2015 (2) TMI 613 - AT - Service Tax

Levy of service tax - Reverse Charge Mechanism - Penalty u/s 76 & 78 - notification no.36/2004 dated 31.12.2004 - Held that - In view of the notification published in the Gazette of the Central Government on 31.12.2004 and made effective from 1.1.2005, no tax can be demanded from the appellant assessee on reverse charge basis prior to 1.1.2005. We further observe that such payment made by appellant as receiver of service to its agent like gift, foreign trip as well as cash prizes, which are in nature of incentive, shall not form part of gross value of the taxable service. - Decided in favour of assessee.

Summary

Issues:
1. Appeal against Order-in-Appeal No. P-III/094/06 dated 1.6.2006 passed by the Commissioner of Central Excise & Service Tax (Appeals), Pune-III.
2. Demand of Service Tax on reverse charge basis under Section 73(1) read with Section 68(2) of the Finance Act, 1994.
3. Conditions precedent for levy of tax on reverse charge basis.
4. Notification by the Central Government specifying taxable services and persons liable to pay Service Tax.
5. Interpretation of the ruling of Larger Bench in Hindustan Zinc Ltd. Vs. Commissioner of Central Excise - 2008 (11) STR 338 (Tri-LB).

Analysis:
1. The appellant contested the demand of Service Tax on reverse charge basis, arguing that two conditions precedent must be met for such levy under Section 68(2). They highlighted that the notification specifying the taxable services and persons liable to pay Service Tax was published by the Central Government on 31.12.2004, effective from 1.1.2005. As the disputed period predated this effective date, the appellant asserted that no Service Tax could be legally demanded. The appellant also relied on the ruling of the Larger Bench in Hindustan Zinc Ltd., emphasizing the need for specific notification to collect tax from non-resident service providers.

2. The Tribunal acknowledged the notification issued by the Central Government on 31.12.2004, making it clear that no tax could be demanded from the appellant on reverse charge basis before 1.1.2005. Additionally, the Tribunal determined that certain payments made by the appellant to its agents, such as gifts, foreign trips, and cash prizes, which were categorized as incentives, should not be included in the gross value of the taxable service. Consequently, the Tribunal allowed the appeal in favor of the appellant, granting any consequential benefits.

This comprehensive analysis covers the issues involved in the legal judgment, providing detailed insights into the arguments presented, legal provisions invoked, and the final decision rendered by the Appellate Tribunal CESTAT MUMBAI.