2025 (3) TMI 383 - AT - Service Tax

Liability of appellant to pay Service Tax under the Reverse Charge Mechanism for the transportation services received from a Goods Transport Agency (GTA) despite the service provider having already paid the tax - invocation of extended period of limitation - HELD THAT - The appellant is agreed upon that if service tax was required to be paid by the appellant as alleged in the show cause notice but the service tax has already been paid by the service provider department cannot recover the service tax once again from the service receiver under Reverse Charge Mechanism. The service tax cannot be demanded on the same service twice irrespective of the fact whether the service tax has been paid by the service provide by service receiver. This issue is no more res-integra. Reliance placed in the case of Dhariwal Industries Limited vs. C.C.E. C. Anand 2023 (10) TMI 595 - CESTAT AHMEDABAD in which this Tribunal held that even though legally the appellant is liable to pay service tax but in the facts of the present case the transport agency has admittedly paid such service tax. The assessment of payment of service tax by the transport agency has not been disputed by their jurisdictional officer. Therefore no question can be raised as regard the service tax payment and assessment thereof at the end of the transport agency. If this be so then the payment of service tax by the goods transport agency was made good as payment of service tax. Therefore the demand against the appellant for the same service will amount to demand of service tax twice on the same service which in any case is not permissible. Once the service provider discharged the service tax where the service recipient is liable to pay the service tax demand of service tax on the same service from the service recipient shall not sustain on the ground that the particular service which already suffered the service tax cannot be made to suffer the service tax twice on the same service. Accordingly the service tax paid by the transport agency in the facts of the present case is the payment of service tax and not deposit. Therefore no demand can be raised from the appellant. The impugned order was held not sustainable and the same was set aside and appeal was allowed. Conclusion - The learned first Adjudicating Authority and the learned Commissioner (Appeals) have committed error in confirming the demand and recovery of service tax amounting to Rs.1, 17, 881/- from the appellant. The first Adjudicating Authority and the learned Commissioner (Appeals) erred in confirming the demand of interest on the amount of service tax and imposition of penalty of Rs.1, 17, 881/- under Section 78(i) of the Finance Act and Rs. 10, 000/- under proviso to Section 77 (1) (b) of the Finance Act 1994 respectively on the appellant. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment were:

• Whether the appellant was liable to pay Service Tax under the Reverse Charge Mechanism for the transportation services received from a Goods Transport Agency (GTA), despite the service provider having already paid the tax.
• Whether the demand for Service Tax was barred by the limitation period prescribed under Section 73 of the Finance Act, 1994.
• Whether the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994, was justified.

ISSUE-WISE DETAILED ANALYSIS

Liability under Reverse Charge Mechanism

• Relevant Legal Framework and Precedents: Section 68(2) of the Finance Act, 1994, stipulates that in certain cases, the service receiver is liable to pay Service Tax. Notification No. 30/2012-ST specifies the applicability of the Reverse Charge Mechanism for GTA services.
• Court's Interpretation and Reasoning: The Tribunal acknowledged that legally, the appellant was required to pay Service Tax under the Reverse Charge Mechanism. However, it emphasized that if the service provider had already paid the tax, demanding it again from the service receiver would result in double taxation, which is impermissible.
• Key Evidence and Findings: The appellant provided documentary evidence showing that the service provider, M/s. Kaveri Transport Carriers, had paid the Service Tax, including invoices and tax returns.
• Application of Law to Facts: The Tribunal applied the principle that tax cannot be levied twice on the same service. Since the service provider had already paid the tax, the Tribunal concluded that the department could not recover it again from the appellant.
• Treatment of Competing Arguments: The Tribunal rejected the department's argument that the appellant was independently liable under the Reverse Charge Mechanism, emphasizing that the tax had already been settled by the service provider.
• Conclusions: The Tribunal concluded that the demand for Service Tax from the appellant was not sustainable.

Limitation Period

• Relevant Legal Framework and Precedents: Section 73 of the Finance Act, 1994, prescribes the limitation period for issuing a show cause notice, typically one year, extendable to five years in cases of suppression, fraud, or willful misstatement.
• Court's Interpretation and Reasoning: The Tribunal noted that the department failed to demonstrate suppression or willful misstatement by the appellant, which is necessary to invoke the extended limitation period.
• Key Evidence and Findings: The Tribunal observed that the department did not provide substantial evidence of any fraudulent intent or suppression by the appellant.
• Application of Law to Facts: Given the lack of evidence for extended limitation, the Tribunal found that the demand was time-barred for the period beyond the normal one-year limitation.
• Treatment of Competing Arguments: The Tribunal dismissed the department's claim for extended limitation, citing insufficient evidence.
• Conclusions: The Tribunal concluded that the demand was time-barred for the major part of the period in question.

Imposition of Penalties

• Relevant Legal Framework and Precedents: Sections 77 and 78 of the Finance Act, 1994, provide for penalties in cases of non-compliance and evasion of tax.
• Court's Interpretation and Reasoning: The Tribunal held that since the demand for Service Tax was not sustainable, the imposition of penalties was also unjustified.
• Key Evidence and Findings: The Tribunal found no evidence of deliberate non-compliance or evasion by the appellant.
• Application of Law to Facts: With the primary demand for tax being unsustainable, the Tribunal logically extended this finding to the penalties, deeming them unwarranted.
• Treatment of Competing Arguments: The Tribunal did not find merit in the department's justification for penalties, given the circumstances.
• Conclusions: The Tribunal concluded that the penalties imposed were not justified and should be set aside.

SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal reiterated the principle that Service Tax cannot be levied twice on the same service, whether paid by the service provider or receiver.
• Final Determinations on Each Issue: The Tribunal set aside the demand for Service Tax and associated penalties, allowing the appeal and overturning the orders of the lower authorities.
• Verbatim Quotes of Crucial Legal Reasoning: "The service tax cannot be demanded on the same service twice, irrespective of the fact whether the service tax has been paid by the service provider or by the service receiver."