2014 (3) TMI 37 - AT - Service Tax

Availment of CENVAT Credit - Whether the appellant liable to pay the service tax on the services received by them from offshore service provider under reverse charge mechanism of Section 66 A of Finance Act, 1994 read with Rule 2(1)(d)(iv) of Service Tax Rules, 1994 by utilizing the cenvat credit - Held that - issue stands decided in favour of the appellant by the judgements of the three High Courts -judgement of Punjab & Haryana High court in the case of Nahar Industrial Enterprises (2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT), judgement of Delhi High Court in the case of Hero Honda Motors (2012 (12) TMI 734 - DELHI HIGH COURT) and the judgement of Hon ble High Court of Himachal Pradesh in the case of Auro Spinning Mills (2011 (7) TMI 849 - Himachal Pradesh High Court). In view of this, it is these judgements which have to be followed - Decided in favour of assessee.

Summary

Issues:
Whether cenvat credit can be utilized for payment of service tax under reverse charge mechanism of Section 66 A of Finance Act, 1994.

Analysis:
The case involved the appellant, a manufacturer of manmade yarn, who exported goods and received services from foreign commission agents, paying service tax under Section 66 A of the Finance Act, 1994. The dispute arose when the department contended that the appellant, as a recipient of taxable services, could not utilize cenvat credit for service tax payment. A show cause notice was issued, leading to confirmation of service tax demand, interest, and penalties by the Joint Commissioner, upheld by the Commissioner (Appeals).

The primary issue before the tribunal was whether the appellant could use cenvat credit for service tax payment under reverse charge mechanism. The appellant argued citing judgments by different High Courts, including Punjab & Haryana, Delhi, and Himachal Pradesh, supporting their position. The appellant contended that these judgments established the legality of using cenvat credit for such payments, contrary to the department's stance.

On the other hand, the Joint CDR defended the department's position by referring to a Tribunal judgment from Bangalore, emphasizing that a person deemed a provider of taxable service could not consider the service received as their output service. The Joint CDR highlighted the need to adhere to the definition of 'output service' as per the Cenvat Credit Rules, which the High Courts' judgments allegedly overlooked.

After considering both parties' arguments and reviewing the records, the tribunal found merit in the appellant's position. The tribunal relied on the judgments of the High Courts, including Punjab & Haryana, Delhi, and Himachal Pradesh, which supported the appellant's right to utilize cenvat credit for service tax payment under reverse charge mechanism. Consequently, the tribunal set aside the impugned order, allowing the appeal in favor of the appellant.

In conclusion, the tribunal's decision favored the appellant's ability to use cenvat credit for service tax payment under the reverse charge mechanism, aligning with the judgments of various High Courts. The tribunal's ruling overturned the department's contention, emphasizing the legal precedence established by the High Courts on this issue.