2024 (6) TMI 1 - AT - Service Tax

Liability for payment of service tax on collection of toll charges - logistic charges recovered from the buyers of car - Demand of service tax on other taxable services for the period 2015-16 and 2016-17 - Invocation of extended period of limitation - Imposition of interest and penalty - Whether the option of 6% or 7% as given in Rule 6 (3) of CCR, 2004 can be thrust upon the Appellant if they had failed to exercise the option under Rule 6 (3A) of CCR, 2004. HELD THAT - This issue has come up for consideration before various Benches of the Tribunal, wherein it has consistently been held that the benefit of Rule 6 (3A) cannot be denied even if the assessee has not exercised the said option in the beginning of the year. Reliance in this connection is placed on the judgement of Hon ble High Court of Telengana in the case of Tiara Advertising Vs. UOI 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT . The above view has consistently been taken by this Tribunal in various other cases. The issue is therefore no more res integra. We therefore, hold that the Appellants are eligible for benefit of Rule 6 (3A) of CCR, 2004, even if they have not exercised their option before the beginning of the year . Demand of service tax on logistic charges recovered from the buyers of car - We have perused the copy of invoice for sale of car as well as invoice for logistic charges. Both these invoices have been raised simultaneously at the time of sale of vehicle. We also note that the VAT Tribunal vide order dt. 25-01-2014, in their own case for A/Y 2009-10, had held that the logistic charges recovered at the time of sale of car is liable to be included in the sale price of vehicle. It therefore held that VAT was payable on logistic charges. It is the settled principal of law that service tax and VAT are mutually exclusive and a transaction can either be taxed under service tax or under VAT. Once VAT has been paid, service tax cannot be demanded. Similar issue had come up for consideration before the Commissioner (Appeals) in the case of Appellant s sister concern wherein the Lower Authorities had confirmed the demand of Rs. 1.08 crore under Rule 6 (3) of CCR, 2004 on receipt of logistic charges. Therefore demand of service tax has been set aside. Thus, we hold that service tax could not have been demanded on logistic charges; particularly when Appellants have paid VAT on the same, Department has not been able to specify the nature of service provided and the order of Commissioner (Appeals) in another case has been accepted by the Department. Demand of service tax on collection of toll tax at toll plaza - We find that the aforesaid issue relating to liability for payment of service tax on collection of toll charges under a contract with NHAI is no more res integra. This issue has been dealt with by this Tribunal in series of cases. We therefore set aside the demand on toll collection and allow the appeal on this issue. Demand of Service tax on other taxable services for the period 2015-16 and 2016-17 - The demand is liable to be set aside on this preliminary observation that demands on new issues cannot be raised by way of Statement of Demand. However, we find that the demand is also not sustainable on merits, in view of our observation. The Statement of Demand proposed to demand Rs. 2.26 crores for the year 2015-16 and Rs. 2.07 crores for the year 2016-17 on the ground that the value of services declared in ST3 returns was much less than the amount received under the heads sale of services, other operating revenue, rent received, miscellaneous income and business auxiliary services. Difference in value of works contract services - availed abatement of 30% - On perusal of detailed chart, we note that difference in value between the value declared in ST-3 return the value as per Balance Sheet is also about 30%. We therefore hold that there is no short payment of service tax under the head Works Contract service. Difference in value of other operating revenue - In case of My Car (P) Ltd. vs. CCE 2015 (8) TMI 353 - CESTAT ALLAHABAD , the Tribunal has held that incentives received by authorized dealers of Maruti Udyog Limited were not taxable under the category of business auxiliary services. Thus, we hold that the Appellants were not liable for payment of service tax on discount /incentive received from suppliers of motor vehicle, spare parts etc and accounted for under the head other operating revenue. Thus, we set aside the entire demand of Rs. 4.26 crores on account of other income. SCN dt 17-10-17 for the period 2012-13 to 2014-15 has been issued under proviso of Section 73 (1) by invoking extended period of limitation. The order invokes the extended period of limitation on the ground that the Appellants had contravened the facts to evade payment of service tax willfully. Appellants never approached the department till departmental officers demanded the records in respect of business conducted by them. Therefore, intension of suppressing the transaction and thereby service provided itself is proved beyond any doubt. Thus, we hold that demand for the period 2012-13 to 2014-15 is not sustainable on the ground of limitation also. However since Appellants have voluntary paid an amount of Rs. 34,72,629/- under Rule 6 (3) (A) and Rs. 26,30,230/- towards interest for the period 2012-13 to 2014-15, the same will not be refundable. Interest and penalty - We find that the issue is no more res integra. Once demand is not sustainable, interest and penalty u/s 78 would not be imposable. Partial demand has been confirmed under Rule 6(3)(A) of CCR, 2004. In this connection, Appellant have produced copy of final order 2021 (8) TMI 1417 - CESTAT ALLAHABAD , in the case of their sister concern (M/s Beeaar Autowheels India Pvt. Ltd.), wherein partial demand had been confirmed under Rule 6(3)(A) of CCR, 2004 and Commissioner (Appeals) upheld the imposition of penalty. Thus, we set aside both the impugned orders and allow the appeals with consequential relief, as per law.

Summary

Issues Involved:

1. Disallowance of Cenvat credit u/r 6(3) of Cenvat Credit Rules, 2004.
2. Demand of service tax on logistic charges.
3. Demand of service tax on collection of toll tax at toll plaza.
4. Demand of service tax on other taxable services for the period 2015-16 and 2016-17.

Issue No. 1: Disallowance of Cenvat credit u/r 6(3) of Cenvat Credit Rules, 2004

The Learned Commissioner held that the Appellants availed Cenvat credit relating to taxable and exempted services without maintaining separate accounts or following the necessary provisions u/r 6(2), 6(3), and 6(3A) of CCR, 2004. Consequently, demands were raised for the period 2012-13 to 2014-15 at 6% of the value of exempted services, and for 2015-16 and 2016-17 at 7%. The Appellants argued that they maintained separate records for input services at workshops and showrooms, and that they were liable for a proportionate payment which they had duly made. The Tribunal held that the benefit of Rule 6(3A) cannot be denied even if the option was not exercised at the beginning of the year, citing multiple precedents. The Tribunal also accepted the Appellants' submission that services availed at workshops were exclusively related to taxable services and thus not liable for reversal. The Tribunal ordered for appropriation of the amounts already paid by the Appellants towards the demand and interest.

Issue No. 2: Demand of service tax on logistic charges

The Department contended that the Appellants had not deposited service tax on logistic charges recovered from car buyers, treating these charges as a separate service. The Appellants argued that logistic charges were part of the transaction value of the car sale, on which VAT was already paid. The Tribunal noted that VAT and service tax are mutually exclusive, and since VAT was paid on logistic charges, service tax could not be demanded. This position was also supported by a previous order of the Commissioner (Appeals) in a similar case involving the Appellants' sister concern, which the Department had not appealed. Therefore, the Tribunal held that service tax could not be demanded on logistic charges.

Issue No. 3: Demand of service tax on collection of toll tax at toll plaza

The Department held that the Appellants' activity of collecting toll tax for NHAI constituted a taxable service. The Appellants argued that their activity fell under the negative list u/s 66D(h) of the Finance Act, 1994, and that they collected toll in their independent capacity, not as agents of NHAI. The Tribunal cited multiple precedents where it was held that toll collection under a contract with NHAI is not liable for service tax, as the Appellants were not acting as commission agents but had secured the right to collect toll independently. Therefore, the Tribunal set aside the demand on toll collection.

Issue No. 4: Demand of service tax on other taxable services for the period 2015-16 and 2016-17

The Statement of Demand issued for 2015-16 and 2016-17 proposed a demand based on discrepancies between amounts declared in ST-3 returns and amounts received under various heads in the balance sheet. The Appellants argued that the differences were due to discounts received from suppliers and other non-service-related receipts. The Tribunal found that the discounts and other amounts did not pertain to any service provided by the Appellants and thus were not liable for service tax. The Tribunal set aside the entire demand of Rs. 4.26 crores on account of other income.

Limitation and Penalties:

The Tribunal held that the extended period of limitation was not invocable as the issues involved interpretation of CCR and service tax provisions, and there was no deliberate suppression of information by the Appellants. Consequently, the demand for the period 2012-13 to 2014-15 was also set aside on the ground of limitation. Penalties were also set aside, as the Tribunal found no contumacious conduct on the part of the Appellants.

The appeals were allowed with consequential relief.