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When the CENVAT credit of service tax paid under reverse charge mechanism is available to the assessee itself, the situation being revenue neutral the demand of interest and penalties on the said tax is liable to be set aside.
Facts
The Appellant raised an amount as External Commercial Borrowing (ECB) in the form of convertible bond and paid amounts to various entities abroad for services rendered. Revenue contended that the amount paid abroad is liable to service tax under reverse charge mechanism. The service tax liability was discharged and the matter was contested. The demand for the period prior to 18/04/2006 was dropped by following the decision of the Apex Court in the case of Indian National Ship Owners Association [2010 (17) STR J-57]. However the demand for the post period was confirmed along with interest and penalties. CENVAT credit was availed of the service tax paid and therefore the present Appeal is filed contesting the interest and penalties only.
Held
The Tribunal relied on the decision in the case of Jain Irrigation Systems Ltd [2015-TIOL-1674-CESTAT-MUM] wherein it was held that since the duty stands paid and the credit of the duty paid is admissible to the Assessee itself, the interest and penalties are set aside. Accordingly the demand of interest and penalty is set aside.
Note: Readers may also note the decision in the case of Lime Chemicals Ltd [2016-TIOL-1567-CESTAT-MUM] wherein the Tribunal held that when the situation is revenue neutral, the assessee would naturally not get any benefit by not paying such tax therefore the extended period could not be invoked and the penalties were set aside.
