Tribunal rules on service tax liability for transportation services; penalties set aside, credit allowed.

The Tribunal held that the provisions applicable at the time of payment would govern regarding liability to pay service tax on transportation services. M/s. Lima Polymers Ltd. was required to pay the demanded amount but could take credit of the Cenvat credit utilized upon payment in PLA along with interest. The Tribunal partially allowed the appeal by setting aside the penalties imposed on the appellants under Sections 76 and 78 of the Finance Act, 1994, emphasizing that invoking Section 80 necessitates full waiver from penalty. The appeals were disposed of without remitting the order for de novo consideration.

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Issues:
1. Liability to pay service tax on transportation service.
2. Applicability of Cenvat credit rules.
3. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.
4. Quantum of penalty determination.
5. Appeal filed by the Revenue regarding penalty determination.
6. Resolution of legal points raised in the appeals.

Analysis:

1. The case revolved around M/s. Lima Polymers Ltd. utilizing transportation services for outward goods transportation in April and May 2007 without initially paying the required service tax. The Revenue contended that post an amendment in the Cenvat Credit Rules, 2004, the service in question was not an output service for the appellants, leading to a demand of Rs. 15,156/- being confirmed along with penalties under Sections 76 and 78 of the Finance Act, 1994.

2. The appellants argued that the service tax for the received service could be paid through Cenvat credit at the time of service receipt, and the amendment mandating cash payment came into effect from April 2008. They relied on a Tribunal decision emphasizing that the duty rate applicable is that during service provision, not during tax payment.

3. The AR for the Revenue contended that the earlier Tribunal decision related to duty rate, not payment manner. The appeal filed by the Revenue regarding the quantum of penalty determined in the impugned order highlighted the Commissioner (Appeals) deciding the assessee's appeal without considering the Revenue's appeal simultaneously.

4. The Tribunal, after considering both sides' arguments, opined that the provisions applicable at the time of payment would govern. Consequently, no relief was granted in the duty demand matter. However, the appellants were permitted to take credit of the Cenvat credit utilized upon payment in PLA along with interest. The Tribunal also noted that invoking Section 80 of the Finance Act, 1994 necessitates full waiver from penalty, not partial relief, thus partially allowing the appeal by setting aside the penalties imposed on the appellants.

5. The Tribunal disposed of both appeals accordingly without remitting the order for de novo consideration, emphasizing the resolution of legal points raised in the appeals and the full waiver of penalties under Section 80 of the Finance Act, 1994.

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