2023 (10) TMI 884 - AT - Service Tax

Violation of principles of natural justice - impugned order passed without properly appreciating the facts and law - non-appreciation of complete facts - SSI Exemption - Business Auxiliary Service - Invocation of Extended period of limitation - Penalty - HELD THAT - The demand of service tax for the period from 1st April 2003 to March 2005 is prima facie wrong because the appellant has started rendering services to M/s IBP Co. Ltd. from 01.09.2005 as is clear from the agreement dated 01.09.2005 which has been accepted in the order-in-original. The appellant is entitled to SSI exemption for the period 2005-2006 because their turnover was less than 4.00 lacs in that financial year which entitles them for SSI exemption in terms of Notification No. 06/2005-ST dated 01.03.2005. In the case of Commissioner of Central Excise, Chandigarh vs. Loan Zone 2015 (12) TMI 269 - CESTAT NEW DELHI wherein identical facts were involved and it was held that the service is not provided to independent persons but to service recipient who is itself brand name owner. Invocation of Extended period of limitation - Penalty - HELD THAT - In the present case, invoking the extended period of limitation is not justified simply on the ground that there was no payment of tax and no return was filed as held in the case of Punjab Technical University 2016 (1) TMI 162 - CESTAT NEW DELHI - imposition of penalty under Section 76 and 77 are bad in law as per the judgement of the Hon ble Punjab and Haryana. The entire demand is barred by limitation - the appellant was entitled to the SSI exemption in view of the facts of this case - Appeal allowed.

Summary

Issues:
The issues involved in the judgment are:
- Allegation of evasion of service tax under Business Auxiliary Service
- Invocation of extended period of limitation
- Contesting the show cause notice and appeal process
- Applicability of SSI Exemption
- Classification of services under Business Support Service
- Tax liability prior to the amendment in Finance Act, 2006
- Imposition of penalties under Sections 76 and 77
- Calculation of service tax and procedural irregularities in orders

Allegation of Evasion of Service Tax under Business Auxiliary Service:
The appellant was accused of evading service tax under Business Auxiliary Service as a commission agent. The Department invoked the extended period of limitation due to alleged suppression. A show cause notice was contested, leading to confirmation of the demand by the original authority and subsequent dismissal of the appeal by the Ld. Commissioner (Appeals).

Applicability of SSI Exemption:
The appellant claimed eligibility for SSI Exemption for a specific period based on turnover criteria, supported by documentary evidence. The appellant argued that the charges were below the threshold for exemption and cited relevant case law to support their position. The issue of SSI Exemption denial due to selling branded products was contested, emphasizing the interpretation of exemption provisions.

Classification of Services under Business Support Service:
The appellant argued that the services provided did not fall under Business Auxiliary Services but rather under Business Support Service, citing specific cases to support this classification. The change in tax liability pre-amendment in the Finance Act, 2006 was highlighted to assert that no tax liability existed before the specified date.

Invocation of Extended Period of Limitation:
The appellant challenged the invocation of the extended period of limitation, arguing that non-payment of tax or non-filing of returns did not constitute suppression. Case law was referenced to support this argument, emphasizing that mere procedural lapses did not imply intentional evasion.

Imposition of Penalties under Sections 76 and 77:
The appellant contended that penalties under Sections 76 and 77 should not be imposed simultaneously, citing relevant legal precedent. Additionally, discrepancies in the computation of service tax and procedural irregularities in the orders were raised as grounds for challenging the penalties.

Judgment:
After considering submissions and evidence, the Tribunal found the demand for service tax for a specific period to be incorrect and upheld the appellant's entitlement to SSI exemption. The Tribunal also concluded that the extended period of limitation was unjustified, penalties under Sections 76 and 77 were unlawful, and the orders were passed mechanically without proper appreciation of facts. As a result, the impugned order was set aside, and the appeal of the appellant was allowed with consequential relief.