2014 (12) TMI 163 - HC - Service Tax

Intellectual property service - Demand of interest as well as penalty under Section 76 on payment of service tax which was found later as not payable - Held that - Service Tax in question is related to the year 1999 to 15-8-2002. The period in question is prior to 16-8-2002. Since the said period is prior to 16-8-2002, it is very clear that the respondent is not liable to pay Service Tax. Since the respondent is not liable to pay Service Tax, the respondent is also not liable to pay penalty as well as interest. The Commissioner (Appeals) as well as the Appellate Authority, after considering the date of amendment made to Service Tax Rules, 1994, have rightly rejected the claim of the appellant with regard to interest and penalty and also with regard to Service Tax. In the light of the discussion made earlier, this Court has not found any force in the contention put forth on the side of appellant and altogether, these Civil Miscellaneous Appeals are liable to be dismissed. - Decided against Revenue.

Summary

Issues:
Appeal against service tax demand, applicability of amendment to Service Tax Rules, liability for penalty and interest under Section 76 of the Finance Act, 1994.

Analysis:
The case involved Civil Miscellaneous Appeals challenging final orders passed in previous appeals regarding a service tax demand on a respondent engaged in the Textile Industry. The respondent had received services from a foreign company for intellectual property services, leading to a demand for service tax payment for the period from 1999 to 15-8-2002. The issue revolved around the demand for interest and penalty under Section 76 of the Finance Act, 1994. The Commissioner (Appeals) and the Appellate Tribunal had previously ruled against the appellant's claim for interest and penalty. The Appellate Tribunal specifically found that the respondent was not liable to pay service tax due to an amendment to Service Tax Rules, 1994, effective from 16-8-2002.

The appellant argued that since the respondent received services from a foreign company, they were liable to pay service tax, despite having already paid a sum towards it. The appellant contended that the Commissioner (Appeals) and the Appellate Tribunal did not consider their arguments properly. However, the respondent's counsel argued that the service tax demand was for a period before the amendment to the Service Tax Rules, and therefore, the respondent was not liable to pay service tax for that period. The counsel highlighted that the amendment did not have a retrospective effect.

The Court noted that the service tax demand was indeed for the period before the amendment came into effect. As the liability to pay service tax was introduced through the amendment for services received from foreign service providers, the respondent was not liable for the mentioned period. Consequently, the Court upheld the decisions of the Commissioner (Appeals) and the Appellate Tribunal, rejecting the appellant's claims for interest, penalty, and service tax payment. The Court found no merit in the appellant's contentions and dismissed the Civil Miscellaneous Appeals without costs, along with the connected Miscellaneous Petition.