Tag Archives: Value Added Tax

Service Tax – Nature and Character of

In Association of Leasing and Financial Service Companies v. Union of India, (2011) 2 SCC 352, the court under the caption “nature and character of service tax” held as under:
“In All India Federation of Tax Practitioners v. Union of India, (2007) 7 SCC 527 the Court explained the concept of service tax and held that service tax is a value added tax which in turn is a destination based consumption tax in the sense that it is levied on commercial activities and it is not a charge on the business but on the consumer. That, service tax is an economic concept based on the principle of equivalence in a sense that consumption of goods and consumption of services are similar as they both satisfy human needs. Today with the technological advancement there is a very thin line which divides a “sale” from “service”. That, applying the principle of equivalence, there is no difference between production or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. It is this principle of equivalence which is inbuilt into the concept of service tax under the Finance Act, 1994. That service tax is, therefore, a tax on activity. That, service tax is a value added tax. The value addition is on account of the activity which provides value addition, for example, an activity undertaken by a chartered accountant or a broker is an activity undertaken by him based on his performance and skill. This is from the point of view of the professional. However, from the point of view of his client, the chartered accountant/broker is his service provider. The value addition comes in on account of the activity undertaken by the professional like tax planning, advising, consultation etc. It gives value addition to the goods manufactured or provided or sold. Thus, service tax is imposed every time service is rendered to the customer/client.
The same view is reiterated broadly in Godfrey Phillips India Ltd. v. State of U.P., (2005) 2 SCC 515 in which a Constitution Bench observed that in the classical sense a tax is composed of two elements: the person, thing or activity on which tax is imposed. Thus, every tax may be levied on an object or on the event of taxation. Service tax, is thus, a tax on activity whereas sales tax is a tax on a sale of a thing or goods.” Union of India v. Bengal Shrachi Housing Development Limited, (2018) 1 SCC 311.

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In a Taxing Statute – There is no room for Intendment

In the case of Hansraj Gordhandas v. CCE and Customs, AIR 1970 SC 755 : (1969) 2 SCR 253, it was held as under:
“It was contented on behalf of the respondent that the object of granting exemption was to encourage the formation of cooperative societies which not only produced cotton fabrics but which also consisted of members, not only owning but having actually operated not more than four power-looms during the three years immediately preceding their having joined the society. The policy was that instead of each such member operating his looms on his own, he should combine with others by forming a society which, through the cooperative effort should produce cloth. The intention was that the goods produced for which exemption could be claimed must be goods produced on his own behalf by the society. On a true construction of the language of the Notifications dated 31.07.1959 and 30.04.1960 it is clear that all that is required for claiming exemption is that the cotton fabrics must be produced on power looms owned by the cooperative society. There is no further requirement under the two notifications that the cotton fabrics must be produced by the cooperative society on the power looms ‘for itself’. It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the taxpayer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different, but that is not the case here.”
Thus, the aforesaid decision makes it quite clear that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. It has also been held by the Constitution Bench, if the tax payer is within the plain terms of the exemption, it cannot be denied its benefits by calling in aid any supposed intention of the exempting authority. That apart, it has also been stated therein that if different intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different. State of Jharkhand v. Tata Steel Limited, (2016) 11 SCC 147.

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Accessory – Meaning of

The term “accessory” has been defined by lexicographers broadly to mean as something which contributes to or aids in an activity or process.
Oxford Advanced Learner’s Dictionary defines it as – “a thing which can be added to something else in order to make it more useful, versatile or attractive.”
According to Merriam Webster Dictionary it is “something added to something else to make it more useful, attractive or effective.”
Black’s Law Dictionary provides that the term “accessory—Means anything which is joined to another thing as an ornament or to render it more perfect or which accompanies it or is connected with it as an incident or as subordinate to it or which belongs to or with it. Adjunct or accompaniment. A thing of subordinate importance. Aiding or contributing in secondary way or assisting in or contributing to as a subordinate.”
The meaning of the expression “accessory” has been explained by the court in Annapurna Carbon Industries Co. v. State of A.P., (1976) 2 SCC 273, in the light of the question whether “arc carbon” is an “accessory” to cinema projectors or other cinematographic equipment under Item 4 of Schedule I to the Andhra Pradesh General Sales Tax Act, 1957 as follows:
“The term accessories is used in the Schedule to describe goods which may have been manufactured for use as an aid or addition.
Other meanings given there are “‘supplementary or secondary to something of greater or primary importance’, ‘additional’, ‘any of several mechanical devices that assist in operating or controlling the tone resources of an organ’. ‘Accessories’ are not necessarily confined to particular machines for which they may serve as aids. The same item may be an accessory of more than one kind of instrument.” Commissioner of Sales Tax v. AKZO Nobel India Ltd., (2014) 16 SCC 242.

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