CCE Vs. ORIENT ABRASIVES

JUDGEMENT

(1.) ONE of the appeals is by the department challenging an order of the Commissioner (Appeals) setting aside the demand of service tax on Goods Transport Operators' (GTO) service received by the respondents during the period 16.11.97 to 1.6.98 and vacating the penalties imposed on them by the original authority. The remaining appeal is by another assessee challenging the order of the Commissioner demanding service tax on similar services received by the party during the above period and imposing penalties on them. As the issue is common, both the appeals are taken up for disposal.

(2.) AFTER examining the records and hearing both sides, I find that M/s. Orient Abrasives (respondents in the department's appeal) and M/s. Jayalakshmi Exports (appellants in the other appeal) had received GTO service during 16.11.97 to 1.6.98, but they had not paid tax on such service during that period. Later on, M/s. Orient Abrasives paid the tax on 13.9.2004 and M/s. Jayalakshmi Exports paid it on 8.8.2006.

(3.) DURING the aforesaid period, the assessees were not liable to pay service tax on GTO service as held by the apex court in the case of Laghu Udyog Bharthi v. Union of India , wherein the provision of Service Tax Rules 1994, which made GTO service recipients liable to pay service tax was struck down as ultra vires Section 66 of the Finance Act, 1954. Subsequently, the Finance Act 1994 was amended by the Finance Act, 2000 (which came into force on 12.5.2000) so as to make GTO service beneficiaries liable to pay service fax with retrospective effect from 16.11.97 to 1.6.98. In view of the amended provisions of law, the department issued show -cause notices to M/s. Orient Abrasives and M/s. Jayalakshmi Exports on 12.11.2004 and 12.11.2002 respectively. In the case of M/s. Orient Abrasives, who had paid service tax for the aforesaid period prior to issue of show -cause notice, the notice proposed to appropriate the payment as also to impose penalties. In the case of the. other party, the notice demanded service tax for the above period and proposed to impose penalties. In the former case, the Assistant Commissioner appropriated the payment made by the party towards service tax for the above period and imposed on them penalties, while in the latter case, the jurisdictional Commissioner demanded service tax from the party for the above period and imposed penalties on them. Both the parties preferred appeals. The appeal of M/s. Orient Abrasives was allowed by the Commissioner (Appeals) and hence the present appeal of the department. Appeal of M/s. Jayalakshmi Exports is presently under my consideration.