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2018 (8) TMI 496 - AT - Service TaxEOU - Reverse charge mechanism - Business Auxiliary Services - received services from Foreign companies, which did not have office in India, in respect of the services rendered abroad - case of appellant is that Section 66A could not have been made applicable retrospectively as it came into force only from 18.04.2006 - Held that - In respect of the service provider being abroad, the liability to pay Service Tax on reverse charge mechanism has come into effect only from 18.04.2006; this has been held by various judgments and particularly, the Indian National Ship Owners Association 2008 (12) TMI 41 - BOMBAY HIGH COURT - there is no need to deliberate on the issue as being a settled one. Whether the requisition received by the appellants after 18.04.2006 are taxable to Service Tax? - Held that - The appellants are in India but the services are rendered by the company which is outside India and the services are also rendered outside India, however, it is not denying that the appellants are receivers and beneficiaries of the services rendered abroad - the demand needs to be made limited to the period from 18.04.2006 to 31.12.2006 and penalty under Section 78 would also be equivalent as per the amount of duty payable for the period. Service Tax for the period from 18.04.2006 onwards - CENVAT Credit - revenue neutrality - Held that - The facts of the case and the submissions of the appellants did not make it clear whether the appellants are registered as Service Tax providers and whether they are availing facility under CENVAT Credit Rules and are following proper procedure - the appellants are liable to pay the Service Tax for the period from 18.04.2006 to 31.12.2006. If the appellants are otherwise liable to take credit of the same and to obtain a refund of the same cannot be decided at this end - As no refund claim is filed, the issue cannot be decided at this stage. For this reason the issue needs to go back to the original authority. Appeal allowed by way of remand.
Issues Involved:
1. Applicability of Section 66A and reverse charge mechanism for services rendered by a foreign service provider. 2. Validity of the Service Tax demand for services received post 18.04.2006. 3. Impact of non-quoting or misquoting of statutory provisions in the Show Cause Notice (SCN). 4. Applicability of CBEC Circulars and their binding nature. 5. Eligibility for CENVAT Credit and refund under CENVAT Credit Rules, 2004. 6. Revenue neutrality and procedural compliance. Detailed Analysis: 1. Applicability of Section 66A and Reverse Charge Mechanism: The appellants, an Export Oriented Unit (EOU), received various services from a foreign company, Macmillan Publishers Ltd., for their export sales. The Department issued a Show Cause Notice (SCN) demanding Service Tax under "business auxiliary service" received from the foreign company. The appellants contended that Section 66A, which introduces the reverse charge mechanism, came into effect only from 18.04.2006 and cannot be applied retrospectively. The Tribunal agreed, citing the Indian National Ship Owners Association case, which confirmed that reverse charge liability applies only from 18.04.2006. 2. Validity of Service Tax Demand Post 18.04.2006: The Tribunal examined whether the services received after 18.04.2006 were taxable. The appellants argued that the services were performed and utilized outside India, and thus not subject to Service Tax. However, the Tribunal referenced the Air India Ltd. case, which held that services received and consumed by a beneficiary in India are taxable under the reverse charge mechanism. Therefore, the Tribunal concluded that the appellants are liable to pay Service Tax for the period from 18.04.2006 to 31.12.2006. 3. Impact of Non-Quoting or Misquoting of Statutory Provisions in SCN: The appellants argued that the SCN did not invoke the relevant sections or rules. The Tribunal, however, accepted the Department's argument that incorrect or missing references to statutory provisions do not invalidate the SCN, as long as the contentions are clear. This position was supported by several judicial precedents cited by the Department. 4. Applicability of CBEC Circulars and Their Binding Nature: The appellants relied on CBEC Circulars, which stated that services provided outside India were not liable to Service Tax. The Tribunal noted that these circulars were issued before the statutory provisions for taxing such services were in place and were withdrawn on 10.05.2007. The Tribunal held that circulars contrary to statutory provisions have no legal standing, as affirmed by the Supreme Court in the Indian National Ship Owners Association case. 5. Eligibility for CENVAT Credit and Refund: The appellants claimed that any Service Tax paid post 18.04.2006 would be eligible for CENVAT Credit and could be refunded. The Tribunal, however, found that the appellants had not obtained Service Tax registration, and it was unclear whether they were following the necessary procedures to claim such credits. The Tribunal determined that eligibility for credit and refund must be verified by the jurisdictional authorities under the relevant rules and procedures. 6. Revenue Neutrality and Procedural Compliance: The Tribunal rejected the appellants' argument on revenue neutrality, noting the lack of clarity on whether the appellants were exporting services and following the proper procedures to claim CENVAT Credit. The Tribunal emphasized that compliance with statutory provisions and procedures is essential for claiming credits and refunds. Conclusion: The Tribunal allowed the appeal by way of remand, directing the lower authorities to quantify the Service Tax and penalty payable by the appellants for the period from 18.04.2006 to 31.12.2006. The Tribunal held that any eligibility for CENVAT Credit and refund should be determined by the jurisdictional authorities following the relevant procedures. The order was pronounced in Open Court on 07/08/2018.
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