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2014 (7) TMI 627 - AT - Service TaxReverse charge mechanism - Section 66A of the Finance Act 1994 - services received and consumed outside India - services for Foreign Currency Term Loan - Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - Amount of tax paid with interest before issuance of SCN - Held that - foreign service providers have provided to the appellant taxable service as defined in section 65(105)(zm), which falls under third category of services contained in Rule 3 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. According to these Rules, if the services specified therein are received by a recipient located in India for use in relation to business or commerce, then these services are deemed to have been provided from outside India and received in India. It is further observed that the place of receiving/consuming service is immaterial. Evidently, the appellant (recipient) is located in India and has used the services of foreign service-providers in relation to their business or commerce in India. - the services are taxable - decided against the assessee. Levy of penalty - revenue neutral situation - Held that - when the situation is revenue neutral and the appellant manufacturer is entitled to CENVAT Credit, it cannot be said that there was an intent to evade duty and extended period can be invoked. - penalty imposed on the appellant cannot be sustained - decision in the case of of M/s Enercon India Ltd. Versus CCE Daman 2012 (7) TMI 196 - CESTAT, AHMEDABAD followed - appellant s case is fully covered by the provisions of Section 73(3) of the Finance Act, 1994 and the Revenue should not have issued show casue notice to the appellant for imposition of penalty. - Decided in favour of assessee.
Issues:
1. Applicability of service tax under reverse charge mechanism on fees paid to foreign service providers. 2. Jurisdiction of the Surat-II Commissionerate in adjudicating the show cause notice. 3. Interpretation of Section 66A of the Finance Act 1994 and Taxation of Services Rules. 4. Applicability of Section 73(3) of the Finance Act 1994 in the case. 5. Imposition of penalty under Section 78 of the Finance Act 1994. Issue 1: Applicability of Service Tax under Reverse Charge Mechanism: The appeal addressed whether the appellant was liable to pay service tax on fees paid to foreign service providers under reverse charge mechanism. The appellant argued that since the service tax amount with interest was paid before the show cause notice, no notice should have been issued. However, the Tribunal found that the services provided by foreign service providers to the appellant, even if consumed outside India, were taxable under Section 66A of the Finance Act 1994 and the Taxation of Services Rules. The location of the recipient, in this case, the appellant in India, and the use of services for business or commerce in India made the services taxable. Issue 2: Jurisdiction of Surat-II Commissionerate: The appellant contended that the Surat-II Commissionerate lacked jurisdiction to adjudicate the show cause notice as services were provided outside India. However, the Tribunal held that the location of service consumption was immaterial, and the appellant being in India and using the services for business here made the services taxable under the relevant provisions. Issue 3: Interpretation of Section 66A and Taxation of Services Rules: The Tribunal analyzed Section 66A of the Finance Act 1994 and the Taxation of Services Rules to determine the taxability of services provided by foreign service providers to the appellant. It concluded that the services fell under the third category of services in the Rules, making them taxable as they were received by the appellant in India for use in relation to business or commerce. Issue 4: Applicability of Section 73(3) of the Finance Act 1994: Regarding the applicability of Section 73(3), the appellant had paid the service tax with interest before the show cause notice was issued. The Tribunal found that the appellant, being a manufacturer of dutiable goods, would have availed CENVAT Credit, leading to a revenue-neutral situation. It held that the appellant did not evade payment of service tax, and penalty under Section 78 was not sustainable. Issue 5: Imposition of Penalty under Section 78: The Tribunal, considering precedent decisions, set aside the penalty imposed on the appellant under Section 78 of the Finance Act 1994. It held that the appellant's case was covered by the provisions of Section 73(3), and the penalty should not have been imposed. Consequently, the penalty was revoked, and the appeal was disposed of accordingly. This detailed analysis of the judgment in the Appellate Tribunal CESTAT AHMEDABAD case provides insights into the issues raised, legal interpretations made, and the final decision rendered by the Tribunal on each aspect of the case.
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