ESS Infraprojects Pvt. Ltd. Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
CESTAT Mumbai quashes service tax demand on legal services under RCM; holds extended limitation not invocable in a revenue neutral situation
The appeal was filed by M/s ESS Infraprojects Pvt. Ltd. challenging the Order-in-Appeal dated 20.07.2022 whereby the Commissioner (Appeals) had upheld the confirmation of service tax demand, interest and penalty in respect of legal services received from advocates.
The appellant is engaged in the business of hiring construction machinery and was registered for payment of service tax under the taxable service of Supply of Tangible Goods for Use (STGU). During departmental audit for the period 2014-15 to 2016-17, it was noticed that the appellant had received legal services from advocates but had not discharged service tax liability under the reverse charge mechanism as required under Section 68(2) of the Finance Act, 1994 read with Notification No. 30/2012-ST dated 20.06.2012. A show cause notice was issued and the adjudicating authority confirmed the demand along with interest and penalty. The Commissioner (Appeals) upheld the order, leading to the present appeal.
Before the Tribunal, the appellant contended that the extended period of limitation had been wrongly invoked merely on the basis of audit objections without establishing fraud, suppression, wilful misstatement or intention to evade tax. The appellant also argued that the audit should have been conducted by a Chartered Accountant rather than departmental officers. Further, it was submitted that the entire exercise was revenue neutral, as any service tax paid under reverse charge would have been available as CENVAT credit to the appellant. The appellant relied upon the decisions in Graphite India Limited and Indus Valley Partners (India) Private Limited.
The Revenue supported the findings of the Commissioner (Appeals).
The Tribunal identified the principal issues for determination as:
