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When the main service undertaken is exempt
under that respective chapter head, can the incidental and ancillary service
be taxed under any other head?
Held : No
The department filed a petition before the Punjab and
Haryana high Court challenging the decision of the appellate tribunal New
Delhi allowing the appeal of the assessee.
Facts in brief are that there is a lab known as M/s Dr. Lal
Path Lab blood, urine and stool samples on behalf of its Principal M/s Dr. Lal
Path Lab (P) Ltd., New Delhi for conducting biological tests. The assessee
respondents based at Ludhiana are given 25% of commission. Sh. Vaneet Grover,
proprietor of Centre at Ludhiana, in his statement dated 26-5-2004 recorded by
the Superintendent (Anti-Evasion) at the time of investigation has stated that
he is the sole proprietor of the assessee-firm, which is Franchisee of the
company based at Delhi in pursuance of an agreement between them. According to
the statement made, the samples so drawn are collected by the collection
centre and then sent by them to the company at New Delhi through a courier.
Out of the total collection, 75% of the amount was transferred to the
principal lab at Delhi by the assessee-respondent through demand drafts.
A show cause notice was issued to the assessee holding the
assessee liable under business auxiliary services. The CIT Appeal upheld the
order of the lower authority.
On appeal before the tribunal, it was held that the
activities of the assessee were not liable to be taxed under Business
Auxiliary Service. The tribunal made the following observations:
‘There is no dispute that testing and analysis carried out
in the specialized laboratories constitute "technical testing and analysis
service" contemplated under the law. Those laboratories are also not subjected
to, including in relation to the drawing of blood samples, treating those
tests and analysis as relating to human beings. The services rendered by the
appellants drawing, processing and forwarding of samples is integral to the
testing of those samples. As already noted, one of the impugned orders has
also noted that the drawing of test samples may form part of test and
analysis. All the same, they are being subjected to tax on the plea that those
services are separate from the scope of testing and analysis service and are
taxable as business auxiliary service. This approach is hard to understand.
There could be no denying that in the absence of drawing of blood samples,
there can be no testing. Further, even if the two services are seen as
entirely separate and different services, drawing of sample and initial
processing of the same are clearly, connected or incidental or ancillary to
testing and analysis. We have already reproduced the definition of technical
testing and analysis, service in Para 4 of this order. That definition is very
broad in its scope. It covers "any service in relation to testing and analysis
service." Thus, drawing of sample will come within the scope of the
definition: The dispute as to whether drawing of sample forms part of testing
and analysis service is not relevant in view of the sweeping nature of the
definition. If the service is "in relation to" testing service will get
classified under technical testing and analysis. It is inconceivable that
"relationship" of sample drawing and initial processing to testing can be
denied. The relationship may be incidental or auxiliary. Whichever way it is,
its connection to testing and analysis service is clear, integral and
undeniable. Thus in the actual situation of the case, and the broad scopes of
the definition, definitely bring the services renders by the collection
centres within the scope, of technical testing and analysis service.
It is well-settled that once there is a specific entry for
an item in the tax code, the same cannot be taken out of that specific entry
and taxed under any other entry. In the present case, revenue is seeking to
discard the specific entry and to bring the appellants services under a very
general entry, only because under the specific entry no tax is payable. This
approach is contrary to the scheme of the legislation. What is specifically
left out of a levy by the legislature cannot be subjected to tax by the
revenue administration under another entry.
There is also no substance in the learned SDR’s contention
that since through definition, testing in relation to human beings or animal
is excluded from the levy, those tests and analysis are liable to be taxed
under some other general heading. Legislature has specifically recognized
technical testing and analysis as s separate service for the purpose of levy.
As to how the technical test and analysis are to be taxed under that heading
is also for the legislature to decide. In the present case, through
definition, the legislature has excluded "testing and analysis of human being
or animal" outside the levy. The definition clearly states the legislative
intention not to impose any tax on such excluded technical testing and
analysis. If the legislature has any intention to tax the testing or analysis
in relation to human being or animal at a different rate than other technical
test and analysis service, the legislature would have separately specified the
levy. In the present case, clearly the intention of the legislature is not to
impose any levy at all on testing and analysis of human being or animals.
Therefore, the contention of the learned SDR to the contrary is not a legally
correct view.
The services rendered by the appellants herein also do not
seem to fall under any category specified in the definition of "business
auxiliary service" The agreements make it clear that the appellants are not
engaged for promotion or marketing of testing and analysis service. The
appellants business is organized for drawal of samples and for processing and
forwarding of those samples. They are also not in the business of marketing or
business promotion. The expertise, through technical staff (Phlebotomist) is
for rendering service in connection with human blood testing. Similarly,
equipment available are for drawing, processing and preserving of samples.
Thus, clearly the appellant cannot come under serial No (ii) of business
auxiliary service. Serial No (iv) brings "any incidental or auxiliary support
service" within the scope of business auxiliary service. Type of services
covered therein are illustrated in the definition "billing" collection or
recovery of cheques, accounts and remittance" etc. The drawing of sample and
processing and forwarding of such samples are not in the same genre as any of
the illustrative services mentioned under serial No (iv). Serial No. (iv)
makes it clear that only incidental or auxiliary support service such as the
ones mentioned therein would fall within the definition. As already noted, the
services provided by the appellants do not come within the categories of
services mentioned in the definition, therefore, these services cannot fall
within serial No (iv).
The High Court on closely perusing the orders passed by the
tribunals came to the conclusion that the appeal of the department is liable
to be dismissed. This is because in pith and substance, the activity of
assessee is confined to a collection centre with facilities and trained
employees for drawal of blood samples and to carry out essential processing of
blood and forwarding samples to Delhi lab through courier. They further held
that merely because the incidental service is rendered by the assessee of
putting across or dropping of the name of the principal too, it would not
become a part of the definition of business auxiliary service. The view of the
tribunal was upheld by the court.
CCE Ludhiana vs. Dr. Lal Path Lab Pvt Ltd. 8 STR 337 (P&H)
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When a service is rendered free and the
revenue is unable to show evidence of reimbursement in some other guise
whether tax is leviable ?
Held : No
The appellant are authorized service station of M/s Maruti
Udyog Ltd. They rendered free service for the vehicles sold by them.
A show cause notice was issued to them demanding the tax.
The CIT Appeals upheld the order of he lower authority.
Before the tribunal, the appellant representative contented
that services have been rendered free and these services have been rendered
after the sales. He further contented that the service was for detecting any
manufacturing defect and when the service was conducted free there cannot be a
service of levy of service tax. The department argued that there was
reimbursement to the appellant for the services rendered.
The tribunal members asked the departmental representative
to show evidence of reimbursement for the services rendered which they were
unable to do.
The tribunal therefore observed that "The Learned
Departmental Representative pointed out that there is reimbursement to the
appellant for the services rendered. The Bench wanted the learned JDR to show
the evidence for reimbursement for the services rendered. He was not in a
position to show us any evidence for reimbursement. The Adjudicating Authority
has stated that the cost for the services rendered is actually hidden in the
cost of vehicles itself. Thus, we find that the demand of Service Tax in these
cases is based on assumptions and presumptions. When a service is free, unless
Revenue shows some evidence that the appellant got reimbursement in some other
guise, it will not be possible to confirm the demand.
Thus the appeal of the appellant dealer was allowed.
Indus Motor Company vs. CE Cochin 9 STR 18 (TRI- Bang)
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Whether CENVAT credit can be allowed on
the basis of photocopy of extra copy of Invoices ?
Held : No
The assessee was manufacturing Ferro alloys and availing
CENVAT credit Rules, 2000. It has availed credit of Rs. 80562/- on the basis
of the office copy of the extra copy of the invoices issued by the supplier of
the goods.
The adjudicating authority on the basis of the material on
records held that cenvat was not allowable to the assessee.
The appellate commissioner held that the appellant had lost
both copies of invoices i.e. original for the buyer and duplicate for
transporter and it had filed the complaint about such loss with the police.
The learned appellate commissioner held that it would be unjust to deprive the
assessee of its legitimate claim of credit only because it has lost the
invoices which were merely an accident. Relying upon the decision of the
tribunal in the case of Dhaulagiree Polyolefin’s (Pvt.) Ltd. vs. CCE
reported in 2002 (147) E.L.T. 843 (Tri.) and in Vikarm Ispat vs. CCE
reported in 2004 (168) E.L.T. 68 (Tri), it was held that since misuse of
lost invoices for the purpose of availing credit by a third party, was not
possible the credit be allowed.
The tribunal held that the learned commissioner has not
appreciated that the credit was sought on photocopy of extra copy of invoices
and not on certified copy of invoices. They noted that a full bench of this
tribunal in CCE, New Delhi vs. Avis Electronics Pvt. Ltd., reported in 2000
(117) E.L.T. 571 (Tribunal) has, in terms, held in paragraph 11 of the
judgment that, the manufacturer who wants to take credit of the duty paid on
inputs must base his claim on the duplicate copy of the invoices. In case the
duplicate copy has been lost in transit, he can take credit on the basis of
the original. Therefore, under the scheme of the provisions of the Cenvat
credit, there is no scope for availing Modvat credit under the cover of a
photocopy of some extra copy of an invoice. The credit was therefore
disallowed.
CCE Raipur vs. Vandana Energy & Steel Pvt Ltd. [9 STR 31
(Tri.-Del.)].
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Whether loading charges paid by the buyer
at the supplier's place will form part of the assessable value of goods ?
Held : Yes
Whether remuneration given to buyer's employee for quality
control activity performed at the assessee‘s factory (seller of goods) has to
be included for the purpose of assessable value of goods ?
Held : Yes
During the period between January, 1995 to October 1997,
the appellant dealer did not include two elements in the assessable value of
the detergents supplied to Hindustan Lever ltd. One of these elements was the
loading charges relating to the loading of the goods at the assessee’s factory
gate. These charges were borne by the buyer. The other element, which was not
included in the assessable value of the goods, was the r'see’s factory. After
including these elements also in the assessable value of the goods, the
original authority raised a demand of differential duty on the assessee,
amounting to Rs. 170277/-.As the assessee had not disclosed to the department
the fact that they had not included the above elements in the assessable value
of the goods, the larger period of limitation was invoked for demanding this
duty on the basis of suppression of facts found against the assessee. In the
appeal preferred by the assessee against the Dy. Commissioner’s order, Id.
Commissioner (appeals) allowed input-duty credit to them but sustained the
demand of duty on them after uploading the valuation done by the lower
authority.
Tribunal observed that two employees of Hindustan Lever
Limited (buyer) were permanently stationed in the assessee’s factory and were
checking the quality of the goods (to be supplied to their employer /
Hindustan Lever Limited) on a day-to-day basis during the period of dispute.
As rightly observed by the Id. Commissioner (appeals), the activity of these
employees of Hindustan Lever Limited was in the nature of enhancing the value
of the goods and making it marketable. Without such quality check and control,
the goods would not have been acceptable to the buyer. In other words, the
activity performed by the above employees of the HLL was an integral part of
the testing of the assessee’s product, an element very much includible in the
assessable value of the goods. As regards loading charges, it is found that,
though these were born by the buyer, these were incurred in connection with
the loading of the goods in the assessee’s factory. Such expenses have been
held to be includible in the assessable value of the goods cleared from the
factory, by a series of decisions of the apex court, vide UOI vs. Bombay
Tyre International [1983 (14) E.L.T. 893 (SC)]. Hence the valuation done,
and the demand of the duty raised, by the lower authorities are quite in
order.
CCE Chennai vs. Ultra Marine Pigments Ltd 204 ELT 158
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Bill of entry triplicate copy is
misplaced. Complaint lodged with Police and Custom Authorities. Credit taken
on photocopy of bill of entry certified by Bankers and Notary Public whether
permissible.
Held : Yes
The issue involves denial of MODVAT credit on the basis of
bill of entry produced by the Appellants.
The Appellants imported capital goods during the year 1998.
They misplaced triplicate copy of bill of entry under which goods were
imported. They lodged complain with the Police and addressed letters to custom
authorities. They took credit on the strength of photocopy of the bill of
entry duly certified by the Bankers and Notary public and wrote a letter to
Deputy Commissioner Excise Ankaleshwar and Custom authorities.
The tribunal observed that it is noticed that there has
been constant change in the procedure in availing the Cenvat credit and also
the nature of the document which are eligible for availment of credit. Earlier
under 57G assessee was entitled to take credit on triplicate copy of Bill of
Entry which supposed to be retained by him. Rule 57G also prescribes other
documents eligible for cenvat credit. Rule 57G was omitted from 31.3.2000,
therefore rule 57AE came into force with effect from 1.4.2000. This shows
under clause (b), Bill of Entry is legally permitted for claiming the credit
as against Triplicate copy of the Bill of Entry. Again rule 7 of the Cenvat
Credit Rules, 2000 has been introduced with effect from 1.4.2001. Clause (c)
of the Rule 7 of the Cenvat Credit also prescribes Bill of Entry as against
Triplicate copy of the Bill of Entry. In the instant case, the Show- Cause
Notice though refers to the Rule 7 of the year 2000-01, but the Commissioner
(A) had discussed about the old rules and dismissed the claims of the
appellants. The Id. Counsel for the appellants relied upon the following
decisions:
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2003 (57)
RLT 359 (CEGAT- Mum) – Shivani Fibres Pvt. Ltd.. vs. CC and CE, Vadodara.
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2002 (144)
E.L.T. 338 (Tri – Bang) Kothari general Foods Corpn. Ltd. vs. CCE,
Bangalore.
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2004 (178)
E.L.T 679 (Tri) = 2004 (97) ECC 756 (Tri) – Bhasker Industries Ltd vs. CCE,
Bhopal.
All the above decisions refer to the point that the
photocopy authenticated invoices and Xerox triplicate copy of the Bill of
Entry and attested copy of Bill of Entry are permissible for availment of
Cenvat credit. The matter was remanded back for reappeal readjudication basing
on the latest provisions of the Cenvat Credit Rules.
Vardana Acrylics Ltd vs. CCE and Custom Surat TRI Mumbai
204 ELT 321.
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Whether intrigated circuits (software for
imported franking machine) should be classified as under Tariff heading
8542.50 being intrigated circuits or chapter heading 8470.90 being franking
machine and parts thereof
HELD – Intrigated circuits 8542.50
The appellant dealers contented that the intrigated
circuits should be classified under Tariff heading 8542.50. The department
contented that it should be classified under chapter heading 8470.90 being
franking machine and part thereof.
The tribunal observed that in a recent decision reported in
2006 (194) E.L.T. 129 (S.C) in the case of Anjaleem Enterprises Pvt. Ltd.
vs. CCE, Ahmedabad, the Apex court has held that even a programmed IC is
classifiable under Heading 85.42 and that the essential character of an IC
does not change with the programme being embedded therein. Further, on
application of Note 2 (a) to section XVI of the Tariff under which chapters 84
and 85 fall, the ICs in question will remain classifiable under Heading 85.42
as, although they may be parts of franking machines, they are specifically
enumerated/ included in Heading 85.42. Further, according to Note 5 to Chapter
85, the classification of ICs under CTH 85.42 will take precedence over any
other heading in the Schedule which may cover ICs by reference to their
function etc. and, therefore, even if the ICs can be treated as parts of
franking machines, by virtue of the above Note 5 , their classification under
Chapter Heading 85.42 will take precedence over classification under CTH
8470.90.
The appeals of the appellants were allowed. The good are to
be classified as intrigated service covered under chapter heading 8542.50.
Bradma of India Ltd vs. Commissioner of Custom Mumbai 204
ELT 82 TRI Mumbai.
