By TIOL News Service

MUMBAI, JAN 31, 2017: TAX liability allegedly arose on the amount paid for 'technical knowhow' to M/s Eagle Telonics, USA.

The Commissioner(A) denied the facility of availment of CENVAT credit for discharge of service tax liability of Rs.18,18,864/- on services received from outside India on 31 st March 2006.

This disputed amount was made good by appellant on 6th March 2012 while the matter was pending before the lower appellate authority.

Before the CESTAT, it is the claim of the appellant that section 66A, for levy of service tax on 'reverse charge basis', was incorporated in Finance Act, 1994 with effect from 18th April 2006 and,therefore, in view of the decision in Indian National Shipowners Association - 2008-TIOL-633-HC-MUM-ST, as confirmed by Supreme Court - 2009-TIOL-129-SC-ST, 'reverse charge mechanism' became law only after such incorporation.

This additional ground was sought to be agitated by filing a Miscellaneous Application which was also heard along with with the appeal.

The AR submitted that new grounds cannot be introduced at this stage of appeal and placed reliance on the decision in Gujchem Distillers - 2010-TIOL-806-HC-MUM-CX.

The Bench inter alia observed –

++ The submission on behalf of Revenue on the additional grounds is not tenable. The Hon'ble High Court of Bombay, in its decision supra, was confronted with the acceptance of a fresh fact which was not within the ken of the original authority. In the present instance, appellant has merely placed on record a decision that was rendered after the show cause notice was issued. Admittedly, appellant had been relying on the lack of any debarment to utilization of credit for discharge of such tax liability.

++ However, the issue raised is one of law which, even if made as an oral submission, cannot be ignored by this Tribunal . Therefore, I find no reason to deny the miscellaneous application.

++ By applying the decision in re Indian National Shipowners Association , the tax itself was not leviable during the dispute period. The manner of discharging that tax liability cannot be the subject of a demand under section 73 read with rule 14 of CENVAT Credit Rules, 2004.

The Appeal was allowed.

(See 2017-TIOL-283-CESTAT-MUM)