2018 (8) TMI 1168 - AT - Central Excise

CENVAT Credit - denial of credit on the sole ground that the service provider has not deposited the same with the Revenue - Held that - The appellant has admittedly procured the Cenvatable services of construction of factory from M/s. Keil India Engineering Pvt.Ltd. and all the requisite particulars stand mentioned in the said invoices so raised by the service provider. The service provider is also registered with the Service Tax department for their Delhi unit, but their NOIDA unit, who has actually provided the services were not registered. However, registration number stands given in the invoice along with the amount of Service Tax. The appellant is neither expected nor is under any legal obligation to find out that the Service Tax so mentioned in the invoices stands actually paid by the service provider or not. In terms Rule 4(7) of Cenvat Credit Rules readwith Rule 9 of Cenvat Credit Rules, the only requirement of the assessee is to pay the value of the services as also the quantum of service tax as assessed in the invoice raised by the service provider and then to avail the credit. The assessee cannot be held responsible for any default in non-deposit of duty by the service provider and the credit of the service tax paid by him to the service provider for further deposit in the exchequer kitty cannot be denied to him on account of the lapse of the service provider. Inasmuch as the appellant has admittedly paid the Service Tax amount to the service provider, along with value of the goods, the fact that the said service provider has not further deposited the same with the government, cannot lead to denial of credit to the present appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of Cenvat credit based on non-payment of service tax by the service provider.

Analysis:
The judgment revolves around the denial of Cenvat credit to the appellant due to the non-payment of service tax by the service provider, M/s. Keil India Engineering Pvt.Ltd. The lower authorities confirmed a demand of duty amounting to ?2,66,61,747 and imposed a penalty on the appellant based on this issue, pertaining to the period from April 2007 to December 2009. The Revenue initiated proceedings against the appellant on the grounds that the service provider did not deposit the service tax despite issuing invoices showing the service tax amount separately. The appellant argued that they had no knowledge of the service provider's non-payment and had rightfully availed the credit based on legitimate invoices provided by the service provider.

The advocate representing the appellant contended that the appellant should not be penalized for the service provider's failure to pay the service tax. The advocate highlighted that the invoices were complete and contained all necessary details, including the service provider's registration number and service tax amount. The appellant had fulfilled their obligation by paying the service tax amount to the service provider as per the invoices. The advocate cited precedent decisions and Circular No.441/7/99-CX to support the appellant's case.

Upon examination of the invoices and considering the legal provisions, the Tribunal noted that the appellant had procured services from the service provider in good faith, with all required details mentioned in the invoices. The Tribunal emphasized that the appellant was not obligated to verify whether the service tax mentioned in the invoices was actually paid by the service provider. Referring to Rule 4(7) and Rule 9 of Cenvat Credit Rules, the Tribunal stated that the appellant had fulfilled their responsibility by paying the service tax amount as assessed in the invoices to avail the credit. The Tribunal reiterated that the Revenue's recourse in such cases should be against the service provider for non-payment of service tax, rather than denying credit to the appellant.

The judgment cited various legal precedents, including decisions by the Supreme Court and High Courts, affirming that the recipient of services cannot be held accountable for the service provider's failure to pay the tax. The Tribunal concluded that since the appellant had paid the service tax amount to the service provider as per the invoices, the denial of credit by the Revenue was unjustified. Consequently, the impugned order denying the credit was set aside, and the appeal was allowed in favor of the appellant.