2014 (10) TMI 883 - Commission - Service Tax

Leviability of Service tax - Rendering Club s or Association s Membership Service during the period 2007-08 to 2011-12 - Revenue considered donations subscriptions entrance fee and election deposit forfeited as the total taxable income for all the five years and demanded Service Tax on this income - Held that - subscription entrance fee and lorry stand collection totalling to 2, 99, 085/- for the year 2010-11 and 3, 31, 750/- for the year 2011-12 is liable for Service Tax after allowing the threshold exemption value for the year 2010-11 determined along with value of taxable service for other services held taxable elsewhere in this order. Leviability of Service tax - Rendering Supply of Tangible Goods Service during the period 2007-08 to 2011-12 - Revenue demanded Service Tax on the basis of the description Hire charges reflected in the financial statements of the Sangam and construed the activity of transporting petroleum products from oil companies namely HPCL as Supply of Tangible Goods Service - Held that - the applicants rebuttal of the Revenue s claim substantiated with brimming facts and reasoning is acceptable and that the nature of activity involved in transportation of petroleum products from the oil companies to the respective destinations by the applicant in their tanker trucks gets covered within the scope of GTA service also gets support from the fact that the same has been accepted by the respective jurisdictional authority and assessed to Service Tax on HPCL and they complied with payment of the Service Tax under Reverse Charge Mechanism and filed periodic ST-3 returns. Moreover if the Service Tax on the Supply of Tangible Goods Service is paid the same would be available as CENVAT credit for payment of Service Tax on GTA service thereby making the exercise revenue neutral. Therefore the entire Service Tax of 3, 50, 451/- demanded on this activity in the impugned show cause notice is infructuous and not sustainable in law. Leviability of Service tax - Rendering Business Auxiliary Service during the period 2007-08 to 2011-12 - Applicant repudiated the demand in respect of turnover discount rebate and incentives received from the principals and spare parts suppliers performance bonus/and reimbursement of expenses received towards maintenance of petrol bunk and uniforms of the employees etc. mentioning that the same are related to trading activity carried on by the applicant and did not come under the scope of service - Held that - the Service tax demanded in respect of the activities namely performance bonus uniform subsidy are not liable for Service Tax as the same is accrued to the applicant on their trading activities. These activities and receipts of income are relatable to the trading activities. Therefore the entire demand of 1, 18, 688/- made under the heading Business Auxiliary Service is not sustainable in law. Leviability of Service tax - Rendering Renting of Immovable Property Service during the period 2007-08 to 2011-12 - Applicant submitted that they rented out vacant land to M/s. HPCL and Service Tax is not required to be paid on the rental of vacant land in terms of Ministry s Circular No. DOF/334/1/2007-TRU dated 28-2-2007 and reckoned the Service Tax liability on the renting of vacant land only from 1-7-2010 to 31-3-2012 - Held that - the total value of service on account of rental of immovable property works out to 14, 25, 776/- for the year 2010-11 and 20, 07, 593/- for the year 2011-12 is liable for Service Tax after allowing the threshold exemption value for the year 2010-11 determined along with value of taxable service for other services held taxable elsewhere in this order. Threshold exemption and Service tax liability and interest - Appellant contended that they were liable for Service Tax only from the year 2009-10 that too after availing the threshold exemption limit of 8/10 lakhs for the respective financial year but revenue contended that the applicant has exceeded the threshold limit during the preceding financial year itself by clubbing the Service tax liability arrived at on the various services provided by the applicant - Held that - the applicant is eligible for total exemption for Service Tax for the years 2007-08 to 2009-10 and are liable to pay Service Tax on the service value of 7, 24, 861/- in excess of the threshold exemption limit of 10 lakhs for the year 2010-11 and no exemption for the year 2011-12 in terms of Notification No. 06/2/2005-S.T. dated 1-3-2005 and Notification No. 33/2012-S.T. dated 20-6-2012. Also the cum-tax benefit sought for by the applicant in terms of Section 67(2) is not admissible. Accordingly the claim of the applicant for cum-tax benefit is disallowed and is arrived at the Service Tax liability at 3, 15, 613/- and applicable interest thereon. Also the applicant had admitted a total liability of 3, 80, 796/-and interest of 40, 675/- payable thereon in their application filed in terms of Section 32E of the Act ibid and during the hearings. Imposition of penalty - Non-payment of Service tax - Held that - in view of the true and full disclosure of tax liability and co-operation extended by the applicant the Bench takes a lenient view and extend partial immunity from penalty to the applicant. Prosecution - Section 32K of Central Excise Act 1944 - the applicant is granted immunity from prosecution under Section 32K of Central Excise Act 1944 as made applicable to Service Tax vide Section 83 of the Finance Act 1994. - Matter disposed of

Summary

Issues Involved:
1. Club's or Association's Membership Service
2. Supply of Tangible Goods Service
3. Business Auxiliary Service
4. Renting of Immovable Property Service
5. Quantification of Tax Liability
6. Threshold Exemption and Service Tax Liability
7. Penalty and Prosecution

Issue-wise Detailed Analysis:

1. Club's or Association's Membership Service:
The applicant provided services such as 'Club's or Association's Membership Service' and collected amounts like subscriptions, donations, entrance fees, and election deposit forfeitures from its members. The Revenue argued that all these collections are taxable under Section 65(105)(zzze) of the Finance Act, 1994. However, the applicant contended that only subscriptions and entrance fees should be taxable, while donations and election deposit forfeitures lack a nexus to the services provided. The Bench agreed with the applicant, holding that donations and election deposit forfeitures are not taxable, but subscriptions and entrance fees are liable for Service Tax.

2. Supply of Tangible Goods Service:
The applicant was involved in transporting petroleum products for HPCL and received hire charges. The Revenue classified this activity as 'Supply of Tangible Goods Service' under Section 65(105)(zzzzj). The applicant argued that the nature of the service was GTA (Goods Transport Agency) service, not Supply of Tangible Goods Service, and that HPCL had paid Service Tax under the reverse charge mechanism. The Bench found the applicant's arguments convincing, noting that the contractual terms and the issuance of consignment notes supported the classification as GTA service, thus nullifying the Service Tax demand under 'Supply of Tangible Goods Service'.

3. Business Auxiliary Service:
The applicant received various commissions and bonuses from HPCL and other suppliers, which the Revenue classified as 'Business Auxiliary Service'. The applicant contended that these receipts were related to trading activities and not services. The Bench agreed with the applicant, finding that the commissions and bonuses were indeed related to trading activities and not subject to Service Tax under 'Business Auxiliary Service'.

4. Renting of Immovable Property Service:
The applicant rented out land and buildings to various entities. The Revenue demanded Service Tax on these rentals. The applicant accepted the tax liability on rentals from buildings but contested the tax on vacant land rentals, citing an exemption up to 30-6-2010. The Bench upheld the applicant's contention, confirming the exemption for vacant land rentals up to 30-6-2010 and accepting the tax liability on building rentals from 1-7-2010 onwards.

5. Quantification of Tax Liability:
The total Service Tax liability was calculated based on various services provided from April 2007 to March 2012. The applicant admitted a liability of Rs. 3,80,796/- and paid the same along with interest. The Bench reconciled the applicant's payments and confirmed the settled amount, directing the Jurisdictional Commissioner to verify the accuracy of the calculations.

6. Threshold Exemption and Service Tax Liability:
The applicant claimed threshold exemptions for the initial years, which the Revenue contested by aggregating the taxable value of all services. The Bench found that the applicant exceeded the threshold exemption limit during the year 2010-11, making them liable for Service Tax on the excess value. The Bench disallowed the cum-tax benefit claim, arriving at a Service Tax liability of Rs. 3,15,613/- plus applicable interest.

7. Penalty and Prosecution:
The Bench noted the applicant's efforts in disclosing their tax liability and cooperation in the proceedings. While partial immunity from penalties was granted, a penalty of Rs. 20,000/- was imposed. The Bench also granted immunity from prosecution, considering the facts and circumstances of the case.

Order:
The Bench settled the case with the following terms:
1. Additional Service Tax settled at Rs. 3,80,796/-, with the balance amount to be paid within 30 days.
2. Interest to be worked out and paid within 30 days.
3. A penalty of Rs. 20,000/- to be paid within 30 days.
4. Immunity from prosecution was granted, with conditions for withdrawal if any material particulars were found to be withheld or false evidence provided.

The order emphasized compliance with the settled terms and conditions and directed the Jurisdictional Commissioner to ensure verification and collection of any due amounts.