2018 (9) TMI 910 - AT - Service Tax

Penalty - GTA service - it appeared to the department that the assessee have not paid service tax on the whole value of the freight amount paid to the transporters; that they have determined the service tax payable on cum-tax method - Held that - The issue of taxability with regard to GTA service had undergone number of changes in the initial years and there was understandable confusion on various aspects. Hence, we are of the considered view that the penalties imposed are unwarranted - Penalties set aside without disturbing the tax demand and interest thereon - appeal allowed in part.

Summary

Issues:
- Calculation of service tax liability on freight amount paid to transporters
- Allegation of contravening provisions of Section 67 and 86 of the Finance Act, 1994 read with Rule 6 of Service Tax Rules
- Proposing penalties under Sections 76 & 77 of the Act
- Appeal against penalties imposed by the original authority

Analysis:
The case involved the appellants, engaged in manufacturing excisable goods, who were discharging their service tax liability under the category of Goods Transport Agency Service. The department alleged that the appellants had not paid service tax on the whole value of the freight amount paid to transporters during the period from October 2006 to July 2007. The department contended that the appellants had incorrectly calculated the taxable value for service tax payment using the cum-tax method, leading to an alleged intention to evade payment. Consequently, a Show Cause Notice (SCN) was issued proposing demand of differential service tax, interest, and penalties under Sections 76 & 77 of the Act. The original authority confirmed the demands, which were upheld by the Commissioner (Appeals), leading to the appeals.

During the proceedings, the appellant did not contest the service tax liability but sought the setting aside of the penalties imposed. The appellant's counsel relied on a Tribunal decision in their own case, where penalties were set aside due to a mistaken belief regarding the taxable value calculation under a Notification. The Tribunal, after considering the facts and the previous decision, concluded that the penalties imposed were unwarranted. Consequently, the impugned orders were modified to set aside the penalties while maintaining the tax demand and interest thereon. Both appeals were partly allowed in terms of setting aside the penalties, as per the Tribunal's decision in the appellant's own case.

In summary, the Tribunal modified the impugned orders to set aside the penalties imposed on the appellants for their service tax liability under the Goods Transport Agency Service category. The decision was based on the appellant's mistaken belief regarding the taxable value calculation, leading to confusion due to changes in taxability rules over the years. The Tribunal found the penalties unwarranted and allowed the appeals only to the extent of setting aside the penalties while upholding the tax demand and interest.