2013 (12) TMI 99 - AT - Service Tax

Stay application - Credit availed for Service Tax paid on the consultancy services - Appellant does not have any office in India - Eligibility for modvat credit - Held that - services were not used in relation to business in India, infact would lead to a situation where the appellants could not have paid Service tax inasmuch as the services were obtained in a foreign country for setting up of a unit in the foreign country itself. As such, if the revenues stand that no services were received in India in relation to the business of appellant are accepted, the same would lead to a situation where no service tax was required to be paid by the appellants - prima facie demand is barred by limitation. The appellants, having reflected the quantum of credit availed by them in the returns filed with the department, cannot be held to be guilty of any mala fide intention or mis-statement - Stay granted.

Summary

Issues:
1. Availment of Service Tax credit for consultancy services from foreign consultants.
2. Time bar for demanding the Service Tax credit.

Analysis:
1. The dispute in this case revolves around the availment of Service Tax credit by the appellants for consultancy services received from foreign consultants for feasibility studies on setting up cement plants in Oman and Iran. The Service Tax amount in question is Rs. 94,859/- and Rs. 58,507/-. The appellants argue that since they paid the Service Tax on these services, which are intended for setting up factories, they should be eligible for modvat credit. On the other hand, the Revenue contends that these services were not used in or in relation to the appellant's business in India, as the foreign consultants did not have offices in India. The crucial point is whether the services were essential for the business conducted by the appellants in India.

2. Additionally, the appellants challenge the demand on the grounds of time limitation, asserting that the availment of credit was duly disclosed in the ST 3 returns. They argue that the notices issued by the Revenue are beyond the normal period of limitation and are therefore time-barred. The appellants maintain that they have not acted with any mala fide intention or misstatement in reflecting the credit availed in their returns. The question here is whether the demand raised by the Revenue is indeed barred by limitation based on the timely disclosure of the credit availed in the returns.

3. Upon considering both arguments, the judge finds that if the Revenue's stance, that the services were not used in relation to the appellant's business in India, is accepted, it would imply that no Service Tax was required to be paid by the appellants. However, at a prima facie stage, the judge rules that the demand is indeed barred by limitation. The appellants have demonstrated that they disclosed the credit availed in their returns, indicating no mala fide intent or misstatement. Consequently, the judge grants a stay on the basis of the limitation issue alone, allowing both stay petitions in favor of the appellants.