2018 (6) TMI 1082 - AT - Service Tax

CENVAT credit - whether the appellants are entitled for cenvat credit of service tax paid on the retention money relating to construction service rendered by the Appellant? - interpretation of Rule 4(7) of CCR,2004 - Held that - Since the said retention amount has been paid fully, therefore, credit of the service tax paid earlier is admissible - Reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE, PUNE-I VERSUS THERMAX ENGINEERING CONSTRUCTION CO. LTD. AND VICE-VERSA 2017 (12) TMI 1191 - CESTAT MUMBAI - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is entitled to cenvat credit of service tax paid on retention money for construction services.

Analysis:
The appeal was filed against an order-in-appeal passed by the Commissioner of Central Excise (Appeals) Raigad. The main issue was whether the appellant could avail cenvat credit of service tax paid on retention money related to construction services provided. The appellant, a construction service provider, had an amount retained by the client as per the performance guarantee clause of the service contract. The appellant paid the service tax on the retention money and claimed cenvat credit. The dispute arose regarding the admissibility of this credit under Rule 4(7) of Cenvat Credit Rules, 2004. The department contended that since the appellant had not received the full service charge and only a portion was retained, the credit was not admissible. However, the appellant argued that since the service tax was paid on the retention money, the credit should be allowed, citing a previous Tribunal judgment in a similar case.

The Tribunal analyzed the situation and referred to the earlier judgment in the case of Thermax Engineering Construction Co. Ltd. where it was observed that when service tax is paid in full, credit cannot be denied. The appellant's representative highlighted that the retention amount had now been fully paid, making the credit admissible. The Tribunal agreed with the appellant's contention and held that the credit was allowable on the retention amount that had been paid. Consequently, the impugned order was set aside, and the appeal was allowed.