Coal company not liable for service tax; buyers responsible under Service Tax Rules

The Tribunal held that the appellant, a coal beneficiation company, acted as an intermediary and the buyers of coal were liable for service tax on transportation charges. The Department's demand for service tax from the appellant was rejected as the buyers were responsible for the tax under Rule 2(1)(d)(v) of the Service Tax Rules, 1994. The Tribunal emphasized the avoidance of double taxation and criticized the Department for not properly verifying the appellant's claims, setting aside the impugned order and allowing the appeals.

---

---

Issues Involved:
1. Liability of service tax payment on transportation charges.
2. Compliance with Rule 2(1)(d)(v) of the Service Tax Rules, 1994.
3. Verification of service tax payment by consignees.
4. Invocation of extended period of limitation.
5. Benefit of Notification No. 32/2004-ST.

Summary:

1. Liability of Service Tax Payment on Transportation Charges:
The appellant, a coal beneficiation company, was charged with a service tax demand of Rs. 3,16,08,381/- for transportation charges paid to M/s Jai Jagdish Transport. The Department contended that the appellant was liable to pay service tax on these charges, while the appellant argued that the buyers of coal (consignees) were responsible for the tax as per Rule 2(1)(d)(v) of the Service Tax Rules, 1994.

2. Compliance with Rule 2(1)(d)(v) of the Service Tax Rules, 1994:
The appellant functioned as an intermediary between the seller (SECL) and the buyers of coal. The buyers were the actual consignees and bore the incidence of freight. The Tribunal's earlier remand order required the adjudicating authority to verify if the service tax on transportation was paid by the buyers. The appellant provided evidence, including challans and undertakings from consignees, confirming the payment of service tax.

3. Verification of Service Tax Payment by Consignees:
The adjudicating authority was directed to examine evidence from both the Department and the appellant. The appellant submitted challans and undertakings from 27 consignees, confirming service tax payments. However, the adjudicating authority rejected this evidence, citing insufficient documentation. The Tribunal found this rejection mechanical and noted the Department's failure to verify documents through jurisdictional officers.

4. Invocation of Extended Period of Limitation:
The appellant argued against the invocation of the extended period, stating that they regularly paid service tax on coal washing charges and filed ST-3 returns. The Department was aware of all relevant facts, and nothing was concealed.

5. Benefit of Notification No. 32/2004-ST:
The appellant was eligible for the benefit of Notification No. 32/2004-ST, subject to conditions. The adjudicating authority claimed the appellant failed to produce necessary evidence, such as certificates from the transport agency. The Tribunal found that the Department did not adequately verify the appellant's claims.

Conclusion:
The Tribunal concluded that the appellant acted as an intermediary between SECL and the buyers of coal. The buyers, as consignees, were liable for the service tax on transportation charges. The Tribunal set aside the impugned order and allowed the appeals, emphasizing that double taxation should be avoided and the Department failed to follow the remand order properly.

(Pronounced in Court on 13.09.2023)

---