2024 (4) TMI 71 - AT - Service Tax

Classification of goods - goods transport agency services or courier service - recovery alongwith interest and penalty - invocation of Extended period of Limitation - HELD THAT - The undisputed facts are that the appellant was transporting a large number of small consignments for its clients and was issuing booking slips. Before issuing the booking slips it was getting an undertaking that the consignment does not contain personal mail, currency notes, jewellery contraband etc. , which is a standard declaration for courier services because the courier companies are barred from carrying these as a part of courier packages - It is also not in dispute that the appellant is using the tracking number generated by a sister firm for all its consignments like its other sister courier companies. It is found that the services rendered by the appellant have all the essential characteristics of courier service and not of goods transport agency service . The appellant could have entertained a belief that they were classifiable under the goods transport agency service and, accordingly, classified its service, paid service tax and filed returns. Classification of the service is a part of a self-assessment by the appellant. The self-assessment is subject to scrutiny and if necessary best judgment assessment under section 72 by the officer and the appellant had been filing returns. It is the responsibility of the officer to scrutinize them. Wherever the appellant had not filed returns or not assessed service tax correctly, it is the responsibility of the officer to initiate best judgment assessment within time from the date of filing of return or the last date for filing the return for a particular quarter. Had this been done, the fact that the appellant qualified its services as goods transport agency service , while it has all the characteristics of a courier service , would have come to light and demands could have issued within time. The ground for invoking extended period of limitation and imposing penalty under section 78 that the appellant had indulged in deliberate misclassification of taxable service is not correct. The assessee is expected to classify its services and pay service tax as per its understanding. It was the job of the officer to scrutinize the returns and if no return is filed by due date, it was his responsibility to call for its records and complete the best judgment assessment. This was not been done in this case and the delay occurred in raising a demand beyond the normal period of limitation for this reason. The extended period of limitation under the proviso to section 73(1) of the Finance Act could not have been invoked. The classification of the service under the courier service upheld - the demand for extended period of limitation and a penalty imposed under section 78 set aside - demand for normal period of limitation is upheld with interest thereon - appeal allowed in part.

Summary

Issues involved:
The issues in this case involve misclassification of taxable services, evasion of service tax, extended period of limitation, and penalty under section 78 of the Finance Act, 1994.

Misclassification of Taxable Service:
The appellant, a limited company, was registered with the service tax department for providing taxable services under "goods transport agency" and "storage and warehouse" categories. However, discrepancies arose as the appellant declared itself as a provider of "cargo handling services" to the income tax department but as a provider of "goods transport agency services" to the service tax department. The Department initiated inquiries suspecting misclassification. It was discovered that the appellant was using a tracking system provided by a sister company and was not registered as a transporter under the Carriage of Goods Act. Furthermore, the appellant did not mention crucial details in documents issued to customers, leading the Department to believe that the appellant had misclassified its courier services as "goods transport agency services" to benefit from exemptions.

Evasion of Service Tax:
A show cause notice was issued to the appellant, alleging that it had misclassified its taxable service as "goods transport service" instead of "courier service," resulting in the evasion of service tax amounting to Rs. 53,92,677. The notice accused the appellant of deliberate misclassification and suppression of taxable income with the intent to evade service tax, justifying the invocation of the extended period of limitation and penalty under section 78 of the Finance Act, 1994.

Decision and Rationale:
After considering submissions from both sides, the Tribunal found that the services rendered by the appellant exhibited characteristics of a courier service rather than a goods transport agency service. However, the Tribunal acknowledged that the appellant may have genuinely believed it was providing goods transport agency services. It emphasized that the responsibility for scrutinizing returns and initiating best judgment assessments lay with the tax officer, and the delayed demand for service tax beyond the normal limitation period was attributed to the officer's failure to conduct timely assessments. As a result, the Tribunal upheld the classification of the service as a courier service but set aside the demand for the extended period of limitation and the penalty under section 78, while upholding the demand for the normal limitation period with interest.

[Order pronounced on 02/04/2024]