2018 (2) TMI 1250 - Commission - Service Tax

Application for Settlement Commission - Eligibility to accept the Settlement Application - Development and Supply of Content Services - demand of service tax on various grounds. Held that - the Bench observes that the case is not one that can be settled in this Forum in view of rival claims leading to total divergence on facts and on law which are essential for settling this case. The Bench observes that the issue of analysing the facts interpretation of legal provisions and consequently determining the tax liability or otherwise of services merely on the basis of claims made by the applicant vis-a-vis the counter claims made by the department cannot be decided in this forum as in an Adjudication proceeding. The Bench by virtue of the powers vested in it in terms of Section 32L of the Central Excise Act 1944 made applicable to Service Tax matters under Section 83 of the Finance Act 1994 rejects the case and sends the case back to the adjudicating authority for adjudication in accordance with the provisions of the law.

Issues Involved:
1. Demand of Service Tax for the period 2011-12 to 2014-15.
2. Recovery of ineligible Cenvat credit on input services.
3. Service Tax under partial reverse charge mechanism.
4. Non-fulfillment of obligations under Rule 6(3) of Cenvat Credit Rules, 2004.
5. Service Tax on commission received from services rendered in Jammu & Kashmir.

Detailed Analysis:

1. Demand of Service Tax for the Period 2011-12 to 2014-15:
The applicant, M/s. Pyro Telecom Solutions Private Limited, was engaged in providing services under the category of 'Development and Supply of Content Services'. The jurisdictional officers found that the applicant had not paid service tax and filed 'Nil' returns despite rendering taxable services. The total service tax liability for the period 2011-12 to 2014-15 was calculated at ?1,67,02,830/-. The applicant admitted partial liability and paid ?35,40,925/- in cash and claimed to have paid the remaining amount of ?1,31,61,905/- through input service credit. The department, however, did not accept this claim due to lack of evidence for proper records and non-disclosure in ST-3 returns as required under Rules 9(6) and 9(9) of the CCR, 2004.

2. Recovery of Ineligible Cenvat Credit on Input Services:
The applicant had availed Cenvat credit on hospitality services and rent-a-cab services. The department argued that these credits were ineligible under Rule 2(1) of Cenvat Credit Rules, 2004, which excludes such services from the definition of 'input service'. The applicant admitted a liability of ?1,02,032/- for hospitality services but contested the remaining ?24,15,675/- for rent-a-cab services, claiming they were used for business purposes. The department rejected this claim, maintaining that the purpose of use was irrelevant as rent-a-cab services were unequivocally excluded from input service credit.

3. Service Tax Under Partial Reverse Charge Mechanism:
The applicant was required to discharge service tax liability under reverse charge mechanism for rent-a-cab services, amounting to ?24,15,945/-. The applicant argued that ?7,44,980/- pertained to services provided by private limited companies, which are not covered under reverse charge mechanism, and for the remaining amount, they had paid the service tax to the service providers. The department accepted the exclusion for private limited companies but maintained that the applicant was liable for the remaining ?16,70,965/- under reverse charge mechanism despite the applicant's payment to service providers.

4. Non-fulfillment of Obligations Under Rule 6(3) of Cenvat Credit Rules, 2004:
The applicant engaged in trading of airtime, considered an exempted service, and availed Cenvat credit on input services without fulfilling the obligations under Rule 6(3) of CCR, 2004. The demand for this non-compliance was ?3,63,071/-.

5. Service Tax on Commission Received from Services Rendered in Jammu & Kashmir:
The applicant received commission from M/s. BSNL for services rendered in Jammu & Kashmir but did not pay service tax on this income. The department argued that the applicant was liable to pay service tax on such commission as per Rule 9 of Place of Provision of Services Rules, 2012, amounting to ?2,56,238/-.

Findings and Decision:
The Bench found significant discrepancies between the claims of the applicant and the department, particularly regarding the eligibility of Cenvat credit and the proper maintenance of records. The Bench emphasized that the Settlement Commission is not an adjudicating authority but an arbitration forum. Given the complexity and contentious nature of the issues, the Bench concluded that these matters should be adjudicated by the proper officer following due process of law.

Order:
The Bench, exercising its powers under Section 32L of the Central Excise Act, 1944, rejected the case and referred it back to the adjudicating authority for a detailed adjudication. The adjudicating authority is to decide the case as if no application for settlement had been filed.

Implementation:
A copy of the order was directed to be given to both the applicant and the Jurisdictional Commissioner for implementation. The order is restricted to the current case and cannot be used for any other purpose without written permission from the Commission.

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