2008 (4) TMI 176 - AT - Service Tax

Services received from foreign company Rule 2(p) CCR - as recipient, assessee paid the tax on the deemed output services - credit denied on ground that assessee was not providing any output service is not justified held that merely because assessee was required to pay the tax on behalf of the supplier, they should not be denied the right as a recipient credit cannot be denied merely because assessee wrongly paid tax as consulting engineer services instead of transfer of technology

Summary

Issues:
1. Applicability of Notification No. 18/2002-ST dated 16-12-2002
2. Admissibility of service tax credit
3. Utilization of Cenvat Credit for payment of service tax
4. Demand of educational cess
5. Imposition of penalties

Applicability of Notification No. 18/2002-ST dated 16-12-2002:
The appellant entered into agreements for technical assistance and paid service tax. The Commissioner held the appellant eligible for the benefit of the notification. The appellant argued that they paid tax as directed by the Department and were entitled to Cenvat Credit. The Tribunal found the denial of credit unsustainable, emphasizing the appellant's dual role as provider and recipient of services.

Admissibility of service tax credit:
The Commissioner disallowed a portion of the credit, citing issues with the timing of invoices and the nature of services received. The Tribunal disagreed, stating that the appellant's status as a recipient entitled them to credit. The Tribunal found the denial of credit unjustified, allowing the appellant to claim the full credit amount.

Utilization of Cenvat Credit for payment of service tax:
The Commissioner demanded service tax payment, questioning the utilization of Cenvat Credit. The appellant argued that they paid tax on deemed output services and were entitled to credit without restrictions. The Tribunal agreed, noting that the appellant's utilization of credit was permissible under the extended definition of output services.

Demand of educational cess:
The Commissioner demanded educational cess, which the appellant contested, claiming exemption for the relevant period. The Tribunal ruled in favor of the appellant, stating that the appellant was not required to pay the cess for that period when the levy was not applicable to service tax.

Imposition of penalties:
The Commissioner imposed penalties on the appellant, which the Tribunal set aside upon allowing both appeals with consequential relief. The Tribunal found in favor of the appellant on all issues, emphasizing their entitlement to credit and the permissible utilization of Cenvat Credit for service tax payment.