Waterfront royalty recovered by State Govt. was not an 'intellectual property service'

Facts:

a) The assessee, i.e., State Government had collected Waterfront Royalty charges, which were charged by Government of Gujarat from Fort users/private parties for use of such Waterfront;

b) The Department sought levy of service tax on such charges under Intellectual Property Services.

The Tribunal held in favour of assessee as under:

1)  The definition of Intellectual Property Rights is about right available with an individual or person;

2) The charges collected by the assessee-Government for usage of Waterfront as Waterfront Royalty Charges could not, prima facie, be covered under definition of Intellectual Property Rights  -  State Charge Gog Port of Magdalla v. Commissioner of Central Excise & Service Tax [2014] 41 taxmann.com 376 (Ahmedabad - CESTAT)

ST demand can't be made under a category not specified in the show cause notice

Where show cause notice sought classification under consulting engineering services but demand was confirmed under "Erection, Commissioning and Installation Services", demand was, prima facie, not maintainable

In the instant case the department issued a show-cause notice to the assessee for the period from 1997-98 to 9-9-2004 seeking payment of service tax under category of consulting engineering services. The adjudicating authority came to conclusion that services rendered by assessee were not 'consulting engineers' services but were taxable under Erection, Commissioning and Installation Services and confirmed demand accordingly. The assessee argued that demand was invalid as show-cause notice did not put them on notice as to that services would be classified under 'Erection, Commissioning and Installation Services'. Thus, this stay petition was filed by assessee for the waiver of pre-deposit requirement.

The Tribunal held as under:

1) The assessee  was not put to notice as regards the classification of its services under "Erection, Commissioning and Installation Services";

2) The assessee had made out a prima facie case for the waiver of the pre-deposit requirement of the amounts involved, as the Board's circular dated 8-8-2007 specifically clarified that services provided by assessee would be classifiable under the category of Erection, Commissioning and Installation Services from 10-9-2004 only;

3) In view of this, the application filed by the assessee for the waiver of the pre-deposit requirement and stay of recovery was allowed -  Kalpataru Power Transmission Ltd. v. Commissioner of Central Excise  [2013] 36 taxmann.com 581 (Ahmedabad - CESTAT)

Assessee's contract couldn't be deemed as composite contract if all its activities were identifiable separately

Where activities undertaken by assessee were identifiable separately, such activities couldn’t be termed as 'composite contract'

In the instant case the assessee was involved in the activity of "Construction of Civil Work" as well as "Erection, Commissioning and Installation Services" for setting-up of the power plant.   It outsourced the 'Civil Work' on which it did not take any Cenvat credit of input services or capital goods and the sub-contractor had paid the service tax on that activity. For the activity of 'Commissioning and Installation', assessee took the Cenvat credit and discharged its service tax liability accordingly without claiming the benefit of Exemption Notification Nos. 15/2004 or 19/2005 or 1/2006. However, the Department argued that assessee's contract was a composite contract taxable in its entirety under "Erection, Commissioning and Installation Services" and it was liable to pay service tax on entire value.

The Tribunal allowed the stay application with the following observation:

In the case of CCE v. BSBK Pvt. Ltd. [2010] 26 STT 263 (New Delhi - Cestat) the Tribunal held that when the activities undertaken by the applicants were identifiable separately, , the whole of the activity couldn’t be termed as "composite contract". In the instant case also the activities undertaken by the appellants could be identified separately, therefore, following the decision in the case of BSBK Pvt. Ltd. (supra), it was held that the assessee had made out a prima facie case for 100 percent waiver of service tax, interest and penalty. – Bharat Heavy Electrical Ltd. v. Commissioner of Service Tax [2013] 36 taxmann.com 366 (Chennai - CESTAT)

Service tax on restaurants and hotel accommodations is unconstitutional; HC sets aside levy of ST

Levy of service tax on service forming part of supply of goods in a restaurant, as well as short-term accommodation services in hotels, inns, etc. is unconstitutional

In the instant case the assessee challenged the levy of service tax on AC restaurants licensed to serve alcoholic beverages and short-term accommodation provided by hotel, inn,  guest house, club or camp-site under sections 65(105)(zzzzv) and 65(105)(zzzzw)] as unconstitutional.

The High Court held the impugned levy as unconstitutional with the following observations:

1) Article 366(29A)(f) empowers State Governments to impose tax on supply, whether it is by way of or as a part of any service of goods either being food or any other article for human consumption or any drink, intoxicating or not. Incidence of sales-tax is on supply of any goods by way of or as part of any service;

2) When food is supplied or alcoholic beverages are supplied as part of any service, such transfer is deemed to be a sale and there cannot be a different component of service which could be charged to service tax by Central Government;

3) In view of judgment in K. Damodarasamy Naidu & Bros. v. State of Tamil Nadu [2000] 1 SCC 521, it held that service formed part of sale of goods and State Government alone had legislative competence to enact law imposing a tax on service element forming part of sale of goods as well;

4) In view of judgment in Godfrey Philips India Ltd. v. State of U.P [2005] 2 SCC 215, it held that luxuries were activities of enjoyment or indulgences which were costly or generally recognised as being beyond necessary requirements of an average member of society;

5) Service tax imposed on services provided in a hotel and other similar establishments, which fall within extended meaning of word "luxuries", trenches upon legislative function of State under Entry 62 of List II;

6) Hence , sub-clauses (zzzzv) and (zzzzw) to clause 105 of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2011 were beyond the legislative competence of the Parliament as the sub-clauses were covered by Entry 54 and Entry 62 of List II of the Seventh Schedule - Kerala Classified Hotels & Resorts Association v. Union of India [2013] 35 taxmann.com 568 (Kerala)

Service tax refund can't be denied without specifying documents required from assessee

Department cannot deny refund of service tax alleging non-supply of 'requisite documents'; it must specify, in writing, list of documents required, in addition to documents already submitted by assessee

In the instant case the assessee was a service provider to its associates which were located outside India. The assessee wrongly raised invoices on its associates for commission which had to be received from the associates and paid service tax thereon. Later on, on finding that invoice was not to be issued, it issued credit note and filed a claim for refund along with copy of service tax returns, invoices, credit notes, correspondence and challan and a certificate from chartered accountant. Despite all that the refund claim was rejected on the premise that the assessee had not provided the required documents in support of claim of its refund.

The Tribunal remanded the matter with the following observation:

The adjudicating authority must have specified, in writing, list of documents required, apart from documents already submitted by the assessee. Matter was to be remanded back for supply and verification of additional documents required by the adjudicating authority - CMA CGM Global (India) (P.) Ltd. v. Commissioner of Service Tax [2013] 35 taxmann.com 318 (Mumbai - CESTAT)

Vehicle registration services rendered by motor car dealer to its buyers aren’t ‘Business Support Services’

Rendering of assistance by a motor car dealer to its buyers in getting motor vehicle registration done cannot, prima facie, be regarded as 'Business Support Services'

In the instant case, the assessee, a motor car dealer, rendered services relating to registration of car to its buyers on payment of fixed charges. Such charges were used towards registration of car and excess collection, if any, was retained by the assessee. The Department sought to levy service tax on excess amount retained by assessee under 'Business Support Service' regarding it as 'transaction processing'

The Tribunal took, prima facie, the view in favour of assessee with the following observation:-

1) Prima facie the activity undertaken by the assessee does not come within the purview of 'Business Support Service';

2) The assessee was rendering assistance to its clients in getting the motor vehicle registration done. The said activity, by no stretch of imagination, could be considered as supporting the business of its customers. - My Car (Pune) (P.) Ltd. v. Commissioner of Central Excise & Service Tax [2013] 33 taxmann.com 321 (Mumbai - CESTAT)

Construction of hostels for educational institutes is deemed to be for non-commercial purpose; ST not leviable

Building constructed as hostel for residence of students studying in an educational institution is a non-commercial/non-industrial building and, therefore, such construction is not liable to service tax under Works Contract Services

The assessee had constructed a Boys and a Girls Hostel for students of educational institutions. It paid service tax thereon under Works Contract Services during April, 2008 to September, 2008 but thereafter it realized that as it was not constructing any building which was being used for commercial purpose therefore it was not liable to service tax, it stopped paying service tax. However, service tax was demanded from assessee.

The Tribunal set aside the service tax demand with the following observations:

1) The building was constructed as hostel for the residence of students studying in medical institute and there was no allegation that the building was used for any other purpose;

2) In above set of facts, the Board Circular No. 80/10/2004-ST, dated 17.9.2004 was applicable and the assessee was not liable to pay service tax. Accordingly, demand was set aside.- Anand Construction Co. v. Commissioner of Central Excise [2013] 33 taxmann.com 59 (Mumbai - CESTAT)

Support services provided by local authorities to business entity are liable to ST

Support services by way of off-street parking or other facilities provided by local authorities to any business entity would be liable to service tax

The local authorities operating off-street parking facilities were not subjected to VAT/service tax in Ireland whereas commercial operators engaged in that activity were liable to VAT/service tax. The Commission of European Communities brought a suit for declaration that said exemption to local authorities was violative of Council Directives.

European Court of Justice held as under:

1) Services provided by Government or local authorities were excluded from charge of service tax to extent specified in negative list under section 66D(a);

2) Such negative list entry, being an exception to charge, was to be strictly construed;

3) Exclusions from negative list provided in clauses (i) to (iv) of section 66D(a) have to be liberally construed, as they were intended to restore general principle of charge of service tax on all services;

4) Therefore, support services by way of off-street parking or other facilities provided by local authorities to any business entity would be liable to service tax - Commission of the European Communities v. Ireland [2013] 30 taxmann.com 234 (ECJ)

Transportation of passengers via ropeway isn’t covered under tour operator’s service

Leasing of a ropeway installed by Municipal Board and operating it to entertain tourists by carrying them from road to hills and back doesn't amount to Tour Operator's services

In the instant case the assessee had leased a ropeway installed by Municipal Board and was engaged in operating it to entertain tourists by carrying them from road to hills and back. The Department sought to levy service tax on the assessee under Tour Operator's services.

The Tribunal held in favour of assessee as under:

1) By a licence deed, the assessee was allowed to operate the ropeway. In terms of section 65(115) to call a person as "Tour Operator" he should be either a planner of tour or an organizer or arranger thereof. So, scheduling tour brings the service provider to the category of tour operator. Meaning of the term "tour" is given by section 65(113) of the Act. "Tour" means journey from one place to another, irrespective of distance from such place;

2) The tourists are not governed by any planning, scheduling, organising or arranging for their journey and are not dependent on the licensee-assessee for such planning, scheduling, organizing or arranging for their tours but only avail the facility of ropeway provided by assessee-licensee during working hours on payment of fees prescribed in licence deed. They are not beneficiaries of any planning, scheduling or arranging of tours, since tour to be taxable has to follow activities enumerated under section 65(115);

3) Accordingly, the assessee had not acted as "tour operator" within the meaning of Section 65(115) for which the taxing entry 65(105)(n) thereof was not attracted. Consequently, the assessee was not liable to service tax - SHAIL SHIKHAR ASSOCIATES V. COMMISSIONER OF CENTRAL EXCISE [2013] 32 taxmann.com 269 (New Delhi - CESTAT) (TM)

Input service distributer may distribute credit of ST even if it has been paid prior to registration

There is no restriction under CENVAT Credit Rules with regard to period for availing CENVAT credit of service tax paid; hence, Input Service Distributor (‘ISD’) may distribute credit of service tax paid prior to its registration as ISD

The assessee had registered itself as ISD with effect from 04.10.2008. Thereafter, it had distributed the credit of service tax paid on common input service to its various units in respect of services received during the period February, 2008 to October, 2008. The department denied Cenvat credit on ground that the services were received prior to registration as ISD and the taxes were also paid on those services prior to that date.

The Tribunal held in favour of assessee as under:

1) There was no restriction under the CENVAT Credit Rules, 2004, with regard to the period for availing CENVAT credit of service tax paid. In other words, a manufacturer/input service provider could avail CENVAT credit of the service tax paid irrespective of any time limitation;

2) The only condition to be satisfied was that they should have paid the service tax prior to availing the credit. So long as this condition was satisfied, there was no time limit prescribed in the Rule within which the CENVAT credit had to be taken. If that be so, there was no reason why in the case of input service distributor alone, a restriction should be placed with respect to availment of CENVAT credit, i.e., input service distributor was permitted to distribute only taxes paid on or after registration. Such a restriction was totally unwarranted and was not provided for in the law;

3) Hence, credit was held validly distributed - Dagger Forst Tools Ltd. v. Commissioner of Central Excise [2013] 32 taxmann.com 353 (Mumbai - CESTAT)

Management and repair of private railway sidings by Central Railways are exempt from ST

Prima facie, Central Railway’s services of management and repair of railway sidings owned by private parties were exempt under Notification No.24/2009-ST, because in view of assessee it was an incident of maintenance and repair of railway tracks

In the instant case, the assessee, Central Railways Department, carried out maintenance and repairs of railway sidings owned by private parties. For said activity the revenue demanded service tax under category of management, maintenance or repairs services. On an application for stay, the Tribunal directed the assessee to make a predeposit of 50 per cent of the service tax demanded. Aggrieved by the order of Tribunal, assessee filed the instant appeal.

The High Court directed a waiver of pre-deposit with the following observations:

1. In view of Notification No. 24/2009-ST, as amended on 21-12-2010, management, maintenance or repair of railways was exempted;

2. Prima facie, from 21-12-2010, assessee's work of management and repair of railway sidings owned by private parties was exempt, because in view of assessee it was an incident of maintenance and repair of railway tracks;

3. For period prior thereto, since demand was levied against the Union Ministry of Railways, ends of justice would require that extent of deposit had to be scaled down. Hence, predeposit was waived off in part - Central Railway v. Commissioner of Central Excise & Customs [2013] 32 taxmann.com 95 (Bombay)

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