Service tax cannot be recovered twice when already paid by service provider under reverse charge mechanism

CESTAT Ahmedabad allowed the appeal in a reverse charge mechanism case. The department demanded 75% service tax from the appellant as service recipient under reverse charge for manpower agency services. However, the tribunal found that 100% service tax was already discharged by the service provider, evidenced in invoices. Following Kerala Ceramics Ltd precedent, CESTAT held that once service tax is fully paid, it cannot be recovered twice from another person. The demand was set aside as it would constitute impermissible double recovery of the same tax liability.

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Issues Involved:
1. Liability of the appellant to pay 75% of the service tax under the reverse charge mechanism.
2. Double taxation and the legality of demanding service tax twice.
3. Invocation of the extended period due to alleged suppression of facts.

Issue-wise Detailed Analysis:

1. Liability of the appellant to pay 75% of the service tax under the reverse charge mechanism:

The appellant, engaged in manufacturing and holding service tax registration, received services from M/s Kalpataru Job Management during the period 01.07.2012 to 31.12.2014. According to Notification No.30/2012-ST dated 20.06.2012, the appellant was required to pay 75% of the service tax on the value of Manpower Supply Agency Service under the reverse charge mechanism. However, the service provider, M/s Kalpataru Job Management, paid the entire 100% service tax, which was reflected in their invoice.

2. Double taxation and the legality of demanding service tax twice:

The appellant contended that since the service provider had already paid the entire service tax, demanding the same tax from the appellant would result in double taxation, which is not permissible by law. This argument was supported by various judgments, including CST, Meerut-ll v Geeta Industries Pvt. Ltd., Angiplast Pvt. Ltd. v CST, Ahmedabad, and others. The Tribunal agreed with the appellant, stating that "the service tax once again cannot be demanded from the appellant otherwise it will amount to recovery of the applicable service tax twice which is not permissible in law." The Tribunal referenced several cases, including Samsung India Electronics Pvt. Ltd vs CCE, where it was established that if the service tax has already been paid by the service provider, it cannot be demanded again from the recipient.

3. Invocation of the extended period due to alleged suppression of facts:

The appellant argued that they were regularly audited by the service tax authorities, implying no suppression of facts and thus, the extended period for demand was not invokable. The Tribunal found merit in this argument, noting that the service tax had been paid and recorded in the service provider's invoices, eliminating the possibility of suppression of facts. Consequently, the demand was also hit by limitation.

Conclusion:

The Tribunal concluded that since the 100% service tax was already discharged by the service provider, demanding the same from the appellant would result in double taxation. The impugned order was set aside, and the appeal was allowed. The Tribunal emphasized that "once 100% service tax was discharged the same cannot be recovered twice from any other person." The appeal was pronounced in favor of the appellant on 27.09.2024.

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