2015 (10) TMI 2159 - AT - Service Tax

Liability of Service Tax Management and Business Consultancy - Appellant discharged liability along with interest; penalties pleaded to be set aside Further contended that appellant can avail CENVAT Credit and liability needs to be discharged under Reverse Charge Mechanism Held That - Services received by appellant from their associates was utilized for manufacturing of final products have been discharged off the central excise duty - Appellant could have taken credit of service tax paid under Reverse Charge Mechanism; penalties imposed are unwarranted and provisions of section 80 should have been invoked Decision made in the case of Essar Steel Ltd. 2008 (11) TMI 105 - CESTAT, AHMEDABAD followed Decided in favour of Appellant.

Summary

Issues involved:
Service tax liability on services received from associate companies abroad, discharge of service tax liability, penalties imposed by adjudicating authority, eligibility to avail cenvat credit, reverse charge mechanism, intention to discharge service tax liability, utilization of services for manufacturing, revenue neutrality, invocation of section 80 of the Finance Act, 1994.

Analysis:

1. Service Tax Liability and Discharge:
The issue in this case revolves around the service tax liability of the appellant for services received from their associate companies abroad. The appellant paid an amount as consideration for services which the Revenue categorized as Management or Business Consultancy services. The appellant discharged the entire service tax liability and interest during the investigation. The service tax liability arose under the reverse charge mechanism as per section 66A of the Finance Act, 1994.

2. Penalties Imposed:
The appellant sought to set aside the penalties imposed by the adjudicating authority. The appellant's counsel argued that the penalties should be waived as the service tax liability was discharged, and the appellant was eligible to avail the cenvat credit. It was contended that the services received were utilized for manufacturing final products on which central excise duty was paid, indicating revenue neutrality. The Tribunal found that the penalties imposed were unwarranted, and section 80 of the Finance Act should have been invoked by the adjudicating authority for non-imposition of penalties.

3. Precedent and Legal Interpretation:
The Tribunal referred to a similar case involving Essar Steel Ltd. where penalties were set aside due to revenue neutrality and the appellant's intention to discharge the service tax liability. The Tribunal emphasized that the appellant's utilization of services for manufacturing, coupled with the payment of central excise duty, demonstrated a lack of intent to evade tax. The Tribunal held that penalties should not have been imposed, invoking the provisions of section 80 of the Finance Act, 1994.

4. Final Decision:
Considering the arguments presented by both sides, the Tribunal set aside the penalties imposed by the adjudicating authority. The Tribunal agreed with the appellant's counsel that the case demonstrated revenue neutrality and lack of intention to evade payment of duty. Therefore, the penalties were waived, and the appeal was allowed to the extent of setting aside the penalties imposed.

In conclusion, the judgment focused on the discharge of service tax liability, penalties imposed, revenue neutrality, and the appellant's intention to comply with tax obligations. The Tribunal's decision to set aside the penalties was based on the appellant's actions in discharging the service tax liability and utilizing the services for manufacturing, aligning with the principles of revenue neutrality and legal provisions under the Finance Act, 1994.