CA Shishir Agrawal

About Notes: The case laws are summarized from supplementary study material issued by The Institute of Chartered Accountants Of India for the Final Examination held in May 2015. For detail case study, please visit http://220.227.161.86/35311scasesp7.pdf .The case laws in italics are fresh addition in current supplementary module.

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SERVICE TAX

Sl No. Case law reference Judgment in exam style
Basic Concept of service tax
1.         Delhi Chit Fund Association(F)

(Related to levy of service tax on the chit fund business)

The definition of service u/s 65B(44) excludes the activity of” transection in money and actionable claims” from the definition. Further as per Explanation 2 the transection in money in respect of conversion of money from one currency to another currency for which extra consideration is charged. The service provided by foreman in Chit fund business is out of ambit of defection of service u/s 65B(44).

2.         RastriyaIspat Nigam Ltd. VsDiwan Chandra Ram Saran(F)

(Related to shifting of service tax liability through the clause of the contract)

In this case the assesse has contract with the service provider that the incidence of all the taxes shall be borned by the service provider. During the contract period reverse charge mechanism got applicable for that service where 50 % of service tax was required to be paid by the service receiver. The assesse service receiver deducted the service tax from the consideration paid to service provider. The Supreme Court held that where the assesse has entered into agreement to pass on the incidence of the tax burden, it can do so. The department is concerned only with the payment if the tax by the relevant assesse. Thus assesse can pass on the incidence of service tax through the agreement.

3.         Kishore K. S. VsChertala Municipality(A)

(Related to the incidence of service tax where the agreement between service provider and servicer receiver is silent about the same)

Where the agreement between service provider and service receiver is silent about the service tax, it is not open to service receiver to escape from the incidence of service tax being “indirect tax” stating that there is no any covenant in agreement for service tax in the agreement.

4.         Trumala Tripati Devasthan(A) (Related to the levy of service tax)

Where the assesse was running guest house for providing shelter to the pilgrims or otherwise, it was providing the taxable services and was thus liable to pay service tax.

5.         Infotech Software dealers Association(ISODA )(A)

(Related to levy of the service tax on software)

The High Court in this case held that though software is though goods, but the transection may not in cases amount to sale. In this case only right to use the software with copyright was given to the customer against the consideration. Thus in this case since the data in the software is sold will only amount to service not sale.

6.         Nahar Industries Enterprises Ltd.(F)

(Related to levy of service tax on the subsidy provided by Govt. on buffer stock to be maintained by assesse)

The assesse was directed to maintain the buffer stock of sugar. The govt. to compensate the interest, rent and insurance cost granted the assesse a buffer subsidy. On the issue of levy of service tax, the High Court held “no one can give service to himself since in this case the service of accommodation of goods was arranged by the assesse himself. Further the Govt. had extended the subsidy only to compensate the assesse.” Thus is the given case there will be no levy of service tax.

7.         Mayo college general Council( A)

(Related levy of service tax on franchise service given to school)

Where the assesse in involved in allowing the schools to use their name, logo as well as their motto, it is providing franchise service and there will be levy of service tax on same.

Place Of Provision Of Service
8.          Wipro Ltd.(F)

(Related to rebate claim of service exported outside of India)

For the rebate on duty paid on input goods or services for the service exported outside India, the exporter is required to file the prior declaration to AC/DC describing taxable service to be exported and value and all details on input goods and services. In the given case the assesse is engaged in providing the IT enabled services such as technical support services and customer care services and back office services in which it was impossible to the assesse to declare the value and description of exported service and duty paid on the input service. Thus the high Court allowed rebate claim filed by the assesse in which declaration was filed after the date of export being the exceptional circumstances.        

Valuation of taxable services
9.         Intercontinental Consultants & Technocrats Pvt. Ltd.(F)

(Related to the inclusion of expenditure incurred by the service provider in valuation of taxable service)

As per the charging section of the service tax, the service tax should be levied on the value of taxable services which is gross amount charged by the service provider for providing “such services”. However as per rule 5(1) of valuation rules, value of taxable service includes the expenditure and costs incurred by the service provider in the course of providing such taxable services. In this Issue the High Court gave the view that power to make rule can’t go beyond the charging section. Thus such rules are ultra-varies to Finance Act, 1994.    

Service tax procedures
10.     Rajasthan Urban Infrastructure (F) (Related to the TDS deduction on the service tax component)

Where the amount of service tax is paid separately and not included in the fee of professional service, the TDS is not required to be deducted on the service tax component.

11.     A.C.L. Education Centre (P) Ltd.(A)

(Related to the holding of ultra-vires of rule 5A(2))

As per the assesse, the rule 5A(2) as formed by central Govt. that the assesse is required to provide the document is not in accordance with the any provision of the Finance Act, 1994. The High Court held that the rule is not ultra-vires and in tune with section 72A of the Act.

Demand, Adjudication and offences
12.     Chitra builders Pvt. Ltd.(F)

(Related to the validity of amount collected during the search)

The department conducted the search in the premises of the petitioner and Rs. 2 Crores were collected the department. The same being recorded as service tax paid by the petitioner. The petitioner objected same. The High court held that as per the well settles position of the law no tax can be collected without passing the assessment order. Thus, the amount collected by the department in the search could not be held valid in the eye of law and department is directed to return the same.    

13.     Infinity Infotech Parks Ltd.(F)

(Regarding extended period of limitation u/s 73(1)

The High Court in this case held that mere contravention in provision of chapter V or rules framed thereunder does not enable the service tax authorities to invoke the extended period of limitation. The contravention necessary has to be with the intent to evade the payment of service tax.

14.     Kandra Rameshbabu Naidu(A)

(Relating to penal and prosecution u/s 89(1))

The assesse was arrested on 22.01.2014 as he had collected service tax but had not paid the same to the credit to the central government from 2011-12 to 2013-14.The assesse contended that the calculation Rs. 50 lacs for penal and prosecution provision u/s 89(1) which is amended by Finance Act, 2013 w.e.f 10.5.2013 shall be calculated from11.06.2013 to 21.01.2014 which is 6 months before arrested date pleading that the amendment in finance Act, 2013 can’t be applied retrospectively. The High Court in this matter held that since the default was continuing one the amount of 50 lacs shall be computed from actual date and assesse shall be liable to penal and prosecution u/s 89(1).    

15.     N. B. C. Corporation Ltd.(A)

(Relating to Best judgment u/s 72)

Best judgment u/s 72 requires assesse to appear and produce the book of account to CEO mandatorily before CEO passes order u/s 72.Thus Order u/s 72 is not an ex-parte order.

16.     Adecco Flexione Workforce solutions Ltd.(F)

(Relating to issue of SCN in case assesse has already paid duty with interest)

Where assesse has already paid the duty together with interest, the Authority has no authority to issue SCN for recovery of penalty u/s 76.

17.     KVR Construction(F)

(Relating to refund of service tax paid by mistaken)

The assesse paid service tax on service which was actually exempt from the levy of service tax and the non-levy was also not disputed by department. The assesse filed the refund u/s 11B but the same was rejected being filed after 1 year from the date of payment. The court held that refund can’t be denied on this ground since there was no authority to accept service tax by the department. This is case of refund of tax which ought not to be paid.

18.     Ankhleshwar Taluka ONGC Land loosers Travellers Co.(F) (Relating to the levy of penalty)

The Co-operative society having the members who are agriculturist and lost their land to ONGC was providing rent a cab service to ONGC. The rent a cab service after that came in ambit of service tax and the same was not paid by the society. The society on reply of SCN raised by department for payment of service tax along with interest and penalty paid the service tax along with interest only. The court on levy of penalty held that the members of the society on reply has paid service tax with interest and since they are illiterate and was unaware of levy, the penalty cam be waived.

Other Provisions
19.     Dell Intl. Serrvices India Pvt Ltd.(F)

(Relating to review by chief commissioner)
Where the committee of commissioner has reviewed the case and accepted the order of commissioner(Appeal) u/s 86(2A) , it is not open for chief commissioner to open the case for review since the sec does not give such power to chief commissioner.

 Note: Apart from these the very recent case laws announced is still to be compiled. Your feedback and suggestions are invited on shishir.lodha@gmail.com.

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