2019 (8) TMI 388 - AT - Service Tax

Demand of service tax - commission paid to sales agent located abroad - reverse charge mechanism - benefit of N/N. 13/2003-ST - penalty - Invocation of extended period of limitation in the second SCN - HELD THAT - It has been already held by Hon'ble Bombay High Court in the case of INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA 2008 (12) TMI 41 - BOMBAY HIGH COURT that no demand can be sustained prior to 19.04.2006 as per Section 66A. Therefore the said demand for the period prior to 19.04.2006 is set-aside. Payment of commission in relation to agriculture product - Benefit of N/N. 13/2003-ST- HELD THAT - It is seen that Dehydrate onion is not covered by the said definition and Dehydrate onion cannot be called as agricultural produce. Dehydrate onion cannot be called as agricultural produce in terms of Notification No. 13/2003-ST. Notification No. 14/2004-ST dated 10.09.2004 is also not applicable in the instant situation as the service provided are not covered by any clause of the said notification. Invocation of extended period of limitation in the second SCN - HELD THAT - The appellant had resisted supplying documents and data. The facts are not disputed by the appellant and in these circumstances, there was suppression of facts and consequently, extended period has been rightly invoked, in the subsequent notice also. The entire demand for the period after 18.04.2006 is upheld - Penalty imposed under Section 78 is also revised as equal to the demand confirmed in the order - appeal allowed in part.

Summary

Issues:
Demand of service tax on commission paid on reverse charge basis; Applicability of Notifications No. 13/2003-ST and No. 14/2004-ST; Invocation of extended period in the second show cause notice.

Analysis:
The appeals were filed against the demand of service tax on commission paid on a reverse charge basis. The appellant argued that prior to 18.04.2006, when Section 66A was introduced, there could be no liability under reverse charge basis, citing the decision of the Bombay High Court. They claimed exemption under Notification No. 14/2004-ST for services related to agricultural products. The appellant also argued for the benefit of Section 80 of the Finance Act, 1994, for penalties and relied on the decision of the Supreme Court regarding the limitation period for the second show cause notice.

The Tribunal found that demand for the period before 19.04.2006 was not sustainable as per Section 66A and set it aside. Regarding Notification No. 13/2003-ST, it was observed that dehydrated onions did not qualify as agricultural produce under the notification's definition. The Tribunal also noted that Notification No. 14/2004-ST was not applicable to the services provided by the appellant.

The appellant's claim for the invocation of the extended period in the second show cause notice was analyzed. The Tribunal referred to a decision involving a similar issue and observed that in cases of fraud or suppression of facts, the extended period could be rightly invoked. It was concluded that for the period after 18.04.2006, the demand was upheld, and the penalty imposed under Section 78 was revised to be equal to the confirmed demand. The appeal was partly allowed based on the above findings.