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TMI Blog2014 (10) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial statements of the Sangam and construed the activity of transporting petroleum products from oil companies namely HPCL as Supply of Tangible Goods Service - Held that:- the applicants rebuttal of the Revenue’s claim, substantiated with brimming facts and reasoning, is acceptable and that the nature of activity involved in transportation of petroleum products from the oil companies to the respective destinations by the applicant in their tanker trucks gets covered within the scope of GTA service also gets support from the fact that the same has been accepted by the respective jurisdictional authority and assessed to Service Tax on HPCL and they complied with payment of the Service Tax under Reverse Charge Mechanism and filed periodic ST-3 returns. Moreover, if the Service Tax on the Supply of Tangible Goods Service is paid the same would be available as CENVAT credit for payment of Service Tax on GTA service, thereby making the exercise revenue neutral. Therefore, the entire Service Tax of 3,50,451/- demanded on this activity in the impugned show cause notice is infructuous and not sustainable in law. Leviability of Service tax - Rendering Business Auxiliary Service during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No. 06/2/2005-S.T., dated 1-3-2005 and Notification No. 33/2012-S.T., dated 20-6-2012. Also the cum-tax benefit sought for by the applicant in terms of Section 67(2) is not admissible. Accordingly, the claim of the applicant for cum-tax benefit is disallowed and is arrived at the Service Tax liability at 3,15,613/- and applicable interest thereon. Also the applicant had admitted a total liability of 3,80,796/-and interest of 40,675/- payable thereon in their application filed in terms of Section 32E of the Act, ibid and during the hearings. Imposition of penalty - Non-payment of Service tax - Held that:- in view of the true and full disclosure of tax liability and co-operation extended by the applicant the Bench takes a lenient view and extend partial immunity from penalty to the applicant. Prosecution - Section 32K of Central Excise Act, 1944 - the applicant is granted immunity from prosecution under Section 32K of Central Excise Act, 1944, as made applicable to Service Tax vide Section 83 of the Finance Act, 1994. - Matter disposed of X X X X Extracts X X X X X X X X Extracts X X X X ..... . Besides performance bonus is also paid by M/s. Hindustan Petroleum Corporation (HPCL). (vii) They have rented 21,000 Sq. ft of vacant land to M/s. Tiruchengodu Lorry Urimaiyalargal Automobiles Sangam on monthly rent basis. They had also leased and rented two storeys Commercial Complex to Canara Bank and Reliance Insurance Company. The details regarding the above transactions mentioned above find place in the respective balance sheets of the applicant. 1.3 From the investigation and on the basis of records namely balance sheets and Income Tax returns for the assessment years 2008-09 to 2012-13, the position revealed in respect of the services rendered by the applicant were as under : Club's or Association's Membership Services 1.4 The applicant got registered with the Registrar of Assurances, Salem in terms of Societies Registration Act, 1860 on 22-1-1963. The status of the applicant under the above said Act is neither a body constituted or established under any law nor their objective is of the nature of public service. Thus the applicant is not coming within the purview of excluded categories of bodies which come under "Club's or Association's Service", body of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Service 1.8 In the instant case, the applicant was involved in the purchase and sale of goods on behalf of their clients and received commission for providing such service in the name of turnover discount, performance bonus, etc. It appears that the commission so received is taxable under the category of 'Business Auxiliary Service'. Renting of immovable property service 1.9 'The applicant has leased and rented the land and building to private parties, Canara Bank, Reliance Insurance Company and M/s. Tiruchengodu Lorry Urimaiyalargal Automobiles Sangam and the amount received towards lease/rent is taxable under the category of 'Renting of Immovable Property Service'. Quantification of tax liability 1.10 From the balance sheet and other documents, the total Service Tax liability on the various services rendered by the applicant from April 2007 to March 2012 are worked out as under : Year Club's or Association's Service Business Auxiliary Service Renting of Immovable Property Service Supply of Tangible Goods Service 2007-08 850725 25059 0 0 2008-09 863495 22162 123914 78391 2009-10 819623 11323 110801 94645 2010-11 1042331 60144 137243 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore question of nexus does not arise. 2.4 The clarification of 'Club's or Association's Membership Service' Circular F. No. B1/6/2005-TRU, dated 27-7-2005 "any other amount" is described to include any consideration received over and above the subscription for any facility or advantages provided to members. Further the C.B.E. & C. Circular No. 127/9/2010, dated 16-8-2010 clarified that "the important point here is regarding the presence or absence of a link between 'consideration' and taxable service. It is a settled legal position that unless the link or nexus between the amount and the taxable activity can be established, the amount cannot be subjected to Service Tax". 2.5 The above clarification of the Department is also supported by the definition of service as per Section 65B(44) of the Finance Act, 1994 after the introduction of negative list which reads " 'service' means any activity carried out by a person for another for consideration, and ....". The above definition, for the purpose of taxation seeks to establish a nexus between the consideration received and service rendered/to be rendered. It is evident from the above Circulars that unless a link or nexus ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges (as specified in the P & L Account) is only a clerical mistake which is contrary to the statement of facts. The receipts are really the freight charges received by the applicant from M/s. HPCL and can never be construed as consideration for service of 'Supply of Tangible Goods Service' to be taxed under Section 65(105)(zzzzj). 2.12 Hence it is prayed that the Service Tax liability of the applicant under the head 'Supply of Tangible Goods Service' be settled as NIL Business auxiliary service 2.13 The Department came to a conclusion that the applicant was engaged in purchase and sale of goods on behalf of service receivers and categorized the commission received into different heads such as performance bonus, discount, rebate, incentive received from HPCL, other automobile spare parts manufacturers/dealers and uniform subsidy. The above receipts were proposed to be taxed under 'Business Auxiliary Service'. 2.14 The goods claimed to be promoted were not goods of the oil company but of the applicant purchased from the oil company on principal-to-principal basis. The definition of the "Commission Agent" as per explanation (a) to Section 65(19) does not apply to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Service' and 'Renting of immovable Property Service', should be taken for arriving at the eligibility under threshold exemption. Against the demand of Service Tax of ₹ 36,06,375/- under 'Club or Association's Membership Service' the applicant admitted only ₹ 40,872/- for the year 2007-08 to 2011-12. (b) Supply of Tangible Goods Service 3.4 The applicant supplies lorry for hire to M/s. HPCL for transportation of fuels and are receiving lorry hire charges based on work order issued by M/s. HPCL. The SCN alleges that the above services provided by the applicant are classifiable under 'Supply of Tangible Goods Service'. Since the applicant submitted that by mistake it was mentioned as 'hire charges' instead of 'freight', it should be treated as GTA. This claim is a classification dispute, and appeared to be out of purview of Settlement Commission, as per third proviso to Section 32E of the Central Excise Act, 1944. (c) Business Auxiliary Service 3.5 The SCN alleges, the services in relation to purchase and sale of goods on behalf of the service receivers and receiving commission for providing such service in the name of turnover discount/commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion at the time of hearing and explained the same too. In respect of the club's or Association's Membership services, he submitted that they should not be compared with entertainment clubs; as they are more similar to cooperative societies. However, he agreed to accept the Service Tax liability on entrance fee, donations of ₹ 5 but not on other voluntary donations received by them. As regards supply of tangible goods service, he submitted that they had issued consignment notes though it has been alleged in the show cause notice that no consignment notes were issued. As this was a new point raised by them they were asked to make further written submissions on this issue as well as on any other issues they want to include. They were also asked to give worksheet showing calculations as to how they were eligible for threshold limit exemption in earlier years. They agreed to make their written submission by the 25th of July, 2014 with a copy to the Commissioner. They further submitted that they had no intention to evade any taxes and have made true and full disclosure of their liability and extended full cooperation in the proceedings and, therefore, pleaded for immunities from pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t they provided was only GTA Service and recipients MPCL paid the Service Tax under GTA service under Reverse Charge Mechanism which was accepted and tax liability assessed by the Department. Relying on the decision of Settlement Commission Principal Bench, Delhi in the case of M/s. Oriflame India (P) Ltd., Settlement Order No. 01/2000, dated 10-10-2000 reported in 2000 (122) E.L.T. 601, the applicant submitted that there was no classification dispute involved. The contract entered into between the applicant and HPCL was a service contract; * the tanker lorries remained throughout the property and in possession of the Sangam; * had it been on 'Supply of Tangible Goods Service' the rental or hire charge could have been paid on hourly or days usage basis; * the operation and maintenance of the tanker lorries rest with the lorry owners, freight charges were paid on the basis of per Kl/per Km basis; * the petroleum products transported in their tanker lorries was not owned by Sangam en-route to the required destination; * the Sangam is rested with only custodial rights it was only after the freight from one end to another, the property in goods are passed on by HPCL to the cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the oil companies and they are used at their (oil company's) will. Even when the tankers were not in use the lorry owners had to be paid hire charges irrespective of the duration or usage. By sighting various other realities and facts the applicant stated that the service rendered was only GTA that was paid by the oil companies and assessed by the Department during all these years. Further report of Jurisidictional Commissioner 6.1 Commissioner vide his report dated 6-8-2014 by quoting extensively from provisions of Finance Act, 1994 reiterated that entire demand made in the show cause notice on account of all the four services rendered by the applicant was sustainable in respect of 'Supply of Tangible Goods Services'. Commissioner stressed that had the auditor reported the GTA service charge were as 'hire charges' they would rectify the mistake by revising the income tax return. Having not done so, their plea of mistaken description as hire charges cannot be accepted. Rebutting the contention of the applicant on the applicability of the ratio of Hon'ble CESTAT order in the case of Birla Ready Mix v. CCE, Noida on the grounds that the period involved in that case was pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of prescribed late fees. The applicant having complied with this requirement, fulfilled the provisions of Section 32E(l)(a) of Central Excise Act, 1944. Quoting from Rule 7C, the applicant further stressed that once the ST-3 returns were filed with late fees, the issue of filing of returns reached finality and the mandatory obligation was substantially fulfilled as envisaged in Section 32E(1)(a) of CEA, 1944. 7.3 Bench also takes note of the recent amendments of Section 32E(1)(a) brought out in the Finance Act, 2014, pursuant to which the Bench records that the circumstances under which they filed the returns with late fee is accepted as compliance of 32E(1)(a) of CEA, 1944 and therefore allow the application to be proceeded with for settlement. Service Tax and interest 7.4 The applicant is issued with a show cause notice demanding a Service Tax of ₹ 46,54,255/- on account of services namely 'Club's or Association's Membership Service', 'Supply of Tangible Goods Service', 'Business Auxiliary Service', 'Renting of Immovable Property Service' rendered during the period 2007-08 to 2011-12. The applicant at the time of filing the application admitted Service T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he service was self-service; there was no entity viz. service provider and service receiver and therefore the activity of Sangam should not be subject to Service Tax at least until 1-7-2012 when the service 'Club or Association' under Section 65(25aa) was redefined and the Negative List of services introduced. The applicant's reliance on the Circular No. F. No. B1/06/2005-TRU, dated 27-7-2005 and Circular No. 120/07/09/2010, dated 16-8-2010 to emphasize that there was no link or nexus between the donation and club service provided; * on the other hand the applicant admitted that the 'subscription' and 'entrance fee' collected for membership were taxable services and willing to discharge Service Tax on that amount; * Bench finds that the applicant's submission that the donation collected was not relevant or related to availing of the services of Sangam, has overwhelming force over the Department's claim and holds that the donation collected and election deposit forfeited during the impugned period were not liable for Service Tax and therefore the Service Tax amount of ₹ 35,47,467/- demanded in the SCN on account of donations collected and election deposit forfeited does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he crew, cost of lubricants and other statutory payments; * the Sangam operated the tanker trucks under its own risk and that oil company were not responsible for any loss or damage done to/by the tanker truck while on company's work, were parked in their premises or anywhere else; * the Sangam would be responsible for quantity and quality of the products on transported, as the custodial rights of goods were transferred to applicant while in transit; * HPCL is entitled to recover from Sangam in case of shortage of quantity or variation in the quality of the product found in the transported destination; * the Sangam provided consignment notes for each consignment loaded on trip/daily basis, the applicant also stated that had it been under the category of supply of Tangible Goods Services, the need for such consignment notes did not arise; * all the above responsibilities and conditions were fastened on Sangam vide their contractual agreements; * the Bench per contra finds from the submissions of the applicant that HPCL has not paid any fixed rent per day, whether the tanker trucks were put to use or not; nor the maintenance of the vehicle, breakdown/repair expenses crew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s namely performance bonus, uniform subsidy are not liable for Service Tax as the same is accrued to the applicant on their trading activities. Bench finds that these activities and receipts of income are relatable to the trading activities. Therefore the Bench holds that the entire demand of ₹ 1,18,688/- made under the heading Business Auxiliary Service is not sustainable in law and drops the demand. Renting of immovable property 7.11 Revenue demanded Service Tax on the service of 'Renting of Immovable Property' to HPCL, Reliance, Canara Bank etc. for the year 2007-08 to 2011-12. However the applicant submitted that they rented out vacant land to M/s. HPCL and Service Tax is not required to be paid, on the rental of vacant land in terms of Ministry's Circular No. DOF/334/1/2007-TRU, dated 28-2-2007 and they reckoned the Service Tax liability on the renting of vacant land only from 1-7-2010 to 31-3-2012. The Commissioner vide their report dated 6-8-2014 accepted this position and the Service Tax in respect of the renting of vacant land became effective only from 1-7-2010 and the applicant accepted the Service Tax liability on the income received on rental of building t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 3,80,796/-and interest of ₹ 40,675/- payable thereon in their application filed in terms of Section 32E of the Act, ibid and during the hearings held. Bench records that the applicant accepted Service Tax liability of ₹ 3,80,796/- and interest of ₹ 40,675/- in the application filed and during hearing held, in terms of Section 32E(c) of the Act, ibid. Therefore the Bench is ordained by law that the settlement ordered by the Commission shall not be less than the duty liability (read Service Tax liability) admitted by the applicant under Section 32E. 7.13 In view of the above findings, the Bench holds that the Service Tax demanded on account of Supply of Tangible Goods Service and Business Auxiliary Service are totally unsustainable in law and facts and therefore drop the demand to that extent. So also in respect of 'Club or Association Service' the Bench holds that the total amount collected towards donation and forfeiture of election deposit are not relatable to service provided and therefore holds not liable for Service Tax. On the other hand, the subscription, entrance fee and lorry stand collection fee collected by the Sangam is liable for Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t payable should be worked out by the applicant to the satisfaction of the .jurisdictional Commissioner. The applicant has paid an amount of ₹ 56,654/- towards interest. The balance amount shall be paid within 30 days of receipt of this order and compliance reported to the Commissioner. (iii) The Bench imposes a penalty of ₹ 20,000/- (Rupees twenty thousand only) on the applicant under the provisions invoked in the show cause notice and grants immunity in excess of the penalty indicated herein. This amount should be paid by the applicant within 30 days of receipt of this order and proof of payment be furnished to Jurisdictional Commissioner. (iv) The applicant is granted immunity from prosecution under Section 32K of Central Excise Act, 1944, as made applicable to Service Tax vide Section 83 of the Finance Act, 1994. 8.2 The immunities are granted in terms of Section 32K of the Central Excise Act, 1944, as made applicable to Service Tax matters vide Section 83 of the Finance Act, 1994. The immunities granted above are liable to be withdrawn if, at any time, it comes to the notice of the Bench that, in obtaining this order of settlement, any material particular ..... X X X X Extracts X X X X X X X X Extracts X X X X
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