Custom, Excise & Service Tax Tribunal
Emerald System Engineering Ltd vs Commissioner Of Service Tax, Mumbai-Ii on 1 March, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.ST/244/12-MUM (Arising out of Order-in-Original No. 19/KLG/Th-II/2010 dated 29/06/2010 passed by Commissioner of Central Excise, Thane-II) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) and Honble Mr. C.J. Mathew, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Emerald System Engineering Ltd. Appellant Vs. Commissioner of Service Tax, Mumbai-II Respondent Appearance: Shri D.H. Nadkarni, Advocate for Appellant Shri P. Vinitha Sekher, Deputy Commissioner (AR), for Respondent CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) Date of Hearing : 01/03/2016 Date of Decision : 01/03/2016 ORDER NO Per: M.V. Ravindran
This appeal is filed against Order-in-Original No. 19/KLG/Th-II/2010 dated 29/06/2010.
2. The relevant facts that arise for consideration are the appellant herein by an agreement with Saurashtra Cement Ltd., during the period 2003-2006 rendered services to Saurashtra Cement Ltd. in respect of various activities like transport, coordination services, organizing sales and Goods Transport Agency Services. Lower authorities were of the view that transport coordination services and organizing of sales is covered under Business Auxiliary Services and Goods Transport Agency Services are covered under GTA and tax liability arises. The adjudicating authority after following the due process of law did not agree with the contention of the appellant and confirmed the demand raised.
3. Learned Counsel takes us through the show cause notice, order-in-original and contract entered by the appellant with Saurashtra Cement Ltd. He would submit that transport coordination activity involved only providing trucks as per requirement of the company for dispatch of goods, supervising, loading, unloading at points etc. He would submit that this activity is now covered by a separate entry under the category of Business Support Services and is taxable from 1.5.2006. He would rely upon the decision of the tribunal in the case of Canara Motors 2011(21)STR-407. As regards organizing of the sales, he would submit that entire sales function was out sourced to the appellant and the entire activity again would get covered under Business Support Services and is covered in his favour by the decision of the Canara Motors (supra). As regards Goods Transport Agency Services, the amount paid by the appellant for transportation were in respect of the coordination work undertaken and hence the tax liability is not sustainable. It is his further submission that the quantification of the demand is also incorrect in respect of GTA Services as amount considered by the adjudicating authority are incorrect. He would submit that for the period in question in case of goods transport agency i.e. January, 2005 to March, 2006, the show cause notice considers a figure which is highly in flated not matching as per the schedule to balance sheet. He would draw our attention to annexure C to show cause notice at page no. 62 and the schedule annexed to profit and loss account at page no. 43.
4. Learned departmental representative reiterates the findings of the lower authorities and submits that the service tax liability arises under Business Auxiliary Services.
5. We have considered the submissions made at length by both sides and perused the records.
6. Undisputedly, appellant has entered into contract with Saurashtra Cement Ltd. for Transport Coordination Services, organizing sales and also for transporting of the goods.
7. As regards the Transport Coordination Services Activity, we find that the services rendered in this case is arranging the entire transportation, dispatching of the goods, supervising the loading and unloading of the goods. We find strong force in the contentions raised by the learned counsel that this activity of the appellant is covered under Business Support Services from 1st May, 2006. As per definition of the Business Support Services under section 65, we find that managing distribution and logistics was covered under the said category as one of the goods on which service tax liability arises under Business Support Services. The said services came to be taxed from 1.5.2006 is not in dispute. In our considered view, the activity under taken by the appellant under Transport Coordination Services would be covered under Business Support Services with effect from 1.5.2006 and will not be covered under Business Auxiliary Services; this view is arrived at after considering the clauses in the agreement entered by the appellant with Saurashtra Cement Ltd. In view of this the demand of the tax on this point is unsustainable and liable to be set aside and we do so.
8. As regards the demand under Business Auxiliary Services for organizing sales we find from the contract that the appellant has indeed organized for the collection of order from various stockist, distribution of said goods and collecting them from said stockist. This activity of the appellant, would fall under the category of Business Auxiliary Services under promotion or marketing or sale of goods produced or provided by or belonging to the client. We have no hesitation to hold that the service tax liability under this head is correctly confirmed by the adjudicating authority. The service tax liability along with interest is upheld.
9. As regards Goods Transport Agency Services, on perusal of the agreement we find that the appellant has not been able to show us the correct figures attributable correctly to inward in words transportation and outward transportation and also amount paid by them for transport of third party in the absence of any such information, we have to hold that service tax demand under goods transportation agency fastened on the appellant for the period in question i.e. January 2005 to March, 2006 is correct, however we do find merits in the submission made by the counsel that the amount of service tax need re-quantification in as much. Annexure to show cause notice at page no. 62 is showing the charges paid by the appellant which is not as reflected in the balance sheet at page no. 43. To soot out the limited question of quantification of limit of service tax liability, we remitted the matter back only on this point to adjudicating authority, who will reconsider the issue of correct tax liability as the entire demand under this category is based upon the figure shown in balance sheet as an amount received for the transport/delivery charges. Appellants counsel undertakes to cooperate with the authorities for re-quantification. For this limited purpose we remand the matter back to the lower authorities, up holding the service tax liability on Goods Transport Agency Services.
10. Interest liability also arises on the appellant in respect of the service tax liability upheld as indicated herein above.
11. As regards the penalties imposed on the appellant, we find except for penalty under section 76 of the Finance Act, 1994, penalties under other sections are unwanted in as much, by invoking the provisions of section 80, the may have had justifiable reasons for not paying the service tax as wordings of the agreement could have created a confusion. Accordingly, we uphold the penalty of the service tax confirmed by us as per the provisions of section 76 of the Finance Act, 1994 and set aside the penalties imposed under section 77 and 78 of Finance Act, 1994.
11. The appeal stands disposed of as indicated herein above.
(Dictated in Court) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) akp 1 6 APPEAL No.ST/244/12-MUM