2010 (6) TMI 31 - AT - Service Tax

Cargo handling service- The appellants are herein rendering cargo handling service. During the period 2002, 2005, a demand of service tax has been confirmed and a penalty of Rs.500/- has been imposed under Section 75A of the Finance Act, 1994. Held that- set aside the impugned order insofar as it disallows the claim for abatement and remit the case to the adjudicating authority for considering the documentary evidence produced by the assessees and passing fresh orders after extending a reasonable opportunity to the assessees of being heard in their defence. The appeal is thus allowed by way of remand.

Summary

Issues:
1. Service tax demand and penalty imposition during 2002-2005
2. Dispute over tax liability and penalty imposition
3. Benefit of abatement of transportation charges

Analysis:

Issue 1: Service tax demand and penalty imposition during 2002-2005
The appellants, engaged in cargo handling services, faced a demand for service tax and a penalty under Section 75A of the Finance Act, 1994 for the period between 2002 and 2005. The adjudicating authority confirmed the demand and penalty. The learned counsel for the assessees argued that since penal proceedings were dropped due to ignorance of tax liability, the service tax demand should not be sustained as it is barred by limitation. However, the Vice-President upheld the demand, noting that the assessees did not dispute their tax liability before the adjudicating authority.

Issue 2: Dispute over tax liability and penalty imposition
The key contention revolved around the dispute over tax liability and the imposition of penalties. The argument put forth by the assessees regarding ignorance of tax liability leading to the dropping of penal proceedings was not accepted as a ground to nullify the service tax demand. The Vice-President emphasized that the assessees' failure to dispute their tax liability before the adjudicating authority was a crucial factor in upholding the demand and penalty imposition.

Issue 3: Benefit of abatement of transportation charges
Regarding the benefit of abatement of transportation charges, it was observed that the invoices relied upon by the Department for raising the demand clearly showed transportation charges separately. As per the Board's Circular dated 1.8.2002, tax was leviable on cargo handling charges. However, the Vice-President directed the adjudicating authority to verify the invoices to consider extending the benefit of abatement. The impugned order disallowing the claim for abatement was set aside, and the case was remitted to the adjudicating authority for reevaluation based on the documentary evidence provided by the assessees, with a reasonable opportunity for the assessees to present their defense.

In conclusion, the appeal was allowed by way of remand, emphasizing the need for a thorough verification of invoices and a fair consideration of the benefit of abatement of transportation charges.