2015 (2) TMI 348 - AT - Service Tax

Imposition of penalty under Section 76, 77 & 78 - Delayed payment of service tax - revenue neutral situation - Malafide intention - whether the appellant was having any intent to evade payment of service tax - Held that - in the case of Indian Oil Corporation Ltd. (2010 (8) TMI 800 - CESTAT MUMBAI) where the appellant after taking Cenvat credit on various inputs cleared as such to their other units indicated the duty payable. However, neither the duty was actually paid and nor the issue of such invoices was declared to the department, in that case it was held by this Tribunal that whatever duty they were to pay the credit of same is available to their sister unit. In such a situation of revenue neutrality, mala fide intention cannot be proved. Therefore, it was held that extended period is not invokable. Appellant has paid service tax along with interest on pointing out by the Revenue during the course of investigation and the appellant is entitled to Cenvat credit of serviced tax paid; in that situation intent to evade duty stands not proved. Consequently, the appellant is entitled for the benefit of Section 73 (3) of the Finance Act, 1994, as held by the Hon'ble Gujarat High Court in the case of Tejas Agency (2014 (8) TMI 151 - GUJARAT HIGH COURT) wherein it was held that it is not a case of non-payment of service tax with intent to evade the payment of same and therefore question of applying sub-section (4) of Section 73 of the Finance Act, 1994 and resultantly exclusion of application of sub-section (3) would not arise. In these circumstances, we hold that the appellant is entitled for the benefit of Section 73(3) of the Finance Act, 1994. Therefore, the show cause notice was not required to be issued. Consequently, the penalties confirmed in the impugned order as not required to be imposed on the appellant - Decided in favour of assessee.

Summary

Issues:
Challenge to penalties imposed on the appellant by the adjudicating authority.

Analysis:
The appellant availed External Commercial Borrowings (ECB) from Non-Residents and paid fees/charges to non-resident service providers for acting as "Mandated Lead Arrangers." These services were taxable under 'Banking and other Financial Services' as 'merchant banking services.' The appellant paid the service tax along with interest before the show cause notice was issued and took Cenvat Credit immediately. The appellant contended that there was no intent to evade payment of service tax due to confusion regarding reverse charge mechanism. The appellant relied on various decisions to support their argument.

The Revenue argued that the appellant's intent was to evade payment of service tax, as detected during investigation. The adjudicating authority imposed penalties on the appellant based on this intent. The Tribunal considered both sides' submissions and focused on whether the appellant had any intent to evade payment of service tax. The appellant's confusion regarding the payment, immediate payment on being pointed out by Revenue, and entitlement to Cenvat Credit were crucial factors.

The Tribunal found that the appellant's payment of service tax along with interest and entitlement to Cenvat Credit indicated a revenue-neutral situation. The appellant's confusion regarding the payment did not demonstrate an intent to evade service tax. Citing precedents, the Tribunal concluded that the appellant was entitled to the benefit of Section 73(3) of the Finance Act, 1994. Therefore, the show cause notice was not required, and the penalties imposed were set aside. The Tribunal emphasized the revenue-neutral nature of the situation and the absence of intent to evade duty.

In conclusion, the impugned order imposing penalties on the appellant was set aside, and the appeal was allowed with consequential relief, if any. The Tribunal's decision was based on the appellant's immediate payment of service tax, confusion regarding payment, entitlement to Cenvat Credit, and the revenue-neutral nature of the situation, leading to the absence of intent to evade service tax.