2024 (11) TMI 350 - AT - Service Tax

Service tax demand being the 50% of the service tax payable by the appellant which it had not paid - Payment responsibility between the appellant and the service recipient - mis-understanding of the service tax provisions - Whether responsibility of the service recipient to pay the entire amount of service tax and the appellant is not liable at all? Interest was demanded u/s 75 and penalties were proposed under section 76, 77 and 78 of the Finance Act. HELD THAT - Service tax has to be paid by the person responsible to pay it. In the normal course the service provider has to pay the service tax. If a notification is issued shifting fully or partly the responsibility of paying service tax to the service recipient, the service recipient is responsible to pay the service tax to that extent. The undisputed legal position is that in respect of the services rendered by the appellant 50% of the service tax had to be paid by the service recipient, which it did. The appellant, as service provider, was required to pay the remaining 50% of the service tax, which it had not. If service tax is paid on a service which is an input service for a taxable service rendered or a dutiable good manufactured the service recipient or manufacturer can take CENVAT credit of the service tax paid. It does not matter whether the service provider paid the service tax or the service recipient paid the service tax under reverse charge mechanism. So long as the service tax is paid on a taxable service and such taxable service is an input service, the service recipient can take credit. There is no provision for the service provider to take credit of the service tax paid on its output service. Even if service tax was paid under reverse charge mechanism by the service recipient, it is the service recipient who can take credit of the tax so paid and not the service provider. Learned counsel has completely mis-construed the legal provisions in claiming that the appellant is eligible to claim credit of the service tax deducted by the service recipient . It has been correctly observed by the Commissioner (Appeals) that the service tax liability does not get extinguished simply because the service recipient had not reimbursed the service tax component to the appellant. Appellant submitted that certain amounts were withheld by the service recipient in the bills of the appellant - Payment for the services rendered is a matter between the appellant and its service recipient. Whether the bills were fully paid or partly paid or any amounts were withheld for any reason is a matter to be settled between the appellant and the service recipient. So long as a taxable service is rendered, service tax has to be paid as per law. In this case, the liability of the service recipient was to the extent of 50% only and the department cannot charge anything more from the service recipient. The service recipient paid its 50% of the service tax. The appellant, as service provider, was required to pay 50% of the service tax which it had not paid. A show cause notice was, therefore, issued and the demands were confirmed with interest and penalty. Not only had the appellant not paid the service tax but it had also not filed any returns. The impugned order is upheld and the appeal is dismissed.

Issues:
- Liability of the appellant for service tax on Works Contract Services provided
- Interpretation of Notification No. 30/2012-ST and 45/2012-ST regarding service tax payment
- Eligibility of the appellant to claim credit of service tax deducted by the service recipient
- Dispute over payment responsibility between the appellant and the service recipient
- Confirmation of demands for service tax, interest, and penalties by the authorities

Analysis:
The case involved an appeal filed by M/s. Ashutosh Upadhyay, Jabalpur, challenging the order-in-appeal dated 20.4.2018 passed by the Commissioner (Appeals), Bhopal, which upheld the order-in-original dated 30.01.2018 passed by the Assistant Commissioner. The appellant, registered for Works Contract Services, was found to have not paid service tax on services provided to M/s Jabalpur Garment & Fashion Design Cluster Association. The appellant had received substantial amounts for works contracts but failed to pay the service tax due for the period 2012-2013 to 2015-2016.

The central issue revolved around the liability to pay service tax, with the appellant contending that it was eligible to claim credit of service tax deducted by the service recipient. However, the Tribunal clarified that the responsibility to pay service tax lies with the person responsible as per the law. In this case, Notification No. 30/2012-ST and 45/2012-ST required both the appellant and the service recipient to each pay 50% of the total service tax payable for the service provided. The service recipient had paid its share, but the appellant had not paid its 50% share and had also not filed any service tax returns during the relevant period.

The Tribunal rejected the appellant's argument that it should be allowed to claim credit for the service tax deducted by the service recipient, emphasizing that the legal provisions do not allow the service provider to claim such credit. The Tribunal upheld the authorities' decision to demand service tax, interest, and penalties from the appellant, noting that the liability of the service recipient was limited to 50%, which was duly paid, while the appellant was responsible for the remaining 50% of the service tax.

In conclusion, the Tribunal found no merit in the appellant's contentions and upheld the impugned order, dismissing the appeal. The decision reaffirmed the legal principle that the service provider is obligated to pay the service tax unless specified otherwise by law, and the failure to fulfill this obligation can lead to demands for unpaid taxes, interest, and penalties.

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