2019 (2) TMI 855 - AT - Service Tax

Non-payment of service tax - Manpower Recruitment and Supply/Security services - period from January 2013 to January 2014 - reverse charge mechanism - extended period of limitation - Held that - The bar under Rule 9(i)(bb) of the CENVAT Credit Rules, 2004 is not applicable to the transaction where service receiver is paying service tax under reverse charge mechanism on GAR-7 challan and is taking the credit thereof on the basis of said challan. In the present case, there cannot be any suppression to evade the tax once the assessee is entitled to take CENVAT credit of the same thereby renders the whole situation as revenue neutral - further, mere omission on the part of the appellant has been treated as suppression of facts with mala fide intention to evade the payment of tax which is not justified in law. The appellant after being pointed out by the audit, paid the service tax along with interest and informed the Department vide their letters dated 24.4.2014 and 21.8.2014 and also declared these facts in their ST-3 returns for the relevant period. Therefore, extended period cannot be invoked. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Applicability of Rule 9(i)(bb) of CENVAT Credit Rules, 2004
- Allegation of suppression with intent to evade tax
- Entitlement to CENVAT credit in revenue neutral transactions

Analysis:

Applicability of Rule 9(i)(bb) of CENVAT Credit Rules, 2004:
The case involved a dispute regarding the applicability of Rule 9(i)(bb) of the CENVAT Credit Rules, 2004 to a transaction where the service receiver was paying service tax under reverse charge mechanism. The appellant contended that Rule 9(i)(bb) was not applicable in their case as they were paying service tax on the basis of GAR-7 challan and were entitled to take credit accordingly. The Tribunal, in line with the decision in Polygenta Technologies Ltd., upheld the appellant's right to avail the credit under Rule 9(i)(e) of the CENVAT Credit Rules, ultimately ruling in favor of the appellant.

Allegation of suppression with intent to evade tax:
The appellant argued against the allegation of suppression with intent to evade tax, emphasizing that the situation was revenue neutral as they had paid the service tax upon realization of the oversight and had duly informed the Department about the corrective actions taken. The Tribunal concurred with the appellant, stating that there was no intent to evade tax as the appellant had rectified the error promptly, paid the service tax along with interest, and declared the relevant facts in their returns. Consequently, the Tribunal dismissed the notion of suppression with mala fide intention in this context.

Entitlement to CENVAT credit in revenue neutral transactions:
In the context of revenue neutral transactions, the Tribunal highlighted that the mere omission by the appellant should not be equated with deliberate suppression of facts to evade tax. The Tribunal emphasized that once the appellant was entitled to take CENVAT credit and had rectified the situation by paying the service tax, the matter should be viewed as revenue neutral. By citing relevant legal precedents, the Tribunal concluded that the impugned order was unsustainable in law and set it aside, thereby allowing the appeal of the appellant.

In conclusion, the judgment addressed the issues of Rule 9(i)(bb) applicability, suppression with intent to evade tax, and entitlement to CENVAT credit in a detailed manner, ultimately ruling in favor of the appellant based on legal interpretations and precedents cited during the proceedings.