2015 (12) TMI 1588 - AT - Service Tax

Demand - transportation of goods by road - Business Auxiliary Services - reverse charge mechanism - Held that - the demand pertains to the period 2007-08 to December, 2009. The dispute on the taxability on the foreign services on reverse charge basis was under dispute only for the period prior to 18/4/2006, however, thereafter there was no doubt about taxability of services therefore the plea of the Ld. Counsel that the matter was under dispute is of no relevance for the period 2007-08 to December, 2009. I also note that Ld. Commissioner, considering the fact that the transaction was recorded in the books of account of the appellant, reduced the penalty to 50% invoking new Section 78. In view of the facts and circumstances of the case, I find that appellant could not make out a case of reasonable cause for non payment of service tax in time. I do not find any infirmity in the impugned order, hence the same is maintained - Appeal dismissed - decided against appellant.

Summary

Issues:
Service tax demand on commission paid to foreign parties, imposition of penalties under Sections 77 and 78, applicability of reverse charge mechanism, bonafide belief as a defense for non-payment of service tax, interpretation of relevant legal provisions.

Analysis:
The case involved an appeal against an Order-in-Appeal passed by the Commissioner, upholding a demand for service tax on commission paid to foreign parties by the appellant, penalties under Sections 77 and 78 were imposed. The appellant, engaged in manufacturing excisable goods, paid commission to foreign parties for services falling under "Business Auxiliary Services." The Adjudication confirmed the demand and penalties, which were partially reduced by the Commissioner (Appeals). The appellant challenged the penalties under Sections 77 and 78 in the current appeal.

The appellant argued that there was a dispute regarding the service tax on reverse charge basis for services provided to foreign entities until a Supreme Court judgment clarified the issue. The appellant claimed a bonafide belief that service tax was not applicable, justifying the delayed payment. However, the Revenue supported the impugned order's findings.

The tribunal, after considering both sides' submissions, rejected the appellant's argument. It noted that the dispute over taxability of foreign services on reverse charge basis was resolved before the period in question (2007-08 to December 2009). Additionally, the Commissioner had reduced the penalty to 50% due to the transaction being recorded in the appellant's books. Consequently, the tribunal found no reasonable cause for the delayed payment of service tax and upheld the impugned order, dismissing the appeal.

In conclusion, the tribunal maintained the demand for service tax on commission paid to foreign parties, upheld the penalties under Sections 77 and 78, and rejected the appellant's defense of bonafide belief for non-payment. The decision was based on the specific timeline of the dispute over taxability, the recording of transactions, and the lack of reasonable cause for the delayed payment.