This weekly round-up analytically summarizes the key stories of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reported at taxscan.in, from 3rd August 2024 to 15th August 2024.
The Delhi bench of the Customs Excise Service Tax Appellate Tribunal ( CESTAT ) held that EPS-ECU is essentially a part of an automobile specifically designed to be a part of power steering and not an instrument. The Tribunal classified the EPS-ECU and its sub-assembly under CTI 8708 94 00.
It was observed that any importer can self-assess goods by filing the Bill of Entry, and until the Bill of Entry is filed, the departmental officer cannot assess or take any action on it with respect to assessment.
While questioning as to how the departmental officers could have insisted that the goods should be classified in a particular heading in the Bill of Entry even before it was filed, the Bench explained that if the proper officer does not agree with the self-assessment by the importer, he can re-assess the duty and provide a speaking order.
It was found that EPS-ECU is a microprocessor with certain other parts which receives information from the speed and torque sensors and processes it and issues instructions to regulate the assistance provided by the power steering to the driver, and therefore, EPS-ECU does not merit classification under CTI 9032 90 00.
The CESTAT therefore dismissed Assessee’s appeal and concluded that EPS-ECU and its sub-assembly deserve to be classified and were correctly classified under CTI 8708 94 00.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has determined that the transfer of wagons to Indian Railways by Bagadiya Brothers Pvt Ltd constitutes a deemed sale under Article 366(29A) of the Indian Constitution, rather than a taxable service. As a result, no service tax is applicable to the transaction.
The two-member bench comprising Mr. Raju (Technical Member) and Dr. Rachna Gupta (Judicial Member) concluded that Bagadiya Brothers had transferred both possession and effective control of the wagons to Indian Railways, fulfilling the criteria for a deemed sale.
The CESTAT ruling stressed that the transfer of wagons to Indian Railways by Bagadiya Brothers Pvt Ltd is a deemed sale, exempting it from service tax. As such, the bench dismissed the appeal filed by the revenue finding no merit in the same. The decision highlighted the importance of analyzing the substance of transactions and distinguishing between deemed sales and taxable services.
The Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), New Delhi has determined that volume discounts received by M/s Divine Autotech Private Limited for purchasing large quantities of paints do not qualify as taxable services but are trade discounts. Consequently, the tribunal quashed the service tax demand on these amounts.
The CESTAT ruled that volume discounts are indeed trade discounts and not payments for services rendered. The tribunal emphasized that trade discounts given for bulk purchases are part of standard commercial practice and do not constitute taxable services under the Finance Act.
The decision reflects a clear understanding of the nature of volume discounts and their role in business transactions. The CESTAT clarified that trade discounts received for bulk purchases cannot be subjected to service tax. The ruling is particularly significant for businesses across various sectors that receive similar discounts from suppliers and manufacturers, ensuring that they are not unfairly taxed on commercial incentives aimed at promoting bulk purchasing.
The ruling stressed the importance of distinguishing between trade discounts and payments for services in service tax matters. It also highlights the tribunal’s role in protecting businesses from undue tax burdens on transactions that do not fall within the scope of taxable services.
In its detailed order, CESTAT also addressed other aspects of the service tax demand on Divine Autotech, remanding certain issues back to the Commissioner for further examination. However, the bench was unequivocal in its decision to quash the service tax demand on volume discounts, providing a significant relief to the appellant.
In result, the two-member bench of the CESTAT comprising Ms. Binu Tamta (Judicial Member) and Mr. P. V. Subba Rao (Technical Member) set aside the demand for service tax on these volume discounts.
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) in a ruling in favor of Bank of India ( BOI ) has held that refund of service tax paid on commission charges for granting credit facility is Allowable subject to verification.
The two member bench of Sulekha Beevi C.S (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the appellant bank has satisfied all the conditions for treating the service as an export of service, but there is a need to verify whether the service tax paid has been recovered or not from M/s. Aban Singapore Pte. Ltd. to be eligible for refund.
The tribunal held that the appellant is eligible for refund of service tax paid on the commission charges in respect of granting credit facility to M/s. Aban Singapore Pte. Ltd., subject to conducting verification whether the appellant has recovered the service tax paid from M/s. Aban Singapore Pte. Ltd. or not.
While allowing the appeal, the Tribunal remands the matter back for the limited purpose of verifying whether the service tax was collected by the appellant.
In a recent case, the Chennai Bench of Customs, Excise and Service Tax appellate Tribunal ( CESTAT ) has held that trading in securities is not a service and sets aside the service tax demand on the same.
The two member bench of Sulekha Beevi.C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) have observed that by making an investment, the appellant does not do any activity for another for consideration. The specific exclusion from the definition of ‘service’ is given to transactions involving ‘transfer of title in goods or immovable property by the way of sale’. Since trading in securities involves transfer of title in goods, the activity of ‘trading in securities’ cannot therefore be said to be a service.
While allowing the appeal, the CESTAT held that the authorities below have grossly erred in demanding the tax on the ‘investment’ made by treating it as ‘service’ although exempted and set aside the order.
Rajaram Ramanan appeared for the appellant and S. Subramaniam appeared for the respondent.
The two member bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ), Delhi, upheld the penalty of ₹50,000 for non-compliance with the CBLR regulations while also addressing the abatement of illegal exports.
The bench, comprising Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member), found the current case distinguishable from the previous one. The earlier allegations concerned only a violation of Regulation 10(n), whereas the present case included multiple violations of various regulations, warranting a broader consideration.
Ultimately, the bench observed that the appellant failed to comply with CBLR, 2018, and abetted illegal exports. The misconduct deemed the appellant unfit to conduct Customs Broker business, justifying the actions taken. Consequently, the bench affirmed the impugned order, dismissing the appeal.
In a significant case,the Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has held that the promotion and marketing services provided by the Australian company to foreign educational universities and institutions do not fall under the category of “intermediary services,” and allowed the benefit of the export of services.
The department contended that the assessee was providing services directly to the third parties located outside India, and as per the terms of the master services subcontracting agreement, various services were to be provided by the petitioner.
The court found that Circular No. 159/15/2021-GST dated 20.09.2021 issued by CBIC envisages that in respect of intermediary services, there should be a minimum of three parties and two distinct supplies, i.e., main supply and ancillary supply. It clarified that a person involved in supply of main supply on a principal-to-principal basis to another person cannot be considered a supplier of intermediary service.
The appellants render the service of helping the students get admission to Australian universities, and the appellants are rendering the same main service as M/s OCA. Whereas M/s OCA gets the remuneration from the universities on the fees paid by the students, the appellants get their remuneration.
While allowing the appeal, the CESTAT held that the services rendered by the appellants to M/s OCA during the period 01.07.2012 to 31.03.2015 do not fall under the category of “intermediary services,” and thus, the appellants are eligible for the benefit of export of services.
The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has quashed the show cause notice issued demanding service Tax on sale of fruits as the assessee, fruit sellers who are not engaged in any service tax-leviable activity.
The two member bench of Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that the show cause notice did not establish that the appellant was providing any service.
While allowing the appeal,the Tribunal held that the department did not have any jurisdiction to issue any show cause notice demanding service tax from the appellant.
The New Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) held that Composite Contracts are not taxable under ‘Erection Commissioning and Installation Service’.
The Two member bench of Binu Tamta, (Judicial ) and Hembika R Priya ( Technical) held that the taxable category “Erection, Commissioning and Installation Services” could only cover pure service contracts within its fold and remanded the case for recalculation of the demand by giving the benefit of abatement to the appellant.
The CESTAT partially allowed the appeal, and also by way of remand for calculating the demand under Works Contract Service by extending the benefit of abatement under the relevant notification. Further upheld the invocation of extended period and hold the appellant liable for penalty under Section 78, which will be based on the reworked quantum of duty.
In a recent case before the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Bangalore, the Kerala State Electricity Board Ltd filed an appeal against an impugned order passed by Commissioner of Customs, charges for supervision of installation and field efficiency test paid to overseas suppliers were excluded from the value of post- importation charges.
The two-member bench of Dr. D.M. Misra and R. Bhagya Devi observed that the issue in the appeal regarding the question ‘whether the value of ‘Supervision of Installation’ and ‘Field Efficiency Test’ should be included in the value of the project import for levy of customs duty.
The revenue had claimed that the charges paid to overseas supplier of goods is a condition of sale, hence included in the value of the goods, but the bench is of the opinion that it cannot be called as a condition of sale of the goods.
Therefore the charges paid are not to be included in the assessable value of the imported goods as post-importation charges, the tribunal held.
Hence, the impugned order was upheld and revenue appeal was dismissed.
The Bangalore Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) held that the Montanide ISA 206 VG is not classifiable as a vaccine for veterinary medicines and the classification by the Department under CTH 30023000 was incorrect and legally untenable, thereby deleting the imposed penalty on Bharat Biotech under Section 114A of the Customs Act, 1962.
The two-member bench comprising P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member) heard both side’s arguments. The tribunal noted that the imported goods are adjuvants which are substances used to enhance the immune response in vaccines. The tribunal observed that the department’s classification of the adjuvants as vaccines under CTH 30023000 was incorrect and legally not tenable. The tribunal ruled imposition of penalty under section 114A of the Customs Act is also not sustainable.
The tribunal allowed the appellant’s appeal and set aside the impugned order.
The Mumbai bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that the transaction for leasing power-generating equipment qualifies as a deemed sale and is therefore exempted from service tax.
The two-member bench, consisting of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member), referenced a similar case Quippo Energy Pvt. Ltd. where it was determined that leasing power-generating equipment constituted a deemed sale, and thus, service tax could not be levied. Additionally, the tribunal cited the UFO Moviez India Ltd. case, reaffirming that leasing transactions for equipment are not subject to service tax.
The tribunal ultimately aligned with the precedent established in prior cases, concluding that the appellants’ leasing activities do not attract service tax.
In a recent case, the Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has held that the assessee is not liable to pay service tax for the activity undertaken by them for laying down the pipelines for government/government undertakings for supply of water from Kerala Water Authority ( KWA ) for Thiruvananthapuram city region for the period 1st June, 2007 to 31st October, 2012.
The two member bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) has observed that the construction of canals/pipelines/conduits to support irrigation, water supply, or sewerage disposal, when provided to government/government undertakings, would be for non-commercial, non-industrial purposes, even when executed under turnkey/EPC contractual mode, and would fall within the ambit of clause (b), Explanation (ii) of Section 65(105)(zzzza), and would consequently not be exigible to service tax.
While allowing the appeal, The CESTAT held that the appellant is not liable to pay service tax. As the service rendered by them is not a taxable service, therefore, the service recipient refused to pay service tax to the appellant. The appellant has borne the service tax by themselves and has passed the bar of unjust enrichment. The refund claims filed by the appellant are not hit by the bar of unjust enrichment.
In a significant ruling, the Mumbai bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) has ruled that marketing and promotion activities conducted by Film Production Companies ( FPCs ) are not subject to service tax under the category of Business Auxiliary Service ( BAS ).
The Tribunal, comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) found that the activities undertaken by the appellant under the agreements with the FPCs did not qualify as taxable services under BAS. The Tribunal noted that the agreements allowed for certain expenses to be adjusted from the revenues and did not constitute a provision of service. Consequently, the Tribunal set aside the impugned order dated 27.02.2021, and the appeal filed by the appellant was allowed.
The two member bench of the Customs Excise and Service Tax appellate Tribunal ( CESTAT ), Mumbai has ruled that the incentive commission received by air travel agents from Global Distribution System /Central Reservation System ( GDS/CRS ) companies and airlines is not liable to Service Tax.
The bench, comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member), found that the Air Travel Agents were using the portals of CRS service providers for booking air tickets. They noted that the passengers were unaware of the specific CRS used by the appellants for ticket bookings and that there was no direct interaction between the passengers and the CRS. Further concluded that the activities of the appellants could not be classified as BAS, as there was no direct connection between the CRS, the appellants, and the customers.
The bench also observed that the receipt of incentives or commissions by the air travel agent did not alter the nature of services rendered, and therefore, could not be subjected to service tax under BAS. They ruled that since the appellants were already paying service tax under Rule 6(7) for air travel agent services, the department could not take a contrary stand to impose tax liability under BAS. CESTAT found that the issue was covered by the ruling of the Larger Bench of the Tribunal in the case of Kafila Hospitality & Travels Pvt. Ltd., which held that incentives and commissions were not subject to service tax. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellants, with consequential relief as per law.
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