2025 (7) TMI 413 - AT - Service Tax

Classification of service - cargo handling service - Management Maintenance or Repair service - Manpower Recruitment and Supply Service - two SCN issued wrongfully. Issuance of two SCN wrongfully - HELD THAT - The issuance of two number is because of clerical mistake on part of the department. Based on this the department cannot have the unfair advantage. It is submitted that the appellant has shown its work done during the relevant period in the registration number AAEFS2040LST001 hence in registration number AAEFS2040CST001 nil returns have been filed. The demand in question has been raised based upon nil return filed for registration number AAEFS2040CST001. The demand is otherwise based on Form 26AS as was filed by the appellant before the income tax department it being the one assesse only in respective of two registration numbers. The appellant vide reply to the show cause notice dated 08.05.2015 and with two additional submissions along with documentary evidences given at the time of personal hearing dated 13.08.2015 and 16.02.2016 has brought the fact of two service tax registration to have been issued in his favour It also brought to the notice that the service tax liability stands discharged under one of such registration number (AAEFS2040LST001) and the nil returns have been filed for registration number AAEFS2040CST001. Classification of service - Management Maintenance and repair service (MMR) - HELD THAT - Most of the activities were mentioned to be covered under works contact and manpower supply for which the service tax is payable under reverse charge in the ratio of 50/50 for Works Contract Service (WCS) and in ratio of 75/25 for MMR. It is observed that the none of these submissions have been dealt with by the original adjudicating authority. It is observed from the decision in the case of Ms. Sahara India TV Network 2015 (10) TMI 2037 - CESTAT NEW DELHI that therein it was held that the legal person under two tax registrations if is the same person issue is not so much of law but of rectification of mistake inadvertently committed and mistake committed in remittance of service tax under different codes. Such situation should have been sought out by the Original adjudicating authority. It is also observed that original adjudicating authority is silent about these grounds raised in defense by the appellant which are duly supported by the documentary evidence. Hence the present appeal is considered to be the fit case for being remanded back to the original adjudicating authority. Appeal allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this matter include:

(a) Whether the activities carried out by the appellant fall under the ambit of cargo handling service, work contract service, management, maintenance or repair services (MMR), or manpower recruitment and supply services, thereby attracting service tax under Section 66B of the Finance Act, 1994;

(b) Whether the show cause notice issued for the period July 2012 to September 2014 is sustainable, particularly given that an earlier notice covered the period up to December 2012;

(c) Whether the appellant's service tax liability has been correctly computed and demanded, especially in light of the appellant holding two service tax registration numbers and having discharged tax liability under one of them;

(d) Whether the department has erred in ignoring payments already made by the appellant towards service tax;

(e) Whether the classification of services and the applicable reverse charge mechanism ratios (50/50 for works contract service and 75/25 for MMR services) have been correctly applied by the adjudicating authority;

(f) Whether the original adjudicating authority properly considered the appellant's submissions and documentary evidence regarding registration numbers and tax payments.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Classification of Services Rendered and Applicability of Service Tax

Relevant legal framework and precedents: Section 66B of the Finance Act, 1994 imposes service tax on taxable services. Section 65B(44) defines management, maintenance or repair services (MMR). Notification No. 30/2012-ST specifies the reverse charge mechanism applicable to manpower recruitment and supply services. Precedents such as the decisions in Sahara India TV Network and K.K. Kedia have been cited regarding classification and tax liability.

Court's interpretation and reasoning: The Tribunal noted that the department alleged the appellant's activities to be taxable under various service categories: cargo handling service for unloading and shifting of coal and stones; management, maintenance or repair services for annual maintenance and routine/breakdown works; and manpower recruitment and supply services for manpower supply to certain entities.

The appellant denied classification of certain activities as MMR and contended that many activities fall under works contract service or manpower supply service, which attract service tax under reverse charge with specified ratios (50/50 for WCS and 75/25 for MMR). The Tribunal observed that the original adjudicating authority did not deal with these submissions.

Key evidence and findings: The appellant provided documentary evidence including work orders, bills, completion certificates, and VAT returns. They also highlighted that service tax liability was discharged under one registration number.

Application of law to facts: The Tribunal recognized that the nature of services rendered is crucial to determine the correct classification and hence the tax liability. It emphasized that the original authority failed to consider the appellant's defense and documentary evidence on this point.

Treatment of competing arguments: The department maintained the correctness of the classification and demand, while the appellant challenged it on grounds of misclassification and partial payment of tax. The Tribunal found merit in the appellant's submissions and noted the lack of adjudication on these points.

Conclusions: The issue of classification and applicability of service tax under the correct category and reverse charge mechanism requires fresh consideration.

Issue (b): Validity of Show Cause Notice for the Period July 2012 to September 2014

Relevant legal framework and precedents: Principles of natural justice and limitation in issuance of show cause notices apply. The Tribunal referred to the fact that an earlier notice covered the period up to December 2012.

Court's interpretation and reasoning: The appellant argued that the impugned show cause notice dated 10.03.2015 was not sustainable for the period July 2012 to December 2012 as that period was already covered by an earlier notice dated 19.12.2014. The Tribunal noted this contention but did not conclusively rule on it, instead opting to remand the matter for fresh adjudication.

Key evidence and findings: The appellant's submissions and the dates of the notices were considered.

Application of law to facts: The Tribunal implied that duplication of proceedings for the same period may be impermissible and required verification by the original authority.

Treatment of competing arguments: The department did not raise objection to remand, implicitly accepting the need for reconsideration.

Conclusions: The issue requires verification and fresh adjudication by the original authority.

Issue (c): Effect of Dual Service Tax Registrations and Payment of Service Tax

Relevant legal framework and precedents: Taxpayer identification and registration under service tax law require clarity. The Tribunal referred to the decision in Sahara India TV Network, which dealt with rectification of mistakes arising from multiple registrations for the same legal entity.

Court's interpretation and reasoning: The appellant demonstrated that two registration numbers were issued due to clerical error but pertained to the same assessee. The appellant had discharged service tax liability under one registration (AAEFS2040LST001) and filed nil returns under the other (AAEFS2040CST001). The demand was based on the nil return registration number, ignoring tax paid under the other number.

The Tribunal observed that the original adjudicating authority did not consider this defense or verify the correctness of the registrations and payments.

Key evidence and findings: Documentary proof of registrations, returns filed, and payments made were submitted by the appellant.

Application of law to facts: The Tribunal held that where the same legal entity is issued multiple registrations, the issue is one of rectification of clerical mistake and proper accounting of tax payments, not a substantive denial of liability.

Treatment of competing arguments: The department did not dispute the existence of two registrations or payment under one but maintained the demand. The Tribunal found the department's approach unjustified.

Conclusions: Verification of registration numbers and tax payments is essential before confirming demand.

Issue (d): Ignorance of Payments Made by the Appellant

Relevant legal framework and precedents: Principles of equity and prevention of unjust enrichment apply. The appellant cited precedents where revenue was not allowed to benefit from ignoring payments made.

Court's interpretation and reasoning: The Tribunal noted that the department and original adjudicating authority ignored the payment of Rs. 38,08,691/- by the appellant towards service tax, which should have been adjusted against the demand.

Key evidence and findings: Payment records and Form 26AS were relied upon by the appellant.

Application of law to facts: The Tribunal emphasized that failing to account for payments results in unjust enrichment of the revenue and is contrary to principles of natural justice.

Treatment of competing arguments: The department did not contest the payment but failed to consider it in the order.

Conclusions: The original authority must consider all payments made and adjust the demand accordingly.

Issue (e): Application of Reverse Charge Mechanism Ratios

Relevant legal framework and precedents: Notification No. 30/2012-ST prescribes reverse charge liability for manpower recruitment and supply services and works contract services with specified ratios.

Court's interpretation and reasoning: The appellant contended that the service tax liability should be apportioned as 50% by the service provider and 50% by the service receiver for works contract services, and 25% by the provider and 75% by the receiver for MMR services.

The Tribunal observed that the original adjudicating authority did not address these submissions.

Key evidence and findings: The appellant's submissions and relevant statutory notifications were presented.

Application of law to facts: Correct application of reverse charge mechanism is critical to determine the quantum and party liable to pay service tax.

Treatment of competing arguments: The department upheld the demand without considering the appellant's contention on reverse charge apportionment.

Conclusions: The issue requires fresh examination by the original authority.

Issue (f): Failure of Original Adjudicating Authority to Consider Appellant's Submissions

Relevant legal framework and precedents: Principles of natural justice require that all relevant submissions and evidence be considered before passing an order.

Court's interpretation and reasoning: The Tribunal found that the original adjudicating authority was silent on several key defenses and documentary evidence submitted by the appellant, including the issue of dual registrations, payment of service tax, classification of services, and reverse charge mechanism.

Key evidence and findings: The appellant's replies to the show cause notice, documentary evidence, and oral submissions during hearings.

Application of law to facts: Failure to consider these aspects vitiates the order and necessitates remand.

Treatment of competing arguments: The department did not oppose remand.

Conclusions: The matter is fit for remand to original adjudicating authority for fresh decision after considering all submissions.

3. SIGNIFICANT HOLDINGS

The Tribunal held that:

"The legal person under two tax registrations, if is the same person, issue is not so much of law but of rectification of mistake inadvertently committed and mistake committed in remittance of service tax under different codes. Such situation should have been sought out by the Original adjudicating authority."

The Tribunal established the core principle that where multiple service tax registrations are issued to the same assessee due to clerical error, the issue is one of rectification and proper accounting rather than denial of liability.

It was further held that the original adjudicating authority must:

• Decide the show cause notice afresh;
• Verify whether the two registrations pertain to the same assessee;
• Ascertain whether the service tax liability has been fully discharged under one registration;
• Determine the correct classification of services and the applicable reverse charge mechanism ratios;
• Afford the appellant adequate opportunity of representation.

The Tribunal allowed the appeals by remanding the matter with directions for fresh adjudication within three months.