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2021 (11) TMI 428 - AT - Service TaxLevy of service tax - reverse charge mechanism - amount paid to the foreign agents as commission - It is the case of the Revenue that as per Section 66A of the Finance Act, if services are rendered by a person outside India and are received by a person in India, the recipient of the service has to pay service tax as if he is the one providing the service - period August 2010 to March 2012 - Levy of penalty u/r 173Q - CENVAT Credit - revenue neutrality - extended period of limitation - - HELD THAT:- It is undisputed that the charging section under which the Department sought to demand service tax under reverse charge mechanism post 1st July, 2012 in this case is Section 66A read with Section 65(105)(zzb). These sections did not exist after 1 July 2012 and, therefore, any reference to any other legal provisions which may have existed during the relevant period and which could have been invoked is irrelevant. It is a well-settled legal principle that the charging section in any taxing statute must be strictly construed and in case of any ambiguity it should be interpreted in favour of the assessee. In the present case, the charging section which has been invoked for the period post 2012 does not exist at all and, therefore, there is no question of any ambiguity. Even if there is an ambiguity, it should go in favour of the assessee. Levy of penalty u/r 173Q - HELD THAT:- The penalty was imposed in both the cases mentioning Rule 173Q clearly indicating the violation on the part of the assessee but without mentioning the clause under this Rule. What was held by the High Courts is that not mentioning a clause of the Rule 173Q does not vitiate the imposition of penalty, when the rule itself is clear and so also are the allegations made. The present case is on a completely different footing and the sections under which the charge is made did not exist at all during the relevant period. There were contrary judgments by the High Court of Punjab & Haryana and thereafter the law was changed to make it explicit that credit of service tax paid on commission paid to commission agent is available. Therefore, they would have been eligible for Cenvat credit and could have claimed refund under Rule 5 of CCR, 2004. CENVAT Credit - revenue neutrality - extended period of limitation - HELD THAT:- All indirect taxes are essentially revenue neutral at the hands of the tax payer. The assessee pays tax and collects it from its customer. Further, if the customer is himself a tax payer he can take credit of the Cenvat credit paid. For instance, A pays tax on his final product which is supplied to B who immediately takes credit of the tax paid by A and uses it to discharge his own liability. B, in turn, pays tax on his final products and sells them to C who takes credit of the tax so paid. The cycle continues until the final consumer is reached or an exempted good is produced or a non-taxable service is rendered. At that stage, the entire burden of tax gets loaded on to the final consumer or on to the non-excisable good or the non-taxable service - revenue neutrality in itself does not extinguish the tax liability of any person. The impugned order does not discuss the ingredients necessary for invocation of extended period of limitation nor does it invoke the proviso to Section 73(1) in the operative part of the order. It is for this reason that we have to set aside the impugned order for the extended period of limitation. The demand within the normal limitation is not covered by the charging sections invoked - entire demand needs to be set aside and we do so. Since the penalty under Section 78 is linked to and equal to the demand confirmed, it needs to be set aside as well. Similarly interest under Section 75 also needs to be set aside. Appeal allowed - decided in favor of appellant.
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