2014 (5) TMI 765 - AT - Service Tax

CENVAT Credit - Debit notes - whether the appellant could avail the Cenvat credit of service tax paid on the Business Auxiliary Service availed by them on the basis of debit notes issued by their dealers - Held that - when the debit note contains all the particulars which are required to be mentioned in an invoice, just because the document is titled debit note instead of invoice , the Cenvat credit cannot be denied. Rule 4A (1) of Service Tax Rules mentions the particulars which are required to be mentioned in an invoice. In our view, if the debit note issued by a service provider contains all the information, which is required to be mentioned in an invoice in terms of Rule 4A (1) of Service tax Rules, 1994, the documents has to be treated as invoice issued under Rule 4 A (1) of Service Tax Rules, irrespective of its title and service tax credit has to be allowed on the basis of such document. However, in this case, the Commissioner has not examined this aspect and has simply disallowed the credit on the basis that the documents on the basis of which the Cenvat credit has been availed were titled debit notes and not invoices. The impugned order, therefore, is not sustainable and the same has to be set aside and the matter has to be remanded for denovo adjudication after examining as to whether the debit notes contained all the information which is required to be mentioned in an invoice in terms of Rule 4A of the Service Tax Rules, 1994 and if this is so, the Cenvat credit has to be allowed. - Decided in favour of assesee.

Summary

Issues:
1. Validity of availing Cenvat credit based on debit notes.
2. Denial of Cenvat credit by the Commissioner.
3. Applicability of Rule 9(1) of Cenvat Credit Rules.
4. Consideration of documents for Cenvat credit eligibility.
5. Correctness of penalty imposition under Rule 15(2) of Cenvat Credit Rules.

Issue 1: Validity of availing Cenvat credit based on debit notes:
The appellant, a manufacturer of Heavy Earth Moving Vehicles, reimbursed service tax to dealers on sales commission, which the dealers paid under Business Auxiliary Services. The appellant took Cenvat credit for this reimbursement. The Commissioner disallowed the credit, stating that debit notes used were not valid documents for Cenvat credit. The appellant argued that the debit notes contained all necessary invoice information. The Tribunal held that if a debit note includes required invoice details, irrespective of its title, Cenvat credit should be allowed. The Commissioner's decision was deemed unsustainable, and the matter was remanded for further examination.

Issue 2: Denial of Cenvat credit by the Commissioner:
The Commissioner, in the show cause notice, demanded recovery of Cenvat credit taken by the appellant, along with interest and penalty under Rule 15(2) of Cenvat Credit Rules. The Commissioner held that the debit notes used by the appellant were not valid documents for Cenvat credit. The Tribunal disagreed, emphasizing that the crucial factor is whether the debit notes contain all required invoice information. The Commissioner's decision was set aside, and the matter was remanded for reevaluation.

Issue 3: Applicability of Rule 9(1) of Cenvat Credit Rules:
The Commissioner invoked Rule 9(1) of Cenvat Credit Rules to deny the appellant's Cenvat credit claim based on debit notes. However, the Tribunal clarified that if a document, like a debit note, includes all necessary invoice particulars, it should be treated as an invoice for Cenvat credit purposes. The Commissioner's decision was found to lack examination of whether the debit notes met the invoice criteria, leading to the order being set aside for reassessment.

Issue 4: Consideration of documents for Cenvat credit eligibility:
The Tribunal highlighted that the key consideration for Cenvat credit eligibility is whether the document used, such as a debit note, contains all information required in an invoice per Rule 4A(1) of Service Tax Rules. The Tribunal emphasized that the title of the document should not be the sole basis for denying Cenvat credit. The Commissioner's failure to assess if the debit notes met invoice requirements led to the decision being overturned for a fresh evaluation.

Issue 5: Correctness of penalty imposition under Rule 15(2) of Cenvat Credit Rules:
The Commissioner imposed a penalty on the appellant under Rule 15(2) of Cenvat Credit Rules, citing the longer limitation period due to alleged suppression of availing Cenvat credit based on invalid documents. The Tribunal, upon setting aside the Commissioner's decision on Cenvat credit denial, implied a reassessment of penalty imposition. The penalty aspect was not specifically addressed in the judgment but would likely be revisited during the denovo adjudication ordered by the Tribunal.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's decision on each matter, ensuring a thorough understanding of the legal complexities addressed in the case.