2022 (9) TMI 1060 - AT - Service Tax

Legislative disbarment of levy of tax on goods transport agency service - clearing and forwarding agency service - inclusion of the value thereof in support service of business and commerce - Amalgamation of two services - HELD THAT - The two services sought to be amalgamated are not only independently taxable but differs in the mechanism of collection and should, intuitively, be immiscible. The provisions of section 65A of Finance Act, 1994 and section 66F of Finance Act, 1994 have not been appreciated in its context. The said statutory enablement is intended to be invoked when the nature of the service, and the consideration thereto, are not perceptibly divisible and differential treatment necessitates adoption of the appropriate rate of tax to the whole. In the present dispute, the rate of tax does not pose any difficulty; it is only the availability of abatement to isolate the service component and the transference of responsibility to discharge liability that distinguishes. The two services are rendered independently even if the transactions of the appellant are with the same recipient and, therefore, is not clearing and forwarding agency service. The treatment of goods transport agency provided after 1st July 2012 continues to remain unchanged and the substitution of support service of business and commerce or of clearing and forwarding agent service with the omnibus service has not altered the delineation to offer any support to the finding in the two impugned orders - Appeal allowed.

Summary

Issues Involved:
1. Late payment of tax and imposition of penalty under Section 76 of the Finance Act, 1994.
2. Recovery of un-discharged tax liability under Section 65(105)(j) of the Finance Act, 1994.
3. Classification of services provided by the appellant under 'Clearing and Forwarding Agent Services' versus 'Goods Transport Agency' services.
4. Appropriateness of merging two distinct services for tax purposes.

Issue-wise Detailed Analysis:

1. Late Payment of Tax and Imposition of Penalty:
The appellant, M/s Auto Cars, was penalized for late payment of tax amounting to Rs. 1,34,37,061 under Section 76 of the Finance Act, 1994. The appellant argued that the dues were discharged, albeit belatedly, due to financial hurdles, and the interest was paid before the show cause notice was issued. The tribunal found that the dues were indeed discharged in full with interest, and thus, the confirmation of demand along with the penalty was set aside.

2. Recovery of Un-discharged Tax Liability:
The appellant was charged with recovery of un-discharged tax liability amounting to Rs. 31,83,62,007 as a provider of 'clearing and forwarding agent' service for the period from April 2009 to January 2014, along with interest and penalties under Sections 77 and 78 of the Finance Act, 1994. The tribunal noted that the appellant had been providing 'goods transport agency' service and had expanded their business activities to include storage, warehousing, and secondary transportation, on which tax liability was duly discharged. The tribunal found no basis for the additional tax liability and penalties imposed by the Commissioner.

3. Classification of Services:
The core issue was whether the services provided by the appellant should be classified under 'Clearing and Forwarding Agent Services' or 'Goods Transport Agency' services. The appellant contended that their services did not conform to the definition of 'clearing and forwarding agent' as per Section 65(25) of the Finance Act, 1994, and cited judicial precedents to support this. The tribunal agreed, noting that the appellant's activities did not fit the description of 'clearing and forwarding operations' and were more aligned with 'goods transport agency' services.

4. Merging of Two Distinct Services:
The tax authorities attempted to merge the 'goods transport agency' service with 'clearing and forwarding agent' service to enhance the assessable value. The tribunal found that the two services were independently taxable and differed in the mechanism of collection, making them immiscible. The tribunal emphasized that the provisions of Section 65A and Section 66F of the Finance Act, 1994, were not applicable in this context as the services were perceptibly divisible and the rate of tax did not pose any difficulty.

Conclusion:
The tribunal concluded that the services provided by the appellant were not 'clearing and forwarding agency' services but 'goods transport agency' services. Consequently, the appeals were allowed, and the impugned orders were set aside. The tribunal also noted that the legislative intent and judicial interpretations were not properly considered by the adjudicating authority, leading to an erroneous classification and imposition of penalties.

(Order pronounced in open court on 16.09.2022)