2009 (1) TMI 160 - AT - Service Tax

Appellants have been discharging service tax under the category of CHA at the rate of 15% of the gross receipts in terms of Board s Circular No. 39/97 SCN alleging rendering of Cargo Handling Service, Port Service, Transportation Service, CHA Service - the Department had full knowledge of the activities carried out by the applicant suppression cannot be alleged notice ought to have been issued within normal period if payment of tax on 15% of gross value was considered as not correct - contention of appellant that the entire demand is time-barred, is acceptable stay granted

Issues Involved:
1. Classification of services under the correct service tax category.
2. Invocation of the extended period for issuing Show Cause Notices.
3. Time-barred nature of the demand.
4. Requirement of pre-deposit for the disputed service tax amount.

Issue-wise Detailed Analysis:

1. Classification of Services:
The applicants were rendering various services at Mangalore Port, discharging service tax under the Custom House Agent (CHA) category at 15% of the gross receipts, as per Board's Circular No. 39/97 dated 11-6-1997. The Department, however, proposed to classify the activities under Port Services, Cargo Handling Services, and Transportation by Road. The Commissioner confirmed the entire demand under Port Services, which was contested by the applicants, who argued that their services should not fall under Port Services based on the precedent set by the Tribunal in the Konkan Marine Agencies case, upheld by the Karnataka High Court. The Tribunal noted that the Commissioner's order lacked clarity as it did not provide a break-up of the amounts confirmed under different categories, which was necessary to determine the correct classification.

2. Invocation of the Extended Period for Issuing Show Cause Notices:
The applicants argued that the Department had full knowledge of their activities since 2001, as evidenced by the adjudication order of the Joint Commissioner and the Commissioner (Appeals). They contended that the invocation of the extended period in the Show Cause Notices was unjustified. The Tribunal agreed, noting that the Department had been aware of the applicants' activities and had received service tax in terms of the Circular. Therefore, invoking the extended period alleging suppression of facts was not acceptable.

3. Time-barred Nature of the Demand:
The applicants argued that the entire demand was time-barred since the Department had knowledge of their activities well before the issuance of the Show Cause Notices. The Tribunal found merit in this argument, noting that the Department had not issued the Show Cause Notices within the normal period despite being aware of the applicants' activities. The Tribunal also highlighted the lack of clarity in the Commissioner's order regarding the break-up of the demand under different categories, further supporting the applicants' contention that the demand was time-barred.

4. Requirement of Pre-deposit:
The Tribunal considered the applicants' compliance with the Board's Circular and the lack of clarity in the Commissioner's order. Given the strong case on limitation and the precedent set in the Ganesh Shipping case, the Tribunal ordered a complete waiver of the pre-deposit of the amounts demanded. The stay application was allowed, and no coercive measures were to be taken by the Revenue to recover the amounts until the disposal of the appeal.

Conclusion:
The Tribunal found that the applicants had a strong case on both the classification and limitation issues. The lack of clarity in the Commissioner's order and the Department's prior knowledge of the applicants' activities were significant factors in the decision. The Tribunal ordered a complete waiver of the pre-deposit and allowed the stay application, ensuring no recovery actions would be taken until the appeal was resolved.

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