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Service Tax - Case Laws
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2025 (5) TMI 1835
Levy and collection of entertainment tax on Direct-to-Home (DTH) broadcasting services and cable television operators - liability to pay entertainment tax under the provisions of the respective State enactments which are relatable to Entry 62 – List II of the Seventh Schedule of the Constitution - Principles of interpretation of tax - doctrine of pith and substance - “Aspect Theory” or Aspect Doctrine - principle of legislative competence - discrimination and violation of Article 14 of the Constitution - Meaning and Scope of the expression “Luxuries, Entertainments and Amusements” - petitions filed under Article 32 of the Constitution - HELD THAT:- We find that the aforesaid observations of this Court squarely exposit the fallacy in the reasoning of the High Court. Even if the statistics presented before the High Court regarding the cable TV operators and their subscribers evinced that the exemption given by the amendment and retrospective exemption granted by the proviso pushed 90% of the operators outside the scope of taxation, the High Court ought to have taken note of the apparent intent of the legislature to tax only those with more than 7500 connections. The High Court was obligated to glean the intent of the legislation by accounting for the exemption provided and not by masking it.
The exemption and the proviso, inserted by way of an amendment, was clearly a statutory tool employed by the legislature to give effect to its conscious decision to levy tax only on the cable operators with more than seven thousand and five hundred connections. Furthermore, there is no reason for striking down a law as unconstitutional merely on the premise that the subscriber could evade or avoid tax liability simply by taking services of an operator with less than seven thousand and five hundred connections. Where the legislation is passed in accordance with constitutional prescriptions, a good faith presumption is accorded to the legislature.
Similarly, it is presumed that the legislature acted with due and elaborate understanding of the societal context for which it legislates. Herein, the legislature perhaps factored that operators with more than 7500 connections ordinarily give add-on features that closely relate to the character of luxury. Be that as it may. Unless a violation of fundamental rights or lack of legislative competence is proved, Courts must be circumspect in interfering with the validity of legislations. It is trite law that this threshold is even stricter in economic legislations.
In any event, if the High Court was of the view that the exemption created was unconstitutional then the correct course would have been to strike down the exemption and direct recovery of tax payable from all assessees for the relevant time period in accordance with sub-section (1) of Section 4. Instead, the High Court has done the opposite. It declared as unconstitutional the provisions of the Kerala Act of 1976 authorizing levy and collection on Cable TV Operators with connections of seven thousand and five hundred and above.
As a result, the revenue payable by a category of assessees who do not fall within the exemption clause is stalled. This not only affects the State’s exchequer but also does not further the plea of equality pressed into service by the assessees. The High Court could have struck down the exemption and directed all cable TV Operators to pay the tax. Instead, while holding that there was a discrimination and violation of Article 14 of the Constitution the High Court has granted an exemption to even the assessee who was liable to pay the entertainment tax under the Kerala Act. By placing the assessee on par with those exempted from payment of entertainment tax, the principle of equality is not applied in its true spirit to the facts of the case. Rather, the High Court has treated unequals as equals, which is in fact a detriment to the plea of equality raised by the petitioner assessee. Rather than striking down the proviso, if the High Court was of the opinion there was a violation of the equality clause under the Constitution, the High Court has extended the exemption clause to the assessee also, which is impressible.
As a result, no cable TV operator would have to pay any entertainment tax. This lacuna in the judgment requires a course connection and hence that portion and particularly paragraph No.6 of the judgment of Kerala High Court dated 28.06.2012 is set aside. The writ petition filed by the assessee is dismissed and the civil appeal filed by the State of Kerala is liable to be allowed and is allowed.
Thus, the judgment of the Kerala High Court is liable to be set aside only on the question of holding that the levy of luxury tax on cable TV operators above 7500 connections being discriminatory and violative of Article 14 of the Constitution of India and thereby declaring it to be unconstitutional.
We summarise our discussion and conclusions as under:
The Civil Appeals filed by the appellants/assessees arising from the judgments of the High Courts of Delhi, Gauhati, Gujarat, Jharkhand, Madras, Orissa, Punjab & Haryana, Rajasthan and Uttarakhand are dismissed. The appeal filed by the State of Kerala is allowed. The appeals arising out of the judgments of Allahabad High Court are allowed in part.
The provisions relevant to this case under the Kerala Tax on Luxuries Act, 1976; Uttar Pradesh Entertainment and Betting Tax Act, 1979; Rajasthan Entertainments & Advertisements Tax Act, 1957 and the Rules thereunder; Gujarat Entertainment Tax Act, 1977 and Gujarat Entertainment Tax (Exhibition by means of Direct-to-Home Broadcasting Services) Rules, 2010; Jharkhand Entertainment Tax Act, 2012 and Jharkhand Entertainment Tax Rules, 2013; Punjab Entertainment Duty Act, 1955 (Amendment in 2010); Delhi Entertainment and Betting Tax Rules, 1997; Assam Amusements and Betting Tax Act, 1939; Orissa Entertainment Tax Rules, 2006, along with the Orissa Entertainment Tax (Amendment) Tax Rules, 2010 are upheld. The correctness of the findings of the High Court of Madras with regard to the charging section in the State enactment being defective is assailed by the State of Tamil Nadu in separate appeals which are not part of this batch of appeals, and accordingly have not been taken up for our consideration herein.
Insofar as the Andhra Pradesh Entertainment Tax Act, 1939 (as adopted by State of Telangana) is concerned, we do not express any opinion as the challenge and applicability of the same is pending before the High Court of Andhra Pradesh. All contentions regarding the assessment orders arising under the Andhra Pradesh State enactment are kept open to be advanced before the appropriate forum.
The Writ Petitions filed before this Court under Article 32 of the Constitution of India are accordingly disposed of.
Having regard to the judgments of this Court in MPV Sundararamier and H.S. Dhillon [1958 (3) TMI 40 - SUPREME COURT], we observe that under the Constitution of India, the power to tax is not an incidental or ancillary power. The power to tax cannot be implied within a regulatory entry under our Constitution. There is also a distinction between the power to regulate and control and the power to tax. However, occasionally a levy may be imposed as a regulatory measure. Thus, the taxation entries under List I and List II (there being no taxation entry in the Concurrent List) are clearly demarcated within the scope of the entries in the aforesaid respective Lists. The effect of this principle is that the subject of taxation is considered to be a distinct matter for the purposes of legislative competence and the power to tax cannot be deduced from the general legislative entry as an ancillary power.
The expression “broadcasting” has been assigned the meaning as per clause (c) of Section 2 of the Prasar Bharti (Broadcasting Corporation of India) Act, 1990 in terms of definition clause in Section 65(13) of the Finance Act, 1994 as amended by the Finance Act, 2001. Under the Prasar Bharti (Broadcasting Corporation of India) Act, 1990, the expression “broadcasting” includes dissemination of any form of communication by transmission of electro-magnetic waves through space or through cables intended to be received by the general public either directly or indirectly through the medium of relay stations.
The expression “entertainments/ entertainment” has been discussed in the cases of Geeta Enterprises, Drive-in Enterprises and Purvi Communications [1983 (9) TMI 319 - SUPREME COURT]. The expression “entertainments/entertainment” includes within its scope and ambit not only the provider of entertainment but also the receiver, inter alia, through the medium of television. Thus, entertainment through television network either through cable television or DTH through set-top box with the object of providing entertainment to the viewer can be taxed in terms of Entry 62 - List II.
We follow the judgment of this Court in Western India Theatres Ltd. in observing that Entry 62 - List II contemplates a tax on entertainments or amusements as objects on which a tax can be imposed and therefore it is not possible to differentiate between an entertainment provider and an entertainment receiver.
If the above reasoning is applied, then both entertainment tax as well as service tax can be imposed on the activity of broadcasting through television for the purpose of entertainment of the subscriber or the receiver thereof. The two taxes are different aspects of the same activity which enable two different legislatures to impose tax under distinct taxation entries in two different Lists.
The principle is well settled that two taxes which are separate and distinct imposed on two aspects of an activity are permissible, as in law, there is no overlapping. This is because the taxes are relatable to distinct taxation entries in separate legislative Lists.
In the instant case, the Parliament under the Finance Act, 1994 and its amendments is not imposing a tax on entertainment. Such a tax is being imposed by the State Legislatures as entertainment is a luxury within the meaning of Entry 62 - List II. In the same way, the Finance Act along with its amendments seeks to impose a tax on the service rendered by the broadcasting agency which is imposed under Entry 97 List – I. In the same vein, under Entry 62 List – II, the State Governments are not imposing any service tax on the assessees.
The Parliament under the Finance Act, 1994 and its amendments is not imposing a tax on entertainment. Such a tax is being imposed by the State Legislatures as entertainment is a luxury within the meaning of Entry 62 - List II. In the same way, the Finance Act along with its amendments seeks to impose a tax on the service rendered by the broadcasting agency which is imposed under Entry 97 List – I. In the same vein, under Entry 62 List – II, the State Governments are not imposing any service tax on the assessees.
The doctrine of pith and substance is applied to consider the vires of a legislation impugned on the basis of the principle of legislative competence in the context of legislative relationship between the Centre and the State. We observe that the aspect theory has no relevance, as such, in determining the constitutionality of any provision on the ground of legislative competence in India. Thus, the constitutional validity of a taxing statute on the ground of legislative competence has to be examined in the context of the doctrine of pith and substance as envisaged under Article 246 of the Constitution of India read with the respective entries in the List. Once the contours of an entry under which a legislation is sought to be made is ascertained, the next step is to study the legislation in question in order to ascertain whether it falls within the contours of that Entry. If it does fall within the contours of a particular entry in a particular List, then that particular legislature which has enacted it would have the legislative competence to enact such a legislation. But a legislation incidentally touching upon an entry in another List does not render it invalid, it means that so long as a piece of legislation is in pith and substance falling within an entry in a particular List, it would be valid as the legislature which has enacted it, has the legislative competence to do so.
Thus, the aspect theory is used to determine if, in fact, there are different aspects within the activity sought to be taxed and whether the taxable event which forms the basis of the levy in a legislative enactment corresponds to any aspect in the activity sought to be taxed.
While applying the aspect theory to the present case, it is noted that the activity of broadcasting is for the purpose of entertainment of the subscriber as held in Purvi Communications. No entertainment can be presented to the viewers unless the broadcaster transmits the signals for instantaneous presentation of any performance, film or any programme on their television. Thus, there are two aspects in this activity; the first is the act of transmission of signals of the content to the subscribers. The second aspect here concerns not only the content of the signals, but the effect of the decryption of the signals by the Set-Top Boxes and the viewing cards inside these boxes provided by the assessees to the subscribers, which is providing and receiving of entertainment through the television. Without the apparatus provided for by the assessees to decrypt the signals, the subscriber would not be able to watch the content that is transmitted, the content being for the purpose of entertainment. The television entertainment provided by them through their modus operandi i.e., by broadcasting, is a luxury within the meaning of Entry 62 - List II. The assessees who are engaged in the activity of providing entertainment are liable to pay service tax on the activity of broadcasting under the provisions of the Finance Act, 1994 read with relevant amendments and are also liable to pay entertainment tax in terms of Entry 62 - List II as being a specie of luxuries. Therefore, both the taxes, one by the State Legislature and the other, by the Parliament are leviable on the activity of the assessees herein. This is because by rendering the service of broadcasting, the assesses are entertaining the subscribers within the meaning of Entry 62 - List II.
There is no overlapping in fact or in law, inasmuch as different aspects of the same activity are being taxed under two different legislations by two different legislatures. This is because the activity of broadcasting is a service and liable to service tax imposed by the Parliament (Entry 97 – List I) and the activity of entertainment is a subject falling under Entry 62 - List II and therefore, the assessees herein are liable to pay entertainment tax as well. Hence, the State Legislatures as well as the Parliament, both have the legislative competence to levy entertainment tax as well as service tax respectively on the activity carried out by the assessees herein.
As far as the judgment of the Allahabad High Court dated 20.07.2012 is concerned, we observe that the High Court could not have construed the amendments made to the UP Act of 1979 as a clarification to include the DTH service which is a new technology, within the purview of the original Act. Hence, to that limited extent, the appeal filed against the judgment of the Allahabad High Court is allowed in part.
The judgment dated 28.06.2012 passed by the Kerala High Court which declared the levy and collection of luxury tax on cable TV operators with connections of 7500 or above as unconstitutional for being discriminatory is incorrect.
The Kerala High Court could have struck down the exemption granted and directed all cable TV operators to pay the tax instead of holding that there is discrimination and violation of Article 14 of the Constitution against the assessees herein. As a result, the High Court has granted an exemption to the assessee who is liable to pay entertainment tax under the Kerala Act. As a result, unequals have been treated as equals which is detrimental to the plea of equality sought to be raised by the assessee.
Thus, paragraph 6 of the judgment of the Kerala High Court dated 28.06.2012 is set aside. The Writ Petition filed by the assessee before the High Court is dismissed and the Civil Appeal filed by the State of Kerala is allowed.
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2025 (5) TMI 1834
Maintainability of appeal - appropriate forum - remedy lies under Section 35G of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994 before the High Court Or exclusively before the Supreme Court under Section 35L of the Central Excise Act, 1944 - Taxability of services - construction of institutions engaged in education - HELD THAT:- Ld. Counsel for the Respondent raises a question relating to the maintainability of the present appeal in view of Section 35G and 35L of the Central Excise Act, 1944, which applies in respect of service tax cases as well.
This Court had an occasion to consider a similar matter in Commissioner of CGST and Central Excise Delhi South v. M/s Spicejet Ltd. [2024 (12) TMI 1408 - DELHI HIGH COURT].
Thus, the present appeal would not be maintainable before this Court. Accordingly, the appeal is dismissed with liberty to the Appellant to approach the Hon’ble Supreme Court.
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2025 (5) TMI 1833
Levy of service tax on a medical professional providing healthcare services - exemption from service tax as per Mega Exemption Notification No. 25/2012-ST - Jurisdiction under section 73 of the Finance Act, 1994 (Service Tax Act) to issue a show cause notice - demand along with interest and penalty - exercising extra-ordinary jurisdiction under Article 227 of the Constitution of India - HELD THAT:- It is also not in dispute that the respondent has not carried out any further inquiry on the basis of information received from the income tax department in Form 26AS to verify as to whether the petitioner was providing medical services or not which is exempt under Notification No. 25/2012.
Considering such facts, we are of the opinion that respondent could not have assumed the jurisdiction under the provisions of the Service Tax Act for levy of service tax for the year 2016-2017. The impugned show cause notice and orders are therefore, quashed and set aside.
Rule is made absolute to the aforesaid extent.
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2025 (5) TMI 1832
Classification of Services as Original Works or Completion and Finishing Services and Valuation under Rule 2A(ii)(A) - Differential duty - reverse charge mechanism - availing the abatement of 60% of the value of works contract services provided by the sub- contractor - Reversal of CENVAT Credit under Rule 6(3) - Discrepancies of financial accounts and ST-returns - period of limitation - HELD THAT:- We have seen the photographs of the buildings in the form in which they are received and how they are completed. We also gone through the extensive work carried out by the appellant. Essentially, the appellant converts a bare skeletal structure of a building into a complete show room including the electricity, HVAC, plumbing, flooring, ceiling, air-conditioning, partitioning etc.
In our considered view, this has to be considered as original work and it cannot be called merely finishing or completion work. If they are considered as original works they will be covered by 2A(ii)(A) of the Valuation Rules and will be entitled to 60% abatement. Service Tax has to be paid only on 40% of the value which the appellant did. We also note it is value taken by previous audit teams who audited the appellants work. Therefore, demand on this count cannot be sustained either on merits or on limitation.
There is no case to invoke extended period of limitation to demand service tax. It is also pointed out that the appellant had been paying service tax and filing ST-3 returns. These could have been scrutinized by the officers within time and if any discrepancy was noticed the demand could have issued within the normal period of limitation. As far as the demand within normal period of limitation is concerned, we find it would be fruitless at this stage to remand the matter to compute service tax for the normal period of limitation because from 2017 the service tax has come to an end and CENVAT credit which was available to assessees was converted into tax credit under the GST. Any payment of service tax under reverse charged mechanism for a normal period of limitation would have to relate back to the time when the services were received and CENVAT credit would also have been available on the same date which would have reduced the service tax liability on the output services corresponding.
At this stage, when the CENVAT provisions under service tax are no longer in existence, it would be fruitless to exercise to go through all this paperwork because revenue will not be entitled to even a rupee of additional service tax. Every rupee the appellant will pay under reverse charge mechanism will necessarily will available to it as CENVAT credit and it would necessarily reduce a rupee as service tax on output services of the appellant.
We, therefore, find that the demand on this count needs to be set aside.
We find that revenue is correct in contending that if common input services are used for providing both taxable and exempted services, proportionate amount of CENVAT credit must be reversed as per rule 6(3) of CCR. However, since the appellant had been filing returns we do not find in justification to invoke extended period of limitation. The demand on this count should be confined to the normal period of limitation.
If the books of accounts show higher figures than the statutory returns the actual figures can be considered for determining the service tax payable by the appellant. However, before considering the figures in the statutory returns and other records, what needs to be ascertained is whether the figures therein represent the value of the taxable services provided or not.
According to the learned counsel for the appellant, it had not only provided taxable service but had also other transactions and the figures in its financial accounts reflected the total. Therefore, they cannot be taken as representing the value of the taxable services provided only. The submissions made by the learned counsel for the appellant deserve to be accepted. Learned counsel further submits that the actual value of taxable services provided were made available to the audit party during audit.
From the impugned order it cannot be established that the entire figures indicated in the commercial accounts reflected only the value of taxable services provided by the appellant. Therefore, the demand of service tax on the count needs to be set aside.
In view of the fact we have set aside the demand of most counts except the reversal of proportionate amount of CENVAT credit under rule 6(3) of CCR for the normal period, we find no justification to uphold the penalties imposed on the appellant.
Thus, the appeal is partly allowed upholding the aforesaid reversal of CENVAT credit under rule 6(3) of CCR but only for the normal period of limitation. Rest of the demand and all penalties are set aside. The matter is remanded to the Commissioner for the limited purpose of determining the amount of CENVAT credit to be reversed under rule 6(3) considering only the normal period of limitation.
The appeal is allowed and the impugned order is modified to the extent indicated above.
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2025 (5) TMI 1831
Demand of service tax on the income declared under survey to Income Tax Department - nature of taxable service - business of construction and sale of residential complexes - income declared to Income Tax Department and director's statement - No independent verification - HELD THAT:- The instant issue stands covered by the decision of this Tribunal in the case of Commissioner of Central Goods, Service Tax and Central Excise, Jaipur vs. M/s Lotus Cons Build Technocrate Private Limited [2025 (1) TMI 788 - CESTAT NEW DELHI].
A perusal of the records indicates that the present demand was proposed based on the statement of the director wherein had stated that amount disclosed before the Income Tax department was received from construction services. We note that the respondent was providing various taxable services, and the statement cannot be sole evidence of provision of services untill corroborated by other documentary evidence. We note that the department has not produced any evidence to establish that the respondent had generated said income / amount so disclosed to Income Tax Department on account of providing taxable services. The proposal of demand of service tax on the income declared under survey to Income Tax Department cannot be sustained.
Thus, we set-aside the impugned order and allow the appeals filed by the appellants.
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2025 (5) TMI 1830
Service tax is leviable on Cheque bouncing, Foreclosure charges and Operating lease rentals are leviable to service tax under category of BOFS - incurred various expenditure in foreign currency for the purpose of import of services under reverse charge mechanism - service of lending - financial lease - Legal Advisory Services - wrongful utilisation of CENVAT Credit - Demand along with interest and penalties - HELD THAT:- We find that as regard to the issue of demand of service tax on cheque bouncing and foreclosure charges involved in both the appeals are concerned, the demand of service tax has been confirmed on both the issues as shown in the table. Both these two issues have been decided by the Tribunal in favour of the appellant in their own case vide Final Order No. 60102-60103/2023 dated 20.04.2023 and the Tribunal held that the demand of service tax with respect to the amount collected as cheque bouncing and foreclosure charges from the customer is not taxable under the Head “BOFS” and is not liable to service tax. It is pertinent to note that the demand with respect to cheque bouncing charges, the demand has been set aside on the ground that the said charges are penal in nature and are not for the purpose of consideration of any service.
As regards the demand with respect to foreclosure charges, the Tribunal set aside the same by relying upon the decision of the Larger Bench in the case of Repco Home Finance Ltd.[2020 (7) TMI 472 - CESTAT CHENNAI] which has categorically held that foreclosure charges cannot be viewed as alternative mode of performance of the contract because they arise upon repudiation of specified terms of contract and are intended to compensate the injured party i.e. banks and non-banking companies.
It is pertinent to mention that the Department filed appeal against the decision of the Tribunal and the Hon’ble Supreme Court, vide its Order dated 29th July, 2024, dismissed the appeal of the Department and upheld the order of the Tribunal. In view of the fact that the matter stands settled by the Hon’ble Apex Court, the demand on these two issues are set aside.
Further, we find that in the present case over the complete period of lease agreement the entire cost of the asset is not being recovered ‘along with interest charges’, as detailed in Annexure B to the agreement. Hence sub-clause (3) of the Explanation is not satisfied and therefore, the transaction will not amount to financial leasing and cannot be taxed under BOFS. Hence, we drop the demand under this category also. As regards the demand of service tax on import of services under reverse charge basis confirmed in the Appeal No. ST/54344/2015, we find that the impugned order has confirmed the demand under four categories viz. the demand of service tax on Equity Shares purchased by the employees under Global Share Participation (GSPP), Legal Advisory Services, Medical treatment of employees and amount with respect to services received prior to October 2007.
As far as the equity shares are concerned, we find that these shares are, in fact, purchased by the employees and contribution is made by the Appellant as per HR Policy and therefore, they are not taxable because they form part of the remuneration of the employees and this activity is not a service and is not classifiable under any of the clause of Section 65(105).
As regards the Legal Advisory Services, we find that the said services were taxable w.e.f. 01.09.2009 under Section 65(105)(zzzzm) but the services in the present case were received during financial years 2007-08 as per the sample invoices on record therefore they are not liable to service tax. Further, as regards the medical treatment of employees are concerned, they are in the nature of reimbursement and not towards any service hence not taxable under any clause of the Section 65(105). As regards the amount received in respect of the services received prior to October 2007, we find that the said amount pertains to the services received by the appellant prior to 2007 and the SCN was issued on 22.04.2012 therefore, the demand cannot sustain as the same is beyond the extended period of limitation.
Further, we also find that in the SCN, demand has been raised on import of services without specifying the specific category under which the service tax has been demanded. Further, the impugned order has also not specified the category under which the demand has been confirmed. Therefore, in view of the decisions cited supra, the demand is liable to be set aside on this ground also. Therefore, we hold that the amount remitted in foreign currency outside India was not subject to service tax during the relevant period.
As regards the demand of interest on wrongful availment of CENVAT credit in Appeal No. ST/55729/2013 is concerned, we find that the demand of interest in the present case is not sustainable for the reason that the appellant had sufficient balance in its CENVAT credit register during the period from 2007-08 and it cannot be said that the CENVAT credit has been utilized and hence demand of interest is not sustainable therefore we set aside the demand of interest. We also find that the entire demand has been confirmed by invoking extended period of limitation but the Department has failed to prove that there was suppression on the part of the appellant.
Further, we find that some of the issues involved in the present case were referred to Larger Bench of the Tribunal in the case of Repco Home Finance Ltd (supra) which clearly shows that the issue involves interpretation of law and it is a settled position of law that extended period cannot be invoked in interpretational cases. Further, we also find that the entire demand has been raised on the basis of audit which cannot be done in view of the decisions cited supra. Therefore, we hold that in the present case, the entire demand is barred by limitation. As regards the question of interest and penalty is concerned, we find that when the demand itself is not sustainable, the question of interest and penalty does not arise.
Thus, we set aside the demand on merit as well as on limitation and allow both the appeals of the appellant with consequential relief, if any as per law.
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2025 (5) TMI 1829
Demand of service tax on construction activities - ‘Commercial or Industrial Construction‘ service - construction services with respect to a building or buildings, having more than 12 residential units - taxability of construction of houses for Avas Vikas Parishad under the scheme of ‘Manyavar Kashiram Shahri Garib Avas Yojna under Welfare Schemes - Taxability of Construction Services Provided to Educational Institutions - HELD THAT:- We observe that the Revenue in its present appeal appears to dispute the well-reasoned and speaking Order passed by the Adjudicating Authority without bringing any evidence on record and without providing any cogent reasoning. We do not find any merit in such approach. As per the documents brought on record before us, and in view of the above discussion, we agree with the Adjudicating Authority that the assessee was involved in the construction of single houses instead of a residential complex.
Accordingly, we find that the issue of taxability of such construction of individual houses has been settled in the case of Macro Marvel Projects Limited. [2008 (9) TMI 80 - CESTAT, CHENNAI], which had been later affirmed by the Hon‘ble Supreme Court. Further, the ratio laid down in the Marco Marvel Projects case was also followed by the Tribunal in A.S. Sikarwar Vs. Commissioner of Central Excise, Indore [2012 (11) TMI 1000 - CESTAT, NEW DELHI].
In the present case, we find that the assessee entered into contract with Avas Vikas Parishad to construct low cost housing under the scheme of ‘Manyavar Kashiram Shahri Garib Avas Yojna‘. Such houses constructed by assessee were not sold but were rather allotted by District Magistrate for a 30 year lease to economically weaker sections/peoples purely in public interest. We find that such fact was not disputed by the Revenue in its appeal.
The existence of a composite contract is immaterial to the issue at hand. Irrespective of the composite contract, the definition of Residential Complex remains unchanged and the houses constructed by the assessee fall under the exclusion of personal use provided therein.
In the present case, the assessee is not availing any exemption provided in an exemption notification. Instead, the construction services by the assessee, involving single houses used for personal residential use, is out of the scope of the definition of Residential complex and thereby is not taxable under the head of ‘Construction of Complex‘ service. In light of the matter being that of pre-negative list regime, since the service in question does not fall under any head of taxable service specified in the Finance Act, 1994; no service tax would be applicable. The name of the scheme under which the houses are constructed is immaterial.
Accordingly, we find that the work undertaken by assessee for constructing low cost housing for Avas Vikas Parishad is out of the purview of Service tax. We do not find any merit or logic in the Revenue‘s argument that such case is not applicable herein in view of the Departmental appeal filed against it which was withdrawn due to monetary limits.
Once a well-reasoned judgement has been passed by the Tribunal in the case of CCE, Allahabad Vs. Ganesh Yadav [2017 (5) TMI 1251 - CESTAT ALLAHABAD], the same cannot be disregarded based on an Appeal filed against such judgement, unless and until the judgement is later stayed/overturned by a higher court. Since the Tribunal‘s decision has not been overturned by a higher court, it is a binding precedent that must be followed by the Revenue in similar facts and circumstances, like in the present case.
Further, we observe that a similar matter of construction by a assessee under ‘Manyaver Kanshiramji Shahri Garib Awas Yojana’ was taken into consideration by this Tribunal in the case of NCR Builders Pvt. Ltd. Vs. Commissioner Of C. EX. & S.T., [2016 (11) TMI 1555 - CESTAT ALLAHABAD].
Thus, conclude that the service provided by assessee of construction of houses to Avas Vikas Parishad, LIC, UPRNN etc. are out of the purview of service tax regime. Accordingly, we uphold the dropping of demand in the Order-in-Original passed by the Adjudicating Authority and disallow the Appeal filed by the Revenue. Next, we move onto the second issue of the demand on construction services provided by the assessee to educational institutions like IIT, JK Educational Foundation, Super house Education Centre etc. relating to construction of buildings i.e. hostels, medical college, lab etc. and repairing activities.
We observe that the Adjudicating Authority has thoroughly perused the documents brought on record by assessee and arrived at a correct conclusion regarding the nature of the concerned educational institutions. Before going into the issue of taxability, we find it prudent to consider the definition of “Commercial or Industrial Construction” as provided under Section 65(25b) of the Finance Act, 1994.
The Hon‘ble Supreme Court in the case of M/s Msco. Pvt. Ltd. Vs. UOI [1984 (10) TMI 44 - SUPREME COURT] has clearly held that the term ‘industry‘ means a place where the process of manufacture or production of goods is carried on and institutions like hospitals, educational, charitable organizations etc. would not fall within the ambit of the same.
We find that even if the definition of industry as under the Industrial Disputes Act, 1947 is relied upon as contended by Revenue, the concerned educational institutions would be excluded from its ambit. We note that no submission has been made by the Revenue in its Appeal in this regard.
We find that in light of Circular No.80/10/2004-ST, it is a settled issue that educational institutions like IIT, JK Educational Foundation etc. which are established for educational, charitable purposes are not primarily used, occupied or engaged in commerce or industry and would not be taxable under the head of ‘Commercial or Industrial Construction’ service. Such Circular is binding on the Revenue and we do not find any reason to deviate from the decision laid down by this Tribunal on this issue.
Accordingly, we uphold the Adjudicating Authority‘s decision of non-taxability of the construction services prided by assessee to education institutions like IIT, JK Educational Foundation etc.
Thus, we do not find any occasion to interfere with the impugned order and the same is sustained.
The appeal filed by the Appellant Revenue is dismissed. Cross objection also gets disposed of.
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2025 (5) TMI 1828
Taxability of the affiliation/inspection fees - rental income - Demand of Service Tax along with interest and penalty - applicability of the negative list under section 66D(1) of the Finance Act, 1994 - HELD THAT:- Learned authorized representative for the Revenue reiterates the impugned order but accepts that the issue involved is the same as in Madurai Kamraj University [2021 (9) TMI 516 - MADRAS HIGH COURT]. We, therefore, find that the demand on this count needs to be set aside.
The appellant collected charges from the banks, post offices, etc. and the demand of service tax has been confirmed on the amounts received by the appellant. Learned counsel submits that the aim of providing the bank, post offices, etc. is not to earn income but to facilitate the students, faculty and staff. This is part of the total service provided by the appellant namely, education which is covered by the negative list under section 66D(l). He, therefore, submits that no service tax can be charged.
Learned counsel, therefore, submits that this issue is also no longer res-integra and the demand needs to be set aside. Learned authorized representative for the Revenue supports the impugned order but concedes that the decision in Rajiv Gandhi University of Health Sciences [2025 (1) TMI 1550 - SC ORDER] was on the same issue.
Thus, we find that question of law with respect to both the demands is decided in favour the appellants. Respectfully following the precedent decisions, we set aside the demand in the impugned order. Consequently, the demand of interest and the penalties also do not survive.
The appeal is allowed and the impugned order is set aside with consequential relief to the appellant.
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2025 (5) TMI 1827
Taxability of service tax liability viz-a-viz the activity of giving vehicle on hire under the head of ‘Supply of Tangible Goods Service’ - receiving a rent-a-cab service under reverse charge mechanism - recovery of service tax of alongwith interest and penalties - invocation of extended period of limitation - taxable service defined under section 65 B 44 of Finance Act, 1994/2012 - HELD THAT:- I observe it to be an admitted fact that the entire service tax liability, for the period in dispute, with respect to giving machinery on hire i.e. with respect to ‘Supply of Tangible Goods Service’ stands paid/ discharged by the appellant alongwith the interest on 07.06.2017. It is clear that the amount of tax demand in dispute, for the said service, was paid by the appellant much prior the issuance of impugned show cause notice except that a meager amount of Rs. 22,177/- along with the interest of Rs. 17300 was paid on 22.02.2018 however prior the issuance of the Order-in-Original. Statute itself provides that where the assessee pays tax, Show Cause Notice is not required to be issued.
These observations are sufficient for me to hold that with respect to the activity of ‘Supply of Tangible Goods’, it is not the case of evasion of duty. I hold that the extended period has wrongly been invoked I draw support from the decision in the case of Anand Nishikawa Co. Ltd. vs. CCE, Meerut [2005 (9) TMI 331 - SUPREME COURT].
Thus, it becomes clear that in the present case there is no intentional evasion of tax on part of the appellant. Hence there was no reason to invoke the extended period of limitation. The Show Cause Notice is liable to be set aside on this score of limitation itself. Also the given circumstances sufficiently shows that present is not the case where penalty should have been imposed as the appellant had already paid the service tax which was not paid earlier due to bonafide belief of no liability. It is also a settled provision of law that mere omission cannot be called as an act of suppression.
In the light of this entire discussion and the Show Cause Notice itself being barred by time the demand confirmed in the name of rent-a-cab service also gets hit by the period of limitation. Otherwise also the demand is not sustainable on the merits.
In the present case the amount received by the appellant was the travelling expenses. There was no contract entered for getting cab on rent. Hence on merits also second demand with respect to rent-a-cab is not sustainable.
As a result of entire above discussion the order under challenge is hereby set aside. Consequent thereto the appeal stands allowed.
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2025 (5) TMI 1826
Taxability of service under the category “tolerating an Act or situation” - Circular No. 214/1/2023-ST - demand alongwith interest and penalty - HELD THAT:- We find that the issue involved in the present case is no longer res integra having been decided by the Tribunal in the case of South Eastern Coal Fields Ltd. [2020 (12) TMI 912 - CESTAT NEW DELHI]
We also find that the CBIC vide Circular No. 214/1/2023-ST dated 28.02.2023 has accepted the decisions of the Tribunal in the cases of South Eastern Coal Fields Ltd. [2020 (12) TMI 912 - CESTAT NEW DELHI] and Western Coalfields Ltd [2022 (9) TMI 741 - CESTAT MUMBAI]
Thus, we are of the considered opinion that as the issue is no longer res integra, therefore, the impugned order cannot be sustained. The appeal is, accordingly, allowed.
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2025 (5) TMI 1825
Application for Condonation of Delay - No details with regards to the date of receipt and reason for delay in receipt - computation of limitation period under Section 85(3A) - HELD THAT:- The Hon’ble Bombay High Court in the case of Skoda Auto Volkswagen India Pvt. Ltd. V/s Commissioner (Appeals) [2021 (3) TMI 542 - BOMBAY HIGH COURT] wherein in similar facts of the case similar order of the Commissioner (Appeals) has been set aside and matter is remanded back.
In view of the above decisions, I do not find any merits in the manner in which the appeal filed by the Appellant has been dismissed. In my view in term of the decision of the Hon’ble Bombay High Court the appeal should be treated as filed within the extended period of limitation and consequences should follow. The Application for Condonation of Delay should have been considered treating the appeal to be filed within the extended period of limitation.
The Appeal is allowed by way of remand to the First Appellate Authority for consideration of the Condonation of Delay Application filed by the Appellant and if the Application is allowed the issue may be decided on merits.
As the matter is substantially old the matter in remand proceeding should be finalized by Commissioner (Appeal) within three months of receipt of this order.
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2025 (5) TMI 1824
Demand of service tax under Business Support Services (‘BSS’) - activity of processing/manufacturing products for GCPL - activity amounts to ‘manufacture’ within the meaning of Section 2(f) of the Central Excise Act, 1944 - Demand of along with interest and penalty - HELD THAT:- Without prejudice, it is submitted even if the activity undertaken by the Appellant does not amount to manufacture, still service tax is not payable in view of the exemption provided vide Notification No. 8/2005-ST dated 01.03.2005 for the period prior to 01.07.2012 and Sl. No. 30(c) of Notification No. 25/2012-ST dated 20.06.2012 for the period post 01.07.2012. Such notification exempts payment of service tax on production or processing of goods which does not amount to manufacture, provided that applicable excise duty is finally paid by the principal manufacturer. Therefore, the impugned order confirming the demand of service tax is liable to be set aside on this ground alone.
We find that in this case also, the facts are similar to the case of M/s Winsor Fashion Private Limited (supra). The invoices raised by the appellant are similar to M/s Winsor Fashion Private Limited [ 2024 (3) TMI 238 - CESTAT KOLKATA].
Therefore, we find that as the issue is more res-integra in view of the decision of the Tribunal in the case of M/s Winsor Fashion Private Limited (supra), we hold that the demand of service tax is not sustainable against the appellant. Accordingly, no penalty is imposable on the appellant.
Thus, we set aside the impugned order and allow the appeal with consequential relief, if any.
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2025 (5) TMI 1823
Taxability of service - receipt of reimbursements for brand promotion of ‘INTEL' and ‘MICROSOFT' - Demand of tax under 'Business Auxiliary Service' - benefit of Notification No. 21/2003-ST - extended period of limitation - levy of penalty - HELD THAT:- Learned Counsel submits that the payments received from Intel are merely in the nature of reimbursement. The reimbursement flows out of a cost sharing agreement, simpliciter and not an agreement for provision of service. Thus, service provider-service recipient relationship does not exist, and there is no consideration for such service. Learned Counsel also draws attention to the contract entered by the appellant and submits that on a plain reading of the above, it is evident that it is not a contract that can be considered as falling under 'Business Auxiliary Service.'
Learned Counsel further submits that Section 65 (105)(zzb) only covers promotion of goods/services. ‘Brand promotion’ is a distinct service that was introduced in the tax net vide insertion of the Section 65 (105)(zzzzq) only with effect from 01.07.2010.
The proceedings against the appellant was initiated and the issue is settled as per the decision in the matter of M/s. Datamini Technologies (India) Ltd. Vs Commr. of C. Ex..,[2016 (12) TMI 1535 - CESTAT MUMBAI], wherein it is held that 'brand promotion' is not covered within the ambit of 'business auxiliary service'.
Learned Counsel further summits that even if it is construed to have rendered service to M/s. Intel, the same should be construed as an export in terms of Rule 3 of Export of Service Rules, 2005. Thus, the demand is unsustainable on this ground also. Learned Counsel also draws our attention to the relevant notifications, including Notification No. 21/2003-ST. dated 20.11.2003, Notification No. 09/2005-ST. dated 03.03.03.2005, Notification No. 28/2005-ST. dated 07.06.2006 and Notification No. 13/2006-ST. dated 19.04.2006
Thus, we find that the issue is squarely covered by the above decision of the Tribunal in the matter of M/s. Datamini Technologies (supra), and we do not have any reason for differ, hence the impugned order is unsustainable and is set aside.
Accordingly the appeal is allowed with consequential relief, if any, in accordance with law.
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2025 (5) TMI 1822
Levy of service tax on works contract services to SEZ units - exemption from payment of service tax vide Notification No. 9/2009-ST - availed CENVAT Credit of service tax paid on input services - demand along with the interest and penalty - difference in the value of the goods procured by the appellant and the value of the sales from their side - HELD THAT:- We find that the ratio laid down in the in the case of HAMON SHRIRAM COTTREL PVT LTD VERSUS COMMISSIONER OF C.E. & S.T. [2024 (4) TMI 628 - CESTAT AHMEDABAD], wherein the judgements of Supreme Court have been relied on, is squarely applicable to the facts of the present appeal. Following the same, we set aside the confirmed demand of Rs.67.62 lakhs and allow the appeal on merits.
We have also given a thought to the present demand, which is in terms of Service Tax demand. Without any dispute, the case is that of purchase [from third party by the appellants] and sale [to the clients of the appellant] of goods. Admittedly, both purchase and sale require VAT payment, since the transaction is that of goods. The margin between the purchase and sale, can never be subjected to any Service Tax, irrespective of whether it is on account of any cost loading or purely on account of price mark up for profit. It is for the Revenue to answer as to how the Service element comes in the margin between the purchase and sale price. Thus, no case towards Service Tax demand could have been made at all in such a situation. Even on this ground, the entire confirmed demand fails.
Coming to the argument of the appellant on time bar, we find that the appellant is registered with the Department for both Central Excise Duty and Service Tax payment. They have been filing their Returns. They also could be holding a bonafide belief that the profit margin is not liable for tax, which is correct. They have recorded all the transactions in the P & L accounts and Balance Sheet, from wherein the data has been gathered by the Revenue to quantify the demand. All these factual details point out that no case of suppression with an intent to evade can be fastened on the appellant. Therefore, we hold that the confirmed demand to the extent of extended period is time-barred. Hence, we said aside the same on the ground of limitation.
The appeal stands allowed, with consequential relief, if any, as per law.
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2025 (5) TMI 1821
Refund claim - Taxability of service - Construction of Residential Complex Service prior to 01.07.2010 - eligible for exemption as per the Board’s Circular No. 108/02/2009-ST - HELD THAT:- In view of the Explanation to the definition of taxable service of ‘Construction of Residential Complex Service’ under Section 65(105)(zzzh) was inserted only with effect from 01.07.2010. The Board’s Circulars dated 29.01.2009 and 10.02.2012 have categorically clarified that the above service was not liable to service tax prior to 01.07.2010; since, the refund claim pertains to the period prior to 01.07.2010, the impugned order rejecting the refund claim cannot be sustained. The issue is no longer res integra in as much as the Principal Bench in the case of Krishna Homes vs. Commissioner of Central Excise, Bhopal [2014 (3) TMI 694 - CESTAT AHMEDABAD].
This Tribunal vide Final order No.21127/2024 dated 18.09.2024 relying upon the various settled decisions held that the appellant is not liable to pay service tax on ‘Construction of Residential Complex’ Service prior to 01.07.2010.
Thus, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law.
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2025 (5) TMI 1820
Entitlement to refund of the accumulated credit on export of the services under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No.27/2012-CE(NT) - Services in the nature of intermediary service - Non- fulfilment of condition laid down in (d) of Rule 6A(1) of the Service Tax Rules, 1994 - HELD THAT:- A plain reading of the said services rendered by the appellant to the overseas company, it cannot be construed that the appellant rendered service in the nature of ‘intermediary service’ if the clarficatiory circular issued by the Board bearing No.159/13/2021-GST dated 20.09.2021 is considered though it is issued in the context of GST, but the concept has been borrowed from the definition of Rule 2 of the POPS Rules, 2012.
The said circular has been considered by the Tribunal in the case of CCT, Bengaluru East Vs. Informatica Business Solutions Pvt. Ltd. Final Order [2024 (11) TMI 922 - CESTAT BANGALORE].
Thus, we do not find merit in the impugned order of the learned Commissioner(Appeals) holding the appellant as an ‘intermediary’ and consequently the services rendered by the appellant to overseas entity fall under the scope of Rule 9(c) of the POPS Rules, 2012; hence, not an export of service.
Consequently, the impugned order of the Ld. Commissioner(Appeals) to the extent of upholding the rejection of the refund claims by Order-in-Orginal Nos. 127/2019 dt. 31.7.2009 & 150/2019 dt. 30.08.2009 is set aside and the above appeals are allowed with consequential relief, if any, as per law.
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2025 (5) TMI 1819
Demand of service tax under the category of 'Mining Services' - activity of “transportation of mining rejects within the mines” - Demand of service tax along with interest and penalty, under Section 78 of the Finance Act, 1994 - imposition of penalty under Section 77 of the Act - HELD THAT:- From the Work Orders listed under paragraph 2.2 of this Order (supra), we observe that the activities undertaken by the appellant as per the said work orders are related to “Transportation of Mining Rejects within the Mines”. We find that transportation of mining rejects is a ‘post mining’ activity which is not liable to service tax under the category of 'Mining Services' as clarified by Board vide Circular No.F.No.232/2/2006-CX.4 Dated 12-11-2007.
Thus, we hold that the demand of service tax confirmed in the impugned order under the category of 'Mining Service' is not sustainable.
Since the demand of service tax is not sustainable, the question of demanding interest and imposing penalty does not arise.
Hence, we set aside the impugned order and allow the appeal filed by the appellant, with consequential relief, if any, as per law.
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2025 (5) TMI 1760
Seeking refund of tax paid under the Reverse Charge Mechanism (RCM) - violation and mis-interpretation of Circular No. 207/5/2017-Service Tax, read with Section 142 (9) (b) of CGST Act, 2017, Rule 7 of the Point of Taxation Rules, 2011 and Rule 7B of the Service Tax Rules, 1994 - Unjust enrichment - HELD THAT:- The learned Tribunal having accepted the fact that there is an error apparent on the face of the order inasmuch as the word “no” was missed out while extracting the relevant portion of the decision in the case of OSI Systems Pvt. Ltd.[2022 (9) TMI 801 - CESTAT HYDERABAD], the Tribunal ought to have noted that the consequence thereof would be to allow the appeal of the assessee and direct the Adjudicating authority to grant refund within a time-frame. In fact, the factual position in OSI Systems Pvt. Ltd., is identical to that of the case of the assessee.
Therefore, the conclusion of the learned Tribunal that the assessee sought for modification of the earlier order dated 4.9.2024 is incorrect since if the word “no” is inserted in the appropriate place then the judgment in OSI Systems Pvt. Ltd. will fully apply to the facts and circumstances of the assessee’s case and consequently, they would be entitled for refund.
Thus, the appeal filed by the assessee is allowed and the order passed by the learned Tribunal is set aside and the substantial questions of law are answered in favour of the assessee and the
Adjudicating authority is directed to grant refund within a period of 60 (sixty) days from the date of receipt of the server copy of this order.
The stay petition (GA/1/2025) also stands allowed.
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2025 (5) TMI 1759
Taxability of services rendered by the sub-contractor - main contractor paid service tax on the entire value of contract - extended period of limitation - imposition of penalties under Section 78 and 77 of the Finance Act - HELD THAT:- We find that the question of taxability of services rendered by the sub-contractor is no longer res-integra. In view of the conflicting decisions of this question, the matter was referred to a Larger Bench of this Tribunal in the case of Commissioner of Service Tax, New Delhi versus M/s Melange Developers Pvt. Ltd. [2019 (6) TMI 518 - CESTAT NEW DELHI-LB]. It was decided that the sub-contractor had to pay service tax on the services rendered by him and the main contractor could to take Cenvat credit of the service tax so paid by the sub-contractor. Therefore, the first question is answered against the appellant and in favour of the Revenue.
On the question of extended period of limitation, we find that during the relevant period, there were conflicting views and the appellant could have honestly entertained the belief that the sub-contractor did not pay service tax. It is only after the decision of the Larger Bench in M/s Melange Developers Pvt. Ltd. (supra) that the issue has been settled. We, therefore, find that the extended period of limitation could not have been invoked in the present case. The entire period of demand falls under the extended period of limitation. For the same reason, penalties under Section 78 and 77 of the Finance Act also should not have been imposed.
Thus, we allow the appeal and set aside the impugned order with consequential relief to the appellant.
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2025 (5) TMI 1758
Application seeking condonation of delay - Covid-19 lock down period - Accountant did not join the office and left without informing about the order of Commissioner (Appeals) to have been received - interpretation of "sufficient cause" - HELD THAT:- No doubt Hon’ble Apex Court in the case of M/s Katiji [1987 (2) TMI 61 - SUPREME COURT], as relied upon by the appellant, has held that the Court should adopt liberal and justice oriented approach for the purposes of condonation of delay. However, in another decision in the case of New India Insurance Company Ltd. Vs. Smt. Shanti Mishra [1975 (10) TMI 101 - SUPREME COURT] it has been held that the discretion given by Section 5 of the Limitation Act, 1963 should not be defined or crystallized so as to convert or discretionary matter into a rigid rule of law. The expression “sufficient cause” should receive a liberal construction however, sufficient cause must cover the whole period of delay.
In an earlier decision in the case of Sitaram Ramcharan Etc. Vs. M.N. Nagarshana And Ors [1959 (9) TMI 51 - SUPREME COURT]., it was held that it shall be incumbent upon the party to satisfy the Court that the party had sufficient cause for not preferring the appeal or making the application itself prescribed time and this was always been understood to meet that the explanation has to cover the whole of the period of delay. Even in M/s Katiji (supra) decision, it has been held that though every days, every hours/every seconds delay is not to be explained by the appellant but the doctrine of a reasonably explaining the sufficient cause must be applied in rationale commonsense pragmatic manner.
Reverting to the present application, as already observed, that leaving of the job by the Accountant during the pandemic period coupled with the fact that the order of Commissioner (Appeals) was received by the appellant within five days of the said order, we hold that the delay even after exclusion of the period, as discussed above is still substantial and the reason quoted is not sufficient to explain the same. This observation of ours stands corroborated from the fact the appellant was aware of the proceedings before Commissioner (Appeals) he had appeared in the matter before Commissioner (Appeals) on 3.2.2021 though through virtual mode. We find no reason for the appellant to keep waiting for more than four years for the order in such proceedings.
Thus, we hold that the present appeal the substantial delay has not been reasonably explained. Hence, we refrain ourselves from condoning the same. The application is therefore dismissed. Resultantly, the appeal with Diary No. 51720 of 2024 remains defective. Be returned to the appellant.
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