2017 (12) TMI 1096 - AT - Service Tax

CENVAT credit - first appellate authority took note that a sample of the copies of invoices furnished did not bear the name and address of the provider of service as detailed in the registration certificate - rule 9(2) of the CCR, 2004 - Held that - in the present instance there is a mis-match of the address of the supplier vis-Rs.-vis registration certificate. The validity of that ground to allege complicity especially in the context of the tax evasion by the service provider to deny CENVAT credit is sustainable only with reasonable evidence - denial of CENVAT credit on the ground of failure to deposit tax by the service provider is not correct in equity when there is no any express condition to that effect of CENVAT Credit Rules, 2004 - denial of credit not tenable - penalty also not proper - appeal dismissed - decided against Revenue.

Summary

Issues:
Challenge against the order-in-appeal setting aside proceedings for recovery of service tax dues included in invoices issued by a service provider; Dispute over availing CENVAT credit by the recipient of services; Non-imposition of penalty under CENVAT Credit Rules, 2004; Discrepancies in documents for availing CENVAT credit; Legal implications of service provider's tax evasion on recipient's entitlement to CENVAT credit; Imposition of penalty on the recipient for availing credit without verifying invoice genuineness.

Analysis:
1. The appellant contested the order-in-appeal that set aside proceedings for recovering service tax dues included in invoices issued by a service provider. The appellant, a service provider, had availed CENVAT credit of service tax included in invoices from a recruitment agency found to have not deposited the service tax collected. The original authority allowed the credit, citing contractual obligations and relevant circulars and case law, leading to the dropping of proceedings.

2. The first appellate authority noted discrepancies in the invoices regarding the provider's details, invoking Rule 9(2) of the CENVAT Credit Rules, 2004, to order the demand. Reference was made to a Gujarat High Court decision disallowing CENVAT credit in similar circumstances.

3. The Revenue appealed against the non-imposition of penalties under CENVAT Credit Rules, 2004, and invoked Section 80 of the Finance Act, 1994. The appellant argued for compliance with the rules, highlighting technical lapses and the responsibility of the service provider to fulfill tax obligations.

4. During the hearing, the Authorized Representative supported the first appellate authority's findings, emphasizing negligence in verifying invoices. The Chartered Accountant relied on High Court decisions from Allahabad and Karnataka, stressing the bona fide nature of transactions and reasonable steps taken by the appellant.

5. The judgments cited underscored the importance of reasonable steps taken by the assessee to ensure duty payment on inputs, rejecting impractical burdens on the recipient. The Karnataka High Court decision supported the appellant's position based on the existence of duty-paid inputs and proper documentation.

6. The records did not indicate complicity of the assessee in tax evasion by the service provider. The entitlement to CENVAT credit was affirmed, emphasizing the recipient's compliance with payment and receipt of services.

7. The denial of CENVAT credit due to discrepancies in documents was challenged, emphasizing that recipient responsibility is limited to verifying relevant details. The mismatch in supplier details did not justify denial of credit based on the service provider's tax evasion.

8. The appeal of the Revenue was dismissed, and the appeals of the appellant and another individual were allowed, emphasizing the entitlement to CENVAT credit and rejecting the imposition of penalties.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the key arguments, legal principles, and decisions cited during the proceedings.