2017 (1) TMI 1026 - AT - Service Tax

CENVAT credit - services received from the foreign company - whether the appellant are entitled to the credit of the duty paid by them? - Held that - in such Revenue neutral situation there cannot be any intention to evade duty. Further Revenue neutrality is to be established on the basis of a fact of data. It is possible that there may be some exemption available to the appellant on account of which some part of the duty paid may not be available as credit. I find no such data has been submitted to establish it was a revenue neutral situation. However, looking at the facts of the case, I am inclined to invoke Section 80 and waive the penalty imposed under Section 78 of the Finance Act - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Calculation of service tax liability based on the rate prevalent at the time of providing/receiving services.
2. Invocation of extended period for issuing show-cause notice.
3. Applicability of penalty under Section 77 and 78.
4. Entitlement to credit of duty paid and invoking Section 80 for relief.

Analysis:

1. The appellant, M/s. SKF India Ltd., had been discharging tax liability on services received from a foreign company under Section 66A. The issue arose when it was discovered that the appellant had paid service tax at a rate of 10.3% instead of the previous rate of 12.36% applicable before 24.02.2009. The Revenue demanded the differential duty based on the higher rate. The appellant rectified the short payment upon identification of the error. A show-cause notice was issued invoking the extended period, leading to the confirmation of the demand for the differential duty along with the imposition of penalties under Sections 77 and 78.

2. The appellant contended that they had availed credit for the duty paid and argued against the invocation of the extended period, claiming no intention to evade duty due to the revenue-neutral situation. The appellant also sought relief under Section 80 as an alternate option. The Tribunal considered the appellant's arguments and the decision in the case of Jet Airways (I) Ltd., emphasizing the need to establish revenue neutrality based on factual data. While acknowledging the lack of such data from the appellant, the Tribunal found merit in the argument that in a revenue-neutral scenario, there is no intention to evade duty. Consequently, the Tribunal decided to invoke Section 80 and waive the penalty under Section 78 of the Finance Act.

3. In conclusion, the Tribunal partially allowed the appeal, recognizing the appellant's position regarding the revenue-neutral situation and the absence of intent to evade duty. The penalty under Section 78 was waived based on the invocation of Section 80. The order was pronounced in court on 28.12.16.

This analysis highlights the key aspects of the judgment, focusing on the calculation of service tax liability, the invocation of the extended period, the applicability of penalties, and the considerations for relief under Section 80.