2022 (3) TMI 319 - AT - Central Excise

CENVAT Credit - duty paying documents - distribution of credit to various manufacturing plants by issuing ISD invoices - Reverse Charge Mechanism availing the benefit of VCES Scheme - Rule 9 of Cenvat Credit Rules - HELD THAT - Rule 9(1)(bb) applies only to supplementary invoice, bill or challan issued by provider of output Service . In the instant case, it is an undisputed fact that service tax has been paid by the appellant under Reverse Charge Mechanism in the capacity of recipient of service and not as provider of service . In these circumstances, the case of the appellant would be covered under Rule 9(1)(e) of the Cenvat Credit Rules, 2004. This view is also supported by the decision of Tribunal in the case of NISSAN MOTOR INDIA PRIVATE LTD. VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI 2019 (2) TMI 1299 - CESTAT CHENNAI and POLYGENTA TECHNOLOGIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NASIK-I 2018 (2) TMI 804 - CESTAT, MUMBAI . The entire case of the Revenue is based on invocation of Rule 9(1)(bb) of the Cenvat Credit Rules and since the said Rule is not applicable in respect of the service tax paid by the recipient of service under Reverse Charge Mechanism, the demand of reversal of cenvat credit cannot be upheld - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of reversal of cenvat credit, interest, and penalty under section 78 of Finance Act read with Rule 15(2) of Cenvat Credit Rules, 2004.

Analysis:
1. The appellant, registered as an input service distributor, distributed cenvat credit to its manufacturing plants based on ISD invoices. The appellant availed ineligible cenvat credit under the Voluntary Compliance Encouragement Scheme 2013 (VCES) for service tax paid on Corporate Cost Sharing Expenses. A show cause notice was issued demanding reversal of the credit under Rule 9(1)(bb) and (e) of Cenvat Credit Rules, 2004. The demand, interest, and penalty were confirmed by the original adjudicating authority.

2. The appellant argued that Rule 9(1)(bb) does not apply when credit is availed on supplementary invoices and contended that the rule does not cover service tax paid under reverse charge mechanism. The appellant also claimed entitlement to credit under Rule 9(1)(e) without the conditions of Rule 9(1)(bb). The argument was supported by relevant case laws, asserting that the show cause notice was time-barred, and no malafides existed due to interpretational issues.

3. The Authorized Representative supported the impugned order, emphasizing the purpose of VCES to encourage service tax compliance. Referring to CBEC Circulars and a CESTAT decision, it was argued that the extended period was correctly invoked due to non-disclosure in ST-3 returns. The appellant discharged its service tax liability under reverse charge mechanism, falling under Rule 9(1)(e) for availing credit.

4. The Tribunal analyzed Rule 9 of Cenvat Credit Rules, determining that Rule 9(1)(bb) applies to providers of output service, not recipients under reverse charge mechanism. Citing precedents, the Tribunal concluded that the appellant's case aligns with Rule 9(1)(e) and not Rule 9(1)(bb). As Rule 9(1)(bb) was inapplicable to the appellant, the demand for reversal of cenvat credit was set aside, and the appeal was allowed.

This comprehensive analysis of the judgment from the Appellate Tribunal CESTAT AHMEDABAD highlights the key legal issues, arguments presented by both parties, relevant case laws, and the Tribunal's decision based on the interpretation of Cenvat Credit Rules in the context of the appellant's situation.