2019 (4) TMI 480 - AT - Service Tax

CENVAT Credit - input services - retention of part payment of input services - Rule 4 (7) of Cenvat Credit Rules - Held that - Rule 4 (7) of CCR stands amended w.e.f. 1st April, 2011 and after the said amendment taking of Cenvat Credit is not linked with the payment of invoice to the service provider but it is linked with the invoice/bill/challan of input service. Though the grievance of the Department seems that irrespective, the payment was still to be made within 3 months, but we observe that since the respondent had paid the entire Service Tax on which they were liable for taking the credit i.e. on the amount as mentioned in the Bill/invoice, they were entitled to avail credit. The circular No. 122/03/2010- ST dated 30th April, 2010 further clarifies the situation that the Service Tax paid is allowed as credit - The circular therefore clarifies that the credit taken would be equivalent to the amount that is paid as Service Tax. There is a clear recitation that irrespective of retention, the amount was paid at the end of stipulated period after the completion of the project. Till date, there is nothing on record to rebut the aforesaid findings. Credit cannot be denied - appeal dismissed - decided against Revenue.

Summary

Issues:
- Whether the appellant wrongly availed Cenvat Credit of Service Tax paid on input services due to withholding part payment of service provider on account of performance guarantee.
- Whether the appellant is entitled to avail the credit of full Service Tax paid irrespective of the amount payable to the service provider being withheld.

Analysis:
1. Issue 1 - Cenvat Credit of Service Tax:
The Department alleged that the appellant wrongly availed Cenvat Credit of Service Tax paid on input services as they were not making full payment to the service provider, retaining part payment on account of performance guarantee. Various show cause notices were initially issued, which were adjudicated confirming the demand. However, the Commissioner (Appeals) allowed the appeal, setting aside the original adjudicating authority's order. The Department filed the present appeals against this decision.

2. Commissioner's Decision and Arguments:
The Department argued that credit can only be allowed when the service recipient makes full payment of the value of input services and Service Tax within the stipulated time. Emphasis was placed on Rule 4(7) of Cenvat Credit Rules, stating that if payment is not made within the specified time, the Cenvat credit needs to be paid back. The Department sought to set aside the order under challenge and allow the appeal.

3. Appellant's Argument and Precedents:
The appellant argued that they were entitled to avail the credit of full Service Tax paid, regardless of withholding payment to the service provider. They referred to precedents where similar issues were decided in their favor. The appellant relied on specific case laws to support their argument.

4. Tribunal's Analysis and Decision:
After hearing both parties and reviewing the records, the Tribunal noted that the appellant had paid the Service Tax on the entire payment made to the contractor. Rule 3 of CCR allows the appellant to avail Cenvat Credit on the amount already paid. The Tribunal observed that Rule 4(7) of CCR, as amended, is not linked with payment to the service provider but with the invoice/bill/challan of input service. The circular further clarified that the credit would be equivalent to the amount paid as Service Tax.

5. Final Decision and Precedential Support:
The Tribunal dismissed the Department's appeals, citing precedents where it was established that the credit of full Service Tax paid by the service provider is available even if the amount payable to the service provider is withheld, as long as the service tax paid remains unchanged. The Tribunal's decision was based on the facts and legal provisions discussed, leading to the dismissal of the Department's appeals.

In conclusion, the Tribunal's detailed analysis and reliance on legal provisions and precedents led to the dismissal of the Department's appeals, affirming the appellant's entitlement to avail the credit of full Service Tax paid on input services, despite the withholding of part payment to the service provider on account of a performance guarantee.