The Kolkata bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that Cenvat Credit is allowable on service tax paid on transportation under the Reverse Charge Mechanism ( RCM ). The Tribunal viewed that when the entire demand is under reverse charge mechanism and if the appellant had paid the service tax under reverse charge mechanism, they would have been entitled to Cenvat credit of the same amounts.
M/s Aditya Dhanraj Enterprises Private Limited , the appellant is engaged in providing the services under the category of “Business Auxiliary Service” and the “Goods Transport Agency” Service
On scrutiny of the documents during the Audit, it was observed that the appellant has made a delayed payment of due service tax as they have not paid the due service tax during the period 2012-13 and 2013-14.
Therefore, proceedings were initiated against the appellant as they had not paid the service tax along with interest. A show-cause notice came to be issued to the appellant to demand service tax along with interest. The demand for service tax was confirmed.
The appellant submitted that the appellant has provided “output services” towards loading supervision and transportation and has paid service tax under the category of Business Auxiliary Services. It was submitted that the transportation charges disclosed in the financial statement are essentially the payment towards hiring a vehicle for use in providing output services, which is not liable to pay service tax as shown as transportation charges.
It was submitted that in the impugned order, it is recorded by the Commissioner ( Appeals ) that the appellant has duly paid the service tax on output services and has not discharged the payment of service tax under RCM on transportation charges incurred by them. It is also held that although it is a revenue-neutral situation, as the appellant has not paid the service tax, therefore, he rejected the case of Revenue neutrality.
It was settled law where the demand is under reverse charge mechanism, the assessee would be entitled to take the canvas credit. Therefore, resulting in a completely revenue-neutral situation, the extended period of limitation is not invokable.
A two-member bench comprising Mr Ashok Jindal, Member ( Judicial ) and Mr K Anpazhakan, Member ( Technical ) found that the appellant was required to pay service tax on transportation services under the Reverse Charge Mechanism ( RCM ). If the said charges had been paid by the appellant, the same were entitled to take the credit to the appellant. Therefore, it is a situation of revenue neutrality as the appellant himself has to take the credit for the same.
The Tribunal viewed that when the entire demand is under reverse charge mechanism and if the appellant had paid the service tax under reverse charge mechanism, they would have been entitled to Cenvat credit of the same amounts. Therefore, the revenue neutrality in this case is evident.
While allowing the appeal, the CESTAT set aside the impugned order.
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