2016 (12) TMI 539 - AT - Service Tax

Rejection of refund claim - payment of service tax on the transportation of cement under GTA services for the period 16-11-1997 to 02-06-1998 under protest, pursuant to a letter issued by department dated 10-12-2003 requiring the appellant to pay service tax - whether the department can retain the amount paid as service tax by the appellant under protest under the category of GTO services for the period 16-11-1997 to 02-06-1998? - Held that - the demand can be confirmed only if a show cause notice is issued prior to the amendment brought out to the Finance Act making the service recipient liable to pay service tax. In this case, undisputedly the department has not issued a show cause notice quantifying the amount. A letter issued to the appellant cannot take the place of a show cause notice provided under law. The Ld. Counsel for appellant submitted that a second letter was issued to the appellant demanding interest after payment of amount under protest. However, for reasons not known, department has refrained from raising a demand/issuing a show cause notice - as the appellant has paid the Service Tax amount under protest, I hold that the appellant is eligible for refund. The impugned order rejecting the refund is set aside - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
Appellant's liability to pay Service Tax under Goods Transport Operators (GTO) category for the period 16-11-1997 to 02-06-1998 and the rejection of refund claim.

Analysis:
The appellant, engaged in cement manufacturing, paid service tax under GTO category based on a departmental letter but later sought a refund of ?36,18,230 paid under protest as no show cause notice was issued. The Commissioner (Appeals) upheld the rejection of refund, leading to the appeal before the Tribunal.

The appellant argued that without a show cause notice quantifying the tax, they are not liable for GTO service tax during the relevant period. Citing legal precedents, including M/s BPL Telecom Pvt.Ltd. and others, they emphasized that GTO services were made taxable retrospectively from 12-05-2000, requiring a pre-amendment show cause notice for demand confirmation.

On the department's side, it was contended that the appellant, as a service recipient, was liable for service tax from 16-11-1997 to 02-06-1998. The exemption under Notification No.49/98 was deemed prospective, justifying the rejection of the refund claim.

The Tribunal deliberated on whether the department could retain the tax amount paid under protest by the appellant for GTO services without a show cause notice. Relying on legal principles established in various cases, including Laghu Udyog Bharati, it was concluded that the absence of a quantifying show cause notice rendered the demand unsustainable.

In line with the decisions in M/s BST Ltd. and M/s Sri Krishna Fertilisers Ltd., where tax paid under protest was found refundable, the Tribunal held that the appellant, having paid under protest and not as a service provider, was eligible for a refund. The rejection of the refund claim was set aside, and the appeal was allowed with consequential reliefs, if any.

This comprehensive analysis highlights the legal intricacies surrounding the appellant's liability for GTO service tax and the subsequent refund claim, emphasizing the importance of a pre-amendment show cause notice for demand confirmation in retrospective tax scenarios.