2016 (5) TMI 1052 - AT - Service Tax

Computation of interest on service tax not paid or delayed paid - Revenue contended that Commissioner ought not to have adjusted the service tax payable on the import with that paid on the output service. - Held that - no serious infirmity is found in the view taken by the Commissioner that adjustment of service tax payable in the import of services as well as paid on the output service can be permitted as long as the liability is adjusted within the same service payment cycle. However, we feel that the computation needs to be factually checked to arrive at the correct value of import of software services and the total service tax liability on such import. The liability of payment of interest under Section 75 also needs to be re-checked in the light of the Revenue s appeal. For this purpose, we consider it necessary to remand the matter to the adjudicating authority who is directed to pass orders expeditiously. The issue of classification of the imported software can also be considered in the light of decision of CESTAT Bangalore brought to our notice by the appellant-assessee. - Appeals disposed of by way of remand

Summary

Issues:
1. Classification of imported software service under different categories.
2. Liability for service tax under reverse charge mechanism.
3. Adjustment of service tax payable on import with that paid on output service.
4. Interest liability under Section 75.
5. Penalty levy.

Analysis:

Issue 1: Classification of imported software service under different categories
The appellant-assessee imported Digital Control Software (DCS) and carried out repairs to make it usable for local customers. The Commissioner classified the imported software as "Information Technology Software Services" for service tax purposes under the reverse charge mechanism. The appellant-assessee argued for classification under "Management, Maintenance and Repair Service." The Tribunal found that the service tax paid on output service could be adjusted with that on the import, provided procedural requirements were met. The matter was remanded for factual verification and rechecking of the correct import value and tax liability.

Issue 2: Liability for service tax under reverse charge mechanism
The Commissioner held the appellant-assessee liable for service tax on imported software under reverse charge. The Tribunal agreed with this finding but emphasized timely discharge of this liability and compliance with Cenvat Credit Rules for utilizing credits. The appellant was directed to maintain proper documentation for verification by Revenue authorities.

Issue 3: Adjustment of service tax payable on import with that paid on output service
The Revenue challenged the Commissioner's adjustment of service tax without considering interest liability for delayed payments. The Tribunal acknowledged the adjustment but noted factual discrepancies in the computation. The matter was remanded for reevaluation, emphasizing correct calculation of import value and tax liability.

Issue 4: Interest liability under Section 75
The Revenue raised concerns about interest liability for delayed service tax payments, which the Commissioner had not addressed. The Tribunal directed a recheck of interest liability under Section 75, highlighting the need for accurate assessment and compliance with payment timelines.

Issue 5: Penalty levy
No specific mention of penalty levy was made in the judgment summary provided.

In conclusion, the Tribunal remanded the case for reevaluation of import value, tax liability, and interest calculation. The appellant's argument for classification under a different service category was considered, emphasizing the importance of procedural compliance and documentation. The judgment highlighted the need for accurate assessment and timely discharge of tax liabilities under the reverse charge mechanism.