Issue Under the laws governing the payment of service tax, Section 68(2) of the Finance Act, 1994, in respect of certain services, provides for shifting the liability to pay service tax to government to the service receiver instead of service provider. There are instances where the service receiver, instead of depositing the service tax to government, pays the same to the service provider. In such cases, the Service tax Department often takes the stand that the liability of service receiver is not extinguished and accordingly demands for payment of service tax and penalties are levied and are generally confirmed upto CCE level. As a result a lot many queries are received asking for solutions to situations where the service provider has discharged the liability and service receiver is unsure of how to mitigate his liabilities and penalty exposures. Resolution In Income-tax Act 1961, for long there was the debate on liability of deductor where the deductee/receiver of payment has discharged the income tax liability. No relief was provided under the Act and the deductor was treated and penalized as assessee in default and burderned with penalties and interest. The anomaly was later corrected vide insertion of proviso to section 201(1) of the Act. However, no such relief has been given or proposed to service tax recipients in service tax laws. Nevertheless, the various benches of CESTAT have taken a liberal view in this situation and offered adequate relief to the service recipients. In recent case, Mumbai bench of CESTAT in case of Umasons Auto Compo Pvt. Ltd. Vs. Commissioner of Central Excise & Customs, Aurangabad reported at 2014 - TIOL - 126 - CESTAT MUM, provided relief to the service recipient. Umasons Auto Compo Private Limited (Umasons), received the services of a Goods and Transport Agent. Instead of discharging the service tax liability on its own under Reverse Charge Mechanism. In the adjudication order, demand of service tax was raised. The same was confirmed by Commissioner (Appeals). Providing relief to Umasons, CESTAT held that there is no dispute regarding payment of service tax by the provider of GTA service. Once the amount of service tax is accepted by the Revenue from the provider of GTA service, it cannot be again demanded from the recipient of the GTA service. We have also shared below additional judgments by various benches of Central Excise & Service Tax Appellate Tribunal (CESTAT) ruling in favor of the assessee on the similar grounds. In Navyug Alloys Private Limited Versus CCE & C, Vadodara-II reported at 2008 (8) TMI 100, Ahmedabad Bench of the CESTAT ruled Once tax already paid on the services, it was not open to the Department to confirm the same against the appellant, in respect of the same services. In M/s. Cronimet Alloys India Limited Versus Commissioner of Central Excise Visakhpatnam-I Commissionerate Visakhapatnam, reported at 2013 (7) TMI 593 Bangalore bench of the CESTAT commented that it cannot be said that there was intention to evade payment of duty when the transporter had paid the service tax and in any case as a recipient, appellant was eligible for the benefit of CENVAT Credit also. Thus ruling out any case for alleging that assessee had the intention to evade service tax. Way Forward The above judgments can be used to defend positions where under reverse charge mechanism, the clients have paid the service tax to the service provider and the same has been deposited by the service provider with the government. The emphasis here is on service tax has been deposited by the service provider with the government. In absence of the same, the above case laws should not be relied upon by the service receiver.
Umasons Auto Compo Pvt. Ltd. Vs. Commissioner of Central Excise & Customs, Aurangabad reported at 2014 - TIOL - 126 - CESTAT – MUM
UMASONS AUTO COMPO PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE & CUSTOMS
2014 (2) TMI 100 - CESTAT MUMBAI
Dated - 28 November 2013
Demand of service tax - Recipient of GTA service - Appellant had paid the service tax to the provider of GTA service and the provider has paid to the Revenue and the appellant has availed credit of the same -
Held that:- there is no dispute regarding payment of service tax by the provider of GTA service. Once the amount of service tax is accepted by the Revenue from the provider of GTA service, it cannot be again demanded from the recipient of the GTA service - Decided in favour of assessee.
Judgment / Order
S S Kang, J.
For the Appellant : Mr A P Kolte, Adv.
For the Respondent : Mr D D Joshi, Superintendent, AR
PER : S S Kang
(Dictated in Court)
M/s. Cronimet Alloys India Limited Versus Commissioner of Central Excise Visakhpatnam-I Commissionerate Visakhapatnam
2013 (7) TMI 593 - CESTAT BANGALORE
Appeal No: ST/285/2012
Dated - 13 June 2013
Recovery of service tax – as per Notification No.35/2004-ST assessee should have discharged the service tax as a recipient - proceedings were initiated for recovering service tax on GTA service received by the assessee - Held that:- Extended period could not have been invoked since it cannot be said that there was intention to evade payment of duty when the transporter had paid the service tax and in any case as a recipient assessee was eligible for the benefit of CENVAT Credit also – court relied upon decisions of the Tribunal in Navyug Alloys Pvt. Ltd. vs. CCE, Vadodara-II: (2008 (8) TMI 100 - CESTAT AHEMDABAD) - Stay application – as there was no point in postponing the final issue court granted the stay – appeal decided in favour of assessee.
Judgment / Order
SHRI B.S.V. MURTHY, J.
For the Appellant: Mr. K. Kumaresan, Advocate
For the Respondent: Mr. S. Teli, Deputy Commissioner (AR)
(Pronounced and dictated in open Court).
NAVYUG ALLOYS PVT. LTD. Versus CCE & C, VADODARA-II
2008 (8) TMI 100 - CESTAT AHEMDABAD
Dated - 19 August 2008
Appellant availing the GTA services, for the period January, 2005 to September, 2006 - service tax on the said services stands paid by the transporters - Revenue’s contention that it was the liability of the appellant to pay the tax, is not acceptable – held that once the tax is already paid on the services, it was not open to the Department to confirm the same against the appellant, in respect of the same services
Judgment / Order
Smt. Archana Wadhwa, Member (Judicial)
Shri V.B. Tayal, Director for Appellant.
Shri Sameer Chitkara, SDR for Respondent.
[Order per Archana Wadhwa Member (Judicial)] –
(Dictated & pronounced in Court.)