2020 (2) TMI 865 - AT - Service Tax

Levy of Service Tax - activity of transportation of pipes by road from their factory to site - reverse charge mechanism - HELD THAT - It is no doubt that the appellant is executing works contract but during their activity they are receiving services of transportation and in terms of Rule 2(1)(d)(v) of Service Tax Rules they are required to pay service tax being a service recipient of transportation under reverse charge mechanism. Therefore the appellants are liable to pay service tax along with interest. Penalty - HELD THAT - Considering the facts of the case that the appellant is entitled to avail CENVAT Credit thereon therefore by invoking Section 80 of the Finance Act 1994 the penalty imposed on the appellant is set aside - appellant is at liberty to avail CENVAT Credit of service tax paid being service recipient on the transportation service. Appeal disposed off.

Summary

Issues:
- Liability to pay service tax on transportation of pipes from factory to site
- Applicability of reverse charge mechanism
- Availability of CENVAT Credit
- Imposition of penalties

Analysis:

1. Liability to pay service tax on transportation of pipes from factory to site:
The appeal was filed against an order confirming the demand for service tax on the transportation of pipes from the factory to the customer site. The appellant argued that they were engaged in a works contract and were already paying VAT on the transportation services. However, the Tribunal found that as per Rule 2(1)(d)(v) of the Service Tax Rules, the appellant was liable to pay service tax under the reverse charge mechanism for the transportation services received. The Tribunal held that the appellant is required to pay service tax as a service recipient of transportation services.

2. Applicability of reverse charge mechanism:
The Tribunal considered the submissions from both sides and concluded that the appellant, as a recipient of transportation services, falls under the purview of the reverse charge mechanism. The Tribunal emphasized that even though the appellant was executing works contracts, they were still receiving transportation services, making them liable to pay service tax under the reverse charge mechanism as per the Service Tax Rules.

3. Availability of CENVAT Credit:
The appellant contended that if they were required to pay service tax, they should be allowed to avail CENVAT Credit. The Tribunal acknowledged this argument and invoked Section 80 of the Finance Act, 1994, to set aside the penalty imposed on the appellant. The Tribunal ruled that the appellant is entitled to avail CENVAT Credit of the service tax paid as a service recipient for the transportation service.

4. Imposition of penalties:
Considering that the appellant is entitled to avail CENVAT Credit for the service tax paid, the Tribunal decided to set aside the penalty imposed on the appellant. The Tribunal granted the appellant the liberty to avail CENVAT Credit of the service tax paid on the transportation services. Ultimately, the appeal was disposed of based on the above terms, providing relief to the appellant in terms of penalty imposition.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT Hyderabad highlights the key issues addressed, the arguments presented by both parties, and the Tribunal's findings and decisions on each issue, ensuring a comprehensive understanding of the legal aspects involved in the case.