2018 (2) TMI 747 - AT - Service Tax

Short payment of service tax - main point of the demand notice is that the appellant-assessee did not discharge the Service Tax on the full consideration shown as income in their accounts for rendering various taxable services - Held that - Concept of reverse charge has been examined and upheld for the service imported by the appellant-assessee. We are in agreement with the learned AR that mere non mentioning of legal provision will not vitiate the proceedings when the gist of the provisions is available in the allegation and discussions recorded in the impugned order. Revenue neutrality - Held that - Revenue neutrality per se cannot be a ground for non payment of any tax which is otherwise payable. If the view of the appellant is accepted then the basis of Cenvat Credit Rules, 2004 will became redundant - appeal of assessee dismissed. Penalty u/s 78 - Held that - There is a categorical, factual finding in the impugned order to the effect that the show cause notice did not allege any conscious act on the part of the appellant-assessee which will constitute fraud, collusion or willful misstatement etc. with intend to evade payment of tax - penalty not leviable. Appeal disposed off.

Issues:
1. Tax liability on import of service under reverse charge mechanism.
2. Imposition of penalty under sections 77 and 78.
3. Non-mentioning of specific legal provisions in the proceedings.
4. Revenue neutrality concept and its impact on tax payment.

Analysis:

1. Tax liability on import of service under reverse charge mechanism:
The case involved an appeal by both the department and the assessee against the order of the Commissioner of Service Tax. The appellant, engaged in providing various taxable services, was accused of short payment of Service Tax for the period 2005-2011. The main contention was regarding the tax liability of ?18,72,421 attributable to reverse charge/import of service. The appellant argued that the demand notice did not correctly invoke the statutory provisions and that the Service Tax payable on reverse charge was available as credit, hence no need for the demand. However, the Revenue contended that the demand for reverse charge was correctly examined and confirmed by the original authority. The Tribunal upheld the tax liability under reverse charge, stating that the absence of specific legal provision mention does not invalidate the proceedings if the essence of the provisions is present in the order.

2. Imposition of penalty under sections 77 and 78:
The original authority confirmed the Service Tax liability but did not impose penalty under section 78 due to the absence of intentional fraud by the appellant. The penalty under section 77 was imposed for late filing of returns. The Tribunal agreed with the original authority's decision on penalty imposition, noting that there was no conscious act to defraud the government, and the appellant had paid the tax regularly. The Revenue's appeal against the non-imposition of penalty under section 78 was dismissed.

3. Non-mentioning of specific legal provisions in the proceedings:
The appellant argued that the non-mentioning of Section 66A in the proceedings rendered the tax liability unsustainable. However, the Tribunal held that the absence of specific legal provision reference does not invalidate the proceedings if the essence and basis for the tax liability confirmation are evident in the order. The Tribunal found no legal merit in the appellant's argument and upheld the tax liability under reverse charge.

4. Revenue neutrality concept and its impact on tax payment:
The concept of revenue neutrality was discussed concerning the appellant's argument that the tax payable on reverse charge was available as credit, hence no need to confirm the demand. The Tribunal emphasized that revenue neutrality cannot be a ground for non-payment of tax, as it would undermine the basis of the Value Added Tax system. The Tribunal dismissed the appellant's appeal, stating that the flow of tax credit in a VAT system does not exempt a taxpayer from paying due taxes.

In conclusion, the Tribunal dismissed both appeals, upholding the tax liability under reverse charge, confirming the penalty under section 77, and agreeing with the non-imposition of penalty under section 78 based on the absence of intentional fraud by the appellant.

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