Whether service tax is payable and penalty is imposable on the activity of testing of LPG tankers?

PJ/Case Laws/2012-13/1419

Case: M/s PRESSURE VESSELS AND EQUIPMENTS TESTING ENTERPRISES V/S CCE, SALEM

Citation: 2013-TIOL-142-CESTAT-MAD

Brief Facts: - The appellants have undertaken the activity of technical testing of the LPG tankers as per Rule 18 and Rule 44 of the Explosives Act. The Revenue is of the view that as the appellants are involved in the activity of technical testing, therefore, they are liable to pay service tax under the category of 'Technical Testing and Certification Services'. Therefore, proceedings were initiated against the appellants. The appellants paid the service tax along with interest before issuance of the show-cause notice. Thereafter a show-cause notice was issued for imposition of penalties. After issuing show-cause notice penalties under Section 76 and 78 were imposed on the appellant. Aggrieved by the said order, the appellants filed this appeal.

Appellant’s Contention: - The appellant contended that the testing of LPG tankers is a statutory obligation under the Indian Explosive Act, 1884 therefore, service tax is not payable on the activity undertaken by them. As no service tax is payable, penalties under Sections 76 and 78 are not warranted.

Reasoning of Judgment: - The Hon’ble Tribunal held that as the issue lies in a narrow compass, therefore, they waive the requirement of pre deposit of penalties and proceed to take up the appeal itself for final disposal. Considering the submissions made by the appellant, they find that the Tribunal in the case of Harshita Handling Vs. CCE, Bhopal - 2010 (19) STR 596 has held that technical inspection and testing under the Indian Explosive Act, 1884 is a statutory obligation, therefore the same is not liable to tax under Technical Testing and Certification Service. Therefore, the appellants are not liable to pay service tax. When no service tax is payable, penalties under Sections 76 and 78 of the finance Act, 1994 are not warranted. Therefore, the impugned order is set aside and the appeal is allowed. The stay application also stands disposed of accordingly.

Decision: - The appeal was allowed.

Comment:-The analogy drawn from this case is that if any activity is undertaken by an enterprise which is covered by the levy of service tax but is specified as statutory obligation under any other act, the same will not be subject to levy of service tax.

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PJ/Case Laws/2012-13/1419

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