2016 (4) TMI 779 - AT - Service Tax

Waiver of pre-deposit - Crushing of iron ore for various customers in terms of contracts - Held that - the applicant is prima facie having a strong case against the impugned order. The ground loss as fixed in the contract is with reference to the crushing charges which is also part of the contract. No indication found in the terms of the contract or in the impugned order to suggest that the rate of crushing charges fixed are linked or influenced by the ground loss, the percentage which is also fixed in the contract. In the absence of evidence to suggest that the crushing charges are influenced by other consideration like reduction in ground loss, we prima facie find the applicant is having a strong arguable case in their favour. Considering the above analysis, this is a fit case for waiver of pre-deposit of adjudicated dues till the disposal of the appeal. - Waived granted

Summary

Issues:
Waiver of pre-deposit of service tax confirmed by the impugned order along with penalty and additional penalty.

Analysis:
The applicant sought a waiver of pre-deposit of service tax amounting to ?75,98,749/-, penalty, and additional penalty as per the impugned order dated 13/3/2014. The dispute arose from the inclusion of the value of self-generated iron ore fines in the gross value for service tax. The Revenue argued that the recovered loss should be considered as an additional consideration for the service rendered by the applicant, citing Section 67 of the Finance Act, 1944 read with Rule 3 of the Service Tax Valuation Rules (STVR). The applicant contended that the reduction in ground loss below 3% resulting in accruing fines did not affect the pre-fixed service value as per the contract terms. The percentage of loss was predetermined in the contract, and any reduction below the agreed percentage was a benefit to the applicant, unrelated to the service value. The applicant emphasized that the crushing charges were fixed independently of the ground loss, and there was no evidence to suggest a link between the two. The applicant argued that the details were properly recorded, and there was no basis for allegations of suppression or demand for an extended period.

The Tribunal carefully examined the terms of the contract and the arguments presented by both parties. It was observed that the ground loss, as specified in the contract, was related to the crushing charges, which were integral to the agreement. There was no indication that the rate of crushing charges was influenced by the ground loss percentage, which was also predetermined in the contract. In the absence of evidence demonstrating a connection between the crushing charges and factors like reduction in ground loss, the Tribunal found that the applicant had a strong prima facie case in their favor. Based on this analysis, the Tribunal concluded that the applicant was entitled to a waiver of the pre-deposit of the adjudicated dues until the appeal's final disposal. Therefore, the Tribunal ordered the waiver of the pre-deposit in favor of the applicant.

This detailed analysis of the issues involved in the judgment showcases the careful consideration given to the contractual terms, the valuation rules, and the arguments presented by both parties, leading to the decision in favor of the applicant regarding the waiver of the pre-deposit of service tax and penalties.