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Refund of Service tax on services not provided cannot be denied on ground that same was not shown as 'receivable' in Balance Sheet

Radico Khaitan Ltd. Vs. Commissioner of Service Tax, Delhi [(2014) 48 340 (New Delhi - CESTAT)]

Radico Khaitan Ltd. (“the Appellant”) entered into an agreement with Diageo Radico Distrilleries Pvt. Ltd. (“DRDPL”) for providing certain taxable services for which the consideration was paid in advance. Accordingly, due Service tax was deposited by the Appellant. Later on DRDPL terminated the said service agreement with the Appellant and the services were not provided by the Appellant. Upon termination of the agreement, the Appellant returned the consideration along with Service tax received to DRDPL and accordingly filed claim for refund of Service tax so deposited along with all vouchers, ledger accounts and CA certificate certifying that advances received from DRDPL stands refunded. However, the Commissioner (Appeals) rejected the refund claim by observing that refund was not shown as receivable in balance sheet and payment between the Appellant and DRDPL was only through book adjustment.

The Hon’ble CESTAT, Delhi observed that it was undisputed that:

(a) Service tax was deposited by the Appellant in advance;

(b) Services were actually not provided on account of cancellation of agreement; and

(c) Entire consideration along with Service tax was refunded to customer.

Consequently, the Appellant was not required to pay any Service tax in respect of services, which were not provided. Hence, denial of refund on sole technical ground that same was not shown in balance sheet as receivable from revenue cannot be held to be just and fair. Hence, refund was allowed.

Service tax on GTA services can be demanded either from specified consignor or consignee, who is liable to pay freight to GTA service provider

Essar Logistics Ltd. Vs. Commissioner of Central Excise, Surat [(2014) 48 73 (Ahmedabad - CESTAT)]

Essar Logistics Ltd. (“the Appellant”), a Goods Transport Agency (“GTA”) service provider, was engaged by Essar Oil Ltd. (“EOL”) for transportation of their final products from refinery to depots of EOL itself, as well as to various terminals hired by the EOL. In the case of transfer of final products to depots of EOL, Service tax leviable was being paid by EOL itself hence it was not in dispute. In the case of transportation of final products from refinery of EOL to their franchisees and other depots of the EOL, the Appellant was charging freight from said consignee, on basis of lorry receipts and Service tax thereon was neither paid by EOL nor by the Appellant.

The Department contended that the Appellant is responsible to pay Service tax in respect of the services rendered by transportation of goods from EOL to their franchisees. It was argued that when the consignee is not covered under the entity as specified under the Rule 2(1)(d)(v)of the Service Tax Rules, 1994 (“the Service Tax Rules”), and the consignor also does not pay the freight, the Appellant, being GTA service provider, is liable to discharge the Service tax on the freight collected by them from the consignee though it may be mentioned on the consignment note that consignee is liable to pay Service tax.

The Hon’ble CESTAT, Ahmedabad, held that as per Rule 2(1)(d)(v) of the Service Tax Rules, if consignor or consignee is one of the specified entities, then person liable to pay Service tax would be person liable to pay freight. Since consignor i.e. EOL was a factory as per Factories Act and a company under Companies Act, GTA service provider i.e., the Appellant was not liable to Service tax. It was further held that the clarification of the Board vide Circular No. 341/18/2004-TRU, dated 17-12-2004 cannot go beyond the statutory provisions, which clearly mandate that Service tax liability has to be discharged either by consignor or consignee, if he falls under the specified category under Rule 2(1)(d)(v) of the Service Tax Rules.

Service Tax already deposited cannot be demanded again from a person who has taken over the business

Essar Projects Ltd. Vs. CCE & ST., Rajkot [2014 (9) TMI 462-CESTAT Ahmedabad]

In the instant case, Essar Projects Ltd. (“Essar”) sold the entire business pertaining to their ‘Construction Division’ to Essar Construction (I) Ltd. (“the New Company”), w.e.f. June 30, 2006 as per ‘Business Transfer Agreement’. The Department contended that amount received by the New Company on account of the services rendered post June 30, 2006, though the entire Service tax liability pertaining to these services had already been discharged by Essar, the New Company is liable to pay Service tax on same. The Department issued Show Cause Notice to the New Company and the demand was confirmed by the Adjudicating authority.

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Bimal Jain
Category Service Tax   Report

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