2016 (12) TMI 343 - AT - Service Tax

Taxability - reverse charge mechanism - whether it was justified in holding that the appellants were procuring the services of foreign agent on commission basis and were required to discharge their tax liability on reverse charge basis in terms of provisions of 66A of the Finance Act, 1994, which were introduced with effect from 18.04.2006? - Held that - reliance placed on the decision of the appellant s own case RSWM Ltd. Vs. CCE 2016 (11) TMI 1363 - CESTAT NEW DELHI , where similar issue was decided, and it was held that the provisions of Section 80 were invoked and the benefit was extended to the appellant. Accordingly, we hold that in absence of any malafide on the part of the appellant, the imposition of penalty upon them is not justifiable, the same is accordingly set aside. In as much as the issue stands decided in the appellant s own case, we set aside the penalty by extending the benefit of Section 80 of the Finance Act, 1994 and confirm the demand along with interest as not contested - appeal disposed off - decided in favor of assessee.

Summary

Issues involved:
1. Tax liability on reverse charge basis under Section 66A of the Finance Act, 1994
2. Imposition of penalty under Section 80 of the Finance Act, 1994

Analysis:

Issue 1: Tax liability on reverse charge basis under Section 66A of the Finance Act, 1994
The appellants were procuring services of a foreign agent on a commission basis and were required to discharge their tax liability on a reverse charge basis as per the provisions of Section 66A of the Finance Act, 1994. The issue involved in this case was identical to previous judgments and was the subject of litigation before various courts. The confusion in the field was addressed by a decision of the Bombay High Court, clarifying the law regarding tax liability. The appellants had deposited the dues within a short period after the clarification of the law, indicating a lack of malafide intent on their part. The Tribunal, considering the precedent and absence of malafide, set aside the imposition of penalty on the appellants.

Issue 2: Imposition of penalty under Section 80 of the Finance Act, 1994
The appellants did not dispute the duty liability confirmed against them but challenged the imposition of penalty. The appellant's advocate argued for the extension of the benefit of Section 80 of the Finance Act, 1994, citing confusion in the field prior to the clarification by the Bombay High Court. Referring to a previous decision in the appellant's favor for a different period, the Tribunal extended the benefit of Section 80 to the appellants, setting aside the penalty while confirming the demand along with interest as uncontested. The Tribunal emphasized the lack of malafide intent on the appellants' part in setting aside the penalty.

In conclusion, the Tribunal disposed of both appeals by setting aside the penalty imposed on the appellants while confirming the demand along with interest. The judgments and decisions cited in the analysis played a crucial role in the Tribunal's decision-making process, ensuring a fair and just outcome based on legal provisions and precedents.