2019 (8) TMI 322 - AT - Service Tax

Valuation - Classification of service - Cargo Handling Services or Supply of Tangible Goods Services? - non inclusion of cost recovered towards Transportation and cargo handling - services provided and agreed to be provided cannot be said to the services in respect of handling mere transportation of goods - HELD THAT - It is quite evident that there is no breakup of charges towards transportation of goods and other services available as part of contract documents between the appellants and M/s CWC. It is also evident that M/s CWC had not provided any breakup even afterwards. What appellant claims is that there were certain breakups agreed during the negotiations between them and M/s CWC. But we find what so ever appellants claim is not part of the agreement/ contract documents. Then what is factual basis for claiming such breakup. Extended period of limitation - HELD THAT - It is quite evident that appellants were charging the service tax from their customer and not depositing the same with the government. They were also not filing the Service Tax returns even after knowing about their liability for the same. Thus, extended period of limitation is applicable in the facts and circumstances of this case. Demand of interest - HELD THAT - Since the demand of tax has been upheld the demand for interest will follow. It is now settled law that interest under Section 75, is for delay in the payment of tax from the date when it was due. Since appellants have failed to pay the said Service Tax by the due date interest demanded cannot be faulted. Penalty u/s 78 - HELD THAT - It is now settled position in law that penalty under section 78 can be imposed only if the ingredients specified in the said section are present. The ingredients specified for invoking the Section 78 are identical to those specified for invoking the extended period of limitation as provided by Section 73 ibid. Since in respect of show cause notice, the demand could have been made by invoking the extended period of limitation as provided by Section 73, we uphold the penalties imposed under Section 78 of The Finance Act, 1994. Penalty u/s 76 and 77 of FA - HELD THAT - Penalty under Section 76 of the Act is imposed for failure to pay Service Tax by the due date - By not taking registration, paying the service tax by due date and not filing ST-3 returns by the due date appellants have contravened the provisions of Section 68, 69 70 of Finance Act, 1994 read with Rule 4,5,6 7 of Service Tax Rules, 1994. Thus appellants have made themselves liable to penalty under Section 77 ibid. Hence the penalties imposed upon by the adjudicating authority under this section are upheld. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Inclusion of transportation charges in taxable value.
3. Liability of sub-contractor to pay service tax.
4. Invocation of extended period of limitation.
5. Applicability of interest under Section 75.
6. Imposition of penalties under Sections 76, 77, and 78.

Analysis:

1. Classification of Services Provided by the Appellant:
The appellant was accused of providing "Cargo Handling Services" and "Supply of Tangible Goods Services" without proper registration and payment of service tax. The Commissioner classified the services under Section 65(23) and Section 65(105)(zr) for cargo handling, and Section 65(105)(zzzzj) for the supply of tangible goods.

2. Inclusion of Transportation Charges in Taxable Value:
The appellant argued that transportation charges should be excluded from the taxable value as they were separately mentioned in the invoices. However, the Commissioner included these charges, stating that the dominant nature of the service was cargo handling, and transportation was incidental. The tribunal upheld this view, noting that the services provided were integrally connected with cargo handling and not mere transportation.

3. Liability of Sub-Contractor to Pay Service Tax:
The appellant contended that as a sub-contractor, they were not liable to pay service tax if the main contractor had already paid it. This argument was rejected based on the precedent set by the larger bench in the case of Vijay Sharma & Co., which held that sub-contractors are liable to pay service tax independently of the main contractor.

4. Invocation of Extended Period of Limitation:
The appellant argued that the demand was barred by limitation. However, the tribunal upheld the invocation of the extended period of limitation, citing the appellant's failure to file service tax returns and deposit the collected tax with the government. The tribunal referenced cases such as Capital Transport Convoy Contractor and Star India Pvt Ltd to support the applicability of the extended period due to suppression of facts.

5. Applicability of Interest under Section 75:
The tribunal confirmed that interest under Section 75 is mandatory for delayed payment of service tax. This was supported by the decision in P V Vikhe Patil SSK, which emphasized that interest is a civil liability and not discretionary.

6. Imposition of Penalties under Sections 76, 77, and 78:
The tribunal upheld the penalties under Sections 76 and 78, noting that they can be imposed simultaneously for different aspects of the same transaction. The penalties were justified due to the appellant's failure to comply with statutory obligations, such as registration, timely payment of tax, and filing of returns. The tribunal referenced multiple cases, including Krishna Poduval and Lawson Travel and Tours (I)(P) Ltd, to support the imposition of penalties.

Conclusion:
The appeal was dismissed, and the tribunal upheld the Commissioner's order, confirming the demand for service tax, interest, and penalties. The tribunal found no merit in the appellant's arguments and emphasized the importance of compliance with statutory obligations.