2011 (4) TMI 172 - HC - Service Tax

Demand - circular no. B1/6/05-TRU dated 27.7.2005 - 75% abatement - Refund - It is evident that on the penultimate day of the period in question the authorities issued clarificatory circular dated 30.3.2005 to the effect that the benefit of abatement of service tax to the extent of 75 percent shall be available to G.T.A and not to the consignor or the consignee - It is evident that confusion was created by the redundant circular dated 30.3.2005 which was rectified by the circular dated 27.7.2005 - it is open to the discretion of the learned authorities under the Act to consider other mode and manner of evidence to consider the claims of the benefit of abatement - it was extremely difficult for the assessee to obtain declaration by G.T.A. on the consignment note not being a mandatory condition - Decided in the favour of assessee

Summary

Issues:
1. Challenge to order for full payment of service tax without abatement.
2. Interpretation of circulars on abatement of service tax.
3. Validity of evidence for claiming refund.
4. Application of Doctrine of substantial compliance.

Issue 1: Challenge to order for full payment of service tax without abatement

The Department of Central Excise challenged an order directing an assessee to make full payment of service tax for the period January 2005 to March 2005 without the benefit of abatement. The assessee, engaged in the production and circulation of newspapers, deposited the service tax based on legal advice entitling it to a 75 percent abatement. However, subsequent clarificatory circulars created confusion regarding the availability of abatement to consignors and consignees. The Tribunal set aside the order for full payment, leading to this appeal by the Revenue.

Issue 2: Interpretation of circulars on abatement of service tax

The circulars issued by the Director General of Service Tax clarified the availability of abatement of service tax to goods transport agencies (G.T.A) and later extended it to consignors and consignees as well. The circular dated 27.7.2005 allowed for a declaration by G.T.A. on the consignment note to suffice for claiming abatement. The confusion caused by the initial circular dated 30.3.2005 was rectified by the subsequent circular, enabling the assessee to claim a refund based on the revised interpretation.

Issue 3: Validity of evidence for claiming refund

The primary question was whether the assessee could comply with the terms of the circular dated 27.7.2005 at a belated stage. The evidence presented by the assessee, including sample copies of certificates issued by G.T.A., was considered by the Court. The Court found that the evidence had substantial compliance with the circular's requirements, especially in light of the confusion created by the authorities' circulars. The Court accepted the evidence as valid for claiming the benefit of abatement and subsequent refund.

Issue 4: Application of Doctrine of substantial compliance

The Court applied the Doctrine of substantial compliance, emphasizing the equitable nature of the doctrine to avoid hardship when a party has done all that can reasonably be expected but failed in minor aspects. The Court held that the evidence presented by the assessee, despite not strictly adhering to the circular's terms, substantially complied with the requirements, considering the confusion caused by the authorities. The Court upheld the Tribunal's order, dismissing the appeal by the Revenue and ruling in favor of the assessee.

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