CENVAT credit can be used to pay service tax on imported services where liability is cast on the recipient.

Where service tax on imported services is statutorily fastened on the recipient, the recipient may use available CENVAT credit to discharge that liability, and the statutory fiction under the service tax and CENVAT framework supports treating the recipient as an output service provider for that limited purpose. The Karnataka HC followed its earlier decision on identical facts and rejected the Revenue's challenge to utilisation of CENVAT credit against the tax payable on services received from outside India.

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Issues: Whether the assessee, as recipient of services from outside India and liable to pay service tax under the statutory fiction, could utilize CENVAT credit for discharge of that liability, and whether it could be treated as an output service provider for that purpose.

Analysis: The questions raised were covered by the Court's earlier decision on identical facts. The Court reiterated that where service tax liability is fastened on the recipient by operation of law, the recipient is entitled to use available CENVAT credit to discharge that liability. The Court also accepted the view that the statutory fiction created under the service tax framework and the CENVAT Credit Rules permits such utilization, and that the contrary challenge raised by the Revenue could not be accepted. The appeal was decided by following the binding earlier view already applied in similar matters.

Conclusion: The issue was answered in favour of the assessee. The Revenue's challenge to utilization of CENVAT credit and to the treatment of the service recipient as an output service provider failed.

Ratio Decidendi: Where service tax liability is statutorily cast on the recipient of imported services, the recipient may utilize available CENVAT credit for payment of that tax, and the statutory fiction supports treatment of the recipient as an output service provider for that limited purpose.

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