2019 (6) TMI 328 - AT - Service Tax

Extended period of limitation - malafides on the part of the appellant - demand of service tax - Business Auxiliary Service - appellant paid certain commission to their overseas agent, who was procuring the purchase order for the appellant - reverse charge mechanism - HELD THAT - Whatever service tax would have been paid by the appellant, the same is entitled as the Cenvat credit to the appellant. This fact is not in dispute, therefore, malafides on the part of the appellant are missing for non-payment of service tax under reverse charge mechanism - the extended period of limitation is not invokable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against demand of service tax confirmed by invoking extended period of limitation.
- Liability to pay service tax under reverse charge mechanism.
- Allegation of malafide intention and suppression by the appellant.
- Entitlement to Cenvat credit for the service tax paid.
- Validity of show cause notice issued by invoking extended period of limitation.

Analysis:

1. Demand of Service Tax Confirmed by Invoking Extended Period of Limitation:
The appellant contested an impugned order confirming the demand of service tax under the category of 'Business Auxiliary Service' by invoking the extended period of limitation. The issue arose from the non-payment of service tax on commissions paid to overseas agents during the export of excisable goods. The appellant was issued a show cause notice for the period 2006-07 and 2008-09, alleging suppression of facts and non-payment of service tax, leading to the imposition of penalties. The Tribunal deliberated on the validity of the extended period of limitation in this context.

2. Liability to Pay Service Tax Under Reverse Charge Mechanism:
The appellant acknowledged their liability to pay service tax under the reverse charge mechanism but contested the issuance of the show cause notice invoking the extended period of limitation. The appellant had paid the service tax along with interest upon audit pointing out the omission. The contention was that the appellant should have been entitled to Cenvat credit for the service tax paid, indicating the absence of malafide intention in non-payment.

3. Allegation of Malafide Intention and Suppression:
The authorized representative alleged malafide intention on the part of the appellant for failing to pay service tax under the reverse charge mechanism despite being aware of the obligation. The argument was centered on the appellant's knowledge of the liability and the subsequent issuance of the show cause notice based on suppression of facts.

4. Entitlement to Cenvat Credit for the Service Tax Paid:
The Tribunal recognized the appellant's entitlement to Cenvat credit for the service tax paid, which was not in dispute. This acknowledgment played a crucial role in determining the absence of malafides in the appellant's actions regarding the non-payment of service tax under the reverse charge mechanism.

5. Validity of Show Cause Notice Issued by Invoking Extended Period of Limitation:
After considering the submissions from both sides, the Tribunal concluded that the extended period of limitation was not applicable in this case. Citing precedent, the Tribunal held that malafides were absent in the appellant's actions, and set aside the impugned order, allowing the appeal with consequential relief.

6. Conclusion:
The judgment by the Tribunal, delivered by Mr. Ashok Jindal, Member (Judicial), emphasized the importance of Cenvat credit entitlement and the absence of malafide intention in determining the liability of the appellant regarding the payment of service tax under the reverse charge mechanism. The decision to set aside the impugned order highlights the significance of considering all relevant factors, including the applicability of the extended period of limitation, in tax disputes.