2013 (12) TMI 1122 - AT - Service Tax

Demand of service tax - Penalty u/s 76, 77 and 78 - Suppression of facts - Intention to evade tax - Business auxiliary service - Commission agents - Assessee contends that entire activity of canvassing of orders was done outside India and hence cannot be taxed in India - Held that - service falls under clause (i) of the definition of service under section 65 (19) of Finance Act 1994 - as per the provisions of Taxation of Services (provided from Outside India and Received in India), Rules 2006, the service is to be considered as imported and is taxable in the hands of the appellants - this service is an input service as defined under Rule 2 (k) of the Cenvat Credit Rules, 2004 because the service is in relation to sales promotion which is specifically included in the inclusive part of the definition. That being the case, the appellants were eligible to take credit of the service tax so payable if the appellants were to pay excise duty on any of the export goods. On textile products a voluntary scheme for payment of excise duty was in force. So the appellants could pay duty, take credit and utilize it either for local clearance or on any export consignment and get rebate. It is also seen that from 01-04-08, the government exempted such taxes subject to certain conditions by issuing notification 17/2008-ST. Part of the demand is after 01-04-08. Thus this is not just a case of revenue neutrality; but a special case of revenue-neutrality involving the same person taking credit of tax paid and also being eligible for relief from such tax incidence on account of the fact that services are used for export of goods. In such circumstances, there is no justification to slap a tax liability on an exporter of goods invoking extended period of time. Therefore, the allegation of suppression is not sustainable. Appellants are eligible for Cenvat credit as per law considering that such credit shall not be denied merely on account of under Rule 9 (1) (II) (bb) of Cenvat Credit Rules, 2004 - Interest as applicable will be payable. The penalties imposed under section 77 are upheld. However, penalties imposed under section 76 & 78 are set aside - Decided partly in favour of assessee.

Summary

Issues:
1. Appeal against orders demanding service tax on services received from abroad.
2. Classification of services as "Business Auxiliary Service" under Finance Act, 1994.
3. Eligibility of appellants to avail Cenvat credit on the service tax paid.
4. Applicability of extended period for tax demand.

Analysis:
1. The judgment involves multiple appeals challenging orders demanding service tax on services received from abroad. The issue pertains to the classification of these services and the subsequent tax liability imposed on the appellants.

2. The primary contention revolves around whether the services received by the appellants from agents abroad fall under the category of "Business Auxiliary Service" as defined in section 65(19) of the Finance Act, 1994. The Revenue argues that since the agents marketed goods belonging to the appellants, the services are taxable under this classification.

3. The appellants, on the other hand, argue that the foreign agents were merely canvassing orders and did not fit the description of "commission agents" as per the Act. They also claim that the entire activity of canvassing orders was conducted outside India, making it exempt from taxation in India. Additionally, they assert their eligibility to avail Cenvat credit on the input services received.

4. The Tribunal acknowledges the arguments presented by both sides. It agrees with the Revenue that the services fall under the definition of "Business Auxiliary Service" and are taxable under the reverse charge mechanism. However, it also recognizes that these services qualify as "input services" under the Cenvat Credit Rules, allowing the appellants to claim credit on the service tax paid.

5. The Tribunal further notes that the appellants were entitled to take credit of the service tax paid, especially considering the voluntary scheme for payment of excise duty on textile products and the exemption notification issued by the government. It emphasizes that in cases of revenue-neutrality involving export of goods, there is no justification for imposing a tax liability invoking an extended period.

6. Ultimately, the Tribunal confirms the tax demands but allows the appellants to avail Cenvat credit as per the law. It upholds the penalties imposed under section 77 but sets aside the penalties under sections 76 and 78. Interest as applicable will be payable by the appellants.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal concerning the tax liability on services received from abroad and the eligibility of the appellants to avail Cenvat credit, providing a comprehensive overview of the legal reasoning and conclusions reached in the case.