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Some More Important judicial pronouncements under Service Tax

1. Whether erection and Commissioning of tower parts through engagement of employees shall be termed as “Manpower Recruitment and Supply Agency Services”?


Facts: Show Cause Notice issued based on the above fact categorizing the respective activity under “Manpower Recruitment and Supply Agency Services”. SCN not making any head or tail of Revenue’s case and not providing foundation for levy in respect of activity carried out.


Decision:  SCN was examined. The audit observation becoming the basis of adjudication fail to neither bring out supply of manpower nor even brings out any element of contract between parties for recruitment and supply of manpower. Show cause notice must clearly bring out the charge against the assessee depicting the gravity of the charge and basis. Therefore, the Appeal of Revenue is dismissed on the aforesaid reasoning.


Comment: There should be a reasonable cause to issue the Show Cause Notice. There should be some Cause to be Shown as per the Notice.

[Refer Commissioner of C.Ex., Raipur Vs Shyam Enterprises 2011 (23) S.T.R.29 (Tri-Del))]


2. Whether lack of Knowledge can be named as mala fide intention to evade tax?


Facts: - Assessee operating one taxi and under impression that only persons owning 50 taxis liable for service tax under “Rent –a-cab Service”. Registration taken and tax paid promptly when pointed out by authorities. No mala fide intention to evade and no mala fide motive in not paying tax within time.


Decision: After going through all the facts and even interest paid because of delay in payment of service tax. After payment of interest also a demand was made for payment of penalty. Therefore, held that cause shown was a reasonable cause and waived the penalty. Appeal of Revenue dismissed.


Comment: Penalties shall be levied keeping in the mind the promptness and intention of the assessee. If assessee discharges liability at the moment he comes to know, which represents his loyalty which cannot be termed as mala fide intention.

[Refer Commissioner of Service Tax, Bangalore Vs. Vinayaka Travels 2011(23) S.T.R.5 (Kar.)]


3. Whether services rendered by one courier agent to another courier agent on principal to principal basis comes under “Business Auxiliary Services”


Facts: In this case, the assessee contends that services rendered by them to another courier agent on principal to principal basis are not covered during the relevant period under BAS. Certificate issued by a Chartered Accountant that remittances have been adjusted against payments due from applicant to foreign clients to foreign exchange.


Decision: Applicants contended that as per Board Circular for year 1996, services provided by one courier agent to another courier agent on principal to principal basis is exempted from service tax. Therefore, prima facie waiver of pre-deposit of entire service tax, interest and penalty is granted and stay thereof is granted during pendency of the appeal.


Comment: The Department always try to levy, levy and levy service tax, with interest and penalties, Service tax implication whether exist or not.

[Refer United Business vs Commissioner of Service Tax, Ludhiana 2011 (23) S.T.R.150 (Tri-Del)]


4. Whether Service Recipient can be held liable to pay service tax under “Business Auxiliary Services?


 Facts: The applicants are paying handling charges separately for handling of molasses by the activity of procuring the same and keeping at particular place. Thereafter, the molasses is transported to their factory. If at all, any service tax liability arises, should be on the service provider and not the service recipient. 


Decision: As per the provisions of Finance Act, 1994, under the category of Business Auxiliary Service, the liability to pay service tax is on the service provider and not on the service recipient. Therefore, waiver of entire service tax demand, interest and penalty is granted and stay demand thereof during the pendency of the appeal..


Comment: When Department people themselves do not follow the provisions of Finance Act, 1994 and try to levy just taxes, then how can they expect the common people to follow the said provisions strictly!

[Refer Simbhaoli Sugar Mills Ltd. Vs Commissioner of Central Excise., Meerut-II 2011 (23) S.T.R. 154 (Tri. – Del)]


5. Whether Exemption under Notification No. 4/2004- S.T. denied as notification ibid exempts tax only on services consumed within SEZ?

Facts: There is no dispute that services are provided to SEZ unit carrying on authorized operations. As per Section 26(1) (e) of the SEZ Act, provides exemption from service tax on taxable services provided to a SEZ unit which carry on the authorized operations.


Decision: The Department contends that Notification in question exempts service tax only on services consumed within SEZ. In the light of the relevant Section of the SEZ Act, and in absence of dispute regarding the provision of taxable services to SEZ unit, Waiver made out and dispense of pre-deposit of the amounts in dispute and stay recovery thereof pending the appeal.


Comment: When Act specifically excludes such activity from the purview of service tax, then how can one rely on some restricted words of notification..

[Refer Maersk India Pvt . ltd. Vs.  Commissioner of Service Tax, Chennai 2011 (23) S.T.R. 169 (Tri. – Chennai)]


Published by

khushbu darak(CWA)
(H & A team(indirect taxes))
Category Service Tax   Report

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