Tribunal remands case for review of service tax payment on company transfers.

The appeal was allowed by the Tribunal for further verification of service tax liability discharge. The matter was remanded for a comprehensive review to confirm the payment of service tax by the appellant on amounts transferred to the company, emphasizing the need for a fair assessment of revenue neutrality.

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Issues:
1. Incorrect procedure for availing CENVAT credit.
2. Discrepancy in taxable value in ST-3 and income tax returns.
3. Service tax liability on franchisee/royalty fees transferred to M/s Aptech.
4. Revenue neutrality and tax liability discharge verification.
5. Appeal for CENVAT credit allowance.

Analysis:
1. The appellant operated as a franchise for a company, remitting 20% of student fees as royalty to the company. The appellant was liable to pay service tax on the collected fees. However, due to ignorance of CENVAT credit procedures, the appellant incorrectly deducted royalty paid to the company and paid service tax on the remaining amount. The appellant sought to avail CENVAT credit for the service tax paid by the company, which would have resulted in a legal method of payment. The appellant did not dispute the service tax liability but requested the allowance of CENVAT credit.

2. The appellant's counsel argued that the issue was the adoption of the wrong procedure for availing CENVAT credit. The discrepancy in taxable value arose from deducting the royalty amount paid to the company from the fees, which were then transferred to the company inclusive of service tax. The company had paid service tax on the royalty amount received. The counsel presented certificates confirming the payment of service tax by the company on the franchise fees received from the appellant. The counsel relied on case laws supporting revenue neutrality in similar situations.

3. The Department's representative reiterated the findings of the impugned order, leading to the appeal being taken for disposal with the consent of both sides. The Tribunal found merit in the appellant's contentions. While acknowledging procedural faults, the Tribunal noted that the appellant had transferred the franchise/royalty fees along with the service tax liability to the company, as certified by the franchisor. Despite the procedural error, the appellant had discharged the tax liability on the received fees. To verify revenue neutrality and tax liability discharge, the matter was remanded for de novo consideration by the adjudicating authority.

4. Ultimately, the appeal was allowed by way of remand for further verification of the service tax liability discharge. The Tribunal emphasized the need for a comprehensive review to confirm the payment of service tax by the appellant on the amounts transferred to the company. The decision was made to ensure a fair assessment of revenue neutrality in the case.

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