2018 (2) TMI 1026 - AT - Service Tax

Exemption Notification Upheld in Freight Charges Service Tax Case

Chandra Shipping & Trading Services Versus CCE, C&ST, Visakhapatnam-II

The Tribunal in the case concerning the applicability of exemption notification No. 32/2004-ST to service tax liability on freight charges ruled in favor ... Benefit of N/N. 32/2004-ST, dated 03.12.2004 - C&F and logistic services - Department took the view that exemption would not be available to the appellant as there was no evidence to show that the conditions specified in the notification were fulfilled - Held that: - circular No. 137/154/2008-CD.4, dated 21.08.2008, clarified that it is but evident that even for the past cases before the extension of benefit of 75%, abatement to GTA services unconditionally (by notification No. 13/2008, dated 1.3.2008), the benefit of such abatement will be available to the appellant without requirement of any specific endorsement on every consignment note, but merely on general declaration from GTA - In the instant case, from the facts it is seen that the appellants have obtained such undertaking letters from the concerned transporters. This being so, the confirmation of demand is in contradiction to the clarifications of CBEC themselves vide circular dated 21.08.2008 - demand set aside - appeal allowed - decided in favor of appellant. Issues:1. Applicability of exemption notification No. 32/2004-ST to service tax liability on freight charges.2. Validity of demand for service tax liability, interest, and penalties under sections 76 & 78 of the Finance Act, 1994.Analysis:Issue 1: Applicability of exemption notification No. 32/2004-ST to service tax liability on freight chargesThe case involved M/s Chandra Shipping & Trading Services, Kakinada, providing shipping, C&F, and logistic services. The appellants were discharging service tax liability on 25% of the total freight charges under notification No. 32/2004-ST. The Department challenged this claiming lack of evidence of fulfilling notification conditions. The original authority granted exemption based on transporter letters confirming non-availment of duty credit and specific notifications. However, a revision order demanded service tax of Rs. 5,38,471 with interest and penalties. The Tribunal noted the evolution of notifications post-2006, emphasizing the continuation of the 25% cap on gross amount charged by Goods Transport Agency (GTA) without additional conditions. Circulars by CBEC clarified the non-requirement of proving non-availment of credit by GTA service providers when consignor or consignee pays the tax. The Tribunal, referencing circulars and case laws, held that a general declaration from GTA sufficed for availing abatement, even for past cases. The confirmation of demand was deemed contradictory to CBEC clarifications, leading to setting aside the impugned order.Issue 2: Validity of demand for service tax liability, interest, and penalties under sections 76 & 78 of the Finance Act, 1994The Tribunal, while analyzing the demand for service tax liability, interest, and penalties imposed under sections 76 & 78 of the Finance Act, 1994, considered the factual background, chronological events, CBEC circulars, and legal precedents. It highlighted the importance of transporter declarations, circulars providing clarifications on abatement conditions, and the inability to add new conditions post-notification. Relying on case laws and the principle that circulars cannot alter exemption notifications, the Tribunal allowed the appeal with consequential benefits as per law. This decision was based on a comprehensive review of the legal framework, factual circumstances, and interpretative guidelines provided by CBEC circulars and judicial precedents.This detailed analysis of the judgment in the Appellate Tribunal CESTAT HYDERABAD case provides a thorough understanding of the issues, legal interpretations, and the Tribunal's decision-making process.