2015 (12) TMI 885 - AT - Service Tax

Demand of service tax - steamer agent service, cargo handling service and business auxiliary service - Waiver of penalty - Held that - Apparently, the appellants paid the amount when audit objection was raised to settle the issue rather than pursuing the matter and litigating further in this case. The department has proceeded only for the purpose of imposing penalty. The amount was paid even before show-cause notice was issued along with interest. If the appellant were to contest the issue on classification at that stage itself the benefit of limiting the demand to normal period also could have arisen and further, whether demand itself was justified or not could have been examined. In such a situation, the appellant is definitely entitled to benefit of provisions of Section 80 of Finance Act, 1994 for the purpose of penalty under Section 78 of Finance Act, 1994. In this case, during the period prior to 2010, the services rendered in port were to be classified according to the category and the nature of service. Only after 2010, the statute treated all services rendered within the port as port service. Therefore since the activity undertaken and the amount collected is for transportation within the port from warehouse to wharf and vice-versa, appellant could have entertained a bona fide belief that what is being rendered is a GTA service. - Decided in favour of assessee.

Summary

Issues:
Classification of services rendered by the appellant for tax liability determination; Imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:
1. Classification of Services Rendered: The appellant, a steamer agent, was discharging service tax under various categories. An audit revealed that inter carting charges were collected by the appellant for transportation of goods. The issue arose when it was contended that the tax should have been paid under the category of steamer agent service. The lower authorities confirmed the demand and penalty under Section 78 without adequately explaining how the inter carting work amounted to rendering steamer agent service. The Commissioner (A) upheld the classification without providing a logical explanation. The appellant, although paid the tax, believed that the service should be classified differently. The appellate tribunal noted that prior to 2010, services in the port were classified based on the nature of service, and only after 2010, all services within the port were treated as port services. As the appellant had a bona fide belief that the service rendered was Goods Transport Agency (GTA) service due to the activity being within the port, the tribunal held that the appellant was entitled to the benefit of Section 80 of the Finance Act, 1994.

2. Imposition of Penalty: The appellant, despite feeling that the service was not correctly classified, did not contest the issue earlier and paid the tax. The tribunal observed that the appellant paid the amount before the issuance of a show-cause notice, indicating a willingness to settle the matter. Considering that the appellant had a reasonable cause for non-payment of tax due to a genuine belief in the classification as GTA service, the tribunal waived the penalty under Section 78 by invoking the provisions of Section 80 of the Finance Act, 1994. The tribunal allowed the appeal, confirming the tax and interest demand while waiving the penalty.

In conclusion, the appellate tribunal found in favor of the appellant, highlighting the importance of considering the classification of services for tax liability determination and the applicability of penalty provisions under the Finance Act, 1994. The judgment emphasized the need for a genuine belief in the classification of services and the benefit of invoking relevant provisions to waive penalties in cases of reasonable cause for non-payment of tax.