2019 (10) TMI 688 - AT - Service Tax

Levy of service tax - Intellectual Property Rights Services - Consulting Engineering Service - reverse charge mechanism during the period 2003-2008 - extended period of limitation - HELD THAT - The entire amount of service tax demand along with interest has already been paid and the assessee has also availed CENVAT Credit of the service tax so paid - Ld. Counsel is not pressing for setting aside of the demand of service tax. Imposition of penalties - HELD THAT - This is a case of revenue neutrality where the very same assessee would be entitled to CENVAT Credit of the service tax paid under reverse charge mechanism. There cannot be any motive to evade payment of service tax - penalties set aside. Appeal allowed in part.

Summary

Issues:
- Liability to pay service tax under reverse charge mechanism for services received from abroad.
- Invocation of extended period of limitation for demand of service tax.
- Imposition of penalties under sections 77 & 78 of the Finance Act, 1994.
- Applicability of Section 80 of the Finance Act, 1994 for waiving penalties.

Liability to Pay Service Tax under Reverse Charge Mechanism:
The appellant, engaged in manufacturing various products, received services from abroad, leading to a demand for service tax under reverse charge mechanism for the period 2003-2008. The appellant argued that demand for service tax prior to 18.04.2006 should be set aside based on precedents. The Tribunal noted that the service tax demand, along with interest, was already paid by the appellant, who also availed CENVAT Credit of the same amount. Consequently, the appellant did not press for setting aside the demand of service tax.

Invocation of Extended Period of Limitation:
The appellant contested the invocation of the extended period of limitation post 18.04.2006, citing lack of evidence of intention to evade payment of service tax. The Tribunal acknowledged the appellant's position that the exercise was revenue neutral since they would be entitled to CENVAT Credit of the service tax paid. Considering the absence of motive to evade payment, the Tribunal found a reasonable ground to waive the penalties imposed under sections 77 & 78 of the Finance Act, 1994.

Imposition of Penalties under Sections 77 & 78:
The Department reiterated the correctness of the demands and penalties imposed. However, the Tribunal, after considering both sides' arguments and perusing the records, concluded that the case demonstrated revenue neutrality. As the appellant had already paid the service tax and was entitled to CENVAT Credit, the Tribunal found no motive to evade payment, leading to the invocation of Section 80 to waive the penalties imposed.

Applicability of Section 80 of the Finance Act, 1994:
In light of the above considerations, the Tribunal set aside the penalties imposed in the impugned order, invoking Section 80 of the Finance Act, 1994. Consequently, the appeal was partly allowed, and the penalties were waived due to the revenue-neutral nature of the case.