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Business Auxiliary Service covers „Service of promoting or marketing of service of client‟. In a case where
the dealer of Motor Vehicle provides TABLE SPACE to bank/financial institutions and charges rent for the
same, whether it can be said that he was promoting the services of the bank and taking rent as consideration
of that service
held that “mere fact of financial institutions being
provided with space by the assessee (appeallant) and the appellant receiving some money for lease of table
space cannot be brought within the definition of “Business Auxiliary Service”.
[DUMPER] [TIPPER]
Issue Whether it can claim cenvat credit of these motor vehicles in terms of „Cenvat Credit Rules,
2004‟?
Held that NO
“Credit of dumpers and tippers is not admissible for provider of „site formation and
clearance service‟.
As per Rule 2(a) of CCR, 2004, „Motor vehicle‟ is „eligible capital goods‟ for specified
service providers only, namely
o Courier
o Cargo Handling Agency
o Goods Transport Agency
o Outdoor Caterer
o Pandal or Shamiana Contractor
o Rent-a-Cab Scheme Operator
o Tour Operator.
Prof Dippak /IDT Latest Cases/Service Tax
Further, as per Rule 2(k) of CCR, 2004, „motor vehicle‟ has been specifically excluded
from definition of „input‟ also.
It shall be noted that this amendment shall
be applicable only for students appearing in May, 2011 Attempt.
Facts Mr A, a practicing CA, starts up the business. He rendered audit service of value of Rs
6,00,000 during the half of FY 2009-10 and paid ST thereon. Subsequently, he
surrendered its Registration Certificate (RC) and claimed refund of ST contending that
the value of taxable service received by them in question was below the exemption limit
of Rs. 10,00,000/- as provided under E/N 6/2005.
The refund was denied on the ground that as per the provisions of E/N 6/2005, a
service provider, who opts to pay ST, then cannot withdraw the option in the said
financial year.
Issue Whether Mr A is entitled to claim refund?
Held that NO
Condition no (ii) of E/N 6/2005 provides that “The provider of taxable service shall have the
option not to avail this exemption and pay ST on the taxable services provided by him.
However, such option, ONCE EXERCISED in a FY, can‟t be withdrawn during the
remaining part of the FY.”
As per the condition, the appellant has to avail the exemption in advance but in this
case the appellant has paid the service tax for the 1 st half year and surrender their registration
in the 2nd half which is not permissible as per the condition mentioned hereinabove. Hence the
appellant is not entitled to avail E/N 6/2005 subsequently
Tutorial Note: EXERCISING AN OPTION:
E/N 6/2005 lists various conditions to be satisfied (simultaneously and as applicable) for availing the exemption
and the preliminary condition is that the provider of taxable service has the option not to avail the exemption
contained in this notification and pay service tax on the taxable services provided by him and such option, once
exercised in a financial year, shall not be withdrawn during the remaining part of such financial year.
Now, the catch in the situation is: HOW TO EXERCISE THE OPTION of not availing the exemption and instead
paying ST?
Whether such option shall be exercised in any particular manner, by giving some intimation to the
Department? Or
Whether payment of ST shall itself be taken as exercise of option?
It shall be noted that SSI Scheme under Excise [E/N 8/2003] stipulates giving an intimation to AC/DC
(alongwith a copy to SCE) when the unit opts not to avail the exemption and pay ED instead.
But E/N 6/2005 does not provide for similar condition. That being so, perhaps, payment of ST in itself shall be
treated as exercise of option to opt out of 6/2005.
--- [Matter is still arguable]
Issue "Whether service by way of "advice, consultancy or technical assistance" in the case of
TURNKEY CONTRACT will attract service tax? In other words, "whether turnkey contract
can be vivisected and portion attributable to Services (taxable service) can be subjected to
ST?
Held that YES
Daelim‟s case is not in accord with the decision of SC in BHARAT SANCHAR NIGAM
LTD. (BSNL) -2006-SC (Larger Bench) and hence, overruled.
In BSNL‟s case, it has been held that after amendments in the Constitution and
introduction of concept of „deemed sale‟, (through Article 366-(29-A)(b)) composite
indivisible / turnkey-contract can be vivisected and sales portion be subject to sales tax.
Severability of composite and turnkey contract permitted by Constitution by Article 366
(29-A)(b) cannot be said to have been for the mere purpose of levy of sales tax/VAT.
When Article 366(29-A)(b) to the Constitution has made indivisible contracts of the
Prof Dippak /IDT Latest Cases/Service Tax
aforesaid nature divisible to find out goods component and value thereof, it can be
unambiguously be stated that the remnant part of the contract may be attributable to the
scope of service tax under the Provisions of Finance Act, 1994 Severance discerns
service elements of the contracts and provides measure of levy to impose service tax on
taxable services.
Thus,
turnkey contracts can be vivisected and
discernible service elements involved therein can be segregated and classifiable as
well as valued for levy service tax under Finance Act, 1994 provided such services
are taxable services as defined by that Act and depending on the facts and
circumstance of each case, services by way of advice, consultancy or technical
assistance in the case of turnkey contract shall attract service tax liability.
Tutorial Notes:
With the Tribunal’s larger Bench, the decision of Daelim’s stands overruled. But the CG has already overruled the Daelim’s decision when
it introduced ‘Works Contract service’ in 2007. Therefore, this decision is more of academic significance as in any case service is taxable.
2) Work Contract Service category only certain specified kind of WORKS CONTRACT (4 kinds only). In case of work contract other t han
these 4, whether decision of Tribunal’s larger bench would still be applicable and value of service portion be chargeable to ST under
the respective category of service?
-- This decision of Larger Bench of Tribunal shall be applicable on all works contract. Thus, all those works contract can be
vivisected and out of total value of contract, service portion can be made subject to service tax.
[Please also refer our new ST Module [Consulting Engg Service] for detailed discussion.
Prof Dippak /IDT Latest Cases/Service Tax
Facts AP Ltd was wholly owned subsidiary of a foreign company. It had entered into an
agreement with the foreign holding company for providing “research and other advisory
services” on payment of fees to the holding company. It filed an application for advance
ruling on the issue “whether research and other advisory services proposed to be provided
by it to the overseas entity had to fulfill the eligibility conditions provided in Export of
Service Rules, 2005”. During the course of hearing, Authority found that AP Ltd had
been already providing the service since June 2005. When asked to explain, AP Ltd
claimed that is so providing the service on a trial run basis.
Issue Whether application for advance ruling is liable to rejected on the ground that it is not in
relation to an activity proposed to be undertaken rather it is in relation to an “ongoing
activity”?
Held that YES – APPLICATION LIABLE TO BE REJECTED
“The definition of advance ruling makes abundantly clear that it is concerned with
determining a question of law or fact in relation to a service which is proposed to be provided
by an applicant. The law does not differentiate between services provided during a trial run
and those provided on an ongoing(commercial) basis.”