2020 (7) TMI 638 - AT - Service Tax

Imposition of penalty u/s 76 and 78 of FA - Non-payment of service tax - Business Auxiliary Services - appellant is incurring commission amount for payment to the selling agents located outside India - period June 2005 to March 2009 - demand paid on being pointed out, before issuance of SCN - Revenue Neutrality - HELD THAT - The applicability of service tax on commission amount paid to the service provider located outside India is not in dispute. The assessee has already deposited the service tax with applicable interest well before the issue of SCN - also, the levy of service tax on services received from outside India was a new concept and the same was made applicable only w.e.f. April 2006. There was an ignorance on the part of the assessees regarding the service tax liability on import of services from outside India. The appellant herein immediately discharged payment of service tax on being pointed out without disputing the tax liability. Revenue Neutrality - HELD THAT - The service tax amount if paid would have been available as credit or refund since the same has been used in making export of goods and the situation would have been revenue neutral. Penalty set aside - other part of demand upheld - appeal allowed in part.

Issues:
Appeal against demand of service tax, applicability of service tax on commission amount paid outside India, imposition of penalty, waiver of penalty.

Analysis:
The judgment pertains to an appeal filed by an assessee against the demand of service tax amounting to ?9,89,709/- along with interest and penalty for the period June 2005 to March 2009. The issue revolved around the applicability of service tax on commission amount paid to selling agents located outside India under the category of Business Auxiliary Services. The Department initiated an enquiry regarding the non-payment of service tax, leading to a Show Cause Notice (SCN) and subsequent confirmation of the demand. The appellant contended that they were unaware of the tax liability initially but promptly paid the service tax along with interest upon realization of the obligation. The appellant argued that the tax amount was utilized in procuring export orders and thus should be considered for input service credit or refund, emphasizing the principle of revenue neutrality. The appellant sought waiver of penalty citing absence of wilful suppression or fraud.

The Tribunal acknowledged that the applicability of service tax on the commission amount paid outside India was not disputed. It noted that the appellant had paid the service tax along with interest before the issuance of the SCN, attributing the non-payment to ignorance rather than wilful evasion. Referring to legal precedents, the Tribunal highlighted that ignorance of law, while not a valid defense, does not necessarily indicate wilful suppression. Citing a case, it emphasized that in revenue-neutral situations, there cannot be willful suppression. The Tribunal agreed with the appellant's argument that the service tax amount, if paid, would have been eligible for credit or refund due to its utilization in exporting goods, maintaining a revenue-neutral stance. Considering the provisions of Section 80 of the Finance Act, 1994, the Tribunal found no justification for imposing a penalty and hence waived the penalty amount. Referring to a relevant case, the Tribunal set aside the penalty imposed on the assessee under Sections 76 and 78, invoking the provisions of Section 80 due to reasonable cause for non-payment of service tax on imported services.

In conclusion, the Tribunal partially allowed the appeal by setting aside the penalty amount imposed in the impugned order, emphasizing the absence of wilful suppression or fraud, and considering the revenue-neutral nature of the situation where the service tax amount had been paid before the issuance of the SCN.

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