2018 (11) TMI 1228 - AT - Service Tax

Business Auxiliary services - RCV would be sold by M/s Tata Sky Ltd. to distributers at concessional rate and same would be further sold by authorized distributer to customers at MRP which was a higher price - discount received and earned by the appellant - Held that - The distributers were purchasing RCVs from M/s Tata Sky Ltd. at discounted price and selling the same at MRP to the customers and retaining the different between the two as profit - the different between the purchased and sales price is not commission and not covered by Business Auxiliary Service - demand set aside. CENVAT Credit - duty paying documents - appellants had availed Cenvat credit of service tax paid by M/s Tata Sky Ltd. through invoices through which RCVs were sold to the appellant - Held that - Since the appellants were not providing any output service, therefore, they were not eligible for Cenvat credit of ₹ 75,28,164/- - credit not allowed. Penalty - Held that - On perusal of Sub-rule 3 of Rule 15 of Cenvat Credit Rules, 2004, it is found that the service provider is liable to be imposed with penalty under the said provisions in case of fraud, collusion etc. and if the intention of the service provider is to evade payment of service tax - in the present case, the appellant was not required to pay any service tax. Therefore, the question of intention to evade payment of service tax does not arise - penalty set aside. Appeal allowed in part.

Summary

Issues:
1. Demand of service tax under 'Business Auxiliary Service'
2. Admissibility of Cenvat credit
3. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004

Analysis:
1. The appeal was against an Order-in-Original dated 03/11/2014, where the revenue demanded service tax of ?4,07,221 under 'Business Auxiliary Service' based on discount received by the appellant for selling Recharge Coupon Vouchers (RCVs). The appellant argued that the transaction was a sale and not covered by service tax. The Tribunal agreed, stating the difference between purchase and sale price was profit, not commission, and not subject to service tax. The demand was dropped as it was not a case of double taxation, but a pure sale transaction not attracting service tax.

2. The revenue disallowed Cenvat credit of ?75,28,164 availed by the appellant, citing ineligibility under Rule 4A of Service Tax Rules, 1994 read with Rule 9 of Cenvat Credit Rules, 2004. The appellant had debited ?4,07,221 from the availed credit, indicating they were not providing any output service and thus not eligible for the credit. The Tribunal agreed, disallowing the difference between the availed credit and debited amount. The penalty imposed under Sub-rule 3 of Rule 15 of Cenvat Credit Rules, 2004 was set aside as the appellant had no intention to evade service tax, making the penalty provision inapplicable.

3. The Tribunal modified the impugned order, allowing the appeal on the grounds that the transaction was a sale not subject to service tax, disallowing the excess Cenvat credit availed, and setting aside the penalty imposed under Rule 15 of Cenvat Credit Rules, 2004. The judgment clarified the nature of the transaction, the eligibility of Cenvat credit, and the applicability of penalty provisions, providing relief to the appellant on all counts.