2011 (3) TMI 942 - AT - Service Tax

Liability of pay service tax - the non-residents provided services to the appellant outside India and the appellant was liable to pay service tax by reverse charge method - Therefore, the provision of Rule 6 of Service Tax Rules, 1994 is not applicable in the present case. The appellant is liable to pay service tax on the services provided by non-residents on the amount for which bills were sent by the non-resident service providers - The valuation of services is to be done as per provisions of Section 67 of the Finance Act, 1994 which provides that the service tax is payable on the gross amount charged by the service provider for service provided or to be provided - It is thus clear that in respect of services provided by the non-residents, the appellant is required to pay service tax on the amount charged by the service providers - Decided against the assessee. Penalty - Regard to the penalty under Section 78 though I find that as per records of the case certain information was not supplied to the department and was suppressed by the appellant, on verification, complete details of transactions were available in the specific records it will be justified if the penalty under Section 78 is reduced to 50% of the service tax not paid - Since the Revenue cannot produce any evidence to counter the argument of the appellant to prove any delay which was deliberate in payment, the penalty imposed under Section 76 is not sustainable

Issues:
1. Liability for service tax on payments to overseas commission agents.
2. Applicability of penalties under Section 76 and 78.
3. Interpretation of Rule 6 of Service Tax Rules, 1994.
4. Justification for penalties under Section 76.
5. Assessment of liability for the years 2006-07 and 2007-08.

Issue 1: Liability for service tax on payments to overseas commission agents:
The case involved M/s. Umedico Lab Pvt. Ltd., Vapi, facing a demand notice for a discrepancy in service tax payment related to payments made to commission agents without offices in India. The appellants argued that service tax liability arises only upon receipt of payment for taxable services, which they had not made to the overseas agents. However, the Commissioner (Appeals) upheld the original order, emphasizing that service tax is payable under the reverse charge method for services provided by non-residents, not governed by Rule 6 of Service Tax Rules, 1994. The Tribunal concurred, stating that service tax must be paid on the amount charged by non-resident service providers, as per Section 67 of the Finance Act, 1994.

Issue 2: Applicability of penalties under Section 76 and 78:
Regarding penalties under Section 76 and 78, the Tribunal found that the plea for an extended period and the demand was not sustainable due to the lack of evidence of suppression of facts by the appellant. While the penalty under Section 78 was justified at 50% of the service tax not paid due to incomplete information provided, the penalty under Section 76 was deemed unsustainable as the appellant had not made any payments to the overseas commission agent, as evidenced by their financial records. The Tribunal concluded that the penalty under Section 76 would not stand.

Issue 3: Interpretation of Rule 6 of Service Tax Rules, 1994:
The Tribunal clarified that Rule 6 of the Service Tax Rules, 1994, applies to cases where the service provider operates within India, not to transactions with non-residents. It emphasized that service tax on services provided by non-residents should be calculated based on the amount charged by the service providers, as per Section 67 of the Finance Act, 1994.

Issue 4: Justification for penalties under Section 76:
The Tribunal determined that the penalty under Section 76, applicable for delayed payments, was not warranted in this case as the appellant had not made any payments to the overseas commission agent. Since there was no evidence of deliberate delay in payment, the penalty under Section 76 was deemed unsustainable.

Issue 5: Assessment of liability for the years 2006-07 and 2007-08:
The Tribunal upheld the liability for service tax for the years 2006-07 and 2007-08, as confirmed in the Order-in-Original, noting that the Revenue failed to provide evidence to counter the appellant's argument that there was no deliberate delay in payment. Consequently, the penalty imposed under Section 76 was deemed unsustainable, leading to a partial modification of the Order-in-Appeal to adjust the quantum of penalty.

In conclusion, the Tribunal disposed of the appeal accordingly, maintaining the Order-in-Appeal with modifications to the penalties imposed under Section 76, based on the findings related to the liability for service tax payments to overseas commission agents and the interpretation of relevant legal provisions.

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