2015 (3) TMI 832 - AT - Service Tax

Service tax liability - Reverse charge mechanism - Imposition of penalty - Held that - For the period 18.04.2006 to 31.3.2008 service tax liability along with interest gets fastened on appellant is required to discharge interest liability on the said service tax in accordance with law. This takes us to the penalty imposed by the lower authorities on the appellant specifically for the period 18.04.2006 to 31.03.2008. We find that the contentions raised by the learned C.A. have a strong force. We do agree that during the relevant period the entire issue of service tax liability under reverse charge mechanism was being contested vehemently by both the sides at higher judicial forum. We find that the issue has attained finality with the judgement of Indian National Ship Owners Association on 14.12.2009. In our considered view and the facts and circumstances of this case, this is a fit case for invoking provisions of Section 80 of the Finance Act, 1994, by setting aside the penalties imposed by the lower authorities - Decided in favour of assessee.

Summary

Issues:
Service tax liability under reverse charge mechanism for the period 01.01.2005 to 31.3.2008.

Analysis:
The judgment addressed the issue of service tax liability on the appellant under the reverse charge mechanism for the period from 01.01.2005 to 31.3.2008. The Tribunal noted that for the period from 01.01.2005 to 17.04.2006, the service tax liability does not arise based on the judgments of the Bombay High Court and the Apex Court. The law established that no service tax is payable by the recipient if the services were rendered before 18.04.2006 when Section 66A was introduced. Consequently, the service tax liability, interest, and penalties for this period were deemed unsustainable and set aside. However, for the period from 18.04.2006 to 31.03.2008, the appellant was held liable to discharge the service tax liability.

Regarding the payment of service tax and the issuance of a show-cause notice, it was mentioned that the appellant had paid a sum towards service tax liability before the notice was issued. The appellant argued that since the issue was being disputed and challenged in court, they had a bona fide belief in deferring the payment of service tax. The Tribunal acknowledged the appellant's contentions and agreed that during the relevant period, the issue of service tax liability under the reverse charge mechanism was vigorously contested at higher judicial forums. The finality of the issue was recognized with the judgment of the Indian National Ship Owners Association. Consequently, the penalties imposed on the appellant under Section 78 were set aside invoking the provisions of Section 80 of the Finance Act, 1994.

In conclusion, the appeal was disposed of with the findings that for the period from 18.04.2006 to 31.03.2008, the appellant was required to discharge the service tax liability along with interest. The penalties imposed by the lower authorities during this period were set aside based on the circumstances and finality of the issue established by the judgments.