2016 (12) TMI 732 - AT - Service Tax

Levy of tax - freight charges for transportation of sugarcane from fields - whether during the period 2005-06 to 2006-07, appellant is liable to discharge the Service Tax liability on the amounts paid by them as freight charges for transportation of sugarcane from fields? - Held that - We have scrutinised the bill no. 93537 which was produced by the learned Counsel. On perusal of the said bill which had been settled by the appellant, to the farmer, clearly indicated that the appellant had deducted an amount paid by them towards harvesting cost to labours and transportation cost of sugarcane to their factory. After reducing the amount paid, appellant settled balance bill to the farmer. We also find that the learned departmental representative putting on record a letter received also includes a bill settled by the appellant wherein it is indicated that appellant had deducted the transportation cost and paid the same to the transporter. On this factual matrix in this case, we have to hold that appellant need not pay Service Tax on the amount of transportation charges. If the appellant had borne and paid transportation charges that would have been liable to pay Service Tax liability under Reverse Charges Mechanism as per the provision of Finance Act, 1994 and Rules made there under. Again there are no provisions for appellant to pay tax on deducted amount, from the final settlement of sale of sugarcane, as it cannot be treated as transportation charges paid by the appellant. The learned Counsel was correct in placing on record that similar issue came in before the Bench, in the case of Bhima Sahakari Sakhar Karkhana 2015 (10) TMI 627 - CESTAT MUMBAI for taxability of amount paid to truck owner, are squarely applicable in this case and are in favour of the appellant herein, where it was held that there will be no Service Tax liability on the appellant sugarcane mills, as they have not received the service from a Goods Transport Agency. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Whether the appellant is liable to discharge Service Tax on freight charges for transportation of sugarcane.
2. Whether the appellant's claim that transportation charges are paid by individual farmers is correct.
3. Whether the appellant is liable to pay Service Tax under Reverse Charge Mechanism.
4. Whether the show-cause notice for tax evasion is barred by limitation.
5. Whether the impugned order confirming the Service Tax liability is sustainable.

Analysis:

1. The appeal challenged an Order-in-Appeal passed by the Commissioner of Central Excise regarding the Service Tax liability on freight charges for transporting sugarcane. The appellant, a sugar factory, contested that the transportation of sugarcane was done by farmers under agreement, and the charges were recovered from them. The appellant argued that the transportation charges were not covered under Goods Transport Agency services and cited various legal precedents to support their case.

2. The appellant contended that they deducted transportation charges from the final settlement with individual farmers, thereby negating the need for them to pay Service Tax on these charges. The Tribunal examined bills and evidence presented by both parties, concluding that the appellant was not liable to pay Service Tax on the transportation charges as they were borne by the farmers and not the appellant.

3. The Tribunal found that the appellant's practice of deducting transportation costs from the final settlement with farmers aligned with legal principles established in previous cases. The Tribunal held that if the appellant had directly paid the transportation charges, they would have been liable under Reverse Charge Mechanism. However, since the charges were deducted from the farmers' payments, the appellant was not obligated to pay Service Tax on these amounts.

4. The Tribunal also addressed the issue of limitation, stating that the show-cause notice for tax evasion was barred by limitation as there was no deliberate withholding of information to evade tax. The demand raised for the period 2005-06 and 2006-07 was deemed untimely.

5. Ultimately, the Tribunal set aside the impugned order, ruling in favor of the appellant. The Tribunal found that the appellant's claim regarding the payment of transportation charges by individual farmers was valid, and the appellant was not liable to pay Service Tax on these charges. The decision highlighted that the transportation costs deducted from the final settlement with farmers did not constitute a taxable service under the Reverse Charge Mechanism.

This detailed analysis of the legal judgment provides a thorough understanding of the issues involved and the Tribunal's decision on each aspect of the case.