2025 (1) TMI 1440 - AT - Service Tax

Failure to discharge proper service tax - Storage and Warehousing Services (SWS) - Goods Transport Agency service (GTA) - Renting of Immovable Property Service (RIS) - whether in the facts of the case the demand levied on the appellant under section 73 under different categories viz. SWS GTA and RIS as also under section 73A are sustainable or otherwise? Storage and Warehousing Services (SWS) - HELD THAT - The rates have been prescribed for various activities covered within the ambit of rake handling contract and it was agreed that the appellant will pay wharfage and demurrage charges if any in time to Railways and inform the company for reimbursement. Therefore the perusal of these documents which clearly show that it was agreed upon that initially the appellants would pay to railways the wharfage and demurrage charges and thereafter claim the same on actual basis from cement companies. These documents support the submission of the appellant that they were merely paying on behalf of the cement companies and it was on reimbursement basis. The Adjudicating Authority has denied the exclusion of these charges primarily on the grounds that there is no evidence to suggest that this was being reimbursed on actual basis by the cement companies to the appellant which however is not correct in view of the representative documents submitted by the appellant. In any case the department s stand is that in terms of Rule 5 of the Service Tax (Determination of Value) Rules 2006 any amount received as reimbursement needs to be included in the gross value. However in view of the judgment of Hon ble High Court of Delhi subsequently upheld by Hon ble Supreme Court in the case of Intercontinental Consultants Technocrats Pvt Ltd 2018 (3) TMI 357 - SUPREME COURT Rule 5(1) of Service Tax (Determination of Value) Rules 2006 was held ultravires. It was only after amendment in Section 67 by the Finance Act 2015 the reimbursement expenditure or costs were required to be included for determination of gross value. Therefore in view of this decision any amount proposed to be included in the gross value on SWS which has been received on reimbursement basis would not sustain and on this ground also demand to the extent of non-inclusion of income on account of reimbursable wharfage and demurrage charges would not sustain. Goods Transport Agency service (GTA) - HELD THAT - In the facts of the case the Service Tax liability has to be made good by the cement companies on RCM basis and not by them whereas the department is also admitting that this amount of transportation charges from the railway station to their godown is not taken into account for the purpose of calculating gross value and short payment and only ex-godown has been taken into consideration. The other issue is whether department has relied on the income shown as local transportation charges which has been subsequently reimbursed at agreed rate as also any other charges which could be on account of their having paid initially for transportation of goods from railway station or godown directly to the distributor premises and later recovered by them. Since these aspects are not clear from the facts of the case this needs to be ascertained. Applicaility of Section 73A - HELD THAT - There is enough evidence to suggest that certain amount collected has already been paid and therefore entire amount cannot be considered as recoverable. There is some dispute about actual amount of Service Tax paid from the amount collected which has to be corroborated with the evidence. Therefore this also needs to be ascertained. Imposition of penalty on RIS - HELD THAT - The penalty under Section 76 77 78 would not survive if the payment including interest has already been made prior to 2012 itself. This also needs to be re-ascertained and reconciled before imposing penalty for balance amount of Service Tax collected but not paid before 2012. Time limitation - HELD THAT - The demand is based on P L account and ST3 returns and it is an admitted position that this P L account breakup and other things were not reflected in ST3 returns and in fact they have taken various grounds in defence of denying leviability of Service Tax on income reflected in P L account including their being pure agent etc. In the facts of the case we find that ground of limitation has been rightly invoked. However it is subject to demand getting sustained on merit itself in the denovo proceedings. Conclusion - i) The demand for including wharfage and demurrage charges in the gross value for SWS is unsustainable and this portion of the demand is set aside. ii) The issue of GTA service liability is remanded for determination of who is liable to pay the Service Tax and whether the cement companies have discharged the liability. iii) The amount of Service Tax collected and paid under Section 73A needs to be redetermined and penalties should be reassessed accordingly. iv) Penalties under Sections 76 and 78 cannot be imposed simultaneously and reassessment is required based on the sustainable demand. v) The issue of the correct penalty rate under Section 76 is remanded for determination based on the actual cut-off date and statutory provisions. Appeal allowed in part by way of remand.

2018 (3) TMI 357 - SC

1. ISSUES PRESENTED and CONSIDERED

The core legal issues addressed in this judgment include:

Whether the demand for Service Tax under various categories such as Storage and Warehousing Services (SWS), Goods Transport Agency (GTA) services, and Renting of Immovable Property Service (RIS) is sustainable.
Whether the appellant correctly acted as a 'pure agent' concerning wharfage and demurrage charges under Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006.
The applicability of Section 73A of the Finance Act, 1994, regarding the collection and non-payment of Service Tax.
The imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, and the applicability of amendments made by the Finance Act, 2012.
The issue of limitation and whether the extended period of limitation is applicable.
The correct rate of penalty under Section 76, whether Rs.100/day or Rs.200/day, during the relevant period.

2. ISSUE-WISE DETAILED ANALYSIS

Storage & Warehousing Services (SWS):

The appellant argued that wharfage and demurrage charges were reimbursed by cement companies and should not be included in the gross value for Service Tax purposes. They relied on the Supreme Court judgment in Intercontinental Consultants & Technocrats Pvt Ltd, which held Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, as ultra vires.
The Tribunal found evidence supporting the appellant's claim that these charges were reimbursed and thus should not be included in the gross value for Service Tax calculation.
The Tribunal concluded that the demand for including demurrage and wharfage charges in the gross value for SWS is unsustainable and set aside this portion of the demand.

Goods Transport Agency (GTA) Services:

The appellant contended that they acted as a GTA, and thus the Service Tax liability should be borne by the cement companies under the reverse charge mechanism.
The Tribunal noted that the department's calculation of gross value did not consider certain transportation charges, and the actual liability needed to be ascertained based on the factual matrix.
The Tribunal remanded the issue back to the Adjudicating Authority to determine the correct liability and whether the cement companies had already discharged the Service Tax liability.

Section 73A - Collection and Non-payment of Service Tax:

The appellant argued that a significant portion of the collected Service Tax had already been paid to the government, and the demand should not survive.
The Tribunal found evidence supporting partial payment and remanded the issue to ascertain the actual amount paid and the remaining liability.

Penalties under Sections 76, 77, and 78:

The appellant contested the imposition of penalties, arguing that penalties under Sections 76 and 78 could not be imposed simultaneously and that the payment of Service Tax with interest before 2012 should exempt them from penalties.
The Tribunal agreed that penalties under both sections could not be imposed simultaneously and directed the Adjudicating Authority to reassess penalties based on the sustainable demand.
The Tribunal also noted that penalties should not be imposed if the entire amount was paid before the cut-off date in 2012.

Limitation:

The Tribunal found that the extended period of limitation was rightly invoked based on discrepancies between the P&L account and ST3 returns.
However, the demand's sustainability on merit would ultimately determine the applicability of the limitation period.

Penalty Rate under Section 76:

The Tribunal noted conflicting arguments regarding the correct penalty rate and remanded the issue to determine the applicable rate based on statutory provisions during the relevant period.

3. SIGNIFICANT HOLDINGS

The Tribunal held that:

The demand for including wharfage and demurrage charges in the gross value for SWS is unsustainable, and this portion of the demand is set aside.
The issue of GTA service liability is remanded for determination of who is liable to pay the Service Tax and whether the cement companies have discharged the liability.
The amount of Service Tax collected and paid under Section 73A needs to be redetermined, and penalties should be reassessed accordingly.
Penalties under Sections 76 and 78 cannot be imposed simultaneously, and reassessment is required based on the sustainable demand.
The issue of the correct penalty rate under Section 76 is remanded for determination based on the actual cut-off date and statutory provisions.

The Tribunal remanded the appeals for redetermination of demand and penalty in light of its observations and directions.

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