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November 2016

[2016-TIOL-2571-CESTAT-CHD] M/s Fermanta Biotech Ltd vs. Commissioner of Central Excise, Chandigarh

By CA Puloma Dalal, CA Jayesh Gogri,CA Mandar Telang, Chartered Accountants
Reading Time 1 mins
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Suppression  cannot  be alleged when there is a failure to pay
service tax under reverse charge mechanism as there is a scope of
interpretation in such cases.

Facts

The appellant received services
from foreign based commission agents and failed to pay service tax under
reverse charge mechanism. on this being pointed out by the audit team, service
tax liability was discharged and a show cause notice was issued demanding equal
penalty u/s. 78 of the finance  act,
1994. The lower authorities confirmed the demand.

Held

The tribunal  noted that in this case, the services were
received from outside india and the tax was payable under reverse charge
mechanism. It was not a case where the services were provided and the service
tax is payable thereon. Accordingly, the benefit of doubt goes in favor of the
appellant and therefore the charges of suppression cannot be alleged. Thus
provisions of section 73(3) of the finance 
act are attracted and therefore, no show cause notice was required to be
issued and accordingly the penalty was set aside.

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