2019 (11) TMI 287 - AT - Service Tax

Demand of service tax - revenue neutrality - reverse charge mechanism - Consulting Engineering Services - amount paid will be later available as credit - Revenue s only contention in the appeal memo as regards the said finding of Commissioner (Appeals) is that it was statutory requirement of the assessee to first discharge the said service tax on reverse charge basis - HELD THAT - Admittedly the service tax required to be paid by the assessee was available to them as credit. Further it seems that appellant was providing output services, which were also taxable. During the period in question, they paid service tax on output services by way of cash. Had they paid service tax on the input services received by them, they could have taken the credit and utilized that credit for payment of duty, instead of paying service tax in cash. The Appellate Authority has gone to the figures of the cash payment of tax and by comparing the same with their liability to pay tax, has come to the right conclusion of Revenue neutrality. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Appeal against order passed by Commissioner (Appeals) regarding demand on reverse charge mechanism for Consulting Engineering Services.
2. Interpretation of Revenue neutrality in the context of Cenvat credit utilization.
3. Contention of Revenue regarding statutory requirement for payment of service tax on reverse charge basis before availing Cenvat credit.

Analysis:
1. The appeal before the Appellate Tribunal involved a dispute regarding the demand confirmed against the appellant by the Original Adjudicating Authority for services received from foreign companies under "Consulting Engineering Services" on a reverse charge basis. The Commissioner (Appeals) set aside the demand, citing Revenue neutrality due to the availability of Cenvat credit to the assessee, which could have been used for payment of service tax on output services. The Tribunal upheld the Commissioner's decision, referencing a previous judgment upheld by the Supreme Court.

2. The main contention raised by the Revenue in the appeal was that the assessee was required to first discharge the service tax on reverse charge basis before availing Cenvat credit. The Revenue argued that the Commissioner was wrong in considering the situation as Revenue neutral. However, the Tribunal noted that the service tax paid by the appellant was available as credit, and had the appellant paid tax on input services, they could have utilized the credit for payment of duty instead of cash. The Tribunal agreed with the Commissioner's assessment of Revenue neutrality based on the comparison of cash payments with tax liabilities.

3. The Tribunal found no infirmity in the Commissioner's order, as the appellant's payment of service tax on output services in cash, instead of utilizing the available credit from input services, did not affect the Revenue adversely. The Tribunal supported the Commissioner's decision by emphasizing the Revenue neutrality aspect and the applicability of the previous Tribunal's judgment upheld by the Supreme Court. Consequently, the Revenue's appeal was rejected by the Tribunal.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the Tribunal's reasoning in resolving the dispute over the demand on reverse charge mechanism for Consulting Engineering Services.