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2018 DIGILAW 349 (RAJ)

Union Of India v. Kansara Modlers Ltd.

2018-01-25

K.S. JHAVERI, PUSHPENDRA SINGH BHATI

body2018
JUDGMENT K.S. Jhaveri, J. - By way of this appeal, a challenge is given to the order dated 3-42013 [2013 (32) S.T.R. 209 (Tribunal)] passed by Learned Customs, Excise and Service Tax Appellate Tribunal, New Delhi whereby the appeal has been allowed. 2. This Court while admitting the appeal, on 27-10-2014 framed following substantial question of law : "Whether the Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi under its order dated 11th April, 2013 is right in arriving at the conclusion that the assessee was required to be treated as Output Service Provider and, therefore, was entitled to have relaxation of CENVAT credit irrespective of the provisions of Rule 5 of the Rules of 2006?" 3. Counsel for the appellant contended that the Tribunal has committed serious error while observing that :- "4. We find in this case contention of Revenue is that appellant is a receipt 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 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, add the expressions 'provider' and 'provided' shall be construed accordingly; (ii) Rule 2(p) - "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; (iii) Rule 2(r) - "provider of taxable service" include a person liable for paying service tax; (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. 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." 4. Counsel for the appellant has also taken us to show cause notice dated 20-5-2011 issued by the Additional Commissioner, relevant para whereof reads as follows :- "19. The recipient of the service is required to pay service tax under Section 66A though the service is actually provided not by the recipient but by a person located in a country other than India. Such taxable services, not being actually provided by the person liable to pay service tax, are not treated as "output services" for the purpose of CENVAT credit under CENVAT Credit Rules, 2004 provided the said services are used as input services by the manufacturer or producer of final products or a provider of output taxable service. 20. Rule 5 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 clarifies that taxable service will not be treated as output service of the recipient for purpose of availing of Cenvat credit of duty of excise paid on inputs or service tax paid on any input service. Thus, the recipient of service has to pay the service tax in case of GAR 7 challan. He cannot utilize his Cenvat credit for payment of this amount, as it is not in 'Output Service, though he is liable to pay basis of GAR 7 challan. I, therefore, hold that charges made against the assessee are sustained and proved beyond doubt. 5. We have heard Learned Counsel for the parties. 6. He cannot utilize his Cenvat credit for payment of this amount, as it is not in 'Output Service, though he is liable to pay basis of GAR 7 challan. I, therefore, hold that charges made against the assessee are sustained and proved beyond doubt. 5. We have heard Learned Counsel for the parties. 6. Though, Counsel for the appellant has tried to raise point that the Cenvat credit will be available not only for unutilized credit, however, the same point was not placed before the first authority. 7. In that view of the matter, the observation made by the Tribunal treating the appellant as 'Output Service Provider' is correct and we are in complete agreement with that. No case for interference is made out. The appeal is dismissed.