2017 (9) TMI 939 - AT - Service Tax

Tribunal rules in favor of appellant due to lack of clarity on supervision charges classification

M/s. Shri Dnyaneshwar Trust Versus Commissioner of Central Excise, Aurangabad

M/s. Shri Dnyaneshwar Trust Versus Commissioner of Central Excise, Aurangabad - 2018 (8) G. S. T. L. 436 (Tri. - Mumbai) Issues:Confirmation of service tax demand on supervision charges collected from a sugar factory under Business Auxiliary Service; Invocation of extended period of limitation; Classification of supervision charges under taxable services.Analysis:1. Confirmation of Service Tax Demand: The appellant, a public charitable trust, appealed against the confirmation of demand for service tax on supervision charges collected from a sugar factory under Business Auxiliary Service. The appellant argued that the supervision charges were for trust administration and staff remuneration, not for any specific service provision. The Revenue contended that the charges were not related to the sale of agricultural produce, exempt under Notification No.13/2003-ST. The Tribunal noted that the show cause notice did not identify the exact activity for which supervision charges were collected, rendering it impossible to classify the services under any taxable category.2. Invocation of Extended Period of Limitation: The appellant argued that the show cause notice issued in 2012 was time-barred as the Revenue was aware of the supervision charges since 2008. They cited an audit report from 2008 to support their claim. The Revenue pointed out a previous order related to harvesting and transportation of sugarcane, which was exempt under Notification No.13/2003-ST. However, the Tribunal emphasized that the Revenue failed to specify the nature of the activity for which supervision charges were collected, leading to the dismissal of the service tax demand.3. Classification of Supervision Charges: The Revenue contended that the supervision charges fell under Business Auxiliary Service, citing legal provisions and a statement from the service recipient detailing the payments made. The Order-in-Original observed that the supervision charges were related to activities like cane harvesting and transportation to the sugar factory, making them chargeable under Business Auxiliary Service. However, the Tribunal noted that the Revenue did not provide grounds to classify the services under Business Auxiliary Service, emphasizing the necessity to analyze the purpose of supervision charges. As the Revenue failed to demonstrate the classification under Business Auxiliary Service, the demand for service tax was deemed unsustainable, resulting in the allowance of the appeal.In conclusion, the Tribunal allowed the appeal on the basis that the Revenue did not establish the classification of supervision charges under Business Auxiliary Service, highlighting the importance of precisely identifying the services for which charges are paid. The judgment emphasized the necessity for Revenue to provide clear grounds for classifying services under taxable categories to uphold service tax demands.