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TMI Blog2019 (7) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... to remit the matter back to Commissioner, after looking into contract under which this payment has been made - matter on remand. Club or Association Services - Amounts paid as membership fees to SPE - levy of service tax - time limitation - revenue neutrality - HELD THAT:- In case of payment of the tax on reverse charge basis the services recipient steps into the shoes of the service provider and pays the tax as if he has himself provided the service. That transaction of is complete when the person paying the tax makes the payment for the service received and tax needs to be paid on receipt of service. Since the tax is paid by the service recipient by stepping into the shoes of service provider, even the persons paying the tax and taking the credit though have same identity differ and hence the principle of revenue neutrality should not apply to such cases - Since Commissioner has dropped the demand holding the same to be barred by limitation on ground of revenue neutrality we remit the matter back to Commissioner for examining the issue of limitation on the basis of other evidences adduced in the show cause notice for invoking extended period of limitation. Benefit of N/N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 4,13,42,028/- (Rupees Four Crores Thirteen Lakhs Forty Two Thousand and Twenty Eight only) 9service Tax inclusive of ED. S H Ed Cess) paid by the noticee during investigation, is hereby appropriated against the demand of Service Tax made under reverse charge mechanism on the services received from the foreign service providers. 5.02 The amount of ₹ 1,40,37,728/- (Rupees One Crore Forty Lakhs Thirty Seven Thousand Seven Hundred Twenty Eight Only) paid by the noticee as interest on the service Tax paid by them during investigation is hereby appropriated. 5.03 Other than the above actions proceedings initiated vide impugned show cause notice No 12/Commr/OFG(6)/SIMPL/STD/Non-CERA/2014-15 dated 17th October 2014 are hereby dropped. 2.1 Respondents herein are registered with LTU. They had been incurring expenditure in foreign currency as remittance to various service providers who do not have any permanent establishment in India and were providing taxable service to them. They were not paying service tax on the gross amount remitted. Suspecting tax evasion investigations were undertaken. 2.2 Findings that ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reverse charge mechanism should not be charged and recovered from them under proviso to Section 73(1) of Finance Act, 1994. iii. The amount of Service Tax inclusive of Ed SHE Cess, of ₹ 4,13,42,028/- already paid by them during investigation should not be appropriated against the amount demanded. iv. Interest amount of ₹ 1,40,37,728/- already paid by them during investigation should not be appropriated against the amount of interest payable as at sr no (iv) above. v. Penalty should not be imposed on them under Section 76 of the Act for failure to pay Service Tax within the prescribed time as required under Section 68 of the Act and Rule 6 of the Rules. vi. Penalty should not be imposed on them under Section 77 of the Act for failure to file proper return within the prescribed period as required under Section 70 of the Act and Rule 7 of the Rules. vii. Penalty should not be imposed on them under Section 78 of the Act for failing to pay Service Tax. 2.6 Show Cause notice was adjudicated by the Commissioner LTU as per the impugned order referred in para 1, supra. Aggrieved b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice viz sponsorship fee for sponsorship which had been continuing into 4th Year . By holding that such payments are donation or grant commissioner has dropped the demand made. No contract or document has been produced showing that these amount were remitted towards donation. 3.4 Commissioner has held that membership fees paid by the appellant to be taxable under category of Club or Association Services but has dropped the demand holding it to be time barred. Commissioner has failed to appreciate that the normal period for raising the demand is within 18 months from the date of knowledge. Further if it was not the investigation undertaken revenue would have never been in know of the things. It has been held by Apex Court in Case of Mehta Co and Kalvert Foods India Pvt Ltd that the period of limitation is to be computed from the date of knowledge. 3.5 Commissioner has dropped the demand in respect of abatement claimed towards the R D Cess in terms of Notification No 17/2004-ST relying on the decision of Tribunal in case of Rochem Separation Systems (I) Pvt Ltd dated 10.12.2014. The said order of Tribunal has been challenged in appeal before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reliance Industries Ltd. [2016 (44) STR 82 (T-Mum)] Sarovar Hotels Pvt Ltd [2017 (9) TMI 893 (T-Mum)] Punjab Chemicals Crop Protection [2017 (47) STR 345 (T-Chan)] British Airways [2014 (36) STR 598 9T-Del)] Jet Airways (I) Ltd [2016 (44) STR 465 9TMum)] INA Bearings India Pvt Ltd [2017 (12) TMI 1143 (T-Mum)] v. Penalty is not impossible as the ingredients specified by section 78 for invoking that section are missing in the present case. Reliance placed on following decisions. Naramada Chematur Pharma Ltd [2005 (1790 ELT 276 (SC)] Jamshedpur Beverages [2007 (214 ) ELT 321 (SC)] Jain Irrigation Systems Ltd [2015 (40) STR 752 (T-Mum)] Surya Pharmaceuticals Ltd [2016 (43) STR 479 (T-Chan)] Dineshchandra R Agarwal [2013 (31) STR 5 9Guj)] Popular Vehicles Services Ltd [2010 (18) STR 493 9T-Bang)] Matrimony.com Pvt Ltd [2019 (3) TMI 1180 (T-Chennai)] 5.1 We have considered the impugned order with the submissions made in appeal and during the course of argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract against which the payments have been made has been not produced just by looking at antecedents of project UKEIRI, this amount can never be called as donation made. Details of Project UKEIRi and its funding partners as submitted by the respondents along with their submissions makes following evident: UK-India Education and Research Initiative (UKIERI) started in April 2006 with the aim of enhancing educational linkages between India and the UK. Since then UKIERI has been recognized as a key multi stakeholder programme that has strengthened the research, leadership, education and now skill sector relations between the two countries. UKIERI is a multi-stakeholder partnership programme supported by Governments Funding partners: UK Partners Indian Partners Department for Business, Energy and Industrial strategy Department of Education Foreign and Commonwealth Office The Scottish Government Northern Ireland Initiative Ministry of Skill Development and Entrepreneu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other Assets 7376 11100 14690 13514 Reserve Fund Investments 32124 42700 38561 39999 Property and Equipment 4946 3700 12582 19959 Interest in SPE Foundation 7463 7800 10471 10811 Total Assets 60792 74400 97029 102768 Liabilities Account Payable 5420 6600 11038 11870 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s barred by limitation. Revenue has challenged this finding of the Commissioner in their appeal. For holding so Commissioner has held that issue is completely revenue neutral and any amounts appellant pay on the reverse charge basis will available as credit to them. We are not in agreement with such finding of Commissioner, as it is against the basic scheme of payment of Service Tax on reverse charge basis. Admissibility of CENVAT Credit cannot be reason for non-payment of tax. Payment of tax and admissibility of credit are two different ideas in the scheme of indirect tax. Service Tax is paid on the output services of the service provider whereas the credit is admissible in respect of the input services received by the service recipient. The credit though taken on the receipt of the services/ documents relating to the service it can be utilized only at the time of payment of tax on the output services or the finished goods. Tribunal has in case of Sudarshan Castings [2007 (217) ELT 428 (T-Del)] held as follows: 12. . The theory of revenue neutrality , advanced by the appellants appears to us to be a highly hypothetical concept, cut off from the ground-level ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition to agree with the said argument in view of the decision of the Apex Court referred above. Also it needs to be noted that revenue neutrality and invocation of extended period of limitation are question of facts and need to be examined in facts of the case in hand. In case of payment of the tax on reverse charge basis the services recipient steps into the shoes of the service provider and pays the tax as if he has himself provided the service. That transaction of is complete when the person paying the tax makes the payment for the service received and tax needs to be paid on receipt of service. Since the tax is paid by the service recipient by stepping into the shoes of service provider, even the persons paying the tax and taking the credit though have same identity differ and hence the principle of revenue neutrality should not apply to such cases. Since Commissioner has dropped the demand holding the same to be barred by limitation on ground of revenue neutrality we remit the matter back to Commissioner for examining the issue of limitation on the basis of other evidences adduced in the show cause notice for invoking extended period of limitation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 66 but the appellant being the receiver is liable to pay under Section 66A. The Commissioner s reasoning is not correct and is rejected. The appellants are eligible to benefit from Notification No. 17/2004. In case of Cummins Technologies [2017 (7) GSTL 69 (T-Del)], tribunal held as follows: 6. Section 66 of the Finance Act, 1994 is the charging Section, which provides that in respect of taxable services mentioned therein, service tax shall be levied and collected in such manner as may be prescribed. Even for the import of service, the service tax has to be levied under Section 66 ibid. Since a deeming fiction was created in Rule 66A ibid, providing for payment of service tax by the recipient of service, such levy is in consonance with the charging provisions contained in Section 66 ibid. Thus, the provisions of Chapter V of the Finance Act should also be applicable in respect of the service tax paid under Section 66A ibid. In the present case, since the appellant is liable to pay service tax as a recipient of the taxable service, the provision of Section 66 ibid should also be applicable to it. In other words, upon fixing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of tax without applying any concession of the notification applicable thereto when the conditions of the said Notifications are fulfilled by the recipient of such service. Accordingly, the finding in the impugned order on this issue is not sustainable. The appeal is allowed on this issue. Also we take note of the fact that the appeal filed by revenue against the order of Tribunal in case of Rochem Separation Systems Pvt Ltd, has been dismissed by the Bombay High Court vide order dated 17.09.2018 in CEA No 57/2017. Bombay High Court has upheld the order of tribunal holding that the demand is barred by limitation. Following the above decisions we do not find any merits in the appeal of the revenue in this respect. 5.6 Whether penalty under Section 78 can be imposed on the Appellants? Revenue has challenged the order of Commissioner whereby he has dropped the penal proceedings initiated against the appellants under Section 78. The facts of the case and submissions of the appellant in this respect have been recorded by the Commissioner in the impugned order follows: 4.02 Penalty in the case of shor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here cannot be any adjudication u/s. 11A(1) and (2) and, therefore, there cannot be any imposition of either interest u/s. 11AB or penalty u/s. 11AC. We quote the tail piece, relied upon by Advocate Shri Kolte : .......On receipt of such information (regarding payment under sub-section (2B) shall not serve any notice under sub-section (1) in respect of duty so paid. We are afraid, the proceedings starting with the show cause notice u/s. 11A(1) are prohibited so far as duty paid. It does not make any reference, much less prohibits issuance of show cause notice for the purpose of according an opportunity to the assessee to show cause as to why interest may not be charged or penalty may not be imposed. The department would be justified in issuing show cause notice pertaining to duty as well if the duty as ascertained by the assessee himself and paid is less than duty as prima facie ascertained by the officer of Central Excise. In any case, we are unable to agree with the submission by learned Counsel Shri Kolte that on payment of short duty as under sub-section (2B), before issuance of show cause notice, no interest u/s. 11AB can be charged, by vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1994. CERA also consequent to audit on the records of the assessee has raised doubts about the service tax liability on expenditure incurred in foreign currency and payments thereof. Therefore extended period of five years under proviso to Section 73(1) of Finance Act, 1994 is invokable . It is now settled by decision of Hon ble Supreme Court in case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)], that the ingredients for invoking provisions of mandatory penalty under section 78 are identical to those invoking extended period under Section 73, and if the ingredient for invoking extended period are found then the penalty under Section 78 is a must. Hon ble Apex Court has stated- 17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to subsection 1 of Section 11A and Section 11AC use the same expressions : ....by reasons of fraud, collusion or any wilful mis-statement or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 96ZO there is no reference to any mens rea as in section 11AC where mens rea is prescribed statutorily. This is clear from the extended period of limitation permissible under Section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statues mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section 11AC, Rule 173Q was in vogue in which no mens rea was provided for. It only stated which he knows or has reason t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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