2019 (5) TMI 1093 - AT - Central Excise

CENVAT credit - input services - service tax not paid in accordance with what is indicated in the Invoice - it was alleged that appellant has not paid the value of input services and the service tax paid as indicated in the invoice/bills has paid a reduced amount as was evident from the records - Rule 4(7) of CCR 2004 - HELD THAT - It is not in dispute that the appellant has paid less amount towards the services availed by them by reducing the consideration of the services. They did not pay the tax on full invoice value. However, service provider paid service tax on the full invoice value and the appellant has taken credit of the entire amount of service tax paid. There is an excess payment of service tax by the service provider considering the reduced payment made for the services. This excess payment could have been claimed as refund by the service provider but they have already passed on this burden to the appellants herein. The appellants herein have borne the full burden of the excess service tax paid by them. They have also taken credit of the excess service tax. An alternative could have been for the appellant to seek refund of the excess amount of service tax paid as the persons who bore the burden of excess service tax. From a plain reading of Rule 4(7), it does not appear that Rule 4(7) provides for a proportionate reduction of CENVAT Credit where the value of services rendered is reduced subsequently but service tax was discharged on the original amount and borne by the service recipient - This is consistent with the circular of the Board No. 877/15/2008-CX, dated 17.11.2008 in which the Board has clarified that where higher duty than the due is paid due to subsequent reduction in prices, credit as per invoice is available to the assessee. This is also consisted with similar circular regarding credit of service tax in Board s Circular No. 122/3/2010-ST, dt.30.04.2010. Both these circulars were, of course, issued prior to Rule 4(7) was amended w.e.f. 01.04.2011. The appellant is entitled to CENVAT Credit of the service tax paid by them as indicated in the invoices - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Appeal regarding eligibility of CENVAT Credit on input services.

Analysis:
1. The appellant, a petroleum products manufacturer, availed CENVAT Credit on inputs and input services. During audit, discrepancies were found where the appellant had not paid the full value of input services to service providers, resulting in a show cause notice for ineligible CENVAT Credit.

2. The appellant argued that despite reducing service charges, they paid the full service tax as per invoices, entitling them to CENVAT Credit. They relied on Rule 4(7) of CCR 2004 and various case laws to support their claim.

3. The Revenue contended that the appellant's reduced payments for services rendered made them ineligible for CENVAT Credit as per Rule 4(7) provisions. They emphasized strict adherence to statutory provisions over circulars and case laws.

4. The Tribunal noted that while the appellant paid less for services, they paid the full service tax amount indicated in the invoices. Considering that the excess service tax burden was passed on to the appellant, they were entitled to CENVAT Credit as per the invoices.

5. The Tribunal held that Rule 4(7) did not mandate a proportionate reduction in CENVAT Credit when the service tax was paid in full, despite reduced service payments. Circulars and past decisions supported this interpretation, ensuring no loss to revenue.

6. Following consistent decisions by Coordinate Benches, the Tribunal allowed the appeal, setting aside the impugned order and granting consequential relief to the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, affirming their entitlement to CENVAT Credit based on full payment of service tax as per invoices, despite reduced payments for services rendered.