2015 (6) TMI 1078 - AT - Service Tax

Cenvat credit - appellant took credit of service tax paid on the services received from two Architect firms during October, 2003 - in both the invoices on the basis of which credit was taken, service tax amount had not been shown separately - Held that - even though several arguments were advanced as to the eligibility of appellant on the ground that the amount was treated as cum-tax amount by both the service receiver and service provider and tax had been promptly paid by both the service providers, yet, in view of the requirement in Rule 5(1) of Cenvat Credit Rules, which says that tax amount paid has to be indicated, I cannot go against the provisions of Rule and therefore, I do not consider it worthwhile to discuss all the submissions made with regard to this issue. Invokation of extended period of limitation - in both the cases, the appellant had paid the amount and subsequently they have produced certificates from the service providers that they had paid tax promptly - Held that - in the case of one service provider, the final invoice copy was also produced which showed service tax amount paid separately and this amount is more than ₹ 74,000/-. This would show that the claim of appellant that both the service provider and the service receiver believed that the amount originally invoiced was cum-tax amount and in one case, the final invoice was also issued confirming the bona fide belief on behalf of both the service receiver and the service provider. In such a situation, when the appellant had taken reasonable steps to ensure that the service providers had paid the tax which has been proved by subsequent certificates issued and also had followed the provisions relating to the steps to be taken by them to ensure that the tax has been paid, it cannot be said that there was intention to evade service tax or suppress the fact of availment of Cenvat credit based on invoices which did not show service tax separately. Therefore, invocation of extended period to demand the amount of credit taken cannot be sustained. - Decided partly in favour of appellant

Summary

Issues:
1. Availment of Cenvat credit without service tax amount shown separately in invoices.
2. Interpretation of Rule 5(1) of Cenvat Credit Rules regarding tax amount indication requirement.
3. Applicability of the extended period for denying Cenvat credit.
4. Consideration of limitation in the case of availed Cenvat credit.

Analysis:
1. The appellant, engaged in consulting engineer services, availed service tax credit for services received from two Architect firms during October 2003. The credit was denied as the service tax amount was not shown separately on the invoices, contrary to the requirement of Rule 5 of Cenvat Credit Rules at that time.

2. Despite arguments on the prompt payment of tax by both service receiver and provider, the Tribunal upheld the denial of credit based on Rule 5(1) mandating the indication of tax amount. The Tribunal declined to entertain arguments contrary to the rule's provisions.

3. However, the Tribunal found merit in the appellant's submissions on limitation and the non-applicability of the extended period for denying Cenvat credit wrongly availed. The appellant had paid the tax promptly, supported by certificates from service providers. In one instance, a final invoice showed the service tax separately paid, exceeding Rs. 74,000. The show cause notice was issued after a significant period, indicating the appellant's good faith belief in the cum-tax nature of the invoiced amounts.

4. Considering the steps taken by the appellant to ensure tax payment, the Tribunal concluded that there was no intention to evade tax or suppress facts regarding Cenvat credit availed based on invoices lacking separate tax amounts. Therefore, the invocation of the extended period to demand the credit amount was deemed unsustainable. The appeal was allowed on the grounds of limitation, providing consequential relief to the appellant.