A Division Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), upheld demand of service tax under Reverse Charge Mechanism (RCM) on payments made to foreign entities.
The case of the department is that the appellant, Gujarat Power Corporation Ltd is liable to pay service tax of Rupees nine lakhs on the amount paid to M/s. Atlantis Resources Corporation Pvt Ltd. on the grounds that the services were provided by an overseas entity and the appellant being the recipient of such services was liable to pay service fax under the reverse charge mechanism.
The same is the case as regards the demand of Rupees four lakhs on the amounts remitted by the appellant to M/s. Solar Media Ltd. The Counsel for the appellant,Amal Daveargued that it is a settled legal position that when cenvat credit of the tax paid is available to an assessee himself, then the intention to evade the payment of tax cannot be attributed and hence the extended period of limitation cannot be invoked.
The Counsel also argued that even if the case of the department is correct the present one is a situation where the amount of service tax if payable was available as cenvat credit to the appellant, and therefore, such being a revenue neutral situation, the extended period of limitation could not have been invoked.
The Counsel further argued that the appellant has remitted these amounts to the overseas service providers for providing services in the territories which are not within India, therefore, the performance of the service being undertaken in a foreign country and being done by a foreign entity, the appellant is not liable to pay any service tax on these amounts inasmuch as no services are rendered within the territory of India.
The Counsel for the Revenue, Dinesh Prithianicontended that Section (27) (d) of the Finance Act defines the “India” means “the air space above its territory and territorial waters,”. Thus, the activities of Oceanographic survey. tide velocity and flow modelling, CRZ mapping through ISRO is done within the India and accordingly the overseas service provider has provided the service in India and under RCM, appellant being a service receiver, liable for payment of service tax.
The Bench consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “The defence is mainly on the ground that the demand is barred by limitation as credit of the said service tax was admissible to the appellant. The appellant has made a bland statement and have not mentioned under what are the taxable output services in respect of which these input service could be availed as cenvat credit.In view of above, we do not find any merit in the defence of the appellant. The demand under this head along with penalties is upheld.”
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