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.
However, an SCN dated November 11, 2019 (“the Impugned SCN”) was issued by the Respondent alleging short payment/non-payment of Service Tax on gross royalty amount from June 16, 2005 to May 7, 2008. Further, the Respondent confirmed the demand vide order dated May 19, 2011 (“the Impugned Order”). Being aggrieved, an appeal has been filed before Commissioner (Appeals) wherein vide Order-in-Appeal dated May 19, 2012 (“the OIA”) the demand of Service Tax was party dropped to INR 13,43,989/-.
Thus, this appeal has been filed on the grounds that the Impugned SCN and the Impugned Order was issued without jurisdiction and that the services rendered to CB GmbH were not ‘franchise services’ as per the Licensing Agreement and thus, not liable to Service Tax under franchise service category. Further, that there is no suppression of fact on the part of the Appellant as the issue on merit was under litigation that whether in case of receipt of service from abroad, the recipient is liable to Service Tax therefore, extended period could not have been invoked. Also, as the Service Tax with interest was paid prior to the issue of SCN, no SCN should have been issued as per Section 73(3) of the Finance Act, 1994 (“the Finance Act”) therefore, no penalty can be imposed and the benefit of Section 80 of the Finance Act should be admissible to the Appellant.
Issue:
Whether the Impugned Order passed by the Respondent is maintainable?
Held:
The CESTAT, Ahmedabad in Service Tax Appeal No. 403 of 2012 held as under:
