No Service tax leviable under 'Club or Association' service in respect of the services provided by clubs to their members in view of the principle of mutuality Matunga Gymkhana, Tahnee Heights Co-Op Housing Society Ltd. And Mittal Tower Premises Co-Operative Society Vs. Commissioner of Service Tax, Mumbai [2015 (1) TMI 1146 - CESTAT MUMBAI] In […]
Service tax on services provided by clubs to its members?
No Service tax leviable under 'Club or Association' service in respect of the services provided by clubs to their members in view of the principle of mutuality
Matunga Gymkhana, Tahnee Heights Co-Op Housing Society Ltd. And Mittal Tower Premises Co-Operative Society Vs. Commissioner of Service Tax, Mumbai [2015 (1) TMI 1146 – CESTAT MUMBAI]
In the instant case, the three Appellants namely Matunga Gymkhana, Tahnee Heights Co-Op Housing Society Ltd. and Mittal Tower Premises Co-Operative Society (the Appellants) were running a club for their members. The activities carried out by the Appellants for their members included Sports, Yoga etc.
The Department confirmed the demand of Service tax on the Appellants based on the premise that the Appellants had provided taxable service namely 'Club or Association' service specified in erstwhile Section 65(105)(zzze) of the Finance Act, 1994 ("the Finance Act") read with Section 65(25a) thereof. Being aggrieved, the Appellants preferred their respective appeals before the Hon'ble CESTAT, Mumbai.
The Hon'ble CESTAT, Mumbai held as under:
- The Hon'ble High Court of Jharkhand in the case ofRanchi Club Vs. Chief Commr. Of C. Exc. & ST, Ranchi [2012 (26) STR 401 (Jhar)], has held that in view of the mutuality and the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another as foundational facts of existence of two legal entities in such transaction is missing;
- Subsequently, the Hon'ble High Court of Gujarat in the case of Sports Club of Gujarat Vs. Union of India [2013-TIOL-528-HC-AHM-ST] has declared Section 65(25a), Section 65(105)(zzze) and Section 66 of the Finance Act as incorporated/ amended by the Finance Act, 2005 to the extent that the said provisions purport to levy Service tax in respect of services provided by club to its members, as ultra vires;
- The afore stated judgments were also considered by the Principal Bench of the Hon'ble CESTAT, Delhi in the case of Federation of Indian Chambers of Commerce & Industry Vs. Commissioner of Service Tax, Delhi [2014-TIOL-701-CESTAT-DEL], wherein it was held that on application of the principle of mutuality, services provided by clubs to their respective members would not fall within the ambit of the taxable 'Club or
Association' service nor the consideration whether by way of subscription/ fee or otherwise received therefore be exigible to Service tax.
Therefore, the Hon'ble Tribunal after holding that the matter is no longer res-integra, decided the matter in favour of the Appellants.
Our Comments: The concept of principle of mutuality in respect of clubs and their membersneeds to be tested legally post facto July 1, 2012 (Negative List Regime of Service tax) whereby the definition of 'Service' provided first time under Section 65B(44) of the Finance Act, which interalia, provides that any activity carried out by a person for another for consideration is a 'Service'.
However, Explanation 3 to Section 65B(44) of the Finance Act has carved out an exceptions to the General Rule that Service tax leviable only when services provided by a person to another.In terms of Explanation 3(a) thereof, an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons.
Thus effective from July 1, 2012, services provided by clubs even to their members may be exigible to Service tax.
When the clearances were not on sale but were purely on stock transfer basis, there is no question of Satnoor unit having recovered the incidence of duty from Abu Road unit and, as such, the bar of unjust enrichment would not apply.
In case of inter-unit 'stock transfer' of intermediate goods, doctrine of unjust enrichment would not apply
Bhansali Engg. Polymers Ltd. Vs. Commissioner of Central Excise & Service Tax, Bhopal [(2015) 53 taxmann.com 264 (New Delhi – CESTAT)]
Bhansali Engg. Polymers Ltd. (the Appellant) manufactured Acrylonitrile Butadiene Styrene Polymers (Final Product) at its two unit located at Satnoor, Madhya Pradesh (Satnoor unit) and Abu Road, Rajasthan (Abu Road unit). In course of manufacture of Final Product, two intermediate products namely HRG Powder and E-SAN Powder (Intermediate Products) arose which were captively used.
During the month of November 2011, there was some break down in Abu Road unit, as a result of which Intermediate Products could not be manufactured there. Therefore, during November 2011, Abu Road unit received Intermediate Products from Satnoor Unit on stock transfer basis on payment of Excise duty under invoices. This transaction was assessed provisionally as the assessable value was to be determined in terms of Rule 8 of the Central Excise Valuation Rules, 2000 on the basis of the cost of production and it was not possible to determine the cost of production exactly at that time.
Later, in the final assessment it was ascertained that the duty finally assessed was less than the duty paid on provisional basis, therefore the Appellant filed six refund claims which were allowed by the Deputy Commissioner with the finding that unjust enrichment was not involved.
Being aggrieved the Revenue preferred an appeal before the Hon'ble Commissioner (Appeals)wherein the refund claims were rejected. Aggrieved by the order of the Commissioner (Appeals), the Appellant preferred an appeal before the Hon'ble CESTAT, Delhi.
The Hon'ble CESTAT, Delhi after observing that the Abu Road unit had reversed the Cenvat credit taken to the extent of refund filed, held that although Satnoor unit had cleared Intermediate Products on payment of Excise duty, wherein the price of Intermediate Products and the duty had been separately mentioned in invoices, but such clearances were on stock transfer basis and not on sale. When the clearances were not on sale but were purely on stock transfer basis, there is no question of Satnoor unit having recovered the incidence of duty from Abu Road unit and, as such, the bar of unjust enrichment would not apply.
It was further held that it is neither the Department's claim nor any evidence produced to show that during November 2011, the price charged by Abu Road unit for Final Product was higher. Hence, the doctrine of unjust enrichment is not applicable in the instant case.
Cenvat Credit cannot be denied on erection and installation of machines by the Manufacturer as part of Input service and activities relating to business of the manufacturer Hercules Hoists Ltd. Vs. CCE, Mumbai-III [2015 (1) TMI 1089 - CESTAT MUMBAI] Hercules Hoists Ltd. (the Appellant) was a manufacturer of machinery and parts thereof which were […]
Cenvat Credit on erection & installation of machines by Manufacturer
Cenvat Credit cannot be denied on erection and installation of machines by the Manufacturer as part of Input service and activities relating to business of the manufacturer
Hercules Hoists Ltd. Vs. CCE, Mumbai-III [2015 (1) TMI 1089 – CESTAT MUMBAI]
Hercules Hoists Ltd. (the Appellant) was a manufacturer of machinery and parts thereof which were cleared on payment of Excise duty. The Appellant had also taken the responsibility of installing the machinery at the customer's premises. For the installation charges, the Appellant had claimed Cenvat credit of the installation charges so paid.
The Department alleged that the installation charges had been paid beyond the place of removal as the Appellant had cleared the machinery from the premises and these charges were not included in
the assessable value, therefore, the Appellant was not entitled for Cenvat credit of the installation charges.
Whereas the Appellant submitted that these services of erection andcommissioning of machinery was a part of their business activity as they are manufacturing the machinery and installing the same at the customer's site. They are not charging any amount over and above the invoice price of the machinery for erection and installation charges from their customers. Therefore, whatever charges for erection and installation have been borne by them is Input service under Rule 2(l) of the Cenvat Credit Rules, 2004 ("the Credit Rules").
Further the Department also denied the benefit of the Exemption Notification No. 22/2003-CX dated March 31, 2003 ("the Exemption Notification") in respect of the goods cleared to the 100% EOU on production of CT-3 certificate as the Appellant was unable to produce the re-warehousing certificate within 90 days.
Both the lower Authorities confirmed the demand of duty and further imposed interest and penalty. Being aggrieved the Appellant preferred an appeal before the Hon'ble CESTAT, Mumbai.
The Hon'ble CESTAT, Mumbai relying upon the judgment of the Hon'ble High Court in the case of Commissioner of C. Ex., Nagpur Vs.Ultra Tech Cement Ltd. [2010 (260) ELT 369 (Bom)], wherein it was held that an assessee who is a manufacturer of excisable goods is entitled for Cenvat credit of the Input services availed by him in the course of their business, held that since the machinery was inoperative in the absence of erection and installation, the services availed by the Appellant for the erection and installation of machineries are part of the business and the Appellants was entitled for availing Cenvat credit on the same.
Further, in respect of denial of benefit of the Exemption Notification, the Hon'ble Tribunal held that although the Appellant was required to submit the re-warehousing certificate within 90 days which they failed to do, but at the same time the Department had not taken further steps to verify whether the re-warehousing certificate has been obtained or not to deny the benefit of the Exemption Notification.
Furthermore, since the facts were in the knowledge of the Department during the audit, the demand was set aside on the ground of being time barred.
Availment and distribution of Cenvat credit by the Head Office registered as ISD cannot be denied on the ground that the invoices are in the name of Branch Office Mahindra and Mahindra Ltd. Vs. Commissioner of Central Excise, Mumbai –V [2015 (1) TMI 1086 - CESTAT MUMBAI] Mahindra and Mahindra Ltd. (the Appellant) was engaged […]
Cenvat Credit to HO Registered as ISD cannot be denied for invoices in Branch Office name
Availment and distribution of Cenvat credit by the Head Office registered as ISD cannot be denied on the ground that the invoices are in the name of Branch Office
Mahindra and Mahindra Ltd. Vs. Commissioner of Central Excise, Mumbai –V [2015 (1) TMI 1086 – CESTAT MUMBAI]
Mahindra and Mahindra Ltd. (the Appellant) was engaged in the manufacture of motor vehicle parts falling under Chapter Headings 84 and 87 of the Central Excise Tariff Act, 1985. The Appellant availed Cenvat credit on inputs as well as input services used in or in relation to the manufacture of their final products.
A Show Cause Notice dated June 22, 2012 was issued to the Appellant alleging that the head office of the Appellant located at Worli, Mumbai, which is registered as an Input Service Distributor (ISD), has distributed inadmissible input service credit under the ISD invoices/ challans which have been utilized towards payment of duty. It was further alleged that in many cases, the ISD office has taken Cenvat credit of Service tax paid on input services on the basis of invoices issued by service providers on the address of the branch offices and other offices of the Appellant not registered as ISD. Also, the payments for such services, including Service tax, have been made by the respective branch offices to the service providers.
Thereafter, the Adjudicating Authority vide Order-in-Original dated February 5, 2013 confirmed the demand of duty along with interest and penalty which was further upheld by the Ld. Commissioner (Appeals). Being aggrieved, the Appellant filed an appeal before the Hon'ble CESTAT, Mumbai.
The Appellant placed reliance on the judgment of the Hon'ble Tribunal in the case of Manipal Advertising Services Pvt. Ltd. Vs. CCE, Mangalore [2010 (19) STR 506 (Tri.-Bang.)] wherein it has been held that if a person is discharging Service tax liability from his premises having centralised registration, the benefit of Cenvat credit cannot be denied on the ground that the invoices are in the name of branch office.
The Hon'ble CESTAT, Mumbai after observing that the branch offices have no separate accounting system and their accounts form part of the Head Office accounts, which is registered as an ISD, held that the Appellant had rightly availed Cenvat credit in respect of the services received at the branch office/regional office and consequently, their distribution in the manufacturing unit is also proper.
It was further held by the Hon'ble Tribunal that the Revenue has erred in disallowing the credit on misconception of the fact that the invoices are not in the name of the Appellant. In the facts and circumstances, the invoices are found to be in the name of the Appellant issued to the branch offices. The payments are accounted at the head office which is registered as an ISD. The availment of Cenvat credit and the distribution by the head office are legal and proper.
Since there was no evidence of higher value of contemporaneous import from same sources and no allegation of mis-declaration of impugned goods, declared value cannot be enhanced merely on the basis of NIDB data. In the present case, Rule 9 of the Valuation Rules cannot be invoked.
Declared value of Imported goods cannot be enhanced merely on the basis of NIDB data
Topsia Estates Pvt. Ltd. Vs. Commissioner of Customs, Chennai [(2015) 53 taxmann.com 345 (Chennai – CESTAT)]
Topsia Estates (the Appellant or the Company) imported PU Coated Fabrics (impugned goods) of various thicknesses from China and filed 24 Bills of Entry during the period from November, 2012 to July, 2013. The Assessing Officer enhanced the declared value of impugned goods based on National Import Data Base (NIDB) data under Rule 9 of the Customs Valuation Rules, 2007 (the Valuation Rules). The Appellant paid duty under-protest. On appeal being filed to the Ld. Commissioner (Appeals), the same was rejected. Being aggrieved, the Appellant preferred an appeal before the Hon'ble CESTAT, Chennai. Before the Hon'ble CESTAT, Chennai, the Appellant submitted as under:
- The Company have been importing impugned goods from various ports such as Chennai, Kolkata etc., and the value of impugned goods depends on the country of origin, quality, size, quantity etc;
- In another case, the Company imported impugned goods from Kolkata Port for which the Adjudicating Authority enhanced the declared value and when the Commissioner (Appeals) set aside the Adjudication Order, no appeal was filed by the Department. Even the Company have also got the refund;
- In present case, the Adjudicating Authority has wrongly enhanced the value of the impugned goods as it is well-settled by the Hon'ble Supreme Court and the Tribunal that the Transaction value cannot be rejected merely on the basis of NIDBdata and Rule 9 of Valuation Rules cannot be invoked.
On the other hand, the Revenue contented that the value of PU Coated Fabrics is a contentious issue for a long time. The declared value of impugned goods is on the lower side in comparison to NIDB data relating to the goods of same description, same country of origin and similar quality.
The Hon'ble CESTAT, Chennai relying upon the decision of the Hon'ble Supreme Court in case of Eicher Tractors Ltd. Vs. Commissioner of Customs [2000 taxmann.com 53 (SC)] which was followed by the Tribunal in various decisions, held that since there was no evidence of higher value of contemporaneous import from same sources and no allegation of mis-declaration of impugned goods, declared value cannot be enhanced merely on the basis of NIDB data. In the present case, Rule 9 of the Valuation Rules cannot be invoked.
Benefit of 'Served from India Scheme' cannot be denied only on the ground that the companies were subsidiaries of foreign companies
Benefit of the 'Served from India Scheme' cannot be denied only on the ground that the companies were subsidiaries of foreign companies
Yum Restaurants (I) Pvt. Ltd.&Anr, Nokia Solutions And Networks India Pvt. Ltd. &Anr& EI DuPont India Pvt. Ltd & Anr Vs. Union Of India &Ors [2015 (1) TMI 1127 – DELHI HIGH COURT]
Yum Restaurants (I) Pvt. Ltd.&Anr(the Petitioners)are companies incorporated under the erstwhile Companies Act, 1956 and have their registered office situated in India. The Petitioners applied for license (Duty Credit Scrips) in terms of the'Served from India Scheme' (SFIS)as framed under the Foreign Trade Policy (FTP) 2004-09 (effective upto August 26,2009) and FTP 2009-14 (effective from August 26,2009) which were duly accepted.
However, later on the Policy Interpretation Committee (PIC) and Director General of Foreign Trade (DGFT) denied the benefit of SFIS, as framed under the FTPto the Petitioners and separate communications were sent to the Petitioners withdrawing/recalling the said benefits on the ground that they were subsidiaries of foreign companies.Hence the objective of SFIS to accelerate growth in export of services from India which creates a powerful and unique served from India brand is not achieved.Being aggrieved, the Petitioners filed Writ Petition before the Hon'ble High Court of Delhi.
The Hon'ble High Court of Delhi allowed the benefit of SFIS to the Petitioners and held the following:
- It cannot be disputed that DGFT is empowered to interpret the FTP but such powers can be exercised only when the plain language of the policy presents an ambiguity. It would not be open for DGFT to introduce new conditions and criteria under the guise of interpreting the policy as that would amount to amending the provision of the FTP;
- The words used in Paragraph 3.12.2 of FTP 2009-14 (Para 3.12.2) are "Indian Service Providers". There is no scope to read into these wordsthat for service provider to be Indian, its shareholders must also be Indian. As this would amount to introducing an additional eligibility condition, which is extraneous to the eligibility criteria as spelt out in Para 3.12.2;
- The conclusion of DGFT that Indian companies having foreign equity cannot be considered as Indian, militates against well-established canons of the Company Law;
- The Petitioners are companies incorporated under the erstwhile Companies Act, 1956 having registered offices in India and are governed by the provisions of the statute and hence are Indian Companies. Insofar as the domicile of the Petitioners is concerned, no distinction can be drawn between the Petitioners and other companies incorporated under the said Act;
Therefore, the decision of DGFT/PIC denying the benefit of the SFIS to the Petitioners by withdrawing/recalling the said benefits was set aside.
DGFT denied the benefit of SFIS, as framed under the FTPto the Petitioners and separate communications were sent to the Petitioners withdrawing/recalling the said benefits on the ground that they were subsidiaries of foreign companies
PFA
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