2014 (1) TMI 720 - AT - Service Tax

Waiver of Pre-deposit u/s 73(2) of Finance Act 1994 Held that - The applicant was paying the service tax for Storage and Warehousing Service provided to SPIC for imported Naphtha for which M/s. IOC Ltd. collected handling charges - the physical handling of the SPIC procured Naphtha viz. unloading storage and pumping through to SPIC premises was made by IOC both during the lease period and after the lease period and all the procedures are same and SPIC who imported Naphtha directly which was also stored in the main tank - service tax was paid on storage and warehousing of imported Naphtha thus tax is payable on storage and warehousing from refineries to storage tanks and connecting pipeline to storage tank of SPIC comply - IOC Ltd. has to store the Naphtha safely as per safety regulation - the applicant failed to make out a prima facie case for waiver of pre-deposit of the entire amount - the applicant is directed to deposit a sum of Rupees Seventy Five Lakhs as pre-deposit upon such submission rest of the duty to be stayed till the disposal partial stay granted.

Issues: Application for waiver of pre-deposit of tax, interest, and penalty under Sections 73(2), 75, and 78 of the Finance Act, 1994.

Analysis:
1. The applicant sought waiver of pre-deposit of tax amounting to Rs.1,77,96,613/- along with interest and penalty imposed under Sections 73(2), 75, and 78 of the Finance Act, 1994. The contention was based on the nature of charges collected by Indian Oil Corporation (IOC) from Southern Petro-chemical Industries Corpn. Ltd. (SPIC) for storing Naphtha in the storage tank and connecting pipelines, termed as "Inventory Management Charges." The applicant argued that the demand for service tax under "Storage and Warehousing Service" was meritless and time-barred, highlighting prior communication with the jurisdictional Superintendent of Central Excise regarding the activities. The applicant also emphasized that the demand for tax for a specific period was beyond the limitation period, as indicated in the show-cause notice issued.

2. The Revenue's representative supported the Commissioner's findings, asserting that the service provided by IOC to SPIC fell under the category of "Storage and Warehousing Service" based on the agreement terms. It was noted that the applicant had been paying service tax for similar services on imported Naphtha. The representative contended that the applicant's company officials acknowledged the provision of storage services during the relevant period. The arguments presented by both sides were duly considered.

3. The Tribunal's analysis revealed that the applicant had indeed paid service tax for storage and warehousing services provided to SPIC for imported Naphtha, where IOC collected handling charges. It was established that IOC handled the physical processes of unloading, storage, and pumping of Naphtha for SPIC, both during and after the lease period, similar to the procedures followed for imported Naphtha stored in the main tank. The Tribunal found that the service tax liability for storage and warehousing from refineries to storage tanks and connecting pipelines to SPIC's storage tank was applicable. The Tribunal opined that the applicant failed to establish a prima facie case for waiving the pre-deposit of the entire tax, interest, and penalty amount. Consequently, the applicant was directed to deposit Rs.75 lakhs within six weeks, with the remaining dues waived pending the appeal process, subject to compliance by a specified date.

4. The judgment concluded that the applicant's arguments did not sufficiently support the waiver of the pre-deposit amount, given the past payment of service tax for similar services and the nature of the activities conducted by IOC for SPIC. The Tribunal's decision highlighted the need for the applicant to comply with the directed deposit to proceed with the appeal process effectively, with a stay on recovery pending the appeal's outcome.

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