2019 (9) TMI 1519 - AT - Service Tax

Demand of service tax alongwith the penalty - services provided outside India after 18.04.2006 - duty and interest were deposited on being pointed out before issuance of SCN - HELD THAT - The issue relating to payment of tax on reverse charge on services received from outside India for the period post 18.04.2006 was a question of interpretation of law. The duty and interest were deposited on being pointed out by the department in 2007 much prior to the issuance of the Show Cause Notice. Further it is found that the Hon ble Madras High Court in THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. JSW STEELS LIMITED 2017 (7) TMI 603 - MADRAS HIGH COURT . Following the ratio laid down by the Hon ble High Court, the penalty imposed is set aside - appeal allowed in part.

Summary

Issues:
1. Confirmation of demand of Service Tax for services provided outside India post-18.04.2006.
2. Dispute regarding the levy of Service Tax for services received from outside India pre-18.04.2006.
3. Assessment of penalty on the Appellant.

Issue 1:
The Appellate Tribunal considered the appeal against the confirmation of the demand of Service Tax for services provided outside India post-18.04.2006. The Ld. Commissioner of Service Tax confirmed the demand, holding the service receiver liable under Section 66A of the Finance Act, 1994. The Appellant challenged this decision, citing the Indian National Shipowners Association case, which was affirmed by the Supreme Court. The Tribunal, following the Bombay High Court's ruling, held that the provision making the recipient of the service liable was invalid. The enactment of Section 66A in 2006 authorized the levy of service tax on Indian recipients of services from non-residents, making them service providers. Consequently, the department's appeal was dismissed.

Issue 2:
Regarding the dispute over the levy of Service Tax for services received from outside India pre-18.04.2006, the department filed an appeal against the dropped demand. The Appellant argued that the issue had been decided in their favor based on previous legal precedents. The Tribunal, in line with the decision in the Indian National Shipowners Association case, dismissed the department's appeal, ruling that the provisions making the recipient of the service liable were invalid before the enactment of Section 66A.

Issue 3:
The Appellate Tribunal addressed the assessment of penalty on the Appellant. The Appellant contended that the penalty should be set aside as it related to an interpretation of law and was clarified later by an official instruction. Citing a decision by the Madras High Court, the Appellant argued that the penalty should be waived due to the timely payment of duty and interest upon notification. The Tribunal agreed with the High Court's ruling and set aside the penalty imposed on the Appellant, concluding that the non-payment of service tax was not a deliberate act of wrongdoing. Consequently, the Appellant's appeal was partly allowed, and the Revenue's appeal was dismissed, with both appeals disposed of accordingly.