2016 (11) TMI 240 - AT - Service Tax

Use of CENVAT credit for discharge of service tax liability - services of design development of fabrics received from a person situated abroad - reverse charge mechanism - Held that - Since the issue involved in this case also the discharge of service tax under reverse charge mechanism by service recipient from a person who situated abroad, there is no bar in utilizing the credit available in CENVAT credit for discharging the service tax liability. Accordingly, I set aside the impugned order - appeal allowed - decided in favor of appellant.

Summary

Issues Involved: Eligibility to use CENVAT credit for service tax liability under reverse charge mechanism.

Analysis:
The appeal in question was directed against order-in-appeal No. PVR/218/NGP/2012 dated 23.11.2012. The central issue for consideration was whether the appellant, during the period from April 2006 to March 2009, could utilize CENVAT credit for the discharge of service tax liability on design development services of fabrics received from a foreign entity. The service tax liability was acknowledged to be payable under the reverse charge mechanism. The Revenue contended that the appellant should have paid the service tax in cash rather than utilizing CENVAT credit.

During the hearing, the appellant's representative highlighted a previous decision by the same Bench in their own appeal No. ST/85593/13. In that case, the Bench had ruled, through final order No. A/44/15/SMB dated 02.01.2015, that CENVAT credit could indeed be used for discharging service tax liability under the category of "Business Auxiliary Service," even when paid under the reverse charge mechanism.

Upon reviewing the aforementioned order from 02.01.2015, it was confirmed that the issue at hand, involving the discharge of service tax under the reverse charge mechanism by a service recipient from a foreign entity, did not prohibit the utilization of available CENVAT credit for settling the service tax liability. Consequently, the impugned order was set aside, and the appeal was allowed, with any consequential relief deemed appropriate. The decision was made by Mr. M.V. Ravindran, Member (Judicial), at the Appellate Tribunal CESTAT MUMBAI.