2017 (2) TMI 261 - AT - Service Tax

Cenvat credit - Payment of salary and other expenses on employees of foreign company - Penalty - Held that - the issue in the show-cause-notice was, whether services rendered by Foreign company were input services or not, therefore, the grounds of appeal were travelling beyond the said show-cause-notice. He further contended that even if liability to pay under Section 66A is created by law, the said liability is in respect of provisions of charging Section 66 of Finance Act, 1994 - Appeal dismissed - decided in favor of the assessee.

Summary

Issues:
- Availment of Cenvat Credit on payment of salary and expenses to a Foreign Company
- Interpretation of input services under Cenvat Credit Rules
- Liability under Section 66A of the Finance Act, 1994

Analysis:
The appeal before the Appellate Tribunal CESTAT ALLAHABAD stemmed from a show-cause notice issued to the respondents regarding the availing of Cenvat Credit amounting to ?17,13,156 on payments made to a Foreign Company for employee-related expenses. The Order-in-Original confirmed the demand and penalty, leading to the respondent appealing to the Commissioner (Appeals) who, in the Order-in-Appeal, allowed the credit by interpreting the payments to the Foreign Firm as falling under the definition of input service. The Revenue challenged this decision before the Tribunal.

During the hearing, the Revenue argued that the Service Tax was paid in accordance with Section 66A of the Finance Act, 1994, and cited Rule 3 of the Cenvat Credit Rule, 2004, which references Service Tax payable under Section 66 of the Finance Act. On the other hand, the respondent's counsel contended that the issue revolved around whether the services provided by the Foreign company constituted input services, and that the grounds of appeal exceeded the scope of the show-cause notice. Additionally, they emphasized that any liability under Section 66A related to the provisions of charging under Section 66 of the Finance Act, 1994.

After considering the arguments presented, the Tribunal found merit in the respondent's contentions, ultimately dismissing the appeal filed by the Revenue. The judgment highlighted the importance of aligning the grounds of appeal with the scope of the show-cause notice and clarified the relationship between liability under Section 66A and the charging provisions of Section 66 of the Finance Act, 1994. The decision reaffirmed the interpretation of input services under the Cenvat Credit Rules and emphasized the necessity of a thorough analysis of the legal framework in such cases.