2024 (12) TMI 285 - AT - Service Tax

Non-payment of service tax - Business Auxiliary Service - Commercial Training or Coaching Services - Extended period of limitation - interest and penalties. Business Auxiliary Service - Commercial Training or Coaching Services - HELD THAT - It is observed that the adjudicating authority has appropriated only Rs.3,05,00,000/-. The Appellant submitted that initially, they have paid Rs. 3,05,00,000/- and balance Rs. 33,87,824/- was paid subsequently in instalments. Thus, they requested for the appropriation of the remaining amount of service tax paid. In this regard, it is observed that the Ld. Adjudicating authority has recorded in para 3.2.2 of the impugned order, wherein he observed that initially the appellant has paid Rs.3,05,00,000/- and subsequently they have paid Rs.33,87,824/- after issue of the Notice. Thus the entire payment amounting to Rs.3,39,72,906/-stands paid and the same is acknowledged by the adjudicating authority in the impugned order. Since the entire payment of Rs. Rs.3,39,72,906/- has already been paid, the same is appropriated against their liability under the category of 'Consulting Engineer's Service, Erection, Commissioning or Installation Service and GTA Service . Demand of service tax of Rs.24,38,975/- under the category of Business Auxiliary Services - HELD THAT - It is observed that the Appellant has rendered service to M/s. Thales, which is having its establishment outside India. It is observed that the services rendered by them, namely, business auxiliary service, falls under Rule 3(1)(iii) of Export of Services Rules, 2005. As per the clarification issued by Board Circular 111/05/2009-ST dated 24.02.2009, the relevant factor that decides whether the service rendered is 'export of service' is the location of the service receiver and not the place of performance of the service. In this case, the training has been received abroad and hence the services rendered are received abroad. Thus, the services rendered fall within the ambit of 'export of service' and accordingly, it is held that no service tax is payable by them on such services. Demand of service tax of Rs.4,23,586/- under the category of Commercial Training or Coaching Services - HELD THAT - It is observed that the appellant has sent their personnel abroad for training and the expenditure in foreign currency was incurred for training their personnel abroad. Thus, the service was received by the appellant in a foreign country which is not liable for service tax in India. Accordingly, the demand of service tax under the category of 'Commercial Training or Coaching Services' is not sustainable. Demand of interest for extended period of limitation - HELD THAT - There is no suppression of facts with intention to evade the tax established in this case. The entire demand has been raised on the basis of the information available in their Balance Sheet and Profit and Loss Account. In such circumstances, the extended period of limitation not invokable. However, the appellant has paid the service tax demanded for the extended period also. The Appellant submitted that they will not claim any refund of the service tax already paid for the extended period and prayed for waiver of interest. It is observed that, just because the appellant has paid service tax including the extended period of limitation, the interest also cannot be demanded for the service tax voluntarily paid by them for the extended period, which is otherwise not payable - the Appellant is not liable to pay interest for the service tax paid by them for the extended period of limitation. Interest under Section 75 of the Finance Act, 1994, for the delay in payment of service tax in respect of the normal period - HELD THAT - The Appellant have submitted, vide letter dated 13.11.2024, that they have paid interest amounting to Rs.21,32,542/- for the delay in payment of service tax for the normal period of limitation. They have enclosed copy of the e-Receipt Challan bearing CTIN No. 2409692124 pertaining to the above payment in support of their claim. Accordingly, the interest of Rs.21,32,542/- paid by them appropriated towards their interest liability. Imposition of penalty under Section 78 of the Act - HELD THAT - It is observed that initially the Appellant has not paid the Service Tax under reverse charge mechanism. However, when the liability was pointed out, the Appellant accepted their liability and discharged Service Tax thereof. Thus, there is no suppression of facts with intent to evade payment of Service Tax existing in this case - the penalty imposed on the Appellant under Section 78 of the Finance Act, 1994 is set aside. Penalties under Section 77(1)(a) and Section 77(2) of the Act are imposed for non-registration and non-filing of ST-3 returns - HELD THAT - It is observed that these penalties have been rightly imposed and we have no reason to interfere with these penalties imposed. Accordingly, the same are upheld. Appeal disposed off.

Summary

Issues Involved:

1. Demand of Service Tax under various categories.
2. Appropriation of Service Tax payments.
3. Applicability of Export of Services Rules, 2005.
4. Liability for interest and penalties.
5. Invocation of the extended period of limitation.

Issue-wise Detailed Analysis:

1. Demand of Service Tax under Various Categories:

The Appellant was issued a Show Cause Notice alleging non-payment of Service Tax amounting to Rs.3,68,35,466/- for services rendered from 2007-08 to 2011-12, including 'Consulting Engineer's Service', 'Business Auxiliary Services', 'Commercial Training or Coaching Services', 'Erection, Commissioning or Installation Service', and 'GTA Service'. The Appellant contested the demands under 'Business Auxiliary Services' and 'Commercial Training or Coaching Services' while accepting the liability under other categories.

2. Appropriation of Service Tax Payments:

The Appellant had paid Rs.3,39,72,906/- towards Service Tax for 'Consulting Engineer's Service', 'Erection, Commissioning or Installation Service', and 'GTA Service'. The Tribunal observed that the entire payment was acknowledged by the adjudicating authority and should be appropriated against the Appellant's liability under these categories.

3. Applicability of Export of Services Rules, 2005:

For 'Business Auxiliary Services', the Appellant argued that services rendered to an entity outside India qualify as 'export of service' under Rule 3(1)(iii) of the Export of Services Rules, 2005, as the service receiver is located outside India. The Tribunal agreed, holding that no service tax is payable on these services.

For 'Commercial Training or Coaching Services', the Appellant contended that training received abroad is not liable for service tax in India. The Tribunal upheld this view, setting aside the demand under this category.

4. Liability for Interest and Penalties:

The Tribunal found no suppression of facts with intent to evade tax, noting that the demand was based on information from the Appellant's financial records. Consequently, the extended period of limitation was not applicable. The Tribunal waived the interest for the extended period but upheld the interest for the normal period, which had already been paid by the Appellant.

Regarding penalties, the Tribunal set aside the penalty under Section 78 of the Finance Act, 1994, due to the absence of mala fide intent. However, penalties under Section 77(1)(a) and Section 77(2) for non-registration and non-filing of returns were upheld.

5. Invocation of the Extended Period of Limitation:

The Tribunal determined that the extended period of limitation was not applicable due to the lack of suppression of facts. The Appellant had paid the service tax for the extended period voluntarily and agreed not to seek a refund, leading to the waiver of interest for this period.

Conclusion:

The Tribunal upheld the demand of Service Tax for 'Consulting Engineer's Service', 'Erection, Commissioning or Installation Service', and 'GTA Service', while setting aside the demands for 'Business Auxiliary Services' and 'Commercial Training or Coaching Services'. Interest for the normal period was upheld, and penalties under Section 77 were maintained, but the penalty under Section 78 was set aside. The appeal was disposed of on these terms.