Indirect Tax Latest Judicial Precedents November 2015

01-11-2015 CA Ashish Chaudhary, CA Rajesh Kumar T R


1. Both inputs and final products are entitled for rebate under Rule 18 of Central Excise Rules (M/s Spentex Industries Ltd 2015-TIOL-239-SC-CX)

  • Background: Assessee filed claim of rebate on finished goods as well as material used in manufacture of final products. Department denied rebate claim stating that only one of the claim is admissible as Rule 18 of Central Excise Rules uses the word “OR” between two type of rebates.  
  • Issue: Whether rebate claim can be claimed simultaneously for duty paid on raw material/intermediate product and final product exported out of India? 
  • Decision: It has always been intention of government to grant benefit of rebate both on input and on final product. If only one of the rebates is allowed, it would defeat the very purpose of grant of remission from payment of excise duty in respect of the goods which are exported out of India. It may also lead to invidious discrimination and arbitrary results. Hence, it is necessary to read the word “OR” as “AND” to carry out the objectives of the Rule 18 and also to bring it at par with Rule 19. Simultaneous claim of both rebates permitted.

Comment: The judgment will put to rest frivolous litigation on the issue since years. This would assist in bringing certainty in the rebate claim process. Also, many exporters who were not claiming both the rebates simultaneously till now to avoid litigation from department would be beneficiary by way of reduction in final cost of products.


  1. No Service tax on laying of pipes for water supply: (Indian Hume Pipes Co. Ltd.(2015 (40) S.T.R. 214 (Mad.)
    • Background: Assessee engaged in laying long distance pipelines to enable State Water Supply and Drainage Board to supply water.
    • Issue: Whether laying of pipeline is liable to service tax? 
    • Decision: The activity of laying pipeline was undertaken in public interest to take care of the civic amenities liable to be provided by state. It is not commercial in nature, hence not covered in the “erection, commissioning or installation service”.

Comment: Service of laying of pipeline provided to government, local authority or governmental authority is exempted vide entry no. 12 (e) of Notification No. 25/2012 under negative list regime also. If service recipient is other than these specified authorities, liable to service tax. 


  1. No service tax on commission by BSNL to SIM card and recharge coupon distributors (Bharat Cell 2015 (40) STR 221 (Mad)
    • Background: BSNL has been distributing following commission to franchisee:
      1. Fixed commission for post paid and pre paid cards
      2. Commission on recharge coupons
      3. Target achievement bonus
      4. Retention Bonus
    • Issue: Whether service tax is leviable on commission under BAS category? 
    • Decision: The tax has been paid on full value of SIM cards by BSNL. Commission given to distributor is part of that consideration only. Relied upon the judgment in case of G.R.Movers (2013 (30) STR 634). Not liable to service tax.

Comment: Services of selling agent or distributor of SIM cards or recharge coupon vouchers specifically exempted vide entry no. 29 of Notification No. 25/2012-ST. No service tax post negative also.


  1. Demand not to be confirmed merely based on