2023 (5) TMI 894 - AT - Service Tax

Non-payment of service tax - GTA Service incurred in connection with export of goods - levy of penalty under Section 78 of Finance Act.1994 Rule 15(3) of the Cenvat Credit Rules 2004 - extended period of limitation - reverse charge mechanism - applicability of N/N. 18/2009-ST dated 7/07/2009 N/N. 31/2012-ST dated 28/06/2012 - HELD THAT - It is seen that the service availment for export purposes is not disputed and it is only the procedural conditions prescribed in the notification that the appellants could not adhere to. They have candidly submitted to the fact of there being unaware of the requirements as set out in the notification. The two conditions that the exporter could not fulfill at the material time, relate to filing of information in form EXP-1 and filing of the required return in form EXP-2 about the fact of availment of the exemption. The said conditions are prescribed vide clause (a) and clause (c) of the impugned notifications. The CBEC vide Circular No. 334/13/2009-TRU dated 6th July, 2009, while dealing with Exemption Scheme under Notification no 18/2009-ST dated 7.07.2009 had prescribed requisite procedure for availing of the said benefit. It is evident that the impugned conditions for non-fulfillment of which credit is denied are clearly procedural in nature. Thus failure on the part of the appellant is only by way of certain procedural inconsistencies/deficiencies. It is settled law that a substantial exemption notification benefit cannot be denied on the ground of failure to comply with certain procedural conditions prescribed. The fact of export not in dispute, technicalities of procedures cannot stand in the way of availment of otherwise admissible substantive benefit. The procedure prescribed in the impugned notification are for the purpose of verification of the claims. Since there is no dispute about the rendering of services for export and which is exempted, it is clear that the appellant is rightly eligible for availing the benefit of the notification. Further, it is very clear from the CBEC s circular, that the conditions not fulfilled in the present matter were merely procedural and not mandatory, required for availment of the benefit. Under the circumstances the fact of receiving service for transport of goods by road for export and making payment for such service is not the least being in dispute, the substantial benefit of a notification should not be denied on account of technical lapses as held by the Hon ble High Court, Bombay in the case of UNION OF INDIA VERSUS FARHEEN TEXTURISERS AND OTHERS 2010 (7) TMI 982 - BOMBAY HIGH COURT . To similar effect is the order of the Hon ble High Court, Allahabad in the case of COMMR. OF CUS. C. EX. VERSUS J.S. GUPTA AND SONS 2015 (7) TMI 379 - ALLAHABAD HIGH COURT , holding the condonable nature of procedural conditions. Also it is settled law that in case of exports a liberal approach may be called for when the fact of such rendering of service for export is not in dispute so as not to render exports noncompetitive in the global trade. There are no merit in the order passed by learned Commissioner (Appeals). The same is therefore set aside, and the appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are non-payment of service tax on GTA Service incurred in connection with the export of goods, imposition of penalty under Section 78 of Finance Act, 1994 & Rule 15(3) of the Cenvat Credit Rules 2004, and challenge of the invocation of the extended period in appeal proceedings before the lower authority.

Non-payment of service tax on GTA Service for export of goods:
The appellant, engaged in the manufacture of jute products and export of finished goods, was aggrieved by the order confirming a demand of Rs.42,343 for "Transport of Goods by Road Service" along with interest and penalty. The appellant contended that they were unaware of the liability to pay tax on expenses incurred under the Head Goods Transport Agency under the reverse charge mechanism. They argued that the charges were used for the export of goods, which is exempted under specific notifications. The appellant claimed they fulfilled the basic conditions of the notification but could not adhere to certain procedural formalities as prescribed. The Tribunal held that the service availed for export purposes was not disputed, and the procedural conditions not fulfilled by the appellant were procedural in nature. The Tribunal cited legal precedents emphasizing that technical lapses should not deny the substantial benefit of a notification, especially when the fact of rendering service for export is not in dispute.

Imposition of penalty under Section 78 of Finance Act, 1994 & Rule 15(3) of the Cenvat Credit Rules 2004:
The appellant challenged the imposition of a penalty under Section 78 of the Finance Act, 1994, and Rule 15(3) of the Cenvat Credit Rules 2004. They argued that the penalty was unjustified due to their unawareness of the liability to pay tax on certain services. The Tribunal considered the appellant's compliance with the basic conditions of the notification and the procedural inconsistencies/deficiencies. It was held that a substantial exemption notification benefit cannot be denied based on failure to comply with procedural conditions. The Tribunal emphasized a liberal approach in cases of exports to avoid rendering exports noncompetitive in global trade.

Challenge of the invocation of the extended period:
The appellant challenged the invocation of the extended period in appeal proceedings before the lower authority. They contended that they were unaware of the liability to pay tax on certain services, which led to procedural inconsistencies. The Tribunal, considering the appellant's compliance with the basic conditions of the notification and the procedural nature of the conditions not fulfilled, set aside the order passed by the learned Commissioner (Appeals) and allowed the appeal.