2023 (6) TMI 901 - AT - Service Tax

Appeal partially allowed on taxation of corporate commission; 'service' post-2012 taxable; 2013-14 demand set aside.

M/s Thyssenkrupp Indl. Solutions (India) Pvt. Ltd. Versus Commissioner of CGST, Navi Mumbai

The appellant's appeal regarding the taxation of 'corporate commission' paid to its holding company abroad was partially allowed. The Tribunal determined ... Levy of Service Tax - Business Support Service - corporate commission given by the appellant herein to its holding company abroad i.e. M/s. Thyssenkrupp, Germany - suppression of facts - extended period of limitation - HELD THAT:- With effect from 1.7.2012 section 66B(44), Finance Act, 1994 defined “service” as “any activity carried out by a person for another for consideration and includes a declared service”. There is nothing wrong in the findings of the authorities below that ‘commission’ per se would fall under the ambit of the definition of ‘service’ (supra). After 1.7.2012 once the activity falls within the definition of ‘service’ it is taxable and the fact that some wrong classification by revenue has been given to it, is not of much help of the assessee as prior to 1.7.2012 services were distinguished under different categories u/s. 65(105) ibid and service tax was charged u/s. 66 therein but w.e.f. 1.7.2012 section 66 ibid was replaced by section 65B ibid for charging service tax. Admittedly the appellant had deposited the duty immediately after being pointed out by the audit which, in the facts of this case, strengthens the stand of the appellant that there was no willful or deliberate suppression on their part. So far as the period 2013-14 is concerned the duty is demanded after invoking the extended period of limitation by attributing willful suppression on the part of the appellant. Suppression etc. cannot be imputed against the appellant merely because they failed to pay the tax on time. It is settled legal position that mere allegation of suppression is not sufficient, it has to be established through some evidence as mere omission to give some information will not always be termed as suppression with intention to evade tax, something more needs to be brought on record by the department. Admittedly the appellant was under obligation to discharge service tax under reverse charge mechanism on the commission paid for corporate guarantee provided by its parent company and if any service was taxed under reverse charge mechanism, they will be entitled to the benefit of Cenvat credit of the service tax paid. Therefore, the entire exercise is revenue neutral. In such a situation this Tribunal in the matter of JET AIRWAYS (I) LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI [2016 (8) TMI 989 - CESTAT MUMBAI] has held that in view of the fact that the demand is completely revenue neutral, extended period of limitation cannot be invoked and therefore I am of the considered view that the demand for the period 2013-14 is hit by limitation and accordingly set aside. The appeal is partially allowed so far as the period 2013-14 is concerned and for the period 2014-15 the same is remanded for the purpose of calculation of duty for the normal period alongwith interest, if any. Issues involved:The issue involved in this case is the taxation of 'corporate commission' paid by the appellant to its holding company abroad, which the revenue authorities consider as 'Business Support Service'. The appellant argues that the commission was paid for a monetary guarantee provided by the holding company and no actual service was received, hence no service tax should be applicable.Details of the judgment:The appellant, engaged in providing taxable services, paid 'Corporate Commission' to its holding company in Germany, M/s. Thyssenkrupp AG, for a monetary guarantee. The revenue authorities demanded service tax under reverse charge mechanism, leading to a show cause notice. The appellant paid the demanded amount 'under protest' after audit pointed out the issue. The Adjudicating Authority confirmed the demand, but the 1st Appellate Authority rejected the appeal except for the imposition of penalty.The appellant argued that the commission was for the corporate guarantee provided to their client, demonstrating a bona fide belief that no service tax was applicable. They contended that immediate payment after audit's observation shows no willful suppression. The revenue representative countered, stating the payment was made 'under protest' and highlighted the appellant's failure to raise objections earlier.The Tribunal noted that 'commission' falls under the definition of 'service' post-2012, making it taxable. However, the immediate payment post-audit indicated no willful suppression by the appellant. Citing legal precedents, the Tribunal emphasized that mere failure to disclose does not imply suppression. The demand for 2013-14 was set aside due to lack of suppression, while the matter for 2014-15 was remanded for calculating the duty and interest, if any.In conclusion, the appeal was partially allowed for 2013-14 and remanded for calculation of duty and interest for 2014-15.