2015 (1) TMI 183 - AT - Service Tax

Clearing and forwarding agent service - Recipient of service - Held that - Demands under Section 73 towards short levy/non-levy of the Service Tax could have been made only in respect of service providers who were required to file returns under Section 70 and not under Section 71A. Filing of returns by recipients of service was provided under Section 71A in 2003 and thereafter, in 2004, Section 73 was amended for recovery of duty from those persons who are required to file return whether under Section 70 or 71A. No such notice has been issued in the present case quoting the correct legal provisions. Therefore, the show cause notice issued in the present case and the impugned orders confirming the demand are unsustainable in law. - Decided in favour of assessee.

Summary

Issues:
Service Tax liability on clearing and forwarding agent services received by the appellant from 16-7-1997 to 31-8-1999. Interpretation of Rule 2(1)(d)(iii) of the Service Tax Rules, 1994. Applicability of Section 73 of the Finance Act, 1994. Legal effect of amendments in 2003 and 2004 regarding filing of returns by recipients of service under Section 71A.

Analysis:
The appeal addressed the Service Tax liability of the appellant, M/s. The Ruby Mills Ltd., for services provided by a clearing and forwarding agent during a specific period. The issue revolved around the interpretation of Rule 2(1)(d)(iii) of the Service Tax Rules, 1994, which stipulated that the recipient of the service was liable to pay the Service Tax. A show cause notice was issued in 2001 to demand the Service Tax amount of &8377; 10,156 under Rule 6 of the Rules read with Section 11 of the Central Excise Act, 1944. The demand was confirmed in 2004, leading to the appeal.

The appellant's counsel argued that since the appellant was not required to file a return under Section 70 of the Finance Act, the provisions of Section 73, which empowered the department to demand duty on short levy/non-levy, did not apply. The counsel highlighted the amendments in 2003 and 2004, introducing Section 71A for filing returns by service recipients and amending Section 73 for recovery of duty from those required to file returns under Section 71A. Citing a Supreme Court decision, the counsel contended that demands based on Section 73 were unsustainable if the recipients were not obligated to file returns under Section 70.

In response, the Additional Commissioner reiterated the lower authorities' findings supporting the demand for Service Tax from the appellant. The Tribunal carefully considered both sides' submissions and relied on the Supreme Court's decision, which clarified that demands under Section 73 for short levy/non-levy of Service Tax applied only to service providers required to file returns under Section 70, not Section 71A. The Tribunal noted the amendments in 2003 and 2004, emphasizing that no notice had been issued in the present case citing the correct legal provisions. Consequently, the show cause notice and the orders confirming the demand were deemed unsustainable in law, leading to the appeal being allowed.

In conclusion, the judgment delved into the nuances of Service Tax liability, the interpretation of relevant legal provisions, and the impact of subsequent amendments on the obligations of service recipients to file returns. The decision underscored the necessity of aligning demands with the appropriate statutory framework and upheld the appellant's position based on the legal analysis provided.