By TIOL News Service

MUMBAI, FEB 21, 2018: THIS is a Revenue appeal.

The AR submitted that the respondent airlines are engaged inter alia in the Transport of Goods by Air; that service tax was imposed on transport of goods by Air w.e.f. 10.09.2004 and vide Notification No. 28/2004-ST dt. 17.09.2004 the transport of goods by air meant for export was exempted. Inasmuch as for the period 10.09.2004 to 16.09.2004 , the service of transport of goods by air for export was chargeable to service tax.

Furthermore, the notification No. 28/2004-ST was rescinded vide notification No. 10/2005-ST dt.03.03.2005 (effective from 15.03.2005) thus w.e.f.16.3.2005 transport of goods for air for export become taxable again.

However, Export of Services Rules, 2005 were introduced vide Notification No. 09/2005-ST dt. 3.3.2005 (w.e.f 15.03.2005) and the services continued to be not liable to service tax u/r 3(2) r/w Rule 4 of Export of Services Rules, 2005. Thereafter vide Notification No. 28/2005-ST dt. 7.6.2005 (w.e.f. 16.06.2005) proviso (b)was introduced to Rule 3(2) which mandated that only if payment of such service provided is received in foreign exchange would it be considered as export of service. As a result the said service provided by the respondent became liable to service tax w.e.f.16.06.2005 as the respondents were receiving the payment for the said service in Indian currency and not in foreign exchange. Nonetheless, unconditional exemption in respect of transport of export goods by air was reintroduced vide Notification No. 29/2005-ST dt. 15.7.2005.

In view of the above, the Revenue contended that the service of transport of exported goods by air was liable to tax during the following periods:

(1) 10.09.2004 to 16.09.2004

(2) 16.06.2005 to 14.07.2005

and service tax was demanded from the respondent by issue of show cause notice.

Further, the respondent had paid the part of the tax for the period 16.6.2005 to 14.7.2005 voluntarily and the balance was paid by the respondent along with interest later.

The AR pointed out that the adjudicating authority dropped the demand without appreciating the fact that there was no exemption from payment of such tax during the said period; that the impugned order wrongly holds that there was no misstatement of facts or suppression; that adjudicating authority is not competent to go into the intention behind grant of exemption or withdrawal of exemption.

The respondent pointed out that the association of air transporters had approached the Ministry seeking retrospective exemption and thus there was no intention to evade payment of duty.

The Bench chronologically listed the legislative amendments as elaborated by the AR and inter alia observed –

On merits:

++ admittedly, during the period 10.09.2004 to 16.09.2004 and 16.6.2005 to 14.07.2005 there was duty/tax liable to be paid on the transport of goods by air for the purpose of export. On merits of the issue, there is no contest.

Limitation:

+ respondents have paid the service tax for both these periods. They have also discharged the interest liabilities on this delayed payment.

+ it has been observed that the respondent had filed ST-3 Return for the period April 2004 to September 2004 on 10.3.2005, i.e. belatedly by about four-five months period; for the second period ST-3 Return was filed on 14.10.2005.

+ it is seen that the show cause notice was issued on 12.10.2009. At the material time the appellant had already discharged duty liability for the period 24.6.2005 to 14.7.2005 but had not discharged duty/tax liability for the period 15.6.2005 to 23.6.2005. The respondent had also not discharged the duty/tax liability for the period 10.09.2004 to 16.09.2004. The duty/tax liability for the period 24.06.2005 to 14.7.2005 was discharged vide challans dt. 6.9.2005 and dt. 7.10.2005.

+ it is apparent that the respondent did not have any reason not to pay the service tax for the said period. For the period 10.09.2004 to 16.09.2004 the respondent had not included the value of such service in their ST-3 Returns. Similarly the taxable value in respect of export cargo was not included in the ST-3 Returns filed by the respondent for the period pertaining to 10.3.2005 to 14.3.2005.

Concluding that the invocation of extended period of limitation is fully justified, the impugned order was set aside and the appeal of Revenue was allowed.

(See 2018-TIOL-619-CESTAT-MUM)