2012 (10) TMI 599 - AT - Service Tax

Cenvat Credit - Cargo Handling Services - whether the amount of service tax collected by the appellant from their customers is required to be deposited with the department in terms of provisions of section 73A of Finance Act, 1994 on the ground that the appellant was not required to pay service tax, which they have paid by using the Cenvat credit. Held that - By reversing the amount of 8 percent, the assessee has paid that amount to the Revenue. Though such amount was strictly not excise duty but the recovery of the said 8 per cent from the buyers cannot be held to be again deposited with the Revenue u/s 11D. appellant have already paid service tax from their Modvat credit, the deposit of the service tax collected from the buyers would amount to double payment. proceedings are for confirmation of demand in terms of section 73A of the Finance Act which relates to the tax collected by an assessee from the buyers, which is not required to be collected. However, the appellant having already paid such collected amount to the Revenue they cannot be made to deposit the same again with the Revenue - Impugned order of CIT(A) is set aside and the appeal allowed with consequential relief to the appellant.

Summary

Issues:
1. Irregular availing of Cenvat credit on cargo handling service.
2. Liability to pay service tax on handling/lifting of fly ash.
3. Requirement to deposit service tax collected from customers with the department.
4. Interpretation of provisions of section 73A of Finance Act, 1994.
5. Applicability of the decision in Unison Metals Ltd. v. CCE 2006 (204) ELT 323 (Tri. - LB).

Analysis:

1. The appellant, engaged in manufacturing Man-made Blended Yarn, availed Cenvat credit irregularly on cargo handling services. They cleared Coal Ash at nil duty rate and provided handling services to themselves within their factory premises. The issue was whether they were liable to pay service tax on this activity.

2. The appellant paid service tax under 'Cargo Handling Services' for handling Coal Ash. The adjudicating authority demanded service tax of Rs. 4,93,999 along with interest under sections 73A and 73B of the Finance Act, 1994. Penalties under sections 76 and 77 were imposed. The question was whether the service tax collected from customers needed to be deposited with the government.

3. The core issue was whether the appellant, despite paying service tax through Cenvat credit, had to deposit the collected service tax with the Revenue as per section 73A of the Finance Act, 1994. The appellant's retention of the service tax collected from customers for depositing with the Revenue was under scrutiny.

4. Referring to the decision in Unison Metals Ltd. v. CCE, the Tribunal held that if the appellant had already paid service tax through Cenvat credit, depositing the collected service tax from buyers would result in double payment. The proceedings were to confirm the demand under section 73A, but since the appellant had paid the collected amount to the Revenue via Cenvat credit, they were not obligated to deposit it again.

5. Consequently, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant based on the interpretation of the provisions of the Finance Act, 1994 and the precedent set by the decision in Unison Metals Ltd. v. CCE.