The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) observed that the availability of credit on payment of service tax paid under RCM can be utilized for discharge of excise duty.
During the investigation the appellant were issued a letter to inform as whether they have obtained Service tax registration as contemplated under Section 69 of the Finance Act, 1994 and whether they have paid service tax at the rate specified under Section 66A of the Finance Act, 1994 and filed the prescribed returns.
The appellant informed that they had raised the finance through FCCB & ECB and has discharged their Service tax liability along with interest for the transaction made with ICICI Bank Ltd., Bahrain. After detail investigation show cause notice was issued to the appellant for recovery of Service tax along with interest and penalties.
Dimple Gohil, Advocate who appeared on behalf of appellant submitted that issue is no longer res-integra as covered by the judgment of the Tribunal in the case of M/s Essar Steel Ltd. Vs. CCE. In the said judgment Tribunal set aside the penalties imposed under Section 78 of the Finance Act on the ground that there cannot be any malafide attributable to the assessee since the entire situation was revenue neutral inasmuch as the service tax paid under reverse charge was available to the assessee as cenvat credit and therefore, there was no requirement of issuing show cause notice itself in terms of Section 73(3) of the Finance Act.
It was also submitted that the issue in dispute in the present case is revenue neutral, as the service tax paid under reverse charge basis was available as cenvat credit to the appellant, which instead of discharging duty in cash on the manufactured final products could have been utilized for payment of excise duty.
A Two-Member Bench comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member observed that “Understandably, Service Tax paid on such services rendered would be available to the appellant themselves as Cenvat credit which can be utilized for discharge of any excise duty on the final goods manufactured and cleared by the appellant.”
“On the factual matrix as noted hereinabove, we find that the issue is to be decided in favour of the appellant, as regards penalty imposed, we find that the plea of Revenue neutrality is strong plea, as in this case also credit is available to the appellant on Service Tax paid under reverse charge mechanism can be utilized for discharge of excise duty and hence there can be no reason to avoid Service Tax liability” the Tribunal concluded.
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