Extended Period on Payment of Service Tax not Applicable in absence of Suppression of fact: CESTAT [Read Order]

The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that an extended period on payment of service tax is not applicable in the absence of suppression of fact.

M/s. AI Champdany Industries Ltd, the Appellant is engaged in the manufacture of jute products. They have been exporting Hessian Cloth to importers from various countries. For such export transactions, the Appellant was paying a commission to various agents. The Central Excise Audit conducted took the view that the Appellant is required to pay the Service Tax on a Reverse Charge basis for such commission paid. 

Further, the Appellant has provided residential accommodation to their staff and officers. For such accommodation, rent has been recovered from the salaries paid to the employees. Appellants have also given certain commercial properties on rent. The Audit took the view that the Appellant is required to pay Service Tax on “Renting of Immovable Property”. The Appellant was issued a Show Cause Notice demanding Rs.25,49,689/- on account of “Renting of Immovable Property Service”.

A Show Cause Notice was issued demanding service tax on “Business Auxiliary Service” to be paid on RCM for the commission paid by them. After due process, the demands were confirmed.

The Appellant submitted that the Commission paid by them is covered under an exemption granted under Notification No. 13/2003-ST dated 20/06/2003 as amended from time to time. As per him, the Hessian cloth exported by them falls under the category of “Agricultural Produce”. Therefore, any commission paid for such agricultural produce will be exempted from Service Tax payment.

Further submitted that all the commissions paid to the Commission Agent were properly reflected in the Profit & Loss Account and Balance Sheet and the data was collected by the Audit Department only from their Balance sheet. Therefore, there is no suppression on their part. They also regularly file their ST Returns and working under the jurisdiction of the Service Tax authorities for many years and are subjected to various audits.

It was argued that Jute per se is a tradable and marketable product. Hessian Cloth is a different manufactured product and the same cannot be classified as “agricultural produce”. The Jute per se is being traded in the Commodity Exchange for being bought or sold. On the other hand, the Hessian Cloth manufactured by the Appellant by using this jute is a separate independent commodity which is being bought and sold for different purposes. The Hessian Cloth does not fall under the category of “Agricultural Produce” as per the definition given in the Explanation given in the Notification No. 13/2003-ST dated 20/06/2003.

A two-member bench of Mr R Muralidhar, Member (Judicial) and Mr K Anpazhakan, Member (Technical) upheld the demand in respect of Business Auxiliary services confirmed by the OIO.

Further observed that the Appellant has been showing all the details of commission paid in their P & L Account and Balance Sheet and also regularly filing their ST-3 Returns. Therefore, we do not find any case has been made out towards suppression of facts. The CESTAT set aside the demand in respect of the extended period on account of limitation.

“We remand the matter to the Adjudicating Authority for limited purposes and for quantifying the demand for the normal period in respect of the Business Auxiliary Services and for quantifying the demand for the normal period in respect of the Renting of Immovable Property services in respect of the rent received on account of commercial properties. On both the above and the re-quantified amount, the Appellant is required to pay the interest. The penalties are set aside and no fresh penalties are to be imposed on the re-quantified demands. Since the matter pertains to 2011-12, the Adjudicating Authority is to complete the proceedings within 4 months from the date of receipt of this Final Order.”, the bench concluded.

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