2014 (2) TMI 806 - AT - Service Tax

Demand of service tax - Information Technology Software Service - Held that - appellant received from a foreign vendor licence for use of IT software in India and conveyed this licence to distributors in India, who in turn conveyed this to the ultimate customers in India. The appellant paid service tax on the consideration received from the distributors. The case of the appellant at this stage is that, in the event of any liability to pay service tax being fixed on them in relation to licence received from the foreign vendor, CENVAT credit of the service tax so paid would be available to the appellant for payment of service tax in India - Stay granted.

Summary

Issues:
1. Waiver and stay of adjudged dues including service tax and education cess under 'Information Technology Software Service' (ITSS) for a specific period.
2. Invocation of proviso to Section 73(1) of the Finance Act, 1994 based on alleged suppression of facts.
3. Appellant's receipt of IT software licence from a foreign vendor and conveyance to distributors and ultimate customers in India.
4. Payment of service tax on consideration received from distributors and plea of revenue neutrality.
5. Availability of CENVAT credit for payment of service tax in India in case of liability.
6. Granting waiver of pre-deposit and stay of recovery in relation to the adjudged dues.

Analysis:
1. The appellant filed an application seeking waiver and stay regarding the adjudged dues, which included over Rs.4.33 crores demanded for service tax and education cess under 'Information Technology Software Service' for a specific period. The demand was based on a show-cause notice invoking the proviso to Section 73(1) of the Finance Act, 1994 due to alleged suppression of facts.

2. It was observed that the appellant received an IT software licence from a foreign vendor and transferred it to distributors in India, who further conveyed it to the end customers in India. The appellant had already paid service tax on the consideration received from the distributors. The appellant argued for revenue neutrality, stating that any liability for service tax related to the foreign vendor's licence would allow them to utilize CENVAT credit for payment of service tax in India.

3. The learned counsel and the Commissioner (AR) did not disagree on the issue of revenue neutrality. Considering this, the Tribunal decided to grant waiver of pre-deposit and stay of recovery concerning the adjudged dues, acknowledging the potential availability of CENVAT credit for payment of service tax in India in case of any liability related to the IT software licence from the foreign vendor.

4. The Tribunal's decision was made after a thorough review of the records and hearing both parties, ultimately finding merit in the appellant's argument regarding revenue neutrality and the utilization of CENVAT credit. As a result, the waiver and stay in relation to the adjudged dues, including service tax and education cess under ITSS, were granted by the Tribunal.