Tribunal Overturns Service Tax Demand on Foreign Currency Expenditure

The Tribunal set aside the demand for service tax under the reverse charge mechanism on foreign currency expenditure for the financial year 2012-13. It ruled that the show cause notice lacked specificity and the charging section invoked did not exist for the relevant periods, making the demand unsustainable. The appeal was allowed, and the impugned order was overturned.

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Issues:
- Demand of service tax under reverse charge mechanism on foreign currency expenditure for the financial year 2012-13.

Analysis:

Issue 1: Vagueness of Show Cause Notice for the period April 01, 2012 to June 30, 2012
The appellant contested the vagueness of the show cause notice for this period as it did not specify the sub-clause of section 65(105) of the Finance Act under which service tax was being levied. The appellant argued that the demand was proposed under section 66A, which did not exist at the time. The Tribunal, relying on previous decisions, emphasized that a charging provision must be strictly construed, and the Department must establish the applicability of the relevant provisions. As the show cause notice lacked specificity regarding the taxable service, the demand based on such vagueness was deemed unsustainable.

Issue 2: Demand under Section 66A for the period July 01, 2012 to March 31, 2013
For this period, the demand was proposed under section 66A of the Finance Act, which the appellant argued did not exist post-July 2012. Citing a Division Bench decision, the Tribunal reiterated that the charging section must be strictly construed, and any ambiguity should favor the assessee. Since the charging section invoked for this period did not exist, the demand could not be confirmed. Consequently, the impugned order was set aside, and the appeal was allowed.

Conclusion:
The Tribunal found merit in the appellant's contentions regarding the vagueness of the show cause notice and the non-existence of the charging section for the respective periods. As a result, the demand for service tax under the reverse charge mechanism on foreign currency expenditure for the financial year 2012-13 was deemed unsustainable, leading to the setting aside of the impugned order.

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