2016 (8) TMI 850 - AT - Service Tax

CENVAT credit liability of assesse to pay service tax under reverse charge mechanism section 66A of the Finance Act, 1994 Management Consultancy Service self-adhesive tapes Notification No. 23/2004-CE (NT) dated 10.09.2004 states that any service tax paid by the manufacturing unit could be availed as credit earlier to 10.09.2004, only if the unit was also providing any taxable output service SCN recovery of cenvat credit alongwith interest and penalty Held that - assessee was not liable to pay service tax on reverse charge basis prior to 18.04.2006 when for the first time reverse charge method was introduced. Thus, respondent was not liable to pay service tax and secondly having paid it, the assessee is entitled to get cenvat credit and the assessee has rightly availed the cenvat credit. Extended period cannot be invoked as there is no suppression with intent to evade payment of duty on the part of the assessee appeal dismissed decided against Revenue.

Summary

Issues:
1. Availment of irregular credit of service tax
2. Liability to pay service tax under reverse charge mechanism
3. Invocation of extended period for raising demand

Analysis:
1. The appeal was filed by the Revenue against the order passed by the Commissioner (Appeals) setting aside the Order-in-Original and allowing the appeal of the assessee, who is engaged in the manufacture of Self-Adhesive Tapes registered under Service Tax provisions for Management Consultancy Service. The issue revolved around the irregular credit of service tax amounting to Rupees 43,29,644/- availed by the assessee on Management Consultancy Services, including payments made prior to 10.09.2004. The show-cause notice was issued for recovery of the said amount under Rule 12 of Cenvat Credit Rules, 2002, along with interest and penalty. The Joint Commissioner confirmed the demand and penalty, leading to the appeal by the assessee and subsequent appeal by the Revenue against the order of the Commissioner (Appeals).

2. The main question was whether the assessee wrongly availed cenvat credit as alleged and whether the impugned order allowing the appeal was justified. The Tribunal analyzed the timeline of service tax payments and the introduction of Section 66A of the Finance Act, 1994, which made service tax liability on reverse charge method effective from 18.04.2006. Relying on legal precedents, the Tribunal concluded that the respondent-assessee was not liable to pay service tax on a reverse charge basis before 18.04.2006. The Commissioner (Appeals) had correctly held that the assessee had no intent to evade payment of service tax, and the extended period for raising the demand was not applicable due to valid reasons provided in the impugned order.

3. The Tribunal further emphasized that the assessee was not initially liable to pay service tax and, having paid it mistakenly, was entitled to avail cenvat credit. The Tribunal also noted a previous order in the appellant's case where the assessee was held entitled to take cenvat credit. Consequently, the Tribunal upheld the decision of the Commissioner (Appeals), stating that the extended period could not be invoked as there was no intent to evade payment of duty. Therefore, the appeal by the Revenue was dismissed, and the impugned order was upheld, emphasizing the lack of merit in the Revenue's appeal.