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2015 (12) TMI 1452 - AT - Service TaxUtilization of CENVAT Credit to pay service tax under reverse charge - levy of service tax on import of services u/s 66 A of the Finance Act 1994 - Held that - Plain reading of the said sub-Rule 4 of Rule 3 of CCR indicates that Cenvat Credit may be utilized for the payment of service tax on any output service. We find from the provisions of Rule 2(r), which provides that provider of taxable service includes person who liable for paying service tax; Rule 2(p) provides that output service means taxable service provided by the provider of taxable service. Reading holistically, if the appellant is required to discharge the service tax under reverse charge mechanism, then it has to be conclude that he is provider of taxable service who provides output service. In our view, the lower authorities were incorrect in interpretation of the provisions and holding that appellant could not have utilised Cenvat Credit for discharge of service tax. - impugned order is incorrect and unsustainable. The impugned order is set aside - Decision in the case of TATA AIG Life Insurance (2014 (4) TMI 637 - CESTAT MUMBAI) and Panchmahal Steel Ltd. (2014 (12) TMI 876 - GUJARAT HIGH COURT) followed - Decided in favour of assessee.
Issues Involved:
1. Appellant's utilization of Cenvat Credit for discharging service tax liability under Section 66A of the Finance Act 1994. Analysis: The appeal was against an order-in-appeal where the appellant had utilized Cenvat Credit to discharge service tax liability on services provided by foreign commission agents from October 2006 to March 2008. The department contended that the appellant should have paid the service tax in cash rather than using Cenvat Credit. Both lower authorities upheld the department's view, leading to a demand confirmation and imposition of penalties. The main issue was whether the appellant was correct in using Cenvat Credit for service tax payment under Section 66A of the Finance Act 1994. The appellant argued that Cenvat Credit Rules allowed for the utilization of credit for payment of service tax on any output service, which they had done. They cited relevant case laws to support their position, including a decision by the Hon'ble High Court of Gujarat and a previous ruling by the Tribunal in a similar case. The department, on the other hand, claimed that the service tax was paid under the reverse charge mechanism, indicating that the appellant had not provided any output service but was deemed an output service provider. They relied on a previous Tribunal order to support their stance. After considering the arguments from both sides and examining the records, the Tribunal analyzed the provisions of the Cenvat Credit Rules. They noted that the appellant was eligible to use the Cenvat Credit balance and that the service tax liability was based on the reverse charge mechanism. The Tribunal interpreted the rules to conclude that the appellant, as a provider of taxable service under the reverse charge mechanism, could utilize Cenvat Credit for service tax payment, contrary to the lower authorities' interpretation. This view was supported by a previous ruling in the case of TATA AIG Life Insurance. The Tribunal further referenced the decisions of various High Courts and reiterated that the appellant was entitled to avail Cenvat Credit for the service tax paid on input services used for providing the output service. They highlighted that the legal position supported the appellant's right to use Cenvat Credit for service tax payment. The Tribunal ultimately held that the impugned order was incorrect and unsustainable, setting it aside and allowing the appeal with consequential relief, if any. The judgment was in favor of the appellant based on the interpretation of the Cenvat Credit Rules and relevant legal precedents.
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