2019 (1) TMI 1425 - AT - Service Tax

CENVAT Credit - input services - duty paying documents - Rule 9 of the Cenvat credit Rules, 2004 - Held that - The substantial particulars i.e. name and address of the service provider, service tax registration number of the service provider, amount of service tax, assessable value, name and address of the service receiver has been mentioned in the letters dated 01/03/2010 and 15/12/2010 having service tax incidence of ₹ 23,48,404/- each and are in the nature of payment advice. These can be considered an invoice and can be accepted in terms of the proviso to Rule 9 of the Cenvat credit Rules, 2004 as there is no allegation that the services covered by these bills have not been accounted for by the appellant. The appellant has also produced the invoice dated 19/08/2010 in support of letter dated 15/12/2010. Merely that these letters are not in the form of invoice cannot be a reason to disallow the Cenvat credit as substantial compliance of the provision under Rule 9(1) of Cenvat Credit Rules have been made. We are not inclined to accept Letter of acceptance dated 22/02/2010 for a service tax amount of ₹ 38,048/- as a proper document as the same does not bear the registration no. of the service provider and cannot be considered as bill/invoice/ challan in terms of Rule 9(1) of the Cenvat Credit Rules, 2004. The appellant has failed to produce a corresponding invoice, payment advice etc. for this amount. Accordingly, demand of ₹ 46,96,808/- on the first two documents is set aside and we uphold a demand of ₹ 38,048/- as sustainable under Rule 14 Of Cenvat Credit Rules, 2004 read with proviso to Section 73(1) of the Finance Act, 1994 as the appellant has failed to justify taking of lawful credit of ₹ 38,048/- on the basis of any acceptable document. Extended period of limitation - penalty - Held that - The extended period of limitation as well as the equivalent penalty of ₹ 38,048/- under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 and interest as applicable under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 on this amount of ₹ 38,048/- is also upheld. Appeal allowed in part.

Summary

Issues:
1. Disallowance of Cenvat credit on services provided to Jaipur Development Authority (JDA) for advertising agency service.
2. Disallowance of Cenvat credit on DMRC documents due to procedural irregularities.

Analysis:

Issue 1: Disallowance of Cenvat credit on services provided to JDA for advertising agency service

The appellants were engaged in providing advertising agency services and incurred expenses on various services provided to JDA, which were essential for obtaining space and time rights for displaying advertisements. The Cenvat credit on these services was disallowed on the grounds that they were not directly related to the output service of advertising agency. The appellant argued that these services were integral to their business and fell under the definition of "input service." The Tribunal observed that the impugned services were used by the appellants to acquire rights for advertising agency services, which were crucial for their output service. The Tribunal held that the services obtained from sub-contractors were indeed input services used for providing the output taxable service of advertising agency. It was emphasized that the connection between the input services and the output service was essential, irrespective of whether JDA had paid service tax on the advertising rights. The Tribunal ruled in favor of the appellants, stating that the services provided to JDA through sub-contractors were integrally connected with the output service of advertising agency, making the Cenvat credit valid.

Issue 2: Disallowance of Cenvat credit on DMRC documents due to procedural irregularities

The demand for disallowing Cenvat credit on three DMRC documents totaling &8377; 47,34,852 was based on the argument that these documents did not comply with Rule 9(1) of the Cenvat Credit Rules, 2004. The appellant contended that the documents contained all necessary particulars, except for minor deficiencies like an old address mentioned. The Tribunal examined each document and found that two of them contained substantial particulars required for availing Cenvat credit. The Tribunal considered these documents as invoices and accepted them under the proviso to Rule 9 of the Cenvat Credit Rules. However, one document was not accepted as a proper document due to the absence of the service provider's registration number. Consequently, the demand on the first two documents was set aside, and a demand of &8377; 38,048 was upheld. The Tribunal emphasized that substantial compliance with the provisions was crucial, and minor procedural irregularities should not lead to disallowance of Cenvat credit. The Tribunal also upheld the penalty and interest on the amount not justified by acceptable documents.

In conclusion, the Tribunal partially allowed the appeal, dismissing the demand of &8377; 38,048 and upholding the demand on the remaining amount, emphasizing the importance of substantial compliance with Cenvat credit rules and the nexus between input services and output services in determining the eligibility for Cenvat credit.