2020 (2) TMI 41 - AT - Service Tax

Valuation - turnover/transaction charges on the brokerage charges/commission - Section 65 of the Finance Act - CBEC Circular F No. 137/57/2006 CX4 dated 18.05.2007 - HELD THAT - The Appellant does not dispute the liability of payment of service tax after 16.05.2008. However, the Appellant is aggrieved by the non-consideration of its prayer regarding the benefit of Cenvat Credit on the input services used by the Appellant. In this regard, we find that the issue has been clarified by the Central Board of Excise and Customs vide Circular dated 18.05.2017. This has also been clarified further by the Circular dated 17 September, 2010. The two Circulars clarify that turnover/transaction charges are liable to be included for the purpose of computation of service tax. The circulars are in conformity with the provisions of Section 67 of the Finance Act. The order passed by the Commissioner, therefore, does not suffer any infirmity on this ground. CENVAT Credit - HELD THAT - The settled legal position is in favour of the Appellant as is clear from the decisions referred to above. The Appellant is entitled to avail Cenvat Credit on the input service used in providing output service. The Commissioner (Appeal) has, however, not granted the availment of Cenvat Credit to the Appellant, to which the Appellant was entitled to in terms of the Cenvat Credit Rules after the verification of the records. Levy of interest and imposition of penalty - HELD THAT - The Appellant is liable to pay the same in terms of the provisions of Section 76, 77 and 78 of the Act, as in spite of having collected the amount representing service tax it failed to deposit the same with the Department. Accordingly, that portion of the order is sustained. Matter remanded back to the adjudicating authority to consider the benefit of Cenvat Credit to the Appellant in terms of Credit Rules - remaining portion of the impugned order is sustained - appeal allowed in part and part matter on remand.

Summary

Issues:
Levy of service tax on turnover/transaction charges; Benefit of Cenvat Credit; Imposition of interest and penalty.

Analysis:
1. The appeal challenged an order modifying the demand of service tax imposed on the Appellant by the Adjudicating Authority. The Commissioner (Appeals) set aside the demand prior to 16.05.2008 but sustained the demand from that date onwards, along with the penalty for not depositing collected service tax. The Appellant, engaged in Forward Contract Service, collected turnover/transaction charges but did not include them in the gross amount charged for service tax calculation. The Appellant argued that no service tax was leviable before 16.05.2008 and that the charges were reimbursed expenses. The Appellant also claimed non-availment of Cenvat Credit on the charges by the exchange.

2. The Appellant's submissions highlighted the period of service provision, collection of charges, and non-availment of Cenvat Credit. The Appellant referred to relevant judgments supporting its case, emphasizing the absence of mens rea for penalty imposition due to a classification issue. The Departmental Representative contended that the Appellant collected and retained service tax, justifying the order's validity.

3. The main issue revolved around the levy of service tax on turnover/transaction charges post-16.05.2008. The Appellant accepted liability but contested the denial of Cenvat Credit benefit. The Circulars clarified that such charges were taxable and should be included for service tax computation. The Appellant's entitlement to Cenvat Credit was affirmed based on legal precedents, necessitating the consideration of credit availment by the adjudicating authority.

4. Concerning interest and penalty, the Appellant was held liable under Sections 76, 77, and 78 for not depositing the collected service tax. The Tribunal remanded the matter to assess Cenvat Credit eligibility while upholding the remaining order. The appeal was partially allowed, emphasizing the Appellant's right to credit and the sustained penalty for non-deposit of service tax.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT NEW DELHI underscores the complexities of service tax levy, Cenvat Credit entitlement, and penalty imposition, providing a comprehensive overview of the legal intricacies involved in the case.