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2018 (12) TMI 259 - AT - Service TaxClassification of services - Supply of Tangible Goods Service or not - Held that - Since the appellant in view of the majority judgment of the Larger Bench judgment of the CESTAT in the case of Global Vectra Helicopter Ltd Vs Commissioner of S.T Mumbai-II 2015 (2) TMI 974 - CESTAT MUMBAI (LB) , did not contest the issue of re-classification of the service provided by the appellant under the category of supply of tangible goods for use service , taxable w.e.f. 16-5-2008, we refrain from deciding the issue of classification of Service provided by the appellant. Demand in respect of the service provided in J&K - POPOS Rules - Held that - The Place of Provision of Service Rules, 2012 were introduced vide Notification No. 28/2012 dated 20.06.2012 and were made effective from 01.07.2012. There is nothing in the said notification that these Rules will be applied retrospectively. Therefore, the said rules cannot be applied for the period prior to 01.07.2012. The appellant had all the supporting documents like invoices, names of the passengers and the passenger manifest to support their claim, that the flights originated and terminated in J&K - Service Tax is not chargeable on the value of services provided in J&K as per Section 64 of the Finance Act, 1994 and demand of ₹ 6,44,66,914/- is held not sustainable under the law and is set aside. Demand of Service Tax - total value of parts and spares used for maintenance and repairs - Held that - The appellant has provided as above, the total value of parts and spares used for maintenance and repairs was ₹ 10,37,49,243/- This amount is not chargeable to Service Tax and the demand of ₹ 1,12,46,921/- in respect of value of parts and spares is not sustainable under the law and therefore is set aside. CENVAT Credit - service of pilot hiring - service component under Maintenance and Repair Service - Held that - The appellant has paid Service tax of ₹ 31,45,915.01 under Reverse Charge Mechanism, in respect of service of pilot hiring and service component under Maintenance and Repair Service - the CENVAT Credit of the same is admissible to the appellant. Adjustment of unutilised Cenvat credit of ₹ 4,01,847/- against the Service tax liability - Held that - The input credit on these input services is admissible under the law.But the Appellant did not utilize available CENVAT Credit of ₹ 4,01,847/- for the payment of Service tax liability of the concerned period. Thus, the available CENVAT credit should have been adjusted against Service tax liability, if any, for the period 2008-09 and 2011-12. CENVAT Credit - input services - nexus with input services - Held that - The input services are relatable to output services - The Learned Commissioner though admitted in the impugned order that the appellant had claimed the Cenvat Credit on above said inputs, but has not returned any finding that the said inputs were not relatable to the service provided by the appellant. The learned Commissioner could have ascertained the details from the copy of the RG-23 Register submitted by the appellant - CENVAT credit for the input services availed can be utilized for the payment of Service tax liability on or after the date on which payment for input services has been made by the assessee. Therefore we hold that the CENVAT Credit of Rs ₹ 4,01,847/- is admissible to the appellant. Extended period of limitation - Held that - The show cause notice is dated 20,10.2013. Thus the demand from 01.04.2008 to 23.10.2008 is beyond the scope of the SCN. Further two SCN dated 20.05.2014 and dated 29.05.2015 were issued covering the period up to 31.03.2014 invoking the extended period of limitation which is contrary to the law - the allegation of suppression or fraud with intention to evade payment of Service Tax cannot be sustained - The invocation of extended period of limitation is set aside. Imposition of penalty - issue involved legal interpretation of law - re-classification of the service provided by the appellant under the category of supply of tangible goods for use service - no suppression of facts - Held that - The appellant did not pay service tax under the category of Supply of Tangible Goods Service but suo moto paid the tax under the category of Passenger Travel by Air and contested the issue from the beginning of the investigation and did not suppress any information from the department - penalty under section 76 for non-payment of tax, u/s 77 for failure to file ST-3 in a proper manner and u/s 78 for deliberately suppressing the facts, is held not leviable under the Finance Act, 1994. In Tecumseh Products India Ltd. V. CCE, 2004 (5) TMI 76 - SUPREME COURT OF INDIA , the Hon ble Supreme Court held that in the circumstances where there was bona fide dispute between the parties in regard to the legal interpretation of law, penalty cannot be imposed on Appellant-assessee. Appeal allowed in part.
Issues Involved:
1. Classification of Service 2. Service Tax Liability in Jammu & Kashmir 3. Extended Period of Limitation 4. Penalties Imposed 5. CENVAT Credit on Inputs and Services 6. Service Tax on Foreign Currency Expenditure Issue-wise Detailed Analysis: 1. Classification of Service: The appellant did not contest the classification of services under "Supply of Tangible Goods for Use" (SOTG) as per the majority judgment of the Larger Bench judgment of the CESTAT in the case of Global Vectra Helicopter Ltd. The services provided by the appellant were reclassified under SOTG, taxable from 16-5-2008. 2. Service Tax Liability in Jammu & Kashmir: The appellant argued that services provided in Jammu & Kashmir (J&K) are not taxable under Section 64 of the Finance Act, 1994. The Tribunal found that the appellant provided sufficient evidence showing that the services originated and terminated in J&K. Therefore, the demand of ?6,44,66,914/- for services provided in J&K was held not sustainable and was set aside. 3. Extended Period of Limitation: The Tribunal held that the extended period of limitation is not invokable as the appellant did not suppress any information with the intent to evade tax. The appellant had been cooperative and provided all necessary information during the investigation. The demand for the period 01.04.2008 to 23.10.2008 was beyond the scope of the SCN, and the extended period for subsequent SCNs was also found to be contrary to law. 4. Penalties Imposed: The Tribunal set aside the penalties under Sections 76, 77, and 78 of the Finance Act, 1994. It was established that the appellant did not suppress facts or commit fraud with the intent to evade tax. The penalties were not justified as the appellant had a bona fide dispute regarding the classification of services. 5. CENVAT Credit on Inputs and Services: The appellant was found entitled to CENVAT credit on inputs and services, including pilot salaries and service charges for repair and maintenance paid under Reverse Charge Mechanism (RCM). The Tribunal held that the available CENVAT credit should have been adjusted against the service tax liability for the concerned period. 6. Service Tax on Foreign Currency Expenditure: The Tribunal observed that the value of parts and spares used for maintenance and repair services is not chargeable to service tax. The demand of ?1,12,46,921/- for parts and spares was set aside. The appellant had paid service tax on the service component and pilot hiring under RCM, and the CENVAT credit of the same was admissible. Summary: The impugned order was set aside, and the appeal was partly allowed. The Tribunal held that the demand for the extended period is not sustainable, and only the demand for the normal period is payable. The appellant is entitled to CENVAT credit on inputs and services, and service tax is not chargeable on spare parts. All penalties were set aside, and the appellant was held entitled to CENVAT credit on input services.
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