2024 (11) TMI 1131 - AT - Service Tax

Demand under the category of port service and under the category of GTA Service under proviso to Section 73(2) - Interest has been demanded on the amount of service tax and CENVAT Credit confirmed - HELD THAT - As we observe that this demand pertains to services rendered to four clients. We observe that out of the demand of Rs.28,24,469/- the appellant agreed to pay service tax on the value of Rs.4,33,000/- received from M/s. Essel Mining Industries Ltd., under the category of 'Port Services'. Accordingly, we confirm this demand along with interest, under the category of 'Port Services. Services rendered To Guru Shipping Clearing and M/s. Lee Muirhead Pvt. Ltd. We observe that the amended definition of 'Port Service' which came into effect from 01.07.2010 is not applicable in this case. Accordingly, we hold that the services rendered by the appellant to the above said clients for handling export cargo in the docks area is appropriately classifiable as 'cargo handling service' and the same are excluded from payment of service tax as per the definition of 'cargo handling service', as defined under Section 65(23) of the Finance Act, 1994. Thus, we hold that the demand confirmed in the impugned order under the category of 'Port Services' is not sustainable. Service rendered by the appellant to M/s. Tata Chemicals Ltd. We observe that the actual service rendered by the appellant is transportation of goods. M/s. Tata Chemicals Ltd., being a registered company, paid the freight and therefore, in terms of Sub-clause (V) of Rule-2(1)(d) of Service Tax Rules, 1994, we observe that the service recipient is liable to pay service tax on the GTA service under reverse charge basis. Accordingly, we hold that the demand of service tax confirmed in the impugned order under the category of 'port services' is not sustainable and hence the same is set aside. Denial of CENVAT Credit - appellant is having other units but no centralized registration has been obtained and accordingly CENVAT Credit availed on the basis of such invoices was disallowed - We observe that when the receipt and utilisation is not in dispute, CENVAT Credit cannot be denied merely on procedural grounds. We hold that the CENVAT Credit availed by the appellant cannot be denied. Levy of interest and penalties - Since the demand of service tax and denial of CENVAT Credit confirmed in the impugned order is held as not sustainable, the question of demanding interest and imposing penalty on the appellant does not arise.

Issues Involved:

1. Demand of service tax under the category of 'Port Services.'
2. Denial of CENVAT Credit.
3. Imposition of interest and penalties.

Detailed Analysis:

1. Demand of Service Tax under 'Port Services':

The primary issue was the confirmation of a service tax demand amounting to Rs. 28,24,469/- under the category of 'Port Services.' The appellant contested this demand, asserting that the services rendered to certain clients were not liable to service tax under 'Port Services.' Specifically, they argued that services rendered to M/s. Guru Shipping & Clearing and M/s. Lee & Muirhead Pvt. Ltd. involved handling export cargo inside the dock area, which is excluded from service tax under the definition of "Cargo Handling Service" as per Section 65(23) of the Finance Act, 1994. The Tribunal agreed with the appellant, noting that the adjudicating authority had erroneously applied the amended definition of 'Port Service' from the Finance Act, 2010, which was not applicable to the period in question (2008-09). Consequently, the demand for service tax under 'Port Services' for these clients was deemed unsustainable.

Regarding services rendered to M/s. Tata Chemicals Ltd., the Tribunal observed that the appellant provided transportation of goods, with M/s. Tata Chemicals Ltd. being liable to pay service tax under the reverse charge mechanism, as per Rule-2(1)(d) of Service Tax Rules, 1994. Therefore, the demand under 'Port Services' was also set aside for this client.

However, the appellant accepted the service tax liability on services rendered to M/s. Essel Mining & Industries Ltd., amounting to Rs. 4,33,000/-. The Tribunal upheld this portion of the demand along with interest.

2. Denial of CENVAT Credit:

The adjudicating authority denied CENVAT Credit of Rs. 2,85,577/- on the grounds that the invoices bore the address of the appellant's headquarters, and no centralized registration was obtained. The appellant contended that the denial was beyond the scope of the Show Cause Notice and that they were entitled to avail CENVAT Credit for services received at their headquarters. The Tribunal agreed with the appellant, emphasizing that when receipt and utilization of services are not in dispute, CENVAT Credit cannot be denied merely on procedural grounds. The Tribunal cited previous decisions, such as Doshion Ltd. Vs. Commissioner of Central Excise, Ahmedabad and Commissioner of Central Excise, Bangalore-I Vs. Ecof Industries Pvt. Ltd., to support this view. Consequently, the denial of CENVAT Credit was overturned.

3. Imposition of Interest and Penalties:

Given that the majority of the service tax demand and the denial of CENVAT Credit were found unsustainable, the Tribunal held that the imposition of interest and penalties on the appellant was unwarranted. The Tribunal explicitly stated that since the primary demands were not sustainable, the associated penalties and interest did not arise.

Conclusion:

The Tribunal's order resulted in the confirmation of service tax only on the amount of Rs. 4,33,000/- under 'Port Services' for services rendered to M/s. Essel Mining & Industries Ltd., along with interest. The remaining service tax demands were set aside. The denial of CENVAT Credit was also overturned, and no penalties were imposed on the appellant. The appeal was disposed of accordingly.

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