2024 (8) TMI 1405 - AT - Service Tax

Liability of appellant to pay service tax - reverse charge mechanism - recovery of service tax twice - eligibility of CENVAT Credit - HELD THAT - As per the facts, even though the appellant is liable to pay service tax but the same service tax was discharged by the service provider. This has been accepted by the revenue and on that basis the original authority has dropped the proceeding. In this fact, even though any activity liable to service tax but the service tax has been discharged even though by different person other the person liable to pay the recovery of service tax again will amount to recovery of service tax twice of the same Tax which is not permissible under any circumstances. This very issue has been considered by this Tribunal in the case of Dhariwal Industries Limited 2023 (10) TMI 595 - CESTAT AHMEDABAD wherein considering the various judgments the Tribunal has held that ' once the payment of service tax was made by the transport agency which has not been altered by taking any action by the department, the cenvat credit of the said amount is also rightly available to the appellant.' Thus, it has been settled that once the service provider discharged the service tax where the service recipient is liable to pay the service tax, demand of service tax on the same service from the service recipient shall not sustain on the ground that the particular service which already suffered the service tax cannot be suffer the service tax twice on the same service. Accordingly, the service tax paid by the transport agency in the facts of the present case is the payment of service tax and not deposit. Therefore, no demand can be raised from the appellant, for the same reason once the amount paid by the transport agency being service tax amount, the appellant is eligible for cenvat credit. In the present case also the demand is not sustainable - the impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Liability of the service recipient to pay service tax under the Reverse Charge Mechanism (RCM).
2. Whether the service tax can be demanded twice for the same service.
3. Eligibility for Cenvat Credit when service tax is paid by the service provider.

Detailed Analysis:

1. Liability of the service recipient to pay service tax under the Reverse Charge Mechanism (RCM):
The assessee, engaged in the manufacturing of biscuits, received manpower supply services from a non-body corporate, M/s Setu Consultancy. According to Notification No. 30/2012 dated 20.06.2012, effective from 01.07.2012, the service recipient (a body corporate) is liable to pay 75% of the service tax under the Reverse Charge Mechanism (RCM). The assessee did not pay the service tax, leading to the issuance of a show cause notice on 16.06.2016. The adjudicating authority initially dropped the proceedings, noting that the service provider had paid the service tax. However, the Commissioner (Appeals) reversed this decision, holding that the statutory provision mandated the appellant to pay the service tax, irrespective of the payment made by the service provider.

2. Whether the service tax can be demanded twice for the same service:
The Tribunal examined whether the service tax could be demanded twice for the same service. The Tribunal found that although the appellant was liable to pay the service tax, the service tax had already been discharged by the service provider. It was held that recovering the service tax again from the appellant would amount to double taxation, which is impermissible. This view was supported by precedents, including the case of Dhariwal Industries Limited, where it was established that once service tax is paid by the service provider, the same cannot be demanded again from the service recipient.

3. Eligibility for Cenvat Credit when service tax is paid by the service provider:
The Tribunal also addressed the issue of Cenvat Credit eligibility. It was noted that if the service tax has been paid by the service provider, the service recipient is entitled to avail of the Cenvat Credit. This principle was reinforced through several judgments, including Elkos Pens Ltd. and Umasons Auto Compo Pvt. Ltd., which held that the service recipient could not be held liable for service tax if the service provider had already paid it and the credit of such payment was validly availed.

Conclusion:
Based on the analysis, the Tribunal concluded that the demand for service tax from the appellant was not sustainable since the service tax had already been paid by the service provider. The Tribunal set aside the impugned order and allowed the appeal, emphasizing that double taxation is not permissible and that the appellant is eligible for Cenvat Credit for the service tax paid by the service provider. The decision was pronounced in the open court on 29.08.2024.