The Ahmedabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that penalty for service tax evasion under Section 76 and 78 of The Finance Act cannot be imposed simultaneously.
The appeal was filed by MD Engineers for challenging some of the demand and penalties imposed by the Commissioner with regard to Service tax of Rs. 1,14,509/- on loading and unloading charges, service tax of Rs. 51,126/- on rent charges reimbursed by a client and lastly service tax of Rs. 73,053/- due to incorrect working of service tax
None appeared on behalf of the MD Engineers however, through e-mail a learned Charted accountant on record requested to decide the appeal on merit.
As for the first ground of appeal it was submitted that the actual movement of goods was done by the service recipient using their own Hydra equipment and MD Engineers have only provided ancillary service of manual labour, which is exempted. They submitted that the CCE erred by levying service tax under Manpower Supply Service and not under cargo handling therefore the same is not sustainable.
As for the second ground of appeal the tax towards the house rent charges was reimbursed by a customer of MD Engineers. It was submitted that the Assistant Commissioner as well as the Commissioner failed to recognize that the residence facility was provided to the workers at the remote site by contractors which was the responsibility of the contractee.
As for the third ground of appeal, MD Engineers submitted that this is not payable as due to incorrect working of service tax in the show cause notice and in a letter written to the superintendent, they have explained the difference year wise, however the same was not considered. Therefore, this demand is not sustainable.
As for the penalties imposed, the major amount was paid and the rest was on debatable issue an penalties are not sustainable invoking section 80 of the Finance Act.
Learned Superintendent (AR) appeared on behalf of the revenue, retaliated the findings of the impugned order.
The two-member bench consisting of Ramesh Nair (Judicial member) and CL Mahar (Technical member) after considering the submissions made by AR and the grounds of appeal and penalties stated that as regard for the first ground of appeal, MD Engineers have provided manpower but when as per contract if they were supposed to provide manpower service then the activity is clearly qualified as Manpower Requirement and Supply Agency Service. Therefore, the demand by the CCE is sustainable.
With regard to the second ground, the Bench noted that it cannot be said that MD Engineers have incurred the expenses on behalf of service recipient because they were supposed to pay salary/food/ accommodation to the workers engaged in the work. Therefore, the demand is sustainable
Lastly, the Bench added that the lower authorities have rejected the letter on the ground that no documents were produced to support their claim and as in the present appeal also no documents were produced. Therefore, the demand is sustainable.
As for the penalties imposed on MD Engineers, they have paid the major amount of Rs. 36,00,875/- along with interest of Rs. 4,23,451/-, and the remaining amount is involved in a debatable issue. As penalty under Sections 76 and 78 cannot be imposed simultaneously. Therefore, the appeal is partly allowed.
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