2018 (5) TMI 1418 - AT - Service Tax

Penalty - Liability of service tax - incentive received for use of AMADEUS systems - Held that - taking note of the fact that the said issue was under litigation before Tribunal, the appellant was under bonafide belief that they are not liable to pay service tax - penalties do not sustain. Penalty - Liability of Service Tax - remuneration / commission received from insurance companies - Held that - taking into consideration that the issue being an interpretational one and the Board has also issued clarifications, the penalty requires to be set aside - penalties set aside. Penalty - CENVAT credit - common inputs - Rule 6(3)(c) of CCR 2004 - extended period of limitation - Held that - appellant contention that the demand being raised invoking extended period cannot sustain for the reason that there was no suppression of facts - when availing the credit, the appellant ought to have taken of the fact that they are availing credit on common input services for both taxable as well as non-taxable service - penalty set aside. The impugned order is set aside to the extent of setting aside the penalties on all the three issues without disturbing the demand of service tax or interest thereon - appeal allowed in part.

Summary

Issues:
1. Liability to pay service tax on incentive received for using AMADEUS systems
2. Liability to pay service tax on remuneration/commission received from insurance companies
3. Eligibility to avail CENVAT credit for the period from October 2006 to January 2008 or whether the demand is hit by limitation

Analysis:

Issue 1: Liability to pay service tax on incentive received for using AMADEUS systems
The appellant argued that they were not promoting the business of AMADEUS and, therefore, should not be liable for service tax. However, the Tribunal, citing a previous case, held that the appellant is indeed liable to pay service tax on the incentive received. Despite the appellant's belief, the penalties were set aside considering the ongoing litigation and the appellant's bonafide belief.

Issue 2: Liability to pay service tax on remuneration/commission received from insurance companies
The appellant contended that they believed the commission from insurance companies was taxable only if received by an insurance agent. However, the Tribunal ruled that the appellant is liable to pay service tax on this commission. The penalties were set aside due to the interpretational nature of the issue and clarifications issued by the Board.

Issue 3: Eligibility to avail CENVAT credit
The appellant availed credit on common inputs used for both taxable and non-taxable services, exceeding the permissible limit. The Tribunal held that the appellant should have utilized only 20% of the credit on common input services for non-taxable services. The penalties were set aside, but the demand for service tax and interest was upheld. The argument of no suppression of facts was rejected, and the extended period for demand was deemed valid.

In conclusion, the penalties were set aside for all three issues, but the demand for service tax and interest was maintained. The appeals were partly allowed based on the above terms.