2024 (7) TMI 550 - AT - Service Tax

Classification of service - manufacture of ply wood and also doing job work of seasoning of the wood on behalf of others - GTA service or Business Auxiliary Service? - HELD THAT - The activity of seasoning of timber by the appellant was made taxable w.e.f. 16.06.2005 whereas the Ld. Commissioner (Appeals) has confirmed the demand of Rs. 3,37,719/- for the period 10.09.2004 to 31.03.2006 @10.2% and on an amount of Rs.4,95,000/- for the period 01.04.2006 to 31.03.2007 @12.24%. Further, we hold that the Ld. Commissioner has wrongly confirmed the demand on the activity of seasoning of timber for the period 10.09.2004 to 16.06.2005 till the entry was amended. As per the appellant, if the benefit of this period is given then their demand would reduce by Rs. 2,09,427/- out of the total demand and they will be entitle to refund of excess duty paid. It is noted that the submissions of the appellant that they are eligible for benefit of SSI exemption under N/N. 6/2005-ST dated 01.03.2005 if their demand of service Tax is considered from 16.06.2005. This aspect will be examined by the Original Authority after fresh quantification. It is also held that since the service tax demand has been confirmed by adjudicating authority, by taking the figures of the amount of job work done from Balance Sheet/ Accounts; the appellant is also entitled to the benefit of cum-tax. Matter remanded back to quantify the demand of service tax w.e.f. 16.06.2005 when the definition of business auxiliary service was amended - appeal allowed by way of remand.

Summary

Issues:
1. Interpretation of the demand of service tax on job work of wood seasoning.
2. Applicability of service tax on inward freight charges.
3. Eligibility for abatement under the service of GTA.
4. Benefit of SSI exemption under Notification No.6/2005-ST.
5. Consideration of cum-tax value.
6. Penalties under Sections 76, 77, and 78.

Analysis:
1. The appeal challenged the demand of service tax on the job work of wood seasoning. The appellant contended that no tax could be demanded for the period before 16.06.2005, as only activities related to production of goods were taxable during that time. The appellant argued that wood seasoning did not result in the creation of a new product, and relied on precedents to support their case.

2. The issue of service tax on inward freight charges was also raised. The appellant had not paid service tax on these charges under the category of GTA service. The appellant's counsel argued that the appellant was eligible for abatement under the service of GTA, which led to the dropping of a portion of the demand and the associated penalty.

3. The eligibility for abatement under the service of GTA was a crucial point of contention. The appellant claimed that they were entitled to claim abatement at a certain rate, which was accepted by the Ld. Commissioner (Appeals), resulting in the dropping of a specific amount from the demand and the penalty imposed under Section 76.

4. The appellant sought the benefit of the Small Scale Industry (SSI) exemption under Notification No.6/2005-ST. The counsel argued that if the activity was taxable from 16.06.2005, the appellant should be eligible for this exemption. The Tribunal was asked to consider this exemption after fresh quantification by the Original Authority.

5. Consideration of cum-tax value was also raised by the appellant. They argued that the figures of job work done were taken from their balance sheet and accounts, entitling them to the benefit of cum-tax value. This point was crucial for determining the final demand amount.

6. Regarding penalties under Sections 76, 77, and 78, the appellant requested that these penalties be waived off under Section 80 of the Finance Act, 1994. They argued that they had reasonable grounds for not paying the service tax, and thus, the penalties should be dropped.

In conclusion, the Tribunal set aside the impugned order and remanded the matter back to the Original Authority with specific directions for quantifying the service tax demand, considering the SSI exemption, adjusting the excess deposit against GTA, and waiving off penalties under Sections 77 & 78. The appeal was disposed of by way of remand.