2018 (5) TMI 1709 - AT - Service Tax

Service tax liability raised under reverse charges mechanism - GTA has himself discharged the tax liability instead of assessee - inward freight charges - GTA service provider - Held that - The issue is nonstarter, as the liability of service tax was with the transporters, but a deeming fiction was created during the relevant period wherein one of the person required to discharge the service tax liability under the category goods transport agency the service tax liability was fastened on recipient of GTA services, and in the case in hand said discharge of service tax liability is done by transporters themselves, seems to have been accepted by the revenue authorities as nothing is on record to show that any Show Cause Notice is issued to transporters, if that be so, again demanding the service tax from the appellant assessee seems to be totally wrong proposition of law - demand of service tax on the appellant assessee is not sustainable. Cenvat Credit - service tax paid by the transporters - inward freight - Held that - Adjudicating authority has correctly appreciated the law to hold that the assessee in this case is eligible to avail Cenvat Credit of the service tax so paid by the transporters. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Demand of service tax under reverse charge mechanism on inward freight charges.
2. Imposition of penalties on the appellant for violation of provisions.
3. Appeal against confirmation of demands.
4. Appeal against dropping of demands for the recovery of Cenvat Credit availed.

Detailed Analysis:
1. The judgment concerns two appeals against Order-in-Appeal No. 16/2012 dated 14.02.2012. The main issue is the demand of service tax on inward freight charges incurred by the appellant assessee. The appellant had not discharged the service tax liability under reverse charge mechanism and had availed Cenvat Credit on the service tax paid by transporters. The adjudicating authority upheld the demand of service tax, interest, and penalties but dropped the proceedings for recovery of Cenvat Credit. The question was whether the appellant was liable to pay the service tax under reverse charge mechanism, even though the transporters had already paid the service tax. The tribunal found the demand on the appellant unsustainable as the transporters had already deposited the service tax with the government, following a deeming fiction created during the relevant period. The judgment referred to a similar case where the demand was set aside based on factual findings and CBEC Circular provisions.

2. The tribunal held that the demand of service tax on the appellant was not sustainable and set it aside based on the precedent and factual findings. The judgment emphasized that the liability of service tax was with the transporters, and the demand on the appellant was a misinterpretation of the law regarding reverse charge mechanism. The tribunal found that the appellant was not required to pay the service tax liability as the transporters had already discharged it, as per the CBEC Circular, which prevented double taxation.

3. Regarding the appeal filed by the revenue against dropping the demands for the recovery of Cenvat Credit availed, the tribunal rejected the revenue's appeal. The tribunal agreed with the adjudicating authority that the appellant was eligible to avail Cenvat Credit on the service tax paid by the transporters for the inward freight services. The tribunal found no reason to interfere with the impugned order and upheld the appellant's right to avail Cenvat Credit on the service tax paid by the transporters.

4. In conclusion, the tribunal allowed the appellant's appeal and rejected the revenue's appeal. The judgment clarified the issues related to the demand of service tax under reverse charge mechanism, imposition of penalties, and the eligibility of the appellant to avail Cenvat Credit on the service tax paid by the transporters. The decision was based on legal interpretations, factual findings, and relevant CBEC Circular provisions, ensuring a fair and just outcome for the parties involved.