2017 (2) TMI 622 - AT - Service Tax

Levy of tax - GTA services - whether tax can be levied when consignment note was not issued? - the appellants had paid the entire Service Tax liability but for a nominal amount of ₹ 1,372/- before the issuance of SCN - interest - imposition of penalties u/s 76, 77 and 78 - Held that - There were decisions interpreting the provisions to hold that Service Tax cannot be demanded whereas some of the decisions held the issue in favor of Department. Taking note of this fact and also taking in to consideration that the appellant has paid the major portion of Service Tax along with interest prior to the issuance of Show Cause Notice Immediately on being pointed out by the Department, the penalties imposed are unwarranted as per provisions contained in sub-Section 3 of Section 73 of Finance Act, 1944. Penalties imposed u/s 76 as well as 78 would not lie simultaneously - impugned order is modified to the extent of setting aside the penalties imposed without disturbing the confirmation of demand and interest - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Liability to pay Service Tax on transportation services.
2. Imposition of penalties under Section 76, 77, and 78 of the Finance Act.

Issue 1: Liability to pay Service Tax on transportation services:
The appellants, registered under the category of GTA Service, procured materials and paid freight on the goods transported by lorries, on which they paid Service Tax until September 2006. They stopped filing ST-3 returns from October 2006. Following a Show Cause Notice issued in 2010, the appellants argued that they were not liable to pay Service Tax as they used private operators who did not issue consignment notes. The original authority confirmed a demand of ?4,19,916, imposed penalties under various sections, which was upheld by the Commissioner (Appeals). The appellant cited judgments stating no Service Tax liability when no consignment note was issued. The Tribunal noted the confusion in the industry regarding the liability to pay Service Tax on transportation services during the relevant period. The appellant had paid a significant portion of the Service Tax before the Show Cause Notice was issued. The Tribunal held that penalties imposed were unwarranted, citing previous decisions setting aside penalties in similar cases. The penalties under Section 76 and 78 were deemed unjustified, and the order was modified to set aside the penalties without disturbing the confirmation of demand and interest.

Issue 2: Imposition of penalties under Section 76, 77, and 78 of the Finance Act:
The respondent argued that the appellant deliberately failed to discharge the Service Tax liability after October 2006 to evade payment, justifying the imposition of penalties. The respondent highlighted that the appellant had not paid the entire Service Tax liability before the Show Cause Notice was issued. The Tribunal acknowledged that a nominal amount was paid before the Notice and that the confusion in the industry regarding Service Tax liability on transportation services during the relevant period. The Tribunal held that penalties under Section 76 and 78 could not be imposed simultaneously, citing specific cases where penalties were set aside. The Tribunal concluded that the penalties imposed were unwarranted, considering the circumstances, and modified the order to set aside the penalties while upholding the demand and interest. The appeal was allowed with consequential reliefs, if any, in accordance with the Tribunal's decision.

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