By TIOL News Service

CHENNAI, FEB 18, 2015: THE Appellants are as a LTU having two units, one at Koratty, Trichur district Kerala, a DTA unit and another unit at Kakkanad which is situated in Special Economic Zone. Appellants have paid commission relating to the sales effected by Overseas agent in respect of both the units and paid service tax under the Business Auxiliary Service under reverse charge and availed credit in respect of service tax paid on behalf of SEZ unit. Adjudicating authority disallowed the cenvat credit on the service tax and related to SEZ unit.

The appellant submitted that even though DTA unit had paid service tax on the services pertaining to SEZ unit, being LTU during the relevant period, they are eligible to distribute credit as service tax credit distributor to other units. He also submits that even if SEZ unit paid service tax they are eligible for refund. As there is revenue-neutral, there is no loss of Revenue.

However, the Tribunal held:

The appellants are liable to pay service tax under reverse charge only in respect of value of service of appellant unit. There is no legal provision to pay service tax on value of services pertaining to SEZ unit. Further, there is no service tax liability on the SEZ units as they are covered under exemption, therefore, prima facie , I find that appellants are not entitled to take service tax credit pertaining to the value of services rendered by the overseas commission agent to the SEZ unit. Appellants are liable to pay service tax only on the value of services related to Koratty unit. Therefore, prima facie , I find that the appellants have not made out a case for waiver of predeposit of entire dues. Accordingly, I order for predeposit of Rs.1,53,000/-.

(See 2015-TIOL-355-CESTAT-MAD)