2024 (5) TMI 624 - AT - Service Tax

Extended period of limitation cannot be invoked when service tax already paid and accepted by department

M/s. Mayur Ply Industries Private Limited (Formerly: ‘M/s. Timtech India Private Limited’) Versus Commissioner of Service Tax, Kolkata

CESTAT Kolkata held that extended period of limitation cannot be invoked when appellant had already paid service tax under Business Auxiliary Service ... Non-payment of service tax - C&F agent service - appellant had received commission from their principals on account of sale of their products as a 'Commission agent' - Commission of 2% received by the appellant on the goods sold on High Sea Sales basis - Invocation of Extended period of Limitation - HELD THAT:- The appellant has considered this service as a taxable service under the category of ‘business auxiliary service’ and paid Service Tax for the period 2008-09. No objection has been raised by the department when they paid service tax for the said service under the category of 'Business Auxiliary Service'. Having accepted service tax under the category of 'Business Auxiliary Service', the department cannot raise the demand for the period 2008 to 2011-12, by invoking extended period of limitation. In the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [2006 (4) TMI 127 - SUPREME COURT], the Hon'ble Apex Court has held that extended period of limitation cannot be invoked when all the facts are already known to the Department - the demand confirmed in the impugned order by invoking extended period of limitation is not sustainable. The Show Cause Notice in this case has been issued on 16.04.2013, for the period from March 2008 to 2011-12. Thus, the demand for the period up to September 2011 is barred by limitation. The appellant submits that they have been paying service tax for the period from October 2011 to March 2012, under the category of 'Business Auxiliary Service'. If according to the Department the said service is liable to service tax under the category of 'Clearing and Forwarding Agency Service', then the service tax paid by them under the category of 'Business Auxiliary Service' may be appropriated/adjusted against the demand of service tax under the category of 'Clearing and Forwarding Agency Service' for the same period - it is found that the rate of service tax under both the categories are the same. Accordingly, the service tax paid by the appellant under 'Business Auxiliary Service' for the period October 2011 to March 2012 may be appropriated against the liability of service tax on the appellant for the same period under the category of 'Clearing and Forwarding Agency Service’. Commission of 2% received by the appellant on the goods sold on High Sea Sales basis - HELD THAT:- The appellant purchases the goods from the overseas suppliers on their own account and thereafter, they sell these goods to the Indian customers by adding a mark-up. The commission/mark-up received by them has been included by the importers in the assessable value for the purpose of payment of Customs duty. Since the commission has already been included for the purpose of demanding customs duty, Service Tax cannot be demanded on the amount under the category of 'Business Auxiliary Service'. The demand confirmed in the impugned order on the commission received on high sea sales of the goods is not sustainable and accordingly, the same is set aside. Since the demand of service tax has not sustained in both the cases, the question of demanding interest and imposing penalty on the appellant does not arise. Appeal allowed. Issues involved: The issues involved in this case are the demand of Service Tax under the category of C&F agent service and the demand of Service Tax on commission received on high sea sales of goods.Demand of Service Tax under C&F agent service:The appellant, engaged in the manufacture of plywood and allied products, was issued a Show Cause Notice demanding Service Tax under the category of C&F agent service. The appellant contended that the demand raised by invoking the extended period of limitation was not sustainable as they had already paid Service Tax under the category of business auxiliary service for the same service during the period 2007-08. They argued that the Department changing its stand and raising a demand for the entire period from March 2008 to 2011-12 was unjustified. The appellant cited legal precedents, including the case of Nizam Sugar Factory v. Collector of C.Ex., A.P., to support their position that the extended period cannot be invoked when all facts are already known to the Department. The Tribunal agreed with the appellant, holding that the demand confirmed by invoking the extended period of limitation was not sustainable. The Tribunal also ordered the appropriation of the Service Tax paid by the appellant under the category of business auxiliary service against the demand of Service Tax under the category of C&F agent service for the same period, thereby relieving the appellant of further liability.Demand of Service Tax on commission received on high sea sales of goods:Regarding the demand of Service Tax on commission received on high sea sales of goods, the appellant argued that since the commission had already been included in the assessable value for the purpose of payment of Customs duty, no Service Tax could be demanded on this amount. The Tribunal observed that the commission/mark-up received by the appellant had indeed been included in the value for customs duty assessment. Citing legal precedents, including the case of Hyderabad Industries Ltd. v. Union of India, the Tribunal held that when the commission had already been included for customs duty purposes, Service Tax could not be charged on the same amount. Therefore, the Tribunal set aside the demand of Service Tax on the commission received on high sea sales of goods.Conclusion:As the demand of Service Tax was not sustained in both cases, the Tribunal did not find it necessary to impose interest or penalty on the appellant. The impugned order was set aside, and the appeal filed by the appellant was allowed.