2014 (12) TMI 827 - AT - Service Tax

Cenvat credit of Service Tax paid - Sales Commission - documents did not contain all the particulars as prescribed under Rule 4A of the Service Tax Rules 1994 - Held that - First appellate authority specifically records that the debit notes on which Cenvat credit was availed contains the details as required under Rule 4A of the Service Tax Rules 1994 and also contains essential details required as per the provisions of Cenvat Credit Rules 2004. After recording such a clear findings the first appellate authority seems to have ventured into directing the lower authorities for verification regarding payment of Service Tax by the service provider to the exchequer. In my view and on perusal of the records I find that this was never an allegation in the show cause notice. If there is no such allegation verification as ordered by the first appellate authority definitely traverses beyond the show cause notice which cannot be permitted. In my view the appeal of the appellant is only to the extent that such an observation or verification was uncalled for seems to be correct and needs to be allowed. - Decided in favour of assessee.

Summary

Issues:
Cenvat credit on sales commission based on debit notes containing prescribed details - Verification of payment of Service Tax by service provider beyond show cause notice - Revenue not appealing against first appellate authority's findings.

Analysis:
The appeal challenged OIA confirming demands and penalties for availing Cenvat credit on sales commission based on debit notes lacking all prescribed particulars. Appellant contested, providing documents, and first appellate authority found debit notes compliant with Rule 4A of Service Tax Rules, 1994, but ordered verification of Service Tax payment by service provider, not alleged in show cause notice. Appellate Tribunal noted the absence of Revenue appeal against this finding. Tribunal held that directing verification beyond show cause notice was impermissible, allowing the appeal on this ground.

The primary issue revolved around the eligibility of Cenvat credit based on debit notes for sales commission. The first appellate authority found the debit notes met the required details under Rule 4A of the Service Tax Rules, 1994 and Cenvat Credit Rules, 2004. However, the authority ordered verification of Service Tax payment by the service provider, not raised in the show cause notice. The Tribunal deemed this verification beyond the scope of the notice and allowed the appeal on this specific ground, as the Revenue did not challenge this aspect.

The crux of the matter lay in the proper application of rules governing Cenvat credit on sales commission. While the first appellate authority acknowledged the compliance of debit notes with relevant rules, the additional requirement of verifying Service Tax payment by the service provider was deemed extraneous to the original show cause notice. As the Revenue did not contest this aspect, the Tribunal upheld the appeal on the basis that the verification directive exceeded the scope of the initial allegations, emphasizing the importance of adherence to procedural fairness and notice requirements in tax matters.