2009 (3) TMI 592 - AT - Service Tax

Appellant's Belief Upheld in Tax Liability Case

NIRAV INDUSTRIES Versus COMMR. OF C. EX. & CUS., RAJKOT

The appellant successfully argued that conflicting decisions prior to the Larger Bench ruling supported their belief that consignment agents were not ... Clearing and Forwarding Agents - consignment agents cannot be held liable to tax under the category of clearing and forwarding operations during the relevant period - Earlier decisions reversed by larger bench - It is well settled law that, when there are favourable or contradictory decisions holding the field, entertaining bona fide belief by an assessee cannot be faulted upon. Issues: Interpretation of law regarding liability of consignment agents to pay service tax as Clearing and Forwarding Agents during the period 2001-02 to 2005-06.The judgment involves the interpretation of the law concerning the liability of consignment agents to pay service tax as Clearing and Forwarding Agents for the period 2001-02 to 2005-06. The appellant argued that the service tax demand against them was confirmed through a show cause notice in 2006, based on a Tribunal decision favoring the assessee during the relevant period. The appellant relied on the case of Mahavir Generics v. CCE, Bangalore, which held that consignment agents cannot be held liable for tax under the category of clearing and forwarding operations. However, this decision was overruled by the Larger Bench decision in the case of Medpro Pharma Pvt. Ltd. v. CCE, Chennai. The appellant contended that in the presence of contradictory decisions, they cannot be held guilty of suppression or misstatement. The appellant admitted duty liability within the limitation period and requested setting aside the balance demand on the ground of limitation itself.The judge agreed with the appellant's argument that prior to the Larger Bench judgment in the case of Medpro Pharma Pvt. Ltd., the decisions favored consignment agents not being liable to pay tax as Clearing and Forwarding Agents. It was acknowledged that when there are conflicting decisions in the field, an assessee acting on a bona fide belief should not be faulted. Consequently, the judge found the demand of duty beyond the normal limitation period unjustified. The impugned order was set aside, and the matter was remanded to lower authorities for re-quantification of duty. Additionally, the penalty under Section 78 was also set aside by invoking the provisions of section 80. The appeal was disposed of based on the above grounds.