2016 (12) TMI 1277 - AT - Service Tax

Cement - C&F services - period October, 2002 to March, 2007 - imposition of penalty - Held that - the agreement clearly indicated that the cement has been sold to the appellant. From the nature of transaction, it is evident that the activity cannot be classified under the C&F agent service. Consequently, demand of Service Tax is not justified for the period April, 2002 to September , 2006, during which the appellant acted as sales promoter . The matter needs to be remanded back to the original adjudicating authority to requantify the demand of Service Tax under the category of C & F agent services with effect from 1.10.2006, from which date, it is an admitted fact that the appellant has provided the C & F agency services - The original adjudicating authority will also take into account the Service Tax already paid by them and demand the differential Service Tax, if any, not paid by the appellant - the demand for Service Tax for the period upto 30.9.2006 stands set aside. Appeal allowed by way of remand.

Summary

Issues:
1. Dispute over demand of Service Tax for the period October, 2002 to March, 2007 under the category of C&F services.
2. Appellant's claim of operating as sales promoters of a company before being appointed as C&F agent.
3. Contest on limitation regarding the department's awareness of facts since 26.12.2002.
4. Classification of appellant's activities as sales promotion or C&F agency services.
5. Requantification of Service Tax demand and consideration of already paid amounts.

Analysis:

1. The appeal challenged the demand of Service Tax amounting to ?23,07,340 along with interest and penalties under the Finance Act, 1994 for the period October, 2002 to March, 2007, categorized as C&F services.

2. The appellant contended that they initially operated as sales promoters before being appointed as C&F agents from 1.10.2006, claiming to have discharged ?13.87 lakh as Service Tax during the disputed period.

3. Apart from disputing the demand on merits, the appellant raised a contest on limitation, asserting that the department was aware of the facts since 26.12.2002, which was crucial to the case.

4. The Tribunal examined the nature of the appellant's activities during the period in question and concluded that they functioned as sales promoters based on the agreements and transactions with the company, not falling under the C&F agent services category.

5. Consequently, the Tribunal remanded the matter to the original authority to reassess the Service Tax demand from 1.10.2006 onwards when the appellant became a C&F agent, instructing to consider the already paid amounts and demand any differential tax, setting aside the demand for the period before the appellant's appointment as a C&F agent and ruling out any penalty imposition.