2024 (2) TMI 909 - AT - Service Tax

Valuation - Composite services - GTA Services on reverse charge basis - non-inclusion of various expenses in the taxable value - non-payment of service tax in respect of the amounts shown under the category of Legal and Professional Charges - levy of penalties. GTA Services - HELD THAT - It appears that the authorities below have totally misunderstood the scheme of taxation on GTA under RCM scheme. Admittedly appellant is paying the service tax on the value of GTA Service as per consignment note/ bilty/ invoices of the GTA service provider on RCM basis. They are receiving certain other services from different service provider which they have put under the category of Loading and Unloading Charges, Pole shifting and stacking services. When the services are received from two different sources how can the same been clubbed under the category of GTA services as composite service. The entire case of the revenue is based creating a composite service of GTA by including these charges while determining the taxable value. Appellant is not providing GTA service to their customers PVVNL, but are manufacturing and selling the PCC Poles to their customers, which they deliver to their customer at the location specified by the customer. It is not even the case of the revenue that the GTA was providing the services categorized under category of loading and unloading charges and pole shifting and stacking charges . It is also not the case of revenue that the charges in respect of these service received by the appellant were paid to GTA. Not even a single invoice to this effect has been produced or relied upon by the revenue in entire proceedings - there are no merits in this demand. Professional and Legal Services - HELD THAT - There are no merits in respect of the demand made by the revenue on the expenditure incurred by the appellant which they have categorized under the category of Professional and Legal charges , which in fact are not paid to advocate or the firms of advocate. Along with the appeal appellant have furnished the vouchers of payment, ledger accounts in respect of these expenses, which substantiate their claim that these expenditures were made for the purchase of stamp papers, for TDS return filing, cost of court expenses/ fees etc. The ledgers of these expenditure were also produced before the lower authorities, and Commissioner (Appeal) has in the impugned order referred to some of the entries made in these ledgers - this demand also cannot be upheld. There are no merits in these two demands and the impugned order upheld to the extent of tax deposited by the appellant along with interest during the course of investigation (Rs 3181/- Rs 573/-). This amount had been deposited by the appellant even prior to issuance of the SCN. As the amount is meager and has been deposited even prior to issuance of SCN, the penalty under Section 78 which has been imposed against this amount, cannot be upheld. All other penalties which have been imposed in terms of Section 77 (1) (a), 77 (2) and 78 also cannot be upheld as the demand itself has no merits. Appeal allowed.

Summary

Issues Involved:
1. Demand of Service Tax under Reverse Charge Mechanism (RCM) on various charges.
2. Demand of Service Tax on "Legal and Professional Charges".
3. Imposition of penalties under various sections of the Finance Act, 1994.

Summary:

1. Demand of Service Tax under Reverse Charge Mechanism (RCM) on Various Charges:
The jurisdictional authorities alleged that the appellant had short-paid service tax on GTA Services by not including various expenses like "Freight, Insurance & Other Charges", "Loading & Unloading Charges", and "Pole Shifting & Stacking Charges" in the taxable value. The authorities issued a show cause notice demanding service tax amounting to Rs 15,01,881/- under Section 73(1) of the Finance Act, 1994. The adjudicating authority confirmed a demand of Rs 3,31,667/- under GTA Service, stating that these charges are part of a single composite service of transportation by road. The Tribunal found that the services were received from separate sources and accounted for separately, hence could not be clubbed under GTA services. The demand was deemed without merit as no evidence was provided to show that these charges were paid to GTA.

2. Demand of Service Tax on "Legal and Professional Charges":
The authorities demanded service tax on "Legal and Professional Charges" amounting to Rs 11,397/-. The appellant admitted to a part of the demand (Rs 3,181/-) and contested the remaining amount, stating that the expenses included costs for stamp papers, CA for tax audit, TDS filing, and excise consultants, which are not subject to service tax under RCM. The Tribunal found that only charges paid to individual advocates or firms of advocates are taxable under RCM as per Notification No. 30/2012-ST. The Tribunal upheld the appellant's claim, stating that the remaining expenses were not for legal services provided by advocates and thus not taxable.

3. Imposition of Penalties:
The adjudicating authority imposed penalties under Sections 77(1)(a), 77(2), and 78 of the Finance Act, 1994. The Tribunal found no merit in the demand itself and thus could not uphold the penalties. The Tribunal allowed the appeal, setting aside all penalties and demands except for the amount already deposited by the appellant (Rs 3,181/- along with interest of Rs 573/-).

Conclusion:
The appeal was allowed, and the Tribunal set aside the demands and penalties, except for the amount already deposited by the appellant. The Tribunal emphasized that services received from separate sources cannot be clubbed under a single composite service for taxation purposes.