2016 (8) TMI 881 - AT - Central Excise

Cenvat credit - availed input services credit without payment of value of input service and service tax on such service to the provider of services - violation of Sub Rule (7) of Rule 4 of Cenvat Credit Rules 2004 - Held that - we have perused certain sample entries of verification made by original authority with reference to date of payment of value for service / service tax to the provider of services. It is very clear that at least in respect of some of the bills the respondent have availed and even utilized credit before the service tax was paid by them by cheque. In terms of the above legal position it is necessary for the respondent to establish with documentary evidence that they have availed Cenvat Credit on input services after the date on which they made payment of value for such services and also service tax has been paid to the provider of services before that date. This obligation has clearly been stipulated under Sub Rule (6) of Rule 9. Accordingly, we find that it is necessary to establish the payment of value as well as tax before availing the credit by supporting documentary evidence, as we have seen at least a few instances of availing credit before actual payment. The case has to go back to the original authority for verification of all entries to arrive at a proper decision about the eligibility of respondent for this credit. If the credits are availed prior to payment then necessarily the question of interest liability is to be examined, if otherwise, the credit become eligible on a later date (after payment of tax). - Appeal allowed by way of remand

Summary

Issues:
- Alleged wrongful availing of Cenvat Credit on input services without payment of service tax
- Failure of Commissioner (A) to examine discrepancies in the enquiry report
- Contestation of burden of proof on correctness of credit taken by the assessee
- Non-imposition of penalty by the impugned order
- Submission by respondent that all credits were availed after payment of value of service
- Examination of legal position regarding availing credit on input services
- Necessity for respondent to establish payment of value and tax before availing credit
- Remand of the case to the original authority for verification of relevant documents

Analysis:
The judgment involves an appeal by the Revenue against an order of the Commissioner (A) regarding the alleged wrongful availing of Cenvat Credit on input services without paying the service tax. The Revenue contended that the Commissioner (A) failed to examine discrepancies highlighted in the enquiry report, emphasizing the burden of proof on the correctness of credit taken by the assessee. It was argued that the respondent availed credit before paying the service tax, violating the rules. The department also challenged the non-imposition of a penalty in this case.

The respondent, on the other hand, argued that all credits were availed after the payment of the value of services to the service provider. The Commissioner (A) examined the accounts submitted by the respondent before concluding in their favor. The Tribunal analyzed the legal position concerning availing credit on input services, emphasizing the requirement to pay the value and tax before claiming credit. They noted instances where the respondent availed credit before making the necessary payments, highlighting the need for documentary evidence to support credit availed after payment.

Ultimately, the Tribunal set aside the impugned order and remanded the case to the original authority for a fresh decision after verifying all relevant documents. The judgment stressed the importance of establishing payment of value and tax before availing credit, directing a thorough examination of all entries to determine the respondent's eligibility for the credit. Interest liability was also mentioned as a consideration if credits were availed prior to payment, underscoring the need for proper verification before making a decision.