2015 (6) TMI 1141 - AT - Service Tax

Payment of tax with interest before issuance of SCN - succession of business - amalgamation - Held that - it is an admitted fact that all the transactions were recorded in the Books of Account maintained by the appellant - it is admitted fact that the factory with respect to which the demand under reverse charges was made has been succeeded by the present appellant, during the period in question, amalgamation proceedings was going on before the Hon ble High Court and the final order was passed only on 2.7.2009 and as such during such transit period, it cannot be said that the appellant have deliberately defaulted in discharging the Service Tax - the appellant have deposited the tax and as such they are entitled to the benefit under the provisions of Section 73(3) of the Finance Act, 1994. The appellant was entitled to the benefit under the provisions of Section 73(3) and no show-cause notice is required to be issued - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of Service Tax on reverse charge basis for services received from a Commission Agent located outside India.
2. Allegation of deliberate default in discharging Service Tax and contravention of the provisions of the Finance Act, 1994.
3. Imposition of penalties under Sections 76, 77, and 78 of the Act.
4. Applicability of Section 73(3) of the Finance Act, 1994 regarding benefit entitlement.

Analysis:

1. The appellant, engaged in manufacturing, was liable for Service Tax on reverse charge basis for services received from a Commission Agent outside India. The issue arose when the appellant failed to pay Service Tax on such services, prompting a show-cause notice for the period 2006-07 to 2009-10, alleging deliberate default and contravention of the Finance Act, 1994.

2. The appellant contested the notice, arguing no deliberate default existed as the levy on reverse charge basis was under litigation until 2008-09. The appellant promptly paid the tax upon notification, citing plausible explanations and reliance on legal precedents to support their case.

3. The Commissioner (Appeals) upheld the demand and penalties, leading the appellant to appeal before the Tribunal. The appellant's counsel emphasized that all transactions were duly recorded, and the change in factory management post-amalgamation did not warrant penalties. Reference was made to legal cases where penalties were set aside under similar circumstances.

4. Upon review, the Tribunal found that all transactions were recorded, and the change in factory management during the amalgamation process impacted the tax liability situation. The Tribunal noted the settlement of the reverse charge liability in a previous legal case and ruled in favor of the appellant, setting aside the penalties under Sections 76, 77, and 78 of the Finance Act, 1994, granting them the benefit under Section 73(3).

This detailed analysis outlines the issues surrounding the liability of Service Tax on reverse charge basis, the alleged deliberate default, the imposition of penalties, and the entitlement to benefits under the Finance Act, 1994, as addressed in the judgment by the Appellate Tribunal CESTAT Mumbai.