2019 (4) TMI 133 - AT - Service Tax

CENVAT Credit - duty paying documents - it is alleged that the documents are not proper - Held that - Though these are ATD memos, it is seen that the appellants have supplied the invoices issued by the service provider to establish the fact that the service tax has been paid by them. The Department does not have a case that the service tax, as per the invoices, is not paid by the appellant. The allegation is that they have to produce proof that the service provider has paid up the service tax collected to the Government. This is not a requirement to avail Credit. When it is established that tax has been suffered, the service recipient is eligible to avail Credit on the said documents - credit allowed. CENVAT Credit - input services - the towers are constructed in Salem and that the Trichy unit is taking the benefit of these towers for providing output service - Held that - It appears that this technical difference has not been appreciated by the Department or even by lower adjudicating authority, although there has been no analysis of this response made by the appellant - the service tax has been suffered by the appellants and there is no finding to the contrary. This being so, the disallowance of Credit is unjustified. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Availment of CENVAT Credit based on improper documents.
2. Denial of credit on the grounds of inadequate proof of service tax payment.
3. Utilization of input services for construction of towers and eligibility of credit.

Analysis:

Issue 1: Availment of CENVAT Credit based on improper documents
The appellants had availed CENVAT Credit amounting to ?9,12,631 based on what the Department deemed as improper documents. The Original Authority confirmed the demand, interest, and penalties, which was upheld by the Commissioner (Appeals), leading to this appeal. The appellant's representative argued that the ATD memos, although internal office memos, were supported by invoices from the service provider containing necessary particulars. The Department contended that these invoices were insufficient to prove service tax payment to the Government. However, the Tribunal held that once it is established that tax has been paid, the service recipient is eligible for credit, and procedural errors should not be a basis for denial. The Tribunal referred to Rule 9 of the CENVAT Credit Rules, emphasizing that the Department's duty is to verify if services were availed and service tax was paid, making the credit eligible.

Issue 2: Denial of credit on the grounds of inadequate proof of service tax payment
The Department argued that the ATD memos were merely inter-office memos and could not be the basis for availing credit. Furthermore, they contended that the towers constructed in Salem were utilized by the Trichy unit, making the credit ineligible for the Salem unit. However, the Tribunal noted that there was no evidence presented to show that the Salem unit did not utilize these towers. The appellants clarified that the towers were Wireless Local Loop (WLL) Towers, essential for telephone connectivity between mobile and landlines in Salem. The Tribunal criticized the lower adjudicating authority for not analyzing this technical difference and unjustly disallowing the credit based on the misconception that the towers were solely for cell phones. Ultimately, the Tribunal found that service tax had been paid by the appellants, and the denial of credit was unjustified.

Issue 3: Utilization of input services for construction of towers and eligibility of credit
The Tribunal concluded that the service tax had been suffered by the appellants, and there was no evidence to the contrary. They highlighted the technical necessity of the towers for providing telephone connectivity in Salem and criticized the lower authorities for their oversight in understanding the nature of these towers. Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential benefits as per the law.