2008 (7) TMI 146 - AT - Service Tax

GTO service - authorities have denied the benefit of the Notification No. 32/2004-ST to the party on the ground that this benefit cannot be claimed by a service recipient and, that too, without the service provider s consignment note containing declaration - Appellant s submission that they are exempted for the service tax to the extent of 75%, is acceptable because impugned notification is expressly in relation to service tax and not in relation to the person liable to pay it stay granted

Issues:
1. Demand of service tax, education cess, interest, and penalties for the period January 2005 to March 2006.
2. Denial of benefit of Notification No. 32/2004-ST to the appellant.
3. Interpretation of the provisions of Section 93 of the Finance Act, 1994 regarding service tax exemption.
4. Applicability of conditions for claiming exemption under Notification No. 32/2004-ST.
5. Decision on waiver of pre-deposit and stay of recovery.

Analysis:

1. The lower authorities demanded over Rs. 8.7 lakhs towards service tax, education cess, interest, and penalties for the period January 2005 to March 2006. An amount of Rs. 2,51,794/- was already paid by the party towards the tax demand. The authorities denied the benefit of Notification No. 32/2004-ST to the party, stating that the benefit cannot be claimed by a service recipient without the service provider's consignment note as required by CBEC's Circular. The appellant argued that the exemption under the Notification was part of service tax to the extent of 75% and did not refer to the "person liable to pay service tax." The Tribunal noted that the exemption was expressly in relation to service tax and not the person liable to pay it, meaning the exemption is available to whoever pays the tax, including service recipients who satisfy the conditions laid down in the Notification. As the authorities did not establish that the conditions were not met, the appellants had a prima facie case against the demand of service tax and penalties.

2. The appellant contended that the benefit of Notification No. 32/2004-ST was wrongly denied to them by the lower authorities. The Tribunal analyzed the provisions of Section 93 of the Finance Act, 1994, under which the Notification was issued. It was observed that the exemption provided in the Notification is related to service tax payment and not the person liable to pay it. Therefore, the appellants, as service recipients, can claim the benefit of the exemption if they fulfill the conditions specified in the Notification. Since the conditions were not shown to be unsatisfied, the denial of the benefit by the lower authorities was not justified.

3. The Tribunal considered the arguments based on the provisions of Section 93 of the Finance Act and the contentions regarding the applicability of Notification No. 32/2004-ST. It was noted that the exemption under the Notification is specifically related to service tax and does not restrict the benefit based on the person liable to pay the tax. Therefore, the Tribunal found merit in the appellant's interpretation that the exemption is available to whoever pays the tax, including service recipients, subject to meeting the conditions stipulated in the Notification.

4. Given the above analysis and interpretation of the relevant legal provisions, the Tribunal concluded that there was a prima facie case in favor of the appellants against the demand of service tax, interest, and penalties. Consequently, the Tribunal ordered the waiver of pre-deposit and stay of recovery in respect of the tax, interest, and penalties, acknowledging the appellant's entitlement to claim the benefit of Notification No. 32/2004-ST as service recipients meeting the conditions specified therein.

5. In the final decision, the Tribunal pronounced the order for the waiver of pre-deposit and stay of recovery concerning the tax, interest, and penalties, based on the findings that the appellants had a prima facie case against the demand and penalties imposed by the lower authorities. The order was issued after a thorough examination of the legal provisions, Notification No. 32/2004-ST, and the contentions presented by the appellant, ensuring a fair and just outcome in the matter.

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