2022 (9) TMI 272 - AT - Service Tax

Invocation of extended period of limitation - marketing and legal services obtained by the appellant from services providers located abroad - reverse charge mechanism - revenue neutrality - HELD THAT - In the instant case, the appellant had shown service tax liability in their balance sheet and the same has not been disputed. Also it is seen in the case of Jayshree Impex 2018 (9) TMI 391 - CESTAT AHMEDABAD relied by revenue the issue of revenue neutrality has not been raised by the appellant. It is seen that the services of the sales commission are ordinarily admissible as cenvat credit to manufacturers and therefore the present situation would be revenue neutral. In these circumstances the intention to evade duty cannot be alleged against the appellant and consequently the extended period of limitation could not be invoked. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of demand of service tax, interest, and imposition of penalty; Invocation of extended period of limitation for service tax liability on reverse charge basis.

Analysis:
The appeal was filed against the confirmation of demand of service tax, interest, and penalty by M/s. Nabros Pharma Pvt Ltd. The appellant engaged in manufacturing pharmaceutical products and availed the services of an overseas agent for procuring export orders, making payments under the head of commission during 2003-2007. The demand of service tax was raised amounting to Rs. 22,93,231/- invoking the extended period of limitation for service tax liability on reverse charge basis.

The appellant argued that the extended period of limitation was invoked despite confusion in the field formation and trade regarding the liability to pay service tax on a reverse charge basis. They believed no service tax was payable on a reverse charge basis, relying on relevant legal decisions. The Revenue contended that the liability existed from 18.04.2006 upheld by legal precedents.

The Tribunal found a liability of service tax on a reverse charge basis but considered if the extended period of limitation could be invoked. The appellant's bona fide doubt regarding service tax liability was noted, as they had paid service tax on similar services from 2003 onwards. The Tribunal highlighted that the decision in a relevant case clarified doubts in 2009.

In a similar case, the Tribunal granted benefit by observing a revenue-neutral situation due to admissible cenvat credit on sales commission services. It was concluded that the intention to evade duty could not be alleged against the appellant, and hence, the extended period of limitation could not be invoked. Consequently, the demand was set aside, and the appeal was allowed.

The Tribunal also set aside penalties imposed under Section 78 and Section 76, citing legal judgments supporting their decision. The demand was fully set aside, and the appeal was partly allowed.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand and penalties imposed, based on the absence of intention to evade duty and the revenue-neutral nature of the transactions.