; the objection of the revenue pertains
more to the form rather than substance.[CCE vs. Nitin Spinners Ltd. (2009) 14 STR
527(Tri – Del.)]Where the assessee had self assessed and deposited excess servicestax
and claimed refund, the rejection of the refund claim by the revenue on the ground that
the assessee had not challenged the assessment by filing a statutory appeal is not
sustainable since no order capable of being appealed against had ever been passed. [CCE
v. Noble Grain India Pvt. Ltd. (2009) 14 STR 617 (Tri. – Mumbai) following the decision
of Rajasthan High Court in Central Office Mewar Palace Org. v. Union of India (2008)
12 STR 545 (Raj.)]
EXPORTS – REFUND
The appellant provided services to clients based abroad. It got these clients through its
agent in India. The consideration for its services was received first by its agent in foreign
currency who after deducting its commission paid the balance to the appellant in INR.
The Revenue denied refund of tax paid on inputs used for export of such services on the
ground that the appellant had not received the consideration for services exported in
convertible foreign exchange directly from service recipient. The Tribunal allowing the
appeal of the appellant held –
i. The condition for receipt in foreign exchange was not applicable prior to 1.3.07 in
respect of services falling under rule 3(3) [i.e.location of service recipient category] and
the appellants claim was in respect of services exported prior to 1.3.07 and also in respect
of services falling under rule 3(3) [i.e. location of servicerecipient category].
ii.Even if there was condition for receiving the money in foreign exchange–
a. The appellant would be satisfying such a condition also by liberal interpretation since
it is the appellant who have rendered the services directly to the recipient situated abroad
and not the agents and the payment has been received in foreign exchange though by
their agents.
b. The receipt of monies by an agent of the appellant in foreignexchange would be
deemed to have been received by the appellant in foreign exchange for the purposes of
exportRules.
Advertising Agency services

The Hon’ble High Court held that –

(i) Advertising material need not always be a product of creative work like
conceptualisation, visualisation, designing etc. by an advertising agency and the
definition of “advertisement” u/s. 65(2) is wide enough to include material in the
form of vinyl stickers, hoardings, boards, banners, boxes, covers, balloons, film-
slides etc. with manufacturers name or logo or product name or trade name, with or
without design work.
(ii) All commercial concerns engaged in any of the activities connected with
advertisement, which includes making, preparation, displaying or exhibition of
advertisement, answer the description of “advertising agency” u/s. 65(3). It is not
necessary to carry out all the activities in the definition viz., making, preparation,
displaying or exhibition.

Accordingly the court held that the assessee who was engaged in production and sale of
the above advertisement material was an “advertising agency” liable to pay “service tax”
under advertising agency services. [CCE vs. Zodiac Advertisers (2009) 13 STR 593
(Ker.); See CST vs. Identity Communication Pvt. Ltd. (2009) 13 STR 614 (Tri-Ahmd.) –
“Tableau” is not an advertisement]

Broadcasting Service
Where the assessee undertook the activities of selection, production and scheduling of
programmes for telecast and collected money from their sponsors / advertisers by sale of
time slots for such telecast the Tribunal held that the activity of selling time slots for the
telecast of programmes, obtaining sponsorships etc., is covered by the second part of the
definition of “broadcasting” and by all these activities, they were providing a service to
their clients in relation to “broadcasting” and such services was exigible to levy of service
tax. [Vijay Television (P) Ltd. vs. CST (2009) 13 STR 296 (Tri. – Chennai)].

Business Auxiliary Services

Where the appellants undertook activities like identifying customers, explaining them the
utility of product and providing them with samples in consideration for a commission
payable only when payment was received from the customers the Tribunal held that the
appellant’s services were in the nature of commission agent and not “promotion” and
hence they were entitled to the benefit of notification no. 13/2003 (as it stood prior to
8.7.2004). [CCE vs. M. A. Menon & Co. vs. CCE&C (2009) 13 STR 653 (Tri-Ahmd.)]
Where the assessee, a dealer in motor vehicles, was promoting or marketing the services
of the financial institution which provided loans to his customers, the Tribunal held that
his services would be liable for service tax under the category of “Business auxiliary
services”. [Roshan Motors Ltd. vs. CCE (2009) 13 STR 667 (Tri-Del.)]

Consulting Engineer Services

Where the appellant entered into a turnkey contract for construction of a LNG Terminal
and had rendered design and engineering services for the purpose of the project, the
Tribunal held that the contract cannot be vivisected and part of it be subjected to service
tax as consulting engineering service [CCE vs. Ishikawajima-Harima Heavy Ind. Co. Ltd.
(2009) 13 STR 650 (Tri-Ahmd.)]
Supervision charges for installation and commissioning of the plant would not be liable
for service tax under the category of ‘Consulting Engineering Service’. [Kirlburn Engg.
Ltd. vs. CCE (2009) 13 STR 285 (Tri. – Ahmd.)].

Insurance Auxiliary Services

The appellants, reinsurance brokers, arranged reinsurance for certain Indian insurance
companies. The overseas reinsurance companies paid the Indian insurance companies a
‘reinsurance commission’ – 50% of which was paid to the appellants and 50% to the
Indian insurance companies. The department sought to tax the appellant’s remuneration
under the category of “insurance auxiliary services” for the period from 16.7.2001 to
30.6.2005. On appeal based on the facts the Tribunal held that -

(i) a contract of reinsurance is essentially a contract of insurance and the definition of

term ‘insurer’ as defined in section 65(58) was wide enough to include the services
 of ‘reinsurer’. The amendment made by the Finance Act, 2006 w.e.f. 1.5.06 to
expressly include a “reinsurer” within the definition of “insurer” was a clarificatory
amendment;
(ii) the services of reinsurance brokers were provided to the Indian insurance company.
Hence its services cannot be considered to be exported out of India;
(iii) in absence of physical receipt of convertible foreign exchange the appellants could
not claim exemption under notification no. 6/99 or 21/2003.

[Suprasesh G.I.S. & Brokers P. Ltd. vs. CST (2009) 13 STR 641 (Tri-Chennai)].

Site formation and clearance, excavation and earth moving and demolition Services
Where the appellants under a contract with APMDCL were required not only to remove
the overburden but to extract Barytes Ore the Tribunal held that the essential character of
the activities of the appellants were in the nature of mining services and site formation
(i.e. removal of overburden) was only incidental. Since mining services were liable to
service tax only w.e.f. 1-6-2007 the demand for a period prior to 1-6-2007 is not payable.
Further, the Tribunal also observed that the contract for mining being comprehensive in
nature cannot be vivisected for the purpose of levying service tax on the portion of
activity relating to site formation services.[M. Ramakrishna Reddy vs. CCE&C (2009) 13
STR 661 (Tri-Bang.)]

Tour Operator services

Prior to 10-9-2004, where the vehicles which were used by the appellants for conveyance
of its client’s staff were not tourist vehicle as defined under Section 2(43) of the Motor
Vehicles Act, read with Rule 128 of the Central Motor Vehicle Rules, the Tribunal held
that appellants cannot be said to be a tour operator within the meaning of the term as
defined under Finance Act, 1994. [CCE vs. Super Travels (2009) 13 STR 625 (Tri-Del.);
See also CCE vs. Gayatri Enterprises (2009) 13 STR 630 (Tri-Del.)]
Appellants having contract carriage permit but not tourist permit (since vehicle was not a
tourist vehicle) would not come within the definition “tour operator”, which, during the
period of dispute stood as “any person engaged in the business of operating tours in a
tourist vehicle covered by a permit granted under the Motor Vehicles Act or the rules
made thereunder”. [Bhagwan Singh Gulati vs. CCE (2009) 13 STR 253 (Tri. – Del.)]

Rate of tax – Taxable event

In a case where insurance premium was received in advance and policy was issued and
thereafter the rate of service tax had increased the Tribunal held the enhanced rate of
Service tax is not applicable to the policies, which were issued prior to the enhancement
of the rate. [Bajaj Allianz General Insurance Co. Ltd. vs. CCE (2009) 13 STR 259 (Tri.-
Mumbai)].

Import of services - Liability

Recipient of taxable services from offshore service provider [i.e. overseas commission
agents in this case] liable to pay service tax under Rule 2(1)(d)(d)(iv) of the Service tax
Rules, only w.e.f. 1.1.2005. [Nahar Spinning Mills vs. CCE (2009) 13 STR 255 (Tri. –
Del.)].
In respect of taxable services received outside India by a person who is resident in India
from a person who is non resident or is from outside India would be liable for service tax
only after enactment of Section 66A w.e.f. 18-4-2006. Prior to 18-4-2006, in respect of
the said services the service recipient in India would not be liable for service tax. [Indian
National Shipowners Association vs. UOI (2009) 13 STR 235 (Bom.)].

Valuation
Photography service is a works contract involving both the elements of sale and service
and the value of sale portion cannot be included with the value of service and subjected to
service tax. [Deluxe Color Lab (P) Ltd. vs. CCE (2009) 13 STR 605 (Tri-Del.); See Jain
Bros. vs. CCE (2009) 13 STR 633 (Tri-Del.)]

Show cause notice

Where refund application of CENVAT credit on inputs used for exports was rejected by
the appellate authority without issuing a show cause notice on the ground that the
CENVAT credit was not available in respect of service tax paid on the services provided
by the foreign commission agents, the Tribunal held the appellate authority travelled
beyond the proposal for considering refund claim and no opportunity was given to the
appellant by way of proceedings to deny CENVAT credit. On this ground the refund was
allowed. [Rawmin Mining and Indus. Ltd. v. CCE (2009) 13 STR 269 (Tri. – Ahmd.)].

Limitation – suppression of facts – burden of proof

Where the revenue had alleged that the appellants (CHA) had not spent any amounts
collected towards reimbursable expenses without verifying the service tax returns and the
Cenvat credit returns which were filed regularly, the Tribunal observed that in absence of
verification the benefit of doubt would be given to the appellants and that the burden to
prove that the said expenses have not been incurred by the appellants lay on the
department. Further, since the appellants had been regular in filing their service tax and
CENVAT credit returns the Tribunal observed that there was no suppression of facts
hence the larger period of limitation was not invokable. [Chandra Shipping & Trading
Services vs. CCE&C (2009) 13 STR 655 (Tri-Bang)]
Where the department had issued an SCN to include erection, commissioning and
installation charges in the assessable value for charging excise duty, a subsequent SCN
on the assessee seeking to invoke the larger period of limitation for charging the said
charges to service tax is not permissible since the department is deemed to be aware of
the facts and there was no suppression of the facts.[Kirlburn Engg. Ltd. vs. CCE (2009)
13 STR 285 (Tri- Ahmd.)]
Where the order for invoking the extended period of limitation was not a speaking one,
the Tribunal held that the extended period is not invokable and directed the CCE to
quantify the demand for the normal period.[Vijay Television (P) Ltd. vs. CST (2009) 13
STR 296 (Tri-Chennai)]

Penalty
Where the appellants had wilfully defaulted in depositing the service tax collected within
the due date with the government but had deposited the same before the issuance of show
cause notice the Tribunal held that penalty was leviable inorder to prevent recurrence of
such breach of law. Thus, penalty u/s. 76 was upheld but reduced from Rs. 100/- per day
starting from the date of default till the date of payment of tax to Rs. 1 lakhs and penalty
u/s. 78 was deleted. [Remac Marketing (P) Ltd. vs. CST (2009) 13 STR 658 (Tri-
Kolkata)]
Where no penalty u/s. 78 was levied in the original show cause notice the Tribunal
observed that the same cannot be levied by way of a revisionary order. [Punjab Small
Inds. & Exports Corpn. Ltd. vs. CCE (2009) 13 STR 677 (Tri-Del.)]
Where the provisions of S. 73(1A) were in existence at the time of issuance of SCN,
proceedings shall be deemed to be concluded on voluntary payment of service tax,
interest and 25% of penalty u/s. 73(1A) even if the demand pertains to the period prior to
the introduction of section 73(1A). [Aneja Property Dealer vs. CCE (2009) 13 STR 266
(Tri. – Del.)].
Penalty u/s. 76 was set aside where the assessee was under a bona fide belief that no
service tax was payable by them and subsequently they paid the service tax alongwith
interest before the issuance of SCN. [ABE Value Point Systems Pvt. Ltd. vs. CST (2009)
13 STR 288 (Tri. – Bang.)].
Setting side of penalties by the Tribunal on the ground that the matter was not free from
doubt and during the relevant period there was a decision by the Tribunal in favour of
assesses, the decision of the Tribunal cannot be held to be a mistake requiring any
rectification by the Tribunal [Redson Pharmaceuticals Ltd. vs. CCE (2009) 13 STR 292
(Tri-Ahmd.)]

Summons
An advocate had filed an argument note on behalf of his clients in certain proceedings
under the Customs Act. Based on the argument note a SCN was issued to a third party.
The third party sought cross-examination of the advocate. Quashing the summon for
cross-examination, the court held that an advocate appearing in a case cannot be forced to
give evidence in respect of his actions as an advocate on behalf of a client. What he has
done is only to present his arguments before the adjudicating Authority under the
Customs Act. In respect of the same he cannot be summoned for cross examination under
section 108 of the Customs Act. [Mohammed Zahir vs. Add. CC (2009) 13 STR 322
(Ker.)]

Cenvat credit - Refund

The place of removal in case where the goods are exported on FOB basis would be the
port and accordingly, credit of service tax paid on C & F agent services for facilitating
clearance of goods from the place of removal (i.e. port) would be admissible. [Rawmin
Mining and Indus. Ltd. vs. CCE (2009) 13 STR 269 (Tri. – Ahmd.)].

CENVAT Credit
Service tax paid on medical and personal accident insurance policies of employees and
catering services would be entitled to input credit since these costs are included in the
cost of final product in terms of CAS-4. Further, in view of the broad definition of input
services, CENVAT credit on the services of landscaping the surrounding of the factory
premises was held to be admissible especially in the present day conditions where much
importance is given to keeping the environment in a proper manner. [Millipore India Ltd.
vs. CCE (2009) 13 STR 616 (Tri-Bang.)]
Prior to 16.6.2005 credit in respect of service tax paid on Goods Transport Agency
services can be availed on the basis of TR-6 challans even if no document was prescribed
for taking credit especially when the service tax was paid and the assessee is otherwise
entitled to credit. [Gaurav Krishna Ispat (I) Pvt. Ltd. vs. CCE (2009) 13 STR 629 (Tri-
Del.); See also CCE v. Shree Sidhbali Steel Ltd. (2009) 13 STR 284 (Tri. – Del.)].
Where the services had been rendered by sub-contractor to the main contractor and the
tax liability thereon had been discharged by the sub-contractor, credit of service tax was
admissible in the hands of the main contractor and such credit cannot be denied on the
ground that sub-contractors were not liable to pay service tax. [Koch-Glitsch India Ltd.
vs. CCE&C (2009) 13 STR 636 (Tri-Ahmd.)]
Credit of service tax paid on mobile phones which are standing in the name of the
company and are used by the employees in relation to work cannot be denied only on the
ground that the same has been incidentally used for personal work. [CCE vs. Conzerv
Systems (Pvt.) Ltd. (2009) 13 STR 638 (Tri-Bang.); See also CCE vs. Brakes India Ltd.
(2009) 13 STR 684 (Tri-Chennai); CCE vs. Steelcast Ltd. (2009) 13 STR 696 (Tri-
Ahmd); See also CCE vs. Stanzen Toyotetsu India (P) Ltd. (2009) 13 STR 289 (Tri.-
Bang.)]
CENVAT credit of service tax paid on amounts paid to Airport Authority for allowing
the appellants to park their aircraft, used for the business purposes, in the airport, is
allowable in absence of evidence that the aircraft had not been used for business
purposes. [Force Motors Ltd. vs. CCE (2009) 13 STR 692 (Tri-Mumbai)].
Authorised Service Station
'Free services' rendered by automobile dealers in respect of vehicles sold are not liable for
service tax since –
(i) the value for such services have already been included in the price of the vehicle
paid by the customer and has been subjected to payment of excise duty and sales tax
(ii) no payment is received for the services from the customers.
(iii) there is no evidence that the vehicle manufacturers have specifically reimbursed any
amount towards the said services.
[K.P.Authomobiles Pvt. Ltd vs. CCE (2009) 13 STR 389 (Tri-Del)]
Banking and other financial services
The very nature of business and transaction under the Chits as per the provisions of the
Chit Funds Act stands on its own as a class. It does not have any parlance or similarity to
that of normal transactions as one understood in law or commercially. Hence in absence
of specific definition of ‘cash management’ or ‘asset management’ in the statute
governing service tax Circular No. 96/7/2007-ST dated 23.8.2007 clarifying Chit funds
business to be within ambit of service tax as being in the nature of cash management is
incorrect and liable to be set aside. [A.P. Federation of Chit Funds vs. UOI (2009) 13
STR 350 (A.P.)].

Business Auxiliary Services

Sale of various telecom services (purchased from BSNL) by the assessee to its customers
is transaction of purchase and sale of ‘goods’ and sales tax is attracted. The activity does
not amount to marketing and distribution of products and would not be liable for service
tax under the category of business auxiliary services. Further BSNL had already paid
service tax.[Chetan Traders vs. CCE (2009) 13 STR 419 (Tri-Del.)]

Goods Transport Agency Services

Where the service tax on GTA services was paid by the transporters, the Tribunal held
that tax in respect of the same services cannot be demanded again from the service
recipient. [Navyug Alloys Pvt. Ltd. vs. CCE (2009) 13 STR 421 (Tri-Ahmd.)]

Mandap Keeper services

Where the appellants, a hotel which let out its halls for functions as well as conferences /
meetings but registered itself only under mandap keeper services and not under
convention services, the Tribunal held that the assessee is required to register under both
as mandap keeper services and convention services and should classify the service each
time either as convention or mandap keeper depending upon whether the hall is let out for
organizing official, social or business function, or for formal meetings / conferences and
discharge service tax appropriately. [Welcome Hotel vs. CCE (2009) 13 STR 375 (Tri-
Ahmd.)]

“Breakfast” and “High Tea” (which in social context is used in replacement of dinner)
would be considered as ‘substantial and satisfying meal’ within the meaning of
Notification no. 21/97-S.T. dated 26.6.1997 and an assessee providing them whether on
fixed menu basis or unlimited basis along with mandap keeper services would be entitled
to abatement under the said notification. In order to claim exemption each and every
invoice disclosing as to whether the supplied item was only tea or coffee or the same was
inclusive of how many number of snacks etc. so as to fulfill the meaning of ‘substantial
and satisfying meal’ is not required to be gone through. It would be sufficient if the
mandap keeper has provided catering services and has disclosed the same as ‘inclusive of
catering charges’ in the invoices raised by him. [Welcome Hotel vs. CCE (2009) 13 STR
375 (Tri-Ahmd.)]
Import of Services
Prior to 1.1.2005, in respect of taxable services provided by a non-resident or a person
from outside India who does not have an office in India to a person based in India, the
recipient of the service is not liable to pay service tax notwithstanding that the recipient
has agreed to bear the tax liability since the tax liability is a creature of the statute and
governed by statutory provisions and cannot be determined or apportioned by an
agreement between two private parties. [CCE vs. Nicholas Piramal India Ltd. (2009) 13
STR 383 (Tri. – Del.)]

Valuation
Income-tax deducted at source under the provisions of Income tax Act would form part of
the gross amount charged for the purpose of charging service tax. [CCE vs. Louis Berger
International Inc. (2009) 13 STR 381 (Tri-Del.)]

Limitation
Where the appellants, bonafide believed that they were not required to pay service tax
both as mandap keeper and convention services since two interpretations were possible
the Tribunal held that larger period of limitation cannot be invoked [Welcome Hotel vs.
CCE (2009) 13 STR 375 (Tri-Ahmd.)]
Where the cenvat credit alleged to have been wrongly availed had been reflected by them
in statutory records placed before the revenue authorities and the issue involved a bona
fide interpretation of the provisions of law the Tribunal held that larger period of
limitation cannot be invoked. [Sagar Springs P. Ltd. vs. CCE (2009) 13 STR 400 (Tri-
Ahmd.)]

Penalty
In this case the Tribunal held as follows:
(i) No penalty would be imposable u/s. 75A (for failure to register) in respect of period
prior to 16.7.2001;
(ii) Where the appellants had bonafide doubts with regard to the classification of
services and the original authority in de novo proceedings directed by the Tribunal
had also reduced substantial amount of demand, no penalty u/s. 76 was imposable;
(iii) Further there being no suppression of facts and in absence of the permission from
the CCE to levy penalty, no penalty u/s. 78 was leviable.

However, the Tribunal held that, penalty u/s. 77 was leviable on account of failure to file
returns. [Maini Industrial Consultants vs. CST (2009) 13 STR 385 (Tri-Bang.)].

Appeal
Appeals filed before the High Court u/s. 35G of the Central Excise Act, 1944 beyond the
prescribed period of limitation in terms of section 35G(2)(a) [180 days from the date of
receipt of the order] would be barred by time and the High Court would have no
jurisdiction to condone the delay and entertain the appeal after the said period of
limitation. Further, the language of the provisions [especially section 35G(9) – opening
words] seen in conjunction with the legislative intent and the objects of expeditious
disposal sought to be achieved would exclude the application of section 5 of the
Limitation Act, 1963 (which provides for condonation of delay on sufficient reasons) by
necessary implication. [CCE vs. Shruti Colorants Ltd. (2009) 13 STR358 (Bom)].

CENVAT Credit
Where credit is taken on common inputs / input services used in the manufacture of
dutiable and exempted products without maintenance of separate accounts as per rule
6(2), but the assessee has reversed the credit on inputs / input services pertaining the
exempt products, either prior to or after the issuance of show cause notice, the assesee
would not be liable to pay 10% of the value of exempted products under rule 6(3)(b) of
the Cenvat Credit Rules, 2004. [Mount Mettur Pharmaceuticals Ltd. v. CCE (2009) 13
STR 414 (Tri- Chennai)].
Authorised service station services
'Free services' rendered by automobile dealers in respect of vehicles sold are not liable for
service tax since -

i. the value for such services have already been included in the price of the vehicle
paid by the customer and has been subjected to payment of excise duty and sales
tax.
ii. no payment is received for the services from the customers.
iii. there is no evidence that the vehicle manufacturers have specifically reimbursed
any amount towards the said services.

[Hindustan Auto House (P) Ltd. vs. CCE (2009) 13 STR 190 (Tri-Del.)]

Business Auxiliary Services

Weighment of goods which are subsequently sold cannot be said to be a service in
relation to sale, promotion or marketing of goods belonging to the client or an activity
incidental or auxiliary to promotion or marketing or sale of goods and hence not liable
under business auxiliary services. [CCE vs. Northern Computer (2009) 13 STR 34 (Tri-
Del.)]

The appellants in the present case were engaged in the activities of beneficiation of coal
i.e. a process whereby the coal extracted from the mines is crushed into pieces and
thereafter washed to remove its impurities and ash content so as to make it fit for sale.
The Revenue raised a demand on the ground that the said activity would liable for service
tax under business auxiliary services as "production or processing of goods for or on
behalf of the client". On appeal, the Tribunal referring to a number of enactments and
cases with regard to mining of coal, held that beneficiation of coal is an integral part of
'mining' and liable under the category of 'mining services' which came into effect only
from 01.06.2007 and not under 'business auxiliary services' [Aryan Energy (P) Ltd. vs.
CCCE (2009) 13 STR 42 (Tri-Bang)].

Sale of SIM cards (purchased from BSNL) by the assessee to its customers is transaction
of purchase and sale of 'goods' and sales tax is attracted. The activity does not amount to
marketing and distribution of products and would not be liable for service tax under the
category of business auxiliary services. Further BSNL had already paid service tax. [R.
Venkataramanan vs. CCE (2009) 13 STR 187 (Tri - Chenai)]

Cargo Handling Services / Port Services

Services of cargo handling (i.e. loading, unloading, etc.) within the port premises by a
person who has been issued a stevedoring licence u/s. 42(3) of the Major Port Trust Act,
1963 read with rule 60 of the New Mangalore Port Rules, 1976 and section 3(i) of the
Department of Surface Transport, Ministry of Transport, Government of India,
Notification dated 16.12.1985, falls within the category of "Cargo Handling Services"
and not "port services". Further, since the assessee was handling only "export cargo" he
would not be liable for service tax even under cargo handling services and accordingly be
entitled to refund of tax paid. [CCE vs. Konkan Marine Agencies (2009) 13 STR 7
(Kar)].

Where the assessees were engaged in operating pay loaders to load the coal into railway
wagons, the Tribunal after examining the contracts held that the activity of the appellants
was not merely "hiring" of payloaders but that of loading the cargo into the railway
wagons and the payloaders were merely an aid to perform the activity. Hence, the
assessee's activity would be liable for service tax under the category of cargo handling
services. [Gajanand Agarwal vs. CCE (2009) 13 STR 138 (Tri-Kolkata)]

Clearing and forwarding Agent services

Where the appellants were engaged in activities of storing, selling and invoicing of the
goods on behalf of their principal, on facts, the Tribunal held that services rendered by
them were in the nature of consignment agent services and were liable to service tax
under the category of clearing and forwarding agent services. [CCE vs. Singhania
Chemicals Agency (2009) 13 STR 160 (Tri-Del.)]

Event management services

Where the appellants had obtained commercial rights in tournaments of PGAI in
exchange for some consideration to be paid to PGAI and undertaking the obligation of
finalizing with sponsors and golf clubs to organize certain minimum number of
tournaments the Tribunal held, on facts, that the appellants, by organizing the golf
tournaments, the commercial rights of which can be exploited by the appellants, have
provided the event management service to themselves and not to the association or to the
sponsors and no service tax is payable on the amount received from the sponsoring
companies under the category of event management services. [Tiger Sports Marketing
Pvt. Ltd. vs. CST (2009) 13 STR 59 (Tri-Del).]

Management Consultants services

Rendering of services in areas like procurement or raw material, packing of finished
goods, documentation, sharing of common facilities and expenses etc. will not amount to
rendering of management consultant services. [Sara Services & Engineers Pvt. Ltd. vs
CCE (2009) 13 STR 177 (Tri-Del.)]

Rent-a-cab operator service

Where the appellants had rented out two of its vehicles having seating capacity of less
than 6 and 6-12 passengers for hire, the Tribunal held that the activity of the appellants
would be covered under "rent-a-cab services" since all vehicles with the relevant seating
capacity used for transportation of passengers would fall within the definition of 'cab',
'motor cab' and 'maxi cab' for the purpose of service tax notwithstanding that other
requirements of Motor Vehicles Act with respect to the vehicles have not been complied
to consider it as motor cab or maxi cab. [Neeraj Construction vs. CCE (2009) 13 STR
145 (Tri-Del)]

Stock Broker services

Services provided by a sub-broker to a stock broker viz., of getting prospective investors
for sale or purchase of securities is liable for service tax post 10.9.04 under the category
of "stock broker services". [Unique Investment Centre vs. CCE (2009) 13 STR 158 (Tri-
Del.) Decision in Vijay Shantha v. CCE (2007) 7 STR 518 (Tri-Del.) held per incurium]

Tour Operator service

Where the appellants were granted "tourist permits" by the transport authorities under the
Motor Vehicles Act, 1988, it was held that they would be covered under the definition of
tour operator and hence would be liable for service tax notwithstanding that the vehicles
were utilised as "stage carriages" and not as contract carriages". [Mangalwardhini Travels
vs. CCE (2009) 13 STR 51 (Tri-Del)]

Valuation
It is only 'gross amount charged for services' that is liable for service tax. Reimbursement
of expenses incurred by the service provider on behalf of the service receiver (which but
for the payment by service provider would have been payable by the service receiver)
cannot be considered as amounts received for rendering of services and hence would not
be included in the gross amount charged for services rendered and accordingly not liable
for service tax. It is not necessary that there must be a specific provision in the Act for
each service regarding deduction of reimbursements. [Rolex Logistics Pvt. Ltd. vs. CST
(2009) 13 STR 147 (Tri-Bang.)]

Limitation
Where an order was issued u/s. 11C dated 4.4.2007 of the Central Excise Act under
which the Government acknowledged that there was a general practice of not levying
service tax in respect of vehicles used as stage carriages and accordingly granted
exemption for the period 1.4.2000 to 4.2.2004, it was held that a show cause notice dated
13.6.2005 invoking longer period of limitation to demand tax for the period 1.4.2001 to
31.3.2004 is time barred. [Mangalwardhini Travels vs. CCE (2009) 13 STR 51 (Tri-Del)]

Where the SCN is based on the information disclosed in balance sheet and other
documents maintained by the appellants and the appellants have been regularly paying
tax and filing returns the Tribunal held that there is no suppression of facts with an intent
to evade tax and hence larger period of limitation cannot be invoked. [Rolex Logistics
Pvt. Ltd. vs. CST (2009) 13 STR 147 (Tri-Bang.)]

Penalty
Where there were factors which created confusion in the minds of assessee with regard to
payment of service tax and the assessee had paid service tax alongwith interest before the
issuance of show cause notice there Tribunal held that there was a reasonable cause
u/s.80 for non levy of penalties u/s. 76, 77 & 78. [Vinayak Travels vs. CST (2009) 13
STR 31 (Tri-Bang.); See also CCE vs. Shantha Satellite Vision (2009) 13 STR 76 (Tri-
Bang.)]

In absence of malafide intention for delay in payment of tax, penalties u/s.76, 77, 78 and
79 must be waived under section 80 on the ground of "reasonable cause" instead of
merely reducing the penalties.[M.R. Coatings Pvt. Ltd. vs. CCE (2009) 13 STR 79 (Tri-
Ahmd.)]
On a question as to whether the benefit of immunity from penalty under the
Extraordinary Tax Payer Friendly Scheme communicated vide D.O. Letter dated
20.9.2004 would be available to the assessees who have registered themselves prior to the
communication of Scheme, The Hon'ble High Court observed:

i. the amnesty scheme is an administrative instruction issued for the benefit of both
the service providers and the Revenue and is not an instruction envisaged under
section 37B of the Central Excise Act. Thus it would not be considered as having
a statutory force.
ii. The scheme is issued with an intention to provide immunity to defaulters who
chose to deposit arrears of tax and interest before the cut off date and hence
immunity should not be denied to persons who have already got themselves
registered prior to the communication of the Scheme.

[UOI vs. Amit Kumar Maheshwari (2009) 13 STR 119 (Raj.)]

Where the appellant was operating in a small town on a small scale, penalties u/s.76 & 77
was waived u/s.80 on the 'reasonable cause' ground [Neeraj Construction vs. CCE (2009)
13 STR 145 (Tri-Del)].

Where there is no intent to evade tax and prevalence of confusion as to taxability at the
infancy stage of implementation of the law the Tribunal waived the levy of penalties u/s.
76, 77 & 78. [Gajanand Agarwal vs. CCE (2009) 13 STR 138 (Tri-Kolkata)]

Penalty can be waived where there was no malafide intention since -

a. the issue in dispute involved bonafide interpretation of provisions of law; and

b. Credit was availed in statutory records under due intimation to the jurisdictional
authorities.

[Mundra Port & Special Economic Zone Ltd. vs. CCE (2009) 13 STR 178 (Tri-Ahmd.)]

Refund/ Rebate
Refund arising due to the order of the Tribunal is refundable even if SLP has been filed
by the department and the matter is pending before the Supreme Court. [Jai Bhagwati
Impex Pvt. Ltd. vs. UoI (2009) 13 STR 24 (Bom.)]

Where the revenue contended that since goods exported out of country were exempted
from payment of duty and therefore, the amount paid by the respondent manufacturer
cannot be treated as "duty" paid and he is not entitld to rebate on account of duty paid on
goods removed from factory / authorised warehouse for export out of India, the High
Court held that -

i. if no duty was leviable and the assessee was not required to pay the duty but still
he has paid the duty the Government cannot retain the same on any ground and
must refund the amount received from the assessee as on their own showing. It
has not received the amount by way of duty which could be appropriated by them
nor to which Section 11B applies.
ii. If on the other hand, the assessee is entitled to remove such goods on payment of
duty in ordinary course he is entitled to claim rebate thereon because the goods
were exported out of country on payment of excise duty.

In either case the refund is admissible. [CCE vs. Suncity Alloys Pvt. Ltd. (2009) 13 STR
86 (Raj.)]

Where the assessees, air travel agents, paid service tax on cancelled tickets but
subsequently refunded the amount of tax and value of its customers, it was held that the
fact that the incidence of tax has not been passed on to any other person stood
established. [CCE vs. Sharma Travel (2009) 13 STR 150 (Tri.-Del.)]

Appeal
Where additional evidence was not adduced before the Tribunal by filing an application
in writing to that effect under r. 23 of CESTAT (Procedures), Rules, 1982 it was held by
the High Court that the order of the Tribunal rejecting the additional evidence and
upholding the order of lower authorities was correct. [Kay Iron Works Pvt. Ltd. vs. CCE
(2009) 13 STR 87 (Bom.)]

Appeals and Remand

In the first round of proceedings, the deputy Commissioner raised a demand and imposed
penalties on the assessee. The CCE(A) confirmed the demand but reduced the penalties to
Rs. 20,000/-. The assessee appealed to the Tribunal for cum-tax computation of demand
which the Tribunal agreed and remanded the matter to "decide the matter afresh including
the imposition of penalty and interest …." On remand, the Assistant CCE sustained the
demand but increased the penalty which the CCE (A) modified to some extent. On
appeal, the Tribunal held that where the reduction in the quantum of penalty to Rs.
20,000/- by the CCE(A) in the first round of proceedings was not challenged by the
revenue authorities the quantum of penalty was final as against them. The remand was
meant for the assessee to seek a waiver of penalty and it was not open to the lower
authorities to pass a more disadvantageous or onerous order so far as quantum of penalty
was concerned. [Bhagwati Security Services vs. CCE (2009) 13 STR 152 (Tri-Del.)]

Cenvat Credit
Custom house agent's services availed for clearance of goods exported does not have any
nexus with the manufacturing and clearance of the final products from the factory and
hence tax paid on custom house agent services is not eligible for cenvat credit. [Nirma
Ltd. vs. CCE (2009) 13 STR 64 (Tri-Ahmd.)]

Credit of service tax paid on manpower supply services used for operation and
maintenance of power plant set up by manufacturers for generating electricity (not
excisable) to produce excisable goods is admissible. [Sanghi Industries Ltd. vs. CCE
(2009) 13 STR 167 (Tri-Ahmd.)]

The appellants generated power in their power plants situated 200 kms away from their
factory and supplied the same to Gujarat Electricity Board in consideration whereof they
were permitted to withdraw electricity for their factory from the power grid on payment
of fixed wheeling charge. On the question whether credit of service tax paid on
maintenance and repair services consumed in their power plants would be admissible the
Tribunal observed that the transaction of delivering power to the grid and sale of power
from the grid are two distinct transactions and there was no direct nexus between the
services received within the power plant and goods manufactured within the factory by
the appellants and hence credit was not admissible. [Ellora Times Ltd. vs. CCE (2009) 13
STR 168 (Tri-Ahmd.)]

Credit of service tax availed on the basis of TR-6 challans cannot be denied since no
document was prescribed for taking credit during the relevant point of time especially
when the payment of service tax has not been denied. [Centaur Phamaceuticals P. Ltd. vs.
CCE. (2009) 13 STR 171 (Tri. - Mumbai)].

In this case the Tribunal held as follows:

i. Cement and steel used in construction of a jetty of a port does not fall within the
definition of term 'inputs' as defined under Rule 2(k) of the Cenvat Credit Rules,
2004 since it cannot be said that they are "used for providing" port services and
accordingly credit of duty paid on cement and steel is inadmissible.
ii. Mobile phone services, Custom house agent's services, Surveyor's services and
rent-a-cab services availed for hiring cars for port officers are "used for providing
output services" and credit of service tax paid on these services is admissible.
iii. Credit of service tax paid on club house fees meant for recreation of workers
being not directly connected with rendering of port services would be
inadmissible.
iv. Credit of duty paid on air-conditioners being capital goods falling with the
definition of term capital goods is fully admissible.

[Mundra Port & Special Economic Zone Ltd. vs. CCE (2009) 13 STR 178 (Tri-Ahmd.)]

Export of services
Where the appellants booked orders in India for the sale of the goods manufactured by its
subsidiary situated in Singapore for a commission, the Tribunal held that:

i. it cannot be said that the booking of orders indicate services being rendered in
India;
ii. since the orders were booked for a Singapore company the services were
considered to be delivered only to the Singapore company;
iii. when the recipient of the service is Singapore Company, it cannot be said that
services is delivered in India and the benefit of services is derived only by the
recipient company;
iv. because of the booking of orders, the Singapore Company gets business therefore
the services are also utilized abroad

Accordingly, the services of the appellant would be considered as export of services and
not liable for service tax. [ABS India Ltd. vs. CST (2009) 13 STR 65 (Tri-Bang.)]
Architect services
The definition of Architect services under the Act is wide enough to cover a commercial
concern engaged in rendering services in the field of architecture. [Unintech Ltd. vs CST
(2008) 12 STR 752 (Tri. – Del.)]

Banking and Other Financial services

Where the appellant gave an extrusion machine on a lease of 35 months extendable to
another period of 2 years for a monthly ‘user charge’ without an option to transfer the
asset at the end of the term, the Tribunal, relying upon the ICAI Accounting Standard 17
defining ‘Financial lease’, held that the lease was for a short period without any relation
to the economic life of the asset and the risks and rewards incidental to ownership was
not transferred to the lessee. Accordingly, the lease was not a ‘financial lease’ liable for
service tax under the category of ‘Banking and Other Financial Services’.[CCE vs. G.E.
India, Industries (P) Ltd. (2008) 12 STR 609 (Tri-Ahmd.)]

Business Auxiliary services

Weighment of goods which are subsequently sold cannot be said to be sale, promotion or
marketing of goods belonging to the client or an activity incidental or auxiliary to
promotion or marketing or sale of goods and hence not liable under business auxiliary
services. [CCE vs. Deepak Computers (2008) 12 STR 569 (Tri- Del.); See also CCE vs.
Bankhe Bihari Computers (2008) 12 STR 724 (Tri-Del.)]
‘Mutual fund units” are ‘goods’ within the meaning of section 2(7) of the Sale of Goods
Act, 1930. Thus, distribution of units of mutual fund schemes for a commission is liable
for service tax under the category of Business Auxiliary services, more particularly u/s.
65(19)(i) ‘promotion or marketing or sale of goods belonging to the client’ and not under
clause (ii) and clause (iv) as propounded by Circular No. 66/15/03 –S.T. dated 5.11.2003.
However, the said services are exempt under notification no. 13/2003 which exempts
service tax on sale and purchase of “goods” by commission agent. [CST vs. P.N. Vijay
Financial Services Pvt. Ltd. (2008) 12 STR 628 (Tri.-Del.)]

Note: The above exemption would be applicable only up to 8.7.2004.

Cargo Handling Services

Where the appellant provides the services of breaking / crushing limestone boulders to
convert it into jelly and transport the same to the client’s premises for further processing
the Tribunal held that such services would not be liable under the category of “Cargo
handling services” since loading and unloading are only incidental activity. [N.
Rajashekar & Co. vs. CCE (2008) 12 STR 760 (Tri. – Bang.)]

Clearing and forwarding agent services

Where on facts, it was found that a corporation established by the state government to
regulate the trade of liquor purchased liquor from various manufacturers / suppliers and
sold it on retail it was held that the appellants were engaged in purchase and sale of liquor
and cannot be considered as a C & F agent although they were described as a
procurement agent in the agreement with the manufacturer/supplier and their income
from sale of liquor was described by them as commission in the balance sheet.
[Chhattisgarh State Beverages Corpn. vs. CCE (2008) 12 STR 607 (Tri-Del.)]

Construction of complex services

Construction and transfer of individual residential units would not be liable for service
tax under the category of “Construction of residential complex services” since the service
is not for construction of a residential complex comprising of more than 12 residential
units. [Macro Marvel Projects Ltd. vs. CST (2008) 12 STR 603 (Tri-Chennai)]

Consulting Engineer service

On facts the Tribunal held that supervisory and field engineering services rendered would
be liable for service tax under the category of Consulting Engineer services [Prodorite
Anticorrosive Ltd. vs. CCE (2008) 12 STR 618 (Tri-Chennai)]
Royalty paid for supply of technical know-how cannot be subject to service tax under the
category of Consulting Engineering services. [CCE vs. Arai Seisakusho Co. Ltd. (2008)
12 STR 709 (Tri-Chennai)]
Services of supervising installation and commissioning equipments constituting an
‘oxygen plant’ would not be liable for service tax under the category of Consulting
Engineering services but only under commissioning and installation services which is
taxable w.e.f. 1.7.2003 [Southern Iron & Steel Co. vs. CCE (2008) 12 STR 725 (Tri-
Chennai)].

Leased Circuit Services

Interconnection Usage Charges collected by one telecom authority from another telecom
authority is not liable for service tax prior to 1.6.2007. [Bharti Airtel Ltd. vs. CST (2008)
12 STR 565 (Tri-Ahmd.)]

Online information and database access or retrieval services vs. Commercial

training and coaching services
Providing online computer courses through the medium of internet is in the nature of
“commercial training and coaching services” and not “online information and database
access or retrieval services” since, the essential character of the services involves
providing education through the medium of internet i.e. providing online lessons on
computer hardware and software, online interaction with the faculty, students and
experts, online test, etc. and not merely providing online access to data or information.
However, computer training institutes being exempt vide notification no. 9/2003 dated
20.6.2003 the appellants were not liable for service tax. [Dewsoft Overseas Pvt. Ltd. vs.
CST (2008) 12 STR 730 (Tri. – Del.)].

Port Service
Where only a portion of the land and water front is licensed by the port to the assessee for
providing ship repair services, the relationship between the port and the assessee is only
that of licensor and licensee and the assessee is not rendering services as authorised
person of port, the Tribunal relying on Homa Engg. vs. CCE (2007) 7 STR 546 (T.) held
that the said activities of ship repair services would not be covered under the category of
port services. [Western India Shipyard Ltd. vs. CCE (2008) 12 STR 550 (Tri-Mumbai)];
Note: Disagreed in Western Agencies Pvt. Ltd. s. CCE (2008) 12 STR 739 (Tri-Chennai)
and matter referred to Larger bench.
Where the appellants holding licences as a stevedoring agent were providing cargo
handling services but such services were not rendered on behalf of the port authorities -
the Tribunal held that the appellant’s services are Cargo handling services and not port
services [H.K. Dave Ltd. vs. CCE (2008) 12 STR 561 (Tri-Ahmd.)].

Burden of proof
The appellants provided computer courses through various franchisees for a fee paid by
the franchisees. During the relevant period i.e.; 1.7.2008 to 6.10.03, four conditions were
required to be satisfied to fall under “franchise service” one of which was that the
franchisee must be under an obligation not to engage in selling or providing similar goods
or services identified with the franchisor. The Tribunal held that the onus of proving
fulfilment of the said condition is on the Revenue, and since Revenue had failed to lead
evidence to prove the satisfaction of this condition the Revenue cannot make the
appellants liable for service tax under the category of Franchise services. [Dewsoft
Overseas Pvt. Ltd. vs. CST (2008) 12 STR 730 (Tri. – Del.)].

Valuation
Unless the invoice mentions that invoice amount is inclusive of service tax it cannot be
treated as cum-service tax price. [Shakti Motors vs. CCE (2008) 12 STR 710 (Tri. –
Ahmd)]

Liability of service recipient to pay service tax

The Tribunal held that though comprehensive provisions for taxing import of services by
all possible modes came w.e.f. 18.4.06 when Section 66A was introduced in the Finance
Act, 1994 and simultaneously Taxation of Services (Provided from Outside India and
Received in India) Rules, 2006 were notified vide Notification No. 11/2006-S.T. dated
18.4.06, but, so far as the taxable services provided in India by a foreigner or non-
resident, not having any office or business establishment in India to a person in India are
concerned, these services were taxable even prior to 18.4.06 under section 66 read with
Section 65(105) of the Finance Act, 1994 and by virtue of Rule 2(1)(d)(iv) of the Service
Tax Rules, 1994 read with Notification 36/04-S.T. dated 31.12.2004 issued under Section
68(2) of the Finance Act, 1994, the recipient in India, was liable to pay service tax w.e.f
1.1.05. [Unitech Ltd. v CST (2008) 12 STR 752 (Tri. – Del.);]
Prior to 1.1.2005, in respect of taxable services provided by a non-resident or a person
from outside India who does not have an office in India to a person based in India, the
recipient of the service is not liable to pay service tax notwithstanding that the recipient
has agreed to bear the tax liability since the tax liability is a creature of the statute and
governed by statutory provisions and cannot be determined or apportioned by an
agreement between two private parties. [JCB India Ltd. vs. CST (2008) 12 STR 714
(Tri. – Del.)]
Demand – Limitation
Where the correspondence with the department revealed that the department was aware
about the non-payment of service tax on certain advance fees received by the appellants,
the Tribunal held that the larger period of limitation was not invokable. [PT Education &
Training Services Ltd. vs. CCE (2008) 12 STR 582 (Tri-Ahmd.)]

Demand – Recoverable only from notice of Show cause notice

Where non-resident companies provided certain services to an Indian company which the
department alleged would be liable for service tax under the category of consulting
engineering services and issued SCNs on the non-resident companies, but made a
demand on the Indian company since the non-resident companies did not pay the service
tax nor responded to the SCNs, the Tribunal struck the demand and held that it is not
open to the department to recover service tax from a person in pursuance of an SCN
addressed to another person. [Southern Iron & Steel Co. vs. CCE (2008) 12 STR 725
(Tri-Chennai)].

Refund
Passing an assessment order is contemplated only when a notice u/s.73 is issued.
Otherwise, there is no provision for assessment. Thus, where the assessee deposited
excess services tax and claimed refund (which was rejected by the lower authorities for
certain reasons), the rejection of the refund claim by the Tribunal on the ground that the
assessee had not challenged the assessment by filing a statutory appeal is not sustainable
since no order capable of being appealed against had ever been passed. [Central Office
Mewar Palace Org. vs. Union of India (2008) 12 STR 545 (Raj.)]
The appellants claimed refund on the ground that service tax was not recovered from the
client at the time of receipt of the value of services. It produced evidence in the form of
CA certificate, invoices and books of account where the amount of service tax was shown
as receivable. The department contended that service tax might have been recovered after
the issue of CA certificate. The Tribunal allowed the refund claim and held that as the tax
was not paid or recovered at the time of payment of value of services the Revenue’s
contention is in the realm of assumption and presumption. [CCE vs. Gujarat Chemical
Port Terminal Co. Ltd. (2008) 12 STR 564 (Tri-Ahmd.)]
Where the appellant paid tax on certain activities but claimed refund on the ground that
tax was not payable, the Tribunal held that since the contract value was inclusive of
taxes, the presumption would be that the tax in question has been collected from the
client unless proved otherwise by specific evidence. Since the appellants only produced a
CA certificate stating that the invoices did not indicate the service tax payments made by
them the Tribunal denied the refund on the ground of unjust enrichment. [Multi Mantech
International Pvt. Ltd. vs. CST (2008) 12 STR 717 (Tri. – Ahmd)].

Cenvat Credit
Where the goods exported have been sold on FOB/CIF basis the Tribunal held that the
load port would be the “place of removal” and accordingly, credit of service tax paid on
CHA services availed for facilitating clearance of goods from the place of removal (i.e.
load port) would be admissible. [CCE vs. Adani Pharmachem P. Ltd. (2008) 12 STR 593
(Tri-Ahmd)]Service tax paid on goods transport agency services availed for
transportation of goods from the factory to the consignment agent’s premises is entitled
to CENVAT credit since consignment agent’s premises is also defined as a place of
removal and the property in the goods never passes to a consignment agent. [CCE vs.
Rajhans Metals P. Ltd. (2008) 12 STR 597 (Tri-Ahmd.)]Rent-a-cab services availed for
transportation of employees to factory premises is an “input service” since –
(a) it may be considered as being used indirectly in relation to manufacture of goods;
or
(b) as part of business activity for promoting the business since any facility given to the
employees will result in greater efficiency and promotion of business.

Accordingly, service tax paid on rent-a-cab scheme services would be entitled to

CENVAT credit. [CCE. v. Cable Corporation of India Ltd. (2008) 12 STR 598 (Tri. –
Mumbai)].
Where the assessee availed CENVAT credit in respect of services availed at premises not
mentioned in the Registration Certificate [but which were subsequently endorsed in the
Registration Certificate], the Tribunal held that the credit is not deniable. [Raaj Khosla &
Co. Pvt. Ltd. vs. CST (2008) 12 STR 627 (Tri. – Del.)].
Where the appellant is liable to pay service tax on Goods Transport Agency services as
payer of freight, such goods transport agency services shall be deemed to be “output
service” as per the Explanation to section 2(p) and accordingly credit of service tax paid
on any input service and/or credit of duty paid on any input or capital goods can be
validly utilised for discharging service tax on such goods transport agency services. [Scan
Synthetics Ltd. vs. CCE (2008) 12 STR 766 (Tri. – Del.)
Service tax paid on cell phone bills of Individuals (presumably employees) would be
allowable subject to verification that phones are being used for attending calls of the
appellant’s customers. [Wiptech Peripherals Pvt. Ltd. vs. CCE (2008) 12 STR 716 (Tri-
Ahmd.)]

Penalties
Where the appellants registered themselves on 10.9.2003 and paid service tax for the
period 1.4.01 to 31.7.02 but did not pay it for the subsequent period in the matter of
Revenue’s appeal against the order of Commissioner of Central Excise (Appeals)
dropping the penalty u/s, 76, 77 and 78 the Tribunal ordered for payment of penalty
limiting to 25% of Service tax amount u/s. 78. [CCE vs. V.S. Patil (2008) 12 STR 567
(Tri-Bang.)]
Where the appellants had paid entire amount of service tax before issuance of show cause
notice but had only withheld the payment of interest for want of quantification the
Tribunal held that there was a reasonable cause u/s. 80 for non levy of penalty u/s.76.
[Lawson Travel & Tours (I) Pvt. Ltd. vs. CST (2008) 12 STR 572 (Tri-Chennai)]
Where the appellants, bonafide believed that only services provided by cable operators
who were receiving signals directly from the satellite, and not from multi system
operator, were liable under cable operator service, the Tribunal held that there was a
reasonable cause for waiver of penalty u/s. 80. [Krishna Satellite Cable Network vs. CCE
(2008) 12 STR 605 (Tri-Del.)]
Though the plea of bona fide belief was not specifically raised before the lower
authorities the fact that the appellant had been resisting the demand of service tax on the
premise that his activity is not liable for service tax led the Tribunal to believe that the
appellants were entertaining bona fide belief of not being liable to pay service tax.
Accordingly the penalties u/s. 76, 77 and 78 were waived on the reasonable cause
ground. [Prodorite Anticorosive Ltd. v. CCE (2008) 12 STR 618 (Tri-Chennai]
Penalty u/s.76, 77 and 78 of the Act can be waived u/s.80 where the appellants committed
the transgressions owing to a bona fide ignorance of statutory provisions. [CCE vs. Busy
Bee (2008) 12 STR 613 (Tri.-Chennai)].
Where there was confusion as regards leviability of service tax on certain receipts and the
appellants also paid the service tax during the investigation proceedings no penalty u/s.
76, 77 or 78 is imposable. [Shakti Motors vs. CCE (2008) 12 STR 710 (Tri. –
Ahmd)]Where issue related to the interpretation of the law penalty cannot be imposed
[Wiptech Peripherals Pvt. Ltd. vs. CCE (2008) 12 STR 716 (Tri. – Ahmd.)]
When the original authority waived the penalty exercising the discretion vested in him
u/s. 80 the Tribunal held that such order cannot be revised by the Commissioner
following the Karnataka High Court judgement in CCE vs. Sunitha Shetty (2006) 3 STR
404 (Kar.). [Solomon Foundry v. CCE (2008) 12 STR 750 (Tri-Chennai); Handiman
Services Ltd vs. CST (2008) 12 STR 765 (Tri. – Bang.)].
Departmental clarifications

Circulars and clarifications issued by the board are binding on the authorities under the
respective statute but are not binding upon the courts.

When the Supreme Court or the High Court declares the law on the question arising for
consideration, it would not be appropriate for the Court to direct that Circular should be
given effect to and not the view expressed in a decision of this court or the High Court.

Circulars issued by the board which run contrary to the statutory provisions have no
existence in law.

The revenue can lodge an appeal taking a ground contrary to a circular if it runs counter
to the decision of a court. [CCE vs. Ratan Melting & Wire Industries (2008) 12 STR 416
(SC)]

Business Auxiliary Service

Sale of SIM cards by the assessee to its customers is transaction of purchase and sale of
'goods' and sales tax is attracted. The activity does not amount to marketing and
distribution of products and would not be liable for service tax under the category of
business auxiliary services. [Vallamattam Communication vs. CCE(2008) 12 STR 267
(Tri. - Bang.)]

Where the assesses was engaged in the activity of applying epoxy coating of reinforced
steel bars supplied by his customers, it was held that the activity would be in the nature of
"production" of goods on behalf of his clients and accordingly liable for service tax under
the category of business auxiliary service since:

i. The activity amounted to "production" though not 'manufacture' so as to merit

exclusion u/s. 65(19);
ii. The production was done 'on behalf of of the assessee's customers (like L&T,
HCC) since the assessee's customers utilised its services for performing their
contracts with State Road Development Corporation.

However, the Tribunal remanded the matter for re-quantification of the demand for (i)
allowing credit of duty paid on materials and tax paid on input services; (ii) excluding
services provided prior to 10-9-2004; (iii) and giving benefit of 'cum service tax value"
computation in terms of Expln. 2 to s. 67. [PSL Corrosion Control Services Ltd. vs. CCE
& C (2008) 12 STR 504 (Tri. - Ahmd.)]

Banking and Other Financial Services

In respect of hire purchase contracts, the taxable event occurs upon entering into the
contract. Therefore, the rate of service tax will be the rate prevailing on the date on which
the contract is entered into. It is not a case where there is a continuous service during the
term of the contract when the instalments are paid. The payment of instalments is only
the obligation of the hirer. Hence contracts entered into prior to 14-5-2003 would be
exigible to service tax @5% notwithstanding the contract continued post 14-5-2003 when
the rate became 8%. [L.F.C. Hire Purchase Company Ltd. vs. CCE & C (2008) 12 STR
320 (Tri.-Bang.)]

Commercial Training or Coaching Services

Notification No. 7/2003 dated 1-7-2003 exempted - (i) vocational training institute (ii)
computer training institute and (iii) recreational training institute from the category of
commercial coaching and training from 1 -7-2003 - 30-6-2004. Thereafter, Notification
No. 24/2004 dated 10-9-2004 exempted only "vocational training institute" and
"recreational training institute" and this notification was amended on 16-6-2005 to
provide that computer training institutes are excluded from the purview of vocational
training institutes. However, in the interim period between 10-9-2004 to 15-6-2005 the
Tribunal held that computer training institutes would qualify as vocational training
institutes since such training imparts skill to the trainee to undertake self-employment or
seek employment after such training and accordingly would be exempt. [Doon Institute of
Information Tech. Ltd. vs. CCE (2008) 12 STR 459(Tri-Del.)]

Consulting Engineering Services

Repair of furnace is not liable for service tax under Consulting Engineering services.
[Schott Glass (I) Pvt. Ltd. vs. CCE (2008) 12 STR 484 (Tri-Ahmd.)]

Erection, Commissioning or Installation

Laying of long distance pipelines is not liable for services tax under the category of
"Erection, Commissioning and Installation" service:

i. "The service does not involve - "erection" which means to put up civic structures
nor "installation" which implies setting up machinery ready for use; nor even
"commissioning" which involves operationalising the machinery;
ii. Long distance pipelines are not 'plants' when plants in popular usage means a
cluster of building or a building in which machinery are involved usually for
manufacture of goods;
iii. Section 65(39)(ii)(b) which reads 'installation of "plumbing, drain laying, or other
installation of transport fluids" would cover only such facility provided in a
building as it appears in the company of air-conditioning system, lifts, electronic
devices including wiring etc. which are installed in a building and not activity of
laying long-distance pipelines. [Indian Hume Pipe Co. Ltd. vs. CCE(2008) 12
STR 363 (Tri. - Chennai)]

Tour Operator services

Services like arranging guide services, monument visit services, porter services, food
services, general assistance services etc. provided by the assessee to Principal Tour
operators who offered package tours to tourists are liable for service tax even before 10-
9-2004 since they are services "in relation to" to a tour. However, amounts paid as
advances by the principal tour operators to be paid to tour escorts and inter-branch billing
would not be liable. [Touraids (I) Travel Services vs. CCE (2008) 12 STR 452 (Tri-Del.)]

Limitation

Where the appellants were large tax payers of Central Excise duty and service tax and
also relied upon several decisions in the context of income tax that the impugned
expenditure on which Cenvat Credit was taken were used for the purpose of business the
appellant's plea of bonafide belief is valid. Further the SCN also did not explicitly bring
out the intention to evade payment of duty or suppression of fact. Hence the extended
period of limitation cannot be invoked [Toyota Kirloskar Motor P. Ltd. vs. CCE(LT.U.)
(2008) 12 STR 498).

Penalty

Where the appellant was under bonafide belief that the activities undertaken by them
were not liable for service tax and also paid the service tax within one month from the
receipt of the order-in-original, the Tribunal waived the penalty u/ss. 76 and 77 and
reduced the penalty u/s. 78 [BPL Mobiles vs. CCE (2008) 12STR274(Tri-Bang.)]

When the assessee did not pay tax initially on a bona fide in interpretation of statutory
provisions of law, but paid the tax subsequently before the issuance of the show cause
notice imposition of penalty u/ss. 76,77 & 78 is not warranted. [Jagdeep Singh Saluja vs.
CCE(2008) 12 STR 309 (Tri. - Del.)]

Proceedings to be concluded on voluntary payment of service tax, interest and 25% of

penalty. [AK & /Advertising Pvt. Ltd. vs. CCE (2008) 12 STR 315 (Tri. -Bang.)]

When there was litigation between the appellant and department whether the activity
carried out by the appellant is manufacture or not, the Tribunal held that the department
was aware of the nature of activity carried out by the appellant and it cannot be said that
there was any suppression, misstatement or intent to evade service tax and hence penalty
u/ss. 76, 77 & 78 is not leviable. [PSL Corrosion Control Services Ltd. vs. CCE &
C (2008) 12 STR 504 (Tri. -Ahmd.)]

Cenvat Credit

Under the Cenvat Credit Rules, 2004, credit of service tax paid on Telephone services
availed by the assessee in respect of Mobile phones provided to its employees cannot be
disallowed on the ground that phones are not installed in the factory premises [CCE vs.
Excel Corp Care Ltd. (2008) 12 STR 436 (Guj.)]

The larger Bench of the Tribunal held that outdoor catering services availed by a
manufacturer to provide the canteen facilities within the factory premises is an "input
service" since:

i. expenditure on running a canteen forms part of the cost of production irrespective

of whether the cost of food is borne by worker or factory;
ii. It is mandatory on part of the factories u/s. 46 of the Factories Act, 1948 to
provide such a facility and hence is an activity relating to the business.

[CCE vs. GTC Industries Ltd. (2008) 12 STR 468 (Tri-LB)]

Expenditure to entertain the employees for social functions such as Kannada Rajyostava
Function and inauguration of police station is not "activity relating to business such as
accounting, auditing, financing, etc." since it is not in the nature of services which are
illustrated (marked bold). Hence, no Cenvat credit would be allowed on such
expenditure. [Toyota Kirloskar Motor P. Ltd. vs. CCE (2008) 12 STR 498 (Tri-Bang.)]

Appeal

Where on facts only a letter was received from the department clarifying the assessee's
right to avail Cenvat credit, but there was no 'adjudication' the Tribunal held that no
appeal is maintainable. Further, the Tribunal also held that an assessee who desires to file
an appeal would be required to pay a minimum fee of Rs. 10001- as required by s.86(6)
of the Finance Act, 1994 even if there is no demand of tax, interest and penalty. [E-Biz.
Com Pvt. Ltd. vs. CCE (2008) 12 STR 438 (Tri-Del.)]

Rectification of Mistakes

When the finding given in Tribunal order is after due consideration of all the issues
raised, it is not open to the revenue to reargue the matter or call upon the Tribunal to
review the basis of decision on the ground of non-citing of an existing judgment and
failure to make enquiries. Hence the application for rectification of mistakes not tenable.
[CCE vs. Victor Gaskets India Ltd. (2008) 12STR341 (Tri.-Mumbai)]
Situs of taxation — Mutuality
Where the appellants, a member of a Committee formed for cementing the relationship
between Germany and India, had conducted an event at the behest of the committee and
received certain amounts for it the Tribunal held that in absence of client-service provider
relationship no event management services were rendered by them to the Committee. The
Tribunal also held that the extended period of limitation could not be invoked. [Phase 1
Events & Entertainment Pvt. Ltd. vs. CST (2008) 12 STR 174 (Tri-Bang.)]

Automated teller machine operations, maintenance or management services

Cash replenishment services in an ATM is liable for service tax only from 1-5-2006
under ‘Automated teller machine operations, maintenance or management services’ and
not under ‘Business Auxiliary services’. [NCR Corporation Pvt. Ltd. vs. CST (2008) 12
STR 68 (Tri-Bang.)]

Business Auxiliary Services – MIS report generation is Information Technology

Services – Exempt
Services of generating various MIS reports in pre-defined formats using input supplied by
the client fall within the realm of ‘computerised data processing’ and accordingly would
not be liable to service tax under the category of ‘Business Auxiliary services’ since
‘Information Technology services’ is specifically excluded. [Dataware Computers vs.
CCE (2008) 12 STR 121 (Tri – Bang.)]

Cargo Handling services

Where the appellants neither collected cargo from the consignor’s premises nor delivered
the same at the consignee’s premises but merely undertook transportation of cargo by air
from air cargo station at source location to air cargo station at destination location the
Tribunal observed that the services of loading and unloading of goods rendered by the
appellants is an integral part of the transportation services. Further relying on decision in
Asian Paints India Ltd. vs. CCE (1988) 35 ELT 3 (SC) the Tribunal held that:
(i) the appellants are admittedly not understood in the common parlance as a cargo
handling agency, inasmuch as they are admittedly airline company;
(ii) the contract entered into between the appellant and their customer is not for
rendering cargo handling services but is for transportation of appellant’s cargo by air.

Accordingly, the same cannot be subjected to tax under the category of ‘Cargo Handling
services’. [Jet Airways (India) Ltd. vs. CST (2008) 11 STR 645 (Tri-Ahmd.)]
Where the appellants were contractors merely engaged in shifting of raw material, waste
materials, finished products etc from one place to another place within the plant, relying
on Sainik Mining and Allied Services Ltd. vs. CCE (2008) 9 STR 531 (Tri-Kol.) the
Tribunal held that the said activities would not be liable to service tax under the category
of Cargo Handling services. [Modi Construction Co. vs. CCE (2008) 12 STR 34 (Tri-
Kolkata)]

Clearing and Forwarding Agents

In this case the Tribunal observed that:
(i) the appellants were rendering the services of storing and transportation of oil
through pipeline to ONGC;
(ii) the relation between them and ONGC was on principal-to-principal basis;
(iii) the appellants were not doing the work of clearing and forwarding and thereafter
held that the said activities would not fall under the category of Clearing and
Forwarding Agents services. [Cairn Energy (I) Pvt. Ltd. vs. CCCE (2008) 11 STR
632 (Tri-Bang.); See also Oil India Ltd. vs. CCE (2008) 12 STR 115 (Tri- Kolkata)
where thereto the Tribunal held that since transportation of crude oil through
pipeline has been brought to tax specifically w.e.f. 16-6-2005 the same cannot be
subjected to tax prior to that date under the category of ‘Clearing and Forwarding
Agency services’ and ‘Business Auxiliary services’]

Consulting Engineering services

Payment of technical fees to foreign collaborators for transfer of technical know-how for
upgrading the manufacturing activities would not be liable for service tax under the
category of Consulting Engineering services. [Spic Pharmaceuticals Division vs. CCE
(2008) 12 STR 226 (Tri-Chennai)]

Management Consultancy services

Activities like making purchase orders, calling tenders, issuing appointment orders,
maintaining leave records and books of account etc., undertaken by the assessee for its
sister concern are not covered under the definition of Management Consultancy Services.
[CST vs. Goetze (India) Limited (2008) 11 STR 629 (Tri-Del.)]

Port Services
Based on the decision in Homa Engineering Works vs. CCE (2007) 7 STR 546 (Tribunal)
and Velji P. and Sons (Agencies) Pvt. Ltd. vs. CCE (2007) 8 STR 236 (Tribunal) the
Tribunal held that rent charged for hiring out barges, floating cranes and tugging facilities
would not be liable for service tax under the category of ‘Port services’. [Vikram Ispat vs.
CCE (2008) 11 STR 639 (Tri-Mumbai)]

Stock Broker services

In a case where assessee was registered as a stock broker with SEBI but working as a
sub-broker the Tribunal held that the assessee was providing taxable services as a stock
broker and is covered by the definition of stock broker. Accordingly service tax
recovered from the customers is liable to be deposited u/s. 11D of the Central Excise Act,
1944. [U.S. Bengali vs. CCE&C (2008) 12 STR 71 (Tri-Ahmd.)]

Storage and Warehousing services

Where the appellants, who were engaged in manufacturing of sugar, were required by
Government of India to maintain a specific quantity of free sale sugar for a specified
period to comply with the provisions of Sugar Development Fund Act, 1982 for which
they were compensated by way of reimbursement of expenses towards interest, storage
and insurance, the Tribunal held that they would not be treated as providing of ‘Storage
and Warehousekeeping services’ to Government and accordingly would not be subjected
to service tax on the said reimbursement received from the Government. [Nawanshahr
Co-op. Sugar Mills vs. CCE (2008) 12 STR 176 (Tri-Del.)]

Telephone services
The Interconnection Usage charges collected from another telecom authority is not
towards telephone services provided to a subscriber accordingly not liable for service tax
under the category of Telephone Services. [Bharat Sanchar Nigam Ltd. vs. CCE (2008)
12 STR 171 (Tri-Bang.)]

Export of services
In case of international courier agency services the services were partly performed in
India and partly outside India and hence they would still qualify as export of services
under Rule 3 of Export of Service Rules, 2005. [U.B. Xpress (South) Pvt. Ltd. vs.
CCE&ST (2008) 12 STR 152 (Tri-Chennai)]
Demand –Limitation — Extended period
Where the department had earlier issued a show cause notice for an issue, the department
being aware of the appellant’s activities, cannot invoke the extended period for issuing a
second show cause notice. [Cairn Energy (I) Pvt. Ltd. vs. CCCE (2008) 11 STR 632 (Tri-
Bang.)]
Where the assessee had suo motu assessed and paid the tax and reflected their income in
the balance sheet and income tax returns for the impugned period the Tribunal held that
the extended period of limitation cannot be invoked. [Om Sai Professional Detective &
Sec. Ser. P. Ltd. vs. CCE (2008) 12 STR 79 (Tri-Bang.)]

Interest
In absence of any tax liability, no interest could be levied even if the assessee had
wrongly paid service tax on the taxable value of services. [CCE vs. Sundaram Textiles
Ltd. (2008) 11 STR 608 (Tri-Chennai)]

Penalty
Where the appellants bonafide believed that the canteen services provided in a space
provided by the service recipient at the factory premises would not come under the
category of ‘Outdoor Catering service’ during the initial period of levy, the Tribunal held
that there was a reasonable cause for failure to pay tax, and accordingly set aside penalty.
[Sharvin vs. CCE (2008) 11 STR 630 (Tri-Del.)]

Where the appellants had paid service tax along with interest before the issuance of show
cause notice and also pleaded ignorance about the provisions of the service tax law the
Tribunal on facts deleted the penalty u/s. 76 of the Finance Act. [Maharashtra State Co-
op. Mktg. Fed. Ltd. vs. CCE (2008) 12 STR 57 (Tri-Mumbai)]

The Tribunal has no power to reduce the quantum of penalty under section 76 below the
mandatory minimum as held by Rajasthan High Court in case of Union of India & Anr
vs. Aakar Advertising – (2008) 11 STR 5 (Raj.). [CCE vs. Bhakya Beauty Parlour (2008)
12 STR 44 (Tri-Chennai)]

Where service tax was not paid on a bonafide impression but was paid partly before the
issuance of show cause notice and partly before passing of the adjudication order,
imposition of heavy penalty is not warranted. However, interest u/s. 75 is payable for
delayed payment of tax. [Lawson Travel & Tour (I) Pvt. Ltd. vs. CCE(A) (2008) 12 STR
119 (Tri-Bang.)]

Where the quantum of penalty imposed by the original authorities was reduced by the
CCE(A) below the statutory minimum penalty prescribed the Tribunal observed that
since there was an element of confusion for categorising the activities of the appellant on
account of interpretation there was a reasonable cause for leniency in levy of penalty and
accordingly the order of CCE (A) was sustainable. [CCE vs. T. Stanes & Co. Ltd. (2008)
12 STR 236 (Tri-Chennai)]

Refund
Where the assessee erroneously paid service tax on pilotage services rendered in minor
ports, under the category of Management Consultancy services instead of ‘Minor port’
services which came into effect from 1-7-2003 and claimed refund of tax for the period
1-10-1999 to 30-9-2002 on 9.10.2003 the Tribunal rejected the refund claim as barred by
limitation after observing that payment on account of misconstruction, misapplication or
wrong interpretation of the provisions of law would not change the character of the
amounts from tax to deposit, and accordingly the refund claim being filed beyond the
statutorily prescribed period (of 1 year) would be barred by limitation. [Karnik Maritime
Pvt. Ltd. vs. CCE (2008) 12 STR 145 (Tri-Mumbai)]

Appeal
Where the appeal was dismissed on account of non-compliance of pre-deposit and its
restoration on compliance was refused by the CCE(A) the Hon’ble High Court held that it
was not permissible to refuse the restoration of appeal on compliance of the pre-deposit
requirement. [Scan Consultancy vs. UOI (2008) 12 STR 108 (Guj.)]

The Tribunal need not decide all the grounds raised in the memo of appeal if the
authorised person has appeared and argued only some of grounds therein. [CCE vs.
Kothari Products (2008) 12 STR 5 (All.)]

An appeal filed even after the statutory period for which delay can be condoned by the
CCE(A) is barred by limitation and cannot be saved even by section 5 of the Limitation
Act, 1963, since:
(i) the provisions of Limitation Act, 1963 apply only to courts or the forums that has
trappings of the court;
(ii) under the provisions of Central Excise Act, CCE(A) is only an executive authority
performing quasi-judicial functions but he cannot be considered as a court or a
forum having trappings of the court;
(iii) the application of Limitation Act must be held to be expressly excluded by virtue of
the specific provisions in section 35 of Central Excise Act which have provided a
maximum period for which delay can be condoned.

CENVAT
Where the appellants were engaged in manufacture of goods the Tribunal held that they
were not entitled to treat the goods transport agency services obtained by them as an
output service and utilise the balance in Cenvat credit account for payment of service tax
on goods transport agency services taking recourse to the erstwhile Explanation to section
2(p) of the Cenvat Credit Rules, 2004. [Alstom Projects India Ltd. vs. CCE (2008) 12
STR 23 (Tri-Chennai)]

Service tax payable on the goods transport agency services by a service recipient can be
paid by way of debit to Cenvat credit account since GTA is deemed to be an output
service. [Mahindra Ugine Steel Co. Ltd. vs. CCE (2008) 12 STR 159 (Tri-Mumbai.)]

Cenvat Credit of service tax paid on ‘Goods Transport services’ used to dispatch finished
goods, is not allowable since it is only “outward transportation up to the place of
removal” that is allowable as per the definition of “Input Services” [CCE vs. Sound
Castings Pvt. Ltd. (2008) 12 STR 25 (Tri-Mumbai)]

The High Court in this case agreed with the decision of the Tribunal that no interest is
leviable where there has been only a reversal of amount of Cenvat credit availed but the
credit was not utilised by the assessee. [CCE vs. Gupta Steel (2008) 12 STR 101 (Guj.)]

Once the service tax has been paid by the supplier of services credit cannot be denied to
the receiver by contending that service tax was not required to be paid by the supplier on
the said service. [Maersk India Pvt. Ltd. vs. CCE (2008) 12 STR 150 (Tri-Mumbai)]

Cenvat credit on inputs cannot be denied merely on the ground of non-mentioning of

registration number in the invoice where the receipt and consumption of goods and
discharge of duty liability thereon is not in dispute. [Agarwal Industries vs. CCE (2008)
12 STR 223 (Tri-Del.)]
Clearing and Forwarding Agents
Services provided by an auctioneer for sale of cardamom by auction is not liable for
service tax under the category of “Clearing and Forwarding Agent’s” services even
though it involves the receiving and storing of goods by the auctioneer. [CCE vs.
Cardamom Mktg. Company (P) Ltd. (2008) 11 STR 522 (Tri. – Bang.)].

Telephone service
Interconnection Usage Charges collected by a telecom authority from other telecom
authorities for terminating calls emanating from the subscribers of the latter to the
subscribers under them is not liable under “telephone services” since the other telecom
authority is not a “subscriber” to whom a telephone connection is given. [Bharat Sanchar
Nigam Ltd. v. CCE (2008) 11 STR 460 (Tri-Del)]

Note: The above decision pertains to the law as it stood prior to 1-6-2007.

Penalty
The Tribunal held that u/s. 73(3) no penalty proceedings can be initiated in case where
the appellants under bona fide belief had failed to discharge their service tax liability in
time but on being pointed out by the department they discharged the same along with
interest before the issuance of show cause notice. [Tidewater Shipping Pvt. Ltd. vs. CST
(2008) 11 STR 475 (Tri-Bang.)]
Where the appellants rendered security agency services and had levied service tax on all
their services except services rendered to the Official Liquidator, High Court but on being
pointed out by the department, they paid the service tax alongwith interest, the Tribunal
condoned the imposition of penalties u/ss. 76 and 78 on the ground that since other
similar assessees were also not levying service tax on the said services the appellant’s
plea of bona fide belief cannot be ignored. [S. Doctor Security Services Pvt. Ltd. vs. CST
(2008) 11 STR 477 (Tri-Ahmd.); See also Sri Venkateswara Cable Network vs. CCE(A)
(2008) 11 STR 512 (Tri-Bang.)]

Refunds
The assessee was granted refund pursuant to the Tribunal’s order. The assessee
subsequently also asked for interest u/s. 11BB of the Central Excise Act. However, the
department instead of paying the interest issued another SCN seeking to recover the
refund already granted on the ground that the Revenue appealed against the Tribunal’s
order to the High Court. The assessee made a Miscellaneous Application to the Tribunal
which held that, in absence of stay against the order of the Tribunal, refusing to pay the
interest u/s. 11BB is illegal and issue of SCN for recovering refund already granted
amounts to contempt of the Tribunal. [Toyota Kirloskar Motor Ltd. vs. CCE (2008) 11
STR 551 (Tri-Bang.)]
Amounts paid by mistake cannot be termed as duty. Accordingly the limitation u/s. 11B
would not apply for seeking refund of such amounts. [CCE vs. Motorola India Pvt. Ltd.
(2008) 11 STR 555 (Kar)]
In this case the Tribunal held:
(a) Where the assessee paid service tax on amounts not received from the customers, it is
not necessary for the CCE(A) to examine each and every entry to overrule the plea of
unjust enrichment. Further, the question of unjust enrichment would not arise in such
a case [7 STR 449 (Tri-Mum.); 3 STR 751 (Tri-Bang.); 10 STR 6 (Kar) relied on];
(b) Boards instruction No. 137/50/2007 CX 4 dated 16-3-2007 clarifying that in the
event of centralized registration obtained by the assessee, the rebate refund claim
shall be dealt with the Service tax Commissionerate having jurisdiction over the
centralized registration of the assessee is not applicable to refunds pertaining to the
period prior to 16-3-2007.

[CCE v. Standard Chartered Bank (2008) 88 RLT 440 (Tri-Bang.)]

Appeal
Where a compendious order was passed by lower authorities disposing of two SCNs
there was no need to file as many number of appeals as the SCNs before the higher
authority – a single appeal would be in order. [Escorts vs. CCE (2008) 11 STR 532 (Tri-
Del.)]
Where the respondents had failed to avail the opportunity of agitating before the Tribunal
by filing a cross objection, they were not allowed to raise new grounds at a later stage.
[CCE vs. Delta Elastometal Compound Pvt. Ltd. (2008) 11 STR 534 (Tri-Mumbai)].
IMPORT OF SERVICES

The question before the larger bench was whether the recipient of taxable services is
liable to pay service tax in respect of services provided by a person resident outside India
not having any office in India under Rule 2(1)(d)(iv) of the Service Tax Rules, 1994
w.e.f. 16.8.2002 or only from 1.1.2005 since notification no. 36/2004 dated 31.12.2004
‘notifying’ taxable services for the purposes for purposes of section 68(2) was to take
effect from 1.1.2005 ? Section 68(2) provided that the Central Government could fasten
tax liability on a person other than the service provider provided –
the taxable service is “notified” by the Central Government in the official Gazette;
(i)
and
(ii) the person liable to pay and the manner of payment is “prescribed”.

The department contended that the notification no. 12/2002 dated 1.8.2002 which
inserted rule 2(1)(d)(iv) in the Service Tax Rules, 1994 satisfied both the above
conditions and hence the recipient was liable from 16.8.2002. The Tribunal dismissed the
contention of the department and held that the section specified the manner in which the
government was to carry out its function i.e. to ‘notify’ the services and ‘prescribe’ the
person liable to pay service tax. The Notification no. 12/2002 dated 1.8.02 inserting Rule
2(1)(d)(iv) which was issued u/s. 94 simply enlarged the definition of ‘person liable to
pay service tax’ by including the recipient of foreign service providers within it but did
not notify taxable services for the purposes of section 68(2). That was done only by
Notification no. 36/2004 dated 31.12.04 which ‘notified’ the ‘taxable services’ “for the
purpose of” section 68(2). Accordingly, the Tribunal held that recipient of services in
such cases would be liable for service tax only w.e.f 1.1.2005 and not from 16.8.2002.
[Hindustan Zinc Ltd. vs. CCE (2008) 11 STR 338 (Tri-LB)]

BUSINESS AUXILIARY SERVICES

On facts, the Tribunal held that the activities of the appellants like selection of the right
supplier or manufacturer, maintaining control over the quality of bags, providing current
market trends/ feedback, keeping track of raw material cost, cost of production, co-
ordinating between suppliers, material department and the plants would fall under the
category of ‘Business auxiliary service’ and not under ‘management consultancy
services’. [CCE vs. Arvind Narayan Prasad Nopany (2008) 11 STR 353 (Tri-Ahmd.)]

CONSTRUCTION OF RESIDENTIAL COMPLEX SERVICE

Where the petitioners were engaged in development and sale of residential flats to
various purchasers who booked such flats on payment of an advance under an agreement
for sale which was executed and registered during the course of construction and the title
to which passed after the completion of the construction the High Court held -
(i) “service” is an act of doing something useful, rendering assistance or help. Service
does not involve supply of goods; “service” rather connotes transformation of
use/user of goods as a result of voluntary intervention of “service provider” and is an
intangible commodity in the form of human effort. To have “service”, there must be
a “service provider” rendering services to some other person(s), who shall be
recipient of such “service”.
(ii) Under the Finance Act, 1994, “service tax” is levied on “taxable service” only and
not on “service provider”. A “service provider” is only a means for deposit of the
“service tax” to the credit of the Central Government. Although the term “service
receiver” has not been defined in the Finance Act, 1994, the “service receiver” is a
person, who receives or avails the services provided by a “service provider”.
(iii) The petitioners were not engaged in rendering any services of construction of
residential complex to the prospective purchasers but were merely undertaking the
construction activities for its own self and any advance, made by a prospective buyer,
or deposit received by the petitioner-company, is against consideration of sale of the
flat/building to such prospective buyer and not for the purpose of obtaining any
“service” from the petitioner-company. Accordingly amounts received from
prospective purchasers were not liable for service tax. [Magus Construction Pvt. Ltd.
vs. UOI (2008) 11 STR 225 (Gau.)]

PORT SERVICES
Where the appellants were undertaking certain activities like chipping, painting and
repairs of vessels / Ships within its own premises and within the port premises under an
authorisation from the Port authorities the Tribunal held that the said services were not
liable under the category of ‘Port services’. [Mazgaon Dock Ltd. vs. CST (2008) 11 STR
271 (Tri-Mumbai)]

REFUND
The assessees, engaged in providing telephone services, inadvertently paid service tax on
the MRP mentioned on the recharge vouchers instead of the discounted price [i.e. on the
net monies received] and on certain vouchers distributed free. The vouchers were
distributed by their agents. The assessees filed refund claims which were rejected by the
lower authorities on the time bar, eligibility and unjust enrichment. However, the
Tribunal allowed the refund observing as follows:
(i) As regards time-bar the department had returned back the refund claim for
insufficiency of documents and thereafter re-submitted by the assessees. The
department contended that the date of re-submission is relevant and the refund claim
was time barred. The Tribunal held that even if a refund claim is incomplete or is not
substantiated by documentary evidence it cannot be retuned back by the adjudicating
authorities. It is incumbent upon the authorities to make an order on such refund
claim. Hence the re-submitted refund claim is in continuation of the original refund
application and thus not hit by limitation.
(ii) As regards the eligibility for refund the department had contested that the invoices
were issued by the assessee’s agent and hence the assessee would not be eligible. The
Tribunal disagreed and held that the agent issued invoices “on behalf of” the
assessees, collected the monies and paid to the assessees. Further, the Tribunal held
that the assessee is the service provider and having paid service tax on the entire
MRP they are eligible for the refund of service tax on the amounts not realised by
them.
(iii) As regards unjust enrichment, though the issue was raised in the show cause notice
and replied by the assessee the lower authorities did not record any adverse finding
in the Order-in-Original nor was it challenged before the CCE(A) who relied upon
the Chartered Accountant’s Certificate and the invoices and found that doctrine of
unjust enrichment did not arise. The Tribunal concurred with CCE(A)’s findings
though it observed that the said question cannot be raised before it. [CST vs.
Reliance Communication Ltd. (2008) 11 STR 258 (Tri-Mumbai)]

The assesee DTIPL provided services to DT, USA for preparation and filing of US
Federal, State and local tax returns, and property tax returns, as well as for computing
advance Tax estimates, wage card processing and transfer pricing planning and execution
which involved data entry, data processing, and such other incidental and support
services. They paid service on the said services under the category of “Business Auxiliary
Services”. Further they also claimed input credit on – (i) Equipment hiring charges; (ii)
Professional Consultation Service; (iii) Recruitment Services; (iv) Security Services; (v)
Telephone Services; (v) Transport Services; (vi) Training Services; (vii) Facility
Operation Service; (viii) Courier Services; (ix) Cafeteria Services; (x) Other input
services like advertisement service. They claimed refund of input credit on the basis that
their services were exported. The Department denied refund on the ground that –
(i) The services were in the nature of information technology service not liable under
business auxiliary services and accordingly input credit cannot be taken;
(ii) Notwithstanding (a) above, the input services were not used for providing input
services;
(iii) The input credit pertained to services exported prior to 14.3.2006

Tribunal dismissed the Revenue’s contention and held as follows –

(a) The services are not information technology services since the use of computer or
computer programme for their services is only secondary and the primary activity that
of is business-related services. Hence their services would be liable as “Business
Auxiliary Services”.
(b) The services on which credit has been claimed are necessary for providing output
services and fall within the definition of input services u/r. 2(l) of Cenvat Credit
Rules, 2004 which has defined the scope of an input service quite widely.
(c) Rule 5 of the Cenvat Credit Rules alongwith Notification no. 5/2006 dated 14.3.2006
provides for refund of credit on input services used for exports. This rule would apply
even in cases where the claim for refunds are filed on or after 14.03.06 but the exports
 in respect of which were made prior to that date.

[CCE vs. Deloitte Tax Services India Pvt. Ltd. (2008) 11 STR 266 (Tri. – Bang.)].

CENVAT
Where the appellants entered into two agreements with a contractor - one for supply of
components and parts and the other for erection at the appellant’s site, the Tribunal held
that credit of duty paid on parts and components which were used in setting up of the
plant at the appellant’s site was fully admissible and the department’s contention that the
components and parts were inputs of the contractor who supplied and assembled them at
the manufacturer’s site since it is he who used it to manufacture the plant is incorrect.
[Rajarambapu Patil SSK Ltd. v. CCE (2008) 11 STR 437 (Tri-Mumbai)]
Where the appellants transferred their factory from one place to another, the input credit
can be allowed to be transferred to the new place without actual physical transfer of the
inputs. [CCE vs. Smithkline Beecham Consumer Healthcare Ltd. (2008) 11 STR 446
(Tri-Chennai)]

PENALTY
Where penalties u/s. 76, 77 and 78 for delay in payment, non-registration and suppression
of facts respectively were imposed on the appellants the Tribunal held as follows :
(i) Penalty u/s. 76 is imposable notwithstanding that the assessee has paid interest.
However, since the assessee did not pay service tax on the bona fide belief that it is
liable to pay only on receipt of the amount from its customers penalty u/s. 76 was
reduced from Rs. 6.54 lakhs to 1 lakh.
(ii) Since no penalties were prescribed for non-registration, penalty under section 77 was
rightly levied.
(iii) Non-submission of the returns was a result of non-registration and cannot be
considered as “suppression of facts” warranting imposition of penalty under section
78.

APPEAL
Additional grounds before the Tribunal can be raised if these grounds are issues of law
necessitated in view of the amendments to the Finance Act, 1994. [Aryan Energy (P) Ltd.
vs. CCE (2008) 11 STR 407 (Tri-Bang.)]
Amounts pre-deposited at the time of pendency of appeal before the Tribunal is required
to be refunded to the appellants on success notwithstanding that department had filed a
reference before the High Court, in absence of stay by the High Court. [Morargee
Goculdas Spg. & Wvg. Mills Co. Ltd. vs. CCE (2008) 11 STR 444 (Tri-Mumbai)]

DEPARTMENTAL CLARIFICATION
A beneficial circular has to be applied retrospectively whereas an oppressive circular has
to be applied only prospectively [Suchitra Components Ltd. vs. CCE (2008) 11 STR 430
(SC)].
Import of Services
Prior to 19.4.2006 i.e. before introduction of section 66A the services rendered outside
India would not be liable for service tax in absence of a charging section (section 66A)
[CCE v. Bhandari Hosiery Exports Ltd. (2008) 11 STR 151 (Tri. - Del.) see also CCE vs.
Jindal Steel & Power Ltd. (2008) 11 STR 14 (Tri. - Del)]

Export of Services
The appellant was an agent of a foreign company - GMC. It sourced contracts from the
India Railways to GMC for a commission. The commission was denominated in USD but
payable by GMC in INR through the Indian Railways. Thus, from the amount of USD
payable to GMC by Indian Railways, the Railways deducted the USD equivalent of the
commission payable to the appellant and remitted the net amount of USD to GMC and
paid the commission in INR to the appellant. The department denied the export
exemption on the basis that the commission was received in INR. The Tribunal allowed
the exemption holding that the appellant was paid an amount in INR equivalent to the
USD commission and correspondingly equivalent USD was not released to the Indian
Railways for remittance to GMC. Hence, the requirements of earning in convertible
foreign exchange was held to be satisfied interpreting the condition in accordance with its
object and purpose. [National Engg. Industries Ltd. v. CCE (2008) 11 STR 156 (Tri. -
Del.)].

Where the appellants were engaged in booking orders in India for their foreign principals
and received commission for such services in convertible foreign exchange the Tribunal
held that such services were in the nature of business auxiliary services provided from
India and used outside India and hence would qualify as export of service under rule 3(2)
of the Export of Service Rules, 2005. [Blue Star Ltd. vs. CCE (2008) 11 STR 23 (Tri-
Bang.)].

Valuation
Where the appellants provided commercial or industrial construction services and
claimed abatement (67%) under notification no. 1/2006 dated 1.3.2006, the High Court
held that for the purposes of computing the abatement, the term "gross amount" charged
in the Explanation to the said notification shall not include the value of free material
supplied by the clients of the appellants. [ERA Infra Engineering Ltd. vs. U.O.I (2008) 11
STR 3 (Del.)].

Where the consideration for services was collected before the imposition of the levy in
respect of services rendered after its imposition, the consideration collected can be
considered to be cum-tax and computation and payment of tax on that basis is in order
[CCE vs. Daswani Classess (2008) 11 STR 189 (Tri. - Del.)]

Business Auxiliary Services

Sale of SIM cards and recharge coupons (purchased from BSNL) by the assessee to its
customers is transaction of purchase and sale of 'goods' and sales tax is attracted. The
activity does not amount to marketing and distribution of products and would not be
liable for service tax under the category of business auxiliary services. [R. B. Agencies
vs. CCE (2008) 11 STR 124 (Tri. - Bang.)].

Cargo Handling Services

Where the appellants were actually engaged in supplying labour for handling the semi-
finished or semi-processed material inside the factory premises, the Tribunal held that
such activities would not constitute as a cargo handling services. [S.N.Uppar & Co. vs.
CCE (2008) 11 STR 34 (Tri-Bang)]

Clearing and Forwarding Agent

Mere purchasing and selling of goods for the principal by an agent on payment of a
commission would not amount to Clearing and forwarding services. [S. B. Enterprise v.
CCE (2008) 11 STR 158 (Tri. - Bang.)]

Consulting Engineering Services

Transfer of technology and technical assistance provided by a foreign company to an
Indian company would not be liable for service tax under the category of consulting
engineer services. [CCE vs. MICO Ltd. (2008) 11 STR 28 (Tri-Bang.)]

Where on facts the appellants were simultaneously engaged in preparing engineering

designs required for executing the project and in carrying out the construction work
involved therein the Tribunal held that it was a turn-key contract which could not be
vivisected and service tax cannot be levied on service portion i.e. consulting engineering
services. [Hindustan Construction Co. Ltd. vs. CCE (2008) 11 STR 121 (Tri-Chennai)]

Repair and Maintenance Services

Where only repair work was undertaken by the appellants without a maintenance
contract, maintenance and repair being distinct (maintenance is prevention from failure,
repair is restoration after failure), such repair services were not liable to service tax prior
to 16.6.05. [CCE vs. Bhiwadi Cylinders Pvt. Ltd. (2008) 11 STR 37 (Tri. - Del.)].

Share Transfer Agent Service

Share Transfer Agent's services which were specifically brought to service tax w.e.f.
1.5.2006, cannot be taxed prior to that date. [Cameo Corporation Services Ltd. v.
Commissioner of Service Tax (2008) 11 STR 161 (Tri. - Chennai)]

Refund
Rule 5 of the Cenvat Credit Rules alongwith Notification no. 5/2006 dated 14.3.2006
provides for refund of credit on input services used for exports. This rule has been held to
apply even in cases where the claim for refunds are filed on or after 14.03.06 but the
exports in respect of which were made prior to that date. [Caliber Point Business
Solutions Ltd. vs. CCE (2008) 11 STR 15 (Tri. - Mum.)].

Where the appellants have not challenged the order of assessment passed by the
Superintendent, no refund claim is maintainable after the order has become final
notwithstanding that the Superintendent had no jurisdiction to pass the assessment order.
[Malwa Cotton Spinning Mills Ltd. vs. CEGAT (2008) 11 STR 82 (P&H)].

Where locational exemptions to units located at Jammu was granted by a Notification by

allowing refund of "duty of excise or additional duty of excise" paid by such units, it was
held that the exemption also extended to "education cess" since cess is also excise duty as
per section 93 of the Finance Act, 2004. [Sun Pharmaceutical Industries vs. CCE (2008)
11 STR 93 (Tri. - Del.) relying on T.T.K.-LIG Ltd. vs. Commissioner (2006) 193 ELT
(169) (Tribunal - LB)].

Cenvat
Where the respondent had voluntarily reversed the amount of credit at the instance of the
department the Tribunal held that the Original reversal is a kind of deposit of disputed
amount which needs to be confirmed by a formal order. As no further actions were
initiated against the reversed amount the appellant was eligible to re-credit the amount of
cenvat or refund. [CCE vs. Intricast Pvt. Ltd. (2008) 11 STR 107 (Tri-Mumbai)].

Cenvat credit in respect of basic excise duty can be utilised for payment of education cess
under rule 3(7) of the Cenvat Credit Rules, 2004. [Sun Pharmaceutical Industries vs. CCE
(2008) 11 STR 93 (Tri. - Del.)].

Where the assessee took full credit based on the supplier's invoice but subsequently
received discounts from the supplier which effectively reduced the invoice price, the
Tribunal held that, the assessee was not required to reverse proportionate credit on receipt
of discounts unless the supplier had obtained a refund of duty from the Government.
[Kedia Electricals Ltd. vs. CCE (2008) 11 STR 197 (Tri. - Bang.)].

Where providing canteen services was a statutory requirement for the appellant's
business, the Tribunal held such a service availed by the appellant to be an input service
and accordingly allowed credit. [Indian Card Clothing Co. Ltd. v. CCE (2008) 11 STR
175 (Tri. - Mum)]

Credit of service tax paid on mobile phones was held allowable where mobile phones
were used in "activities relating to business". [Grasim Industries vs. CCE 11 STR 168
(Tr. - Del.)]

Penalty
On facts, the Hon'ble High Court held:
 a. The Tribunal cannot entertain an appeal on merits where the appeal has been
rejected by the lower adjudicating authorities on account of non-compliance with
the requirement of pre-deposit; and
b. Penalty imposable u/s. 76 of the Finance Act, 1994, in absence of reasonable
cause, cannot be reduced below the minimum amount prescribed in that section. It
can, however, be completely dispensed with (not reduced below prescribed
minimum) if reasonable cause is shown by the assessee. [UoI vs. Aakar
Advertising (2008) 11 STR 5 (Raj.)]

Where the appellants had not collected service tax from their clients since they had
doubts regarding their liability to service tax but paid service tax before the issuance of
show cause notice, and where the original authority itself had not imposed penalty u/s.
78, the Tribunal held that penalties u/s. 76 and 77 cannot be imposed. However, interest
was payable on the delayed payment. [Nithyananda Electronics vs. CCE(Appeals) (2008)
11 STR 18 (Tri-Bang.)]

The appellants, an air travel agent, had not collected and paid the service tax in respect of
certain bookings. However, on being pointed out they paid a major portion of the service
tax liability before the issuance of show cause notice and the balance before the issuance
of order-in-original. On facts the Tribunal held that there was a reasonable cause under
Section 80 for not levying penalty under section 78. However, the appellants were liable
to pay interest on delayed payments. [Akbar Travels of India (P) Ltd. vs. CCCE (2008)
11 STR 42 (Tri-Bang.)]

Where the appellants had got themselves registered and paid service tax alongwith
interest before the issuance of show cause notice and recorded its receipts in its books,
the Tribunal held that there was no suppression of value and hence penalty u/s. 78 was
not imposable. However, penalty u/s. 76 and 77 for delay in payment and filing of the
return is sustainable. [R. R. Construction Company vs. CCE (2008) 11 STR 53 (Tri-
Del.)]

Penalty under sections 76, 77 and 78 can be waived on the 'reasonable cause' in case of
newly introduced service where there is a nitty-gritty with regard to method and manner
of computation of service tax and such fact has been intimated to the department by
appellant. [Magnum International v. Comm. Cust., & Cent., Excise (2008) 11 STR 176
(Tri. - Del.)]

Where the assessee, a commercial coaching and training centre, though registered but
failed to pay and file returns fees received for providing commercial training or coaching
services were recorded in the records. Tribunal held that there was no suppression of
facts with intent to evade payment of tax and hence, no penalty imposable u/s. 78.
However, on facts, the tribunal reduced the penalty u/s. 76 [CCE vs. Target Institution of
Competition (2008) 11 STR 152 (Tri. - Del.)]
On facts, where there were no findings to indicate contumacious conduct on the part of
the appellants to evade payment of service tax or not following statutory formalities and
where the amount of tax alongwith interest was paid before the issuance of show cause
notice the Tribunal held that appellants were eligible to relief in the form of waiver of
penalty u/s. 80 of the Finance Act, 1994. [R.Sukumar vs. CCE (2008) 11 STR 118 (Tri-
Chennai)]

Where the service tax was paid before the issuance of show cause notice and the assessee
also had a bona fide doubt as to the taxability of their activity, the Tribunal held that
penalty u/s. 78 is not imposable since-

i. u/s. 73(3) show cause notice itself was not required to be issued; and
ii. there was 'reasonable cause' u/s. 80 for not imposing penalty.

[Bhoruka Aluminium Ltd. v. CCE (2008) 11 STR 163 (Tri. - Bang.)]

Revision
Where the original authority had correctly appreciated the facts and exercised his
discretion u/s. 80 to drop penalties u/s. 76 & 77, the Commissioner in exercise of his
revisional jurisdiction cannot sustain the penalties by fettering with the discretion of the
original authority [Price Water House Coopers Dev. Associates Ltd. vs. CST (2008) 11
STR 43 (Tri-Bang)].
ADVERTISING AGENCY SERVICES
Amounts received by the assessee, an advertising agency (for the year 2000-01), from
other advertising agencies as a sub-contractor was held not liable for service tax so long
as the main ad-agency had already discharged service tax. [Synergy Audio Visual
Workshop P. Ltd. vs. CST (2008) 10 STR 578 (Tri. – Bang.)].Where the appellants did
not design, visualise or conceptualise any advertisement to be displayed/exhibited on the
banners, traffic sign board, traffic barricade or hoarding which they erected, they cannot
be said to have made or prepared any advertisement so as fall within the scope of
advertising agency service. [Market Chase Advertising vs. CCE (2008) 10 STR 598 (Tri.
– Chennai)].

BANKING AND OTHER FINANCIAL SERVICES

The Supreme Court has affirmed the decision of Tribunal upholding that only “hire
purchase” and not “hire purchase finance” is covered under the category of “Banking or
other financial services”. In this case the appellants entered into an agreement whereby its
customer identifies the vehicle that he wishes to purchase from the manufacturer/dealer
thereof, makes a part payment to the seller of the vehicle, applies to the appellants for
financing the balance, and once the financing is sanctioned, the customer enters into an
agreement with the appellants and provides as security, right of repossession of the
vehicle to the appellants in the event of his (customer’s) default in payment of
instalments to the appellants. The customer becomes the owner of the vehicle - the title to
the vehicle vests with him who is a purchaser and it is in his name that the vehicle stands
registered and insured and the appellants are the nominees. The Tribunal held that such
an agreement is a ‘hire purchase finance agreement’ which is different from ‘hire
purchase agreement’ where the title to the goods remains with the finance company
which bails the goods to the hirer in return for periodical payments and the title to the
goods is transferred to the customer/hirer only if he exercises the option to purchase the
same on full payment to the finance company. Having noted the distinction the Tribunal
observed that only “hire purchase” and not “hire purchase finance” is covered under the
category of “Banking or other financial services”. [CCE vs. Bajaj Auto Finance Ltd.
(2008) 10 STR 433 (SC)].

CARGO HANDLING SERVICE

Where the assessee had undertaken a series of activities from mining to the delivery of
limestone to designated places, the Tribunal rejected the Department’s contention that the
amount attributable to loading charges should be treated as liable under cargo handling
services since
1 the activity of loading is incidental to mining and transportation; and
2 the same is rendered to the assessee himself in completing the entire work assigned to it
by the contract

[CCE vs. Giriraj Brothers (2008) 10 STR 549 (Tri. – Del.); CCE vs. Laxmi Trading Co.
(2008) 10 STR 620 (Tri. – Del.)].

CLEARING AND FORWARDING AGENT

Where on facts the appellants were involved in selling goods on behalf or their principal
for a commission the Tribunal held that the said activity would not come within the
purview of Clearing and forwarding services as they were not involved in handling of the
goods on behalf of their principal. [Style Cell vs. CCE(A) (2008) 10 STR 456 (Tri-
Bang.)]

CONSULTING ENGINEERING SERVICES

Where on facts the appellants who were designing and manufacturing fire fighting
equipments, inter alia also undertook erection and installation the said equipments, the
Tribunal held that the said services would not be covered under Consulting Engineering
services. [CCE vs. Agnice Fire Protection (P) Ltd. (2008) 10 STR 447 (Tri-Chennai)]
Royalty paid for transfer of technical know-how was held to be in the nature of
intellectual property rights services and not be liable tax under the category of consulting
engineering services. [Nypro Forbes Products Ltd. vs. CST (2008) 10 STR 595 (Tri-
Chennai)]

ERECTION, COMMISSIONING AND INSTALLATION

Electrical work like laying of pipe for crossing of wires, fixing junction boxes etc.,
digging earth pits for laying cables etc. would be covered under the category of Erection
commissioning and installation only w.e.f. 16.6.2005 since it is only w.e.f. 16.6.2005 that
installation of electrical devices including wiring or fittings, therefor, was included in the
definition of erection, commissioning or installation. Hence services rendered prior to the
said period were not liable. [Rajeeve Electrical Works vs. CCE (2008) 10 STR 494 (Tri-
Del.)].
Installation and commissioning of fire safety and protection systems would be liable for
service tax only w.e.f 16.6.2005 and not prior to that date since fire proofing service has
been specifically included under the category of ‘Erection, Commissioning or Installation
Services’ only w.e.f. 16.6.2005. The Tribunal also held that post 16.6.2005, the assessee
is entitled to avail benefit of Notification no. 12/2003-ST and deduct the cost of goods
sold during the course of providing the service and also avail input credit on input
services. [Firepro Systems Private Ltd. vs. CST (2008) 10 STR 606 (Tri. – Bang.)].

VALUATION
Where service tax has not been charged and collected separately by the service provider
the amounts collected towards the provision of services should be considered as inclusive
of service tax. [CCE vs. Advantage Media Consultant (2008) 10 STR 449 (Tri-Kolkata)]
Out of Pocket expenses reimbursable on actual basis are not includable in the value for
the purpose of service tax. [Aurobindo Pharma Ltd. vs CCEC (2008) 10 STR 611 (Tri. –
Bang.); Al-Baith Steel (P) Ltd. vs. CCE (2008) 10 STR 554 (Tri. – Bang.)].

DEMAND
On facts the Tribunal held that where the ground of limitation was not raised in the show
cause notice by the lower authorities, they cannot reject the refund claim filed by the
appellants on the grounds of time-bar. [Britannia Industries Ltd. vs. CCE (2008) 10 STR
528 (Tri-Kolkata)]
Service tax cannot be confirmed on the basis of amounts shown as receivables in the
Income Tax Returns and Balance Sheet. [Synergy Audio Visual Workshop P. Ltd. vs.
CST (2008) 10 STR 578 (Tri. – Bang.)].
The demands confirmed on services which are not invoked in the show cause notice, is
beyond the scope of the show cause notice and hence unsustainable. [Aurobindo Pharma
Ltd. vs CCEC (2008) 10 STR 611 (Tri. – Bang.)].
Where the show cause notice and the order of the adjudicating authority and lower
appellate authority only related to the interest and penalty without confirming the service
tax demand against the appellants, the Tribunal held that the notice/order is not legally
sustainable and the impugned order was set aside. [Total Security Systems vs. CCE&C
(2008) 10 STR 624 (Tri. – Mumbai).

PAYMENT OF SERVICE TAX

Where the appellants paid service tax for the month of December, 2004 on behalf of four
other service providers and on coming to know that those service providers have
themselves separately paid the tax amount, the Tribunal allowed the adjustment of the
excess tax so paid while paying the tax amount for the month of February, 2005 under
rule 6(3) of the Service Tax Rules, 1994. [Narnolia Securities Pvt. Ltd. vs. CST (2008) 10
STR 619 (Tri. – Kolkatta)].

PENALTY
Where the Commissioner while exercising his revisionary powers had not disputed the
facts and circumstances of case as narrated by the adjudicating authority who dropped the
penalties exercising his discretion u/s. 80 the Tribunal held that the penalties could not be
re-imposed in the revision order. [L.N.Gupta vs. CCE (2008) 10 STR 462 (Tri-Del.)]

REFUND
Where the CCE(A) insisted upon a CA certificate for verifying unjust enrichment and
relying upon the CA certificate [which had examined the books of accounts of the
assessee] granted refund to the assessee, the Tribunal held that the action of the CCE(A)
cannot be faulted. [CCE vs. Pauls Engineering Industries Pvt. Ltd. (2008) 10 STR 561
(Tri. – Mumbai)].

EXPORT OF SERVICES - REFUND

On facts the Tribunal upheld the appellants contention that the delay in filing the
declaration for claiming rebate on export of services under notification no. 12/2005 dated
19.4.2005 was due to lack of awareness of the new provisions and accordingly the delay
was rightly condoned. [CST vs. Keane Worldzen India Pvt. Ltd. (2008) 10 STR 471 (Tri-
Del.)]

APPEALS
Advocate-on-record has the authority to engage a counsel for representing the client
before any forum without the requirement of client executing a separate vakalatnama in
favour of the counsel. [Kevin Infotech Pvt. Ltd. vs. UOI (2008) 10 STR 514 (Cal.)]

CENVAT CREDIT
Where the assessee availed Cenvat credit in respect of services availed at premises not
mentioned in the Registration Certificate [but which were subsequently endorsed in the
Registration Certificate], the Tribunal held that the credit is not deniable. However, the
Tribunal denied credit where the invoices were not in the name of the appellant but
another legal entity. [Raaj Khosla & Co. vs. CCE (2008) 10 STR 600 (Tri. – Del.)].
Credit on the 17 specified services as enumerated under Rule 6(5) of the Cenvat Credit
Rules would be fully allowed to be taken and utilised and not restricted to 20% of the tax
payable as mentioned in the erstwhile Rule 6(3)(c) of the Credit Rules. [CCE vs. V. M.
Salgaonkar & Bros. Pvt. Ltd. (2008) 10 STR 609 (Tri. – Mumbai)].
SOVEREIGN ACTIVITY NOT A SERVICE
The activity of preparing electoral identity cards for The Election Commission of India is
a sovereign duty under the Constitution of India and accordingly not a “service” liable for
Service Tax. [CCCE v. C. S. Software Enterprises Ltd. (2008) 10 STR 367 (Tri. – Bang.)
relying on CCE vs. Ankit Consultancy Ltd. (2007) 6 STR 101 (Tri. – Del.) and CCCE vs.
CMC Ltd. (2007) 7 STR 702 (Tri. – Bang.)]
SITUS OF TAXATION
Business Auxiliary services provided abroad prior to 18.4.06 not liable for service tax.
[Prabhat Tyagi vs. CCE(Appeals) (2008) 10 STR 240 (Tri-Bang)]

RATE OF TAX APPLICABLE AS ON DATE OF RENDERING SERVICES

The rate of tax applicable is the rate prevailing on the date of rendering of services and
not the rate prevailing on the date of billing. [Reliance Industries Ltd. vs. CCE (2008) 10
STR 243 (Tri-Ahmd.)]

ADVERTISING AGENCY
The appellants, an advertising agency, provided services of booking slots in print and
electronic media for various advertisers for a commission. The media billed the
appellants Rs. 100/- less @ 15% discount i.e. Rs. 85/- plus 10.2% service tax and the
appellants in turn charged the same Rs. 85/- + 10.2% service tax to the advertisers,
recovered the amount from them and paid it over to the media who paid the service tax of
10.2% on Rs. 85/- to the Exchequer. The appellants paid service tax on the commission it
received from the advertisers. The department sought to levy tax on the discount of 15%
received from the media. The Tribunal disagreed and held that the discounts given by
media is not an amount “received” by the advertising agency. It is only a “discount”.
Further, the media is not the client of the advertising agency. Hence the discount is not
taxable. [Mccann Erickson (India) Pvt. Ltd. v. CST (2008) 10 STR 365 (Tri. – Del.)
relying on the decision in Euro RSCG Advertising Ltd. v. CCE (2007) 7 STR 277 (Tri.-
Bang.)]

CLEARING AND FORWARDING AGENTS

Commission received on account of del credre agency not liable for service tax under the
category of clearing and forwarding services. [CCE vs. United Plastomers (2008) 10 STR
229 (P&H)]

INTEREST
Where on the facts the payment of service tax was stayed by the High Court it was held
that no interest was payable by the assessee for the period stayed by the High Court.
[CCE vs. R.K.Swamy B.B.D.O. (2008) 10 STR 252 (Tri-Mumbai)]

IMPORT OF SERVICES

 Where on the facts the appellants were in receipt of patented intellectual property
services from abroad before the same were brought under the service tax net and
the department had demanded service tax from both the appellants and the
Foreign Service provider the Tribunal held that service tax can be demanded only
 from the person who is liable to discharge the same. Since the appellants were
neither agents of, nor did they represent, the Foreign Service provider service tax
cannot be demanded from them. [Sundaram Textiles Ltd. vs. CCE (2008) 10 STR
260 (Tri-Chennai)]
 The High Court confirmed the order of the Tribunal holding that the effective date
of reverse charge under rule 2(1)(d)(iv) of the Service Tax Rules, 1994 (i.e. in
respect of services provided by non-residents or persons from outside India not
having an office in India) is 1.1.05. [UoI vs. Aditya Cement (2008) 10 STR 228
(Raj.)]

REFUND

 The assesses were issued SCN dated 28.06.02 demanding tax on Goods Transport
operator services availed by them. The assesee informed the Asst. CCE on
15.7.02 that they were not liable in view of the “exemption for SSIs” vide
Notification no. 43/97 dated 5.11.97. Following the retrospective amendment to
the above notification on 14.05.03 to exclude a “person registered for sales tax
and whose turnover exceeded Rs. 50 lakhs in the preceding financial year” from
the exemption, the Dy. CCE on 5.11.03 asked the assesses to pay up, which the
assessees duly did on 12.11.03. The Asst. CCE dropped the SCN proceedings and
granted refund in terms of “exemption for SSIs”. The assesee claimed refund on
18.08.06. The CCE sought to revise the order of Asst. CCE rejecting the claim as
time barred. On appeal, the Tribunal held that the amount paid on 12.11.03 at the
instance of Dy. CCE’s letter dated 5.11.03 must be considered as paid under
protest since they had already claimed “exemption for SSIs” in the SCN
proceedings and hence the time bar would not apply. In any event, the amounts
collected by the revenue were not to be considered as “tax” since the same were
collected without any authority of law. [Wardex Pharmaceuticals Pvt. Ltd. vs.
CCE (2008) 10 STR 245 (Tri-Chennai)]
 Payment of tax into a jurisdiction (Jaipur - II) other than the jurisdiction of the
adjudicating authority (Jaipur – I) is no ground for denying the refund when the
assesee was otherwise entitled to the same. [Devasthan Vibhag v. CCE (2008) 10
STR 415 (Tri. – Del.)].

SHOW CAUSE NOTICE

Where the SCN issued to the appellants does not give the basis of the calculation of
demand nor specifically invoked the extended period of limitation in the SCN, it was held
that the proceeding flowing from such a defective SCN was neither legal nor proper. [TIL
Ltd. CST (2008) 10 STR 405 (Tri. – Kolkata)].

CENVAT CREDIT
Allowing the credit of service tax paid on outdoor catering for providing canteen
facilities to employees in factory premises the Tribunal held as follows:
(i) The meaning assigned to “input service” is divided in two parts. The first part giving
the specific meaning and the second part gives the inclusive meaning of the same. In
the second part, an inclusive meaning is given to “input service”, which otherwise
would not have been covered in the main first part.
(ii) The expression “such as” contained in the phrase “activities ‘relating to’ the
business such as accounting, auditing, financing, ………..” means that the stipulated
activities that follow the said expression in the definition are only illustrations and
not limitations.
(iii) The expression “relating to” occurring in the above phrase is to be given a wide
construction.
(iv) Canteen facility although not specifically stated in the list of activities in the
definition of “input service” is an “activity relating to the business” of the
appellants.
(v) Canteen facility is beneficial for the workers as they are served food at concessional
rates and it is they who are engaged in the business of the appellants which is
nothing but manufacture of goods. Hence the manufacturer can be said to be using
the canteen facility indirectly for manufacture of goods.
(vi) The following facts fortify that canteen expenditure is an ‘activity relating to
business’. (a) maintenance of a canteen is a statutory requirement u/s. 46 of the
Factories Act, 1948; (b) the appellants have paid fringe benefit tax [which is a tax on
business expenditure] on canteen related expenses under the Income Tax Act; (c)
credit of service tax paid on repairs and maintenance of residential colonies
provided to employees is allowed. [Manikgarh Cement v. CCE (2008) 9 STR 554
(T)]; (d) credit on mobile phones are allowed [CBEC Circular No. 97 dated
23.8.2007]; (e) expenditure on restoration of buildings and residential quarters as
well as expenditure on maintenance of transit quarters for accommodating outstation
employees have been held to be business expenditure under the Income-tax Act,
1961.
[Victor Gaskets India Ltd. v. CCE (2008) 10 STR 369 (Tri. – Mumbai)].
ADVERTISING AGENCY SERVICES
Where the appellants were only undertaking the activities of painting on the walls and the
shutters as per the photograph of the advertisement provided to them by the advertiser the
Tribunal held that the services rendered cannot be in the nature of advertising agency
services since it was a mere painting job by the appellants and the services of designing,
conceptualizing, visualizing etc normally provided by advertising agencies were not
rendered. [Dhanshree Publicity vs. CCE (2008) 10 STR 209 (Tri-Del.)]

BANKING AND OTHER FINANCIAL SERVICES

Where the hirer earmarks a portion of the cost of vehicle and the balance amount being is
financed by the appellants and the vehicle is registered in the name of hirer then the
transaction would be covered under "Hire purchase finance" services and accordingly not
liable for service tax. On the other hand where the ownership of vehicle lies with the
financier then the same would fall under the "hire purchase" services and accordingly be
liable to service tax. [Kausalva Finance Ltd. vs. CCE&S (2008) 10 STR 150 (Tri-Bang)]

BUSINESS AUXILIARY SERVICE

 The activities of verifying the credentials of applicants and processing their

applications for grant of loans or for issuance of credit cards would be liable for
service tax under the category of Business Auxiliary service and not under
Franchise Service. [CCE vs. Oritrade Pvt. Ltd. (2008) 10 STR 215 (Tri-Kolkata)]
 Where the appellants who were engaged in providing the services of registrar and
share transfer agent, they were held not to be falling under the category of
Business Auxiliary services for the period prior to 1.5.06 when share transfer
agent was brought within the service tax net since prior to 1.05.06 it was not
covered under any other category of services. [Karvy Consultants Ltd. vs. CCE
(2008) 10 STR 166 (Tri-Bang.)]

CARGO HANDLING SERVICE

Where the appellants were engaged in mere supply of manpower and their activities were
ancillary in the entire activity of packing, loading and unloading of cement bags from
machines without having any control over the loading machines it was held that the
services would not fall under the category of cargo handling services but under the
Manpower Recruitment Agency service. [C. Krishnakumar vs. CCE&S (2008) 10 STR
162 (Tri-Bang.)]

CLEARING AND FORWARDING SERVICE

On facts it was held that the activity of mere procurement of orders without attaching any
liability on the appellant in respect of the goods would not get covered under the service
of Clearing and Forwarding Agent service. [Patwari Forgings Pvt. Ltd. vs. CCE (2008)
10 STR 52 (Tri-Kolkata)]

COMMERCIAL TRAINING OR COACHING SERVICE

Where the appellants were conducting diploma or post graduation course in management
but were a non-profit organisation under the Companies Act and a Public Charitable trust
under the Income tax Act, 1962 and there were also restrictions on distribution of profits
or dividends to their members, the Tribunal held that no service tax would be leviable
under the category of commercial training or coaching service since the appellants were
not providing "commercial" training with a sole object of making profit. [Great Lakes
Institute of management Ltd. vs. CST (2008) 10 STR 202(Tri-Chennai)]

Consulting Engineering Service

 Where the contract was for operating and maintaining a power plant it was held
by the Tribunal that they were not rendering any service in the nature of
 consulting engineering service to any person,the engineering service if any was
for themselves [Rolls Royce (2006) 3 STR 292 referred], and further, that the
contract cannot be vivisected to levy service tax on a portion of the contract.
[GVK Power & Infrastructure Ltd. vs. CCE (2008) 10 STR 146 (Tri-Bang.)]
 Construction of commercial and residential buildings on a turnkey basis was held
to be services falling under the category of works contract services liable from 1-
6-07 and not under the category of consulting engineering service. Further the
stray payments made by the appellants under the category of consulting engineers
service would not make the service taxable under that category. [Malar
Constructions vs. CCE (2008) 10 STR 156 (Tri-Chennai): See also BHEL v. CCE
(2008) 10 STR 218 (Tri-Kol.)]

VALUATION
 Where as per the terms of agreement the appellants were in receipt of
reimbursement of various expenses (viz. rent, loading -unloading charges,
Freight, Courier, stationery etc.) from their principal besides the amount of
service charges, the Tribunal held that service tax cannot be levied on the
reimbursements since the same is not received for rendering services. [Apco
Agencies vs. CCE (2008) 10 STR 169 (Tri-Bang.); See also S & K Enterprises vs.
CCE (Appeals) (2008 10 STR 171 (Tri-Bang.)]
 Deduction of the value of materials/ consumables used in rendering the services
of photography is allowable vide notification no. 12/2003-ST dated 20-06-03.
(CCE vs. Crystal Colour Lab (2008) 10 STR 26 (Tri-Bang.); See also Digi Studio
vs. CCE (2008) 10 STR 31 (Tri-Bang.)] No requirement of mentioning value of
materials in invoice [Jyoti Art Studio vs. CCE (2008) 10 STR 158 (Tri. - Bang)]
 Service tax is not leviable for the free service rendered by the authorised agency
in respect of the cars sold by them. [AVG Motors Ltd. vs. CCE 2008 (10) STR 20
(Tri. - Bang.)].

DEMAND
 Where the appellants had filed the memorandum and articles with the department
at the time of registration specifying the activities carried out by company it was
held that there was no suppression of facts and the extended period of limitation
was cannot be invoked. [Karvy Consultants Ltd. vs. CCE (2008) 10 STR 166
(Tri-Bang.)]
 Demand of excise duty on receipts which are subject matter of another show
cause notice allegedly due to rendering of services as Consulting Engineer in
another proceedings is not sustainable. [Unitherm Engineers Ltd. vs. CCE (2008)
10 STR 15 (Tri. - Bang)]

REFUND
 Where the appellants had wrongly paid the service tax under the category of
consulting engineer services but were liable to pay service tax from 1-7-03 under
 the category of erection commissioning and installation, the Tribunal upheld the
refund claim of assessee. [Caryaire Equipments India P. Ltd. vs. CCE (2008) 10
STR 121 (Tri-Del.)]
 Where the order of the Tribunal granting refund to the appellants was pending
adjudication before the Supreme Court and show cause notice was issued to
nullify the order and to withhold the amount of refund the Tribunal observed that
in the absence of any interim order by Supreme Court the department was bound
to implement the orders of the Tribunal. [CCE vs. Diamond Cement (2008) 10
STR 183 (Tri-Del.)]
 Where on the facts the amount of service tax paid by the assessee could not be
recovered from the customers and a claim for refund of the amount paid in excess
was made it was held that the principal of unjust enrichment would not be apply
to such refund since it is just money which the assessee is entitled as the same was
paid by assessee in excess. [CST vs. Standard Chartered Bank (2008) 10 STR 6
(Kar)]

PENALTY
 Where the department tried to challenge the powers of the adjudicating authority
to reduce the penalties imposed by the original authority it was held that penal
provisions confer an inbuilt discretion on the authorities to reduce the penalty.
Moreover, section 80 of the Finance Act '94 also empowers the authorities to
waive the imposition of penalties under sections 75, 76, 77 and 78 of the Act.
[CCE vs. Nesamony Tours & Auto Consultant Travels (2008) 10 STR 42 (Tri-
Chennai)].
 Where the appellants had collected the service tax without obtaining the
registration and also did not remit the tax so collected to the Exchequer the
Tribunal held that tax so collected alongwith penalties and interest was payable
even if the service tax was not payable on the transaction. [Febin Advertisers vs.
CCE (2008) 10 STR 50(Tri-Bang)]
 Where the assessee was not familiar with the formalities related to the new levy of
service tax and the Commissioner (Appeals) considering their case leniently
quashed the penalties levied, it was held that section 80 of the Finance Act
empower the proper officer to condone the levy of penalty if there was a
reasonable cause for the failure. [CCE vs. Military Ex-Servicemen Services
(2008) 10 STR 135 (Tri-Chennai)]
 Where there was a dispute as regard the nature of service and interpretation of the
scope of the service it was held that levy of penalty could be waived under s. 80
of the Finance Act. [National Mining Co. Ltd vs. CCE (2008) 10 STR 136 (Tri-
Kolkata)]
 With respect to quantum of penalty for delay in payment of taxes u/s. 76 the
adjudicating authorities can, in exercise of the discretion u/s. 80, impose a penalty
lesser than that prescribed u/s. 76. [CCE v. Mukul S. Patil (2008) 10 STR 115
 (Bom.); See also CCE v. Vinay Bele & Associates (2008) 9 STR 350 (Bom.) and
M.R. Bhagat & Associates v. CCE(2008)10STR130(Tri-Mum.)].

EXPORT OF SERVICES
Where the appellants being a courier agency had rendered international courier services
during the period 15.03.2005 to 16.06.2005 it was held by the Tribunal that as part of
services were performed within India and the rest outside India, the courier services
would be considered as exported and hence no service tax is payable even if the
consideration for the services was not received in foreign exchange. The requirement that
the services must be delivered and used outside India and the amount of consideration
must be received in convertible foreign exchange would not apply for period prior to
16.06.2005. [Professional Couriers vs. CST (2008) 10 STR 125 (Tri-Chennai)]

CENVAT CREDIT

 Service tax on Goods Transport Agency services payable as a recipient of services

can be paid by utilisation of Cenvat credit. [Bhushan Power & Steel Ltd. vs. CCE
(2008) 10 STR 18 (Tri-Kolkata); Also See CCE vs. Flowserve Microfinish Valves
Pvt. Ltd. (2008) 10 STR 21; Nagammai Cotton Mills (P) Ltd. vs. CCE (2008) 10
STR 77 (Tri-Chennai) (Tri-Bang)] (These cases pertain to period prior to
19.4.2006)
 Where the decision of the Tribunal, ordering refund of unutilized Cenvat credit to
the assessee who had surrendered its registration due to the closure of the
company was challenged, the High Court held that claim for refund cannot be
rejected relying on r. 5 of Cenvat Credit Rules, 2002 when the assesee company
has been closed and the assesee has opted out of the Modvat scheme. [Union of
India vs. Slovak India Trading Co. Pvt. Ltd. (2008) 10 STR 101 (Kar.)]
 Where the capital goods were installed in the factory premises and were in a
position to be used at any time, Cenvat credit on the capital goods cannot be
denied for the mere reason that the said capital goods could not be made
functional. [CCE vs. Seat Metal Components India (P.)Ltd. (2008) 10 STR 108
(Tri-Bang)]
 In this case the appellants were manufacturing yarn both cotton and polyester and
were utilizing the Cenvat credit without fragmenting the amount of credit between
the products. On appeal the Tribunal held that Cenvat credit is indefeasible
account and henceallocation of credit on the basis of raw material or product is
not permitted. [Vardhman Spg. & Gen Mills Unit -I vs. CCE (2008) 10 STR
109(Tri-Del)]
 Where the appellant had availed cenvat credit on Goods Transport Agency
services for inward transportation of inputs but thereafter retuned some of the
inputs received by it, since they were substandard, the Tribunal held that the
credit of service tax and education cess availed on the Goods Transport Agency
services utilised for inward transportation need not be reversed proportionately
 when some of the inputs were subsequently returned. [Chitrakoot Steel & Power
Pvt. Ltd. vs. CCE (2008) 10 STR 118 (Tri-Chennai)].
 A certificate from the service provider that the services have been rendered to the
service recipient can be accepted as a valid document for availing Cenvat credit
where the bills did not specify the name and the address of the service recipient.
[CCE vs. Diamond Cements (2008) 10STR160(Tri-Del.)]

RECTIFICATION OF MISTAKE
An order of the Tribunal concluded contrary to a decision of a superior court (High Court
or Supreme Court) rendered "subsequent" to the order of the Tribunal would be amenable
to rectification as involving an error apparent from records even though the Tribunal had
decided the order "prior to" the judgement of the superior court since the subsequent
decision does not "enact" the law but "declares" the law as it always was [Hindustan
Lever Ltd. vs. CCE (2008) 10 STR 91 (Tri. -IB)].

SERVICE OF ORDER/DECISION /SUMMON/ NOTICE

Pursuant to s. 37C of the Central Excise Act, 1944 an order / decision / summon/ notice,
etc. maybe served on an assessee - (i) by physical delivery ; or (ii) by registered post; or
(iii) on failure of the first two modes by affixing it on the assessee's premises; or (iv) on
failure of all the aforesaid modes by affixing the copy of order on the notice board of the
concerned officer. With regard to mode (ii) the Tribunal held "dispatch of adjudication
order by speed post/registered post would not amount to a valid service in the absence of
proof of actual delivery of speed post". The Tribunal also held that there cannot be a
service by registered post and simultaneously affixing the order on the notice board and
the affixing of the order has to be considered after failure of the first two modes. [Margra
Industries Ltd. vs. CC (2008) 10 STR 81 (Tri-LB)]
Sovereign activity not subject to service tax
Sovereign activities of inspection and certification of electrical installations done by
Electrical Inspectorate, Government of Karnataka, a State Government Department, in
terms of the Electricity Act is not subject to service tax being a statutory function.
[Electrical Inspectorate, Government of Karnataka v. CST (2008) 9 SR 494 (Tri-bang.)].

Sub-Contracting of services
Where the appellants, engaged in the business of providing photography services, were
sub-contracted work by various other photo studios, the Tribunal basing its decision on
various circulars and also on the principle that Revenue cannot demand service tax on the
same service more than once held that the sub-contractor is not liable to pay service tax if
the tax liability has been discharged by the main contractor. Further, it was also held that
the onus of verifying whether the payment of service tax was made by the main
contractor lies on the department and not on the assessee. [Foto Flash vs. CST (2008) 9
STR 462 (Tri- Bang); See also Evergreen Suppliers vs. CCE (2008) 9 STR 467 (Tri-
Bang).]
Cargo Handling Services
Where as per the terms of contract the contractors were to make arrangement for the
transportation of goods which incidentally included loading and unloading of goods it
was held that the activity of loading and unloading would not be liable as cargo handling
services. [Dalveer Singh vs. CCE (2008) 9 STR 491 (Tri-Del)].
Supply of labours who are under the supervision and control of the service recipient
would not be considered as cargo handling services. [CCE vs. Pawan Associates (2008) 9
STR 458(Tri-Bang)]
Mechanical transfer of coal from coal face to tippers and subsequent transportation of
coal within the mining area would not constitute as cargo handling services since :
(i) the dominant activity undertaken was movement of coal within the mining area, and
loading and unloading was incidental;
(ii) 'Cargo' in common parlance means something which is carried as freight in a ship,
plane, rail or truck while in the present case the coal was merely moved within the
mining area. [Sainik Mining & Allied Services Ltd. vs. CCEC & S (2008) 9 STR 531
(Tri-Kolkata)]

On facts the Tribunal held that the respondent's activity comprising of excavation,
transportation and filling of iron ores to the crusher plant are primarily in the nature of
mining activities and not 'cargo' handling services since:-
(a) “Cargo” is commercially known to be something which is carried as freight in a ship,
air plane, rail or truck for freight while in the present case what is carried cannot
commercially be called 'cargo'; and
(b) The incidental activities of loading and unloading cannot give the contracted
activities (mining of ores) the character of cargo handling services. [CCE & C vs.
B.K.Thakkar (2008) 9 STR 542 (Tri-Kolkata).]

Consulting engineering services

Where the appellants manufactured gas/air separation plants for various chemical
industries on a turnkey basis and in order to supply the plant they undertook detail
designing, drawing and engineering, etc. the Tribunal relying on Daelim industrial Co.
Ltd. vs. CCE (2003) 155 ELT 457 (Tri- Del) held that the designs and drawings carried
out are essentially for the manufacture of plant and hence these services are not directly
rendered to the clients but to themselves in order to carry out the works contract and
accordingly not liable for service tax under consulting engineering services. Further the
Tribunal also held that since works contract came into the service tax not only in 2007 it
was was not liable for service tax under the category of consulting engineering services
prior to that. [Air Liquid Engg. India Pvt.Ltd. vs. CCE (2008) 9 STR 486 (Tri-Bang)].
Pre-design drawing done by an electrical contractor for the purpose of erection of a
transformer is not liable for service tax under the category of consulting engineering
services since the services are provided by an electrical contractor and not a qualified
engineer and moreover no engineering consultancy is provided. Further, the services of
erection is also liable only from 10.9.2004 and erection done prior to 10.9.2004 (on
17.1.2004) is not liable for service under “commissioning and installation”. Lastly,
electrical wiring, and installation of bulbs, etc. are liable under the category of “erection
commissioning and installation” only after the enactment of the Finance Act, 2005 which
enlarged the definition of taxable service and not prior to that. [Power Best Electricals
Ltd. vs. CCE (2008) 9 STR 497 (Tri Bang)].

Goods Transport Agency Services Cenvat credit and abatement

In this case the Tribunal clarified a number of issues with regard to goods transport
agencies and held as follows :
(a) service tax paid on goods transport agency (“GTA”) services by the consignor or the
consignee liable to pay the freight in terms of section 68(2) does not make them a
service provider
(b) in respect of GTA services availed for inward transportation of inputs or capital
goods for which service tax is paid by the assessee as consignees (since they paid the
freight to the GTA), they continue to be service recipients and therefore, such
services are input services for them entitled for credit. Further, in respect of such
consignments, the assessees as consignees would still be entitled to credit even if the
service tax is paid by the consignors as payer of freight.
(c) the service tax paid on GTA services for outgoing consignments of finished goods
by consignors (since they paid the freight to the GTA) shall not be eligible as credit
to them.
(d) while paying service tax on GTA services availed in connection with removal of
finished goods from factory, the person liable to pay service tax is entitled to utilize,
for payment of service tax on such GTA service, the credit of tax paid on the GTA
service availed by them in connection with receipt of inputs in their factory [M/s.
India Cements Ltd. v. CCE (2007) 7 STR 569 (T) relied. See also Pallipalayam
Spinners P. Ltd. v. CCE (2008) 9 STR 544 (Tri-Che.)]
(e) notwithstanding taking of credit of service tax paid under GTA services in respect of
incoming consignments, the respondents are eligible to avail the benefit of
notification No. 32/2004-ST, dated 3-12-2004 (75% abatement). [See also CCE v.
Sunhill Ceramics P. Ltd. (2008) 9 STR 530 (Tri-Ahmd.)].

LEASED CIRCUIT SERVICES

The Interconnection Usage charges collected by each telecom authority for the calls
terminating to the subscribers under them emanating from other telecom authorities
cannot be treated for use of "leased circuit" and accordingly not liable for service tax
under the category of leased circuit services. [BSNL v. CST (2008) 9 STR 499 (Tri-
Bang.)]
WORKS CONTRACT
Where the appellants were engaged in supply, installation and commissioning of ATMs
for banks on a turnkey basis, the Tribunal held on facts that the activity of appellants
were not liable for service tax under the category of “commissioning and installation
agency services” since :-
(i) the services are in the nature of an indivisible works contract which were exigible to
service tax only w.e.f. 1.6.2007 and prior to that date such indivisible contracts
could not be vivisected for the purpose of levy of service tax on the service
component alone;
(i) the services are in the nature of an indivisible works contract which were exigible to
service tax only w.e.f. 1.6.2007 and prior to that date such indivisible contracts
could not be vivisected for the purpose of levy of service tax on the service
component alone;
(ii) in any case, such contracts are not liable for service tax under Commissioning and
installation services since ATM services became taxable only from 1.5.06 and not
prior to that date. In other words, in the ever-widening sphere of service tax,
addition of an item to the list of taxable services is just an addition, and not a
subtraction from a pre-existing entry.
(iii) the fact that the services of “Commissioning and installation” of 'equipments' was
entitled to 67% abatement and ATMs were 'equipments' does not ipso facto mean
that supply, commissioning and installation of ATMs on a turnkey basis is exigible
to service tax since charging provisions are to be found in the statute itself and
where there is none it cannot be supplemented by notifications. Notifications can
have no operation as long a service does not find place in the list of taxable
services.
Valuation
Where the appellants who were engaged to market the personal loan products of the
banks besides raising invoices for “service charges” also received the reimbursement of
the salaries paid to the personnel deputed and also infrastructural expenses such as rent,
telephone charges, electricity etc. the Tribunal held that the reimbursements received
cannot be said to be amounts “charged” by the service provider and hence is not
includible in the taxable value for the purpose of payment of service tax. [Malabar
Management Services P. Ltd. vs. CST (2008) 9 STR 483 (Tri-Che.); See also Keralam
Enterprises vs. CCE (2008) 9 STR 503 (Tri-Bang.) in the context of reimbursement for a
clearing and forwarding agent]

LIMITATION
Where service tax is not paid as a result of confusion prevailing in the field as regards the
liability of service tax it was held that the benefit of doubt is to be extended to the
assessee and the extended period of limitation is not invokable. [Dalveer Singh vs. CCE
(2008) 9 STR 491 (Tri-Del)].
REFUND
Recovery of demands by adjustment against refunds due to the assessee u/s. 11 of Central
Excise Act is not permissible if the demands are not final but pending appeal before
higher judicial fora. Hence it was held that the assessee was entitled to the interest in the
refunds so adjusted. [Voltas Ltd. vs. CCE (2008) 9 STR 591 (Tri-Bang)].
APPEALS

 The miscellaneous application signed by a person having a vakalatnama is not

valid. It has to be signed by the appellant. [SBEC Sugar Ltd. vs. CCE (2008) 9
STR 573 (Tri-Del)]
 Appeal to Commissioner (Appeals) - additional grounds can be added by filing an
addendum before the hearing [CCE vs. Tata SSL Ltd. (2008) 9 STR 579 (Tri-
Mumbai)].

CENVAT

 Where the appellant's factory for manufacture of cements was located at remote
places without any facilities for accommodation and stay of their employees, and
the appellants had constructed residential colonies for its employees so that their
employees are available to them on the spot in order to maintain continuity of
manufacture it was held that management, maintenance or repair services used by
the appellants in the residential colonies are “input services” being relatable to
business of the assessee and service tax paid on such maintenance and repair
services is entitled to input credit. [Manikgarh Cement vs. CCE&C (2008) 9 STR
554 (Tri-Mumbai)].
 Where the appellants had reversed the credit availed on inputs on a mere letter of
superintendent of central excise when there was no show-cause notice and an
adjudication to that effect they cannot suo-motu re-credit the amount of input
credit without the permission of the Assistant Commissioner. [Oudh Sugar Mills
Ltd. vs. CCE (2008) 9 STR 577 (Tri-Del)].

BUSINESS AUXILIARY SERVICES / BUSINESS SUPPORT SERVICES

Services provided by the appellants to banks for verifying the correctness, fairness and
authenticity of information furnished by the borrowers is not a service in relation to
promotion or marketing of a service provided by the bank but a service rendered in
relation to evaluation of prospective customers liable under ‘Business Support Services’
and not under ‘Business Auxiliary Services’. [S. R. Kalyanakrishnan vs. CCE (2008) 9
STR 255 (Tri. – Bang.)].

CLEARING AND FORWARDING AGENTS

Services provided by an auctioneer for sale of cardamom by auction is not liable for
service tax under the category of “Clearing and Forwarding Agent’s” services even
though it involves the receiving and storing of goods by the auctioneer. [CCE vs.
Cardamom Mkg. Corporation (2008) 9 STR 247 (Tri. – Bang.)].

CONSULTING ENGINEERING SERVICES

 The appellant in the course of manufacture of transformers also carried out work
in relation to design, drawing, engineering, training, supervision of erection,
commissioning, trouble shooting etc. and raised separate invoices for the same.
The Tribunal held that the appellants are liable for service tax since there is a
clear demarcation of charges for various services rendered and the ratio that a
works contract cannot be vivisected to charge service tax as held in M/s. Daelim
Industrial Co. Ltd. vs. CCE (2006) 3 STR 124 did not apply to the present case.
[Transformers & Electricals Kerala Ltd. vs. CCE (2008) 9 STR 285 (Tri. –
Bang.)].
 Where the contract was one for design, manufacture, supply, erection, testing and
commissioning of complete electro-mechanical equipment on turn-key basis and
the terms and conditions of payment were as per the progress of work the
Tribunal (3rd member) held that the services were not liable under Consulting
Engineering Services since a composite contract cannot be vivisected. [Jyoti
Limited vs. CCE (2008) 9 STR 373 (Tri. – Ahmd.)].

N.B.: In this case the learned member (Judicial) had also come to the same conclusion
on two other grounds:

(i) That the appellants were engaged in the manufacture of the goods and cannot be said
to be covered by expression “professionally qualified engineers”, or “engineering
firm” engaged in providing or rendering any advice, consultancy or technical
assistance.
(ii) The jobs were not in the nature of advice, consultancy or technical assistance but was
one of manufacture and sale of equipment and not engineering consultancy.

PORT SERVICES

 Railway siding charges received by the appellants, a port trust, from the Railways
for allowing them to utilise their railway marshalling yard for construction and
maintenance of railway sidings are not services in relation to vessels or goods and
accordingly not liable for service tax under Port Services. [New Mangalore Port
Trust vs. CCE (2008) 9 STR 235 (Tri. – Bang.)].
 The appellants, a minor port, provided various port services and registered for
service tax with effect from 1.7.2003. It raised separate bills for wharfage,
storage, etc. The department contended that the storage charges are liable for
 service tax under the category of “Storage and Warehousing Services” w.e.f.
16.8.02. Dismissing the contention of the department the Tribunal held that
storage charges was not liable for service tax under “storage and warehousing
services” but under “port services” since:

(i) Storage & Warehousing is not a separate service but were an essential,
integral and core part of the port service and were performed for the better
enjoyment of the port service;
(ii) Port services were subsequently introduced w.e.f. 1.7.03 without making a
change in the definition of Storage and Warehousing service thus indicating
that the two services were distinct and separate services.
[Gujarat Chemical Port Terminal Company Ltd. v. CCE (2008) 9 STR 386 (Tri. –
Ahmd.)].

TECHNICAL TESTING AND ANALYSIS

Where the appellant, a blood collection centre, drew / collected samples of blood and
forwarded the sample after certain processing (e.g. serum separation) to test laboratories
who do the testing, relying upon CCE vs. Dr. Lal Path Lab P. Ltd. (2007) 8 STR 337
(P&H), the High Court held that the said service was in the nature of “technical testing
and analysis” but being in relation to human beings was specifically excluded from that
category and were not liable under the category of ‘business auxiliary services’. [CCE vs.
Patient Service Centre (2008) 9 STR 229 (P&H)].

VALUATION
Where the appellant, a dealer of motor cars, provided free after sales service to the
customers to whom cars were sold by them without being reimbursed by the
manufacturer for the cost of free service, the Tribunal held that the dominant intention of
the appellant was to sell the cars and not to provide free service, which was merely
incidental and intended to promote the sale of cars and hence the entire amount including
the dealers’ margin was rightly charged to sales tax and no service tax can be levied on
the amount representing dealers’ margin or any part of it. [ASL Motors Pvt. Ltd. vs.
CCE&ST (2008) 9 STR 356 (Tri. – Kol.)].

DEMAND
When all the relevant facts against the appellant were in the knowledge of the authorities
at the time of the issuance of the first SCN, then the same/similar facts could not be taken
as suppression of facts on the part of the assessee while issuing subsequent SCN for
making the demand for the extended period. [Nizam Sugar Factory vs. CCE (2008) 9
STR 314 (SC)].

REFUND
The appellants collected certain amounts from the customers from April, 2000 to January,
2005 and paid service tax under the category of Real Estate Agent’s services, filed
returns and accepted assessments for the said period. However, when the services of
Management, Maintenance and Repair of immovable property was notified w.e.f.
16.6.2005, the assessee claimed refund for the said period arguing that the tax paid was
not “tax” but “money simplicitor” and must be refunded unaffected by the provisions of
Section 11B. The authorities refunded the amount paid for the period March, 2004 –
January, 2005 (which was within 1 year limitation period provided u/s. 11B) but rejected
the refund claim for the previous period. On appeal, the Tribunal, on facts, dismissed the
appeal of the assessee and held that the amount paid was “tax” and not “money
simplicitor” especially considering that the assessee had paid tax, filed returns and also
accepted the refund for 2004-05 for which he submitted a CA certificate that the tax was
not collected from the customers. Accordingly, the provisions of S. 11B were held to be
applicable and the amount for the period April 2000 – March 2004 was held time barred.
[Campus Service (India) Pvt. Ltd. vs. CCE (2008) 9 STR 259 (Tri. – Chennai)].

CENVAT CREDIT
Goods Transport Agency service received for clearance of product from factory is
deemed “output service” as per the Explanation to section 2(p) of the Cenvat Credit Rules
(as it stood at the relevant time) and accordingly Cenvat credit can be validly utilised for
discharging service tax on such goods transport agency services. [CCE vs. Nahar Exports
Ltd. (2008) 9 STR 252 (Tri. – Del); CCE vs. Flowserve Microfinish Pumps Pvt. Ltd.
(2008) 9 STR 278 (Tri. – Del.)].

SERVICE TAX - VAT

The appellant an advertising agency while providing advertising services also created
original concept, designed advertising material, brochures, annual report etc. and raised
an invoice on the customers giving break up of service element and material. The
appellant paid sales tax on value of materials and service tax on design and work charges.
The sales tax department took a view that sales tax is payable on the entire amount
charged from the customer including the amount of design and concept charges since the
same went into the creation of the product which was ultimately sold. The Supreme Court
held that the contract was a composite contract [as distinguished from an indivisible
contract] for services and sale and accordingly sales tax would not be payable on the
value of entire contract but only on the material component. [Imagic Creative Pvt. Ltd.
vs. CCT (2008) 9 STR 337 (SC)].

ADDENDUM TO THE BUDGET PUBLICATION 2008-09 – CA A. R. KRISHNAN

As new services are introduced and existing services are expanded, for some it is good
news since they will be able to avail cenvat credit and for others it is an add on cost. But
for us (CA’s) it is always good news with more work. This sentiment I express in my
“Ode to The Finance Bill” as under–

Every year the Finance Bill, Is a regular Drill,

Supposed to be a Pill, For all economic ills,

The suspense of the Bill, Brings an aura of Thrill,

Once introduced, this Bill, Give us some Fill, Some Chill,

To some, it brings Goodwill, To some, life goes downhill,

For us these Bills, Ensure that our Skills,

Are always going Uphill, It brings us a lot of Goodwill,

Thus, we wait, Till the next Bill !

ADVERTISING AGENCY
The appellants were an advertising agency who provided advertising services to their
clients and charged a fixed fee for its services. Their services consisted of booking slots
in print and electronic media for the advertiser. The media billed the appellants @15%
discount. If Rs. 100/- was the tariff rate the media charged them Rs. 85/- plus 10.2%
service tax. The appellants in turn charged the same Rs. 85/- + 10.2% service tax to the
advertisers, recovered the amount from them and paid it over to the media who paid the
service tax of 10.2% on Rs. 85/- to the Exchequer. The appellants paid service tax on the
fixed fee it received from their clients. Further, the appellants also received cash
discounts (discount for prompt payment) and target incentives (incentive for achieving a
certain level of business) from the media. The department sought to tax - (i) the discount
of 15%; (ii) cash discount ; and (iii) target incentives under the category "Advertising
agency" services. Dismissing the department's contentions the Tribunal relying
upon Euro RSCG Advertising Ltd. vs. CCE (2007) 7 STR 277 (Tri.-Bang.) held -

i. For an advertising agency it is the advertiser who is its 'client'. Its client is not the
media. It is only the amounts that are received from its clients which is taxable
under the category of "Advertising agency" services and any amount received
from media will not be liable for service tax.
ii. The discounts given by media is not an amount "received" by the advertising
agency. It is only a "discount". Further, the media is not the client of the
advertising agency. Hence the discount is not taxable.
iii. Both cash discounts and target incentives are not connected to the service
rendered to the clients (advertisers) nor are they billed to the clients (advertisers).
Hence these incomes earned by appellants are not liable for service tax under the
category of "Advertising agency services". [Kerala Publicity Bureau vs.
CCE (2008) 9 STR 101 (Tri-Bang)]

CLEARING AND FORWARDING AGENTS

No service tax is payable on reimbursement of expenses such as accountant's salary,
godown keeper's salary, steno's salary, office maintenance, computer programmer salary,
computer installation, etc. incurred by a clearing and forwarding agent. [JayaLaxmi
Enterprises vs. CCE (2008) 9 STR 19 (Tri. - Bang.)]

Booking of orders done by the broker on behalf of the appellant is not liable for service
tax under Clearing and Forwarding Agent's services. [Harinagar Sugar Mills Ltd. vs.
CCE (2008) 9 STR 128 (Tri. - Kol)].

SCIENTIFIC OR TECHNICAL CONSULTANCY SERVICES

Transfer (sale) of technology with all its rights is not a provision of service and
accordingly not liable under Scientific or Technical Consultancy Services. [Matrix
Laboratories Ltd. vs. CCE (2008) 9 STR 15 (Tri. - Bang.)]

VALUATION
Where a dealer of motor vehicles offered 3 free services on the sales made by him to his
customers, the services provided by him are not liable for service tax in absence of any
consideration. [Indus Motor Company vs. CCE (2008) 9 STR 18 (Tri. - Bang.)].

Cost of material consumed while rendering photography service are not includible in the
value of taxable service vide Notification No. 12/2003-ST dated 20-6-2003. [CCE vs.
Express Color Lab (2008) 9 STR 126 (Tri. - Bang.)]

DEMAND - LIMITATION
Where the departmental authorities were not clear as to the nature of activities rendered
by the assessee and had taken different views at different points of time the extended
period of limitation cannot be invoked. [Nexcus Computers (P) Ltd. vs. CCE (2008) 9
STR 34 (Tri. - Chennai)].

INTEREST
Where the assessee, a recipient of service from a foreign company which did not have an
office in India, was liable for payment of service tax as a recipient of service under Rule
6 of the Service Tax Rules, 1994 as it stood during the material time [prior to 16-8-2002]
since it was held by the High Court that the agreement with the foreign company
authorised the service receiver to meet the service tax liability, the Supreme Court held
that the assessee was also liable to pay interest if there was a delay in payment of service
tax by the recipient. [Kerala State Electricity Board vs. CCE (2008) 9 STR 3 (SC)].

PENALTY
Duty paid before the issuance of show cause notice is a sufficient ground to show that
there has been no intention to evade payment of duty and accordingly penalty u/s. 11AC1
was set aside. [CCE vs. S. B. Packaging Ltd. (2008) 9 STR 124 (P & H)].

CENVAT
Where the assessee, a manufacturer of computers, did not utilise the balance of Cenvat
Credit but had to pay excise duty in cash on the instructions of the Department, the
Tribunal allowed the cash refund of unutilised credit when his final product became
exempted. [Microstar Computers vs. CCE (2008) 9 STR 22 (Tri. - Ahmd.)]

Credit taken on the basis of the photocopy of the invoices is inadmissible. [CCE vs.
Vandana Energy & Steel Pvt. Ltd. (2008) 9 STR 31 (Tri. - Del.)].

The assessee is entitled to avail full credit on inputs procured from manufacturers, even
though the manufacturer of inputs paid duty @24% instead of 16% and no dispute was
initiated by the revenue at the supplier manufacturer's end. [CCE vs. Purity Flexpack
Ltd. (2008) 9 STR 125 (Guj.)].

Where the assessee is only receiving taxable services and not providing any output
service, service tax paid on the Goods Transport Agency Service received shall be
deemed to be output service and accordingly credit of service tax paid on any input
service and / or credit of duty paid on any input or capital goods could be validly availed
against tax paid / payable on this output service. [Soundararaja Mills Ltd. 'E' Mills vs.
CCE (2008) 9 STR 183 (Tri. - Chennai)].

1. Corresponding to S. 78 of the Finance Act, 1994, law governing service tax.