The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that the demand for extended period not sustainable on no suppression of fact or malafied intention to evade payment of service tax.
A service provider had provided “Business Auxiliary Service” as defined in Section 65(19) of the Finance Act, 1994 and had provided support services of business or commerce as defined in section 65(104c) of the Finance Act, 1994, which were taxable under the respective sub-sections of Section 65 of Finance Act, 1994.
Regarding the valuation of taxable services, the provisions of Service Tax (Determination of Value) Rules, 2006 (Valuation Rules) were invoked by the department and all the expenditure or costs treated as consideration for the taxable service provided was included in the value for the purpose of charging service tax. As a result, the service provider was issued show cause notice.
The Chartered Accountant, Nilesh Suchak for the appellant, submitted that the demand of Service tax of Rs. 34,56,764/- under the category of “Business Auxiliary Service” (BAS) and “Support Service of Business or Commerce” (BSS) confirmed on incentive charges, Ocean Freight, Air Freight, amount paid to Shipping Line, Customs Clearance Charges, Fumigation charges etc. The impugned order has considered the profit of non-taxable activity as value of service based on whims and fancy without stating under which provisions of Finance Act, 1994 such profit can be taxed.
It was further submitted that there is not an iota of evidence of any suppression or intent to evade payment of tax on appellant’s part. Further, the issue of taxability of reimbursement of expenses has travelled upto the Supreme Court and before many lower appellate forums. This shows that the issue involved is of pure interpretation of legal provisions and therefore it cannot be said that appellant has any mala fide intention.
A Two-Member Bench comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member observed that “since there is no suppuration of fact or malafied intention to evade payment of service tax, demand for the extended period shall not be sustainable also on the ground of limitation. Therefore we set aside the demand not only on merit but also on limitation for the period which is beyond normal period of limitation.”
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