TaxTMI 
TaxTMI 
2021 (8) TMI 866
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....mitted that the appellants are engaged in manufacture of motor cars, parts and accessories and are registered with the Central Excise Department. They had also registered with the service tax cell in respect of taxable services provided by non-resident service provider under the categories of consulting engineering service, advertising and scientific services. They were paying service tax on the input service received by them from foreign service providers under the reverse charge mechanism. On verification of ST 1 as well as ST3 returns, the department was of the view that the appellant is not eligible to avail credit of the service tax paid by them under reverse charge mechanism. So also the department was of the view that such credit availed by them cannot be utilized for payment of central excise duty. After due process of law, original authority confirmed the demand along with interest. The appellant preferred appeal before the Tribunal and vide the above final order, the matter was decided in favour of the assessee. 4. He submitted that the allegations against the appellants are as under:- (a) The appellants have wrongly availed credit and utilized the credit i....
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....(13) STR 235 (Bom.). The ld. Counsel also submitted that the period is much before the introduction of Section 66A in the Finance Act, 1994 and the appellants have discharged the duty liability under reverse charge mechanism under Rule 2(1)(d)(iv) of Service Tax Rules, 1994. The Hon'ble High Court of Bombay in the case of Indian National Ship Owners Association has categorically held that the liability to pay service tax under reverse charge mechanism for the services received from the foreign entity would be applicable after introduction of Section 66A with effect from 18.4.2006 only. Thus, the appellants ought not to have paid service tax before introduction of section 66A. On such score even if the appellant has availed credit, the situation would be a revenue neutral situation. He prayed that the appeals may be allowed. 6. The ld. AR Smt. K. Komathi appeared on behalf of the department, She supported the findings in the impugned order. 7. Heard both sides. 8. The appellants were issued Show Cause Notice No. 66/2005 dated 6.10.2005 for the period 14.5.2003 to 30.9.2004 and Show Cause Notice No. 80/2005 dated 28.11.2005 for the period 14.5.2004 to 30.11.2....
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....ong with the Finance Act, 1994 and the contention of the department that the said provision does not have any application to Service Tax Credit Rules or CENVAT Credit Rules, 2004 is without any substance. 12. In reply to the Show Cause Notice, the appellants have referred to the Circular issued by the Ministry in F. No. 59/8/2003 dated 20.6.2003 wherein it is clearly indicated in clause 2.9.2 that "as there is no power under Service Tax law on the service tax payer to take the same amount back as credit, the service receiver after having paid the service tax on behalf of non-resident service provider can take credit of the same on the basis of document / bill / invoices under which he paid service tax". The above circular clarifies that the appellant would be eligible to take credit of the service tax paid by them under reverse charge mechanism. Sub-clause (2) of section 68 of the Finance Act, 1994 would also make it clear that such credit can be used for discharging duty / tax liability. Further, after introduction of CENVAT Credit Rules, 2004, the appellants have rightly transferred their eligible service tax credit to CENVAT credit account. The CENVAT credit is a common p....
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....as received is foisted on him under law. It is to discharge the liability he is entitled to use the cenvat credit which was available with him and therefore the Tribunal was justified in interfering with the order passed by the Commissioner. In that view of the matter, we do not see any merit in these appeals. As there is no liability to pay tax the question of imposing penalty would not arise." 14. Be that as it may, it also needs to be stated that appellants were not liable to pay service tax under reverse charge mechanism prior to introduction of Section 66A in the Finance Act, 1994. The Hon'ble High Court of Bombay held that tax cannot be levied or collected on the basis of Rules only. The decision in the case of Indian National Ship Owners Association as reported in 2009 (13) STR 235 (Bom.) by the Hon'ble High Court of Bombay was upheld by Hon'ble Supreme Court vide judgment reported in 2010 (17) STR J57 (SC). The relevant para of the Hon'ble High Court of Bombay reads as under:- "17. Reliance is placed on the provisions of Rule 2(1)(d)(iv) quoted above for justifying the levy of service tax for the period from 16-8-2002. Perusal of the above quoted Ru....