2011 (11) TMI 164 - AT - Service Tax

Period of limitation - Service Tax on Postal charges incurred by bank in respect of various Banking & other Financial Service Held that - Since order of the Commissioner (Appeals) in respect of very same Bank but another branch has taken a view that such charges are not leviable to Service Tax, the appellant cannot be found fault with for entertaining a belief that they are not liable to pay Service Tax on such charges recovered from the customers. It is the question of interpretation of law and when two views are possible, unless documentary evidence or evidence in any other form is available to show that there was suppression of facts or mis-declaration with intention to evade duty, extended period cannot be invoked.- Decided in favor of assessee.

Issues:
1. Liability to pay Service Tax on Postal charges incurred by the assessee.
2. Applicability of penalties under Section 76 and 78 of the Finance Act, 1994.
3. Imposition of interest on the demanded amount.
4. Invocation of the extended period for demanding Service Tax.
5. Interpretation of law regarding the valuation of services and includibility of charges.

Analysis:
1. The Appellate Tribunal considered the case where Bank of India, Corporate Banking Branch, Ahmedabad, was registered as a service provider for Banking & other Financial Services. The issue arose when proceedings were initiated against the assessee for not paying Service Tax on Postal charges incurred in providing various services during the period from 10.09.04 to 17.04.06, with a demanded amount of Rs.3,93,293/-. The appellant argued that prior to the introduction of rules in 2006, such charges were not liable to Service Tax as they were incurred on behalf of customers and were recovered from them during service provision.

2. The Chartered Accountant representing the appellant pointed out that the matter had been previously considered by the Commissioner (Appeals) for another branch of the same bank, who held that such charges recovered on behalf of customers were not subject to Service Tax. The appellant also claimed that the demand was time-barred as the Show Cause Notice was issued in October 2007 without invoking suppression of facts. On the other hand, the Revenue argued that the charges were related to various services and thus correctly demanded Service Tax.

3. The Tribunal refrained from discussing the merits of the case, emphasizing that the appellant had started paying Service Tax on postal charges post-April 2006. It was noted that since the Commissioner (Appeals) had previously held in favor of the assessee regarding similar charges, the appellant could not be faulted for believing they were not liable to pay Service Tax. The Tribunal highlighted that the differential duty arose due to the interpretation of provisions on service valuation and charge includibility. In the absence of evidence showing suppression or misdeclaration to evade duty, the extended period for demanding Service Tax could not be invoked.

4. Consequently, the appeal was allowed on the ground of limitation, with the Tribunal not delving into the appeal's grounds due to the absence of a dispute regarding includibility post-April 2006. The decision was made based on the lack of evidence supporting the invocation of the extended period and the differing interpretations of the law regarding the charges in question.

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