2015 (3) TMI 962 - AT - Service Tax

Waiver of pre deposit - Denial of benefit of exemption Notification No.18/2002-ST dated 16.12.2002 - R& D Cess was paid after making the payment to the overseas service provider - Penalty u/s 77 & 78 - Held that - Major portion of the demand relates denial of the benefit of exemption Notification No. 18/2002/ST dt.16.12.2002. relating to the R& D Cess paid to Govt. of India under Section 3 of Research and Development Cess Act, 1986 on the amount paid to the overseas service provider. The demand has been confirmed on the ground that the R& D cess was paid subsequent to the payment made to the overseas service provider. Prima facie , we find the issue covered by the decision of this Tribunal in Jindal Praxair Oxygen Co. (2007 (8) TMI 177 - CESTAT, BANGALORE) - demand on other issues rests on appreciation of evidence and debatable. In these circumstances, the Applicant could able to make out a prima facie case for waiver of predeposit dues adjudged. Accordingly pre-deposit of dues adjudged is waived and its recovery stayed during the pendency of the Appeal. - Stay granted.

Summary

Issues:
Waiver of predeposit of service tax and penalty under Sections 77 and 78 of the Finance Act, 1994; denial of benefit of Notification No.18/2002-ST; taxability of services received at a separate business establishment; payment of interest acknowledged by the Department.

Analysis:
The application sought waiver of predeposit of service tax and penalties totaling &8377; 10,70,46,523 along with a penalty of &8377; 10,000 under Sections 77 and 78 of the Finance Act, 1994. The primary contention was the denial of the benefit of Notification No.18/2002-ST concerning the payment of Research and Development Cess (R&D Cess) to the Government of India after remitting payments to overseas service providers. The appellant argued that since the R&D Cess was paid, the benefit of exemption should not be denied, citing a precedent from the Tribunal. Additionally, the appellant highlighted that certain amounts were related to services received at a separate business establishment in China, which they believed were not taxable under the relevant provisions.

The Revenue, represented by the ld. AR, reiterated the findings of the Commissioner, supporting the initial demand. The Tribunal observed that a significant portion of the demand pertained to the denial of the exemption under Notification No. 18/2002-ST due to the sequence of payment of R&D Cess in relation to overseas service provider payments. The Tribunal referred to a previous judgment where it was held that the delay in R&D Cess payment should not be a ground for denying the exemption. Consequently, the Tribunal found merit in the appellant's argument regarding the exemption and allowed the appeal with consequential relief.

Regarding other issues, such as the taxability of services received at a separate business establishment and the payment of interest not acknowledged by the Department, the Tribunal noted that these matters were debatable and required further evaluation of evidence. As a result, the Tribunal granted a waiver of predeposit for the adjudged dues and stayed the recovery during the pendency of the appeal. The Tribunal concluded by allowing the Stay Petition in favor of the Applicant, providing relief from the predeposit obligations.