2019 (1) TMI 1232 - AT - Service Tax

Penalty u/s 78 of FA - Failure to take registration - non-payment of service tax - appellant registered as a provider of goods transport agency service , had, under a contractual agreement with M/s Kudremukh Iron Ore Co Ltd, been acting for the latter in the sale of pig iron manufactured by them - classification of services in dispute - Held that - The appellant had discharged tax liability and interest in full; there was even an excess deposit owing to the benefit of cum-tax computation which the original authority appropriated towards the penalties. The activity of the appellant, as intermediary between M/s Kudremukh Iron Ore Co Ltd and the buyer of pig iron , was admitted to be classified as clearing and forwarding liable to tax under section 65 (105) (j) of Finance Act, 1994 - The straddling of the intermediary between two different services is indicative of the difficulties in specifying the object of taxation. In the circumstances, and in the absence of any evidence of suppression or mis-declaration on the part of appellant, we conclude that the ingredients for invoking section 78 of Finance Act, 1994 does not exist. Penalty u/s 78 set aside - appeal allowed.

Issues:
1. Tax liability of M/s Vishal Traders for services provided to M/s Kudremukh Iron Ore Co Ltd between 2005-06 and 2008-09.
2. Imposition of penalties under various sections of the Finance Act, 1994.
3. Nature of services provided by M/s Vishal Traders and the corresponding tax classification.
4. Appropriation of excess tax paid towards penalties.

Analysis:

Issue 1: Tax Liability
M/s Vishal Traders, registered as a goods transport agency service provider, acted as an intermediary for M/s Kudremukh Iron Ore Co Ltd in selling pig iron but failed to register and discharge tax on the consideration received between 2005-06 and 2008-09. The original authority confirmed a demand of &8377; 5,46,013, considering the appellant liable to tax as a commission agent under section 65(105)(zzb) of the Finance Act, 1994. The Commissioner of Central Excise (Appeals) modified the order, setting aside one penalty but confirming the rest. The appellant challenged these confirmations in the appeal.

Issue 2: Imposition of Penalties
The appellant contended that the demand was flawed, arguing that the contract nature as a consignment agent indicated taxability as a clearing and forwarding agent, thus questioning the imposition of penalties under sections 76 and 77 of the Finance Act, 1994. The Authorized Representative defended the penalties, citing deliberate suppression of facts and the appropriateness of the penalties imposed.

Issue 3: Nature of Services and Tax Classification
The appellant's activity as an intermediary between M/s Kudremukh Iron Ore Co Ltd and the buyer of pig iron was classified as clearing and forwarding, falling under section 65(105)(j) of the Finance Act, 1994. The original authority confirmed the demand for acting as a commission agent, also falling under the definition of business auxiliary service. The complexity of the intermediary role between different services posed challenges in specifying the object of taxation. However, in the absence of evidence of suppression or mis-declaration, the tribunal concluded that the conditions for invoking section 78 of the Finance Act, 1994 were not met.

Issue 4: Appropriation of Excess Tax
The appellant had fully discharged tax liability and interest, even resulting in an excess deposit due to cum-tax computation. The original authority appropriated this excess towards penalties. The tribunal set aside the penalty under section 78, ruling in favor of the appellant on this limited extent.

In conclusion, the tribunal ruled in favor of M/s Vishal Traders by setting aside the penalty under section 78, considering the absence of evidence for invoking it. The judgment addressed the tax liability, penalties, nature of services, and the appropriation of excess tax in a detailed and comprehensive manner.

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