My client is paying service tax under the service of cable operator.we import set top boxes and avail the cenvat credit on the CVD part.Further we sell(deemed sales under sale of goods Act) it to our subscribers and pay VAT accordingly.The service tax Dept demanded service tax under "supply of tangible goods services".Hoever we replied that the set top boxes are sold to our subscribers and also as VAT is paid,we cannot pay service tax.However the demand was confirmed and we have approached CESTAT in this regard.We continue to pay service tax on cable operator service.
Now the Dept has issued a letter saying that as the set top boxes have been sold (deemed sales) as claimed by us and as we have claimed it as capital goods,we are to reverse the CENVAT CREDIT already taken and utilised.They further say that it is a clear case of misuse of cenvat credit and that the capital goods were cleared as such (Rule 5 of cenvat credit Rules).
The fact is that we are utilising the credit to pay the service tax on cable operator service.The set top boxes are capital goods sold to our customers.only our customers can use the set top boxes.the set top boxes are integral to our main business as cable operator.
Please respond
CAclubindia
