Foreign warehousing services not taxable in India, so related credit, demand, interest, and penalty could not survive.

Credit on warehousing services engaged outside India was found unsustainable because the services were rendered and received abroad, beyond Indian taxing jurisdiction, and no service tax was payable on them. On that basis, the related credit could not be retained, and the consequential demand, interest, and penalty also lacked legal foundation and could not survive. The matter turned on the taxability of the underlying foreign service, and once that was negatived, all derivative liabilities fell with it.

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Issues: Whether credit taken on warehousing services hired in the USA could be denied on the ground that no service tax was leviable on such services received abroad, and whether the consequential demand, interest, and penalty could survive.

Analysis: The warehousing facilities were engaged outside India and beyond the jurisdiction of the Indian authorities. On that footing, no service tax was payable on the services rendered and received abroad. Since the tax itself was not payable, the credit availed on such amount was not sustainable, and there was no basis for the related demand or for the levy of interest and penalty.

Conclusion: The denial of credit, the demand, the interest, and the penalty were held unsustainable, and the appeal succeeded.

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