TMI Blog2021 (11) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, is situated in Hardwar and has service tax registration. It receives manpower recruitment/subway agency services, GTA service and works contract service. The appellant also exports biscuits and for this purpose appointed commission agents abroad and paid commission to them in foreign exchange. 3. Its records were audited for the period August 2010 to March 2012 and the audit party pointed out that the appellant was required to discharge service tax under reverse charge mechanism as per Section 66A of the Finance Act on the amount paid by it to the foreign agents as commission. For the period 2010-2011 and 2011-2012, an amount of ₹ 74,09,083/- was calculated as the service tax due from the appellant. Further details of commission paid during 2012-2013 and 2013-2014 were also obtained by the Department and an amount of ₹ 1,24,11,492/- has been calculated as service tax due. 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. The nature of the service provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se charge mechanism under Section 66A. It is also undisputed that the appellant has not paid any service tax on the amounts. 8. Learned Counsel for the appellant submits that the entire demand has been made only under Section 66A read with Section 65(105)(zzb) of the Finance Act but these provisions were repealed with effect from 1.7.2012 after the introduction of negative list regime. 9. When service tax was first levied in 1994 it was to be charged on a few services indicated in Section 65(105) of the Finance Act. This list was expanded from time to time. With effect from 1st July, 2012 every service has been made taxable except those in a negative list. Therefore, the provisions of service tax were revamped completely and both Section 66A and Section 65(105) have been deleted. Learned Counsel submits that the entire demand made with effect from 1st July, 2012 is, therefore, unsustainable and needs to be dropped on this ground alone. 10. He submits that there are new provisions applicable to period post 2012 but there is no demand under them. He further submits that Rule 6A(1) and 6A(2) of Service Tax Rules which were made with reference to the place of provision of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraph 43 of the judgment is reproduced below: 43 . There is abundant jurisprudential justification for this. In the Governance of rule of law by a written Constitution, there is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so endowed by the Constitution itself. It is for this reason that the Courts insist upon strict compliance before a State demands and extracts money from its citizens towards various taxes. Any ambiguity in a taxation provision, therefore, is interpreted in favour of the subject/assessee. The statement of law that ambiguity in a taxation statute should be interpreted strictly and in the event of ambiguity the benefit should go to the subject/assessee may warrant visualizing different situations. For instance, if there is ambiguity in the subject of tax, that is to say, who are the persons or things liable to pay tax, and whether the revenue has established conditions before raising and justifying a demand. Similar is the case in roping all persons within the tax net, in which event the State is to prove the liability of the persons, as may arise within the strict language ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re correctly invoked. The appellant had engaged a commission agent and paid commission in foreign exchange and the nature of services provided by the commission agent fall under Section 65(105)(zzb) of the Finance Act as business auxiliary service. This section is covered under reverse charge mechanism under Section 66A which requires the service recipient in India to pay service tax. However, the demand of service tax for the entire period is beyond the normal period of limitation under Section 73 of the Finance Act and so the extended period of limitation has been invoked. 18. The position taken by the appellant from the time liability was pointed out was not that it was not liable or that it was ignorant about the liability, but it is as follows: (i) Until Section 66A was enacted there was no provision to tax services provided by a person outside India to a person in India; (ii) This law (Section 66A) has illegally imposed tax on commission paid to foreign agents; (iii) Levy of service tax is against the basic principles of business law; (iv) The applicability of service tax on transactions not originating or received in India is seriously in doubt because it chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the exemption notifications claimed were more or less identically worded and none of them were unconditional. The claimant is required to satisfy various conditions mentioned in table of the said notifications as well as in its proviso, such as giving prior information to the jurisdictional Assistant Commissioner, being registered with export promotion council, holding an Import Export code, filing of half yearly returns, submission of documentary proof of payment of commission and copy of contract or agreement. None of these conditions - all of which are substantial- have been fulfilled. Not only has intimation not been filed by the appellant, but it also did not follow the other conditions of the notifications and, therefore, they cannot claim the benefit of the exemption notification. 21. On the argument of the appellant that it could have availed Cenvat credit and taken refund of unutilized Cenvat credit under Rule 5 of CCR, 2004 and, therefore, the entire exercise is revenue neutral, the Commissioner relied on the judgment of High Court of Gujarat in CCE Vs. Cadila Healthcare Ltd. [ 2013 (30) STR 3 (Guj) ] in which it was held that the services of sales commission agents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r suppressing and concealing the facts regarding availing taxable services rendered by service providers located outside India with intent to evade payment of service tax payable by them under Section 66A of the Act. In the light of above said discussion, I hold that the said party is liable for penalty under Section 78 of the Finance Act, 1994. 24. Thus, the Commissioner held that the appellant is liable to penalty under Section 78 of the Finance Act. 25. Learned Departmental Representative agrees that there is no clear finding on the invocation of extended period of limitation in the impugned order but asserts that the findings on applicability of Section 78 being identical, must be reckoned for invoking extended period of limitation also. 26. Thus for the period prior to 2012, it is undisputed that Section 65(105)(zzb) read with Section 66A of the Finance Act was applicable and it was rightly invoked for demanding duty. On the question of eligibility of the exemption notification, it is undisputed that the exemption notifications were all conditional and none of the conditions of the exemption notification have been fulfilled. Therefore, the benefit of exemption notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. However, this does not mean that A, B,C, etc. do not have to pay tax which the law requires them to pay. They are also entitled to take credit as per the legal provisions. Therefore, revenue neutrality in itself does not extinguish the tax liability of any person. In fact Section, 73 of the Finance Act, Section 11A of Central Excise Act and Section 28 of the Customs Act do not mention revenue neutrality at all. However, all these sections fix two time-limits within which demands can be raised in case of short payment. The normal period applies in every case and the extended period of limitation can be invoked in case of fraud, collusion, willful misstatement or suppression of facts or violation of the provisions of the Act or Rules with an intent to evade payment of duty. What is important for invoking extended period of limitation is the intent to evade payment of duty. Mere omission or careless mistake is not sufficient. Wha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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