CESTAT, NEW DELHI BENCH: CONSIDERATION DEEMED TO BE RECEIVED ON THE DATE OF ENCASHMENT OF CHEQUE AND NOT ON DATE OF RECEIPT

In its judgment dated Jun 27,2012, CESTAT, NEW DELHI BENCH in case of Sarvashaktiman Traders (P.) Ltd. vs. Commissioner Of Central Excise, Kanpur upheld that consideration deemed to be received on the date of encashment of cheque and not on date of receipt.

Issue Involved

The issue involved in this case is whether tax is to be pay on the receipt of cheque or on encashment of the cheque.

Facts of the case

The appellant was providing business auxiliary services. It was found that in respect of the services rendered during the period April, 2006 to December, 2006, the appellant have not deposited the Service Tax.

The appellants representative, in his statement admitted that bills for the amount of Rs. 54, 76,172/- for the services rendered during the period April, 2006 to December, 2006 stand raised by them in December, 2006. The cheque for the same was received on 4.1.2007 but physically the cheque was deposited in the bank account on 5.2.2007 and as such the Service Tax was to be paid by 5.3.07.

They also submitted that there was no mala fide on their part inasmuch as they were having huge modvat credit for discharge of Service Tax.

The challenge in the present appeal is to imposition of penalty under the provisions of section 76 of the Finance Act, 1994.

Observation of Commissioner (Appeal)

 On appeal against the above order, Commissioner (Appeals) observed that

• there was huge Cenvat credit lying with the appellant
• account payee cheque was only received in January
• account payee cheque was taken into account books,

This reflects that there is no intention on the part of the appellant to evade payment of Service Tax.

He also observed that appellant has nowhere suppressed the value of taxable service from the department.

As such, he set aside the penalty imposed upon section 78. Similarly, he set aside the penalty imposed upon under section 77 of the Finance Act, 1994

However, he upheld the imposition of penalty under section 76 of the Finance Act,   which is the subject-matter of the present appeal.

Judgement

In the present case, though the cheque was received on 4.1.2007, the same was actually deposited in the bank on 5.2.2007 and must have been encashed on a date after that.

As such, it is to be considered as if the consideration for the services was received by the appellant in the month of February itself, thus requiring them to deposit the tax with the 

department in March, 2007.

As such, Commissioner (Appeal) find that there is no delay in depositing the service tax, thus requiring no imposition of penalty upon the appellant.

Accordingly, penalty imposed under section 76 is set aside with consequential relief to the appellant.

Relevant Sections

        

• Section 76 of the Finance Act deals with imposition of penalty on any person, liable to pay Service Tax , fails to pay such tax

• Section 68 requires the assessee to discharge his tax liability by 5th of the next month during which the consideration for the services stand received by the appellant.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, Delhi-110001

Mobile:- +91-9873082769

CESTAT MUMBAI BENCH:VALUE OF PURCHASED STUDY MATERIAL SUPPLIED TO STUDENTS NOT INCLUDIBLE IN THE VALUE OF COMMERCIAL COACHING SERVICES (In favour of assessee)

In its judgment dated 2^nd April, 2012 CESTAT, MUMBAI BENCH in the case of Chate Coaching Classes (P.) Ltd. vs. Commissioner of Central Excise, Aurangabad held that value of study material supplied by coaching institutes shall not be included in value of taxable services i.e shall not be included in the value of coaching services.

Facts of the Case

• The appellant is engaged in providing the service of “commercial training and coaching”.

• Appellant is providing study material to students and the value of the said material has not been included in the assessable value of the services. By virtue of the benefit provided by Notification NO.12/2003-ST dated 20.6.2003.

• As per Notification No. 12/2003-ST “Goods and materials sold by service provider to recipient of service – Value thereof, exempts so much of the value of all taxable services, as is equals to value of goods and materials sold by the service provider to the recipient of service from the service leviable thereon under section 66 of the said Act, subject to condition that there is documentary proof specifically indicating the value of the said goods and materials.

• And for the condition of documentary proof specifically indicating the value of the said goods and materials, appellant has shown the value of the material supplied in the invoice separately, therefore they have fulfilled the second condition of Notification 12/2003.

• But a show cause notice was issued on the basis of circular No.59/8/2003 dated 20.6.2003 according to that the appellant is not entitled for exemption under Notification 12/2003 dated 20.6.2003 and exemption is available only in case the commercial coaching and training classes makes available the standard textbooks.

• Since this study material is provided by the institute as part of their service, therefore the value of this service material is includible in the value of taxable service.

Issue for Consideration

The issue arises here is whether    the study material provided by commercial training and coaching centers to their student is exempt from service tax or not.

Observation of Tribunal

In this case Tribunal was held that the appellant is entitled for the benefit of Notification NO.12/2003-ST dated 20.6.2003 on the basis of followings:-

• The Circular No.59/8/2003 dated 20.6.2003 of CBEC quoted by the learned DR states that such exemption will be applicable only if material sold is ‘standard textbooks’.

• The question as to what is a ‘standard textbook’ can lead to disputes.

• Since the expression is not used in the notification and the fact that the books sold are of another entity namely “Bulls Eye’, we do not find any reason to deny the benefits of the Notification No.l2/2003-ST.”

Regards
CA. Mona Singhal
Partner

Arpit Guta & Associates
Chartered Accountants

701,Nirmal Tower,
26, Barakhamnba Road,
Connaught Place, DELHI-110001

Mobile: +91-9873082769 

CESTAT, KOLKATA BENCH: SERVICE TAX PENALTY CANNOT BE IMPOSED U/S. 76 AND 78 SIMULTANEOUSLY (In favour of assessee)

In its judgment dated 27^th July 2012 CESTAT, KOLKATA BENCH in the case of Commissioner of Central Excise vs. Mittal Technopack (P.) Ltd. held that penalty u/s 76 shall not be imposed if penalty u/s 78 has already been imposed.

Issue for Consideration

The issue arises here for consideration is that whether the penalty u/s 76 of service tax can be imposed if penalty u/s 78 has already been imposed.

Facts of the case

• The appellant had rendered services under the heading ‘Business Auxiliary Service’ but failed to discharge the Service Tax during the period from 1/4/07 to 31/3/2008.

• But he has paid the entire amount of Service Tax has been paid by the applicant before issuance of show cause notice i.e. on 13/2/2009.

• The show cause notice was issued to them on 28/10/2009. Penalty has been proposed under Section 76 and 78 of the Finance Act, 1994.

• The Adjudicating Authority confirmed the demand and imposed penalty equivalent to Service Tax under Section 78 of the Finance Act 1994 only.

• Aggrieved, the Revenue filed the appeal before the Commissioner of Central Excise (Appeals) submitted that both the Lower authorities has erred in not imposing the penalty under 76 of the Finance Act.

• The Commissioner (Appeal) dismissed the appeal filed by the Revenue and upheld the order in original of the Lower Authority.

Observation of the ld. Commissioner (Appeal)

Commissioner (Appeal) dismissed the appeal filed by the Revenue for levy of both penalty u/s 76 and 78 of the act and held that penalty u/s 76 shall not be imposed if penalty u/s 78 has already been imposed relying on the judgment of:-

    
    Hon’ble Tribunal’s in the case of The Financers v. CCE [2007] 8 STR 7 (T) (2007-TIOL- 1778-CESTAT-DEL) wherein it has been held that “Double penalty under section 76 not impassable in cases where penalty imposed under section 78 ibid for suppression”. The present case is no different Therefore, I find that simultaneous imposition of both penalties is double punishment to the appellant and thus not justified”.

Hon’ble High Court of Punjab and Haryana in the case of First Flight Courier Ltd. wherein it has been held that penalty has been levied under section 78 could be taken into account for levying or not levying penalty under section 76 of the Act and penalty equal to service tax had already been imposed under section 78 of the Act.


Regrads
CA. Mona Singhal
Partner

Arpit Gupta & Associates
Chartered Accountants

701, Nirmal Tower,
26, Barakhamba Road,
Connaught Place, Delhi -110001 

Mobile: +91-9873082769