Assessee entitled to CENVAT credit for reverse-charge service tax paid on non-resident services received before 18.04.2006

CESTAT CHANDIGARH - AT held that the assessee is entitled to CENVAT credit for service tax paid under the reverse charge on services from a foreign service provider received prior to 18.04.2006, noting the issue has been authoritatively settled by the SC that services provided by a non-resident and received outside India became taxable only from 18.04.2006. The Tribunal found invocation of the extended period unjustified given no suppression and regular filings/audits, set aside the impugned order on merits and limitation, and allowed the appeal.

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Issues Involved:
1. Eligibility for CENVAT credit on service tax paid on import of services under reverse charge mechanism for the period prior to 18.04.2006.
2. Invocation of the extended period of limitation.

Summary:

The present appeal challenges the order dated 15.10.2012 by the Commissioner (Adjudication) Service Tax, New Delhi, confirming a demand of Rs. 6,73,96,506/- under Section 73(1) of the Finance Act, 1994, read with Rule 14 of the Cenvat Credit Rules, 2004, along with interest and penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

The appellant, engaged in providing taxable services, availed CENVAT credit on service tax paid on input services, including those under the reverse charge mechanism. The dispute arose regarding the eligibility of CENVAT credit for service tax paid on import of services prior to 18.04.2006.

The Ld. Counsel for the appellant argued that the impugned order denied CENVAT credit based on the premise that the appellant was not liable to pay service tax on import of services before 18.04.2006. She highlighted the lack of clarity and evolving legal provisions during the relevant period, including various notifications and amendments, culminating in the introduction of Section 66A of the Act effective from 18.04.2006. The Counsel cited several judicial precedents supporting the eligibility of CENVAT credit even when service tax was paid under a mistake of law.

The Tribunal considered whether the appellant is eligible for CENVAT credit on service tax paid on import of services under reverse charge mechanism for the period prior to 18.04.2006. It was noted that this issue has been consistently decided in favor of the assessee by various benches of the Tribunal, affirming the eligibility of CENVAT credit for service tax paid under reverse charge mechanism on services received from foreign service providers before 18.04.2006.

The Tribunal referred to decisions such as Alcatel Lucent India Ltd., where it was held that the appellant is entitled to CENVAT credit on service tax paid under reverse charge mechanism before 18.04.2006. The Tribunal emphasized that the appellant acted under a bona fide belief and paid service tax under Rule 2(1)(d) of the Rules, availing and utilizing the CENVAT credit for outward service tax liability.

Regarding the invocation of the extended period of limitation, the Tribunal found it unjustified due to the lack of clarity in the law during the relevant period and the appellant's regular compliance with audits and filing of returns. The Tribunal concluded that the impugned order is bad in law on both merits and limitation, setting it aside and allowing the appeal with consequential relief.

(Pronounced on 12.01.2024)

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