AI Drafter 
TaxTMI 
TaxTMI 
2019 (10) TMI 99
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....ue the present case, for which it was duly registered with the Service Tax authorities. 3. The present dispute emanates from a Show Cause Notice dated 30th August, 2010, issued to the appellant, proposing two demands of service tax, of Rs. 24,72,677/- and Rs. 1,93,74,146/- respectively. Of these, the former demand, of Rs. 24,72,677/-, stands dropped; ergo, we are not required to concern ourselves therewith. The controversy, in the present appeal, relates to the sustainability of the second demand, as proposed in the aforesaid Show Cause Notice and as successively confirmed by the Commissioner of Central Excise (hereinafter referred to as "the Commissioner") and the CESTAT. 4. Qua this demand, of Rs. 1,93,74,146/-, the case of the Revenue - as accepted by the CESTAT in the impugned Final Order - is that the appellant erroneously paid the said amount of service tax by utilization of CENVAT Credit available with it, whereas the amount was required to be paid in cash. The CESTAT has, therefore, affirmed the decision, of the Commissioner, requiring the appellant to pay the said amount of service tax, all over again, in cash, with the caveat that, having done so, the appellant can ....
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....hed a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply." 10. It is also necessary to refer to certain provisions of the CENVAT Credit Rules, 2004 (hereinafter referred to as "CENVAT Credit Rules"). Rule 3(4) of the CENVAT Credit Rules - sans the various provisos thereto, which are of no particular relevance - reads as under: "3. Cenvat Credit. - (4) The CENVAT credit may be utilized for payment of - (a) any duty of excise on any final product; or (b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or (c) an amou....
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....ed in clauses (d), (zzzc), and (zzzr) does not relate to immovable property; and (c) those specified in clause (ii) of this rule, be such services as are received by a recipient located in India for use in relation to business or commerce. 4. Registration and payment of service tax.- The recipient of taxable services provided from outside India and received in India shall make an application for registration and for this purpose, the provisions of Section 69 of the Act and the rules made thereunder shall apply." 13. The expressions "output service", "person liable for paying service tax" and "provider of taxable service" were defined in Clauses (p), (q) and (r) of Rule 2 of the CENVAT Credit Rules, during the relevant period, which read as under:- "(p) "output service" means any taxable service, excluding the taxable service referred to in sub-clause (zzp) of clause (105) of Section 65 of the Finance Act, provided by the provider of taxable service, to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions 'provider' and 'provided' shall be construed accordingly; (r) "provider of taxable serv....
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....vice tax paid on any input services under CENVAT Credit Rules, 2004." Thus, a reading of statutory provisions contemplated in Section 66A(1) of the Act along with Rule 2(1)(d)(iv) of the said Rules, Rules 3(1) and 3(4)(e) of the CENVAT Credit Rules, 2004 and Rule 5 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, as a whole, clarifies unambiguously that the Noticee was not entitiled to utilize the CENVAT credit against payment of service tax on the services received by it from outside India. The Noticee was required to pay the service tax on the services received y it from outside India through cash. This amount as demanded in the impugned notice is liable to be recovered from them in cash. The contention of the Noticee that it is revenue neutral has no merit at all, for that payment of service tax through cash, in such circumstances, is the mandate of the law. The other contention of the Noticee that they had reflected the utilization of CENVAT credit on such services in the ST-3 returns also does not have any merit, for that, in this regard, a clear picture does not emerge from the returns. Moreover, the liability to pay service tax and....
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....sel for the appellant and Mr. Amit Bansal, learned Standing Counsel appearing for the respondent. 21. A query was put to Mr. Amit Bansal at the outset, as to how, when the Explanation, prohibiting payment of service tax, on reverse charge basis, from the CENVAT credit account, was introduced in Rule 3(4) of the CENVAT Credit Rules only with effect from 1st July, 2012, the Revenue was effectively making the said prohibition applicable to a prior period. Mr. Amit Bansal's response was that the said Explanation was only clarificatory in nature. The response, needless to say, merits submission only to invite rejection. The Explanation to Rule 3(4) of the CENVAT Credit Rules, as engrafted on 1st July, 2012, created a substantive liability, and a prohibition, on payment of service tax on reverse charge basis from the CENVAT credit account. It is trite that provisions creating substantive rights, or liabilities, cannot have retrospective application. [Refer State of Punjab v. Bhajan Kaur AIR 2008 SC 2276] It is equally trite that a provision cannot be treated as clarificatory until and unless the provision itself so declares. [Refer Virtual Soft Systems Ltd. v. Commissioner of Income T....
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....t,1994 provided by the provider of taxable service, to a customer, is an "output service". (iii) "Provider of taxable service" is defined, in Rule 2(r) of the CENVAT Credit Rules as including a person liable for paying service tax. (iv) Rule 2(q) of the CENVAT Credit Rules defines "person liable for paying service tax" as having the same meaning, assigned to the expression, in Rule 2(1)(d) of the Service Tax Rules, 1994 (hereinafter referred to as "the Service Tax Rules"). (v) In case of services provided by a provider located outside India and received by a recipient located in India, the Indian recipient is, by virtue of Rule 2(1)(d)(iv) of the Service Tax Rules, defined as the "person liable for paying service tax". (vi) The Indian recipient of the service also, therefore, becomes the "person liable for paying service tax", under the CENVAT Credit Rules. (vii) The Indian recipient of the taxable service also, consequently, becomes the "provider of taxable service", as defined in Rule 2(r) of the CENVAT Credit Rules. (viii) Rule 3 (4) of the CENVAT Credit Rules permits CENVAT Credit to be utilised for payment of service tax on....