Notification No.2 /2013 - Service Tax dt 1st March, 2013 on abatement

(Abatement for residential unit having carpet area upto 2000 square feet or where the amount charged is less than rupees one crore made 75% and all other constructions 70%.)

The notification shall come in to force on the 1st day of March, 2013

Amendment to the notification No.26/2012-Service Tax, dated the 20th June, 2012,

In the said notification, in the TABLE, for serial number 12 and the entries relating thereto, the following serial number and the entries shall be substituted, namely:-

Description of Service	% of Taxable Value	Conditions
12. Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate bythe competent authority,-		(i) CENVAT credit on  inputs used for providing  the taxable service has not  been taken under the  provisions of the CENVAT  Credit Rules, 2004;
(i) for residential unit having carpet area upto 2000 square feet or where the amount charged is less than rupees one crore;	25	(ii) The value of land is  included in the amount charged from the service  receiver.
(ii) for other than the (i) above.	30

Existing provisions of Entry no 12 as notification No.26/2012-Service Tax, dated the 20th June, 2012

12.

Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority

25

(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004. (ii)The value of land is included in the amount charged from the service receiver.

Decision by CESTAT, Ahmedabad on Considering the Gross Value of Invoice as cum Value U/s 67(2) - by a unregistered Service provider at the time of providing service, Decision dated 11.02.2013.

Appellant (s)     :               M/s. Viraj Travel Agency

V/s

Respondent (s) :               Commissioner of Service Tax, Ahmedabad

1. The facts of the case,

The appellant is engaged in providing taxable services under the category of Rent-a-cab Services as defined under Section 65 of the Finance Act, 1994 since 2006 without having service tax registration up to January 2008 and without paying service tax on the amount received by them for providing taxable service to M/s. Torrent Power Limited. 

 The appellant accepted the fact that this income was taxable under Service Tax and has applied for service tax registration on 24.1.2008 and however, he had neither paid service tax nor filed ST-3 return till that time.  Further  the appellant  paid service tax of Rs. 2,75,417/-, willingly without any protest, as per their own calculation.

 However a show cause notice was issued to the appellant on 13.8.2008 and the adjudicating authority confirmed the demand of service tax amounting to Rs. 3,09,346/- under Section 73(1) read with Section 68 of the Act and ordered to appropriate the amount of Rs. 2,75,417/- already paid by them, ordered recovery of the interest thereon under Section 75 of the Act and ordered to appropriate Rs. 28,017/- already paid by them and imposed penalties under Section 76,77 and Section 78 of the Act.

Aggrieved by such an order, appellant preferred appeal before the first appellate authority.  The first appellate authority, after following the due process of law upheld the order in original.

2. Analysis:

The lower authorities have issued the show cause notice on the figures which have been worked out by them but not considered the cum duty benefit that may arise to the appellant in the entire demand. (That is the Invoice amount is inclusive of service Tax as per Sec 67(2)). The further demand of Rs 33,929 is only on account of this treatment.

This case is similar to Advantage Media Consultant V’s  CBEC, Supreme Court 2009 (14) STR J49 (SC).

“the issue now stands settled by the Division Bench in the case of Advantage Media Consultant (supra) wherein the Bench has recorded as under:-

”Service tax is an indirect tax. As per this system of taxation, tax borne by the consumer of goods/services is collected by the assessee (manufacturer/service provider) and remitted to the Government. When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. So considered, when no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable. We find that this principle has been legislated in the following terms with effect from 18-4-2006 in Section 67(2) of the Finance Act, 1994 as amended :

 “67(2). Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged.”

3. Decision:

Impugned orders to the extent they confirm the differential service tax liability of Rs. 33,929/- along with interest are set-aside.and the consequent penalties imposed by the lower authorities also set aside, as when there is no demand of service tax, the question of penalty does not arise.  Accordingly, the penalties imposed under Section 76 and 78 are set-aside.

Clarifications by CBEC

1. Clarification in respect of notices/ reminder letters issued for life insurance policies

 Issue:

Whether service tax liability arises when life insurance companies issues reminder notices/letters are being issued to the policy holders to pay renewal premiums.

Clarification by CBEC vide: Circular No.166/1/2013 –ST, dated  1  January 2013.

1. Under the Point of Taxation Rules 2011, the point of taxation generally is the date of issue of invoice (as issued under Rule 4A of the Service Tax Rules 1994) or receipt of payment whichever is earlier.

2. Therefore no tax point arises on account of such reminders, The reminders not being invoices would not invite levy of service tax. In case of issuance of any invoice, point of taxation shall accordingly be determined.

3. This clarification is issued only for life insurance sector.

2. Clarification in respect of  transportation of milk  by rail/vessel  

Issue:    Indian Railways seeks  clarification as to whether service by way of transportation of milk by rail is covered by Notification No.25/2012-ST dated 20.06.2012, serial number 20(i) ( food stuffs).

Clarification by CBEC vide: Circular No.167/2/2013 –ST, dated  1  January 2013

The service by way of transportation of milk by rail or a vessel from one place in India to another, is covered by the Notification No.25/2012-ST dated 20.06.2012.

Decision on Application for condonation of delay for refund claim, by CESTAT West Zonal Bench, Ahmedabad dated 21.01.2013

M/s. Intas Pharma Limited  (Appellant (s))

Vs

Commissioner of Service Tax Ahmedabad (Respondent(s))

Facts :

1. The appellant is holding Service Tax registration and also registered with the office of Kandla Special Economic Zone (KASEZ for short).  Appellant filed a refund claim on 21.09.2010 for Rs. 47,858/- in terms of the Notification No. 15/2009 dated 20.5.2009.  On scrutiny of the said refund claim, it was observed that the actual payment was made for services from 08.9.2009 to 20.3.2010 and the claim of refund should be filed within six months from the date of actual payment of service tax by such developer or unit to the service provider.

2. Accordingly, the adjudicating authority concluded that major part of the refund is not eligible to the appellant, i.e. after six months.  Adjudicating authority, out of the total claim of Rs. 47,858/- sanctioned the refund amount of Rs. 249/- and rejected the balance amount of Rs. 47,609/- in terms of Notification No. 09/2009-ST dated 03.3.2009 as amended to read with Section 11B of the Central Excise Act, 1944 as made applicable to the service tax matters vide Section 83 of the Finance Act, 1994. Aggrieved by such order in original, appellant preferred an appeal before the first appellate authority.  First appellate authority also relied upon the findings of the adjudicating authority and rejected the appeal filed.

3. The appellant had submitted along with reply to the show cause notice, which was filed on 01.11.2010, an application for condonation of delay, giving reasons for delay in filing the refund claim before the adjudicating authority.  However  the lower authorities have not considered this application for condonation of delay in proper perspective ( as mentioned in Clause 2(f) of the Notification 9/2009-ST dated 03.3.2009, as amended from time to time, to submit that the said Clause specifically talks about condonation of delay by the jurisdictional Assistant Commissioner or Deputy Commissioner of the Central Excise.)

Judgement:

4. On perusal of the record, it was found that the adjudicating authority as well as the first appellate authority has not considered the representation made by the appellant along with the reply to the show cause notice.  The said letter specifically states that due to the distance between their head office and the factory premises, this information was not captured in the general accounts of the appellant.  In my view, this letter should have been considered by the lower authorities in its proper perspective and a view should have been taken.  Adjudicating authority as well as the first appellate authority has not referred to this letter which was filed by the appellant along with the reply to the show cause notice.  Therefore, both the lower authorities should be given a chance to reconsider the issue in the light of such a letter which is on record along with the reply to the show cause notice. The judgment in the case of APK Identification vs. CCE Noida - 2012 (27) STR 20 (Tri. Del.) where in such a view is taken.

5.In view of the forgoing, without expressing any opinion on the merits of the case, the impugned order is set-aside  and remit the matter back to the adjudicating authority to reconsider the issue afresh in the light of the allegations made in the show cause notice, replies made by the appellant and also to consider the application for condonation of delay in filing the refund claim, which is submitted along with the reply to the show cause notice.  Needless to state that adjudicating authority shall follow the principles of natural justice before coming to any conclusion.

Decision on Penalty imposed U/s 76 of FA 1994, by CESTAT East Zonal Bench, Kolkata, dated 27-12-2012.

COMMISSIONER OF CENTRAL EXCISE, GUWAHAT (APPELLANT (S))

VERSUS

M/S. GLOBAL COKE PRODUCTS (RESPONDENT (S))

(ARISING OUT OF ORDER-IN-APPEAL NO.13/SH/CE(A)/GHY/10 DATED 21.12.2010  PASSED BY COMMISSIONER OF CUSTOMS & CENTRAL EXCISE (APPEALS), GUWAHATI , Transaction for the period from April, 2007 to March, 2008  )

    

 1.    Facts of the case:

1.                    The Respondent are engaged in the manufacture of LM Coke.  They are also registered with the Department for availing the service of Goods Transport Agency (GTA) in relation to inward as well as outward freight.

2.                   Being the consignor/consignee, they had discharged the service tax liability on the GTA service availed by them during the period, April, 2007 to March, 2008.  During the said period, they had availed the CENVAT Credit on the service tax of Rs.3,93,054/- paid on GTA service (inward freight) and utilized the same towards the payment of service tax on the liability of GTA service arising out of the outward freight service.

3.                    A show cause notice dated 13.10.2008 was issued to them for recovery of service tax short paid by wrongly utilizing CENVAT Credit in discharging their service tax liability of GTA service (outward freight), which was not admissible to them.

4.                    The said demand notice was confirmed by the Adjudicating Authority.  He had also imposed a penalty of Rs.3,93,054/- under Section 76 of the Finance Act, 1994.

5.                    The Respondent discharged the entire amount of service tax on GTA service (outward freight) for the said period later, through GAR-7 challan on 08.07.2009.

6.                     However, they had filed an appeal before the learned Commissioner (Appeals) disputing the penalty imposed under Section 76 of the Finance Act, 1994.  The learned Commissioner (Appeals) has allowed their appeal.  Aggrieved by the said Order, the Revenue is in Appeal before this Tribunal.

2.    The Revenue reiterated that the Respondent had paid the entire amount of service tax on GTA service (outward freight) through GAR-7 challan, accepting their mistake only after completion of the adjudication process.  It indicates that their intention was not to make the payment voluntarily, till the demand notice was adjudicated against them. Therefore, the penalty imposed by the Adjudicating Authority under Section 76 of the Finance Act, 1994, ought to be sustained.

3.        Contentions by the Respondents:

a. There was a bona fide mistake on the part of the Respondent in utilizing the CENVAT Credit availed on the GTA service (inward freight) in discharging their service tax liability towards the GTA service (outward freight) treating it as output service.  

b. The Respondent were not aware of the amendment that had been brought to the definition of output service and other provisions of CENVAT Credit Rules, 2004 with effect from 19.04.2006, as earlier, it was permitted for utilization of CENVAT Credit availed on the GTA service (inward freight) in discharging the liability of GTA service (outward freight) treating it as output service. 

c. They  further submitted that the entire amount of  service tax liability on the GTA service (outward freight) had been properly determined and paid by utilizing the CENVAT Credit availed on the GTA service (inward freight), and the payments were duly reflected in the relevant ST-3 return filed with the Department for the material period. Thus, there was no intention whatsoever, in not discharging the liability of service tax on the GTA service (outward freight) during the said period, i.e. from April, 2007 to March, 2008.

d. The amount of CENVAT Credit paid towards the GTA service (outward freight) is still lying with the Department and they had not claimed the refund of it, nor intended to do so.

e. In the absence of any intention to evade or default in making payment of service tax, no penalty is imposable under Section 76 of the Finance Act, 1994. 

F .In support, they  has referred to the judgement of the Hon: Karnataka High Court in the case of CST, Bangalore vs. Motor World [2012(27) STR 225(Kar.) and also the judgement of the Hon: Gujarat High Court in the case of CCE & C, Daman vs. PSL Corrosion Control Services Ltd. [2011(23) STR 116(Guj.).

4. Judgment:

a.            Section 80 of the said Act stipulates that no penalty shall be imposable on an assessee under Sections 76, 77 or 78 ibid if the assessee proves that there was reasonable cause for the said failure.

b.            The Appellants have submitted that the lapse occurred due to their presumption that the adjustments of output service tax against input service tax is allowable, which has not been otherwise communicated to them by the Department.

c.             Moreover, the Appellants have owned up the liability and have already deposited the S.T. amount along with interest. The department is not able to establish on record that there was any intention to evade tax on the part of the Appellant who have adduced reasonable and sufficient cause for the failure on their part to pay the service tax.

d.            Since penalty is imposable with regard to existence of mens rea or conscious disregard of statutory obligation, the absences of these features are material and hence benefit would accrue to the Appellant. Moreover, there obtains an adequate ground for invoking the provisions of Section 80 ibid to not impose penalty prescribed under Section 76.

e.                   The Hon: High Court of Karnataka in the case of Motor World (cited supra) had observed that the imposition of penalty should not be automatic under Sections 76 and 78 of the Finance Act, 1994.  In the event sufficient cause is shown for default in payment of service tax, Section 80 of the said Act could be invoked.  The said view had also been echoed by the Hon: High Court of Gujarat in the case of PSL Corrosion Control Services Ltd. (cited supra).

 f.                       In this case Respondent has established a reasonable cause for failure to pay the service tax on the GTA service (outward freight) during the period, April, 2007 to March, 2008, through the GAR-7 challan (although the said liability had already been discharged by debiting CENVAT Credit Account during the relevant period),

g.                   And  hence, it is an appropriate case to invoke the provisions of Section 80 of the Finance Act, 1994, which has been rightly pressed into service by the ld. Commissioner (Appeals).  In these circumstances, the Order passed by the lCommissioner (Appeals) is upheld and the Appeal filed by the Revenue being devoid of merit, is hereby dismissed.

h.            In view of the above, the penalty imposed under Section 76 ibid is not maintainable and is liable to be set aside. 

Decision by CESTAT South Zonal Bench at Bangalore, on Food Coupons to Employees dated 28-12-2012

The Commissioner of Service Tax Bangalore (Appellant )

Versus

M/s. C. Cubed Solutions Pvt. Ltd. (Respondent)

(Arising out of Order-in-Appeal No. 120/2010 dated 10.03.2010 passed by the Commissioner of Central Excise, Bangalore for the transactions for the period 01.01.2008 to 31.03.2008)

1.            M/s. C. Cubed Solutions Pvt. Ltd is a 100% EOU taking benefit of the CENVAT credit scheme. They are provider of output services namely Online Data Retrieval or Access Service and their entire service is exported. Consequently, they are not able to utilize CENVAT credit taken for payment of service tax on any domestic services rendered. Therefore, they claim refund of such credit under Rule 5 of the CENVAT Credit Rules 2004 read with Notification No. 5/2006-CE (N.T) dated 14.03.2006.

2.            For the period 01.01.2008 to 31.03.2008, they had claimed refund of Rs. 2,96,940/  of which - Rs. 2,53,655/- was sanctioned by the adjudicating authority and  Rs. 43,285/- was rejected.

3.             Against this rejection, they moved the Commissioner (Appeals). The Commissioner (Appeals) has allowed refund of this amount also, stating that he was satisfied that there is enough nexus between the input services and the exported services and therefore, the appellants are eligible for the refund.

4.            Aggrieved by the order of the Commissioner (Appeals), Revenue has filed this appeal. The learned AR for Revenue submits that the appellants had taken credit on services like Advertising Services, Food Pass Services, Security Services etc. which have no direct nexus with the exported services and therefore the finding of the Commissioner (Appeals) is not correct.

5.            Following are the  split up of the amounts involved:: 

Items	Rs
Advertising	3,413
Food Pass	2,409
House Keeping	10,188
Network and Connectivity	84,572
Repairs and Maintenance   Computer	17,223
Audit	15,534
Recruitment	3,584
Rent	1,51,860
Security Service	8,157
Total	296940

                                                 

    6.        The respondent argued that it is an EOU  and is providing output services and the asset of the respondent is only computers and staff. And each of the services in the above table is with reference to these two assets.  For example t the advertisement has been published for recruitment of personnel. The recruitment service is one of the services which is specifically included in the inclusive portion of the definition of input services at Rule 2(l) of CENVAT Credit Rules, 2004 and therefore there cannot be any doubt about the nexus of this services with the business process.

7.            There was some detailed discussion in the matter of food passes. She submits that these are food coupons issued to selected employees to enable them to have food while at work. Since the Courts have recognized that providing food to employees has a close nexus to the business process, there is no reason to deny CENVAT credit on this item. It appears that the agency issuing the food passes has paid service tax under the head of Business Auxiliary Service .

8.Food Passes:  On this point the arguments by the appellant   is as follows:

                                     It almost like cash which can be encashed for purchase of any goods in selected shops. Therefore, it  not possible to establish a clear nexus that this was for providing service while doing the business of the respondent. This is just another form of perk being given to the employees who consume it in their personal capacity and not in the business process and therefore CENVAT credit cannot be allowed.

9.          The Judgment: 

The input services tabulated above except in the case of food pass are services  necessary for acquiring and utilizing their business assets namely people and computers

However, in the matter of food passes, in as much as the manner in which these food passes are utilized is not a matter which can be clearly established. Without such information it is not possible to come to a conclusion that there was a nexus between the food passes and the business process of the respondent. Moreover this is essentially in the nature of a payment of a perk to the employee rather than as an input service for business .

 So the appeal is allowed  only to the limited extent of   Rs. 2409/- with regard to Food Passes  The appeal of Revenue is rejected in respect of the remaining amounts. 

Amendment in the Service Tax Rules, 1994, Notification 47/2012-ST dt. 28-09-2012

In exercise of the powers conferred by 94(1) read with 94 (2) of section 94 of the Finance Act 1994, the Central Government hereby makes the following Amendment in  the Service Tax Rules, 1994, namely:-

           

 In rule 7(2), the following proviso shall be inserted, namely:-

“Provided that  the Form ‘ST-3’ required to be submitted by the 25^th day of October, 2012 shall cover the period between 1^st April  to 30^th June, 2012 only.”

Note:

 A. In the current half  year, an assessee would have had to give data  of two types

1. With respect to specific services and the corresponding legal provisions for the period 1-4-2012 to 30-6-2012.

2. The data for the period   1-7-2012 to 30-9-2012, would have been with respect to different services and the corresponding legal provisions.

Combination of all these provisions into one return would have made the return complex for   the assessees . 

B. Therefore,  the assessees have to provide data only for the period 1-4-2012 to 30-6-2012 in the first half yearly return which is due on 25-10-2012. (The data for the period from 1-7-2012 to 30-9-2012 shall not be filed).

C. Modifications will be made in the ACES so that any data filed for this period is rejected. Till such time as the modifications are made, ACES will not be accepting returns).

D. Data for the period 1-7-2012 to 30-9-2012 will have to be furnished in a return in a revised format. The revised format of the return and the last date for filing it will be indicated separately.