Reverse charge service tax before section 66A and extended limitation were both rejected in favour of the assessee.

Service tax on imported input services under reverse charge was not payable before introduction of section 66A of the Finance Act, 1994, so tax paid for that earlier period was treated as mistaken payment and corresponding Cenvat credit was allowable. The tribunal also found no suppression of facts or intent to evade, so the extended period of limitation could not be invoked and the demand was time-barred. As a result, the assessee's credit claim was sustained and the demand, interest, and penalty were not maintainable.

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Issues: (i) whether service tax on imported input services under reverse charge was payable before the introduction of section 66A of the Finance Act, 1994 and, if not, whether cenvat credit of such tax paid could be taken; (ii) whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): whether service tax on imported input services under reverse charge was payable before the introduction of section 66A of the Finance Act, 1994 and, if not, whether cenvat credit of such tax paid could be taken.

Analysis: The liability to pay service tax on services received from abroad under reverse charge arose only from 18.04.2006 with the introduction of section 66A of the Finance Act, 1994. For the period in question, the assessee was not liable to pay service tax on such imports. Once tax was paid mistakenly on such services, the assessee was entitled to avail corresponding cenvat credit, and the credit could not be denied merely on the ground that the services were received earlier than the specified date under the credit rules.

Conclusion: The issue was decided in favour of the assessee; the credit was held to be correctly availed.

Issue (ii): whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The record disclosed no suppression of facts with intent to evade duty. The assessee had paid tax mistakenly in a period of conflicting legal views and later availed credit under a mistaken understanding of the law. In these circumstances, the ingredients for invoking the extended period were absent, and the demand was held to be time-barred.

Conclusion: The issue was decided in favour of the assessee; the extended period could not be invoked.

Final Conclusion: The revenue challenge failed, the assessee's credit claim was sustained, and the demand, interest, and penalty were not maintainable.

Ratio Decidendi: Reverse charge service tax liability cannot be fastened for a period prior to the statutory introduction of section 66A of the Finance Act, 1994, and in the absence of suppression with intent to evade, the extended period of limitation is unavailable.

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