Turner Project Management India Pvt. Ltd vs Commissioner Of Central Tax, Navi Mumbai

Anil G. Shakkarwar, Member (T)

Brief facts of the case are that the appellant paid service tax under reverse charge mechanism on the expenditure incurred in foreign currency in respect of contribution towards social security for employees of their overseas holding company. Such employees were working for the appellant in India. Appellant paid an amount of Rs.19,67,840/- towards service tax for the period from April 2016 to April 2017. Appellant has availed cenvat credit of the said amount since they had paid service tax under reverse charge mechanism. It appeared to Revenue that the definition of service provided under Section 65B(44) of Finance Act, 1994 excludes payments made to employees by employer from the definition of service and, therefore, the said amount was not required to be paid by the appellant. It further appeared to Revenue that under Rule 2(l) of Cenvat Credit Rules, 2004, the said amount did not become duty or service tax paid and, therefore, was not eligible to be availed as cenvat credit. Therefore, proceedings were initiated for recovery of the said amount as irregularly availed ineligible cenvat credit. On contest, original authority confirmed the demand and imposed penalties. Appellant preferred appeal before learned Commissioner (Appeals). Learned Commissioner (Appeals) did not interfere with the confirmation of demand and imposition of penalties. Therefore, appellant is before this Tribunal.

Heard the learned Chartered Accountant for the appellant. He has submitted that though the appellant was not required to pay the said amount towards service tax, it was paid and Revenue has not held through any order that the said amount was not payable and did not pass any assessment order nor refunded the said amount to the appellant and, therefore, the said amount has attained the nature of service tax though it was not payable by the appellant. He has further submitted that the ruling by Hon’ble Bombay High Court in the case of CCE, Pune vs. Ajinkya Enterprises reported at 2013 (294) ELT 203 (Bom) is squarely applicable in the present case. He has submitted that in the said case, central excise duty which was not required to be paid on the final product was paid by the appellant and the appellant had availed cenvat credit of duty paid on the inputs and Hon’ble Bombay High Court has held that in view of the fact that the assessment of final product was not reversed by Revenue and the appellant before them was not paid the refund of the duty which was not required to be paid, availment of cenvat credit of duty paid on inputs was regular. He has further submitted that the situation is revenue neutral since the amount which was not required to be paid has been paid and equal credit is availed. He has argued that, as a result, there is no loss to the exchequer and, therefore, the impugned order may be set aside.

Learned AR has supported the impugned order-in-appeal.

I have carefully gone through the record of the case and submissions made. I note that in the present case, service tax was not payable on the contribution towards social security which was part of salary paid by the employer to the employee. I find that though the service tax which was not payable was paid, Revenue has not refunded the said tax paid by the appellant. I also note that the appellant has taken cenvat credit of equal amount. Therefore, I find that there is no loss to the exchequer. I have further gone through the ruling by Hon’ble Bombay High Court in the relied upon case of CCE, Pune vs. Ajinkya Enterprises. I find that it is relevant to reproduce para

10 of the said judgment which is as follows:-

“10. Apart from the above, in the present case, the assessment on decoiled HR / CR coils cleared from the factory of the assessee on payment of duty has neither been reversed nor it is held that the assessee is entitled to refund of duty paid at the time of clearing the decoiled HR / CR coils. In these circumstances, the CESTAT following its decision in the case of Ashok Enterprises 2008 (221) ELT 586 (T), Super Forgings 2007 (217) ELT 559 (T) , S.A.I.L. 2007 (220) ELT 520 (T), M.P. Telelinks Limited 2004 (178) ELT 167 (T) and a decision of the Gujarat High Court in the case of CCE V/s. Creative Enterprises reported in 2009 (235) ELT 785 (Guj) has held that once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity does not amount to manufacture. Admittedly, similar view taken by the Gujarat High Court in the case of Creative Enterprises has been upheld by the Apex Court (see 2009 (243) E.L.T. A121) by dismissing the SLP filed by the Revenue.”

In the present case, Revenue has retained service tax which was not to be paid and the appellant has availed cenvat credit of equal amount and utilized the same for payment of service tax for other services. I, therefore, relying on the ruling by Hon’ble Bombay High Court in the above stated case, hold that the impugned order-in-appeal is not sustainable.

I, therefore, without interfering with the service tax already paid and cenvat credit availed of equal amount, set aside the impugned order and allow the appeal.