2017 (4) TMI 947 - AT - Service Tax

Valuation - freight - outward movement of goods of the bread division - inapplicability of N/N. 34/2004-ST dated 3rd December 2004 - case of Revenue is that each consignment was freighted at a cost below the threshold prescribed therein was not evidenced - Held that - Taxability is a primary requisite for raising a demand and in the absence of law providing for levy of the tax, a demand cannot be allowed to sustain merely owing to procedural rigours - it is in the fitness of things that coverage u/s 65(105)(zzp) of FA, 1994 needs to be ascertained despite being raised for the first time before first appellate authority and if so, the extent to which the freight is excluded from the purview of tax. As facts pertaining to the legal issue requires to be examined, it would be appropriate for the original authority to undertake this task - matters remanded back to the original authority to consider the plea of the appellant that the goods were transported by individual truck owners - matter on remand.

Summary

Issues:
1. Applicability of notification no.3/2004-ST dated 3rd December 2004 for exemption based on consignment cost.
2. Taxability as a recipient of 'goods transport agency' service for outward movement of goods.
3. Rejection of new grounds by the first appellate authority under rule 5 of Central Excise (Appeals) Rules, 2001.
4. Consideration of tax liability and procedural rigours in confirming the demand.
5. Interpretation of Section 65(105)(zzp) of Finance Act, 1994 for exclusion of freight from tax.

Analysis:

1. The dispute revolved around the freight charges incurred by the appellant on the outward movement of goods without discharging service tax liability. The appellant claimed exemption under notification no.3/2004-ST, citing that the charges were below the prescribed threshold of ?750 per consignment. However, the investigation team noted that payments were made in consolidated amounts at periodic intervals, leading to the demands being confirmed by the lower authorities and upheld by the first appellate authority.

2. The lower authority confirmed the demand primarily due to the alleged inapplicability of notification no. 34/2004-ST, as the appellant failed to provide evidence that each consignment's freight cost was below the threshold. Additionally, the appellant contended that the trucks used were owned and operated by individual owners, thus falling outside the scope of taxability as a recipient of 'goods transport agency' service. However, this plea was rejected by the first appellate authority citing inadmissibility of new grounds under rule 5 of Central Excise (Appeals) Rules, 2001.

3. The issue of taxability was raised but not considered in the impugned orders, emphasizing that taxability is a fundamental requirement for raising a demand. The appellant relied on a Supreme Court decision to argue that the appellate authority has the power to entertain additional grounds if raised bona fide and not previously possible for good reasons. The judgment highlighted the importance of correctly assessing tax liability and the discretion of the appellate authority in allowing new grounds to be raised.

4. In light of the above, the judgment emphasized the need to ascertain the coverage under section 65(105)(zzp) of the Finance Act, 1994, despite being raised for the first time before the first appellate authority. It directed the original authority to examine the plea of the appellant regarding the transportation of goods by individual truck owners, indicating a remand of the matters for further consideration based on the legal issues at hand.

5. The judgment concluded by setting aside the impugned orders and remanding the matters back to the original authority for a detailed examination of the legal issues raised, particularly focusing on the interpretation of tax liability and the exclusion of freight from the purview of tax under the relevant provisions of the Finance Act, 1994.