2017 (5) TMI 704 - AT - Service Tax

Appellate tribunal rules in favor of appellant on taxable services valuation dispute.

M/s Godawari Power & Ispat Ltd. (formerly known as Hira Industries Ltd.] Versus CCE, Raipur

The appellate tribunal ruled in favor of the appellant in a case concerning the valuation of taxable services rendered, specifically regarding the ... Valuation - Business Auxiliary Service - additional consideration in the form of iron ore fines emerging during the course of such crushing - during the course of crushing some iron ore is lost due to various reasons - whether such value of iron ore fine should be added in the crushing charges for tax liability? - Held that: - the contingency of emergence of iron ore fines having some value, is not determinable at the time of fixing of crushing charges. Hence, it is not tenable to hold that the crushing charges are influenced by the possible emergence of iron ore fines and its additional value to the appellant - The Revenue has no evidence to support the allegation that the value of iron ore fines likely to emerge during the crushing operation have impacted the crushing charges and, as such, are to be considered as additional consideration for taxable service. In the absence of any indication to that effect, we are not in agreement with the proposal that there is a non-monetary consideration in the form of iron ore fine influencing the crushing charges - appeal allowed - decided in favor of appellant. Issues: Valuation of taxable service rendered by the appellant, inclusion of value of iron ore fines in consideration for tax purposes, imposition of penalties under Section 76, 77, and 78 of Finance Act, 1994, question of limitation for demand of extended period.Valuation of Taxable Service Rendered by the Appellant:The appeal in question pertains to the valuation of taxable service rendered by the appellant, who is engaged in crushing iron ore lumps on a job charges basis. The dispute revolves around whether the value of iron ore fines arising from the crushing operations and retained by the appellant should be added to the total consideration for calculating the service tax liability. The Original Authority held that such iron ore fines should indeed be included in the taxable consideration, leading to the confirmation of a service tax liability of &8377; 75,98,749 against the appellant. However, the appellant argued that the crushing charges were fixed beforehand, with the permissible loss of 3 to 4% agreed upon by the customer. The appellant contended that the iron ore fines, categorized as self-generated fines and retained by them, should not be considered as an additional consideration for determining the value of the service rendered. The appellate tribunal analyzed the contractual terms, work orders, and business practices in the industry to conclude that the crushing charges were not influenced by the possible recovery of iron ore fines, thereby setting aside the impugned order and allowing the appeal.Inclusion of Value of Iron Ore Fines in Consideration for Tax Purposes:The crux of the issue lies in whether the value of iron ore fines retained by the appellant should be added to the taxable consideration for service tax purposes. The Revenue contended that the iron ore fines arising from crushing operations have market value and should be considered as an additional consideration under Section 67 of the Finance Act, 1994. However, the appellant argued that the crushing charges were fixed without any reference to the possible recovery of iron ore fines and that such fines, categorized as waste, should not impact the job charges collected. The tribunal examined the work orders, loss percentages, and industry practices to determine that the emergence of iron ore fines within permissible limits did not directly influence the fixed crushing charges agreed upon between the customer and the appellant. As there was no evidence supporting that the value of iron ore fines impacted the charges, the tribunal held that there was no non-monetary consideration in the form of iron ore fines influencing the taxable service, ultimately allowing the appeal.Imposition of Penalties and Question of Limitation for Demand of Extended Period:The appellant also contested the imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994, along with the demand raised by the Revenue for the extended period. The appellant argued that there was no basis for invoking suppression for the demand of the extended period as the generation of iron ore fines was recorded, and the demand was calculated based on the appellant's maintained records. The tribunal, after considering the arguments, found that there was no case for invoking suppression or imposing penalties, thereby setting aside the impugned order and allowing the appeal.