2023 (7) TMI 1327 - AT - Service Tax

Levy of penalty - penalties imposed inspite of service tax was paid - taxability of service challenged for setting aside penalty - Market Survey fees - Export Promotional Expenses - Technical Fees and Consultant Fees - Legal and Professional Consultancy - revenue neutrality - HELD THAT - It is found that without going into merit of taxability the issue of penalty or otherwise also can be decided on the submission of revenue neutral. The appellant being a manufacturer and exporter of the goods all the services received by the appellant are in relation to export of goods - all the services were used in relation to export of goods. Therefore, the appellants were eligible for availing the cenvat credit on the service tax payable on the aforesaid services on reverse charge mechanism. In view of the decisions in COMMR. OF C. EX. CUS., VADODARA-II VERSUS INDEOS ABS LIMITED 2010 (3) TMI 656 - GUJARAT HIGH COURT and COMMISSIONER VERSUS INDEOS ABS LTD 2011 (3) TMI 1575 - SC ORDER it is found that whenever there is a revenue neutral situation no malafide should be attributed to the assessee. Considering the aforesaid settled legal position in the present case the penalties imposed by the Adjudicating Authority are not sustainable. Hence, the same are set aside. However, the service tax paid by the appellant is maintained on conceding by the learned Chartered Accountant. Consequently, the interest on service tax demand is also sustained and the same is recoverable from the appellant. The impugned order stands modified - Appeal allowed in part.

Summary

Issues involved:
The issues involved in the judgment are the taxability of services received from outside India, imposition of penalties for non-payment of service tax, availability of cenvat credit, and the time bar for the demand of service tax.

Taxability of services received from outside India:
The appellant, engaged in the manufacture of glass bottles, received various services from outside India related to market survey fees, export promotional expenses, technical fees, and consultant fees. While the appellant had been paying service tax on these services, an investigation revealed that tax was not paid on certain invoices. The Adjudicating Authority confirmed the demand for service tax, interest, and penalties. The appellant challenged the taxability of the services, arguing that they were exclusively related to the export of goods and hence not taxable under Rule 3(iii) of Taxation of Services Rules. The appellant also contended that the demand was time-barred based on previous judgments.

Imposition of penalties for non-payment of service tax:
The appellant argued that despite paying the service tax and interest, penalties were unjustly imposed by the Adjudicating Authority. They maintained that since the services were used for export purposes, the penalties were unwarranted. Citing various judgments, the appellant asserted that the demand was revenue neutral due to the availability of cenvat credit, rendering the penalties unsustainable.

Availability of cenvat credit:
The appellant claimed that the service tax paid was available as cenvat credit, making the situation revenue neutral. They relied on judgments supporting the notion that when an assessee is eligible for cenvat credit, the scenario becomes revenue neutral. The appellant argued that since the tax was not payable, the penalties imposed by the Adjudicating Authority were not justified.

Time bar for the demand of service tax:
The appellant contended that the demand was time-barred based on specific judgments. They argued that since the tax itself was not payable, the penalties imposed were consequential and therefore unsustainable. The appellant's position was supported by legal precedents emphasizing the importance of a revenue-neutral approach in such cases.

Judgment summary:
The Appellate Tribunal, after considering the submissions from both sides and examining the services received by the appellant, found that all services were indeed used in relation to the export of goods. As a result, the appellant was eligible for cenvat credit on the service tax paid under the reverse charge mechanism. The Tribunal concluded that the demand was revenue neutral, echoing established legal principles. Consequently, the penalties imposed by the Adjudicating Authority were set aside, while the service tax and interest were upheld. The impugned order was modified accordingly, with the appeals being allowed in favor of the appellant.