Case Law Details
Sud Chemie Pvt Ltd. Vs C.C.E. & S.T. (CESTAT Ahmedabad)
Sud Chemie Pvt Ltd (Appellant) filed an appeal against the Order No. OIA-VAD-EXCUS-001-APP-287-2018-19 dated August 20, 2018 (Impugned order) which was passed by the Commissioner (Appeals) Central Excise, Customs and Service Tax, Vadodra (Respondent). The Impugned order pertained to the demand of Service Tax and a subsequent imposition of penalties on the Appellant by the Respondent.
The Appellant, raised two issues before the Tribunal:
1. The first issue related to the payment of service on the reverse charge basis (“RCM”) on Goods Transport Agency (“GTA”) services received by the Appellant– when the Respondent pointed out that this amount should be paid in cash, the Appellant discharged the duty in cash on December 27, 2006 and therefore, were entitled to the benefit under Section 73(3) of the Finance Act, 1994.
2. The second issue related to the demand of service on a RCM in respect of commission paid by the Appellant to a foreign entity– The Appellant contended that during that period there was a lot of confusion in the trade regarding enforceability of the said duty on a reverse charge basis. Furthermore, it was claimed that the Appellant was not demanding any refund of duty but only setting aside penalties imposed under Sections 76 and 78 of the Finance Act, 1994. The Appellant also claimed that their specific claim under Section 80 of the Finance Act, 1994 was not considered.
As opposed to the Appellant’s contentions, the Respondent argued that Section 73(3) of the Finance Act, 1994 can have no retrospective applicability.
After taking cognizance of all the facts and evidences, the Central Excise Service Tax Appellate Tribunal (“CESTAT”), Ahmedabad adjudicated on both the issues of the case:
A. Issue 1. The Court opined that the Appellant had paid the Service Tax as soon as it was pointed by the Respondent and again in cash when it was pointed out that it has to be paid in cash. Therefore, no mal-intent on the part of the Appellant was to be found. The Court further opined that the benefit under Section 80 of the Finance Act, 1994 should be extended to the Appellant and penalty under Section 76 and 78 of the Finance Act, 1994 must be set aside.
B. Issue 2. The Court held that the period in question is prior to the introduction of 66A of the Finance Act, 1994 when the said duty was not leviable. Therefore, the Court adjudged that the penalty under Section 76, 77 and 78 of the Finance Act, 1994 was unjust. The Court also acknowledged that, the Appellant was not contesting payment of duty but rather contested the penalty imposed.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal has been filed by M/s Sud Chemie Pvt Ltd against the demand of service tax and imposition of penalties.
2. Learned counsel for the appellant pointed out that there are two issue involved. The first issue relates to the payment of service on the reverse charge basis on GTA services received by them. He pointed out that the demand pertains to the period April 2005- March 2006.The appellant has discharged the duty liability through their Cenvat credit on 1st December, 2006 along with interest. However, when the revenue pointed out that this amount should be paid in cash, the appellant discharge the duty in cash on 27th December, 2006. Learned counsel pointed out that they are not contesting for payment of duty and interest. Learned counsel pointed out that they are entitled for the benefit of section 73(3) of the Finance Act, 1994. He pointed out that the revenue has denied the benefit of the said section because section 73(3) was introduced in 2010 much after the disputed period. The learned counsel relied upon the decision in the case of M/s SKY AUTOMOBILES -2018 (12) TMI 74- CESTAT KOLKATA to claim that the section 73(3) was clarificatory in nature.
2.1 The second issue relates to the demand of service on reverse charge basis in respect of commission paid by the appellant to a foreign entity. The period of the second dispute is 16th June 2005 to March 2006. He pointed out that the said period is prior to the introduction of section 66A. He pointed out that prior to the said period the levy itself was not leviable. He argued that during that period there was lot of confusion in the trade regarding leviability of the said duty on reverse charge basis. He also claimed that they are not demanding any refund of duty but only setting aside of penalties imposed under section 76 and 78. He also claimed that their specific claim under section 80 was not considered.
3. Learned AR relied on the impugned order. He argued that section 73(3) introduced much after the disputed period and therefore, has no application in the instant case.
4. I have gone through rival submissions. I find that the first issue is involved relates to the payment of service on reverse charge basis in respect of GTA services received by appellant. The appellant has paid the service tax as soon as it was pointed by the auditor and again in cash when it was pointed out that it has to be paid in cash. In these circumstances, I do not find any that there was any malafide on the part of the appellant. Therefore, benefit of section 80 should be extended for the appellant and penalty under section 76 and 78 are set aside. The appellant have already conceded that they are not contesting the payment of duty.
4.1 The second issue relates to demand of service tax of reverse charge basis in respect of commission to a foreign entity. The period is prior to introduction 66A when the duty is not leviable. In this circumstance, I do not find any justification in imposition of penalty under section 76, 77 and 78. The penalty imposed under section 76, 77 and 78 are set aside. The appellant has already conceded that they are not contesting payment of duty. The appellant has however conceded payment of penalty under section 77 in respect of first charge.
5. The appeal is partly allowed in above terms.
(Dictated and pronounced in the open court)
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