2018-TIOL-551-CESTAT-DEL

ST - Commercial training or coaching service - Appellants, engaged in providing computer education in animation and cinematics, made an agreement with Maya Academy of Advanced Cinematics [MAAC] -vide impugned order, the Commissioner (Appeals) reversed the decision of the original authority and confirmed the ST demand and imposed penalties on the appellant - appeal to CESTAT.

HELD: Students who got admitted for the courses pay a consideration, which is credited to MAAC in full and the same has been subjected to ST under ‘commercial training and coaching service' - the fact that the premises in which the training is carried out by the appellant is also listed for central registration to discharge ST by MAAC is not disputed -in such a situation, it is not clear as to how ST liability on the appellant can again be fastened on the very same activity - it is clear that the appellant acts as an instrument in carrying out the training programme which is designed and managed by the MAAC - this is evident from the course completion certificate issued by MAAC - the appellant's name is nowhere figuring in the completion certificate -all these facts will indicate that MAAC is overall managing and the commercial coaching and training service suffered tax at their hands - no merit found in the impugned order upholding the ST liability against the appellant - the same is set aside and the original order is restored - appeal allowed : CESTAT [para 9, 10, 11] - Appeal allowed: DELHI CESTAT

2018-TIOL-550-CESTAT-DEL

ST - Respondent-assessee are engaged in business of financial as well as operating lease of vehicles -they were registered with the ST Department and were paying ST under the category of Banking and Other Financial Services [BOFS] - the dispute is with reference to their business in operating lease with reference to motor vehicle given to the clients -respondent procured orders from their clients and after verification entered into a lease agreement with them - respondent thereafter sent quotation for different type of vehicles as required by the clients and on confirmation of the requirements, order for the vehicle to be supplied - Revenue entertained a view that the terms and conditions governing both types of leases, namely financial lease and operating lease are similar and as such the consideration received in such business transaction is liable to be taxed under BOFS - various SCNs covering the period 2004-05 to 2011-12 issued - Original Authority dropped the proceedings initiated through 4 SCNs - he held that there is a clear distinction between financial lease and operating lease agreement entered into by the respondent - accordingly, he held that activities undertaken by the respondent as per operating lease agreement are not covered by the tax entry BOFS - Revenue before CESTAT.

HELD - The impugned order has examined the issue elaborately by extensively referring to the terms of agreement, Accounting Standard 19 [AS-19] issued by the Institute of Chartered Accountants and the legal provision under Finance Act, 1994 relevant to the present dispute - the whole dispute is with reference to categorising the lease arrangement either as "Financial lease" or "Operating lease" - the Commissioner, after examining the Board's clarification dated 9.7.2001, referring to AS-19 and Supreme Court decisions [more specifically the decision in Association of Leasing and Financial Service Companies - 2010-TIOL-87-SC-ST-LB ], finally arrived at the conclusion that the respondent are not liable to pay ST on operating lease arrangement- regarding the contention of the Revenue with reference to ownership of the vehicle and its implication the decide lease arrangement, the Apex Court in the case of Industrial Credit and Development Syndicate Ltd. [(2013) 3 SCC 541] , dealing with the provisions of Motor Vehicle Act and Income Tax Act with reference to depreciation, held that no inference can be drawn from the registration certificate under Motor Vehicle Act as to the ownership of the legal title of the vehicle -it was held that if the lessee was in fact the owner he would have claimed depreciation of the vehicle, which as specifically recorded in the order of the Appellate Tribunal was not done -the entire lease rent received by the assessee is assessed as business income in its hand and the entire lease rent paid by the lessee has been treated as deductable Revenue expenditure in the hands of the lessee - the Bench is in agreement with the respondent and the findings of the Commissioner regarding the treatment of AS-19 to decide the nature of lease arrangement -the respondent submitted profit and loss accounts for the relevant period -on perusal, it is noted that the income for operating lease were shown as lease rental and the assets were depreciated in the lesser's account as these are shown as own assets -in financial lease no depreciation is accounted for -the income shown on such arrangement is EMI received which is principal + interest - listing out the difference between operating lease and financial lease, the impugned order categorically recorded that the lease arrangements on which the respondent discharged VAT are operating leases and are not liable to ST -on close consideration of the findings recorded in the impugned order and the grounds of appeal contesting such findings, the Bench is of the view that the impugned order is legally sustainable -the whole thrust of the distinction for financial lease and operating lease is the ownership of the asset -this aspect has been adequately analysed and covered in the impugned order with more specific reference to AS-19 - as such, there is no factual or legal error in the impugned order calling for interference -accordingly, it is found that the appeals by the Revenue are without merit -the same are dismissed : CESTAT [para 11, 12, 15, 16, 17] - Appeals of Revenue dismissed: DELHI CESTAT

2018-TIOL-549-CESTAT-DEL

ST - Appellant, a recognised EOU, is engaged in the manufacture and export of pharmaceutical products - the dispute in the present appeals relates to two issues, mainly ST liability on the expenditure incurred by the appellant in setting up of certain branch offices in foreign countries like Bangladesh, Ukraine etc., which is sought to be taxed under Business Auxiliary Service [BAS] on reverse charge basis and, secondly, advertising services availed by the appellant in pursuance of contract with various foreign service providers who advertised and promoted the product of the appellant in foreign countries -this is sought to be taxed on reverse charge basis as advertisement services - the original authority confirmed ST liability on both counts and imposed penalties, therefore, appeal to CESTAT.

HELD: Issue of the expenditure incurred by the appellant with reference to the branch office located abroad, which was involved in activities, which may fall under BAS was considered by the Tribunal in the case of Torrent Pharmaceutical Ltd. - 2014-TIOL-2647-CESTAT-AHM - the matter came up before the Tribunal again in the case of Milind Kulkarni - 2016-TIOL-709-CESTAT-MUM - the ratio of the above decisions and also a close reading of the proviso to section 66 A of the Finance Act, 1994 alongwith explanation therein makes it clear that the legal fiction of considering a branch of an assessee as a separate establishment is not to tax a service rendered to its head office -further, in the present case there is no such service also which has been identified with supporting evidence - the ratio adopted by the Tribunal in examining the application of the said proviso is appropriate to the facts of the present case and accordingly, the tax liability under BAS cannot be sustained - the whole expenses now sought to be taxed are only with reference to setting up, running and also expenses of that branch incurred by the appellant and not relating to any expenditure in their branches with reference to BAS - with reference to tax liability of the appellant on advertising service on reverse charge basis, the advertisement services are specifically mentioned as category (iii) services in the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - it is clear that statutorily such services are considered for taxation based on the location of the service recipient -such being the clear position as per law in the present case, the services being utilized by the appellant as a manufacturer of the said goods, which are exported and marketed in the places where the advertisement are held, the tax liability on such services are correctly made against the appellant on reverse charge basis -however, the appellants have a strong case on limitation as the whole tax paid on such is apparently eligible for credit for the appellant -in such a situation, the Tribunal has consistently held that there can be no question of intention to evade or the existence of any ingredient for invoking demand for extended period - accordingly, while upholding the tax liability, the Bench holds that the same should be restricted to the normal period -for the same reasoning, penalties imposed on the appellant shall not be sustained -the same are set aside - the appeals filed by the appellant are partly allowed : CESTAT [para 6, 7, 8, 9, 10, 11] - Appeals partly allowed: DELHI CESTAT