2007 (9) TMI 50 - AT - Service Tax

Demand (Service tax) - Appellant contended that department is not consistent in their approach and demanded service tax at different point of time under different category hence extended period of limitation not invokable - Tribunal allow the assessee appeal

Summary

Issues:
1. Demand of service tax for the period September 1999 to March 2004 in the category of 'Clearing and Forwarding Agents Service'.
2. Imposition of penalties under Sections 75A, 76, and 77 of the Act.
3. Interpretation of the term 'Clearing and Forwarding Agents Service'.
4. Application of the extended period of limitation under the proviso to Section 73(1)(a) of the Finance Act, 1994.
5. Allegation of intent to evade payment of service tax.
6. Inconsistency in the department's approach to the nature of service rendered.

Analysis:
1. The lower authorities had demanded service tax from the appellants for the period in question under the category of 'Clearing and Forwarding Agents Service', invoking the extended period of limitation under Section 73(1)(a) of the Finance Act, 1994. The appellants were engaged in canvassing and order procurement for M/s. IBM Singapore on a commission basis. The appellants argued that mere order procurement did not constitute 'Clearing and Forwarding Agents Service', citing relevant legal precedents. The department's inconsistent approach to classifying the service added to the confusion, leading to the conclusion that the appellants did not intend to evade tax.

2. The Tribunal found that the department's vacillating stance on the nature of the service provided by the appellants created confusion and chaos, absolving the appellants of any intent to evade tax. The show-cause notice was issued beyond the normal limitation period without meeting the requirements for invoking the extended period of limitation. Consequently, the demand for tax was set aside on the grounds of limitation, leading to the vacation of imposed penalties. The appeal was allowed, highlighting the importance of consistent interpretation and application of tax laws by the authorities.

3. The judgment emphasized the need for clarity and consistency in the application of tax laws, especially concerning the classification of services for taxation purposes. The case highlighted the impact of departmental inconsistencies on taxpayers and the importance of adhering to legal precedents and statutory provisions. The decision to set aside the tax demand and penalties underscored the significance of fair and consistent tax administration to prevent undue hardship on taxpayers.