2020-TIOL-NEWS-260, Dated: Wednesday, November 04, 2020

ST - The petitioner develops Anti Virus Software in the name of 'K7 Total Security' and 'K7 Anti Virus', which is a software for Anti Virus protection, Anti-spyware protection, Email Scanner, Firewall and Privacy protection etc. - This software is downloadable from the petitioner's website - demand of service tax of Rs.4,27,99,059/- under the head 'Information Technology Software Service' and payable for the period from July 2012 to March 2013 was confirmed along with penalty and this order is under challenge in this Writ petition - Petitioner contends that 'Anti Virus Software' does not fall within the ambit of taxable service, as defined under Section 65 (105) (zzzze) of the Act; that the petitioner has discharged VAT on the sale of Anti Virus Software, since it is deemed to be a 'sale of goods' and has been duly assessed by the authorities under the Tamil Nadu Value Added Tax Act over the statutory returns filed by them and, therefore, the claim of the Department that the transactions rendered by the petitioner is amenable to service tax, cannot be substantiated - Counsel for the respondent Revenue placed reliance on a Division Bench decision of the Madras High Court in the case of Infotech Software Dealers Association (ISODA) = 2010-TIOL-620-HC-MAD-ST and submitted that the petitioner's Anti Virus Software is a representation of instructions recorded in a machine readable form that provides interactivity to the End User through a computer that has working internet connectivity and therefore, Anti Virus Software squarely falls within the definition of 'Information Technology Software'.

Held: Submissions of the petitioner that an 'Anti Virus Software' is outside the ambit of the definition of an 'Information Technology Software' is not based on any 'Intelligible Differentia' - Petitioner has failed to substantiate that an 'Anti Virus Software' will not fall within the ambit of the definition of 'Information Technology Software' - While that being so, by applying the ratio of the Division Bench in ISODA (supra), it can be held that 'Information Technology Software' is a 'service' and when the 'Anti Virus Software' of the petitioner would fall within the definition of an 'Information Technology Software', Bench does not find any infirmity in the action taken by the Department in demanding service tax from the petitioner, through the impugned order - Since the petitioner is liable to pay service tax but had not discharged the service tax liability, the provisions of Section 68 of the Finance Act, 1994 r/w. Rule 6 of the Service Tax Rules has been violated and therefore, there is no infirmity on the part of the Department in imposing interest under Section 75(i) along with penalty under Section 76(1) of the Finance Act, 1994 - There is no merit in the Writ Petitions, hence same are dismissed: High Court [para 16 to 18]

ST - Petitioner Association on behalf of automobile dealers had filed the petition challenging the notices issues by the Third Respondent, seeking to tax the commission received from financial institutions for arranging finances for the purchasers under the ambit of 'Business Auxiliary Service' u/s 65 of the Finance Act, 1994 - However, since the Central Government has implemented the Goods and Service Tax Act in 2017 , with effect from 1st July 2017, service tax has been subsumed into the same; consequently this Writ Petition has become infructuous - Petitioner prays that the Court may pass appropriate orders and render justice. Held: In view of the subsequent events, nothing remains for further consideration in the Writ Petition - Writ Petition is dismissed as infructuous: High Court [para 2]

ST - Similar show cause notice dated 14.10.2014 was issued for the subsequent period July, 2012 to March, 2014, also proposing to disallow the cenvat credit taken on input and input services on similar allegations that cenvat credit is admissible only when such input services /inputs are used for providing any output services alleging that the appellant has availed cenvat credit during the period when mall building was under construction and the appellant was not in a position to provide any output services - It was also alleged that the appellant has utilised such cenvat credit for payment of service tax on output services as well as for arrears - Show cause notice was confirmed vide order-in-original but the Commissioner (Appeals) allowed assessees' appeal - Since the said order has been accepted by the Department and no further appeal has been filed, the impugned order is set aside and appeal is allowed with consequential relief: CESTAT [para 12]

ST - The appellant company entered into turnkey contract with M/s ONGC for the 'revamp of 26 platforms at Mumbai High South field', on acceptance of bid and project office closed, as intimated to Reserve Bank of India on completion - Two SCNs were issued to them for recovery, under section 73 of FA, 1994, as tax dues arising from rendering of 'erection, commissioning or installation service' under the said contract as well as the amount that was alleged to have been wrongly availed as CENVAT credit and the amount allegedly due as deemed provider, under section 66A of FA, 1994, on services provided from outside India to the appellant - Towards the liability in the second notice, Rs. 17,55,26,556 has been deposited before issue of SCN on account of tax and Rs. 11,79,54,465 on account of interest - As deemed provider of service, the appellant company, upon discharge of tax liability on services procured from outside India, is eligible for CENVAT credit - There is, additionally, a further claim of eligibility for availment of Rs. 2,88,93,108 that was denied by original authority - In conjunction with amounts appropriated in impugned order, no tax liability remained unpaid on the date of notice warranting closure of proceedings without issue of notice merely for imposition of penalty even in circumstances of lack of clarity on the extent of taxability - Hence, in terms of section 73(3), with no dues apparently pending, there is no scope for imposition of penalty under section 78, same is set aside - The claim of appellant to lower tax liability on output service, owing to eligibility for abating of material cost from the taxable value of services, must be responded to - With the finding that service provided under contract to M/s ONGC is liable to tax from appellant as also on the services procured from outside India to the extent permissible, and in accordance with Taxation of Services Rules, 2006, matter remanded to the original authority for fresh quantification net of the exclusions, to the extent available to them, after affording opportunity to appellant for exercise of option to claim abatement of value of material used for rendering output service and to furnish data in support of several claims recorded - The appellant company shall be entitled to set off the consequent liability against tax, and interest, paid before issue of notice and eligible CENVAT credit on services procured domestically and from outside India: CESTAT

ST - The assessee is engaged in providing output services under taxable category of "Information Technology Software", "Manpower Recruitment Agency", "Commercial Training and Coaching" and "Consulting Engineer" Services, defined under Section 65 of FA, 1994 - They avails Cenvat credit of Service Tax paid on various input services used/utilized in, or in relation to providing the said output services - In respect of impugned order, the Commissioner has confirmed the adjudged demands on the ground that the disputed services namely, Health Insurance, Cargo Handling and Photography Services are not confirming to the definition of 'input service', provided in Rule 2(l) of CCR, 2004 - On a conjoint reading of statutory provisions and the notifications issued by Central Government from time to time, it transpires that input services may not necessarily be used directly in provision of output service and use of such services 'in or in relation to' also meet the requirement of Rule 5 ibid for the purpose of refund benefit - While interpreting the expression 'in relation to' used in the statute, the Supreme Court in case of Doypack Systems Pvt. Ltd. 2002-TIOL-389-SC-MISC has held that the said phrase is equivalent to or synonymous with 'pertaining to' and 'concerned with' and therefore, the said phrase has a very broad connotation and cannot be given a narrow meaning - In view of the settled position of law, there is no requirement of establishing one to one correlation between the input services and the output service - Based on adoption of prescribed formula, the refund application alone should be processed and settled by the department and the aspect of direct nexus or correlation between the input service and output service should not be looked into for such purpose - Therefore, no merits found in the impugned orders, insofar as the refund benefit was denied to the assessee on the ground of non-establishment of direct nexus between the input services and the output service exported by it - On careful examination of various notifications, it reveals that based on the prescribed formula, the refund application has to be filled by assessee and to be processed by jurisdictional service tax authorities for sanction of refund of un-utilised Cenvat credit, owing to the reason of exportation of output service - No other mode or method has been prescribed in statute for consideration of the refund benefit - Since, the specific issue regarding adoption of the formula prescribed under Rule 5 ibid has not been discussed by the authorities below, the matter should be remanded to the original authority for a fresh finding on the issue, whether the requirement of the said rule has actually been complied with by the assessee: CESTAT

- Appeals partly allowed: AHMEDABAD CESTAT

CX - The assessee-company manufactures 'Gear cutting tools, Broaches, Measuring Equipment' - During verification of the assessee's accounts, it was found that it had availed CENVAT credit of service tax paid under Business Auxiliary Service for sales commission to paid its agents - The Revenue opined that the activity of sales agent did not qualify as an input service - Hence an SCN was issued to the assessee for the relevant period, proposing to deny credit and recover the same with interest and penalty - On adjudication, the demands were confirmed - Hence this appeal.

Held - The CENVAT credit was denied based on allegation that sales agents were directly concerned with sales, rather than with sales promotion - The issue at hand herein has been settled vide a verdict rendered in the assessee's own case for a past period - Also considering the decision of the High Court in Commissioner of Central Excise, Ludhiana Vs. Ambika Overseas as well as the decision in the assessee's own case, the duty demand is set aside: CESTAT (Para 1,5)

Cus - Show Cause Notice dated 31st July, 2019 was issued to the petitioner for the alleged breach of the Customs Act, 1962 and the Notification referred to in the Show Cause Notice - Thereafter Show Cause Notice was adjudicated and Order-in-Original was passed on 30th June, 2020 - Petition has been preferred against this order seeking for setting aside the said order and remanding the matter back to the respondent no. 2 to permit the Petitioner to file its detailed reply duly supported by documents and decide the show cause notice 31.7.2019 afresh after giving opportunity of hearing to the Petitioner.

Held: Petitioner has challenged the Order-in-Original dated 30th June, 2020, which is an appealable order under Section 129-A of the Customs Act, 1962 - As an efficacious alternative remedy is available to the petitioner, Bench is not inclined to go into the fine niceties of the facts - Contentions sought to be taken by the petitioner in this writ petition can also be taken in appeal filed against the Order-in-Original - In view of the judgment of the Supreme Court in the case of Commissioner of Income Tax and Ors. v. Chhabil Dass Agarwal, = 2013-TIOL-40-SC-IT and Glaxo Smith Kline Consumer Health Care Ltd. = 2020-TIOL-93-SC-VAT , Bench is not inclined to grant any relief to this petitioner in the present petition - petition appears to involve highly disputed question of fact regarding the service of the notice of personal hearing to the petitioner - Tribunal is the final fact finding authority, therefore, Bench is not inclined to pass any order or direction or writ in the present writ petition upon the respondents - petitioner is permitted to prefer an appeal under the Customs Act, 1962 - Petition is dismissed: High Court [para 6, 8, 9]

Cus - Tribunal dismissed the Appeal filed by the Assessee, a CHA, against imposition of penalty of Rs.50,000/- only on the ground of delay in filing the same, which was as much as 764 days - aggrieved, the appellant, has filed appeal before the High Court - Appellant submitted that the enquiry held by the Competent Authority gave the findings in favour of the Assessee that there was no mis-declaration on the part of the Assessee but however, the Commissioner did not agree with those findings and imposed the said penalty of Rs.50,000/- - Department does not seriously dispute this factual position about the finding of the enquiry officer in favour of the Assessee, however, supports the impugned CESTAT order as the delay is huge.

Held: For the fault of the advisor/counsel, the Assessee should not suffer and the fact finding bodies like Tribunal should make endeavour to decide the appeals on merits, as far as possible rather than taking a pedantic approach of dismissing the appeals on the ground of delay, unless there is a gross delay and no sufficient reason is made out - impugned order of the Tribunal dated 28 April 2000 is set aside and the matter is remitted back to the learned Tribunal for deciding the appeal on merits and in accordance with law, after giving an opportunity of hearing to both the parties - Appeal disposed of: High Court [para 5, 6]

Cus - Import of automatic Patek Philippe wrist watch allegedly for personal use - Importer had filed a petition before the Bombay High Court seeking a direction to the respondents Revenue to give effect to the order-in-appeal dated 29.11.2019 and to allow clearance of the imported watch covered by bill of entry dated 02.01.2019 on payment of duty on the declared value - High Court had vide its judgment dated 15.09.2020 - 2020-TIOL-1567-HC-MUM-CUS directed the respondent Revenue to release the imported watch of the petitioners forthwith in terms of the order-in appeal dated 29.11.2019 - Incidentally, Revenue viz. Commissioner of Customs (Import-ACC), Mumbai, ACC has filed the present appeal aggrieved by the order dated 29.11.2019 passed by the Commissioner(A) along with an application for stay of operation of the said order dated 29.11.2019.