In M/s Hindustan Zinc Ltd. v. The Commissioner, Central Excise, Udaipur, [FINAL ORDER NO. 51819-51820/2021 dated September 17, 2021], M/s Hindustan Zinc Ltd (Appellant) filed the appeal to assail the order passed by the Commissioner, Central Excise, in which the demand notice in view of the provisions of Section 73(3) of the Finance Act,1994 (Finance Act) have been issued to the Appellant.

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Factually, the two units of the Appellant are engaged in manufacture of lead, zinc and other concentrates. Two show cause notices were issued to the Appellant proposing demand of service tax on foreign currency expenditure alleging that it was towards receipt of taxable services on which the Appellant was liable to pay service tax under the reverse charge mechanism.

The issue relate to demand of service tax on remittance towards services on which service tax was payable as per the Import Rules and has been paid by the Appellant but it has not been accepted by the Department.

The Hon’ble CESTAT, Delhi held that the service tax paid by the Appellant is more than the service tax pointed out by the Department for the reason that actual remittance is more on account of exchange rate difference and substantial TDS. It has also been pointed out by the Appellant that there are no other remittances of the service provider and therefore the service tax payment pertains to this very transaction. The Appellant has paid the service tax though on a higher value than proposed by the Department. The show cause notice for the demand, in view of the provisions of Section 73(3) of the Finance Act, should not have been issued.

Further, the Court relied upon the judgment in the case M/s Kriti Nutrients Ltd. v. Commissioner of Central Excise and Services Tax, Indore [FINAL ORDER NO. 55315/2016] in which it was held that the fact that the service tax on reverse charge was recently introduced and its scope was not clear and entertained various doubts, requiring issuance of various clarifications by the Board. And held that when there was some ambiguity regarding levy of service tax on services received from abroad under the reserve charge mechanism and it was clarified later, it cannot be said that the Appellant had suppressed any material fact from the department with intention to avoid payment of service tax.

Hence the order passed by the Commissioner cannot be sustained and is set aside. The appeal is accordingly, allowed.

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