2013 (12) TMI 1076 - AT - Service Tax

Demand of service tax - Goods Transport Agency services - Held that - there was enough room for having a bonafide doubt regarding scope of levy. As a Public Sector Undertaking under the direct control of one of a Ministry of Govt of India, they cannot be accused of any intention to evade payment of service tax by seeking clarification from the Ministry of Finance. After having filed appeal before CESTAT, they have paid duty liability along with interest. As on date, the service tax along with interest stands paid and in the circumstances, no reason to sustain penalty imposed - However, demand for interest is confirmed - Decided partly in favour of assessee.

Summary

Issues:
1. Liability to pay service tax as a recipient of services from Goods Transport Operators.
2. Imposition of penalty under section 76 of the Finance Act, 1994.

Issue 1: Liability to pay service tax as a recipient of services from Goods Transport Operators

The appellant, a public sector undertaking, engaged in the manufacture of petroleum products, utilized truck operators for transporting their products. A doubt arose regarding the levy of service tax on these services as a recipient, especially when no Goods Transport Agency was involved, and no consignment notes were issued. The appellant sought clarification from the Ministry of Finance through its administrative Ministry. The Directorate General of Service Tax and CBEC confirmed that the appellant had to pay tax. The appellant paid the service tax but was later issued a show cause notice for interest and penalty. The Commissioner confirmed the demand for interest and penalty. The appellant, after withdrawing the appeal on interest, contested only the penalty in the proceeding.

Issue 2: Imposition of penalty under section 76 of the Finance Act, 1994

The appellant argued that there was a genuine doubt regarding the levy of service tax due to the ambiguity in the definition of "Goods Transport Agency" and the announcement made by the Finance Minister. They emphasized that there was no deliberate attempt to avoid tax payment, and they followed the advice given by the Ministry of Finance. The appellant cited a similar case where the penalty was set aside. On the other hand, the Revenue argued that the appellant further delayed payment even after clarifications, justifying the imposition of penalty under section 76. The Revenue relied on various case laws to support their argument.

In the judgment, the Tribunal considered both sides' submissions and noted that there was a genuine doubt regarding the scope of levy in this case. Being a Public Sector Undertaking under the direct control of a Ministry of the Government of India, the appellant's intention to evade tax was ruled out. The appellant had paid the duty liability along with interest before the Tribunal hearing. Consequently, the Tribunal set aside the penalty imposed by the Commissioner but confirmed the demand for interest, partially allowing the appeal.

This judgment highlights the importance of genuine doubts in tax matters, especially for entities seeking clarification from relevant authorities. It also emphasizes the significance of following official advice and making timely payments to avoid penalties under the Finance Act, 1994.