2018 (8) TMI 1688 - AT - Service Tax

Liability of Service Tax - stitching/ tailoring charges under the category of Fashion Designing - Time Limitation - Circular No. F. No. B/1/2002/TRU of the Finance Act, 2002 dated 01/08/2002 - Held that - In view of the clarification as above by the CBEC, it is evident that no Service Tax can be charged on stitching/ tailoring charges under the category of Fashion Designing. Consequently, no Service Tax is payable on the stitching charges. The cost of raw materials used by the appellant and recovered from their customers also cannot be included for payment of Service Tax. Under the category of Fashion Designing However, amounts recovered by the appellant towards the activity of designing such as design of Jodhpuri, blazer etc, which was carried out by the appellant at the request of the customers will squarely be covered within the category of fashion designing and Service Tax is liable to be paid for amounts recovered towards this - demand upheld. Time Limitation - Section 11B of CEA - Held that - Larger Bench of the Tribunal in the case of Veer Overseas Ltd V/s Commissioner 2018 (4) TMI 910 - CESTAT CHANDIGARH , where it was held that the time limit prescribed under Section 11B of the Central Excise Act, 1944 will govern claim for refund of service tax - With reference to part of refund falling within the time limit under Section 11B, the issue is required to be remanded to the Original Authority for restricting the same only to the stitching charges recovered as well as the cost of raw materials. Appeal decided partly against appellant - part matter on remand.

Summary

Issues:
1. Applicability of Section 11B for the refund of Service Tax.
2. Interpretation of activities falling under the category of "Fashion Designing."
3. Time limitation for claiming refund under Section 11B.

Analysis:
1. Applicability of Section 11B for the refund of Service Tax:
The appellant filed a refund claim for the Service Tax paid, contending that the activities undertaken by them did not fall under the definition of fashion designing. The lower authorities rejected a part of the refund claim on the grounds of time limitation under Section 11B of the Central Excise Act, 1944. The Larger Bench's decision in the case of Veer Overseas Ltd v/s Commissioner clarified that Section 11B applies strictly to any refund of Service Tax, even if paid under a mistaken notion. The Tribunal upheld the rejection of the refund claim falling within the time limit under Section 11B.

2. Interpretation of activities falling under the category of "Fashion Designing":
The appellant argued that the activities of stitching charges and cost of raw materials do not attract Service Tax under the category of Fashion Designing. The Circular by CBEC clarified that tailors involved only in stitching clothes are not covered under the tax net. However, designing activities like creating Jodhpuri, blazer, etc., at the request of customers fall within the category of fashion designing and are liable for Service Tax. The Tribunal held that Service Tax is not payable on stitching charges or raw materials but is applicable to amounts recovered for specific design activities.

3. Time limitation for claiming refund under Section 11B:
Regarding the issue of limitation, the Tribunal affirmed that the Service Tax paid for activities falling under the category of fashion designing is subject to the time limit prescribed by Section 11B. The appellant's argument that the payment was due to a mistake of understanding was dismissed based on the decision of the Larger Bench. The Tribunal directed the Original Authority to restrict the refund claim within the time limit under Section 11B, excluding amounts related to design of garments.

In conclusion, the appeal was disposed of with the Tribunal upholding the rejection of a part of the refund claim due to the time limitation under Section 11B and directing a remand to the Original Authority for further proceedings based on the interpretation of activities under the category of fashion designing.