2018 (12) TMI 84 - AT - Central Excise

CENVAT Credit - relevant date for taking credit and payment of service tax - Rule 4(7) of CCR, 2004 - the appellants have taken Cenvat credit of service tax on input service before making payment of the same - contravention of Rule 4(7) of CCR, 2004 - Held that - The assessee is entitled to avail the Cenvat credit on input service, if the bill/invoice of the said input service has been paid - the appellant is entitled to avail Cenvat credit on payment of bill/invoice of input service along with service tax and the payment of same has not been disputed by the Revenue - no demand of service tax is sustainable against the appellant. Demand of Interest - Held that - It is the mandate of provisions of Cenvat Credit Rules, 2004, the appellant is entitled to avail Cenvat credit after making payment of the invoice - thus, for the intervening period, the appellant is liable to pay interest. Penalty - Held that - As the appellant had contravened the provision of Rule 4(7) of the Cenvat Credit Rules, 2004, in these circumstances, the appellant is liable to pay penalty of ₹ 2000/- in each case. Appeal allowed in part.

Summary

Issues:
Violation of Rule 4(7) of Cenvat Credit Rules, 2004 - Availing Cenvat credit on input services before payment.

Analysis:

1. Facts and Background: The appellants availed Cenvat credit on input services before making payments, leading to the issuance of show cause notices demanding Cenvat credit amounts and penalties for the period April 2007 to March 2009.

2. Appellants' Arguments: The appellants argued that they did not utilize the credit and that the final product was cleared on payment of duty, citing judgments from various High Courts and the Supreme Court to support their case.

3. Revenue's Arguments: The Revenue contended that the appellants did not reverse the credit before utilization, distinguishing the case from precedents where no interest was liable. They relied on a Supreme Court decision interpreting 'taken' or 'utilized wrongly' in favor of the Revenue.

4. Judgment: The Tribunal analyzed Rule 4(7) of Cenvat Credit Rules, 2004, which requires payment of the invoice before availing Cenvat credit. As the appellants paid the invoices later, they were held liable to pay interest for the intervening period and a penalty of ?2000 in each case for contravening the rule.

5. Decision: The Tribunal ruled that no demand for service tax was sustainable against the appellants as they eventually paid the invoices. However, they were directed to pay interest for the intervening period and reduced the penalty to ?2000 in each appeal.

6. Conclusion: The appeals were disposed of with the above decisions, emphasizing compliance with Rule 4(7) of the Cenvat Credit Rules, 2004, regarding availing Cenvat credit on input services after payment of invoices.