The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand by holding that the certificates given by Experts in their respective fields cannot be ignored without providing cogent reasons.
It appeared to the Department, in the case of M/s Lakshya International Private Limited, that the appellant was rendering “Business Auxiliary Service” as per Section 65(19) as a commission agent; as the commission agents are located outside India, the appellants, as receivers of the service are liable to pay service tax under Reverse Charge Mechanism in terms of Rule 2 (1) (d) (iv) of the Service Tax Rules, 1994 w.e.f. 09.07.2007 in terms of Notification No.13/2003-ST dated 20.06.2003 as amended.
A show cause notice was issued demanding a service tax of Rs.3 lakhs along with interest and seeking to impose penalties and seeking to appropriate service tax of Rs.1 lakh deposited by the appellant.
Sudhir Malhotra, Counsel for the appellant contended that applicable service tax along with interest has been paid and in the case of M/s Lakshya International, a penalty of 25% of the service tax of Rs.1,65,814/- also stands paid and therefore, there was no need for the Department to proceed by the issuance of show cause notice in terms of Section 73(3) of Finance Act, 1994.
The Counsel further argued that there was no mala fide act on the part of the appellants to evade payment of duty as the service tax payable on commission to overseas entities would have been available to them as Cenvat credit.
Shivani, Authorized Representative for the Department submitted that the appellants cannot take the plea that the service tax payable by them is available to them as Cenvat credit as this is not an issue in the show cause notice and the appellants have not taken the same at the level of adjudication and first stage appeal.
The Two-Member Bench of the Tribunal comprising S.S. Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “We find that the appellants have produced Chartered Accountant certificates regarding the commissions paid to overseas agents for the period before and after 18.04.2006. We find that the lower authorities have simply relied on the figures proposed in the show cause notice and have not discussed at all the Chartered Accountant certificates.”
Quashing the service tax demand, the Tribunal further noted that “We are of the considered opinion that certificates given by Experts in the respective fields cannot be ignored without cogent reasons. Therefore, we find that the duty has been correctly paid by the appellants.”
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