2016 (8) TMI 310 - AT - Service Tax

Cenvat credit credit of service tax paid on GTA service while claiming the same as re-reimbursement of expenses for providing Business auxiliary services - commission agent servcies - Held that - the tax amount on availment of service of goods transport agency is, in reality, paid by the appellant; when the appellant is entitled to, and has been claiming, reimbursement of such charges along with the tax thereon from their clients, such activity is not segregatable from other agency functions rendered by the appellant on reimbursement basis. It does not therefore constitute performance of a taxable service insofar as the appellant is concerned. - cenvat credit not allowed. Levy of penalty - Held that - In the absence of clear evidence of suppression of information with intention to evade tax, scope for invoking section 78 in relation to second period of demand cannot sustain decided partly in favor of respondent.

Summary

Issues:
- Tax liability on commission earned by a commission agent registered as a goods transport agency and business auxiliary service provider.
- Availment of CENVAT credit for discharging tax liability.
- Imposition of penalties under section 78.
- Suppression of facts and intention to evade tax in subsequent notice.

Analysis:

Issue 1: Tax liability on commission earned
The appellant, a commission agent handling sponge iron for steel production, received commission liable to tax under the business auxiliary service. The appellant availed CENVAT credit for tax liability on the commission earned. The Revenue contended that the tax was not on the appellant's account as they acted as an agent with contractual reimbursement. The Tribunal held that the tax paid by the appellant, even if reimbursed by clients, was still paid by the appellant and not segregable from other agency functions. Therefore, the tax liability on commission earned was upheld.

Issue 2: Availment of CENVAT credit
The appellant argued that the CENVAT credit availed on tax paid for goods transport agency service was permissible under the CENVAT Credit Rules, 2004. The Tribunal noted that the utilization of tax credit paid for goods transport agency service to discharge tax liability as a business auxiliary service provider was not sustainable under the rules. The credit availed against proper documentation was disallowed as the tax payment did not constitute a taxable service by the appellant.

Issue 3: Imposition of penalties under section 78
Penalties under section 78 were imposed by the original authority and upheld by the first appellate authority. However, the Tribunal found that the second notice for penalties was issued without clear evidence of suppression of information with the intention to evade tax. As a result, the imposition of penalties under section 78 for the second period of demand was not sustainable, and the penalty imposed by the original order was set aside.

Conclusion
The demands under the impugned orders were upheld, but the penalty imposed in one of the orders was set aside. The Tribunal disposed of the appeals by pronouncing the judgment on 08/07/2016.