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2015 (2) TMI 974 - AT - Service TaxClassification of services - supply of tangible goods for use of service or transport of passengers by air service - Extended period of limitation - Levy of penalty - Held that - From the preamble of the contract entered into by the appellant with M/s. ONGC, it is seen that ONGC was interested in charter hiring of helicopters for offshore operations being carried out by them and the appellant agreed to provide the required services against the corporation s order in this regard. - t the services rendered by the appellant in charter hire of helicopters to various corporate for offshore operations is classifiable under supply of tangible goods for use service. - Demand of service tax confirmed. The appellant has raised a point that the consideration received should be treated as cum tax and the amount so received shall be apportioned between the taxable value and the service tax. There is merit in this argument. If the appellant has not charged service tax separately and the amounts received included all taxes, the appellant would be definitely eligible for cum tax benefits. However, this benefit will not accrue where the appellant has collected service tax from the customers separately. Once the demand for service tax is confirmed, interest liability is automatic and consequential. Accordingly, we confirm the liability to pay interest on the delayed payment of service tax by the appellant under the provisions of section 75 of the Finance Act, 1994. Cenvat Credit - Held that - There is a denial of Cenvat credit to the extent of ₹ 2,33,09,951/- which was taken by the appellant but not utilized. The credit has been denied on account of non-production of duty paying documents for the credit availed during 16/05/2008 to 31/03/2009. Rule 9(9) of Cenvat Credit Rules also envisages that the provider of output services availing Cenvat credit shall submit half yearly returns in the form specified and the appellant has failed to comply with the requirements. Therefore, the availment of credit without the duty paying documents and without filing the prescribed return is not in accordance with the law and accordingly, the appellants are not eligible for the credit. Therefore, denial of credit is justified. The appellant is also liable to pay interest on the credit taken though not availed, in view of the decision of the Hon ble Apex Court in the case of Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - Supreme Court . Extended period of limitation - Imposition of penalty - Difference of opinion - Majority order - Whether the appellant is liable to penalty under the provisions of Sections 76 & 78 of the Finance Act, 1994 - Held that - Immediately after the introduction of service tax under the category of supply of tangible goods , the appellant had taken the registration on 2nd July 2008. Thus the facts that they were under the said business was not only informed to the department but they also took registration for the same. Under the circumstances, it cannot be said that there was any suppression of facts. In view of the fact that the appellant has taken the registration as early as on 2 nd July 2008, the appellant has also billed to their customers for the service tax element and on being raising dispute about the levy by few customers, the appellant took the legal opinion on 22nd October 2008 and also the fact that when the Revenue started investigation, they started paying the service tax and the first payment was made on 22nd January 2009, in my view, the ingredients to impose penalty under Section 78 for the period 16 th May 2006 to March 2009 are missing. Under the circumstances, in my view, penalty under Section 78 imposed in the first show cause notice is not sustainable. I also note that initially the show cause notice proposed penalties both under Sections 76 and 78, but in the impugned order, penalty under Section 76 has not been imposed in view of the fact that the penalty was imposed under Section 78 and the Revenue has not come in appeal against the said order. Therefore, non-imposition of penalty under Section 76 has reached finality as far as the first show cause notice is concerned. While there can be arguments or reasons for the period upto March 2009 for failure to pay the duty, there does not seem to be any valid ground for non-payment of duty after April 2009. In view of the said position, in my considered view, penalty for the period April 2009 to March 2011 cannot be waived under Section 80 of the Finance Act. Imposition of penalties on the appellant under Section 76 & 77 of the Finance Act, 1994 for the default in payment of service tax and for non-compliance of statutory provisions relating to the service tax is upheld. However, we set aside the penalties imposed under Section 78 of the Finance Act, 1994. The penalty of ₹ 2,000/- imposed under Rule 15(3) of the Cenvat Credit Rules, 2004 is also upheld. - Decided partly in favour of assessee.
Issues Involved:
1. Classification of services provided by the appellant. 2. Applicability of service tax under "Supply of Tangible Goods for Use" (SOTG) versus "Transport of Passengers by Air Service". 3. Validity of penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994. 4. Denial of Cenvat credit. 5. Treatment of consideration received as cum-tax. Issue-wise Detailed Analysis: 1. Classification of Services Provided by the Appellant: The appellant, engaged in providing helicopter services, classified their services under "transport of passengers by air service" and paid service tax accordingly. The Department contended that the services should be classified under "Supply of Tangible Goods for Use" (SOTG) as per Section 65 (105) (zzzj) of the Finance Act, 1994. The Tribunal upheld the Department's contention, stating that the appellant provided helicopters on a charter-hire basis without transferring the right of possession and effective control, thus falling under SOTG. 2. Applicability of Service Tax under SOTG versus Transport of Passengers by Air Service: The appellant argued that their services involved transporting personnel, which should be classified under "transport of passengers by air service". The Tribunal, however, noted that the contracts with clients like ONGC specified charter-hiring of helicopters, with the appellant retaining possession and control. The Tribunal referenced the Bombay High Court's decision in Indian National Ship Owners Association v. Union of India and other similar cases, concluding that the services were rightly classified under SOTG. 3. Validity of Penalties Imposed under Sections 76, 77, and 78 of the Finance Act, 1994: The Tribunal upheld the penalties under Sections 76 and 77 for non-compliance with statutory provisions and default in payment of service tax. However, there was a difference in opinion regarding penalties under Section 78. One member argued that there was no suppression of facts since the appellant had taken registration and paid part of the duty. The third member concluded that penalties under Section 78 were not sustainable due to the absence of fraud or willful suppression. Thus, penalties under Section 78 were set aside. 4. Denial of Cenvat Credit: The Tribunal upheld the denial of Cenvat credit amounting to Rs. 2,33,09,951/- due to non-production of duty-paying documents and non-compliance with Rule 9(9) of the Cenvat Credit Rules. The appellant was also liable to pay interest on the credit taken but not utilized. 5. Treatment of Consideration Received as Cum-Tax: The Tribunal acknowledged the appellant's argument that the consideration received should be treated as inclusive of service tax if it was not collected separately from customers. The demand was to be recomputed accordingly, and the appellant's claim for payment of Rs. 10,31,53,803/- towards service tax dues was to be verified and deducted from the amount due. Final Order: The services rendered by the appellant were classified under SOTG, and the demand for service tax under this category was upheld, along with interest. The penalties under Sections 76 and 77 were confirmed, while penalties under Section 78 were set aside. The denial of Cenvat credit was upheld, and the appellant was liable for interest on the wrongly availed credit. The consideration received was to be treated as cum-tax where service tax was not collected separately.
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