2014 (4) TMI 767 - AT - Service Tax

Refund claim for service tax paid wrongly - Foreign commission agent - appellant paid the service tax and took the cenvat credit of the same as a receiver of the service - realising that there was no need to pay service tax as a receiver, appellant filed a refund claim which was allowed - Before receiving the refund, appellant had reversed the cenvat credit taken by them - Held that - The legal principle laid down cannot be said to be not applicable just because the service receiver and the provider happen to be one and the same. Further, I also find considerable force in the argument advanced by the ld. counsel that at the time when credit was taken it cannot be said that there was a wrongful availment. In any case, there is a question of interpretation of law involved and it would require consideration of statutory provisions and precedent judicial decisions to come to a final conclusion. However, prima-facie the ld. counsel has been able show that the time when tax was paid by the appellant as a receiver, it cannot be said that it was paid wrongly especially when it was paid on the advice of the department. Under these circumstances, it cannot be said that the credit was availed wrongly and therefore interest is liable to be paid when the credit is reversed. Since appellant has made a prima-facie case for waiver of pre-deposit, the pre-deposit is waived and stay against recovery of the dues is granted during the pendency of appeal - Stay granted.

Summary

Issues:
1. Liability to pay interest on service tax amount taken as cenvat credit reversed by the appellant.
2. Whether the appellant wrongly availed cenvat credit.
3. Interpretation of law regarding the payment of service tax by the appellant as a receiver.

Analysis:
1. The appellant had not paid service tax as a receiver for services received from a foreign commission agent during 2003-2005. Upon realizing the error, the appellant filed a refund claim, which was granted. However, the department contended that since the refund claim was made by the appellant on the grounds of non-liability to pay service tax, the cenvat credit taken and reversed by the appellant was wrongly availed. Citing a Supreme Court decision, the department demanded interest on the reversed cenvat credit. The Tribunal considered the arguments and held that the appellant made a prima facie case for waiver of pre-deposit, and stay against recovery of dues was granted during the appeal.

2. The appellant argued that the cenvat credit was not wrongly availed as it was taken correctly when the service tax was paid. The appellant contended that just because the credit was reversed upon receiving the refund does not imply wrongful availment. On the other hand, the Revenue argued that the appellant, being both a receiver and provider of service, should have been aware of the incorrect payment of service tax. The Tribunal noted that the legal principle of examining cenvat credit at the receiver's end based on proper documents and tax payment status should apply even if the receiver and provider are the same entity. The Tribunal found merit in the appellant's argument that the tax payment was not wrongful, especially when done based on department advice. Therefore, the Tribunal held that the credit was not wrongly availed, and interest was not liable to be paid upon credit reversal.

3. The Tribunal considered the submissions from both sides and emphasized the need for interpreting statutory provisions and judicial decisions to determine the correct application of law. It was noted that the appellant had a valid argument that the tax payment was not wrongful at the time of payment, especially considering the department's advice. The Tribunal acknowledged the complexity of the case involving interpretation of law and precedent. Ultimately, the Tribunal found that the appellant had presented a prima facie case for waiver of pre-deposit, indicating that the credit was not wrongly availed, and granted a stay against recovery of dues during the appeal process.