2018 (8) TMI 1595 - AT - Service Tax

Maintainability of appeal - appeal was dismissed on the ground of non-payment of predeposit - reverse charge mechanism for manpower supply service and professional consultancy charges remitted to foreign service provider - Held that - In case of non-payment of pre-deposit, appeal should not have been admitted or else rejected but dismissal of appeal without consideration of its merit requires re-adjudication since predeposit of 10% of penalty amount has already been paid at this end. It is surprising that appellant has not challenged the genuineness of duty liability before the adjudicating authority and promptly met the demand imposed on it that itself would give sufficient indication about the bonafideness of the appellant in discharging tax liability. As found from the record in respect of service availed from foreign agency also, there was short-payment noticed for a particular period and raised tax amount was promptly paid under the reverse charge mechanism. However without scrutinisation of the relevant document no definite opinion can be formed by this Tribunal regarding tax liability, of the appellant, if exist at all, which is a pre-requisite for imposition of penalty since the payment of duty demand may satisfy compliance of executive instructions and may not be in confirmity to Section 265 of the Constitution of India. The matter is remanded back to the Commissioner (Appeals) for disposal of the appeal on merits - appeal allowed by way of remand.

Summary

Issues: Appeal against adjudication order for tax liability under reverse charge mechanism challenged due to non-payment of pre-deposit.

Analysis:
1. Background and Adjudication Order: The appellant's appeal against the adjudication order confirming tax liability of ?2,16,994/- along with interest and penalty under reverse charge mechanism for manpower supply service and professional consultancy charges was rejected by the Commissioner (Appeals) for non-payment of pre-deposit.

2. Submission by Appellant: The appellant argued that since the tax liability was discharged, they believed pre-deposit was not required, resulting in the dismissal of the appeal by the Commissioner (Appeals) without being heard on merit. The appellant requested to be heard by the Tribunal or for the matter to be remanded back for re-adjudication by the Commissioner on merit.

3. Respondent's Justification: The respondent justified the Commissioner's order, stating that Section 35F mandates a pre-deposit of 7.5% of the penalty amount if only the penalty part is challenged in the appeal, and thus, the Commissioner's decision was in line with the law.

4. Tribunal's Analysis: The Tribunal noted that the appellant promptly paid the duty and interest upon audit report findings, without challenging it before the adjudicating authority or Commissioner (Appeals). The introduction of partial reverse charge mechanism for manpower services was discussed, highlighting the liability split between service provider and recipient as per notification No. 30/12 dated 20th June 2012.

5. Legal Position and Observations: The Tribunal examined the legal position, emphasizing the importance of challenging tax liability before imposition of penalties. It was noted that without scrutinizing relevant documents, a definite opinion on tax liability could not be formed. The Tribunal highlighted the need for adherence to constitutional provisions and the obligation of the Commissioner (Appeals) to state points for determination and reasons for decisions.

6. Decision and Order: The Tribunal allowed the appeal, setting aside the Commissioner (Appeals) order and remanding the matter back for disposal on merit. The order was pronounced in court on 27/08/2018.

This detailed analysis of the judgment showcases the issues involved, the arguments presented by both parties, the legal framework considered by the Tribunal, and the final decision reached, providing a comprehensive overview of the case.