2015 (6) TMI 1031 - AT - Service Tax

Commissioner exceeded authority in Cenvat credit dispute, Tribunal rules in favor of appellant

Page Industries Ltd. Versus Commissioner of C. Ex. & S.T., Bangalore-III

The Tribunal held that the Commissioner exceeded authority by ordering recovery of Cenvat credit utilized for Service Tax payment without finding it ... Liability of Service tax - Services received from foreign service providers - Intellectual Property Services, Management Consultancy Services and Business Auxiliary Services - Amount paid towards service tax by reversal of Cenvat credit - Appellant submitted that an amount paid by utilizing Cenvat credit related to the period prior to April, 2006 and the demand for payment of service tax on output services has been dropped for this period, so, the question of recovery of Cenvat credit utilized for payment of service tax does not arise. Held that:- Commissioner has clearly held that for the period prior to 18-4-2006, there is no liability for payment of Service Tax on services received from abroad. Therefore, whether they paid the amount by utilizing Cenvat credit or by cash is irrelevant. Strictly going by law, when the demand for Service Tax on output services is dropped, the amount paid would be refundable. The only question is whether the appellant is required to pay the amount because it is inadmissible. So, in the absence of any allegation that the credit was not admissible and in view of the specific allegation that the credit could not be utilized for payment of Service Tax for output services, the Commissioner, as submitted by the appellant, has clearly traveled beyond the show cause notice. Moreover, in the absence of any finding that the credit is inadmissible, it cannot be recovered also. Therefore, the order of the Commissioner directing to pay an amount is not sustainable and accordingly, set aside. - Decided in favour of appellant Issues:1. Liability to pay Service Tax on services received from a foreign service provider.2. Admissibility of Cenvat credit for payment of Service Tax.3. Recovery of Cenvat credit utilized for payment of Service Tax.4. Commissioner's authority to order payment beyond the show cause notice.Analysis:Issue 1: Liability to pay Service Tax on services received from a foreign service providerThe dispute in this case revolved around whether the assessee was liable to pay Service Tax for services received from a foreign service provider between August 2002 and September 2006. The appellant was issued a show cause notice proposing service tax on 'Intellectual Property Services', 'Management Consultancy Services', and 'Business Auxiliary Services'. The Commissioner dropped the demand for the period before April 2006 based on a decision of the Hon'ble High Court of Bombay, but demanded the amount reversed on the Cenvat account.Issue 2: Admissibility of Cenvat credit for payment of Service TaxThe appellant had paid a significant amount using Cenvat credit, and the Commissioner ordered the recovery of this amount on the grounds that it was taken wrongly. However, the appellant argued that since the demand for payment of Service Tax on output services had been dropped for the relevant period, the recovery of Cenvat credit does not arise. The Commissioner's order lacked a finding on why the credit was inadmissible, and it was argued that the appellant should be eligible for a refund of the reversed Cenvat credit.Issue 3: Recovery of Cenvat credit utilized for payment of Service TaxThe Commissioner's decision to recover the Cenvat credit utilized by the appellant for payment of Service Tax was challenged on the basis that there was no finding that the credit was inadmissible. The appellant contended that the Commissioner had exceeded the scope of the show cause notice by ordering the recovery of the Cenvat credit, as the notice only proposed payment in cash due to the alleged improper payment using the credit.Issue 4: Commissioner's authority to order payment beyond the show cause noticeThe Tribunal held that the Commissioner had overstepped the boundaries of the show cause notice by directing the payment of the amount utilizing Cenvat credit. Since there was no finding that the credit was inadmissible, the recovery of the Cenvat credit was deemed unjustified. Therefore, the Tribunal set aside the Commissioner's order directing the payment of the amount by the appellant.This comprehensive analysis highlights the key legal issues and arguments presented in the judgment, providing a detailed overview of the case and the Tribunal's decision.