The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand on tour operator as Cenvat Credit of service tax allowable on payment under reverse charge mechanism (RCM).
In order to provide the service, the appellant, Incredible Indian Moments Pvt. Ltd, uses the services of taxis and the operators of these taxis paid service tax and recovered it along with their service charges from the appellant. The appellant availed Cenvat credit of the service tax so paid and utilised it in paying service tax on its output service.
The Deputy Commissioner of Service Tax issued Show Cause Notice to the appellant proposing to recover the service tax amounting to Rs. 2,76,808/- invoking extended period of limitation under the proviso to section 73(1) of the Finance Act along with interest and impose penalties.
As per Section 68(2) of the Finance Act if any services are notified by the Central Government, Service tax in respect of those services shall be paid by the service recipient to the extent indicated in the notification. Notification No. 30/2012- ST was issued and as per S. No. 7(a) of the table contained in it, ‘in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on abated value to any person who is not engaged in the similar line of business’, 100% service tax should be paid by the service recipients and no service tax needs to be paid by the service provider.
A Two-Member Bench comprising Justice Dilip Gupta, President and PV Subba Rao, Technical Member observed that “It is evident that the taxi operators were paying service tax on their services considering themselves liable to pay service tax and the appellant has been taking Cenvat credit of such service tax. To charge service tax again on reverse charge basis from the appellant (the service recipient) would result in double taxation on the same service.”
“If the appellant had paid service tax under reverse charge mechanism, it would have been entitled to Cenvat credit on it immediately because it is its input service. Thus, the entire exercise is revenue neutral and in such a situation, the appellant cannot be alleged to have had an intent to evade payment of service tax” the Bench concluded.
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