2017 (4) TMI 953 - AT - Service Tax

CENVAT credit - irregular availment - Department alleged that as the service provider of security service discharged 100% of the tax liability, they have paid in excess 75% of service tax. Further, since liability to pay 75% has not been discharged by the appellant, that amounts to non-payment of service tax to that extent and hence they have appeared to have availed excess cenvat credit - Held that - There could no dispute that service tax leviable has been fully paid. This fact will therefore satisfy the requirement of Rule 3 ibid and particularly, when such tax liability has been passed on to the appellant and they have also made payment thereof to the service provider, there can be no denial to them of such cenvat credit - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged wrongful availment of credit of service tax paid on security services during a specific period.
2. Interpretation of Notification No.30/2012-ST regarding distribution of tax liability between service recipient and service provider.
3. Dispute over the eligibility of the appellant to avail 100% credit of the tax liability discharged.

Analysis:

Issue 1: Alleged wrongful availment of credit
The case involved a manufacturing unit that allegedly wrongly availed credit of service tax paid on security services between July 2012 to August 2013. The department claimed that the appellant had paid 100% of the tax liability when, as per the notification, they were only liable to pay 75%. Consequently, the department issued a show cause notice proposing recovery of the allegedly wrongly availed credit along with interest and penalties. The original authority and the Commissioner (Appeals) upheld these proposals.

Issue 2: Interpretation of Notification No.30/2012-ST
The appellant argued that despite discharging 100% of the tax liability, they were billed and paid the amount by the service provider, who also filed returns confirming the payment. The appellant contended that based on Tribunal decisions and High Court rulings, they should be allowed to avail the credit based on the amount paid, regardless of the proportion specified in the notification.

Issue 3: Eligibility to avail 100% credit
The Tribunal analyzed the notification and relevant rules, emphasizing that the notification only dictates the distribution of tax liability between the service recipient and provider. It does not prohibit the service recipient from availing 100% credit if the tax liability has been discharged and passed on to them. The Tribunal cited Rule 3 of the Cenvat Credit Rules, 2004, which allows credit on duties paid on input services received. As the tax liability was fully paid and passed on to the appellant, they were entitled to avail the credit. The Tribunal allowed the appeal, granting consequential benefits as per the law.

In conclusion, the Tribunal ruled in favor of the appellant, highlighting that the notification did not restrict the appellant from availing the credit if the tax liability was discharged and passed on to them. The decision was based on a clear interpretation of the relevant rules and previous legal precedents, allowing the appellant to avail the cenvat credit.