2019 (7) TMI 1072 - AT - Service Tax

Levy of service tax - reverse charge - foreign remittances - sponsorship services or not - Appellant claims that the amounts paid by them to UKEIRI were towards donations made by them to UKEIRI - HELD THAT - The invoice has been indicating British Council Trading and is issued against the contract number UKIERI for an amount of GBP 100,000/- towards payment of the fourth year re sponsorship fee for UKIERI. In our view the invoice itself justifies the correctness of the stand taken by revenue. If the invoice has been issued against a contract, appellant could have easily contradicted the stand taken by the revenue by producing the contract UKEIRI referred to in invoice. Since the contract against which the payments have been made has been not produced just by looking at antecedents of project UKEIRI, this amount can never be called as donation made - the details do not clearly establish the nature of the payments made. In absence of any conclusive evidence coming on record in respect of the payments made we are left with no option but to remit the matter back to Commissioner, after looking into contract under which this payment has been made - matter on remand. Club or Association Services - Amounts paid as membership fees to SPE - levy of service tax - time limitation - revenue neutrality - HELD THAT - In case of payment of the tax on reverse charge basis the services recipient steps into the shoes of the service provider and pays the tax as if he has himself provided the service. That transaction of is complete when the person paying the tax makes the payment for the service received and tax needs to be paid on receipt of service. Since the tax is paid by the service recipient by stepping into the shoes of service provider, even the persons paying the tax and taking the credit though have same identity differ and hence the principle of revenue neutrality should not apply to such cases - Since Commissioner has dropped the demand holding the same to be barred by limitation on ground of revenue neutrality we remit the matter back to Commissioner for examining the issue of limitation on the basis of other evidences adduced in the show cause notice for invoking extended period of limitation. Benefit of N/N. 17/2004-ST - recipient of service - HELD THAT - Commissioner has allowed the benefit of notification and dropped the demand in this respect. Revenue has challenged the order of Commissioner on the ground that the order of CESTAT relied upon by the Commissioner while extending the benefit is under challenge before the High Court of Bombay - there is no merits in the appeal of Revenue - benefit remains allowed. Penalty u/s 78 - revenue neutrality - HELD THAT - On the issue of revenue neutrality we have discussed the issue in substantial detail in para 5.4 and have held that revenue neutrality cannot be valid ground for non-payment/ short payment of taxes required to be paid under the reverse charge mechanism. Hence we do not find any merits in the order of Commissioner holding that for the reason of admissibility of CENVAT Credit in respect of the tax sought to be recovered the issue is revenue neutral - the Commissioner has himself rejected the arguments advanced by the respondents in respect of system inaccuracies and bonafide belief. Once the Commissioner has rejected such arguments then in respect of the amount of tax paid by the appellants during the investigation he could not have dropped the penal proceedings. Commissioner is necessarily mandated in the present case to record the findings in respect of the above referred para of show cause notice. If commissioner finds that that was has been stated in this para of show cause notice is correct, he has no option but to impose penalty equivalent to the duty demanded - Since order of Commissioner has not considered this aspect the matter needs to be remanded back to him for re-determination of the issue on limitation. Appeal allowed in part and part matter on remand.

Issues Involved:
1. Liability of the noticee to penalty for tax short paid before issuance of Show Cause Notice.
2. Liability to pay Service Tax on "Sponsorship services without benefit" and membership fees paid outside India.
3. Eligibility for exemption under Notification 17/2004-ST.
4. Imposition of penalty under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Liability to Penalty for Tax Short Paid:
The revenue questioned whether the noticee is liable to penalty for tax short paid before the issuance of the Show Cause Notice. The Commissioner did not impose a penalty, considering that the noticee had paid the tax and interest during the investigation. The revenue argued that penalties should apply as per precedents like Neminath Fabrics and Machino Montell (I) Ltd. The Tribunal noted that the ingredients for invoking extended periods of limitation are identical to those for imposing penalties under Section 78, as held by the Supreme Court in Rajasthan Spinning and Weaving Mills. The matter was remanded to the Commissioner for reconsideration on the basis of evidence provided in the Show Cause Notice.

2. Liability to Pay Service Tax on Sponsorship and Membership Fees:
The revenue contended that payments made to UKEIRI were for sponsorship services, as evidenced by invoices. The Tribunal found the invoice sufficient to prove the payment was not a donation but for services received. The matter was remanded to the Commissioner to examine the contract under which the payment was made.

Regarding membership fees paid to SPE, the Commissioner had held these fees liable to service tax under "Club or Association Services" but dropped the demand as time-barred. The Tribunal disagreed with the revenue neutrality argument and remanded the matter for further examination of the limitation issue.

3. Eligibility for Exemption under Notification 17/2004-ST:
The Commissioner allowed the benefit of Notification 17/2004-ST, which the revenue challenged on the grounds that the Tribunal's decision in Rochem Separation Systems Pvt Ltd was under appeal. The Tribunal upheld the Commissioner's decision, citing precedents like Cummins Technologies and United News of India, which stated that the benefit of the notification is available to the recipient of the service under Section 66A of the Finance Act, 1994.

4. Imposition of Penalty under Sections 76, 77, and 78:
The Commissioner dropped the penal proceedings, considering the situation as revenue neutral and citing inadvertence and interpretation differences. The Tribunal found the revenue neutrality argument invalid and noted the Commissioner had rejected the respondents' arguments regarding system inaccuracies and bona fide belief. The Tribunal remanded the matter to the Commissioner for re-determination based on the findings in the Show Cause Notice.

Summary of Findings:
1. Sponsorship Services: Remanded for consideration of the contract named UKEIRI.
2. Membership Fees: Remanded for consideration of the limitation issue.
3. Notification 17/2004-ST: Order of the Commissioner upheld.
4. Penalty under Section 78: Matter remanded.

Conclusion:
The Tribunal partly allowed the revenue's appeal and remanded the matter to the adjudicating authority for reconsideration of the issues as indicated. The order was pronounced in open court on 18.07.2019.

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