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2023 (11) TMI 614 - AT - Service TaxLevy of service tax - reverse charge mechanism - payments made by the appellant to USFDA as fees for obtaining approval - time limitation - penalty - HELD THAT - On identical matter in the case of Vidhi Dyestuff Mfg. Ltd. versus Raigad 2016 (4) TMI 111 - CESTAT MUMBAI , a bench of this Tribunal held in similar set of facts the Tribunal in the case of M/S. KG. DENIM LTD. VERSUS CCE, SALEM 2014 (9) TMI 544 - CESTAT CHENNAI had held that payment of charges for textile processing to M/s Testex, Swiss will not fall under the category of reverse charge mechanism. The ratio of the said judgment squarely covers the issue in the case in hand. As is evident from paragraph 3 of CBEC Circular No. 89/7/2006-ST dated 18.12.2006 even according to the Board, if an authority performs a service, which is in the nature of statutory activity and a fees is levied for the purpose it does not fall within the ambit of a taxable service, but if a service is performed by the authority, which is not in the nature of statutory activity it will be exigible to service tax. There cannot be any two opinions that USFDA is a statutory authority mandated by the US laws to regulate the import of pharmaceuticals into the country. It is the counterpart of the Drugs Controller General of India without whose approval pharmaceuticals manufactured abroad cannot be imported into India. Therefore, any fees paid to obtain the approval will get squarely covered even as per the CBEC Circular. The distinction drawn by the lower authorities between statutory authorities within India and the statutory authorities outside India has no legal basis. As the issue is found in favour of the appellant on merits itself, the submissions on the limitation and penalty need not be examined - Appeal allowed.
Issues:
The judgment involves the following Issues: - Confirmation of demand for service tax under reverse charge mechanism - Application of extended period of limitation - Imposition of penalty under section 78 Confirmation of Demand for Service Tax: - The appellant, a pharmaceutical manufacturer, paid fees to the United States Food & Drugs Administration (USFDA) for approval to export its products. - The audit revealed that the payment fell under the category of "Technical Inspection and Certification Agency Service" liable for service tax under reverse charge mechanism. - A show cause notice was issued demanding service tax of Rs. 4,55,734/- along with interest and penalty under section 78. - The appellant contested the demand, citing precedents where payments to USFDA were held not liable for service tax. - The department argued that the payment was unearthed during audit, justifying the invocation of extended period of limitation and imposition of penalty. - The Tribunal analyzed the nature of the payment to USFDA and the relevant CBEC Circular, concluding that no service tax was payable on the fees paid for obtaining approval to export pharmaceuticals. Application of Extended Period of Limitation: - The appellant argued against the invocation of extended period of limitation, highlighting their regular compliance with filing returns and lack of intent to evade duty. - The department contended that the detailed audit uncovered the liability, justifying the extended period of limitation. - The Tribunal found the case to be revenue neutral, as the service tax paid would have been available as Cenvat credit, negating any intent to evade payment of duty. - Ultimately, the Tribunal's decision in favor of the appellant on the service tax issue rendered examination of limitation and penalty unnecessary. Imposition of Penalty under Section 78: - The appellant challenged the imposition of penalty, asserting no willful suppression and characterizing the issue as interpretational. - The department supported the penalty, emphasizing the necessity of the audit to uncover the short payment of service tax. - The Tribunal's decision in favor of the appellant on the service tax issue rendered the examination of penalty moot. - Consequently, the appeal was allowed, the impugned order was set aside, and consequential relief was granted to the appellant.
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