2016 (11) TMI 489 - AT - Service Tax

100% EOU - demand - invocation of proviso to Sub-Section 1 of Section 73 of Finance Act, 1994 - Held that - the entire demand in the show-cause-notice is raised by invoking proviso to Sub-Section 1 of Section 73 of the Finance Act, 1994. The requirement under said proviso is that suppression or misstatement etc. is to be established separately and intention to evade Service Tax is to established separately for invoking said proviso. The appellant are service receiver and they are entitled for credit of Service Tax paid as service receivers, and as a result, it could not be established by Revenue that the appellant had intention to evade payment of Service Tax. Since, the intention to evade payment of Service Tax could not be established through the said show cause notice, the said proviso was not invokable. As a result, the entire demand has became bad in Law - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against Order-in-Appeal
- Demand raised invoking proviso to Sub-Section 1 of Section 73 of Finance Act, 1994
- Allegation of suppression and intention to evade payment of Service Tax
- Appellant being service receiver and eligibility for Cenvat Credit
- Interpretation of Section 66A and Taxation of Services Rules

Analysis:
The appeal was filed against Order-in-Appeal No. passed by the Commissioner (Appeals), challenging a show-cause notice dated 20th March, 2013, which raised a demand under the proviso to Sub-Section 1 of Section 73 of the Finance Act, 1994. The appellant, a 100% EOU engaged in manufacturing and exporting Computer Software, entered into an agreement with a consultant in Germany for professional services. The Revenue contended that remittances made to the consultant were liable to Service Tax under Section 66A of the Finance Act, 1994. The Original Authority upheld the demand, imposing a penalty, which was affirmed by the Commissioner (Appeals), leading to the appeal before the Tribunal.

During the proceedings, the appellant argued that as a service receiver, they were entitled to avail Cenvat Credit for the Service Tax paid under Section 66A. They contended that the Revenue failed to establish any intention to evade payment of Service Tax, rendering the demand unsustainable. The Tribunal observed that for invoking the proviso to Section 73, suppression and intention to evade Service Tax must be separately established. As the appellant was entitled to credit as a service receiver, the Revenue couldn't prove an intention to evade payment. Therefore, the proviso was inapplicable, rendering the entire demand legally flawed. Consequently, the Tribunal set aside the impugned orders and allowed the appeal with consequential relief.

In conclusion, the Tribunal found that the demand raised under the proviso to Section 73 was unsustainable due to the lack of evidence establishing an intention to evade payment of Service Tax by the appellant, who was eligible for Cenvat Credit as a service receiver. The interpretation of Section 66A and Taxation of Services Rules played a crucial role in determining the liability of the appellant. The Tribunal's decision highlighted the importance of establishing intention to evade payment of taxes for invoking specific legal provisions, ultimately leading to the appeal being allowed in favor of the appellant.