2016 (11) TMI 839 - AT - Service Tax

Demand - GTA service - Held that - the appellant itself has arranged for transportation and paid the transportation cost and the same has been recovered from the bottlers. The contention of the appellant is that they were under bona-fide belief that the transportation cost is borne by the bottlers and they are required to pay service tax. In this case, the appellant itself has arranged for transportation and paid transportation changes. In these circumstances, as per Rule 2(1)(d)(iv) of the service tax Rules, 1994, the appellants are liable to pay service tax as they are paying freight charges to the transporters on behalf of the bottlers and as per the said provisions, they are liable to discharge the service tax liability on the GTA services. As the appellant did not pay service tax therefore, I hold that the appellant is liable to pay service tax along with interest during the impugned period on GTA services. Whether the appellant was under bona-fide belief that they are not liable to pay service tax? - Held that - the appellant has arranged for transportation and paid transportation changes, in that circumstances, the appellant is liable to pay service tax on GTA Service under reverse charges mechanism. Therefore, I hold that the extended period of limitation is rightly invoked in this case. Whether the appellant can be given the benefit of section 80 of the Finance Act, 1994 to impose penalty or not? - Held that - In this case, the appellant has paid service tax along with interest and the appellant has not got any benefit. In that circumstances, the benefit of section 80 can be given to the appellant. By giving the benefit of section 80 of the Finance Act, 1994, I drop the penalty against the appellant. Matter on remand to verify the fact whether the appellant has paid the service tax along with interest or not, if Service tax has paid along with interest, the proceedings against the appellants shall come to an end otherwise the adjudicating authority is at the liberty to pass an order in terms of law - appeal disposed off by way of remand.

Issues:
1. Liability to pay service tax on GTA services
2. Applicability of extended period of limitation
3. Imposition of penalty under Section 80 of the Finance Act, 1994

Analysis:

Issue 1: Liability to pay service tax on GTA services
The appellant, engaged in manufacturing concentrate, transferred it to bottlers at the factory gate with transportation costs borne by the bottlers. The appellant argued that since they paid transportation costs on behalf of the bottlers, they were not liable to pay service tax. However, the Tribunal held that as per Rule 2(1)(d)(iv) of the service tax Rules, 1994, the appellant was liable to pay service tax on GTA services as they were paying freight charges to transporters. The Tribunal concluded that the appellant must pay service tax along with interest during the impugned period on GTA services.

Issue 2: Applicability of extended period of limitation
The appellant claimed they were under a bona-fide belief that they were not liable to pay service tax. However, since the appellant arranged transportation and paid transportation charges, the Tribunal ruled that the extended period of limitation was rightly invoked. The Tribunal held that the appellant was liable to pay service tax on GTA services under the reverse charges mechanism.

Issue 3: Imposition of penalty under Section 80 of the Finance Act, 1994
Regarding the penalty, the appellant had paid the service tax along with interest and did not receive any benefit. The Tribunal decided to give the benefit of Section 80 of the Finance Act, 1994, to the appellant and dropped the penalty. However, the adjudicating authority was directed to verify whether the appellant had indeed paid the service tax along with interest. If the payment was confirmed, the proceedings against the appellant would end; otherwise, the authority could pass an order as per the law.

In conclusion, the Tribunal disposed of the appeal by remanding the matter back to the adjudicating authority for verification of the service tax payment and further proceedings based on the verification results.

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