2023 (12) TMI 784 - AT - Service Tax

Liability of service tax - works contract service - eligible for benefit of Notification No. 30/2012-ST dated June 20, 2012 or not - filing of incorrect service tax returns - Whether the payment of 50% tax by the appellant and remaining 50% by recipient of its service resulted into short payment of duty, as alleged? - Extended period of limitation - HELD THAT - The admitted fact is that 100% tax liability towards the amount of consideration received by the appellant (the service provider) for providing services of Packaging activity to M/s HEG (service recipient) stands discharged by the provider as well as the recipient to the extent of 50% each. There is also no denial to the fact that appellant itself is the manufacturer of the wooden crates i.e. the packing material used while providing the said service to M/s HEG is also manufactured by appellant the service provider and that the service is provided in M/s HEG premises itself. It is observed that 100% tax has already been paid w.r.t. the impugned taxable service of packaging in terms of the Notification No. 30/2012. Then notification applies to WCS and apparently the activity rendered by appellant is WCS. Hence payment of 50% of tax by appellant, the service provider is wrongly alleged as short payment when admittedly remaining 50% of the liability stands discharged by the recipient of the service (M/s HEG) - demand has wrongly been confirmed by the department. Extended period of limitation - HELD THAT - Present is not the case of tax evasion, the returns were regularly been filed by the appellants, we are of the opinion that the extended period should not have been invoked - the charging of service tax again from the appellant the service provider when the liability has been discharged by him under forward mechanism and by the service recipient under the reverse charge mechanism to the extent of 50% each in terms of relevant notification, will amount to the double taxation on the same service, question of alleging an intent to evade payment of service is absolutely in irrelevant. The department is held to have wrongly invoked the extended period of limitation. Appeal allowed.

Summary

Issues:
The issues involved in the judgment are:
1. Whether the payment of 50% tax by the appellant and remaining 50% by the recipient of its service resulted in short payment of duty as alleged?

Summary:

Issue 1: Payment of Tax Liability

The appellant was engaged in providing taxable service of 'Packaging Activity' to M/s HEG. Initially, the appellant discharged their service tax liability on the full amount of consideration received from M/s HEG. Subsequently, they started paying tax on only 50% of the consideration received, claiming the benefit of Notification No. 30/2012. The department alleged that the services rendered were not works contract services and issued a show cause notice for short payment of service tax. The appellant contended that their activity qualified as works contract service under Notification No. 30/2012, with 50% tax liability discharged by the service provider and 50% by the recipient. The appellant argued that the demand was unjustified, citing relevant case laws in support.

Issue 1 Decision:
The Tribunal observed that the appellant's activity involved both goods (wooden crates) and services (packing activity), qualifying as works contract service under Notification No. 30/2012. As 100% tax liability had been paid in accordance with the notification, the payment of 50% tax by the appellant was not a short payment, as the remaining 50% was discharged by the recipient. The Tribunal referenced a Karnataka High Court decision and previous Tribunal rulings to support their decision, setting aside the demand.

Issue 2: Invocation of Extended Period and Penalty

The department invoked the extended period and imposed penalties alleging suppression of facts and misrepresentation. The Tribunal noted that there was no tax evasion, regular filing of returns, and held that the extended period should not have been invoked. Citing Supreme Court decisions, the Tribunal concluded that the allegations of suppression and misrepresentation were unsustainable. Charging service tax again from the appellant, when the liability had been discharged under the relevant notification, would amount to double taxation. The Tribunal set aside the order and allowed the appeal.

Final Decision:
The Tribunal set aside the order, finding that the appellant had not underpaid the service tax, and the allegations of suppression and misrepresentation were not valid. The invocation of the extended period and imposition of penalties were deemed unjustified, and the appeal was allowed.