The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), consisting of P.K. Chaudhary (Judicial Member), has held that the notification levying service tax under the reverse charge mechanism (RCM) for works contract service shall be applicable only to individuals, partnership firms, and Hindu Undivided Families (HUF), and not to corporate assessees.
The appellant/assessee is in the business of manufacturing soft ferrite parts and components falling under Tariff Heading No. 85051110 of the First Schedule to the Central Excise Tariff Act, 1985. A show-cause notice was issued to the appellant, alleging wrong availment and utilisation of CENVAT credit on air travel agency services, work contract services, construction services, etc.
The adjudicating authority has confirmed the demand as proposed in the show-cause notice and appropriated a sum of Rs. 35,536 that was paid or reversed by the appellant. An amount of Rs. 6090 was also paid towards the interest liability. On appeal, the Commissioner (Appeals) rejected the appeal before him and upheld the adjudication order.
Regarding air travel agent and rail travel agent services, the Commissioner (Appeals) observed that there is nothing on the records to the effect that the said services have not been used primarily for personal purposes or for consumption by the employee.
Regarding "Works Contract Service," it has been observed in the order that, w.e.f. July 1, 2012, vide Notification No. 30/2012-ST, the reverse charge mechanism for Works Contract Service was introduced.
The CESTAT determined that if the travels were for personal reasons or consumption by an employee, the Appellant Company would not provide them and they would not be debited to their books of accounts. Unless and until the travel is for business purposes, the company will not include the expense in its books. The entire order of the adjudicating authority is very cryptic, and there is no discussion to justify the conclusion drawn in the adjudication order. He has simply proceeded to confirm the demand as proposed in the show-cause notice.
The tribunal has observed that Notification No. 30/2012-ST is applicable to individuals, partnerships, and Hindu Undivided Families (HUF). It is not applicable to corporate taxable entities. The appellant is a private limited company, and the services are supplied by a private limited company. Accordingly, the notification is not applicable. The Commissioner (Appeals) has also referred to Notification No. 26/2012-ST dated July 1, 2012, for the valuation of services and abatement. The notification is also not applicable. Therefore, the credit disallowed under "Works Contract Service" cannot be sustained, and the same is set aside.
Case Title: M/s TDK India Private Limited Versus Commissioner of CGST & Excise, Kolkata North
Citation: Excise Appeal No.76541 of 2018
Counsel For Appellant: Advocate S.P.Majumdar
Counsel For Respondent: Authorized Representative S.Mukhopadhyay