2011 (10) TMI 87 - AT - Service Tax

Payment of service tax on import of services through Cenvat Credit - held that - appellant was entitled to take the credit of the amount paid by them towards service tax as a receipient of service - Therefore, the exercise of payment of service tax and availment of credit is Revenue neutral exercise - no reason for appellants to resort to suppression of facts or mis-declaration - Suo Moto credit/debit rectify the arithmetic mistake is permissible - show cause notice is issued beyond one year,the impugned order is not sustainable - decided in favour of assesse

Summary

Issues:
1. Whether the appellant correctly reversed the credit of service tax taken in their books of accounts for cenvat credit.
2. Whether the show cause notice invoking the extended period and alleging suppression of facts was valid.
3. Whether the appellant was entitled to take the credit of the amount paid towards service tax.

Analysis:

1. The appellant had initially credited the cenvat account with service tax and education cess, which was later reversed upon realizing that the amount was not payable. The appellant also took credit for service tax paid towards foreign commission agents. The show cause notice was issued, contending that the appellant should have filed a refund claim instead of reversing the credit. The Tribunal found that the appellant's actions were revenue neutral as the amount paid was available as credit. The Tribunal cited decisions supporting the appellant's belief that rectifying the entry was in order.

2. The Tribunal held that it was not necessary to delve into the merits of the case due to the show cause notice being issued invoking the extended period and alleging suppression of facts. After considering the arguments and records, the Tribunal concluded that the extended period should not have been invoked. The appellant's belief in regularizing the entry through reversal was considered bonafide, and the Tribunal found no reason for suppression of facts or misdeclaration.

3. The Tribunal determined that the appellant was entitled to take the credit of the amount paid towards service tax as a recipient of service. The Revenue did not question this credit taken by the appellant. The Tribunal emphasized that the exercise of payment and availing credit was revenue neutral. Since the situation was revenue neutral even before the debit/credit transactions in the cenvat credit accounts, the extended period for demanding the reversal of cenvat credit was deemed unsustainable. Consequently, the impugned order was set aside, providing relief to the appellants.