2019 (5) TMI 5 - AT - Service Tax

Valuation - inclusion of administrative charges and supervision charges collected over and above the selling price from their customers in the assessable value tripartite agreement - extended period of limitation - HELD THAT - The procurement of goods in the case on hand by the appellant, be it coal or fertilizer, is not for self-consumption or usage by the appellant nor has it been canvassed in this fashion before us, but for the benefit of TNEB/MFL. This being so, on going through the documents it is to be held that the appellant has only been acting on behalf of TNEB/MFL and thereby providing services in relation to procurement of goods or services for them - Typically, HSS is neither liable to customs duty nor under sales tax and therefore just because the invoice price was offered to sales tax, claimed as exemption, would not ipso facto justify that HSS was liable under sales tax in the first place and secondly, it is not our domain also to go into this issue. Time Limitation - HELD THAT - The tax evasion came to the notice of the Revenue on specific intelligence following which they started investigating the activities of the appellant. Also apart from analysing the purchase orders, tripartite agreement, balance sheets etc., Revenue also examined the Dy. General Manager of MMTC on 17.03.2008 and after gathering pieces of evidence, a SCN dated 23.03.2009 came to be issued. In the totality of circumstances therefore, the conclusion by the Revenue that there was wilful intent to evade tax cannot be faulted nor considered inconsistent with statutory prescription that justify invocation of extended period of limitation - extended period rightly invoked. Appeal dismissed - decided against appellant.

Issues Involved:
1. Non-payment of service tax on administrative and supervision charges.
2. Classification of services under "Business Auxiliary Service" (BAS).
3. Liability for service tax on agency commission paid to foreign agents.
4. Invocation of extended period of limitation for tax demand.

Detailed Analysis:

1. Non-payment of Service Tax on Administrative and Supervision Charges:
The Show Cause Notice (SCN) issued on 23.03.2009 alleged that the appellant did not pay service tax on administrative and supervision charges collected over the selling price from their customers. The appellant was involved in procuring 'Steaming Coal' of Chinese origin for Tamilnadu Electricity Board (TNEB) and entered into a tripartite agreement with M/s. Adani Global Private Ltd., Singapore, and M/s. Adani Exports Ltd., Mumbai. The appellant charged ?100/- PMT as suppliers' administrative charges from TNEB and 50 cents PMT as its margin for bulk urea supplied to M/s. Madras Fertilizers Ltd., Chennai (MFL). The SCN treated these charges as liable for service tax under BAS.

2. Classification of Services under "Business Auxiliary Service" (BAS):
The Revenue classified the appellant's activities under BAS, specifically under Section 65(19)(iv) of the Finance Act, 1994, which covers procurement of goods or services that are inputs for the clients. The appellant contended that the transactions were purely trading in nature, involving purchase and sale of coal and urea, and that the administrative charges were trading margins. The tribunal, however, noted that the appellant procured goods for TNEB/MFL and did not have ownership or control over the goods, thus acting on behalf of TNEB/MFL and providing services related to procurement of goods.

3. Liability for Service Tax on Agency Commission Paid to Foreign Agents:
The SCN also alleged that the appellant was liable to pay service tax on the commission paid to foreign agents under Rule 2(1)(d)(iv) of Service Tax Rules, 1994, read with Section 66A of the Finance Act, 1994. The tribunal observed that the appellant paid ?55/- PMT to AEL as agency commission, which was part of the administrative charges collected from TNEB. This commission was subject to service tax as it fell under the services rendered by commission agents.

4. Invocation of Extended Period of Limitation for Tax Demand:
The appellant argued that the SCN was issued beyond the normal period and that there was no fraud, suppression, or wilful non-disclosure to justify the extended period of limitation. The tribunal, however, found that the appellant did not disclose the nature of the transactions and the administrative charges in their entirety. The investigation revealed that the appellant acted on behalf of TNEB/MFL, and the SCN was issued based on specific intelligence and scrutiny of documents. The tribunal upheld the invocation of the extended period of limitation, concluding that there was a wilful intent to evade tax.

Conclusion:
The tribunal dismissed the appeal, affirming the adjudication order which confirmed the demand for service tax along with applicable interest and penalties under Sections 75 and 78 of the Finance Act, 1994. The tribunal found that the appellant's activities fell under BAS and that the extended period of limitation was rightly invoked due to the appellant's non-disclosure and intent to evade tax. The appeal was thus devoid of merits and dismissed.

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