2017 (12) TMI 1222 - AT - Central Excise

CENAVT credit - input services - Engineering Service, Business Auxiliary Service etc. from foreign based service provider - reverse charge mechanism - Held that - Section 66A of the Finance Act, 1994 was brought into the statute w.e.f. 18.04.2006. After the inclusion of such Section service tax became liable to be paid on specified services received from outside India. But the dispute is of the period prior to this date. The appellant has paid the service tax on reverse charge basis even for the period prior to 18.04.2006. But such service tax paid cannot loose the colour of tax only because the service tax on reverse charge basis has been held to be payable only w.e.f. 18.04.2006 - Having paid the service tax, the appellant is entitled to cenvat credit thereof since there is no dispute that such services, otherwise satisfy the norm of input service. The fact of payment of service tax is not in dispute and hence, there is no reason to disallow the cenvat credit of such service tax. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over availing cenvat credit for input services paid under reverse charge basis before the insertion of Section 66A of the Finance Act, 1994.

Analysis:
The appellant, engaged in manufacturing excisable goods, availed cenvat credit for input services, including Engineering Service and Business Auxiliary Service, from foreign providers. The Revenue disputed the credit amounting to ?1,30,94,599/-, claiming the appellant was not required to pay service tax on reverse charge basis before 18.04.2006, the date when Section 66A was inserted. The impugned order disallowed the credit and imposed a penalty, allowing it only for the period after 18.04.2006. The appellant contended that the service tax, though not payable during the dispute period, was paid and should be considered a refund of erroneously paid tax, citing precedent. The Revenue argued that tax paid before 18.04.2006 was not eligible for cenvat credit.

The Tribunal noted that Section 66A mandated service tax payment on specified services from outside India starting 18.04.2006. However, the appellant paid service tax on reverse charge basis even before this date and claimed cenvat credit. The Revenue's stance was based on the view that service tax was payable on reverse charge basis from 16.08.2002, a position challenged and later upheld through legal proceedings. The Tribunal emphasized that the appellant's payment of service tax, although disputed, should not disqualify it from cenvat credit eligibility, as the services met input service criteria. The Tribunal overturned the impugned order, allowing the appeal.

In conclusion, the Tribunal held that the appellant, despite paying service tax before the statutory backing of Section 66A, was entitled to cenvat credit for the disputed period. The legal history and the nature of the services supported the appellant's claim, leading to the setting aside of the impugned order and allowing the appeal.