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2025 (3) TMI 122 - AT - Service TaxShort payment of service tax - Exemption from services tax - export of services or not - appellant has received the amount which was not reflected in the ST-3 returns for the relevant period (2015-16) - extended period of limitation - penalties - HELD THAT - In the present case it is observed that appellant is engaged in providing Goods Transport Agent services. They issue consignment notes for transportation of goods from India to Nepal for which payments are received by him from overseas clients in India who undisputedly are corporate entities. Thus the liability to pay service tax is on the consignee. By referring to provisio to the said rule Commissioner (Appeal) has concluded that the liability to pay service tax falls on the appellant - While coming to the said conclusions impugned order also rejected the arguments advanced by the appellant vis a vis Notification No 30/2012-ST which provides for payment of service tax on reverse charge basis by the person liable to pay freight. From perusal of the documents i.e. consignment note it is quite evident that both consigner and consignee are corporate entity. The freight in the present case is paid by the consignee located outside India in Nepal. The liability to pay service tax in such case would be on consignee and not on GTA as per notification no.30/2012 dated 20.06.2012 - From Rule 10 of the Place of Provision of Services Rule 2012 it is evident that in case of Good Transport Agency Service the place of provision of service is location of the person liable to pay service tax. In the present case the person liable to pay service tax is the consignor or consignee as the case may be and the location of the said person will be the place of provision of service. Extended period of limitation - HELD THAT - By combined and harmonious reading of the Rule 2(1) (d) of Service Tax Rules 1994 Rule 10 of Place of Provision of Services Rules 2012 and Notification No 30/2012-ST it is found that appellant was having a reason to bonafide belief that no service tax was payable by him in respect of service provided by him. As it is found that appellant entertained a belief which is on the basis of the notification and the documents there are no merits in invocation of extended period for making this demand. Penalties - HELD THAT - As the demand cannot stand in the test of limitation the same is set aside. Penalties imposed upon the appellant are also set aside. Conclusion - i) In the present case the person liable to pay service tax is the consignor or consignee as the case may be and the location of the said person will be the place of provision of service. ii) As it is found that appellant entertained a belief which is on the basis of the notification and the documents there are no merits in invocation of extended period for making this demand. iii) Penalties imposed upon the appellant are also set aside. Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include: (i) Whether the services provided by the appellant qualify as export of services under Rule 6A of the Service Tax Rules, 1994, and thereby exempt from service tax. (ii) Whether the demand of service tax amounting to Rs. 78,16,912/- under the proviso to Section 73(1) of the Finance Act, 1994, along with interest under Section 75 and penalty under Section 78, is justified. (iii) Whether the appellant is liable to pay service tax under the reverse charge mechanism as per Notification No. 30/2012-ST and Rule 2(1)(d) of the Service Tax Rules, 1994. (iv) Whether the invocation of the extended period of limitation for the demand is justified. (v) Whether the penalties imposed under Sections 77 and 78 of the Finance Act, 1994, are justified. ISSUE-WISE DETAILED ANALYSIS Export of Services The appellant contended that the services provided to clients in Nepal qualify as export of services, thus exempt from service tax. Under Rule 6A of the Service Tax Rules, 1994, services are considered exported if specific conditions are met, including the location of the service recipient outside India and payment received in convertible foreign exchange. The Tribunal examined Rule 10 of the Place of Provision of Services Rules, 2012, which states that for goods transportation services, the place of provision is the location of the person liable to pay tax. Since the consignee was located in Nepal, a non-taxable territory, the appellant argued the service qualified as export. However, the Tribunal found that the place of provision was not outside India because the person liable to pay tax was the appellant, as per the proviso to Rule 2(1)(d) of the Service Tax Rules, 1994. Demand of Service Tax The demand for service tax was based on the appellant's alleged short payment. The Tribunal noted that the appellant had provided transportation services to both domestic and international clients but failed to pay the appropriate service tax. The Tribunal upheld the demand, emphasizing the appellant's failure to substantiate their claim with adequate documentation and the absence of evidence to support their exemption claim. Reverse Charge Mechanism The appellant argued that under Notification No. 30/2012-ST, the liability to pay service tax was on the service recipient under the reverse charge mechanism. The Tribunal acknowledged that the notification specifies that service tax is payable by the consignee if they are a corporate entity. However, since the consignee in Nepal was in a non-taxable territory, the Tribunal concluded that the appellant was liable to pay service tax. Extended Period of Limitation The Tribunal considered whether the extended period for demand was justified, which is applicable in cases of fraud, collusion, willful misstatement, or suppression of facts. The Tribunal found that the appellant's failure to disclose the taxable value and the discovery of short payment through third-party data indicated an intention to evade tax, justifying the extended period. Penalties The Tribunal upheld the penalties imposed under Sections 77 and 78 of the Finance Act, 1994. The appellant's failure to disclose actual receipts and the suppression of facts warranted the imposition of penalties. The Tribunal also upheld penalties for not paying service tax electronically and for not submitting ST-3 returns. SIGNIFICANT HOLDINGS The Tribunal held that the appellant was liable to pay service tax on the services provided, as they did not qualify as export of services. The Tribunal emphasized the applicability of the reverse charge mechanism and the appellant's liability due to the consignee's location in a non-taxable territory. The Tribunal justified the invocation of the extended period for demand due to the appellant's suppression of facts. The Tribunal concluded that the penalties imposed were appropriate given the appellant's failure to comply with statutory obligations. The appeal was dismissed, and the demand and penalties were upheld.
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