2025 (1) TMI 895 - AT - Service Tax

Levy of service tax - Cleaning Service and Goods Transport by Road Service - evacuation and transportation of fly ash - time limitation - HELD THAT - Timilar issue was before this Bench in the case of M/S MARSHALL CORPORATION LTD., VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, KOLKATA. 2023 (7) TMI 766 - CESTAT KOLKATA . In this case, the entire consideration was sought to be taxed under the category of Cleaning services , without any bifurcation between Cleaning service and GTA services. There are considerable force in the arguments of the appellant that if there is any movement of goods resulting in GTA Service, the Service Tax is required to be paid by the recipient of the service. It is not in dispute that the clients the corporate public limited companies, who are one of the seven categories of persons responsible to pay the Service Tax on Reverse Charge basis. On this count itself the confirmed demand under this heading is required to be set aside. Time limitation - HELD THAT - No case has been made out by the Revenue towards suppression with an intent to evade Service Tax payment. Therefore, the confirmed demand for the extended period is not legally sustainable and the same is set aside on account of limitation also. Conclusion - The activities undertaken by the Appellant are not chargeable to service tax under the category of Cleaning Service . The demands for service tax under Cleaning Service and GTA Service were set aside. The demand for the extended period was deemed time-barred, and the penalty under Section 78 was not justified. The appeal is allowed on merits fully and partly on account of limitation.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the activities undertaken by the appellant, specifically the evacuation and transportation of fly ash, are liable to service tax under the categories of 'Cleaning Service' and 'Goods Transport by Road Service' (GTA).
Whether the demand for service tax for the period 2004-05 to 2006-07 is time-barred.
Whether the penalty imposed under Section 78 of the Finance Act, 1994, is justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Services

Relevant Legal Framework and Precedents: The case references Section 65(24b) of the Finance Act, 1994, which defines 'Cleaning Activity'. The precedents considered include the Tribunal's decisions in Marshall Corporation Ltd. and M/s. Novel Engineering & Technical Works P Ltd.
Court's Interpretation and Reasoning: The Tribunal found that the activities of evacuating ash and transporting it within the power plant premises were composite and integral to the production process, rather than distinct service activities liable to service tax.
Key Evidence and Findings: The appellant's activities were classified by the Department as 'Cleaning Service' and 'GTA service'. However, the Tribunal noted that the activities were inseparable and integral to the industrial process.
Application of Law to Facts: The Tribunal applied the precedent set in similar cases, determining that such activities were not chargeable under 'Cleaning Service' and that any GTA service tax liability should fall on the recipient under the reverse charge mechanism.
Treatment of Competing Arguments: The appellant argued that the services were wrongly classified and that any GTA tax should be paid by the recipient. The Tribunal agreed, finding the Department's classification and demand unsustainable.
Conclusions: The Tribunal set aside the demands for service tax under 'Cleaning Service' and 'GTA Service', concluding that the activities were not taxable as claimed by the Department.

Issue 2: Time-Barred Demand

Relevant Legal Framework and Precedents: The normal period for issuing a show cause notice was one year. The Tribunal considered whether the delay in issuing the notice was justified.
Court's Interpretation and Reasoning: The Tribunal found that the Department was aware of the appellant's activities and contracts since 2006, yet delayed issuing the notice until 2008 without new facts emerging.
Key Evidence and Findings: The appellant had submitted relevant documents and filed returns regularly. The delay in issuing the notice was not justified by any new findings.
Application of Law to Facts: The Tribunal applied the principle that a lack of malafide intent and regular filing of returns negates the justification for an extended period demand.
Treatment of Competing Arguments: The appellant argued that the demand was time-barred, which the Tribunal accepted, noting the absence of suppression or intent to evade tax.
Conclusions: The Tribunal set aside the demand for the extended period as time-barred.

Issue 3: Penalty under Section 78

Relevant Legal Framework and Precedents: Section 78 of the Finance Act, 1994, pertains to penalties for service tax evasion.
Court's Interpretation and Reasoning: The Tribunal agreed with the Commissioner (Appeals) that there was no malafide intent on the appellant's part, thus the penalty under Section 78 was not imposable.
Key Evidence and Findings: The Tribunal noted the appellant's compliance with registration and return filing, and the absence of evidence of intent to evade tax.
Application of Law to Facts: The Tribunal applied established legal principles to determine that the penalty was unjustified.
Treatment of Competing Arguments: The appellant's argument against the penalty was upheld, as the Department did not appeal the dropping of the penalty.
Conclusions: The penalty under Section 78 was set aside.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "We hold that the activities undertaken by the Appellant are not chargeable to service tax under the category of 'Cleaning Service'. Hence, the demands confirmed in the impugned Revision Order are not sustainable."
Core Principles Established: The Tribunal reinforced the principle that composite activities integral to an industrial process are not separately taxable as services. It also emphasized the liability of service tax under GTA should fall on the recipient under the reverse charge mechanism.
Final Determinations on Each Issue: The demands for service tax under 'Cleaning Service' and 'GTA Service' were set aside. The demand for the extended period was deemed time-barred, and the penalty under Section 78 was not justified.

The appeal was allowed on merits and partly on account of limitation, granting the appellant consequential relief as per law.

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