2025-VIL-129-CESTAT-MUM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Limitation, Admissibility of Cenvat Credit, Jurisdiction – Appellant entered into contracts for providing various services. Based on an audit, Department alleged that the appellant was involved in trading of telecom equipment and had wrongly availed Cenvat credit - Demand invoking the extended period of limitation - HELD - The show cause notice is hit by limitation as the normal period of 30 months expired on 15.02.2020 and the show cause notice was issued on 22.12.2020. The ST-3 returns were filed by the appellant and there was no finding by the original authority or the show cause notice as to which information was required by the Department as per law but was not filed by the appellant, or there was any wilful misstatement or suppression of facts to invoke the extended period of limitation. In the absence of any such finding, the proceedings are hit by limitation and this ground alone is sufficient to set aside the impugned order – Further, neither the show cause notice nor the impugned order provided any details of any trading of telecom equipment by the appellant during the relevant period, apart from some sale of scrap - the appellant was providing services like colocation, hosting, marketing and sales promotion of telecom services, business and technology consulting and other business support services. There was no examination as to how the input services received by the appellant were not eligible for providing the output services, and therefore, the finding of the original authority disallowing the Cenvat credit has no basis and is set aside - Since no part of the order-in-original either disallowing cenvat credit or confirming the demand of service tax sustains, the order for recovery of interest on the same and imposition of penalties does not sustain - the impugned order is set aside and the appeal is allowed - Whether the appropriation of amount reversed by the appellant under Rule 4(7) of the Cenvat Credit Rules is sustainable - HELD - The amount was reversed by the appellant under Rule 4(7) of the Cenvat Credit Rules before the issuance of the show cause notice. For appropriation of any amount, the demand has to be confirmed first and there has to be a provision in law authorizing the adjudicating authority to confirm such demand. However, the Rule 4(7) does not have any such provision and therefore, the order of the original authority appropriating the amount is not sustainable - Demand of service tax on the advances received from customers – HELD - by the time the show cause notice was issued, said advance amount was paid back. Therefore, it was not available with the appellant as advances from customers as on the date of issue of SCN. Therefore, the demand confirmed by the original authority does not sustain and set aside - Demand of service tax under proviso to sub-section (1) of Section 73 of Finance Act, 1994 – HELD - the issue of valuation and taxability both are involved in the present issue. The operation of Chapter V of Finance Act, 1994 which included charging section for charging of service tax and Section 67 for determination of value for assessment of service tax ceased to exist prospectively with effect from 01.07.2017. Therefore, both the provisions, viz. charging section i.e. Section 66B and Section 67 on valuation of taxable services for charging service tax were not operational for levy and collection of service tax as on 31.03.2018 and, therefore, confirmation of demand is not sustainable - Adjustment in balance of unsecured loans - Recovery of interest on late payment of service tax on the basis of Rule 3 of Point of Taxation Rules – HELD – the said amount which was treated as unsecured loan could not be treated as advance against provision of payment of service and was held to be unsecured loan. Therefore, the provisions of Rule 3 of Point of Taxation Rules are not applicable in the present case - the order by the original authority for recovery of interest on payment of service tax cannot sustain.
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