2015 (4) TMI 576 - AT - Service Tax

Demand of service tax on import of services - Revenue neutrality - eligibility to avail Cenvat Credit - Business Support Services - Held that - Appellant is covered as an exporter of services under the Export of Services Rules, 2005 and no services are provided by the appellant in India. It is observed from the case records that appellant has been getting refund claim from July 2006 onwards under Rule 5 of the Cenvat Credit Rules 2004. Any service tax payable by the appellant on reverse charge basis under Section 66 A of the Finance Act 1994 was also admissible as Cenvat Credit. As no services are provided by the appellant in India, therefore, the entire service tax so paid would have been admissible as Cenvat Credit and refundable to the appellant as per the provisions of Rule, 5 of the Cenvat Credit Rules, 2004. In the case of Commissioner of Central Excise Chandigarh Vs. Dharampal Satyapal 2008 (11) TMI 581 - CESTAT NEW DELHI was relied upon the appellant. In this case appeal filed by the Revenue was rejected by holding that on the grounds that in a case of Revenue neutrality demand does not survive - service tax payable under Section 66A of the Finance Act 1994 was also admissible to the appellant as Cenvat Credit. As appellant is only an exporter of services and availing Cenvat Credit the same would have been admissible as refund under Rule 5 of the Cenvat Credit Rules 2004. It is Revenue neutral situation, therefore, demands are not sustainable on merits in view of the settled proposition of law. - Decided in favour of assessee.

Summary

Issues:
- Whether the demand issued to the appellant should be set aside on grounds of Revenue neutrality and limitations.
- Whether the demands are sustainable on merits in view of the settled proposition of law.
- Whether the demand is time-barred.

Analysis:
1. Issue of Revenue Neutrality and Limitations:
The appellant, a Software Technology Park Unit engaged in exporting Business Support Services, argued that it falls under the Export of Services Rules, 2005 and is not liable to pay service tax as all clients are foreign-based. The appellant claimed refund under Rule 5 of the Cenvat Credit Rules for services availed for export. The appellant cited cases supporting revenue neutrality, emphasizing that any service tax paid was refundable. The Tribunal noted that the appellant had been receiving refunds since 2006 and that service tax paid under reverse charge basis was admissible as Cenvat Credit. Citing relevant case law, the Tribunal held that the demands were not sustainable due to revenue neutrality.

2. Sustainability of Demands on Merits:
The Tribunal observed that the appellant's export-only services made the service tax paid admissible as refund under Cenvat Credit Rules. Referring to a case rejecting revenue neutrality appeals, the Tribunal concluded that the demands were not sustainable on merits. The Tribunal emphasized that service tax under Section 66A of the Finance Act 1994 was admissible as Cenvat Credit, leading to a revenue-neutral situation.

3. Time Bar Issue:
The appellant contended that the demand was time-barred as the Show Cause Notice was issued after the financial years in question. The Revenue cited Supreme Court judgments on time limitations. However, the Tribunal differentiated the present case from those judgments, stating that it involved Cenvat Credit admissibility and refund eligibility. Considering the absence of intent to evade tax and the appellant's refund history, the Tribunal found the extended period inapplicable and dropped the demands as time-barred.

In conclusion, the Tribunal allowed the appeal on both merit and time bar grounds, emphasizing the revenue neutrality of the appellant's export services and the inapplicability of extended period due to the absence of tax evasion intent and refund eligibility.