2018 (4) TMI 542 - AT - Service Tax

Extended period of limitation - penalty - Classification of services - vehicles given by them on hire - whether GTA Service or Supply of Tangible goods services? - Held that - the Appellant even before the coming into effect of levy of service tax under the category of Supply of Tangible Goods Services were registered under the category of Goods Transport Agency and were discharging the service tax liability - it is absolutely clear that the Appellant had no intention to evade service tax or to suppress any fact with the department. The demand raised by invoking extended period of limitation is not sustainable - penalties also not imposable - appeal allowed in part.

Summary

Issues: Applicability of service tax category, imposition of penalties, intention to evade tax, time-barred demands.

Analysis:
1. Applicability of Service Tax Category: The case involved a dispute regarding the correct categorization of the Appellants' services for the purpose of service tax. The Appellants were initially registered under the category of "Goods Transport Agency" and were paying service tax accordingly. However, during an audit, it was observed that their service fell under the category of "Supply of Tangible Goods Services." This led to a show cause notice being issued, demanding differential service tax and penalties. The Appellants contended that they had been compliant with their tax obligations under the GTA category and that the new category did not exist when they started their operations. The Tribunal acknowledged the Appellants' compliance and found that they had no intention to evade tax, ultimately setting aside the demand for service tax under the extended period.

2. Imposition of Penalties: The adjudicating authority had imposed penalties and fines on the Appellants, which were subsequently upheld by the Commissioner (Appeals) to some extent. The Appellants argued that the penalties were unjustified given their history of compliance and lack of intention to evade tax. The Tribunal agreed with the Appellants, noting that the penalties under section 78 and other fines were not sustainable in the circumstances where there was no intent to evade tax. As a result, the Tribunal set aside the penalties, fees, and fines imposed on the Appellants.

3. Intention to Evade Tax: The Tribunal considered the Appellants' conduct and history of compliance in determining whether there was an intention to evade tax. Despite the change in the categorization of their services for tax purposes, the Tribunal found that the Appellants had acted in good faith and had not attempted to evade tax. This finding was crucial in the Tribunal's decision to set aside the demand for service tax under the extended period and the associated penalties.

4. Time-Barred Demands: The Tribunal addressed the issue of time-barred demands in the case, emphasizing that the Appellants had been registered and paying taxes under the GTA category even before the new tax category came into effect. Given the Appellants' regular filing of tax returns and compliance with their obligations, the Tribunal concluded that the demands raised under the extended period of limitation were not sustainable. Consequently, the Tribunal set aside the demands for service tax for the extended period, along with the associated penalties, fees, and fines.

In conclusion, the Tribunal partially allowed the appeal, ruling in favor of the Appellants by setting aside the demands for service tax under the extended period and the imposed penalties, fees, and fines. The judgment highlighted the importance of considering the taxpayer's compliance history and intention in tax disputes, ultimately leading to a favorable outcome for the Appellants in this case.