2015 (10) TMI 2002 - AT - Service Tax

Liability of Service Tax on GTA Services Transportation of Inputs Appellant contended that they were not the receiver of services; thus demand not sustainable leave alone invocation of extended period Revenue drew attention to Rule 4(a) and Rule 4(b) of Service Tax Rules and submits that law is very clear; extended period has been rightly invoked and tax has been rightly demanded Held That - They have been told by the consignor as well as the transporter that they should pay the tax - Despite of being informed from consignor and transporter, tax was not paid; three business partners had an understanding that service tax liability would fall on Appellant Further, no boan-fide query raised to Department for liability of tax and thus claim for non-invocation of extended period cannot be sustained - Penalties imposed under Section 76 and Section 78 of Finance Act, 1994 are dropped by invoking the provisions of Section 80 of Finance Act, 1994 but demand for service tax, interest thereon and imposition of late fee are upheld Decided in favour of Revenue.

Issues:
1. Liability for service tax on transportation expenses incurred by the appellant.
2. Invocation of the extended period for demanding service tax.
3. Applicability of Section 80 for waiver of penalties.

Analysis:

Issue 1: Liability for service tax on transportation expenses
The appellant, a manufacturer of excisable goods, was found to have not paid service tax on GTA service for transportation of inputs. The appellant argued that they were not liable to pay service tax as they were not the receiver of service from the transporter. However, the Tribunal considered Rule 2(d)(v)(g) of Service Tax Rules, which states that the consignor or consignee of the goods is liable for paying service tax in relation to taxable service provided by a goods transport agency. The Tribunal analyzed the documents, including purchase orders, invoices, and consignment notes, and concluded that there was a clear understanding between the parties that the appellant was liable to pay the freight separately. The Tribunal noted that the appellant was aware of the service tax liability as indicated by the consignor and transporter, and therefore held that the appellant was liable to pay service tax on the transportation expenses.

Issue 2: Invocation of the extended period
The appellant contended that the demand for service tax beyond the normal period of limitation should not be sustained. The Tribunal observed that the appellant did not question the liability for service tax with their business partners or departmental authorities for over five years. The Tribunal emphasized that the appellant failed to establish a bona fide belief by not seeking legal opinion or raising queries regarding the service tax liability. Therefore, the Tribunal held that the claim for non-invocation of the extended period was not sustainable.

Issue 3: Applicability of Section 80 for waiver of penalties
The appellant requested the benefits of Section 80 for waiver of penalties. The Tribunal considered the provisions of Section 80 and noted that while penalties under Section 76 and Section 78 were dropped, the demand for service tax, interest, and late fee were upheld. The Tribunal highlighted that the appellant's continuous challenge of the liability and non-payment led to the non-admissibility of Cenvat credit and interest liability. Therefore, the Tribunal invoked the provisions of Section 80 of the Finance Act, 1994 to drop the penalties but upheld the demand for service tax, interest, and late fee.

In conclusion, the Tribunal held that the appellant was liable to pay service tax on transportation expenses, upheld the demand for service tax, interest, and late fee, and dropped the penalties by invoking Section 80 of the Finance Act, 1994.

← Previous Next →