2007 (5) TMI 224 - AT - Service Tax

Revenue has proceeded to levy Service Tax under the category of Goods Transport Operators which was brought into effect retrospectively from 16-11-97- held that demands cannot sustain when SCN has been issued subsequent to the retrospective amendment - point made by appellant that they are manufacturers and suppliers of Transformers and the freight charges are borne by the purchasers and for such, levy of Service Tax does not arise is acceptable appellant s appeal allowed

Summary

Issues:
1. Retrospective levy of Service Tax on Goods Transport Operators
2. Validity of Show Cause Notice issued post retrospective amendment
3. Liability of manufacturers and suppliers for Service Tax on freight charges

Analysis:

Issue 1: Retrospective levy of Service Tax on Goods Transport Operators
The appeal in question challenged the imposition of Service Tax under the category of Goods Transport Operators, which was made effective retrospectively from 16-11-1997. The appellant contended that the Show Cause Notice issued on 5-4-2002, subsequent to the retrospective amendment, rendered the demands unsustainable. Citing the judgment in Laghu Udyog Bharati Ltd. v. UOI, it was argued that demands cannot be upheld when the Notice is issued post the retrospective amendment. The Tribunal agreed with this argument, highlighting the consistent application of this principle in various cases, such as BPL Ltd. v. CC & CE and BST Limited v. CC & CE. Consequently, the Tribunal found the demands under the retrospective levy not sustainable.

Issue 2: Validity of Show Cause Notice issued post retrospective amendment
The Tribunal acknowledged the appellant's submission that the Show Cause Notice was issued subsequent to the retrospective amendment to the Finance Act, which sought to levy Service Tax on Goods Transport Operators. Relying on the legal precedent and reasoning presented by the appellant, the Tribunal concurred that the demands based on the Notice were not legally tenable. The Tribunal emphasized that the retrospective nature of the amendment, coupled with the timing of the Notice, warranted the dismissal of the demands.

Issue 3: Liability of manufacturers and suppliers for Service Tax on freight charges
The appellant further argued that as manufacturers and suppliers of Transformers, they were not engaged in Goods Transport services, and the freight charges in question were borne by the purchasers, not by them. The appellant contended that the imposition of Service Tax on freight charges was unwarranted in their case and fell under the purview of Excise Duty, not Service Tax. The Tribunal, after due consideration, found merit in the appellant's argument, ruling that the levy of Service Tax on freight charges was not applicable in the circumstances presented. Consequently, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief deemed necessary.

In conclusion, the Tribunal upheld the appellant's contentions on all fronts, ruling in their favor based on the retrospective nature of the amendment, the timing of the Show Cause Notice, and the specific circumstances regarding the liability for Service Tax on freight charges. The impugned order was set aside, granting relief to the appellant in accordance with the legal principles and precedents cited during the proceedings.