2013 (7) TMI 181 - AT - Service Tax

Penalty - revenue neutral - the appellant is manufacturing the final products on which excise duty liability is discharged Held that - d the entire amount of service tax liability with interest after the issuance of show cause notice but before the adjudication. - The appellant can avail the CENVAT credit on the amount of service tax paid by him under reverse charge mechanism - revenue neutrality is a strong ground which can be taken for setting aside the imposition of penalty u/s 76 - penalty imposed u/s 78 also waived off appeal allowed in the favour of assessee.

Summary

Issues Involved:
Service tax liability under reverse charge mechanism for commission on export sales and advertisement charges paid to foreign firms. Imposition of penalties under Section 76, 77 & 78 of the Finance Act, 1994.

Analysis:

Service Tax Liability:
The appellant, engaged in manufacturing Pressure Cookers and Non Stick Utensils, availed Cenvat credit and faced a service tax demand for commission on export sales and advertisement charges to foreign firms. The issue revolved around the liability under reverse charge mechanism. The appellant accepted the liability but disputed penalties imposed by lower authorities.

Penalty Imposition:
The lower authorities upheld penalties under Section 76, 77 & 78 of the Finance Act, 1994. The appellant contended that penalties were unjustified due to a bonafide belief, revenue neutrality, and confusion regarding services availed. The appellant argued that the penalties should be set aside based on these grounds.

Judgment:
The Tribunal found that the penalties imposed under Section 76 on the service tax liability amount needed to be set aside. The appellant had discharged a portion of the liability before adjudication, and penalties were deemed incorrect. Regarding penalties under Section 78, the Tribunal considered the appellant's argument on revenue neutrality valid. As the appellant could avail Cenvat credit and excise duty liability was discharged on final products, penalties under Section 78 were set aside. However, penalties under Section 77 were upheld. The appeal was disposed of accordingly, with the Tribunal setting aside certain penalties while upholding others based on the arguments presented and legal provisions.

This judgment highlights the intricacies of service tax liability under reverse charge mechanism and the considerations for imposing penalties under different sections of the Finance Act, 1994. The Tribunal's decision provides clarity on the applicability of penalties based on factors such as bonafide belief, revenue neutrality, and compliance with legal requirements.