2024 (3) TMI 70 - AT - Service Tax

Interpretation of statute - transportation of goods - whether sale is not mandatory in relation to the word goods for purpose of levy of service tax? - applicability of the concept of marketability to the instant case - HELD THAT - The contention cannot be agreed upon that the said components are not goods as they are not sold ordinarily. This Tribunal in M/S. DIESEL LOCO MODERNIZATION WORKS VERSUS CCE, CHANDIGARH 2011 (3) TMI 161 - CESTAT, NEW DELHI had categorically held that Notification No.29/2008-ST dated 26.06.2008 pleaded by the appellant in support is not applicable to GTA Services which is covered by sub-Clause (zzp) of Clause 105 of Section 65 of the Finance Act, 1994 whereas the exemption under the said Notification is meant for sub-clause (zzzz) of Clause 105 of Section 65 of the Act ibid. Undoubtedly, the component manufactured and transported by the appellant are covered within the definition of Goods under the Finance Act, 1994 being movable property and satisfying the definition of the term under Section 2 of the Sale of Goods Act, 1930. Also the unit has been registered as a factory under the Factories Act. The appellants are covered within the definition of term other persons‟, required to pay service tax as recipient of GTA Services under Rule 2(1)(v)(a) of the Service Tax Rules, 1994. There being no distinction in law between a private factory or a government body using GTA Services. No exemption is therefore admissible to the appellant either as a Government factory or as a unit of the Ministry of Railways. The tax demand along with interest as confirmed by the learned Appellate Authority is clearly payable by the appellant. After considering the facts and circumstances of the case and the appellant belonging to the Ministry of Railways enabling the discharge of sovereign functions, as pointed out by the learned Advocate, this is a fit case for waiver of any penal liability imposed. The appeals are, therefore, disposed off upholding the tax demand and interest while setting aside the penal liabilities.

Summary

Issues involved:
The issues involved in the judgment are the demand of service tax, imposition of penalties under Sections 76 and 77 of the Finance Act, 1994, and the applicability of tax exemptions to a government organization under the Ministry of Railways.

Demand of Service Tax:
The appellant, M/s Diesel Loco Modernization Works, filed appeals against orders confirming the demand of service tax for specific periods. The appellant argued that as a unit under the Ministry of Railways, they are not subject to taxation and do not engage in the sale of goods. However, the Commissioner upheld the demand, stating that the appellant failed to discharge their service tax liability for services provided by Goods Transport Agency. The Tribunal agreed that the appellant's components qualify as goods under the Finance Act, 1994, and are subject to service tax as recipient of GTA services, regardless of being a government entity. The tax demand and interest were upheld, but penal liabilities were waived due to the appellant's role in sovereign functions.

Imposition of Penalties:
The Tribunal found no grounds to challenge the Commissioner's order confirming the demand of service tax and penalties under Sections 76 and 77 of the Finance Act, 1994. The appellant's argument that their components were not capable of being bought and sold, thus not covered under the Sale of Goods Act, 1930, was deemed meritless. The Tribunal emphasized that the appellant, as a registered factory under the Factories Act, falls under the definition of "other persons" required to pay service tax for GTA services, irrespective of their government affiliation. The exemption claimed by the appellant was deemed inapplicable to the services provided by GTA, leading to the confirmation of tax liability and interest.

Applicability of Tax Exemptions:
The appellant's plea for tax exemption as a government factory or a unit of the Ministry of Railways was rejected by the Tribunal. It was established that there is no legal distinction between a private factory and a government body in terms of paying service tax for GTA services. The Tribunal referenced previous rulings and statutory provisions to conclude that the appellant's components qualify as goods under the Finance Act, 1994, and are subject to service tax. Despite the appellant's role in sovereign functions, the Tribunal upheld the tax demand and interest while waiving the penal liabilities.