The Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled in favor of Maruti Suzuki, confirming that education cess and secondary education cess should be calculated on the net service tax after deducting the Research and Development ( R&D ) cess.
Maruti Suzuki India Ltd, appellant-assessee, manufactured engine and transmission parts for two- and four-wheeler vehicles. It paid service tax under the ‘Consulting Engineering Service’ and ‘Intellectual Property Service’ categories, using exemptions provided by Notification No. 18/2002-ST and Notification No. 17/2004-ST. These exemptions covered the R&D cess paid on the transfer or import of technology.
The assessee paid education and secondary education cess only on the net service tax after deducting the R&D cess. Following an audit, a show cause notice was issued in April 2011, invoking the extended period of limitation. After the due process, the Commissioner confirmed the demand, including interest and penalties.The assessee appealed before the tribunal.
Boost Your Earning Potential: Upskill in Tax and Finance
The assessee’s counsel argued that the impugned order was incorrect and should be set aside, as it didn’t properly consider the facts and law. The counsel pointed out that the same issue had been decided in the assessee’s favor for a later period, and the department had dropped similar cases for 2014-15 and 2015-16. The department accepted these decisions, which had become final, and couldn’t change its position on the same issue.
The counsel explained that the Commissioner confirmed the demand for education cess and secondary & higher education cess, stating they were part of the service tax. The assessee argued that R&D cess should be deducted from the total service tax, including these cess amounts. The department had not disputed the assessee’s eligibility for the exemption under the notifications.
The counsel referred to a circular stating that in cases of partial exemption, education cess should be calculated on the net tax paid. The counsel also stated that the demand was wrongly calculated using best judgment provisions for the period 2008-09 to 30.09.2010, as the appellant had been filing returns regularly.
Boost Your Earning Potential: Upskill in Tax and Finance
Finally, the counsel argued that the assessee had a genuine belief they had correctly paid the required cess and that the issue was a complex legal interpretation, so there was no intent to evade tax.
The tribunal reviewed the submissions and the record. It found that in the appellant’s case for the financial years 2014-15 and 2015-16, the Commissioner had ruled in favor of the assessee in Order-in-Original No. 08/ST/COMMR/VMJ/RTK/2017-18 dated 29.12.2017. The department accepted this order and did not file an appeal.
In another order dated 23.03.2021, the adjudicating authority noted that the Committee of Chief Commissioners had accepted the 2017 order. Since the department had accepted the earlier decision and the current case arose from the same audit, the CESTAT ruled that the issue was in favor of the assessee.
It also confirmed that the assessee had correctly paid the education cess and secondary & higher education cess on the net service tax after deducting the R&D cess.
In short,the appeal filed by the assessee was allowed for consequential relief.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
