The Chennai bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the actual amount received from M/s BPCL for the sale of fleet cards cannot be subject to the levy of service tax.
The appellant M/s. Perundurai Lorry Urimaiyalargal Sangam Perundurai was registered with the department under the category of “Mandap Keeper Service” and they paid service tax on such category and also filed ST-3 Returns for the period April 2007 to March 2012. On verification of records, it was noted by the Department that the appellant is collecting subscription, Donation and Entrance Fee from their members and did not discharge service tax under the category of “Clubs or Associations Membership Services”.
Further, the appellant was supplying Tanker Lorries to M/s. BPCL and collected Lorry freight. The appellant though was liable to pay service tax under “Supply of Tangible Goods Service” on such freight charges collected by them had not discharged service tax.
Again, the appellant received amounts from M/s. BPCL in the name of dealer commission, turnover discount, etc., and had not discharged service tax. So also, they had received commission on taking Demand Draft in respect of transactions with M/s. BPCL which was reimbursed by M/s. BPCL. The said amount was not included in the taxable value.
The appellant had also received reimbursement by way of Bank charges from M/s. BPCL. They had obtained amounts from M/s. BPCL for sale of fleet cards on which also service tax was not discharged. Show Cause Notice was issued to the appellant for the period 2007 to 2012, proposing to demand service tax under the category of club’s or association’s membership services, supply of tangible goods services, renting of immovable property services and business auxiliary services. Show cause notice also proposed to impose penalties.
After due process of law, the Original Authority confirmed the demands along with interest and imposed a penalty. The Original Authority had imposed a penalty under Section 77(1)(a) of the Finance Act, 1994 as it stood during the relevant period for not taking registration only to an extent of Rs.10,000/-.
Mr. V Ravindran, representing the appellant, argued that respect of rental income received from M/s. BPCL as well as Mandap Keeper Services, further submitted that the appellant was not contesting the issue and has already discharged the service tax.
In regard to the demand of service tax under Supply of Tangible Goods Services, it was explained by the consultant that the appellant had received only freight charges form M/s. BPCL. The appellant has not received any higher charges and therefore the demand under Supply of Tangible Goods Services is not applicable. On the amount received by the appellant as freight charges, M/s. BPCL has discharged service tax under GTA services. The demand would be double taxation.
It was submitted that the demand has been raised by the Department under the category of Business Auxiliary Services on the discount and commission accounted by the appellant. These are not discount and commission and these amounts are received from M/s. BPCL as repayment of price difference in the sale of fuel. It cannot be treated as discount and commission and is only in the nature of reimbursement of the price difference
Mr. N Satyanaryanan representing the department supported the findings in the impugned order. It was submitted that the appellant had not registered for various services provided by them. The fact of nonpayment of service tax would not have come to light, but for the verification done by the Department and its officers. It is submitted that the demand of service tax, interest and penalties imposed is legal and proper. It is prayed that the appeal may be dismissed.
The tribunal bench observed that the department has confirmed the demand of service tax under Supply of Tangible Goods Services. The appellant has received freight charges from M/s. BPCL for supply of Lorries for transport of petrol. Even as per the Show Cause Notice, it is seen that the appellant has collected only freight charges. The appellant has not collected any amount as hire charges in addition to the freight charges.
Further noted that the service tax on the freight charges has been paid by M/s. BPCL who is the service recipient. The Tribunal in the case of M/s. Erode Lorry Owners Association (supra) had considered the issue on very similar set of facts and held that the demand of service tax under Supply of Tangible Goods Services cannot sustain.
The two member bench of the tribunal comprising Vasa Sesha Giri Rao (Accountant member) and Sulekha beevi C.S (Judicial member) found that the actual amount received from M/s. BPCL for sale of fleet cards cannot be subject to levy of service tax. CESTAT concluded that the demand of service tax under this category cannot sustain and requires to be set aside.
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