2017 (1) TMI 431 - AT - Service Tax

Reverse charge mechanism - transportation charges - Service Tax liability is fastened on the appellant on the ground that they have paid transportation charges for the year 2006-07 and 2007-08, despite the fact that they being a sugar factory are require to pay Service Tax under reverse charge mechanism - Held that - an identical issue came up before this Bench in the case of Shri Chhatrapati SSK Ltd. Vs. Commissioner of Central Excise, Pune-III 2016 (9) TMI 736 - CESTAT MUMBAI , 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.

Summary

Issues: Service tax liability on transportation charges paid by a sugar factory under reverse charge mechanism.

Analysis:
The appeal was filed against an Order-in-Appeal passed by the Commissioner of Central Excise, Pune-I. Despite the appellant not appearing, the Tribunal proceeded with the matter for disposal. The Service Tax liability was imposed on the appellant for paying transportation charges in 2006-07 and 2007-08, as they were a sugar factory required to pay Service Tax under the reverse charge mechanism. However, upon reviewing the records, it was observed that the payment made to a cooperative society for harvesting and transporting sugarcane to the factory was misconstrued as payment for transportation of sugarcane. The Tribunal referred to a similar case and relied on the decisions in the cases of Nandganj Sihori Sugar Co. Ltd. and Bhima S.S.K. Ltd. to support the appellant's position. Consequently, the Tribunal found the issue to be settled in favor of the appellant and set aside the impugned order, allowing the appeal with any consequential relief.

This judgment highlights the importance of correctly interpreting the nature of payments made by entities to avoid erroneous imposition of tax liabilities. The Tribunal's reliance on precedent cases demonstrates the significance of established legal principles in resolving similar disputes. The decision emphasizes the need for clarity and consistency in applying tax laws to prevent undue financial burdens on taxpayers.