2022 (2) TMI 1123 - AT - Service Tax

Reversal of Cenvat Credit - ocean freight - point of taxation - it is alleged that Rule 8 B of the point of Taxation Rules 2011 has wrongly been invoked in the SCN but it is actually rule 7 which is applicable on the appellant according to which the date of payment is the point of taxation - HELD THAT - The fact makes it clear that it is rule 7 which shall be applicable in the present case as this rule applies to the persons who are required to pay tax as recipients of service i.e. under reverse charge mechanism. This particular perusal is sufficient to hold that rule 8 has wrongly been applied by the adjudicating authorities. It was wrongly been proposed to be applicable in the impugned SCN. Further perusal of Rule 7 shows that the Point of Taxation shall be the date on which the payment of service tax made. From the above mentioned admitted fact No.2, it is clear that the payment of service tax for six of the invoices under question was made on 30th June, 2017. The admitted figures in the table at admitted fact No.3, are sufficient to show that, in the given circumstances, the appellant has rightly availed the input credit of service tax paid by him though under Reverse charge mechanism. The confirmation of demand by Commissioner (Appeals) is hereby set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Wrongly availed Cenvat Credits on various items.
2. Applicability of Rule 8B of Point of Taxation Rules, 2011 or Rule 7 thereof to the case.

Detailed Analysis:
1. The appellants were engaged in manufacturing packing material and availing Cenvat Credit on inputs, capital goods, and input services. After an audit, it was found that they had wrongly taken Cenvat Credits on detention charges, invoices lacking required particulars, input services under reverse charge mechanism, documents issued beyond one year, and ocean freight. A show-cause notice was issued for recovery of the amount. The Order-in-Original confirmed part of the demand, leading to the appeal. The main issue was the availed Cenvat Credit on ocean freight.

2. The appellant argued that the demand was based on the wrong point of taxation rule, Rule 8B, instead of Rule 7. They contended that service tax on ocean freight was paid in June 2017, while the demand made them liable from April 2017. The appellant sought to set aside the Commissioner (Appeals) order and allow the appeal. The Department justified the order, emphasizing the application of Rule 8 and sought dismissal of the appeal.

3. The Tribunal considered the admitted facts that the appellant was liable to pay service tax on ocean freight under reverse charge mechanism, and the service tax payment for the invoices in question was made on June 30, 2017. Rule 7, applicable to recipients of service under reverse charge, mandated the point of taxation as the date of payment. As the payment for the invoices was made on June 30, 2017, the Tribunal held that the appellant had rightly availed the input credit. Consequently, the demand confirmation by the Commissioner (Appeals) was set aside, and the appeal was allowed.