2018 (4) TMI 1462 - AT - Service Tax

Penalty - revenue neutrality - Reverse charge mechanism - GTA services - commission paid to commission agent situated abroad - Held that - the appellant has been taking consistent stand before the lower authorities that even if the service tax liability needs to be discharged they are eligible to avail the same as CENVAT credit as the services of GTA and the commission agent s services were in relation to the manufacturing of final products - revenue neutrality being a situation, there would not be any willful suppression of fact. Revenue neutrality argument can be claimed for setting aside the penalty. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against service tax liability under reverse charge mechanism for 'manpower supply agency services', 'GTA services', and 'commission paid to commission agent situated abroad'. Dispute over penalties imposed by lower authorities.

Analysis:
The appeals were filed against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Pune, regarding the service tax liability under reverse charge mechanism for specified services. The adjudicating authority confirmed the demand raised, along with interest and penalties. The first appellate authority dropped the demand for 'manpower supply agency services' but upheld it for 'GTA services' and 'commission paid to commission agent situated abroad', along with interest and penalties.

The appellant contended that they had discharged the service tax liability and interest for GTA and commission agent's services through adjustments made by Revenue authorities against sanctioned rebates. They challenged only the imposition of penalties by the lower authorities. Citing legal precedents, the appellant argued that the service tax liability under reverse charge mechanism could be offset as CENVAT credit, especially in cases of revenue neutrality. The appellant relied on decisions such as Commissioner of Central Excise v. Telco Tenneco RC India Pvt. Ltd., Nirlon Ltd. v. Commissioner of Central Excise, and others to support their position.

On the other hand, the Authorized Representative argued that the eligibility for CENVAT credit and revenue neutrality should not excuse non-payment of service tax. They maintained that confirmed demands necessitated the discharge of service tax liability, and any failure to do so due to suppression of facts warranted penalties. After considering the submissions, the Tribunal focused on the issue of penalties. The Tribunal noted the appellant's consistent stance on claiming CENVAT credit for service tax liabilities related to manufacturing activities, citing revenue neutrality as a valid argument against willful suppression of facts.

Ultimately, the Tribunal agreed with the appellant's position, emphasizing that the law, as established by various decisions, allowed for the revenue neutrality argument to set aside penalties. Relying on the legal precedents cited, the Tribunal held that the penalties imposed on the appellant should be set aside, thereby overturning the impugned orders that upheld the penalties.