2007 (4) TMI 723 - AT - Central Excise

Summary

Issues involved:
The issues involved in the judgment are the refund claim for service tax paid by the appellants for the period from 17-10-1998 to 30-6-1999, the liability of service users on C & F agents post-16-10-1998 as per Finance Act, 2000, and the interpretation of relevant provisions of the Service Tax Rules, 1994.

Refund Claim Issue:
The respondents, manufacturers of Cement and Clinker, filed a refund claim for service tax paid to clearing and forwarding agents from 17-10-1998 to 30-6-1999. The Commissioner (Appeals) allowed the refund based on the decision in Laghu Udyog Bharati case, holding that the service users are not liable to pay service tax. The revenue appealed, citing the Gujarat Ambuja Cements Ltd. case, which stated that the amendments in 2003 did not overrule the decision in Laghu Udyog Bharati. The Tribunal upheld the Commissioner's decision, stating that no service tax liability can be imposed on the recipient of C & F agent services beyond 16-10-1998.

Liability Issue Post-16-10-1998:
The revenue argued that the Ministry's clarification and the amended Service Tax Rules, 1994, made the service receiver liable to pay service tax even after 16-10-1998. However, the Tribunal referred to the CESTAT's Chennai Bench decision, which held that the amended provisions could not create tax liability for clearing and forwarding services post-16-10-1998. The Tribunal concluded that no service tax liability can be imposed on the recipient of C & F agent services beyond 16-10-1998 based on the law as interpreted by the CESTAT's Chennai Bench.

Interpretation of Service Tax Rules, 1994:
The Tribunal analyzed the amendments made in terms of section 116 of the Finance Act, 2000, which made the recipient of clearing and forwarding services liable for service tax from 16-7-1997 to 16-10-1998. It held that the revenue cannot collect service tax from the recipient for any period beyond 16-10-1998. The Tribunal emphasized that section 117 is procedural and does not alter the substantive provision brought by section 116. Consequently, the revenue's appeal was rejected based on the interpretation provided by the CESTAT's Chennai Bench.