2007 (4) TMI 95 - AT - Service Tax

Demand (Service tax) - Alleged that appellants activity of carrying out sale through consignment agent covered under C & F Agents and appellant liable to pay service tax - Held that procedure failure by appellant were due to bona-fide belief on non liability and that s why extended period of limitation not imposable

Summary

Issues:
1. Liability of service tax on consignment agents
2. Applicability of limitation period for tax demand
3. Interpretation of conflicting views on taxability of consignment agents
4. Bona fide belief of the appellant regarding tax liability

Analysis:

Issue 1: Liability of service tax on consignment agents
The case involved a dispute regarding the liability of service tax on consignment agents engaged by the appellant for the sale of aluminum products. The appellant contested that consignment agents' services did not fall under the category of clearing and forwarding services, which were subject to service tax. The Commissioner partially upheld the demand based on the interpretation of relevant legal provisions and precedents. The appellant challenged this decision in the present appeal.

Issue 2: Applicability of limitation period for tax demand
The appellant argued that the demand for service tax was raised belatedly and was not sustainable due to the limitation period. The Commissioner rejected the appellant's contention, citing non-disclosure of material facts and failure to comply with the procedural requirements. However, the Tribunal held that the procedural failure was due to the appellant's bona fide belief that the service was not taxable, especially considering conflicting views on the taxability of consignment agents.

Issue 3: Interpretation of conflicting views on taxability of consignment agents
The Commissioner noted conflicting views of the Tribunal on the taxability of consignment agents but still upheld the demand. The Tribunal emphasized that when different views exist on tax applicability, the extended period for raising demands is not applicable. It was highlighted that the issue was resolved by a Larger Bench decision, indicating the complexity and ambiguity surrounding the taxability of consignment agents.

Issue 4: Bona fide belief of the appellant regarding tax liability
The appellant argued that their failure to pay tax was based on a bona fide belief that the service was not taxable. The Tribunal agreed with this argument, emphasizing that in cases of differing judicial opinions, the appellant could not be faulted for holding a particular view. The Tribunal found that the appellant's procedural failure was a result of their genuine belief about the tax liability, leading to the allowance of the appeal on the ground of limitation.

In conclusion, the Tribunal allowed the appeal of the appellant based on the limitation issue, rejecting the revenue's appeal. The judgment highlighted the importance of considering bona fide beliefs in tax matters, especially in cases of conflicting legal interpretations.