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2023 (12) TMI 252 - AT - Service TaxCENVAT Credit - appellant raised finance through External Commercial Borrowings (ECB) Foreign Currency Convertible Bonds (FCCB) for which they have received services of various service providers - reverse charge mechanism - deposit of entire amount of service tax liability along with interest much before the issue of show cause notice - applicability of the provisions of Section 73(3) of the Finance Act, 1994 - revenue neutrality - Penalty - HELD THAT - It is admitted fact on records that the appellant herein had discharged the Service Tax liability along with interest before receipt of the show cause notice. It is also undisputed that the Service Tax liability under RCM has arisen on the ground of appellant being the recipient of services of Banking and Financial Services from an overseas banks. Understandably, Service Tax paid on such services rendered would be available to the appellant themselves as Cenvat credit which can be utilized for discharge of any excise duty on the final goods manufactured and cleared by the appellant. Revenue Neutrality - HELD THAT - The plea of Revenue neutrality is strong plea, as in this case also credit is available to the appellant on Service Tax paid under reverse charge mechanism can be utilized for discharge of excise duty and hence there can be no reason to avoid Service Tax liability - the appellant is a manufacturer of dutiable goods and the Service Tax paid on services provided by foreign service-providers would have been available to them as Cenvat credit under the Cenvat Credit Rules, 2004 leading to a revenue neutral situation. In the facts and circumstances of this case, it is improper to allege that the appellant did not pay service tax with an intent to evade payment of Service Tax. Penalty - HELD THAT - The penalty has been imposed by the Ld. adjudicating authority with the finding that the appellant had not deposited service tax on the basis of own ascertainment and that it was only after the department letter they deposited - the very SCN was issued on 28.01.2010 for which the compliance was already made by the appellant on 24.11.2007 by way of payment of tax and interest. The only grievance of revenue is that the appellant-assessee has not deposited service tax on their own ascertainment - when the tax amount stands already deposited with interest, the very SCN was not required to be issued under Section 73(3). Merely because the tax amount has been deposited on the basis of ascertainment by the Department, the assessee cannot be deprived of the benefit of aforesaid provisions, more so in view of the fact that no evidence has been adduced in the SCN that there was a deliberate short payment. Any other interpretation will render the said provision redundant inasmuch as the very intention of the said provision is to reduce litigation when compliance is made by the assessee. The appellant s case is fully covered by the provisions of Section 73(3) of the Finance Act, 1994 and the Revenue should not have issued show cause notice to the appellant for imposition of penalties. Accordingly, the penalties imposed upon the appellant under the Finance Act, 1994set aside - Appeal allowed.
Issues involved:
The issues involved in this case are related to the penalties imposed on the appellant by the Ld. Adjudicating authority. Summary of Judgment: Issue 1: The appellant raised finance through 'External Commercial Borrowings (ECB)' and 'Foreign Currency Convertible Bonds' (FCCB) for which they received services from various service providers based outside India. The appellant was held liable to pay Service tax on such services under the category of Banking and Financial Services. The Ld. Commissioner confirmed the demand of Service tax and penalties. The Tribunal remanded the case for reconsideration of limitation and penalty imposition. The Ld. Commissioner passed an order confirming the service tax demand, leading to the present appeal. Issue 2: The appellant argued that the issue is revenue neutral as the service tax paid under reverse charge was available as CENVAT credit, making the situation revenue neutral. The appellant contended that penalties should not be imposed as there was no suppression of facts and they had paid the service tax before the show cause notice was issued. The appellant cited various judgments in support of their arguments. Issue 3: The Revenue reiterated the findings in the impugned order, supporting the penalties imposed on the appellant. Judgment: The Tribunal found that the appellant had discharged the Service Tax liability along with interest before receiving the show cause notice. The Service Tax paid under reverse charge mechanism was available to the appellant as Cenvat credit, leading to a revenue neutral situation. The Tribunal held that penalties should not be imposed as there was no intent to evade payment of Service Tax. The penalties imposed by the Ld. adjudicating authority were set aside, and the appeal was allowed with consequential benefits. This summary provides a detailed overview of the judgment, highlighting the issues involved and the Tribunal's decision on each issue.
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