2018 (7) TMI 93 - AT - Service Tax

CENVAT Credit - duty paying documents - case of Revenue is that such credit was availed by the appellant on the input documents issued prior to 14.03.2003 which is violative of Service Tax Credit (Second Amendment) Rules, 2003 framed under N/N. 5/2003 dated 14.05.2003 vide sub-rule (1) of Rule 3 - Held that - The payment in respect of all bills were made after 14.05.2003 and the cenvat credit was availed by the appellant between July 2013 and September 2013, as found from the appeal memo, which covers the case under proviso annexed to Rule 3 - appellant had not availed any cenvat credit in violation of Rule 3(1)(b) of Cenvat Credit Rules 2002 (second amendment) - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refusal of cenvat credit availed by appellant advertising company on input services, challenge to legality of demanding tax, interpretation of Cenvat Credit Rules 2002, invoking extended period of limitation, applicability of Rule 3(1)(a) and (b) of Cenvat Credit Rules 2002, justification of order by Commissioner (Appeals), consideration of proviso annexed to Rule 3, payment dates of invoices, setting aside order of adjudicating authority.

Analysis:
The case involves the challenge to the refusal of cenvat credit amounting to ?8,08,800/- by an advertising company on input services, following an audit report indicating the credit as inadmissible. The appellant contested the demand for tax, interest, and penalty imposed by the first adjudicating authority, leading to an appeal before the Commissioner (Appeals) (Para 1).

During the period of July 2013 to September 2013, the appellant availed input credits on various services. The show-cause notice alleged that the credit availed on input documents issued before 14.03.2003 violated the Service Tax Credit Rules. The Commissioner allowed a partial credit but confirmed a substantial demand, leading to the appeal (Para 2).

The appellant's counsel argued that the Commissioner erred in disallowing the cenvat credit and invoking the extended period of limitation without proper legal appreciation. Reference was made to judicial decisions to support the appeal's position (Para 3).

The respondent department contended that the appellant's case fell under Rule 3(2) of the Cenvat Credit Rules 2002, justifying the order passed by the Commissioner (Appeals) and the first adjudicating authority. The distinction between input services falling in the same category as output service and other services was highlighted (Para 4).

The Tribunal analyzed the amended Rule of 2002 and the documents on record. The interpretation of cenvat credit concerning input services used for output services was a crucial issue. The appellant accepted that the services in question could fall under the category of other services as per Rule 3(b) of the Cenvat Credit Rules 2002, leading to a detailed examination of the Rule's text (Para 5).

The Tribunal noted that the proviso annexed to Rule 3 had been overlooked by the authorities in upholding the inadmissibility of cenvat credit. The appellant demonstrated that payments for all invoices were made after 14.05.2003, aligning with the proviso's requirements. Consequently, the Tribunal found merit in the appellant's submission and allowed the appeal, setting aside the orders of the Commissioner (Appeals) and the adjudicating authority (Para 6-8).