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2024 (11) TMI 1343 - AT - Service TaxDemand of service tax on the price at which the appellant had sold the coal rejects - HELD THAT - Demand is not sustainable because service tax is not a tax on the sale of goods. If the appellant had received some coal rejects, for instance, and an amount of Rs. 100 is deducted from the service charges by the client towards these coal rejects, service tax has to be paid without this deduction of Rs. 100/- from service charges. The appellant did so. Now, if the appellant subsequently sells this coal rejects either as such or after mixing it with some other coal and sells them for Rs. 150, this amount is the value of coal the rejects sold by the appellant on which the appellant may be required to pay VAT/ sales tax. According to the appellant it had paid appropriate VAT to the State Government. The demand of service tax on the sale price of rejects is beyond the scope of the Finance Act, 1994 because service tax can be levied only on the consideration received for the services and not on a goods sold by the appellant. Service Tax has already been discharged on the entire value of consideration this as is evident from the invoices. In this case, the appellant already paid service tax on the entire amount of beneficiation charges without deducting the value of the coal rejects. Therefore, the entire amount of service tax having been paid, the demand of service tax again on the value of coal rejects sold by the appellant in the four show cause notices confirmed in the two impugned orders is totally misconceived. No service tax can be levied on the sale of goods as proposed in the show cause notice on them as service charges for coal beneficiation. Appeal allowed.
Issues:
1. Whether the appellant paid service tax on the entire amount of service charges received, including the value of rejects. 2. Whether the demand for service tax on the sale price of coal rejects is valid. Analysis: The appellant, a coal beneficiation company, filed appeals against orders confirming service tax demands along with interest and penalties imposed by the Commissioner. The appellant provided coal washing services to power generation companies, retaining rejected coal. The dispute arose regarding whether the appellant paid service tax on the entire service charges, including the value of rejects. The appellant argued that it paid service tax on the full amount received, either in cash or kind, and not just on the cash portion. The department issued multiple show cause notices alleging non-payment of service tax on the sale value of coal rejects. The Tribunal examined invoices and agreements, concluding that the appellant had indeed paid service tax on the total service charges without deducting any amount for the value of rejects. The department's demand for service tax on the sale price of coal rejects was deemed unsustainable as service tax is levied on consideration for services, not goods sold. The Tribunal highlighted that the appellant had already paid appropriate VAT on the sale of rejects to the State Government. Referring to a previous case, the Tribunal emphasized that service tax should be paid on the entire amount of service charges without deducting any amount for coal rejects. Since the appellant had paid service tax on the full service charges, the demand for service tax on the sale price of rejects was considered misconceived. Consequently, both appeals were allowed, and the impugned orders were set aside, providing relief to the appellant. In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that service tax should be paid on the total service charges received, excluding any deductions for coal rejects. The demand for service tax on the sale price of rejects was deemed outside the scope of the Finance Act, 1994. The judgment provided significant relief to the appellant by setting aside the impugned orders and granting consequential relief.
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