Custom, Excise & Service Tax Tribunal
Mphasis Ltd vs Bangalore Service Tax-Ii on 19 January, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 20507 of 2016
[Arising out of Order-in-Original No. BLR-EXCUS-004-COM-021-2015-16 dated
8.1.2016 passed by the Commissioner of CE, Bangalore-IV Commissionerate]
Mphasis Ltd ......Appellant
Bagmane World Technology Centre,
Marathahalli ORR, Mahadevapura,
Bangalore - 560048
VERSUS
Principal Commissioner of Service ......Respondent
Tax, Bangalore-II 4th Floor, TTMC BMTC Bus Stand Building, Old Airport Road, Bangalore - 560071 APPEARANCE:
Present for the Appellant: Sh. K. Parameswaran, Advocate Present for the Respondent: Sh. M.A. Jithandra (Asst. Commr.), A.R. CORAM:
HON'BLE Dr. D. M. MISRA, MEMBER (JUDICIAL) HON'BLE Mr. PULLELA NAGESWARA RAO, MEMBER (TECHNICAL) FINAL ORDER NO. 20057/2024 DATE OF HEARING: 19.01.2024 DATE OF DECISION: 19.01.2024 PER D. M. MISRA This appeal is filed against Order-in-Original No. BLR-
EXCUS-004-COM-021-2015-16 dated 08.01.2016 passed by the Commissioner of CE, Bangalore-IV Commissionerate.Page 1 of 8
ST/20507/2016
2. Briefly stated facts of the case are that the appellant are engaged in providing of 'Information Technology Software Service', 'Management Consultants Service', 'Business Auxiliary Service' during the relevant period. Alleging that they had wrongly utilized CENVAT Credit in discharging their service tax liability under Reverse Charge Mechanism during the period December 2010 to March 2011 and also availing inadmissible CENVAT Credit on various input services, show cause notice was issued to the appellant on 23.04.2012 for recovery of the service tax amounting to Rs.14,36,72,226/- and CENVAT Credit of Rs.2,60,66,700/- with interest and proposal for penalty. On adjudication, the entire demand of service tax of Rs.14,36,72,226/- was confirmed with interest and penalty; and part of CENVAT Credit amounting to Rs.25,99,085/- was confirmed with interest and penalty; balance amount of CENVAT Credit was allowed by the Commissioner. Aggrieved by the said order, the present appeal has been filed.
3. At the outset, the ld. Advocate for the appellant submits that the issue of utilization of CENVAT Credit in discharging service tax on Reverse Charge Mechanism during the period in question has been settled by various judicial pronouncements. In support, he refers to the decision of this Tribunal in the case of HDFC Bank Ltd vs. CCE, Thane-II - 2019-TIOL-2338- CESTAT-MUM and judgments of the Hon'ble Karnataka High Court in the cases of CST, Bangalore vs. Aravind Fashions Ltd Page 2 of 8 ST/20507/2016
- 2012 (278) ELT 164 (Kar.) and CCT, Bangalore West vs. Toyota Kirloskar Motors - 2022-TIOL-30-HC-KAR-ST. He also submits that even though the ld. Commissioner allowed CENVAT Credit on most of the input services, however without recording any findings on the issue of admissibility of CENVAT Credit amounting to Rs.25,99,085/-, disallowed the same. He submits that the CENVAT Credit on input services namely 'Architect Services', 'Clubs & Association Services' and other services, which were considered not admissible have been taken prior to 01.04.2011 and held to be admissible under various judgments of this Tribunal and Hon'ble High Courts. It is his contention that in the principle, CENVAT Credit on such input services is admissible; hence, the same may be allowed.
4. Per contra, the ld. AR for the Revenue reiterated the findings of the ld. Commissioner. Further, he has submitted that the CENVAT Credit of Rs.25,99,085/-availed by the appellant on various input services needs to be verified in the light of the case- laws submitted and documentary evidences produced by the appellant during the course of adjudication proceedings.
5. Heard both sides and perused the records.
6. The issues involved in the present appeal for determination are : (i) whether service tax paid by the appellant on tax on Reverse Charge Mechanism basis by utilizing CENVAT Credit for the period prior to 01.04.2011 is valid; and (ii) CENVAT Page 3 of 8 ST/20507/2016 Credit on various input services claimed to have been used in providing output services amounting to Rs.25,99,085/- is admissible.
7. As regards the first issue concerned, we find that this Tribunal in the HDFC's case (supra) has observed that for the period prior to the amendment to the relevant Rules, the eligibility to utilize CENVAT Credit in discharging service tax on Reverse Charge Mechanism cannot be questioned and accordingly, held to be admissible. It is observed as follows:
"6. The limited issue involved in the present appeal for determination is: whether the appellant, who received services from overseas service providers and discharged service tax under reverse charge mechanism, is eligible to utilize cenvat credit in discharging such service tax.
We find that the fulcrum of the argument of the Revenue is on Rule 5 of the Taxation of Services (Provided from outside India and received in India) Rules, 2006. The Revenue has argued that for the purpose of discharging service tax under the said Rule, there is an embargo to utilize cenvat credit by the service recipient. This issue is is no more res integra as already been considered by this Tribunal in the case of USV Ltd.'s case (supra). This Tribunal considering similar type of argument and referring to the ratio laid down in Kansara Modler Ltd's case (supra), observed as follows:-
4. Heard both the sides and perused the records.
We find that under Cenvat Credit Rules, 2004 there is no bar for utilization of Cenvat credit for the deemed service provider to pay the service tax liability casted upon him in terms of Section 66A. In terms of Rule 2 (r) the Appellant is Page 4 of 8 ST/20507/2016 a deemed service provider. Rule 5 of Taxation of Service Rules (Provided from outside India and Received in India) Rules only refers to availing of Cenvat Credit and not utilization of cenvat credit. Further the restriction to utilize the cenvat credit came into Cenvat Credit rules by inserting explanation in rule 3 (4) vide Notification No. 28/2012-CE (NT) dt. 20.06.2012 which reads as under:
"Explanation. - CENVAT credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service recipient"
5. We thus find that before 20.06.2012 there was no restriction upon the deemed service provider to pay the service tax liability from cenvat credit. The Tribunal in the case of M/s Kansara Modler Ltd. 2013 (32) STR 209 (TRI) has allowed the utilization of credit. The relevant portion of the order is as under :
4. We find in this case contention of Revenue is that appellant is a recipient of services and cannot be treated as provider of output service. Hence appellant cannot utilize Cenvat account for payment of service tax on services received from abroad. On the other hand appellant claims that they are provider of output service as per-definitions under Rule 2(p), Rule 2(q), Rule 2(r) of the Cenvat Credit Rules read under Rule 2(1)(d)(iv) of Service Tax Rules, 1994.
5. For sake of convenience we reproduce these Rules below :-
(i) Rule 2(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;
(ii) Rule 2(q) - "person liable for paying service tax" has the meaning as assigned to it in clause (d) of sub-rule (1) of Rule 2 of the Service Tax Rules, 1994;Page 5 of 8
ST/20507/2016
(iii) Rule 2(r) - "provider of taxable service" include a person liable for paying service tax; Rule 2(1)(d)(iv) of Service Tax Rules.
(iv) in relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India under section 66A of the Act, the recipient of such service;
6. If we read Rule 2(q) of Cenvat Credit Rules with Rule 2(1)(d)(iv), we find that appellant is a person liable to Service Tax. Once appellant is person liable to service tax, he becomes provider of taxable service under Rule 2(r) and consequently becomes output service provider under Rule 2(p) of the Cenvat Credit Rules. Revenue is also relying on Rule 5 of Taxation of Services (Provided from Outside India and Received in India) Rules. We find that Rule 5 refers to availing of Cenvat credit and not to utilization of credit. We are therefore of the view that the finding of the Commissioner not treating the appellant as output service provider, is not correct and accordingly we set aside the impugned order and allow the appeal."
Similar view has been expressed by this Tribunal in Welspring Universal's case and Sangam (India) Ltd.'s case (supra). Also, we find that the principle laid down in Kansara Modler Ltd's case has been upheld by the Hon'ble Rajasthan High Court. In these circumstances, we do not find any reason to deviate from the aforesaid judgments of this Tribunal.
7. In the result, following the judgments of this Tribunal on the issue which is consistent, we set aside the impugned order and allow the appeal with consequential relief, if any, as per law." The same principle has been laid down by the Hon'ble Karnataka High Court recently in the case of CCT vs. Toyota Kirloskar Motors (supra).
Page 6 of 8
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8. In view of the above judgments, we do not see merit in the impugned order confirming demand of Rs.14,36,72,226/- with interest and penalty, hence, accordingly set aside.
9. Regarding the issue of admissibility of CENVAT Credit on input services namely 'Architect Services', 'Clubs & Association Services' and other services, even though the ld. Commissioner held that credit on these services are not admissible, however, detailed finding has not been recorded in the order. The ld. Advocate for the appellant submits that all these input services availed credit on these services prior to 01.04.2011 and held to be admissible under various judgments of this Tribunal. He fairly submits that since the ld. Commissioner has not recorded findings on principle of admissibility and substantial verification of the documents on which credit has been taken, the matter may be remanded to the ld. Commissioner for verification. The ld. AR has no objection.
10. Consequently, the matter is remanded to the adjudicating authority for the limited purpose of verification of the admissibility of CENVAT Credit to the extent of Rs.25,99,085/-. The appellant are at liberty to file relevant documents in support of the claim of admissibility of CENVAT Credit.
11. In the result, the impugned order is modified to the extent of setting aside the demand of service tax of Rs.14,36,72,226/- with interest and penalty, and for verification Page 7 of 8 ST/20507/2016 of the admissibility of CENVAT Credit, it is remanded to the adjudicating authority. Since the matter is quite old, the ld. adjudicating authority as far as practicable decide the same within three months from the date of communication of this order.
12. The appeal is disposed of accordingly.
(Dictated and pronounced in the open court) Sd/-
(D. M. MISRA) MEMBER (JUDICIAL) Sd/-
(PULLELA NAGESWARA RAO) MEMBER (TECHNICAL) RA_Saifi Page 8 of 8