Tribunal rules in favor of appellant, setting aside service tax demand. Genuine doubt, past practices considered.

The Tribunal ruled in favor of the appellant, setting aside the demand of service tax, interest, and penalties imposed. The extended period of limitation for service tax liability on a reverse charge basis was not upheld due to the appellant's genuine doubt regarding the tax liability, supported by past practices and legal decisions. The Tribunal also noted the revenue-neutral nature of the transactions and the absence of intent to evade duty, leading to the decision to allow the appeal and fully set aside the demand while partially allowing the appeal.

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Issues:
Confirmation of demand of service tax, interest, and imposition of penalty; Invocation of extended period of limitation for service tax liability on reverse charge basis.

Analysis:
The appeal was filed against the confirmation of demand of service tax, interest, and penalty by M/s. Nabros Pharma Pvt Ltd. The appellant engaged in manufacturing pharmaceutical products and availed the services of an overseas agent for procuring export orders, making payments under the head of commission during 2003-2007. The demand of service tax was raised amounting to Rs. 22,93,231/- invoking the extended period of limitation for service tax liability on reverse charge basis.

The appellant argued that the extended period of limitation was invoked despite confusion in the field formation and trade regarding the liability to pay service tax on a reverse charge basis. They believed no service tax was payable on a reverse charge basis, relying on relevant legal decisions. The Revenue contended that the liability existed from 18.04.2006 upheld by legal precedents.

The Tribunal found a liability of service tax on a reverse charge basis but considered if the extended period of limitation could be invoked. The appellant's bona fide doubt regarding service tax liability was noted, as they had paid service tax on similar services from 2003 onwards. The Tribunal highlighted that the decision in a relevant case clarified doubts in 2009.

In a similar case, the Tribunal granted benefit by observing a revenue-neutral situation due to admissible cenvat credit on sales commission services. It was concluded that the intention to evade duty could not be alleged against the appellant, and hence, the extended period of limitation could not be invoked. Consequently, the demand was set aside, and the appeal was allowed.

The Tribunal also set aside penalties imposed under Section 78 and Section 76, citing legal judgments supporting their decision. The demand was fully set aside, and the appeal was partly allowed.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand and penalties imposed, based on the absence of intention to evade duty and the revenue-neutral nature of the transactions.

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