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2024 (3) TMI 285 - AT - Service TaxLevy of service tax - Support Services of Business or Commerce - receipt collected from the clients towards ocean freight - eligible documents under Rule 9 of Cenvat Credit Rules, 2004 or not - imposition of consolidated penalties under Section 76, 77 78 of the Act - extended period of limitation - HELD THAT - The issue in dispute is no longer res integra. Mere purchase and sale of booking cargo space is not a Service and the surplus income/receipts earned is not consideration towards rendition of any BSS to their client and hence not liable to service tax. Neither the transaction is amenable to Service Tax under the category oBusiness Auxiliary Service nor under 'Business Support Service' and thus, the demand of service tax confirmed vide the impugned Order is not sustainable and is liable to be set aside. Further, in the case of M/S. CONSOLE SHIPPING SERVICES INDIA PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI-II 2023 (5) TMI 192 - CESTAT NEW DELHI , the Tribunal held that the income/receipts under the head of airline commission and airline incentive was not taxable under BAS as the Appellant assessee was not buying and selling space on the airline on behalf of their client but on their own account as the they were directly buying themselves and thereafter selling the same to the exporters. Therefore, the said activity cannot be considered as BAS since the statute requires at least three parties to be involved in the transaction namely the service provider, service recipient and the client which was not the case involved. Hence, Service Tax was not payable. Extended period of limitation - Penalties - HELD THAT - It is imperative to state that the Appellant assessee had discharged their tax liability towards terminal handling services, documentation service, Bill of Lading service, etc., even when they were not required to do so under the existing law during the relevant period. This further establishes bona fide intent of the Appellant assessee - the Appellant assessee cannot be alleged to have suppressed facts with mala fide intention. Once the demand is not sustainable on merits as elaborated above, for the same reasons the imposition of penalties upon the Appellant assessee under Section 77 and Section 78 of the Finance Act, 1994 are liable to be set aside. Furthermore, considering that the demand itself has no foundation, the benefit of Section 80 of the Finance Act permitting waiver of penalty is extendable and no interest is recoverable under Section 75 of the Finance Act when it has been established that demand is not sustainable. The impugned order cannot be sustained and is therefore set aside - Appeal allowed.
Issues Involved:
1. Liability of Service Tax on ocean freight under "Support Services of Business or Commerce." 2. Eligibility of Cenvat credit on invoices issued to unregistered branch offices. 3. Imposition of combined penalties under multiple sections of the Finance Act. Summary: 1. Liability of Service Tax on Ocean Freight: The Tribunal addressed whether the receipt collected from clients towards ocean freight is liable to Service Tax under "Support Services of Business or Commerce" (BSS). The Appellant-assessee argued that the transportation of export cargo through ocean/air was not taxable as it was not notified under any sub-clause of Section 65(105) of the Finance Act, 1994. The Tribunal found that mere purchase and sale of booking cargo space is not a "Service" and the surplus income earned is not consideration towards any "BSS" to their client. The Tribunal cited several precedents, including Supply Chain Logistics Pvt. Ltd. vs. Commissioner of Service Tax, Chennai and Console Shipping Services India Pvt. Ltd. v. Commissioner of Service Tax, Delhi-II, to support its decision that the transactions were not liable to service tax. 2. Eligibility of Cenvat Credit: The Tribunal considered whether the Cenvat credit was correctly taken by the Appellant-assessee for input services procured for facilitating their output services, even if the invoices were in the name of their unregistered branch offices. The Appellant-assessee argued that they are eligible to claim Cenvat credit as the payments for such services were made by them, and centralized registration was obtained in July 2009. The Tribunal agreed, referencing decisions such as Cyber Park Pvt. Ltd. vs. Principal Commissioner of Central Goods & Service Tax, Noida and Manipal Advertising Services Pvt. Ltd. vs. Commissioner of Central Excise, Mangalore, and concluded that Cenvat credit cannot be denied merely due to procedural irregularity. 3. Imposition of Combined Penalties: The Revenue appealed against the imposition of consolidated penalties under Section 76, 77, and 78 of the Finance Act, arguing that combined penalties under two or more sections cannot be imposed. The Tribunal found that the demand itself was not sustainable on merits, and thus, the imposition of penalties under Section 77 and Section 78 of the Finance Act was liable to be set aside. Furthermore, the Tribunal extended the benefit of Section 80 of the Finance Act, permitting waiver of penalty and establishing that no interest is recoverable under Section 75 when the demand is not sustainable. Conclusion: The Tribunal set aside the impugned order, allowed the appeal filed by the Appellant-assessee with consequential relief as per law, and dismissed the appeal filed by the Appellant-Revenue. The judgment emphasized that the transactions in question were not liable to service tax and that procedural irregularities should not result in the denial of Cenvat credit. The Tribunal also found that penalties were not warranted given the lack of sustainable demand.
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