Messrs Vardhaman Stamping Pvt Ltd VERSUS C.C.E. & S.T.-Ahmedabad-iii

SERVICE TAX Appeal No. 11839 of 2013-DB

 

[Arising out of Order-in-Original/Appeal No 54-55-2013-AHD-III-SKS-COMMR-A-AHD dated 02.04.2013 passed by Commissioner of Central Excise-AHMEDABAD-III]

Messrs Vardhaman Stamping Pvt Ltd

VERSUS

C.C.E. & S.T.-Ahmedabad-iii

APPEARANCE:

Shri Sudhansu Bissa, Advocate for the Appellant

Shri. Sanjay Kumar, Superintendent (Authorized Representative) for the Respondent

 

CORAM: HON’BLE MEMBER (TECHNICAL), RAJU HON’BLE MEMBER (JUDICIAL), SOMESH ARORA

 

FINAL ORDER NO. A/10435 / 2023

 

RAJU

DATE OF HEARING: 07.03.2023 DATE OF DECISION: 07.03.2023

 

 

This appeal has been filed by M/s. Vardhaman Stamping Pvt Ltd. against demand of Service Tax, imposition of penalty under Section 76, 77 & 78 of the Finance Act, 1994.

 

2. LearnedCounsel pointed out that they had availed the services of Foreign commission agent for sale of their goods abroad. They failed to pay

 

the service tax on Reverse Charge Mechanism and when the same was pointed out by Revenue they paid the amount along with interest. The revenue issued the SCN and confirmed the demand along with penalties under Section 77 &

78. Againstthe said order before the Tribunal.

 

 

 

2.2  Learned Counsel pointed out that they had paid the Service Tax liability by utilizing CENVAT Credit and the same was not recognized by the Commissioner (Appeals) in the impugned order as due payment of pre deposit under Section 35F. Therefore, their appeal was dismissed for failure to comply with Section 35F. The Commissioner (Appeals) also took up the appeal of revenue wherein revenue had sought simultaneously imposition of penalty under Section 76, 77 & 78 which the Commissioner (Appeals) allowed. The appellants are before Tribunal against the order of Commissioner (Appeals). Learned counsel for the appellant pointed out that law permits utilization of CENVAT credit to pay Service Tax on reverse charge basis. He relied decision of in the case of Mccan Erickson (India) Ltd.- 2019 (30) GSTL 425 (Del.). He pointed out that in these circumstances, the payment paid by them was due compliance of Section 35F and therefore their appeal should be heard on merit.

 

 

2.2  He further relied on the decision of Tribunal in the case of Wanbury Ltd.- 2019 (21) GSTL. 154 (Tri. – Mumbai) to assert that no service tax is payable.

3. Learned AR relied on the impugned order. He relied on the decision of Hon’ble High Court of Commissioner of C. Ex., Ludhiana- 2010 (18) STR 713 (P & H) asserting that Service Tax is leviable on ReverseCharge Basis.

 

4. We have considered rival submission. In the case of Mccan Erickson (India) Ltd.- 2019 (30) GSTL 425 (Del.) following has been observed:

 

“23. We, however, propose to accord to the dispute a more empirical analysis.

 

24. Section 66A of the Finance Act, 1994 makes the recipient of any service, specified in Section 65(105) of the Finance Act, 1994 – which would cover all “taxable services” – received by a person located in India, from a service provider located outside India, liable to pay Service Tax thereon as if he had himself provided the service in India. This, in taxing parlance, is known as payment on “reverse charge basis”. In the Service Tax universe, Service Tax is payable, on reverse charge basis in variouscircumstances, chiefly in cases of “import of service”, e. where the Service Tax provider is located outside India and the Service Tax recipient is located in India, and where the service provider is a Goods Transport Agency (GTA).

 

25. Rule 2(1)(d)(iv) of the [Service Tax] Rules defines the recipient of the service, in cases where the service, received by a recipient in India, is provided by a service provider located outside India, as the “person liable for paying service tax”.

 

26. Theissue to be determined is whether the appellant, as the person liable to pay the Service Tax on services provided by service providers located outside India, could pay the said Service Tax by utilization of Cenvat credit available with it.

 

27. A bare reading ofthe Cenvat Credit Rules reveals that the answer to this question has necessarily to be in the affirmative. This may be demonstrated thus :

 

• Rule 3(4) of the Cenvat Credit Rules clarifies that Cenvat credit may be utilised for payment, inter alia, of Service Tax on any output service.

 

• “Output service” is defined, in Rule 2(p) of the Cenvat Credit Rules, which envisages that any Taxable Service, excluding the taxable service referred to in sub-clause (zzp) of Clause(105) of Section 65 of the Finance Act, 1994 provided by the provider of taxable service, to a customer, is an “output service”.

 

• “Providerof Taxable Service” is defined, in Rule 2(r) of the Cenvat Credit Rules as including a person liable for paying Service Tax.

 

• 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”).

 

• 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 TaxRules, defined as the “person liable for paying Service Tax”.

 

• The Indian recipient of the service also, therefore, becomes the “person liable for paying Service Tax”, under the Cenvat Credit Rules.

 

• 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.

 

• Rule 3(4) of the Cenvat Credit Rules permits Cenvat credit to be utilised for payment of Service Tax on any “Output Service” is defined, in Rule 2(p) of the Cenvat Credit Rules as serviceprovided, by a provider of Taxable  It has 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”. Section 66A of the Finance Act, 1994, holds that, in cases where service, provided by a provider located outside India, is received by a recipient in India, the service would be deemed to have been provided by the Indian recipient.

 

• Resultantly, therefore, the services received in India, by the appellant, from the service providers located outside India,were deemed to be output services, provided in India, for which the appellant was the service provider.

 

• In this scenario, therefore, Service Tax, on such services,was payable by utilisation of Cenvat credit, by virtue of Rule 3(4) of the Cenvat Credit Rules.

 

28. We may also observe, in this context, that this issue has engagedthe attention of various High Courts from time to time, including, inter alia, the High Court of Rajasthan in U.O.I. v. Kansara Modlers Ltd. – 2018 (15) G.S.T.L. 255 (Raj.), the High Court of Karnataka in in CST  Aravind Fashions Ltd. – 2012

(25) S.T.R. 583 (Kar.) [SLP (C) Diary No. 23369/2018, preferred against which, has also been dismissed by the Supreme Court on 3rd August, 2018] [2019 (18) G.S.T.L. J36 (S.C.)], the High

Court of Punjab and Haryana in C.C.E. v. Nahar Industrial Enterprises Ltd. – 2012 (25) S.T.R. 129 (P & H) and the High Court of Bombay in C.C.E. v. U.S.V. Ltd. – 2019-VIL-334-BOM- S.T.

 

29. All these decisions have been digested by the High Court of Bombay in U.S.V. Ltd. (supra), para 7 of which reads thus :

 

“The view taken by the Tribunal in respect of Rule 3(4)(e) of the Cenvat Credit Rules, 2004 now stands concluded against the revenue by the decision of the Gujarat High Court in the case of Commissioner of C.Ex. & Customs v. Panchmahal Steel Ltd., 2015 (37) S.T.R. 965 (Guj.), Delhi High Court in the case of Commissioner of Service Tax v. Hero Honda Motors Ltd. – 2013

(29) S.T.R. 358 (Del.) and Punjab and Haryana High Court in Commr. of C.Ex., Chandigarh v. Nahar Industrial Enterprises Ltd., 2012 (25) S.T.R. 129 (P & H). The aforesaid decisions have been followed by this Court in The Commissioner of CGST &

 

Central Excise v. Godrej & Boyce Mfg. Co. Ltd. (Central Excise Appeal No. 23 of 2019) decided on 24th June, 2019 to allow utilisation of Cenvat credit for payment of service tax on reverse charge basis GTA (Goods Transport Agency). The above decision of Gujarat, Delhi and Punjab High Courts were also followed by us in Commissioner of CGST and Central Excise, Belapur Commissionerate v. M/s. GTL Infrastructure Limited in (Central Excise Appeal No. 94 of 2019) decided on 25th June, 2019. In respect of discharge of service tax obligation on reverse charge basis on import of services under Section 66A of the Finance Act, 1994 by utilization of cenvat credit. Thus there is no reason not to follow our Court’s decision in GTL Infrastructure Limited (supra).”

 

30. In view of the above, keeping in view the statutory provisions and judicial pronouncements as referred to hereinabove,it is clear that the impugned Final Order, dated 1st February, 2018, of the CESTAT cannot sustain in law. It is, accordingly, set aside.”

 

 

 

Thus it is seen that payment of Service Tax on reverse charge mechanism using CENVAT is a valid payment. We find that the impugned order has failed to consider merit for the appellant’s case and dismissed only for non- compliance of Section 35F. In this circumstances, we find that the impugned order does not dealt with the entire defense of the appellant. The said order is also set aside and matter remanded to the Commissioner (Appeals) for fresh adjudication.

 

(Dictated & Pronounced in the open Court)

 

 

 

 

 

(RAJU) MEMBER (TECHNICAL)

 

 

 

 

 

 

(SOMESH ARORA) MEMBER (JUDICIAL)