2014 (1) TMI 1095 - AT - Service Tax

CENVAT Credit - Supply of Tangible Goods Services - Held that - appellant is a person liable to Service Tax. Once appellant is person liable to service tax, he becomes provider of taxable service under Rule 2(r) and consequently becomes output service provider under Rule 2(p) of the Cenvat Credit Rules. Revenue is also relying on Rule 5 of Taxation of Services (Provided from Outside India and Received in India) Rules. We find that Rule 5 refers to availing of Cenvat credit and not to utilization of credit. We are therefore of the view that the finding of the Commissioner not treating the appellant as output service provider, is not correct - Decided in favour of assessee.

Summary

Issues:
Interpretation of Cenvat Credit Rules regarding the utilization of Cenvat account for payment of service tax on services received from abroad.

Analysis:
The appeal was filed by M/s. Kansara Modler Ltd. against an order-in-appeal regarding the payment of service tax on services received from M/s. Aschaffenburger Maschinenfabrik Johhann Modeler GMBH, Germany. The Department contended that service tax should be paid in cash and not through Cenvat Credit. The original authority adjudicated the matter, and the appeal was rejected by the Commissioner of Central Excise (Appeals), leading the appellant to approach the Tribunal.

The main contention revolved around whether the appellant could be considered a provider of output service under the Cenvat Credit Rules. The Revenue argued that the appellant, as a recipient of services, could not utilize the Cenvat account for service tax payment. However, the appellant claimed that they qualified as a provider of output service based on the definitions under the Cenvat Credit Rules and Service Tax Rules.

The Tribunal analyzed the relevant rules, specifically Rule 2(p), Rule 2(q), Rule 2(r) of the Cenvat Credit Rules, and Rule 2(1)(d)(iv) of the Service Tax Rules, to determine the appellant's status. By interpreting Rule 2(q) of the Cenvat Credit Rules in conjunction with Rule 2(1)(d)(iv), the Tribunal concluded that the appellant could be considered a person liable for service tax, thereby qualifying as a provider of taxable service and an output service provider under the rules.

Additionally, the Tribunal addressed the Revenue's reliance on Rule 5 of the Taxation of Services (Provided from Outside India and Received in India) Rules, clarifying that Rule 5 pertained to availing Cenvat credit, not its utilization. Consequently, the Tribunal disagreed with the Commissioner's decision not to recognize the appellant as an output service provider, leading to the setting aside of the impugned order and allowing the appeal in favor of the appellant.