2023 (3) TMI 695 - AT - Service Tax

Extended period of limitation - Non-payment of service tax - translation services received by the appellant from the various individuals taxable with effect from 01.05.2006, under Business Support Services or not - HELD THAT - The period of dispute is from 2006-07 to 2010-11 and the tax demand was raised under reverse charge mechanism. Hence, when the tax is paid under reverse charge mechanism, the appellant would be entitled to avail credit of the same, which invariably leads to a revenue neutral situation. Thus, there is no scope to allege fraud, suppression, etc., to invoke the extended period of limitation for non-payment of tax. The demand is possible only for the normal period. The Show Cause Notice in this case having been issued on 08.05.2014, the demand proposed and confirmed for the period prior to October 2009, is barred by limitation. It is deemed proper to set aside the above demand by agreeing with the contentions of the Learned Consultant for the appellant that the same is hit by limitation - demand for the normal period upheld - matter remanded to the file of the Adjudicating Authority to the limited extent of working out the demand for the normal period. Penalty under Section 78 and penalty under Section 77 of the Finance Act, 1994 - HELD THAT - The Revenue has not made out any case of fraud, suppression, etc., and therefore, the impugned order is set aside to this extent of levying penalty under Section 78 ibid. - there are no allegations as to the violation of any of the provisions of Section 77. Hence, the penalty appears to have been imposed mechanically. Further, the Adjudicating Authority has ordered for appropriation of the amount paid including interest and there is no allegation further as to non-registration, etc., by the appellant. Thus, the appellant has made out a case for intervention for invoking the provisions of Section 80 of the Act, as it stood then. Thus, to this extent also, the impugned order stands set aside and the grounds-of-appeal, stand allowed. The appeal filed by the assessee allowed in part and part matter on remand.

Summary

Issues involved:
The issues involved in the judgment are the taxability of translation services under 'support services of business or commerce' and the justification for invoking the extended period of limitation.

Taxability of Translation Services:
The appellant, a Private Limited Company engaged in knowledge process outsourcing, was investigated by the Service Tax Commissionerate based on intelligence input regarding the receipt of taxable services from overseas companies without remitting Service Tax. The Show Cause Notice alleged that translation services received by the appellant were taxable under Business Support Services from 01.05.2006 to 30.09.2010. The appellant contested this taxability specifically for translation services under 'support services of business or commerce.'

Extended Period of Limitation:
The key questions for consideration were whether translation services fall under 'support services of business or commerce' and if the Revenue was justified in invoking the extended period of limitation. The period in dispute was from 2006-07 to 2010-11, with the tax demand raised under reverse charge mechanism. The Tribunal found that the demand for the period prior to October 2009 was barred by limitation as the Show Cause Notice was issued on 08.05.2014.

Decision and Ruling:
After hearing both parties, the Tribunal concluded that there was no dispute on the facts. They determined that the demand for the normal period was valid, but the demand for the period prior to October 2009 was hit by limitation. The Tribunal set aside the demand for the barred period and remanded the matter to the Adjudicating Authority for working out the demand for the normal period. They also set aside penalties imposed under Sections 78 and 77 of the Finance Act, 1994, as the Revenue failed to establish fraud or suppression. The Tribunal allowed the appeal to the extent of setting aside the penalties and partially allowed the appeal filed by the assessee.