2010 (9) TMI 76 - AT - Service Tax

Service tax on freight- The assessee did not pay service tax on freight. The revenue imposed service tax and penalty. The asseessee defended stating that the service tax was demanded on the basis of ledger entries and the ledger entries consisted of loading and unloading as well as transportation charges and therefore the demand was not correct. Tribunal confirmed the demand and did not accept the assessee s plea.

Summary

Issues:
1. Service tax liability on freight paid for Goods Transport Service from January 2005 to September 2006.
2. Verification of ledger entries and exclusion of loading/unloading expenses.
3. Imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:

Issue 1: Service Tax Liability
The appellant did not pay service tax on freight for Goods Transport Service from January 2005 to September 2006. The proceedings were initiated, and a demand of Rs.2,36,519/- was made with interest and equivalent penalty. The appellant failed to provide evidence regarding the amounts incurred towards loading/unloading and transportation charges. The lower authorities correctly considered the submissions and verified the ledger entries, which included loading/unloading and transportation charges. The appellant did not segregate the expenses or demonstrate the actual amounts spent on transportation and loading/unloading. Consequently, the service tax and interest were deemed correctly demanded.

Issue 2: Verification of Ledger Entries
The appellant defended the case based on ledger entries, claiming that the demand was incorrect as loading/unloading expenses were included in the ledger. However, the Range Superintendent confirmed that the total expenses exceeded Rs.2.31 crores, indicating that loading/unloading costs were excluded from the service tax calculation. The appellant failed to prove the specific amounts allocated to transportation and loading/unloading. The Tribunal upheld the lower authorities' decision, stating that the service tax demand was justified based on the evidence presented.

Issue 3: Imposition of Penalty
A penalty under Section 78 of the Finance Act, 1994, equal to the service tax amount, was imposed. The provisions of Section 78 are akin to Section 11AC of the Central Excise Act, 1944, concerning penalties. The Tribunal noted that the appellant was not given the option to pay the demanded service tax, interest, and 25% penalty within 30 days, as required by law. Following precedent, the Tribunal extended the option to limit the penalty to 25% of the service tax if the appellant settled the liability within the specified period. Failure to comply would result in a penalty equal to the service tax payable.

In conclusion, the Tribunal upheld the service tax demand, emphasizing the importance of providing evidence to support claims and complying with penalty payment options within the stipulated timeframe to avoid additional financial consequences.