TaxTMI 
TaxTMI 
2026 (7) TMI 329
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....pellant discharged service tax liability on said services through CENVAT credit on capital goods instead of making payment through cash. As the provisions of service tax law were not followed, the payment of tax through CENVAT is alleged as non-payment thereof. 2. Department further observed that after discharging their service tax liability wrongly through Cenvat credit, the appellant re-availed the said Cenvat credit amount of Rs. 5,11,74,946/- which also appears to be wrong and illegal in terms of Rule 4 (7) of the Cenvat Credit Rules, 2004. Accordingly, said wrongly availment of Cenvat credit of service tax paid through Cenvat credit in respect of import of services for the period 2011-12 is also recoverable from the appellant. It is further noticed that while re-availing Cenvat credit, the appellant availed excess Cenvat credit to the tune of Rs. 1,36,31,755/- during the period 2011-2012. On being pointed out, the Cenvat credit of Rs. 1,36,31,755/- was reversed. The appellant submitted the Special Auditor Report for October 2011 to March 2012. On verification the demand for the said period was observed to be of Rs. 2,54,84,291/- discharging the service tax liability was den....
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....hile rebutting these submissions, learned departmental representative has reiterated the findings of the original adjudicating authority. It is submitted that the appellant is actually the recipient of service. Hence, they could not availed and utilized the Cenvat credit for discharging the service tax liability under reverse charge mechanism, in terms of the explanation as was added in Rule 3 (4) of Cenvat Credit Rules vide Notification No. 28/2012 w.e.f. 01.07.2012. Learned departmental representative has relied upon the decision of this Tribunal in the case of Sangam (India) Ltd. versus Commissioner of Central Excise, Jaipur - II [2012 (26) S.T.R. 241 (Tri. - Del.)] wherein it has been held that when a service received by the personal is clearly covered by the definition of input service the same cannot be treated as the output service. With these submissions and impressing upon no infirmity in the order under challenge the appeal is prayed to be dismissed. 7. Having heard both the parties. The core issue to be adjudicated in the present appeal is observed to be : Whether the assessee can discharge the service tax liability under reverse charge mechanism in respect o....
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....pellant was the service provider. In this scenario, therefore, service tax, on such services, was payable by utilization of CENVAT Credit, by virtue of Rule 3 (4) of the CENVAT Credit Rules". 8. In the present case it was already been pointed out, hereinabove, that the petitioner was, by dint of the definition of the expression, as contained in Rule 2 (r) of the CENVAT Credit Rules, the "provider of taxable service". We may also observe, in this context, that this issue has engaged the attention of various High Courts from time to time, including, inter alia, the High Court of Rajasthan in Union of India versus Kansara Molder Ltd. [2018 (15) GSTL 255 (Raj.)] the High Court of Karnataka in CST versus Aravind Fashions Ltd. [2012 (25) STR 583 (Kar)] [SLP (C) Diary No. 23369/2018 preferred against which, has also been dismissed by the Supreme Court on 3rd August, 2018], the High Court of Punjab and Haryana in CCE versus Nahar Industrial Enterprises Ltd. [2012 (25) S.T.R. 129 (P&H)] and the High Court of Bombay in CCE versus U.S.V. Ltd. [2019 - VIL - 334 - BOM - ST.] All these decisions have been digested by the High Court of Bombay in U.S.V. Ltd. (supra) para 7 ....
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....of Virtual Soft System Ltd. versus Commissioner, Income Tax, Delhi [2007 (9) S.C.C. 665] In light of this discussion, we hold that explanation to Rule 3 (4) of Cenvat Credit Rules, 2004 since it is in nature of a prohibition cannot be applied prior to 1st July 2012 i.e. the explanation is inapplicable to the period in dispute (October 2011 to March 2012). 10. Further it is observed that the Adjudicating Authority is observed to have given the contradictory findings vis-à-vis Rule 5 of the Taxation of Service Rules, 2006 as is apparent from para 55.1 of the impugned order, wherein it has been recorded :- "I find that the Credit Rules during the relevant period did not prohibit utilization of credit for payment of service tax under reverse charge mechanism. Later on vide Explanation, the utilization of credit for payment of service tax under reverse charge was barred. Further, Rule 5 of the Import of Service Rules restricted only availemnt of credit and not its utilization". 11. The Hon'ble High Court of Rajasthan in Union of India versus Kansara Molder Ltd. [2018 (15) G.S.T.L. 255 (Raj.)] has held otherwise as follows :- "If we read Rule 2 (q) of Cenva....