Custom, Excise & Service Tax Tribunal
Bharath Cylinders vs Madurai on 1 May, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
SOUTH ZONAL BENCH
CHENNAI
Appeal No.ST/40770/2013
[Arising out of Order-in-Appeal No. 323/2012 dt. 21.12.2012 passed
by Commissioner of Central Excise (Appeals), Madurai]
Appeal No. ST/40777/2013
[Arising out of Order-in-Appeal No.322/2012 dt. 21.12.2012 passed by
Commissioner of Central Excise (Appeals), Madurai]
Bharat Cylinders Appellant
50, Amman Sannidhi,
Madurai-625001.
Versus
Commissioner of Central Excise, Respondent
Central Revenue Building, Bibikulam, Madurai-625002.
Appearance :
Ms. S. Sridevi, Advocate For the Appellant Shri K. Veerabhadra Reddy, ADC (AR) For the Respondent CORAM :
Hon'ble Shri Madhu Mohan Damodhar, Member (Technical) Hon'ble Shri P. Dinesha, Member (Judicial) Date of Hearing: 07.03.2019 Date of Pronouncement: 01.05.2019 FINAL ORDER Nos. 40753-40754/2019 Per P. Dinesha 2 Appeal Nos.ST/40770/2013, 40777/2013 The facts of the case are that appellants were inter alia rendering services of segregation, reconditioning, surface cleaning and washing of empty cylinders meant for LPG cylinders which, according to department, was exigible to service tax liability. Accordingly, show cause notices dt. 19.01.2011, 08.03.2011 for periods 01.04.2006 to 30.09.2009 and 01.10.2009 to 30.09.2010 were issued inter alia demanding service tax liabilities of Rs.13,74,744/- with interest and Rs.1,69,079/- with interest. The SCNs also proposed imposition of penalties under various provisions of law. In adjudication, the original authority confirmed the demands and also imposed penalties under Section 78 of the Finance Act, 1994 in respect of the first notice and imposed penalties under Section 76 & 77 ibid in respect of the second notice. In appeal, Commissioner (Appeals) vide a common order dt. 21.12.2012 upheld the orders of the original authority. Hence these appeals.
2. Today when the matter came up for hearing, on behalf of the appellants, Ld. Advocate Ms. S. Sridevi made oral and written submissions which can be broadly summarized as under:
i) The appellant submits that the repair of valve leakage during the process of testing are covered under Management, Maintenance or Repair Services (MMRS) attracting service tax as per the impugned order. The appellant submits that they have been engaged in the statutory testing of LPG Cylinders under Gas Cylinder Rules, 2004 and the Indian Explosives Act, 1884. The cylinders are to be tested periodically and a certificate was required to be issued to the effect that the cylinders had undergone various tests. The impugned activity therefore cannot be classifiable under MMRS as held in the impugned order and therefore not liable for payment of Service Tax.
ii) Reliance is placed on the case law of Harshita Handling Vs. Commissioner of Central Excise, Bhopal - 2010 (19) STR 596, affirmed by Hon'ble Supreme Court
iii) Further reliance is placed on the following decisions
a) Sri Ayyappan Cylinders - 2017 (6) TMI 579 CESTAT Chennai 3 Appeal Nos.ST/40770/2013, 40777/2013
b) Pressure Vessels and Equipments Testing Enterprises - 2013 (1) TMT 683 Cestat, Chennai
c) RK Cylinders - 2018 (9) TMI 187 Cestat, Bangalore
iv) The department has alleged that the value of paints consumed while providing MMRS service was required to be included in the taxable value and service tax is required to be paid by them. In the decision of Hon'ble CESTAT in Harshitha Holdings referred above, which was affirmed by Supreme Court, it was held the above activities of the appellants would not be get covered under "Technical testing and certificate service or Management, Maintenance and Repairs service", Hence, inclusion of material value and demand of service tax on those services is not sustainable in limine.
v) Alternatively, the appellants submit that they are entitled for benefit of notification No.12/2003 which exempts the value of goods involved in taxable service. As per the Notification, the value of goods and materials sold by the service provider to the recipient are excluded from the payment of service tax, if there is sufficient evidence for the value of the goods sold separately. In this connection, the appellant submits that they have purchase bills to show that the paints purchased have suffered VAT and the appellants also paid appropriate VAT on such value of sale of paint. They rely on the ratio of the Tribunal decision of Mehta Plast Corporation Vs. CCE, Jaipur - 2012-TIOL-616-CESTAT.
vi) The appellant are engaged in delivering the tested cylinders at their respective bottling plants in their own vehicles as agreed in the contract. The impugned order has confirmed the demand of ST under GTA services. Appellants are not liable for payment of ST, as they used their own vehicle for transportation and have not acted as Goods Transport Agency. The appellant also submits that the liability for the payment of Service tax under GTA services would fall on the service recipient and as such the appellant is not liable to pay service tax MSPL Ltd. Vs. CCE, Belgaum - 2009 (13) STR 554).
vii) They have not suppressed any fact from the department.
The appellant had obtained registration and started paying ST from 04.06.2007 and also filing periodical returns. As such, the allegation 4 Appeal Nos.ST/40770/2013, 40777/2013 of suppression is not at all maintainable. Also, they had furnished the partnership deed, invoices and all such related documents vide their letter dt.03.09.2009. The non-inclusion of material cost in the taxable value and non-payment of service tax on the transportation charges collected was only under bona-fide belief. They rely on the decision of Tribunal in Gayathri Construction Co. Vs. CCE, Jaipur - 2012 (25) STR 259 (Tri. - Del).
viii) Also, mere non-filing / non-registration without any deliberate intention to withhold/suppress information from the department, does not amount to suppression. They rely on the Hon'ble Supreme Court judgement in Anand Nishikawa Co Ltd. Vs. CCE
- 2005 (188) ELT 149 (SC).
3.1 On the other hand, Ld. A.R Shri K. Veerabhadra Reddy supports the impugned orders.
3.2 In respect of demand on testing charges, he draws our attention to para 5.2 of the impugned order where the Commissioner (Appeals) has analysed the issue in detail and given a considered decision that the activities carried out by the appellants are indeed liable to service tax.
3.3 In respect of issue of non-inclusion of value of paints, he draws our attention to para 5.3 of the order where the appellate authority has clearly held that benefit of Notification No.12/2003-ST dt. 20.06.2003 is not applicable.
3.3 In respect of the dispute on GTA, Ld. A.R draws our attention to para 5.4 wherein the appellate authority has relied on Board's Circular No.104/7/2008-ST dated 06.08.2008.
4. Heard both sides.
5.1 The testing of LPG cylinders, under a Statute, is no doubt a statutory obligation, but the appellant is a private organization and its appointment by statutory notification is not there. Thus, the appellant 5 Appeal Nos.ST/40770/2013, 40777/2013 is only carrying out an outsourced job and in the absence of any document as to the statutory notification appointing it, we are unable to accept the appellant's arguments. We may also have to observe that when tax payment is a statutory obligation, each tax payer cannot claim that his/its activities to be exempt because of his/its discharge of statutory obligation. It may be a duty cast on each tax payer, but the same cannot be equated to be an exempted activity. For the above reasons we do not accede to the appellant's contentions that it is carrying out a statutory obligation and hence, its services are exempt. Further, the appellant has claimed that the cylinders are being delivered after testing, in their own vehicles as agreed to in terms of a contract. This agreement is an inter-se agreement between the appellant and the other person/agency, which is binding only on the parties to the said agreement and therefore, it can never have any implications on the appellant's statutory obligations nor could it be even imagined to have any effect on any other person, not to speak of the Revenue.
5.2 In the SCN, the adjudicating authority observes from the details furnished by the appellant as under:-
".......5. From the details furnished by the assessee, the following were noticed:
i) They claimed that paints used in proving the service of restoration/repair of LPG cylinders need not suffer service tax..............
ii) The paint consumed by the assessee while providing the maintenance or repair service is not covered under the said exemption........."
5.3 The above findings are not disputed. From the above, it is clear that the assessee itself had accepted its activities of providing repair and maintenance of cylinders and we do not see anywhere either in the assessee's reply or elsewhere, as to the appellant claiming to have under taken the above services free of cost. Hence, we do not find any good reason to interfere with the findings of the lower authorities.
6Appeal Nos.ST/40770/2013, 40777/2013 For these very reasons and factual position, we are of the opinion that the case laws relied on by the appellant are not applicable.
6. With regard to the penalties imposed under Section 76 and 78, however, we note that Section 76 and 78 are mutually exclusive and hence there cannot be any penalty under both sections. Facts are very clear right from the stage of SCN and we are also clear that it was a bonafide mistake on the part of the appellant to entertain a belief that its activities were statutory obligations, exempt from tax, for which they had also relied on a few decisions. In any case, it is a pure question of law and hence we do not see any case of suppression or fraud, etc. and accordingly, we are of the view that the discretion under Section 80 of the Act could be exercised to set aside the penalties under Section 76 and 78 ibid. But in any case, it is the settled position that penalties under both Sections 76 and 78 are not exigible and therefore, levy of penalty in this case under both Sections 76 & 78 is clearly without any authority of law. But however, penalty under Section 77 should sustain for the reasons given in the impugned order.
7. Appeals are therefore treated as partly allowed on the above terms.
(Order pronounced in court on _01.05.2019) (Madhu Mohan Damodhar) Member (Technical) (P. Dinesha) Member (Judicial) BB