2024 (9) TMI 1652 - AT - Service Tax

Service Tax under Reverse Charge Mechanism - all the expenditure are booked under the head of legal and professional fees - HELD THAT - We find that the appellant has made out a prima facie case in as much as they have clearly shown the bifurcation of the expenses booked under the head of legal and professional charges in their books of account. Merely because the appellant have booked the expenses of various professional under one head that is legal and professional charges this cannot be the reason to demand Service Tax from the appellant under Reverse Charge Mechanism on the assumption that all the expenses booked under the said head is towards the legal fees. Appellant have produced the chart whereby it is explicit that the major amount pertains to various other professions such as Chartered Accountant, Chartered Engineer etc. for which the appellant is not liable to pay Service Tax under Reverse Charge Mechanism in terms of Section 68(2) r/w Notification No. 30/2012-ST. however, this clear bifurcation has not been submitted by the appellant before the adjudicating authority therefore the matter needs to be reconsidered by the adjudicating authority on all the issues. Therefore, allow the appeal by way of remand to the adjudicating authority. Since the appeal pertains to very old period of 2017 and the period involved is July-2012 to November-2015 the adjudicating authority shall pass de novo order within a period of two months from the date of this order.

Summary

Issues:
Interpretation of Service Tax liability under Reverse Charge Mechanism for legal and professional expenses.

Analysis:
The case involved a dispute regarding the Service Tax liability of the appellant under Reverse Charge Mechanism for expenses booked under legal and professional fees. The department contended that all expenses under this head made the appellant liable for Service Tax. However, the appellant argued that not all expenses were towards legal fees and that they had paid Service Tax for fees to legal professionals. The appellant also claimed that for expenses to other professionals, Service Tax was payable on forward charges. The appellant provided a bifurcation of expenses, showing which amounts were for legal fees and which were for other professionals. The appellant emphasized that they were engaged in manufacturing excisable goods and could avail Cenvat Credit for any Service Tax paid. The appellant cited various judgments to support their case.

In the judgment, the Tribunal noted that the appellant had clearly shown a bifurcation of expenses in their books of account. The Tribunal acknowledged that just because expenses were booked under legal and professional charges did not automatically make the appellant liable for Service Tax under Reverse Charge Mechanism. The Tribunal found merit in the appellant's argument that the major amount of expenses pertained to various other professions, such as Chartered Accountants and Chartered Engineers, for which Service Tax was not payable under Reverse Charge Mechanism. However, the Tribunal highlighted that the clear bifurcation provided by the appellant was not submitted before the adjudicating authority, necessitating a reconsideration of the matter on all issues.

As a result, the Tribunal set aside the impugned order and allowed the appeal by remanding the case to the adjudicating authority. Due to the case's age, the adjudicating authority was directed to pass a fresh order within two months from the date of the Tribunal's order, covering the period from July 2012 to November 2015.

This judgment underscores the importance of proper documentation and submission of relevant evidence before the adjudicating authority to support claims regarding Service Tax liability. It also highlights the need for a thorough review of all issues by the adjudicating authority to ensure a fair and just decision.