Service tax demand upheld for Transport of Export Cargo during specific period due to changes in exemption notifications. Penalties set aside.

The Tribunal upheld the demand of service tax for Transport of Export Cargo from 15.03.2005 to 23.06.2005, based on changes in exemption notifications and the appellant's realization of tax liability. Penalties under Section 76 & 78 were set aside. The appeal was partially allowed, with the judgment pronounced on 28.10.2015.

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Issues:
Demand of service tax under Transport of Cargo by Air under Section 65(105) (zzn) of the Finance Act, 1994 for the period from 15.3.2005 to 23.6.2005.

Detailed Analysis:

1. Exemption Notification and Changes in Service Tax Regulations:
The appellant contested the demand of service tax, arguing that the service tax exemption on Transport of Cargo by Air was withdrawn on 15.3.2005, making their services taxable. They highlighted the subsequent amendments in Export of Service Rules, particularly the requirement of consideration to be received in foreign exchange for exemption. The appellant relied on various case laws to support their position that the exemption notifications were clarificatory and retrospective in nature.

2. Limitation and Correct Value of Service:
The appellant raised concerns regarding the limitation period for issuing the demand, claiming it was beyond the extended period. Additionally, they pointed out discrepancies in the value furnished to the Department, providing evidence of rectification in their calculations which was not considered. They argued that the demand was based on incorrect values.

3. Revenue's Position and Tribunal's Decision:
The Revenue contended that the service did not qualify under Export of Service Rules, as both provider and recipient were in India, making it ineligible for exemption. They argued against the retrospective and clarificatory nature of the exemption notifications. The Tribunal upheld the demand of service tax for the period in question, noting that the appellant had started collecting service tax from customers after realizing the tax liability. The Tribunal referenced a previous case to support their decision and waived the penalties while confirming the tax liability.

4. Final Decision and Outcome:
The Tribunal upheld the demand of service tax for Transport of Export Cargo from 15.03.2005 to 23.06.2005, based on the changes in exemption notifications and the appellant's realization of tax liability. However, the penalties imposed under Section 76 & 78 were set aside considering the circumstances of the case. The appeal was partially allowed, with the judgment pronounced on 28.10.2015.

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