2006 (9) TMI 10 - AT - Service Tax

Service Tax Supervision charges imposed as levy by State Govt. were not charges recovered for any Storage or Warehousing and liable to service tax and such levy cannot be described as consideration of storage and warehousing Article 289 did not debar Union from levying customs and excise duties on imported or produced by a State

Summary

Issues involved:
1. Imposition of penalties under Sections 75A and 77 of the Finance Act, 1994 for failure to apply for registration and furnish ST-3 return.
2. Whether the Excise Department of the State Government was providing taxable service of "Storage and Warehousing Services" subject to Service Tax.
3. Interpretation of Article 289 of the Constitution of India in relation to the imposition of taxes by the Union on State Government activities.

Analysis:
1. The first issue pertains to the imposition of penalties under Sections 75A and 77 of the Finance Act, 1994 for failure to apply for registration and furnish ST-3 return. The Appellate Tribunal upheld the penalties imposed by the Commissioner (Appeals) on the appellants for non-compliance. The Tribunal found that the services rendered by the appellants were indeed liable to service tax, requiring registration and filing of returns. The Tribunal also noted that the supervision charges levied under Section 28-A of the Madhya Pradesh Excise Act, 1915 were not exempt from Service Tax under Article 289(1) of the Constitution, thus affirming the penalties imposed.

2. The second issue revolves around whether the Excise Department of the State Government was providing taxable service of "Storage and Warehousing Services" subject to Service Tax. The Tribunal analyzed the nature of the services provided by the State Government and concluded that warehousing of Indian-made foreign liquor fell within the purview of Service Tax under the category of "Storage and Warehousing Services." The Tribunal held that the State Government was required to take registration and file returns for such activities, as they were deemed commercial activities falling within the purview of Service Tax.

3. The final issue concerns the interpretation of Article 289 of the Constitution of India in relation to the imposition of taxes by the Union on State Government activities. The Tribunal examined the provisions of Article 289 and the legal precedents, including the decision of the Supreme Court in the case of In re Sea Customs Act (1878). The Tribunal determined that the levy imposed under the State law for supervision charges was not comparable to charges for "Storage and Warehouse Services." Therefore, the Tribunal set aside the impugned orders made against the appellants, concluding that the nature of the levy did not warrant the imposition of Service Tax.

In conclusion, the Tribunal upheld the penalties imposed on the appellants for non-compliance with registration and return filing requirements, affirmed the applicability of Service Tax on the State Government's warehousing activities, and clarified the interpretation of Article 289 in the context of taxation on State Government activities.