2025 (1) TMI 427 - AT - Service Tax

Levy of service tax - clearing and forwarding agency service for the period 2010-11 to 2013-14 - SCN has been issued on the basis of the difference between the figures found in the balance sheet and S.T.-3 Returns - suppression of facts or not - Demand of Service Tax under the category of GTA service - Appellant's failure to register and file returns under this category during the relevant period - Levy of penalty. Levy of service tax - clearing and forwarding agency service for the period 2010-11 to 2013-14 - SCN has been issued on the basis of the difference between the figures found in the balance sheet and S.T.-3 Returns - suppression of facts or not - HELD THAT - As the Appellant had been filing their Returns regularly under the category of clearing and forwarding agency service, it is found that they have not suppressed any information from the Department. If there is any short payment of Service Tax under this category, then the demand should have been raised within the normal period of limitation - the demand of Service Tax confirmed in the impugned order by invoking the extended period of limitation under the category of clearing and forwarding agency service is not sustainable. The Appellant is liable to pay Service Tax for the normal period of limitation confirmed in the impugned order. As there is no suppression of fact with intention to evade the tax established in this case, no penalty is imposable for the demand confirmed under this category for the normal period of limitation. Demand of Service Tax under the category of GTA service - Appellant's failure to register and file returns under this category during the relevant period - HELD THAT - The Appellant had not taken registration under the category of GTA service and not filed Returns in respect of this category. It is on record that the Appellant had been collecting Service Tax under the category of GTA service and had been paying Service Tax under the category of GTA service, but had not filed returns to that effect under the said category. The Appellant has suppressed information regarding collection of Service Tax by them under the category of GTA service and not paid appropriate Service Tax to the Department. Hence, the extended period of limitation has been rightly invoked to demand Service Tax under the category of GTA service. Therefore, the Appellant is liable to pay Service Tax of Rs.4,31,764/-, along with interest, under the category of GTA service. Levy of penalty - HELD THAT - The Appellant had taken registration under the category of GTA service only on 04.09.2013. Hence, penalty has been rightly imposed on them under Section 77 of the Finance Act, 1994. Accordingly, the penalty imposed for non-registration under Section 77 of the Finance Act, 1994 upheld. Conclusion - (i) The demand of Service Tax under the category of clearing and forwarding agency service for the extended period of limitation is set aside. The Appellant is liable to pay Service Tax for the normal period of limitation. No penalty shall be imposable for the demand confirmed under this category for the normal period of limitation. (ii) The issue is remanded back to the adjudicating authority for the purpose of quantification of the demand under the category of clearing and forwarding agency service . (iii) The Appellant is liable to pay the Service Tax of Rs.4,31,764/-, along with interest, under the category of GTA service. They are also liable to pay penalty equal to the amount of tax confirmed under Section 78 of the Finance Act, 1994. (iv) The penalty imposed under Section 77 of the Finance Act, 1994 is upheld. Appeal disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the demand for Service Tax under the category of "clearing and forwarding agency service" for the period 2010-11 to 2013-14 is sustainable, particularly when the extended period of limitation is invoked.
• Whether the demand for Service Tax under the category of "goods transport agency (GTA) service" is sustainable, considering the Appellant's failure to register and file returns under this category during the relevant period.
• Whether penalties imposed under Sections 77 and 78 of the Finance Act, 1994, are justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Demand under "clearing and forwarding agency service"

• Relevant legal framework and precedents: The case involves the interpretation of the Finance Act, 1994, specifically concerning the invocation of the extended period of limitation for Service Tax demands. Precedents cited include cases like M/s. Munna Construction and Arya Logistics, which emphasize that extended limitation cannot be invoked if the taxpayer has regularly filed returns and there is no suppression of facts.
• Court's interpretation and reasoning: The court found that the Appellant had been registered and regularly filing returns under the "clearing and forwarding agency service" category. The demand was based on discrepancies between the balance sheet and S.T.-3 Returns, not on any suppression of facts.
• Key evidence and findings: The Appellant's regular filing of returns and lack of suppression of information were key factors. The Show Cause Notice was issued based on data from the Appellant's financial documents.
• Application of law to facts: The court applied the principle that the extended period of limitation is not applicable when the taxpayer has been compliant in filing returns and there is no evidence of intent to evade tax.
• Treatment of competing arguments: The Revenue argued for the extended period due to alleged suppression, but the court found no evidence supporting this claim.
• Conclusions: The demand for the extended period was set aside, and the Appellant was held liable only for the normal period of limitation.

Issue 2: Demand under "goods transport agency (GTA) service"

• Relevant legal framework and precedents: The Finance Act, 1994, governs the registration and filing requirements for Service Tax under different service categories.
• Court's interpretation and reasoning: The court noted that the Appellant collected Service Tax under GTA but failed to register and file returns until 2013, indicating suppression of information.
• Key evidence and findings: The Appellant's failure to register and file returns under GTA service, despite collecting Service Tax, was crucial.
• Application of law to facts: The court found that the extended period of limitation was applicable due to the Appellant's non-compliance and suppression of information.
• Treatment of competing arguments: The Appellant's argument that they eventually registered and filed returns was insufficient to negate the finding of suppression.
• Conclusions: The demand for Service Tax under GTA, including penalties, was upheld.

Issue 3: Penalties under Sections 77 and 78

• Relevant legal framework and precedents: Sections 77 and 78 of the Finance Act, 1994, pertain to penalties for non-registration and suppression of tax information.
• Court's interpretation and reasoning: The court upheld the penalties under both sections due to the Appellant's failure to register and file returns under GTA service.
• Key evidence and findings: The evidence of non-registration and non-filing of returns supported the imposition of penalties.
• Application of law to facts: The penalties were deemed appropriate given the Appellant's non-compliance and suppression of information.
• Treatment of competing arguments: The Appellant's compliance after the fact did not mitigate the penalties for the prior period of non-compliance.
• Conclusions: Penalties under Sections 77 and 78 were upheld.

3. SIGNIFICANT HOLDINGS

• Core principles established: "The extended period of limitation cannot be invoked if the taxpayer has been compliant in filing returns and there is no evidence of intent to evade tax." This principle was applied to the clearing and forwarding agency service demand.
• Final determinations on each issue:
• For the "clearing and forwarding agency service," the demand for the extended period was set aside, with liability limited to the normal period.
• For the "goods transport agency service," the demand and penalties were upheld due to suppression of information.
• Penalties under Sections 77 and 78 were confirmed due to non-registration and non-filing of returns under GTA service.

The judgment provides a nuanced application of the law concerning the extended period of limitation and the obligations of service providers under the Finance Act, 1994. It distinguishes between compliant and non-compliant behavior, emphasizing the importance of registration and accurate filing of returns to avoid extended liability and penalties.