2013 (1) TMI 683 - AT - Service Tax

Penalty u/s 76 - u/s 78 - Activity of technical testing of the LPG tankers - Technical Testing and Certification Services - Rule 18 and Rule 44 of the Explosives Act - Held that - Following the decision in case of Harshita Handling (2010 (4) TMI 122 - CESTAT, NEW DELHI) that technical inspection and testing under the Indian Explosive Act, 1884 is a statutory obligation, therefore the same is not liable to service tax and therefore penalties under Sections 76 and 78 of the finance Act, 1994 are not warranted - In favour of assessee

Summary

Issues: Appeal against penalties under Sections 76 and 78 of the Finance Act, 1994 for technical testing activity under the Explosives Act.

Analysis:
The appellants challenged penalties imposed under Sections 76 and 78 of the Finance Act, 1994 for their technical testing activity of LPG tankers under Rule 18 and Rule 44 of the Explosives Act. The Revenue argued that the appellants should pay service tax under 'Technical Testing and Certification Services' due to their testing activity. The appellants paid the service tax with interest before receiving the show-cause notice. Subsequently, penalties were imposed after the show-cause notice was issued. The appellants contended that testing LPG tankers is a statutory obligation under the Indian Explosive Act, 1884, hence no service tax should be payable, and consequently, penalties under Sections 76 and 78 were not justified.

The presiding judge noted that the issue was narrow and decided to waive the predeposit requirement for penalties, proceeding directly to the appeal's final disposal. The learned counsel argued that testing LPG tankers is a statutory obligation under the Indian Explosive Act, 1884, and therefore, not subject to service tax. The judge referred to a precedent in the case of Harshita Handling Vs. CCE, Bhopal, where it was held that technical inspection and testing under the Explosives Act is a statutory obligation exempt from tax under Technical Testing and Certification Service. Consequently, the judge ruled in favor of the appellants, setting aside the impugned order and allowing the appeal. The stay application was also disposed of accordingly.

In conclusion, the judgment favored the appellants, ruling that their technical testing activity of LPG tankers under the Explosives Act was a statutory obligation exempt from service tax, leading to the dismissal of penalties imposed under Sections 76 and 78 of the Finance Act, 1994. The decision was based on the precedent establishing that such testing activities fall under statutory obligations and are not taxable under the relevant service category.