2014 (1) TMI 504 - AT - Service Tax

Waiver of pre-deposit of duty - Imposition of penalty - Availment of CENVAT Credit - Availment of services from foreign commission agent - Held that - Period involved in the present appeal is from January, 2008 to March, 2008 and the said rules were brought into existence with effect from 19-4-2006. The judgment of Punjab & Haryana High Court in the case of Nahar Spinning Mills is prior to 19-4-2006, when the service recipient was given an artificial status of service provider by deeming fiction of law. The said deeming provision stands withdrawn from 19-4-2006. As such, I find that the appellants do not have any prima facie case so as to allow the stay petition - Conditional stay granted.

Summary

Issues: Application to dispense with pre-deposit of duty amount and penalty under Rule 15 of Cenvat Credit Rules, 2004.

Analysis:
1. The appellant sought to dispense with the pre-deposit of duty amount and penalty imposed on them. They availed services from a foreign commission agent and paid service tax from their Cenvat credit account instead of in cash, as required by the Revenue.

2. The Revenue contended that the appellant cannot utilize input credit for discharging service tax liability on services received from a foreign commission agent, as it does not qualify as "output service."

3. The appellant's advocate relied on a Tribunal decision in the case of CCE v. Nahar Spinning Mills, where it was held that a recipient of GTA service is deemed an output service provider by law and entitled to utilize credit.

4. The Revenue highlighted Rule 5 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, stating that services received from outside India shall not be treated as output services for availing credit under Cenvat Credit Rules, 2004.

5. The period in question was from January 2008 to March 2008, while the rules were in effect from April 19, 2006. The deeming provision granting service recipient an artificial status of service provider was withdrawn post-April 19, 2006. Consequently, the appellant lacked a prima facie case to allow the stay petition, leading to a directive to deposit the duty amount within four weeks for compliance by a specified date.

This judgment underscores the importance of complying with tax regulations and the impact of legal amendments on entitlement to tax credits, as demonstrated by the withdrawal of deeming provisions post-April 2006.