2017 (4) TMI 756 - AT - Service Tax

CENVAT credit - denial on the ground that services were provided by MSM Singapore therefore MSM India has neither provided any service nor required to obtained the registration and also not required to pay any service tax - With effect from July, 2012 MSM-India took service tax registration by giving the care of address of MSMPL, its sole agent in India. It does not have any physical establishment, infrastructure or equipment in India for production and up-linking of programs, i.e. IPL, T.V. Serials 85 Films. - case of Revenue is that appellant is hot a service provider as the service was provided by their Singapore entity therefore being non service provider they are not entitle for the Cenvat credit. Held that - There is no dispute that the entity in India and Singapore is the same entity i.e. M/s. MSM Satellite (Singapore) Pte. Ltd therefore the service provider is the same company even though the service was provided from different location. It is admitted fact that even though if the contention of the Revenue is accepted that services were provided by MSM Singapore, but it is also a fact that services were received in India therefore service per se is taxable and the government is legally required to collect the service tax on such services and it had indeed collected. Therefore service tax even though paid by MSM Singapore through their office in India discharged the service tax payment of services tax cannot be disputed. In such a situation Cenvat credit is legally admissible to the appellant - once registration was granted by the department and the service tax was collected consequent Cenvat credit cannot be denied. As per the service tax provisions the service tax liability is based on the place of consumption, therefore in the present case not only the services provided in India but also consumed in India therefore place of provisions is India only. Hence service tax registration obtained by M/s. MSM Satellite (Singapore) Pte. Ltd in India is absolutely in order. Extended period of limitation - penalty - Held that - entire activity was in the knowledge of the department as the appellant vide their letter dated 24-5-2012 had made detailed representation to the CBEC to seek continue deemed broadcaster status of MSMPL and CBEC when not responded, appellant approached for registration dated 2-7-2012 wherein they have set out detailed reason for seeking registration and also stated that they will be paying service tax on distribution and claiming input service credit. In this fact there is no suppression of facts on the part of the appellant with intent to evade payment of duty - demand of extended period is not sustainable, hence equal amount of penalty u/s 11AC being consequential will also not sustain and same is set aside. As regard penalty imposed upon BCCI on the ground that they have fraudulently passed on Cenvat credit, availment of Cenvat credit by M/s. MSM Satellite (Singapore) Pte. Ltd is legal & correct, the consequential penalty does not survive. Moreover, the payment of service tax made by BCCI is absolutely legal & correct firstly for the reason that being the payment of service charges in Indian rupees the transaction is not of export, Secondly even it is presumed as export it is option of service provider, to opt for payment of service tax on output service or not. In this position, imposition of penalty upon BCCI and on it s officials is absolutely incorrect and illegal. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Entitlement to Cenvat credit by MSM India.
2. Legality of service tax registration and payment by MSM India.
3. Applicability of Explanation 3(b) to Section 65B(44) of the Finance Act, 1994.
4. Penalties imposed on various parties including MSM India, BCCI, and individuals.
5. Invocation of extended period for demand of Cenvat credit.

Issue-wise Detailed Analysis:

1. Entitlement to Cenvat Credit by MSM India:
The adjudicating authority disallowed the Cenvat credit to MSM India on the grounds that MSM India was not a service provider since services were provided by MSM Singapore. The Tribunal found that MSM India, despite being the same entity as MSM Singapore, had obtained service tax registration and discharged service tax on output services. The Tribunal emphasized that even if services were provided by MSM Singapore, they were received in India, making the service taxable. Consequently, the Cenvat credit utilized for payment of service tax could not be denied. The Tribunal cited several judgments supporting the admissibility of Cenvat credit even if the service was not taxable but the tax was paid.

2. Legality of Service Tax Registration and Payment by MSM India:
The Tribunal noted that MSM India was granted service tax registration by the department, which collected service tax without objection. The Tribunal highlighted that the service tax provisions mandate taxability based on the place of consumption, which in this case, was India. Hence, the service tax registration and payment by MSM India were deemed legitimate. The Tribunal rejected the adjudicating authority's assumption of separate entities (MSM Singapore and MSM India), affirming that MSM Satellite (Singapore) Pte. Ltd. was a single entity operating in both locations.

3. Applicability of Explanation 3(b) to Section 65B(44) of the Finance Act, 1994:
The Tribunal dismissed the application of Explanation 3(b) to Section 65B(44) of the Finance Act, 1994, as it was not invoked in the show cause notice. The Tribunal held that the explanation did not apply to the facts of the case, as MSM Singapore and MSM India were not separate entities but the same company. The Tribunal emphasized that the location of the service provider is determined by the premises where the service provider has obtained registration, which in this case, was MSM India.

4. Penalties Imposed on Various Parties:
The Tribunal set aside the penalties imposed on MSM India, BCCI, and individuals, including Mr. Andrew Kaplan and Mr. Sanjay Patel. The Tribunal found that the penalties were consequential to the charge of wrong availment of Cenvat credit, which was deemed in order. The Tribunal also noted that there was no evidence of collusion or fraudulent practice by BCCI or its officials. Furthermore, the Tribunal highlighted that the penalties under Section 78A of the Finance Act, 1994, could not be imposed on Mr. Andrew Kaplan, as the provision was introduced after the relevant period.

5. Invocation of Extended Period for Demand of Cenvat Credit:
The Tribunal rejected the invocation of the extended period for demand of Cenvat credit, as the entire activity was within the knowledge of the department. The Tribunal noted that MSM India had made detailed representations to the CBEC and obtained service tax registration with full disclosure. The Tribunal concluded that there was no suppression of facts or intent to evade payment of duty by MSM India. Consequently, the demand for the extended period and the equal amount of penalty under Section 11AC were not sustainable.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned order and confirming the legality of Cenvat credit availment by MSM India. The penalties imposed on various parties were also set aside. The Tribunal emphasized that the service tax registration and payment by MSM India were legitimate, and the extended period for demand of Cenvat credit was not applicable.