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TMI Blog2018 (2) TMI 1249X X X X Extracts X X X X X X X X Extracts X X X X ..... he Service provider, attracting interest. It is only a case of excess payment of tax by a different assessee, dealt according to the provisions of law governing refund/ adjustment and it cannot be linked with the case on hand. Hence, the Bench holds that interest is chargeable from the date on which the Service Tax became payable by the applicant, as alleged in the show cause notice and as contended by the jurisdictional Commissioner. The Bench, thus, settles the Service Tax liability and interest liability at ₹ 81,59,255/- and ₹ 14,61,006/respectively. Penalty - Held that: - This is a case of short payment of Service Tax. Though the sequence of events suggest that the short payment had occurred out of mistaken understanding of the legal position by the Service recipient, the applicant had not disclosed the above facts of short payment till the unit was audited by the officers of the Department. Nevertheless, the applicant had paid short of the appropriate Service Tax and the short payment had come to the notice only on verification by the Audit. The applicant has not suo moto informed the position to the Department - Considering the fact that misunderstanding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50% of the Service Tax amount mentioned in the invoices. On enquiry it was informed that their customer, M/S. Chareon Popkhand Pvt. Ltd. had not paid them 50% of the Service Tax amount mentioned in the invoice on the pretext that their customer - service receiver, was liable to pay 50% of the Service Tax under reverse charge mechanism as per Notification No.30/2012-S.T., dated 20-6-2012, since November, 2012. 1.2 In terms of Notification No.30/2012-S.T., dated 20-6-2012 read with Rule 2(d) of the Service Tax Rules, 1994, provisions of reverse charge mechanism in respect of service portion in execution of Works Contract would apply only in case of Individual, Hindu Undivided Family and Partnership Firm. In other cases, the entire liability is on the Service provider. The applicant, being a private limited company, is excluded from the category of persons defined in the Notification and it appeared that the applicant was liable for the entire Service Tax liability. In terms of the provisions of Sections 65B(44), 66E and 67 of the Finance Act, 1994, the applicant appeared to be liable to pay a Service Tax of ₹ 81,59,255/- for the period from October, 2012 to December, 2013. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the Service Tax amount paid previously on the services received from the applicant as advance/excess payments and suo motu adjusted such excess payments in terms of Rule 6(4A) of Service Tax Rules, 1994, against the payment of Service Tax for the months of March, 2014 and April, 2014. The excess payments made by M/s. CPIPL was attributable to 'interpretation of law and procedures' and it appeared that the adjustment of Service Tax paid previously towards future payments could not be considered as payments made during the relevant period. It, therefore, appeared that M/s. CPIPL should have opted for refund and utilization of the said excess amount under sub-rule (4A) of Rule 6 was not correct and hit by the condition in sub-rule 6(4B) of Rule 6 of Service Tax Rules, 1994. Without taking cognizance of the proceedings initiated against the applicant, the show cause notice No.20/2016, dated 13-4-2016 was issued to M/s. CPIPL without making the applicant, a co-noticee. The show cause notice No.93/2015, dated 22-7-2015 issued to M/s. CPIPL was adjudicated by the Principal Commissioner of Service Tax, Service Tax I Commissionerate, vide Order-in-Original No.CH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on account of M/s. CPIPL, the same was duly ratified in Order-in-Original No.13/2016-17, dated 11-8-2016. In other words, the Service Tax remained credited to the Government at the relevant time. As a sequel to the payment under reverse charge mechanism not in accordance with the law, M/s. CPIPL had to release the balance 50% of the Service Tax to the Applicant for remittance to the Government and M/s. CPIPL sought permission for adjustment of excess payment/ advance payment of Service Tax for future liabilities. Applicant took persuasive action with CPIPL to either get the balance of 50% of Service Tax reimbursed to them or to seek the approval or consent of the officers to enable CPIPL remit the said 50% Service Tax directly into the Government account in the STC No. of the applicant, which had all been on record and confirmed in the SCN No.93/2005, dated 22-7-2015 and Order-in-original No.13/2016-17, dated 11-8-2016. All the facts had been in the knowledge of the department and none hidden. As the applicant caused the payment of balance Service Tax liability of ₹ 81,59,255/- by M/s. CPIPL under the registration no. of the applicant, paid the interest for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, 2012 to December, 2013, the service recipient was paying 50% of the service tax involved and they were paying the remaining 50%; that though they were insisting that they need to pay the entire 100% of the service tax involved, their clients did not agree with them and they were also remitting the amount from 29 th October, 2012 to 27 th December, 2013, on various dates (as detailed in the paper book page nos. 11-16). 3.4 The advocate argued that it is pertinent to refer the proceedings initiated against their client namely, M/s. Chareon Popkhand Pvt. Ltd., Pune later name changed as M/s. CPF (India) Pvt. Ltd., which culminated in the Order-in-Original 1 No.13/2016-17-ST-1 Adj. dated 11-8-2016. The said proceedings were initiated against their service recipient on the ground that, after coming to know that they ought not to have paid 50% of the tax under Reverse Charge Mechanism on behalf of the applicant, they (the service recipient) suo motu adjusted the said amount of ₹ 81,59,255/- paid by them during the period November, 2012 to December, 2013 against their subsequent tax liabilities; that on conclusion of the proceedings, the service recipient was allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Taxation Rules, 2011, Service Tax is due when the invoice is raised or date of payment or provision of service, whichever is earlier. Hence the applicant is liable to discharge the tax liability as they had raised the invoice on their customers for the services rendered irrespective of the fact whether M/s. CPIPL paid or not. The issue involved is whether the applicant had paid their Service Tax liability in full or not and whether the revenue to the Government was clearly accounted for in full. The applicant themselves had conceded the fact that they had discharged only partial Service Tax liability and that they were taking into account the Service Tax payment of another Corporate Body, which is a separate and unrelated company as payment towards their liability and the position is not acceptable by law. The applicant is not contesting the fact that the service was not provided or partially provided. They are also not contesting the fact that the invoice was generated after the provision of service or during the provision of service as per the terms of the contract. Further, they had agreed to the finding of the Audit team that they had short paid their Service Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge the tax liability, but the recipient, by mistake, paid the Service Tax partially on mistaken understanding of law under Notification No.30/2012-S.T., dated 20-6-2012, which was the subject matter of deliberation in the departmental proceedings in the show cause notice No.93/2015, dated 22-7-2015 and adjudication vide Order-in-original No.CHN-SVTAX-001-COM-13/2016-17, dated 11-8-2016. The applicant drew strength from the findings of the learned Commissioner in the cited order and pleaded for settlement, as the Service Tax liability of ₹ 81,59,255/- stood paid. 5.2 The applicant further submitted that in the face of the findings recorded in the Order-in-Original dated 11-8-2016, the jurisdictional Superintendent was intimated by the Service recipient on 12-5-2014 about the demand of Service Tax by the department on the applicant and once the Service recipient realized the mistake, the applicant paid the disputed amount on 5-7-2014, well before the issuance of show cause notice. The applicant raised bills on M/S. CPIPL by charging the entire tax and the same was reflected in the ST-3 Returns. The entire proceedings against the applicant as also the recipient were based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, which was objected to by the department and the corresponding penal proceedings against the Service recipient were dropped with the passing of the Order-in-Original No.13/2016-17, dated 11-8-2016 by the Principal Commissioner of Service Tax, Service Tax I Commissionerate, Chennai. The applicant's contention in this regard is that as the Service recipient was allowed adjustment of Service Tax of ₹ 81,59,255/- paid under Reverse Charge Mechanism during November, 2012 to December, 2013, towards Service Tax payments for the months of March, 2014, and April, 2014, vide the above said order, in the facts and circumstances of the case, the Service Tax demanded from the applicant remained with the Government till the passing of the Order-in-Original and therefore, the interest liability would accrue only from March, 2014, i.e. the period for which the Service recipient was permitted to adjust the excess payment, till the date of second payment of ₹ 81,59,255/on 5-7-2014. Accordingly, the applicant claimed that their interest liability was only ₹ 3,99,103/-. However, the Commissioner of GST and Central Excise, Chennai Outer Commissionerate, contended strongly that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat interest is chargeable from the date on which the Service Tax became payable by the applicant, as alleged in the show cause notice and as contended by the jurisdictional Commissioner. The Bench, thus, settles the Service Tax liability and interest liability at ₹ 81,59,255/- and ₹ 14,61,006/respectively. Penalty 5.5 This is a case of short payment of Service Tax. Though the sequence of events suggest that the short payment had occurred out of mistaken understanding of the legal position by the Service recipient, the applicant had not disclosed the above facts of short payment till the unit was audited by the officers of the Department. Nevertheless, the applicant had paid short of the appropriate Service Tax and the short payment had come to the notice only on verification by the Audit. The applicant has not suo moto informed the position to the Department. However, the Bench also observes that the applicant had co-operated fully with the department and the Settlement Commission. Considering the fact that misunderstanding of the provisions of Notification had led to the short payment of Service Tax and the applicant had made good the short payment on bein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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