2011 (4) TMI 250 - AT - Service Tax

Demand, interest and penalty - Reverse charge mechanism for the services received from foreign nationals - Find that the services rendered in this case is prior to 18/4/2006 - This factual position is not disputed by the lower authorities - If that be so, the liability to discharge service tax by reverse charge mechanism was brought into statute from 18/04/2006 only - Held that - as per the judgments of the Hon ble High Court of Karnataka in the case of CST, Bangalore Vs. Bharat Electronics Ltd. 2010 -TMI - 78931 - BANGALORE HIGH COURT ,would squarely cover the issue in favour of the appellant - Decided in favour of assessee. Service tax credit - Demand of Rs.1,04,875/- and Rs.85,185/- find that the appellant has been taking a consistent stand before the adjudicating authority that the input stage service tax credit availed of Rs.1,04,875/- is for only providing taxable output services - Unfortunately, the adjudicating authority has not given any findings on such categorical stand taken except recording that there is no evidence or corroboration for the contention of the assessee - As regards the confirmation of demand of irregular availment of cenvat credit of Rs.85,185/-, we find that assessee is able to produce before us the certificate issued by the service provider that they have discharged the service tax liability on the entire contract executed by them for the assessee - If that be so, the credit of service tax paid by service provider cannot be denied - set aside the impugned order and remit these two issues back to the adjudicating authority for re-consideration after appreciating the evidences.

Summary

Issues:
Service tax liability under reverse charge mechanism for services received from foreign service providers, denial of cenvat credit, imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, demand confirmation, interest under Section 75 of the Act.

Service Tax Liability under Reverse Charge Mechanism:
The appellant, a service tax payer under Consulting Engineer category, was alleged to have not paid service tax on consultancy services, irregularly utilized service tax credit, and not paid service tax on services received from foreign providers. The adjudicating authority confirmed the demands and imposed penalties. The appellant contended that the liability for service tax under the reverse charge mechanism arose post 18/04/2006, citing relevant judgments. The Tribunal agreed, setting aside the demand confirmation, penalties, and interest on this count.

Denial of Cenvat Credit:
The appellant contested the denial of cenvat credit, arguing that the input service tax credit was for taxable output services only. The Tribunal noted the appellant's consistent stand on this issue, supported by documentary evidence. As the adjudicating authority failed to provide findings on this, the Tribunal remitted the matter back for reconsideration, instructing the authority to appreciate the evidence presented.

Imposition of Penalties:
The Tribunal set aside the penalties imposed on the appellant concerning the denial of cenvat credit and service tax liability under the reverse charge mechanism. It directed the adjudicating authority to follow natural justice principles while reconsidering these issues, emphasizing the need for a detailed examination of the evidence presented.

In conclusion, the Tribunal ruled in favor of the appellant on the service tax liability under the reverse charge mechanism issue, citing relevant judgments. It remitted the matters related to the denial of cenvat credit back to the adjudicating authority for a detailed review, setting aside the penalties imposed. The Tribunal emphasized the importance of following natural justice principles in reconsidering these issues.