The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Mumbai has ruled that Sahara India TV Network is entitled to utilize Cenvat credit for payment of service tax on reverse charge basis on services rendered as output services.
The appellant, Sahara India TV Network, is a provider of Broadcasting services, Business Auxiliary Service, renting of immovable Property, Erection Commissioning, and Installation Service and Sound recording services. During the course of an audit, it was revealed that the appellant had incurred expenditure in foreign currency towards the services received from various foreign-based service providers and had paid the service tax by way of the utilization of Cenvat credit. Therefore, a show-cause notice was issued to them proposing to demand and recover Service Tax amounting to Rs. 5,36,752/- for the period 2008-09 to 2010-11. The Adjudicating Authority confirmed the demand of Rs. 5,36,752/- along with interest under Section 75 and appropriated the amount of Rs. 86,111/- and imposed an equal penalty under Section 78 and also imposed a penalty of Rs. 5,000/- under Section 77 of the Finance Act, 1994.
The Chartered Accountant (CA) who appeared on behalf of Appellant submitted that in terms of Rule 3(4) of CCR, 2004, Cenvat Credit can be utilized for payment of tax on output services and explanation to Rule 2(p) ibid clarified that if a person liable for paying service tax did not provide any taxable service or did not manufacture final products, then the service to which he was liable to pay service tax should be deemed to be the output service and there was no specific restriction on utilization of credit by the person liable.
In view of the above decisions, it is settled that once the assessee in terms of Rule 2(q) r/w Rule 2(1)(d)(iv) ibid, is liable to pay service tax then he also becomes a provider of taxable service under Rule 2(r) and consequently becomes a provider of output service under Rule 2(p) ibid and becomes entitle to utilize the Cenvat credit for payment of service tax on reverse charge basis. Rule 5 of the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006 prohibits only for availing of Cenvat credit and not for utilizing the Cenvat credit to discharge its service tax obligation on reverse charge basis. The period involved in this Appeal is from April 2008 to March 2011 whereas the prohibition as per the notification dated 20.6.2012 regarding the utilization of the Cenvat credit by way of amendment in Rule 3(4) ibid, is effected from 1.7.2012 only, therefore during the period in issue the Appellants i.e. the service recipient were very well within their rights to discharge the service tax liability on reverse charge basis by utilizing the Cenvat Credit. There is no need for me to take up the issues of limitation or penalty since on merits I am convinced and am allowing the Appeal.