2016 (4) TMI 199 - AT - Service Tax

Dispensation of pre-deposit - Confirmation of service tax liability and imposition of penalty - Commission paid to foreign bankers under the category of banking and other financial service on reverse charge basis - Appellant claimed that demand is barred by limitation - Held that - the notice stand issued in the April, 2010 for confirmation of demand of duty relating to the activity undertaken in December, 2006. The said activity of the assessee was not performed in India and the demand was confirmed on the reverse charge basis, in respect of commission paid to foreign bankers for raising the capital in foreign countries. During the relevant period, there was lot of confusion in the field, and law was not clear either to the assessee nor to the Revenue itself. Lot of litigation was going on the legal issue of payment of tax on reverse charge basis. So, in the absence of any positive evidence to reflect upon the malafide by the appellant, it cannot be said that the non-payment of service tax, if at all, was with an intention to avoid the same. Hence, the appellant has good case on limitation. Therefore, as the appellant has already deposited the amount of ₹ 4.88 lakhs approx., by treating the same as sufficient, the condition of pre-deposit of the balance amount of tax and entire amount of penalty and interest is dispensed of. - Pre-deposit dispensed of

Summary

Issues:
Dispensation of pre-deposit of service tax liability and penalties based on limitation period.

Analysis:
The case involved a stay petition seeking the dispensation of pre-deposit of service tax liability and penalties totaling &8377; 48,79,502 imposed under sections 77 and 78 of the Finance Act, 1994. The tax liability was confirmed due to commission payments to foreign bankers under banking and financial services on a reverse charge basis for the period of December 2006. The appellant argued that the demand was barred by limitation, citing correspondence with the Revenue and legal uncertainties during the relevant period. The Revenue contended that the longer period of limitation was rightly invoked as the correspondence did not prove prior intimation of the activity. The Tribunal noted the confusion in the law during the relevant period and the subsequent clarification by the Bombay High Court and the Supreme Court regarding tax payment on a reverse charge basis. Lack of evidence reflecting malafide intent by the appellant led the Tribunal to believe that non-payment was not intentional evasion. Considering the amount already deposited by the appellant and the circumstances, the Tribunal dispensed with the pre-deposit condition for the remaining tax and penalties during the appeal's pendency.

This judgment addressed the issue of dispensation of pre-deposit of service tax liability and penalties based on the limitation period. The Tribunal considered the arguments presented by both parties regarding the invocation of a longer limitation period due to lack of evidence of prior intimation to the Revenue. The Tribunal acknowledged the legal uncertainties during the relevant period and the subsequent clarification by higher courts on tax payment on a reverse charge basis. The absence of evidence indicating intentional evasion led the Tribunal to rule in favor of the appellant, dispensing with the pre-deposit condition for the remaining tax and penalties during the appeal process. The decision highlighted the importance of legal clarity and evidence in determining tax liabilities and limitations, ultimately providing relief to the appellant based on the circumstances and legal developments.