2009(08)LCX0297 IN THE CESTAT, SOUTH ZONAL BENCH, BANGALORE S/Shri M.V. Ravindran, Member (J) and P.

Karthikeyan, Member (T) ABB Ltd. Versus Commissioner of Central Excise, Bangalore Final Order No. 1110/2009, dated 5-8-2009 in Appeal No. ST/468/2008 Cases Quoted Amco Batteries Ltd. v. Commissioner - 2003(02)LCX0007 Eq 2003 (153) ELT 0007 (S.C.) Noted [Paras 6,8] Commissioner v. Jamshedpur Beverages Adityapaur - 2007(04)LCX0179 Eq 2007 (214) ELT 0321 (S.C.) - Referred [Para 6] Commissioner v. Mahindra & Mahindra Ltd. - 2005 (171) ELT 0159 (S.C.) - Referred [Para 6] Commissioner v. Mahindra and Mahindra Ltd. - 2004(09)LCX0194 Eq 2005 (179) ELT 0021 (S.C.) - Relied on [Para 8] Commissioner v. Narayan Polyplast - 2003 (179) ELT 0020 (S.C.) - Referred [Para 6] Commissioner v. Narmada Chematur Pharmaceuticals Ltd. - 2004(12)LCX0054 Eq 2005 (179) ELT 0276 (S.C.) - Referred [Para 6] Commissioner v. Textile Corporation, Marathwada Ltd. - 2008(09)LCX0028 Eq 2008 (231) ELT 0195 (S.C.) - Referred [Para 6] Indian National Shipowners Association v. Union of India - 2008(12)LCX0014 Eq 2009 (013) STR 0235 (Bom.) - Relied on [Paras 2,5] Unitech Ltd. v. Commissioner - 2009(05)LCX0048 Eq 2009 (015) STR 0385 (Del.) Referred [Para 2] Advocated By Shri G. Shiva Dass, Advocate, for the Appellant. Ms. Joy Kumari Chander, JCDR, for the Respondent. [Order per : P. Karthikeyan, Member (T)]. The appellants M/s. ABB Ltd., Bangalore (ABB) received services classifiable under various categories such as Consulting Engineer, Business Auxiliary Service, Commissioning and Installation, Online Information and Database Access, Maintenance or Repair Service and Management Consultancy Service from foreign companies. Such services were also received by group companies of ABB located abroad. The impugned order confirmed demand of Service tax and education cess totaling Rs. 1,49,65,179/- (Rupees One crcre forty nine lakh sixty five thousand one hundred and seventy nine only) against the appellant and applicable interest for the delay in payment of the tax. Vide the impugned order, equal amount of penalty was imposed on ABB under Section 78 of the Finance Act '94 (The Act) and also penalty at the rate of 200/- per day under Section 76 of the Wet. The appellant paid an amount of Rs. 80,97,088/- towards the liability found which the Commissioner appropriated vide the impugned order. The period of dispute is from August, 2002 to June, 2006. The demand has been raised invoking longer period under proviso to Section 73(1) of the Act. That the liability against ABB, is found in terms of Section 68(2) of the Act read with Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 as recipient of service is the common case of the parties. 2. Reiterating the arguments taken in the appeal before us, the learned Counsel for the appellants submitted that prior to the enactment of Section 66A of the Act on 18-4-2006 vide the Finance Act, 2006, there were no provisions in the Act which authorized the authorities

to collect tax on services received by a person in India from a person having his business establishment located in a country other than India. He relied on various judicial authorities in support of the above claim. He invited our attention to the judgment of the Hon'ble High Court of Delhi in the case of Unitech Ltd. v. CST, Delhi reported in 2009(05)LCX0048 Eq 2009 (015) STR 0385 (Del.) = 2009-TIOL-293-HC-DEL-S.T. wherein the Hon'ble High Court concurred with the judgment of the Hon'ble High Court of Bombay in the case of Indian National Shipowners Association v. Union of India reported in 2008(12)LCX0014 Eq 2009 (013) STR 0235 (Bom.) and held that the appellant therein, a recipient of taxable services in India from a non-resident, was not liable to pay the tax demanded in terms of Rule 2(l)(d)(iv) of the Service Tax Rules, 1994 (the Rules) for a period prior to 18-4-06. The revenue could collect tax only upon being vested with due legal authority. This had occurred only on the insertion of Section 66A of the Act on 18-4-2006 by virtue of the Finance Act, 2006. 3. As regards the demand for the period 18-4-2006 to June, 2006, the appellant submitted that the show cause notice basic to the proceedings had been issued in December, 2007 after the expiry of the normal period of limitation of one year. The learned Counsel for the appellant submitted that the assessee was entitled to avail Cenvat credit of whatever service tax was paid. This claim was not disputed by the Commissioner. Payment of impugned demand of Service tax hence would entail a revenue neutral situation. In the circumstances, extended period of limitation could not be validly invoked. He relied on the ratio of various judgments in support. 4. We have also heard the learned DR who defends the order impugned. 5. We have carefully studied the case records and the submissions by both sides. We find that the demand is confirmed against ABB, as recipient of the impugned services, as per Rule 2(1)(d)(iv) of the Rules. Rule 2(1)(d)(iv) authorizes the authorities to recover Service tax leviable on services provided by a person who is non-resident or is from outside India and does not have any office in India, from the person receiving such service in India. In the Indian National Shipowners Association v. UOI case (supra) the Hon'ble High Court had held that demand of Service tax for the period prior to 18-4-2006 invoking Rule 2(1)(d)(iv) of the Rules was not sustainable. The Hon'ble High Court observed as under : "It appears that it is first time when the Act was amended and Section 66A was inserted by Finance Act, 2006 w.e.f. 18-4-2006, the Respondents got legal authority to levy Service tax on the recipients of the taxable service. Now, because of the enactment of Section 66A, a person who is resident in India or business in India becomes liable to be levied Service tax when he receives service outside India from a person who is non-resident or is from outside India. Before enactment of Section 66A it is apparent that there was no authority vested by law in the Respondents to levy service tax on a person who is resident in India, but who receives services outside India. In that case till Section 66A was enacted a person liable was the one who rendered the services. In other words, it is only after enactment of Section 66A that taxable services received from abroad by a person belonging to India are taxed in the hands of the Indian residents. In such cases, the Indian recipient of the taxable services is deemed to be a service provider." Appellants in the instant case had received BAS from commission agents based abroad mostly prior to 18-4-2006. There were no provisions in the Act to tax the appellants for these services. Therefore, demands on this account for the period prior to 18-4-06 have to fail." In view of the above ratio, demand for the period prior to 18-4-06 is held to be not sustainable. 6. As regards the demand for the period 18-4-2006 to June, 2006, ABB has taken the ground that had they paid the impugned tax, they could have taken Cenvat credit of equal amount. Therefore, there was no intention on the part of the appellant to evade the impugned tax. In such circumstances, longer period could not be invoked to demand Service tax. In support of the above claim, the appellant has relied on the following case-law :

(a) Amco Batteries Ltd. v. CCE - 2003(02)LCX0007 Eq 2003 (153) ELT 0007 (S.C.) (b) CCE, Jamshedpur v. Jamshedpur Beverages - 2007(04)LCX0179 Eq 2007 (214) ELT 0321 (S.C.) (c) CCE v. Textile Corpn. Marathwada Ltd. - 2008(09)LCX0028 Eq 2008 (231) ELT 0195 (S.C.) (d) CCE, Mumbai v. Mahindra & Mahindra Ltd. - 2005 (171) ELT 0159 (S.C.) (e) CCE v. Narayan Polyplast - 2003 (179) ELT 0020 (S.C.) (f) CCE v. Naramada Chematur Pharma Ltd. - 2004(12)LCX0054 Eq 2005 (179) ELT 0276 (S.C.) 7. It is also submitted that the agreement of the appellant governing the transactions with the foreign companies found liable to Service tax had been submitted to the departmental authorities on 9-7-2005. For the period April, 2006 to June, 2006, the relevant date for filing ST-3 returns by ABB was 25-10-2006; one year period for raising demand relating to this period had expired on 25-10-2007. The show cause notice was issued on 5-12-2007. As the department was aware of the facts relating to the impugned transactions as early as in July, 2005, show cause notice issued on 5-12-2007 was barred by limitation. 8. We have examined the plea of limitation raised by ABB in respect of demand for the period April, 2006 to June, 2006. The case law relating to revenue neutrality and limitation dealt with in the judicial authorities cited are to the effect that demanding duty or cenvat credit, as the case may be, resulted in a revenue neutral situation if the assessee was entitled to equal amount of Cenvat credit or duty exemption of the same amount as credit taken. There was no reason for the appellant to suppress (liability to excise duty) as it was entitled to have facility of modvat scheme. Extended period of limitation under proviso to Section 11A(1) of the Central Excise Act was not invocable. We note that this ratio was examined by a three member bench of the Supreme Court in CCE, Mumbai v. Mahindra & Mahindra Ltd. - 2004(09)LCX0194 Eq 2005 (179) ELT 0021 (S.C). The Apex Court held that the observation that the appellant was entitled to get the benefit of modvat scheme, therefore, there was no justifiable reason for appellant to suppress any fact which appeared in the Supreme Court's decision in Amco Batteries Ltd. v. CCE - 2003(02)LCX0007 Eq 2003 (153) ELT 0007 (S.C.) had to be read in the context of facts and circumstances noticed in earlier paragraphs, in addition to assessee being entitled to benefit of Modvat credit. It was held that availability of Modvat credit to an assessee by itself was not conclusive or decisive consideration; it may be one of the relevant considerations for deciding applicability of proviso to Section 11A(1) of Central Excise Act, 1944. We find that the above ratio applies equally to invocation of larger period for demand of Service tax not paid under Section 73(1) of the Act. Since we cannot hold that ABB's liability to tax on the services it received from foreign companies during the period April, 2006 to June, 2006 was not known to it in view of the express provisions contained in Section 66A of the Act and Rule, 2(1)(d)(iv), the plea of limitation on the ground of revenue neutrality advanced cannot be accepted. It has to be held that ABB chose not to pay tax deliberately. However, since the department was aware of the nature of the impugned transactions as early as in July, 2005 from the agreements furnished and tax paid from the S.T. 3 returns periodically filed by ABB as an assessee providing taxable services, we find the claim that show cause notice dated 5-12-2007 could not have validly invoked longer period of limitation has to be sustained. 9. In the circumstances we find the entire demand not sustainable and consequently the demand of interest as well as the penalty imposed. Accordingly we set aside the impugned order and allow the appeal filed by ABB. (Operative portion of this Order was pronounced in open court on conclusion of hearing) Equivalent 2010 (018) STR 0433 (Tri. - Bang.)