Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

Comments

Print   |    |  Comment

PJ/CASE LAW/2016-17/3173

Penalty on the ground that the appellant was liable to discharge tax under reverse charge mechanism on the payment made by them.

Case:-ROHA DYECHEM PVT LTD VIDHI DYESTUFF MFG LTD Vs COMMISSIONER OF CENTRAL EXCISE, RAIGAD

Citation: -   2016-TIOL-727-CESTAT-MUM

Issue: -Penalty on the ground that the appellant was liable to discharge tax under reverse charge mechanism on the payment made by them.

Brief facts:-  These two appeals are against Order in Appeal Nos: US/527/RGD/2011 & US/523 & 524/RGD/2011 both dated 30/12/2011 passed by the Commissioner of Central Excise (Appeals), Mumbai-II. The period involved in both these appeals is 18/04/2006 to 31/03/2008. The lower authorities have confirmed the demand of service tax along with interest and imposed equivalent amount of penalty on the ground that the appellant is liable to discharge service tax on the reverse charge mechanism as per Section 66A of the Finance Act, 1994 for the payment made by them to Food and Drug Administration of USA for the services under the category of ‘technical inspection of certification services' and under the category of ‘business exhibition services'. The facts in the case are that the appellant had sought certification of their products by Food and Drug Administration, USA for the products manufactured by them. The Food and Drug Administration of USA certifies the quality of the products which enables the appellant to sell the products in USA, where it is statutorily required that the such products needs to be certified by US FDA.

Appellant contention: -It is the case of the appellant that the certification is nothing but a statutory requirement and the amount paid by them to US FDA are nothing but fees. In order to market the goods in USA the products needs to be certified by US FDA for which they have to pay a fee which have been charged under reverse charge mechanism, we find that in similar set of facts the Tribunal in the case of K.G. Denim Ltd. vs. Commissioner of Central Excise, Salem 2015 (37) STR 140 2014-TIOL-1734-CESTAT-MAD had held that payment of charges for textile processing to M/s Testex, Swiss will not fall under the category of reverse charge mechanism. The ratio of the said judgment squarely covers the issue in the case in hand. Regarding the business exhibition service, appellant submitted that in the case of Positive Packaging Industries Ltd. vs. Commissioner of Central Excise, Raigad 2015 (39) STR 219, it was held that service tax gets attracted only if service is performed in India. It is also held that that business exhibition service, if entirely performed outside India would not get covered under taxable service even under reversed charge mechanism. In the case in hand, the facts are not in dispute as the appellant had engaged the services of an entity for business exhibition service outside India. 

Respondent contention: -Lower authorities have confirmed the demand of Service Tax along with interest and imposed equivalent penalty on the ground that the appellant was liable to discharge tax under reverse charge mechanism on the payment made by them to Food & Drug Administration of USA for the services rendered under the category of ‘Technical Inspection & certification service' & also BAS. It was contention of Revenue that when the service provider is located abroad and service recipient is located in India, the payment so made against taxable service falls within purview of reverse charge and accordingly service tax is payable by the appellant.

Reasoning of judgment: -The appeal was allowed by relying on decision of Tribunal in the case of K.G. Denim Ltd. vs. Commissioner of Central Excise, Salem 2015 (37) STR 140 = 2014-TIOL-1734-CESTAT-MAD. In this case, it was held that payment of charges for textile processing to M/s Testex, Swiss will not fall under the category of reverse charge mechanism as it is a statutory requirement and payment so made is in nature of fees. In the instant case also, the payment made by the appellant is a sort of fees paid to US FDA, thus, no service tax is attracted. As regards the business exhibition service, matter was also decided in favour of appellant by relying on the case of Positive Packaging Industries Ltd. vs. Commissioner of Central Excise, Raigad 2015 (39) STR 219 = 2013-TIOL-2150-CESTAT-MUM in which it was held that service tax gets attracted only if service is performed in India. It is also held that that business exhibition service, if entirely performed outside India would not get covered under taxable service even under reversed charge mechanism. In the case in hand, the facts are not in dispute as the appellant had engaged the services of an entity for business exhibition service outside India. Thus, service tax was held as not payable.

Decision: -Appeal allowed.
                
Comment: -The service tax liability is not attracted if the payment made by Indian service recipient to foreign service provider is a statutory requirement. In such a case, the payment is being made in form of “fees” which does not get covered under purview of taxable service and accordingly no service tax is payable under reverse charge. In case of foreign exhibition service, it was held that where the service is entirely performed outside India, it will not be taxable in India. 
 
Prepared By: - Alakh Bhandari

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com