2023 (11) TMI 172 - AT - Service Tax

Non-payment of service tax - Transport of Goods by Road Services - incurring expenditure on account of amounts, paid to Rice millers, which included payment towards transportation, from the premises of millers to the godowns of FCI - reverse charge mechanism - time limitation - HELD THAT - The show-cause notice does not specify as to how the transportation charges have been arrived at for the purpose of showcause notice. It is seen from the Chart given under Para 2 of the show-cause notice that 33.33% of the payment, @ Rs.15 per quintal made to the millers, has been assumed to be charges towards transportation; no basis for the same has been given. Moreover, the difference between figures indicated in the Trial Balance was compared with the figures given in ST-3 Returns and service tax is sought to be levied on the differential figures. It is opined that such a vague and unsubstantiated show-cause notice cannot stand the scrutiny of law. Allegations in the show-cause notice should be based on concrete evidence of the services rendered or availed and the consideration paid or received for the same. In the absence of the same, the allegation will not survive. Moreover, the certificates given by the rice mills have been sought to be discarded during the course of hearing before us stating that the same do not bear date etc. However, no investigation appears to have been done to verify the authenticity or otherwise of such documents - Department has not established that the services have been rendered by a taxable service provider and that the appellants are under obligation to discharge duty on Reverse Charge Mechanism. Time limitation - HELD THAT - The appellants, moreover, being a Government Corporation cannot be alleged to have suppressed material fact with intent to evade payment of tax. The Courts and Tribunal have been consistently holding that in respect of Government Corporations, Companies etc. intent to evade payment of service tax cannot be alleged. Moreover, it is found that during the relevant period, there was lot of confusion in the minds of the assessee regarding the taxability of goods transport operators; therefore, extended period cannot be invoked and to that extent, the appellants succeed on limitation. Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the liability of the appellant to pay service tax on transportation services under Reverse Charge Mechanism and the invocation of the extended period for recovery of service tax.

Liability of the Appellant to Pay Service Tax:
The appellant, a Government Corporation, procured paddy from farmers and supplied it to FCI after milling by millers. The millers transported the goods to FCI using their trucks. The appellant argued that as the services were not provided by goods transport operators, the obligation to pay service tax did not arise. The appellant contended that if any obligation existed, it should be on the millers who transported the milled rice. The Department argued that the appellant was aware of the obligation to pay service tax and had registered under Reverse Charge Mechanism. It was noted that the show-cause notice did not specify how transportation charges were calculated. The Tribunal found the notice vague and unsubstantiated, lacking concrete evidence of services rendered or availed. The Department failed to establish that the appellant was obligated to pay duty under Reverse Charge Mechanism.

Invocation of Extended Period for Recovery of Service Tax:
Regarding the issue of limitation, the show-cause notice alleged suppression of material facts by the appellant with the intent to evade service tax payment. However, no positive act of omission or commission was evidenced to support this claim. The Tribunal noted that Government Corporations cannot be alleged to have suppressed material facts with intent to evade tax. It was observed that there was confusion during the relevant period regarding the taxability of goods transport operators. Therefore, the extended period for recovery of service tax could not be invoked against the appellant. The Tribunal held in favor of the appellant on the issue of limitation.

Conclusion:
The Tribunal allowed the appeal, finding that the Department had not established the liability of the appellant to pay service tax under Reverse Charge Mechanism. The Tribunal also ruled that the extended period for recovery of service tax could not be invoked against the appellant due to the lack of evidence of intent to evade tax and the confusion surrounding taxability during the relevant period.