2015 (2) TMI 44 - AT - Service Tax

Denial of CENVAT Credit - Merchant Banking Services - whether or not TR-6 challan evidencing payment of tax after detection of offence case is eligible document for availing Cenvat credit under Rule 9(1)(b) of the Rules, 2004. - Held that - Respondent issued challan after 14 days of such taxable services and, therefore, it could not be treated as challan under Rule 9(1)(b) of Rules, 2004. There is no dispute that Rule 9(1)(e) permitted to avail credit on the basis of a challan. A challan evidencing payment of Service Tax by the person liable to pay Service Tax under sub-clauses (iii), (iv), (v) and (vii) of clause (d) of sub-rule (1) of Rule 2 of the Service Tax Rules, 1994. - So, it is apparent that after insertion of clause (bb) in Rule 9(1) Notification No. 13/2011 supra, credit can be denied on a challan availed on account of fraud, collusion, etc. Tribunal in the case of M/s. Metafab (2005 (4) TMI 564 - CESTAT CHENNAI) while dealing with Notification No. 6/97-C.E., wherein Rule 57E of the erstwhile Rules was amended, whereby fraud, collusion, suppression of facts, etc., were incorporated as ground for denying the benefit of Rule 57E to a manufacturer of final product receiving inputs on which initially duty had not been paid or had been short-paid on account of fraud, collusion, suppression of facts, etc. In that case, The Tribunal has observed that the said amendment was not applicable prior to the date of Notification. Similarly, in the present case, the denial of credit on the basis of a challan for the reason of fraud, collusion, suppression of facts, etc., would not be applicable prior to the notification, dated 31-3-2011. Hence, I am unable to accept the contention of the learned Authorised Representative. Hence, in the present case, the respondent availed credit on the basis of the challan as specified under Rule 9(1)(e) which cannot be denied. - Decided against Revenue.

Summary

Issues:
- Eligibility of availing Cenvat credit based on TR-6 challan after detection of offence case under Rule 9(1)(b) of Cenvat Credit Rules, 2004.

Detailed Analysis:

Issue 1: Eligibility of availing Cenvat credit based on TR-6 challan after detection of offence case under Rule 9(1)(b) of Cenvat Credit Rules, 2004:

Facts: The case involved the respondent, engaged in manufacturing, who availed Cenvat credit benefit but faced a dispute regarding availing service from a foreign provider related to Foreign Currency Convertible Bonds (FCCB). The respondent paid tax after detection by DGCEI officer, leading to a show cause notice disallowing the credit based on the TR-6 challan.

Revenue's Argument: The Revenue contended that Rule 9(1)(b) restricts credit eligibility for supplementary invoices due to fraud, collusion, or wilful misstatement. They highlighted Rule 4A of Service Tax Rules, 1994, requiring issuance of invoices/challans within 14 days, which the respondent failed to comply with in this case.

Respondent's Argument: The respondent argued that the TR-6 challan was a specified document under Rule 9(1)(e) of Cenvat Credit Rules, 2004. They referenced a Tribunal decision and a notification post-dispute period, supporting their position on credit eligibility based on the challan.

Commissioner (Appeals) Finding: The Commissioner held that Rule 9(1)(b) did not apply to Service Tax, and the TR-6 challan was an eligible document for credit under Rule 9(1)(e), citing a relevant case law.

Tribunal's Decision: The Tribunal analyzed the applicability of Rule 9(1)(b) and the insertion of clause (bb) post-dispute period, emphasizing that denial of credit based on fraud-related grounds was not applicable retroactively. They upheld the Commissioner's decision, concluding that the respondent rightfully availed credit based on the specified challan under Rule 9(1)(e).

Conclusion: The Tribunal rejected the Revenue's appeal, affirming the eligibility of the respondent to avail Cenvat credit based on the TR-6 challan, as per Rule 9(1)(e) of Cenvat Credit Rules, 2004.