Appellant wins appeal after depositing service tax liability before show cause notice under Section 73(3)

CESTAT Ahmedabad allowed the appeal where appellant raised finance through External Commercial Borrowings and Foreign Currency Convertible Bonds, receiving services from overseas banks under reverse charge mechanism. Appellant deposited entire service tax liability with interest before show cause notice issuance. Tribunal held revenue neutrality applied as service tax paid would be available as Cenvat credit for excise duty discharge. Since compliance was made before SCN under Section 73(3) of Finance Act 1994, penalties were set aside as no deliberate evasion was established.

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Issues involved:
The issues involved in this case are related to the penalties imposed on the appellant by the Ld. Adjudicating authority.

Summary of Judgment:

Issue 1:
The appellant raised finance through 'External Commercial Borrowings (ECB)' and 'Foreign Currency Convertible Bonds' (FCCB) for which they received services from various service providers based outside India. The appellant was held liable to pay Service tax on such services under the category of Banking and Financial Services. The Ld. Commissioner confirmed the demand of Service tax and penalties. The Tribunal remanded the case for reconsideration of limitation and penalty imposition. The Ld. Commissioner passed an order confirming the service tax demand, leading to the present appeal.

Issue 2:
The appellant argued that the issue is revenue neutral as the service tax paid under reverse charge was available as CENVAT credit, making the situation revenue neutral. The appellant contended that penalties should not be imposed as there was no suppression of facts and they had paid the service tax before the show cause notice was issued. The appellant cited various judgments in support of their arguments.

Issue 3:
The Revenue reiterated the findings in the impugned order, supporting the penalties imposed on the appellant.

Judgment:
The Tribunal found that the appellant had discharged the Service Tax liability along with interest before receiving the show cause notice. The Service Tax paid under reverse charge mechanism was available to the appellant as Cenvat credit, leading to a revenue neutral situation. The Tribunal held that penalties should not be imposed as there was no intent to evade payment of Service Tax. The penalties imposed by the Ld. adjudicating authority were set aside, and the appeal was allowed with consequential benefits.

This summary provides a detailed overview of the judgment, highlighting the issues involved and the Tribunal's decision on each issue.

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