Feedback   New User   Subscription   Demo   Login      
Tax Management India. Com TMI - Tax Management India. Com
Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles SMS News Highlights
        Home        
Extracts
Home List
← Previous Next →

Canon India Pvt. Ltd. Versus CCE & ST, LTU, Delhi

2018 (2) TMI 936 - CESTAT CHANDIGARH

Banking and Financial Service - appellant is engaged in the financial leasing of equipment and machines under the agreement named as Fixed Period Rental Agreement - Held that: - admittedly there is no transfer of the ownership of the goods at the end of lease, the same does not fall in the category of financial lease and falls in the category of operating lease - demand not sustainable. - Business Auxiliary Service - it was alleged that appellant is providing Business Auxiliary Service for t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Management, Maintenance and Repair Service - import services - recipient of services - reverse charge mechanism - Held that: - it is difficult to agree with the finding of the Ld. Commissioner (A) that it is not an export of service. Since it will be export of service, in that circumstances too, no service tax is leviable and the demand on this issue is therefore unsustainable. - Appeal allowed - decided in favor of appellant. - Appeal No. ST/60413/2013 - Final Order No. 62210 / 2017 - Da .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts from M/s Canon Singapore Pvt. Ltd. (M/s CSPL) on a principal to principal basis and subsequent sale or leasing in the domestic market. Five show cause notices were issued to the appellant during 2008-2011 on the following allegations: (i) that the appellant is engaged in the financial leasing of equipment and machines under the agreement named as Fixed Period Rental Agreement . (ii) that the appellant is providing Business Auxiliary Service for the foreign entity, namely, M/s Canon Singapore .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

charges in relation to management, maintenance and repair services (Sr. No. (iii) above) but has confirmed the demand of ₹ 4,92,22,756/- for the period 01.10.2006 to 30.09.2010 along with interest, demand of ₹ 1,13,45,443/- for the period 01.04.2008 to 30.11.2009 along with interest, and penalties under Section 76,77 & 78 of the Act were also imposed. The confirmed demands pertain to financial leasing of equipment and the Business Auxiliary Service (S. No. (i) and (ii) above). Ag .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

order that the leasing activity of the appellant is squarely covered by the operating lease instead of financial lease has wrongly confirmed the demand. There was no allegation in the show cause notices regarding levy of tax for operating lease . Hence, the adjudicating authority has travelled beyond the show cause notices. He argued that no service tax is payable on the operating lease as has been held by Hon ble Supreme Court in the case of Association of Leasing and Financial Service Companie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t the title of the goods passed from M/s CSPL to the appellant at the time of dispatch of the goods. In this regard, he invited attention to clause 7.3 and 8.1 of the agreement. He claimed that reimbursement is not a consideration of service and the receipt of subsidy from M/s CSPL is a kind of financial support and is like a discount or reduction of the sale price. He argued that neither the CSPL is a client of the appellant qua the goods for which the promotion activity is undertaken nor of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

service and hence not chargeable to service tax because M/s Canon Singapore Pvt. Ltd. is located outside India and they are ultimate beneficiary. He relied on the following case laws in support his contentions:- (i) Gap International Sourcing (India) Pvt. Ltd. Vs. Commr. Of ST. Delhi reported in 2015 (37) STR 757 (Tri. Del.) (ii) Paul Merchants Vs. CCE 2013 (29) STR 257 ( Tri. Del. ) (iii) Pratap Singh & sons Vs. Commissionr of C.Ex., Mumbai-I reported in 2007 (5) STR 389 (Tri. Mumbai) (iv) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

88 to 91 of the impugned order, the Ld. Commissioner (A) has analyzed the nature of leasing activity in details and concluded that the activity of the appellant is squarely covered by the Operating Lease instead of Financial lease . The finding in para 89 and para 91 are particularly relevant and are reproduced below:- 89. The features of agreement suggest that the Noticee has entered into agreement with their customers for leasing of equipments. The Noticee has impliedly accepted this insinuat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ause appended with Section 65(12)(a)(i) of the Act are necessary, that is to say, such conditions are necessary in Financial Lease instead of Operating Lease . Thus, it is unambiguously clear that the Noticee is providing leasing of equipments covered by operating lease instead of financial lease , which is falling under the Banking and other Financial Services defined under Section 65(105)(zm) read with Section 65(12) of the Act and, accordingly, leasing of equipments is liable to Service Tax. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the period prior to 01.06.2007, while upholding the constitutional validity of levy of Service Tax or Financial Lease transactions, has, in para 20 of the judgment, distinguishing the Financial lease from operating lease observes as under: The point which needs to be reiterated is that the funding activity undertakenby the financing party which could be in form of loan or equipment leasing or hire purchase financing, would be exigible to service tax if such activity falls in the category of ban .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

served as under:- As stated above, we are concerned with Financial Leasing Services which are sought to be taxed under section 65(12)(a)(i). The taxable event is indicated in Sec. 65(105)(zm). As stated above, the impugned provision operates qua an activity of funding/ financing of equipment/asset under equipment leasing under which a lessee is free to select, order, take delivery and maintain the asset. The lessor (NBFC) arranges the finances. Thus, the lessor (NBFC) renders financial services .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

agreements in which there is no component of finance would not be covered by the term Financial Lease . 5.3 The definition of Banking and other financial services as given in section 65(12) during the period of dispute was as under: Banking and other financial services means the following services provided by a banking company, on a financial institution or including a non banking financial company on any other body corporation namely (i) financial leasing services including equipment leasing a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

5.4 Thus even during the period price to 01.06.07 when there was no definition of the term Financial Leasing in Section 65(12), this term did not cover the operating lease agreements in which there is no clause giving the lessee, at the end of the lease period, entitlement to purchase the asset an option to purchase the asset. In any case, it is well settled law that a term in a taxing statute, in absence of its definition in it, is to be interpreted in the sense in which it is understood in com .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

customers. There is no evidence to show that the lessee agreements cover 75% or more of the estimated economic life of the leased assets. When the lease agreements are not financial lease agreements, the same would not be exigible to service tax under section 65(105) (zm) read with section 65(12) of the Finance Act, 1994. We, therefore, do not find any infirmity in the impugned order. The Revenue s appeal is dismissed.] 6. Since, in this case, admittedly there is no transfer of the ownership of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the operating lease . In view of the foregoing, the demand of service tax on this ground is unsustainable and is therefore set aside. Issue No. 2: Business Auxiliary Service The allegation in this regard is that the authorized distributor agreement dated 01.08.1997 between M/s CSPL and the appellants vide clause 9.4 provides that M/s CSPL shall from time to time provide reasonable support to the appellants for the promotion and sale of products in India. The appellants have argued that they imp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ant in the form of reimbursement of part such expenses towards such promotional activities. 7. The ld. Advocate emphasized that the goods imported by the appellant are sold by them on their own account and not as an agent of M/s CSPL. He invited attention to clause 7.3 of the above mentioned agreement in which it is mentioned that title to the products shall pass from M/s CSPL to the appellants. We find that the definition of the Business Auxiliary Service includes promotion or advertisement for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ppellant are liable to pay service tax in view of the CBEC Circular No. 141/10/2011 dated 13.05.2011. The appellants have argued that the reimbursement is not a consideration for service and M/s CSPL is neither a client of the appellant qua the goods for which promotional activities are undertaken nor are the goods produced and provided by M/s CSPL. We find force in the contention of the appellant in view of the clauses 7.3, 8.1 and 12 of the agreement mentioned hereinbefore, which are reproduce .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ipal and agent .CIPL shall purchase and sell the products for and at its own account and risk The terms of the authorized distributor agreement are clearly on principal to principal basis. We also note that for the previous period 2003-2008, the Department has accepted the view that the appellant is carrying out the sales and promotion on their own behalf. Hence, these activities are not covered under Business Auxiliary Service . 8. Even if the finding the Ld. Commissioner (A) is accepted that t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a) and Association of Leasing and Financial Service Companies (supra) that service tax is a value added tax, which, in turn, is a destination based consumption tax in the sense that it is not a charge on business but is a charge on the consumer. Therefore what constitutes export of service has to be decided strictly in accordance with the provisions of Export of Services Rules, 2005 and for this purpose, in case of services in relation to business or commerce covered by Rule 3(1)(iii), the term .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

receipt, consumption and delivery of the service is the same. Therefore the condition regarding delivery of service being outside India and use of service being outside India prescribed in Rule 3(2) of Export of Services Rules, 2005 were superfluous and for this reason only, these conditions were deleted first, the condition regarding delivery of service being outside India was deleted w.e.f. 1-3-2007 and thereafter the condition regarding use of service being outside India was deleted w.e.f. 2 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mance of such service in India, would not make them received/consumed in India, if beneficiary user/recipient of said service provided in relation to business or commerce, who has paid for these service and has used the service in his business, is located abroad. The position would be different if the company located abroad who has paid for the service, also has some branch/project in India and the service provided in India is meant for that branch/project - only in that case, the consumption of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

India also needs to be independently satisfied for availing the benefit of export and that effective use of advertisement services shall be the place where the advertising material is disseminated to the audience though the actual benefit may finally accrue to the buyer who is located at another place is not only not in accordance with the provisions of Rule 3(1) of the Export of Services Rules, 2005, but is also contrary to the law laid down by the Apex Court in the case of All India Federation .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


Share:            

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version