2014 (5) TMI 1047 - AT - Service Tax

Demand of service tax - Reverse charge mechanism - Held that - the Service Tax liability which is fastened on the appellant along with the interest is correctly held to be paid by the appellant inasmuch as, during the material period such a provision does exist in form of Section 66A of the Finance Act, 1994. We do not find any reason to interfere in such an order which upholds the Service Tax liability and the interest thereof. The appeal filed by the appellant to that extent is rejected. - during the material period, appellant could have being under the bona fide impression, as to since the services were rendered i.e. testing of the product was done abroad, the Service Tax liability on the appellant may not arise - appellant has shown sufficient cause for setting aside the penalties imposed by the adjudicating authority and upheld by the first appellate authority - Decided partly in favour of assesssee.

Summary

Issues:
1. Liability of the appellant to pay Service Tax for testing charges paid abroad.
2. Imposition of penalties on the appellant.

Analysis:
1. The appellant had paid for testing charges abroad and was held liable to pay Service Tax under Section 66A of the Finance Act, 1994. The lower authorities confirmed the demands with interest and penalties. The appellant contended that the Service Tax liability should be eligible for Cenvat credit as the testing charges were for products manufactured and cleared by them. The Tribunal found that the Service Tax liability was correctly upheld as per Section 66A, and the appeal on this ground was rejected.

2. Regarding the penalties imposed on the appellant, the Tribunal noted that the appellant may have been under a bona fide impression that no Service Tax liability arose since the testing was done abroad. Considering this, the Tribunal invoked Section 80 of the Finance Act, 1994, and held that the appellant had shown sufficient cause for setting aside the penalties. As a result, the penalties imposed were set aside, and the appeal on this issue was allowed.

In conclusion, the Tribunal disposed of the appeal by upholding the Service Tax liability on the appellant for testing charges paid abroad but setting aside the penalties imposed, considering the appellant's bona fide belief during the material period.