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TMI Blog2012 (8) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of procuring export orders received from overseas agents, not having any office or business establishment in India, can be paid through Cenvat credit or whether the same are required to be paid in cash. The department is of the view that the business auxiliary service of procuring export orders received from foreign service providers (overseas agents), in respect of which the appellant are required to pay service tax as service recipient, cannot be treated as their "output service" within the definition of this term as defined in Cenvat Credit Rules, 2004 and, hence, the service tax on these services received was required to be paid in cash and the same could not be paid through Cenvat credit. It is on this basis that the Jurisdictional Deputy Commissioner passed the following three orders-in-original by which the service tax demands were confirmed under Section 73 of Finance Act, 1994 along with interest and beside this, penalties were imposed under Section 76 and 77 of the Finance Act, 1994. Sl. No. Order-in- original No. Date period of demand Service tax demand confirmed (Rs.) Penalty imposed (Rs.) 1. 152/2009- 2010(ST) 29-3-10 April 07 to Sept. 2007 3,80,816/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, that, therefore, the appellant are the "person liable for paying service tax" as per Rule 2(1)(d)(iv) of Service Tax Rules, 1994 through reverse charge mechanism, that in this regard reliance is placed on letter No. B-1/4/06-TRU, dated 19-4-2006 clarifying that the reverse charge mechanism of paying Service tax according to which the services provided by a foreign service provider to a domestic customer are subjected to VAT/GST under reverse charge or tax shift mechanism and under reverse charge method, a legal fiction is created as if the recipient has himself provided the services domestically and accordingly the recipient of service is treated as "deemed service provider", that a 'provider of taxable service' is entitled to pay the service tax through Cenvat credit account, that there is no provision in the Cenvat Credit Rules, 2004, that a deemed service provider shall be barred from this entitlement and in this regard reliance is placed on the judgments of the Tribunal in the cases of Soundararaja Mills Ltd. 'E' Mills v. CCE, Madurai reported in 2008 (223) E.L.T. 203 (Tri.-Chennai) = 2008 (9) S.T.R. 183 (Tri.-Chennai), Prakash Industries Ltd. v. CCE, Raipur reported in 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot an output service, that term 'output service' is defined in Rule 2(p) of Cenvat Credit Rules, 2004 according to which the 'output service' means any taxable service provider by the provider of Taxable Service to a customer or subscriber or policy holder or any other person, as the case may be, and the expression "provider" and "provided" shall be construed accordingly, that from the definition of 'output service' it is clear that the 'output service' is the one which is provided by the "provider of taxable service" to some customer, client etc., that the service received by the appellant from the foreign service provider is not the service which has been provided by the appellant to some client, that the service received by the appellant, from foreign service providers is covered by the definition of 'input service', that the same service cannot be treated as "input service" as well as output service at the same time, that in term of Rule 5 of the Import of Service Rules, the service received from foreign service provider is not to be treated as 'output service' for the purpose of availing Cenvat credit under Cenvat Credit Rules, that since in terms of the provisions of Rule 3(4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blishment or permanent address or usual place of residence in country other than India and which is received by a person having place of business, fixed establishment or permanent address/usual place of residence in India, such service for the purpose of this section shall be taxable service and shall be treated as if the recipient has himself has provided the service in India and accordingly all the provisions of this chapter shall apply. By virtue of this provision a person, resident in India , receiving taxable service from a foreign/offshore provider becomes the person liable to pay the service tax on the service received by him under Rule 2(1)(d) (iv) of Service Tax Rules, 1994. In relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India under Section 66A, the recipient of such service would be the person liable for paying service tax. The Central Government under Section 93 and 94 readwith Section 66A of Finance Act, 1994 has framed "Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, which define as to what constitutes import of service in respect of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of Rule 2(1)(d) of Service tax Rules. 5. A service for being called out for "output service" under Rule 2(p) must satisfy two conditions - (i) it must be provided by the provider of taxable service; (ii) it must be provided to some customer, client, subscriber, policy holder or any other person or in other words to some client or customer of the provider of taxable service. A taxable service received by a person from an offshore service provider in respect of which that person by virtue of the provisions of Section 66A of Finance Act, 1994 readwith Rule 2(1)(d)(iv) of Service Tax Rules, 1994 is liable to pay the service tax, is deemed to have been provided by that person in India and that person by virtue of this provision of Rule 2(q) of Cenvat Credit Rules, 2004 is deemed to be provider of taxable service. The question arises as to whether the service received from offshore service provider on which the service recipient is liable to pay service tax can be treated as his 'output service' for the purpose of Cenvat Credit Rules, 2004. In our view, this service received from outside offshore service provider cannot be treated as output service as while by the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, in respect of which the appellant are liable to pay service tax, must be deemed to be their 'output service', have cited a number of judgments. We have gone through these judgments, we find that the Tribunal's judgment in the cases of Soundararaja Mills Ltd. 'E' Mills v. CCE, Madurai reported in 2008 (223) E.L.T. 203 (Tri.-Chennai) = 2008 (9) S.T.R. 183 (Tri.-Chennai); India Cement Ltd. v. CCE reported in 2007 (7) S.T.R. 569 (Tribunal) = 2008 (223) E.L.T. 78 (Tribunal); CCE, Chandigarh v. Nahar Exports Ltd. reported in 2008 (223) E.L.T. 205 (Tri.-Del.) = 2008 (9) S.T.R. 252 (Tri.-Del.); R.R.D. Tex Pvt. Ltd. v. CCE, Salem reported in 2007 (8) S.T.R. 186 (Tribunal); CST v. Arvind Fashions Ltd. reported in 2009 (13) S.T.R. 544 and Bhushan Power & Steel Ltd. v. CCE, BSBR-II reported in 2008 (10) S.T.R. 18 (Tri.-Kolkata) pertain to the period prior to 19-4-2006 when there was following explanation to Rule 2(p) of Cenvat Credit Rules, 2004 "for the removal of doubts it is hereby clarified that if a person liable for paying service tax does not provide any taxable service or does not manufacture any final products, the service for which he is liable to pay service tax shall be deeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the services provided by a foreign supplier to a domestic customer are subjected to VAT/GST under reverse charge or tax shift mechanism, that under reverse charge mechanism a legal fiction is created treating as if the recipient has himself provided has the services domestically and accordingly the recipient of services is treated as deemed service provider. On the basis of this Circular it has been pleaded the service received should be treated as output service. Here again, the appellant's plea is fallacious as the legal fiction created for making service recipient as the deemed "provider of taxable service" for the purpose of making is liable to pay the service tax and collecting service tax from him, cannot be extended to the area of mode of payment of service tax - whether through cash or through Cenvat credit account by treating the service received as his 'output service', for which another legal fiction would be required which is not there. It is settled law that the legal fiction created for a particular purpose cannot be extended to other areas. 7. In view of the above discussion, we are of the view that the appellant have not been able to establish prima facie c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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