2019 (2) TMI 382 - AT - Service Tax

Non-payment of service tax - expenditure in foreign currency, relating to Commission, Interest, Bank Charges and Other Misc. cheque - Reply to SCN not made - lock out in the factory - Held that - In response to the SCN dt. 22.10.2012, the appellant could not file a proper reply narrating their defense to the allegation leveled in the show cause notice. The reason for non-filing of reply as submitted by the appellant was due to lock out of their factory. Now the appellant filed a Chartered Accountant Certificate making out a prima facie case that the amount alleged in the show cause notice is not correct. The appellant must be provided an opportunity to submit their reply to the show cause notice - the appeal is allowed by way of remand to the adjudicating authority.

Summary

Issues Involved:
Appeal against Order-in-Original passed by Commissioner of Central Excise, Raigad regarding non-payment of service tax under reverse charge mechanism.

Analysis:
The appeal was filed against Order-in-Original No. 185/MAK/(185)COMMR/RGD/2013-14 alleging non-payment of service tax under reverse charge mechanism for the period 2007-08 to 2011-12. The appellant had incurred expenditure in foreign currency, including Commission, Interest, Bank Charges, and Other Misc. cheque amounting to ?589.24 lakhs. The demand of ?2,60,35,000/- was confirmed with interest and penalty. The appellant contended that their accounts were maintained on an accrual basis, and detailed remittance made towards bank charges could not be substantiated due to factory lockout. The appellant requested a remand to the adjudicating authority to file a proper reply with collected documents.

The Ld. Advocate for the appellant submitted that the accounts of Foreign Commission Agents were maintained on an accrual basis and not on actual receipt basis. He argued that the expenditure in foreign currency towards bank charges was equivalent to interest charges on finance provided by foreign banks. Due to factory lockout, a proper reply to the show cause notice could not be filed earlier. The appellant now submitted a Chartered Accountant Certificate supporting their defense. The Tribunal found merit in the appellant's request and set aside the impugned order, allowing the appeal by way of remand to the adjudicating authority. The appellant was given an opportunity to submit a reply to the show cause notice within six weeks from the date of communication of the order. All issues were kept open for further consideration.

In conclusion, the Tribunal allowed the appeal by way of remand, providing the appellant with an opportunity to submit a proper reply to the show cause notice. The appellant's argument regarding the maintenance of accounts on an accrual basis and the inability to substantiate foreign currency expenditure due to factory lockout was considered valid. The impugned order was set aside, and the matter was remanded to the adjudicating authority for further proceedings.