Value Labs vs Commissioner Of Customs ,Central ...

[Arising out of Order-in-Appeal No. 30/2010 (H-IV) S. Tax dated 22/12/2010 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals-II), Hyderabad.]

For approval and signature:

HON'BLE SHRI B.S.V.MURTHY, TECHNICAL 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? Yes 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

VALUE LABS PLOT NO.41, HITECH CITY, PAHSE -II, MADHAPUR, HYDERABAD.500 081 AP Appellant(s)

Commissioner of Customs ,Central Excise and Service Tax POSNETT BHAWAN, TILAK ROAD, RAMKOTI, HYDERABAD, - 500001 ANDHRA PRADESH Appellant(s)

Versus

Commissioner of Customs ,Central Excise and Service Tax POSNETT BHAWAN, TILAK ROAD, RAMKOTI, HYDERABAD  500001. ANDHRA PRADESH Respondent(s)

VALUE LABS PLOT NO.41, PHASE-II, HITECH CITY, MADHAPUR, HYDERABAD-81 Respondent(s)

Appearance:

Mr. Y. SREENIVASA REDDY, Advocate C-403, KESHAVDALE, ANAND NAGAR COLONY, KHAIRATABAD HYDERABAD - 500004 ANDHRAPRADESH For the Appellant

Mr. Mohd. Yusuf, Addl. Commissioner (AR) For the Respondent

Date of Hearing: 09/04/2015

Date of Decision: 09/04/2015

CORAM:

HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER

Final Order No. 21024-21025 / 2015

Per : B.S.V.MURTHY

Appellant is engaged in providing information technology services and related services. On the basis of the intelligence that appellants were receiving certain taxable services viz., Business Auxiliary Services and Management Consultancy Services from the persons located outside India who do not have an office in India and were not discharging service tax liability, investigations was initiated culminating in issuance of show-cause notice on 22.12.2009 requiring the appellants to pay service tax of Rs.18,78,785/- and interest thereon and also proposing to levy penalties. The original adjudicating authority came to the conclusion that appellants had suppressed the facts and therefore extended period is invocable and confirmed the demand for service tax and interest and appropriated amounts paid by the appellant towards the same. Penalties under Section 77 & 78 are also imposed. On an appeal filed by the appellants, the Commissioner (A) refused to intervene as regards the confirmation of demand for service tax and interest but allowed the appellants to pay 25% of the service tax towards penalty.

2. Revenue is in appeal against the decision of the learned Commissioner (A) reducing the penalty and assessee is in appeal against the imposition of penalty.

3. Learned counsel submits that appellant is a STPI unit and all the services are exported. Till the officers informed them, the appellant was neither aware of their eligibility for CENVAT credit of service tax paid on input services received from domestic service providers nor in respect of input services received from abroad. When the officers pointed out, they released the mistake in not paying the service tax on the services received from abroad and promptly paid the entire amount with interest. It is his submission that because of their ignorance of law, the appellant has almost lost more than Rs.3 lakhs of CENVAT credit in respect of services received from domestic service providers. Further, he also submits that the entire situation was revenue neutral. If the appellant was to pay service tax on the input services received from abroad, they could have claimed refund. Subsequently registration was obtained and the appellant has been claiming refund every quarter and has been getting the amount back. By not paying the service tax on the services received from abroad, the appellant has not made any gains instead they have lost the interest portion which they have already paid and they have got actually the refund of actual tax paid. When there is no profit to be made or gain is to be made by the action against which revenue has initiated proceedings against them, question arises as to whether there was any intention to evade tax or suppression of facts or mis-declaration. He submits that this is a case where the benefit of provision of Section 80 could have been easily invoked and extended to the appellants because of their actions. Appellants have indeed lost the money and not gained a single pie. He also submits that except stating that appellants have suppressed the facts no evidence has been discussed and no facts supporting suppression of facts have been brought out. Provisions of Section 80 have not been applied on the ground that the legal position was very clear and Board had also clarified that appellant could not have any doubt whatsoever regarding their liability.

4. Learned AR submits that Commissioner (A) could not have extended the benefit of payment of 25% of the penalty at the appellate stage since as per the statutory provisions only the original adjudicating authority could have extended this benefit. Moreover, the appellants have not deposited the amount within one month from the receipt of Order-in-Original to entitle them for the benefit of penalty of 25%.

5. I have considered the submissions made by both the sides. This is a clear case of lack of understanding of the law, which resulted in loss to the assessee. When there was nothing to gain, it is difficult to take a view that there was an intention to evade taxes and therefore the assessee resorted to mis-declaration, suppression, etc. In this case, by not paying the tax, appellant had to pay interest and since all the services have been exported, the refund could be only to the extent of CENVAT credit taken and as a result, interest paid is a benefit to the Government. In such a situation even though ignorance of law is not an excuse, in the case of exports and in the case of units like this where there is absolutely no gain made because of the practice followed, in my opinion, provisions of Section 80 can be invoked and should have been invoked. The assessee is not challenging the levy of service tax and interest thereon which has already been paid. Appellant could not even take CENVAT credit on the domestic services because the limit of one year had already crossed and this has caused further loss to them also. In such a situation, in my opinion, the appellant is entitled to benefit of Section 80 and therefore I consider it appropriate to extend the same at this stage.

5.1 As regards Revenues appeal, in view of the fact that penalty imposed itself has not been sustained, the question of imposing 100% penalty instead of 25% does not arise.

6. In the result, appeal filed by the Revenue is rejected and the appeal filed by the assessee is allowed as regards penalty alone. It is made clear that amounts paid towards service tax and interest are held to be rightly paid and not contested.

(Order pronounced in open court)

B.S.V.MURTHY TECHNICAL MEMBER rv 4