2019 (11) TMI 20 - HC - Service Tax

Levy of service tax - Ocean Freight as per balance-sheet - in the second show-cause notice the tax was claimed on account of the service of Freight Forwarder. - HELD THAT - The adjudicating authority shall not permit the respondents to run a case inconsistent with the earlier show-cause notice, if the appellant is able to show that the transactions covered by the earlier showcause notice and those which are the subject-matter of the present show-cause notices are identical in nature, scope and effect. All other points are kept open before the said authority. The impugned judgement and order dated 14th August 2018 is modified by relegating the appellant to the alternative forum directing it to decide the two show-cause notices before it by giving an opportunity to the appellant to file a reply thereto, strictly in terms of our observations by a reasoned order, within six months of communication of this order - appeal disposed off.

Summary

Issues involved: Interpretation of service tax on freight forwarding services, consistency of show-cause notices, invocation of longer period of limitation, jurisdiction of adjudicating authority, modification of judgment.

Analysis:
1. Interpretation of service tax on freight forwarding services:
The appellant, a freight forwarder, was charged with service tax on income under "Ocean Freight" and as a "Freight Forwarder" by two show-cause notices. The appellant argued that only the service representing the commission or "mark-up" amount should be subject to service tax, citing Rule 10 of the Place of Provision of Service Rules, 2012. The appellant contended that the tax demanded in the earlier notice was consistent with this interpretation.

2. Consistency of show-cause notices:
The appellant raised concerns about the inconsistency between the show-cause notices issued by the authorities. The appellant's senior advocate argued that the earlier notices and the subsequent ones were inconsistent with each other, creating confusion regarding the nature and scope of the transactions in question. The appellant pointed out that the earlier notice had already been adjudicated upon and was under challenge before the Customs, Excise and Service Tax Appellate Tribunal.

3. Invocation of longer period of limitation:
The appellant contested the invocation of the longer period of limitation by the respondents, emphasizing that the transaction was continuous, and all details were known to the authorities due to the earlier show-cause notice. The appellant argued that the longer period of limitation should not have been applied in this case.

4. Jurisdiction of adjudicating authority:
The Additional Solicitor General representing the Union of India argued that all three show-cause notices would be adjudicated by the same authority. The court acknowledged this but directed the adjudicating authority not to permit the respondents to present an inconsistent case compared to the earlier notice. The court emphasized that if the transactions covered by the earlier notice were identical to those in the present notices, the adjudicating authority should consider all contentions raised by the appellant.

5. Modification of judgment:
The High Court modified the judgment and order dated 14th August 2018, directing the appellant to address the two show-cause notices before an alternative forum within six months. The court instructed the adjudicating authority to consider the appellant's submissions and observations while deciding on the show-cause notices, ensuring consistency and fairness in the adjudication process.

In conclusion, the High Court's judgment addressed various legal issues concerning the interpretation of service tax on freight forwarding services, the consistency of show-cause notices, the invocation of the longer period of limitation, the jurisdiction of the adjudicating authority, and the modification of the initial judgment to ensure a fair and thorough adjudication process.