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Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Rachna Gupta (Judicial Member) allowed an appeal in relation to evasion of payment of duty.

Appellants were registered under the category of legal consultancy service, work contract service, manpower recruitment/ supply agency service, maintenance or repair service and security/ detective agency service. During the scrutiny of ST-3 Returns of the appellant by AG (Audit), the Department noticed that the appellant had received services of manpower recruitment or supply agency during the period of April, 2015 to March, 2016 and had paid Service Tax under manpower recruitment or supply agency service on 75% of gross service value under reverse charge mechanism as per the provisions of Notification No.30/2012-ST dated 20-06-2012. It was observed that the appellant was otherwise liable to pay Service Tax on 100% of gross service value in terms of the aforesaid Notification being amended vide Notification No. 07/2015-ST dated 01-03-2015 with effect from 01-04-2015.

Short payment of Service Tax of Rs 71,440/- was proposed by the department alongwith the interest and the penalty.

It was submitted on the behalf of the appellant that he was liable to pay Service tax on 75% of gross service value of the services received under reverse charge mechanism. It was submitted that the period in dispute was immediately after the said amended Notification i.e. w.e.f. April 2015 to March, 2016 and the amendment had also to take effect from 01-04-2015. In the given circumstances, intentional evasion may not be alleged against the appellant. The authorities below were alleged to have wrongly held suppression of facts on part of the appellant.

The Tribunal observed that appellant admitted his liability of paying Service Tax for receiving manpower recruitment and supply agency service to the extent of 75% on the gross value of service received under reverse charge mechanism and further opined that non-payment by the appellant for the said period is merely due to his bonafide belief of his liability to the extent of paying the service tax at 75% of the service value. Once there is no apparent malafide on part of the appellant and in view of the aforesaid bonafide belief of the appellant, fastening the allegations as that of concealment fraud and suppression are held to be highly unjustified.

The Tribunal relied on the judgments of the Supreme court in Pushpam Pharmaceuticals Co. v. Collector of Central Excise, 1995 (78) ELT 401 (S.C.) and Continental Foundation Jt. Venture v. CCE, 2007 (216) ELT 177 (SC) explaining the term “suppression of facts”.

When the Revenue invokes the extended period of limitation under Section 11A, the burden is cast upon it to prove the suppression of fact as far as fraud and collusion are concerned, it is evident that intent to evade duty is built into these very words so far as misstatement or suppression or facts are concerned, they are clearly qualified by the word “willful” preceding the words “mis-statement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or Rules” are again qualified by the immediately following words” with intent to evade payment of duty”. Therefore, there cannot be suppression or misstatement of fact which is not willful.

The Tribunal allowing the appeal held that alleged non-payment cannot be called as willful or intentional act of the appellant to evade the payment of duty. The findings of Commissioner (Appeals) that there was no documentary evidence to prove the payment of service tax twice in support of appellants contention was therefore held, not at all sustainable.[Mahatma Gandhi University of Medical Sciences and Technology v. CCE & CGST, Service Tax Appeal No. 50962 of 2020 [SM], decided on 08-09-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Raju (Technical Member) partly allowed an appeal which was field against the demand of service tax and imposition of penalties.

Counsel for the appellant pointed out that there were two issues involved. First issue related to the payment of service on the reverse charge basis on GTA services received by them and he pointed out that the demand pertains to the period April 2005- March 2006. The appellant had 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 discharged the duty in cash on 27-12-2006. It was again pointed out that they were not contesting for payment of duty and interest and were entitled for the benefit of Section 73(3) of the Finance Act, 1994. The revenue had denied the benefit of the said section because Section 73(3) was introduced in 2010 much after the disputed period.

Second issue related to the demand of service on reverse charge basis in respect of commission paid by the appellant to a foreign entity. Period of the second dispute was 16th June 2005 to March 2006. He pointed out that the said period was prior to the introduction of Section 66A and 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 were not demanding any refund of duty but only setting aside of penalties imposed under Sections 76 and 78. He also claimed that their specific claim under Section 80 was not considered.

AR argued that Section 73(3) introduced much after the disputed period and therefore, had no application in the instant case.

The Tribunal found that the first issue related to the payment of service on reverse charge basis in respect of GTA services received by appellant, and that the appellant had paid the service tax as soon as it was pointed by the auditor and again in cash when it was pointed out that it had to be paid in cash and thus, no malafide on the part of the appellant could be found.  It was held that the benefit of Section 80 should be extended for the appellant and penalty under Section 76 and 78 were set aside.

In reference to the second issue, it was established that the period was prior to introduction 66A when the duty was not leviable, thus the Tribunal partly allowing the appeal found that there is no justification in imposition of penalty under Sections 76, 77 and 78.[Sud Chemie (P) Ltd. v. C.C.E. & ST, Service Tax Appeal No.10021 of 2019, decided on 02-09-2021]


Suchita Shukla, Editorial Assistant has reported this brief.