2023 (4) TMI 922 - AT - Service Tax

CENVAT Credit - business support services - taxable service provided or not - invoices were issued without specifying the actual nature of services provided by the dealers - Rule 4A of the Service Tax Rules, 1994 - when the disputed service tax amount has admittedly been paid by the provider of service to the Government exchequer, can the benefit of such tax element be denied to the appellants, as the receiver of such taxable service? HELD THAT - Sub-rule (1) of Rule 3 ibid is the enabling provision, which entitles a manufacturer or a provider of output service to take Cenvat credit on various duties and taxes paid on any inputs or capital goods received in the factory of manufacture of final product and on any input service received by the manufacturer of final product or by the provider of output service. The Cenvat credit availed as per the provisions of sub-rule (1) ibid, can be utilized for payment of various duties and taxes, itemized in sub-rule (4) of Rule 3 ibid. Further, the documents based on which the credit has to be availed has also been prescribed in Rule 9 ibid - In this case, it is an admitted fact on record that the automobile dealers are registered with the service tax department for providing the taxable services and that the disputed service tax amount was paid by them into the government exchequer. When that is the admitted position, then denial of the benefit of such tax amount as cenvat credit to the appellants as the recipient of such service, cannot be questioned by the jurisdictional service tax authorities. In the present case, the department has mainly proceeded against the appellants for confirmation of the adjudged demands on the ground that no services were provided by the automobile dealers and therefore, Cenvat credit is not available to the appellants, based on the invoices issued by such dealers - Since, the issue regarding payment of service tax and compliance of the statutory provisions, more specifically as contemplated under Rule 4A of the Service Tax Rules, 1994 have not been disputed by the jurisdictional service tax authorities at the service provider s end, in our considered view, the same cannot be questioned or objected to by the service tax authorities, having jurisdiction over the premises of the appellants, as the recipient of such taxable service, at the time when the Cenvat credit of service tax was availed by them. An identical issue came up for consideration by the Hon ble Madras High Court, in the case of M/S. MODULAR AUTO LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI 2018 (8) TMI 1691 - MADRAS HIGH COURT where it was held that unless and until the assessment made on BIL was revised, which obviously could have been done, at this juncture, on account of the expiry of the period of limitation, the interpretation given by the Commissioner (Appeals) as well as the Tribunal with regard to the nature of invoice raised on the assesses is unsustainable. It is observed that by placing reliance on the judgement of Hon ble Madras High Court, this Tribunal in the cases relied upon by the learned Counsel for the appellants has held that unless and until the assessment made at the dealer s end is revised or altered, the Cenvat credit availed on the basis of invoices by the recipient s unit cannot denied/whittled down. There are no force in the impugned order, insofar as it has confirmed the adjudged demands on the appellants - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Denial of Cenvat credit benefit by service tax authorities at the service recipient's end.
2. Entitlement to Cenvat credit when the service tax has been paid by the service provider.

Summary:

Issue 1: Denial of Cenvat credit benefit by service tax authorities at the service recipient's end.

The Tribunal examined whether the service tax authorities at the service recipient's end are correct in denying the cenvat benefit of service tax paid by the provider of service on the taxable services. It was noted that the appellants, M/s Future Generali India Insurance Company Ltd., availed Cenvat credit of service tax paid on input services provided by motor car dealers. The service tax department initiated proceedings against the appellants, alleging that the invoices issued by the dealers were fabricated and did not reflect the true nature of services provided. The adjudicating authority confirmed the demand of Rs. 20,88,85,344/- along with interest and imposed penalties. However, the Tribunal found that the automobile dealers were registered with the service tax department and had paid the disputed service tax amount to the government. Thus, denial of the benefit of such tax amount as Cenvat credit to the appellants was not justified.

Issue 2: Entitlement to Cenvat credit when the service tax has been paid by the service provider.

The Tribunal considered whether the benefit of the service tax amount paid by the provider of service can be denied to the appellants as the receiver of such taxable service. It was highlighted that the statutory provisions entitle a manufacturer or a provider of output service to take Cenvat credit on various duties and taxes paid on input services. The Tribunal noted that the department had not alleged wrongful availment or utilization of Cenvat credit by the appellants. The Tribunal referred to the judgment of the Hon'ble Madras High Court in the case of M/s. Modular Auto Ltd. vs. Commissioner of Central Excise, Chennai, which held that unless the assessment made at the dealer's end is revised, the Cenvat credit availed by the recipient's unit cannot be denied. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellants.

Conclusion:

The Tribunal concluded that the service tax authorities at the service recipient's end cannot deny the Cenvat credit benefit when the service tax has been paid by the provider of service. The appeal was allowed, and the impugned order was set aside.