9911796707
TMI Blog2019 (10) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... ly registered with the Service Tax authorities. 3. The present dispute emanates from a Show Cause Notice dated 30th August, 2010, issued to the appellant, proposing two demands of service tax, of Rs. 24,72,677/- and Rs. 1,93,74,146/- respectively. Of these, the former demand, of Rs. 24,72,677/-, stands dropped; ergo, we are not required to concern ourselves therewith. The controversy, in the present appeal, relates to the sustainability of the second demand, as proposed in the aforesaid Show Cause Notice and as successively confirmed by the Commissioner of Central Excise (hereinafter referred to as "the Commissioner") and the CESTAT. 4. Qua this demand, of Rs. 1,93,74,146/-, the case of the Revenue - as accepted by the CESTAT in the impugned Final Order - is that the appellant erroneously paid the said amount of service tax by utilization of CENVAT Credit available with it, whereas the amount was required to be paid in cash. The CESTAT has, therefore, affirmed the decision, of the Commissioner, requiring the appellant to pay the said amount of service tax, all over again, in cash, with the caveat that, having done so, the appellant can avail CENVAT Credit of the said amount; in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply." 10. It is also necessary to refer to certain provisions of the CENVAT Credit Rules, 2004 (hereinafter referred to as "CENVAT Credit Rules"). Rule 3(4) of the CENVAT Credit Rules - sans the various provisos thereto, which are of no particular relevance - reads as under: "3. Cenvat Credit. - (4) The CENVAT credit may be utilized for payment of - (a) any duty of excise on any final product; or (b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or (c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or (d) an amount under sub-rule (2) of rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness or commerce. 4. Registration and payment of service tax.- The recipient of taxable services provided from outside India and received in India shall make an application for registration and for this purpose, the provisions of Section 69 of the Act and the rules made thereunder shall apply." 13. The expressions "output service", "person liable for paying service tax" and "provider of taxable service" were defined in Clauses (p), (q) and (r) of Rule 2 of the CENVAT Credit Rules, during the relevant period, which read as under:- "(p) "output service" means any taxable service, excluding the taxable service referred to in sub-clause (zzp) of clause (105) of Section 65 of the Finance Act, provided by the provider of taxable service, to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions 'provider' and 'provided' shall be construed accordingly; (r) "provider of taxable service" includes a person liable for paying service tax; (q) "person liable for paying service tax" has the meaning as assigned to it in clause (d) of sub-rule (1) of Rule 2 of the Service Tax Rules, 1994" 14. Clause (q) of Section 2 of the CENVAT Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Services (Provided from Outside India and Received in India) Rules, 2006, as a whole, clarifies unambiguously that the Noticee was not entitiled to utilize the CENVAT credit against payment of service tax on the services received by it from outside India. The Noticee was required to pay the service tax on the services received y it from outside India through cash. This amount as demanded in the impugned notice is liable to be recovered from them in cash. The contention of the Noticee that it is revenue neutral has no merit at all, for that payment of service tax through cash, in such circumstances, is the mandate of the law. The other contention of the Noticee that they had reflected the utilization of CENVAT credit on such services in the ST-3 returns also does not have any merit, for that, in this regard, a clear picture does not emerge from the returns. Moreover, the liability to pay service tax and the assessment thereof is upon the Noticee under self-assessment scheme and not upon the department. Thus, this argument of the Noticee also does not sustain. Hence, it is rejected." 16. The CESTAT concurred with the Commissioner, holding that Section 66-A of the Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced in Rule 3(4) of the CENVAT Credit Rules only with effect from 1st July, 2012, the Revenue was effectively making the said prohibition applicable to a prior period. Mr. Amit Bansal's response was that the said Explanation was only clarificatory in nature. The response, needless to say, merits submission only to invite rejection. The Explanation to Rule 3(4) of the CENVAT Credit Rules, as engrafted on 1st July, 2012, created a substantive liability, and a prohibition, on payment of service tax on reverse charge basis from the CENVAT credit account. It is trite that provisions creating substantive rights, or liabilities, cannot have retrospective application. [Refer State of Punjab v. Bhajan Kaur AIR 2008 SC 2276] It is equally trite that a provision cannot be treated as clarificatory until and unless the provision itself so declares. [Refer Virtual Soft Systems Ltd. v. Commissioner of Income Tax, Delhi (2007) 9 SCC 665] Inasmuch as the Explanation to Rule 3(4) of the CENVAT Credit Rules, 2004 engrafts a prohibition in the CENVAT Credit Rules, resulting in a liability on the assessee, it cannot, quite obviously, be accorded retrospective effect, or be applied to a period prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax" as having the same meaning, assigned to the expression, in Rule 2(1)(d) of the Service Tax Rules, 1994 (hereinafter referred to as "the Service Tax Rules"). (v) In case of services provided by a provider located outside India and received by a recipient located in India, the Indian recipient is, by virtue of Rule 2(1)(d)(iv) of the Service Tax Rules, defined as the "person liable for paying service tax". (vi) The Indian recipient of the service also, therefore, becomes the "person liable for paying service tax", under the CENVAT Credit Rules. (vii) The Indian recipient of the taxable service also, consequently, becomes the "provider of taxable service", as defined in Rule 2(r) of the CENVAT Credit Rules. (viii) Rule 3 (4) of the CENVAT Credit Rules permits CENVAT Credit to be utilised for payment of service tax on any "output service". "Output service" is defined, in Rule 2(p) of the CENVAT Credit Rules as service provided, by a provider of taxable service. It has already been pointed out, hereinabove, that the petitioner was, by dint of the definition of the expression, as contained in Rule 2(r) of the CENVAT Credit Rules, the "provider of taxable service". Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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