2014 (2) TMI 1130 - AT - Service Tax

Classification of service - GTA service or Site formation and clearance, excavation and earthmoving and demolition activity - removal of all materials in all kinds of strata with its drilling, excavation, loading, transport and dumping, spreading and dozing at specified places as per instructions of the client - Held that - There is no evidence before us to show that transportation activity was the predominant activity, nor any attempt has been made by the appellant as to the amount received in respect of transportation activity or that transportation was predominant activity and the other activities undertaken by the appellant were ancillary to transportation. In the absence of any evidence in this regard, we are unable to accept the contention of the appellant that they are not liable to discharge service tax liability on the aforesaid activity - Penalty imposed also sustainable - Decided against assessee. Levy of penalty - non collection of service tax from the recipient of services - Held that - Merely because the service recipient did not pay the service tax liability initially, that would not take away/obliterate the liability on the service provider to discharge the tax. If this plea is accepted, it would make the taxable event as receipt of service tax from the recipient of the service which is not the law. The law envisages payment of service tax on rendering of taxable service and it has nothing to do with the receipt of service tax from the service recipient. Therefore, this plea of the appellant that the service-recipient did not reimburse service tax and hence the appellant did not pay service tax is not acceptable or satisfactory explanation. - Levy of penalty confirmed.

Summary

Issues:
1. Classification of service under "Site formation and clearance, excavation and earthmoving and demolition service."
2. Liability to discharge service tax on the activity undertaken.
3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Classification of Service:
The appellant contested the classification of their activity under "Site formation and clearance, excavation and earthmoving and demolition service." The appellant argued that transportation was the predominant activity and thus should not fall under this category. However, the Tribunal found that the appellant's activities, including drilling and excavation, clearly fell within the taxable service definition. The Tribunal noted that the appellant had been paying service tax under this category since September 2006, indicating a lack of conviction in their argument. Therefore, the Tribunal upheld the classification, holding the appellant liable to discharge service tax on the services rendered.

Liability to Discharge Service Tax:
The appellant claimed that their liability to pay service tax was delayed due to the service recipient's failure to reimburse them. However, the Tribunal emphasized that the liability to pay service tax arises upon rendering the service, regardless of reimbursement by the recipient. The Tribunal rejected the appellant's argument that non-reimbursement justified their delay in discharging the tax liability. Consequently, the Tribunal upheld the service tax demand and the interest on the amount confirmed in the impugned order.

Imposition of Penalties:
Penalties were imposed on the appellant under Sections 76, 77, and 78 of the Finance Act, 1994. The Tribunal clarified that penalty under Section 76 is attracted for delay or default in payment of service tax, without requiring proof of mens rea. Additionally, penalties under Sections 77 and 78 were justified due to the appellant's non-compliance with statutory obligations and contravention of the law. The Tribunal rejected the appellant's argument for penalty waiver, emphasizing that liability to penalties was established by the appellant's actions. Therefore, the Tribunal upheld the penalties imposed on the appellant.

In conclusion, the Tribunal found no merit in the appellant's appeal and dismissed it, upholding the impugned order and confirming the service tax demand, interest, and penalties.