2024 (5) TMI 415 - AT - Service Tax

Levy of service tax - handling and forwarding charges collected by the appellant from their customers - period involved in this case is from 2012-2013 to 2013-2014 - show cause notices were issued on 16.05.2013 12.03.2015 - violation of principles of natural justice - HELD THAT - This Bench agrees with the reasoning of the AR that the earlier decision was sub-silentio on aspect doctrine of aspect and its applicability. The payment of VAT, when service portion is also involved and contract/invoice is not indivisible cannot deprive, department of its due revenue, specially in the negative list regime. The service tax was payable by the party during the negative list regime on the handling charges paid by them. However, this bench also notes that knowledge about such charges having being recovered was available with the department at the time when impugned show cause notice were issued and earlier litigation on the same point for prior to negative list regime was already underway and was decided in their favour as per the decision in their own case JIVAN JYOT MOTORS PVT LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, SURAT 2023 (7) TMI 1178 - CESTAT AHMEDABAD . The extended period of limitation would not apply and penalty will also need to be reconsidered. Appeal is therefore remanded to the original adjudicating authority to work out the same, by confining to normal period demand and to consider penalty a fresh in the absence of extended period. Appeal is allowed by way of remand.

Summary

Issues involved:
The issue involved in this case is whether handling and forwarding charges collected by an automobile dealer from customers are liable to service tax, despite VAT being paid on the total value of the invoice, during the period from 2012-2013 to 2013-2014.

Summary of Judgment:

Issue 1: Reliance on Previous Order and Limitation Period
The appellant, an automobile dealer, argued that since they had discharged VAT on handling charges, they should not be subjected to service tax on the same amount. The appellant also contended that the demands were time-barred. The department, however, emphasized that the handling charges had elements of services and were taxable under service tax laws. The tribunal agreed with the department's reasoning, stating that VAT payment does not exempt the service portion from service tax, especially in the negative list regime. The tribunal referred to legal principles regarding the aspect theory and upheld that service tax was applicable on handling charges.

Issue 2: Application of Aspect Theory
The tribunal cited various judgments to explain the aspect theory, which allows different aspects of a single transaction to be taxed under different statutes. It was clarified that the State can tax the sale of goods element in a transaction, even if services are involved, without entrenching upon the Union List. The tribunal concluded that service tax was payable on the handling charges during the negative list regime.

Issue 3: Limitation Period and Penalty
The tribunal noted that the department was aware of the charges being recovered when issuing the show cause notices. As the earlier litigation on the same point was decided in favor of the appellant, the extended period of limitation did not apply. The tribunal remanded the case to the original adjudicating authority to reconsider the penalty and confine the demand to the normal period.

Conclusion
The tribunal allowed the appeal by way of remand, emphasizing the applicability of service tax on handling charges and the reconsideration of penalty due to the limitation period not being applicable.

This judgment clarifies the application of service tax laws on handling charges collected by automobile dealers and highlights the aspect theory in taxation jurisprudence.