2024 (12) TMI 604 - AT - Service Tax

Levy of service tax - Commission received - Export Sales Commission Advertisement Expenses paid - eligibility of CENVAT Credit - revenue neutrality - invocation of Extended period of limitation - HELD THAT - There is no dispute that the appellant s records were audited under EA-2000 audit by the departmental officer from time to time, admittedly the audits were conducted in April-2009 and May-2010 the data for the purpose of this demand was taken from the books of account in EA-2000 audit. The audit of books of account is mandatory, therefore the audit party could have raised this objection right from the day one when the audit was conducted in April-2009. Therefore, it cannot be said that the appellant have any malafide intention, to suppress the fact with intent to evade payment of service tax. Moreover, as regard the service tax demand on the foreign commission and advertisement expenses, the appellant being liable to pay service tax under Section 66A as per reverse charge basis, hence they were eligible for Cenvat credit. Therefore, it is revenue neutral exercise. It is held in a catena of judgments that in case of revenue neutrality, the malafide intention cannot be attributed to the assessee and therefore, the extended period is not invokable. The entire demand being under extended period is not sustainable only on the ground of time bar - the impugned order is set aside - appeal allowed.

Summary

Issues:
1. Demand of Service Tax on Commission received
2. Demand of Service Tax on Export Sales Commission & Advertisement Expenses paid

Analysis:

Issue 1: Demand of Service Tax on Commission received
The appeal was against the Order In Appeal passed by the Commissioner (Appeals) upholding the demands of Service Tax on Commission received. The appellant argued that the income of Commission and expenses related to Export Sales Commission & Advertisement were dealt with by their Head Office, not the manufacturing unit. They contended that any demand should be against the head office, not the manufacturing unit. The appellant claimed that the demand was time-barred as the details were available during audits in April 2009 and May 2010. Additionally, they argued that the demand was not sustainable as they were liable to pay service tax under reverse charge, making it a revenue-neutral situation. The appellant cited various judgments to support their case. The Revenue argued that the appellant had not declared the value of services in their returns, leading to suppression of facts. They contended that the demand under the extended period was justified. The Tribunal found that the appellant's records were audited, and the data for the demand was available during audits. As the demand was revenue-neutral and there was no malafide intention to evade tax, the extended period was not applicable. The Tribunal allowed the appeal, holding the demand unsustainable on the ground of time bar.

Issue 2: Demand of Service Tax on Export Sales Commission & Advertisement Expenses paid
The demand for Service Tax on Export Sales Commission & Advertisement Expenses paid was also challenged in the appeal. The appellant argued that as they were liable to pay service tax under reverse charge, and were eligible for Cenvat credit, the demand was revenue-neutral. They contended that the extended period for raising the demand was not applicable. The Revenue reiterated the findings of the impugned order, stating that the appellant had not declared the value of services in their returns, leading to suppression of facts. They argued that the demand under the extended period was justified. The Tribunal found that the demand was not sustainable under the extended period as the appellant had no malafide intention to evade tax and the demand was revenue-neutral. The Tribunal allowed the appeal, setting aside the impugned order.

This judgment highlights the importance of maintaining accurate records, the applicability of reverse charge mechanism for service tax liability, and the concept of revenue neutrality in tax demands. The Tribunal's decision emphasizes the need for a clear intention to evade tax for the extended period to be invoked and the significance of proper documentation and compliance with tax laws.