2018 (10) TMI 705 - AT - Service Tax

100% EOU - CENVAT Credit - duty paying invoices - credit availed on the basis of photocopy of invoices - Held that - Since the appellants have already furnished the original invoices at the time of filing the refund claim, it cannot be expected of the appellants to produce the same in these proceedings before the authorities - credit cannot be denied. Penalties - CENVAT credit - denial on account that appellants have not produced invoices - credit along with interest paid before issuance of SCN - Held that - The records are not so clear as to the fact of reversal of credit by the appellants - this issue requires to be relooked by the adjudicating authority - Matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Eligibility of Cenvat credit on input services for output services.
2. Disallowance of credit based on lack of original invoices.
3. Reversal of credit before issuance of show-cause notice.
4. Applicability of penalties and interest on reversed credit.

Issue 1: Eligibility of Cenvat credit on input services for output services

The appellant, a 100% EOU engaged in e-Publishing services, faced show-cause notices proposing recovery of ineligible Cenvat credit. The authorities dropped proceedings for a significant amount but disallowed a portion as ineligible. Appeals were filed and argued based on the submission that original invoices were produced during the refund claim process, and xerox copies were provided later. The consultant relied on a precedent to argue that credit should be allowed on xerox copies if payment of service tax is not in dispute. The Tribunal found that the appellants had availed credit on photocopies of invoices, originally filed for a refund claim, and upheld the credit, citing the precedent and the facts of the case.

Issue 2: Disallowance of credit based on lack of original invoices

Regarding specific amounts disallowed due to lack of original invoices, the consultant argued that the appellants had produced original invoices during the refund claim process. The Tribunal agreed that since the original documents were submitted during the refund claim, it was not necessary for the appellants to produce them again. The Tribunal allowed the credit in this regard, emphasizing the appellants' prior submission of original invoices.

Issue 3: Reversal of credit before issuance of show-cause notice

The Tribunal addressed the issue of a specific amount disallowed where the appellants had allegedly reversed the credit before the show-cause notice was issued. The appellants contended that they had already reversed this amount and should not be liable for interest or penalties. However, the Tribunal found the records unclear regarding the reversal of credit and remanded the issue to the adjudicating authority for further examination. The Tribunal highlighted the need for clarity on the reversal of credit before determining the applicability of penalties.

Issue 4: Applicability of penalties and interest on reversed credit

In the case of the amount where credit was allegedly reversed before the show-cause notice, the Tribunal emphasized the importance of clear records regarding the reversal to determine the applicability of penalties. The issue was remanded for further review by the adjudicating authority to ascertain the factual position on the reversal of credit. The Tribunal indicated that if the credit had indeed been reversed, penalties could not be sustained based on a relevant precedent.

In conclusion, the Tribunal modified the impugned order by allowing certain credits, remanding one issue for further review, and partly allowing the appeals. The judgment provided detailed analysis and considerations on the eligibility of Cenvat credit, the submission of original invoices, reversal of credit, and the applicability of penalties and interest in the given context.