2017 (1) TMI 1720 - AT - Service Tax

Demand of Service Tax - remittance of royalty in their books of accounts towards payment to be made to their associates - service tax leviable for the past period, on reverse charge method - explanation to Rule 6 which came into effect from 10-5-2008 - HELD THAT - In the amending Act in the Service Tax Rules, 1944, vide Notification No. 19/2008-S.T., dated 10-5-2008, it has been stated that the said amendment will have retrospective effect. Prior to 10-5-2008 service tax was not demandable under Rule 6 of Service Tax Rules, 1994 on the basis of book entries made for Cenvat credit prior to the insertion explanation in Rule 6 with effect from 10-5-2008. Extended period of limitation - HELD THAT - The issue is wholly interpretational and it has been so held by the ld. Commissioner in the impugned order. Accordingly, the extended period of limitation is not invokable, in the facts and circumstances of the case. Demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues: Interpretation of retrospective effect of amendment in Service Tax Rules, applicability of extended period of limitation, demand of service tax prior to 10-5-2008 based on book entries.

In this case, the appellant, M/s. Terex Equipments P. Ltd., appealed against Order-in-Original No. 57/Commisioner/Noida/2012-13, challenging the demand of service tax on royalty payments made to associates. The Revenue alleged that service tax was payable even before 10-5-2008, based on the retrospective effect of an amendment in the Service Tax Rules. The Tribunal analyzed the amendment in Notification No. 19/2008-S.T., dated 10-5-2008, which stated that the amendment would have retrospective effect. The Tribunal found the issue to be interpretational and agreed with the Commissioner that the extended period of limitation was not applicable in this case. The Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits to the appellant. Regarding the merits, the Tribunal held that prior to 10-5-2008, service tax was not demandable under Rule 6 of the Service Tax Rules, 1994, based on book entries made for Cenvat credit before the insertion of an explanation in Rule 6 on 10-5-2008. Therefore, the Tribunal concluded that the demand for service tax was also invalid on merits. The judgment was dictated and pronounced in open court by the Tribunal members Shri Anil Choudhary and Anil G. Shakkarwar.