2025 (4) TMI 963 - AT - Service Tax

Availment of CENVAT Credit of service tax paid on reimbursement of diesel and electricity cost and its admissibility to the respondent - admissibility of CENVAT credit availed by the respondent on the basis of debit notes issued by the vendor - HELD THAT - The issues under dispute is no more res integra in view of the decision of the Co-ordinate Bench of the Tribunal in the case of self-same respondents in COMMISSIONER OF CGST CENTRAL EXCISE MUMBAI VERSUS VODAFONE IDEA LIMITED 2022 (9) TMI 1285 - CESTAT MUMBAI wherein it has been held that the respondents are eligible for CENVAT credit and the appeal filed by Revenue was dismissed. The cost Diesel and Electricity form a part of the value of the services provided by the Vendor. Conclusion - i) The respondents are eligible for CENVAT credit. ii) The cost Diesel and Electricity form a part of the value of the services provided by the Vendor. The appeal filed by the appellant-department is dismissed.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the CENVAT credit availed by the respondent on the basis of service tax paid on reimbursement of diesel and electricity charges is admissible under the CENVAT Credit Rules, 2004.

2. Whether the CENVAT credit availed by the respondent on the basis of debit notes issued by the vendor qualifies as valid documents under Rule 9 of the CENVAT Credit Rules, 2004 for the purpose of credit availment.

3. Whether the demand for recovery of service tax along with interest and imposition of penalty, as raised in the Show Cause Notices (SCNs), is justified.

Issue-wise Detailed Analysis

1. Admissibility of CENVAT Credit on Service Tax Paid on Reimbursement of Diesel and Electricity Charges

Relevant legal framework and precedents: The CENVAT Credit Rules, 2004 govern the availment of credit on inputs and input services used in the course of business. The Finance Act, 1994 prescribes the levy and collection of service tax. The issue revolves around whether diesel and electricity costs reimbursed to the vendor, on which service tax was paid, qualify as inputs or input services eligible for credit.

Court's interpretation and reasoning: The Tribunal examined the nature of the services and the contractual arrangements between the respondent and its vendor. It was noted that the respondent obtained Passive Infrastructure Support services from the vendor, which included reimbursement of expenses towards electricity and diesel consumed by the vendor to provide continuous power backup essential for telecommunication services.

The Tribunal observed that there was no separate contract for supply of diesel or electricity to the respondent; rather, these were inputs consumed by the vendor in providing the Passive Infrastructure Support services. The vendor raised debit notes for these reimbursed expenses, which formed part of the value of the service rendered.

Thus, the Tribunal held that diesel and electricity costs are integral components of the service provided and not separate supplies of goods. Consequently, the service tax paid on these reimbursements qualifies for CENVAT credit as it forms part of the input service.

Key evidence and findings: The contractual agreements and invoices/debit notes issued by the vendor, detailing the bifurcation of charges including electricity and diesel reimbursements, were critical. The Tribunal relied on the fact that these charges were reimbursed on an actual basis and were necessary for the provision of the Passive Infrastructure Support services.

Application of law to facts: Applying the CENVAT Credit Rules, the Tribunal concluded that since the diesel and electricity costs were consumed in providing taxable services, and service tax was discharged on these amounts, the respondent was entitled to avail credit.

Treatment of competing arguments: The Revenue argued that diesel is not an eligible input under the CENVAT Credit Rules and electricity is not a taxable service under the Finance Act, 1994, hence credit on these reimbursements should be disallowed. The Tribunal rejected this contention, distinguishing between diesel as goods and diesel/electricity consumed by the vendor in providing taxable services. It emphasized that the tax liability was discharged by the vendor on the entire service value, including these reimbursements.

Conclusions: The Tribunal upheld the view that the service tax paid on diesel and electricity reimbursements is eligible for CENVAT credit.

2. Validity of Debit Notes as Documents for Availment of CENVAT Credit

Relevant legal framework and precedents: Rule 9 of the CENVAT Credit Rules, 2004 prescribes the documents required for availing credit, including invoices issued by the service provider. Rule 4A of the Service Tax Rules, 1994 specifies the particulars that must be contained in such documents.

Court's interpretation and reasoning: The Tribunal analyzed the debit notes issued by the vendor, which contained details such as serial number, name and address of the service provider and recipient, registration number, description and classification of the service, value, and service tax payable.

It was held that these debit notes fulfilled the conditions prescribed under Rule 4A of the Service Tax Rules and thus qualified as valid documents for availing CENVAT credit under Rule 9 of the CENVAT Credit Rules.

Key evidence and findings: Sample debit notes issued by the vendor were examined, confirming the presence of all requisite particulars. The Tribunal noted that the debit notes were raised for reimbursement of expenses incurred by the vendor in providing the service and were not mere adjustment entries.

Application of law to facts: Since the debit notes contained all prescribed particulars and reflected the tax liability discharged by the vendor, they were valid documents for credit availment.

Treatment of competing arguments: The Revenue contended that debit notes are not specified documents for CENVAT credit and thus credit availed on their basis was inadmissible. The Tribunal rejected this, relying on precedents and the statutory provisions, clarifying that debit notes satisfying Rule 4A can be treated as specified documents.

Conclusions: Debit notes issued by the vendor were held to be valid documents for the purpose of availing CENVAT credit.

3. Justification of Demand for Recovery of Tax, Interest, and Penalty

Relevant legal framework: Sections 73(1), 75, and 78 of the Finance Act, 1994, along with Rules 14 and 15 of the CENVAT Credit Rules, 2004, govern recovery of tax, interest, and imposition of penalty for wrongful availment of credit.

Court's interpretation and reasoning: Since the Tribunal held that the CENVAT credit availed was lawful and the debit notes valid, the demands for recovery of tax and penalty were unfounded.

The Tribunal noted that while interest under Section 75 may be applicable in cases of recovery, since the demands were dropped, it was unnecessary to delve into interest or penalty issues.

Key evidence and findings: The impugned order by the Commissioner of Service Tax had already dropped all proceedings, finding no merit in the Revenue's claims.

Application of law to facts: Given the admissibility of credit and validity of documents, the demands for recovery and penalty could not be sustained.

Treatment of competing arguments: The Revenue's appeal against the dropping of demands was dismissed, as the Tribunal found no error in the original order.

Conclusions: The demand for recovery of tax, interest, and penalty was rightly dropped.

Additional Considerations

The Tribunal also referred to a coordinate bench decision involving the same parties and similar issues, where the Revenue's appeal was dismissed on identical grounds. The principle of consistency and judicial discipline was invoked to uphold the impugned order in the present appeal.

Significant Holdings

"Thus I hold that the cost Diesel and Electricity form a part of the value of the services provided by the Vendor."

"...debit notes issued by the vendor contains all the relevant details as prescribed/required under Rule 4A of Service Tax Rules, 1994 and hence qualifies as a specified document for availing Cenvat Credit under Rule 9 of Cenvat Credit Rules, 2004."

"It is settled law that once the tax has been collected, it is not within the jurisdiction of the tax authorities governing the recipient to contend that such payment of tax was not in consonance with the law."

"In view of the above, the demands raised on the noticee vide the subject five Show cause notice are required to be dropped."

"We are of the considered opinion that the issues under dispute having been already decided by the Co-ordinate Bench of the Tribunal, we cannot take a different stand in respect of the self-same respondents under the same Service Tax jurisdiction."

The Tribunal established the core principles that service tax paid on reimbursed expenses such as diesel and electricity, when forming part of the value of taxable services, is eligible for CENVAT credit; that debit notes containing prescribed particulars are valid documents for credit availment; and that demands for recovery and penalties based on non-admissibility of such credit must be rejected.

Accordingly, the appeal filed by the Revenue was dismissed, and the impugned order upholding the respondent's entitlement to CENVAT credit was affirmed.