Customs, Excise and Services Tax Appellate Tribunal
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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The coram of Sulekha Beevi C.S. (Judicial Member) and P. Anjani Kumar (Technical Member) allowed an appeal which was filed aggrieved by the order of the original authority confirming the demand interest and imposed penalty, including a separate penalty on the Former Chief Financial Officer of Indian Overseas Bank. 

 

Appellant-bank allegedly  had wrongly availed CENVAT Credit in respect of the Service Tax paid on deposit insurance service provided by Deposit Insurance and Credit Guarantee Corporation (hereinafter referred to as ‘DICGC’), investigation was initiated by the Kochi Regional Unit of the Directorate General of Central Excise Intelligence (DGCEI). Scrutiny of documents and statements recorded indicated that the credit availed on the Service Tax paid on deposit insurance service was ineligible. Show Cause Notice was issued proposing to disallow the wrongly availed credit and also to recover the same along with interest and also for imposing penalty.  

 

Counsel of the appellants submitted that the question involved was whether the appellant-bank can avail credit of the Service Tax on the deposit insurance service provided by DICGC. As per Section 15 of the DICGC Act, every insured bank has to pay premium at the rate notified by them. That the appellant has paid Service Tax on the basis of the premium / fees paid by them to DICGC to insure the deposits. That this is an input service for the appellant-bank and the appellant has correctly availed credit of the Service Tax paid to DICGC. 

 

The Tribunal followed the decision in South Indian Bank Ltd. v. CCE, 2020 SCC OnLine CESTAT 2395 wherein it was held that insurance service provided by DICGC to the banks is an input service and the credit of Service Tax is eligible. 

The Tribunal while allowing the appeal held that the credit of the Service Tax paid on the basis of premium paid to DICGC is eligible for Cenvat Credit. 

 

[Indian Overseas Bank v. Commr. of CE&ST, Service Tax Appeal No. 40702 of 2016, decided on June 10, 2022] 


Ms Shwetha Vasudevan, Advocate for the Appellant 

Ms K. Komathi, Authorized Representative for the Respondent 


*Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise & Service Tax Appellate Tribunal, New Delhi (CESTAT): The Coram of Dilip Gupta (President) and P.V. Subba Rao (Technical Member), expressed that, service tax can be levied on services rendered by the club to its members.

Factual Matrix


Rajasthan Cooperative Dairy Federation Limited – Appellant was registered under the Rajasthan Co-operative Societies Act, 2001 for implementation of ‘Operation Milk Flood’ in the State and the District Milk Cooperative Societies and milk unions were all members of the appellant.

The Appellant charged an amount @ 1.25% of the annual turnover of milk unions to manage their finances and other services and the said amount was called by the appellant as Rajasthan Cooperative Dairy Federation Cess.

As per the audit report, it was noted that the appellant had started paying service tax on RCDF Cess but had not paid service tax before and that it was liable to pay service tax on RCDF cess before June 2012 under the category of ‘business support services’ under Section 65(104c) of the Finance Act, 1994.

The appellant had paid service tax from July 2012 but had not paid service tax on the RCDF cess for the period prior to this date. Hence, a show-cause notice was issued to the appellant demanding service tax with interest and proposing to impose penalties upon the appellant. The Commissioner passed the impugned order confirming service tax demand of Rs 6,55,25,588 along with interest and penalties were imposed.

In view of the above, the present appeal was filed.

Question for Consideration


Whether the services provided by the appellant to its own members (who are also separate legal entities) can be considered as services provided by one entity to another?

Analysis, Law and Decision

Tribunal found that the Constitution Bench of the Supreme Court in State of W.B. v. Calcutta Club Ltd., (2017) 5 SCC 356, discussed at length the doctrine of mutuality under Article 366 (29A) (e) of the Constitution and held that doctrine of mutuality continues to be applicable to incorporated and unincorporated members’ clubs after the 46th Amendment to the Constitution and, therefore, no sales tax is payable to the State by the Calcutta Club.

Further, it was held that the above-stated logic would apply to service tax levied on members’ clubs.

The law laid down in the above-stated case was that a club and its members are one and the same, therefore any amount paid by the members to the club and the services rendered by the club to its members were self-service and cannot be taxed.

Coram stated that, the fact that the club was incorporated as a separate legal entity made no difference, further it was added that the same principle won’t be applied.

Further, it was expressed that,

“…the nature of the relationship between the appellant and the milk unions continues to that of club to its members.”

Hence, no service tax was payable on the services rendered by the appellant to the milk unions.

Lastly, the Tribunal held that the demand and penalties imposed needed to be set aside. [Rajasthan Co-operative Dairy Federation Ltd. v. Commr., Central Excise, Service Tax Appeal No. 53009 of 2016, decided on 9-5-2022]


Advocates before the Tribunal:

Shri Narendra Singhvi, Advocate for the Appellant

Shri Ravi Kapoor, Authorised Representative for the Respondent

Customs, Excise and Services Tax Appellate Tribunal
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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Division Coram of P. Anjani Kumar (Technical Member) and P. Dinesha (Judicial Member) allowed appeals against the order of First Appellate Authority which upheld the demand of service tax by the adjudicating authority.

Show cause notices were issued based on the agreement between players and franchisee and MOU between M/s. United Breweries Limited (UBL for short) and M/s. Royal Challengers Sports Private Limited (RCSPL for short), alleging thereby that the appellant had provided the services of promotion or marketing of goods/services by engaging himself in carrying advertising, promotional activity, team endorsement provided by M/s. RCSPL/franchisee/co-sponsors and hence, the same was taxable in terms of Section 65(105)(zzb) of the Finance Act, 1994. It was further proposed that the appellant had also provided the services under the category of “Business Auxiliary Service” as the services provided by the appellant were covered under (i) and (ii) to Section 65(19) of the 1994 Act. Thus, service tax was demanded for the period 2009-10 and 2008-09, apart from interest under Section 75 and penalties under Sections 76 and 77.

In the reply the appellant had denied of any liability however, the adjudicating authority chose to confirm the demand of service tax as well as interest and penalties. Appeal was made to the first appellate authority wherein the order of the adjudicating authority was upheld, thus the instant appeal was filed.

The Tribunal agreed with the contention of the senior advocate for the appellant that the issue was no more res integra as the very same issue was considered by the Kolkata Bench of the CESTAT in Sourav Ganguly v. Commissioner of Central Goods & Service Tax, Kolkata, 2020 SCC OnLine CESTAT 378 wherein, the issue has been decided in favour of a similarly placed taxpayer. The Kolkata Bench had taken into account the decision of Bombay High Court in the case of Indian National Shipowners’ Association v. Union of India, 2008 SCC Online Bom 1187 wherein it had been held that the activity of the appellant therein could not be subjected to levy of service tax under Business Auxiliary Service prior to July 1st, 2010.

The Tribunal finally relying on the order of the Kolkata Bench decision allowed the appeal and held that there is no liability on the appellant and hence, demands raised for both the periods cannot sustain.[Anil Kumble v. Commr. of Central Excise, Customs & Service Tax, 2022 SCC OnLine CESTAT 105, decided on 31-03-2022]


Mr. V. Raghuraman, Senior Advocate For the Appellants

Mr. P. Gopakumar, Additional Commissioner (AR)


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: In the instant appeals, the Market Committees located in Rajasthan raised their grievance over the decision of CESTAT that respective Market Committees are liable to pay service tax under the category of ‘renting of immovable property service’ for the period upto 30.06.2012. The Division Bench of M.R. Shah* and B.V. Nagarathna, JJ., while observing that in a taxing statute, it is the plain language of the provision that has to be preferred, where language is plain and is capable of determining defined meaning; dismissed the appeals and held that on and after 01.07.2012, such activities carried out by the Agricultural Produce Market Committees is placed in the Negative List. If the intention was to exempt such activities of the Market Committees from levy of service tax, then there was no necessity to place such activity of the Market Committees in the Negative List. Therefore, it can be safely said that that, the Market Committees were not exempted from payment of service tax on such activities.

Facts: Krishi Upaj Mandi Samitis (Agricultural Produce Market Committees) were established in Rajasthan under the provisions of Rajasthan Agricultural Produce Markets Act, 1961. The committees regulate sale of agricultural produce in the notified markets. They charged “market fee” for issuing license to traders, agents, factory/storage, company or other buyers of other agricultural produce. They also rented out the land and shops to traders and collect allotment fee/lease amount for such land/shop.

The Revenue was of the view that the appellants are liable to pay the service tax on the services rendered by them by renting/leasing the lands/shops. The same was challenged by the appellants. However CESTAT noted that with the introduction of Negative List Regime of taxation w.e.f. 01.07.2012, the services in question were excluded from the tax liability and therefore the appellant(s) being an Agricultural Produce Market Committee was/were excluded from tax liability on and after 01.07.2012; i.e. Market Committees are not liable to service tax for the period after 01.07.2012, however CESTAT held that Market Committees are liable to pay service tax under the category of “renting of immovable property service” for the period upto 30.06.2012.

The grievance of the appellants was centered around Circular No.89/7/2006 dated 18.12.2006. As per the Circular, activities performed by the sovereign / public authorities under the provisions of law being mandatory and statutory functions and the fee collected for performing such activities is in the nature of a compulsory levy as per the provisions of the relevant statute and it is deposited into the Government Treasury, no service tax is leviable on such activities. Paragraph 3 of the Circular, specifically clarifies that if such authority performs a service, which is not in the nature of a statutory activity and the same is undertaken for consideration, then in such cases, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service.

Contentions: The counsels for the appellants Prakul Khurana and Ms. Divyasha Mathur, submitted before the Court that the activity of allotting shops/premises/spaces to traders and brokers by the respective Market Committees for the purpose of storage and/or marketing of agricultural produce is in the nature of a statutory activity as mandated under S. 9 of Rajasthan Agricultural Produce Markets Act, 1961 and, therefore, the Market Committees are exempted from payment of service tax on such services as per Circular. They further contended that the fees collected by the respective Market Committees on renting/leasing the land/shop will be deposited in the Market Committee Fund and the same shall be ultimately used for the betterment of the market area, thus when the Market Committees are the public authorities under the 1961 Act and when they perform the statutory duty / function of allotment/renting/leasing of land/shop, then such Market Committees are entitled to the exemption provided under the 2006 Circular.

The counsel for the respondent, Nisha Bagchi submitted before the Court that the activities of allotment/renting/leasing of the shop/shed/platform/land cannot be said to be a mandatory statutory activity and therefore, the Market Committees are not exempted from service tax as per 2006 Circular. She further argued that as per the language used in the legislation, S. 9 of the 1961 Act, is an enabling provision and does not cast a mandatory duty over the Market committees to allot/rent/lease the shop/land/platform.  Therefore the activities of renting/leasing by the Market Committees to the traders cannot be said to be a statutory activity, hence the market committees are not entitled to claim any exemption under the 2006 circular. The respondents further contended that exemption notification should be strictly construed and given meaning according to legislative intent and that the statutory provisions providing for exemption have to be interpreted in light of the words employed in them and there cannot be any addition or subtraction from the statutory provisions.

Observation: Perusing the 2006 Circular, the Court noted that language used is clear and unambiguous. Applying the principles of interpretation of statutes, the Court observed that, “It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the relevant policy and the exemption notifications issued in that regard”.

The Court observed that the contention of the appellants stating that the activity of rent/lease/allotment of shop/land/platform/space is a statutory activity and the Market Committees are performing their statutory duties under S. 9 hence the entitlement to exemption, holds no substance.

After carefully perusing the words used in S. 9, the Court stated that the activity cannot be said to be a mandatory statutory activity as contended by appellants since the fee collected is not deposited into the Government Treasury; it will go to the Market Committee Fund and will be used by the market committees. Thus such a fee collected cannot have the characteristics of the statutory levy/statutory fee. Thus, under the1961 Act, it cannot be said to be a mandatory statutory obligation of the Market Committees to provide shop/land/platform on rent/lease. “If the statute mandates that the Market Committees have to provide the land/shop/platform/space on rent/lease then and then only it can be said to be a mandatory statutory obligation otherwise it is only a discretionary function. If it is discretionary function, then, it cannot be said to be a mandatory statutory obligation/statutory activity. Hence, no exemption to pay service tax can be claimed”.

[Krishi Upaj Mandi Samiti v. Commissioner of Central Excise and Service Tax, 2022 SCC OnLine SC 224, decided on 23-02-2022]


*Judgment by: Justice MR Shah


Sucheta Sarkar, Editorial Assistant has put this report together

Customs, Excise and Services Tax Appellate Tribunal
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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Dilip Gupta (President) and P.V. Subba Rao (Technical Member) took up an appeal which was filed by Air India to assail that part of the order by which the demand of service tax of Rs. 37,58,23,581/- has been confirmed against the total amount of service tax that was proposed in the show cause notice. It was for the reason that there was no liability pay service tax prior to 18-04-2006. The Commissioner had also ordered for recovery of interest under section 75 of the Finance Act, 1994 and penalty under Sections 76, 77 and 78 of the Finance Act.

The issue that arises for consideration in this appeal is regarding demand of service tax under the reverse charge basis on the services received from “Computer Reservation System” companies under the category of “online information and database access or retrieval” services defined under section 65 (75) of the Finance Act and made taxable under section 65(105)(zh) of the Finance Act.

The appellant claims to be a 100% government owned company engaged in the business of transportation of passengers, cargo, etc. in national and international traffic by air. It further explained the entire working of the CRS companies.

The Directorate General of Central Excise Intelligence had initiated an investigation against the appellant by alleging non-payment of service tax on reverse charge basis for payment made to CRS companies.

The Tribunal analysed on two sets of decisions in order to address the issue first being United Telecom Ltd. v. Commr. of Service Tax, 2008 (8) TMI 191- CESTAT-Bangalore wherein the appellant entered into a contract with the Government of Andhra Pradesh to build, own and operate a Wide Area Network to provide data communication services to Andhra Pradesh Technology Services Limited. The issue that arose was whether the appellant was liable to pay service tax under OIDAR. The Division Bench held that the ownership of data was relevant and since the data was generated only by Andhra Pradesh Government and the same was used by different wings of the Government, the appellant had not provided any data. Thus, the demand of service tax was not justified and second being British Airways v. Commr. of Central Excise (Adjudication), 2013 (36) STR 598 (Tri.-Del.) where the issue was whether OIDAR service was received by British Airways from foreign based CRS companies and British Airways was liable to pay service tax under reverse charge mechanism, the Division Bench after referring to the  earlier decision held that the services were covered by the definition of OIDAR.

The Tribunal was of the view that there were two conflicting views of Division Benches of the Tribunal. It would, therefore, be appropriate to refer the matter to the President for constitution of a Larger Bench of the Tribunal to decide the issue.[Air India Ltd. v. Commr. (Adjudication) Service Tax, 2022 SCC OnLine CESTAT 33, decided on 08-02-2022]


Suchita Shukla, Editorial Assistant ahs reported this brief.

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Customs, Excise and Service Tax Appellate Tribunal, Chandigarh: Coram of Ashok Jindal (Judicial Member) and CJ Mathew (Technical Member) addressed whether the assessee will be liable to reverse CENVAT credit on the amount written off as bad debts.

Two appeals were filed against the impugned orders confirming the demand for reversal of CENVAT credit on the amount written off as bad debts and on advertisement & sales promotion services.

Factual Background

Appellant was engaged in providing banking and other financial services, credit card, debit card etc. and business support services, further, the appellant received various input services for providing their output services and availed CENVAT credit thereon.

It was stated that, in some cases, the appellant could not recover certain payments from their customers and wrote them off as bad debts in their financial records.

To launch a co-brand credit card, the appellant entered into a co-brand credit card agreement with Indian Railway Catering and Tourism Corporation Limited (IRCTC). Appellant paid fixed charges to IRCTC for every subscriber of credit card and in turn, IRCTC agreed to promote the credit card by modifying its website, through press advertisements and related collaterals.

IRCTC raised invoices on the appellant for the said purpose and the appellant availed the CENVAT credit of service tax paid thereon.

Two show-cause notices were issued for the reversal of CENVAT credit availed on input services attributable to the amount written off as irrecoverable dues; reversal of CENVAT credit where service tax was paid under reverse charge basis; reversal of CENVAT credit availed on the advertisement, catering and event management services.

Impugned orders were passed by confirming the demands holding that the amount written off as bad debts, the appellant was not entitled to avail CENVAT credit of input services attributable to the amounts written off and denial of CENVAT credit on input services received from IRCTC by classifying them as catering services.

Appellant approached the tribunal against the above-stated orders.

What was the dispute?

The appellant had written off certain amounts for consideration of services, they had not received.

Analysis and Discussion

Rule 3 of the CENVAT Credit Rules, 2004 deals with the situation for entitlement of the CENVAT credit, which prescribes that a provider of the output service shall be allowed to take CENVAT credit of any input service received by the provider of output service on or after 10th day of September, 2004.

The services on which appellant had taken CENVAT credit were ‘input services’ in terms of Rule 2(I) of the CENVAT credit Rules, 2004 and was a provider of output service.

Hence, in terms of Rule 3 of the CENVAT Credit Rules, Tribunal held that the appellant was entitled to avail CENVAT Credit on input services in question.

CENVAT Credit Rules or Finance Act there was no provision for reversal of CENVAT credit for the services provided for which no consideration for service provided was received by an assessee.

Therefore, the appellant had correctly availed the CENVAT Credit on input services although the amount of non-recoverable taxable service had been written off by the appellant for the period prior to 1-4-2011.

Appellant had admitted that they paid service tax on all the taxable services provided by them after 1-4-2011 at the time of provision of service. Hence the appellant cannot be liable for reversal of CENVAT Credit for the services provided after 1-4-2011 on which the service tax was paid.

Denial of CENVAT credit on Invoices issued by IRCTC

Coram found that the description of the service provided by IRCTC was SBI co-brand registered as “SBI” and the said invoice did not prescribe that IRCTC had provided any ‘catering service’ to the appellant.

Concluding the matter, Tribunal held that the appellant was entitled to CENVAT Credit in the services provided by IRCTC as advertisement services.

The impugned orders were set aside in view of the above. [SBI Cards and Payments Services (P) Ltd. v. Commr. Of Service Tax, 2022 SCC OnLine CESTAT 18, decided on 4-1-2022]


Advocates before the Tribunal:

Present for the Appellant: Sh. B.L. Narasimhan, Ms. Krati Singh, Ms. Priyanka Singla, Advocates

Present for the Respondent: Sh. H. S. Brar, A.R.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Division Coram of Sulekha Beevi (Judicial Member) and P Venkat Subbarao (Technical Member) allowed an appeal made in pursuance of an impugned order which allowed levy of service tax on construction services involving composite contracts consisting of material + service. The appellant had not discharged service tax on the consideration received by them for the construction services. Following which a SCN was issued and interest and penalty was charged.

 By the virtue of the following appeal in this court, the counsel for the appellant contended that being composite contracts, the demand under Commercial or Industrial Construction Services cannot sustain in the legal process. This proposition was supported by decision of the Tribunal in the case of India Guniting Corporation v. Commr. Of Central Tax, 2021 (52) G.S.T.L. 174(Tri.-Del.) and Real Value Promoters v. GST. In response to the appellant’s contentions, the department had not put forward any evidence to establish any positive act of willful suppression or mis-statement against the appellant.

The Tribunal relied upon the decision of the Supreme Court in the case of CCE & C v. Larsen & Toubro Ltd., 2015(39) S.T.R. 9013(S.C.)., while upholding the arguments of appellant, the Tribunal accepted the appeal and set aside the impugned order with consequential relief.[SS Constructions v. CCE & ST, 2021 SCC OnLine CESTAT 2680, decided on 10-12-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Ashok Jindal (Judicial Member) allowed an appeal wherein the refund claim was denied in the impugned order on two grounds:

(a) On account that duty has been paid excess, therefore they are not entitled to take excess claim of refund of excess duty paid.

(b) The freight has not been included in the assessable value of the goods, therefore, they are not entitled to claim refund claim thereon.

Counsel for the appellant submitted that at the time of the clearance they were paying duty but in the impugned period certain goods were returned from the buyers on which they have paid the duty which has been cleared on payment of duty, as they have cleared the goods and paid duty at the time of clearance, therefore they have not paid any excess duty and they have claimed refund of the actual duty paid by them in cash. It was further submitted that freight has not been included in the assessable value.

AR submitted that as the goods have been returned to the appellant and they have taken the Cenvat credit thereon, it is not clear from the records that whether any process has been taken on goods and they have been cleared on payment of duty. It is a fact that when they have taken the credit excess payment of duty, therefore, they are not entitled to claim refund of excess duty paid in cash.

The Tribunal noted that it was a fact on record that at the time of clearance of goods, the appellant paid duty and claim refund thereof only, there was a Cenvat credit relying in Cenvat credit account unutilized due to return of goods already cleared by the appellant on payment duty, further held that appellant was entitled for refund of duty paid in cash at the time of clearance of goods relying on the decision of Shree Nath Industries v. Commr. Of CE, 2018 (364) E.L.T. 904. Further, it was a claim of the appellant that they have not included the transportation charges in the assessable value which was evident from the invoices placed before me, in these circumstances, Tribunal held appellant was entitled to claim refund of duty paid on service tax paid on transportation charges.[Pearl Drinks Ltd. v. C.G.& S.T., 2021 SCC OnLine CESTAT 2711, decided on 24-11-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Anil Choudhary (Judicial Member) allowed an appeal which involved the issue as to whether appellant have rightly utilised the cenvat credit for payment of service tax, and whether the same tax can again be demanded.

Appellants were engaged in providing construction/works contract services and renting of immovable property services. During 2011 to 2015, appellants “constructed mall (self owned) at Bulandshahar for the purpose of renting of shops”. The appellant took cenvat credit of Rs.19,76,562/- during construction and Rs.45,45,465/- after completion, totalling Rs.65,22,027/-. Appellant also constructed one building in Noida for M/s.Fiza Services (P) Ltd. on contract value of Rs.91.68 lacs. Appellants disclosed and paid service tax liability of Rs.4,40,105/- under Works Contract Service for the period January, 2015 to September, 2015.

Appellants availed cenvat credit of service tax paid on various services such as civil work, plumbing work, architecture fees, etc. used in construction of mall. The total credit availed on such services was Rs.65,22,027/-. Appellants also availed credit of Rs.41,955/- on input services used for rendering works contract services to M/s.Fiza Services (P) Ltd. which was not in dispute.

Consequent to audit, show cause notice proposed to deny cenvat credit Rs.65,22,027/- relating to input services of mall, and also demanded Rs.3,98,150/- (Rs.4,40,105 – Rs.41,955), as credit wrongly utilised for payment of service tax. It also proposed to impose penalties and demand interest. During adjudication, appellants reversed credit of Rs.19,76,562/- taken on civil work etc., and contended that the balance credit pertains to input services availed after completion of the construction of mall. On appeal, the Commissioner (Appeals) held that service portion of work contract (for construction work) is specifically excluded from the ambit of input service, but there is no restriction with regard to other input services availed for construction of mall.

The Tribunal found that the Department never issued any show cause notice for disallowance of cenvat credit taken, which has been disclosed in the Returns filed before the Department and further, proper records were maintained. It was further found that the appellant has rightly utilised this accumulated cenvat credit for payment of output service tax of Rs.3,98,150/-, which has been objected to by the Revenue and further demand on this score is set aside. Tribunal held that extended period of limitation was not attracted in the facts and circumstances as the issue being wholly of interpretation. Accordingly, penalties imposed under Rule 15 of CCR as well as under Section 78 of the Finance Act were set aside. The appeal was allowed.[MMR Infrastructure Developers (P) Ltd. v. Commr. Of CGST, 2021 SCC OnLine CESTAT 2707, decided on 02-11-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Anil Choudhary (Judicial Member) allowed the appeals which were filed against the common Order-in-Appeal which dealt with the issue as to whether the services provided by the appellant to its parent company in Hong Kong, could be treated as export of services, and if the answer was in affirmative, whether the refund of amount paid under mistake of law by treating such export of services, as taxable service, could be denied by the revenue.

Appellant (M/s CHF Industries India (P) Ltd.) was a wholly owned subsidiary of M/s CHF International Limited, Hong Kong. The appellant was incorporated under the Companies Act, 2013, and was having service tax registration. They provided services in the nature of „assistance in procurement of goods‟ by the parent company in Hong Kong, directly from third parties in India during October, 2015 to March, 2016 and April, 2016 to September, 2016. For the services so provided, the appellant raised invoice for reimbursement of expenses, without charging any service tax and payment for the same was received by the appellant in convertible foreign exchange. The appellant erroneously paid service tax of Rs. 12,84,404/- for the period October, 2015 to March, 2016 and Rs. 9,82,965/- for the period April, 2016 to September, 2016 on wrong legal advice. Subsequently, appellant filed revised returns for both the periods and the entire amount received in convertible foreign exchange was claimed exempt, against “export of services”. The refund claims were rejected by the Assistant Commissioner on the ground that clause (d) & (f) of Rule 6A(1) of Service Tax Rules, 1994, were not fulfilled i.e. place of provision of service was not outside India, and the provider of service and recipient of service were establishments of same person, under Explanation 3(b) of clause (44) of Section 65B of the Act. The appeals of the same were dismissed by Commissioner (Appeals), thus the instant appeal was filed.

The Tribunal concluded that the appellant as well as its parent company in Hong Kong were separate legal entities and therefore they cannot be treated as “same person”. Merely because the parent company in Hong Kong is a holding company of the appellant, the same does not means that the appellant and its parent company are same “person”. The Tribunal relied upon the Supreme Court judgment in Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 where it was held,

72. The approach of both the corporate and tax laws, particularly in the matter of corporate taxation, generally is founded on the abovementioned separate entity principle i.e. treat a company as a separate person. The Income Tax Act, 1961, in the matter of corporate taxation, is founded on the principle of the independence of companies and other entities subject to income tax. Companies and other entities are viewed as economic entities with legal independence vis-à-vis their shareholders/participants. It is fairly well accepted that a subsidiary and its parent are totally distinct taxpayers. Consequently, the entities subject to income tax are taxed on profits derived by them on stand-alone basis, irrespective of their actual degree of economic independence and regardless of whether profits are reserved or distributed to the shareholders/participants. Furthermore, shareholders/ participants that are subject to (personal or corporate) income tax, are generally taxed on profits derived in consideration of their shareholding/participations, such as capital gains. Nowadays, it is fairly well settled that for tax treaty purposes a subsidiary and its parent are also totally separate and distinct taxpayers.”

The Tribunal further added that in the present case appellant is neither arranging nor facilitating provision of service between the parent company at Hong Kong and the third parties in India but is providing its services directly, on its own account, on principal to principal basis, hence appellant is not an “intermediary” and services provided by the appellant to its parent company in Hong Kong cannot be categorized as “intermediary services”.

The Tribunal allowing the appeals finally held that Rule 2(f) read with Rule 9 of Place of provision of Service Rules, 2012, clearly provides that „intermediary‟ which means one who procure or an agent, does not include a person who provides the main service or supply of goods on his account directing the Adjudicating Authority to grant the refund within a period of thirty days from the date of receipt of this order, alongwith interest @12% per annum.[CHF Industries India (P) Ltd. v. Commr. Of CGST, Service Tax Appeal No. 70457 of 2020, decided on 08-10-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): P Dinesha (Judicial Member) allowed an appeal in which the Tribunal had to decide whether the appellant was entitled to refund under Rule 5 of CENVAT Credit Rules, 2004 (CCR).

The Tribunal noted that the adjudicating authority had rejected the refund claim mainly on the ground that the appellant had not debited the amount claimed as refund from their CENVAT credit account, which according to the said authority, was in violation of Para 2(h) of Notification No.27/2012-CE (NT) dated 18-06-2012. Commissioner (Appeals) had dismissed the appeal thus the instant appeal was filed.

The appellant stated that he in fact, had debited the amount claimed as refund in its Returns filed for the period ended 30-06-2017 and the said ST-3 Returns were very much available for verification.

The Tribunal quoted the relevant para in the judgment of Suretax Prophylactics India (P) Ltd. v. CCE, (2020) 116 Taxmann.com 566 wherein the Karnataka High Court had ruled,

“In other words, time limit has to be computed from the last date of the last month of the quarter which would be the relevant date for the purposes of examining if the claim is filed within the limitation prescribed under Section 11-B or otherwise.”

The Tribunal was of the opinion that claim of the appellant had been filed before the expiry of the quarter in which one year period from the last date of receipt of falls and accordingly the applications for refund was well within time. However, as regards the reversal the adjudicating officer had no chance of verifying the veracity of the appellant’s claim vis-à-vis ST-3 Returns in the subsequent period wherein the said reversal was claimed to have been made. Thus, the Tribunal deemed it proper to remand the case for the file of adjudicating authority before whom the appellant shall furnish its ST-3 Returns for the subsequent period wherein the said reversal is reflected. The Tribunal allowed the appeal by the way of remand.[Zafin Software Centre Of Excellence (P) Ltd. v. Commr. Of CT & CE, 2021 SCC OnLine CESTAT 2614, decided on 12-10-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Anil Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) allowed an appeal which was filed against the Order-in Appeal passed by the Commissioner (Appeals), CGST & Central Excise Appeal Commissionerate, Allahabad.

Appellants were providing ‘Consulting Engineer Service’ taxable under the Finance Act, 1994 (hereinafter referred to as ‘the Act’) on which service tax was payable by the appellant. The appellant had also received ‘rent-a-cab service’ and ‘legal service’ on which service tax was payable by the appellant under reverse charge. The show cause notice alleged that the appellant had suppressed the ‘taxable value’ of consulting engineer services provided to their clients during the period 2011-12 to 2015-16 and also that service tax has not been paid on the services of ‘rent-a-cab service’ and ‘legal services’ under ‘reverse charge’ during this period.

The Revenue had computed the tax liability on the basis of gross turnover as reflected in Form No. 26AS (under the Income Tax provision), which is a document available on the website of Income Tax Department, wherein the data recorded is on cash basis or receipt basis of accounting. Whereas under the provisions of service tax, the tax liability is computed on the basis of accrual on mercantile system of accounting, which is in contrast to the cash basis of accounting.

The Tribunal found that the allegations of Revenue were frivolous, that it was only on enquiry it came to know about the affairs of the appellant, i.e. providing of taxable service in view of the admitted facts that appellant is a registered assessee under the Service Tax provision, and have been filing their returns and paying tax. The Tribunal further found that Form No. 26AS was not a statutory document for determining the taxable turnover under the Service Tax provisions. Whereas under the Service Tax provisions, the service tax was chargeable on mercantile basis (accrual basis) on the service provided whether the value of such service was received or not, thus the Tribunal concluded that the whole basis of show cause notice was incorrect and/or misconceived.

This Tribunal has held in other disputed cases that even the barricade provided on the side of highway, maintaining greenery on the side or middle of highway, construction of any facility, refreshment centre for road users, is also part of the road construction and such activity is also exempt. Even the administrative building constructed by the concessionaire, for construction of the road or highway for administration and collection of toll etc. is part of road.

The Tribunal allowed the appeal holding that appellant was entitled to exemption under the Notification No. 25/2012-ST under Sl. No. 13(a) of the said notification for providing consulting engineer services in the matter of road construction.

[Quest Engineers & Consultant (P) Ltd. v. Commr. CGST & CE, 2021 SCC OnLine CESTAT 2629, decided on 28-09-2021]


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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Rachna Gupta (Judicial Member) allowed an appeal which was filed against the order of Commissioner (Appeals) in which he had wrongly invoked the principle of unjust enrichment while rejecting the refund of the appellant.

The appellant in the present case had imported 3000 MT of Aluminium Nitrate from Indonesia. At the time of filing home consumption clearance, appellant had claimed preferential rate of Basic Customs Duty (BCD) @ 5% under Notification No.46/2011 Entry No. 358(1) against BCD @ 7.5%. However, at that time, he could not produce original certificate of origin with authentic signatures. Accordingly, provisional assessment was resorted for. The bills were, therefore, assessed provisionally in terms of section 18(1) of the Customs Act, 1962, however, by extending the aforesaid notification benefit. The appellant later submitted the original certificate of origin along with original revenue deposit challans with the request for finalization of the provisional assessment. The appellant also requested for refund of aforesaid revenue deposit of Rs.15,09,146/-. The original authority after examining the applicability of principles of unjust enrichment and considering the certificate issued by the appellant’s Chartered Accountant, sanctioned the aforesaid refund. However, review order passed under section 129D(2) of the Customs Act, 1962 that the Deputy Commissioner of Customs, Visakhapatnam was required to file an appeal against the said Order-in-Original. The said appeal of the department had been adjudicated thereby setting aside the Order-in-Original. Being aggrieved, the importer had filed the present appeal before this Tribunal.

The appellant had submitted that the BCD as was applicable to the import of Aluminium Nitrate made by the appellant was @ 5% in terms of Notification No.46/2011 Entry No. 358(1). However, a provisional assessment was resorted to for want of certain documents and customs duty @ 7.5% was paid by the importer. At the time of final assessment, the benefit of notification was extended. Accordingly, the appellant became entitled for the refund of the duty paid to the extent of excess 2.5% thereof.

The Tribunal assessed the two findings given by the Commissioner (Appeals) while rejecting the refunds:

  1. i) that the appellant/assessee has not proved constructively with the supporting documents that the duty paid is not charged to the buyer and whether there was any change in the price of the goods produced by them to that effect.

(ii) CA certificate is not sufficient to show that burden has not been passed on to other persons.

The Tribunal was of the view that the said document was opined to be a sufficient document to ascertain whether the incidence of duty has or has not been passed on to the customers as the cost of the product because the books of account are the only way for examining the same. If an amount is shown in books of accounts as cost of material the amount has to be debited from the cash account and has to be credited towards expenses of materials account in the profit and loss statement. On the other hand, if the burden of duty has been borne by the manufacturer itself, the amount shall be debited in the cash account and a credit as receivables shall be shown in the books of accounts. The tribunal drew support from various decisions of Uniword Telecom Ltd. v. CCE, 2017 (358) ELT 666 (Tri-All.), Savita Oil Technologies Ltd. v. CCE, 2017 (358) ELT 331 (Tri-Mumbai).

The Tribunal distinguished the decisions of Hindustan Petroleum Corprn. Ltd. v. Commissioner of Customs, 2015 (328) ELT 410 and UOI v. Solar Pesticides (P) Ltd., 2000 (116) ELT 401 (SC) stating that they were wrongly applied to the facts of the present case which simply talks about the documents to be mandatorily provided in terms of section 27(1A) of the Customs Act to prove that there has been no unjust enrichment.

The Tribunal allowed the appeal and finally held that the findings of Commissioner (Appeals) while rejecting the refund of Rs.15,09,146/- which admittedly was an excess amount paid by the appellant, over and above his liability of paying BCD @ 5% in terms of Notification No. 46/2011 Entry No. 358(1), was not sustainable.[Indian Explosives (P) Ltd. v. Commr. Of Customs & ST, Customs Appeal No. 30258 of 2019, decided on 03-09-2021]


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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Rachna Gupta (Judicial Member) allowed an appeal in relation to evasion of payment of duty.

Appellants were registered under the category of legal consultancy service, work contract service, manpower recruitment/ supply agency service, maintenance or repair service and security/ detective agency service. During the scrutiny of ST-3 Returns of the appellant by AG (Audit), the Department noticed that the appellant had received services of manpower recruitment or supply agency during the period of April, 2015 to March, 2016 and had paid Service Tax under manpower recruitment or supply agency service on 75% of gross service value under reverse charge mechanism as per the provisions of Notification No.30/2012-ST dated 20-06-2012. It was observed that the appellant was otherwise liable to pay Service Tax on 100% of gross service value in terms of the aforesaid Notification being amended vide Notification No. 07/2015-ST dated 01-03-2015 with effect from 01-04-2015.

Short payment of Service Tax of Rs 71,440/- was proposed by the department alongwith the interest and the penalty.

It was submitted on the behalf of the appellant that he was liable to pay Service tax on 75% of gross service value of the services received under reverse charge mechanism. It was submitted that the period in dispute was immediately after the said amended Notification i.e. w.e.f. April 2015 to March, 2016 and the amendment had also to take effect from 01-04-2015. In the given circumstances, intentional evasion may not be alleged against the appellant. The authorities below were alleged to have wrongly held suppression of facts on part of the appellant.

The Tribunal observed that appellant admitted his liability of paying Service Tax for receiving manpower recruitment and supply agency service to the extent of 75% on the gross value of service received under reverse charge mechanism and further opined that non-payment by the appellant for the said period is merely due to his bonafide belief of his liability to the extent of paying the service tax at 75% of the service value. Once there is no apparent malafide on part of the appellant and in view of the aforesaid bonafide belief of the appellant, fastening the allegations as that of concealment fraud and suppression are held to be highly unjustified.

The Tribunal relied on the judgments of the Supreme court in Pushpam Pharmaceuticals Co. v. Collector of Central Excise, 1995 (78) ELT 401 (S.C.) and Continental Foundation Jt. Venture v. CCE, 2007 (216) ELT 177 (SC) explaining the term “suppression of facts”.

When the Revenue invokes the extended period of limitation under Section 11A, the burden is cast upon it to prove the suppression of fact as far as fraud and collusion are concerned, it is evident that intent to evade duty is built into these very words so far as misstatement or suppression or facts are concerned, they are clearly qualified by the word “willful” preceding the words “mis-statement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or Rules” are again qualified by the immediately following words” with intent to evade payment of duty”. Therefore, there cannot be suppression or misstatement of fact which is not willful.

The Tribunal allowing the appeal held that alleged non-payment cannot be called as willful or intentional act of the appellant to evade the payment of duty. The findings of Commissioner (Appeals) that there was no documentary evidence to prove the payment of service tax twice in support of appellants contention was therefore held, not at all sustainable.[Mahatma Gandhi University of Medical Sciences and Technology v. CCE & CGST, Service Tax Appeal No. 50962 of 2020 [SM], decided on 08-09-2021]


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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Raju (Technical Member) partly allowed an appeal which was field against the demand of service tax and imposition of penalties.

Counsel for the appellant pointed out that there were two issues involved. First issue related to the payment of service on the reverse charge basis on GTA services received by them and he pointed out that the demand pertains to the period April 2005- March 2006. The appellant had discharged the duty liability through their Cenvat credit on 1st December, 2006 along with interest. However, when the revenue pointed out that this amount should be paid in cash, the appellant discharged the duty in cash on 27-12-2006. It was again pointed out that they were not contesting for payment of duty and interest and were entitled for the benefit of Section 73(3) of the Finance Act, 1994. The revenue had denied the benefit of the said section because Section 73(3) was introduced in 2010 much after the disputed period.

Second issue related to the demand of service on reverse charge basis in respect of commission paid by the appellant to a foreign entity. Period of the second dispute was 16th June 2005 to March 2006. He pointed out that the said period was prior to the introduction of Section 66A and prior to the said period the levy itself was not leviable. He argued that during that period there was lot of confusion in the trade regarding leviability of the said duty on reverse charge basis. He also claimed that they were not demanding any refund of duty but only setting aside of penalties imposed under Sections 76 and 78. He also claimed that their specific claim under Section 80 was not considered.

AR argued that Section 73(3) introduced much after the disputed period and therefore, had no application in the instant case.

The Tribunal found that the first issue related to the payment of service on reverse charge basis in respect of GTA services received by appellant, and that the appellant had paid the service tax as soon as it was pointed by the auditor and again in cash when it was pointed out that it had to be paid in cash and thus, no malafide on the part of the appellant could be found.  It was held that the benefit of Section 80 should be extended for the appellant and penalty under Section 76 and 78 were set aside.

In reference to the second issue, it was established that the period was prior to introduction 66A when the duty was not leviable, thus the Tribunal partly allowing the appeal found that there is no justification in imposition of penalty under Sections 76, 77 and 78.[Sud Chemie (P) Ltd. v. C.C.E. & ST, Service Tax Appeal No.10021 of 2019, decided on 02-09-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Dilip Gupta (President) and P. Anjani Kumar (Technical Member), partly allowed a petition in which the issue was as to whether the credit of Excise Duty/Additional Customs Duty (CVD) on inputs and capital goods and credit of Service Tax paid on input services which have been used for the construction of Mall, further used/usable for providing taxable output service was admissible to the appellants.

The appellant was engaged in the business of setting up and managing shopping centres, family entertainment centres, multiplexes, etc. popularly known as “Malls”. The appellant registered itself with the Service Tax Department for Renting of Immovable Property Service, Maintenance and Repair Services, Advertising Services, GTA Services, Management Consultancy Services, etc., intended to be provided by them. The appellant availed the credit on inputs like cement, steel, angles, channels etc., and input services like construction services, consultancy, architect and allied services etc., used by them in the construction of “Malls”. After an audit of appellants records the Department opined that the appellant was not eligible to avail such credit. Show Cause Notice was issued wherein recovery of CENVAT credit availed and utilized was confirmed under Rule 14 of CENVAT Credit Rules 2004 along with applicable interest and penalty.

Senior Counsel assisted by Shri Navin Khandelwal and Shir Piyush Parashar appearing on behalf of the appellant submitted that definition of “Input” and “Input Service” had undergone a change with effect from 01-04-2011 by Notification dated 01-03-2011 and it is evident that goods used in the construction of a building or a civil structure are excluded from 01-04-2011 but were included to be eligible for CENVAT credit prior to 01-04-2011; therefore, the credit availed by the appellant prior to 01-04-2011 has rightfully been availed.

Authorized Representative appearing for the Department submits that in terms of Rule 2 (1) of the Credit Rules, CENVAT credit is restricted to such services which are used by the provider of taxable services.

The Tribunal on the argument of Revenue regarding absence of nexus between input services and output services relied on the decision of DLF Promenande Ltd. v. Commr. ST, Service Tax Appeal No. 54213 of 2014 decided on 29-01-2020 and held that issue of nexus between input material/services and the output services has been settled by the Tribunal in favour of the appellant.

The Tribunal however noted that facts of the instant case were slightly different as in the present case the appellant could not complete the construction of the mall. However, this fact should not in any way affect the admissibility of credit to the appellant as the admissibility of the credit availed prior to 01-04-2011, has been settled in principle. It was held that the appellant had correctly availed the credit on inputs and input services, the duty and tax on which has been paid by the appellant.

In respect to the issues of time bar and availability of credit to the appellant it was submitted that the appellant had been regularly filing the ST-3 Returns and as such nothing was suppressed by it so as to invoke of the extended period. Authorized Representative submitted that there was no mention of CENVAT credit in the Returns filed till September 2009 and an opening balance has been shown in the Returns filed for the period October 2009 to March 2010. The Tribunal found that Credit Rules imposed certain conditions for allowing credit in terms of Rules 4 & 9 and cast certain obligations upon the assessee in terms of Rule 6. The quantum of admissibility of credit depends on satisfying the conditions imposed therein and the discharge of obligations. In such circumstances it is not possible to quantify the admissible credit at this juncture. For this limited purpose, the issue needs to be remanded to the Adjudicating Authority.

The Tribunal partly allowed the appeal remanding the issue to the adjudicating authority for quantifying the credit admissible.[Indore Treasure Market City (P) Ltd. v. Commr. CGST & CE, Service Tax Appeal No. 50248 of 2021, decided on 01-09-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Ashok Jindal (Judicial Member) and Sanjiv Srivastava (Technical Member) allowed an appeal which was directed against the order-in-appeal which was again upheld by the Commissioner (Appeals).

The appellants were during the financial year 2004-05 providing taxable services namely:

  • Consulting Engineer Service under Section 65 (105)(g) of the Finance Act, 1994.
  • Erection, Commissioning & Installation under Section 65(105)(zzd) of the Act.
  • Maintenance & Repair under Section 65 (105)(zzg) of the Act.

As appellants had defaulted on payment of service tax due on these services, Revenue had issued show cause notice dated 28-03-2007 demanding service tax under certain category. By the said show cause notice, appellant were asked to show cause as to why:-

  1. an amount of Rs.13,22,959/- (Rs. Thirteen lakhs twenty two thousand nine hundred and fifty nine only) being the service tax (incl. Education cess) (as per Annexure “B”) payable under Section 68 of the Finance Act, 1994 on the amount of Rs. 1,29,70,186/- recovered by the assessee during the FY 2004-05 towards the business conducted with M/s Malabar Cements Ltd., should not be demanded and recovered from them;
  2. an amount of Rs. 2,12,691/- (Rs. Two lakhs twelve thousand six hundred and ninety one only) ( as per Annexure “B” towards wrong availment / utilisation of cenvat credit should not be demanded and recovered from them in terms of Rule 14, read with Rule 16, of the Cenvat Credit Rules, 2004 and Section 73 of the Finance Act, 1994;
  3. the provisions of extended period under Section 73 of the Act ibid should not be invoked;
  4. interest at the appropriate rate for the period by which payment of tax delayed should not be demanded from them under Section 75 of the Act ibid;
  5. a penalty should not be imposed under Section 76, 77, 78 for the acts and omissions as stated above.
  6. the amount of Rs. 4,89,955/- (ST of Rs. 3,68,547/- and interest of Rs. 1,21,408/-) deposited vide TR-6 dated 7.6.2007 as part payment made against the abovesaid service tax liability should not be appropriated and confirmed.

The Tribunal after hearing the parties was convinced of the fact that the services provided by the appellant were contract services as the invoices are supply of material alongwith services. The Tribunal further agreed that the issue was covered in the case relied on by the Counsel of the Appellant in CCE & Cus. v. Larsen & Toubro Ltd., 2015 (39) STR 913 (SC) relevant paras of which were:

“43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services.

  1. We have been informed by counsel for the revenue that several exemption notifications have been granted qua service tax “levied” by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise. With these observations, these appeals are disposed of.
  2. We, therefore, allow all the appeals of the assessees before us and dismiss all the appeals of the revenue.”

The Tribunal following the above decision allowed the appeal and held that appellant was entitled to consequential benefits.[Enexco Teknologies (India) Ltd. v. Commr. ST, 2021 SCC OnLine CESTAT 2541 , decided on 27-08-2021]


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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Anil Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) allowed an appeal which was filed with the main issue of as to whether the service tax have been rightly demanded on the appellant who had constructed houses for rehabilitation of poor people under JNNURM.

The appellant was engaged in providing works contract services and was registered with the Department, in the month of February, 2014 the Department received some financial data from third party source wherein the name of the appellant appeared thereafter he was asked to submit documents for verification of discharge of service tax liability which submitted timely. He also submitted contract wise detail of all the contract works done during the last five financial years on the request of the Range Superintend.

It appeared to the Revenue that appellant had wrongly availed exemption in respect of Jawaharlal Nehru Urban Renewal Mission (JNNURM) during the Financial year 2009-10 to 2010-11 as the construction services provided under JNNURM were exempted vide Notification No. 28/2010–ST which came into force on 01 July, 2010. It further, appeared that appellant had wrongly claimed exemption in respect of construction works done for Krishi Utpadan Mandi Parishad (for short Mandi Parishad) during the financial year 2013-14 as under Serial No.12(a) of Notification No.25/2012-ST exemption is available for construction services provided to a government authority which is meant predominantly for use other than commercial/industrial. It further appeared that appellant had not discharged service tax on construction services provided to M/s Uncle Builders during the financial year 2009-10 & 2010-11.

The issues framed by the commissioner were:

  1. Whether the exemption from payment of Service Tax in respect of services provided by the notice to Agra Development Authority (in short ‘ADA’) under Jawaharlal Nehru Renewal Mission (in short ‘JNNURM’) for construction of houses for weaker section of society would be available for the period from 2009-10 to 2010-11(up to 30.06.2010) before issuance of Notification No. 28/2010-ST dated 22.06.2010 (w.e.f. 01.07.2018).
  2. Whether the exemption from payment of Service Tax in respect of services provided by the noticee to Rajya Krishi Utpadan Mandi Parishad (in short ‘Mandi Parishad’) during 2013-14, for construction work under Works Contract would be available, under Sl. No. 12(a) of Notification No. 25/2012-ST dated 20.06.2012.
  3. Taxability of services provided to M/s Uncle Builders during 2009-10 & 2010-11.
  4. Issue relating to demand of interest and penal action against Noticee.

 Counsel for the appellant assailed the findings of the Commissioner stated that for the advance amount received before July, 2010 for construction of residential houses under JNNURM & ‘Rajiv Awaas Yojana’, the work was done after July, 2010 and exempted as per Notification No. 30/2010 dated 28 June, 2010. Further, for the work relating to JNNURM have been executed for the Uttar Pradesh Government, which is providing shelter and home to the poor people at nominal rental basis and thus falls under the definition of construction for personal use of the Government or government authority.

As regards the second issue relating tax liability for construction for Mandi Parishad, Commissioner had observed that these Mandi Parishad were formed under the Act of State Legislature ‘Uttar Pradesh Krishi Utpadan Mandi Adhiniyam 1964’, but not for carrying out any municipal function which are provided under Article 243W of the Constitution of India. Counsel for the appellant urged that admittedly appellant had constructed toilets, roads, drainage, outer sewage, underground water storage tank reservoir, drinking water supply, S.T.P. (Sewage Treatment Plant)Labour shed etc. for the Mandi Samiti and it was a statutory body created under the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964. Thus as per Entry No.12 & 13 of Mega Exemption Notification No.25/2012, the appellant had rightly claimed exemption for providing construction services to the Statutory Authority, and the same was not commercial in nature as has been clarified by the Board vide Circular dated 18 December, 2006.

The Tribunal was of the view that various constructions works carried out for Mandi Parishad was not liable to service tax and were exempted in view of the Education Guide dated 20 June, 2012 by the Board, read with Circular No.89/7/2006 dated 18 December, 2006, read with the Mega Exemption Notification No.25/2012-ST. The Tribunal further added that as regards the third issue i.e. tax liability for work done for Uncle Builders (from 2009-10 to 2010-11), admittedly the appellant had paid tax on 04 June, 2006 along with interest before the issuance of SCN (issued on 31 March, 2016).

The Tribunal held that extended period of limitation is not available to Revenue in these facts and circumstances. Further, appellant have maintained books of account and filed regular returns. It further found that Revenue have erred in adopting Form 26AS for calculating tax liability, which is patently wrong, as Form 26AS is not a prescribed document in the service tax rules for ascertaining the gross turnover of the assessee. The appeal was allowed with consequential benefits.[Ganpati Mega Builders (INDIA) (P) Ltd. v. Commr., Customs, CE & ST, 2021 SCC OnLine CESTAT 1679, decided on 05-08-2021]


Suchita Shukla, Editorial Assistant has reported this brief.


Advocates before the Tribunal:

Advocate for the Appellant: Ms Rinki Arora & Shri Aalok Arora

Authorized Representative for the Respondent: Shri Rajeev Ranjan

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): P. Dinesha (Judicial Member) allowed an appeal which was filed after being rejected by the Adjudicating Authority and First Appellate Authority in relation to refund claim in the chit fund business.

The appellant engaged in the chit fund business and after the introduction of negative taxation regime, they were compelled to pay Service Tax on the foreman charges collected for their chit fund activities for the period from 01-07-2012 to 31-05-2013.

The counsel for the appellant, Mr A. Niraikulam also submitted that in the case of Delhi High Court of Delhi Chit Fund Association v. Union of India, 2013 (30) S.T.R. 347 (Del.) it was ruled that Service Tax was not chargeable on the services rendered by the foreman in the chit fund business which was upheld by the Supreme Court by dismissing the Revenue’s Special Leave Petition as reported in 2015 (38) S.T.R. J202 (S.C.). The appellant had filed its refund claim and the Adjudicating Authority had rejected the refund claim as being hit by the limitation of time as prescribed under Section 11B of the Central Excise Act, 1944. On first appeal, the First Appellate Authority also having rejected the appellant’s appeal, the present appeal had been filed before this forum.

The Tribunal was of the opinion that the decision of the Supreme Court was the law of the land and therefore if it had held that when there was no question of liability to Service Tax, then, any amount collected under the guise of Service Tax becomes a collection of the said amount without the authority of law and the Revenue can never, therefore, claim any right over such amount; the same will have to be refunded forthwith to the concerned person.

The Tribunal held that the collection of amount, which according to the appellant was out of compulsion, being a collection without any authority of law, will have to be refunded. The Tribunal while allowing the appeal set aside the orders by the lower authorities. However. Tribunal was of the view that the application for refund was filed on 19-01-2018; the date of the judgement of the Supreme Court was 07-01-2014 so there was a clear four-year delay in filing the refund claim therefore appellant is not entitled to any interest for the delay caused by it as the appellant cannot take advantage of its own mistake of filing a delayed refund claim and thus cannot claim the interest for that delayed period during which time it slept over its rights.[Sivamurugan Chit Fund (P) Ltd. v. Commr. Of G.S.T. & CE, 2021 SCC OnLine CESTAT 371 , decided on 06-08-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Dilip Gupta (President) and P.V. Subba Rao (Technical Member) allowed the appeals which were related to demand of service tax on liquidated damages recovered by the appellant for acts of default, like delayed or deficient supplies by various suppliers.

The appellant was a Public Sector Undertaking engaged in excavation of lignite from the captive mines at Neyveli in Tamil Nadu and at Barsingsar in Rajasthan. Lignite is principally consumed in the generation of electricity at the thermal power stations of the appellant.

The appellant had executed a contract dated 10-08-2006 with Bharat Heavy Electricals Limited for design, engineering, manufacture, supply, erection, testing, commissioning, and supply of two Circulating Fluidised Bed Combustion steam generators, complete with all accessories and auxiliaries and two Steam Turbines. BHEL was required to complete successful performance guarantee tests for UNIT 1 within 35 months of date of Letter of Award and for UNIT 2 within 39 months of date of Letter of Award. As BHEL failed to adhere to the above time limits, the appellant recovered liquidated damages in terms of the contract. Likewise, the appellant recovered liquidated damages for non-adherence to the time schedule for supplies from other contractors/Vendors. The appellant was served with show cause notice and he filed a detailed reply in which he mentioned that proceedings may be dropped for the reason that no service tax was payable on liquidated damages and penalties recovered under the contract.

The Commissioner not accepting his contentions had passed an impugned order against the appellant, thus the instant appeal was filed.

Ms Krithika Jaganathan, counsel appearing for the appellant submitted a number of case laws which supported their contention that the amount of liquidated damages/penalty collected for non-compliance of the terms of the contracts cannot be subjected to levy of service tax.

The Tribunal was convinced with the arguments of the counsel of the appellant that no service tax was payable on the amount collected towards liquidated damages considering the decision relied on by the counsel in South Eastern Coalfields Ltd. v. Commr. of Central Excise and Service Tax, 2020 (12) TMI 912.

The Tribunal observed that the Commissioner, however, did not accept the contention advanced on behalf of the appellant and confirmed the demand of service tax holding that the amount received by the said appellant towards penalty, earnest money deposit forfeiture and liquidated damages would tantamount to a consideration “for tolerating an act” on the part of the buyers of coal/contractors, for which service tax would be levied under section 66 E(e) of the Finance Act.

The Tribunal rejected the contentions advanced on behalf of the Department that penalty amount, forfeiture of earnest money deposit and liquidated damages had been received by the said appellant towards “consideration” for “tolerating an act” leviable to service tax under section 66E(e) of the Finance Act.

The Tribunal while allowing the appeal held that the view taken by the Commissioner that since BHEL did not complete the task within the time schedule, the appellant agreed to tolerate the same for a consideration in the form of liquidated damages, which would be subjected to service tax under section 66E(e) of the Finance Act cannot be sustained.[Neyveli Lignite Corprn. Ltd. v. Commr. Of CCE & ST, 2021 SCC OnLine CESTAT 2511, decided on 26-07-2021]


Suchita Shukla, Editorial Assistant has reported this brief.