MEC SHOT BLASTING EQUIPMENT P LTD vs JODHPUR

IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
NEW DELHI

Principal Bench
COURT NO. III

Service Tax Appeal No. 50469 of 2019

[Arising out of the Order-in-Appeal No. 326 (CKJ)/ST/UDR/2018 dated
03/07/2018 passed by The Commissioner (Appeals), Customs Goods Service
Tax, Udaipur.]

M/s Mec Shot Blasting Equipment P. Ltd. Appellant
Plot No. E-279, MIA, Basni Phase – II,
Jodhpur, Rajasthan – 342 005.

VERSUS

The Commissioner of Central Goods Respondent
and Service Tax ,
G-105, New Industrial Area,
Opp. Diesel Shed, Basni,
Jodhpur, Rajasthan.

Appearance

Shri Om P. Agarwal, Chartered Accountant for the appellant.

Shri Anil Kumar, Authorized Representative (DR) – for the Respondent.

CORAM: Hon’ble Shri Ajay Sharma, Member (Judicial)
Hon’ble Ms. Hemambika R. Priya, Member (Technical)



FINAL ORDER No. 51617/2026


DATE OF HEARING:08.10.2026

DATE OF DECISION:16.10.2026

HEMAMBIKA R. PRIYA

1
M/s Mec Shot Blasting Equipment (P) Limited have filed this
appeal against the impugned Order-in-Appeal No. 326
(CKJ)/ST/UDR/2018 dated 03/07/2018 whereby the
Commissioner (Appeals) upheld the Order-in-Original to the
extent of demand of service tax of Rs. 2,12,386/- along with

1 The appellant

2 ST/50469/2019
interest and reduced the penalty to Rs. 1,06,193/- under Section
78 of the Finance Act, 1994.
2. The brief facts of the case are that the appellant was
engaged in manufacturing of excisable goods falling under
chapter 84 and availing Cenvat credit of duty and tax paid on
input and input services. They were also registered under section
69 of the Finance Act, 1994 for discharging the service tax
liability payable by them. During the period from 01.07.2012 to
31.03.2014, the appellant had paid a sum of Rs.50,60,273/- to
various service providers towards providing of manpower
recruitment or supply agency services. The appellant being body
corporate and service provider being an individual, therefore,
they were liable to deposit service tax of Rs.4,69,087/- under
reverse charge mechanism as per Notification No.30/2012-ST
dated 20.06.2012.Show Cause Notice dated 18.01.2016 was
issued to the appellant for demand of service tax of
Rs.4,69,087/- along with interest under provisions of section 73
and 75 of the Finance Act, 1994. Penalties were also proposed to
be imposed upon them under section 76, 77 and 78 of the
Act.The Adjudicating Authority vide the Order-in-Original dated
24.01.2017 confirmed the demand of service tax amounting to
Rs. 4,69,087/- including cesses along with interest under section
75 and penalty of Rs.4,69,087/- under section 78 and
Rs.20,000/- under section 77 of the Act. Being aggrieved with
the said order, the appellant filed an appeal before Commissioner
(Appeals). Vide the impugned order, the Commissioner (Appeals)
upheld the demand for Rs. 2, 12, 386/- along with interest and
reduced the penalty of Rs. 1,06,193/-. Aggrieved by the said
order, the appellant filed the present appeal.

3 ST/50469/2019
3. Learned Chartered Accountant appearing for the appellant
submitted that this demand was not sustainable on the principle
of 'revenue neutrality' as the appellant was entitled to Cenvat
credit of tax so demanded and such credit would have been
utilized for discharging duty on excisable goods manufactured by
the appellant or for discharging service tax on output services
provided by the appellant (like commissioning and installation
services in which the manpower was used). The appellant was
regularly paying duty of excise and service tax. Learned
Chartered Accountant relied on the decision of the Tribunal in the
case of Texyard International versus Commissioner of
2
Central Excise wherein the Tribunal held that service tax was
payable under reverse charge but since the appellant were
eligible for Cenvat credit, therefore, demand was dropped on the
grounds that the entire exercise was revenue neutral. He further
contended that the Supreme Court in Commissioner of Central
3
Excise Vs. Coca Cola India Pvt. Ltd. had held that when
assessee is eligible to Modvat credit, the situation becomes
revenue-neutral. The Tribunal vide Final Order No. 56255/2017
dt. 21.08.2017 in the case of Satyam Enterprises also held that
the demand is not sustainable due to situation of neutrality.
3.1 Learned Chartered Accountant further contended that the
demand was hit by limitation. The entire transactions were duly
recorded in the Books of Accounts and the payments were made
through banking channel. He submitted that the non-payment of
tax was noticed during the course of audit of records of the
appellant. Since, the transactions were a part of audited Books of
Accounts, therefore, suppression and intent to evade cannot be

2 2015 (40) STR 322 (Tri.)
3 2007 (123) ELT 490 (SC)

4 ST/50469/2019
alleged. It was a case of non-payment of tax under bona fide
belief. He submitted that the appellant was eligible for Cenvat
credit of the tax demanded, therefore, in view of decision given
by Hon'ble Supreme Court in the case of Amco Batteries Ltd.
4
Vs. Commissioner of Central Excise there was no reason for
the appellant to suppress and hence, extended period limitation
was not invocable. As demand was not sustainable, therefore,
interest was also not recoverable and penalty imposed was not
sustainable.
4. Learned Authorized Representative for the Department
submitted that the Commissioner (Appeals) in para 6 of Order-in-
Appeal had observed that in respect of amount of Rs.22,91,105/-
paid to service provider (M/s Aditya Construction and M/s
Petrochem Solution), no documentary evidence was submitted to
substantiate their claim that services provided by these persons
was not covered under manpower supply services and hence they
were not liable to pay service tax under Notification no.30/2012-
ST dated 20.06.2012.The claim of revenue neutrality by the
appellant is not acceptable as the appellant did not pay service
tax under Reverse Charge Mechanism for the period 01.07.2012
to 31.03.2014. This non-payment was a loss to Government
Exchequer and it cannot be presumed that had the duty been
paid, the credit would have been admissible and available. The
concept of revenue neutrality in nature cannot be an excuse for
non-payment of tax. If such a contention was accepted, the very
concept of credit chain would be obsolete. The appellant had
failed to properly assess the service tax liability and also failed to
reflect the correct information in ST-3 returns. They suppressed

4 2003 (153) ELT 7 (SC)

5 ST/50469/2019
the material facts and misrepresented their case with an intent to
evade the duty. During the course of audit, the department
detected that they had not paid their service tax liability. The
appellant was requested to deposit their dues. However,
Appellant vide letter dated 10.08.2015 stated that they were not
liable to pay service tax under RCM and further stated that even
otherwise also, in view of principle of revenue neutrality, demand
was not sustainable.
5. We have heard the learned counsel for the appellant,
learned AR for Revenue and perused the records.
6. Learned Counsel has primarily relied on the submissions
that as the appellant was to pay the service tax under RCM, and
could avail Cenvat Credit of such payment, hence it is revenue
neutral. In this context, it is important to note that the liability to
service tax arises under section 66A of the Finance Act 1994 on
the provider's taxable event. It is not contingent on the
recipient's entitlement to credit. Taking Cenvat credit is
conditional, dependent on the provisions of the relevant Rules.
Credit of tax paid under section 68(2) arises under Rule 3(1)(vii)
Cenvat Credit Rules 2004 only upon payment. Rule 4(7) CCR,
read with Rule 9 makes payment the condition precedent. The
judgment by Supreme Court in Collector of Central Excise,
5
Pune versus Dai Ichi Karkaria Ltd. has held that credit is a
concession, subject to the Rules, not an accrued right. The right
to avail Cenvat Credit arises only when the service tax paid.
Hence, the duty liability does not get extinguished based on the
fact that the appellant was eligible to avail Cenvat credit of the
service tax paid under RCM. We draw support from the Tribunal’s

5 AIR 1999 SC 3234

6 ST/50469/2019
decision in Commissioner of Central Excise and Service Tax,
Indore versus Cummins Technologies India Limited[2017
(7) GSTL 69 (Tribunal-Delhi)] wherein the Tribunal held as
follows:-
“6. Section 66 of the Finance Act, 1994 is the
charging Section, which provides that in respect of
taxable services mentioned therein, service tax shall
be levied and collected in such manner as may be
prescribed. Even for the import of service, the service
tax has to be levied under Section 66 ibid. Since a
deeming fiction was created in Rule 66A ibid,
providing for payment of service tax by the recipient
of service, such levy is in consonance with the
charging provisions contained in Section 66 ibid.
Thus, the provisions of Chapter V of the Finance Act
should also be applicable in respect of the service tax
paid under Section 66A ibid. In the present case,
since the appellant is liable to pay service tax as a
recipient of the taxable service, the provision of
Section 66 ibid should also be applicable to it. In
other words, upon fixing the responsibility for
payment of service tax under reverse charge
mechanism, no distinction can be placed between the
service receiver and service provider for the purpose
of Section 66 ibid.”


7. In view of the above, we hold that the appellant is liable to
pay service tax under RCM on such services as recipient of the
services.
8. We now address the submissions related to the invocation
of the extended period. We note that it is settled position of law
that if the recipient of the service is liable to pay the service tax,
and simultaneously eligible to avail the Cenvat Credit on such tax
paid by him, then extended period cannot be invoked. We draw
support from this Tribunal’s decision in M/s South Eastern
Coalfields Ltd versus Commissioner, CGST Customs &
Central Excise, in Service Tax Appeal No. 50412 of 2024 vide
Final Order No. 59414 of 2024 dated 06.11.2024. The Tribunal
held as under: -

7 ST/50469/2019
“8. The other submission of the learned Counsel for the
appellant is based on the principle of revenue neutrality.
The Tribunal in the case of Asmitha Microfin Ltd. (supra)
has already held that the entire demand is under reverse
charge mechanism, and if the applicant had paid the
service tax, they would have been entitled to Cenvat credit
of exactly the same amounts and, therefore, the revenue
neutrality is evident. Referring to the decision of the Apex
Court in Jet Airways (India) Ltd. that extended period of
limitation cannot be invoked in revenue neutral cases, it
was held that the entire demand is hit by limitation and is
accordingly set aside. Same principle would apply in the
present case and there is no reason to differ from the
same as the entire demand proposed in the show cause
notice falls within the extended period of limitation and,
therefore, is liable to be set aside.”

9. In view of the above discussions, we hold that the
invocation of the extended period is not correct. The penalty
under Section 78 is also set aside. However, the demand for the
normal period, if any, is upheld, along with penalty under Section
77 imposed on the appellant.
10. Consequently, the impugned order stands modified and the
appeal is allowed to the extent indicated above.
( Pronounced on 16.10.2026)





(AJAY SHARMA)
Member (Judicial)




(HEMAMBIKA R. PRIYA)
Member (Technical)
GY.