2024 (12) TMI 1301 - AT - Service Tax

Non/short payment of service tax - transportation charges received under C F services - job charges under business auxiliary service - renting of immovable property service - extended period of limitation - penalties u/s 77 and 78 of FA. Demand of Rs.44,83,913/- under the category of 'GTA' service - HELD THAT - The Appellant had been engaged as a consignment agent of M/s. Tata Steels Ltd. and had also provided goods transport agency service . In this regard, the Appellant produced a letter dated 09.01.2011 issued by M/s. Tata Steels Ltd. wherein M/s. Tata Steels Ltd. have categorically stated that they are paying Service Tax in respect of the services under goods transport agency (GTA) service - the activity undertaken by the Appellant is appropriately classifiable under the category of goods transport agency (GTA) service, the Service Tax for which is liable to be paid by the recipient of Service viz. M/s. Tata Steels Ltd. In this case, the above letter clearly indicates that M/s. Tata Steels Ltd. has accepted their liability for payment of Service Tax under GTA services under reverse charge mechanism and discharged their Service Tax liability. In view of the above, the demand of Service Tax of Rs.44,83,913/- from the Appellant under clearing and forwarding agency service is not sustainable. Demand of service tax of Rs.1,07,40,970/- under the category of 'Business Auxiliary Service' - HELD THAT - The Appellant has been rendering job work at the premises of the principal wherein, after the job work, the final product has been cleared on payment of duty by the principal. However, in the impugned order, the benefit of the above Notification has not been extended to the Appellant on the ground that the job work has not been done at their own premises. In this regard, it is observed that there is no such condition in the notification that the job work has to be done in their own premises. Even if the job work is undertaken at the premises of the customer, the benefit of the exemption under N/N. 08/2005-S.T cannot be denied to the appellant. Accordingly, the demand of Service Tax of Rs.1,07,40,970/- confirmed under the category of business auxiliary service in the impugned order is not sustainable and thus, the same is set aside. Demand of Service Tax of Rs.3,43,641/-under the category of renting of immovable property service - demand in this case has been raised for the period from 2007-08 to 2011-12 and the Show Cause Notice was issued on 19.10.2012 - Extended period of limitation - HELD THAT - There was confusion prevalent during the relevant period about the Service Tax liability of an assessee under the category of renting of immovable property service and thus the invocation of the extended period of limitation is set aside. Thus, the appellant is liable to pay Service Tax for the normal period of limitation, along with interest. Imposition of penalty under Section 78 of the Finance Act, 1994 - HELD THAT - There is no suppression of facts with intention to evade the tax established in this case. Accordingly, no penalty is imposable on the Appellant and hence the same is set aside. Penalty imposed under Section 77 of the Act - HELD THAT - The same has been imposed based on the allegation that the Appellant has not reflected the correct service values in their S.T.-3 Return. This allegation is not substantiated. Accordingly, the penalty imposed under Section 77 ibid. is also set aside. Conclusion - The demands under 'clearing and forwarding agency service' and 'business auxiliary service' were set aside. The demand under 'renting of immovable property service' was upheld only for the normal period, and all penalties were set aside. Appeal disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the demand for Service Tax under the category of 'clearing and forwarding agency service' is sustainable, given that the recipient of the service, M/s. Tata Steels Ltd., has already paid the Service Tax under the reverse charge mechanism.
Whether the demand for Service Tax under the category of 'business auxiliary service' is justified when the services rendered qualify for exemption under Notification No. 08/2005-S.T.
Whether the demand for Service Tax under the category of 'renting of immovable property service' is valid, particularly concerning the invocation of the extended period of limitation.
Whether the penalties imposed under Sections 77 and 78 of the Finance Act, 1994, are justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Clearing and Forwarding Agency Service

Relevant Legal Framework and Precedents: The issue involves the applicability of Service Tax under the 'goods transport agency' (GTA) service, which is payable by the recipient of the service under the reverse charge mechanism.
Court's Interpretation and Reasoning: The court observed that M/s. Tata Steels Ltd. had accepted liability for the Service Tax under GTA services and discharged it. Therefore, the demand from the appellant was not sustainable.
Key Evidence and Findings: A letter from M/s. Tata Steels Ltd. confirmed their payment of Service Tax under the GTA category.
Application of Law to Facts: The court applied the reverse charge mechanism principle, concluding that the appellant was not liable for the Service Tax.
Treatment of Competing Arguments: The appellant's argument that they were not liable due to the recipient's payment was accepted.
Conclusions: The demand of Rs.44,83,913/- was set aside.

Issue 2: Business Auxiliary Service

Relevant Legal Framework and Precedents: The exemption under Notification No. 08/2005-S.T. for job work services was central to this issue.
Court's Interpretation and Reasoning: The court noted that the exemption does not require job work to be done at the appellant's premises, and thus, the denial of exemption was incorrect.
Key Evidence and Findings: The appellant provided job work at the principal's site, which was exempt under the notification.
Application of Law to Facts: The court applied the notification's provisions, allowing the exemption for job work performed at the principal's site.
Treatment of Competing Arguments: The appellant's contention regarding the exemption's applicability was upheld.
Conclusions: The demand of Rs.1,07,40,970/- was set aside.

Issue 3: Renting of Immovable Property Service

Relevant Legal Framework and Precedents: The issue involved the applicability of the extended period of limitation for Service Tax demands.
Court's Interpretation and Reasoning: The court found that there was confusion regarding the tax liability during the relevant period, thus invalidating the extended period's invocation.
Key Evidence and Findings: The appellant had paid the Service Tax for the normal period, but not for the extended period.
Application of Law to Facts: The court applied the principle that confusion about tax liability negates the extended period's applicability.
Treatment of Competing Arguments: The appellant's argument against the extended period was accepted.
Conclusions: The demand for the extended period was set aside, but liability for the normal period was upheld.

Issue 4: Penalties under Sections 77 and 78

Relevant Legal Framework and Precedents: The imposition of penalties under the Finance Act, 1994, requires evidence of suppression or incorrect service value reporting.
Court's Interpretation and Reasoning: The court found no evidence of suppression or incorrect reporting by the appellant.
Key Evidence and Findings: The allegations against the appellant were unsubstantiated.
Application of Law to Facts: The court applied the law, requiring evidence of intent to evade tax for penalties.
Treatment of Competing Arguments: The appellant's defense against the penalties was upheld.
Conclusions: Penalties under Sections 77 and 78 were set aside.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "In view of the above, we hold that the demand of Service Tax of Rs.44,83,913/- from the Appellant under 'clearing and forwarding agency service' is not sustainable. Hence, we set aside the same."
Core Principles Established: The judgment reinforces the principle that the recipient's payment of Service Tax under the reverse charge mechanism absolves the service provider of liability. It also clarifies the conditions under which exemptions apply and the limitations on invoking extended periods for tax demands.
Final Determinations on Each Issue: The demands under 'clearing and forwarding agency service' and 'business auxiliary service' were set aside. The demand under 'renting of immovable property service' was upheld only for the normal period, and all penalties were set aside.

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