2022 (4) TMI 774 - HC - Service Tax

CENVAT Credit - duty paying invoices - adherence to the provisions of Section 68 2 of the Finance Act, 1994 amended from time to time or not - photocopies of the invoices - eligible documents to allow credit or not - Rule 9 of the CENVAT Credit Rules, 2004 - Double taxation - HELD THAT - Whatever the ratio, the tax in its entirety has reached the hands of the ex-chequer. Merely for the reason that there was no strict adherence to the ratio as envisaged during the relevant point of time for payment of tax insofar as the assessee and the service provider, the assessee cannot be made liable to pay the double tax. What is significant to note is that the discharge of entire tax amount is not disputed. Thus, the reverse charge mechanism would not lead to double taxation. Issue of photocopies of the invoices based on which no CENVAT Credit was allowed - HELD THAT - It is pertinent to note that the learned Single Judge has remanded the matter for fresh consideration mainly on the ground that the assessee is ready and willing to produce the original invoices. Hence, adjudicating upon the issue of award of CENVAT Credit on the basis of the Photostat copies of the documents would become academic. In the present set of facts, without dwelling upon the said issue, more particularly, in view of the assessee being ready and willing to produce the original invoices, this case is disposed off confirming the order of remand. The Writ Appeal stands disposed of directing the Settlement Commission to re-consider the matter afresh - Appeal allowed by way of remand.

Summary

Issues:
1. Adherence to tax payment provisions under the Finance Act, 1994.
2. Acceptance of photocopies for CENVAT Credit eligibility.

Analysis:

Issue 1: Adherence to Tax Payment Provisions
The appeal challenged a Writ Court order remanding a matter to the Settlement Commission for fresh consideration. The primary argument was the requirement for the assessee to strictly adhere to the provisions of Section 68[2] of the Finance Act, 1994, regarding tax payment ratios. The ratio of tax payable by the assessee and the service provider shifted from 50:50 to 75:25 and eventually to 100% for the consumer. The Settlement Commission's decision was contested due to non-conformity with the tax payment provisions applicable at the time. However, the High Court upheld the Writ Court's decision, emphasizing that the entire tax amount was paid, even if not in the correct ratio, thus ruling out double taxation. The court also referenced a CBEC Circular supporting the assessee's position.

Issue 2: Acceptance of Photocopies for CENVAT Credit
The second argument revolved around the acceptance of photocopies of invoices for CENVAT Credit eligibility. The Writ Court remanded the matter for reconsideration based on the availability of original invoices. The assessee argued that the photocopies should suffice, citing a CBEC Circular and precedents from other High Courts. The High Court, however, concluded that since the assessee was willing to produce the original invoices, the issue of awarding CENVAT Credit based on photocopies became irrelevant. As a result, the court confirmed the remand order, directing the Settlement Commission to re-examine the case in compliance with the law and after notifying all concerned parties.

In conclusion, the High Court's judgment addressed the issues of tax payment adherence and CENVAT Credit eligibility based on photocopies, ultimately upholding the Writ Court's decision and directing a fresh consideration by the Settlement Commission in light of the parties' willingness to produce original invoices.