2007 (1) TMI 499 - AT - Service Tax

Summary

Issues involved: Interpretation of Section 11D of the Central Excise Act, 1944 in relation to the recovery of service tax on non-taxable services.

Issue 1: Application of Section 11D to the recovery of service tax on non-taxable services

The Department appealed regarding the recovery of service tax on non-taxable services under Section 11D of the Central Excise Act, 1944. The dispute arose from the amount collected by the appellants in respect of non-taxable services, which the Department sought to recover as per Section 11D, applicable to Service Tax matters from 16-8-2002. The Department argued that the appellants had indicated service tax components in invoices or through annexed worksheets, and the Balance Sheets also reflected the amount collected as Service Tax. The advocate for the Respondents contended that Section 11D applies only to those liable to pay duty, and the appellants cannot be considered as such for non-taxable services. Citing various judgments, it was argued that the appellants did not collect amounts as representing service tax.

Issue 2: Interpretation of the applicability of Section 11D

The Commissioner (A) reasoned that Section 11D is not applicable in these cases as the appellants were not liable to pay service tax on non-taxable services. The Commissioner highlighted that the invoices did not separately mention service tax, and mere mention in worksheets/letters was insufficient to prove collection of amounts towards Service Tax. It was noted that no enquiries were made at the customer's end to confirm the collection of Service Tax on non-taxable services. The Commissioner emphasized that the requirements of Section 11D were not satisfied by the appellants, as they were not liable to pay service tax on the services in question.

Conclusion:

The Tribunal upheld the Commissioner (A)'s decision, stating that the wordings of Section 11D are clear and both conditions must be satisfied for its application. Since the appellants were not liable to pay service tax on non-taxable services, the provisions of Section 11D did not apply to them. Consequently, the appeals of the Department were rejected.