2023 (8) TMI 319 - AT - Service Tax

Appeal outcome: Auctioneer's service demand set aside, GTA service demand sustained. Penalties waived, but GTA penalties upheld.

The appeal was disposed of with the demand under auctioneer's service set aside, while the demand for GTA service for the normal period was sustained. ... Classification of services - auctioneer’s service or not - conducting auction of various commodities for which they receive consideration in the form of commission / service charges - demand of Service Tax under GTA service - levy of penalties u/s 76, 77(1)(a) and 77(2) of the Finance Act, 1994. HELD THAT:- This very Bench in the appellant’s own case for an earlier period has, in its Final Order [2021 (3) TMI 218 - CESTAT CHENNAI], set aside the demands insofar as auctioneer’s service and business support service are concerned, but however, has sustained the demand under GTA service for the normal period, if any - since the Revenue did not place any deviating circumstances on record, following the above order the impugned order is set aside insofar as auctioneer’s service is concerned. But however, the demand of Service Tax, if any, in respect of GTA service, is sustained for the normal period alone. Penalties - appellant seeks waiver of penalties imposed on them on the ground that the issue being one of interpretation of law, the non-payment of Service Tax was under a bona fide belief, thus arguing that there was no suppression or intention to evade duty on their part - HELD THAT:- It is deemed fit to set aside the imposition of penalty under Section 76 of the Finance Act, 1994. However, the proportionate penalties insofar as GTA service alone is concerned, imposed under Section 77(1)(a) and 77(2) ibid., for non-obtaining Service Tax Registration as stipulated under Section 69 and for non-furnishing of statutory ST-3 returns as required under Section 70 respectively, are sustained. Appeal allowed in part. ISSUES PRESENTED AND CONSIDERED 1. Whether the demand of Service Tax under 'auctioneer's service' (Section 65(7a) / 65(105)(zzzr), Finance Act, 1994) is sustainable. 2. Whether the demand of Service Tax under 'GTA service' (Section 65(50b) / 65(105)(zzp), Finance Act, 1994) is sustainable for the period(s) in issue and whether extended period invocation is permissible. 3. Whether consequential penalties under Sections 76, 77(1)(a) and 77(2) of the Finance Act, 1994 are justified given the facts, including whether non-payment arose from bona fide interpretation and whether there was suppression or wilful evasion. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Auctioneer's service: legal framework - Auctioneer's service falls within the statutory definition in Section 65(7a) read with Section 65(105)(zzzr) of the Finance Act, 1994; service tax liability depends on whether the services rendered by the assessee amounted to 'auctioneer's service' as so defined. Precedent treatment - The Tribunal's earlier Final Order in the appellant's own case for an earlier period held that demands insofar as auctioneer's service could not be sustained and set aside such demands; that earlier decision is followed by the Court in the present appeal. Interpretation and reasoning - The Court examined the nature of activities (conducting auctions, storage, post-auction collection/distribution) and found they fell within the scope considered in the earlier bench order. No deviating facts were produced by Revenue to distinguish the earlier decision. The Court applied the prior finding that those activities did not attract auctioneer's service liability for the period(s) concerned. Ratio vs. Obiter - The holding that the impugned demand under auctioneer's service cannot be sustained is ratio in relation to the present appeal because it directly disposes of the contested demand; reliance on the earlier bench decision constitutes binding tribunal precedent for the same facts and period class unless distinguishable. Conclusion - Demand of Service Tax under auctioneer's service is set aside (not sustainable) in the present appeal, following the Tribunal's earlier order and in absence of distinguishing material from Revenue. Issue 2 - GTA service: legal framework - Goods Transport Agency (GTA) services are defined under Section 65(50b) read with Section 65(105)(zzp) and attract service tax unless exempted by applicable notifications; exemption(s) for transportation of food grains/pulses under Notification No. 33/2004 (as amended by Notification No. 4/2010) are relevant. Precedent treatment - The Tribunal's earlier order in the appellant's own case considered the interpretation of GTA liability, referenced decisions such as Lakshminarayana Mining Co. (Tri. Bangalore / Karnataka High Court decisions) which favored taxpayers on interpretational grounds regarding truck owners/operators, and applied them to limit extended-period demands. Interpretation and reasoning - The Court noted that: (a) the appellant carried food items under the Public Distribution System (PDS), (b) notification amendments exempting transportation of food grains/pulses impacted liability, and (c) earlier judicial pronouncements and legislative intent (budget speech) indicated interpretational ambiguity about taxing individual truck owners/operators. In absence of evidence of suppression or positive concealment in the show cause notice, invocation of extended period was unjustified. However, the Tribunal accepted that liability for GTA service for the normal (non-extended) period, if any, remains enforceable; only the extended-period demand was set aside. Ratio vs. Obiter - The core ratio: extended-period demand for GTA service cannot be sustained where liability arose from an interpretational issue and there is no evidence of suppression or wilful evasion; this is binding in the present contest. The observation that service tax for the normal period remains payable is a consequential ratio determining the scope of relief. References to legislative speech and comparative case law function as supporting reasoning rather than mere obiter. Conclusion - Demand of Service Tax under GTA service is sustained only for the normal period (i.e., the Tribunal leaves open liability, if any, for the normal period) but the extended-period demand is set aside for lack of suppression and because the matter involved a bona fide interpretation affected by exemption amendments and prior case law. Issue 3 - Penalties under Sections 76, 77(1)(a) and 77(2): legal framework - Section 76 imposes penalty for failure to pay service tax where there is adjudged liability; Sections 77(1)(a) and 77(2) penalize failure to obtain registration (Section 69) and failure to furnish returns (Section 70), respectively. Penalty imposition requires proof of mens rea or statutory defaults as prescribed. Precedent treatment - The Tribunal's earlier order in the appellant's own case set aside penalties under Sections 76 and 78 (equivalent in effect) where non-payment arose from an interpretational dispute and absence of evidence of suppression; that reasoning is followed here. Interpretation and reasoning - Applying the same facts and reasoning that led to setting aside the substantive extended-period demands, the Court held the penalty under Section 76 (reflecting alleged suppression/wilful evasion) is not warranted because non-payment stemmed from bona fide interpretation and no positive act of suppression was demonstrated by the Department. Conversely, penalties relating to statutory compliance (failure to obtain registration and file ST-3 returns) under Sections 77(1)(a) and 77(2) are distinct: they attach to non-compliance irrespective of interpretational disputes about taxability. The Tribunal therefore distinguished between punitive relief tied to evasion and statutory procedural defaults, setting aside the former and sustaining the latter proportionately in respect of GTA service for the normal period. Ratio vs. Obiter - Ratio: penalties premised on suppression or wilful evasion (Section 76) cannot be sustained where non-payment results from bona fide interpretational doubt and no evidence of concealment exists; penalties for registration/return defaults (Sections 77(1)(a) and 77(2)) are sustainable despite bona fide disputes because they penalize statutory procedural breaches. These conclusions are determinative of the appeal. Conclusion - Penalty under Section 76 is set aside. Proportionate penalties under Sections 77(1)(a) and 77(2) are sustained insofar as they relate to GTA service non-compliances (failure to obtain registration and non-filing of returns) for the period(s) where normal liability is maintained. Cross-references - The conclusions on auctioneer's service and setting aside Section 76 penalty follow and rely on the Tribunal's prior Final Order in the appellant's own case; the reasoning on GTA service and extended-period limitation invokes prior tribunal and court decisions (e.g., Lakshminarayana Mining Co.) and the legislative exemption history (Notification No. 33/2004 as amended by Notification No. 4/2010) to justify treating extended-period demands differently from normal-period liabilities.