Appeal dismissed on service tax, penalty set aside, appellant exempt from charges, cenvat credit issue remanded

The Revenue's appeal was dismissed as the appellant was found not liable to pay service tax on income earned from foreign exchange transactions. The appellant's appeal partially succeeded, setting aside the penalty for denied cenvat credit due to prior payment and lack of show cause notice. The relationship between the appellant and TCIL was deemed that of seller and purchaser, exempting the appellant from service tax charges. The issue of denied cenvat credit was remanded for document verification.

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Issues involved:
1. Service tax demand on money changers business
2. Disallowance of cenvat credit

Analysis:
1. The issue in the Revenue's appeal was whether the income earned by the appellant on foreign exchange surrendered to Mass Group India Ltd. is taxable under Business Auxiliary Service (BAS). The Ld. Commissioner concluded that the appellant is not liable to pay service tax on the income margin earned from this transaction. The contract analysis showed that the appellant purchased foreign currency from customers and sold it to TCIL, indicating no principal-agent relationship between the parties.
2. The Revenue contended that the appellant was appointed as an agent of TCIL, but the transaction was determined to be sale/purchase proceeds, not commission as a commission agent. Therefore, it did not fall under the scope of a commission agent for the purpose of service tax under BAS.
3. The assessee's appeal involved two issues. Firstly, denial of cenvat credit exceeding 20% under Rule 6(3) of Cenvat Credit Rules, 2004. The appellant argued that some services fell under Rule 6(5), allowing full credit irrespective of use for exempted output service. However, no documents were produced to support this claim. Secondly, denial of cenvat credit for common input services shared with another entity. The appellant claimed to have documents to demonstrate the quantum of services shared.
4. Regarding the denial of cenvat credit exclusively for exempted services, the appellant had paid the amount along with interest before the show cause notice (SCN) was issued. The appellant sought the benefit of sub-section 3 of section 73 to avoid penalty.
5. The Tribunal found that the relationship between the appellant and TCIL was that of seller and purchaser, not principal and agent, exempting the appellant from service tax on charges received. The matter of denied cenvat credit was remanded to the original authority for verification of documents. The penalty for the cenvat credit utilized for exempted services was set aside due to prior payment and non-issuance of SCN.

In conclusion, the Revenue's appeal was dismissed, and the assessee's appeal was partly allowed to set aside the penalty. The matter of cenvat credit was remanded for further verification.

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