2022 (7) TMI 922 - AT - Service Tax

Waiver of demand and additional interest for delayed payment of Service Tax - services received from associated enterprises - short reversal of Cenvat credit for bad debt written off by the Appellants - demand of short reversal of Cenvat credit by adding the value of export of services in the total turnover (in the numerator) as per formula given under Rule 6(3A) of the Cenvat Credit Rules, 2004 - HELD THAT - The Ld. Adjudicating authority placing reliance on the CBIC s Circular No. 868/8/2008-CX dated 09/05/2008, wherein it was already clarified that the export of services, without payment of service tax, are not to be treated as exempted services for the purposes of Rule 6(3) of the CCR, 2004. The Appellant submits that under Rule 6(3A)(b)(iii) of the Cenvat Credit Rules 2004, the term 'N' inter alia includes total value of taxable and exempted services provided. Under the Finance Act as well as Cenvat Credit Rules, 2004, only the terms 'exempted services' and 'taxable services' were defined. The term ' taxable service' has been defined under Section 65(105) of the Finance Act to mean the services specified under the various sub-clauses. The term 'exempted service' was defined, during the impugned period to mean taxable services which are exempt from the whole of the Service Tax leviable thereon and includes services on which no Service Tax is leviable under section 66 of the Finance Act - the Appellant has not short reversed Cenvat credit under Rule 6(3A) of the CCR, 2004 and we therefore drop the proceedings to the above extent by allowing the Appeal filed by the assessee. Demand of additional interest on delayed payment of Service Tax on account of services received from associated enterprises - HELD THAT - The lower authority has given a finding that the tow enterprises namely PWC Services BV Netherlands and PWC Global Licencing Services Corporation, Canada cannot be treated as associated enterprises as the same has not been declared by the assessee in their Return of Income tax filed in form 3CEB for FY 2009-10 and hence the payment of Services Tax basis the booking of expense cannot be sustained - since the Ld. Adjudicating authority has not gone into the details of the matter, it would be prudent in the interest of justice, that the matter be remanded to the Adjudicating authority to verify as to why such enterprises were not disclosed in Income Tax returns and pass a reasoned and speaking order thereafter. Needless to mention an opportunity ofhearing should be given to the assessee concerned. Following the decision of the Chandigarh Bench in SBI CARDS AND PAYMENTS SERVICES PVT LTD VERSUS COMMISSIONER OF SERVICE TAX, DELHI 2022 (1) TMI 449 - CESTAT CHANDIGARH , it is opined that the departmental Appeal as regards reversal of Cenvat credit on amounts written off as bad debt by the assessee cannot be sustained and the same is dismissed accordingly. Appeal disposed off.

Summary

Issues:
1. Irregular Cenvat credit availed by the Appellant.
2. Dropping of demand by Revenue for additional interest on delayed payment of Service Tax.
3. Short reversal of Cenvat credit by the Appellant.

Analysis:

1. The Appellant availed Cenvat credit amounting to Rs. 38,79,756, which was confirmed by the Ld. Commissioner. The Appellant contended that the Cenvat credit was availed in accordance with Rule 6(3)(ii) of the Cenvat Credit Rules, 2004. The Appellant included the total turnover, which comprised export of services, resulting in a Show Cause Notice (SCN) for short reversal of Cenvat credit. The Order-in-Original (OIO) partially confirmed the demand, leading to the present Appeal by both parties.

2. The Revenue appealed against the dropping of demand for additional interest on delayed payment of Service Tax. The Ld. Adjudicating authority found two enterprises not declared as associated enterprises in the Income Tax return, leading to the conclusion that the payment of Service Tax based on the booking of expenses cannot be sustained. The Tribunal recommended a detailed verification by the Adjudicating authority to ascertain the non-disclosure of these enterprises.

3. The Appellant's Appeal regarding short reversal of Cenvat credit was based on the inclusion of export of services in the total turnover. The Tribunal referred to CBIC's Circular and held that export of services, without payment of Service Tax, should not be considered exempted services. The Appellant's argument regarding the definition of 'export of service' and 'taxable services' was analyzed, leading to the conclusion that the Appellant did not short reverse Cenvat credit. Consequently, the Tribunal allowed the Appellant's Appeal.

4. The Tribunal also addressed the Revenue's Appeal concerning the reversal of Cenvat credit on amounts written off as bad debt by the Appellant. Referring to a judgment by the Chandigarh Bench, the Tribunal held that there is no provision for reversal of Cenvat credit for services provided where no consideration is received. Following the Chandigarh Bench's decision, the Tribunal dismissed the Revenue's Appeal on this issue.

In conclusion, the Tribunal allowed the Appellant's Appeal related to Cenvat credit and dismissed the Revenue's Appeal concerning additional interest and reversal of Cenvat credit on bad debts. The detailed analysis of each issue led to the Tribunal's decision, ensuring a comprehensive review of the legal aspects involved in the case.