2019 (2) TMI 1309 - AT - Service Tax

Short-payment of service tax - freight charges - consulting engineering service to the concerned persons / clients as per the Slump Sale Agreement - time limitation - Held that - When the appellant has taken up the business of NEPC, which includes assets as well as liabilities, they have to establish with concrete evidence that the liability to discharge service tax is retained by NEPC. In the present case, as agreed by the Slump Sale Agreement, the appellants have to pay up the amount to the clients under GTA service as well as Consulting Engineering Service. Therefore, they are liable to pay the service tax on these amounts under reverse charge mechanism - on merits, the apellant falls. Time Limitation - Held that - In the present case, the services were availed by NEPC and thereafter the payments were made by appellant pursuant to the Slump Sale Agreement. It is also seen that there is no specific stipulation in the agreement with regard to the burden to discharge the service tax liability - Further, in all the letters issued by the appellant to the department, they have given the details of the payments made and also clarified that they are making the payments in accordance with Slump Sale Agreement - the appellant cannot be saddled with the guilt of suppression of facts with intention to evade payment of service tax - SCN issued extended period cannot sustain - appellant succeeds on the ground of limitation. The impugned order is set aside on the ground of limitation - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of the appellant to pay service tax on freight charges and consulting engineering services.
2. Applicability of the reverse charge mechanism.
3. Grounds of limitation for invoking the extended period.

Analysis:
1. The appellant argued that as per the Slump Sale Agreement, they only took over the assumed liabilities, which did not explicitly include the obligation to pay service tax. However, the Tribunal held that by acquiring the business of NEPC, including its liabilities, the appellant is liable to pay service tax on the freight charges and consulting engineering services under the reverse charge mechanism. The Tribunal found the appellant's contention unconvincing and ruled against them on this issue.

2. The appellant further contended that they should not be held responsible for the service tax liability as they did not receive the services directly. The Tribunal disagreed, emphasizing that the appellant made payments to the clients as per the Slump Sale Agreement, thereby assuming the liability for service tax under the reverse charge mechanism. The Tribunal upheld the liability of the appellant for the service tax on these payments.

3. Regarding the issue of limitation, the appellant argued that the show cause notice was issued beyond the statutory period and that they had provided all relevant details to the department in a timely manner. The Tribunal acknowledged that the appellant had disclosed the payments made and clarified their compliance with the Slump Sale Agreement in their correspondence with the department. Consequently, the Tribunal held that the appellant cannot be accused of suppressing facts to evade service tax payment. The Tribunal set aside the show cause notice issued beyond the limitation period in favor of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant on the grounds of limitation, setting aside the impugned order and allowing the appeal with consequential relief. The Tribunal emphasized the appellant's liability to pay service tax on the freight charges and consulting engineering services under the reverse charge mechanism, rejecting the appellant's arguments to the contrary.