Custom, Excise & Service Tax Tribunal
Kirby Building Systems India Ltd vs Hyderabad-I on 16 September, 2019
(1) Appeal No. ST/3167/2011
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench - Court - I
APPEAL No. ST/3167/2011
(Arising out of Order-in-Original No. 05/2011(Service Tax)-Commr., dated 23.09.2011
passed by Commissioner of Customs, Central Excise & Service Tax, Hyderabad-I)
KIRBY BUILDING SYSTEMS India Limited .. APPELLANT
Plot No. C-8 to C-15, IDA Phase-III,
Pashamylaram,
Medak District,
Telangana - 502 307.
Vs.
Commissioner of Central Tax, .. RESPONDENT
Customs & Service Tax, Hyderabad-I Commissionerate, Kendriya Shulk Bhavan, L.B.Stadium Road, Basheerbagh, HYDERABAD - 500004.
APPEARANCE:
Shri G. Prahlad, Advocate for the appellant Shri C. Mallikharjun Reddy, Superintendent/AR for the respondent CORAM: Hon.'ble Mr. P.V. SUBBA RAO, MEMBER (TECHNICAL) Hon.'ble Mr. P. DINESHA, MEMBER (JUDICIAL) FINAL ORDER No. A/30787/2019 DATE OF HEARING: 16.09.2019 DATE OF DECISION: 16.09.2019 [ORDER PER: Mr. P. VENKATA SUBBA RAO)
1. Heard both sides and perused the records.
2. The appellant herein is engaged in the manufacture of pre-fabricated building systems, sandwich panel, steel guard rail, steel racking systems, (2) Appeal No. ST/3167/2011 components and articles of Iron and Steel, under a licence agreement which they have with M/s Kirby, Kuwait to use their brand name. During verification of records of the appellant, the department found that they have received services from abroad in the form of "Intellectual Property Rights Services" and "Consulting Engineering Service" and were therefore liable to pay service tax on these services under reverse charge mechanism during the period 2003-2008. Accordingly, a show cause notice dated 31.03.2011 was issued to the appellant demanding the aforesaid service tax invoking the extended period of limitation. It was also proposed to impose penalties under sections 77 & 78 of the Finance Act, 1994. After following due process, the Ld. Commissioner confirmed the demand and appropriated the amounts already paid by the appellant towards demands. He also imposed penalties under sections 77 & 78 of the Finance Act, 1994. Hence this appeal.
3. Ld. Counsel for the appellant submits that it is now well settled that the demand of service tax on the services received from abroad under reverse charge mechanism cannot be upheld for the period prior to 18.04.2006 when Section 66A was inserted in the Finance Act, 1994. This issue has been settled in the case of Indian National Shipowners' Association vs. Union of India [2009(14)S.T.R. 289 (Bom.)]. Hence the demand for the period upto 18.04.2006 needs to be set aside. His second round of argument is that the extended period of limitation cannot be invoked even for the period post 18.04.2006 because there is no evidence of intention to evade payment of service tax. In fact, if they had paid the service tax, they were entitled to avail CENVAT Credit of the same amount. Therefore, as far as they are concerned, the entire exercise is revenue neutral and hence (3) Appeal No. ST/3167/2011 extended period of limitation alleging fraud, collusion, wilful misstatement cannot be invoked. For the same reason, no penalty should be imposed under section 78 because the elements necessary for imposing the penalty are absent. He relies on the case laws of M/s Jet Airways Limited vs. CST, Mumbai [2016(44)STR 465)] which has been upheld by Hon'ble Apex Court in [2017(7)GSTL 35 (SC). Thirdly, he would argue that the entire amount of service tax demanded including for the period prior to 18.04.2016 along with interest was already paid by them well before the issuance of show cause notice. Therefore, in terms of Section 73(3) of Finance Act, 1994, no show cause notice should have been issued to them at all, let alone imposing any penalty. He also prayed that in terms of Section 80 of the Finance Act, 1994 where there is a reasonable ground for failure to pay service tax, penalty can be waived. This is a clear case in which section 80 can be invoked to waive the penalties. He further submits that although they have paid the service tax, which according to them is not payable, he is not pressing the issue of non-liability of service tax because they have already availed the CENVAT Credit of the same amount.
4. Ld. DR reiterates the findings of the lower authority and asserts that the demands were correctly confirmed and penalties were correctly imposed. He also argues that merely because the assessee is entitled to CENVAT Credit, it does not mean that extended period of limitation cannot be invoked, as has been held by Hon'ble Apex Court in the case of Commissioner of Central Excise, Mumbai vs. Mahindra & Mahindra Limited [2005(179) ELT 21 (S.C.)].
(4) Appeal No. ST/3167/2011
5. We have considered the arguments on both sides and perused the records. We find that the entire amount of service tax demand along with interest has already been paid and the assessee has also availed CENVAT Credit of the service tax so paid. For this reason, Ld. Counsel is not pressing for setting aside of the demand of service tax. As far as penalties are concerned, we find that this is a case of revenue neutrality where the very same assessee would be entitled to CENVAT Credit of the service tax paid under reverse charge mechanism. Hence, we find that there cannot be any motive to evade payment of service tax. For this reason, we find there is a reasonable ground to invoke Section 80 to waive the penalties imposed upon the appellant.
6. In view of the above, the penalties imposed in the impugned order are hereby set aside invoking section 80.
7. Appeal is partly allowed as discussed herein above.
(Dictated and pronounced in open Court) (P. VENKATA SUBBA RAO) MEMBER (TECHNICAL) (P. DINESHA) MEMBER (JUDICIAL) Vrg