Violation of reverse charge

[Pawan Agarwal]

Respected Seniors,

If i received a service which falls under reverse charge mechanism but by mistake service provider charges service tax on his bill and i pay the bill with service tax then..

A) Should I am liable to pay service tax again under reverse charge??

B) Can i avail cenvat credit of service tax paid to service provider on the basis of his invoice?

[KASTURI SETHI]

Sh.Pawan Agarwal Ji,

No. Both (Service Provider and Service Receiver) have to pay their due ST independently. Service Provider cannot deposit the whole amount of ST (including Service Receiver's due). If Service Provider has paid Service Receiver's ST, he is required to apply for refund of ST paid in excess.

[CS RAHUL AGARWAL]

You need not to avail credit on the basis of SP's invoice as it is not admissible in RCM and shall be dismissed straight forward. You pay your liability in terms of reverse charge and then claim refund for the amount so paid.

[Ganeshan Kalyani]

Yes the law is clear as explained by my learned friends. However I have come across a judgement where the decision was given favorable on the conclusion that there is revenue neutral. Anyway it is not advisable to take shelter of the case law when the law is crystal clear. Thanks.

[YAGAY andSUN]

Yes, there are certain judgments available which enumerates that if S.T. is paid inadvertently by the provider of the services then it cannot be demanded again from the recipient of service under Reverse Charge Mechanism.

[KASTURI SETHI]

M/s.YAGAY AND SUN,

Sir, There are such judgments. I agree. Now Govt. and Courts (including CESTAT, Commissioner(Appeals) etc. have become strict. Nobody can deny refund as pointed out by you but if Service Provider pays the dues of Service Receiver or Service Receiver pays the dues of Service Provider in the guise of some agreement that agreement will be in violation of Service Tax provisions and will attract penalty. Govt. will also earn interest from that person who does not pay ST on the ground that SP has paid. So assessee has to be careful.

[Pawan Agarwal]

Respected Seniors,

Thanks a lost for your valuable comments.

What I, understand from the discussion is although there is no revenue loss to the department, provisions mentioned in law should be followed religiously otherwise penal provisions can be applied.

1. Service provider has to claim refund of the amount paid.

2. Service recipient has to pay service tax on RCM and avail credit of the same.

Regards,

CA Pawan Agarwal.

[Ganeshan Kalyani]

Absolutely right. Further it is nice to read a confirmation message from the querist otherwise in many a time query is posted and the querist disappears leaving the experts to discuss the issue among themselves. though the benefit is taken from the discussion by not only the querist himself but also the onlooker who are also eager to learn from the valuable discussion. Nice forum. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Your observations are par excellence. Querist may disappear but there are so many visitors of this site/forum who get benefit of our discussion. Our discussion helps them to manufacture opinion about any issue. I would like to call the experts of this firm as "Torchbearer" who serve not only TMI but also nation free of charge. Hats off to Experts as well as TMI.

[Mahir S]

The views expressed above by Pawan Agarwal ji in his reply dated 04.02.2016 is correct.

Further, as explained by others, it it is a genuine one time mistake then it may be allowed and may be condoned.

AI Summary

Service Tax Error: Pay Independently, Claim Refunds; Reverse Charge Liability Must Be Settled per Law to Avoid Penalties. A service recipient queried about paying service tax under the reverse charge mechanism after mistakenly paying it to the service provider. Experts advised that both parties must pay their respective service tax independently. The service provider should claim a refund for any excess tax paid, and the recipient should pay their liability under reverse charge and then seek a refund. While some judgments suggest no additional demand if the tax is paid inadvertently, strict adherence to the law is recommended to avoid penalties. The discussion highlighted the importance of following legal provisions despite no revenue loss.