Whether penalty or interest could be waived in case of non-payment of ST on commission paid to overseas agent?

PJ/Case Law /2016-17/3289

Case-SURYA PHARMACEUTICALS LTD. Versus COMMISSIONER OF C. EX, CHANDIGARH-II

Citation-2016 (43) S.T.R. 479 (Tri. - Chan.)

Brief Facts-The appellant is in appeal against imposition of penalty under Section 78 of the Finance Act, 1994.The facts of the case are that the appellant is engaged in the manufacture of bulk drugs and exporting the same. On exportation of the bulk drugs, the appellant is to pay commission to foreign agents who procured the orders for them. They are liable to pay Service Tax under reverse charge mechanism. As the appellant did not pay Service Tax under reverse charge mechanism, therefore, the proceedings were initiated against the appellant and demand of Service Tax was confirmed along with interest and penalty under Section 78 was also imposed.

Appelants Contention-Learned Counsel for the appellant submitted that although the appellant is liable to pay Service Tax under reverse charge mechanism. Due to inadvertent mistake, they could not pay service tax as they have paid service tax thereon and they are entitled to take credit. In the circumstances, he prayed that the penalty imposed on the appellant is to be waived under Section 80 of Finance Act, 1994. To support his contention, he relied upon the decision of the Tribunal in the case of Matrix Telcom P. Ltd. v. CCE, Vadodara-II - 2013 (32)S.T.R.423 (Tri.-Ahmd.).

Respondents Contention-On the other hand, learned AR reiterated the findings of the impugned order.
Reasoning Of Judgement-Heard the parties and considered the submissions. In this appeal, the appellant is liable to pay service tax under reverse charge mechanism, therefore, this situation is of revenue neutrality. As the appellant has paid Service Tax, in that circumstance, the penalty is not imposable on the appellant. They further hold that the appellant has not paid the interest for the intervening period, therefore, the appellant is directed to pay interest on Service Tax, if any, for the intervening period within 30 days failing which the appellant is liable to pay penalty under Section 78 of Finance Act, 1994.The appeal is disposed of in the above terms.

Decision-Appeal disposed of

Comment-Though in the given case the assessee is required to pay service tax under RCM on payment of commission made by him to overseas agent but even if said payment having been made, the entire exercise is revenue neutral as the assessee is entitled to take Cenvat credit of same. Therefore requirement of penalty be waived but the interest for the intervening period is chargeable.

Prepared By-Neelam Jain

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PJ/Case Law /2016-17/3289

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