2020 (1) TMI 762 - AT - Service Tax

Tribunal upholds service tax liability on reimbursed expenses, penalties imposed for non-compliance

The tribunal upheld the Commissioner's order, ruling that the appellants were liable to pay service tax on reimbursed expenses as they provided taxable ... Business Support Services - reimbursement of expenses - amounts on which service tax has been demanded has been spent by Shri Ajay Kumar on transportation of the vehicles on behalf of M/s Jaika Motors Ltd. - extended period of limitation - demand of interest and penalty. HELD THAT:- Undisputed and also as admitted by the appellants in their letter dated 07.01.2013 which was in response to the summons issued under Section 14 of Central Excise Act, 1944 which by Section 83 of Finance Act, 1994 has been made applicable to service tax matters - From the definition of the Business Support Services as above and the clarification issued it is quite evident that the activities undertaken by the appellant clearly fall within the category of Business Support Services. Since the appellants had not disclosed the details of these transactions to the revenue in the ST-3 returns filed by them. Neither they have been able to establish any bonafides in non disclosure of such information to revenue - the impugned order for invoking extended period of limitation is upheld. Demand of interest - HELD THAT:- Since the demand of tax has been upheld the demand for interest will follow. It is now settled law that interest under Section 75, is for delay in the payment of tax from the date when it was due. Since appellants have failed to pay the said Service Tax by the due date interest demanded cannot be faulted - the demand of interest made under Section 75 of the Finance Act, 1994 is upheld. Penalty - HELD THAT:- It is now settled position in law that penalty under section 78 can be imposed only if the ingredients specified in the said section are present. The ingredients specified for invoking the Section 78 are identical to those specified for invoking the extended period of limitation as provided by Section 73 ibid - Since in respect of SCN, we hold that demand could have been made by invoking the extended period of limitation as provided by Section 73, we uphold the penalties imposed under Section 78 of The Finance Act, 1994. By not indicating the details of these transactions in the ST-3 returns as required under Section 70 of Finance Act, 1994 read with Rule 7 of Service Tax Rules, 1994, appellant have made themselves liable to penalty under Section 77 ibid. Hence the penalties imposed upon by the adjudicating authority under this section are upheld. Appeal dismissed. Issues Involved:1. Liability to pay service tax on reimbursed expenses.2. Invocation of the extended period of limitation.3. Imposition of interest under Section 75 of the Finance Act, 1994.4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.Issue-Wise Detailed Analysis:1. Liability to Pay Service Tax on Reimbursed Expenses:The appellants argued that the amounts spent by Shri Ajay Kumar on transportation of vehicles on behalf of M/s Jaika Motors Ltd. were reimbursements and not liable to service tax. However, it was found that the appellants were providing taxable services under the category of Business Support Services, as they managed the transportation logistics and office expenses for M/s Jaika Motors Ltd. The tribunal upheld the Commissioner’s view that these activities fall within the definition of Business Support Services as per Section 65(104c) of the Finance Act, 1994, and thus, are liable to service tax. The tribunal referenced the case of Capital Transport Convoy Contractor [2016 (41) STR 651 (T-Del)] to support this classification.2. Invocation of the Extended Period of Limitation:The appellants contended that the extended period of limitation could not be invoked. However, the tribunal noted that the appellants had not disclosed the details of these transactions in their ST-3 returns and failed to establish any bonafides for non-disclosure. The tribunal cited the case of Star India Pvt Ltd [2015 (38) STR 884 (T-Mum)] to justify the invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994. The tribunal held that the appellants’ suppression of facts warranted the extended period for issuing the show cause notice.3. Imposition of Interest under Section 75 of the Finance Act, 1994:The tribunal upheld the demand for interest under Section 75, stating that interest is a civil liability for the delay in payment of tax from the due date. The tribunal referenced the case of P V Vikhe Patil SSK [2007 (215) ELT 23 (Bom)], emphasizing that the imposition of interest is mandatory and not discretionary. The tribunal also referred to other decisions, including Kanhai Ram Thakedar [2005 (185) ELT 3 (SC)] and Ballarpur Industries Limited [2007 (5) STR 197 (T-Mum)], to support the imposition of interest.4. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994:The tribunal upheld the penalties imposed under Sections 76, 77, and 78. It noted that the ingredients for invoking Section 78, which are identical to those for invoking the extended period of limitation, were present. The tribunal cited the case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)] to support the imposition of penalties under Section 78. The tribunal also upheld the penalties under Section 76 for the period up to 16.05.2008, as the second proviso to Section 78, which prevents simultaneous penalties under Sections 76 and 78, came into effect only after that date. The tribunal referenced the Kerala High Court’s decision in Krishna Poduval [2006 (1) STR 185 (Ker)] to justify the simultaneous imposition of penalties under Sections 76 and 78 for the relevant period. Additionally, the tribunal upheld the penalties under Section 77 for failing to fulfill statutory obligations, referencing the Supreme Court’s decision in Gujarat Travancore Agency [1989 (42) ELT 350 (SC)].Conclusion:The tribunal dismissed the appeal, upholding the Commissioner’s order in its entirety, including the demand for service tax, interest, and penalties under the relevant sections of the Finance Act, 1994. The tribunal emphasized the appellants' failure to disclose relevant transactions and the applicability of the extended period of limitation and penalties due to the suppression of facts.