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Service Tax - Case Laws
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2024 (12) TMI 14
Service Tax on “Technical Testing and Analysis Service” has been paid by the service recipient under Reverse Charge Mechanism-RCM - as alleged such demand is not tenable because testing of mint samples has not been considered under RCM u/s 68 (2) of the Finance Act, 1994 and in Rule 2 (1) (d) of Service Tax Rules, 1994 or in the relevant Notification issued by the Government from time to time and the statutory liability of service provider cannot be shifted on service recipient by mutual agreement until and unless the provisions of law allow doing so -
HELD THAT:- It is not disputed that the service recipient namely, M/s. MCX Sohan Lal Commodity Management Pvt. Ltd., New Delhi have in fact paid the Service Tax on "Technical testing & Analysis Service" received by them from the Appellants. The Challans evidencing payment of such tax were submitted before the Adjudicating Authority below and again annexed with this Appeal. We find force in the contention of the Appellant that once the Service Tax has been discharged by the recipient of service, demand of Service Tax from the Appellant again will amount to double taxation which is not permissible under law. The case laws relied upon by the Appellant and the CBEC Circular dated 17.12.2004 are applicable in the facts and circumstances of the case.
We also observe that the Appellants have been filing regular ST-3 Returns and maintaining the statutory records relating to payment of Service Tax wherein all the transactions were duly recorded. There is no allegation that any transaction was found beyond the mandatory records maintained by the Appellant. It is also an admitted fact that the Appellants are an autonomous body under Government of India, Ministry of MSME. We considered view that the extended period of limitation is not applicable in the instant case.
My opinion on limitation also gets support from the decision of Continental Foundation Jt. Venture Vs. CCE, Chandigarh-1 [2007 (8) TMI 11 - SUPREME COURT] there is no question of payment of interest and the same are set aside. The penalty imposed is also set aside.
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2024 (12) TMI 13
Demand of service tax - Manpower Recruitment or Supply (MRS) - Amounts reimbursable from DT towards ESI & PF/Uniform /Tea expenses - HELD THAT:- We find that the Appellant is getting several expenses reimbursed which are in the nature of ESI/PF Charges, Uniform expenses, tea expenses and the said reimbursements are akin to the issues decided in the Apex Court’s judgement Intercontinental Consultant & Technocrats [2018 (3) TMI 357 - SUPREME COURT] since the Appellants had collected ESI and PF charges which are indicated separately in the invoices as reimbursements from customer (DT) no abatement on statutory levy like ESI/PF could be extended as per extant Board circular and so the department has entertained the view that the amount was taxable.
As per the Apex Court’s decision, such reimbursements are taxable only w.e.f. 14th May 2015, the date on which the amendment to Section 67 came into force. Hence in view of the above discussions and judicial precedents pointed above, we are inclined to hold that reimbursements in the nature of ESI/PF charges/ Uniform charges, tea expenses and insurance does not fall within the ambit of levy of service tax during the material period (2003-04-2007-08 in the present case) and hence the demand is not legally sustainable. As the demand itself is unsustainable, question of imposition of penalty does not arise.
Period involved in respect of Manpower Recruitment and Supply Service is between 29.06.2005 to 31.03.2008 for MRC and 26.05.2005 to 27.12.2005 for Nursing Assistants provided to Delphi- TVS - whether the conditions precedent for invocation of the extended period of limitation existed or not? - We find that no specific reasons have been mentioned for invoking the extended period of time in paragraph 9 of the Show Cause Notice.
Appellant has been regularly filing periodical returns and discharging applicable service tax. The department was aware of the facts and the issue was detected only upon audit conducted by the department. It is to mention that the ST 3 returns filed by the Appellant periodically are subject to examination and scrutiny by proper officers before whom the returns are filed.
Appellants were under bona fide belief that no service tax was liable to be paid and hence the appellant also did not charge any service tax. Only after departments stand, the Appellant has raised debit notes on MRC towards service tax. We find that the adjudicating authority in his findings has pointed out to audit findings and non-disclosure by the Appellant, when it was pleaded specifically by the Appellant that they were not aware of the lapses which were unintentional.
We are inclined to hold that invocation of extended period in respect of MRS is not legally sustainable in this case. As per Rule 7 of Service Tax Rules,1994 every assessee shall submit the half yearly return by the 25th of the month following the particular half-year. Hence demand of service tax for the period from October 2007- March 2008 is only sustainable and the interest payment u/s 75 automatically flows from such duty demand. We find that the lower authority has imposed penalty only u/s 78 for the total demand. As the demand for extended period is unsustainable. The penalty imposed under Section 78 is set aside. The Appellant has pleaded sufficient cause for non-imposition of penalty and hence penalty for the normal period is also set aside.
Disallowance of Cenvat credit - assessee had failed to provide valid documents for availing of such Cenvat Credit and hence the recovery of Cenvat Credit along with interest is sustained. The Appellant has not disputed payment of interest towards belated payment of service tax.
Demand on reimbursements of PF/ESI/Uniform /Tea expenses is not legally sustainable and demand on MRS service is upheld only for the normal period. The appeal is partly allowed, with consequential benefits, if any on the above terms.
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2024 (12) TMI 12
Classification of services - Services falling within the definition of “mining services” or “Site formation and clearance, excavation and earthmoving and demolition” - scope of section 65(105)(zzzy) of the Finance Act, 1994, which was introduced on 01.06.2007 - HELD THAT:- The activities undertaken by the appellant amounted to mining activity ipso facto. Following the decision of Doypack Systems P Ltd [1988 (2) TMI 61 - SUPREME COURT] we also find that the activity relates to the mining of lignite which is mining of mineral. Accordingly, the services provided by the appellant are falling in the scope of clause (zzzy) of sub-section (105) of section 65 of the Act.
Since we have already explained the necessity to read the contract in its entirety and finding the ‘mining service’ to be more specific, appropriate and applicable category, we do not delve upon the classification of such services as transportation of goods.
The services provided by the appellant under the said contract were not preparatory work to mining activities but they were carried out to win the minerals and constituted mining activities per se, we hold that the views expressed by Commissioner of Central GST (A) in para 8 of the impugned order are incorrect and contrary to the statutory provisions. We also carefully referred to the circulars cited in impugned order, however in view of discussion and plain reading of law as it stood at the relevant time, we do not find any merit in the decision taken in the impugned and thus we hold that the services provided by the appellant under the said contract are in the nature of mining services so defined in clause (zzzy) of sub-section (105) of section 65 of the Act and not falling within the meaning of “Site formation and clearance, excavation and earthmoving and demolition” defined in clause (97a) of section 65 of the Act. We also hold by following the principles laid down by the Apex Court that the said services cannot be subjected to tax prior to 01.06.2007 and accordingly the appellant merits refund of amounts paid by them.
Facts relating to the contract number 53223 dated 07.12.2004 are not verifiable since the appellant have neither supplied the copy of the contract nor the relevant invoices. All the issues involved in the present case are significantly and dominantly factual issues in nature and therefore careful examination of the facts emanating from contemporaneous evidences is indispensable before reaching to any conclusion otherwise that will be complete miscarriage of justice to the other side. Thus, in absence of relevant materials, we do not wish to interfere in the impugned order to the extent that related to the services provided by the appellant under contract number 53223.
Refund of service tax - Since, we have held that the services are classifiable under clause (zzzy) i.e. mining services, brought to taxability w.e.f. 01.06.2007, the amount denoted as [D] above i.e. Rs. 2,04,87,723 is not eligible whereas the amount denoted as [C] above i.e. Rs. 4,60,77,978 is found eligible in facts as well as law. Thus, we hold that the appellant is eligible for refund.
Unjust enrichment - We find from the facts and submissions made by the appellant, more particularly the invoices attached to the refund applications and certificate from the chartered accountant that the incidence of such tax was borne by them and therefore bar of unjust enrichment was not applicable. We also find that said documentary evidences were furnished by the appellant to the lower authorities and against which no plausible explanations or contemporaneous evidences have been brought on record by the revenue to inflict bar of unjust enrichment. Therefore, we hold that the appellant has crossed the bar of unjust enrichment since the burden of tax was borne by themselves.
Interest on refund prayed by the appellant - As we find that the adjudicating authority in order-in-original ordered to deny the interest on refund to the appellant. As held by us above, the Appellant is eligible for refund of Rs. 4,60,77,978 and since the interest is consequential in terms of Section 11BB of the Central Excise Act, 1944 we hold that the Appellant is eligible for interest on delayed payment of interest in terms of Section 11BB of the Central Excise Act, 1944 which is made applicable to service tax provisions vide Section 83 of the Finance Act, 1994, by following the decision of Supreme Court in case of Ranbaxy Laboratories Ltd v. UOI [2011 (10) TMI 16 - SUPREME COURT] held the liability of the revenue to pay interest u/s 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund u/s 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made.
Thus the appellant is entitled for interest from the expiry of 3 months from the date of original application filed for claim of refunds before the jurisdictional authority till the date of sanction.
Thus finding from the facts and records that services provided by the appellant under contract are not preparatory work but they are mining activities per se, services provided prior to 01.06.2007 were not taxable and thus the impugned order is modified to that extent and the appellant is allowed refund with consequential relief of interest as per above. The appeal filed by the Appellants is partly allowed in the above terms.
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2024 (12) TMI 11
Demand of Service Tax on Amount retained through forfeiture of earnest money/security deposits of contractors - Declared Service - consideration for tolerating the act of poor performance by service providers /contractors - Applicability of section 66E(e) of the Finance Act, 1994 - HELD THAT:-From the perusal of these decisions it becomes abundantly clear that the issue of considering a forfeited amount as an amount of consideration towards declared services stands already settled in favour of the assessee. The same is already held to not to be the consideration towards rendering declared service defined u/s 66E(e) of the Finance Act, 1944. In fact the cancellation of contract itself is held to not to be a service. We find no reason to differ from these findings.
We further observe that department also vide Circular No.214/1/2023-ST dated 28th February, 2023 has clarified about leviability of service tax on the declared services, “agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act” under clause (e) of section 66E of Finance Act, 1994 and has clarified that the activities contemplated under section 66 E (e) i.e. when one party agrees to refrain from an act or to tolerate an act or a situation, or to do an act, are the activities where the agreements specifically refers to such an activity and there is a flow of consideration for this activity.
The decision of this Tribunal in the case of Dy. General Manager (Finance), Bharat Heavy Electricals Limited [2022 (9) TMI 1005 - CESTAT NEW DELHI] wherein the earlier decision of the Tribunal in the case of M/s. South Eastern Coalfields [2020 (12) TMI 912 - CESTAT NEW DELHI] was dealt with, has been referred in this Circular. The Board has decided to not to file any appeal against the decision in M/s. South Eastern Coalfields [2023 (8) TMI 606 - SC ORDER]. The said decision has also been upheld by Hon’ble Supreme Court [2023 (8) TMI 606 - SC ORDER] passed in the case of Commissioner of Central Excise and Service Tax vs. South Eastern Coal Fields Limited in Civil Appeal No. 2372/2021.
We hold that the amount retained has wrongly been held to be the amount towards rendering declared service. The order under challenge is therefore set aside and consequent thereto, the appeal is hereby allowed.
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2024 (11) TMI 1349
Validity under the Voluntary Compliance Encouragement Scheme (hereafter VCES) - SCN Issued to the taxpayer alleging wrongful availing of cenvat credit in regard to the service tax paid on “medical insurance services” provided to the taxpayer’s employees during the period from 2007-08 to 2011-12 - whether the taxpayer was ineligible to furnish a declaration under VCES in terms of Section 106 (1) of the 2013 Act on account of the audit report dated 22.09.2010 and the SCN?
HELD THAT:- The question is not whether any exercise for determining the service tax dues had been conducted or whether an ascertainable quantum of outstanding service tax had been reported. The opening sentence of Section 106 of the 2013 Act is unambiguous, and expressly provides that any person may make a declaration with respect to the dues in respect of which “no notice or an order of determination under Section 72 or Section 73 or Section 73A of the Chapter had been issued or made before the 1st day of March, 2013”. Thus, for the said exception to apply, it would be necessary that an order of determination under Section 72, Section 73 or Section 73A of the 1994 Act had been issued. Clearly, an audit report is not an order of determination under either of the aforesaid sections, as mentioned in the opening sentence of Section 106 (1) of the 2013 Act.
Issuance of the SCN - There is no cavil that SCN was a limited notice in respect of service tax dues relating to the medical insurance services provided to the taxpayer’s employees. The taxpayer’s declaration under Section 107 of the 2013 Act was not in respect of the said dues. The order-in-original dated 24.05.2016 also indicates that the taxpayer was entitled to file a declaration in respect of the dues that were not covered by an earlier demand cum show cause notice. On that basis, the taxpayer’s declaration was partly allowed.
Thus, since the SCN did not cover any of the dues in respect of which a declaration was filed, the taxpayer cannot be deprived of the benefit of VCES. We find no infirmity with the decision of the learned CESTAT in allowing the taxpayer’s appeal.
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2024 (11) TMI 1348
Receipts pertain to export of services or not? - Demand by deviating the basis issue as to whether the receipts pertain to export of services or not - HELD THAT:- Original Authority accepted the activity undertaken by the appellant as ‘export of service’ and dropped the proceedings by considering all the evidences on record.
As find that on appeal filed by the Revenue, Commissioner (Appeals) without considering the reasons on the basis of which the Original Authority has dropped the proceedings, proceeded to confirm the demand on the basis of irrelevant discrepancies which was not the issue for determination especially when the Original Authority has accepted the receipts to be export proceeds on the basis of FIRC which is a legal document for acceptance of proof of export of service.
The entire proceedings against the appellant were initiated on the basis of gross receipts as shown in the Income Tax Returns and Form 26-AS for the year 2014-15.
The entire demand in the present case is barred by limitation because the Show Cause Notice was issued on 29.09.2020 but the same was served on 18.02.2022 whereas the period of demand is October 2014 to March 2015; and Commissioner (Appeals) has not given any finding on the limitation.
The extended period of limitation can only be invoked when the department establishes by cogent evidence that there is a suppression of material facts at the appellant’s end with intent to evade payment of duty, whereas in the present case there is no suppression because the Show Cause Notice is based upon the documents including bank account and Income Tax Returns.
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2024 (11) TMI 1347
Demand of service tax under the head of Mandap Keeper Services - invoking extended period of limitation - HELD THAT:- As the appellant is a statutory body and no individual would gain from avoiding or evading tax. In these circumstances, we concur with the aforesaid decision to hold that there cannot be any intention to evade payment of duty and therefore, invocation of extended period of limitation cannot be sustained. The appellants can only be liable for the period within the period of limitation.
Liability of tax for the period post 01.07.2012 - Taxability of services provided by a government authority under the negative list post 01.07.2012 - Revenue has sought to classify the service in the nature of Mandap Keeper Service under the category of ‘support service - No merit in the argument of Revenue that the service in the nature of Mandap Keeper can be classified under the category of ‘support services’. From the definition of ‘support services’, it is clear that only the services which are in the nature of outsourced services i.e. the functions that entities carry out in ordinary course of operations themselves but may obtain as service by the outsourcing from others for any reason whatsoever. The services in the instant case do not qualify as ‘support services’ and therefore, the services provided by the appellant are covered under the negative list. In these circumstances we find that after 01.07.2012 the services provided by the appellant are covered by the negative list.
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2024 (11) TMI 1346
Demand of Service Tax and imposition of penalties - appellant conducts Cricket Matches in International Level, National Level and State Level at different places in Vadodara region - service provider/service receiver relationship between the appellant and BCCI for the purpose of levying service tax
appellant was receiving subsidies/assistance from BCCI from time to time. The appellant had also received certain capital equipment from BCCI. Under the mistaken belief that the capital equipment is additional subsidy/assistance from BCCI, the appellant paid service tax thereon. Later on, the BCCI informed that them the said capital received is part of the total subsidies/assistance from BCCI and not in addition to it. The appellant had also paid the service tax on “total subsidy”. Later on BCCI raised debit note on the appellant. In respect of the value of the goods supplied as capital equipment. Consequently, the appellant took suo moto re-credit of the service tax paid on the capital equipment
HELD THAT:- The appellant had received certain equipment from BCCI and under the impression that the said equipment is in addition to the grant given by the BCCI, the appellant discharged service tax thereon. Later on, when debit note was raised by the BCCI, the appellant released that the equipment received was part of the grant and not in addition to it and consequentially corrected the situation by taking re-credit of the service tax paid on capital equipment.
Similar facts are mentioned in the statement of the Head of Account of BCCI. In the said statement against question No. 8, 9 and 10, Shri Vidyadhar Laxman Sahasrabudhe has observed that BCCI has debited an amount of Rs. 4.14 Crore from the account of BCA maintained by them by way of issuing debit note dated 31.03.2014. Shri Vidyadhar Laxman Sahasrabudhe also submitted the relevant ledgers for 2013-14. In similar circumstances in the case of Saurashtra Cricket Association [2022 (11) TMI 152 - CESTAT AHMEDABAD] the tribunal had relied on the observations made by Tribunal in the case of Vidarbha Cricket Associate [2014 (1) TMI 204 - CESTAT MUMBAI (LB)] to allow the benefit.
The decision of Tribunal in the case of Saurashtra Cricket Association [2022 (11) TMI 152 - CESTAT AHMEDABAD] has been upheld by the Hon’ble Apex Court as reported [2023 (5) TMI 814 - SC ORDER]. Appeal allowed.
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2024 (11) TMI 1345
Delay passing adjudication order - Short payment of the differential service tax - discharging service tax liability on construction services after taking 67% abatement in terms of Notification No. 01/2006-ST dated 01.03.2006 - HELD THAT:- The period of dispute 2008-09 to 2010-11 and show cause notice was issued on 16.10.2014 whereas the Order-in-Original was passed on 22.03.2021 approximately after the expiry of seven years and there has been no correspondence from the department at all for a period of seven years; the department has not been able to give any cogent reason for such a delay in adjudication; the delay in adjudication has resulted in lapsing of other benefits of the appellant and has increased unnecessary interest liability on the appellant; therefore, the impugned order in first instance is violative of the principle of natural justice and is liable to be set aside as held in the cases of Unnayak Prop [2009 (7) TMI 947 - CESTAT, KOLKATA] and Shirish Harshvadan Shah[2010 (1) TMI 508 - BOMBAY HIGH COURT]
Appellant has opted for the abatement scheme provided in Notification No. 01/2006-ST dated 01.03.2006 and has fulfilled all the conditions specified in the said notification and there is no dispute in this regard. Once the appellant has opted for the benefit of that notification and admittedly the said notification has not been withdrawn even after framing the composition scheme under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. Further, under the composition scheme, the appellant was required to give option for the same in terms of Rule 3 of the said Rules, whereas, in the present case, the appellant has not opted for the said scheme and continued to avail the benefit under Notification No. 01/2006 after fulfilling all the conditions prescribed therein.
Decision of the Tribunal in the case of Bharat Heavy Electricals Ltd [2012 (4) TMI 197 - CESTAT, MUMBAI] is applicable in the present case and benefit of the Notification No. 01/2006 cannot be denied to the appellant once they fulfilled the conditions of the same.
Denial of benefit of Notification No. 01/2006-ST dated 01.03.2006 is bad in law therefore set aside the impugned order and allow the appeal of the appellant with consequential relief, if any, as per law.
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2024 (11) TMI 1344
Classification of services - whether the works undertaken by the appellant are “original works” or “completion and finishing services”?
Claim of abatement as per the Notification No.11/2014-S.T., dated 11-7-2014 during the relevant period - HELD THAT:- To invoke the proviso to Section 73 of the Finance Act, 1994, one of the ingredients such as fraud, collusion, wilful misstatement, suppression of facts or contravention of any of the provisions of this Chapter or the rules made thereunder with intent to evade payment of service tax, has to be established. In the instant case, there is nothing on record to establish that the appellant had suppressed any of the facts or there was any intention to evade payment of duty.
In the case of Uniworth Textiles Ltd. [2013 (1) TMI 616 - SUPREME COURT] observed that unless there is positive evidence to prove that the appellant had suppressed the facts or contravened the provisions of the act, the extended provisions of limitation cannot be extended. Since, in the instant case, nothing is on record to prove the same, we are not inclined to confirm the demand beyond the normal period.
Services rendered to the SEZ unit - the only objection taken by the Revenue is the Form A-2 which includes the specified services duly authorized is mentioned as “works contract services” but the specified services to be received by the SEZ unit are “Architect Services” - HELD THAT:- In the instant case, admittedly, the services were rendered to the SEZ unit by the appellant, the only objection raised was that the services rendered was ‘Works Contract Services’ while it is mentioned in the form as ‘Architect services’. The fact that services were rendered to the SEZ unit is not disputed and both the services are eligible for the benefit of exemption as per the letter dated 02.01.2018 issued by the Department of Commerce (SEZ Section), therefore, we do not find any reason to deny the exemption. Hence, the impugned order to this extent is set aside.
The demand of Service Tax is confirmed for the normal period along with interest with regard to the ‘works contract services’ undertaken by the appellant in terms of Rule 2A(ii)(B)(ii) of Service Tax (Determination of Value) Rules, 2006. The demand is set aside for the services provided to the SEZ unit. Penalty under Section 78 of the Finance Act, 1994 is also set aside. The appeal is allowed by way of remand for redetermination of duty only for the normal period relating to ‘Works Contract Service’ rendered and for services meant for other than SEZ units.
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2024 (11) TMI 1343
Demand of service tax on the price at which the appellant had sold the coal rejects - HELD THAT:- Demand is not sustainable because service tax is not a tax on the sale of goods. If the appellant had received some coal rejects, for instance, and an amount of Rs. 100 is deducted from the service charges by the client towards these coal rejects, service tax has to be paid without this deduction of Rs. 100/- from service charges. The appellant did so.
Now, if the appellant subsequently sells this coal rejects either as such or after mixing it with some other coal and sells them for Rs. 150, this amount is the value of coal the rejects sold by the appellant on which the appellant may be required to pay VAT/ sales tax. According to the appellant it had paid appropriate VAT to the State Government. The demand of service tax on the sale price of rejects is beyond the scope of the Finance Act, 1994 because service tax can be levied only on the consideration received for the services and not on a goods sold by the appellant. Service Tax has already been discharged on the entire value of consideration this as is evident from the invoices.
In this case, the appellant already paid service tax on the entire amount of beneficiation charges without deducting the value of the coal rejects. Therefore, the entire amount of service tax having been paid, the demand of service tax again on the value of coal rejects sold by the appellant in the four show cause notices confirmed in the two impugned orders is totally misconceived. No service tax can be levied on the sale of goods as proposed in the show cause notice on them as service charges for coal beneficiation. Appeal allowed.
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2024 (11) TMI 1285
Taxability of service tax on transporting goods by road itself - appellant has employed GTAs for the purpose, but in those cases the appellant has discharged the service tax liability under Reverse Charge Mechanism (RCM) and has taken credit of such service tax paid in their Cenvat account at appropriate percentage in terms of Rule 6 (3) of Cenvat Credit Rules, 2004 - HELD THAT:- Since admittedly the appellant is neither the GTA, nor the Courier agency hence, the activity of transportation of goods by road by them is well covered under the aforesaid provision. The amount in question is an amount towards facilitation of freight and insurance by the appellants themselves. The said perusal of section 66D (p) in itself is sufficient to hold that the service tax on the said amount has wrongly been demanded. The order to that extent is therefore liable to be set aside.
Demand of reversal of Cenvat credit on the services of hiring of water tankers, mechanized canteen cleaning, catering services - Section 44 of the Act requires every factory owner to make suitable arrangements for sitting of all workers obliged to work in standing position and even for all other workers engaged in a particular manufacturing process or working in a particular room. Section 46 of Factory Act requires the existence of canteen in the factory and the cleanliness thereof. In the light of the above discussed statutory mandate the services of hiring of water tankers having mechanized canteen cleaning and that of catering services, to our opinion are the eligible input services. Hence we hold that the Cenvat credit has wrongly been denied to the appellant.
In the present case the services like hotel accommodation etc. were for the personnel called for imparting training to the employees of the appellants. Hence it is clear that services were not meant for personal use of the employee. We hold that the credit of these services has been rightly availed.
Meaning of terms “Includes”, ‘in relation to’ and ‘such as’ referred in view of the following Decisions in Bakelite Hylam [1998 (7) TMI 92 - SUPREME COURT], Azad Coach Builders [2006 (2) TMI 171 - SUPREME COURT] and CCE v. JK Cement Works [2009 (1) TMI 146 - CESTAT NEW DELHI], TTK Pharma Ltd v. CCE [ 1992 (8) TMI 183 - CEGAT, NEW DELHI] respectively.
Credit on short term accommodation/hotel services was with respect to the visits in factory for inspection and witnesses of the test on the goods ordered by the customers for giving certificate of acceptance. Hence, the expenditure was directly related to the manufacture of goods and rendering of services by the appellant. Resultantly, the denial of availment of Cenvat Credit is not sustainable. The order to this extent is also liable to be set aside. In the light of entire above discussion the Order in Original/ Order under challenge is set aside. Consequent thereto the appeal is hereby allowed.
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2024 (11) TMI 1284
Service tax on amounts received by an employee from the employer on premature termination of contract of employment - HELD THAT:- We find that the issue is no longer res integra in view of the decision of GE T & D INDIA LIMITED (FORMERLY ALSTOM T & D INDIA LIMITED) VERSUS DEPUTY COMMISSIONER OF CENTRAL EXCISE [2020 (1) TMI 1096 - MADRAS HIGH COURT] as followed in M/S HCL LEARNING LIMITED [2019 (12) TMI 558 - CESTAT ALLAHABAD] wherein held the employer cannot be said to have rendered any service per se much less a taxable service and has merely facilitated the exit of the employee upon imposition of a cost upon him for the sudden exit. The definition in clause (e) of Section 66E is not attracted as the employer has not 'tolerated' any act of the employee but has permitted a sudden exit upon being compensated by the employee in this regard.
Though normally, a contract of employment qua an employer and employee has to be read as a whole, there are situations within a contract that constitute rendition of service such as breach of a stipulation of noncompete. Notice pay, in lieu of sudden termination however, does not give rise to the rendition of service either by the employer or the employee. No merit in the appeal of jurisdictional Commissioner of Service Tax which is dismissed.
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2024 (11) TMI 1283
Demand of service tax by invoking extended period of limitation - technical knowhow falls under the category of "Consulting Engineer Service" and is liable to service tax under reverse charge mechanism, invoking section 66A of the Finance Act, 1994 - HELD THAT:- We find that the impugned order has not examined the aspect relating to payment of duty and availment of credit thereon. The impugned order takes note of service tax paid by the appellant and also the fact that the credit of same has been availed as can be seen from impugned order. Therefore, it is apparent that there is no dispute that whatever service tax was to be paid by the respondent would have been available as cenvat credit to them instantly. In these circumstances, invocation of extended period of limitation cannot be sustained. See Nayara Energy Ltd. [2023 (12) TMI 252 - CESTAT AHMEDABAD] and Chiripal Polyfilms Ltd. [2021 (3) TMI 1345 - CESTAT AHMEDABAD]
Thus it can be held that there was no malafide or intention to evade on the part of the respondent and therefore, extended period of limitation could not have been invoked. Consequently no penalty u/s 11AC could be imposed. The appellant has already discharged the duty liability.
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2024 (11) TMI 1282
Classification of services received from overseas service providers - Determination of place of provision of such services - services received by the respondent from the overseas service providers is "Online Information and Database access or retrieval services" OR "Market Research Services"
HELD THAT:- The activities done by the Foreign Service provider are merely in the nature of the data collection activities with no research or interpretation of the data. The raw data collected in terms of questionnaire designed by the respondent is supplied back to the respondent in the raw form. Research on the said data is done by the respondent.
It is like an architect outsourcing services of a surveyor to map a piece of land as input for the architectural services that he may provide. Merely because survey is necessary input for providing architectural services the outsourced activity of survey cannot be classified as architectural service.
Similar is the case of a tour operator hiring buses. While the service provided by tour operator is that of tour operator, the service availed by hiring buses does not become tour operator service although it is a necessary component of tour operator service.
No merit in holding that foreign service provider is providing market research service. The issue if the said service was classified as ‘Online Information and Data Basis Access or Retrieval Service’ or not is not relevant in this background. The charge made in the show cause notice seeking to classify the service of data collection as market research cannot survive.
Invoking larger period of limitation for issue of show cause notice - As on merits, the demand has not survive before Commissioner (Appeals) as well as Tribunal and therefore, it cannot be said that the interpretation of respondent was malafide or with intent to evade payment of duty. In these circumstances, extended period could not have been invoked to raise this demand show cause notice.
As claimed by the respondent that the entire service tax if any payable on the services received from Foreign Service Provider would have been available as cenvat credit to the respondent. In that scenario, the entire exercise would have been Revenue neutral. This would be another reason to say that there would have been no intention to evade payment of duty. Revenue appeal dismissed.
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2024 (11) TMI 1281
Service tax on amounts received by the Local Cable Operators (LCOs) - invocation of extended period of limitation - proof of suppression of material on the part of the appellant
HELD THAT:- Department has not been able to establish the suppression of material on the part of the appellant who is only a small service provider. Further, the appellant has filed all the relevant documents and has not concealed any information from the department so as to invoke the extended period of limitation.
It has been consistently held by the Courts in various decisions that in order to invoke extended period, there must be some positive act on the part of the party to establish either wilful mis-declaration or wilful suppression - mis-statement or suppression of facts must be wilful and deliberate.
As decided in Chemphar Drugs & Liniments [1989 (2) TMI 116 - SUPREME COURT] that “Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability”.
Thus, the invocation of extended period of limitation is not justified in the present case and therefore hold that the entire demand is barred by limitation. We are not going into the merits of the controversy as held in the case of Commissioner of Customs vs. B.V. Jewels[2004 (9) TMI 104 - SUPREME COURT]
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2024 (11) TMI 1280
Classification of services - works contract services or Construction of Residential Complex service - valuation of services - values of sale of land and construction of framework were clubbed and abatement of 70% was deducted in order to arrive at the value of taxable services - clause (b) of section 66E of the Finance Act, 1994 - liability of service tax on the amount retained by the appellant upon cancellation of the booking by the buyer on which tax was paid earlier as part of works contract services.
HELD THAT:- The revenue has not disputed that the appellant has used own goods while carrying out the construction activities. It is also found that another aspect of the construction of villa, which relates to construction of balance works, was classified as works contract services and accepted by the revenue in impugned order. The appellant has vehemently pressed that the construction of balance works in indispensable part for construction of villa and which submission has not been controverted by the revenue with plausible explanations or contemporary evidences. It is also found that the revenue has not disputed that the activity of constructing framework was indivisible in nature with respect to goods and services and value of goods was not separately measured by the appellant.
The adjudicating authority has deemed the transaction as that of sale of villa instead of construction whereas the adjudicating authority has classified the transaction under clause (b) which deemed “construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority”. Needless to elaborate that the very applicability of clause (b) would also require services by way of construction of a complex or building and sale thereof before completion of construction, which apparently and unequivocally transpires from the plain language of clause (b). If the transaction, according to the adjudicating authority, is limited to that of sale of villa and not involving agreement to construct the same, the same cannot fall within the scope of clause (b) whereas the adjudicating authority has classified the transaction under clause (b) - the arguments and averments made by adjudicating authority in the impugned order to declassify the transactions under works contract and to classify them under the construction services are self-contradictory as well as preposterous.
In view of decision of Supreme Court in case of Larsen & Toubro v. State of Karnataka [1992 (11) TMI 254 - SUPREME COURT], it is abundantly clear that the sale of a building prior to completion of construction constitutes a works contract and the issue is no more res integra and thus contention made by adjudicating authority in impugned order to draw distinction between sale of villa prior to completion of construction and agreeing to construction activity is unacceptable and contrary to settled position of law - there are force / merit in the argument placed by Shri Rahul Patel that amendment in rule 2A retrospectively by way of section 129 of Finance Act, 2017 shows the clear intention of the government to align the valuation machinery with the law settled by the Supreme Court.
Inclusion of value of land in the value of construction services by the revenue - HELD THAT:- Since there is no contention in the impugned order or allegation in the show cause notice to re-determine the value of works contract services under rule 2A to include the value of land, value determined by the appellant under rule 2A shall be accepted as final. However, it is found that the appellant has raised various grounds and substantiated with the help of logical interpretation that the value of land cannot be included in the value of works contract under rule 2A - there are force in the clarity brought on record by him that the service tax cannot be extended to the value of land which is not a necessary an integral element of works contract like goods. Since the land is subject matter of State levy, same cannot be deemed as part of the service so defined in section 65B(44) of the Act. Thus, it is necessarily transpiring that the works contract is comprised of only two elements i.e. ‘goods’ and ‘service’ and does not include ‘land’ as integral part of it. However, this may not have any restriction to combine the works contract along with land under commercial arrangement and if that has been done the arrangement needs to be vivisected so as to separate the works contract from the land. It is a settled position of law that where the tax is imposed on the subject matter the measure for levying such a tax can only be the value of such subject matter.
Though the works contract is a different and distinct specie of contracts and distinct from a contract for service simplicitor, measure of tax is considered divisible so as to ensure that the tax is imposed only on that value which attributes to the powers available with respective tax authority. The Supreme Court has categorically held that the moment the levy contained in a taxing statute transgresses into a prohibited exclusive field, it is liable to be stuck down. This necessitates a complete segregation of the elements involved in the works contract to ensure compliance with constitutional mandates.
Any reference to the measure of taxable event shall be on the basis of measure of works contract by excluding the actual value of goods involved or be on the basis of measured as per fictional machinery provided in rule 2A(ii), however measure of levy cannot solely depend upon the measure of a bundle comprising works contract and land - it is not a case of revenue leading to overvaluation of land by the appellant. Accordingly, the value agreed upon with the buyer with respect to land and indicated in the agreement shall be the value of land required to be separated from the works contract. Accordingly, there are force in the argument that the land value is not includable in the value of works contract irrespective of and regardless of the option exercised by the appellant for valuation of works contract services under rule 2A.
Re-determination of the value by the Revenue concerning the construction of balance works by treating them as finishing services under Rule 2A(ii)(B) instead of Rule 2A(ii)(A), as adopted by the appellant - HELD THAT:- The transaction of constructing balance of works are in relation to construction of villa and which is classified as works contract. Construction of framework and construction of balance works collectively resulted into construction of villa which is a residential dwelling for the buyer. Thus, it is found that the treatment available to the construction of framework shall be the treatment for construction of balance work. Since it is already decided that the construction of framework is works contract and the appellant has classified them as original works under rule 2A(ii)(A), construction of balance works deserves classification under same machinery and not under the rule 2A(ii)(B).
The construction of balance works merits classification under rule 2A(ii)(A) as per its plain language - it is observed that clause (B) of Rule 2A(ii) expressly begins with the words, "in the case of works contract, not covered under sub-clause (A)," which implies that clause (B) applies exclusively to works that do not qualify under clause (A). Given that the construction of balance works, even if involving finishing services, qualifies as "original works," their valuation must be determined under clause (A) and not clause (B) - the contention of the Revenue in the show cause notice and the impugned order, which seeks to determine the value under Rule 2A(ii)(B), is incorrect. Accordingly, the demand for service tax amounting to Rs. 1,53,07,940/- based on the higher rate of valuation under clause (B) is unsustainable and is liable to be set aside.
Demand of service tax amounting to Rs. 3,29,637/- confirmed in relation to cancellation charges - HELD THAT:- The Revenue has treated the retained amounts as consideration for agreeing to an obligation, classifiable under clause (e) of Section 66E, and quantified the tax liability on the portion exceeding the value determined under works contract services at the rate of 40%. Since the Revenue itself, as evident from the facts stated in the show cause notice, has deducted the amounts on which service tax was paid under works contract services by the appellant, it follows logically that the amounts now subject to the impugned demand represent retentions from the payments originally received towards works contract services. Consequently, these amounts cannot simultaneously be treated as consideration for a new and distinct service provided by the appellant under clause (e) of Section 66E of the Act - the cancellation charges, even if considered distinct from their prior taxation under works contract services, do not fall within the ambit of clause (e) of Section 66E of the Act. Accordingly, the demand for service tax on cancellation charges is unsustainable and is liable to be set aside.
Limitation for issuance of the show cause notice - HELD THAT:- The period covered by the notice is 2015-16 to June 2017, while the show cause notice was issued on 22-12- 2020. Additionally, we find that the ST-3 return for the period ending June 2017 was filed on 27-09-2017. Thus, the entire demand is raised under the extended period of limitation. The Revenue has invoked the extended period on the grounds of alleged suppression of facts by the appellant - the appellant has clearly disclosed the amounts in Form ST-3 under the category of works contract services. These facts unequivocally demonstrate that the Revenue was aware of the appellant’s business activities and the classification adopted - it would be inappropriate to attribute serious allegations of suppression of facts or an intent to evade payment of tax to the appellant - the invocation of the extended period of limitation is unsustainable.
The impugned order and the demands arising from the impugned order are legally as well as factually incorrect and unsustainable and hence set aside - Appeal allowed.
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2024 (11) TMI 1233
Dismissal of appeal as filed belatedly and beyond the time permitted by the statute - petitioner vehemently submits that this is a case where certain events peculiar to the petitioner have to be noticed while this Court considers the question as to whether the appeal filed by the petitioner must be restored to file for the purposes of disposal on the merits of the matter - HELD THAT:- As in normal circumstances, this Court will not restore an appeal which has been rejected on the ground that it was filed beyond the period of limitation if it has found that such rejection was justified by the statutory provisions governing the filing of such appeal. However, if this Court comes to the conclusion that there are some special and extraordinary circumstances which could have prevented the person filing the appeal from presenting the appeal within time, this Court cannot be denuded of the authority to issue a writ of mandamus commanding the Appellate Authority to consider the appeal on the merits and to take a decision in the matter.
Taking cue from the observations of the Supreme Court in B.C. Chaturvedi [1995 (11) TMI 379 - SUPREME COURT] in the extraordinary and special circumstances of this case, the order of the Appellate Authority can be set aside and the appeal filed by the petitioner against Ext. P3 order can be restored to file with a direction to the Appellate Authority to hear and dispose of the appeal on merits and in accordance with the law.
This writ petition is allowed, setting aside Ext. P5 order of the Appellate Authority and directing that the appeal filed by the petitioner against Ext. P3 order-in-original shall be heard and disposed of in accordance with the law.
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2024 (11) TMI 1232
Refund of pre-deposit - dispute over inclusion of certain reimbursement expenses such as freight, stationery, printing charges, telephone charges, asset hire, courier, insurance and other taxes while providing Clearing and Forwarding agency services.
HELD THAT:- Revenue has accepted that once the appeal is decided in favour of the assessee, he shall be entitled to refund of the amount deposited along with interest at the prescribed rate from the date of making the deposit to the date of refund, irrespective whether the order of the Appellate Authority is proposed to be challenged by the Department or not.
The amount of 10% of the tax amount deposited by the appellant had become refundable as with the passing of the final order dated 1.5.2019 in their favour by the Tribunal, the entire demand had become annulled. Therefore, conclude that the deposit made by the appellant is not a payment of duty but only a pre-deposit for availing the right of appeal and such amount is bound to be refunded when the appeal is allowed with consequential relief.
The impugned order is unsustainable and is hereby set aside. The appellant is entitled to refund of Rs.70,400/- along with interest @6% from the date of deposit till the date of actual refund is made. The Department is directed to release the amount within a period of 4 weeks.
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2024 (11) TMI 1231
Demand of service tax was confirmed under “Cargo Handling Service” along with interest and penalty - whether the services provided by the appellant to WCL are taxable under the category of “Cargo Handling Service” or “Transportation of Goods by road service”? - HELD THAT:- The primary nature of work awarded to the appellant was transportation as is evident from the valuation of the work, which is attributable mainly to the transportation activities and the very limited portion is towards mechanical loading of coal. The work orders of WCL shows the combined rate for loading and transportation of coal as well as work orders for only loading coal in the wagons.
It has been pointed out that the element of loading in combined contract is merely 5% and the remaining 95% of valuation is attributable towards transportation activities. Therefore, logically the primary and the dominant nature of work is transportation within the mining area and would, therefore, not fall under “Cargo Handing Service”.
We are of the view that the Commissioner was not justified in holding that the appellant had undertaken the activity of “Cargo Handling Service”. In fact, the Commissioner while passing the impugned order had not adjudicated the issue within the four corners of the remand order passed by the Tribunal. In view of the issue having been settled as referred above, the impugned order is unsustainable and is hereby set aside. The appeal is accordingly allowed.
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