2017 (6) TMI 686 - AT - Service Tax

Tax Tribunal Upholds Terminal Handling Charges Taxability as Business Auxiliary Service

The Tribunal upheld the taxability of Terminal Handling Charges (THC) under 'Business Auxiliary Service' (BAS), rejecting the assessee's argument that the ... Business Auxiliary Services - classification of services - whether the Terminal Handling Charges (THC) received by the assessees is taxable under the category of Business Auxiliary Service? Held that: - The definition, as it stood prior to 10.9.2004, expressly mentions the words billing, collection or recovery of cheques, accounts and remittances which are the services falling under Sl. No.12 to 14 out of the fourteen services rendered by the assessee. It is not necessary that such services should be incidental or auxiliary to the services mentioned in (i), (ii) and (iii). As rightly argued by the department, the services of billing, collection of freight etc. are stand alone services by themselves and would qualify to be Business Auxiliary Service. The assessee, is preparing the Railway receipt, (billing), collecting the Railway Freight and remitting the same in RBI for Railways. For utilizing the services of Railways within the Port area the customers have to pay charges to Railways. The assessee cannot collect freight from the customers unless authorized by the Railways. For this reason, the issuance of railway receipts and collection of freight is definitely rendered on behalf of Railways and the remittances of the amount in Reserve Bank of India is also rendered on behalf of Railways which would make the services rendered on behalf of client. The Consultant has made a frail effort to establish that being transportation of goods by rail the services if any would fall under Sec 65(105)(zzzp) and such transportation being through government railways, it is not exigible to tax. The activities carried out by the assesse, are not mere transportation of goods by rail, but the billing, collection of freight, remittance etc. Therefore this ground fails. When the assessee is receiving Terminal Handling Charges for the services rendered to Railways and when Sl. Nos. 12, 13 and 14 would qualify for Business Auxiliary Service as taxable services, it is for the assessee to give the charges collected for each of the 14 services and to prove that such THCs do not apply to the services other than Sl. No. 12, 13 and 14. Extended period of limitation - Held that: - appellants had suppressed the fact of subject income in the subsequent periods. In this scenario, appellant cannot then take the plea that the extended period cannot be invoked on the ground that the information was declared in the returns. Being a public sector also cannot be a plea against invocation of extended period - appellants did not seek or obtain additional registration under Business Auxiliary Service even after the issue of the first impugned order of the Commissioner dated 11.5.2006 - invocation of extended period justified. Penalties - Held that: - the appellant had paid up the tax liability along with interest even before issue of the SCN which cooperation has been taken into consideration by the adjudicating authority for non-imposition of penalties as a mitigating factor for non-imposition of penalties - penalties not justified. Appeal allowed - decided partly in favor of assessee. Issues Involved:1. Taxability of Terminal Handling Charges (THC) under 'Business Auxiliary Service' (BAS).2. Admissibility of additional grounds raised by the assessee.3. Invocation of the extended period of limitation for demand.4. Imposition of penalties.Issue-wise Detailed Analysis:1. Taxability of Terminal Handling Charges (THC) under 'Business Auxiliary Service' (BAS):The primary issue was whether the THC received by the assessees was taxable under BAS. The assessees argued that THC did not fall within the definition of BAS as per Section 65(19)(iv) and that their services were not incidental or auxiliary to the services mentioned in clauses (i), (ii), and (iii). However, the Tribunal found that the services of billing, collection of freight, and remittance to RBI, which were part of the THC, were standalone services that fell under BAS. The Tribunal concluded that the activities performed by the assessee, such as preparing Railway receipts, collecting freight, and remitting it to RBI on behalf of Railways, were indeed services rendered on behalf of a client and thus taxable under BAS.2. Admissibility of additional grounds raised by the assessee:The assessee filed a miscellaneous application to raise additional grounds, including arguments that the services fell under transportation of goods by rail and were not exigible to tax under Section 65(105)(zzzp). The Tribunal dismissed the miscellaneous application, stating that these grounds were entirely new and had not been raised before the adjudicating authority. The Tribunal referenced the Supreme Court's decision in Warner Hindustan Ltd. and the Madras High Court's decision in Sree Vishnu Electronics, which held that it is not permissible to build up a new case at the Tribunal stage.3. Invocation of the extended period of limitation for demand:The Tribunal upheld the invocation of the extended period of limitation, noting that the assessee had suppressed the receipt of THC and had not included it in their statutory returns. The Tribunal found that the assessee's argument that being a public sector undertaking should exempt them from the extended period was untenable. The Tribunal emphasized that public sector undertakings have an increased responsibility to discharge tax liabilities correctly. The Tribunal cited the adjudicating authority’s findings that the assessee had accepted the liability for an earlier period but continued to suppress the receipt of THC in subsequent periods.4. Imposition of penalties:The department appealed against the non-imposition of penalties in one of the orders. The Tribunal noted that the assessee had paid the tax liability along with interest before the issuance of the show cause notice, which the adjudicating authority had considered as a mitigating factor. The Tribunal found no infirmity in the adjudicating authority's decision to not impose penalties and dismissed the department's appeal.Conclusion:The Tribunal dismissed the appeals filed by the assessee, upholding the demand of service tax on THC under BAS and the invocation of the extended period of limitation. The Tribunal also dismissed the department's appeal regarding the imposition of penalties, affirming the adjudicating authority's decision. The judgment emphasized the importance of correctly discharging tax liabilities and the inadmissibility of raising new grounds at the appellate stage.