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Service Tax - Case Laws
Showing 1 to 20 of 704 Records
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2020 (12) TMI 1318
Pendency of judgement relied upon in the impugned judgement - It is urged that the judgment relied upon by the Tribunal referred to in paragraph 2 of the impugned judgment is pending in appeal before the High Court of Judicature at Allahabad.
HELD THAT:- Issue notice on the application for condonation of delay as well as on the Civil Appeal, returnable within four weeks.
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2020 (12) TMI 1248
Levy of service tax - commission paid to the Petitioner as foreman of chit fund business - period from April 2014 to March 2015 - HELD THAT:- The Hon'ble Supreme Court of India in UNION OF INDIA AND ORS. VERSUS M/S. MARGADARSHI CHIT FUNDS (P) LTD. ETC [2017 (7) TMI 224 - SUPREME COURT] has held that service tax cannot be levied on the foreman of chit fund business for the period from 15.06.2007 to 14.06.2015.
The Respondent shall not be entitled to recover the service tax demanded from the Petitioner in the impugned order - Petition disposed off.
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2020 (12) TMI 1127
Seeking extension of time limit for compliance of action under the Custom Excise and Service Tax - Failure to make payment against the SVLDRS3 for the purpose of availing the benefit under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT:- The writ applicant should take up this issue with the Chairman, CBIC by filing an appropriate application or representation. Mr. Nainawati, the learned counsel has shown his inclination to deposit ₹ 15 lakh with the Registry of this Court to show his bona fide. We are of the view that the Registry of this Court should not be involved in such type of matters. Let the Chairman, CBIC look into the issue at the earliest and take an appropriate decision.
This writ application stands disposed of
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2020 (12) TMI 1126
Quantification of service tax demand - Sabkha Vishwas (Legacy Dispute Resolution) Scheme, 2019 opted - quantification prior to 30.06.2019 - it is the stand of the Department that such quantification was also served on the Petitioner - HELD THAT:- It is clear that the Petitioner falls within the category of persons who is entitled to approach the authorities under the Scheme. Consequently, the order of rejection would have to be set-aside and the Respondents shall consider and pass orders on the application of the Petitioner, in accordance with the terms of the Scheme, within a period of six weeks from the date of receipt of this order.
Petition disposed off.
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2020 (12) TMI 1125
Levy of service tax - Petitioner is foreman of chit fund business for the period from October 2014 to May 2015 - HELD THAT:- Hon'ble Supreme Court of India in UNION OF INDIA AND ORS. VERSUS M/S. MARGADARSHI CHIT FUNDS (P) LTD. ETC [2017 (7) TMI 224 - SUPREME COURT] has held that service tax cannot be levied on the foreman of chit fund business for the period from 15.06.2007 to 14.06.2015.
Having regard to the said authoritative pronouncement of the Hon'ble Supreme Court of India, which holds the field, it is not possible to sustain the impugned order, which shall stand set aside - Petition allowed - decided in favor of appellant.
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2020 (12) TMI 1096
CENVAT Credit - short/delayed payment of service tax - willful statement or willful suppression of facts with an intent to evade payment of service tax - extended period of limitation - Notification dated September 10, 2004 - period October, 2005 to March, 2007 - HELD THAT:- It is correct that section 70 of the Finance Act requires every person liable to pay service tax to himself assess the tax on the services provided by him and furnish a return, but at the same time the Circular dated April 23, 2009 also casts a duty on the assessing officer to effectively scrutinize the returns, at least at the preliminary stage. The appellant has been regularly filing the returns and so the Department cannot take a stand that it is only during the audit that it can examine the factual position. Thus, it cannot be urged by the Department that if the officers of the audit team had not conducted the audit, non-payment of service tax would not have been unearthed - It, therefore, follows that the Commissioner (Appeals) was not justified in holding that the extended period of limitation was correctly invoked. The extended period of limitation could not have been invoked in the facts of the present case as facts were not suppressed by the appellant.
In regard to the period from October, 2005 to March, 2006, the appellant had submitted working of ST-3 return in the reply to show cause notice, but it has been rejected by the Adjudicating Authority merely on the ground that the working was not supported by any document or a certificate from the Chartered Accountant. The Adjudicating Authority could have asked the appellant to supply the documents, if it was not satisfied with the explanation - The appellant has also stated that the computation of demand in the show cause notice is not correct. In this connection, reference has been made to the Notification dated September 10, 2004 that provides for abatement of 67%. Thus, service tax was effectively payable only on 33% of the gross value.
Further, in regard to the period from April, 2006 to March, 2007, the contention of the appellant is that the show cause notice has not explained as to how there was an alleged short-payment of ₹ 1,58,24,365/- during the aforesaid period. According to the appellant, the impugned order has confirmed the demand of ₹ 1,58,24,365/- without considering the TR-6 challans submitted by the appellant in the reply to the show cause notice. The challans have been enclosed with the Appeal.
It cannot, therefore, be said that the appellant had any intention, much less willful intention not to pay service tax in regard to the four audit objections referred to the Audit Report - It is, therefore, more than apparent that even otherwise, the appellant did not suppress facts with an intention to wilfully evade payment of service tax.
Appeal allowed - decided in favor of appellant.
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2020 (12) TMI 1095
Principles of Natural Justice - rejection of declaration under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - grievance of the petitioner is that the Authority without providing an opportunity of hearing as contemplated under Section 127 of the Sabka Vishwas Scheme have rejected the petitioner’s application and have accepted the second application - HELD THAT:- The petitioner filed two applications, on 28.12.2019 and 14.01.2020 to avail the benefit of SVLDRS Scheme which was processed on the basis of correctness of “Tax Dues” declared in the application with reference to the amount of duty quantified in the reference document mentioned in the said declaration. As there were application wherein the amount of ‘Tax Dues’ declared by the declarant in their SVLDRS application were not matching with the amount of duty quantified in the reference document issued on or before 30.06.2019, there was delay in proceessing. It is urged that the second application dated 14.01.2020 was processed early because the amount of Tax due declared therein matched with the amount of duty quantified in the departmental audit spot memo No.228 dated 17.05.2019. And being to be correctly filed, the amount of ₹ 74423447.50 payable by the petitioner after allowing the benefit of SVLDRS was intimated vide SVLDRS–3 form issued on 10.02.2020. It is urged that with the acceptance of declared SVLDRS application dated 17.01.2020, the earlier application which required and was under process to match out the amount of Tax Due declared with the amount of duty quantified with reference document issued on or before 30.06.2019, therefore, rendered redundant.
We perceive logic in the action of the respondent in not taking decision on the application dated 28.12.2019, which the Department was not under statutory obligation to have considered first - there are no illegality or a jurisdictional error in considering the application dated 14.01.2020, rendering earlier application as redundant, no interference is caused.
Petition dismissed.
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2020 (12) TMI 1069
Refund of services tax - input services received by the unit of the appellant established in SEZ - refund rejected for alleged non-compliance of several conditions prescribed in the notifications dated March 3, 2009 and May 20, 2009, but in view of the provisions of section 26 of the SEZ Act read with rules 22 and 31 of the SEZ Rules, the claim for refund could not have been rejected - Refund in respect of certain input services not duly approved by Unit Approval Committee - Availment of CENVAT Credit - Time limit for filing of refund - No documentary evidence to satisfy condition no. 2(a) of Refund Notification - Nexus of input services with the ‘authorized operations’ - Input service invoices are dated prior to the date of refund notification - Refund admissible only in case where services not wholly consumed within SEZ.
Refund in respect of certain input services not duly approved by Unit Approval Committee - proviso (a) of the notification dated March 3, 2009 - HELD THAT:- In MAST GLOBAL BUSINESS SERVICES INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE [2018 (9) TMI 258 - CESTAT BANGALORE] the Tribunal held that the SEZ Act had an overriding effect, in view of the provisions of section 51 of the SEZ Act, over all other laws and, therefore, the ground for rejecting the refund claims was not tenable in law and even otherwise, approval from UAC was only procedural in nature and not a mandatory condition - the Commissioner (Appeals) was not justified in rejecting the refund claims on this ground.
Availment of CENVAT Credit - proviso (e) of the Notification dated March 3, 2009 - HELD THAT:- The reversal of CENVAT credit prior to its utilization and prior to the filing of the refund application would amount to not availing CENVAT credit. This, in turn, would mean that the requirement for claiming exemption contemplated under proviso (e) of the Notification dated March 3, 2009 stands satisfied. The rejection of the refund claim on this ground by the Commissioner (Appeals) is, therefore, not justified.
Time limit for filing of refund - clause 2(f) of the Notification dated March 3, 2009 - HELD THAT:- Though, this issue did not form part of the show cause notice, yet a perusal of the details contained in the aforesaid table clearly indicate that the refund claims have been filed within six months from the date of payment of the service tax. In such circumstances the refund claims could not have been rejected on this ground.
No documentary evidence to satisfy condition no. 2(a) of Refund Notification - paragraph 2(a) of the Notification dated March 3, 2009 - HELD THAT:- There is no evidence on the record which may indicate that any operation was carried out by the appellant from any unit outside the SEZ. Thus, all input services were used in relation to the authorized operations. This issue was examined by the Tribunal in RELIANCE INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I [2015 (11) TMI 1048 - CESTAT MUMBAI]. The Tribunal found as a fact that the unit of the appellant operating in SEZ was the sole undertaking of the appellant and the SEZ Act that provides for exemption of duties and taxes has an overriding effect when in conflict with other laws. The Tribunal, therefore, held that there can be no doubt that the services provided by the appellant were for authorized operations in SEZ - learned counsel for the appellant has also pointed out that a certificate issued by a chartered engineer that input services had been used in relation to authorized operations had also been placed before the Department. - finding recorded the Commissioner (Appeals) on this issue, therefore, cannot be sustained.
Input service invoices are dated prior to the date of refund notification - HELD THAT:- Tribunal in WARDHA POWER COMPANY LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NAGPUR [2012 (5) TMI 289 - CESTAT, MUMBAI] wherein emphasis was placed on clause 3 of the notification dated March 3, 2009 which states that the exemption benefit in the notification shall apply only in respect of service tax paid on the specified service on or after the date of publication of the notification in the Official Gadget - the Commissioner (Appeals) committed an error in rejecting the refund applications for this reason since it is the date of making payments this is relevant.
Refund admissible only in case where services not wholly consumed within SEZ - HELD THAT:- Learned counsel for the appellant submitted the substantive benefit of the service tax exemption provided under section 26 of the SEZ Act and rule 31 of the SEZ Rules cannot be denied by any procedural requirement under a notification - This submission of learned counsel for the appellant deserves to be accepted.
The substantive benefit of service tax exemption provided under section 26 of the SEZ Act read with rule 31 of the SEZ Rules cannot be denied on procedural grounds. It is not in dispute that the appellant was not required to deposit service tax under the notification dated May 20, 2009, but service tax was deposited. It cannot be urged that the appellant is not entitled to claim refund because of a mistake in depositing service tax even if it was not required to be deposited. This issue has been examined while dealing with the applicability of the section 26(1) of the SEZ Act - the Commissioner (Appeals) was not justified in rejecting the refund applications on this ground.
The matter is remitted to the Commissioner (Appeals) to decide whether the appellant had paid service tax on the services for which the appellant had claimed refund in the five applications submitted by the appellant - Appeal allowed by way of remand.
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2020 (12) TMI 1055
Demand of Service Tax - Merger / Demerger of units - commission/ discounts paid to Abhijeet Ltd. and Corporate Ltd. - case of Revenue is that Abhijeet Ltd. and Corporate Ltd. had merged with the Appellant, it was the Appellant that was liable to pay service tax that would otherwise have been payable by Abhijeet Ltd. and Corporate Ltd. - HELD THAT:- It is apparent that only the Sponge Iron Plants and Power Plants of Abhijeet Ltd. and Corporate Ltd. merged with the Appellant and it was not a merger of Abhijeet Ltd. merged with the Appellant and it was not a merger of Abhijeet Ltd. and Corporate Ltd with the Appellant. The Demerged Companies, namely Abhijeet Ltd. and Corporate Ltd., continue to operate as going concerns. Thus, the liabilities of Abhijeet Ltd. and Corporate Ltd. could not have been fastened upon the Appellant.
However, even if it is assumed that BAS was provided, then too only Abhijeet Ltd. and Corporate Ltd. were liable to pay service tax and not the Power Plants and Sponge Iron Plants, which constituted “the Demerged Undertakings” and which alone stood merged with the Appellant. Even in such a situation, it is doubtful whether the Appellant could be held to be liable for discharge service tax liability of the “Demerged Undertakings”.
The show cause notice could have been issued to Abhijeet Ltd. and Corporate Ltd. and not to the appellant, which is a service recipient and not “a person” liable to pay service tax under section 68 of the Finance Act.
Appeal allowed - decided in favor of appellant.
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2020 (12) TMI 1018
Manpower recruitment or supply agency service - Non-payment of service tax - agreements entered into by the appellant with its group companies located in the USA, UK, Dublin (Ireland), Singapore etc. and provide general back office and operational support to such group companies - certain employees who were seconded to the appellant by the foreign group companies - amounts are remitted by the Appellant in foreign currency and accounted in their financial statements - Demand alongwith interest and penalty - Circular F.No. B1/6/2005-TRU dated 27.07.2005 - HELD THAT:- The definition of “Manpower Recruitment or Supply Agency” seeks to bring under its ambit, two types of activities i.e. recruitment of manpower and supply of manpower and further the service becomes the taxable service only if provided by a manpower recruitment or supply agency but in the present case, we are concerned only with the supply of manpower. Further, it is found that after the post July 2012, the definition of service specifically incorporated seeks to exclude certain transactions from the ambit of service and provision of service by an employee to the employer in the course of or in relation to his employment stands excluded from the definition of service. Also, the legal position post negative list regime does not make any departure from the settled position of law as existed before 2012 with respect to the service tax implications on deputation of employees. In fact, the above exclusion in the definition of service amplifies the position of law to keep employees providing service to the employer in the course of their employment out of the purview of service tax. We have also examined the agreements entered into by the appellant with a group company which are specifically for provision of certain specialized services and are not related to ‘supply of manpower’ which is evident from various clauses in the Agreements and we also find that group companies are not in the business of supplying manpower.
The persons seconded to the appellant working in the capacity of employees and payment of salaries etc is made to such employees by group companies only for disbursement purposes and hence employee-employer relationship exist and such an activity cannot be termed as “manpower recruitment or supply agency” and the whole arrangement between the appellant and its group companies does not fall under the taxable service of manpower recruitment or supply agency service as defined under the Finance Act, 1994 - Also, there is no service provider-recipient relationship in the present case, as required by Section 65(105)(k).
The method of disbursement of salary cannot determine the nature of the transaction and this issue was considered in the case of M/S VOLKSWAGEN INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [2013 (11) TMI 298 - CESTAT MUMBAI] which has been upheld by the Hon’ble Apex Court in the case of COMMISSIONER VERSUS VOLKSWAGEN INDIA (PVT.) LTD. [2016 (1) TMI 1320 - SC ORDER].
The Hon’ble High Court of Gujarat in the case of COMMISSIONER OF SERVICE TAX VERSUS ARVIND MILLS LTD. [2014 (4) TMI 132 - GUJARAT HIGH COURT] has held that even if the actual cost incurred by appellant in terms of salary remuneration and perquisites is only reimbursed by group of companies, there remains no element of profit or finance benefit. The arrangement is that of the continuous control and the direction of the company to whom the holding company has deputed the employee, such an arrangement is out of the ambit to be called manpower supply service.
As such, there is no supply of manpower service which is rendered to the appellant by the foreign/holding company. As far as short payment of service tax of ₹ 41,11,742 and the interest of ₹ 16,82,810 is concerned, the learned Counsel has submitted that the entire amount totaling ₹ 47,17,537/- (service tax and interest) has been paid vide GAR Challan and the challans have also been annexed but the learned Commissioner has not considered the same and appropriated the same also - For this discrepancy, matter remanded to the learned Commissioner to examine the payment of service tax paid by the appellant through various challans and thereafter determine the demand of service tax and interest due from the appellant, if any.
Appeal allowed by way of remand.
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2020 (12) TMI 1017
Condonation of delay in filing appeal - recovery of CENVAT Credit - construction services other than residential complex - HELD THAT:- It is a fact that the appellant had taken loan from the banks and ultimately the loan was declared as NPA and proceedings were initiated against the appellant under the provisions of the SARFAESI Act. Possession was also taken by the bank on July 26, 2013. After the impugned order was passed by the Commissioner on February 10, 2014, the appellant has reversed the CENVAT credit. It also needs to be noticed that the mall was ultimately auctioned by J.M. Financial Assets Reconstruction Company. It also transpire from the records that the Department had written letters to J.M. Financial Assets Reconstruction Company and the auction purchaser for compliance of the order passed by the Commissioner.
The appellant in the present appeal has satisfactorily explained the delay in filing the appeal.
The delay condonation application is allowed subject to payment of cost of ₹ 25,000/-, which the appellant shall deposit within the period of one month from today in the Prime Minister’s CARES Fund - matter shall be listed on January 8, 2021 for a report regarding compliance of the order.
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2020 (12) TMI 1016
Commercial Coaching or Training service - the contention of the Appellant/Applicant that the retrospective amendment in the definition of Section 65(105)(zzc) of Chapter V of the Finance Act, 1994 without a validation clause would not affect pending proceedings, was rejected - time limitation - HELD THAT:- The clarification sought for by the Appellant/Applicant in the Miscellaneous Applications is wholly unnecessary for the reason that on a bare perusal of Para 8 and 9 of the Final order alongwith Para 12 and 13 thereof, it is amply clear that the Service Tax demand of ₹ 19,02,103/- on reimbursable expenses for the period of October, 2001 to March 2006 is already set aside and further in respect of Service Tax demand of ₹ 78,12,418/- for the period of 01.07.2003 to 31.03.2008 under the category of Commercial Coaching or Training service, the appellant is extended the benefit of exemption under Notification No. 9/2003-ST dated 20.06.2003 and Notification No. 24/2004-ST dated 10.04.2004. Further, on limitation it is held that demand upto March, 2006 is barred by normal period of limitation. When the tax demand for the entire period in dispute has already been set aside and benefit of exemption under Notification No. 9/2003-ST dated 20.06.2003 and Notification No. 24/2004-ST dated 10.04.2004 has been extended on merits, no demand survives and while dealing with the contentions of the Appellant/Applicant, on points of limitation, it has been held that demand upto March, 2006 is barred by limitation.
Appeal allowed - decided in favor of appellant.
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2020 (12) TMI 1015
Admissibility of abatement under the Notification dated March 1, 2006 - impugned order has denied the abatement availed by the appellant during the month of March, 2006 on the ground that the appellant availed and utilized credit for providing the output services of CIC for the month of March 2006, which is not permitted under the Notification dated March 1, 2006 - HELD THAT:- CENVAT credit availed by the appellant of the service tax paid by the service providers for the services rendered prior to 01.03.2006 cannot be faulted with as availment of CENVAT credit by service recipient is subject to the condition that payment for such service rendered as the provisions. Undisputedly, in this case the appellant had paid the service providers / settled the service providers bill subsequently from March 2006 for the service rendered prior to 01.03.2006 and has correctly claimed the legitimate CENVAT credit available.
The Commissioner has held in the impugned order that the agreement between the Principles and the Consortium Members is a composite contract for provision of services and supply of goods. According to the appellant, the composite contract has the essential character of a “works contract”, as it involves both supply of goods as well as provision of services. Hence, the various services provided by the appellant under the agreement will more appropriately being classified under ‘works contract’ service which became taxable w.e.f June 1, 2007 - The impugned order also records a finding that the contract involves provision of services as well as supply of goods. Thus, the demand raised for a period prior to June 1, 2007 is not sustainable. Even for the period post June 1, 2007, the demand cannot be sustained as it has been raised under CIC and ECI and not under “works contract” service.
The demand raised under CIC and ECI for the period July 1, 2007 and post June 1, 2007 cannot be sustained - Appeal allowed - decided in favor of appellant.
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2020 (12) TMI 1014
Business Auxiliary Services - service tax on the incentives received by the appellant - tax on incentives prior to July, 2012 - HELD THAT:- The appellant purchases vehicles from MUL and sells the same to the buyers. It is clear from the agreement that the appellant works on a principal to principal basis and not as an agent of MUL. This is for the reason that the agreement itself provides that the appellant has to undertake certain sales promotion activities as well. The carrying out of such activities by the appellant is for the mutual benefit of the business of the appellant as well as the business of MUL. The amount of incentives received on such account cannot, therefore, be treated as consideration for any service. The incentives received by the appellant cannot, therefore, be leviable to service tax.
The demand of service tax in respect of the amount collected on account of bouncing of cheques and cancellation of orders is also not sustainable. These amount are penal in nature and not towards consideration for any service - The issue relating to demand of service tax on income earned by the appellant from registration charges and number plate charges under BAS and freight expenses under GTA has also been decided in favour of the appellant in ROHAN MOTORS LTD. VERSUS C.C.E., MEERUT-I [2018 (7) TMI 29 - CESTAT NEW DELHI].
Appeal allowed - decided in favor of appellant.
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2020 (12) TMI 1013
Levy of Service Tax - Banking and other Financial Services - amounts/value charged by the foreign bankers while delivering their inward remittance in foreign currencies to the Indian Bankers of the Appellant - services received by the appellant from M/s Dada Consultancy and M/s Phara Dr. D.R. Ivan - demand under Scientific or Technical Consultancy Services - time limitation.
Banking and other Financial Services - amounts/value charged by the foreign bankers while delivering their inward remittance in foreign currencies to the Indian Bankers of the Appellant - HELD THAT:- The export sale proceeds from their overseas customers are collected by the Appellant’s Indian Banker. The Indian Banks, who collect the said amount for the appellant, in the process are required to pay certain charges to the foreign banks who transfer the funds to Indian Banks - following the principles laid down in GREENPLY INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I [2015 (12) TMI 80 - CESTAT NEW DELHI] and also in the case of M/S RAJ PETRO SPECIALITIES P LTD VERSUS C.C.E. & S.T. - SILVASA [2018 (8) TMI 1179 - CESTAT AHMEDABAD] in identical facts and circumstances, we do not find merit in confirming the Service Tax demand for the charges deducted by the foreign banks under the category of “Banking and other Financial Services”, where it was held that Any bank charges paid by Indian Bank to the Foreign Banks even though in connection with import and export of the goods and the same was debited to the appellant, the service tax liability does not lie on the appellant.
Scientific or Technical Consultancy Services - services received by the appellant from M/s Dada Consultancy and M/s Phara Dr. D.R. Ivan - HELD THAT:- The learned Commissioner in the impugned order, even though accepted that the overseas firms are providing consultancy services, which meant to be used in obtaining marketing right of the appellant to their manufactured pharmaceutical products, but proceeded to observe that the said consultancy of clinical and non-clinical overviews of the literature were scientific in nature, therefore, the consultancy service provided fall under the category of Scientific and Technical Consultancy Services - Tribunal in the case of M/S IPCA LABORATORIES LTD. VERSUS COMMISSIONER OF CE & ST, LTU, MUMBAI [2018 (5) TMI 34 - CESTAT MUMBAI] on similar circumstances held that when such services are provided for marketing of the product in the overseas market to meet the regulatory requirement, the same cannot fall under the category of Scientific or Technical Consultancy Services - the contention of Revenue that the consultancy charges paid to M/s DADA Consultancy and M/s Pharphe Dr. D.R. Iban be taxable under the category of ‘Scientific or Technical Consultancy Services’ is devoid of merit and cannot be sustained.
Extended period of limitation - HELD THAT:- The demand is barred by limitation as during the course of audit by the Department, specifically the issue of applicability of Service Tax for payments made to M/s DADA Consultancy and M/s Pharphe Dr. D.R. Iban have been examined by the Department to which the appellant filed a reply enclosing the opinion of legal experts on the subject - Also, it is not in dispute that the appellant has started discharging Service Tax on the said services w.e.f. 01.06.2007 under the category of ‘Management and Consultancy Services’ to which the Department did not raise any objection and the ST-3 returns have been assessed from time to time - there are merit in the contention of the learned Advocate that since they would be eligible to avail credit of the Service Tax paid on reverse charge mechanism, hence there could not be any incentive/intention to evade payment of Service Tax - the demand for the period 2006-07 is not sustainable being barred by limitation.
Appeal allowed - decided in favor of appellant.
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2020 (12) TMI 1012
Renting of immovable property Service - Bundled services - Appellant had entered into agreements with films Distributors under which the theatrical exhibition rights for exhibition of the films were transferred to the Appellant, either for a specified number of shows and period or in perpetuity - HELD THAT:- The agreements entered into between the Appellant and the film Distributors clearly indicate that the film Distributors had granted theatrical exhibition rights to the Appellant and in return of transfer of such rights, the Appellant had agreed to pay certain amount to the Distributors, fixed generally as a percentage of Net Box Office Collection. The Principal Commissioner found that the Appellant had provided ‘renting of immovable property’ services. For an activity to fall under ‘renting of immovable property’ services, the nature of the activity should be that of renting or letting or leasing or licensing or other similar arrangements of immovable property, for use in the course or furtherance of business or commerce - A perusal of the agreements between the Appellant and the Distributors would also make it abundantly clear that it is the Appellant who makes payment to the Distributors for grant of theatrical rights. This clearly indicates the flow of service and the consideration. Thus, as it is the Appellant who pays a fixed consideration to the Distributor, no service tax can be levied on the Appellant - it is not possible to sustain the finding recorded by the Principal Commissioner that ‘renting of immovable property’ service had been rendered by the Appellant to the film distributors.
Renting of Immovable Property - amount received by the Appellant under ‘miscellaneous receipts’ and ‘license fee’ from Snack Bar - demand of service tax - HELD THAT:- The confirmation of demand of ₹ 36,000/- covered under “renting of immovable property” service is much below the threshold exemption of ₹ 10,00,000/- provided in the notification dated June 20, 2012 and hence not liable to service tax.
The income received by the Appellant under “Shots and Slides Hire” income is on account of exhibition of advertisement films and slides of vendors, during the showcasing of movies. This income is not taxable w.e.f July 1, 2012 as it covered under the negative list provided under section 66 D(g) of the Finance Act, which relates to “selling of space or time slots for advertisement, other than advertisement broadcast by radio or television. Even for the period prior to July 1, 2012, this service is in the nature of exhibiting shots/graphic films, still slides and cannot be classified as ‘renting of immovable property’ service - interest amount income shown by the Appellant in its books of account represents the income earned by the Appellant from the deposits held in bank account and is not towards the ‘renting of immovable property’ service.
Appeal allowed - decided in favor of appellant.
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2020 (12) TMI 914
Determination of service tax liability on the approval of resolution plant under IBC - Seeking declaration that total liability of the petitioner to the respondent does not exceed ₹ 35,54,682.55 in accordance with the order dated 30.08.2019 passed by the National Company Law Tribunal, Mumbai Bench sanctioning the resolution plan of the petitioner under section 31 of the Insolvency and Bankruptcy Code, 2016 - direction to the respondent not to appropriate an amount of ₹ 6,23,82,214.00 already recovered following the order in original dated 22.07.2020 - seeking direction to the respondent to refund an amount of ₹ 5,88,27,531.45 to the petitioner.
HELD THAT:- As per the statement of objects and reasons which preceded the bill while being introduced in the parliament, there was no single law in India dealing with insolvency and bankruptcy. There were several laws dealing with different aspects and providing for creation of multiple fora. Existing framework for insolvency and bankruptcy was found to be inadequate and ineffective resulting in undue delays in resolution. Therefore, the said legislation was proposed. Objective of the Code is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the priority of payment of government dues and to establish an Insolvency and Bankruptcy Fund and matters connected therewith or incidental thereto - The Code seeks to provide the National Company Law Tribunal and Debts Recovery Tribunal as the adjudicating authorities for resolution of insolvency, liquidation and bankruptcy. The Code separates commercial aspects of insolvency and bankruptcy proceedings from judicial aspects besides providing for an Insolvency and Bankruptcy Board of India for regulation of insolvency professionals etc.. Insolvency professionals will assist in completion of insolvency resolution, liquidation and bankruptcy proceedings envisaged in the Code.
It is evident that focus of the Code is resolution of insolvency and bankruptcy. In other words the thrust is for revival of such corporate persons, partnership firms and individuals facing insolvency and bankruptcy rather than liquidation.
The preamble of the Code was examined by the Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT]. It was held that the preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganization and insolvency resolution of corporate debtors. Unless such reorganization is effected in a time bound manner, the value of the assets of such persons will deplete. Therefore, the maximization of the value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions.
Thus, it is evident that if the adjudicating authority is satisfied that the resolution plan as approved by the committee of creditors under sub section (4) of section 30 meets the requirements of sub section (2) of section 30, it shall by order approve the resolution plan. Once such approval is granted by the adjudicating authority, it shall be binding on the corporate debtor and its employees, members, creditors (including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed), guarantors and other stakeholders involved in the resolution plan. As per the proviso, before passing an order under section 31 the adjudicating authority has to satisfy itself that the resolution plan has provisions for its effective implementation - From a conjoint reading of section 31(1) and section 238 of the Code, it is quite evident that the provisions of the Code shall have overriding effect. The non obstante clause in section 238 and the use of the expression “shall” in sub section (1) of section 31 makes it abundantly clear that a resolution plan approved by the committee of creditors and further approved (or sanctioned) by the adjudicating authority would be binding on all creditors including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed.
Thus, the resolution plan mentions that the claim of service tax dues falls under the definition of operational creditors. Such dues should be settled at par with other operational creditors under the resolution plan which provides for settlement of dues of operational creditors at the rate of 5% of the principal amount with waiver of interest, penal interest and penalties. The claim amounting to ₹ 1929.85 lakhs was being contested by the corporate debtor before the concerned authority and the amount of admitted claim could not be determined until the outcome of the said proceeding. Therefore, the said amount of ₹ 1929.85 lakhs was kept in abeyance. However, the amount that would come to be determined upon adjudication would be settled at the appropriate time.
In the present case, what we have noticed is that section 87(b) (i) was invoked as early as on 18.04.2013 whereas the first show-cause cum demand notice was issued to the petitioner only on 18.04.2015. While invocation of section 87(b)(i) and recoveries made thereunder are highly questionable, it may not be necessary for us to delve into the legality or illegality of the same in the present proceeding because of the binding nature of the resolution plan as approved by the committee of creditors and sanctioned by the Tribunal. However, attempt by the respondent for appropriation of the amount recovered through such questionable means in the face of the resolution place so approved and sanctioned is a live issue and hence needs to be adverted to.
Once a resolution plan is approved by the committee of creditors by the requisite percentage of voting and the same is thereafter sanctioned by the adjudicating authority (Tribunal in this case), the same is binding on all the stakeholders including the operational creditors. As a matter of fact, respondent herein as an operational creditor had lodged its claim before the resolution professional. The resolution plan provides for settlement of service tax dues at 5% of the amount of principal dues that would be crystallized upon adjudication, further providing for waiver of interest, penal interest and penalty that may be charged. As we have held above, respondent may be justified in proceeding with the show-cause cum demand notices because that has resulted in crystallization of the total amount of service tax dues i.e., the principal amount payable by the petitioner which is ₹ 7,02,20,725.00. The amount of service tax dues having thus crystallized as above, the resolution plan says that the same would be settled at 5% of the principal dues adjudicated. The word used is “adjudicated” and not “adjusted” as sought to be read and applied by the respondent. Therefore, the amount that the petitioner would be required to pay is 5% of ₹ 7,02,20,725.00. In so far the recovered amount i.e. ₹ 6,23,82,214.00 is concerned, the same is part of the total demand determined i.e. ₹ 7,02,20,725.00. After retaining 5% of ₹ 7,02,20,725.00, respondent would be duty bound to refund the balance amount to the petitioner which will not only be in terms of the resolution plan and thus in accordance with law but will also be a step in the right direction for revival of the petitioner which is the key objective of the Code. There is no question of retaining the said amount. Submissions made by Mr. Jetly that the amount already recovered should be allowed to be appropriated by the respondent and that petitioner should pay 5% of the balance of the principal dues i.e. 5% of ₹ 7,02,20,725.00 less ₹ 6,23,82,214.00 is without any substance and liable to be rejected.
There should be no hesitation to hold that principal service tax dues quantified by the respondent vide order in original dated 22.07.2020 has to be settled at the rate of 5%, in other words 5% of ₹ 7,02,20,725.00. The directions of the respondent for appropriation of the amount of ₹ 6,23,82,214.00 already recovered cannot be sustained. Respondent shall retain 5% of ₹ 7,02,20,725.00 from the above amount recovered and thereafter refund the balance amount to the petitioner. To that extent, impugned order in original dated 22.07.2020 is interfered with. Refund shall be made within a period of three months from the date of receipt of a copy of this judgment and order.
Petition allowed.
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2020 (12) TMI 913
Levy of Service tax - Reverse Charge Mechanism - consulting engineer service - amount paid to Honda Japan under the Technical Agreement - contention of appellant is that no services were received by the appellant from Honda Japan and, therefore, no service tax could have been levied - HELD THAT:- The show cause notice only refers to various clauses of the Technical Agreement and the taxing provisions and then alleges that the appellant is liable to pay service tax on the amount paid under the Termination Agreement, without identifying or specifying what particular ‘consulting engineer’ service was rendered by Honda Japan to the appellant. The appellant has stated that the amount of JPY 130,000,000/- was paid to compensate for the work undertaken by Honda Japan towards the commencement of volume production of the new Honda CIVIC Model and details have also been provided, which details clearly indicate that the amount was paid to compensate Honda Japan for the research and allied work it had performed at its end and not towards supply of any technical information to the appellant. In the absence of any evidence to the contrary, the Commissioner (Appeals) could not have concluded that the aforesaid amount was paid by the appellant to Honda Japan for rendering any taxable service.
It is, therefore, not possible to accept the contention of the learned authorized representative of the Department that in terms of Article 4.1 of the Technical Agreement, Honda Japan was required to furnish technical information to the appellant on a continuous basis or that the amount was paid for the commencement of the production.
It has also been submitted by the leaned counsel for the appellant that the amount paid by the appellant to Honda Japan is actually in the nature of a cancellation fee and, therefore, neither any service was rendered by Honda Japan to the appellant nor any amount was paid for any service. The contention is that the amount was paid by the appellant only to restitute Honda Japan for the cost incurred, once the Model Agreement to provide the service was terminated - This submissions of learned counsel for the appellant also deserves to be accepted. In view of the specific provisions of the Termination Agreement, it is clear that no service, much less ‘consulting engineer’ service, was provided to the appellant. The appellant, therefore, could not have been subjected to service tax on a reverse charge basis.
In Ford India [2018 (1) TMI 1219 - CESTAT CHENNAI], a Division Bench of the Tribunal, held that no identifiable service can be attributed for payments made if the agreement is terminated, since the consideration is to make good the loss - In Lemon Tree [2019 (7) TMI 767 - CESTAT NEW DELHI], the Tribunal again held that the amount retained after cancellation cannot be subjected to service tax.
The amount paid by the appellant to Honda Japan was not towards any consideration for a taxable service. It is, therefore, not possible to sustain the demand confirmed by the Commissioner (Appeals) - Appeal allowed - decided in favor of appellant.
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2020 (12) TMI 912
Declared Service or not - appellant had collected an amount towards compensation/penalty from the buyers of coal on the short lifted/un-lifted quantity of coal; collected amount towards compensation/penalty from the contractors engaged for breach of terms and conditions; and collected amount in the name of damages from the suppliers of material for breach of the terms and conditions of the contract - period from July 2012 to March, 2016 - Whether the appellant is providing a “declared service” contemplated under section 66E(e) of the Finance Act, which service became taxable w.e.f July 1, 2012?
HELD THAT:- Liability has been fastened upon the appellant under section 65B read with section 66E(e) of the Finance Act for the period from July 2012 till March 2016 for the reason that by collecting the said amount the appellant had agreed to the obligation to refrain from an act or to tolerate the non-performance of the terms of the contract by the other party - Section 65B (44) defines ‘service’ to mean any activity carried out by a person for another person for consideration, and includes a declared service. Under section 66E (e), a declared service shall constitute agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act. Section 66 B provides that service tax shall be levied at the rate of 12 per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Section 66D contains a negative list of services, while section 66E contains a list of declared services.
Section 68 provides that every person providing taxable service to any person shall pay service tax at the rate specified in section 66B in such manner and within such period as may be prescribed - It is, thus, clear that where service tax is chargeable on any taxable service with reference to its value, then such value shall be determined in the manner provided for in (i), (ii) or (iii) of subsection (1) of section 67. What needs to be noted is that each of these refer to “where the provision of service is for a consideration”, whether it be in the form of money, or not wholly or partly consisting of money, or where it is not ascertainable. In either of the cases, there has to be a “consideration” for the provision of such service. Explanation to sub-section (1) of section 67 clearly provides that only an amount that is payable for the taxable service will be considered as “consideration”. This apart, what is important to note is that the term “consideration” is couched in an “inclusive” definition.
The Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [2018 (2) TMI 1325 - SUPREME COURT], while deciding the appeal filed by the Department against the aforesaid decision of the Tribunal, also explained the scope of Section 67 of the Act. The Supreme Court observed that any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under Section 67.
It would also be pertinent to refer to TRU Circular dated 20 June, 2012 issued by the Central Board of Excise and Customs as an Education Guide when the Negative List based taxation regime was introduced from July 2012 to clarify various aspects of the levy of service tax. The Board dealt with “consideration” in paragraph 2.2 of this Circular and pointed out that since the definition was inclusive, it will not be out of place to refer to the definition of “consideration” as given in section 2(d) of the Indian Contract Act, 1872.
A service conceived in an agreement where one person, for a consideration, agrees to an obligation to refrain from an act, would be a ‘declared service’ under section 66E(e) read with section 65B (44) and would be taxable under section 68 at the rate specified in section 66B. Likewise, there can be services conceived in agreements in relation to the other two activities referred to in section 66E(e) - It is trite that an agreement has to be read as a whole so as to gather the intention of the parties. The intention of the appellant and the parties was for supply of coal; for supply of goods; and for availing various types of services. The consideration contemplated under the agreements was for such supply of coal, materials or for availing various types of services. The intention of the parties certainly was not for flouting the terms of the agreement so that the penal clauses get attracted. The penal clauses are in the nature of providing a safeguard to the commercial interest of the appellant and it cannot, by any stretch of imagination, be said that recovering any sum by invoking the penalty clauses is the reason behind the execution of the contract for an agreed consideration. It is not the intention of the appellant to impose any penalty upon the other party nor is it the intention of the other party to get penalized.
The activities, therefore, that are contemplated under section 66E (e), when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity - In the present case, the agreements do not specify what precise obligation has been cast upon the appellant to refrain from an act or tolerate an act or a situation. It is no doubt true that the contracts may provide for penal clauses for breach of the terms of the contract but, as noted above, there is a marked distinction between ‘conditions to a contract’ and ‘considerations for a contract’.
It is, therefore, not possible to sustain the view taken by the Principal Commissioner that penalty amount, forfeiture of earnest money deposit and liquidated damages have been received by the appellant towards “consideration” for “tolerating an act” leviable to service tax under section 66E(e) of the Finance Act - Appeal allowed - decided in favor of appellant.
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2020 (12) TMI 911
Distribution of CENVAT Credit - Cenvat Credit including Education Cess and SHE cess taken on the Research & Development services received to their manufacturing units - Rule 7 of Cenvat Credit Rules, 2004 - HELD THAT:- This Bench in its earlier judgement DR. REDDY’S LABORATORIES LIMITED VERSUS COMMISSIONER OF CUSTOMS CENTRAL EXCISE & SERVICE TAX, HYDERABAD [2020 (3) TMI 1276 - CESTAT HYDERABAD] has held that the services used in the R&D have a direct nexus with the manufacture of the final products. It is not necessary that the pharmaceutical industry has a complete R&D facility in each of its manufacturing units. In order to economise and benefit from the economies of scale, R&D units are set up as independent units for serving various manufacturing units of the manufacturer. In such a case, the services availed in the R&D units have a direct nexus to the manufacture of the products in various units. If the assessee is registered as an input service distributor, the CENVAT Credit availed on the services used in the R&D unit can be distributed to various manufacturing units.
Appeal allowed - decided in favor of appellant.
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