Whether credit deniable on ground that service tax paid under wrong category by service provider?

PJ/CASE LAW/2015-16/2821

Case:-INDIA VISION SATELITE COMMUNICATIONS LTD. VERSUSC.C.E., C. & S.T., COCHIN

Citation:- 2015 (39) S.T.R. 684 (Tri. - Bang.)

Brief facts:- Appellant is a Malayalam Television News Channel engaged in Television Broadcasting Services. They commenced broadcasting activities from 1-8-2003 and paid Service Tax on advertising revenue received for the months of August and September, 2003 and also filed quarterly returns on 28-11-2003. Thereafter, the appellant neither filed returns nor paid any tax. Thereafter in December, 2005, appellants filed ST-3 returns for the period subsequent to September, 2003 up to October, 2005 and in the Order-in-Original No. 75/2006, dated 1-4-2006, the show cause notice issued to the appellant on 26-8-2005 was adjudicated resulting in imposition of penalty under Section 77 of the Act for not filing their returns. Apparently from the facts narrated above what emerges is the fact that department took up the issue of non-filing of returns and thereafter the appellant filed the returns in December, 2005 and for delayed filing of returns penalty was imposed. Any layman would conclude that the proceedings ended at this stage. However that is not the case with the Central Excise Department or Service Tax Department. A show cause notice was issued on 20-6-2006 on the ground that the claim of the appellant made in the ST-3 returns that Service Tax has been adjusted from the Cenvat credit account was not correct and it was proposed in the show cause notice that credit availed itself was not correct. In the show cause notice it was held that the invoices received by the appellant showed that they had paid rent on equipment and on this rent on equipment, service provider had charged Service Tax which was paid by them.

Appellant’s contention:-During the course of adjudication and appellate process, the appellants contended that what they had received was installation and commissioning service in respect of equipment and according to the agreement they were also required to pay rent.

Reasoning of judgment:-Both the authorities observed that the service provider was registered only for providing services of installation and commissioning and therefore, the natural conclusion would be that tax was paid on installation and commissioning service, yet, the said conclusion would not be applicable in this case in view of the fact that the equipment could not have been installed and commissioned every month requiring such amounts to be paid. However, on going through the ST-3 returns copies of which have been filed before them, they find that in all the ST-3 returns there is an enclosure (hopefully this was filed with the return) which shows that Service Tax was paid by the appellant under the category of rent on equipment. At least from this, it can be inferred that appellants when they filed ST-3 returns apparently never made a claim that what they had received was installation and commissioning service. Their claim is that they had paid Service Tax charged by the service provider and the equipment was being used by them for providing Broadcasting service and therefore, credit is admissible. However, there is a bald observation in the Order-in-Original that “equipment rental charges are not an input service for the purpose of availment of credit” and that if the credit is relating to commissioning and installation service, there cannot be commissioning and installation service every month. Similar observations have been made by the Commissioner (Appeals). Both the authorities have not discussed or concluded that there cannot be a Service Tax on the equipment rental charges. The objection is that it is not an input service without even saying or examining what is the nature of service, what is the nature of equipment, what is it’s use, where is it installed and no facts whatsoever have been discussed.
It is settled law that if Service Tax has been paid by the service provider and service receiver is eligible for the credit, it is not the responsibility of the service receiver to examine the correctness of Service Tax paid by the service provider. That amounts to assessment by the service receiver of the service received by him. It is not at all the responsibility cast on him. There are several decisions taking a view that examination of correctness of tax paid is not the responsibility of the service receiver and department cannot deny the credit of Service Tax on this ground. The decision of the Hon’ble Supreme Court in the case of CCE & Cv. MDS Switchgear Ltd. [2008 (229)E.L.T.485 (S.C.)]was cited, wherein it was held that quantum of duty already determined by Jurisdictional Officers of supplier cannot be contested or challenged by officers in charge of recipient unit. In the case of Ultratech Cement Ltd. v. CCE, Nagpur [2011 (22)S.T.R.289 (Tri.-Mumbai)], it was held that departmental authorities have no jurisdiction over service recipient, cannot sit in judgment over the correctness of the tax paid and it is not proper to deny the assessee Cenvat credit of Service Tax paid by agencies engaged by them. In the case of Treadsdirect Ltd.v. CCE, Calicut [2012 (286)E.L.T.583 (Tri.-Bang.)], it was held that the question as to whether input is dutiable cannot be agitated at the end of manufacturer of final product.
In view of the above decision and also in view of the discussion about the facts of this case, they find that there is absolutely no case for the Revenue to deny the Cenvat credit and accordingly the impugned order is set aside and appeal is allowed with consequential relief if any to the appellant.

Decision:- Appeal allowed.

Comment:-The substance of the case is that service recipient is not responsible for examining the correctness of service tax paid by service provider. Service Tax has been paid by service recipient as charged by service provider. As far as the assessee had paid service tax charged by the service provider and the equipment was being used by them for providing Broadcasting service, credit was admissible.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2821

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