2023 (5) TMI 894 - AT - Service Tax

Tribunal rules in favor of jute manufacturer in service tax dispute, emphasizing exemption fulfillment and competitive trade promotion.

M/s. Kariwala Industries Limited Versus Commr. of CGST & CX, Kolkata North Commissionerate

M/s. Kariwala Industries Limited Versus Commr. of CGST & CX, Kolkata North Commissionerate - TMI Issues involved: The issues involved in the judgment are non-payment of service tax on GTA Service incurred in connection with the export of goods, imposition of penalty under Section 78 of Finance Act, 1994 & Rule 15(3) of the Cenvat Credit Rules 2004, and challenge of the invocation of the extended period in appeal proceedings before the lower authority.Non-payment of service tax on GTA Service for export of goods:The appellant, engaged in the manufacture of jute products and export of finished goods, was aggrieved by the order confirming a demand of Rs.42,343 for 'Transport of Goods by Road Service' along with interest and penalty. The appellant contended that they were unaware of the liability to pay tax on expenses incurred under the Head Goods Transport Agency under the reverse charge mechanism. They argued that the charges were used for the export of goods, which is exempted under specific notifications. The appellant claimed they fulfilled the basic conditions of the notification but could not adhere to certain procedural formalities as prescribed. The Tribunal held that the service availed for export purposes was not disputed, and the procedural conditions not fulfilled by the appellant were procedural in nature. The Tribunal cited legal precedents emphasizing that technical lapses should not deny the substantial benefit of a notification, especially when the fact of rendering service for export is not in dispute.Imposition of penalty under Section 78 of Finance Act, 1994 & Rule 15(3) of the Cenvat Credit Rules 2004:The appellant challenged the imposition of a penalty under Section 78 of the Finance Act, 1994, and Rule 15(3) of the Cenvat Credit Rules 2004. They argued that the penalty was unjustified due to their unawareness of the liability to pay tax on certain services. The Tribunal considered the appellant's compliance with the basic conditions of the notification and the procedural inconsistencies/deficiencies. It was held that a substantial exemption notification benefit cannot be denied based on failure to comply with procedural conditions. The Tribunal emphasized a liberal approach in cases of exports to avoid rendering exports noncompetitive in global trade.Challenge of the invocation of the extended period:The appellant challenged the invocation of the extended period in appeal proceedings before the lower authority. They contended that they were unaware of the liability to pay tax on certain services, which led to procedural inconsistencies. The Tribunal, considering the appellant's compliance with the basic conditions of the notification and the procedural nature of the conditions not fulfilled, set aside the order passed by the learned Commissioner (Appeals) and allowed the appeal.