2025-VIL-1905-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Section 73 of Finance Act, 1994 – Providing of chartering service – Tax liability – Respondent arranged for shipping of goods by Public Sector Undertakings (PSUs) and Government departments and charged 1% of freight, demurrage, etc. as chartering charges for this service – Department issued show cause notice to Respondent by proposing demand of service tax on chartering service charges by invoking extended period of limitation – Principal Commissioner dropped proceedings initiated under show cause notice – Whether chartering service provided by Respondent is chargeable to service tax or not – HELD – Main contention of Revenue is that nature of service rendered by Respondent was not a sovereign function of Ministry of Shipping and it was rendered as per a contract and for a consideration of 1% of freight, demurrage, etc. Services rendered by Respondent were to support PSUs and others to charter space on ships for their exports for a commission of 1%. Mere fact that participating shipping lines would bear this cost will make no difference to taxability of activity. Chartering service rendered by Respondent was taxable – Appeal partly allowed - Invoking of extended period of limitation – Whether extended period of limitation can be invoked to raise demand – HELD – If service tax is not paid or short paid, show cause notice can be issued within one year as prescribed under Section 73 of the Act. If such non-payment or short payment is by reason of fraud, collusion, willful misstatement or suppression of facts with intent to evade payment of service tax, show cause notice can be issued within five years as per proviso to Section 73 of the Act. There is no evidence that Respondent had any intent to evade paying service tax. Respondent simply felt that service tax was not payable and hence did not pay service tax. There is no justification to invoke extended period of limitation. Demand can only be confirmed within normal period of limitation with consequential interest.
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