Allied Tax Laws

Held : Yes.

Whether such refund claimed can be considered unjust enrichment.

Held : No.

The dealer bank filed an application for refund of excess Service Tax paid on the ground that the Service Tax paid by the assessee has not been recovered from its customers. Therefore, it has right to claim for refund. The refund application filed by the assessee was rejected by the Original Authority on the ground that the assessee has produced only the compact disc to show that the assessee did not recover the amount from its customers and the compact disc does not reveal the full transaction. Therefore, the application was rejected.

The Commissioner of Central Excise (Appeals), after hearing both the parties came to the conclusion that the compact disc produced by the assessee is admissible in evidence and considering the nature of transaction and its voluminous nature, by testing the cases at random, the Commissioner came to the conclusion that the assessee satisfied the genuineness of the claim. Contending that the original authority has committed an error in holding that the compact disc is inadmissible and did not consider a certificate issued by the Chartered Accountant, allowed the appeal of the assessee and set aside the order passed by the original authority.

The Tribunal after considering the order passed by the original authority as well as the order of Commissioner of Central Excise held that the Commissioner of Central Excise was justified in allowing the appeal as the compact disc produced by the assessee was admissible and the certificate produced by the assessee from its Chartered Accountant would satisfy the claim. Accordingly, the appeal of the revenue was rejected.

Before the High Court the following questions were raised :

1. Whether refund could be granted without verification of documentary evidences including the documents referred to in Section 12A of the Central Excise Act ?

2. Whether refund would be admissible without examining the applicability of principle of unjust enrichment as laid down under the provisions of Section 11(B)(2) of Central Excise Act, 1944 ?

The court held that question no. 1, is question of fact and since the final fact finding authority has satisfied itself and allowed the refund, that question was answered against department.

In respect of the question no. 2 the High Court observed that such question was not urged by revenue before the tribunal. Even if it was treated as a pure question of law then too department has no case on merits, as assessee dealer has claimed refund of excess Service Tax paid not recovered by it from its customers. The Court observed that when assessee dealer was unable to recover tax from its customers, the assessee cannot be made to pay the service tax in excess and if such refund is asked, we cannot consider the claim of the applicant as unjust and it is just money to which the assessee is entitled to, since the same was paid by the assessee in excess.

[Commissioner of Service Tax vs. Standard Chartered Bank (10 STR 6 KAR)]

Held : No.

Held : Yes.

The appellants collected rental in respect of hoardings owned by them for advertisement purposes. Further, they hired certain premises from the Railways and afterwards hired those premises for purposes of advertisement. Revenue proceeded against the appellants on the ground that they are engaged in providing advertisement services which are taxable in terms of the Finance Act, 1994.

The dealer relied on following decisions in course of the argument before Tribunal :

1. Rex Advertisers vs. CST, Bangalore -2006 (2) STR 330 (Tri. Bang)

2. Prism Ads vs. CCE & C, Mumbai-2006 (2) STR 501 (Tri. Mumbai).

3. CCE, Chennai vs. Team UDP Ltd. -2006 (3) STR 427 (Tri) = 2005 (179) ELT 469 (Tri. Chennai).

4. CCE, Kolkata-V vs. The Incoda -2006 (3) STR 302 (Tri.) = 2004 (174) ELT 65 (Tri.-Kolkata).

5. CCE, Chennai vs. Team UDP Ltd. -2006 (3) STR 602 (Tri.) = 2005 (184) ELT 389 (Tr. Chennai).

The dealer reiterated that since they had not conceptualised, visualised and designed the advertisements, they would not be covered under the definition of Advertising Agency in terms of definition and also in terms of Board’s circular no. 345/4/97-TRU dated 16-8-1999.

The tribunal observed that the entire tax amounts and penalty imposed can not be satisfied. The Tribunal, however, noted that the dealer had collected an amount of Rs. 37,589 from various clients towards Service Tax and had not remitted the amount to the Government.

The Tribunal confirmed the demand of Rs. 37,589, Penalty of Rs. 37,589 u/s. 78 and penalty of Rs.500 for not obtaining registration.

[FEBIN Advertisers vs. CCE, CALICUT (10 STR, 50 (Tri. Bang).]

Held : Rate of tax prevailing on
the date of rendering service.

The appellant was receiving consulting engineering services from the service provider located outside India.

The original authority confirmed the demand of service tax amounting to Rs. 5,08,643 along with interest and also imposed penalty of equal amount on the ground that even in respect of the services received on dates prior to 14-5-2003, the rate of service tax shall be as on the date of billing for payment.

Before the Tribunal it was contended that the rate of duty should be the rate applicable at the time of receiving services and it has no relevance to the date of billing or date of payment for the same. He relied on the following decisions of the Tribunal.

1. Lumax Samlip Industries vs. CST, Chennai - 2007 (6) STR 417 (Tri-Chennai).

2. CCE, Noida vs. Matsushita TV & Audio India Ltd.-2006 (1) STR 162 (Tri. Del).

3. Art Leasing Ltd. vs. CCE, Cochin - 2007 (8) STR 162 (Tri. Bang.).

The department argued that in respect of service tax, the liability is linked to the payment of service charges and, therefore, the relevant date would be the date of billing. He also relied on the CBEC’s Circular No. 56/5/2003-ST, dated 25-4-2003.

Tribunal observed that the liability to service tax is on account of rendering of the services. There are variations in matters relating to manner of collection when compared to other taxes. It shall be normally paid by the person rendering services but in certain cases it shall be paid by the recipient of the services. Similarly, it need not be paid on the date of rendering of services but subsequently at the time of receiving the service charges. When the service tax was introduced for the first time for any service, in respect of the service already rendered on the dates prior to introduction of service tax, even if the payments are received on a subsequent date, no tax shall be leviable. Similarly, it hold that in absence of specific provision, the rate of tax applicable to the service tax shall be the rate prevailing on the date of rendering the services.

Tribunal further observed that the board’s clarification "A further question raised is relating to payments receivable in foreign exchange for the services performed prior to 1-3-2003 when the rate of service tax applicable was 5% but payments are received after 1-3-2003. The enhancement of the rate of service tax from 5% to 8% would be applicable only when the Finance Bill is passed. If payments are received in the aforesaid case after the Finance Bill is passed, the rate of tax applicable would be 5% so long as the billing has been made prior to the date of passing of the Finance Bill. If the billing is made subsequent to the date of passing of the Finance Bill, the service tax would be applicable at the enhanced rate of 8%", it can not be considered to be authorising the application of rate prevailing at the time of billing/payment. The linking of the rate of duty to the one prevailing on the date of billing or date of payment is not legally justified.

[Reliance Industries Ltd. vs. CCE, Rajkot, 10 STR 243 (Tri.-Ahmd.)]

Held : No.

The issue involved in the above appeal relates to the inclusion of value of material and other consumables in the taxable value of Photographic Service and denial of exemption under Notification No. 12/2003-ST dated 20-6-2003. In the impugned orders, the learned Commissioner (Appeals) has relied on the decision of the Laxmi Colour (P) Ltd. case decided by the Tribunal as reported in 2006 (3) S.T.R. 363 (Tribunal) = 2006-TIOL-918-CESTAT-Del. However, this Bench, in the following decisions, held that the appellants are entitled to the benefit of Notification No. 12/2003-S.T.

1. Shilpa Color Lab v/s CCE, Calicut -2007 (5) STR 423 (Tri.-Bang).

2. Adlabs v/s CCE, Bangalore -2006 (2) STR 121 (Tri-Bang).

3. M/s. Suvi Color Fotos and M/s. Suvi Color Spot- Final Order Nos. 486 & 487/2007 dated 17-4-2007

Further, the learned Commissioner (Appeals) failed to note that the decision of the Laxmi Color (P) Ltd. was considered by this Tribunal in the case of Shilpa Colour Lab vs. CCE, Calicut wherein it was observed that Laxmi Color (P) Ltd. case relied on the Supreme Court’s decision in C. K. Jidheesh vs. UOI -2006 (1) STR 3 (SC) and which decision has been overruled by the Apex Court. Therefore, reliance on Laxmi Colour (P) Ltd. decision may not be correct. As the issue is squarely covered by the above mentioned decisions, we allow the appeal with consequential relief, if any.

[M/s. DIGI Studio vs. CCE, Calicut (10 STR TRI-BANG)]

Held : No.

In the above matter Tribunal observed that when the proprietor has the business premises and he carries on the business activity from business premises then service tax is admissible on telephone installed at the business premises and not at the residence.

[International Testing Centre vs. CCE, Panchkula (10 STR 253 Tri. Del).]

Held : No.

The Commissioner Appeal allowed the Cenvat Credit in the respect catering/canteen services provided in factory premises.

The department proceeded in appeal.

Tribunal concluded that catering/canteen services are neither used in or in relation to the manufacture or clearance of final products nor can it be said to be an activity relating to business. Catering service cannot be treated as an activity relating to business and even if it is obligatory on the part of the assessee/respondents as per the requirement of the Factories Act, 1948, to provide a canteen, this does not automatically lead to the conclusion that a catering service relates to business activity. It is in the nature of welfare activity and not an activity relating to business.

[Mahindra Soua Ltd. vs. CCE, Nashik (10 STR, 256 Tri. Mumbai).]