2015 (7) TMI 966 - AT - Service Tax

Denial of CENVAT Credit - input services - non payment of service tax by the provider of serivces to the revenue - Invoices received by the appellant showed that they had paid rent on equipment and on this rent on equipment, service provider had charged service tax which was paid by them - Held that - If service tax has been paid by the service provider and service receiver is eligible for the credit, it is not the responsibility of the service receiver to examine the correctness of service tax paid by the service provider. That amounts to assessment by the service receiver of the service received by him. It is not at all the responsibility cast on him. There are several decisions taking a view that examination of correctness of tax paid is not the responsibility of the service receiver and department cannot deny the credit of service tax on this ground. In the case of Ultratech Cement Ltd Vs CCE Nagpur 2010 (12) TMI 90 - CESTAT, MUMBAI , it was held that departmental authorities have no jurisdiction over service recipient, cannot sit in judgment over the correctness of the tax paid and it is not proper to deny the assessee CENVAT credit of service tax paid by agencies engaged by them. In the case of Treads direct Ltd., Vs CCE Calicut 2013 (3) TMI 476 - CESTAT BANGALORE , it was held that the question as to whether input is dutiable cannot be agitated at the end of manufacturer of final product. - there is absolutely no case for the Revenue to deny the CENVAT credit and accordingly the impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
Non-filing of service tax returns leading to penalty imposition under Section 77 of the Act. Claim by the appellant regarding adjustment of service tax from CENVAT Credit account. Dispute over nature of service received and tax paid on equipment rental charges. Denial of CENVAT credit by the Revenue.

Analysis:
The case involved a Malayalam Television News Channel providing Television Broadcasting Services. The appellant initially paid service tax on advertising revenue for August and September 2003 but failed to file returns or pay tax thereafter. Subsequently, in December 2005, they filed returns for the period up to October 2005, resulting in a penalty for non-filing of returns under Section 77 of the Act. A show-cause notice was issued in June 2006, challenging the appellant's claim of adjusting service tax from the CENVAT Credit account. The notice alleged that the service provider had charged service tax on rent for equipment paid by the appellant.

During the adjudication process, the appellant contended that they received installation and commissioning services for the equipment, along with a requirement to pay rent. However, authorities noted that the service provider was registered only for installation and commissioning services, leading to a dispute over the nature of the service received and tax paid on equipment rental charges. The authorities observed that the equipment could not have been installed and commissioned every month, questioning the monthly payments made by the appellant for rent on equipment.

The Tribunal analyzed the ST-3 returns filed by the appellant, noting that the service tax was paid under the category of rent on equipment, not installation and commissioning services. The authorities had concluded that equipment rental charges were not input services for credit availment without discussing the nature of the service, equipment use, or installation details. The Tribunal cited legal precedents emphasizing that the responsibility to examine the correctness of service tax paid by the provider does not lie with the service receiver. The decisions highlighted that the department cannot deny CENVAT credit based on the recipient's assessment of the tax paid by the provider.

Based on the legal principles and the facts of the case, the Tribunal found no grounds for the Revenue to deny the CENVAT credit to the appellant. Consequently, the impugned order was set aside, and the appeal was allowed, granting any consequential relief to the appellant. The judgment emphasized that the Revenue cannot challenge the tax paid by the service provider and must allow credit to the eligible service receiver.

This detailed analysis of the judgment highlights the issues of non-filing of returns, dispute over service tax adjustment, nature of services received, and denial of CENVAT credit, providing a comprehensive overview of the legal reasoning and conclusions reached by the Tribunal in this case.