‘Inadequacy regarding Tax Liability in Service Tax Demand’: CESTAT Remands matter in Shipping Corporation of India Lt. Case [Read Order]

The Mumbai Bench of the CESTAT remanded the case for a fresh decision on service tax liability due to the inadequacy of details in the service tax demand order.

The appellant Shipping Corporation of India had appealed against the demand of Rs. 3.58 crores for the rendering of ‘business auxiliary service’ as well as ‘taxable service’ between October 2009 and September 2014 and of Rs. 14,35,303 between April 2014 and March 2015 under Section 73 of the Finance Act, 1994, along with interest under Section 75 of the Finance Act, 1994.

The appellant offered vessels on charter to various oil companies for lifting crude from outside India to be delivered for refining in India.

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In this case, the order imposes tax liability on the appellant for receiving 'address commission,' considering it as ‘business auxiliary service’ under Section 65 of the Finance Act, 1994, before July 1, 2012, and as an ‘intermediary’ afterward. However, the term ‘intermediary’ is not defined in the Finance Act of 1994 but was introduced through the ‘Education Guide’ during the shift to the negative list regime. Based on Section 66C, this classification treated intermediaries as operating within the taxable territory, effectively extending tax liability to services rendered abroad.

The counsel on behalf of the appellant contended that the ‘address commission’ was just a ‘trade discount’ and should be considered a component of the agreement between the appellant and the owners of the vessels chartered by the appellant. The counsel also contended that the impugned order is a non-speaking order.

The CESTAT observed that the essence of ‘business auxiliary service', which is the intended target of tax, is the presence of a service provider between a service or product belonging to one and required by another.

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The bench, after going through the contentions raised by both parties and the submissions made thereafter, reached a strong conclusion that the impugned order was inadequate and the inadequacies prevented the bench from deciding whether the tax liability was in fact legal and proper.

The Tribunal stressed the need for a fresh decision, taking into account the show cause notice, the appellant’s contentions, and the relevant legal provisions under Section 66 and Section 66B of the Finance Act, 1994.

The CESTAT, comprising Ajay Sharma (Judicial Member) and C. J. Mathew (Technical Member), set aside the impugned order and remanded the matter back for fresh adjudication.               

To Read the full text of the Order CLICK HERE

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