M/S. Vibha Agrotech Ltd vs Commissioner Of Customs, Central ...

[Arising out of Order-in-Appeal No 26/2010 dated 09/12/2010 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals-II), Hyderabad.]

For approval and signature:

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

M/s. VIBHA AGROTECH LTD MADHAPUR, HYDERABAD. Appellant(s)

Versus

Commissioner of Customs, Central Excise and Service Tax HYDERABAD-IV POSNETT BHAWAN, TILAK ROAD, RAMKOTI, HYDERABAD  500 001. Respondent(s)

Appearance:

Mr. K. PRAKASH BABU, Advocate LEVEL 2 'AKASAM' 10-1-17/1/1,MASAB TANK, HYDERABAD - 500004 For the Appellant

Dr.A.K. Nigam, AC (AR) For the Respondent

Date of Hearing: 02/02/2015

Date of Decision: 02/02/2015

CORAM:

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER

Final Order No. 20213 / 2015

Per : ARCHANA WADHWA

The prayer in the appeal is to set aside the penalties imposed under the provisions of service tax law inasmuch as there is no contest to the duty and interest confirmed against the appellant in respect of GTA services so received by them.

2. The appellant submits that they are engaged in the activity of research, production and marketing of various varieties of seeds for agricultural purposes. This activity of production of seeds is exempted from payment of excise duty and also from Value Added Taxes (VAT) levied by the State Government on sales. They are mainly involved in the scientific process as such they do not know that the payment of service tax has to be made under Reverse Charge Mechanism on GTA services availed. They were under the bona fide belief that service tax is not applicable to them as they are dealing in goods which are exempt from the excise duty and VAT. They could not imagine the existence of Reverse Charge Mechanism contemplated in the GTA services. They were under the impression that service tax has to be paid by the service provider and not by the service receiver.

2.1 They further submit that on being informed by the Central Excise officers, they immediately paid service tax along with interest. In such a scenario, he submits that there was no question of issuance of show-cause notice for imposition of penalties in terms of the provisions of Section 73(3) of the Finance Act, 1994.

3. After hearing the learned DR, I find that the said Section 73(3) is to the effect that if an assessee pays the short-paid or non-paid service tax either on his own or on the basis of tax ascertained by a Central Excise Officer, who shall not serve any notice under subsection (1) in respect of the amount so paid. However, subsection (3) of the said Section shall not apply to a case where the service tax has not been paid on account of any fraud, collusion, willful mis-statement or suppression, etc.

3.1 As such, the only question required to be decided in the present appeal is as to whether the appellant had not paid the service tax, on reverse charge basis, in respect of GTA services so received by him with any mala fide. The appellants have strongly contended that they are research body and were exempted from payment of excise duty or VAT, etc. As such, they were not aware of the provisions of payment of service tax on reverse charge basis, inasmuch as it was not the appellant who had provided the services. In such a scenario, they submit that they were under a reasonable bona fide impression that no tax is required to be paid by them. As soon as they were pointed out that they were liable to pay service tax, the same was paid immediately before the issuance of show-cause notice.

3.2 The Tribunal in the case of Ratindranath K. Kanungo vs. Commissioner of Central Excise, Ahmedabad: 2010 (07) LCX 0170 has dealt with an identical situation and has observed that the situation was squarely covered by the provisions of Section 73(3) and there was no requirement for issuance of show-cause notice. There are many other decisions on the fact that when there was a reasonable cause on the part of the appellant, the penal provisions are not required to be invoked. One such reference can be made to the Tribunals decision in the case of Commissioner of Central Excise, Madurai vs. Aquanet: 2010 (11) LCX 0101.

4. In view of the above discussions, I set aside the impugned order insofar as the same relates to imposition of penalties. The demand of duty as also interest stands confirmed as not contested.

(Operative portion of the Order was pronounced in open court)

ARCHANA WADHWA JUDICIAL MEMBER rv 3