2015 (12) TMI 1404 - AT - Service Tax

Demand of service tax - Goods Transport Operator service - Notification Nos, 42/97-ST & 43/97-ST both dated 05.11.1997 read with Rule 2 (c) (d) of Service Tax Rules, 1994 - Held that - Issue is squarely covered by the earlier ruling of this Tribunal in the cases of L.H. Sugar Factories Ltd. (2005 (7) TMI 106 - SUPREME COURT OF INDIA) &. Hi-Tech Carbon (2004 (8) TMI 7 - CESTAT (NEW DELHI)). Accordingly, the impugned order is set aside - Appellant, has pointed out that the total demand of ₹ 8,03,076, was raised on the Assessee, out of which, ₹ 3,74,294/- was paid by them before issuance of show-cause notice and during investigation, they also paid ₹ 4,28,782/- on 27.11.2003 before passing of the Order-in-Original. In the present circumstances, it is not an issue of unjust enrichment involved and the Appellant is also entitled to refund - Decided in favour of assessee.

Summary

Issues Involved:
1. Liability of service tax on the receiver of Goods Transport Operator (GTO) services.
2. Validity of Rule 2 (d)(xii) and (xvii) of the Service Tax Rules, 1994.
3. Applicability of reverse charge mechanism prior to the introduction of Section 66A.
4. Entitlement to refund of service tax paid by the appellant.

Detailed Analysis:

1. Liability of Service Tax on the Receiver of Goods Transport Operator (GTO) Services:
The appellant, M/s Seksaria Biswan Sugar Factory Ltd., contested the imposition of service tax liability as a receiver of GTO services. The tax was initially imposed via Notification Nos. 42/97-ST and 43/97-ST dated 05.11.1997, but later exempted by Notification No. 49/98-ST dated 02.06.1998. The appellant relied on the Supreme Court's decision in Laghu Udyog Bharati Vs. Union of India, which clarified that service tax is levied on the person providing the service, not the receiver. The Supreme Court held that making the receiver of services liable for service tax was ultra vires the Act.

2. Validity of Rule 2 (d)(xii) and (xvii) of the Service Tax Rules, 1994:
The Supreme Court in Laghu Udyog Bharati quashed Rule 2 (d)(xii) and (xvii) of the Service Tax Rules, 1994, which made the customer of GTO services responsible for collecting and paying service tax. The Court held that these provisions were in conflict with Sections 65 and 66 of the Finance Act, 1994, which stipulate that the service provider is liable for service tax.

3. Applicability of Reverse Charge Mechanism Prior to the Introduction of Section 66A:
The Bombay High Court, affirmed by the Supreme Court in Indian National Shipowners Association Vs. Union of India, ruled that service tax under the reverse charge mechanism could not be imposed before 18.04.2006, when Section 66A was introduced. This was further supported by the Tribunal's ruling in L. H. Sugar Factories Ltd. Vs. Commissioner of Central Excise, Meerut II, which held that no show-cause notice could be issued under Section 73 of the Finance Act, 1994, for periods when no return filing date was prescribed for receivers of services.

4. Entitlement to Refund of Service Tax Paid by the Appellant:
The appellant had paid a total of Rs. 8,03,076, with Rs. 3,74,294 paid before the issuance of the show-cause notice and Rs. 4,28,782 paid during the investigation. The Tribunal found that the appellant was entitled to a refund of the total amount since the imposition of service tax on the receiver of GTO services was ultra vires. The refund was to be granted within three months, subject to verification of the arithmetical accuracy of the amount.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The appellant was entitled to a refund of the total service tax paid, amounting to Rs. 8,03,076, to be processed within three months from the date of receipt of the order, subject to verification. The decision was based on precedents set by the Supreme Court and earlier Tribunal rulings, affirming that the liability for service tax lies with the service provider, not the receiver, and that the reverse charge mechanism could not be applied retroactively before the introduction of Section 66A.