2018 (12) TMI 305 - AT - Service Tax

Liability of Service Tax - amount paid for services received from the foreign company under reverse charge mechanism - CENVAT Credit - common input services used for trading activity - Rule 6(3A) of the CENVAT Credit Rules, 2004 - Extended period of limitation. Non-payment of service tax - Service tax on services received from the foreign company - service tax with interest and penalty paid before issuance of SCN - Held that - The appellant had accepted their liability and paid the entire amount of Service Tax with interest and later availed CENVAT Credit of the Service Tax paid, as mentioned in their written submission and the services stated in the said work-sheet were taxable services - analyzing the issue raised about proper classification of the service, in our opinion, would become more of academic exercise. consequently, the confirmation of demand of Service Tax, interest and penalty on this count in the impugned order does not merit interference and accordingly upheld. Recovery of proportionate CENVAT Credit availed on various input services used for trading activity - Held that - The admissibility of CENVAT Credit availed on input services used in providing trading activity, is no more res integra and covered by the recent judgment of this Tribunal in the case of Commissioner of Service Tax, New Delhi Vs. AVL India Pvt. Ltd. 2017 (3) TMI 793 - CESTAT NEW DELHI where this Tribunal analyzing the amendment to the definition of exempted services w.e.f. 1.4.2011 observed that since trading activity itself is not a taxable service or activity subject to excise duty, therefore, subsequent amendment considering trading activity as exempted service cannot entitle the assessee to avail the proportionate credit on various input services attributable to the trading activity. Extended period of limitation - Held that - The issue is clarified in the case of M/S AKSH OPTIFIBRE LIMITED VERSUS CCE, JAIPUR-I 2017 (11) TMI 1449 - CESTAT NEW DELHI , where it was held that The input services, on which credit was availed by the appellant, were consumed for trading activities and such credit could not have been availed or taken for discharging service tax on the services provided by the assessee, there is no scope for any interpretational misconceptional on this aspect - extended period rightly invoked. The impugned order is upheld and the appeal is dismissed - decided against appellant.

Summary

Issues Involved:
1. Liability to Service Tax on the amount paid for services received from the foreign company under reverse charge mechanism.
2. Liability to reverse proportionate CENVAT Credit availed on common input services used for trading activity under Rule 6(3A) of the CENVAT Credit Rules, 2004.

Detailed Analysis:

Issue 1: Liability to Service Tax on the amount paid for services received from the foreign company under reverse charge mechanism

The appellant was found to have received services from a foreign company and paid consideration without discharging the applicable Service Tax under Section 66A of the Finance Act, 1994. The investigation revealed that the appellant had paid the entire Service Tax amount of ?94,69,097/- along with interest of ?6,61,087/- and penalty of ?5,35,161/- before the issuance of the show-cause notice. The appellant provided a detailed breakdown of the Service Tax paid, which included various services such as Banking and Financial Services, Consulting Engineers Services, Courier Services, Cargo Handling Services, Information Technology Software Services, and Intellectual Property Services for the period 2008-09 to 2012-13. The Tribunal noted that since the appellant had accepted their liability and paid the entire amount of Service Tax with interest and penalty, the issue of proper classification of the services received became an academic exercise. Consequently, the confirmation of the demand for Service Tax, interest, and penalty was upheld.

Issue 2: Liability to reverse proportionate CENVAT Credit availed on common input services used for trading activity under Rule 6(3A) of the CENVAT Credit Rules, 2004

The appellant availed CENVAT Credit on common input services used in manufacturing, providing taxable output services, and trading activities. The Tribunal referred to the amendment made to the definition of "exempted service" under Rule 2(e) of the CENVAT Credit Rules, 2004, effective from 1.4.2011, which included trading activities. The Tribunal cited previous judgments, including Commissioner of Service Tax, New Delhi Vs. AVL India Pvt. Ltd. and AkshOptifiber Ltd. Vs. Commissioner of Central Excise, Jaipur, which held that trading activities are not taxable services and thus not entitled to CENVAT Credit. The Tribunal emphasized that the appellant's failure to maintain separate accounts for common input services used for trading activities necessitated the reversal of proportionate credit attributable to trading activities.

Extended Period of Limitation:

The Tribunal upheld the invocation of the extended period of limitation for the recovery of proportionate CENVAT Credit attributable to trading activities. It was noted that the appellant had not reversed any credit on their own and only did so when investigated. The Tribunal referenced the judgments in Godfrey Philips India Ltd. and AkshOptifibre Ltd., which supported the invocation of the extended period due to the appellant's failure to correctly reverse the credit and maintain proper records.

Conclusion:

The Tribunal upheld the impugned order, confirming the demand for Service Tax, interest, and penalty on the amount paid for services received from the foreign company under the reverse charge mechanism. Additionally, the Tribunal upheld the demand for the reversal of proportionate CENVAT Credit availed on common input services used for trading activities, along with the invocation of the extended period of limitation. The appeal was dismissed.