2019 (7) TMI 1178 - AT - Service Tax

Tribunal grants appeal, reclassifies services, rejects extended limitation, and dismisses penalty.

The Tribunal allowed the appeal, setting aside the impugned order. The appellant's services from CRS companies were classified under OLIDAR Services. The ... Classification of services - Online data base retrieval and access service or not - extended period of limitation - revenue neutrality - levy of Interest and penalty - subsequent SCN. HELD THAT:- Admittedly the impugned order-in-original arose from the subsequent show cause notice dated 23.10.2013 and admittedly an earlier show cause notice was issued dated 22.04.2009. Thus, the Revenue was aware of the facts of the appellant case. Thus, there is no justification for invocation of extended period as held by Hon’ble Supreme Court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [2006 (4) TMI 127 - SUPREME COURT]. Revenue neutrality - HELD THAT:- The issue is wholly Revenue neutral as the said input service was directly relatable to rendering of output service by the appellant. It is admitted fact that the appellant has discharged service liability on the output service – transportation of passengers by air service. Thus, there is no case of any constumuous conduct or malafide on the part of appellant. Further, the admitted fact is that the appellant has filed their ST-3 returns from time to time and have maintained proper record of their transaction in the ordinary course of business. The appellant has made out case both on the question of Revenue neutrality and also as to non-applicability of extended period of limitation. Appeal allowed - decided in favor of appellant. Issues Involved:1. Classification of services received by the Airlines/assessee under the tax entry 'Online Database Retrieval and Access Service'.2. Invocation of the extended period of limitation.3. Imposition of penalty and interest.Detailed Analysis:1. Classification of Services:The primary issue was whether the services received by the appellant from Computer Reservation System (CRS) companies fall under the taxable category of 'Online Information and Database Access or Retrieval Service' (OLIDAR Services) as per Section 65(75) read with Section 65(105)(zh) of the Finance Act, 1994. The appellant argued that these services did not fall under the OLIDAR Services category and hence did not pay service tax for the period before 01.07.2012. However, the department issued show cause notices demanding service tax on the payments made to CRS companies. The Tribunal referenced the Supreme Court judgment in the case of Jet Airways (India) Ltd. which upheld the classification of services received from CRS companies as OLIDAR Services. Thus, it was concluded that the services received by the appellant from CRS companies are classifiable under OLIDAR Services.2. Invocation of Extended Period of Limitation:The appellant contended that the extended period of limitation was not applicable due to the revenue-neutral situation. The Tribunal noted that the appellant could have claimed Cenvat credit for the service tax paid under the reverse charge mechanism, making the entire situation revenue neutral. The Tribunal relied on multiple judgments, including the Jet Airways CESTAT order and the British Airways case, which supported the appellant's argument of revenue neutrality. Additionally, the Tribunal found that the department was aware of the facts of the appellant's case due to an earlier show cause notice issued in 2009. Therefore, there was no justification for invoking the extended period of limitation, as held by the Supreme Court in the Nizam Sugar Factory case.3. Imposition of Penalty and Interest:The Tribunal examined whether the penalty and interest were rightly demanded. Given the revenue-neutral situation and the appellant's compliance in filing ST-3 returns and maintaining proper records, the Tribunal found no evidence of contumacious conduct or malafide intent on the part of the appellant. Consequently, the Tribunal concluded that the demand for penalty and interest was not justified. The Tribunal referenced the principle that in a completely revenue-neutral situation, the entire demand along with interest and penalty should be set aside, as upheld in various judgments including the case of Commissioner of Central Excise vs. Angadpal Indl. P. Ltd.Conclusion:The Tribunal allowed the appeal, setting aside the impugned order. The appellant was entitled to consequential relief in accordance with the law, based on the findings that:- The services received from CRS companies are classifiable under OLIDAR Services.- The extended period of limitation was not applicable due to the revenue-neutral situation.- The imposition of penalty and interest was not justified in the absence of contumacious conduct or malafide intent.(Pronounced on 19.07.2019).