2017 (3) TMI 245 - AT - Service Tax

Levy of tax - reverse charge mechanism - services received from outside India - claim of appellant that section 66A, for levy of service tax on reverse charge basis , was incorporated in Finance Act, 1994 with effect from 18th April 2006, and reverse charge mechanism became law only after such incorporation - Held that - the tax itself was not leviable during the disputed period. The manner of discharging that tax liability cannot be the subject of a demand u/s 73 read with rule 14 of CCR, 2004 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of facility of availment of CENVAT credit for service tax liability on services received from outside India on 31st March 2006.

Analysis:
The appeal was filed against the order-in-appeal dated 30th November 2015, which denied the facility of availment of CENVAT credit amounting to &8377; 18,18,864 for service tax liability on services received from outside India. The appellant made good the disputed amount on 6th March 2012 while the matter was pending before the first appellate authority. The tax liability arose from payment for 'technical knowhow' to a company in the USA.

The appellant contended that the levy of service tax on a 'reverse charge basis' under section 66A was incorporated in the Finance Act, 1994, with effect from 18th April 2006. Referring to legal precedents, the appellant argued that the 'reverse charge mechanism' became law only after such incorporation. An additional ground related to this issue was raised through a Miscellaneous Application pending disposal.

The Authorized Representative objected to the introduction of new grounds at a later stage, citing a decision of the Hon’ble High Court of Bombay in a different case. The CESTAT observed that the appeal was disposed of on a ground not urged before the Adjudicating Authority, which could entail a finding on facts. However, the Tribunal found that the issue raised was one of law and could not be ignored, even if not raised earlier.

Considering the legal position established in the case of Indian National Shipowners' Association, the Tribunal held that the tax itself was not leviable during the disputed period. Therefore, the manner of discharging the tax liability could not be the subject of a demand under section 73 read with rule 14 of the CENVAT Credit Rules, 2004.

In conclusion, the appeal was allowed, and the Miscellaneous Application was disposed of in favor of the appellant. The Tribunal pronounced the decision in court, upholding the appellant's claim regarding the denial of CENVAT credit for service tax liability on services received from outside India.