2018 (10) TMI 87 - AT - Service Tax

Utilization of CENVAT Credit for payment of Service Tax by service recipient - Reverse Charge Mechanism - period of dispute is from October' 2008 to September' 2009 - Held that - Tribunal, in the case of the appellant itself, MORARJEE TEXTILES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, NAGPUR 2015 (2) TMI 755 - CESTAT MUMBAI , on identical set of facts, by analyzing the provisions of Rule 2(r), 2(p) and 2(q) of the Cenvat Credit Rules, 2004 read with the provisions of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 has held that since the person is liable to pay service tax as a recipient of taxable service, it is erroneous in not considering him as the service provider for the purpose of utilization of Cenvat credit for payment of service tax under reverse charge mechanism. Under the un-amended provisions of sub-rule (4) of Rule 3 of the Cenvat Credit Rules, 2004 (effective up to 30.06.2012), there were no specific restrictions imposed for utilization of credit for discharging the liability under reverse charge mechanism by the recipient of service. Such restriction was brought w.e.f. 01.07.2012, by amending the provisions of the said rule - In the present case, since the period of dispute is from October' 2008 to September' 2009, the case of the appellant will be governed under the provisions of un-amended Rule 3(4) ibid and in absence of specific restrictions contained therein for non-utilisation of Cenvat credit by the service recipient, the benefit of the existence rule should be available for utilization of Cenvat credit for payment of service tax under reverse charge mechanism. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Disputed payment of service tax through Cenvat account and availment of Cenvat credit.
2. Applicability of Cenvat credit rules for payment of service tax under reverse charge mechanism.
3. Interpretation of statutory provisions regarding utilization of Cenvat credit by service recipients.
4. Comparison of the present case with precedents and decisions of the Tribunal.
5. Impact of amendments in Cenvat Credit Rules on the case timeline.
6. Distinguishing factors from a previous case involving ITC Ltd.

Analysis:
1. The case involved a dispute regarding the payment of service tax by the appellant through debiting its Cenvat account and subsequent availment of Cenvat credit. The Department contended that this method was improper and not in line with statutory provisions, leading to show cause proceedings and an adjudication order disallowing Cenvat credit and imposing penalties.

2. The appellant argued that previous Tribunal orders supported the utilization of Cenvat account for service tax liability payment as a recipient of taxable services. The Department, however, relied on a different Tribunal decision to oppose this stance.

3. The Tribunal analyzed Cenvat Credit Rules and Service Tax Rules to determine the liability of the service recipient for service tax payment. It referred to specific provisions to support the appellant's position as a service provider for Cenvat credit utilization under the reverse charge mechanism.

4. By comparing the present case with previous decisions involving the same appellant, the Tribunal found consistency in allowing Cenvat credit utilization for service tax liability. It highlighted precedents like Kansara Modler Ltd. and Tata AIG Life Insurance Co. Ltd. to support its decision in favor of the appellant.

5. The Tribunal noted the impact of amendments in Cenvat Credit Rules, emphasizing that the un-amended provisions applied to the appellant's case timeline. It highlighted the absence of specific restrictions on Cenvat credit utilization for service tax under reverse charge mechanism during the relevant period.

6. Lastly, the Tribunal distinguished the present case from the ITC Ltd. decision cited by the Department, emphasizing that the nature of the appellant's business involving manufacturing excisable goods differentiated it from the circumstances in the ITC Ltd. case, making the cited decision inapplicable.

In conclusion, the Tribunal found no merit in the impugned order, setting it aside and allowing the appeal in favor of the appellant. The decision was based on a thorough analysis of statutory provisions, precedents, and the unique aspects of the case at hand.