2019 (1) TMI 1237 - AT - Service Tax

Refund of accumulated and unutilized CENVAT credit - input services used to provide output services which were exported - import of service under Reverse Charge Mechanism - refund denied on the ground that appellant is not eligible to avail CENVAT credit on service tax paid on import of services under Reverse Charge Mechanism and payment of service tax has been made in the subsequent quarter - applicability of Rule 9(1)(bb) of the CENVAT Credit Rules - Held that - In the present case, the appellant has availed CENVAT credit of service tax paid on import of services under the reverse charge mechanism on the basis of ST challans in accordance with the provisions of Rule 9(1)(e) which allows the assessee to take CENVAT credit on the basis of challan in case of reverse charge mechanism - Both the authorities have wrongly denied the CENVAT credit by invoking Rule 9(1)(bb) which is not applicable in the present case. Tribunal in the case of Polygenta Technology Ltd. 2018 (2) TMI 804 - CESTAT, MUMBAI , the Mumbai Bench of CESTAT on an identical facts has held that The appellant is paying service tax on reverse charge basis in terms of Rule 2(1)(d) of Service Tax Rules, 1994 and therefore credit can be availed in terms of Rule 9(i)(e) of CCR. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeals against rejection of refund claims for CENVAT credit on service tax paid on import of services under Reverse Charge Mechanism.

Analysis:

Issue 1: Rejection of refund claims
The appellants filed appeals against the rejection of their refund claims for accumulated and unutilized CENVAT credit availed on input services used for exported output services from July 2014 to September 2014. The show-cause notice alleged that the appellants were not eligible to avail CENVAT credit on service tax paid on import of services under Reverse Charge Mechanism. The original authority rejected the refund application, and the Commissioner (A) also upheld the rejection.

Issue 2: Applicability of CENVAT credit rules
The learned counsel for the appellant argued that the impugned order was unsustainable as it invoked incorrect provisions. He contended that availing credit on service tax paid on a reverse charge basis as a recipient should be based on the challan towards payment of service tax in accordance with Rule 9(1)(e) of the CENVAT Credit Rules, 2004. He cited precedents where similar issues were decided in favor of the assessee, emphasizing that refund/CENVAT credit cannot be denied by invoking Rule 9(1)(bb) when the tax is paid along with interest.

Issue 3: Tribunal's decision
After considering the submissions of both parties and the material on record, the Tribunal found that the appellants had availed CENVAT credit on service tax paid on import of services under the reverse charge mechanism based on ST challans as per Rule 9(1)(e). The Tribunal noted that both authorities had wrongly denied the credit by invoking Rule 9(1)(bb), which was not applicable in this case. Referring to a precedent, the Tribunal held that since Rule 9(1)(bb) was not applicable to the appellants, the credit could not be denied. The Tribunal set aside the impugned orders and allowed the appeals with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellants, holding that they were entitled to avail CENVAT credit on service tax paid on import of services under the reverse charge mechanism based on ST challans as per Rule 9(1)(e) of the CENVAT Credit Rules, 2004. The impugned orders were deemed unsustainable in law, and the appeals were allowed with consequential relief.