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Extended period of limitation not invokable in case of revenue neutral situation

There is no dispute that the appellants were eligible for CENVAT credit for the amount paid as Service Tax and, therefore, this is a situation which was revenue neutral and by not paying the Service Tax immediately, appellants have lost more than Rs.26,00,000/- paid by them as interest which would not have become payable if Service Tax was paid promptly and taken as credit.

CESTAT, AHMEDABAD BENCH

Adani Ports & Special Economic Zone Ltd.

Versus

Commissioner of Service Tax, Ahmedabad

ORDER NOS. A/1451/WZB/AHD of 2012

& S/2151/WZB/AHD of 2012

APPLICATION NO. ST/S/733 of 2012

APPEAL NO. ST/316 of 2012

AUGUST 30, 2012

ORDER

B.S.V. Murthy, Technical Member

The Appellants are engaged in providing Port services. Proceedings were initiated against the appellants on the ground that they are liable to pay Service Tax on commercial charges paid by them for availing External Commercial Borrowings (ECB) under “Banking and Other Financial Services” during the period from 2005-06 to June, 2010. After submitting the details to the department in response to the query made on 21/8/2010, appellants promptly paid the Service Tax of Rs. 1,75,74,654/- with interest in September/October, 2010 and informed the Investigating Agency (DGCEI). Thereafter proceedings were initiated against the appellants which has culminated in the impugned order whereby the amount paid by the appellants towards Service Tax and interest have been appropriated and penalties under various sections of Finance Act, 1994 have been imposed.

2. Heard both the sides.

3. The Ld. Advocate submitted that there is no dispute about the liability to Service Tax. In view of the fact that whatever amount paid by them was available to them as CENVAT credit which would be used for payment of Service Tax liability on them, he submits that there was no intention to evade tax and, therefore, extended period could not have been invoked and since show-cause notice has been issued on 18/3/2011 the demand itself is time-barred. Nonetheless they are not disputing the liability. He relied upon the decision of the Tribunal in the case of Essar Steel Ltd. v. CCE& C [2009] 19 STT 42 (Ahd. – Cestat) to submit that in such a situation, no penalty is imposable. The Ld. Advocate also submitted that Service Tax on ECB was not paid for the reason that there was restructuring in the Finance Department of the company and the officers who are responsible for handling ECB transactions and new officers sought consultant’s opinion and did not pay the Service Tax. He submits that confusion arose because of decision taken in the Head Office which was not known to the unit receiving the service and further there was no intention to evade Service Tax, since whatever Service Tax paid was available at credit.

4. The Ld. AR submits that the facts remains that the Appellants received service limiting to ECB and liable to pay Service Tax as a recipient, but did not pay the same, did not take registration, did not intimate the department and, therefore, the appellants have been rightly visited with penalties.

5. We have considered the submissions made by both sides. No doubt, there is no dispute that the appellants were eligible for CENVAT credit for the amount paid as Service Tax and, therefore, this is a situation which was revenue neutral and by not paying the Service Tax immediately, appellants have lost more than Rs.26,00,000/- paid by them as interest which would not have become payable if Service Tax was paid promptly and taken as credit. In such circumstances, no service recipient would evade payment of Service Tax and become liable to pay interest which cannot be taken as credit. Therefore, it cannot be said that there was mis-declaration or suppression in the action of the appellants rendering them liable to penalty under various Sections of the Finance Act, in view of the fact that the demand itself time is barred since extended period could not have been invoked. However, since appellants are not contesting demand for Service Tax and interest paid by them, the confirmation of demand for Service Tax and interest thereof has to be upheld as not contested and penalties have to be set aside.

5.1 In view of the above observations, appeal is allowed to the extent of penalties imposed on the appellants under various sections of the Finance Act which are set aside.

NF
Categories: Service Tax
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