By TIOL News Service

MUMBAI, APRIL 26, 2017: THE appellant is a Broadcasting Service provider and avails CENVAT credit.

Pursuant to an Audit, a SCN was issued for the period July 2012 to March 2014 where by CENVAT Credit of an amount of Rs.445croreswas proposed to be denied on the ground that services were provided by MSM Singapore, therefore,MSM India has neither provided any service nor was required to obtained the registration and also not required to pay any service tax.

The adjudicating authority confirmed the demand of CENVAT credit invoking the extended period and also imposed penalties and interest.

Appeals have been filed against this order.

Inter alia, the appellant argued that appellant was allowed by the department to act as a service tax assessee and to pay service tax;Cenvat credit so availed was utilized for payment of service tax, therefore, now for any reason the said Cenvat credit cannot be disallowed as same was utilized for payment of service tax on output services. It is further submitted that the order relying on explanation 3(b) to Section 65B(44) of FA, 1994 which is not flowing from the show cause notice is illegal. Reliance is placed on the decisions in Ballarpur Industries Ltd - 2007-TIOL-153-SC-CX and Champdany Industries Ltd. - 2009-TIOL-104-SC-CX. The appellant concluded their submissions by stating that as the appellant has already reversed the CENVAT credit by debit in the register when it utilized the same towards payment of service tax, there is no question of payment the amount once again. [Infosys Technologies Ltd. - 2016-TIOL-2237-CESTAT-MUM, Bajaj Allianz General Insurance Co Ltd.- 2014-TIOL-1540-CESTAT-MUM.]

As regards the service tax paid by the appellant BCCI (against whom penalty has been imposed), it is submitted that invoice dated 01.04.2013 was raised on MSM Singapore in INR and payment of the same was also received in INR; that as per rule 6A of STR, 1994, any service qualifies as ‘export' only if the payment is received in convertible foreign exchange; that as the payment was received in INR, it did not qualify as ‘export' and hence service tax was rightly paid by BCCI; that in the absence of collusion on the part of BCCI, penalty imposed cannot be sustained; that they had informed the department that appellant had taken registration in India and that henceforth they will be raising invoice along with service tax; that no objection was raised by department for three years, hence, there cannot be any malafide attributed; that issue is revenue neutral inasmuch as if BCCI would have not charged service tax to MSM treating it as export of service then MSM would not have claimed Cenvat credit; that out of the total amount of CENVAT credit allegedly availed wrongly by appellant, BCCI had charged 20% and there are other service providers who have charged service tax amounting to 80% of the credit taken by appellant, however, penalty has been imposed only on BCCI.

The counsel for the Revenue justified the demand and made detailed bullet-wise submissions taking support of various case laws.

After considering the submissions, the Bench observed thus -

+ We find that Revenue after knowing the entire facts of the entire activity of the appellant, granted registration to the appellant enabling them to pay service tax on the service provided by the MSM Singapore. The appellant admittedly discharged service tax on the output services … There is no dispute that the entity in India and Singapore is the same entity i.e. M/s. MSM Satellite (Singapore) Pte. Ltd therefore the service provider is the same company even though the service was provided from different location i.e. Singapore but the M/s. MSM Satellite (Singapore) Pte. Ltd obtained registration on address C/o. Multi Screen Media Pvt Ltd, Interface, Building 7, 4th Floor, Off. Malad Link Road, Malad (W), Mumbai 400064.

+ It is also provided under Section 66A that any service provided from outside India and received in India is invariably taxable service.

+ In the present case it is admitted fact that even though if the contention of the Revenue is accepted that services were provided by MSM Singapore, but it is also a fact that services were received in India, therefore, service per se is taxable and the government is legally required to collect the service tax on such services and it had indeed collected.

+ Therefore, service tax even though paid by MSM Singapore through their office in India discharged the service tax, payment of service tax cannot be disputed. In such a situation Cenvat credit is legally admissible to the appellant.

+ The revenue knowing the status of the appellant granted registration to the appellant without raising any objection that the service are provided by the Singapore and regularly collected the service tax. This action of the Revenue stand unaltered as no any action, to hold that obtaining registration and payment of service tax is illegal, has been taken by the department.

+ Therefore, once registration was granted by the department and the service tax was collected consequent Cenvat credit cannot be denied . It is settled in various judgments as cited below that even though service is not taxable and if the assesse paid service tax the Cenvat credit is allowable. [ DCM Shriram Consolidated Ltd.- 2016-TIOL-2506-CESTAT-DEL, Ranbaxy Labs Ltd.- 2006-TIOL-438-HC-P&H-CE, Sundaram Industries Ltd. - 2016-TIOL-1513-CESTAT-MAD]

+ In the present case the service are very much taxable, therefore the appellant's case is on better footing as compared to the situation in the above cited judgments. For this reason also, appellant is legally entitled for the Cenvat credit.

+ The adjudicating authority has proceeded and decided the entire matter under the assumption that there are two different entities like MSM Singapore has provided the services and MSM India has not provided the service, whereas in fact it is the same M/s. MSM Satellite (Singapore) Pte. Ltd which is located in Singapore as well as in India. Hence impugned order has preceded on wrong assumption.

+ Without prejudice to above, we also observed that even though services initiated by uplinking from Singapore but services are provided in India by decoding, downlinking, broadcasting, therefore, provision of services is taken place in India only. As per the service tax provisions the service tax liability is based on the place of consumption, therefore, in the present case not only the services provided in India but also consumed in India, therefore, place of provisions is India only. Henceservice tax registration obtained by M/s. MSM Satellite (Singapore) Pte. Ltd in India is absolutely in order .

+ We also agree with the contention that on one hand Revenue sought to disallow the Cenvat credit on the ground that appellant is not service provider and on the other hand service tax was collected from the appellant even if it is accepted that appellant is not service provider. In such a case, the payment of service tax made by appellant also does not remain as payment of service tax .

+ In such situation whatever Cenvat credit taken by the appellant it stands reversed in the form of debit towards of payment of service tax. If the contention of the department is accepted that the appellant cannot be treated as service provider then in such case payment made by the appellant should not be treated as payment of service tax, accordingly it amounts to reversal of Cenvat credit availed by them, for this reason also demand of Cenvat credit does not exist.

Limitation:

"…we find that entire activity was in the knowledge of the department as the appellant vide their letter dated 24-5-2012 had made detailed representation to the CBEC to seek continue deemed broadcaster status of MSMPL and CBEC when not responded, appellant approached for registration dated 02-07-2012 wherein they have set out detailed reason for seeking registration and also stated that they will be paying service tax on distribution and claiming input service credit. In this fact there is no suppression of facts on the part of the appellant with intent to evade payment of duty ."

Penalty:

+ The appellant as against Cenvat Credit of Rs.445,20,87,937/- paid the service tax much more than the Cenvat amount, this clearly shows that there is no intention of the appellant to evade payment of service tax. Therefore, demand of extended period is not sustainable, hence equal amount of penalty under Section 11AC being consequential will also not sustain and same is set aside.

+ As regard the penalties on other appellants, since penalties being consequential to the charge of wrong availment of Cenvat credit by the appellant, we decide that availment of Cenvat credit by the M/s. MSM Satellite (Singapore) Pte. Ltd is in order, penalties are also not sustainable on other appellants also.

+ As regard penalty imposed upon BCCI on the ground that they have fraudulently passed on Cenvat credit, we find that since we hold that availment of Cenvat credit by M/s. MSM Satellite (Singapore) Pte. Ltd is legal &correct, the consequential penalty does not survive. In this position, imposition of penalty upon BCCI and on its officials is absolutely incorrect and illegal.

The appeals were allowed.

(See 2017-TIOL-1413-CESTAT-MUM)