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Service Tax - Case Laws
Showing 61 to 71 of 71 Records
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2021 (2) TMI 83
Taxability - supply of tangible good for use or not - tool kits provided by the appellant to associated companies - supply of tangible goods without transferring right of possession and effective control - Levy of service tax on rental charges for baked oven under STGU.
Whether the tool kits provided by the appellant to associated companies would be a service of “supply of tangible good for use”- STGU and would be a taxable service contemplated under section 65 (105)(zzzzj) of the Finance Act, which is any service provided to any person, by any other person, in relation to supply of tangible goods without transferring right of possession and effective control? - HELD THAT:- There is no dispute with the regard to the first two conditions. The dispute revolves around the third condition, namely whether the transaction between the Appellant and the associated companies involves transfer of right of possession and effective control. This is for the reason that any transaction involving transfer of “right to use‟ would result in a “deemed sale”, which would be beyond the purview of service tax.
The term “transfer of right to use goods‟ was interpreted by the Supreme Court in BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [2006 (3) TMI 1 - SUPREME COURT], wherein five attributes for a transaction to constitute a “transfer of right to use goods‟ were highlighted - It is, therefore, clear that sales tax/VAT can be levied if there is a transfer of possession and effective control in goods, while for levy of service tax there is no transfer of possession and effective control.
The submission of the appellant that tool kits were in possession of the associated companies with the right to use the kits to the exclusion of appellant and the appellant could also not have passed the right to any other person has not be controverterd in the impugned order nor has any material been provided by the learned Authorized Representative of the Department to controvert this fact - it is not possible to sustain the finding recorded by the Principal Commissioner.
Whether service tax would be leviable on rental charges for baked oven under STGU? - HELD THAT:- This issue relates to levy of service tax under the category of STGU on the tools imported by the appellant. The appellant had imported “baking oven” from its foreign associated companies. The appellant claims that it discharged the applicable customs duty and freight charges were also paid by the Appellant.
It would be seen that the Principal Commissioner has confirmed the demand by holding that “the ownership” of the baking oven continued with the foreign supplier, as a result in which the transaction would qualify as a service involving STGU - There is no discussion in the order passed by the Principal Commissioner as to why the possession and control of the baking oven continued to be with foreign companies. According the Appellant, the baking ovens were imported and they were in exclusive possession of the Appellant. Thus, when the possession and exclusive control over the imported goods was in the hands of the Appellant, the transaction would qualify as deemed sale by foreign companies. The Principal Commissioner was, therefore, not justified in holding that the transaction would result in levy of service tax under the category of STGU.
Appeal allowed - decided in favor of appellant.
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2021 (2) TMI 50
Condonation of delay in filing appeal - it is contended that the delay occurred on account of the fact that the appeals were mistakenly filed before the Calcutta High Court - HELD THAT:- Even if the period of time which was spent in pursuing the appeals before the High Court is excluded, there is still a substantial and unexplained delay. Even otherwise, we are of the view that the Union of India, which has competent legal advice at its command, cannot, particularly in the facts of the present case, be heard to contend that they were under a mis-apprehension that the appeals would lie before the High Court. The nature of the controversy involved in the appeals leaves no manner of doubt, that the appeals were maintainable before this Court and this Court alone. Hence, we are not inclined to condone such a gross delay on the part of the Revenue in accessing its remedies before the court. In a matter such as the present, certainty in fiscal matters is of importance to the assessee just as the interests of the Revenue have to be duly protected. The concerns of the Revenue have to be duly met by showing alacrity in pursuing remedies which are available in law.
The appeals are dismissed on the ground of delay.
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2021 (2) TMI 49
Valuation of taxable services - inclusion in assessable value, the items supplied on free of cost - whether comes within the ambit of the term "consideration" or not - HELD THAT:- This precise issue came up for consideration before the Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [2018 (2) TMI 1325 - SUPREME COURT] as the issue before the Supreme Court was also whether the value of goods/material supplied or provided free of cost by a service recipient and used for providing the taxable service of construction or industrial complex is to be included in the computation of gross amount for valuation of the taxable service under section 67 of the Finance Act. The Supreme Court observed that a plain reading of the expression “the gross amount charged by the service provider for such service provided or to be provided by him‟ would lead to the conclusion that the value of goods/material that is provided by the service recipient free of charge is not to be included while arriving at the “gross amount‟ for the reason that no price is charged by the assessee/ service provider from the service recipient in respect of such goods/materials.
The decision of the larger bench of the Tribunal in M/S BHAYANA BUILDERS (P) LTD. & OTHERS VERSUS CST, DELHI & OTHERS. [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] and the decision of the Supreme Court in Bhayana Builders are clearly applicable to the facts of the present case inasmuch as the charge in the show cause notice is that the cost of material supplied free of cost should be included in the gross value of the taxable service provided by the appellant.
Appeal allowed - decided in favor of appellant.
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2021 (2) TMI 12
Power of CAG to conduct service tax audit of private party - Central Excise Revenue Audit (CERA) - Validity of notice intimating that petitioner’s case has been selected for scrutiny / audit - petitioner's primary assertion is that the impugned notice / intimation seeking audit of petitioner's accounts is without jurisdiction i.e it has been issued without invoking the provisions of statutory laws under which a special audit, as purported, can be conducted - interpretation and application of Section 16 of the CAG’s (DPC) Act read with Articles 148, 149 and 151 of the Constitution of India dealing with CAG - HELD THAT:- It may be mentioned that the accounts will be audited by a Chartered Accountant or a Cost Accountant to be appointed by the Commissioner. In Clause (2) to Section 72A, it is stated that the Chartered Accountant or Cost Accountant will submit a report duly signed and certified by him to the Commissioner. In Clause (4), it is stated that the person liable to pay tax shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit under sub-section (1) and proposed to be utilized in any proceeding. Copy of the audit report may be made available to the assessee and a proper opportunity will also be provided to him, as per law.
Rule 5A sub-rule (2) states that every assessee shall, on demand, make available to the officer authorised or the audit party, records, trial balance and income-tax audit report, if any. The officer may demand the documents to ensure correctness of the books of accounts and ultimately, the audit will be conducted by the audit party headed by the Chartered Accountant/Cost Accountant, as the case may be, deputed by the Commissioner. It is Commissioner on whose behalf the officer will collect the material and the auditor will perform the audit. In any case, the final report duly signed by the Chartered Accountant will be submitted to the Commissioner. In case of government autonomous bodies, the function of audit has been assigned to CAG - From the above, it is crystal clear that in case of a private assessee, Commissioner will refer the matter to an officer to collect the material or Chartered Accountant for the purpose of audit. Thus, for the purpose of audit, material can be collected either by the officer authorized by the Commissioner or by the auditor himself. But, audit will be performed only by the Chartered Accountant. It is the pious duty of the assessee to make available the record as mentioned in Rule 5A i.e. trial balance or its equivalent; and the Income-tax audit report, if any, under Section 142(2A) of the Income Tax Act, 1961, for the scrutiny of the officer or the audit party, as the case may be.
Admittedly, in the present case the impugned notice / intimation dated 10.01.2019 seeking audit of petitioner’s accounts is not contemplated under the provisions of Rule 5A of the Service Tax Rules, 1994. On the contrary, it is the assertion of the respondents that these have been issued under section 16 of CAG’s (DPC) Act.
Interpretation and application of Section 16 of the CAG’s (DPC) Act read with Articles 148, 149 and 151 of the Constitution of India dealing with CAG - whether CERA, an audit wing of the Principal Director of Audit (Control), Kolkata under the CAG, has power to and / or authority and / or jurisdiction to audit the account, of the petitioner company under Section 16 of the CAG’s (DPC) Act, where admitedly the petitioner company is not an undertaking of the Central Government or of any State Government and is prely a private entity? - HELD THAT:- It is clear that the statutory responsibility of the CAG is to audit receipts of the Union and States. These receipts include both direct and indirect taxes. It is duty of the Central Excise Revenue Audit (CERA) to see that sums due to the Government are properly assessed, realized and credited to the Government account. The scheme enacted and envisaged in Chapter III of the CAG’s (DPC) Act, 1971 begins with the word “Comptroller or Auditor General to compile accounts of Union and or States.” The statutory scheme clearly states that the CAG shall from the accounts compiled by him or by the Government or any person responsible prepare in each year accounts showing under the respective heads, the annual receipts and disbursement for the purpose of the Union, each State or each Union Territory and shall submit the same to the President or the Governor or the Administrator, as the case may be. It is in such context that the provisions of Section 16 pertaining to audit of all receipts which are payable into the Consolidated Fund of India and each State and of each Union Territory is required to be construed with respect to the accounts maintained in the Government departments / Corporations belonging to the Government.
In view of the mandate of Section 16 of the CAG’S (DPC) Act, 1971, CERA audit cannot be extended to call for audit of a private entity such as the petitioner company.
Petition allowed.
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2021 (2) TMI 11
Rejection of SVLDRS application for non-payment of dues (service tax) - Principles of Natural Justice - seeking direction to the respondents to afford an opportunity of hearing to the petitioner and thereafter pass appropriate order in terms of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - non-consideration of the CENVAT credit as pre-deposit made by the petitioner while granting tax relief under the scheme.
Personal hearing denied to the petitioner - HELD THAT:- What transpires is that when the amount estimated to be payable by the declarant, as estimated by the designated committee, exceeds the amount declared by the declarant in the declaration then the designated committee shall issue in electronic form an estimate of the amount payable by the declarant within 30 days. After such estimate is issued in the prescribed format, the designated committee shall give an opportunity of hearing to the declarant if he so desires before issuing the statement indicating the amount payable by the declarant. However, as per the proviso on sufficient cause being shown by the declarant only one adjournment may be granted by the designated committee.
While giving an opportunity of hearing to the declarant by the designated committee when its estimation exceeds that of the declarant has been made mandatory, granting of adjournment of such opportunity of hearing or confining the same to only one adjournment by the designated committee has been made discretionary. Elaborating further we may say that on sufficient cause being shown the hearing may be adjourned. Thus, discretion has been vested on the designated committee to grant adjournment of personal hearing in an appropriate case. Such discretionary power has to be exercised in a just, fair and judicious manner. But if on the adjourned date, for reasons beyond the control of either the designated committee or of the declarant or for any act of God, say for example, there is fire or flood or an earthquake or a pandemic as in the present case, the hearing cannot take place, can it be construed that there can be no further hearing beyond the date of hearing fixed. Such a view besides being too narrow and rigid would also be opposed to the very principles of natural justice which is nothing but fair play in action. In our view, in such a situation the adjourned date of personal hearing would not be considered as the date of hearing and, therefore, a fresh date of personal hearing would have to be granted - coming to the facts of the present case, we find that designated committee had initially fixed personal hearing on 19.03.2020. Petitioner while objecting to the estimated amount determined by the designated committee urged adjournment of the personal hearing fixed on 19.03.2020 on account of short notice and due to the situation arising out of Covid-19 pandemic. While petitioner suggested 06.04.2020 as the adjourned date of hearing, respondent No.4 fixed the personal hearing on 30.03.2020.
Non-consideration of the CENVAT credit as pre-deposit made by the petitioner while granting tax relief under the scheme - HELD THAT:- Since we have taken the view that the impugned decision contravenes the principles of natural justice causing prejudice to the petitioner and consequently the matter is required to be remanded back to the designated committee, it is not necessary to delve into the second grievance of the petitioner i.e., to treat the CENVAT credit amount of ₹ 3,28,49,069.00 as pre-deposit of the petitioner while granting relief under the scheme - there is one more aspect which we would like to briefly dilate upon. In their affidavit, respondents have stated that designated committee (respondent No.4) has limited the pre-deposit of the petitioner to cash payment of ₹ 1,11,25,000.00 and thus denying the benefit of CENVAT credit on the basis of reports received from the Deputy Director, DGGI Zonal Office, Mumbai dated 04.03.2020 and 16.03.2020. Neither of the two reports have been annexed to the impugned order dated 05.05.2020 nor furnished to the petitioner. The said reports have also not been annexed to the reply affidavit. It is a settled proposition of law that when an authority relies upon a document to take a decision which is adverse or prejudicial to a party, principles of natural justice demands that copy of such document or the essence thereof should be furnished to the affected party before the decision is taken so that the affected party can properly defend its case. Failure to do so would result in violation of the principles of natural justice and fair play in action which would vitiate the decision making process and ultimately the decision taken.
Matter is remanded back to respondent No.4 to consider the declaration of the petitioner vis-a-vis claim of CENVAT credit of ₹ 3,28,49,069.00 as pre-deposit in addition to the cash deposit of ₹ 1,11,25,000.00. While doing so respondent No.4 shall provide an opportunity of hearing to the petitioner and thereafter pass a speaking order with due intimation to the petitioner - petition allowed by way of remand.
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2021 (2) TMI 10
Rejection of SVLDRS application for non-payment of dues (service tax) - Seeking to reconsider its declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 by allowing pre-deposit made by the petitioner while the appeal is pending - basic grievance of the petitioner is non-acceptance or rather disallowance by the designated committee i.e., respondent No.3 of two payments made by the petitioner through its client M/s. Walchandnagar Industries Limited and additional payment as pre-deposit made by the petitioner thus resulting in the amount payable by the petitioner which it says is not required to be paid under the scheme - HELD THAT:- What is deducible is that service tax department had initiated investigation against the petitioner on the ground of alleged non-payment of service tax dues covering the period from 01.04.2006 to 31.03.2011. During the investigation period, petitioner had made a deposit of ₹ 1,30,00,000.00. This is admitted by the respondents and accepted as a pre-deposit while determining the outstanding dues payable by the petitioner. After issuance of the show cause-cum-demand notice dated 20.04.2012, petitioner has stated that it had made further payments of ₹ 46,44,094.00 covering the period under investigation through its client M/s. Walchandnagar Industries Limited; in addition further sum was paid which pertained to the period from 01.04.2011 to 31.03.2012 which was beyond the period of investigation. This amount was not accepted as payments made on behalf of the petitioner by the adjudicating authority i.e., the Commissioner on the ground that no evidence was submitted to that effect. Regarding the further payments made by the petitioner to the extent of ₹ 56,11,819.00, stand taken by the respondents is that the challans pertaining to payment of the aforesaid amount were from August, 2013 to April, 2015. Designated committee could not ascertain whether the said payment was for the period covered by the investigation or for the period beyond the investigation. Therefore, designated committee could not provide relief to the petitioner vis-a-vis the amount of ₹ 56,11,819.00. In paragraph 21 of the reply affidavit, it is stated that designated committee could not ascertain with confidence whether the said payment pertained to the period covered by the investigation i.e., by the order-in-original or pertained to period post 2012.
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 has been introduced primarily for liquidation of past disputes pertaining to central excise and service tax so that trade and industry can move ahead so also the tax administration which can then fully focus on the smooth implementation of goods and services tax (GST). Basic thrust is to unload the baggage of pending litigations centering around service tax and excise duty which stood subsumed in GST. As an incentive those making the declaration and paying the declared tax verified and determined in terms of the scheme would be entitled to certain benefits in the form of reduced tax liability, waiver of interest, fine, penalty and immunity from prosecution. This is a beneficial scheme for settlement of legacy disputes. Therefore, the officials while considering declarations made under the scheme must have the broad picture in mind. The approach should be to ensure that the scheme is successful and, therefore, a liberal view embedded with the principles of natural justice is called for.
In the instant case, as against the petitioner’s claim of pre-deposit of two amounts of ₹ 46,44,094.00 and ₹ 56,11,819.00, designated committee did not accept payments of the two amounts as pre-deposit. In fact in the impugned order dated 25.02.2020, which is in Form No.SVLDRS-3, no reasons have been assigned for exclusion of the two amounts - In so far the second amount of ₹ 56,11,819.00 is concerned, stand taken is that though the said amount has been received by the department, it could not be verified with confidence whether the said payment pertained to the period covered by investigation i.e., by the order-in-original or for the period post the period of investigation.
Since the verification carried out by respondent No.3 cannot be said to be a full and complete verification in terms of section 126(1) and rule 6(1), we are of the considered opinion that the matter is required to be remitted back to the designated committee for taking a fresh decision in the matter after giving an opportunity of hearing to the petitioner and thereafter to pass a speaking order with due intimation to the petitioner.
Matter is remanded back to respondent No.3 for taking a fresh decision in the matter after giving due opportunity of hearing to the petitioner which shall be informed about the place, date and time of hearing. Respondent No.3 shall thereafter pass a speaking order in accordance with law with due intimation to the petitioner - Petition allowed by way of remand.
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2021 (2) TMI 9
Maintainability of petition - declaration of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, which have since been subsumed under the goods and services tax (GST) - HELD THAT:- We allow withdrawal of the two writ petitions pertaining to the orders-in-original dated 09.10.2001 relating to the factories at Thane. Accordingly, the writ petitions are disposed of on withdrawal.
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2021 (2) TMI 8
Requirement of showing the trading turnover and ‘non-taxable’ services in the periodical ST-3 returns - Existence of column in ST- 3 form dealing with “non-taxable turnovers” under the Finance Act, 1994 - HELD THAT:- When there is no such column in ST-3 returns dealing with “non-taxable turnovers”, petitioner cannot be blamed by the respondents for not indicating the ‘non-taxable’ turnovers in the ST-3 return and it cannot be penalized for the same ignoring all the other material evidence which has already been submitted by the petitioner to the respondents on various occasions as mentioned in para 13 of the affidavit filed in support of the Writ Petition and also the letters dt.10.04.2017 and dt.17.10.2017 including the audit reports relating to the audit of their accounts, work sheets, etc.
The 4th respondent ought to have examined the said material which was already available with the 1st respondent-department to test the petitioner’s defence i.e., that for the financial year 2011-12, petitioner had executed only irrigation and canal projects, which were exempt vide Notification No.41/2009/ST dt.23.10.2009, and that from 2012-13 onwards, petitioner was executing electrical works also and was discharging service tax liability on the taxable turnover, and the difference between the Balance Sheet and the ST-3 returns is because of this reason - the 4th respondent could also have asked the petitioner to furnish such material, if he could not find it in the file during the course of the personal hearing, and he could not have penalized the petitioner on the said ground. Such action of the 4th respondent vitiates the impugned order.
In M.P. Special Police Establishment v. State of M.P. [2004 (11) TMI 524 - SUPREME COURT] the Supreme Court held that non-consideration of material on record by an authority would vitiate the exercise of power by the said authority.
The impugned Order passed by the 4th respondent cannot be sustained and that the matter must be remitted to the 4th respondent to consider afresh - Petition allowed by way of remand.
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2021 (2) TMI 7
Service tax Liability - selling/renting of bare spaces to their clients and also providing additional services to its customers for displaying their advertisements on the hoardings and kiosks - inclusion of the service in the expression of “selling of space of time slots for advertisement other than advertisements broadcast by Radio or Television” as placed in the negative list of service provided under Section 66D of the Finance Act, 1994 with effect from 01.07.2012 or not - extended period of limitation.
HELD THAT:- The making of advertisement includes basic planning of advertisement For eg: How to advertise, where to advertise, mode of advertisement, etc. which are decided on the basis of the requirement of the client. Preparation of advertisement includes preparing the detailed execution program for advertisement on the basis of planning, printing of the material for display or exhibition. Display/exhibition includes displaying the advertisement through various mode such as hoardings, kiosk, etc. - as regard the disputed amount on which the Service Tax was demanded does not relate to making of advertisement or preparation of advertisement. The appellant’s activity is covered under the display of the advertisement through various modes such as hoardings, display board, kiosk, etc. this can be further get cleared from the invoices of the service raised by the appellant.
The appellant is charging fixed amount on monthly basis towards display charges and the description provided in the invoice is media space. In the invoice there is no charges for the services such as making of advertisement or preparation of advertisement example for visualizing, conceptualizing, designing, etc. of the advertisement therefore, it is clear that the invoices raised by the appellant is not for making or preparation of advertisement but only for the display charges for the space used for display of such advertisement. The appellant has submitted that the printed material/flex is provided by the client therefore, there is no question of including the cost thereof in the media space invoice of the appellant. The appellant’s service is confined to display of advertisement on the hoardings, boards, kiosk, etc. and charge for the same is as per the space provided - As per the advertising service display of advertising (in this case sale of space for advertisement) is one of the various advertising service but by virtue of entry provided in the negative list selling of space for advertisement is not taxable.
If providing space for advertisement is taxed then the entry provided in the negative list under Section 66D (g) will become redundant. The appellant can be charged service tax only in case where they themselves developed printed vinyl/flex and display the same on their hoardings, board, kiosk, etc. - Whereas, as per the facts available on record the concept of visualization, conceptualization, preparation of advertisement were done by some other persons and the appellant only provided the space for displaying such advertise therefore, the appellant’s activity is clearly limited to “Selling of space or time slots for advertisements other than advertisements broadcast by radio or television”. As per the facts, we find that in the present case Customers who intend to advertise their product/service do approach to the advertising agency to advertise their product by providing duration and the time during which their advertisement should be displayed. If the advertising agency designs, visualizes, of conceptualizes advertisement to be displayed or exhibited then he will be covered under the scope of taxable service.
The appellant have categorically asked for the cross examination of the witnesses who have given the statements but the adjudicating authority giving a lame excuse rejected the request for the cross-examination. Section 9D mandatorily put obligation on the adjudicating authority to examine the witness before relying on the statements recorded during investigation - even if, the appellant does not ask for the cross-examination, the adjudicating authority is duty bound that he must examine each and every witness whose statement he is going to rely upon for adjudication of the case. Since witnesses were not cross examined, their statement cannot be used as evidence. In that case only other documents available on record can be used for deciding the case. As per the documents as discussed above, we do not find that the appellant are engaged in visualizing, conceptualizing , creating, making, preparing the advertisement, these activities are done by advertising agencies who in turn provide the readymade advertising material to the appellant only for displaying on their hoardings. Therefore, firstly the statements particularly in the nature of the present case is not very relevant, secondly the same cannot be relied upon as the same has not passed the test of examination as mandatorily required under section 9D of the Central Excise Act, 1994 which is applicable in the case of Service Tax as per Section 83 of the Finance Act, 1994.
The appellant has provided service of sale of space for advertisement on their hoardings/bill boards, kiosk, etc. and it is clearly covered under Negative List during the period 01.07.2012 to 30.9.2014, accordingly demand for this period is set aside.
Demand for the period 01.10.2014 to March, 2016 - HELD THAT:- The appellant has repeatedly submitted that from 01.10.2014 they have been paying Service tax regularly and there is no short payment of Service Tax rather there may be excess payment. It is observed that from the submission made by the appellant before the learned adjudicating authority and the finding in the impugned order that some service of sale of space was provided during the period 01.07.2012 to 30.09.2014 but the invoices were raised on or after 01.10.2014. The Adjudicating Authority since decided the matter on merit that service of the appellant is taxable he has not gone into the issue that in case service was provided prior to 30.09.2014 and invoices were raised after 01.10.2014, Whether the service tax should be chargeable considering the date of service or the date of the invoices.
The bona fide belief with regard to non taxability of sale of space for advertisement gets clearly established. The appellant were regularly filing their ST-3 returns. It was known to the department that the appellant was paying Service tax prior to 01.07.2012 and also started paying Service Tax from 01.10.2014 and interregnum period the entry of space for advertisement was under Negative List. Therefore, we do not see any suppression of fact or the mala fide intention on the part of the appellant for non-payment of service tax. Therefore, the demand for extended period is not sustainable not only on merit but also on limitation. Having held so no penalty is imposable on the appellant for the same reason.
Appeal allowed - decided in favor of appellant.
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2021 (2) TMI 6
Levy of personal penalty - Levy of penalty of ₹ 1 Lakh each on the Managing Director as well as Chief Financial Officer under Section 78A of the Finance Act, 1944 - allegation is that Chief Financial Officer of the company and Managing Director both were well aware of the fact of service tax charged and collected in full but not paid to the Government Account - HELD THAT:- During the pendency of these three appeals, the company as well as the Managing Director and the Chief Financial Officer applied under the Sabka Vishwas Legal Dispute Resolution Scheme but only the application filed by the company was cleared by the Department and Discharge Certificate was issued and accordingly the appeal of the company is dismissed as withdrawn but the applications filed by the individuals were rejected.
Further, on merit also, there are no material which was considered by both the authorities below while imposing the penalties on these two officers under Section 78A of the Finance Act. The only ground on which both the authorities have imposed penalties is that these officers were negligent whereas there are no material to substantiate that allegation against these officers. These officers have merely complied with the agreement entered into between the parties and no knowledge can be imputed on them that they have deliberately violated the provisions of the Act.
In the case of HINDUSTAN STEEL LIMITED VERSUS STATE OF ORISSA [1969 (8) TMI 31 - SUPREME COURT], wherein it was held that penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of it obligation - Further, in the SCN also, it has not been established that these individuals have acted in contumacious manner so as to impose penalty.
The imposition of penalty on the appellants is not justified - appeal allowed - decided in favor of appellant.
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2021 (2) TMI 5
CENVAT credit - input services or not - Input service distributor (ISD) - service rendered by Tata Sons Ltd. under BEBP agreement dated 18.12.1998 between Tata Steel Ltd. and Tata Sons Ltd. - service tax paid as per the BEBP Agreement dated 18.12.1998 between itself and Tata Sons Ltd. exclusively to its Steelworks at Jamshedpur and not to other units of TSL - time limitation.
Whether the service rendered by Tata Sons Ltd. under BEBP agreement dated 18.12.1998 between Tata Steel Ltd. and Tata Sons Ltd. is eligible as “input service” for TSL and the service tax paid is available as cenvat credit to TSL under the Cenvat Credit Rules, 2004? - HELD THAT:- The BEBP Agreement allows user by TSL of the “Tata” brand name, on its products/goods manufactured at its factory in Jamshedpur. Such user of the brand name enhances the marketability of the said goods. Hence, the services have been used by TSL, the manufacturer, indirectly in relation to the manufacture of final dutiable products in its factory at Jamshedpur. This satisfies the requirement of the main part of Rule 2(l) of the Cenvat Credit Rules. The said service is also a service used in relation to TSL’s business of manufacture of final products indirectly. The requirement of the inclusive part of the definition of Rule 2(l) of the Cenvat Credit Rules, as it then was, is also therefore satisfied. Hence, the said service is “input service” on which TSL is eligible to avail cenvat credit.
A similar issue arose in the case of JUBILANT LIFE SCIENCES LTD. VERSUS C.C.,C.E & S.T –NOIDA [2017 (8) TMI 358 - CESTAT ALLAHABAD]. In this case input services were received and consumed in providing Scientific and Technical Consultancy Services by the R&D centres of the assessee to its own units for manufacturing drugs and it was held that the appellant have rightly taken cenvat credit as permissible under Rule 3 read with Rule 2(1) of CCR, 2004 as the services in question have been admittedly used by the manufacturer indirectly in relation to manufacture of final dutiable products. We also find that there is no dispute with regard to the distribution of the credit as permitted in the scheme of the Act and the Rules.
The service involved is an ‘input service’ under the Cenvat Credit Rules for TSL and the tax paid on such service is available as cenvat credit to TSL - Issue is amnswered in favor of appellant.
Whether TSL as ISD was entitled to, during the relevant period, distribute under the Cenvat Credit Rules, 2004, the credit of service tax paid as per the BEBP Agreement dated 18.12.1998 between itself and Tata Sons Ltd. exclusively to its Steelworks at Jamshedpur and not to other units of TSL? - HELD THAT:- TSL have rightly contended that there is no “Tata Steel Group Companies”. The company is Tata Steel Limited, which is incorporated and registered under the Companies Act, 1956 as a public limited company. It has various divisions/units situated in various parts of the country, as detailed hereinabove. The registered and Head Office of the company, including of the said divisions/units, is at Mumbai, the ISD in the instant case. No evidence to the contrary is disclosed in either the show cause notice or in the impugned order, as well as in the instant proceedings. It is settled proposition of law that divisions and units of a company are not separate legal entities/persons. They are part and parcel of the same legal entity, the company, of which they are divisions/units. None of them can be termed as a company as per the Companies Act, 1956. Registration separately as per the provision of the Central Excise Act, 1944 or the Finance Act 1994 as per the requirement of the said statutes and the rules framed thereunder cannot and does not alter this settled legal position.
This issue also decided in favor of appellant - TSL as ISD was entitled to distribute the credit of the service tax paid in respect of the service rendered under the BEBP Agreement exclusively to its Jamshedpur Steelworks during the relevant period - issue covered by the decision in the case of MAHINDRA LOGISTICS LTD. VERSUS COMMISSIONER OF CUSTOMS, EXCISE & SERVICE TAX, NAGPUR [2012 (12) TMI 880 - CESTAT MUMBAI] where it was held that Mahindra and Mahindra Limited is a legal entity which is having two separate divisions. Merely by taking two separate service tax registrations, it cannot be said that both are separate legal entitled. Therefore, demand for the period 15.12.2007 to 10.9.2008 is not sustainable.
The CENVAT credit amount involved has been correctly availed, distributed and utilised by the appellants. The tax demanded and penalties imposed upon the appellants are thus unsustainable. The impugned order cannot be sustained - The issue of time limitation need not be considered.
Appeal allowed - decided in favor of appellant.
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