Appellant liable for service tax on foreign commission under reverse charge mechanism. Time-barred demand upheld.

The Tribunal upheld the appellant's liability to pay service tax on commission to foreign service providers under the reverse charge mechanism, rejecting arguments that the services were consumed abroad. The Tribunal also ruled that the demand was not time-barred, emphasizing the appellant's failure to comply despite awareness of potential liability since 2007. The appellant was ordered to pay the demanded amount of &8377; 48,79,542 along with penalties under the Finance Act, 1994.

---

---

Issues:
- Liability of service tax on commission paid to foreign service provider under reverse charge mechanism.
- Applicability of period of limitation for the demand.

Analysis:

Issue 1: Liability of service tax on commission paid to foreign service provider under reverse charge mechanism
The appellant, engaged in manufacturing insulated wire and cables, raised funds for business activities through external commercial borrowings facilitated by foreign agencies. The department contended that service tax liability under banking and financial services category was not discharged by the appellant. The department invoked Section 66A of the Finance Act, 1994, requiring service tax payment on the commission paid to foreign service providers under the reverse charge mechanism. The Order-in-Original confirmed a demand of &8377; 48,79,542, with penalties under the Finance Act. The appellant argued that since services were received and consumed abroad, service tax was not payable in India. They also claimed the demand was time-barred due to ongoing correspondence with the department since 2007. The Tribunal held that as per Section 66A, the appellant was liable to pay service tax on the commission paid to foreign institutions for ECBs, even if part of the funds were used abroad for business purposes.

Issue 2: Applicability of period of limitation for the demand
The appellant contended that the demand was time-barred, citing correspondence with the department since 2007 and withdrawal of a show cause notice by another Commissionerate. The Tribunal noted that the appellant, aware of potential service tax liability since 2007, failed to take proactive steps to comply with the law. The Tribunal rejected the appellant's argument that the extended time proviso under Section 73(1) was not applicable, emphasizing the appellant's responsibility to pay service tax as per the law. The Tribunal held that the department had valid grounds to invoke the extended time proviso under the Finance Act, dismissing the appeal and upholding the order-in-appeal.

In conclusion, the Tribunal upheld the liability of the appellant to pay service tax on commission paid to foreign service providers under the reverse charge mechanism. The Tribunal also ruled that the demand was not time-barred, as the appellant failed to discharge their service tax liability in a timely manner despite being aware of the legal requirements since 2007.

---