2016 (2) TMI 546 - AT - Service Tax

Tribunal classifies services as Business Support Service, penalties reduced under Sections 76 and 78

Capital Transport Convoy Contractor Versus Commissioner of Central Excise And Service Tax, Indore

The Tribunal upheld the classification of services provided by the appellant as Business Support Service (BSS) from 1.5.2006 onwards due to their ... Classification of services - providing services relating to transportation of light Commercial Motor Vehicles & Multi Utility Vehicle, manufactured by M/s Force Motors Ltd. by way of getting them driven by skilled drivers - Support Service for Business or Commerce (BSS) and / or Business Auxiliary Service (BAS) - Held that:- It is seen from the agreement that the appellant was not providing skilled drivers to the service recipient. Indeed, the appellant took the responsibility for transportation of the vehicles. It is thus evident that the appellant was entrusted to manage distribution and logistics in relation to transport and delivery of the vehicles at the service recipient's depots/dealer's premises. It was not merely making available skilled drivers to the service recipient. Indeed, the drivers were never provided the service recipient but were engaged by the appellant to fulfill its responsibility as per the agreement. Its responsibility as per the said agreement was not merely executory but required proper management supervision and coordination of various aspects relating to fulfillment of its responsibilities as per the said agreement. Therefore the services rendered clearly fell under the scope of managing distribution and logistics. None of the limbs of BAS covers the impunged activity - the services rendered by the appellant were clearly, unambiguously and fully covered within the scope of managing distribution and logistics and therefore the impugned services were classifiable under BSS and liable to service tax with effect from 1.5.06. Extended period of limitation - the facts relating to the value of services rendered during the period January 2008 and September 2008 were not available with Revenue and the appellant deliberately did not provide them in a timely manner in spite of repeated and numerous reminders sent over a period of several months. - Once suppression is established as it has been in the present case , Revenue gets a period of 5 years to issue show cause notice as per the proviso to Section 73(1) ibid. Demand pertaining to the period 1.5.06 to 31.12.07 along with interest and penalty under Section 78 is upheld. - Decided against the assessee. Issues Involved:1. Classification of services provided by the appellant.2. Applicability of extended period for demand.3. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.4. Applicability of the Supreme Court judgment in Nizam Sugar Factory for subsequent show cause notice.5. Entitlement to reduced penalty under Section 78.Detailed Analysis:1. Classification of Services Provided by the Appellant:The appellant contended that their services did not fall under Business Auxiliary Service (BAS) or Support Service for Business or Commerce (BSS). They argued that they only provided skilled drivers for transportation, which could be classified under GTA service or manpower recruitment. However, the Tribunal analyzed the agreement between the appellant and the service recipient, which revealed that the appellant was responsible for managing distribution and logistics, including appointing representatives, arranging drivers, ensuring safe transportation, and preparing delivery challans. The Tribunal concluded that the services rendered were not merely the provision of skilled drivers but involved comprehensive management and logistics, falling under BSS from 1.5.2006 onwards.2. Applicability of Extended Period for Demand:The appellant argued against the invocation of the extended period, claiming no willful misstatement or suppression. The Tribunal found that the appellant did not take service tax registration or file ST-3 returns, indicating suppression of facts. The Tribunal held that the extended period was invokable due to the appellant's failure to provide necessary information, despite repeated reminders from the Revenue.3. Imposition of Penalties under Sections 76 and 78:The primary adjudicating authority imposed penalties under Sections 76 and 78. However, the Commissioner (Appeals) set aside the penalty under Section 76, sustaining the penalty under Section 78 and extending the benefit of reduced penalty if paid within 30 days. The Tribunal agreed with this view, citing judgments from Punjab & Haryana High Court, and extended the benefit of reduced penalty under Section 78 for the impugned order dated 26.2.2009.4. Applicability of the Supreme Court Judgment in Nizam Sugar Factory for Subsequent Show Cause Notice:The appellant cited the Supreme Court judgment in Nizam Sugar Factory to argue against the extended period for the subsequent show cause notice. The Tribunal found that the appellant deliberately withheld information required for computing service tax liability, despite numerous reminders. Therefore, the judgment in Nizam Sugar Factory was not applicable as the facts and circumstances differed. The Tribunal upheld the extended period for the subsequent show cause notice.5. Entitlement to Reduced Penalty under Section 78:The Tribunal noted that the lower adjudicating authority did not expressly extend the benefit of reduced penalty under Section 78. Citing the Gujarat High Court decision in Ratnamani Metals & Tubes Ltd., the Tribunal extended the benefit of reduced penalty to the appellant, provided the recomputed demand along with interest and reduced penalty were paid within 30 days of receipt of intimation from the primary adjudicating authority.Orders:(i) Appeal No. ST/57963/2013 in respect of order-in-appeal dated 25.2.2013 is dismissed.(ii) Appeal No. ST/406/09 is partly allowed as follows:(a) The demand for the period up to 30.4.06 is set aside.(b) Penalty under Section 76 is set aside.(c) Demand for the period 1.5.06 to 31.12.07 along with interest and penalty under Section 78 is upheld. The case is remanded to the primary authority for recomputation of the demand for this period. The penalty under Section 78 shall be reduced to 25% of the mandatory penalty if the recomputed demand along with interest and reduced penalty are paid within 30 days of receipt of intimation from the primary adjudicating authority.Both appeals are disposed of accordingly.