2018 (3) TMI 172 - AT - Central Excise

CENVAT credit - the service tax was paid by the service provider by reason of fraud collusion or willful misstatement etc. and accordingly as per the provisions of Rule 9(1)(bb) of the Rules the appellant is not permitted to take Cenvat credit - Held that - the charges leveled against the service provider regarding fraud collusion willful mis-statement etc. were no more in existence in view of the proceedings dropped by the jurisdictional Commissioner (Appeals). Since the service tax amount in question was not paid by the reason of fraud collusion etc. the appellant cannot be denied the Cenvat credit benefit in terms of the Rule 9(1) (bb) of the Rules. Since the service tax paid by the service provider was availed as credit by the appellant on the basis of the bills raised by him the benefit of CENVAT credit cannot also be denied to the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of Cenvat credit due to service tax paid by service provider under Rule 9(1)(bb) of the Cenvat Credit Rules, 2004.

Analysis:
The case involved an appeal against an order passed by the Commissioner (Appeals) disallowing Cenvat credit to the appellant for service tax paid on man power recruitment and supply agency services provided by a specific service provider. The Department contended that the service tax was paid by the service provider due to fraud, collusion, or willful misstatement, invoking Rule 9(1)(bb) of the Cenvat Credit Rules, 2004. The appellant's Cenvat credit amounting to ?11,06,092/- was disallowed, and a penalty of ?5,53,046/- was imposed. The Commissioner (Appeals) upheld the demand confirmed on the appellant.

The appellant argued that the show cause notice issued against the service provider was set aside by the Commissioner (Appeals), indicating that the charges against the service provider were no longer valid. As the service tax paid by the provider was not due to fraud or collusion, the appellant should not be denied Cenvat credit under Rule 9(1)(bb) of the Rules. The Commissioner (Appeals) observed that the service provider's demand for service tax was set aside, indicating the absence of fraud or collusion. The appellant, having availed the service tax credit based on bills raised by the provider, was entitled to the Cenvat credit under Rule 3 of the Rules.

The Tribunal, after considering the arguments and observations, found no merit in the impugned order disallowing the Cenvat credit. The Tribunal set aside the order and allowed the appeal in favor of the appellant. The decision was based on the absence of fraud or collusion in the service tax payment and the appellant's entitlement to Cenvat credit under Rule 3 of the Cenvat Credit Rules, 2004.