In a significant case, the Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the demand for tax on an extended period is not valid when the entire service tax is paid even period before its levy.
Chiron Behring Vaccines Private Limited, the appellant has receivedfranchiseservicefrom CB GmbH for the manufacture of rabies vaccine at its plant located in Gujarat for manufacture and sale of rabipur vaccines theappellant entered into a license agreement dated 01.06.1998 with Chiron Behring GmbH & Company whereinthe appellant would be granted anexclusive and non-transferable licenseto manufacturerabipur.
The appellant would remit royalty @ 5% on the domestic sales to CB GmbH. The appellant voluntarily applied for service tax registration as the recipient of service under the taxable category of franchise service on 28.04.2008.
The appellant during the course of the investigation paid the balance service tax of RS. 17,17,373/- on the value of TDS deducted from royalty for the period 16.06.2005 to 28.02.2009 along with interest. Show cause notice dated 12.11.2009 was issued alleging short payment/non-payment of service tax on gross royalty amount from 01.01.2005 to 15.06.2005 and also on TDS component an amount of Rs. 17,17,373/-. The adjudicating authority confirmed the demand vide order in original dated 19.05.2011.
The Commissioner (Appeals) partly dropped the demand of service tax about the period before 18.06.2006 i.e. 01.01.2005 to 17.04.2006 and upheld the balanced demand of Rs.13,43,989/- for the period 18.06.2006 to 28.02.2009 on TDS component.
A Coram comprising of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) observed that the appellant has made a submission about limitation and sought the benefit of section 73 (3) and Section 80 of the Finance Act, 1994.
Section 73 of the Finance Act 1994 states that when service tax has not been levied or paid, the Central Excise Officer may within (18 months) from the relevant date (which was the period relevant at that time) serve notice on the person chargeable with the service tax required to show cause why he should not pay the amount specified in the notice.
It was observed that the appellant has paid the entire service tax even for the period before its levy and the appellant has filed ST-3 returns wherein details of paymentshave been declared. Further found that the appellant alternatively claimed the benefit of Section 73 (3) of the Finance Act, 1994 on the ground that the entire service tax along with interest paid before show cause notice.
The Tribunal set aside the demand of service tax for an extended period and the penalties are set aside. The appeal of the assessee was allowed. Shri Sanjeev Nair, Advocate appeared for the Appellant and Shri G.Kirupanandan appeared for the Respondent.
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