2018 (12) TMI 436 - AT - Service Tax

Cargo Handling service - demand of accound of MPSEZ issued debit notes on account of deficiencies of service - adjustment of excess paid service tax - period November 2011 to March 2011 - Held that - The debit notes issued were in respect of deficiency of service provided by the appellant on which on the entire value service tax was paid. Since the debit note was issued, the value of the output service stand reduced, in such case on the amount of debit note, the service tax is not payable - however, since the appellant have already paid the service tax in the entire bill value and due to deficiency in the service, the excess paid service tax is adjustable in the future liability. CENVAT Credit - denial on the ground that the appellant have taken credit on the debit notes raised by MPSEZ towards the part of service provided by 3rd party to MPSEZ - Held that - Since the appellant invoice is inclusive of service provided by 3rd party, the MPSEZ has issued a debit note, therefore, the service for which the debit note was raised which was provided by the 3rd party is a deemed input service for the appellant - credit allowed - penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Demand of ?1,97,700/- for cargo handling service provided to M/s MPSEZ and adjustment of excess paid service tax.
2. Demand of Cenvat Credit amounting to ?1,03,952/- for service provided by a 3rd party to MPSEZ.

Analysis:
1. The appellant argued that the demand of ?1,97,700/- against the debit note raised by MPSEZ for service deficiency should not be payable as per Rule 6(3) of Service Tax Rules, 1994, allowing adjustment of excess paid service tax towards future liability. The appellant contended that since the service tax was already paid on the entire bill value, the excess paid service tax should be adjustable. The tribunal agreed, setting aside the demand as the excess paid service tax was deemed adjustable in future tax liability, though the appellant was liable to pay interest from the due date of payment till adjustment eligibility.

2. Regarding the demand of Cenvat Credit of ?1,03,952/- for service provided by a 3rd party to MPSEZ, the appellant claimed eligibility for the credit as the service by the 3rd party was deemed an input service. The tribunal concurred, noting that since the appellant had paid service tax on the entire bill value inclusive of the 3rd party service, they were entitled to the Cenvat Credit. As the demand was found unsustainable, no penalty was imposed, and the impugned order was set aside, allowing the appeal and disposing of the matter.