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2018 (11) TMI 1389 - AT - Service TaxReverse charge mechanism - various services received from overseas - revenue neutrality - time limitation - Held that - In respect of the Service Provided from the overseas the liability of payment of Service Tax is on the recipient of service in India, in terms of Rule, 2(1)(d)(iv) of Service Tax Rules, 1994 read with Section 66A of the Finance Act, 1994. Therefore, on merit the Service Tax liability is on the appellant. Time Limitation - Held that - The demand amount of approximate 17.5 Lakhs is also available as a Cenvat Credit to the appellant, to that extent the Service Tax payment in cash will stand reduced. Therefore, this is a clear case of Revenue neutrality - the issue of Revenue neutrality has been considered in various judgments cited by the appellant in particular Larger Bench judgment in the case of JAY YUHSHIN LTD 2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI , according to which if there is a case of Revenue Neutrality the longer period cannot be invoked. Penalty also set aside on account of absence of malafide intent on the part of appellant. The demand for the extended period is not sustainable, the same is set aside - If there is any amount of Service Tax arising in the normal period of limitation only that much amount is payable - appeal allowed - decided in favor of appellant.
Issues: Service tax liability on overseas services, applicability of Rule 2(1)(d)(iv) of Service Tax Rules, 1994, demand for service tax, Cenvat credit entitlement, revenue neutrality, limitation period for demand, malafide intention, penalty imposition.
Analysis: 1. The case involved the appellant making payments to various overseas entities for services like banking, financial services, management consultancy, and technical inspection certification. The issue was whether these services were liable for service tax under Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, and Section 66A of the Finance Act, 1994. A show cause notice was issued demanding service tax, which was confirmed by the adjudicating authority, leading to the appeal before the Commissioner (Appeals) and subsequently before the CESTAT Ahmedabad. 2. The appellant argued that they were engaged in mining services and had paid service tax on their transactions, with a significant portion paid in cash and some through Cenvat. The appellant claimed entitlement to Cenvat credit on the service tax demanded, asserting revenue neutrality and no malafide intention. The appellant cited various judgments to support their case, emphasizing the applicability of revenue neutrality principles in determining the demand for service tax and the limitation period for such demands. 3. The Revenue, represented by the Assistant Commissioner, reiterated the findings of the impugned order, supporting the demand for service tax on the overseas services provided to the appellant. 4. The CESTAT considered the submissions of both parties and reviewed the records. It held that the liability for service tax on overseas services rested on the recipient in India as per Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, and Section 66A of the Finance Act, 1994. While acknowledging the service tax liability on the appellant, the CESTAT also noted that a significant portion of the service tax had been paid in cash, with a smaller amount paid through Cenvat. This led to a finding of revenue neutrality, where the demand amount was available as a Cenvat credit to the appellant, reducing the cash payment liability. The CESTAT emphasized that the case demonstrated revenue neutrality, citing relevant judgments, and concluded that the demand for the extended period was not sustainable due to the revenue-neutral nature of the transactions. 5. Consequently, the CESTAT set aside the demand for the extended period, ruling that only the amount arising within the normal limitation period was payable. As there was no finding of malafide intention on the part of the appellant, any penalty related to the recoverable service tax amount was also set aside. The appeal was allowed in favor of the appellant, with the decision pronounced in open court on 26/11/2018.
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