2019 (5) TMI 157 - AT - Service Tax

Utilization of CENVAT credit for payment of Service Tax under RCM - import of Information Technology Software Service - HELD THAT - This Tribunal in the case of PLANSEE INDIA HIGH PERFORMANCE MATERIALS PVT LTD VERSUS COMMISSIONER OF CENTRAL TAX 2018 (10) TMI 324 - CESTAT BANGALORE has considered the same issue and held that there is no bar for utilization of CENVAT credit for deemed service provider to pay Service Tax liability from CENVAT credit in terms of Section 66A - CENVAT credit can be utilized for payment of service tax payable under reverse charge mechanism in respect of the services received from abroad. CENVAT Credit - input services - air ticket booking - employee gratuity - factory insurance - factory building maintenance - HELD THAT - The Learned Commissioner in the impugned order has observed that the air ticket booking, employee gratuity, factory insurance expenses and factory building maintenance on description itself appears to have nexus with output services - Further, Explanation to Rule 3(4) of CCR, 2004 was inserted with effect from 01.07.2012 whereby restriction was imposed but in the present case, the period involved is April 2010 to July 2012 therefore for one month of July 2012, the appellant is liable to pay Service Tax in cash and is not entitled to utilize CENVAT credit for the month of July 2012. Thus, the impugned order is set aside by allowing the appeal of the appellant except for the month of July 2012 for which he is liable to pay the Service Tax in cash - appeal allowed in part.

Summary

Issues:
- Utilization of CENVAT credit for payment of Service Tax under RCM
- Denial of CENVAT credit on input services

Analysis:

Utilization of CENVAT credit for payment of Service Tax under RCM:
The appeal challenged an order upholding the denial of CENVAT credit for Service Tax payment under Reverse Charge Mechanism (RCM) and penalties imposed. The appellant, engaged in various services, availed CENVAT credit but faced allegations of wrongly using it for Service Tax on imported Information Technology Software Service and on ineligible input services. The Original Authority confirmed the demand, which the Commissioner (Appeals) upheld. The appellant argued that pre-2012, there was no restriction on CENVAT credit utilization for RCM Service Tax payment, citing relevant case laws like Plansee India High Performance Materials Pvt. Ltd. v. CCT. The Tribunal found in favor of the appellant, citing precedents and the absence of restrictions pre-2012. The impugned order was set aside, except for July 2012, where cash payment was required.

Denial of CENVAT credit on input services:
The appellant also contested the denial of CENVAT credit on certain input services, arguing their eligibility based on precedents like Rakindo Kovai Township Ltd. v. CGST & CE. The Tribunal agreed, noting the nexus between the input services and output services. The Tribunal highlighted the insertion of an Explanation to Rule 3(4) of CCR, 2004 in 2012, restricting CENVAT credit use for Service Tax payment where the service recipient is liable. However, as the case pertained to the period before this amendment, the Tribunal allowed the appeal, except for July 2012, where cash payment was mandated. The impugned order was set aside, and the appeal was partly allowed based on the cited precedents and legal arguments.

This detailed analysis of the judgment showcases the issues, arguments presented by both parties, relevant legal provisions, and the Tribunal's reasoning leading to the decision in favor of the appellant on both issues raised in the appeal.