2023 (6) TMI 497 - AT - Service Tax

Non/short payment of Service Tax - Information and Technology Software Service - import sale of software as a dealer provided to their clients the right to use information technology software for commercial exploitation including right to reproduce distribute and sell information technology software and right to use software components for the creation of and inclusion in the software products - reverse charge mechanism - Section 66A of the Finance Act 1994 and Section 67 (4) (c) of the Finance Act 1944. Technical Testing and Analysis Services - MRSS - Department has denied to accept the contention that these services have been exported on the ground that the appellant has not received the consideration in convertible foreign exchange - HELD THAT - Ld. Counsel has explained the provisions with regard to manner of receipt in foreign exchange. As per said rules a person shall be deemed to have repatriated the realised foreign exchange to India when he receives in India payment in rupees from the account of a bank or an exchange house situated in any country outside India maintained with an authorized dealer. The appellant has furnished FIRC documents before the authorities below - the view taken by the department that appellant has not received consideration in convertible foreign exchange is without any factual or legal basis. The contention of the appellant that the services were exported stands established. The levy of service tax on MRASS TTAS therefore cannot sustain and the demand of Rs.64, 14, 478/- requires to be set aside. Reversal of CENVAT Credit - value of exempted services provided by them as required under Rule 6 (3) of CCR 2004 - Department is of the view that as the appellant had not intimated the department that they are exercising the option in terms of Rule 6 (3A) - HELD THAT - The appellant has been asked to pay 6% / 8% of the value of exempted services. This issue is no longer res integra. The Tribunal in the case of M/S. RELIANCE LIFE INSURANCE CO. LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI 2017 (10) TMI 400 - CESTAT MUMBAI analysed the issue and held that procedure given in Rule 6 (3A) of CCR 2004 is intended to make Rule 6 (3) workable and available to the assessee. Rule 6 (3) (i) cannot be made automatically applicable on failure to intimate in writing about the option to be availed by the assesseee - the demand cannot sustain and requires to be set aside. Disallowance of cenvat credit availed on meal passes and group insurance services - HELD THAT - Needless to say that during the relevant period (prior to 01.04.2011) the definition of input services had a wide ambit as it included the phrase activities relating to business . Thus almost all the services were covered within the definition of input services if used for providing the output services. There is nothing to show that the said services were not used for the employees of the appellant-company. The Tribunal in the case of Ford 2018 (8) TMI 1513 - CESTAT CHENNAI had considered the issue and held that the credit is eligible. The appellant is eligible for credit and the disallowance of credit is not sustainable and requires to be set aside. The appeal is allowed.

Summary

Issues Involved:

1. Demand of Service Tax under 'Technical Testing and Analysis Services' (TTAS) and 'Manpower Recruitment or Supply Agency Services' (MRASS).
2. Reversal of Cenvat Credit attributable to exempted services.
3. Disallowance of Cenvat Credit on meal passes and group insurance services.

Summary:

1. Demand of Service Tax under TTAS and MRASS:

The appellant contested the demand of Rs. 64,14,748/- under TTAS and MRASS, arguing that these services were exported and thus not subject to service tax. The appellant provided these services to their parent company in the USA and received payment in convertible foreign exchange. The Tribunal referred to various precedents and regulations under FEMA, confirming that payment received in Indian rupees from a bank account situated outside India qualifies as receipt in convertible foreign exchange. The Tribunal concluded that the services were indeed exported, and thus, the demand of Rs. 64,14,748/- for service tax was set aside.

2. Reversal of Cenvat Credit for Exempted Services:

The appellant had reversed the proportionate credit attributable to exempted services but had not intimated the department. The department demanded 6%/8% of the value of exempted services due to this procedural lapse. The Tribunal, referencing previous decisions, held that the substantive right to reverse proportionate credit cannot be denied due to procedural lapses. It was determined that the demand for reversal of credit as per Rule 6(3) of CCR 2004 was not sustainable and was set aside.

3. Disallowance of Cenvat Credit on Meal Passes and Group Insurance Services:

The appellant claimed Cenvat credit on meal passes and group insurance services, which the department disallowed. The Tribunal noted that during the relevant period, the definition of "input services" included activities related to business, thus covering these services if used for providing output services. The Tribunal found no evidence that these services were not used for the employees of the appellant-company and held that the credit was eligible. Consequently, the disallowance of credit was set aside.

Conclusion:

The Tribunal set aside the demands confirmed in the impugned order, allowing the appeal with consequential relief.