Custom, Excise & Service Tax Tribunal
Al Bucheeri General Transport Est vs Service Tax - Chennai on 5 September, 2018
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
CHENNAI
Appeal No.ST/151/2012
[Arising out of Order-in-Original No.06/2012 dt. 31.01.2012 passed by
Commissioner of Central Excise, Chennai-III]
AL Bucheeri General Transport Est. Appellant
Versus
Commissioner of Service Tax,
Chennai Respondent
Appearance :
Shri R. Varadharajan, Consultant Shri P.V. Sathyanarayanan, Advocate For the Appellant Shri A.Cletus, ADC (AR) For the Respondent CORAM :
Hon'ble Ms. Sulekha Beevi, C.S., Member (Judicial) Hon'ble Shri Madhu Mohan Damodhar, Member (Technical) Date of hearing / decision : 05.09.2018 FINAL ORDER No. 42374 / 2018 Per Bench Appellants were engaged in processing of oily sludge to obtain clear crude oil for refineries. They undertook the said activity in their various branches located at Chennai, Kerala and Assam Pursuant to investigation, it appeared that appellants had undertaken mechanical processing of sludge; that they had 2 Appeal No.ST/151/2012 collected processing charges from their clients which was inclusive of service tax; that however they did not pay service tax so collected and also had not filed any ST-3 returns. It appeared that the services provided by appellants fell within the category of 'Business Auxiliary Service' requiring payment of service tax amounting to Rs.1,89,90,583/- for the period October 2004 to March 2009. Accordingly, show cause notice dt. 22.04.2010 was issued to appellants inter alia, proposing demand of an amount of Rs.1,89,90,583/- with interest thereon , appropriation of amount of Rs.1,03,83,084/- paid by appellants during investigation and imposition of penalties under Section 76, 77 & 78 of the Finance Act, 1994. In adjudication, the commissioner vide impugned order dt. 31.01.2012 confirmed the demand proposed in the notice along with interest , appropriated the amount already paid and also imposed equal penalty under Section 78 of the Act and a penalty under Section 77 ibid. Aggrieved, appellants are before this forum.
2. On the date of hearing, on behalf of the appellant, Shri R.Varadharajan, Consultant and Shri P.V. Sathyanarayanan Advocate made various submission which can be summarized as under :
i) In the present case, the process of mechanical treatment of Oily Sludge is ancillary, that is, integral part of manufacturing Petrol and Petroleum Oils, which are excisable goods covered under Chapter 27 of Central Excise Tariff Act, 1985 (5 of 1986). This is even confirmed by the client (CPCL).
Once the activity is a ‚manufacturing activity‛ of goods under section 2(f) of Central Excise Act, 1944, the said activity is not covered in the purview of ‚ 3 Appeal No.ST/151/2012 Business Auxiliary Services‛ under charging Section 65 (105) (zzb) read with Section 65 (19) of the Finance Act, 1994.
ii) Notification No.08/2005 dated 1st March 2005 exempts the taxable service of production of goods on behalf of the client referred to in Section 65 (19) (v) of the Finance Act, from the whole of Service Tax leviable there on, if :
(i) Goods are produced using raw materials or semi-finished goods supplied by the client.
In the present case, Appellant produces "CRUDE" using raw material "Oily Sludge" supplied by the Clients (CPCL/IOCL/BPCL).
(ii) Goods so produced are returned back to the said client.
In the present case, Appellant returns "CRUDE" to the Clients (CPCL/IOCL/BPCL).
(iii) Such goods returned back to the said client is for use in or in relation to manufacture of other goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) on which appropriate duty of Excise is payable.
In the present case, the clients (CPCL/IOCL/BPCL) pay Excise Duty under Chapter 27 of Central Excise Act, 1944 (against HS Codes 2710, 2711, 2712, 2713, 2714, 2503, 2901 & 2804) ranging between 8% and 14%.
Hence, exemption of Service Tax is applicable to the appellant as per Notification No.08/2005-ST dated 1st March 2005.
iii) In the said impugned order, the value of taxable services amounting to Rs.15,76,81,173/- for the period from October 2004 to March 2009 arrived at by the department is entirely wrong and without any basis. Likewise, the service tax of Rs.1,89,90,583/- computed on the said value of taxable services is also entirely wrong.
4
Appeal No.ST/151/2012 The exact service income of the Appellant is detailed in the table below which clearly explains how much is the
a) Service Income
b) Service Tax collected
c) Service Tax remitted to the Government and
d) Service Tax not accepted based on Notification No.08/2005-ST dated 01.03.2005.
Payment Income Service Tax Service Tax Service Tax An
received from collected remitted to not accepted ne
govt. x
CPCL, Chennai 4,63,10,937 56,68,606 56,68,606 Nil I
IOCL, Assam 5,49,74,283 66,60,458 70,16,666 Nil II
BPCL/KRL, 2,18,12,654 Nil Nil 25,21,843 III
Kochi
TOTAL 12,30,97,874 1,23,29,064 1,26,85,272 25,21,843
iv) Ld. counsels submit that based on the above calculations, they are not
required to pay any liability beyond Rs.1,23,29,064/- which has been collected by them and which liability is not disputed by them. In fact, they have remitted higher amount of Rs.1,26,85,272/- to the exchequer. If the benefit of Notification No.08/2005-ST is given to them, their net liability will only be Rs.1,23,29,064/-.
v) The entire dispute has arisen only on account of interpretation of bonafide belief that they were not required to pay the tax liability and on the confusion whether process carried out by them would be considered as ‚Manufacture‛ or as a ‚Business Auxiliary Service‛.
3. On the other hand, on behalf of the department, Ld. A.R Shri A.Cletus supports the impugned order. He submits that plea of extending benefit of Notification No.08/2005-ST was not raised during adjudication. So also, as per the appeal and stay order, only an amount of Rs.1,03,83,084/- has been paid by the appellants during investigation; however they are now stating that they have paid up Rs.1,26,85,272/-. The reasons for claiming the value of taxable service as 5 Appeal No.ST/151/2012 only Rs.12,30,97,874/- is also not brought out by the appellant either at adjudication stage or even before the Tribunal.
4. In response, ld. counsels submit that though they had put forth all such arguments in their reply dt. 10.05.2016 to the SCN, running into 15 pages, however the arguments and submissions therein were not taken cognizance of or analyzed by the adjudicating authority.
5.1 Heard both sides and have gone through the facts. 5.2 Discernably, the appellants are not disputing tax liability to the extent of Rs.1,23,29,064/-. The dispute is only in the difference between this amount and that demanded in the impugned order. The appellants have put forth various arguments to support their stand including that the value of taxable service worked out in the SCN namely Rs.15,76,81,173/- is wrong and that the correct figure should be Rs.12,30,97,874/-. They have also now sought benefit of Notification No.8/2005-ST. In the event, on the quantum of tax liability we find that interests of justice would be best served by remanding the matter to the adjudicating authority for de novo consideration, in such denovo adjudication, the adjudicating authority will take into account the submissions and contentions put forth by the appellants herein above. The appellants should be given sufficient opportunity for presenting the case including the submission of additional documents, if any, in support of their arguments. 5.3 Coming to the matter of penalty, we find ourselves in agreement with the argument of the appellant that non-discharge of tax liability arose only on account of interpretational dispute. It is also to be noted that appellants were processing the sludge only for Public Sector Undertakings, like IOCL, CPCL, and BPCL. We 6 Appeal No.ST/151/2012 therefore hold that the elements of suppression, fraud etc. cannot be alleged against the appellant and hence imposition of penalties under Section 78 as well as Section 77 is unjustified and requires to be set aside, which we hereby do. So ordered.
5.4 We make it clear that the de novo adjudication ordered supra is only for the limited purpose to consider the appellant's arguments and submissions with regard to quantum of tax liability along with interest as applicable.
Appeal partly allowed and partly remanded.
(operative part of the order pronounced in court) (Madhu Mohan Damodhar) (Sulekha Beevi, C.S) Member (Technical) Member (Judicial) gs 7 Appeal No.ST/151/2012