2022 (8) TMI 496 - AT - Service Tax

Recovery of Service tax - Goods Transport Agency Service - Business Auxiliary Service - Manpower Recruitment Service or Supply Service - activity undertaken by the appellant in providing trucks for transportation of goods from railway siding in Gorakhpur to different parts of Nepal - extended period of limitation - penalty - HELD THAT - On going through the sample challans and find that the said challans do contain details like truck number driver name and particulars of the goods. The said challans do not mention separately the consignor and the consignee. It is submitted that the Nepali Traders engaged these trucks from the appellant and others for transporting their own goods for transportation from Gorakhpur to different places in Nepal. Thus in the facts of the case it appears that the consignor and consignees are same. Appellant referred to the speech of Hon ble Finance Minister on 08.07.2004 stating that there has been no intention of law makers to levy service tax on services provided by individual truck owner operators. It is found that under the circumstances department s holding that the challans are consignment notes is incorrect. The Department was confused where issuing show cause notice. In so far as the loading unloading charges are concerned the show cause notice considered them receipts for services rendered as Manpower Supply Agency . The impugned order treats them to be for the Goods Transport Agency Services . Penalties - HELD THAT - The department has simply confirmed the service tax liability against the appellant without going into the details of arrangements between the appellant and his clients relying only on the documents like income tax returns profit and loss account and balance sheet etc. The appellant s contention on the receipts being within exemption limits over the years is acceptable - the demand confirmed is not sustainable. Accordingly the penalties imposed are not sustainable. The learned Commissioner (Appeals) has analyzed the issues correctly and has recorded correct findings. Even though he decided the issue in the negative list regime post 1.7.2012 the argument is valid for earlier period also and the impugned demand covers partly the period after 1.7.2012. Learned Commissioner has correctly evaluated the services rendered by the appellants. The Department has accepted the order. It cannot be said that the order has been accepted on monitory grounds when an appeal against the earlier order passed is pending before this Bench. The appeal is allowed.

Summary

Issues Involved:
1. Classification of services provided by the appellant under 'Goods Transport Agency Service' (GTA).
2. Classification of services provided by the appellant under 'Business Auxiliary Service' (BAS).
3. Validity of demand under 'Manpower Recruitment Services' versus 'Goods Transport Agency Service'.
4. Applicability of the extended period for demand and penalties.

Analysis:

1. Classification under 'Goods Transport Agency Service':
The appellant provided trucks for transportation of goods from the railway siding in Gorakhpur to Nepal, issuing delivery challans. The Department contended these challans were consignment notes, qualifying the appellant as a 'Goods Transport Agency'. However, the Tribunal found no evidence of the appellant undertaking responsibility for the goods' safe delivery, a key characteristic of a consignment note. The challans lacked separate consignor and consignee details, indicating the appellant merely facilitated transportation without assuming the role of a 'Goods Transport Agency'. The Tribunal concluded the Department's classification was incorrect, noting the appellant's activity did not meet the criteria for 'Goods Transport Agency Service' under Section 65(105) of the Finance Act, 1994.

2. Classification under 'Business Auxiliary Service':
The appellant earned a commission of Rs.100 per truck arranged for Nepal parties. The Department argued this constituted 'Business Auxiliary Service'. The Tribunal found no evidence that the commission was paid by the Nepal parties, indicating the appellant did not render 'Business Auxiliary Service' to the truck owners. The Tribunal accepted the appellant's argument that the commission income fell within the exemption limits provided by relevant notifications, thus not attracting service tax liability.

3. Validity of Demand under 'Manpower Recruitment Services' vs. 'Goods Transport Agency Service':
The show cause notice initially demanded service tax under 'Manpower Recruitment Services' for loading and unloading charges, but the Order-in-Original confirmed the demand under 'Goods Transport Agency Service'. The Tribunal held this shift beyond the scope of the show cause notice was impermissible. The Department's reliance on judicial precedents to justify this shift was rejected, as the core issue was the incorrect classification of services rather than a mere misstatement of legal provisions.

4. Applicability of Extended Period and Penalties:
The Tribunal found the Department's demand calculations were based on approximate figures, sometimes showing implausible transportation capacities (e.g., 58 MT per truck). The Department's argument that the appellant should have provided evidence to correct these figures was dismissed. The Tribunal emphasized the Department's responsibility to substantiate its claims with precise evidence. The lack of a thorough inquiry and reliance on financial documents without corroborative evidence led the Tribunal to conclude the demand was unsustainable. Consequently, the penalties imposed were also deemed unjustifiable.

Conclusion:
The Tribunal set aside the impugned order dated 16.07.2014, allowing the appeal with consequential relief. The decision underscored the importance of accurate classification and substantiation of service tax demands, rejecting the Department's assumptions and approximations. The Tribunal also highlighted procedural fairness, ensuring demands align with the initial show cause notice and are supported by concrete evidence.