Maneet

Hello and welcome to yet another episode of Legal Wrangle - India's first video headnote brought to you by TIOL Tube. In this episode we are covering FIVE important judgments relating to Indirect Taxes. Lets start with a SERVICE TAX case and the assessee here is MACKINTOSH BURN LTD.

V/O

The assessee along with 50 other assessees has claimed that no service tax is payable on the fees collected as sub contractors appointed by the executive agencies under a Memorandum of Understanding entered into by the Govt of India for construction of Border outposts.

Maneet

The issue is, whether the activity or service of 'Border Fencing', across Indo Bangladesh Border, is a service falling under the definition of Erection, Commissioning or Installation as prescribed under Section 65(39a) of the Finance Act, 1994 or otherwise? Let's go to Purnima for the facts of the case.

Purnima

The primary assesse, a contractor of numerous architectural marvels and structural masterpieces, was assigned the task of construction of Border outposts for BSF and road along Indo Bangladesh Border. For this work the assessee was compensated by way of fees at a certain percentage of the project cost. A demand cum show cause notice was issued alleging that the activity of construction of border-fencing is chargeable to service tax under the category 'Erection, Commissioning or Installation Services.

Maneet

The Commissioner observed that fence refers to structure and the service of erection of fence satisfies the definition of Erection, Commissioning or Installation Service. Therefore he confirmed the demand and imposed penalty equivalent to the amount of service tax payable.

V/O

The CESTAT held that fence, even though a structure, cannot be read in isolation but has to be read along with erection, commissioning or installation and also with the objects of service tax levy .i.e plant, machinery or equipment.

Purnima

The CESTAT hence ruled that it was not possible to accept the Department's view that the service of erection of border fencing structure standing alone, would be subjected to service tax under clause (39a) of section 65 of the Finance Act.

Maneet

Thank you Purnima. In this case interestingly Revenue argued that Board Circulars should not be read as statutes and are merely clarificatory in nature.

Fencing on Indo Pak Border not taxable? The Tribunal was informed that there was no demand for Service tax on identical fencing in the Indo Pak Border.

Aasha

Lets move on to our next, yet another very interesting case of SERVICE TAX and the assessee involved in this case is a famous tollywood film star, who has argued that he should also be granted the benefit of exemption notification as allowed to theatre artists.

Maneet

The key issue in this case is - Whether the benefit of exemption notification no 25/2012 available to theatre artists can be extended to film actors also? Lets go to Purnima for the facts of the case, Purnima?

Purnima

Yes Maneet. Assessee is a film star, who filed the present writ petition questioning the Notification granting service tax exemption to performing artist in folk or classical art forms of music, dance or theatre. Assessee submitted that his job involved skills to display different kinds of emotions and dialogue delivery. Such skills are not different from the skills of an actor who performs with similar skills in theatre or drama.

Maneet

Before the High Court, assessee contended that the impugned notification is arbitrary and discriminatory as it benefits only performing artistes in theatre and drama and not film artists.

V/O

The High Court held that it was towards the object of Article 229 of the Constitution of India, that a salutory endeavour has been made to give support to native art and culture and encourage them as they suffer from financial constraints. This is not the position of films.

Maneet

And therefore the assessee, a film artist, would not be able to claim exemption under the prescribed exemption notification in respect of service tax. Our next case is regarding the rebate of service tax claim.

V/O

The assessee involved is AMBE INTERNATIONAL.

Maneet

The key issue in this case is Whether an appeal against the order of Commissioner (A) regarding Service Tax rebate claim of assessee, lies to the Appellate Tribunal or not? The facts of the case, Purnima?

Purnima

Assessee had a Service Tax registration under the category of "Manpower recruitment and supply agency".It claimed rebate on the services exported out of India, which was rejected by the Assistant commissioner on the ground that the assessee had not submitted complete information in support of its claim.

V/O

CESTAT held that as per the provisions of Section 35B of the Central Excise Act, no appeal shall lie to the Appellate Tribunal and it has no jurisdiction to decide any appeal in respect of order passed by the Commissioner (Appeals) in a case of rebate of duty of excise on goods exported to any country or territory outside India.

Maneet

On further appeal by the Revenue, High court held that the Tribunal has clearly missed and omitted consideration from sub-section (2A) of section 86 of the Finance Act. This clearly mentions that Tribunal has identical powers in order to dispose of the appeals as given as per the Central Excise Act. In short, it held that the appeal was competent and maintainable.

V/O

This appeal was clearly maintainable and should have been entertained & decided on merits.

Maneet

The Delhi High Court had earlier given an identical ruling in the case of Glyph International .

This Courtroom battle has now entered Parliament. In the Budget 2015, the Finance Bill proposes to amend the Act to stipulate that in such cases, the appeal does not lie to the Tribunal and the matter has to be taken up to the Revision Authority.

Let's move on to our next CESTAT decision in the case of M/s. Ankur Packaging Pvt. Ltd.

Maneet

The key issue is when scrap is retained by the job worker, sale of the same will affect the conversion charges towards job work and hence the same should be included in the assessable value of the job work goods? Purnima will let us have the facts of the case.

Purnima

Assesse here is a job worker. On factory visit it was observed that the value of scrap generated during the manufacturing process has to be added back to the assessable value of the goods manufactured ,since sale proceeds of such goods was allowed to be retained. It was the contention of the department that the value of job work gets reduced to the extent of scrap value allowed to be retained on its sale. Assesse paid the differential duty along with the interest without any protest.

Maneet

Thank you Purnima. Later , the assesse realized that they were not supposed to pay excise duty on the value of the scrap and, therefore, filed refund claim for the amount of duty and interest paid, which was rejected by the Original authority but allowed by the Commissioner (Appeals).

V/O

CESTAT observed that against overall activity of job work, job worker is getting the consideration in two forms, one job work charges and second realized value of scrap sale. Thus, total sum of both these elements will form the total consideration received by the respondent towards job work and the sale value of scrap is includible in the assessable value of job work goods.

Maneet

The CESTAT has made clear that an assesse acting as a job worker has to include sale value of scrap in the assessable value of job work goods for the purpose of computing Excise duty.

Our last case is of Tamil Nadu VAT dealer, M/s Sree Kumar engineering works, which came up before the Madras High court.

in this case was -

The document required for the availing credit was lost by the department, and the assessee was asked to file an indemnity bond . The interesting issue here is weather asked the assessee can denied benefit of credit on the basis of duplicate copy of such document available with the assesse?

V/O

The key issue before the HIGH COURT was regarding the liability of the assesse in case of loss of original credit documents because of the fault of the department. Can the assesse be made liable to make declaration in the form of an indemnity bond ?

Maneet

The Revenue argued that as per Rule 12 sub rule (2) of the Central Sales Tax (Registration and Turnover) Rules, when 'C' Form declaration was lost, it was open for the assessee to furnish indemnity bond to the Notified Authority . To know more about the facts of the case, let's turn to Purnima.

Purnima

The assesse, a dealer in magnetite powder, has handed over Form C IN ORIGINAL, relating to the turnover, to the Commercial Tax Officer, for which an acknowledgement was also given by the department. Subsequentaly the Revenue passed an order stating that 'C' Form was not filed by the assessee and therefore the assessee had to file a declaration in the form of an Indemnity bond, otherwise it would not be given any benefit of credit.

Maneet

The High court observed that the relevant rule 12(2) can be made applicable only when the document is misplaced by the assesse. An assesse cannot be made liable for indemnity bond for no fault of it.

V/O

The High court held that when the Revenue authority had misplaced the original document for whatever reason, there was no hard and fast rule to deny the request of the assesse for accepting the duplicate copy of the document, which was available with the assesse.

Maneet

This decision of the High court reiterated that the assesse cannot be held liable for the Department's lapse.

This brings us to the end of this episode of Legal Wrangle. Thank You for being with us. Please mail us your comments and suggestions at editor@tiol.in

See you again next week on Legal Wrangle for Direct tax.