Case Law Details
Scope E Knowledge Center Private Limited Vs Commissioner of Service Tax (CESTAT Chennai)
CESTAT find that there is no dispute insofar as the facts are concerned. The only short questions that arise for our consideration are: (1) whether translation services constitute “support services of business or commerce” as defined under Section 65 (104c) of the Finance Act, 1994 and (2) whether the Revenue was justified in invoking the extended period of limitation?
We find that the period of dispute is from 2006-07 to 2010-11 and the tax demand was raised under reverse charge mechanism. Hence, when the tax is paid under reverse charge mechanism, the appellant would be entitled to avail credit of the same, which invariably leads to a revenue neutral situation. Thus, there is no scope to allege fraud, suppression, etc., to invoke the extended period of limitation for non-payment of tax.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The appellant is a Private Limited Company engaged in providing knowledge process outsourcing. A perusal of the Show Cause Notice dated 08.04.2011 and the impugned Order-in-Original dated 03.04.2013 reveals that there was an investigation by the Survey, Intelligence and Research (SIR) Branch of the Service Tax Commissionerate based on an intelligence input that the appellant was receiving various taxable services from overseas companies but had not remitted Service Tax. It appears that there were several queries and replies, which finally resulted in issuing the Show Cause Notice dated 08.04.2011.
2.1 It has been highlighted in the Show Cause Notice that the Revenue had scrutinized the documents furnished by the appellant, including Schedules to the individual Annual Reports for the years 2005-06 to 2009-10. There was also a verification of the agreements with various parties who are located outside India, wherein it is said to have been noticed that the appellant had engaged various individual professors and students for carrying out the work of language translation from Chinese to other desired languages. It further transpires that the appellant had accounted the above transactions as “Translation Charges” in their books of accounts and made payments to the individuals.
2.2 By the above, it was alleged in the Show Cause Notice that the translation services received by the appellant from the various individuals were taxable with effect from 01.05.2006, under Business Support Services and hence, the appellant was liable to pay Service Tax for the period from 01.05.2006 to 30.09.2010 as covered under Section 65 (104c) and Section 65 (105) (zzzq) of the Finance Act, 1994. Though there are other allegations as regards demanding Service Tax for other services, the appellant has only questioned the taxability of translation services under ‘support services of business or commerce’ in this appeal.
3. Heard Shri N.K. Bharath Kumar, Learned Consultant for the appellant and Smt. K. Komathi, Learned Additional Commissioner for the Revenue.
4. After hearing both sides, we find that there is no dispute insofar as the facts are concerned. The only short questions that arise for our consideration are: (1) whether translation services constitute “support services of business or commerce” as defined under Section 65 (104c) of the Finance Act, 1994 and (2) whether the Revenue was justified in invoking the extended period of limitation?
5.1 We find that the period of dispute is from 2006-07 to 2010-11 and the tax demand was raised under reverse charge mechanism. Hence, when the tax is paid under reverse charge mechanism, the appellant would be entitled to avail credit of the same, which invariably leads to a revenue neutral situation. Thus, there is no scope to allege fraud, suppression, etc., to invoke the extended period of limitation for non-payment of tax.
5.2 Viewed thus, the demand is possible only for the normal period. The Show Cause Notice in this case having been issued on 08.05.2014, the demand proposed and confirmed for the period prior to October 2009, is barred by limitation.
6. In view of the above, we deem it proper to set aside the above demand by agreeing with the contentions of the Learned Consultant for the appellant that the same is hit by limitation. However, we uphold the demand for the normal period. Consequently, we are remanding the matter to the file of the Adjudicating Authority to the limited extent of working out the demand for the normal period.
6.1 We find from the impugned order that the Learned Commissioner has confirmed reduced penalty under Section 78 and penalty under Section 77 of the Finance Act, 1994.
6.2 In view of our discussions, we find that the Revenue has not made out any case of fraud, suppression, etc., and therefore, we set aside the impugned order to this extent of levying penalty under Section 78 ibid. and allow this ground of the appeal.
6.3 With regard to the penalty under Section 77 of the Act, we do not find any justification in the impugned order for imposing the same. Penalty under Section 77 could be imposed for failure to take up registration, failure to keep, maintain or retain books of account and other documents as required, etc., and we do not find any allegations as to the violation of any of the provisions of Section 77. Hence, the penalty appears to have been imposed mechanically. Further, we find that the Adjudicating Authority has ordered for appropriation of the amount paid including interest and there is no allegation further as to non-registration, etc., by the appellant. Thus, we are of the clear view that the appellant has made out a case for intervention for invoking the provisions of Section 80 of the Act, as it stood then. Thus, to this extent also, the impugned order stands set aside and the grounds-of-appeal, to the above extent, stand allowed.
7. We therefore set aside the impugned order to the above extent and partly allow the appeal filed by the assessee.
(Order pronounced in the open court on 16.03.2023)
