2025-VIL-1079-CESTAT-BLR-ST
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SERVICE TAX CESTAT Cases

Service Tax – Demand under Reverse Charge Mechanism on the expenditure incurred in foreign exchange, Authorised Service Station Service, Extended Period of Limitation, Revenue Neutrality – Adjudicating authority invoked the provisions of Section 66A of the Act on the expenditure incurred in foreign exchange without specifying the activity or service involved on such foreign exchange – Whether the appellant is liable to pay service tax under the Reverse Charge Mechanism (RCM) on the expenditure incurred in foreign exchange - HELD - The adjudicating authority had not specified the taxable service involved in the expenditure incurred in Foreign Exchange. For a demand under RCM, the adjudicating authority must establish that the service was imported into India as per the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006. Since these aspects were not satisfied, the demand under RCM is prima facie unsustainable - Further, even if the appellant had paid service tax under RCM, they were eligible to claim CENVAT credit against such payment, resulting in a revenue neutral situation - The demand under RCM confirmed by invoking the extended period of limitation and the penalties imposed are unsustainable and set aside – The appeal is allowed - Whether the demand of service tax under Authorized Service Station category is sustainable - HELD - The definition of "Authorised Service Station" under Section 65(9) of the Finance Act, 1994 requires the service station to be authorized by the manufacturer of the motor vehicles to carry out any service or repair of the vehicles manufactured by that particular manufacturer. Since the appellant was the manufacturer of electric cars and had its own service station, the services provided by the appellant cannot be considered as falling under the category of Authorised Service Station. Accordingly, the demand under the Authorised Service Station category is set aside.
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