2018 (12) TMI 86 - AT - Service Tax

Extended period of limitation - no malafide intent - revenue neutral situation as whatever service tax was paid by the appellant was entitled for cenvat credit - paymnet of service tax with interest on being pointed out - penalty for the normal period - Held that - Whatever amount of service tax is to be paid by the appellant under reverse charge mechanism, the appellant entitled to avail cenvat credit. In that circumstances, relying on the decision of this Larger Bench in the case of Jay Yuhshin Ltd. 2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI , the extended period of limitation is not invokable. Penalty for the demand within normal period - Held that - The extended period of limitation is not invokable, consequently, for the demand within the period of limitation penalty is not imposable on the appellant - As extended period of limitation is not invokable, therefore, a show cause notice was not required to be issued to the appellant in terms of Rule 73 (3) of the Finance Act, 1994. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the extended period of limitation is invokable in the given case?
2. Can penalty under Section 77 & 78 be imposed on the appellant for the demand within the limitation period?

Analysis:

(A) Extended Period of Limitation:
The appellant appealed against an order confirming the demand of service tax, interest, and penalty under reverse charge mechanism for availing services from an advertising agency located outside India. The appellant argued that since the service tax paid was entitled to cenvat credit, no mala-fide intent could be attributed to them, making the extended period of limitation inapplicable. Citing a precedent from the case of Jay Yuhshin Ltd., it was held that the extended period of limitation is not invokable in such circumstances. Consequently, the demand related to the extended period was set aside, and no penalty was imposed.

(B) Penalty Imposition within Limitation Period:
Regarding the demand within the limitation period, the appellant contended that penalty under Section 77 & 78 should not be imposed as they had paid the service tax and interest during an audit. Since the extended period of limitation was deemed inapplicable, it was established that a show cause notice was not required to be issued to the appellant as per Section 73 (3) of the Finance Act, 1994. Consequently, it was determined that the show cause notice issued lacked jurisdiction, leading to the dropping of proceedings against the appellant. Therefore, it was concluded that no penalty could be imposed on the appellant for the demand within the limitation period.

In conclusion, the appeal was allowed, and the proceedings against the appellant were dropped due to the inapplicability of the extended period of limitation and the lack of jurisdiction in issuing the show cause notice.