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2024 (10) TMI 817 - AT - Service TaxWrongful availment of CENVAT Credit - CENVAT Credit on Service Tax paid under Reverse Charge Mechanism before 18.04.2006. Payment of service tax made after 18.04.2006 - HELD THAT - A specific provision has been inserted in Rule 3 of the CENVAT Credit Rules, 2004, allowing CENVAT Credit of service tax paid under Section 66A of the Finance Act, 1994. Hence, it is observed that the CENVAT Credit availed by the Respondent for the period after 18.04.2006 is legal and proper. Credit availed on the payment of service tax made for the period prior to 18.04.2006 - HELD THAT - The law relating to taxability of import services was not settled during that period. However, the Respondent decided to pay service tax to avoid any disputes. Once, service tax is paid by the Respondent on the import of services and the same is accepted by the Department, then the credit of the same cannot be denied. The Respondent is eligible to avail the credit of service tax paid under Section 66A during the period from 2004-05 to 2007-08 - the impugned order is upheld - appeal filed by Revenue is rejected.
Issues:
1. Whether the Respondent wrongly availed CENVAT Credit in contravention of Rule 3 (1) (ix) of CENVAT Credit Rule, 2004? 2. Whether the Service Tax paid under Reverse Charge Mechanism before 18.04.2006 is eligible for CENVAT Credit? 3. Whether the impugned order dropping the demands raised in the Show Cause Notice is justified? Analysis: 1. The appeal was filed by the Revenue against the Order-in-Original passed by the Principal Commissioner alleging that the Respondent wrongly availed CENVAT Credit of Rs. 4,20,21,467/- under Section 66A of the Finance Act, 1994. The Revenue contended that prior to 18.04.2006, the credit of Service Tax paid under Reverse Charge Mechanism was not justified as per Rule 3 of CENVAT Credit Rules, 2004. 2. The Revenue argued that before the enactment of Section 66A, there was no provision to levy Service Tax on services received from abroad. They cited a Bombay High Court case to support their claim that no legal basis existed to avail CENVAT Credit against Service Tax paid on input services before 18.04.2006. The Revenue prayed for setting aside the impugned order. 3. In response, the Respondent highlighted that a specific provision in Rule 3 of CENVAT Credit Rules, 2004 allowed CENVAT Credit of service tax paid under Section 66A after 18.04.2006. They argued that for the period before 18.04.2006, they paid service tax on import services due to legal uncertainty. The Respondent relied on previous decisions by CESTAT to support their stance that credit for service tax paid on import services before 18.04.2006 should be allowed. 4. The Tribunal observed that the Respondent had paid Service Tax under Reverse Charge Mechanism and availed CENVAT Credit for the period 2004-05 to 2007-08. They noted the insertion of a specific provision in Rule 3 allowing credit after 18.04.2006. The Tribunal also acknowledged the legal uncertainty regarding taxability of import services before 18.04.2006 and the Respondent's compliance with paying service tax during that period. 5. Citing decisions by CESTAT in Mumbai and New Delhi, the Tribunal held that the Respondent was eligible to avail the credit of service tax paid under Section 66A for the period in question. Consequently, the impugned order dropping the demands raised by the Revenue was upheld, and the appeal was rejected.
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