2018 (7) TMI 702 - AT - Service Tax

CENVAT Credit - input services for providing output service namely sponsorship service - The department was of the view that appellant being not eligible to pay service tax for sponsorship services and credit cannot be allowed - The demand arises out of the basic allegation that the appellant has wrongly paid the service tax on sponsorship service when actually service recipient ought to have paid. Held that - The department has no case that the appellant has not paid the service tax on these input services nor is there a case that they are not used for providing sponsorship service. The only allegation is that the appellant ought not to have collected the service tax on sponsorship service. Generally, it is the output service provider who has to pay the service tax and in some cases like sponsorship services, the Service Tax Rules provide that the liability to pay service tax is upon the service recipient. Appellant has collected service tax wrongly from service recipient and paid to Central Government instead of the service recipient paying it directly to Central Government for sponsorship services - Other than this allegation of wrongly paying the service tax on sponsorship service, there is no evidence of positive act of suppression of fact with intent to evade payment of service tax on the part of appellant. On the mere ground that the appellant has wrongly discharged the service tax on sponsorship services, the entire demand has been raised. There is no iota of evidence to establish that there was any willful intention on the part of the appellant to evade payment of service tax by suppression of facts - the demand raised for the extended period cannot sustain and requires to be set aside. The impugned order is set aside on the ground of limitation and the appeal is allowed

Summary

Issues:
1. Appellant wrongly collected service tax on sponsorship services.
2. Eligibility of input service credit for sponsorship services.
3. Allegation of suppression of facts by the appellant.
4. Application of extended period for demand.

Analysis:
1. The appellant, a publisher of newspapers and magazines, conducted competitive programs and received sponsorship for them, collecting service tax on sponsorship services. The department contended that the appellant wrongly paid the service tax on sponsorship services, which should have been paid by the service recipient. The issue was whether the input services used for providing sponsorship services were eligible for credit.

2. The appellant argued that despite mistakenly collecting service tax on sponsorship services, the input services like mandap keeper and quiz master services were used for conducting events and providing sponsorship services. They contended that denial of credit based on the appellant's incorrect discharge of service tax was unjustified. The appellant cited precedents to support their argument and emphasized that the department had not issued any show cause notice to the service recipients.

3. The department maintained that the appellant should not have paid service tax on sponsorship services, as it was the service recipient's liability. They alleged that the appellant manipulated facts to evade service tax payment and incorrectly availed CENVAT credit. The department invoked the extended period for demand based on these allegations.

4. After hearing both sides, the tribunal found that the demand was primarily based on the appellant's incorrect payment of service tax on sponsorship services. There was no evidence of willful intent to evade tax by the appellant. The tribunal referred to a similar case where credit was allowed despite a similar discrepancy. Consequently, the tribunal set aside the demand for the extended period, ruling in favor of the appellant and allowing the appeal with consequential relief.