2016 (3) TMI 232 - AT - Service Tax

Demand of Service tax - Transport of Cargo by air under Section 65(105) (zzn) of the Finance Act, 1994 for the period from 15.3.2005 to 23.6.2005 - Held that there was an exemption of service tax in transport of cargo by air vide Notification No. 28/2004-ST dated 17.09.2004. which was withdrawn vide Notification No. 10/2005-ST dated 03.03.2005 w.e.f. 15.03.2005. Again another notification was issued for exemption vide Notification No.29/2005-ST dated 15.07.2005. Since the appellant s service do not quality under the Export of Service Rules for the period 15.03.2005 to 23.06.2005 and the payment was received in Indian currency, the appellants w.e.f 24.06.2005 started collecting the service tax from their customers and started paying the service tax. Therefore, by referring the case of M/s. Srilankan Airlines Vs. CST, Chennai 2012 (8) TMI 437 - CESTAT, CHENNAI , the demand of service tax along with interest is confirmed under the category of Transport of Export Cargo as there was no exemption of service tax on the said service from 16.06.2005 to 23.06.2005 and penalties are not to be imposed under Section 76 & 78. - Decided partly in favour of appellant

Summary

Issues:
Demand of service tax under Transport of Cargo by Air under Section 65(105) (zzn) of the Finance Act, 1994 for the period from 15.3.2005 to 23.6.2005.

Detailed Analysis:

1. Exemption Notification and Changes in Service Tax Regulations:
The appellant contested the demand of service tax, arguing that the service tax exemption on Transport of Cargo by Air was withdrawn on 15.3.2005, making their services taxable. They highlighted the subsequent amendments in Export of Service Rules, particularly the requirement of consideration to be received in foreign exchange for exemption. The appellant relied on various case laws to support their position that the exemption notifications were clarificatory and retrospective in nature.

2. Limitation and Correct Value of Service:
The appellant raised concerns regarding the limitation period for issuing the demand, claiming it was beyond the extended period. Additionally, they pointed out discrepancies in the value furnished to the Department, providing evidence of rectification in their calculations which was not considered. They argued that the demand was based on incorrect values.

3. Revenue's Position and Tribunal's Decision:
The Revenue contended that the service did not qualify under Export of Service Rules, as both provider and recipient were in India, making it ineligible for exemption. They argued against the retrospective and clarificatory nature of the exemption notifications. The Tribunal upheld the demand of service tax for the period in question, noting that the appellant had started collecting service tax from customers after realizing the tax liability. The Tribunal referenced a previous case to support their decision and waived the penalties while confirming the tax liability.

4. Final Decision and Outcome:
The Tribunal upheld the demand of service tax for Transport of Export Cargo from 15.03.2005 to 23.06.2005, based on the changes in exemption notifications and the appellant's realization of tax liability. However, the penalties imposed under Section 76 & 78 were set aside considering the circumstances of the case. The appeal was partially allowed, with the judgment pronounced on 28.10.2015.