2016 (6) TMI 20 - AT - Service Tax

Imposition of penalty - Section 76 & 78 of the Finance Act, 1994 - Business Auxiliary Service - Reverse charge mechanism - Services for Commission Agents when used in respect of exported products were exempt from payment of service tax by virtue of Notification No. 41/2007 dated 06.10.2007 as amended by Notification No. 12/2008 dated 01.04.2008 and subsequently vide Notification No. 18/2009-ST dated 07.07.2009. available as Cenvat credit - Service tax along with interest had been paid before issuance of SCN - Held that - in the appellant s own case (when it was known as Sterlite Industries (India) Ltd.) reported in 2005 (5) TMI 212 - CESTAT, MUMBAI , the Tribunal has already held that where credit is available to another unit of the same company, the situation was revenue neutral and the allegation of suppression with an intention to evade payment of duty could not have been sustained. Therefore, the allegation of suppression with the intention to evade payment of tax not being sustainable, the Revenue was not justified in contending that the appellant was hit by the bar under Section 73(4). In this view of the matter, the benefit under Section 73(3) ought to have been extended to the appellant and no notice should have been issued to it. Also the entire amount of interest paid by the appellant is a cost to the company in a situation where otherwise there can be no dispute that there was an exemption available from the payment of service tax in respect of Commission Agent services. The appellant was entitled to the benefit of the said exemption had it complied with the procedural requirements. The other argument of the Department that the tax was paid on being pointed out by the Revenue is also no ground for denying the benefit under Section 73(3) as the Section itself envisages that the tax which has been short paid or short levied can be paid by an assessee on its own volition or upon being pointed out by the Department. To suggest that in every case where tax is being paid on being pointed out by the Department, the benefit of Section 73(3) would not be available would tantamount to rendering Section 73(3) redundant, which is clearly impermissible. In view of the above, I hold that benefit of Section 73(3) was available and accordingly set aside the penalty. The appropriation of tax and interest already paid is upheld. - Decided in favour of appellant

Summary

Issues:
1. Liability to pay service tax under Business Auxiliary Services for commission paid to foreign agents.
2. Imposition of penalty under sections 76 and 78 of the Finance Act, 1994.
3. Requirement of issuing a Show Cause Notice in case of disputed service tax liability.
4. Applicability of extended period of limitation.
5. Benefit of Section 73(3) of the Finance Act, 1994.

Issue 1: Liability to pay service tax under Business Auxiliary Services for commission paid to foreign agents.

The appellant, engaged in manufacturing, paid sales commission to foreign agents for exported products. The appellant availed Cenvat credit but did not fulfill the procedural requirement of informing the department before claiming exemption. The department pointed out non-payment, leading to the appellant paying the service tax and interest. The issue revolved around whether the appellant was liable to pay service tax under Business Auxiliary Services, despite the exemption for exported products. The appellant argued that the service tax liability was not disputed and no Show Cause Notice was necessary. The revenue contended that the penalties were rightly imposed, emphasizing the need for compliance with statutory provisions. The Tribunal held that the appellant's submission for exemption need not be examined as the service tax was deposited before the Notice issuance. The Tribunal found that the appellant's immediate availability of Cenvat credit made the situation revenue neutral, supporting the appellant's contention of no intention to evade duty.

Issue 2: Imposition of penalty under sections 76 and 78 of the Finance Act, 1994.

The adjudication confirmed the service tax, demanded interest, and imposed penalties under sections 76 and 78 for non-payment. The Ld. Counsel argued that the dispute was revenue neutral, and penalties were unwarranted. The revenue maintained that penalties were justified, citing the need for compliance irrespective of revenue neutrality. The Tribunal found that the appellant's immediate Cenvat credit availability rendered the suppression allegation unsustainable, leading to the penalties being set aside under Section 73(3) of the Finance Act, 1994.

Issue 3: Requirement of issuing a Show Cause Notice in case of disputed service tax liability.

The appellant contended that a Show Cause Notice was unnecessary as they did not dispute the service tax liability. The Tribunal acknowledged the immediate payment of service tax before the Notice issuance, rendering the examination of exemption eligibility unnecessary.

Issue 4: Applicability of extended period of limitation.

The Show Cause Notice invoked the extended period due to non-payment of service tax. The appellant argued against the extended period, emphasizing revenue neutrality. The Tribunal found the immediate availability of Cenvat credit supported the appellant's stance, leading to the benefit of Section 73(3) being extended and penalties set aside.

Issue 5: Benefit of Section 73(3) of the Finance Act, 1994.

The appellant sought the benefit of Section 73(3) due to the immediate payment of service tax upon audit pointing out non-payment. The Tribunal agreed that the appellant qualified for the benefit, setting aside the penalties imposed under sections 76 and 78 of the Finance Act, 1994.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT CHENNAI highlights the key issues, arguments presented, and the Tribunal's findings, ensuring a comprehensive understanding of the legal aspects involved in the case.