2019 (4) TMI 244 - AT - Service Tax

Non-payment of service tax - Management Consultant Services received form the overseas providers - Business Auxiliary Services provided in India - Held that - The words The Central Excise Officer used in Section 73 (1) & 73 (2) of Finance Act, 1994 cannot be read to be the same officer. It suffices if a Central Excise Officer is vested with such powers becomes The Central Excise Officer for the purposes of the Sections referred above. It is not the case of the appellants that the ADG, DGCEI issued the SCN and the Commissioner of Central Excise who adjudicated the case is not Central Excise Officers. In bureaucracy, officers keep on changing due to transfers, etc. If one considers the proposition that the same officer who has issued the SCN should adjudicate the case leads to an impracticable situation. Reverse charge mechanism - services availed from a provider located outside India - Liability of service tax - Held that - The appellants are not required to pay Service Tax under reverse charge mechanism for the period prior to 18.04.2006 even though a payment for the part of the period was received after 18.04.2006. Liability of service tax - commission charges received - Cum-duty benefit - Held that - The appellants are entitled for cum-duty benefit for the Service Tax payable or paid by them for the period 09.07.2004 to 31.03.2007. For this reason issue needs to go back to the adjudicating authority to compute the cum-duty Service Tax for the period 09.07.2004 to 31.03.2007. Extended period of limitation - penalty - Held that - The appellants have not demonstrated their bonafides vis- -vis invocation of extended period. It is not the case of the appellants that they have kept the Department informed of all their activities and made a mention of the same in the CT-3 Returns. In the absence of the same, the Department would have no way to find out the taxable services rendered by the appellants and the remuneration received. Therefore, the extended period is squarely invokable in the case - the penalty cannot be imposed under both Sections 76 & 78 of the Finance Act, 1994 during the relevant period. Therefore, the penalties imposed under Section 76 is set aside. Appeal allowed by way of remand.

Summary

Issues:
1. Jurisdiction of the Central Excise Officer in issuing Show Cause Notice (SCN) and adjudicating the case.
2. Liability to pay Service Tax under the 'reverse charge mechanism' for services received from overseas providers.
3. Taxability of commission charges received by the appellants.
4. Invocation of extended period for tax assessment and imposition of penalties under Sections 76 & 78 of the Finance Act, 1994.

Jurisdiction Issue:
The appellants challenged the jurisdiction of the Central Excise Officer in issuing the SCN and adjudicating the case, citing a distinction between concurrent and joint exercise of power. They argued that a delegate cannot further delegate, supported by legal precedents. However, the Tribunal clarified that the power vested in a Central Excise Officer suffices for the purpose of Sections 73(1) and 73(2) of the Finance Act, 1994. The Tribunal emphasized that the same officer need not issue the SCN and adjudicate the case, as officers may change due to transfers, and upheld the validity of the issue as per the decision of the Hon'ble Allahabad High Court.

Liability under Reverse Charge Mechanism:
Regarding the liability to pay Service Tax under the 'reverse charge mechanism' for services received from overseas providers, the appellants argued that payments made before 18.04.2006 should not be taxed. They cited relevant cases to support their position. The Tribunal agreed with the appellants, ruling that Service Tax was not applicable under the 'reverse charge mechanism' for services received before 18.04.2006, even if payments were made after that date.

Taxability of Commission Charges:
The issue of taxability of commission charges received by the appellants was discussed. The appellants contended that commission received in foreign currency should not be taxable, citing legal positions. The Tribunal agreed that commission received in foreign currency is not taxable. However, for a specific period where payments were received in Indian currency, the Tribunal did not accept the argument that it should be treated as export of services. The case was remanded to compute the Service Tax payable for that period, considering cum-duty benefits.

Extended Period and Penalties:
The Tribunal considered the invocation of an extended period for tax assessment and the imposition of penalties under Sections 76 & 78 of the Finance Act, 1994. The appellants claimed a bona fide belief in the non-applicability of Service Tax, arguing against the invocation of the extended period and penalties. However, the Tribunal found that the appellants had not demonstrated their bonafides adequately to avoid the extended period. Penalties under Section 76 were set aside, but penalties under Section 77 were upheld, and penalties under Section 78 were restricted to the duty computed.

In conclusion, the Tribunal partly allowed the appeal by setting aside the demand for taxable services under 'Management Consultancy Services' and penalties. The demand for 'Business Auxiliary Services' was confirmed for a specific period, subject to cum-duty benefit computation. Penalties under Section 76 were set aside, while penalties under Section 77 were upheld, and penalties under Section 78 were limited to the duty computed.