Custom, Excise & Service Tax Tribunal
Shree Saibaba Chemicals Industries vs Vadodara-Ii on 6 March, 2025
CUSTOMS,EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD
REGIONAL BENCH : COURT NO. 3
SERVICE TAX Appeal No. 10539 of 2018-SMB
[Arising out of Order-in-Original/Appeal No VAD-EXCUS-002-APP-463-2017-18 dated 28.09.2017 passed
by Commissioner ( Appeals ) Commissioner of Central Excise, Customs and Service Tax-VADODARA-I]
Shree Saibaba Chemicals Industries ...Appellant
Plot No. 3709/3, Gidc, Ankleshwar
Bharuch, Gujarat
VERSUS
Commissioner of C.E. & S.T.-Vadodara-ii ...Respondent
1st Floor... Room No.101, New Central Excise Building, Vadodara, Gujarat-390023 Appearance:
Shri Vinay Kansara, Advocate for the appellant Shri A R Kanani, Superintendent (AR) for the respondent CORAM:
HON'BLE Dr. AJAYA KRISHNA VISHVESHA, MEMBER ( JUDICIAL ) Final Order No.10159/2025 DATE OF HEARING: 29/01/2025 DATE OF DECISION: 06/03/2025 Dr. AJAYA KRISHNA VISHVESHA This appeal is directed against the Order-In-Appeal No. VAD-EXCUS- 002-APP-463-2017-18 dated 28.09.2017 passed by the Commissioner (Appeals) Central Excise and GST, Vadodara, through which the learned Commissioner upheld the Order-in-Original dated 28.09.2016 and rejected the appeal.
1.1 The facts pertaining to this appeal in brief are that the appellant is manufacturer of excisable goods falling under Chapter 29 of CET, 1985. During the course of audit of Central Excise records conducted in the month of July and August, 2015, it was noticed by the audit party that the appellant had not paid the Service Tax on transportation service received from M/s. Kaveri Transport Carriers for the period 2011-2012 to 2014-2015. The audit party 2 ST/10539/2018-SMB was of the view that in respect of GTA Services, as the appellant is the partnership firm and had paid freight for the transportation of goods by road in goods carriage, they are liable to pay Service Tax in terms of Section 68 (2) of the Finance Act, 1994 read with Rule 2 (1) (d) (i) (B) of the Service Tax Rules, 1994 and Notification No. 30/2012-ST dated 20.06.2012 as amended.
In these circumstances Show Cause Notice No. V(a)/Ch.28/155/AC/Audit- II/2015-2016 dated 08.01.2016 was issued proposing to demand the Service Tax amounting to Rs. 1,17,881/- for the period from April, 2011 to March, 2015 under proviso to Section 73(1) of the Finance Act, 1994 to recover interest under Section 75 of the Finance Act, 1994 and to impose penalty under Section 78 (1) of the Finance Act, 1994 and under Section 78 (1) of the Finance Act, 1994 read with Rule 7 of STR 1994 and Section 77 of the Act read with Rule 4 of the STR 1994. The appellant submitted the detailed reply dated 25.09.2016 explaining the legal position. However, the Deputy Commissioner did not accept the submissions made by the appellant and confirmed the demand of Service Tax of Rs. 1,17,881/-, imposed penalties, ordered to recover the interest as mentioned in the Order-In-Original No. DIV- VI/BRH/ST/38/2016-17 dated 28.09.2016.
1.2 Feeling aggrieved and dissatisfied with the above mentioned order, the appellant preferred an appeal under the provisions of Section 85 of the Finance Act, 1994 before the Commissioner (Appeals) Central Excise, Goods and Service Tax, Vadodara. However, the Commissioner (Appeals) did not accept the submissions made by the appellant and rejected the appeal vide Order-In-Appeal NO. VAD-EXCUS-002-APP-463-2017-18 dated 28.09.2017. Feeling aggrieved and dissatisfied from the Order-In-Appeal the appellant submitted this appeal before the Tribunal.
2. The learned Counsel for the appellant submitted during the arguments that the grounds on which the demand has been confirmed are improper and unjustified and those grounds are not based on any legal proposition. 3 ST/10539/2018-SMB 2.1. The learned Counsel for the appellant also submitted that while raising Central Excise invoices to the customers, the appellant charged the freight amount along with the Service Tax and the same amount has been paid to the transporter and in turn the transporter had deposited the Service Tax to the Government accounts. Since, it was cost to the appellant company, the freight including Service Tax has been recovered from the customers. Thus, the Service Tax has already been paid by the Goods Transport Agency i.e. Kaveri Transport Carriers on the amount of freight on which the Service Tax has been demanded in this case. The appellant has enclosed with this appeal proof of payment of Service Tax which has already been paid to the said Goods Transport Agency. As proof of payment, the appellant has enclosed the Service Tax registration of M/s. Kaveri Transport Carriers, sample copies of the invoices raised by the M/s. Kaveri Transport Carriers, declaration provided by M/s. Kaveri Transport Carriers, ST-3 returns filed by M/s. Kaveri Transport Carriers along with the challans and its calculation. On perusal of the above mentioned documentary evidence, it will be clear that Service Tax has already been paid by M/s. Kaveri Transport Carriers and there is no question of payment of Service Tax once again.
2.2. The learned Counsel for the appellant also submitted that if it is assumed that the Service Tax is required to be paid by the appellant as alleged in the show cause notice, since the Service Tax has already been paid by the service provider. Central Excise Department cannot recover once again the Service Tax from the service receiver under Reverse Charge Mechanism. It is settled legal position that Service Tax cannot be demanded on the same services twice, irrespective of the fact whether the Service Tax has been paid by the service provider or by the service receiver. This issue is no more res integra. As it has been decided by the Hon'ble CESTAT in Omori India Pvt. Ltd. V/s CCE 2017 (11) TMI 759 CESTAT-Ahmedabad and Gurudev Dystuff (India) Pvt. Ltd. V/s CCE 2018 (2) TMI 1399- CESTAT-Ahmedabad. 4 ST/10539/2018-SMB 2.3. The learned Counsel for the appellant also submitted that in this case neutrality of revenue is in existence because if the appellant will pay Service Tax, the CENVAT Credit would be available, in terms of the definition of 'Input Service' as defined in Rule 2 (i) of the CCR, 2004, to the appellant Company. Even if it is assumed that the appellant is required to pay Service Tax then CENVAT Credit is admissible because services are received and utilized in or in relation to manufacture of finished goods whether directly or indirectly. Therefore, if the Service Tax liability would be discharged through challan, the credit can also be taken by the appellant company on the basis of the challans. Since, the appellant has not paid the amount of Service Tax under Reverse Charge Mechanism as alleged by the Department, they have not taken CENVAT Credit. If the appellant would have paid the service tax then CENVAT Credit would have been availed by them and in turn such CENVAT Credit would have also been utilized for payment of Central Excise Duty because the appellant regularly paid the Central Excise Duty through PLA. As the neutrality of payment is in existence. Therefore, the present demand is not sustainable. 2.4. The learned Counsel for the appellant also submitted that the contention of the appellate authority is not correct, that the transporter has arbitrarily levied and collected Service Tax from the appellant whereas the onus was on the appellant to pay Service Tax on incurring such transportation expenses/charges.
2.5. The learned Counsel for the appellant also argued that if the Department was of the view that the Service Tax was not required to be paid by the transporter then the Department ought to have refunded the amount of Service Tax to the transporter. Instead of doing so department has demanded the amount of Service Tax from the appellant company. Therefore, the Department intends to recover Service Tax twice on the same services which is not proper but arbitrary. This contention of the department is not proper and sustainable.
5 ST/10539/2018-SMB 2.6. The learned Counsel for the appellant also submitted that he does not dispute the fact that the Service Tax was required to be paid by the appellant as recipient of the service. But if the service provider has charged, collected and has already deposited the amount of Service Tax in the Government account then appellant is not required to pay the Service Tax once again to the Government.
2.7. The learned Counsel for the appellant also submitted that major part of the demand is barred by limitation as the period involved in the present case is 2011-2012 to 2014-2015 whereas the show cause notice was served in the month of the January, 2016. Therefore, the show cause notice was served beyond the normal time limit as prescribed under the provisions of Section 73 of the Finance Act, 1994. The allegation regarding suppression of facts or willful misstatement with intent to evade payment of Service Tax are not proved. Whether service tax has been paid by the service provider or by the service receiver, there cannot be any malafide intention on the part of the service provider or service receiver. Hence, in such case extended period cannot be invoked.
2.8. The learned Counsel for the appellant relied upon Parekh Plast (I) Pvt. Ltd. V. CCE 2012 25 STR 46 (T-Ahmd), V. Mohan Vs. CCE (ST) 2010 (20) STR 686 (T), Aditya Birla Nuvo Ltd. Vs CCE (2011) 22 STR 41 (T-Ahmd) and Padmini Products Vs. CCE 2002-TIOL-289-SC-CX.
2.9. The learned Counsel for the appellant also submitted that the Department is not justified in invoking the extended period of limitation beyond the period of one year under the provisions of Section 73 of the Finance Act, 1994, because in the show cause notice, the breach of any one of the four necessary ingredients such as fraud, collusion or willful misstatement or suppression of facts or contravention of any of the provision of this Act or Rules made thereunder with intent to evade payment of duty, has not been explained properly. The Department has also failed to produce 6 ST/10539/2018-SMB substantial or cogent evidences to prove the alleged breach of anyone of the above referred ingredient. Therefore, major part of the demand is time barred. The appellant relied upon CCE V/s Chemphar Drugs & Liniments - 1989 (40) ELT 276 (SC), Uniworth Textiles Ltd. V/s CCE 2013 (288) ELT 161 (SC) and Pushpam Pharmaceuticals Company V/s CCE 1995 (78) ELT 401 (SC) 2.10. The learned Counsel for the appellant also submitted that when the demand of Service Tax is not sustainable on merit and on the ground of limitation, the question of imposition of penalty under Section 77 & 78 of the Finance Act, 1994.
2.11. Learned Counsel for the appellant finally submitted that in view of the grounds mentioned above the impugned order is not sustainable and it should be set aside and the appeal be allowed.
3. The learned Authorized Representative on the other hand submitted that the impugned order has rightly confirmed the demand of Service Tax. Service Tax is payable generally by the provider of service. However, in certain taxable services in Reverse Charge Mechanism, Service Receiver is made liable to pay Service Tax and comply with other provisions of Finance Act, 1994. In case of GTA, a person liable to pay the freight on the transport of goods has also been made liable to pay Service Tax. As per Entry No. A (ii) of Notification No. 30/2012-ST, reverse charge is applicable only when taxable service provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road. Therefore, if the freight is paid by an individual / proprietorship or HUF then the Service Tax thereon shall be paid by the GTA itself. In other cases the onus is on the consignor or consignee to pay Service Tax availing transportation services. The details of GTA services is given under Notification No. 30/2012-ST and according to this notification, every person liable to pay Service Tax must pay it and abatement may be considered. Therefore, from a plain reading of the definition of 'GTA' services 7 ST/10539/2018-SMB and Notification as mentioned above, it is clear that the GTA received by the appellant are well covered within the purview of GTA services and the appellant is required to pay Service Tax under Reverse Charge Mechanism as provided under Notification No. 35/2004-ST dated 03.12.2004 and Notification No. 30/2012-ST dated 20.06.2012 as amended.
3.1. The learned AR also contended that the impugned order has rightly confirmed the demand of Service Tax as the appellant being a partnership firm had paid freight for the transportation of goods by road in goods carriage and were therefore, liable to pay Service Tax in terms of Section 68 (2) of Finance Act, 1994 read with Rule 2 (1)(d)(i)(B) of Service Tax Rules, 1994 and Entry No. A (ii) of Notification No. 30/2012-ST dated 20.06.2012 as amended. Therefore, in these circumstances, the service provider cannot exercise any option to avail the exemption or otherwise to collect and pay Service Tax on the said services. The appellant is a manufacturer of excisable goods which he has registered with Central Excise Department. Therefore, when transportation services were consumed by the appellant, they should have paid the Service Tax at the first instance. Ignorance of law is not a shield from non-compliance of legal and statutory obligation. The contention of the appellant has no force that they were not aware about the interpretation of the Notification. The plea of the appellant cannot be accepted that Service Tax has already been paid by the aforesaid GTA, therefore, demand is not sustainable. The demand is not time barred and appellant is liable to discharge their Service Tax liability as rightly confirmed by the Adjudicating Authority under the impugned order.
3.2. Learned AR also argued that the contention of the appellant has no force that as the transporter M/s. Kaveri Transport Carriers had already paid the Service Tax under GTA category. Therefore, appellant is not liable to pay Service Tax on the same service because in the instant case service recipient is liable to pay the tax and not the service provider.
8 ST/10539/2018-SMB 3.3. The learned AR also submitted that under the self -assessment regime, noticee was entrusted with the responsibility to assess the Service Tax payable correctly by virtue of chapter 5 of Finance Act, 1994 and the Rules framed thereunder. The Noticee was, therefore, required to assess the correct Service Tax and to pay it by the due date and to file returns to the Central Excise Officer. The fact of having received the taxable service and non-payment of Service Tax payable there on was never declared and disclosed to the Department by the noticee. These facts came to the knowledge of the Department only during the course of the audit of the case of the noticee. It appears that the noticee failed to assess the correct Service Tax liability with respect to the goods transport agency service and also failed to pay said Service Tax. Therefore, it appears that the noticee had not paid Service Tax by resorting to suppression of the material facts and violated the provisions of the Act and Rules made thereunder and had deliberately not paid the Service Tax on the above mentioned service with intent to evade payment of Service Tax. Therefore, the Department is entitled to get the benefit of extended limitation and it cannot be claimed that the demand is barred by limitation.
3.4. The learned AR has summed up his argument and prayed that the appeal be dismissed and the impugned order be confirmed.
4. This Tribunal has heard the learned Counsel for the appellant and learned Authorised Representative for the department and perused the record. 4.1 Section 68 of the Chapter V of Finance Act, 1994 provides as follows:-
"SECTION 68. Payment of service tax (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section[ 66B] in such manner and within such period as may be prescribed.
(2) Notwithstanding anything contained in sub-section (1), in respect of [such taxable services as may be notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such 9 ST/10539/2018-SMB manner as may be prescribed at the rate specified in section [66B] and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service:
[ Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider.]"
4.2 As per Entry No. A (ii) of Notification No.30/2012-ST reverse charge is applicable only when taxable service provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road, where the person liable to pay freight is:
• Any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
• Any society registered under the Societies Registration Act, 1890 (21 of 1860) or under any other law for the time being in force in any part of India;
• Any co-operative society established by or under any law; • Any dealer of excisable goods, who is registered under the Central Excise Act,1944 (1 of 1944) or the rules made there under; • Any body corporate established, by or under any law; or • Any partnership firm whether registered or not under any law including any association of persons.
4.3 I agree with the learned counsel for the appellant that if service tax was required to be paid by the appellant as alleged in the show cause notice, but the service tax has already been paid by the service provider, department cannot recover the service tax once again from the service receiver under Reverse Charge Mechanism. The service tax cannot be demanded on the same service twice, irrespective of the fact whether the service tax has been paid by the service provide by service receiver. This issue is no more res-integra. 10 ST/10539/2018-SMB 4.4 The learned Counsel for the appellant cited the case of Dhariwal Industries Limited vs. C.C.E. C. Anand- 2023 (10) TMI 595- CESTAT Ahmedabad, in which this Tribunal held that even though, legally the appellant is liable to pay service tax but in the facts of the present case the transport agency has admittedly paid such service tax. The assessment of payment of service tax by the transport agency has not been disputed by their jurisdictional officer. Therefore, no question can be raised as regard the service tax payment and assessment thereof at the end of the transport agency. If this be so, then the payment of service tax by the goods transport agency was made good as payment of service tax. Therefore, the demand against the appellant for the same service will amount to demand of service tax twice on the same service which in any case is not permissible. 4.5 This Tribunal further held that once the service provider discharged the service tax where the service recipient is liable to pay the service tax, demand of service tax on the same service from the service recipient shall not sustain on the ground that the particular service which already suffered the service tax cannot be made to suffer the service tax twice on the same service. Accordingly, the service tax paid by the transport agency in the facts of the present case is the payment of service tax and not deposit. Therefore, no demand can be raised from the appellant. The impugned order was held not sustainable and the same was set aside and appeal was allowed. 4.6 In my view, the facts of the above mentioned case, resemble with the facts of the present case and the principles of law laid down in the above mentioned case are fully applicable in the facts of the present case. 4.7 The learned Counsel also cited Saraswati Engineering Vs. C.C.E. & S.T. -Rajkot- 2023 (12) TMI 1005 - CESTAT Ahmedabad, Kiran Motors Ltd Vs. CCE, Surat- 2012 (7) TMI 135 -CESTAT, Ahmedabad, Sitaram Jaggnath Prasad Sihotia Vs. Commissioner (Appeals), Customs, Central Excise & CGST - (2024) 17 Centax 75 (Tri.-Del), Mahatma Gandhi University of Medical Sciences & Technology Vs. Commr. Of C. Ex. & CGST, Jaipur - 11 ST/10539/2018-SMB 2021 (55) G.S.T.L. 26 (Tri. - Del.), Rambal Ltd. Vs. Commissioner of Service Tax-III, Chennai - 2017 (4) G.S.T.L. 333 (Tri. - Chennai). 4.8 I agree with the principles of law laid down in the above mentioned cases by the Tribunals.
4.9 Though I agree with the learned Authorised Representative for the department that the appellant was required to pay the service tax under Reverse Charge Mechanism as provided under Notification No.30/2012-ST dated 20.06.2012 as amended yet in view of the facts of this case, since the service tax has already been paid by the service provider, therefore, the department cannot recover the service tax once again from the service receiver under Reverse Charge Mechanism.
4.10 In view of the above observations, I am of the view that the learned first Adjudicating Authority and the learned Commissioner (Appeals) have committed error in confirming the demand and recovery of service tax, amounting to Rs.1,17,881/- from the appellant. The first Adjudicating Authority and the learned Commissioner (Appeals) erred in confirming the demand of interest on the amount of service tax and imposition of penalty of Rs.1,17,881/- under Section 78(i) of the Finance Act and Rs. 10,000/- under proviso to Section 77 (1) (b) of the Finance Act, 1994, respectively on the appellant. Therefore, the appeal is liable to be allowed and the impugned order dated 28.09.2017 is liable to be set aside.
5. Consequently, the appeal is allowed and the impugned order dated 28.09.2017 is set aside.
(Pronounced in the open court on 06.03.2025) (Dr. AJAYA KRISHNA VISHVESHA) MEMBER ( JUDICIAL ) Bharvi