2016 (11) TMI 515 - AT - Service Tax

Levy of tax - imposition of penalty - time bar - Scientific and Technical Consultancy Service - reverse charge mechanism - Held that - As the appellant is not contended the classification of the service nor its liability to remit service tax as the recipient of the Scientific or Technical Consultancy service and remittance of service tax and availing credit for the input service. As however, the only contend the appellant is that it is the revenue s, situation whatever they would have paid service tax, they were entitled to take cenvat credit the same immediately. In that circumstances, the extended period of limitation is not invokable. I have seen that in the balance sheet, the appellant is disclosed the receipt of the records payment of services. The same has been accepted by the department. In that circumstance, extended period of limitation is not invokable - the service tax for the extended period of limitation is not sustainable and no penalty is imposable on the appellant - appeal allowed.

Summary

Issues:
Recovery of service tax for failure to file returns and remit tax, invocation of extended limitation period, classification of service received, liability to service tax, justification for penalty, appropriateness of remittances, revenue neutrality, availability of cenvat credit, wilful suppression of facts.

Analysis:
The judgment pertains to a case where proceedings were initiated against the petitioner to recover service tax amounting to ?35,14,534 along with interest and penalties for not filing ST-3 returns and remitting service tax as a recipient of Scientific or Technical Consultancy service. The petitioner, a manufacturer of agro chemicals, had engaged Foreign Scientific or Technical Consultancy service providers for facilitating product registration for exports. The remittances made to these foreign service providers were disclosed in the balance sheets and profit and loss account. The Revenue initiated proceedings after noticing these remittances during investigation.

The adjudicating authority rejected the petitioner's claim of no justification for invoking the extended limitation period under the proviso to Section 73(1) of the Finance Act, 1994. The petitioner did not contest the classification of the service received or its liability to service tax but contested the extended limitation period. The authority confirmed the service tax liability, interest, and penalties. The petitioner's appeal against this decision was also rejected.

The petitioner argued that since the remittances were reflected in the financial statements and were known to the Revenue during the investigation, there was no wilful suppression of facts to evade duty, making the extended limitation period unwarranted. The petitioner also claimed revenue neutrality as they were entitled to avail cenvat credit for the service tax paid under the reverse charge mechanism.

The appellate tribunal held that since the petitioner did not dispute the classification of the service or its liability to remit service tax, and had already remitted a portion of the amount, the extended limitation period was not applicable. The tribunal accepted the petitioner's argument that the situation was revenue neutral due to the availability of cenvat credit. Consequently, the service tax for the extended period was deemed unsustainable, and no penalty was imposed on the appellant. The appeal was allowed based on these findings.