2017 (1) TMI 1463 - AT - Service Tax

Tax Appeal Allowed on Time-Bar Grounds, Penalties Modified, Demand for Extended Period Not Sustainable

Hira Cement Versus Commissioner of Central Excise & S.T., Raipur

The Tribunal allowed the appeal on the grounds of time-bar, ruling that the demand for an extended period was not sustainable for a single transaction in ... Business Auxiliary Services - activity of acting as intermediary for their sister concern Hira Industries Ltd., in connection with crushing up ore of another person - whether taxable under the head BAS or otherwise? - Held that: - sub-clause (iv) has no application to the facts of the present case regarding promotion and marketing of service. Though, there is no written agreement, it is apparent that the activity of the appellant promoted the services rendered by their sister concern. This much is clear from the nature of consideration received by the appellant, which is categorized as liaisoning charges in P & L account - demand upheld. Extended period of limitation - Held that: - the allegation of fraud, suppression and wilful misstatement cannot be sustained in the facts of the present case for one of transaction carried out by the appellant during the year, 2005 - extended period cannot be invoked. Appeal allowed on the issue of time bar. Issues:1. Tax liability under Business Auxiliary Service (BAS) for acting as an intermediary for a sister concern.2. Imposition of penalties under Sections 76 & 78 of the Finance Act, 1994.3. Applicability of time bar for raising the demand.Analysis:Issue 1: Tax liability under Business Auxiliary Service (BAS)The appellant, engaged in cement and clinker manufacturing, acted as an intermediary for their sister concern in a single transaction in 2005. The Revenue contended that this activity falls under the taxable entry of 'business auxiliary service.' The Commissioner (Appeals) upheld the tax liability, except for setting aside the penalty under Section 76. The appellant argued that they did not promote the business of their sister concern and that the activity in question was a one-time arrangement, not a regular practice. The Tribunal found that the appellant's activity did promote the services of their sister concern, evident from the consideration received categorized as liaisoning charges. However, the Tribunal ruled that the demand for an extended period was not sustainable for a single transaction in 2005. Thus, the appeal was allowed on the grounds of time-bar.Issue 2: Imposition of penalties under Sections 76 & 78The penalties under Sections 76 & 78 of the Finance Act, 1994 were imposed on the appellant by the Revenue. While the Commissioner (Appeals) upheld the penalties, the Tribunal set aside the penalty under Section 76. The appellant's argument that they did not make efforts to get registered or clarify the matter with the competent authority was rejected. However, the Tribunal found that the allegations of fraud, suppression, and willful misstatement could not be sustained for a single transaction in 2005.Issue 3: Applicability of time barThe appellant maintained records reflecting the transaction in question and the receipt of consideration. The Revenue raised the demand after four years of conducting an audit, solely based on the records maintained by the appellant. The Tribunal, citing a similar case precedent, held that the demand for an extended period could not be sustained. Therefore, the demand for an extended period was deemed not sustainable, and the appeal was allowed on the question of time-bar.In conclusion, the Tribunal allowed the appeal on the grounds of time-bar, ruling that the demand for an extended period was not sustainable for a single transaction in 2005 where the appellant acted as an intermediary for their sister concern.