Reverse charge service tax may be paid through Cenvat credit, and non-merits dismissal was remanded for fresh adjudication.

Service tax payable on reverse charge for services received from abroad could be discharged through available Cenvat credit because the recipient was treated under the statutory scheme as the person liable to pay tax and, for that purpose, as a provider of taxable service. The appellate dismissal for non-compliance with the pre-deposit requirement was interfered with because the merits of the defence had not been examined and the payment method adopted was legally recognised. The matter was remanded to the Commissioner (Appeals) for fresh adjudication after recognising the validity of discharge through Cenvat credit.

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Issues: (i) Whether service tax payable on reverse charge basis for services received from a foreign commission agent could be discharged by utilisation of Cenvat credit. (ii) Whether the dismissal of the appeal for non-compliance with the pre-deposit requirement and the resulting adjudication warranted interference and remand.

Issue (i): Whether service tax payable on reverse charge basis for services received from a foreign commission agent could be discharged by utilisation of Cenvat credit.

Analysis: The legal framework treated the Indian recipient of services from abroad as the person liable to pay service tax and, by the deeming and definitional scheme in the Service Tax Rules and Cenvat Credit Rules, as a provider of taxable service. On that basis, service tax payable on reverse charge was regarded as capable of being paid through available Cenvat credit.

Conclusion: The payment of service tax on reverse charge basis by utilisation of Cenvat credit was valid, in favour of the assessee.

Issue (ii): Whether the dismissal of the appeal for non-compliance with the pre-deposit requirement and the resulting adjudication warranted interference and remand.

Analysis: The appellate authority had dismissed the assessee's appeal only on the ground of non-compliance with the pre-deposit requirement without considering the substantive defence on merits. As the payment made through Cenvat credit was a legally recognised discharge of liability, the merits of the assessee's case required fresh consideration.

Conclusion: The order was interfered with and the matter was remanded to the Commissioner (Appeals) for fresh adjudication, in favour of the assessee.

Final Conclusion: The dispute on liability was not finally determined on merits at this stage, and the matter was sent back for reconsideration after recognising the validity of payment through Cenvat credit.

Ratio Decidendi: Service tax payable on reverse charge basis can be discharged through Cenvat credit where the recipient is deemed to be the provider of taxable service under the statutory scheme.

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