CA Final IDT Case Laws May 17 Series - Basic Concepts

Service Tax

Chapter: Basic Concepts

#CAPassion #IDTCL #M17-001

Rashtriya Ispat Nigam Ltd. v. Dewan ChandRam Saran (2012 - SC)

Issue: where service recipient is liable to pay service tax, can he shift his liability to pay service tax on service provider by changing a clause in the contract?

Decision: Yes, it is possible, the reason being service tax is an indirect tax which may be passed on. Thus assessee can contract to shift its liability

Note: 

1. Finance Act, 1994 is relevant only between assessee and Tax authorities and irrelevant in determining rights and liabilities between service provider & receiver as agreed in a contract between them.

2. As per this case facts, it was case of service in relation to clearing and forwarding agent's services, there is not specifically mentioned anywhere in act regarding payment of service tax in relation to said service by service receiver, hence, it is possible to shift liability on contractual basis 

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#CAPassion #IDTCL #M17-002

Commissioner v. GMK Concrete Mixing Pvt. Ltd. 2015 SC

Issue: Does preparation of ready mix concrete (RMC) along with pouring, pumping, and laying of the concrete amount to provision of service?

Decision: NO, SC upheld the decision of Tribunal, wherein it was held that the contract between parties was to supply RMC and not to provide any taxable service.

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#CAPassion #IDTCL #M17-003

Kishore K.S. v. Cherthala Municipality (2011 - ker. HC)

Issue: Can municipality pass the burden of service tax to service receiver in a case where rooms have been rented out by the municipality?

Facts: Municipality gave rooms on rent to Kishore and called upon to pay service tax. Kishore denied to pay on the following basis:

- there was no provision to pay service tax under the agreement, municipality have no authority to pass on the burden of service tax

- being a small tenant, the municipality must be treated as Units of State within the meaning of Article 289 of COI, therefore levy of service tax on property was unsustainable.

Revenue contended that though municipality was liable to pay service tax, but there was nothing in law which prevented passing the liability to pay service tax to tenants.

Decision: Municipality can pass the burden of service tax to tenants. Service tax is an indirect tax and law provides that it can be passed on to the beneficiary.

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#CAPassion #IDTCL #M17-004

Indian Coffee Workers’ Co-operative Society Ltd. v. CCE&ST (2014 - All. HC)

Issue: Whether supply of food, edibles & beverages provided to customers, employees and guests using canteen or guesthouse of other person, results in outdoor caterer service ?

Facts: assessee entered into an agreement with NTPC & LANCO for running and maintenance of the guest house and catering services respectively.

Assessee charged amounts in cash from customers & did not pay any service tax as it was of the view that it was only selling goods to customers, no service element is involved there.

Revenue contended that assessee was engaged in providing services in connection with catering at a place other than its own. Thus assessee was liable to pay service tax

Decision: HC opined that assessee is a caterer and was providing catering service to NTPC & LANCO at a place other than its own place. Hence it is an outdoor catering service.

HC further clarified that taxability of service does not depend upon who is actually consuming food & beverages, what material here was that service was provided to other person, thus the charge of service tax is attracted.

The assessee was liable to pay service tax as an outdoor caterer.

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#CAPassion #IDTCL #M17-005

CCE & ST v. Garg Aviations Ltd. 2014 (All. HC)

Issue: Whether Course completion certificate offered by approved Flying Training Institute & Aircraft Engineering Institutes is recognized by law, if such certificate is only for the purpose of eligibility for obtaining an ultimate license for certifying repair/maintenance of aircraft?

Facts: Assessee running a flying training institute, engaged in providing training and coaching to individuals for operating commercial pilot license from DGCA.

Department demanded Service tax on this training activity, whereas assessee contended that he is eligible for exemption from service tax as services were leading to the grant of diploma/certificate recognized by law, referring the case of Indian Institute of Aircraft Engineering v. Union of India 2013, where it was held that such services were not chargeable to service tax.

Decision: HC upheld the decision of Tribunal and held that appeal filed by revenue would not give rise to any question of law. Hence appeal filed was dismissed and the assessee was not held to be liable to pay service tax.

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Hotel East Park v. UOI 2014 (Chhatisgarh HC)

Issue: Whether service tax on service portion of service in relation to food or drink for human consumption, ultra vires the Article 366(29A)(f) of the constitution?

Or

Whether any service tax can be charged on the sale of an item or vice versa?

Whether article 366(29A)(f) is violated by sec 66E(i) of Finance Act, 1994?

Decision: HC held that sec. 66E(i) of Finance Act, 1994 is intra vires the Article 366(29A)(f) of COI.

The article does not indicate service part is subsumed in the sale of the food, it rather separates food and drinks from service.

Sec. 66E(i) charge service tax only on the service part, not the sales part.

Further, No VAT can be charged on amount meant for service or vice versa.

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#CAPassion #IDTCL #M17-007

Mayo College General Council v. CCEx. (A) 2012 (Raj. HC)

Issue: A society running schools allow other schools to use a specific name, its logo and motto and receives non- refundable amount and annual fee as a consideration, whether this amounts to a taxable service?

Facts: Department contended that assessee was engaged in providing franchise service, hence issued SCN for recovery of service tax along with interest and penalty.

The assessee contended that they provided their expertise for establishment and development of such schools. Agreements between such schools and the assessee did not reveal any franchise service. Further, the assessee contended that they were a non-profit society carrying on non-commercial activities and that their main objective was to maintain the high standard of education in the said schools. Also, they did not collect any franchise fees from such schools.

Decision: HC held that it clearly tantamounted to providing franchise service and the assessee is bound to pay service tax to the department.

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By
Gourav Kapoor

(Founder of CA Passion)

You may reach me at
www.fb.com/gourav.kapoor

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