Whether allegation of suppression is sustainable in situation of revenue neutrality?

PJ/Case Laws/2012-13/1342

Case: - INDIA TRIMMING PVT. LTD. VERSUS COMMISSIONER OF C.EX., COIMBATORE

Citation: - 2012 (28) S.T.R. 401 (Tri-Ahmd.)

Brief fact: - The Appellants are manufacturer and exporter. During the course of their manufacture and export activity, they have taken the services of Goods Transport Agency and paid commission to overseas service provider. The appellant did not show the amount of GTA availed by them and commission paid from overseas in their ST3 Return and did not pay service tax on these two services. During the course of investigation, it was pointed out by the Department that they are required to pay service tax on these two activities under reverse charge mechanism. On pointing out by the Department, the appellants paid service tax along with interest.
Thereafter, the appellant was issued show-cause notice for appropriation of the amount of service tax and interest paid by the appellant and proposing penalty under Section 78 of the Finance Act. Both the lower authorities has imposed penalty under Section 78 of the Finance Act, 1994 equal to the service tax amount.
Aggrieved by the said order, the appellants are in appeal before the Tribunal.

Appellant Contention: - The learned counsel for the appellant submits that the appellant were under a bona fide belief that they are not required to pay service tax for GTA and commission paid to abroad under reverse charge mechanism as they are not service provider. He further submitted that the appellants are manufacturers and exporters and they are discharging their service tax liability for the remaining activities. He further submitted that if at all they have paid service tax on these two activities they are entitled to take credit of the same. Therefore, there is a situation of revenue neutrality and in that situation the allegation of suppression is not sustainable. In support of these contentions, he relies on the Tribunal's decision in Amman Steel Corporation v. CCE, Trichy - Vide Final Order No. 277/2011, dated 1-2-2011 [2011 (22) S.T.R. 563 (Tri.)]. In view of these submissions, it is prayed that penalty under Section 78 be waived.

Respondent Contention:- The learned AR contended that both the lower authorities have given clear finding in the impugned orders that the appellants have suppressed the material fact from the Department and if at all investigation could not be conducted the evasion of tax could not be found out. It is further submitted that the appellants are having service tax registration and that they are dealing with excisable goods as well as taxable services, they must know the law clearly. As they did not pay the service tax on GTA and commission paid to abroad, therefore it is a case of suppression. In view of these it is prayed that the impugned order be sustained.

Reasoning of Judgment:- The Tribunal held that it is a case where the service tax has been paid alongwith interest on pointing out by the department during the course of investigation. If the appellant have paid the service tax they are entitled to take credit of the same. In that view, it cannot be said that by suppressing the fact that the appellants are going to get extra benefit on account of suppression. The Tribunal has followed the decision in the case of Amman Steel Corporation (supra), which is reproduced as below:-

"6. I have carefully considered the submissions from both sides and perused the records. The service tax on GTA services was introduced w.e.f. 1- 1-2005. Rule 2(1)(d)(v) provided that the service tax in respect of GTA services can be paid by any of the following persons :-
(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948)
(b) any company established by or under the Companies Act, 1956 (1 of 1956)
(c) any corporation established by or under any law
(d) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India
e) any co-operative society established by or under any law
(f) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder, or any body corporate established, or a partnership firm registered, by or under any law, any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage .

In other words, the service tax was payable not necessarily only by the service provider unlike in most of the other services. Further, in the initial stages there were disputes relating to as to who shall pay the service tax on GTA services. In these circumstances and in view of multiplicity of persons out of whom one of them was required to pay service tax, the claim of the appellants that they were in the bona fide belief that they were not required to pay service tax and there has no deliberate intention on their part to evade the service tax, deserves to be accepted. On the officers' pointing out that as recipient of the GTA services who are paying the freight for such services, they were liable to pay the service tax, they have proved their bona fide by paying service tax along with interest promptly. In these circumstances, it is deemed as appropriate that the appellants who are dealers of scrap have to be extended the benefit of provisions of Section 80 of the Finance Act, 1994."

In this case also, if the appellant have paid service tax they are entitled to take credit of the same. In that view, it cannot be said that by suppressing the fact that the appellants are going to get extra benefit on account of suppression. In view of these observations and following the decision in the case of Amman Steel Corporation (supra), the Tribunal are of the view that penalty under Section 78 of the Finance Act is not sustainable. Accordingly, penalty under Section 78 is waived and the appeal is disposed of in the above terms.

Decision:- Appeal disposed off.

Comment:- The analogy drawn from this case is that where the situation is revenue neutral, and assessee is not getting any extra benefit from the default then the allegation of suppression of facts cannot materialize and the assessee is entitled to the benefit of the provisions of section 80 of the Finance Act.

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PJ/Case Laws/2012-13/1342

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