TaxTMI 
TaxTMI 
TaxTMI 
2014 (6) TMI 626
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....sed u/s 78 of the Act. (iii) Penalty of Rs. 5,000/- was levied under Section 77 of the Act. 2. While challenging aforesaid levy by the appellant it was also challenged that extended period of limitation prescribed by proviso to sub-section (1) of Section 73 of the Act was not invokable on the ground that the appellant was not liable to service tax under section 66A of the Act and also appellant had furnished entire information during investigation. BACK GROUND OF THE CASE, INVESTIGATION RESULT AND ADJUDICATION FINDING AS WELL AS CONSEQUENCES THEREOF 3.1 When it came to knowledge of Revenue that certain Airlines operating in India were availing "Online information and data base access or retrieval service" from foreign based CRS service providers and were liable to service tax as recipient of service, but no service tax due were deposited by them, investigation was made. It was revealed that those Airlines in terms of certain agreements with foreign based companies viz M/s. Galileo International Partnership USA, M/s. Abacus Distribution System Pvt. Ltd. Singapore, M/s. Amadeus Marketing, S.A. Spain, M/s. Sabre Travels Information Network, USA and other....
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....and use by the Airline as well as Travel Agents for ultimate benefit of each other so as to facilitate sale of products and services of Airlines. Airline appellant in consideration of the receipt of online data base access and retrieval thereof was paying agreed charges to the CRS companies. 3.7 Enquiry was made to ascertain whether the CRS companies viz. M/s Amadeus Marketing S.A.R.L. France, M/s Abacus Distribution system Pvt. Ltd., Singapore, M/s Galileo International Partnership, USA and M/s Sabre- American airlines Inc, USA, had any office in India to determine the person liable to pay such service tax. It was revealed that Indian companies with similar names viz. M/s Galileo (India) Pvt. Ltd., M/s Abacus Distribution systems (India) Pvt Ltd and M/s Amadeus (India) Pvt. Ltd., were functioning in India as separate legal entities. M/s Abacus Distribution System (I) P. Ltd and M/s Galileo India P Ltd function as National Marketing Companies entrusted with the work of Marketing the Abacus and Galileo CRS to travel agents in India. Such fact was confirmed from the statements recorded from Shri Ankur Bhatia of M/s Amadeus India (P) Ltd. and Shri V. Kesavan, General Manager, M/s Gal....
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....ved by the Airlines operating in India through their permanent establishment in India. 3.11 Examining section 65(105)(zh) of the Act, learned Adjudicating Authority opined that it was not necessary that the data/information should be provided to a customer personally or that the computer network should be owned by the service provider as service being accessible or retrievable online in respect of data or information through the computer network as vehicle online. 3.12 Contention of the appellant that the impugned service was provided outside India as the CRS company and their parent company were situated outside India for which there cannot be tax liability of appellant was considered by ld. Adjudicating Authority. But he discarded such plea finding that the CRS companies even if situated outside India were providing service to Appellant having establishment in India which enabled Travel Agents of the appellant to achieve its object. Appellant may not be privy to the contract between CRS/GDS companies. But its parent company entered into contract with CRS/GDS companies to achieve object of the appellant operating in India under RBI permission and service was provided to the Appe....
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.... data base access or retrieval service" within the meaning of section 65(75) of the Finance Act, 1994 read with section 65 (105)(zh) thereof since CRS companies merely enable travel agencies to access the computer system and data base of head office of the appellant. To support such contention, reliance was placed by appellant on the decision of the Tribunal in the case of United Telecom Ltd Vs. Commissioner of Service Tax, Bangalore -2009 (14) STR 212 (Tri - Bang). So also reliance was placed on the stay order passed in the case of Nestle India Ltd. Vs. Commissioner of C. EX. New Delhi - 2011 (22) STR 165 (Tri -Del) 4.6 Reliance was placed on CBEC Circular dated 09/07/2001 to submit that platform which only enables e-commerce transaction to be carried out is not covered by section 65 (75) read with section 65 (105) (zh) of the Finance Act, 1994 (Ref: Page : 353 in para 6). 4.7 Demand is time barred and no extended period is invocable. 4.8 Ld. Sr. Counsel also supported following summary of arguments made in the case of Thai Airways heard analogous with this appeal on the same day and dealt separately: (A). That the CRS companies abroa....
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....erse inference can be drawn to impose penalty as well as tax. (F). Proceeding was time barred for which neither tax nor penalty is leviable. The appellant bonafide believed that it had not incurred tax liability for which extended period is not invocable. In the course of investigation, entire activities carried out by the appellant were made known to the investigation and reply was submitted against the allegations of investigation. When the investigation was well aware of the facts, there was no scope to issue Show Cause Notice. (G). There was no suppression of fact nor there do any deliberate intention to evade tax. ARGUMENTS ON BEHLAF OF REVENUE 5. Per Contra summary of submissions of Revenue were as under: 5.1 While the Appellant created fiction that British Airways UK and British Airways India are two different entities, only British Airways PLC., UK was granted permission by Reserve Bank of India (RBI) to operate in India (Ref: Page - 85 of appeal paper book). Therefore head office of the appellant and appellant in India cannot be two distinct entities under law. Appellant fulfilled object of the contract entered into by its head of....
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....er limited permission granted by RBI. It was recipient of service from CRS companies abroad to make that available to its Travel Agents in India and others for booking tickets etc., and was making payment to CRS companies through regulatory measures of RBI under FEMA by settlement of its account with its head office and cleared the debits made to its accounts for tickets booked in India. Therefore it cannot plead its innocence of no liability under service tax law. 5.6 Inviting attention to letter dated 25/5/2007 of Austrian Lines filed before learned Adjudicating Authority it was submitted that learned Adjudicating Authority in his order under Appeal No. 718/2012 has appropriately held that the appellant therein was recipient of service and liable to service tax. The appellant being in similar footing is also liable to service tax. So also stay order dated 23.08.2012 passed in the case of Continental Airlines Vs. CST vide order No. ST/SO/860/2012 indicates liability incurred by the appellants u/s 65(105)(zh) read with section 65(75) of the Act. 5.7 When the Appellant ought to have been registered under the Act, and required to file its returns under law, failing to do so, there ....
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.... the appellant to avail above service during the impugned held that the appellant as a service recipient of taxable service u/s 65(105)(zh) of the Act read with section 65(75) thereof was liable to service tax under section 66A of the Act. Accordingly, he raised demands as set out at the outset. Section 65(105)(zh) of the Act which is the taxing entry reads as under: "Section 65 (105) "taxable service" means any service provided or to be provided, - XX XX XX (zh) to any person, by any person, in relation to on-line information and database access or retrieval or both in electronic form through computer network, in any manner;" [Emphasis supplied] 7. The expression "on-line information and data base access and retrieval" has been defined by section 65(75) of the Act reading as under: Section 65 (75) "on-line information and database access or retrieval" means providing data or information, retrievable or otherwise, [to any person], in electronic form through a computer network; [Emphasis supplied] 8. The appellant pleaded before learned Adjudicating Authority tha....
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.... inevitable necessity to make it available to the Air travel Agents in India to promote its business. Article 4 of the agreement appearing at page 99 of appeal folder dealt with monthly basis charges payable to Galileo by appellant participant for use of the system of the later. 12. The appellant in consideration of availing aforesaid service had paid charges as has been found by learned adjudicating authority. For the service so availed, consideration paid directly or indirectly by the appellant or paid on its behalf in discharge of its liability or settlement by any mode, made no difference to law as theory of equivalence determines value of taxable service through its in built provisions embedded to the rules of valuation in the Finance Act, 1994. 13. Argument of the appellant that the appellant was not a party to the agreement fails to stand for the reason that it is no way different from its head office to operate in India since its head office was only permitted to operate in India which was a party to the agreement aforesaid. It was service recipient from Galileo. So also its Indian office. Modus operandi of the appellant came to record proving its existence to fulfill obj....
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.... this section. Explanation 1. - A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2. - Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted.] 15. The appellant having its place of business in India was recipient of online data base access and retrieval thereof to promote its business in India ensuring error free information to the travel agents in India. Who makes payment to the service provider is immaterial and no free service was provided by service provider. What that is material is service received by the appellant which in essence and substance was established. Revenue's arguments that appellant's remittances came to notice of investigation proved quid pro quo is well founded. Appellant misconceived that it was taxed as beneficiary. 16. When the appellant falls u/s 66A (1)(b) of the Act as recipient of the description of service charged to tax by section 65(105)(zh) read with section 65(75) of the ....
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....se, appellant as a recipient of service has been brought to tax while in that case service provider was brought to tax. Both cases are on different footings. Therefore that decision is not profitable to the appellant. Appellant further relied on the decision of Nestle India Ltd. V. CCE, New Delhi -2011 (22) STR 165 (Tri-Del). That was an interim order not laying down the ratio in appeal decision. Therefore that has no application by the very nature of the order which is liable to be varied or vaccated. 19. Appellant's plea that it shall get Cenvat credit of service tax levied by the adjudication order does not exonerate it from the liability it has incurred under the law. Grant of Cenvat credit arises only if service tax is paid by the appellant and such grant is not otherwise disallowed by law. Without undergoing scrutiny of law as to admissibility of Cenvat credit, appellant's hypothetical argument has no sense in the eyes of law. 20. Appellant's reliance on Paul Merchants case (supra) is of no use to it as the issue involved therein was whether there was an export of service made by Paul Merchants from India. Present case of appellant is not export of service from ....
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.... brief look at the facts of this case. 25.1. M/s. British Airways PLC. with their registered office at "Waterside, P.O. Box 365, Harmondsworth UB7 OGB, United Kingdom" (hereinafter referred to as "B.A UK") are an airline engaged in providing the service of transportation of passengers and cargo by air and having operations all over the world. On the basis of their application dt. 19.10.2005 for grant of permission to establish a branch office in India for the purpose of undertaking the activity of operating air services between India and United Kingdom, the RBI granted the necessary permission in terms of the provisions of Regulation 5 of the Foreign Exchange Management (establishing in India a branch or office or other place of business) Notification No.FEMA-22/2000 RBI dt. 03.05.2000. A copy of this letter is reproduced below:- "FE.CO.FID/10.90.845/2005-2006 BY AIR MAIL/REGISTERED A.D. British Airways PLC, Registered Office Waerside P.O. Box-365, Harmondsworth UB7 OGB United Kingdom. Dear Sir, SUB: Per....
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....hrough normal banking channels for meeting the expenses of the office and for expenses incurred by the Head Office on behalf of the Branch Office and profit made by the Branch Office Debits to this account could be raised for the expenses incurred by the Branch Office and losses incurred by the Branch Office. 4. It is clarified that the permission granted hereby is limited to Regulation 5 of the Foreign Exchange Management (Establishing in India of a branch office or other place of business) Notification No. FEMA. 22/2000-RB dt. 3rd May 2000 and shall not be taken in any way as regularizing condoning or in any manner validating any irregularities, contraventions or other lapses, if any, under the provisions of any other law for the time being in force". 25.2. On the basis of the above permission granted by the RBI, the 'BA, U.K.' have set up an office in India at DLF Plaza Tower, DLF City., Phase-I, Gurgaon-122002, (Haryana) [hereinafter referred to as "BA, India"]. The demand of service tax along with interest and penalty by the impugned order is against BA, India and it is the BA, India who is the appellant, [para 27 of the impugned order in original]....
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.... provided by the CRS/GDS Companies is "online database access and/or retrieval service" taxable under Section 65(105)(zh) read with Section 65(75) & Section 65(36) of the Finance Act, 1994 and since the same has been used by the Appellant's IATA Agents in India for selling of tickets of British Airways, the services provided by the CRS/GDS Companies have to be treated as received and consumed in India by the BA, India and hence the remunerations received by the CRS/GDS Companies abroad from 'BA, U.K.' would attract service tax which would be recoverable from Appellant BA, India under reverse charge mechanism of Section 66A of the Finance Act, 1994 read with Rule 2(1)(d)(iv) of the Service Tax Rules, 1994. On this basis, a Show Cause Notice dt. 24.10.2008 was issued to the Appellant for demand of service tax of Rs 8,98,20,174/- along with interest in respect of period from 01.04.2003 to 31.05.2008 and also for imposition of penalty on them. The Show Cause Notice was adjudicated by the Commissioner vide order-in-original dt. 08.11.2011 by which the Commissioner holding that the service provided by CRS/GDS Companies based abroad has been received by the appellant BA, India....
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....on of "online information and data base access and/or retrieval" service as defined in Section 65(105)(zh) read with Section 65 (75) and Section 65(36) of the Finance Act, 1994 and hence the same is not taxable. 28. There is no dispute that:- (a) the service providers i.e. the CRS/GDS Companies are located abroad and they do not have any office in India; (b) the agreements for providing service are between the Appellant's head office at U.K. i.e. 'BA, U.K.' and the CRS/GDS Companies; and (c) the payments for the services rendered by the CRS/GDS Companies have been received by them directly from BA(U.K.) and as such the entire payments for the services, in question, have been made outside India [para 24.3 of the impugned order dt.24.10.2008]. The dispute is only on the point as to whether the Appellant BA, India can be treated as an entity separate and distinct from their head office 'BA, U.K.' in terms of the provisions of Section 66A(2) and whether BA, India the Appellant, can be treated as recipient of the service provided by CRS/GDS companies and on this basis, subject to service tax under reverse ....
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....f, are as under: - (1) while the term "service" is not defined in the Finance Act, 1994, assuming that a service transaction is akin to a transaction of sale of goods, it can be treated as an activity carried out by a person (service provider) for another person for some consideration the consideration can be in cash or other than cash, whether paid directly or indirectly. Just as in case of a sale transaction, the buyer is the one who is obliged to make the payment or makes the payment for the goods purchased and is legally entitled to receive the goods, in case of a service transaction, the service recipient would be the person on whose instructions the service is provided, who is legally entitled to receive the service and is liable to make the payment or makes the payment and whose need is satisfied by the Provision of the service i.e. who consumes the services, or in other words, is the buyer of the service. Thus, for existence of a service transaction between two persons - A (Service provider), and B (Service recipient), not only there must be an activity performed by A for B, but there must also be flow of consideration, cash or other than cash, direct or....
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....es, 1994, the service recipient in India is deemed to have provided the service in India and he is treated as "the person liable to pay service tax" and the service tax is recovered from him. For this purpose, in case of a body corporate, the place where it is incorporated or is "otherwise legally constituted is treated as its "usual place of residence" [explanation 2 to Sec. 66A] and a person carrying on a business through a branch or agency in any country, is to be treated as having "business establishment" in that country [explanation 1 to Section 66A] Under section 66A(2), when a person carries on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate person for the purpose of this section. Thus for the purpose of section 66A, the Head Office of a multinational company incorporated or legally constituted in a Country A and its branches in Countries B,C and D would be treated as separate persons. In term of 1st Proviso to Section 66A(1) the provisions of this sub-section are not applicable to an individual in respect of service received by him from....
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....p; (d) It is this principle of equivalence which is inbuilt into the concept of service tax under the Finance Act, 1994. The implication of the above ruling would be that service provided by a service provider located abroad, not having any branch or business establishment in India, would be taxable in India only if the consumer of the service, who is the same as the recipient of the service, is located in India. Here it may also be clarified that unlike a transaction of sale of goods, in a transaction of provision of service, the receipt and consumption goes together, as the provision of service satisfies the need of the service recipient and, thus, stands consumed by him. In other words in case of a service transaction, the service recipient is also the person who has consumed the service. (4) Conceptually the Export of Service Rules, 2005 together with Taxation of Services (Provided from outside India and received in India) Rules, 2006, are basically the Rules for determining the place of service recipient/service consumer, and for this reason only, in the budget of 2012-13, these Rules have been replace....
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.... permitted for operating air service. There is nothing in this letter from RBI from which it can be inferred that the branch office is only a temporary establishment for some limited purpose. A temporary establishment in India of a Company based abroad would be that establishment which is for a particular project after completion of which, it would get wound up. The 'BA, U.K.' have been allowed by RBI to set up branch office in India for operating air services subject to conditions as mentioned in the letter and the RBI's letter does not mention any period of validity of the permission or that the permission to set up branch, once granted, cannot be renewed, Therefore the Department's contention that branch office of 'BA, U.K.' in India is not a permanent establishment is without any basis. The Appellant BA, India, therefore have to be treated as a branch office in India of 'BA, U.K.' and in terms of Explanation to Section 66A, BA, India, would have to be treated as 'Business Establishment' of 'BA, U.K.' in India, which as discussed above, has to be treated as a 'Permanent business establishment' of BA,U.K. in India. By virtue....
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....te, there was no definition of 'service recipient' in the Finance Act, 1994 or in the Rules made there under. Even in negative list based regime of service tax in force since 2012, there is no definition of 'service recipient', though there is definition of 'service'. Therefore, the meaning of 'Service' and 'Service Recipient' during the period of dispute has to be ascertained from the nature of the service transactions. As discussed in para 30 above, a service transaction is akin to a sale transaction. Just as sale of goods, which attracts sales tax, is transfer of property in goods by a person (seller) to another person (buyer) for some consideration, a service transaction, generally, is carrying out of an activity by a person (service provider) for another person for some consideration, which may be cash or other than in cash, direct or indirect. Just as in case of sale of goods, it is the buyer who is obliged to pay or pays for the goods and is entitled for delivery of the goods to him or his intended beneficiary, in case of Provision of Service, it is the recipient who would be the person obliged to make the payment or pays for the servi....
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....RS/GDS Companies, nor there is any flow of consideration, direct or indirect from the Appellant to CRS/GDS Companies. (2) In this case, from the agreements between the Appellant's Head Office at UK and the CRS/GDS Companies, it is clear that the CRS/GDS Companies were not providing any Indian branch specific service. It is the Head Office at UK which, in order to promote its business by facilitating the booking of air tickets though IATA agents all over the world, had negotiated with the CRS/GDS Companies and had entered into contacts with them for storage of updated data on real time basis regarding their flight schedules, fares, seat availability etc. and making the same accessible to their IATA agents. The Appellant's job is only appointing the IATA agents in India, collection of sale proceeds of tickets sold by IATA agents and remitting the same to Head Office and as such there is nothing to show that they are not involved in taking key business decisions for the entire company. Therefore, applying the underlying principle of 2nd proviso of Section 66A(1) discussed in para 30(2)(c) above, it is the Head Office i.e. BA, UK which has to be treated as t....
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....9;BA, U.K.', the head office and its Indian branch BA, India have to be treated as two separate persons. (5) When the service has been received by the Head Office of the Appellant at UK against its agreements with CRS/GDS Companies and as accepted in the impugned order, entire payment has been made abroad by the Head Office directly to CRS/GDS Companies and when in view of the provisions of Section 66A(2), the Appellant-BA, India and their Head Office at UK , BA, UK. are to be treated as separate persons, the entire transaction of provision of Service has to be treated as having taken place outside India and the service received by the Head Office at UK can not be treated as service received by the Appellant, in India. (6) In my view, the only situation where in respect of the service provided by a service provider A located outside India against an agreement/contract with Head Office of a company 'B', incorporated outside India i.e. located outside India, the service tax can be charged from the branch office 'B-1' in India of the Company 'B' when:- (a) the Headquarter of....
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....ailing aforesaid service has paid charges as has been found by learned Adjudicating Authority". 31.3.1 In my view, as discussed earlier paras, for the purpose of Section 66A, the airline head office -'BA, U.K.' and its Indian branch office - BA, India can not be treated as one entity in view of the provisions of Sub Section 66A, but have to be treated as two different persons. Therefore, it would be wrong to treat the services received from CRS/GDS companies by 'BA, U.K.', as the services received by their Indian branch-BA, India. Similarly the payments made to CRS/GDS companies by 'BA, U.K.' can not be treated as payments made to CRS/GDS Companies by BA, India or on behalf of BA, India, unless it is proved that the services provided by CRS/GDS companies were Indian branch specific services which satisfied the business needs of BA, India and the role of 'BA, U.K.' was of facilitator only. 31.3.2 Similarly in my view, the observations of Hon'ble Member (J) in para 15 of his order that who makes payment for the service provided is not material for determining as to which has received the service, is also not correct, as an discussed in para 31.2(....
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....treated as recipient of the service provided by the CRS/GDS Companies, in pursuance of their agreements with the Appellant's Head Office at UK, and, therefore, no service tax can be charged from the Appellant. 32. As regards the question of longer limitation period under Proviso to Section 73(1) of the Finance Act, 1944, the same would not be available to the Department, as no intention to contravene the Provisions of Finance Act, 1994 and of the rules made there under can be attributed to the Appellant for the reason that even if they are required to pay service tax on the service, in question, provided by CRS/GDS Companies, the entire service tax paid would be immediately available to them as Cenvat Credit and collection of service tax from the Appellant would be a revenue neutral exercise. A Larger Bench of the Tribunal in case of Jay Yushin Ltd. reported in 2000(119) ELT -718, has held that in such circumstances where revenue neutral situation comes about in relation to the credit available to the assessee himself of the duty paid by him and not by the way of availability of credit to the buyer of the assessee's manufactured goods [para 13(b) of the judgment], longer l....
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....) of Central Excise Act, 1944 read with Section 86(7) of the Finance Act, 1994, for deciding the following points of difference. 1. "Whether on the facts and in the circumstances of the case, the appellant permitted by Reserve Bank of India (RBI) to carry out air transport activity in India was a branch in India and was recipient of "Online Database Access or retrieval Service" from CRS/GDS service provider abroad and liable to service tax in terms of Section 65(105)(zh) read with Section 65(75) of Finance Act, 1994 on reverse charge mechanism basis under Section 66A of the said Act w.e.f. 18.4.2006 or exempt in terms of Section 66A(2) thereof." 2. "If service tax is payable by the appellant in respect of the service provided by the CRS/GDS companies, whether longer limitation period under provision to Section 73(1) of Finance Act, 1994 would be available to the Department for recovery of tax and whether penalty on the appellant under Section 78 ibid would be attracted." 36. As is seen from above, ld. Member (Judicial) Shri D.N. Panda has rejected the appeal on merits as also on limitation wher....
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....person as if he has himself provided the service in India. As such, according to the deeming provision, as a service recipient, he has to discharge his service tax liability accordingly. In a simple language, a person in India, who has received the services from a foreign service provider and has consumed the services in India, is required to pay service tax on the same. The difference of opinion has to be answered in the light of the provisions contained in Section 66A of the Act. 41. Before I go to the said Section, it would be worthwhile referring to certain undisputed facts. The CRS/GDS companies are admittedly located outside India and do not have any office in India; 'online data based access/or retrieval service' stands provided by the said CRS/GDS companies in terms of the agreement entered between them and British Airways, UK and the payment for the said services stand made by British Airways, UK. As such, the service provider is located in a foreign land, service is being mainly provided to British Airways UK, which is also located outside India and the payment for such services are being made by British Airways, UK outside India only. 42. In the light of the ab....
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....n. As such, it stands contended that the scheme of the Companies Act which primarily deals with the legal status of corporate bodies makes it abundantly clear that there is no legal distinction between the foreign companies with its parent office abroad and their local subordinate branch office in India. It was in these circumstances that British Airways, UK was given permission by the RBI to open its branch office in India. As a consequence, of this facility provided to the foreign company for operating in India, by opening an office, the corporate office directly controls its office in India not as a holding company but as an office with administrative flow over of their operations including appointment of employees, control over expenses and obligation of evidence as long as that is not in conflict with Indian laws. As such, ld. DR submits that British Airways, UK and British Airways India is the same legal person as its branch office in India. 44. While dealing with an identical submission of the Revenue, ld. Member (Technical) has referred to the permission dated 3.5.2000 granted to British Airways, UK. No doubt, the permission granted to British Airways, UK is to establish a....
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....ce receives any service from an outside India service provider, he will have to be treated as service recipient, being a separate person in view of the said Section 66A. 46. In view of the foregoing discussions, M/s British Airways, India has to be treated as a separate person. If that be so, in view of the admitted position that the contract between CRS/GDS companies is not with M/s British Airways, India and is only that M/s British Airways, UK, the present appellant cannot be held to be recipient of the services so as to make him liable to pay service tax, on reverse charge basis, in terms of the provisions of Section 66A. The said issue stands discussed by the ld. Member (Technical) in his impugned order, by giving example with which I am in full agreement. 47. The above discussions leads to the factual position of British Airways, UK having received the services, which stands provided by CRS companies located outside India and the consideration for which stands provided by British Airways UK. The same stands consumed in UK only inasmuch as the Server provided by CRS/GDS companies to IATA agents are connected between the two of them and such services are being utilised by the....
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....y, the demands stand raised by invoking the longer period of limitation and during the relevant period, there was no service tax being paid by M/s British Airways India and as such the question of availability of credit of the same would become relevant only once the demands stand raised subsequently on a disputed issue. Had they been paying the service tax during the relevant period, they would have been availing the credit of the same and utilising the same for discharge of admitted service tax liability, leading to Revenue neutral situation. The question of availability of credit in a subsequently raised confirmed demand would arise only at the time of finalisation of the demand itself. Reference in this regard can be made to the Hon'ble Supreme Court's decision in the case of Formica India - 1995 (77) ELT 511 (SC), wherein the Hon'ble Supreme Court has held that when an assessee is contesting the correctness of the demand, he could not have followed the procedure of Rule 56A (erstwhile) for the claim of set-off, which has to be extended, if the demand is ultimately upheld. It is only when after the demand stands confirmed, against an assessee, who is even challengin....