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When service tax liability in one transaction leads to availability of CENVAT credit in subsequent transaction resulting in a revenue neutral exercise, demand of tax was dropped.
Facts
The assessee was appointed as Outsourcing Agent by postal authorities for promotion of postal services carried out by postal department. The postal department discharged the service tax on the entire value of services being collected from the customers of postal department. During the said business, the assessee is acting as intermediary for collection of letters, affixing postal stamps for which he is getting commission from postal department on the turnover. In the adjudication, demand was confirmed holding that the assessee is independent service provider and the postal department is a service recipient and for the said services, the assessee is receiving service charges in the form of commission, therefore, their independent activity is liable for service tax.
Held
The Tribunal observed that it was not under dispute that the services provided by the assessee would be considered as input services for the postal department. The postal department is admittedly paying the service tax on the total value of the services which obviously includes service value of the assessee. In this situation, if service tax is paid by the assessee, the assessee’s services is an input service for the postal department and postal department is entitled for CENVAT credit, thus in our view the present case is Revenue neutral as the postal department is entitled for CENVAT credit of the service tax if at all payable by the assessee. In view of revenue neutrality, the demand does not exist. The demand was dropped accordingly without addressing the issues of taxability of service limitation.
