2017 (12) TMI 390 - AT - Service Tax

Levy of tax - appellant had been charging some amount from the transporters for arranging/providing cargo but in the case of Ex-mill sales, the appellant were arranging for the transport of the finished goods to the buyers - business auxiliary services - extended period of limitation - Held that - Since the appellant provide volume of business to the transporters, the lower authorities have correctly held that they are promoting business for transporters - it is evident that there is clear understanding between the transporters and appellant that the consideration is being paid to them for the volume of business arranged for the transporters. Business Auxiliary Services - case of appellant is that the BAS should be provided to a client and the transporter is not a client - Held that - as the service has been provided by the appellant to transporter who is a service provider therefore the above contention of the appellant is not tenable - reliance placed in the case of Union of India & Ors. Versus M/s Martin Lottery Agencies Ltd. 2009 (5) TMI 1 - SUPREME COURT OF INDIA , where it was held that Service tax purports to impose tax on services on two grounds (1) service provided to a customer and (2) service provided to a service provider - the service tax has been correctly charged in the category of BAS. Extended period of limitation - Held that - the information with regard to charging of amount of the given service and activity was never brought to the notice of the department by way of periodical returns or otherwise - Once the finding of the bonafide belief is given by the adjudicating authority, invocation of extended period of limitation would not be available to the Revenue - extended period not invokable. Matter remanded back to the original adjudicating authority for re-quantification of the demand without invoking the extended period - appeal allowed by wya of remand.

Summary

Issues:
1. Whether the appellant correctly charged amounts from transporters for arranging cargo and is liable for service tax.
2. Whether the extended period for demanding service tax is applicable in this case.
3. Whether the penalties under Sections 77 and 78 of the Finance Act, 1994 are justified.

Analysis:
1. The appellant was engaged in manufacturing and processing fabric under exemption Notifications NO.29/04-CE and 30/04-CE. A show cause notice was issued for demanding service tax, alleging that the appellant charged amounts from transporters for arranging cargo. The adjudicating authority upheld the demand and penalties but granted benefit under Section 80 of the Finance Act, 1994 due to bonafide belief. The appellant contended that there was no contract for promoting business with transporters and the extended period should not apply as there was no fraud or suppression of facts. However, the Tribunal found that the appellant did promote business for transporters, and service tax was correctly charged under Business Auxiliary Service (BAS) category.

2. Regarding the extended period, the adjudicating authority granted benefit under Section 80 due to a reasonable cause for failure to pay tax. The Tribunal held that once bonafide belief is established, the extended period cannot be invoked, citing relevant case law. It was emphasized that the extended period should not be applicable in this case, and the matter was remanded for re-quantification of demand without invoking the extended period, granting the appellant an opportunity to be heard.

3. The penalties under Sections 77 and 78 were upheld by the adjudicating authority but were waived due to bonafide belief. The Tribunal found that since the penalties were waived, the extended period should also not apply, as there was no mala fide intent to evade payment of duty. The case was remanded for re-quantification of demand without invoking the extended period, ensuring the appellant's right to be heard. The appeal was disposed of by remand for further proceedings.