2017 (1) TMI 1080 - AT - Service Tax

Imposition of penalty u/s 76 and 78 of FA, 1994 - appellants did not discharge Service Tax - minimum guarantee TEU charges - Buffer yard charges - Miscellaneous charges - invocation of section 80 - Held that - the provisions contained in Section 80 provides for waiver of penalty if the assessee proves that there was a reasonable cause for failure to pay service tax. The original authority did not record any reasoning for imposition of penalty u/s 78 or any reference to section 80 for waiver of penalty u/s 78. The inference by impugned order that discretion u/s 80 has been raised is not correct. There is no partial discretion provided for u/s 80 - penalty set aside. Time Bar - Held that - The appellants who are discharging service tax should have maintained separate accounts, if they wanted to claim exemption for these disputed service which are relatable to export cargo. Having failed to do so, it is not open to them now to challenge the demand on the ground of time bar. Tax demand confirmed - penalty set aside - appeal disposed off - decided in favor of assessee.

Issues:
Service tax liability on charges related to transportation and warehousing services, imposition of penalties under Section 76 and Section 78, applicability of Section 80 for waiver of penalties, exemption for charges related to handling of export cargo, maintenance of separate accounts for exempted services.

Analysis:

1. Service Tax Liability: The appellants were engaged in providing taxable services under various categories, including transportation of goods by roads, rail, and storage warehousing services. The dispute in the appeal revolved around charges like minimum guarantee TEU charges, buffer yard charges, and miscellaneous charges on which the appellants did not discharge service tax. This led to proceedings resulting in a confirmation of service tax demand of &8377;2,16,340. The original authority imposed penalties under Section 76 and Section 78 of the Finance Act, 1994.

2. Penalties Imposed: The advocate for the appellant did not contest the service tax liability but argued for setting aside the demand on the grounds of time bar. The appellant had been regularly filing ST-3 returns with the Department, and they sought waiver of penalties under Section 80, believing that the charges were related to handling export cargo and thus exempt from service tax.

3. Contentions: The argument put forth by the appellant was that the charges in question were mainly related to handling export cargo, which they believed to be exempt from service tax. However, the Department contended that these services were incidental to storage and warehousing services, not directly attributable to cargo handling for export.

4. Legal Infirmity: The Tribunal noted legal infirmities in the imposition of penalties under Section 78. The original order and the first appellate order lacked proper reasoning for imposing the penalties. Section 80 allows for waiver of penalties if there was a reasonable cause for failure to pay service tax, but the authorities did not provide sufficient reasoning or reference to Section 80 for the imposition or waiver of penalties.

5. Decision: The Tribunal found that the appellant did provide services related to export cargo, which is exempted from service tax. While some of the disputed charges had a linkage to cargo handling service, the appellant did not have specific figures to substantiate the exact quantum of exempted service related to export cargo. The Tribunal acknowledged that the appellants should have maintained separate accounts to claim exemption for services related to export cargo. However, since they failed to do so, the demand for service tax was confirmed, but the penalties under Section 76 and Section 78 were set aside based on the reasonable cause provision in Section 80.

6. Conclusion: The Tribunal disposed of the appeal by confirming the service tax demand that had been paid, while providing relief by setting aside the penalties imposed under Section 76 and Section 78. The decision emphasized the importance of maintaining separate accounts for exempted services and upheld the service tax liability for services other than those related to export cargo.

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