2014 (11) TMI 209 - AT - Service Tax

Re-classification of service for the purpose of cenvat credit - Management Consultancy Service or Business Auxiliary Service - Whether or not duty determined and classification of services made at the service provider s end can be charged by the authorities having jurisdiction over the service recipient s end - advocate explained that if the classification of the services is under Section 65 (105) (r) then 100% credit of input services is admissible to the appellant as claimed - if the classification is made under Section 65 (105) 22b) then credit admissible for use will be 20% of the total credit as claimed by Revenue - Held that - In view of the interpretation of law made by the Courts including the Apex Court 2007 (11) TMI 23 - SUPREME COURT OF INDIA no option is left with the Revenue to change the classification/ assessments of the services at the service recipient s end. The service tax paid by M/s. IHCL was at the behest of the department and was not altered during the disputed period. Credit of service tax paid on the invoices cannot be denied or utilisation reduced on the grounds that classification of the services was wrongly done at the service provider s end. - Decided in favour of assessee.

Summary

Issues:
Classification of services for tax purposes; Admissibility of input service credit; Jurisdiction over service recipient's end; Applicability of case laws; Conscious withholding of information; Imposition of penalties.

Classification of services for tax purposes:
The appellant argued that the services received should be classified as 'Management Consultancy' under Section 65 (105) (r) of the Finance Act, 1994, while the Revenue contended for classification as Business Auxiliary Services under Section 65 (105) (22b). The appellant claimed 100% input service credit under one classification and 20% under the other. The appellant relied on various case laws to support the argument that once classification is done at the service provider's end, it cannot be changed at the recipient's end. The judgment referred to a case where the Supreme Court upheld the classification declared by the manufacturer. The Tribunal found that the Revenue cannot alter the classification at the recipient's end, especially when the service tax was paid by the service provider at the behest of the department. Consequently, the appellant's appeal was allowed based on this ground.

Admissibility of input service credit:
The appellant contended that even if credit utilization was restricted, accumulated credit should be available for utilization after a certain date. The judgment mentioned a circular supporting this argument. However, the Tribunal primarily focused on the issue of classification and did not delve into the other issues raised by the appellant regarding credit utilization or time-barred demands.

Jurisdiction over service recipient's end:
The central issue revolved around whether the authorities at the recipient's end could change the duty determined and classification made at the service provider's end. The appellant relied on various case laws, including a judgment by the Madras High Court, to support their argument. The judgment highlighted a case where the Tribunal's classification was challenged and set aside by the Supreme Court. The Tribunal concluded that the Revenue cannot alter the classification of services at the recipient's end if it was correctly done at the service provider's end.

Applicability of case laws:
The appellant and the Revenue presented arguments based on relevant case laws to support their positions. The appellant cited several case laws to establish that classification done at the service provider's end should be final. The judgment extensively discussed a case where the Tribunal's decision was overturned by the Supreme Court, emphasizing the importance of adhering to the classification declared by the manufacturer.

Conscious withholding of information:
The appellant argued that there was no intentional withholding of information from the department, hence the extended period should not be invoked, and no penalties should be imposed. The Tribunal did not find any conscious withholding of information by the appellant, leading to the conclusion that penalties were not imposable in the present proceedings.

In conclusion, the Appellate Tribunal CESTAT Ahmedabad allowed the appellant's appeal based on the primary issue of classification of services for tax purposes. The judgment emphasized that the classification made at the service provider's end should be final and cannot be altered by the authorities at the recipient's end. The decision referenced relevant case laws, including a Supreme Court judgment, to support the conclusion. The Tribunal did not address the other issues raised by the appellant, focusing solely on the classification issue to decide in favor of the appellant.