2015 (11) TMI 51 - AT - Service Tax

Port services in Kakinada Port - reverse charge - infrastructural support was provided by GOAP at Port - Held That - it is the assessee who is required to undertake the activity of assessment and there is no system of scrutiny of the assessment and confirmation of the correctness by the Revenue or the officers. In such a situation, it cannot be said that assessee was not aware of the classification of the service and the consequences of introduction of negative list and introduction of new definitions, etc. The very fact that the appellant defended the case by stating that Section 65 was not applicable and the definition of support service had undergone a change would show that the appellants were not prejudiced by the omission in the show-cause notice and the confirmation of demand by the Commissioner is on the ground that service is covered by the definition as we have mentioned that GOAP has provided infrastructural support. Once the service provider has paid the tax under reverse charge mechanism, service tax cannot be demanded from the appellant. Nevertheless it has to be appreciated that this is a mistake on the part of the appellant since they were liable to pay the tax but did not pay. However, remedy would lie in imposition of penalty for contravention of relevant provisions but not recovery of service tax. In this case penalty has been imposed on the ground that service tax was not paid and not for mere contravention of provisions. Demand for CENVAT credit of service tax of ₹ 7,54,47,488/ - Revenue contends that credit disallowed only on ground that port officer did not issue any invoice in name of appellant but had issued only an acknowledgement which is not a proper document - Held That - If challan contains all details which are mentioned by appellant, credit is admissible and demand for more than ₹ 7.54 crores being CENVAT credit cannot be sustained. Demand of CENVAT credit of ₹ 6,60,545/- - Health service, insurance and motor vehicles, rent-a-cab service, works contract service and services in relation to 7th berth - Held That - Provision of health care within port area where accident can take place cannot be said to be having no nexus to port service, thus credit of ₹ 83,430/- is admissible - It is a mandatory obligation to insure all vehicles used within port area, credit is thus admissible - Rent-a-cab service is not for personal use but for movement of authorities in providing port service, credit is eligible - Definition of input service includes works contract in relation to construction activity and not in relation to erection and installation activity thus benefit available to assessee - Geotechnical investigation services were provided in relation to 7th berth and same does not become operational, it may be premature to deny credit. Denial of CENVAT credit of ₹ 8,82,646/- - Credit is proposed to be denied on ground that the service provider was eligible for exemption, on this ground denial cannot be sustained - Decided in favour of Appellant.

Issues Involved:
1. Service tax demand of Rs. 5,88,35,509/-
2. Demand for CENVAT credit of Rs. 7,54,47,488/-
3. Demand of CENVAT credit of Rs. 6,60,545/-
4. Denial of CENVAT credit of Rs. 8,82,646/-
5. Imposition of penalty

Issue-Wise Detailed Analysis:

1. Service Tax Demand of Rs. 5,88,35,509/-:
The appellant, engaged in providing port services at Kakinada Port, faced a service tax demand based on the classification of their services under Business Support Service. The appellant argued that Section 65, which defined Business Support Service, ceased to apply from 1.7.2012, making the demand unsustainable. The tribunal noted that both the show-cause notice and the order-in-original failed to consider the change in definition post-1.7.2012. Despite this, the tribunal acknowledged that the introduction of the negative list and reverse charge mechanism was mentioned. The tribunal found that the service provided by GOAP constituted infrastructural support, covered under both pre and post-1.7.2012 definitions. However, since GOAP had already paid the tax, the tribunal concluded that the same service could not be taxed twice. Therefore, the demand for Rs. 5.88 crores was not sustained.

2. Demand for CENVAT Credit of Rs. 7,54,47,488/-:
This demand represented the service tax amount paid by GOAP, which the appellant argued should be eligible for CENVAT credit if they had paid the tax under reverse charge mechanism. The tribunal found that the credit was taken based on challans, which contained all necessary details. The Commissioner had disallowed the credit on the ground that the port officer did not issue an invoice but an acknowledgment. The tribunal held that the credit was admissible based on the challans, and thus, the demand for Rs. 7.54 crores was not sustained.

3. Demand of CENVAT Credit of Rs. 6,60,545/-:
- Health Service (Rs. 83,430/-): The tribunal found that health care within the port area was mandatory, thus the credit was admissible.
- Insurance (Rs. 29,558/-): Insurance of vehicles used within the port was mandatory, making the credit admissible.
- Rent-a-Cab Service (Rs. 18,688/-): The tribunal accepted that the service was for port operations, thus the credit was admissible.
- Construction Service (Rs. 2,82,038/-): The tribunal differentiated between construction and erection services, finding the latter eligible for credit.
- Geotechnical Investigation (Rs. 2,46,800/-): The tribunal held that such services related to port expansion and could not be denied prematurely.

4. Denial of CENVAT Credit of Rs. 8,82,646/-:
The credit was denied on the ground that the service provider was eligible for an exemption. The tribunal held that the receiver of the service (appellant) could not determine the tax liability or exemption eligibility of the service provider. The tribunal found that the credit could not be denied on this ground.

5. Imposition of Penalty:
The tribunal noted that the appellant had contravened provisions by not paying the tax under the reverse charge mechanism. However, given that it was the initial period of new provisions, a lenient view was taken under Section 80 of the Finance Act, and no penalty was imposed.

Conclusion:
The appeal was allowed with consequential relief, if any, to the appellants. The tribunal found that except for the imposition of penalty for contravention of provisions, no case was made out for the Revenue on any other ground. The order was pronounced in open court on 01/06/2015.

← Previous Next →