TaxTMI 
TaxTMI 
2014 (10) TMI 929
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....ax liability of Rs. 4,77,807/-. 1.2 Briefly stated, the facts of the case are that : (a) based on intelligence by the Range Officer, Tiruchengode that the applicant failed to pay Service Tax on the taxable value received during the period in dispute, issued letter to the applicant on 3-8-2012 followed by summons to the President of the applicant unit on 25-9-2012; (b) in compliance to the Summon dated 25-9-2012, the President of the applicant unit appeared on 1-10-2012 and produced balance sheets for the years 2007-08 to 2011-12 along with documents relevant to this matter; (i) In his statement, he inter alia stated that they are registered under Service Tax Registration No. AABTS9227NSD003, dated 30-7-2012. To a query raised by the Department as they were having any other Service Tax registration he replied they were having Service Tax Registration certificate No. AABTS9227NSD001. Since it was filed with wrong jurisdiction namely Namakkal that registration got automatically cancelled and yet another registration No. AABTS9227NSD002 also got cancelled automatically as it was timed o....
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.... any other person was not taxable. However, from 16-5-2011 onwards service provided or to be provided to any person including the member of the 'Club's or Association Membership Service' is taxable. Therefore it appears that the service provided by the applicant is taxable under the category of 'Club's or Association's Membership Service' on the value of subscription and any other amount received by the service provider. Supply of tangible goods service : 1.6 The applicant had provided transport vehicles (oil tankers) to their client (M/s. IOCL) on hire charge basis. The entire amount received as hire charges under the category of 'Supply of Tangible Goods Service' is liable to Service Tax. Business Auxiliary Service : 1.7 In the instant case, the applicant was involved in the purchase and sale of goods on behalf of their clients and received commission for providing such service in the name of turnover discount, performance bonus, etc. It appears that the commission so received is taxable under the category of 'Business Auxiliary Service'. Renting of immovable property service : 1.8 The applicant has leased and rented the land and building to IOCL ....
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....ication on 'Club's or Association's Membership Service' vide Circular No. F. No. B1/6/2005-TRU, dated 27-7-2005 "any other amount" is described to include any consideration received over and above the subscription for any facility or advantageous provided to members. Further the C.B.E. & C. Circular No. 127/9/2010, dated 16-8-2010 clarified that "the important point here is regarding the presence or absence of a link between 'consideration' and taxable service. It is a settled legal position that unless the link or nexus between the amount and the taxable activity can be established, the amount cannot be subjected to Service Tax". 2.5 The above clarification of the Department is also supported by the definition of service as per Section 65B(44) of the Finance Act, 1994 after the introduction of negative list which reads "service" means any activity carried out by a person for another for consideration, and ....". The above definition, for the person of taxation seeks to establish a nexus between the consideration received and service rendered/to be rendered. It is evident from the above circulars that unless a link or nexus is established between the amount (donation/entran....
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....nt) is only a clerical mistake which is contrary to the statement of facts. The receipts are really the freight charges received by the applicant from M/s. IOCL and can never be construed as consideration for service of 'Supply of Tangible Goods Service' to be taxed under Section 65(105)(zzzzj). 2.12 Hence it is prayed that the Service Tax liability of the applicant under the head 'Supply of Tangible Goods Service' be settled as NIL Bussiness Auxiliary Service : 2.13 The Department came to a conclusion that the applicant was engaged in purchase and sale of goods on behalf of service receivers and categorized the commission received into different heads such as performance bonus, discount rebate, incentive received from IOCL, other automobile spare parts manufactures/dealers and uniform subsidy. The above receipts were proposed to be taxed under 'Business Auxiliary Service'. 2.14 The goods claimed to be promoted were not goods of the oil company but of the applicant purchased from the oil company on principal to principal basis. The definition of the "commission agent" as per explanation (a) to Section 65(19) does not apply to the applicant as the sale pri....
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....rvice' and 'Renting of immovable Property Service', should be taken for arriving at the eligibility under threshold exemption. Against the demand of Service Tax of Rs. 39,94,077/- under 'Club or Association's Membership Service' the applicant admitted only Rs. 10,063/- for the years 2010-11 and 2011-12. (b) Supply of Tangible Goods Service : 3.4 The applicant supplies lorry for hire to M/s. Indian Oil Corporation Ltd. (IOCL), for transportation of fuels and are receiving lorry hire charges based on work order issued by M/s. IOCL. The SCN alleges that the above services provided by the applicant are classifiable under 'Supply of Tangible Goods Service'. Since the applicant submitted that by mistake it was mentioned as 'hire charge' instead of 'freight', it should be treated as GTA. This claim is a classification dispute, and appeared to be out of purview of Settlement Commission, as per third proviso to Section 32E of the Central Excise Act, 1944. (c) Business Auxiliary Service : 3.5 The SCN alleges, the services in relation to purchase and sale of goods on behalf of the service receivers and receiving commission for providing such service in the name....
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.... they should not be compared with entertainment clubs; they are more similar to cooperative societies. However, he agreed to accept the Service Tax liability on entrance fee, donations of Rs. 5 but not on other voluntary donations received by them. As regards supply of tangible goods service, he submitted that they had issued consignment notes though it has been alleged in the show cause notice that no consignment notes were issued. As this was a new point raised by them they were asked to make further written submissions on this issue as well as on any other issues they want to include. They were also asked to give worksheet showing calculations as to how they were eligible for threshold limit exemption in earlier years. They agreed to make their written submission by the 25th of July, 2014 with a copy to the Commissioner. They further submitted that they had no intention to evade any taxes and have made true and full disclosure of their liability and extended full cooperation in the proceedings and, therefore, pleaded for immunities from penalties and prosecution. 4.3 The representative of the Department reiterated the written submissions made by the Commissioner in his r....
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....ity assessed by the Department. Relying on the decision of Settlement Commission, Principal Bench, Delhi in the case of M/s. Oriflame India (P) Ltd., Settlement Order No. 01/2000, dated 10-10-2000 reported in 2000 (122) E.L.T. 601. the applicant submitted that there was no classification dispute involved. The contract entered into between the applicant and IOCL was a service contract; • the tanker lorries remained throughout the property and in possession of the Sangam; • had it been on 'Supply of Tangible Goods Service' the rental or hire charge could have been paid on hourly or days usage basis; • the operation and maintenance of the tanker lorries rest with the lorry owners, freight charges were paid on the basis of per Kl/per Km basis; • the petroleum products transported in their tanker lorries was not owned by Sangam en route to the required destination; • the Sangam is rested with only custodial rights it was only after the freight from one end to another, the property in goods are passed on by IOCL to the customers; • the Sangam did issue consignment note with certificates to the consignor; ....
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....t of hiring of tankers v. GTA services the applicant stated that under hiring the tankers are left in the custody of the oil companies and they are used at their (oil company's) will. Even when the tankers were not in use the lorry owners had to be paid hire charges irrespective of the duration or usage. By sighting various other realities and facts the applicant stated that the service rendered was only GTA that was paid by the oil companies and assessed by the Department during all these years. Further report of Jurisidictional Commissioner : 6.1 Commissioner vide his report dated 6-8-2014 by quoting extensively from provisions of Finance Act, 1994 reiterated that entire demand made in the show cause notice on account of all the four services rendered by the applicant was sustainable in respect of supply of 'Tangible Supply of Goods Services'. Commissioner stressed that had the auditor reported the GTA service charge were as 'hire charges' they would rectify the mistake by revising the income-tax return. Having not done so, their plea of mistaken description as hire charges cannot be accepted. Rebutting the contention of the applicant on the applicability of the ratio ....
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....ated 21-6-2014, stated that, the applicant was ignorant of the Service Tax laws but on their own declared their transactions to the Range Officer and taken Registration and submitted themselves to compliance of the Service Tax Law. They further submitted that Finance Act, 1994 and Service Tax Rules, 1994 had some distinctive features. Rule 7C ibid read with Section 70 of Finance Act, 1994 provides for filing of belated returns along with the payment of prescribed late fees. The applicant having complied with this requirement, fulfilled the provisions of Section 32E(1)(a) of Central Excise Act, 1944. Quoting from Rule 7C, the applicant further stressed that once the ST-3 returns were filed with late fees, the issue of filing of returns reached finality and the mandatory obligation was substantially fulfilled as envisaged in Section 32E(1)(a) of CEA, 1944. 7.3 Bench also takes note of the recent amendments of Section 32E(1)(a) brought out in the Finance Act, 2014, pursuant to which the Bench records that the circumstances under which they filed the returns with late fee is accepted as compliance of Section 32E(1)(a) of CEA, 1944 and therefore allows the application to be proc....
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....es like hosting parties, sponsoring musical and sports events, conducting indoor/outdoor games for relaxation of the mind and body of the members therefore the Sangam should not be equated with a 'Club or Association' as these institutions were understood in common parlance; • 'donations' collected has no nexus to the services provided by the Club; • to avail the services of the Sangam one had to become member of the Sangam by paying the 'subscription' prescribed for that purpose; • the applicant's reliance on the judgments delivered in the case of Saturday Club (supra) and other case laws to drive home that in an association like a Club, the Club and the members are the one and the same entity and the service was self-service; there was no entity viz. service provider and service receiver and therefore the activity of Sangam should not be subject to Service Tax at least until 1-7-2012 when the service 'Club or Association' under Section 65(25aa) was redefined and the Negative List of services introduced. The applicant's reliance on the Circular F. No. B1/06/2005 TRU, dated 27-7-2005 and Circular No. 120/07/09/2010, dated 16-8-2010 to emphasiz....
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....invoices/bills/chits or any other document for the 'hire charges' collected from IOCL. Revenue went on further to state that the issue involved was a classification dispute as to whether the service rendered was classifiable under supply of tangible goods service or GTA service and therefore this issue could not be brought before the commission for Settlement. Jurisdictional Commissioner also dismissed the copies of consignment notes submitted post-hearing (afterthought). 7.4.4 The Bench finds from the averments of the applicant that • the transport contract was processed by participating in Tender floated by IOC; • there was an elaborate contractual agreement entered into by the applicant with IOC; • the freight charges paid were for the actual transportation of the goods on 'per kiloliter per kilometer' basis; • the Sangam was not guaranteed any minimum billing/mileage or loads for any period whatsoever; • IOC was not held responsible for their inability in offering any load on any day or during any particular period and no idle charges, etc., would be payable; • the Sangam undertook the respons....
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....s gets covered within the scope of GTA service also gets support from the fact that the same has been accepted by the respective Jurisdictional authority and assessed to Service Tax on IOCL and they complied with payment of the Service Tax under Reverse Charge Mechanism and filed periodic ST-3 returns. Moreover, if the Service Tax on the Supply of Tangible Goods Service is paid the same would be available as CENVAT Credit for payment of Service Tax on GTA service, thereby making the exercise revenue neutral. Therefore the Bench holds that the entire Service Tax of Rs. 20,77,448/- demanded on this activity in the impugned Show Cause Notice is in-fructuous and not sustainable in law. 7.4.5 Business Auxiliary Services : The Bench finds that out of eight services, on which Service Tax was demanded in the category of 'Business Auxiliary Services' in the impugned notice, the applicant accepted the liability in respect of the services namely commission received on IRCTC booking, incentives received on petrol card sale, commission on cell-prepaid card sale and commission received on Railway ticket booking. The applicant repudiated the demand in respect of turnover discount/perfo....
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....or the year 2010-11 and Rs. 23,16,950/- for the year 2011-12. Bench holds that the applicant is liable to pay Service Tax on the value by adding with such value of other such taxable service by allowing the threshold exemption limit. The Bench set aside the demand of Rs. 4,18,405/- on the rental value of the vacant land as unsustainable in law. 7.4.7 Threshold exemption and Service Tax liability : The applicant right through their various submissions stated that they were liable for Service Tax only from the year 2009-10, that too after availing the threshold exemption limit of Rs. 8/10 lakhs for the respective financial years. However, Revenue contended that the applicant has exceeded the threshold limit during the preceding financial year itself by clubbing the Service Tax liability arrived at, on the various services provided by the applicant. Bench finds that even after holding that major portion of Service Tax demanded in the impugned show cause notice, unsustainable in view of the above findings, still finds that the applicant has exceeded the threshold exemption limit during the year 2008-09 itself as the value of the services held to be taxable exceeded the thres....
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....full disclosure of tax liability and co-operation extended by the applicant, the Bench takes a lenient view and extend partial immunity from penalty to the applicant. Prosecution : 7.6 Considering the facts and circumstances of the case, the Bench considers it as a fit case for grant of immunity from prosecution to the applicant. ORDER 8.1 In the light of the above, the Bench settles the case on the following terms and conditions under the Central Excise Act, 1944 made applicable to Service Tax by Section 83 of the Finance Act, 1994. (i) The additional amount of Service Tax is settled at Rs. 8,77,116/- (Rupees eight lakhs seventy seven thousand one hundred and sixteen only). The applicant has already paid Rs. 4,77,808/- and the balance amount of Service tax of Rs. 3,99,308/- has to be paid within 30 days of receipt of this order and proof of payment furnished to jurisdictional Commissioner. (ii) The interest payable should be worked out by the applicant to the satisfaction of the jurisdictional Commissioner. The applicant has paid an amount of Rs. 80,767/- towards interest. The balance amount sh....