Reverse charge service tax on imported services: recipient treated as output service provider and may use Cenvat credit.

A recipient of taxable services from abroad, when made liable to pay service tax under the reverse charge mechanism, was treated as a provider of taxable service for Cenvat purposes. Reading the service tax rules and Cenvat Credit Rules together, the tribunal held that such liability brings the recipient within the definition of output service, allowing utilisation of Cenvat credit for discharge of the tax. The rule governing services received from outside India was construed as dealing with availment of credit and not as barring its use for payment of the reverse-charge liability. The contrary view was set aside, and the appellant was allowed to use Cenvat credit for the imported service tax.

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Issues: Whether the recipient of taxable services from abroad, made liable to pay service tax under the reverse charge mechanism, can be treated as a provider of output service and thereby utilise Cenvat credit for payment of the tax.

Analysis: The relevant definitions were read together. A person liable to pay service tax under the service tax rules is included within the expression "provider of taxable service", and such a person consequently falls within the definition of "output service" under the Cenvat Credit Rules. The rule dealing with services received from outside India was held to concern availing of Cenvat credit and not to prohibit its utilisation for discharge of the tax liability. On that construction, the appellant was entitled to be treated as an output service provider for payment of service tax on the imported service.

Conclusion: The appellant was entitled to utilise Cenvat credit for payment of service tax on the services received from abroad, and the contrary view was set aside.

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