CCE Vs. JAISWAL EQUIPMENT AND HOLDINGS

JUDGEMENT

(1.) THE Revenue challenges the order of the Commissioner (Appeals) made on 30.12.2004 setting -aside the order -in -original by which demand of Rs. 9,981/ - by way of Service Tax recoverable on the amount paid by the assessee to the Goods Transport Operators (hereinafter referred to as 'GTOs') during the period from 16.11.1997 to 01.06.1998 was confirmed and recovery of interest ordered.

(2.) THE respondent was a registered trader for trading of excisable goods. During the course of its trading activities, the respondent utilized the services of the GTOs on payment of freight. Service Tax was payable in respect of the services provided by GTOs and levied on the receiver of such services w.e.f. 16.11.1997 by Notification dated 05.11.1997. The said taxable service was exempted from Service Tax by Notification No. 49/98 -ST dated 02.06.1998. Thus, Service Tax on taxable services provided by the GTOs was leviable on the recipient of the services for the period from 16.11.1997 to 01.06.1998. The respondent did not obtained registration under Rule 4 of the Service Tax Rules nor paid Service Tax under Rule 6 and did not file returns as required by Rule 7. On examination of the ledgers produced by the respondents, it appeared that the entire amount of taxable service had escaped assessment and the Service Tax calculated thereon was Rs. 9,981/ -. As no return was filed under Section 70 of the Finance Act, 1994 and material facts were not disclosed, show cause notice was issued to the respondent on 22.11.2002 for recovery of the Service Tax and penalties. In reply to the show cause notice filed on 30.12.2002 (wrongly typed as 30.06.2002), the respondent pleaded that, it was a SSI Unit and, therefore, not liable to pay Service Tax. The respondent relied upon the decision of Hon'ble Supreme Court in Laghu Udyog Bharati v. Union of India , in which Rule 2(d)(xii) was held to be ultra vires the Act. On the basis of the material on record, the adjudicating authority held that, the liability to pay Service Tax was transferred to receiver of the services from the provider of services on introduction of Sub -rule (xvii) of Rule 2(1)(d) of the Service Tax Rules vide Notification No. 42/97 -ST dated 05.11.1997 w.e.f 16.11.997, by which only 8 categories of persons were specified, which included "any dealer of excisable goods who is registered under the Central Excise Act in force in any part of India", and made liable to pay the Service Tax in respect of the transport services availed by them. Service Tax availed on taxable services of GTOs was thus leviable for the period from 16.11.1997 to 01.06.1998 vide Notification No. 49/98 -CE dated 02.06.1998 issued in respect of the said 8 categories of persons and orders were issued for keeping in abeyance the Service Tax, inter alia, in respect of factories registered as small scale industries. The category of dealers of excisable goods, however, continued to be liable to pay Service Tax, though they were not to be compelled to get the registration. Vide Notification No. 49/98 -ST, the taxable services provided to a customer by a goods transporter were exempted from the whole of the Service Tax.

(3.) AFTER Clause (xvii) of Rule 2(1)(d) was struck down by the Hon'ble Supreme Court as ultra vires the Act in Laghu Udyog Bharati v. Union of India (supra), by Finance Act, 2000, which came into force from 12.05.2000, validating provisions were made and the action taken under Rule 2(1)(d)(xvii) was validated, notwithstanding anything contained in any judgment, decree or order of any Court, Tribunal or other authority. By Section 160(1) of the Finance Act, 2003, it was provided in the context of the Notification dated 05.11.1997, that it will stand amended as specified in the 12th Schedule, on and from the 16th day of November, 1997 to the 1st day of June, 1998 retrospectively. As per this amendment, Clause (i) and (ii) of the Notification dated 05.11.1997 were substituted by, inter alia, providing that, any factory registered under or governed by the Factories Act, 1948, other than a factory registered as small scale industry with the State Government, would be liable to pay Service Tax. Therefore, only a factory registered as small scale industry with the State Government would be exempted.