CESTAT Weekly Round – UP

This weekly round-up analytically summarises the key stories of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reported at tax scan. in, from April 9^th to 15^th ,2023.

Cenvat Credit Available on Books of Account Can Be Rejected only with Due Procedure (M/s Saavn Media Private Limited vs Commissioner of Central Goods & Service Tax,2023 TAXSCAN (CESTAT) 361)

The Mumbai Customs, Excise & Service Tax Appellate Tribunal (CESTAT), has held that Cenvat Credit available on books of accounts, can be rejected only with due procedure. With the Tribunal setting aside the impugned order, to the extent of rejection of refund of CENVAT Credit respectively to the tune of Rs. 5,97,465/- and Rs. 6,17,759/-, as well as directing the original authority to allow the refund of the same, a single member bench comprising Anil G Shakkarwar, the Member (Technical), found that CENVAT Credit was not disallowed by way of invoking Rule 14 of CENVAT Credit Rules, 2004.

“Since the CENVAT Credit is available on the accounts of the appellant, the refund of the same could not be rejected”, the Tribunal concluded.

Adjudication of SCN demanding Service Tax issued on same set of facts without Adjudicating First one is not Tenable  (M/s Shairu Gems Diamonds Pvt. Ltd vs Commissioner of Service Tax-IV, 2023 TAXSCAN (CESTAT) 362)

The Mumbai bench of Customs Excise & Service Tax Appellate Tribunal (CESTAT), has held that adjudication of a Show Cause Notice (SCN), demanding service tax issued on the same set of facts without adjudicating the first one, is not tenable.

With the department having alleged that the appellants had received Business Auxiliary Service from M/S. Bonas & Co. Ltd., London, and that they had paid them a commission in foreign currency for services received from outside India, a Coram comprising of Mr S K Mohanty, Member (Judicial) and Mr M.M Parthiban, Member (Technical) held:

“Since the first show cause notice dated 21.08.2012 has considered the aspects of liability for payment of service tax by the recipient of service consequent upon analysis of the statutory provisions, it was required to be adjudicated at the first instance and the subsequent follow-up show cause notices issued thereafter to be adjudicated at a later stage.”

Hair Transplant is “Cosmetic Surgery”, Subject to Service Tax (Dr Sanjiv Arunchandra Vasa vs C.S.T.-SERVICE TAX, 2023 TAXSCAN (CESTAT) 363)

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has held that the activity of Hair Transplant is cosmetic surgery and shall be liable to the service tax levy under the provisions of the Finance Act, 1994.

The aforesaid decision was made by a two-Member Tribunal comprising Mr. Ramesh Nair, Member (Judicial) and Mr. C.L. Mahar, Member (Technical), while considering an appeal by Dr. Sanjiv Arunchandra Vasa, a medical practitioner doing ‘Hair Transplantation’ work, who was registered during the period under consideration, as a Service Provider under the Category – ‘COSMETIC AND PLASTIC SURGERY SERVICES’.

The appellant having sought a refund vide letter dated 25.04.2011, through their counsel, contending that their services “Hair Transplantation” were not taxable, the CESTAT noted that the Hair Transplant is neither undertaken to restore nor reconstruct anatomy or its functions, nor the procedure of hair transplant restores developmental abnormalities degenerative diseases, injury or trauma.

Thus, rejecting the appellant’s plea, the CESTAT observed:

“We find that hair transplant is a medical procedure to improve outer look of the body for time being and it does in any way contributes to the anatomy or functions of the human body.”

Company Not Required to Service Tax under RCM on Rent paid to Directors for Leasing Out Premises in Their Individual Capacity (Cords Cable Industries Limited vs Commissioner, 2023 TAXSCAN (CESTAT) 364)

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi bench has held that a company need not pay service tax on the rental amount paid to its directors who leased out the premises in their individual capacity.

While a two-Member bench of the CESTAT comprising Justice Dilip Gupta, the President and Mr. P. V. Subba Rao, the Member (Technical) observed that the CBIC relied on the Notification dated 20.06.2012, as amended by Notification dated 07.08.2012 wherein the description of services, the person liable to pay service tax and the extent of service tax payable by such person, under the reverse charge mechanism, has been specified, the CESTAT, relying on the notification, held:

 “The Commissioner (Appeals) assumed that Naveen Sawhney and D.K. Prashar are providing service of renting of immovable property as Directors of the appellant, whereas they are providing the said service in their individual capacity as owners of the premises and not as Directors of the appellant. The appellant, in such a situation, could not have been asked to pay service tax on a reverse charge mechanism. What needs to be further noticed is that service tax had been deposited on the rent received by Naveen Sawhney and D.K. Prashar from the appellant.”

Ex-Kings XI Punjab Player Ajitesh Argal not liable to Service Tax for Brand Promotion Payments from Nike India during IPL (Ajitesh Kamlesh Argal vs Commissioner of Central Excise & ST, 2023 TAXSCAN (CESTAT) 365)

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has recently ruled in favour of cricketer Ajitesh Argal, a former under-19 Indian Team player, that he is not liable to pay service tax on brand promotion payments received from Nike India during IPL.

With Mrugesh Pandya, the counsel appearing on behalf of the appellant, having submitted that the appellant is not engaged in the brand promotion of any Company, and therefore that the agreement for employment of the appellant with KPH shall not attract service tax, and he quoted a bunch of rulings in his favour, based on which the Service Tax Tribunal Bench observed:

 “The major amount of remuneration received is towards engaging the appellant by KPH to play cricket in Indian Premier League matches.”

“It was thus held that “the activity of the cricket player does not fall under the category of Business Auxiliary Services. As per this settled legal position, in the present case also involving similar agreement and arrangement, the demand under Business Auxiliary Service does not sustain. Since the remuneration received by the appellant from KPH does not involve any service, the appellant shall be eligible for small-scale exemption provided under Notification No. 6/2005-ST dated 01.05.2005 up to the threshold limit of gross value in a financial year.”, the Bench further added, while setting aside the impugned order of demand of Service Tax.

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