2016 (11) TMI 1111 - AT - Service Tax

Classification of services - storage and warehousing services, supply of manpower, Rent-a cab Services - classifiable under Cargo Handling Services or GTA services - Held that - At this preliminary stage, we do not think that the appellant has made out a prima facie case for full waiver of pre-deposit. We therefore direct the appellant to deposit 25% of the tax demand which in our view would suffice the pre-deposit envisaged under section 35F for considering the stay application. The appellant is directed to deposit 25% of tax demanded (Rs. 20,45,779/-) within a period of 4 weeks and report compliance on or before 21.9.2016; on failures to deposit or report compliance, the appeal will stand dismissed for non-compliance without further notice.

Issues:
1. Classification of services provided by the appellant.
2. Demand of service tax, interest, and penalties under the Finance Act, 1944.
3. Upholding of lower authority's order by the Commissioner (Appeals).

Analysis:

Issue 1: Classification of services provided by the appellant
The appellant was registered with the Service tax department for various services, including cargo handling, storage, warehousing, maintenance, repair, rent-a-cab, and renting of immovable property. The Department observed that the appellant provided cargo handling services to clients, misclassifying them under GTA Service to claim an exemption on the taxable value. The Department alleged that the appellant underpaid service tax, leading to a demand for the shortfall amounting to ?20,45,779. The appellant contended that the services provided were warehouse agreements, including supply of forklifts, trailers, and car hire, which they classified as transportation services availing a 75% abatement on transportation charges. The disagreement on the classification of services led to a detailed analysis of the nature of services provided by the appellant.

Issue 2: Demand of service tax, interest, and penalties under the Finance Act, 1944
The adjudicating authority confirmed the demand of ?20,45,779 under Cargo Handling Services for the period from October 2006 to September 2011. Additionally, interest under Section 75 and penalties under Sections 76, 77(2), and 78 of the Finance Act, 1944 were imposed. The penalties were imposed for deliberately suppressing facts leading to evasion of service tax and failure to file half-yearly returns. The Commissioner (Appeals) upheld the lower authority's order, resulting in the appellant filing an appeal challenging the demand, interest, and penalties imposed.

Issue 3: Upholding of lower authority's order by the Commissioner (Appeals)
The Commissioner (Appeals) upheld the order of the lower authority, confirming the demand, interest, and penalties imposed on the appellant. The appellant's representative argued that the services provided were misclassified by the Department, emphasizing that the rates mentioned in the payment schedule were for specific services like forklift, car, and trailer hire, which should be classified under the supply of tangible goods and rent-a-cab services. The appellant's plea for a full waiver of pre-deposit was not accepted, and they were directed to deposit 25% of the tax demand within a specified period to consider the stay application, failing which the appeal would stand dismissed for non-compliance.

This detailed analysis of the judgment highlights the issues of classification of services, demand of service tax, interest, and penalties, and the decision of the Commissioner (Appeals) upholding the lower authority's order.

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