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Custom, Excise & Service Tax Tribunal

Service Tax-I, Kolkata vs Price Waterhouse Coopers Pvt. Ltd. on 26 April, 2024

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
             EASTERN ZONAL BENCH : KOLKATA

                       REGIONAL BENCH - COURT NO. 1

                 Service Tax Appeal No. 76130 of 2016
 (Arising out of Order-in-Original Sl. No. 44/COMMR/ST-I/KOL/2015-16 dated
 29.02.2016 passed by the Principal Commissioner of Service Tax-I, Kendriya Utpad
 Shulk Bhawan, 180, Shantipally, Rajdanga Main Road, Kolkata - 700 107)


 Commissioner of Service Tax                                      : Appellant
 Service Tax-I Commissionerate,
 Kendriya Utpad Shulk Bhawan, 3rd Floor,
 180, Shantipally, Rajdanga Main Road, Kolkata - 700 107

                                      VERSUS

 M/s. Price Waterhouse Coopers Private Limited                 : Respondent

Plot No. V-14, Block-EP, Sector-V, Salt Lake, Kolkata - 700 091 APPEARANCE:

Shri J. Chattopadhyay, Authorized Representative for the Appellant/Dept. Shri Vikash Agarwal, Chartered Accountant for the Respondent CORAM:

HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL) HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL) FINAL ORDER NO. 75800 / 2024 DATE OF HEARING / DECISION: 26.04.2024 Order :[PER SHRI K. ANPAZHAKAN] The present appeal has been filed by the Revenue against the impugned Order-in-Original Sl. No. 44/COMMR/ST-I/KOL/2015-16 dated 29.02.2016 passed by the Principal Commissioner of Service Tax- I, Kolkata.

2. The facts of the case are that the Respondent M/s. Price Waterhouse Coopers Private Limited are engaged in providing "Management Consultancy Services" falling under Section 65(105)(r) of Finance Act, 1994. During the material period, the Respondent had made payment of Service Tax to the tune of Page 2 of 7 Appeal No.: ST/76130/2016-DB Rs.4,20,21,467/- under Section 66A of Finance Act, 1994 and availed credit of the amount of Service Tax paid by them. Audit conducted on the books of accounts of the Respondent opined that the Respondent has availed the credit of service tax paid under Section 66A in contravention of Rule 3(1)(ix) of CENVAT Credit Rule, 2004. Accordingly, it was alleged that the Respondent has wrongly availed CENVAT Credit to the tune of Rs. 4,20,21,467/- (Including Cess).

2.1. A Show Cause Notice dated 19.06.2009 was issued to the Respondent demanding CENVAT Credit of input service availed and utilized by the Respondent during the material period, to the tune of Rs. 4,20,21,467/-(Including Cess) in terms of Section 73 of Finance Act, 1994 read with Rule 14 of CENVAT Credit Rule, 2004, along with interest and penalty. The said Notice was adjudicated by the Ld. Principal Commissioner vide the impugned order wherein the demands raised in the Notice were dropped. Aggrieved against the dropping of the demands, Revenue has preferred this appeal.

3. In the Grounds of Appeal, Revenue has made the following submissions: -

(i) In the impugned order, the Adjudicating Authority has held that the Service Tax paid under Reverse Charge Mechanism in terms of Section 66A of Finance Act, 1994 has been added in the list of eligible credits under Rule 3 of CENVAT Credit Rules, 2004 only w.e.f.

18.04.2006. It is, therefore, unambiguous that availment of credit of Service Tax paid under Reverse Charge Mechanism for the period prior to 18.04.2006 is not justified.

Appeal No.: ST/76130/2016-DB

(ii) In the case of Indian National Ship Owners' Association Vs Union of India cited in 2009(13) S.T.R. 235 (Bom.), the Hon'ble High Court of judicature at Bombay has observed that only after the enactment of Section 66A that taxable services received from abroad by a person belonging to India, are taxed in the hands of Indian residents. Before enactment of Section 66A, there was no such provision in the Act, and, therefore, the respondents had no authority to levy Service Tax on the members of the petitioner's association. Therefore, it is quite clear that prior to enactment of Section 66A with effect from 18.04.2006, no statutory legal provision existed to levy and collect Service Tax from the recipients of service from overseas service providers and as such there is no question of availing CENVAT Credit against Service Tax paid on input services by the recipients of service for the period prior to 18.04.2006.

(iii) In the instant case, the Respondent has paid Service Tax under Reverse Charge Mechanism in terms of Section 66A of Finance Act, 1994, and has availed CENVAT Credit against such payments of Service Tax during the period from 2004-05 to 2007-08 which means availment of credit against payment of Service Tax under Reverse Charge Mechanism for the period from 2004-05 to 18.04.2006 is bad in law.

(iv) Accordingly, the Revenue prayed for setting aside the impugned order.

4. In response to the above, the respondent submitted that in respect the credit availed on the payment of Page 4 of 7 Appeal No.: ST/76130/2016-DB service tax made after 18.04.2006, a specific provision was inserted in Rule 3 of CENVAT Credit Rules, 2004 allowing CENVAT credit of service tax paid under Section 66A of the Finance Act, 1994 and hence, there is no question of denial of credit availed after 18.04.2006.

4.1. In respect the credit availed on the payment of service tax made for the period prior to 18.04.2006, the Respondent submits that during this period, the law relating to taxability of import services was not settled; in view of the uncertainty that prevailed, they decided to pay service tax. It is submitted that once, service tax is paid on import of services and the same is accepted by the Department, then the credit of the same cannot be denied.

4.2. The Respondent relied on the following decisions wherein CESTAT has allowed the credit of service tax paid on import of services for the period prior to 18.04.2006: -

(i) Aditya Birla Nuvo Ltd. vs Commissioner of Central Excise, LTU, Mumbai. [2016-TIOL-576-CESTAT-

Mum]

(ii) Alcatel Lucent India Ltd vs Commissioner of Service Tax, [2021 (2) TMI 157-CESTAT-New Delhi] 4.3. In view of the decisions cited above, the Respondent prayed for upholding the impugned order and rejecting the appeal file by Revenue.

5. Heard both sides and perused the appeal documents.

Appeal No.: ST/76130/2016-DB

6. In the instant case, we observe that the Respondent has paid Service Tax under Reverse Charge Mechanism in terms of Section 66A of Finance Act, 1994, and has availed CENVAT Credit against such payments of Service Tax during the period from 2004-05 to 2007-08. In the impugned order, the Ld. adjudicating authority has dropped the demands raised in the Notice and allowed the CENVAT Credit availed by the Respondent. Aggrieved against the dropping of the demands, Revenue has preferred this appeal.

6.1. In respect the credit availed by the Respondent on the payment of service tax made after 18.04.2006, we observe that a specific provision has been inserted in Rule 3 of the CENVAT Credit Rules, 2004, allowing CENVAT Credit of service tax paid under Section 66A of the Finance Act, 1994. Hence, we observe that the CENVAT Credit availed by the Respondent for the period after 18.04.2006 is legal and proper.

6.2. Regarding the credit availed on the payment of service tax made for the period prior to 18.04.2006, we observe that the law relating to taxability of import services was not settled during that period. However, the Respondent decided to pay service tax to avoid any disputes. Once, service tax is paid by the Respondent on the import of services and the same is accepted by the Department, then the credit of the same cannot be denied.

6.3. We observe that this view has been held by CESTAT, Mumbai in the case of Aditya Birla Nuvo Ltd. vs Commissioner of Central Excise, LTU, Mumbai. [2016-TIOL-576-CESTAT-Mum]. The relevant part of the said decision is reproduced below: -

Appeal No.: ST/76130/2016-DB "8. Ater going through the various circulars and the judgments I find that there is only one charging section in the service tax i.e. Section 66. Section 66A is merely a deeming provision which deems that the services provided by various service providers are provided by service recipients in India. Section 66A is not a charging section and the same has also been made clear by circular 354/148/2009-TRU dated 16.07.2009 and in the said circular CBEC has made it clear that there is no mistake or omission in that relevant provision of CENVAT Credit Rules, 2004 and credit of tax paid on imported services should be allowed if they are in the nature of input services. Further in this case the tax was paid under Section 66 of the Finance Act, and hence the credit is admissible in the appellant. Further as per the department impugned order though the tax itself was not required to be paid then in that case credit is nothing but a refund of the tax erroneously paid by the appellant in their Cenvat Credit account.

Further, in the case of Bajaj Allianz General Insurance (supra) the bench of this Tribunal by relying upon the judgment of the Supreme Court in the case of CIT vs Mahalakshmi Textile Mills Ltd. 1967 (66) ITR 710 (SC) has held that the Cenvat Credit taken by the appellant is nothing but refund of the service tax paid by them on the services which were not required to pay service tax. The above said decision is squarely applicable in the facts and circumstances of the present case. Further, in this case extended period cannot be invoked as the appellant have been disclosing the credits in their ER-1 returns and they were under a bonafide belief that they are liable to pay tax in terms of Rule 2(1)(d)(iv) and also entitled to take credit and the issue involved in the present case was with regard in interpretation of statutory provision and moreover the ld. Commissioner has also not given any finding that the appellant have suppressed anything from the department. Further, I find that the judgment cited by the ld. AR are not applicable in the facts and circumstances of the present case and it is not necessary for me to deal with each and every judgment separately."

6.4. The same view has been held by CESTAT, New Delhi in the case of Alcatel Lucent India Ltd vs Commissioner of Service Tax, [2021 (2) TMI 157 - CESTAT, New Delhi].

Appeal No.: ST/76130/2016-DB 6.5. In view of the discussions and decisions cited above, we hold that the Respondent is eligible to avail the credit of service tax paid under Section 66A during the period from 2004-05 to 2007-08.

7. Accordingly, we uphold the impugned order and reject the appeal filed by the Revenue.

(Operative part of the order was pronounced in open court) Sd/-

(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-

(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd