TaxTMI 
TaxTMI 
2018 (2) TMI 1249
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....penalty under Section 78 of the Act, besides proposing appropriation of Rs. 81,59,255/- paid by the applicant towards the Service Tax liability. Brief Facts 1.1 The applicant are registered with the department for Works Contract Service, Construction Service other than residential complex, including Commercial/ industrial buildings or civil structures. During the course of verification, it was noticed that the applicant had filed ST-3 Returns for Construction service, but the Service Tax was paid for Works Contract Service. The applicant had undertaken Works Contract Service in respect of M/s. Chareon Popkhand Pvt. Ltd., Pune and invoices raised periodically for taxable service. The applicant had paid 50% of the Service Tax amount mentioned in the invoices. On enquiry it was informed that their customer, M/S. Chareon Popkhand Pvt. Ltd. had not paid them 50% of the Service Tax amount mentioned in the invoice on the pretext that their customer - service receiver, was liable to pay 50% of the Service Tax under reverse charge mechanism as per Notification No.30/2012-S.T., dated 20-6-2012, since November, 2012. 1.2 In terms of Notification No.30/2012-S.T., dated 20-6-2012 read ....
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....2 to March, 2013, under reverse charge mechanism. • The applicant had not paid Service Tax in full and short paid to the extent of sharing of liability with M/s. CPIPL under reverse charge mechanism and informed the department that M/s. CPIPL had not released the entire Service Tax, but had paid only 50% of the Service Tax and the balance of 50% had been paid by M/s. CPIPL. • Reverse Charge Mechanism did not apply in the case as both the Service provider and Service recipient were body corporate. • M/s. CPIPL, instead of giving back the Service Tax amount to the applicant, paid the said amount directly into the Government account under the applicant's registration no. and M/s. CPIPL treated the Service Tax amount paid previously on the services received from the applicant as advance/excess payments and suo motu adjusted such "excess payments" in terms of Rule 6(4A) of Service Tax Rules, 1994, against the payment of Service Tax for the months of March, 2014 and April, 2014. • The excess payments made by M/s. CPIPL was attributable to 'interpretation of law and procedures' and it appeared that the adjustment of Service T....
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....PIPL. They did not have any control over the action of M/s. CPIPL, but persuaded them to effect payment of 50% of the Service Tax so as to clear themselves from legal accountability and responsibility. • Having raised bills on CPIPL by charging the entire Service Tax, they not only declared in their records their liability, but also filed the ST-3 returns inconsistent with the invoices and there was no suppression of value, facts or any other details, particularly with intent to evade payment of Service Tax. • The revenue to the Government was accounted for in full, no matter the tax was paid jointly by the service provider and service receiver under partial reverse charge mechanism. Though not in line with the Notification No.30/2012-S.T., dated 20-6-2012 and the mistake was on account of M/s. CPIPL, the same was duly ratified in Order-in-Original No.13/2016-17, dated 11-8-2016. In other words, the Service Tax remained credited to the Government at the relevant time. • As a sequel to the payment under reverse charge mechanism not in accordance with the law, M/s. CPIPL had to release the balance 50% of the Service Tax to the Applicant for remi....
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....id period; that the remaining amount was not paid by them as the service recipient did not pay them the said amount on the ground that the service recipient was under the impression that they need to pay 50% of the Service Tax involved under Reverse Charge Mechanism to the exchequer; that they resorted to this practice for the period from November, 2012 onwards; that later they understood the entire liability is only on them and not on the service recipient; that this had happened only because of wrong under standing of the law by the service recipient; that they admitted their tax liability when the above discrepancy was pointed out to them by the audit team; that the said amount, once pointed out by the audit has been remitted on 5-7-2014. 3.3 It was further submitted by the advocate that right from November, 2012 to December, 2013, the service recipient was paying 50% of the service tax involved and they were paying the remaining 50%; that though they were insisting that they need to pay the entire 100% of the service tax involved, their clients did not agree with them and they were also remitting the amount from 29^th October, 2012 to 27^th December, 2013, on var....
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....nding of the law by one of their service recipients, he prayed for immunity wholly from the imposition of penalty and from prosecution. 3.8 None represented the Revenue. The Bench directed that a copy of the Record of Proceedings to be sent to the jurisdictional Commissioner and they expedite their report on the application. Jurisdictional Commissioner's Report • 4.1 The Commissioner of GST and Central Excise, Chennai Outer Commissionerate, in his report C. No.IV/02/12/2017 R & T, dated 14-9-2017, submitted, inter alia, as follows : • As the applicant had provided services to M/s. CPIPL. In terms of Section 67A of the Finance Act, 1994, the applicant is liable to pay the applicable tax liability irrespective of the fact whether M/s. CPIPL paid the tax. • In terms of the Point of Taxation Rules, 2011, Service Tax is due when the invoice is raised or date of payment or provision of service, whichever is earlier. Hence the applicant is liable to discharge the tax liability as they had raised the invoice on their customers for the services rendered irrespective of the fact whether M/s. CPIPL paid or not. • The issue involved....
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....interest liability worked out to Rs. 14,61,006/- and they had paid interest of Rs. 3,99,103/-. They are required to pay the balance interest of Rs. 10,61,903/-. • The applicant is a Private Limited Corporate Company and should have been aware of laws. Hence the submission that the delay of payment of Service Tax was due to incorrect understanding of law and there was no wilful intent was not acceptable. Additional Submission by the Applicant : 5.1 On providing a copy of the report dated 14-9-2017 of the jurisdictional Commissioner, the applicant, vide their letter dated 27-9-2017, submitted that the department had not denied the fact that the applicant and their Service recipient had paid the Service Tax in full, but jointly, during the material period, viz., November, 2012 to March, 2013. The applicant alone were required to discharge the tax liability, but the recipient, by mistake, paid the Service Tax partially on mistaken understanding of law under Notification No.30/2012-S.T., dated 20-6-2012, which was the subject matter of deliberation in the departmental proceedings in the show cause notice No.93/2015, dated 22-7-2015 and adjudication vide Order-in-origi....
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....ice Tax Registration No. Therefore, the quantum of differential Service Tax to be paid was not under dispute. However, the contention of the applicant before the Commission is only the quantum of interest payable. Interest 5.3 It is the stand of the applicant that since the entire tax (100%) was paid before the due date, partially (50%) by the applicant and partially (50%) by the Service recipient, there was no short payment in the strict sense warranting payment of interest from the date, on which the Service Tax became payable under the law. They contended that after the payment of 50% of Service Tax again by the Service recipient, on behalf of the applicant, on 5-7-2014, the total tax paid became 150% and the Service recipient took suo motu refund of the tax paid earlier in terms of Rule 6(4A) of the Service Tax Rules, which was objected to by the department and the corresponding penal proceedings against the Service recipient were dropped with the passing of the Order-in-Original No.13/2016-17, dated 11-8-2016 by the Principal Commissioner of Service Tax, Service Tax I Commissionerate, Chennai. The applicant's contention in this regard is that as the Service recipient....
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....00% and paying only 50% of the tax to the Government clearly establishes short payment by the Service provider, attracting interest. The Bench also considers that the decision of the Adjudicating Authority in the case of their Service recipient permitting adjustment of excess payment of Service Tax for the period November, 2012 to December, 2013, towards their Service Tax liability for March, 2014 and April, 2014, does not lend support to the applicant for calculating interest liability in their case from the date of passing of the Adjudication order, a position which is not supported by any legal provisions. It is only a case of excess payment of tax by a different assessee, dealt according to the provisions of law governing refund/ adjustment and it cannot be linked with the case on hand. Hence, the Bench holds that interest is chargeable from the date on which the Service Tax became payable by the applicant, as alleged in the show cause notice and as contended by the jurisdictional Commissioner. The Bench, thus, settles the Service Tax liability and interest liability at Rs. 81,59,255/- and Rs. 14,61,006/respectively. Penalty 5.5 This is a case of short payment of Service ....