2017 (10) TMI 755 - AT - Service Tax

Classification of services - Port services - activity of transportation of cargo within the port area of Mumbai Port Trust - extended period of limitation - Held that - It is settled law that there are divergent views on the issue and dispute is resolved by the Larger Bench, no malafide or suppression of facts can be alleged on the assesee. Even on the identical issue the Tribunal has held that it was a case of bonafide doubt for which extended period could not be invoked - the SCN is time barred - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Whether the appellant's activity of transporting cargo within the port area of Mumbai Port Trust is liable to service tax under the category of port service.
2. Whether confusion regarding the classification of services as port service justifies dropping the penalty.
3. Whether the sow-cause notice issued for a specific period is time-barred.

Analysis:

Issue 1: Liability of service tax on transportation within the port area
The appellant's activity of transporting cargo within the port area was contested for service tax liability under the category of port service. The appellant conceded that the merit of the case was against them based on a decision by a Larger Bench in a previous case. The confusion arose due to divergent decisions in various cases. Ultimately, the Larger Bench in the case of Western Agencies Pvt. Ltd. resolved the dispute by holding that transportation within the port area falls under the category of port service. The Commissioner (Appeals) acknowledged the confusion and dropped the penalty, although refraining from giving any findings on limitation. The Tribunal, after considering submissions from both sides, concluded that the transport service within the port area indeed falls under the category of port service as per the Finance Act, 1994.

Issue 2: Justification for dropping the penalty
The Tribunal noted that the confusion surrounding the taxability of the services in question had not reached finality due to the stay on the Larger Bench decision by the Hon'ble Madras High Court. The Commissioner accepted the confusion and questioned the propriety of imposing penalties when the taxability issue remained unsettled. The Tribunal further emphasized that the appellant had a bona fide belief about the levy of service tax, given the divergent views and the unresolved nature of the issue. Citing previous judgments, the Tribunal held that in cases of bonafide doubt, the extended period for invoking penalties could not be justified. Consequently, the Tribunal found no malafide intent or suppression of facts by the appellant, leading to the allowance of the appeal.

Issue 3: Time-barred sow-cause notice
The sow-cause notice issued for a specific period was deemed time-barred by the Tribunal. The notice dated 22/02/2006 for the period 01/11/2002 to 31/12/2003 was considered beyond the permissible time limit. As a result, the demand for the extended period was set aside, and the appeal was allowed in favor of the appellant.

In conclusion, the Tribunal's detailed analysis and consideration of the legal precedents led to the decision in favor of the appellant, highlighting the complexities of tax classification issues and the importance of bonafide beliefs in tax matters.

This summary provides a comprehensive breakdown of the judgment, addressing each issue involved in detail while retaining the legal terminology and significant phrases from the original text.