2019 (3) TMI 246 - AT - Service Tax

Non-payment of service tax - storage and warehousing service - charges collected by the appellant from their sister concern for storage of soya bean meal which they subsequently exported - Held that - Once the appellant is charging a sum for storage of the goods which belongs to another legal entity, the amounts have to be considered as storage and warehousing charges and a service tax has to be paid accordingly. The appellant has clearly not paid the service tax nor have they disclosed the details of service charges to the department - Even when the department received information and inquired from them, they did not produce the required information immediately - this is a fit case to invoke extended period of limitation and invoke a demand. Wrongful utilization of CENVAT credit of input services consumed into exempted output services for payment of service tax - appellant has utilized 100% of credit taken instead only 20% as was prevalent during the relevant period in terms of Rule 6(3)(c) of CCR, 2004 - Held that - It is true that during the relevant period only 20% of credit could be utilized but we find force in the argument of the appellant that they were not barred from taking credit but were only barred from utilizing it. They were free to utilize remaining 80% in the immediate next financial year. Therefore, the demand on this ground does not sustain. CENVAT Credit - credit of common input services - demand equal to 8% of the value of exempted services for period 01.4.2008 to 31.3.2008 under Rule 14 of CCR, 2004 - demand of ₹ 1,43,310/- at the rate of 6% of value of exempted services for the period 01.4.2009 to 06.7.2009 under Rule 6(3) read with Rule 14 of CCR - Held that - Once the CENVAT credit on common input services has been reversed the demand under Rule 6(3) read with Rule 14 does not sustain - appellant have reversed the entire amount of credit taken on common input services and therefore these demands need to be dropped along with interest thereon - demand set aside. Penalties - Held that - The appellant may have been under the mistaken impression that they were not liable to pay service tax on the warehousing charges and therefore, taking a lenient view and invoking provisions of Sec.80 of the Finance Act, 1994, penalties set aside. Appeal disposed off.

Summary

Issues involved:
1. Demand of service tax on storage and warehousing charges.
2. Allegation of taking excess CENVAT credit.
3. Demand of 8% of value of exempted services.
4. Imposition of penalties under Sec.76 & 78 of the Finance Act, 1994.

Demand of service tax on storage and warehousing charges:
The appellant, a service provider registered with the Central Excise Department, was found to be not paying service tax on storage and warehousing charges collected for Soya bean meal stored before export. The department issued a show cause notice demanding an amount along with interest and penalties. The appellant argued that mere renting of premises to a sister concern cannot be considered as warehousing service and that the goods were subsequently exported, making it a cargo handling service. However, the tribunal found that charging for storage of goods belonging to another entity constitutes storage and warehousing service, and the appellant failed to pay the due service tax. The tribunal upheld the demand of service tax along with interest.

Allegation of taking excess CENVAT credit:
The appellant was accused of utilizing 100% of the CENVAT credit instead of the permissible 20% during the relevant period. The appellant contended that they were not restricted from taking credit but only from utilizing it, and the remaining credit could be used in the immediate next financial year. The tribunal agreed with the appellant, stating that the demand for excess credit utilization does not hold as they were entitled to use the credit in subsequent years. Therefore, the demand on this ground was set aside.

Demand of 8% of value of exempted services:
The department raised a demand of 8% of the value of exempted services, alleging that the appellant had availed common input services and reversed only a small portion of the credit. The appellant argued that they had reversed the entire credit on common input services. The tribunal found merit in the appellant's argument and set aside the demands related to the 8% value of exempted services, stating that once the CENVAT credit on common input services had been reversed, the demands could not be sustained.

Imposition of penalties under Sec.76 & 78 of the Finance Act, 1994:
Regarding the penalties imposed, the tribunal noted that the appellant may have been under a mistaken impression about their tax liability. Taking a lenient view, the tribunal invoked Sec.80 of the Finance Act, 1994, and set aside all penalties imposed on the appellant. The tribunal modified the impugned order, upholding the demand for service tax on storage and warehousing charges, setting aside the demand for excess CENVAT credit utilization, dropping the demands related to the 8% value of exempted services, and canceling all penalties.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT HYDERABAD provides a comprehensive understanding of the issues involved and the tribunal's findings on each matter, preserving the legal terminology and significant phrases from the original text.