2017 (5) TMI 1148 - AT - Service Tax

Tribunal rules against Revenue in service tax appeal emphasizing proof of payment for taxable services

CCE, Raipur Versus M/s Sarda Energy & Mineral Limited

The Tribunal dismissed the Revenue's appeal regarding the non-payment of service tax by the respondents for importing 'Scientific Technical Consultancy' ... Reverse Charge Mechanism - liability of tax - Scientific Technical Consultancy service - Held that: - the revenue contends that the respondent received taxable service in terms of the agreement, from China. The respondent refuted the charge stating that they have only imported equipments and paid money towards that import. The agreement for design was later amended and there was no payment, for other than the equipments, to their contracting parties in China - This aspect has been noted by the impugned order. In fact, the Commissioner (Appeals) advised the Revenue to verify any payments towards the disputed proforma invoice, to confirm the tax liability of the respondents. He instructed that the matter can be verified with RBI for any payment in foreign currency - there is also no verification or follow up details were ascertained by the Revenue before the proceedings were initiated with the allegation of non-payment of service tax - appeal allowed by way of remand. Issues:Discharge of service tax liability for import of service under 'Scientific Technical Consultancy' service from a foreign company.Analysis:The case involves an appeal by the Revenue against the order of the Commissioner (Appeals-I), Raipur, regarding the non-payment of service tax by the respondents for the import of service under the category of 'Scientific Technical Consultancy' service from a foreign company. The respondents, engaged in manufacturing Ferro Alloys, had a facility for generating electricity and were availing cenvat credit. The Revenue alleged non-payment of service tax on an amount of US $3,50,000 paid to a foreign company for a project. The original authority confirmed a service tax liability of &8377; 15,54,734/- along with penalties. However, the Commissioner (Appeals) set aside the original order and allowed the appeal by the respondent.The Revenue contended that the respondent received scientific or technical service as per the agreement and proforma invoice issued by the foreign company, thus should be liable for service tax. The AR argued that the respondent failed to provide evidence of non-payment towards designs to the foreign supplier. On the other hand, the respondent's counsel stated that the payment made was only for the supply of equipment, not for any design charges to the foreign company. They emphasized that no payment was made for design charges, as asserted before the lower authorities. The respondent challenged the Revenue to prove the payment, which they failed to do.The dispute centered around the liability of the respondent for service tax on a reverse charge basis for a taxable service received from abroad. The Revenue claimed that the respondent received a taxable service from China, while the respondent maintained that they only imported equipment and paid for that import. The Commissioner (Appeals) highlighted the need for verification of any payments towards the disputed proforma invoice to confirm the tax liability. However, no such verification was conducted by the Revenue. The Tribunal noted that the show cause notice lacked specificity regarding the alleged payments for taxable services. The absence of evidence of actual payment towards taxable service led to the dismissal of the Revenue's appeal, as the findings in the impugned order were not challenged effectively.In conclusion, the Tribunal found no merit in the Revenue's appeal and dismissed it, emphasizing the importance of establishing actual payment towards taxable services to confirm tax liability.