2009 (12) TMI 314 - AT - Service Tax

Limitation- the appellant had been registered with the department as a provider of or cargo handling services with effect from 16-8-2002. The appellants had wrongly described the service rendered by them as stevedoring in their application instead of port services or cargo handling service . Thus SCN issued for demanding service tax and penalty. Held that- it cannot hold that the department was not aware of the nature of activity undertaken by the appellants when it was issued a registration certificate in August, 2002. There fore, as rightly argued by the appellants, the show cause notice basic to the proceedings issued in July, 2006 is barred by limitation. The demand of service tax is not sustainable, the demand for interest and penalties imposed are also not sustainable. Accordingly, the impugned order set aside and the appeal is allowed.

Summary

Issues:
1. Demand of service tax for port services rendered by the appellants.
2. Validity of the show cause notice issued on the ground of limitation.
3. Classification of services rendered by the appellants under 'port services.'
4. Imposition of penalties under Sections 76 and 77 of the Act.

Analysis:

1. The impugned order confirmed a demand of Rs. 1,02,892/- for port services rendered by the appellants during a specific period, along with interest and penalties under Sections 76 and 78 of the Finance Act, 1994. The original authority invoked a larger period under Section 11A of the Central Excise Act due to the appellants' failure to submit ST.3 returns, indicating a suppression of facts. The Commissioner found discrepancies in the appellants' registration and service description, justifying the demand for service tax under 'port services.'

2. The appellants challenged the impugned order on the grounds of limitation and merits before the Tribunal. They argued that the show cause notice issued after about four years of registration was time-barred. The appellants contended that there was no evidence of fraud or intent to evade payment of service tax. They also highlighted that their activities did not fall under 'port services' as defined, citing various case laws to support their position.

3. The Tribunal carefully reviewed the case records and submissions. It noted that the appellants were initially registered under 'cargo handling services' despite engaging in stevedoring activities. The department's subsequent change in classification raised questions about its awareness of the nature of the appellants' services. The Tribunal agreed with the appellants that the show cause notice issued in 2006 was indeed barred by limitation. It also found no evidence of fraud or suppression to warrant the invocation of a larger period for tax demand.

4. Considering the definition of 'port services' and precedents, the Tribunal concluded that the demand for service tax was unsustainable both on merits and limitation grounds. As a result, the penalties and interest imposed were also deemed unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellants.

This detailed analysis highlights the key legal issues addressed in the judgment, focusing on the demand for service tax, validity of the show cause notice, service classification, and imposition of penalties under the relevant provisions of the Act.