2018 (12) TMI 1098 - AT - Central Excise

CENVAT Credit - service tax paid belatedly - reverse charge mechanism - Rule 9(1)(bb) of Cenvat Credit Rule, 2004 - whether the appellant is entitled for Cenvat Credit in respect of Service Tax paid belatedly on the services received from abroad under Reverse Charge Mechanism? Held that - As per Rule 9(1)(bb) it is observed that the credit can be denied only if the short payment or non-payment for the reason of fraud or collusion or willful mis statement or suppression of fact or contravention of any of the provisions of the finance Act or Rules made there under with intent to evade payment of Service Tax - From reading of above Section 73 (4A) it is seen that it starts with the terms not with-standing anything contained under 73 (4A) which deals with situation whether there is a fraud or collusion or willful mis-statement or suppression of fact etc, therefore, when the appellant have availed Section 73 (4A) and the case of non-payment of Service Tax stood concluded by making payment of Service Tax along with interest and 15% penalty, it cannot be said that there is suppression of fact on the part of the appellant. When there is no adjudication, whether there is fraud or collusion or willful mis statement or suppression of fact the same is not established, therefore, after making the payment under Section 73 (4A), the case stand concluded, there cannot be charge of fraud or collusion or willful mis statement or suppression of fact etc. Accordingly, credit on that amount cannot be denied. The denial of Cenvat Credit by the lower authority is not legal and proper - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of Cenvat Credit on services received from abroad due to non-payment of service tax initially
- Interpretation of Rule 9(1)(bb) of Cenvat Credit Rules, 2004 regarding admissibility of Cenvat Credit in cases of belated service tax payment
- Application of Section 73(4A) in determining suppression of fact or fraud in service tax payment

Analysis:
The case involved the appellant, a manufacturer availing Cenvat Credit, who received services from abroad but initially did not pay the service tax. The appellant later discharged the service tax on reverse charge basis following an audit. A Show Cause Notice (SCN) was issued proposing to deny Cenvat Credit based on Rule 9(1)(bb) of Cenvat Credit Rules, 2004, citing suppression of fact and willful misstatement. The adjudicating authority confirmed the demand, leading to an appeal before the Commissioner (Appeals), which was rejected. The appellant then appealed the decision.

During the proceedings, the appellant's counsel argued that no malafide intention could be attributed to the appellant for the belated service tax payment under reverse charge mechanism. They cited precedents like the case of JET AIRWAYS (I) LTD. Vs. C.S.T, Mumbai and JOHN ENERGY LIMITED VS. C.C.E & S.T.- AHMEDABAD-III to support their stance.

The dispute centered on whether the appellant was entitled to Cenvat Credit for the belated service tax payment. The lower authority had denied the credit invoking Rule 9(1)(bb) of Cenvat Credit Rules, 2004. However, a detailed analysis of the rule revealed that credit could only be denied in cases of fraud, collusion, willful misstatement, or suppression of fact with intent to evade service tax payment. The appellant had paid the service tax along with penalties and interest under Section 73(4A) without the need for an adjudication process, indicating no suppression of fact.

The Tribunal concluded that after the payment under Section 73(4A), the case stood concluded without establishing fraud or collusion. Therefore, denial of Cenvat Credit based on Rule 9(1)(bb) was found to be improper. The Tribunal referenced the case of Shiv Lifters to support this interpretation. The impugned order was set aside, and the appeal was allowed, highlighting that the denial of Cenvat Credit by the lower authority was not legally justified.