2019 (2) TMI 946 - AT - Service Tax

Import of services - foreign remittances outside India for availing certain services for use in their manufacturing business - reverse charge mechanism - GTA Services - period 01.01.2004 to 31.12.2004 and period 01.01.2005 to 31.12.2006. Import of services received from outside India - Held that - Though the Ld. Commissioner has in-principle agreed that service tax liability will arise on payment basis and not on accrual basis, he has considered the tax liability for the period from 2003 to 2006. It is now well settled legal position as held by the Hon ble Supreme Court in Indian National Ship Owners Association 2009 (12) TMI 850 - SUPREME COURT OF INDIA , that the service tax liability will arise for foreign remittances made for import of services for the period 18.4.2006 onwards. In the instant case, since the period in dispute is 01.01.2003 to 31.12.2006, the demand would be restricted to import of taxable service for the period from 18.04.2006 to 31.12.2006 only - the adjudicating authority would accordingly re-compute the final service tax liability for the aforesaid period. Explanation 3 to Section 67 of the Finance Act, 1994 - Held that - The service tax is payable only when the payment of consideration /foreign remittance is made (cash basis) as per Rule 6 of the Service Tax Rules, 1994. If the contention of the Revenue is accepted, the same would lead to premature demand which is legally not sustainable in view of the aforesaid provisions of Rule 6 - the demand which has been dropped by Ld. Commissioner is on account of point of taxation and not the value of taxable services - decided against Revenue. Service tax demand on Goods Transport agency service for the period January 2005 to December 2006 - abatement benefits - Held that - The Revenue has filed appeal against the abatement benefits extended by Ld. Commissioner only on the ground that he has not verified the genuineness of the certificates submitted by concerned transporters based on which abatement benefit has been extended. However, no evidence has been provided by the Revenue to doubt the correctness of the said certificates provided by the transporters. Time limitation - penalty - Held that - The service tax payable under reverse charge on import of services from outside India as well on Goods Transport services would be available as credit and hence, revenue neutral - Further, the very levy on import of service was under dispute which was finally settled by Hon ble Supreme Court in Indian National Ship Owner s Association - extended period not invocable - Since there is no suppression, penalty also not sustainable. Appeal allowed in part.

Summary

Issues Involved:
1. Service tax liability under reverse charge for import of services from outside India based on accrual vs. payment basis.
2. Service tax liability under reverse charge for receiving Goods Transport Agency services.
3. Validity of abatement benefits extended by the Commissioner for Goods Transport agency services.
4. Plea of limitation for service tax payable under reverse charge.

Detailed Analysis:

Issue 1: Service tax liability under reverse charge for import of services from outside India based on accrual vs. payment basis:
The appellant, engaged in manufacturing industrial fans, made foreign remittances for services used in their business. The demand was raised based on financial statements on an accrual basis, but the law required tax liability to be determined on a payment basis during the relevant period. The Commissioner partially dropped the demand based on actual payments shown in a Chartered Accountant certificate. The appellant contested the demand for the period prior to 18.04.2006, citing a Supreme Court ruling. The Tribunal agreed that service tax liability arises on a payment basis post-18.04.2006, restricting the demand to the relevant period. The appellant's tax liability for the specified period was already paid, and the penalty was contested on grounds of fraud or suppression, which was found to be revenue-neutral.

Issue 2: Service tax liability under reverse charge for receiving Goods Transport Agency services:
Regarding the service tax demand for Goods Transport agency services, the appellant had paid the tax after claiming a prescribed abatement of 75%, which was upheld by the Commissioner. The Revenue appealed against the abatement benefits, questioning the genuineness of certificates submitted by transporters. However, no evidence was provided to doubt the validity of the certificates. The Tribunal found the abatement benefits to be correctly extended.

Issue 3: Plea of limitation for service tax payable under reverse charge:
The Tribunal held that the service tax payable under reverse charge for import of services and Goods Transport services was revenue-neutral and not subject to an extended period of limitation due to lack of suppression. Referring to a Supreme Court decision, it was concluded that since the levy on import of services was under dispute and a significant portion of the demand was dropped, penalty was not sustainable.

In conclusion, the Tribunal allowed the appeal by the assessee for remand to compute the service tax liability for the specified period and rejected the Revenue's appeal. The judgment was pronounced on 09-01-2019.