2024 (5) TMI 1123 - AT - Service Tax

Demand of service tax - service tax so paid under protest - service rendered by a non-resident from a country outside India - issuance of Foreign Currency Convertible Bonds (FCCB) - banking and financial services - Recovery of Interest and Imposition of Penalty - Recovery of CENVAT credit wrongly taken or erroneously refunded - HELD THAT - As per the impugned order the demand of service tax made against the appellant has been dropped. They had deposited the amount demanded in show cause notice during the course of investigation under protest and are entitled to refund of the same along with the interest as prescribed in law. However while depositing the said amount appellant had taken the cenvat credit of the same and as they are registered as input service distributor distributed the same to their manufacturing units. We in view of above undertaking do not find any reason to disallow the distribution of the said amount taken as credit by the appellant. Impugned order does not record any reason for disallowing the credit and its distribution, except that the service tax has been held to be not payable by the impugned order. In any case the entire exercise of recovering the said credit from the appellant is nullity as the appellant is entitled to refund of the same/ similar amount along with interest as per the impugned order. We are in agreement with the submission made by the appellant that show cause notice issued to them do not record any reason or the provisions in law as per which this recovery of CENVAT Credit is to be made. Even the impugned order does not record any provisions under which this recovery has been ordered. In absence of statement of any such provision in the show cause notice or the impugned order, the impugned order to this extent cannot be upheld. Thus, we do not find any justification in implementation of the impugned order to extent it orders for recovery of CENVAT Credit, in view of the undertaking given by the appellant during the course of argument on appeal. Appeal is disposed of.

Summary

Issues Involved:
1. Demand of Service Tax
2. Recovery of Interest and Imposition of Penalty
3. Disallowance of CENVAT Credit Distribution

Summary:

1. Demand of Service Tax:
The appeal challenges the order dated 22.08.2014, which dropped the demand of Service Tax amounting to Rs. 1,29,31,229/- u/s 73(2) of the Finance Act, 1994. The appellant, registered as an "Input Service Distributor," had received "banking and financial services" from M/s Jefferies International Ltd., London, and paid service tax under protest. The impugned order concluded that service tax was not leviable on services provided by a person located outside India to a recipient in India before 18.04.2006, as per CBEC Circular No. 276/8/2009-CX. 8A dated 26.09.2011 and relevant Supreme Court judgments.

2. Recovery of Interest and Imposition of Penalty:
The impugned order also dropped the proceedings regarding the recovery of interest and imposition of penalty as proposed in the Show Cause Notice (SCN). The appellant had paid the service tax under protest and contended that the service tax was not applicable as the services were undertaken outside India.

3. Disallowance of CENVAT Credit Distribution:
The impugned order disallowed the appellant from passing on the service tax paid to any other manufacturer or service provider in India for availing CENVAT credit. The appellant argued that the impugned order traveled beyond the SCN, which did not propose to disallow/recover the CENVAT credit. The appellant relied on several judicial precedents to support their claim that once service tax is paid, even if not payable, CENVAT credit cannot be denied.

The Tribunal noted that the appellant had deposited the service tax under protest and distributed the credit to their manufacturing units. The Tribunal found no reason to disallow the distribution of the said amount taken as credit by the appellant, especially since the impugned order did not record any reason for disallowing the credit and its distribution. The Tribunal relied on the decision in Ajinkya Enterprises [2013 (294) E.L.T. 203 (Bom.)] and other relevant cases, concluding that the recovery of CENVAT credit was unjustified.

Conclusion:
The appeal was disposed of, with the Tribunal finding no justification in the implementation of the impugned order to the extent it ordered the recovery of CENVAT credit, given the appellant's undertaking not to claim a refund of the amount credited and distributed. The Tribunal upheld the appellant's right to distribute the CENVAT credit taken for the service tax paid under protest.