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2023 (6) TMI 498 - CESTAT CHENNAIShort-payment of service tax - Management or Business Consultancy service - non-inclusion of VAT amount in the value of taxable service to arrive at the service tax payable by them which has resulted in short-payment of service tax - time limitation - revenue neutrality - HELD THAT:- The period involved is prior to 18.4.2006. The appellant has been called upon to pay service tax under reverse charge mechanism. Section 66A was introduced in the Finance Act, 1994 only with effect from 18.4.2006. The judgment of the Hon'ble High Court of Bombay in the case of INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA [2008 (12) TMI 41 - BOMBAY HIGH COURT] which has been affirmed by the Hon'ble Supreme Court in UNION OF INDIA VERSUS INDIAN NATIONAL SHIPOWNERS ASSOCIATION [2009 (12) TMI 850 - SC ORDER] has held that the service recipient cannot be called upon to pay service tax under reverse charge mechanism for the services rendered prior to the introduction of Section 66A. Following the said decision, the demand upto 18.4.2006 is required to be set aside. Part of the demand is also confirmed from 18.4.2006 to July 2007. It is submitted by the learned counsel that the amounts were paid under book adjustments. So also VAT refunds were received by such book adjustments from their associated enterprise, situated at Netherland. The demand has been made on the book adjustments which are made prior to 10.5.2008. When the entries are made in the books of accounts of the appellant in respect of the amounts which are to be paid to the overseas entities, prior to 10.5.2008, there is no liability to pay service tax merely on such accounts - The decision of the Tribunal in the case of M/S. SIFY TECHNOLOGIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, LTU CHENNAI [2015 (3) TMI 964 - CESTAT CHENNAI] as well as M/S. NORTEL NETWORKS (I) PVT. LIMITED VERSUS CST, NEW DELHI [2015 (9) TMI 50 - CESTAT NEW DELHI] have considered the issue and held the issue in favour of the assessee. After appreciating the facts and following the case laws cited above, the demand for the period after 18.4.2006 also cannot sustain and requires to be set aside. Time Limitation - revenue neutrality - HELD THAT:- It is seen that the issue as to whether the recipient of service is liable to pay service tax under reverse charge mechanism to an overseas service provider was under dispute and the Hon'ble Supreme Court in the case of Indian National Shipowners Association had held that the demand cannot be made prior to the introduction of section 66A in the Finance Act, 1994. Further, the situation is revenue neutral as the appellant would be able to take credit of the service tax paid under reverse charge mechanism for the relevant period. The department has not been able to establish any positive act of suppression of facts with intent to evade payment of tax on the part of the appellant. In such circumstances, the demand raised invoking the extended period cannot sustain and the Show Cause Notice is time-barred. The appeal succeeds both on merits as well as on limitation. The appeal is allowed.
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