2018 (2) TMI 330 - AT - Service Tax

Appellant wins appeal on service tax liability under Reverse Charge Mechanism

The Tribunal ruled in favor of the appellant in a case concerning liability to pay service tax under Reverse Charge Mechanism for services imported from ... 100% EOU - time limitation - whether the appellant is liable to pay service tax under Reverse Charge Mechanism of services imported from outside India and received in India rendered by the service provider located outside India? - Held that: - the SCN is barred by limitation, as the appellant had taken a categorical stand, as early as on 06/03/2014 that they are not liable to pay service tax with respect to services received from outside India and most of such services were received and consumed outside India - SCN dated 16.10.2015 is not maintainable and the same is hit by limitation - Appeal allowed - decided in favor of appellant. Issues:1. Liability to pay service tax under Reverse Charge Mechanism for services imported from outside India.2. Barred by limitation - Show cause notice validity.Analysis:Issue 1: Liability to pay service tax under Reverse Charge Mechanism for services imported from outside IndiaThe appellant, a 100% EOU, contended that they are not liable to pay service tax on foreign expenditure and services received from outside India. The dispute arose when the revenue claimed that service tax was due on various expenses like legal charges, commission, maintenance charges, etc., under Reverse Charge Mechanism for the period 2011-12 to 2013-14. The appellant argued that most services were provided from outside India, a non-taxable territory, and thus, they were not liable to pay service tax. The revenue, however, invoked the extended period of limitation and issued a show cause notice demanding service tax along with a penalty. The Tribunal noted that the show cause notice was not maintainable as the appellant had clearly stated their non-liability for service tax early on, making the notice time-barred. Consequently, the Tribunal allowed the appeal, setting aside the impugned order in favor of the appellant.Issue 2: Barred by limitation - Show cause notice validityThe crucial point of contention in this issue was the timeliness of the show cause notice. The appellant had promptly communicated their stance of not being liable to pay service tax on services received from outside India in March 2014. However, the show cause notice was issued in October 2015, well beyond the statutory time limit. The Tribunal held that the notice was hit by limitation, rendering it invalid. As a result, the Tribunal ruled in favor of the appellant, allowing the appeal and granting them consequential benefits as per the law.In conclusion, the Tribunal's judgment in the present case revolved around the appellant's liability to pay service tax under Reverse Charge Mechanism for services imported from outside India and the validity of the show cause notice. The Tribunal found in favor of the appellant on both issues, holding that the show cause notice was time-barred and, therefore, not maintainable. Consequently, the impugned order was set aside, and the appellant was entitled to consequential benefits as per the law.