2018 (4) TMI 541 - AT - Service Tax

Service provided by one division to another - GTA service - scope of SCN - Held that - From the SCN, it is apparent that the ground of demand was that the Appellant has taken trucks from trucking division and there was no demand on the ground of trucks taken from third party - the demands has been confirmed beyond the scope of SCN and hence not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of service tax on intercompany transactions and third-party transport services; Scope of show cause notice; Validity of demand confirmation; Requirement of consignment notes for service tax liability; Revenue neutrality and penalty imposition.

Analysis:
The Appellant company, with various divisions, faced a demand for service tax against its CFS Division due to alleged receipt of GTA Services from its Trucking Division without payment under Reverse Charge Mechanism. The adjudicating authority confirmed a demand on freight charges paid to third-party transporters, despite dropping the inter-division transaction demand. The Appellant challenged the order, arguing the demand exceeded the show cause notice scope and lacked merit as no consignment notes were issued by third-party transporters. They cited legal precedents supporting their position and emphasized revenue neutrality as service tax paid was creditable.

Upon review, the Tribunal found the demand confirmation beyond the show cause notice scope, referencing the Toyo Engineering case. They noted the demand was sustainable only if third parties issued consignment notes, which was absent in this case, aligning with legal precedents like Ultra Tech Cement Ltd. The Tribunal emphasized that the service tax had been paid, rendering the demand invalid. Considering the revenue neutrality and lack of legal basis for the demand, the Tribunal ruled in favor of the Appellant, setting aside the impugned order and negating penalty imposition.

This judgment highlights the importance of aligning demand confirmations with show cause notice grounds and the necessity of fulfilling legal requirements, such as consignment notes, for service tax liability. It underscores the significance of legal precedents in supporting arguments and emphasizes the availability of credit for paid service tax in revenue neutrality assessments.