2017 (10) TMI 137 - AT - Service Tax

Validity of SCN - Time limitation - whether the show cause notice is validly issued by invoking the extended period of limitation? - Held that - there is no element of suppression, concealment or any action, inaction on the part of the appellant to evade the payment of duty nor any collusion etc., so as to attract the proviso of Section 73(1) of the Finance Act read with Section 11A of the Central Excise Act. Accordingly, we hold that the show cause notice is bad for invoking the extended period of limitation - as per the show cause notice, Revenue have got all the information from the records maintained by the appellant in the ordinary course of the business. Not a single instance of any manipulation or suppression and/or misinformation have been pointed out, save and except the bald allegations made in the show cause notice. CENVAT credit - whether Service Tax input credit was rightly taken by the appellant during the period from 1st January, 2010 till 29th March, 2010, pending approval of the scheme of the demerger by the Hon ble High Court, which was approved by the order of Hon ble High Court dated 19 March, 2010? - Held that - The transfer of the Cenvat Credit under sub Rule (1) and (2) shall be allowed only if the stock of inputs as such or in process, or the capital goods is also transferred along with the factory or business premises to the new site or ownership and the inputs or capital goods on which credit had been availed of are duly accounted for to the satisfaction of the Deputy Commissioner of Central Excise as the case may be the Assistant Commissioner of Central Excise. Further, Rule (3) of Rule 10 indicates that such transfer will be allowed only when input capital goods in respect of which credit was transferred were also transferred to the transferee - Whereas in the present case, the Cenvat Credit in respect of input services was already consumed to a certain extent before 29 March, 2010 - admittedly the dispute arose because of the order of merger dated 1 February, 2008, allowing merger with effect from the retrospective date 01 April, 2006. However, during the material time when Service Tax was discharged by the appellant RSPL, the same was illegally paid and credited to the Government. As such tax paid on input service was held to be correctly utilized by the appellant in terms of Cenvat Credit Rules, 2004 - in view of the admitted fact on record that part of the credit already stood utilized prior to 29 March, 2010 for discharging of Service Tax levied on output services of the 6/7 outgoing channels. Thus, the demand based on the input credit is wholly untenable and misconceived by the learned Commissioner. Whether Service Tax on Reverse Charge Basis under the classification online information and data access or retrieval services falling under Section 65(105)(zzzzb) have been rightly demanded? - Held that - the appellant did not provide such service as an output service which was allegation in the show cause notice for demanding duty and as such the demand of ₹ 45 lakhs is not maintainable on this score also. The show cause notice to be not maintainable - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Validity of the show cause notice invoking the extended period of limitation.
2. Appropriateness of Service Tax input credit taken by the appellant from 1st January 2010 to 29th March 2010.
3. Demand of Service Tax on Reverse Charge Basis under the classification of online information and data access or retrieval services.

Detailed Analysis:

1. Validity of the Show Cause Notice Invoking the Extended Period of Limitation:
The primary issue was whether the show cause notice issued on 31st March 2013 was valid by invoking the extended period of limitation. The Tribunal found no element of suppression, concealment, or any action/inaction on the part of the appellant to evade payment of duty. It was noted that all transactions were properly recorded in the appellant's books of accounts and disclosed in periodical returns filed with the Service Tax Department. The scheme of demerger was advertised in widely circulated newspapers. The Tribunal concluded that the Revenue had obtained all relevant information from the appellant's records maintained in the ordinary course of business, with no instances of manipulation or suppression. Therefore, the invocation of the extended period of limitation was deemed inappropriate, rendering the show cause notice invalid.

2. Appropriateness of Service Tax Input Credit Taken by the Appellant from 1st January 2010 to 29th March 2010:
The appellant had taken Service Tax input credit for the period from 1st January 2010 to 29th March 2010, during which the demerger scheme was pending approval by the High Court. The Tribunal noted that during this period, the appellant was the only legal entity operating the business, including the outgoing channels. The Tribunal referred to Rule 10 of the Cenvat Credit Rules, 2004, which allows the transfer of Cenvat credit in cases of sale, merger, amalgamation, etc., provided the inputs or capital goods are duly accounted for. The Tribunal held that the appellant was entitled to take and utilize the input credit during the relevant period as the demerger was effective from 1st January 2010, but the scheme became operative only from 29th March 2010. The Tribunal also cited the ruling in RSPL Ltd v/s CCE, where it was held that credit availed during the material time remains valid despite subsequent amalgamation. Consequently, the demand based on the input credit was found to be untenable and misconceived.

3. Demand of Service Tax on Reverse Charge Basis under the Classification of Online Information and Data Access or Retrieval Services:
The Revenue had demanded Service Tax on payments made by the appellant to foreign companies for images and text materials retrieved from their websites, classifying it under 'Online Information and Data Base Access or Retrieval Services' as per Section 65(105)(zzzzb) of the Finance Act, 1994. The Tribunal observed that the appellant did not provide such services as an output service, which was the basis for the demand in the show cause notice. Therefore, the demand of ?45,23,799 was not maintainable on this ground.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits to the appellant. The decision was primarily based on the invalidity of the show cause notice due to the improper invocation of the extended period of limitation. Consequently, the Tribunal did not record findings on the merits of the case.