TMI Blog2014 (10) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... le Goods Service - Held that:- the applicants rebuttal of the Revenue’s claim, substantiated with brimming facts and reasoning, is acceptable and that the nature of activity involved in transportation of petroleum products from the oil companies to the respective destinations by the applicant in their tanker trucks gets covered within the scope of GTA service also gets support from the fact that the same has been accepted by the respective jurisdictional authority and assessed to Service Tax on HPCL and they complied with payment of the Service Tax under Reverse Charge Mechanism and filed periodic ST-3 returns. Moreover, if the Service Tax on the Supply of Tangible Goods Service is paid the same would be available as CENVAT credit for payment of Service Tax on GTA service, thereby making the exercise revenue neutral. Therefore, the entire Service Tax of ₹ 3,50,451/- demanded on this activity in the impugned show cause notice is infructuous and not sustainable in law. Leviability of Service tax - Rendering Business Auxiliary Service during the period 2007-08 to 2011-12 - Applicant repudiated the demand in respect of turnover discount rebate and incentives received from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T., dated 20-6-2012. Also the cum-tax benefit sought for by the applicant in terms of Section 67(2) is not admissible. Accordingly, the claim of the applicant for cum-tax benefit is disallowed and is arrived at the Service Tax liability at ₹ 3,15,613/- and applicable interest thereon. Also the applicant had admitted a total liability of ₹ 3,80,796/-and interest of ₹ 40,675/- payable thereon in their application filed in terms of Section 32E of the Act, ibid and during the hearings. Imposition of penalty - Non-payment of Service tax - Held that:- in view of the true and full disclosure of tax liability and co-operation extended by the applicant the Bench takes a lenient view and extend partial immunity from penalty to the applicant. Prosecution - Section 32K of Central Excise Act, 1944 - the applicant is granted immunity from prosecution under Section 32K of Central Excise Act, 1944, as made applicable to Service Tax vide Section 83 of the Finance Act, 1994. - Matter disposed of - - - Final Order No. 49/2014-S.T. - Dated:- 24-10-2014 - Shri J. Chaturvedi, Vice-Chairman and C.S. Prasad, Member Shri M.V. Rangarajan, FCA, Ms. N.C. Sandhya, Advocate, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturers to promote sales of spares. Besides performance bonus is also paid by M/s. Hindustan Petroleum Corporation (HPCL). (vii) They have rented 21,000 Sq. ft of vacant land to M/s. Tiruchengodu Lorry Urimaiyalargal Automobiles Sangam on monthly rent basis. They had also leased and rented two storeys Commercial Complex to Canara Bank and Reliance Insurance Company. The details regarding the above transactions mentioned above find place in the respective balance sheets of the applicant. 1.3 From the investigation and on the basis of records namely balance sheets and Income Tax returns for the assessment years 2008-09 to 2012-13, the position revealed in respect of the services rendered by the applicant were as under : Club s or Association s Membership Services 1.4 The applicant got registered with the Registrar of Assurances, Salem in terms of Societies Registration Act, 1860 on 22-1-1963. The status of the applicant under the above said Act is neither a body constituted or established under any law nor their objective is of the nature of public service. Thus the applicant is not coming within the purview of excluded categories of bodies which come under Clu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and dale of the consignment and thereby applicant is not eligible as per the conditions giving exemption from payment of tax stipulated under Notification No. 1/2009-S.T., dated 5-1-2009. Hence the entire amount received as hire charges under the category of Supply of Tangible Goods Service is taxable. Business Auxiliary Service 1.8 In the instant case, the applicant was involved in the purchase and sale of goods on behalf of their clients and received commission for providing such service in the name of turnover discount, performance bonus, etc. It appears that the commission so received is taxable under the category of Business Auxiliary Service . Renting of immovable property service 1.9 The applicant has leased and rented the land and building to private parties, Canara Bank, Reliance Insurance Company and M/s. Tiruchengodu Lorry Urimaiyalargal Automobiles Sangam and the amount received towards lease/rent is taxable under the category of Renting of Immovable Property Service . Quantification of tax liability 1.10 From the balance sheet and other documents, the total Service Tax liability on the various services rendered by the applicant from April ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid the above admitted tax liability along with interest vide challans on various dates during March 2012 and November 2012. Club or Association Membership Service 2.3 The applicant admitted that the Sangam is an association of the lorry owners established for the mutual benefit. The members are entitled to the services from the Sangam only on the payment of subscription. Hence the receipt of subscription by the Sangam from its member squarely fall within the definition of taxable service as per Section 65(105)(zzze) of the Finance Act, 1994. The applicant contended the other receipts received by the Sangam namely entrance fee and donation do not fall within the purview of Subscription or any other amount as appearing in the definition of taxable service under Section 65(105)(zzze). The donation and entrance fees are not considerations received by the Sangam for any service rendered/to be rendered and therefore question of nexus does not arise. 2.4 The clarification of Club s or Association s Membership Service Circular F. No. B1/6/2005-TRU, dated 27-7-2005 any other amount is described to include any consideration received over and above the subscription for any f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntemplated in the SCN under Section 65(105)(zzzzj) of the Finance Act, 1994. According to the definition of the taxable service referred in the above Section, the Supply of Tangible Goods Service must be for use apparently by the service receivers. The Department has no basis to claim the HPCL was rendering service as GTA by using the Tanker Trucks (i.e. Tangible Goods) received from the applicant. The covenants of the transport contract, clearly established that the custody/responsibility of the goods carried by the applicant were passed on to them till delivery at the destination for which transportation charges were to be paid by M/s. HPCL. 2.11 From the above, it is clear that nothing in the covenants to support the claim of the Revenue that the applicant supplied Tangible goods (Tanker Trucks) for the transportation of goods by M/s. HPCL and that HPCL operates as GTA service. The hire charges (as specified in the P L Account) is only a clerical mistake which is contrary to the statement of facts. The receipts are really the freight charges received by the applicant from M/s. HPCL and can never be construed as consideration for service of Supply of Tangible Goods Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 made the following submissions. (a) Club or Association Membership Service 3.2 The applicant s contention that only subscription collected from the members are taxable was not accepted for the reason that as per Section 65(105)(zzze) taxable service means any service provided or to be provided to its members by any club or association in relation to provision of services, facilities or advantages for a subscription or any other amount. Hence the collection of donations, entrance fee from the members are taxable as the services are provided out of these amounts and these amounts would squarely fall under any other amount . 3.3 The threshold exemption claimed for the years 2007-08 and 2008-09 and 2009-10 was not accepted as the aggregate value and services namely Club or Association Membership Service , Supply of Tangible Goods Service and Business Auxiliary Service and Renting of immovable Property Service , should be taken for arriving at the eligibility under threshold exemption. Against the demand of Service Tax of ₹ 36,06,375/- under Club or Association s Membership Service the applicant admitted only ₹ 40,872/- for the year 2007-08 to 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the extent of ₹ 42,73,460/- Amount of interest paid ₹ 56,654/- The reason for difference in the amount of Service Tax demanded and the amount of Service Tax accepted by the applicant if any Discussed in detail in the earlier part of the report Details of BG/Bond Executed Nil Whether the applicant is eligible for any refund on the subject issue and if so the amount of refund Nil * However the applicant in their Annexure-II enclosed to the application stated that they have paid ₹ 14,785/- in excess which they wanted to treat as the part of the tax accepted to be paid. Hearing : 4.1 The case was posted for hearing on 15-7-2014. The applicant was represented by Shri M.V. Rangarajan FCA, Smt. N.C. Sandhya, Advocate, M.R. Madhavan and M. Venkatesh while the jurisdictional Commissioner was represented by Shri S. Hariharan, Supdt., Trichengode Range. 4.2 The Chartered Accountant for the applicant narrated the facts of the case in detail and made another written submission at the time of hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members have provided for themselves these facilities through the instrumentality or the agency of the Club or Association and that the members are joint owners of the properties and therefore governed by principles of mutuality and not by the relationship of service provider and recipient. 5.3 That only from 1-7-2012 on the introduction of Negative List the Club or Association Service became liable for Service Tax. Likening the services of the Sangam to that of a farmer s Co-operative Society it was stated that the Sangam provides only operational services like facilitations with RTOs, Tollgates, Police, Safety and Security enroute, accident reports, representation to Government and statutory authorities for fixation of freight tariff and wages. The Sangam did not provide any recreational welfare like cultural programs, sports activities, etc. Therefore, the applicant pleaded that only the subscription and ₹ 5/- collected from the lorry owners (to restrict the lorry entries into the cement factories) were liable for Service Tax. 5.4 On the demand made on account of Supply of Tangible Goods Service the applicant submitted that what they provided was only GTA Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from prosecution and penalties; 5.5 Pursuant to directions of the Bench, he produced few copies of consignment notes which contained informations as required under Rule 4B of Service Tax Rules, wherein the oil companies were shown as a consignor, the applicant as GTA service provider transporting the goods to the consignee of the oil companies. He further submitted that they collected only freight charges from the oil companies. The ownership of the tanker lorries maintenance, repairs and various statutory certification were vested wholly with the applicants. The tankers are dedicated and customized with reference to lubricating oil, motor spirit, diesel and the same cannot be interchangeably used. The freight, transportation of petroleum goods are governed by tender process and mutually agreed upon by the oil companies and the tenderors. The other conditions in the agreement were explanatory to conclude that they paid only freight charges per Kl/per Km basis and the tankers were not hired. 5.6 Contrasting the concept of hiring of tankers v GTA services the applicant stated that under hiring the tankers are left in the custody of the oil companies and they are used at thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and considered the oral and written submissions made by the applicant and the Jurisdictional Commissioner during the hearing and thereafter. Maintainability of the application 7.2 On perusal of the application and enclosures thereto, the Bench finds that the applicant has not complied with the requirement of Section 32E(l)(a) inasmuch as they did not file the periodical returns in the prescribed manner. However, they filed ST-3 returns along with late fee as prescribed in Rule 7C of Service Tax Rules, 1994 read with Section 70 of Finance Act, 1994. The applicant was directed to explain the reasons for non-filing of returns in the prescribed manner. The applicant vide their submissions dated 21-6-2014, stated that, the applicant was ignorant of the Service Tax laws but on their own declared their transactions to the Range Officer and taken Registration and submitted themselves to compliance of the Service Tax Law. They further submitted that Finance Act, 1994 and Service Tax Rules, 1994 had some distinctive features. Rule 7C ibid read with Section 70 of Finance Act, 1994 provide for filing of belated returns along with the payment of prescribed late fees. The applicant ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing only operational services for the members in their business of plying the trucks with loads, across the country where problems like traffic compliance, tollgates, troubleshooting when accidents happened, Police intervention etc., and the body, also negotiated freight rates, road taxes etc., with the Government Departments for the benefit of members; the society was not rendering any recreational services like hosting parties, sponsoring musical and sports events, conducting indoor/outdoor games for relaxation of the mind and body of the members, therefore the Sangam should not be equated with a Club or Association as these institutions were understood in common parlance; donations and election deposit forfeited has no nexus to the services provided by the Club; to avail the services of the Sangam one had to become member of the Sangam by paying the Subscription prescribed for that purpose; the applicant s reliance on the judgments delivered in the case of Saturday Club supra and other case laws to drive home that in an association like a Club, the Club and the members are the one and the same entity and the service was self-service; there was no entity viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not issue any invoices/bills/chits or any other document for the hire charges collected from HPCL. Revenue went on further to state that the issue involved was a classification dispute as to whether the service rendered was classifiable under supply of Tangible Goods Service or GTA service and therefore this issue could not be brought before the commission for Settlement. 7.8 The Bench finds from the averments of the applicant that : the transport contract was processed by participating in Tender floated by HPCL; there was an elaborate contractual agreement entered into by the applicant with HPCL; the freight charges paid were for the actual transportation of the goods on per kilo liter per kilometer basis; the Sangam was not guaranteed any minimum billing/mileage or loads for any period whatsoever; HPCL should not be held responsible for their inability in offering any load on any day or during any particular period and no idle charges, etc. would be payable; the Sangam undertook the responsibilities of maintenance of the trucks and other expenses relating to fuel, salary/wages of the crew, cost of lubricants and other statutory payments; the Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Tax under Reverse Charge Mechanism and filed periodic ST-3 returns. Moreover, if the Service Tax on the Supply of Tangible Goods Service is paid the same would be available as CENVAT credit for payment of Service Tax on GTA service, thereby making the exercise revenue neutral. Therefore the Bench holds that the entire Service Tax of ₹ 3,50,451/- demanded on this activity in the impugned show cause notice is infructuous and not sustainable in law. (c) Business Auxiliary Services 7.10 The Bench finds that, the Services on which Service Tax was demanded in the category of Business Auxiliary Services in the impugned notice, the applicant repudiated the demand in respect of turnover discount rebate and incentives received from the principals viz. HPCL and spare parts suppliers, performance bonus/and reimbursement of expenses received towards maintenance of petrol bunk and uniforms of the employees etc., mentioning that the same are related to trading activity carried on by the applicant and did not come under the scope of service. The Service Tax demanded in respect of the activities namely performance bonus, uniform subsidy are not liable for Service Tax as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld to be taxable exceeded the threshold exemption limit of ₹ 10 lakhs in that year. Therefore the Bench, accepting the contention of the Revenue, holds that the applicant is eligible for total exemption for Service Tax for the years 2007-08 to 2009-10 and holds that they are liable to pay Service Tax on the service value of ₹ 7,24,861/- in excess of the threshold exemption limit of ₹ 10 lakhs for the year 2010-11 and no exemption for the year 2011-12, in terms of Notification No. 06/2/2005-S.T., dated 1-3-2005 and Notification No. 33/2012-S.T., dated 20-6-2012. However, the Bench holds that the cum-tax benefit sought for by the applicant in terms of Section 67(2) is not admissible as contended by the Commissioner. Accordingly, the Bench disallow the claim of the applicant for cum-tax benefit and arrive at the Service Tax liability at ₹ 3,15,613/- and applicable interest thereon. The Commissioner vide his report dated 28-5-2014 6-6-2014 confirmed payment of ₹ 3,79,602/- and interest of ₹ 56,654/-. However, Bench finds that the applicant had admitted a total liability of ₹ 3,80,796/-and interest of ₹ 40,675/- payable thereon in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice by submitting extensive reply based on law and facts. However, the Bench finds that but for the action initiated the applicant s Service Tax liability would have remained unpaid. In view of the true and frill disclosure of tax liability and co-operation extended by the applicant the Bench takes a lenient view and extend partial immunity from penalty to the applicant. Prosecution 7.15 Considering the facts and circumstances of the case, the Bench considers it as a fit case for grant of immunity from prosecution to the Applicant. ORDER 8.1 In the light of the above, the Bench settles the case on the following terms and conditions under the Central Excise Act, 1944 made applicable to Service Tax by Section 83 of the Finance Act, 1994. (i) The additional amount of Service Tax is settled at ₹ 3,80,796/- (Rupees three lakhs eighty thousands seven hundred and ninety six only). The applicant has already paid an amount of ₹ 3,79,602/-. The balance amount should be paid within 30 days of receipt of this order and compliance reported to Jurisdictional Commissioner. (ii) The interest payable should be worked out by the applicant to the satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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