2019 (6) TMI 74 - AT - Service Tax

Utilization of CENVAT Credit - receipt of services from overseas service providers and discharged service tax under reverse charge mechanism - whether the appellant is eligible to utilize cenvat credit in discharging such service tax? - Rule 5 of the Taxation of Services (Provided from outside India and received in India) Rules, 2006 - HELD THAT - Similar issue decided in the case of M/S. USV LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI 2018 (4) TMI 617 - CESTAT MUMBAI where it was held that Under CCR 2004 there is no bar for utilization of Cenvat credit for the deemed service provider to pay the service tax liability casted upon him in terms of Section 66A - In terms of Rule 2 (r) the Appellant is a deemed service provider. Rule 5 of Taxation of Service Rules (Provided from outside India and Received in India) Rules only refers to availing of Cenvat Credit and not utilization of cenvat credit. Utilization of credit is not incorrect - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Whether the appellant, who received services from overseas service providers and discharged service tax under reverse charge mechanism, is eligible to utilize cenvat credit in discharging such service tax.

Analysis:
The appeal was filed against an order passed by the Commissioner of Central Excise, Thane-II, regarding the appellant's service tax liability for using the network of Visa and Master Card. The appellant had paid a significant amount of service tax through cash and cenvat account. The dispute arose due to the interpretation of Rule 5 of the Taxation of Services Rules, 2006, concerning the utilization of cenvat credit. The appellant argued that they should be considered as a provider of taxable service under the Cenvat Credit Rules, enabling them to utilize the cenvat credit for service tax payment. The appellant cited various Tribunal judgments to support their stance, emphasizing that the restriction in Rule 5 pertains to availing credit, not its utilization.

The Revenue contended that the appellant, as a service recipient under reverse charge mechanism, cannot be treated as an output service provider for availing cenvat credit. They referred to a Circular clarifying the treatment of foreign services under international tax practices. The Revenue highlighted the amendment to Rule 2(p) of the Cenvat Credit Rules in 2012, restricting credit utilization for services where the recipient is liable to pay tax. They argued that the appellant's actions constituted incorrect payment of service tax, justifying the invocation of the extended period of limitation.

The Tribunal analyzed the issue in light of previous judgments and upheld the appellant's right to utilize cenvat credit for discharging service tax. They referred to cases like USV Ltd. and Kansara Modler Ltd., where it was established that before the 2012 amendment, there was no restriction on deemed service providers utilizing cenvat credit. The Tribunal emphasized that Rule 5 of the Taxation of Services Rules pertains to availing credit, not its utilization. They concluded that the appellant should be considered an output service provider, as per the Cenvat Credit Rules, allowing them to use cenvat credit for service tax payment. The Tribunal set aside the Commissioner's order and allowed the appeal, following consistent judgments on the issue.

In conclusion, the Tribunal's decision clarified the eligibility of the appellant to utilize cenvat credit for discharging service tax on services received from overseas providers under the reverse charge mechanism. The judgment emphasized the interpretation of relevant rules and previous Tribunal decisions to support the appellant's position as an output service provider, entitling them to utilize cenvat credit.