2018 (2) TMI 1399 - AT - Service Tax

CENVAT credit - credit of full service tax paid on partial reverse charge on input services - Alleging that as per N/N. 30/2012-ST dated 20.06.2012, the appellant was required to pay 75% of the Service tax amount as service recipient whereas, the service provider was required to pay 25% of the service tax liability, instead, since the service provider had paid the entire service tax amount(100%), therefore, the appellant are not eligible to avail credit of the service tax paid by the service provider. Held that - the appellant though required to pay 75% of the service tax liability, on receiving the man-power supply service from the service provider, however, initially the entire amount of service tax was paid by the service provider and later recovered from the appellant by indicating the same in the invoice - appellant eligible for credit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of CENVAT credit on service tax paid by the service provider
- Interpretation of Notification 30/2012-ST dated 20.06.2012
- Eligibility of credit based on payment of service tax by service provider
- Application of Rule 4(7) of the Cenvat Credit Rules, 2004

Analysis:
1. The appeal revolved around the appellant's eligibility to avail CENVAT credit on service tax paid by the service provider for man-power supply service used in manufacturing finished goods. The dispute arose from the requirement under Notification 30/2012-ST, where the service recipient was to pay 75% of the service tax liability, but the service provider paid the entire amount. This led to a demand notice for credit recovery, which was confirmed upon adjudication.

2. The appellant contended that they were entitled to the credit as they had paid against invoices issued by the service provider, regardless of who paid the service tax. Citing the judgment of the Hon'ble Gujarat High Court in a similar case, the appellant argued that the service tax payment by the provider should not affect credit eligibility. Furthermore, they referred to a Tribunal judgment supporting their stance.

3. The appellant's advocate emphasized that the apportioned service tax liability in Notification 30/2012-ST did not impact credit eligibility for the recipient. They highlighted the amended Rule 4(7) of the Cenvat Credit Rules, 2004, stating that credit could be claimed once the service tax amount was indicated in the invoice, as was the case here.

4. The Tribunal, after considering the arguments and legal precedents, found in favor of the appellant. Referencing the judgment of the Hon'ble Gujarat High Court, the Tribunal concluded that the service provider's payment should not hinder the recipient's credit claim. The Tribunal highlighted the entitlement to CENVAT credit under the Cenvat Credit Rules, 2004, even if the duty was mistakenly paid by the supplier.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal and providing consequential relief as per the law. The decision was based on the principle that the payment of service tax by the service provider should not affect the appellant's right to avail CENVAT credit for the input service used in manufacturing.