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2021 (8) TMI 866 - AT - Service TaxReverse charge mechanism - wrongly availed credit and utilized the credit - contravention of Service Tax Credit Rules, 2002 r/w CENVAT Credit Rules, 2004 - revenue neutrality - HELD THAT:- The appellants availed the credit of service tax paid by them under reverse charge as an input service recipient and utilized the same for payment of service tax. During the relevant period, the credit availed on service tax was governed by the Service Tax Rules, 1994 and credit availed on inputs and capital goods was governed by CENVAT Credit Rules, 2002. CENVAT Credit Rules, 2004 came into force with effect from 10.9.2004 and then the appellants transferred the unutilized credit to CENVAT account and utilized it for payment of central excise duty also. The appellant not being a service provider is not eligible to take credit of the service tax under Service Tax Rules, 1994 and that such credit cannot be used to discharge their service tax liability. When the credit was not eligible, appellant’s ought not to have transferred the unutilized service tax credit to CENVAT account and utilized it to discharge their tax / duty liability. It also needs to be stated that appellants were not liable to pay service tax under reverse charge mechanism prior to introduction of Section 66A in the Finance Act, 1994. The Hon'ble High Court of Bombay held that tax cannot be levied or collected on the basis of Rules only. The decision in the case of UNION OF INDIA VERSUS INDIAN NATIONAL SHIPOWNERS ASSOCIATION [2009 (12) TMI 850 - SC ORDER] where it was held that the provisions of Rule 2(1)(d)(iv) are clearly invalid. Although, there was no liability to pay the tax as per law, the appellants have discharged the tax liability as a service recipient and availed credit. So the situation is revenue neutral also. Appeal allowed - decided in favor of appellant.
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