TMI Blog2021 (8) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT 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. - Service Tax Appeal No.106 of 2006 and 136 of 2006 - Final Order Nos. 41756-41757/2021 - Dated:- 17-8-2021 - Ms. Sulekha Beevi C.S., Member (Judicial) and Shri P. Venkata Subba Rao, Member (Technical) Shri S. Muthuvenkataraman, Advocate for the Appellant Smt. K. Komathi, ADC (AR) for the Respondent ORDER The issue involved in both these appeals being the same were he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge their service tax liability as they cannot be construed as provider of output service. (f) After CENVAT Credit Rules, 2004 came into force with effect from 10.9.2004, they wrongly transferred the ineligible service tax credit to the CENVAT account and wrongly utilized it to discharge central excise duty. 5. He adverted to section 68 of the Finance Act, 1994 and submitted that sub-clause (2) of the said section would make it clear that when the appellant is paying service tax on behalf of non- resident service provider, the appellants will be deemed to be a service provider. Sub-section (2) of section 68 states that if service tax is paid under reverse charge mechanism, all provisions of the said Chapter will apply to such person as if he is the person liable for paying the service tax in relation to such services. The appellant becomes eligible for credit as the service provider when the service tax is discharged under reverse charge mechanism on behalf of foreign entity. The view taken by the department that the deemed fiction created under section 68(2) will not be applicable for Service Tax Credit Rules, 2002 is untenable. He relied upon the decision of the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT account and utilized it for payment of central excise duty also. 9. In the Show Cause Notice, the department alleges that the appellant cannot be considered as a provider of service as they have only received the service from the foreign entity and discharged the liability as per section 66 r/w Rule 2(1)(d)(iv) of Service Tax Rules, 1994. 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. 10. Section 68 of the Finance Act reads as under:- Section 68. Payment of service tax - (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), in respect of any taxable services notified by the Central Government in the Official Gazette, the service tax thereon shall be paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Property Service (IPS) with effect from 10.9.2011 to the assessee and the assessee company being the service provider was made liable to pay service tax in terms of section 68(2) of the Finance Act 2(1)(d)(iv) of the Service Tax Rules, 1994. The service tax liability was discharged by the assessee using cenvat credit availed on Intellectual Property Service which was objected to by the department. The assessee filed a revised returned and used credit relating to other input services such as advertisement, freight, manpower recruitment, courier services, maintenance, repair and construction services for discharging service tax under the category of intellectual Property Service in the capacity of the service receiver. The Revenue proceeded against the assessee on the ground that cenvat was wrongly used for paying service tax on Intellectual Property Service purported service when he is not a service provider but the receiver of service. Therefore, overruling the objections of the assessee the demand was confirmed. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal held that though the assessee is a recipient of services in law as the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the Petitioner-association outside India. Therefore, it cannot be said that on the basis of Rule 2(1)(d)(iv), service tax can be levied on the members of the Petitioners-association. It is further to be seen here that Section 64 gives powers to the Central Government to make rules for carrying out the provisions of the Chapter. The chapter relates to taxing the services which are provided, the taxing on the value of the service and it is only the person who is providing the service can be regarded as an assessee. The rules therefore, cannot be so framed as not to carry the purpose of the Chapter and cannot be conflicted with the provisions in Chapter V of the Act. In other words, as the Act makes the person who is providing the service liable, the provisions in the Rules cannot be made which makes the recipient of the service liable. It is, thus, clear that the provisions of Rule 2(1)(d)(iv) are clearly invalid. 15. Although, there was no liability to pay the tax as per law laid in the above decision, the appellants have discharged the tax liability as a service recipient and availed credit. So the situation is revenue neutral also. 16. From the above, after app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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