Some of the latest Service tax Case laws

Business Auxiliary Services
Where the appellant, a CHA, arranged containers for their clients who were exporters of goods through steamer agents for a brokerage paid by the steamer agents, the Tribunal held that the brokerage was not taxable under ‘Business Auxiliary Services’ since the assessee’s services were in the nature of ‘secondary services’ which ultimately got consumed with the primary services [presumably steamer agent service] that were exported and by virtue of CBEC Circular No. 56/5/2003 dated 25/4/2003 such secondary services are ‘exports’ and not taxable. [Ruth Shipping Agencies Pvt. Ltd. vs.CCE (2010) 19 STR 39 (Tri- Che.)]
Cargo Handling services
Where the assessees arranged loading and unloading of consignments of fertilizers and charged the clients with a 15% margin compared to the amount paid to the contractors it was held that the assessees provided cargo handling services to the client. [Karnataka State Warehousing Corporation Ltd. vs. CCE (2010) 19 STR 32 (Tri-Bang.)]
Clearing and forwarding
The activity of cutting of sugarcanes and its loading and transportation upto the sugar factories does not amount to ‘clearing and forwarding agent’ services. [Ajinkyatara Sahakari Krishi Audyogik Otvs Ltd. vs. CCE (2010) 19 STR 285 (Tri-Mumbai)]
Commercial or industrial construction service
Laying of pipelines for Gujarat Water Supply and Sewerage Board (GWSSB) for supply of drinking water to gram panchayats and nagar panchayats would not be liable under ‘commercial or industrial construction services’ [which includes construction of pipeline or conduit] since the pipelines were not laid to facilitate any commercial or industrial activity of GWSSB. [Nagarjuna Construction Co. Ltd. vs. CCE (2010) 19 STR 259 (Tri-Bang.) relying on Indian Hume Pipe Co. Ltd. vs. CCE (2008) 12 STR 363 (Tri)]
Erection, Commissioning or Installation
Laying of pipelines is not covered under the category of “Erection, Commissioning or Installation” service and hence not liable for service tax [A. Sekar v. CCE (2010) 19 STR 82 (Tri. – Chennai) relying on Indian Hume Pipe Co.Ltd. v. CCE (2008) 12 STR 363 (P&H)]
Practicing Chartered Accountant’s services
Transfer Pricing certification / report under section 92E of the Income-tax Act, 1961 would be considered as ‘auditing’ services and accordingly not entitled for exemption under notification no. 59/98-ST dated 16.10.98 (whereby all services except accounting, auditing and certain certification services were exempt).[Price Waterhouse vs. CST (2010) 19 STR 63 (Tri. – Che.)] 
Storage and Warehousing services
In this case the High Court held that subsidy received from the Government  towards interest, storage and insurance for maintenance of a specific quantity of free sale sugar for a specified period (buffer stock) under the provisions of Sugar Development Fund Act, 1982 is not liable under the ‘storage and warehousekeeping services’ after making the following observations-
(i)  Nobody can provide service to himself – the appellant stored the goods owned by himself for a specified period and after the expiry of the period he was free to sell the same;
(ii)   Subsidy received was not on account of services rendered to Government but is received as compensation on account of loss of interest, cost of insurance etc. incurred on account of maintenance of stock.
(iii)  Just because the storage period of free sale sugar had to be extended at the behest of Government of India, neither the sugar mills becomes ‘Storage and Warehouse Keeper’ nor the Government of India become their client in this regard.
[CCE vs. Nahar Industrial Enterprises Ltd. (2010) 19 STR 166 (P&H)]
Ø  The Karnataka State Warehousing Corporation, whose services are requisitioned by the State Government for storing of essential commodities like fertilizers on payment of a charge, does not perform a “statutory function”, and is liable for service tax under storage and warehousing services [Karnataka State Warehousing Corporation Ltd. v. CCE (2010) 19 STR 32 (Tri-Bang.)]
Tour operator services
Transporting staff of client from work place to their residence and back in a vehicle would not be liable for service tax under the category of “tour operator services” since the appellant was neither engaged in transporting the staff in ‘tourist vehicle’ nor his activity involved planning, scheduling, organizing, arrangement of tours using his vehicle [Remanan Travels vs. CST (2010) 19 STR 83 (Tri. – Bang.)] .
Import of Services
Consulting engineering services rendered by a ‘foreign company’ to the appellants during the period Nov. 98 to December, 2000 is not liable for service tax, since:
(i)  Consulting engineering services provided by a ‘body corporate’ would be liable for service tax only w.e.f. 1.5.2006 and not prior to that date;
(ii)  in any event no service tax would be payable on services provided from outside India prior to 18.4.2006 since s.66A of the Finance Act, 1994 was introduced only w. e. f. 18.4.06.
Accordingly the High Court held that the appellants would not be liable to pay service tax on the services provided by overseas foreign company. [CCE vs. Araco Corporation (2010) 19 STR 169(Kar.) relying on CCE vs. SKF India Ltd. (2010) 18 STR 388 (Kar.)]
Valuation
SIM card is not a ‘goods’ sold to the customer by a mobile service provider but is supplied as part of telecommunication service and it has no intrinsic value other than receiving mobile telephone service from the service provider. Consequently, the value of SIM card is includible in the value of taxable service. [CCE vs. Idea Mobile Communications Ltd. (2010) 19 STR 18 (Ker.)]
Where the appellant has already paid VAT on the material component of the construction contract which as per the state VAT law was deemed as 70% and on the balance 30% paid service tax, the Tribunal held that the Revenue cannot collect service tax on the material component since it would violate the principles of fiscal federalism and mutuality of service tax and sales adopted in the Constitution. [Sobha Developers Ltd. v. CCE & ST (2010) 19 STR 75 (Tri. – Bang.)]
Demand
Where the revenue had raised the demand based on the differences between the amounts shown in ST-3 return and the balance sheet, bank book & ledger and where it had failed to consider the explanation for the differences given by the assessee at the time of investigation the Tribunal held that the demand was not in accordance with law and hence not sustainable since the entire demand was based on assumptions and presumptions and the department had failed to establish the demand based on evidence. [CST vs. Purni Ads Pvt. Ltd (2010) 19 STR 242 (Tri-Ahmd.)]
Limitation
Where the assessees were registered under storage and warehousing services as early as 8.3.2004 but did not pay service tax, a show cause notice issued on 21.3.2006 for demanding service tax for the period 16.8.2002 to 31.3.2005 pursuant to a visit of the departmental officers on 14.2.2005, cannot invoke the longer period of limitation and the demand beyond the normal period of limitation is not sustainable. [Karnataka State Warehousing Corporation Ltd. vs. CCE (2010) 19 STR 32 (Tri-Bang.)]
Where the department had already issued a show cause notice on 28.3.2003 seeking to tax the assessee under ‘clearing and forwarding services’ for the period 1997-98 to 2000-01, a second show cause notice dated 9.11.2004 seeking to tax the same activity under ‘goods transport services’ is barred by limitation since the department was already aware of the facts. [Ajinkyatara Sahakari Krishi Audyogik Otvs Ltd. vs. CCE (2010) 19 STR 285 (Tri-Mumbai)]
Penalty
Where penalty u/s. 78 was not proposed to be imposed in the show cause notice (the foundation stone of the case) the revenue cannot impose the same by exercising the revisionary jurisdiction. Further, where the adjudicating authority imposed a penalty of only Rs. 100/- u/s. 76, the High Court held that the Commissioner in exercise of his revisionary jurisdiction cannot increase the penalty to Rs. 1.5 lakhs since the assessee being a Government Undertaking there was no intention of evasion of tax and the assessee had also explained the reason of non-payment and had immediately deposited the tax on being pointed out. [CCE vs. Punjab Small Industries & Export Corpn. Ltd. (2010) 19 STR 16 (P&H)]
In the present case the appellant has deposited the service tax on the service of renting of immovable property provided by him belatedly. The adjudicating authority imposed penalty u/s 76. The Tribunal held that the penalty u/s. 76 is not imposable since the appellant was under a bona fide belief for not depositing the service tax in time and there was no allegation that the tax was collected from service receivers but not paid. [Taradevi Bafna vs. CCE (2010) 19 STr 73 (Tri. – Mum)]
Where the assessee had paid service tax and interest before the issuance of Show Cause Notice, the Tribunal held that in view of the CBEC Circular No. 137/167/2009-CX.4 dated 3.10.07 no show cause notice was required to be issued. Accordingly no penalties were imposable.[Nischint Engineering Consultants Pvt. Ltd. vs. CCE (2010) 19 STR 276 (Tri-Ahmd.)]
Refund
The place of removal in case where the goods are exported on FOB basis would be the port and accordingly, credit of service tax paid on CHA services in respect of excisable goods at the port area i.e. place of removal would be admissible and accordingly refund of service tax paid on CHA service which is used as input for export of final product would be allowed. [Leela Scottish Lace Pvt. Ltd.. vs. CCE. (2010) 19 STR 69 (Tri. – Bang.)]
Where the assessee paid service tax on auctioneer services, under the category of business auxiliary services even before the introduction of service tax on auctioneeer’s services w.e.f. 1.5.2006 the Tribunal allowed the refund claim for the amount of service tax paid by it under the category of business auxiliary services holding –
(i)  Auctioneer services are liable only w.e.f. 1.5.2006 and not prior to that date and hence the assessee was eligible for refund of such tax;
(ii)   Section 11B of the Central Excise Act, 1944 would not apply to such cases, and accordingly the limitation bar of 1 year would not be applicable.
(iii)  The assessee had not collected the service tax from its clients evidenced by the Balance Sheet (amount disclosed as ‘receivables’) and Chartered Accountant’s Certificate. Hence the bar of unjust enrichment would also not be applicable.
[CCE vs. Shankar Ramachandra Auctioneers (2010) 19 STR 222 (Tri – Mumbai)]
Where the appellant paid Rs. 37,960/- as service tax during 2006–07 but claimed refund of such tax on 21.1.2008 on the ground that the total value of taxable services for the year 2006 – 07 was below the exemption limit [Rs. 4 lakhs], the Tribunal held that the refund was not permissible since the exemption has to be claimed in advance and once claimed cannot be withdrawn for a financial year. [L.G. Marwadi vs. CCE (2010) 19 STR 279 (Tri-Mumbai)]
Appeals – Letter from Commissioner appealable?
Pursuant to a clarification sought by the respondent-assessee the Addl. CCE vide letter dated 23.12.2004 clarified that service tax was not payable on international door-to-door courier service but the Commissioner vide letter dated 9-1-2006 stated that the clarification of the Addl. CCE was not in accordance with a Board Circular and directed the payment of service tax. On appeal, the CESTAT held that the Commissioner’s letter dated 9.1.2006 was an order but was bad in law since it did not give an opportunity to the assessee of being heard / showing cause either under section 73 or section 84. The High Court affirmed the order of the CESTAT. [Chief Commissioner, LTU,Bangalore vs.TNT India Pvt. Ltd 2010 (19) STR 5 (Kar)] 
Recovery of amounts
The department has no authority to use coercive measures to collect any amount of tax in advance at the time of raid. It can legitimately do so only at the time of recovery proceedings when tax liability has been ascertained by following the procedure of issue of show cause notice and not before that. Thus where the assesee had to make a compulsory payment towards tax in advance at the time of raid and in absence of any show cause notice issued by the department, the Hon’ble High Court held that the department had no right to do so and accordingly ordered the amount to be refunded.[Naresh Kumar & Co. vs. UOI (2010) 19 STR 161 (Cal.)]
Where the department had issued notice to ONGC u/s. 87(b)(i) of the Finance Act, 1994, for recovery of service tax on services provided by certain manpower supply agencies to ONGC without passing assessment orders crystallising the service tax liability of the manpower supplying agencies the High Court held that, only after an assessment order has been passed and the assessees have defaulted in payment of assessed tax, the department has powers to issue notice to ONGC u/s. 87 and not before that.[O.N.G.C. Ltd. vs. DyCCCEST (2010) 19 STR 164 (A.P.)]
CENVAT credit
CENVAT credit of service tax paid on construction of staff quarters is allowed on the ground that staff quarters are premises of the bank and input services include services used in the premises of output service provider [The Lakshmi Vilas Bank Ltd. vs. CCE (2010) 19 STR 40 (Tri.-Che)]
CENVAT credit of service tax paid on repair / maintenance, insurance, surveys, technical inspection certification services and manpower recruitment services all relating to vessels, viz., tugs and barges which were used for the purpose of transporting raw materials and final products from / to ships anchored at sea to/from the appellant’s factory was disallowed by the Tribunal on the ground that none of the above mentioned services would be considered as input services since the quintessential requirements of “input service” laid down in the main part of the definition have not been established by the appellant i.e. a nexus between the services in question and manufacture / clearance of excisable goods by the appellant.[Vikram Ispat vs. CCE (2010) 19 STR 52 (Tri. – Mumbai)]
Rent-a-cab, air travel and servicing of motor vehicle services were considered as activities relating to business and CENVAT credit of service tax paid on those services were allowed [Dr. Reddy’s Lab. Ltd. vs. CCE (2010) 19 STR 71 (Tri. – Bang.)]
(i)   CHA Service : The load port would be the “place of removal” and accordingly, credit of service tax paid on CHA services availed for facilitating clearance of goods from the place of removal (i.e. load port) would be admissible as activity relating to business.
(ii) Dry Cleaning Services : Wearing of clean uniforms/clothing is mandatory under Drugs and Cosmetics Act for personnel engaged in the manufacturing of medicaments or drugs. Hence, said services are relating to business and CENVAT credit of tax paid on same is allowed.
(iii)Telephone Service : Telephone is used by the appellant for the day to day business operation and hence CENVAT credit of service tax paid on the same is allowed.
[CCE vs. Fourrts (I) Laboratories Pvt. Ltd. (2010) 19 STR 86 (Tri. – Che.)]
CENVAT credit of service tax paid on mediclaim policy, Security services, vehicle insurance, Car rentals, Pest control activities are allowed on the ground that the said services are all related to the business activity of the appellant. [Hindustan Coca Cola Beverages P. Ltd. vs. CCE (2010) 19 STR 93 (Tri. – Bang.)]
Cenvat credit of service tax paid on outdoor catering services availed by the various assessee – manufacturers for providing canteen facilities to their employees would not be admissible for the following reasons:
(i) credit of duty / tax in respect of inputs or input services is permitted only when the same is used “in, or in relation to manufacture of excisable goods”.
(ii)  Cenvat credit would not be available merely on the basis that the value of input / input services is included in the value of finished excisable goods;
(iii) Use of the input service must be integrally connected with the manufacture of the final product. The input service must have nexus with the process of manufacture. It has to be necessarily established that the input service is used in or in relation to the manufacture of the final product. One of the relevant test to determine the availability of credit would be – “can the final product emerge without the use of the input service in question?” Since Outdoor Catering is not integrally connected with the manufacture of final product it is not an “input service”.
[CCE vs. Sundaram Brake Linings (2010) 19 STR 172 (Tri-Chennai), departing from CCE v. GTC Industries Ltd. (2008) 12 STR 468 (Tri-LB) in view of the Supreme Court decision in Maruti Suzuki Ltd. vs. CCE (2009) 240 ELT 641 (SC)]
Credit of service tax paid on garden maintenance being an activity relating to business is admissible. [Rane TRW Steering Systems Pvt. Ltd. vs. CCE (2010) 19 STR 251 (Tri-Chennai) relying on Millipore India Ltd. vs. CCE (2009) 13 STR 616 (Tri)]
Credit of service tax paid on inspection charges for constructing staff quarters admissible.
Credit of service tax paid on Mobile Phones admissible.
[Port Officer, Gujarat Maritime Board vs. CCE (2010) 19 STR 282 (Tri-Ahmd.)  
CENVAT Credit cannot be denied by questioning the assessment of service provider since it is beyond the jurisdiction of the authorities in-charge of the service recipient. [Hindustan Coca Cola Beverages Pvt. Ltd. vs. CCE (2010) 19 STR 280 (Tri-Del.)]
Where the assessee provided taxable services as well as was engaged in trading activity, and availed CENVAT Credit on input services used for taxable services as well as trading activity, the Tribunal held that –
(i)  Trading activity is nothing but purchase and sales and cannot be called a service and therefore it cannot be considered as exempted service.
(ii)  Rules 6(2) and 6(3) of the CENVAT Credit Rules, 2004 only deal with a situation where service provider is providing taxable and exempted ‘services’. Since trading activity is not an exempted service rule 6 cannot be applied to such a situation.
(iii)  The only obvious solution which would be legally correct appears to be to ensure that once in quarter or once in six months, the quantum of input service tax credit attributed to trading activity according to standard accounting principles is deducted and the balance only availed for the purpose of payment of service tax of output service. This proposition is not against the law in view of the fact that there are several decisions of various High Courts and also of the Tribunal wherein a view has been taken that subsequent reversal of credit amounts to non-availment of credit.
[Orion Appliances Ltd. vs. CST (2010) 19 STR 205 (Tri-Ahmd.)]