2012 (7) TMI 258 - AT - Service Tax

Service tax on waterfront royalty and way leave facility compensation - extended period of five years has been wrongly invoked - Held that - Commissioner has come to the conclusion that there was suppression of facts only on the ground that the agreement was drafted in a complicated manner with intention to evade payment of duty. For this, there is no evidence forthcoming and it was submitted that agreement was entered into before the liability of Service Tax arose. This submission would show that invocation of extended period is not based on a strong ground and the appellant has been able to make out a prima facie case as far as extended period is concerned - as extended period should not have been invoked and stay was granted directing the appellant to deposit an amount of Rs.25 lakhs, as condition of hearing of their appeal - in favour of assessee

Issues:
1. Misapplication of service tax provisions and inclusion of constituents revenue in taxable service value.
2. Invocation of extended period for demand of service tax.
3. Discretion under section 80 for waiver of demand.
4. Pre-deposit requirement for hearing the case.
5. Difference of opinion on the amount to be deposited.

Issue 1: Misapplication of service tax provisions and inclusion of constituents revenue in taxable service value:
The appeal filed by M/s. Gujarat Maritime Board against the demand of service tax and penalty raised concerns about the misconstrued application of service tax provisions. The appellant argued that the constituents revenue, namely "waterfront royalty and way leave facility compensation," were wrongly included in the taxable value of "port" service. The appellant maintained that the service tax, penalty, and interest demanded were not leviable, advocating for a complete waiver under section 80 due to the alleged misinterpretation and incorrect application of the provisions.

Issue 2: Invocation of extended period for demand of service tax:
The appellant contended that they were not under the taxable service category until the period in question, and they had collected and paid service tax on the gross amount charged at the appropriate rate. The appellant argued against the invocation of the extended period of five years, emphasizing that there was no non-disclosure or suppression of facts regarding the taxable service value. However, the Revenue presented a strong case in favor of invoking the extended period, leading to a pre-deposit requirement for hearing the case.

Issue 3: Discretion under section 80 for waiver of demand:
The appellant sought discretion under section 80 for the complete waiver of the demanded service tax, penalty, and interest. The argument centered around the alleged misapplication of service tax provisions and the inclusion of constituents revenue in the taxable service value, emphasizing the lack of non-disclosure or suppression of facts on their part.

Issue 4: Pre-deposit requirement for hearing the case:
Upon reviewing the case facts, the Tribunal found that the Revenue had a strong case, though no observations were made on the case's merits. To proceed with the case, a pre-deposit of Rs. 3 crores was ordered within eight weeks, with further recovery and proceedings kept in abeyance until compliance was reported.

Issue 5: Difference of opinion on the amount to be deposited:
A difference of opinion arose between the Members regarding the required pre-deposit amount. One Member directed a deposit of Rs. 3 crores, while another Member suggested restricting the deposit to Rs. 25 lakhs, citing factors such as bonafide belief, conflicting decisions, and the stay on a relevant Larger Bench decision. The third Member agreed with the latter, emphasizing the appellant's prima facie case on the extended period and the lack of strong grounds for invoking it.

In conclusion, the Tribunal directed the appellants to deposit Rs. 25 lakhs within eight weeks based on the majority order, with compliance to be reviewed on a specified date.

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