2019 (3) TMI 1430 - AT - Service Tax

Reverse charge mechanism - Security Agency Services - N/N. 30/2012-ST, dated 20.06.2012 - it was alleged that the appellants are liable to discharge 100% of the service tax without opting for reverse charge mechanism - Held that - The appellants, who are the service providers have discharged 25% of the service tax, whereas, the service recipient has discharged and paid to the Government 75% of the service tax on services provided. Thus, it is not disputed that the services rendered by appellants have suffered service tax. Merely for the erroneous manner of discharging the service tax by opting for the benefit of N/N. 30/2012-ST, dated 20.06.2012 and discharging it to the Government under reverse charge mechanism, the demand has been raised - Since the service tax on the entire services has been paid to the Government, a further demand on such services cannot sustain. Penalty - Held that - The situation is contravention of the relevant provisions by wrongly availing the notification benefit. Taking this into consideration, the penalty of ₹ 6,105/- imposed is required to be sustained - The impugned order is, therefore, modified to the extent of setting aside the demand of service tax but upholding the penalty of ₹ 6,150/- imposed under section 76 of the Finance Act, 1994. Appeal allowed in part.

Summary

Issues:
Demand of service tax under reverse charge mechanism, applicability of Notification No.30/2012-ST, erroneous discharge of service tax, imposition of penalty.

Analysis:
The case involved a dispute regarding the demand of service tax on Security Agency Services, where the appellants had discharged only 25% of the service tax instead of the entire amount. The department contended that the appellants were not eligible for the benefit of Notification No.30/2012-ST as the service recipient did not fall under the specified category. The original authority confirmed a demand of &8377; 61,055/- along with interest and imposed a penalty. The Commissioner (Appeals) upheld the demand but reduced the penalty to &8377; 6,105/-.

The appellants argued that they had discharged the entire tax liability in collaboration with the service recipient, who had agreed to pay 75% of the service tax as per the notification. They contended that since the entire service tax had been paid to the government, demanding the full amount again would amount to double taxation. The appellants cited a relevant decision in support of their argument.

On the other hand, the department maintained that the notification applied only to services provided to a Body Corporate, and since the service recipient in this case did not fall under that category, the entire service tax should have been paid by the appellants under the forward mechanism. The department supported the findings of the impugned order, asserting that the demand, interest, and penalties imposed were lawful.

After hearing both sides, the Tribunal acknowledged that the services provided by the appellants had indeed incurred service tax, but the issue arose due to the incorrect application of the reverse charge mechanism under the notification. The Tribunal agreed with the appellants that demanding additional tax on services for which the tax had already been paid to the government was unjustifiable. However, considering the contravention of provisions by wrongly availing the notification benefit, the Tribunal upheld the penalty of &8377; 6,105/-. Therefore, the demand of service tax was set aside, but the penalty was maintained.

In conclusion, the Tribunal partly allowed the appeal by modifying the impugned order to set aside the demand of service tax while upholding the penalty imposed under section 76 of the Finance Act, 1994.