2024 (8) TMI 1404 - AT - Service Tax

Classification of service - Cargo handling service or construction service - Cargo handling service or manpower supply service? - Demand of service tax construction services rendered by the assessee - Penalties under Sections 77(1)(a), 77(1)(b) and 77(1)(c) of the Finance Act, 1994 as well as Rule 7C of the Service Tax Rules, 1994 - assessee have failed to take registration and not filed returns in respect of the services rendered. Cargo handling service or construction service - HELD THAT - The entire demand has been raised only on cargo handling service and there is no separate demand raised for construction service . It is a settled law that no service tax liability can be fastened on unidentified service. It is observed that the Notice in this case was issued without specifying the nature of activity carried out by the appellant-assessee and without classifying the service under any particular category of taxable service. The entire demand has been raised in the Notice on the basis of comparison of the figures as reflected in their Balance Sheet, profit and loss account and S.T.-3 Returns, for the period from 2008-09 to 2012-13. The demand of Service Tax by comparing the turnover found in the Profit Loss Accounts/Balance Sheets/Bank Statements with that of the ST-3 Returns, without proper inquiry/investigation carried out by the Revenue and without any admissible evidence, is not sustainable - the submission of the appellant-assessee agreed upon that the demands confirmed in the impugned order without quantifying the service tax liability under each category of taxable service is not sustainable. Demand of Service Tax under the category of cargo handling service - Cargo handling service or manpower supply service? - appellant-assessee contended that they have only supplied manpower for the purpose of loading of cement in the trucks and wagons - HELD THAT - A similar issue, in their own case for the earlier period, has already been decided by this Tribunal in M/S. SEN BROTHERS VERSUS COMMR. OF CGST CENTRAL EXCISE, BOLPUR 2023 (12) TMI 1345 - CESTAT KOLKATA wherein this Tribunal held that the activity of supply of manpower for loading of cement would not be classifiable under the category of 'Cargo Handling Service' - the activity of supply of manpower for loading of cement in trucks and wagons is not liable to be classified under the category of cargo handling service - the demand of Service Tax under the 'category of cargo handling service is not sustainable. Demand of service tax construction services rendered by the assessee - HELD THAT - The ld. adjudicating authority has excluded the value of construction services rendered to IIT - Kharagpur, NIT- Durgapur and M/s. BIT, Mesra also. The ld. adjudicating authority has arrived at the balance Service Tax payable by the appellant-assessee as Rs.2,46,75,336/-. However, the ld. adjudicating authority has not mentioned under which category the appellant-assessee is liable to pay Service tax. It is already observed that the demand of Service Tax confirmed in the impugned order is not sustainable, without specifying the category under which Service Tax is liable to be paid. In view of the above the demand of service tax under the category of 'Construction service' is not sustainable. Since the demand of Service Tax itself is not sustainable, the question of demanding interest and imposing penalty on this demand does not arise. Penalties under Sections 77(1)(a), 77(1)(b) and 77(1)(c) of the Finance Act, 1994 as well as Rule 7C of the Service Tax Rules, 1994 - assessee have failed to take registration and not filed returns in respect of the services rendered - HELD THAT - As the services rendered by the assessee have been held to be not liable to Service Tax under the category of cargo handling service , we hold that no penalty is imposable under Sections 77(1)(a), 77(1)(b) and 77(1)(c) and Rule 7C ibid. The impugned order is set aside - appeal allowed.

Issues Involved:
1. Classification of services provided by the appellant-assessee.
2. Validity of service tax demand based on balance sheet and ST-3 returns comparison.
3. Demand of service tax under the category of 'cargo handling service'.
4. Exemption of 'construction services' under Notification No. 25/2012-ST.
5. Imposition of penalties under Sections 77(1)(a), 77(1)(b), 77(1)(c), and Rule 7C of the Service Tax Rules, 1994.

Detailed Analysis:

1. Classification of Services Provided by the Appellant-Assessee:
The appellant-assessee, M/s. Sen Brothers, provided 'manpower recruitment or supply agency service' and 'construction service.' The department alleged that the appellant-assessee had not paid appropriate service tax and suppressed the gross value of taxable services. The Show Cause Notice demanded service tax under the category of 'cargo handling service' for loading cement in trucks and wagons for M/s. Birla Corporation Ltd. The appellant-assessee argued that they had only supplied manpower for loading cement and had already paid service tax under the 'manpower supply service' category.

2. Validity of Service Tax Demand Based on Balance Sheet and ST-3 Returns Comparison:
The appellant-assessee contended that the demand was raised based on a comparison of figures from their balance sheet, profit and loss account, and ST-3 returns without proper inquiry or investigation. The tribunal agreed, stating that service tax liability cannot be fastened on unidentified services and that demands based solely on turnover comparison without admissible evidence are not sustainable. The tribunal relied on decisions such as Prakash Road Lines vs. Commissioner of Central Excise, Customs and Service Tax and Indian Machine Tools Manufacturers Association vs. The Commissioner of Central Excise to support this view.

3. Demand of Service Tax Under the Category of 'Cargo Handling Service':
The tribunal observed that the Show Cause Notice did not specify the nature of the activity or classify the service under a particular category of taxable service. The appellant-assessee argued that a similar issue had been decided in their favor by the tribunal in an earlier case, where it was held that the activity of supplying manpower for loading cement would not be classifiable under 'cargo handling service.' The tribunal agreed and held that the demand of service tax under the 'cargo handling service' category is not sustainable.

4. Exemption of 'Construction Services' Under Notification No. 25/2012-ST:
The department's appeal contended that the benefit of Notification No. 25/2012-ST, which exempts certain construction services, should not be extended to services provided to BIT, Mesra as it is a commercial concern. The tribunal noted that the Show Cause Notice demanded service tax only under the 'cargo handling service' category and did not mention services rendered to BIT, Mesra. The tribunal observed that the adjudicating authority had already excluded the value of construction services rendered to BIT, Mesra in the computation of service tax liability. Therefore, the tribunal held that the demand of service tax on services rendered to BIT, Mesra is not sustainable.

5. Imposition of Penalties Under Sections 77(1)(a), 77(1)(b), 77(1)(c), and Rule 7C of the Service Tax Rules, 1994:
The tribunal held that since the services rendered by the assessee were not liable to service tax under the 'cargo handling service' category, no penalties under Sections 77(1)(a), 77(1)(b), 77(1)(c), and Rule 7C could be imposed. The tribunal set aside the penalties imposed by the adjudicating authority.

Conclusion:
1. The entire demand of service tax under the 'cargo handling service' category is set aside.
2. The demands of interest and all penalties imposed on the appellant-assessee are set aside.
3. The dropping of demands by the adjudicating authority is upheld.
4. The appeal filed by the Revenue is dismissed.
5. The tribunal allowed the appeal filed by the appellant-assessee and set aside the impugned order.

(Order pronounced in the open court on 27.08.2024)

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