Double taxation under reverse charge barred where service tax was already paid by the provider and credit remained available.
Service tax could not be levied again on the recipient under reverse charge where the service provider had already discharged tax on the full invoice value and the department had accepted that payment, as a second levy would amount to double taxation. On the same footing, CENVAT credit could not be denied merely because the recipient was not the direct payer, since the tax had already been paid and deposited by the provider. Demand, interest, and penalty were therefore unsustainable.
Issues: (i) Whether the service recipient could again be fastened with service tax liability under reverse charge when the service provider had already discharged tax on the full value of the services. (ii) Whether the recipient was entitled to CENVAT credit of the service tax paid and deposited by the service provider.
Issue (i): Whether the service recipient could again be fastened with service tax liability under reverse charge when the service provider had already discharged tax on the full value of the services.
Analysis: The service tax on the services in question had already been paid by the service provider on the entire invoice value and accepted by the department. Re-imposition of tax on the recipient for 75% of the value under the reverse charge arrangement would result in double taxation, which was not warranted. The reasoning followed the view that once the provider has discharged the tax liability on the billed amount, the recipient cannot be subjected to the same levy again.
Conclusion: The recipient was not liable to be taxed again under reverse charge for the same service value.
Issue (ii): Whether the recipient was entitled to CENVAT credit of the service tax paid and deposited by the service provider.
Analysis: Since the service provider had duly discharged and deposited the tax on the taxable services, the amount formed part of tax already paid to the Government. In such circumstances, denial of credit on the premise that only 25% could be taxed and credit taken only to that extent was unsustainable. The assessment already made on the provider could not be re-opened against the recipient for credit denial on the same tax payment.
Conclusion: The recipient was entitled to CENVAT credit of the service tax paid by the service provider.
Final Conclusion: The demand, interest, and penalty were unsustainable and the appeal succeeded in full.
Ratio Decidendi: Where the service provider has discharged service tax on the full value of taxable services and the tax has been accepted by the department, the service recipient cannot be subjected to a second levy on the same value under reverse charge, and credit cannot be denied merely because the recipient was not the direct payer of that tax.
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