2017 (12) TMI 1030 - AT - Service Tax

Delay in payment of service tax - demand of interest and penalty - extended period of limitation - Held that - As far as the penalty under section 77 and 78 is concerned, I find that there is no suppression of fact in the present case. Therefore, the extended period of limitation cannot be invoked. Interest - Held that - the service tax has been paid on R&D Cess but there was a delay in the payment of the same. But the appellant s stand is that they have paid the interest which is disputed by the Revenue - the matter is remanded back to the original authority for fresh computation of interest after considering the submissions of both the parties. Appeal allowed in part and part matter on remand.

Summary

Issues:
- Appeal against rejection of appeal by Commissioner (A) and upholding of order-in-original.
- Availing exemption under Notification No.17/2004-ST for R&D Cess.
- Demand of interest and penalty for short payment of service tax and R&D Cess.
- Invocation of extended period of limitation.
- Imposition of penalty under sections 77 and 78.
- Dispute regarding payment of interest on R&D Cess.
- Applicability of relevant case laws on suppression of facts and revenue neutrality.

The appellant, engaged in various services, availed CENVAT credit and discharged service tax under the reverse charge mechanism. The issue arose when it was found during an audit that the appellant wrongly availed exemption under Notification No.17/2004-ST regarding the Research & Development (R&D) Cess payable in relation to intellectual property right services. The appellant had not paid the R&D Cess at the time of service tax payment, leading to short payment of service tax. A show cause notice was issued, resulting in the confirmation of demand, interest, and penalty by the Asst. Commissioner. The appellant appealed to the Commissioner (A) challenging the demand, interest, and penalty, citing an amendment to the notification and claiming no suppression of facts. However, the Commissioner (A) upheld the order-in-original, leading to the present appeal.

The appellant argued against the demand of interest and penalty, contending that the extended period of limitation was wrongly invoked. They claimed to have already discharged the interest for delayed R&D Cess payment and disputed the additional interest demanded due to quantification errors. They relied on case laws like Continental Jt. Venture Foundation and Excorts Ltd. to support their stance against the imposition of penalty and extended limitation period. The appellant emphasized their entitlement to credit of service tax paid, asserting no suppression of facts for duty evasion, citing cases like Nirlon Ltd., CCE Jamshedpur, and Commissioner of CCE Bangalore. They also argued against penalty under section 78, referencing cases like CCE vs. Jamshedpur Beverages and Texyard International.

The Revenue, represented by the Learned AR, supported the findings of the impugned order, maintaining the stance on interest and penalty. After considering both parties' submissions and relevant case laws, the Judicial Member found that the service tax had been paid on R&D Cess but with a delay. Noting the appellant's claim of having paid the interest, disputed by the Revenue, the Member concluded that there was no suppression of fact justifying the invocation of the extended limitation period. Citing the case of M/s. Nirlon Ltd., it was held that in the absence of malafide intention to evade duty and with a revenue-neutral outcome, penalties under sections 76 and 78 were dropped. However, the matter of interest computation was remanded back to the original authority for fresh assessment, and the appeal was disposed of accordingly.