2018 (10) TMI 324 - AT - Service Tax

Utilization of CENVAT Credit for payment of Service Tax under reverse charge basis - appellant receiving service of commission agents for export of their goods - services received from outside India - POT Rules - Rule 3(4) of the CENVAT Credit Rules, 2004 - it was alleged that the payment of service tax was to be made in cash only and not from credit account was done by the appellant on 30/05/2012 and 31/08/2012 - demand alongwith Interest and penalty - extended period of limitation. Held that - There is no bar for utilization of CENVAT credit for deemed service provider to pay the service tax liability caused upon him in terms of Section 66A. In terms of Rule 2(r), the appellant is a deemed service provider. Rule 5 of Taxation of Services (Provided from outside India and received in India) Rules only refer to availing of CENVAT credit and not utilization of CENVAT credit. Before 20/06/2012 there was no restriction upon the deemed service provider to pay the service tax liability from CENVAT credit. The Tribunal in the case of Kansara Modler Ltd. Vs. CCE, Jaipur-II 2014 (1) TMI 1095 - CESTAT NEW DELHI has allowed the utilization of credit. Extended period od limitation - Held that - The period involved is 30/09/2011 to 30/07/2012 and the show-cause notice was issued on 22/05/2004 which is beyond the normal period prescribed under Section 73. Therefore, the entire demand is time barred. Appeal allowed on merits as well as on limitation - decided in favor of appellant.

Summary

Issues involved:
- Demand of service tax
- Penalty for delay in payment
- Utilization of CENVAT credit for payment of service tax
- Time limitation for demand

Analysis:

1. Demand of service tax:
The appeal was against an order confirming the demand of service tax while dropping the penalty due to the absence of suppression of facts. The appellant provided various services and received commission payments during a specific period. The department alleged liability for penalty due to the delayed option for exemption under Notification No.18/2009. Additionally, there were issues related to the payment of service tax under reverse charge mechanism and interest payment delays. The lower authority confirmed the demands, leading to the appeal before the Commissioner(Appeals).

2. Utilization of CENVAT credit for payment of service tax:
The appellant argued that CENVAT credit could be used to pay the service tax liability as a deemed service provider under Section 66A, and there was no restriction before 20/06/2012. The Tribunal's decision in a similar case allowed credit utilization, supported by the High Court's judgment. The appellant cited precedents like Kansara Modler Ltd. and Toyota Kirloskar Motor Pvt. Ltd. to support their argument that CENVAT credit could be used for payment.

3. Time limitation for demand:
The appellant contended that the demand period was beyond the normal period prescribed under Section 73 of the Finance Act, making the entire demand time-barred. The Commissioner(Appeals) also acknowledged no suppression of facts by the appellant, leading to the conclusion that the extended period could not be invoked. The appellant relied on the decision in the case of Shree Rajasthan Syntex Ltd., where it was established that CENVAT credit could be utilized for service tax payment under the reverse charge mechanism for services received from abroad.

4. Judgment:
The Tribunal, after considering the submissions and precedents cited, held that the impugned order was unsustainable both on merits and limitation grounds. The order was set aside, allowing the appeal of the appellant. The judgment emphasized the legality of utilizing CENVAT credit for service tax payments and the importance of adhering to time limitations for demands.

This comprehensive analysis of the legal judgment highlights the key issues, arguments presented, relevant legal provisions, and the final decision rendered by the Appellate Tribunal CESTAT BANGALORE.