Demand not sustainable when Service Tax is already paid prior to its levy

Chiron Behring Veccines Private Limited Vs C.C.E. & S.T. (CESTAT Ahmedabad)

The CESTAT, Ahmedabad in Chiron Behring Vaccines Private Limited v. C.C.E. & S.T.-Surat-ii [Service Tax Appeal No. 403 of 2012 dated February 6, 2023] has set aside the demand order issued for the extended period, on the ground that the assessee had already paid the entire Service Tax prior to its levy by the Revenue Department. Held that, the Show Cause Notice (“SCN”) under Section 73(3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) was issued after the Service Tax amount was paid by the assessee, thus, the demand for the tax is not sustainable,

Facts:

Chiron Behring Vaccines Private Limited (“the Appellant”) received a franchise service for manufacture of rabies vaccine and its sale for which the Appellant entered into exclusive and non- transferable license agreement dated June 1, 1998 (“the Licencing Agreement”) with Chiron Behring GmbH & Company (“CB GmbH”) in Mumbai. The Appellant would remit 5% royalty on the domestic sales to CB GmbH. The Appellant voluntarily applied for Service Tax registration on April 28, 2008 and suo moto discharged the Service Tax liability from June 16, 2005 to May 7, 2008 under a bonafide belief that the Service Tax needs to be discharged on the net royalty paid after deducting Tax Deducted at Source (“TDS”) as per the Income Tax Act, 1961 (“the IT Act”).

Subsequently, an investigation was initiated on January 9, 2009 by the Revenue Department (“the Respondent”) wherein the Appellant was requested to submit details of Service Tax discharged under Reverse Charge Mechanism (“RCM”). Further, during the investigation, the Appellant paid the balance Service Tax of INR 17,17,373/- on the value of TDS deducted from royalty along with interest.

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