2018 (4) TMI 228 - AT - Service Tax

Utilisation of CENVAT credit - reverse charge - service receiver - case of Revenue is that the CENVAT credit cannot be used for payment of service tax in respect of services where the person liable to pay the tax is the service recipient - sub-rule (4) of Rule 3 of CCR 2004 - Held that - The wordings used in the Explanation to Rule 3 of CCR 2004, incorporated with effect from 01.07.2012, is CANNOT and is in the nature of mandate and the usage of CENVAT credit for payment of service tax on WCS, MRS etc. as service recipient, is clear violation of Rule 3 of CCR 2004. Appellant, being service recipient cannot utilise the CENVAT credit to make the payment - appeal dismissed - decided against assessee-appellant.

Summary

Issues involved: Appeal against rejection of appeal by Commissioner (Appeals) regarding utilization of CENVAT credit for payment of service tax under reverse charge mechanism.

Analysis:
1. Facts of the Case: The appellant, engaged in manufacturing MET Coke, availed CENVAT credit for duty paid on inputs, capital goods, and service tax on input services. They intended to pay service tax on certain services under reverse charge using CENVAT credit, which led to a dispute regarding the contravention of Rule 3 of CENVAT Credit Rules, 2004.

2. Appellant's Argument: The appellant contended that the impugned orders were contrary to facts and law, emphasizing that CENVAT credit should be available to service providers liable to pay service tax. They argued that using CENVAT credit was revenue-neutral and that financial constraints compelled them to use the credit instead of cash for service tax payment.

3. Respondent's Defense: The learned Assistant Commissioner defended the impugned orders, stating that Rule 3 of CENVAT Credit Rules, 2004 prohibits using CENVAT credit for services where the service recipient is liable to pay tax. He highlighted that the reverse charge mechanism does not permit utilizing CENVAT credit for works contract service, manpower supply service, rent-a-cab service, and GTA.

4. Commissioner's Decision: The Commissioner (Appeals) upheld the orders, emphasizing that the legislative explanation to Rule 3 clearly prohibits using CENVAT credit when the service recipient is liable to pay tax. The Commissioner dismissed the appellant's arguments related to administrative convenience and legislative intent, stating that the rules are for implementation, not interpretation.

5. Tribunal's Verdict: After considering the submissions and the Commissioner's findings, the Tribunal found no fault in the impugned orders. Upholding the Commissioner's decision, the Tribunal dismissed the appeals, affirming that using CENVAT credit for services where the service recipient is liable to pay tax violates Rule 3 of CENVAT Credit Rules, 2004.

6. Conclusion: The Tribunal, in its judgment dated 08-02-2018, upheld the decision of the Commissioner (Appeals) and dismissed the appeals, concluding that the appellant's use of CENVAT credit for service tax under reverse charge mechanism was in violation of Rule 3 and the legislative explanation to the CENVAT Credit Rules, 2004.