#Finance Act

The Supreme Court ruled that a penalty can be imposed only when the Foreign Travel Tax is not paid at all, and that a one-day delay in deposit does not attract the fine under Section 38(3). This limits liability to non-payment, obliges the government to refund the Rs 71.29 million penalty with interest, and affects airlines and other carriers subject to the tax.

CESTAT quashed a Rs 22.84 crore service tax demand against HCL Infosystems, holding that the services do not fall within the negative-list taxable categories and are not deemed sales or advertising agency services. The ruling narrows the tax base under the negative-list regime, benefitting IT service providers offering consulting, maintenance and related services.

CESTAT Mumbai rules that when an adjudication order incorrectly states the limitation period for filing an appeal, the taxpayer’s reliance on that error constitutes a legitimate expectation that overrides procedural dismissal for non-filing of condonation application. This protects taxpayers from punitive outcomes arising from official legal misstatements, reinforcing administrative accountability in tax proceedings.

CESTAT Chennai rules that the 50% upfront capital contribution by industrial lessees toward water supply infrastructure is a one-time, non-recurring payment exempt under Section 104 of the Finance Act, 1994, and cannot be taxed as a support service. This clarifies the tax treatment of long-term industrial lease arrangements involving shared infrastructure costs, benefiting state industrial promotion bodies and manufacturing tenants nationwide.

CESTAT Ahmedabad rules that remuneration paid to whole-time directors as commission or perquisites qualifies as salary under the Income Tax Act, placing it within the employer-employee relationship exemption from service tax. This clarifies a critical boundary for corporate compensation structures and relieves companies from reverse charge obligations on director payments previously treated as taxable services.

CESTAT Chennai ruled that service tax liability for real estate agent services must be calculated on the gross amount inclusive of tax under Section 67(2) of the Finance Act. The tribunal remanded the case for fresh adjudication, allowing the appellant to submit additional evidence, clarifying the computation methodology for tax professionals and real estate service providers.

CESTAT rules that pre-SCN payment of service tax, interest, and 15% penalty under Section 78's second proviso conclusively terminates proceedings, shielding assessees from further demand or penalties. The ruling reinforces voluntary compliance as a complete defense, impacting tax dispute resolution strategies for service providers.

CESTAT rules that salaries paid by hotel owners to key managerial staff under a hotel operating agreement are not includible in the 'operator fee' for service tax valuation under Section 67 of the Finance Act. The decision clarifies that only amounts directly linked to the provision of taxable services can be taxed, protecting hotel owners from inflated tax liabilities.

CESTAT Hyderabad rules that service tax under Goods Transport Agency Service (GTAS) cannot be levied without a valid consignment note as defined under Rule 4B of Service Tax Rules. The absence of such a note negates tax liability, reinforcing precedent that documentary evidence is essential for GTAS classification.

CESTAT Allahabad rules that electricity supplied through diesel generating sets constitutes a sale of goods, not a taxable service under the Finance Act. The tribunal also holds that extended limitation under Section 73 cannot be invoked without proof of wilful suppression, impacting service tax assessments for commercial property lessors.

CESTAT Hyderabad rules that salary reimbursements to foreign entities for expatriate employees directly employed by an Indian entity are not liable for service tax. The Tribunal held that the employer-employee relationship overrides secondment arrangements, negating the reverse charge mechanism under the Finance Act.

CESTAT Bangalore holds that services for road maintenance during 2005-2009 are exempt under Section 97 of Finance Act, 2012, and contract labor does not equate to manpower supply.

CESTAT Hyderabad holds service tax cannot be imposed on construction services where flats are sold with separate construction agreements for personal use, clarifying classification under Works Contract.