2016 (1) TMI 1194 - AT - Service Tax

CENVAT credit on amount declared under VCES scheme - construction services - Held that - Discharge of tax liability is a matter of fact that can be, and should have been, verified by the appropriate authorities. A presumption on the basis of a service tax return that could well be erroneous should not stand in the way of acknowledging tax paid whether it has been in accordance with the schedule prescribed in the Finance Act, 1994 and the rules framed thereunder or any special scheme. A plain reading of Rule 6(2) of the VCES 2013 would demonstrate that the restriction on utilisation of CENVAT credit is limited only to the tax dues - The deposits and utilization of credit requires a detailed examination. matter remanded back to examine the documentary proof and restrict the demand thereafter to such amounts as are not covered by the tax paid by deposit or by CENVAT credit utilisation and the amount paid under the VCES - appeal allowed by way of remand.

Summary

Issues: Admissibility of CENVAT credit utilized by M/s Constro Enterprises for construction services.

Analysis:
1. The appellant, M/s Constro Enterprises, contested the service tax demand confirmed in the impugned order, arguing that the demand pertained to a period where they had already remitted an amount of service tax and paid the balance by debiting CENVAT credit account. They had also declared an amount under the Service Tax Voluntary Compliance Encouragement Scheme 2013 (VCES) for a different portion of services rendered.

2. The appellant highlighted that the VCES declaration did not provide for the declaration of tax paid, only focusing on tax dues. The original authority, relying on Rule 6(2) of the VCES 2013, prohibited the utilization of CENVAT credit for tax dues under the scheme, assuming the amount not reflected in the service tax return as tax due and unpaid, despite the appellant submitting all relevant documents with the VCES application.

3. The Authorized Representative supported this argument, referencing circular No. 170/5/2013-ST clarifications by the Central Board of Excise and Customs regarding VCES. The examination of the RG-23A register revealed that CENVAT credit had been utilized before the VCES declaration, which was settled by a cash deposit as per the submitted worksheet.

4. Emphasizing the importance of verifying the actual payment of tax by appropriate authorities, the Tribunal noted that a presumption based on potentially erroneous service tax returns should not hinder recognizing actual tax payments, whether under the Finance Act, 1994, rules, or special schemes. Rule 6(2) of VCES 2013 was interpreted to restrict CENVAT credit utilization to actual tax dues defined for a specific period.

5. Consequently, the Tribunal set aside the impugned order and remanded the matter to the original authority for a detailed examination of documentary proof provided by the appellant regarding tax payments from October 2010 to March 2012. The demand was to be restricted to amounts not covered by tax payments through deposit, CENVAT credit utilization, or VCES payments.

6. The appeal was disposed of accordingly, emphasizing the need for a thorough examination of deposits and credit utilization to determine the admissibility of CENVAT credit for the appellant's construction services.