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2019 (12) TMI 1171 - AT - Service TaxRecovery of CENVAT credit - input services - allegation that input services were not utilized by the assessee but utilised for the broadcasting of channels by the overseas entity - penalties u/s 78A of Finance Act, 1994 - exported services or not - exclusion from the definition of input service in rule 2(l) of CENVAT Credit Rules 2004 or not - insistence on the part of Revenue that the responsibility for discharge of tax liability is distinct from provision of service which alone entitles availment of CENVAT credit. HELD THAT - It is not disputed that the appellant-assessee has discharged tax liability but it has been held that such compliance is as a mere agent who does not consume the input service ; implicit in this hypothesis is that even the procurement of service is as an agent even though Learned Authorized Representative is unable to draw sustenance for deeming such agency in the taxing statute or in the CENVAT Credit Rules, 2004. It is not the entitlement of the broadcaster within the scheme of CENVAT credit that is objected to but the claim of the appellant-assessee to that entitlement as surrogate of provider of service - There is no allegation that the disputed services are not input services for a broadcaster and, hence, the exclusions or the schedule, for which that definition is intended, are not relevant for deciding on eligibility in the dispute before us. The perception conflict between surrogacy and agency seems to be the genesis of the controversy; while the appellant-assessee claims to be the surrogate, Revenue is prepared only to concede status of agency for discharge of liability and, that too, as a legal fiction which excludes categorization as broadcaster. The levy on manufacture is crystallised on the product without having to take recourse to manufacturer making abundantly clear, by implication, that the manufacturer pays the duty and takes eligible credit. Likewise, in section 66 of Finance Act, 1994, there is no reference to any person but only to the taxable events described in section 65(105), and in the successor section 65B, even less so. The complexity of definition of taxable activity, necessitating human presence, is now sought to be superimposed on the CENVAT credit scheme which recognises only the taxpayer within its ambit. The deployment of expressions in CENVAT Credit Rules, 2004 warrants recourse to Finance Act, 1994 only for interpreting expressions that are not defined therein. As the said Rules do not allude to taxable service except with the qualification provider of , and is defined in rule 2(q) and rule 2(r) as a composite expression, which is not untrammeled, even the parent statute may be unable to afford an interpretation. By inclusive qualification, rule 2(r) of CENVAT Credit Rules, 2004 brings person liable to pay tax within its ambit - The levies devolve on the person liable to tax as laid out in the Service Tax Rules, 1994 and, in view of rule 9 of CENVAT Credit Rules, 2004, credit can be taken only by the entity burdened with the incidence of tax. That is the sole criteria of eligibility to take credit and not the process by which broadcast signals are received in India. The relationship between the overseas entity and the appellant-assessee is open and declared and the tax law sought to be invoked against the latter is not premised on the existence of a relationship between the two. The laudable morality that guided the widening of investigative jurisdiction cannot be read out of context to impute an allegation that is not acknowledged in the law pertaining to levy of service tax. In the light of findings that the appellant-assessee is not only de facto but also de jure provider of output service as well as consumer of the impugned input service , the recovery ordered in the impugned order as well as the penalties on the appellant-assessee and the individual appellants is set aside - appeal allowed - decided in favor of assessee.
Issues Involved:
1. Recovery of CENVAT credit availed on certain 'input services'. 2. Imposition of penalties under section 78A of Finance Act, 1994. 3. Eligibility of credit for services allegedly used for broadcasting by an overseas entity. 4. Specific exclusions from the definition of 'input service'. 5. Determination of the recipient of 'eligible input service'. 6. Compliance with rule 3 and rule 9 of CENVAT Credit Rules, 2004. 7. Discharge of tax liability and entitlement to CENVAT credit. Issue-wise Detailed Analysis: 1. Recovery of CENVAT Credit: The appellant-assessee, M/s Sony Pictures Networks India Pvt Ltd, was challenged on availing CENVAT credit of ?2,21,75,67,529 on certain 'input services' during 2010-2013 and April 2013 to September 2014. The dispute centered on credit of ?2,21,58,24,907 availed on 12 taxable services which were allegedly used for broadcasting channels by an overseas entity and ?17,41,622 on three services excluded from the definition of 'input service' in rule 2(l) of CENVAT Credit Rules, 2004. 2. Imposition of Penalties: Penalties of ?1,00,000 each were imposed on Mr. Manjit Singh and Mr. Andrew J Kaplan under section 78A of Finance Act, 1994. The first appeal contested the demand arising from the substantive issue along with a penalty of like amount under section 78 of Finance Act, 1994. 3. Eligibility of Credit for Services Used for Broadcasting by Overseas Entity: The appellant argued that they were the exclusive agent of M/s MSM Satellite (Singapore) Pte Ltd for distribution of channels and sale of airtime slots, and that the tax liability was discharged by them. The adjudicating authority contended that the overseas entity owned the channels and infrastructure, thus the appellant could not claim to be the provider of 'broadcasting service'. The Tribunal found that the appellant-assessee, as the legally recognized provider of service, was entitled to the credit. 4. Specific Exclusions from the Definition of 'Input Service': The credit of tax paid on 'rent-a-cab service', 'outdoor catering service', and 'club and association service', which were excluded from the ambit of 'input services' post-1st July 2012, was contested. The Tribunal accepted the appellant's argument that the exclusions were intended to disallow services for personal benefit, which was not the case here, thus the demand of ?17,41,622 failed. 5. Determination of the Recipient of 'Eligible Input Service': The Tribunal emphasized that the appellant-assessee was the surrogate of the broadcaster and not merely an agent. The appellant had discharged the tax liability and was thus entitled to avail the credit of tax paid on services procured by them. 6. Compliance with Rule 3 and Rule 9 of CENVAT Credit Rules, 2004: The Tribunal noted that under rule 3, credit is allowed to a 'provider of taxable service' and that the eligibility has only two conditions: leviability of tax and being a provider of 'taxable service'. The appellant-assessee met these conditions, and there was no exclusion applicable to deny the credit. 7. Discharge of Tax Liability and Entitlement to CENVAT Credit: The Tribunal concluded that the appellant-assessee was both de facto and de jure provider of 'output service' and consumer of the 'input service'. The law had erased the overseas entity from the scheme, and the appellant-assessee was entitled to avail the credit of tax paid on input services. Conclusion: The Tribunal set aside the recovery ordered in the impugned order and the penalties on the appellant-assessee and the individual appellants, allowing all three appeals. The decision was pronounced in the open court on 18/12/2019.
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