2023 (5) TMI 567 - AT - Service Tax

Non-payment of Service Tax - Business Auxiliary Service - receiving service of foreign agents - section 66 A of the Finance Act 1994 read with Section 65 (19) of the Finance Act 1994 and Section 65 (105) (zzb) of the said act - extended period of limitation - Suppression of facts or not - HELD THAT - The show cause notice should have been issued during the normal period of demand as show cause notice dated 17.03.2008 has already been issued under the provision of Section 73 (1) of the Finance Act 1994 alleging suppression of facts with intention to evade payment of service tax and invoking larger period of demand. Tribunal in the case of M/S. MARCK BIOSCIENCE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST AHMEDABAD 2019 (7) TMI 653 - CESTAT AHMEDABAD held that in case of sales commission to overseas commission agent under reverse charge mechanism the extended time proviso is not invokable. With regard to the second show cause notice dated 20.03.2009 where under the adjudicating authority has confirmed the demand of Rs. 10, 96, 848/- also invoking relevant penal provision. In this regard that show cause notice has been issued on 20.03.2009 demanding the duty for the period April 2007 to March 2008 by invoking larger period of limitation under Section 73 (1) of the Finance Act 1994. Since the first show cause notice has already been issued on 17.03.2008 invoking a period of five years and therefore the second show cause notice should have been for normal period of demand and department should not have invoked the extended time period for demanding service tax. The second show cause notice dated 20.03.2009 is beyond normal period of limitation and therefore the matter is remanded back to the original adjudicating authority to re-adjudicate the matter and confirm the service tax for the normal period of demand as provided under Section 73 (1) of the Finance Act 1994. Appeal allowed in part.

Summary

Issues involved:
The issues involved in this case relate to the liability of the appellant to pay service tax on services received from foreign agents for promotion, marketing, and sale of goods, as well as the applicability of the extended period of demand for service tax.

Issue 1: Service tax liability on services received from foreign agents
The department alleged that the appellant had not discharged the service tax liability on services received from foreign agents for promotion, marketing, and sale of goods in foreign countries. The adjudicating authority confirmed the demand for service tax under the Business Auxiliary Service category. The appellant contended that they were not aware of the reverse charge mechanism before 18.04.2006, leading to confusion regarding service tax payment. The appellant argued that they were eligible for cenvat credit and could have claimed a refund, making the issue revenue-neutral. The appellant cited precedents where confusion over service tax payment under the reverse charge mechanism led to the rejection of demands under the extended period of limitation.

Issue 2: Applicability of extended period of demand
The appellant challenged the invocation of the extended period of demand for the service tax demand covering the period from 18.04.2006 to 31.03.2007. They argued that the extended time proviso should not apply as there was no suppression of facts or intent to evade tax. The appellant also contended that the second show cause notice issued for the period April 2007 to March 2008 was beyond the normal period of limitation and should not have invoked the extended time period for demanding service tax. The Tribunal set aside the demand for the longer period based on precedents and remanded the matter back for re-adjudication for the normal period of demand.

Judgment Summary:
The Tribunal, after considering the arguments and precedents, set aside the demand for service tax under the first show cause notice dated 17.03.2008, as the extended period was not applicable due to the revenue-neutral situation. The penalties imposed were also set aside based on the lack of malafide intention. Regarding the second show cause notice dated 20.03.2009, the Tribunal found it beyond the normal period of limitation and remanded the matter for re-adjudication. The appeal was partly allowed, with the demand for the first notice being set aside and the matter for the second notice being remanded for further adjudication.