2017 (7) TMI 650 - AT - Service Tax

Benefit of N/N. 9/2004-ST dt. 9.7.2004 - denial on the ground that appellant have availed CENVAT credit - Held that - there is no allegation that the appellant have violated the condition of notification No. 9/04-ST. Moreover in the annexure to show cause notice which quantified the differential short paid service tax clearly shows that the show cause notice itself extended, the abatement of 60% as available under the Notification No.9/2004-ST thereafter it is not open for the adjudicating authority as well as the Commissioner (Appeals) to visit to the issue of eligibility of the abatement provided under Notification No.9/04-ST. The entire finding which is based on the said notification is baseless and not flowing from the show cause notice. The impugned order is set aside and matter remanded to the adjudicating authority to verify the correct rate of service tax applicable on the date of provision of service and accordingly re-quantify the service tax liability if any arise - appeal allowed by way of remand.

Issues:
1. Eligibility for exemption under Notification No. 9/04-ST.
2. Availment of cenvat credit.
3. Calculation of short paid service tax.
4. Rate of service tax application.

Eligibility for exemption under Notification No. 9/04-ST:
The case involved the appellant, a Rent-a-cab operator, facing a demand for short paid service tax. The appellant argued that the lower authorities had exceeded the scope of the show cause notice by confirming the demand based on the appellant's alleged ineligibility for the exemption under Notification No. 9/04-ST. The appellant contended that the abatement of 60% under the said notification had already been extended in the show cause notice itself. The Tribunal agreed that the demand was not sustainable as the authorities had wrongly assessed the eligibility for abatement beyond the show cause notice's scope. The Tribunal emphasized that the appellant's alleged violation of conditions related to cenvat credit did not disqualify them from the exemption under Notification No. 9/04-ST.

Availment of cenvat credit:
The appellant had availed cenvat credit during the relevant periods, which was contested by the authorities. However, the Tribunal noted that there was no prohibition on availing such credit to benefit from the abatement under Notification No. 9/04-ST. The Tribunal held that the alleged cenvat credit claimed by the appellant was in relation to input services, which did not breach the conditions for availing the exemption. The Tribunal relied on various judgments to support the appellant's position regarding the cenvat credit issue.

Calculation of short paid service tax:
The authorities had quantified a short paid service tax despite the abatement under Notification No. 9/04-ST. The appellant argued that the difference in the tax amount was due to the differing rates of service tax applicable during the periods of service provision and service charge receipt. The Tribunal agreed with the appellant, emphasizing that the rate of service tax applied at the time of service provision, not receipt of charges. The lower authorities had failed to consider this crucial aspect, leading to an incorrect assessment of the short paid tax amount.

Rate of service tax application:
The Tribunal highlighted the importance of applying the correct rate of service tax based on the date of service provision. It noted that the lower authorities had overlooked this factor in their calculations, leading to an erroneous determination of the short paid service tax. The Tribunal directed the adjudicating authority to reevaluate the service tax liability by considering the correct rate of service tax applicable at the time of service provision, emphasizing that revisiting the issue of abatement under Notification No. 9/04-ST was not permissible as it was not the subject matter of the show cause notice. The appeal was allowed for remand based on the above considerations.

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