PSL Limited Vs C.C.E. & S.T. Rajkot (CESTAT Ahmedabad)
Learned Counsel argued that they had a bonafide belief that activity of coating of pipelines do not qualify as Business Auxiliary Service as neither the said activity amounted to “production” of goods nor it was conducted “on behalf of client”. It was argued that there was no suppression and none of the ingredient on Section 73 of the Finance Act, 1994 are present to invoke extended period of limitation.
It is apparent that the revenue was fully aware of the activities carried on by the respondent. In the circumstances, as rightly held by the Tribunal, though according to the revenue the said activities were taxable as “Business auxiliary services”, the revenue never advised the respondent to start paying tax on the said activity. That considering the fact that the revenue was aware of the respondent’s activities, it cannot be said that there was any suppression, misstatement or intent on the part of the respondent to evade service tax. Besides, the facts of the case indicate that there was a bona fide litigation going on as regards the nature of the activity carried on by the respondent. As to whether the activity carried on the by respondent would amount to production so as to be covered under the category of “Business Auxiliary Services” was a debatable issue. In the circumstances, it cannot be said that the assessee has not proved that there was reasonable cause for the failure referred to in the provisions of Section 76, Section 77 or Section 78 of the Act. The Tribunal was, therefore, justified in setting aside the penalty imposed under Section 80 of the Finance Act, 1994.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal has been filed by M/s Psl Limited against demand of service tax, interest and imposition of penalty under Section 76, 77 and 78.
2. Learned Counsel for the appellant pointed out that they are inter alia engaged in undertaking epoxy coating of pipelines. A demand was made under the head of Business Auxiliary Service for the activity of Epoxy Coating of pipelines undertaken by the appellant. The demand was raised after an audit objection. Learned counsel argued that the demand under the head of Business Auxiliary Service cannot be made for the following reasons:
i. The only activity of ‘production’ of goods on behalf of client was leviable to service tax prior to 16.06.2005 and only w.e.f. 16.06.2005, the activity of ‘production or processing’ of goods or on behalf of client was made liable to service tax. It has been argued that since the period pertains to prior to 16.06.2005 and the activity of Epoxy Coating of pipes does not qualify as “production” of goods and therefore, the said activity is not covered under Business Auxiliary Service.
ii. The second ground raised by the appellant is that the activity of coating of pipes undertaken by them was on a principal to principal basis for M/s IOCL. The activity was not carried out “on behalf of the client” and there was no third party involved in this transaction. In view of above, it was argued that the activity does not fall under the category of Business Auxiliary Service.
iii. The next argument raised related to invocation of extended period of limitation on the ground of bonafide belief. Learned Counsel argued that they had a bonafide belief that activity of coating of pipelines do not qualify as Business Auxiliary Service as neither the said activity amounted to “production” of goods nor it was conducted “on behalf of client”. It was argued that there was no suppression and none of the ingredient on Section 73 of the Finance Act, 1994 are present to invoke extended period of limitation.
iv. Learned counsel further sought invocation of provisions of Section 80 of the Finance Act, 1994, to set aside the penalties imposed under Section 76, 77 and 78 of the Finance Act, 1994 as the issue involved relates to interpretation of statute.
3. Learned Authorized Representative relies on the decision of the Commissioner (Appeals). He also relied on the decision of Tribunal in the case of PSL Corrosion Control Services Ltd. to hold that the activity undertaken by them classifies as „Business Auxiliary Service‟s. He further pointed out that the said decision of Tribunal has been approved by Hon’ble High Court as reported in 2011 (23) STR 116. He also relied on the following decisions:
This appeal has been filed by M/s Psl Limited against demand of service tax, interest and imposition of penalty under Section 76, 77 and 78.
4. Learned Counsel for the appellant pointed out that they are inter alia engaged in undertaking epoxy coating of pipelines. A demand was made under the head of Business Auxiliary Service for the activity of Epoxy Coating of pipelines undertaken by the appellant. The demand was raised after an audit objection. Learned counsel argued that the demand under the head of Business Auxiliary Service cannot be made for the following reasons:
i. The only activity of ‘production’ of goods on behalf of client was leviable to service tax prior to 16.06.2005 and only w.e.f. 16.06.2005, the activity of ‘production or processing’ of goods or on behalf of client was made liable to service tax. It has been argued that since the period pertains to prior to 16.06.2005 and the activity of Epoxy Coating of pipes does not qualify as “production” of goods and therefore, the said activity is not covered under Business Auxiliary Service.
ii. The second ground raised by the appellant is that the activity of coating of pipes undertaken by them was on a principal to principal basis for M/s IOCL. The activity was not carried out “on behalf of the client” and there was no third party involved in this transaction. In view of above, it was argued that the activity does not fall under the category of Business Auxiliary Service.
iii. The next argument raised related to invocation of extended period of limitation on the ground of bonafide belief. Learned Counsel argued that they had a bonafide belief that activity of coating of pipelines do not qualify as Business Auxiliary Service as neither the said activity amounted to “production” of goods nor it was conducted “on behalf of client”. It was argued that there was no suppression and none of the ingredient on Section 73 of the Finance Act, 1994 are present to invoke extended period of limitation.
iv. Learned counsel further sought invocation of provisions of Section 80 of the Finance Act, 1994, to set aside the penalties imposed under Section 76, 77 and 78 of the Finance Act, 1994 as the issue involved relates to interpretation of statute.
