Tribunal rules in favor of manufacturer on service tax liability for import of services

The Tribunal ruled in favor of the appellant, a manufacturer of industrial fans, in a case concerning service tax liability under reverse charge for import of services and Goods Transport Agency services. The demand for service tax was restricted to the relevant period, and the abatement benefits claimed were upheld. The Tribunal found the tax liability to be revenue-neutral and not subject to an extended period of limitation. The appeal by the assessee was allowed for remand to calculate the service tax liability for the specified period, and the Revenue's appeal was rejected.

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Issues Involved:
1. Service tax liability under reverse charge for import of services from outside India based on accrual vs. payment basis.
2. Service tax liability under reverse charge for receiving Goods Transport Agency services.
3. Validity of abatement benefits extended by the Commissioner for Goods Transport agency services.
4. Plea of limitation for service tax payable under reverse charge.

Detailed Analysis:

Issue 1: Service tax liability under reverse charge for import of services from outside India based on accrual vs. payment basis:
The appellant, engaged in manufacturing industrial fans, made foreign remittances for services used in their business. The demand was raised based on financial statements on an accrual basis, but the law required tax liability to be determined on a payment basis during the relevant period. The Commissioner partially dropped the demand based on actual payments shown in a Chartered Accountant certificate. The appellant contested the demand for the period prior to 18.04.2006, citing a Supreme Court ruling. The Tribunal agreed that service tax liability arises on a payment basis post-18.04.2006, restricting the demand to the relevant period. The appellant's tax liability for the specified period was already paid, and the penalty was contested on grounds of fraud or suppression, which was found to be revenue-neutral.

Issue 2: Service tax liability under reverse charge for receiving Goods Transport Agency services:
Regarding the service tax demand for Goods Transport agency services, the appellant had paid the tax after claiming a prescribed abatement of 75%, which was upheld by the Commissioner. The Revenue appealed against the abatement benefits, questioning the genuineness of certificates submitted by transporters. However, no evidence was provided to doubt the validity of the certificates. The Tribunal found the abatement benefits to be correctly extended.

Issue 3: Plea of limitation for service tax payable under reverse charge:
The Tribunal held that the service tax payable under reverse charge for import of services and Goods Transport services was revenue-neutral and not subject to an extended period of limitation due to lack of suppression. Referring to a Supreme Court decision, it was concluded that since the levy on import of services was under dispute and a significant portion of the demand was dropped, penalty was not sustainable.

In conclusion, the Tribunal allowed the appeal by the assessee for remand to compute the service tax liability for the specified period and rejected the Revenue's appeal. The judgment was pronounced on 09-01-2019.

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