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TMI Blog2025 (4) TMI 1396X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in providing taxable services namely Construction services other than residential complex including commercial/ industrial building or civil structure. 2.2 During the Course of audit of the records of the respondent, it was observed that: they had availed the input service credit of Rs.68,42,830/- on the strength of invoices bills raised by the service providers instead of GR-7 challans. As per Rule 9(1)(e) of the Cenvat Credit Rules, 2004 Cenvat Credit can be availed only on the strength of challans evidencing payment of Service Tax and the invoices/ CGST Bills are not the proper document to avail the input service credit, as the service tax was payable by the appellant under Reverse Charge Mechanism. they had discharged the service tax liability of Rs.68,42,830/- for the month of June'2017 irregularly from the wrongly availed credit of input services as mentioned above. 2.3 A show cause notice dated 14.06.2019 was issued to the respondent asking them to show cause as to why: i. Input Service Credit amounting to Rs. 68,42,830/- should not be recovered from them under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 read with S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Challans dated 06.07.2017 and 14.08.2017 was admissible only on or after the said dates, such Cenvat Credit was not legally available for utilization towards payment of Service Tax for the month/ quarter ending 30.06.2017 and the party has wrongly utilized the said Cenvat Credit towards payment of Service Tax payable for June'2017. Documents for availing Cenvat Credit have been prescribed under Rule 9 of the Cenvat Credit Rules, 2004 wherein the prescribed document for availment of Cenvat Credit is 'a challan evidencing payment of service tax by the person liable to pay service tax' in the case of payment of Service Tax under Reverse Charge Mechanism(RCM). First proviso to Rule 3(4) of Cenvat Credit Rules, 2004.the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month or quarter for payment of duty or tax relating to that month or the quarter. The Commissioner (Appeals) has himself admitted in the Order-in-Appeal passed by him that "Regarding utilization of the CENVAT credit against the service tax payable for the month of June-2017, the same was available to the appellant for payment of service tax only after it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CCR, the CENVAT credit in respect of the input services on which tax was payable under RCM was admissible only on GR-7. In this regard the appellant had contended that the Service tax, under RCM, for the month of June-17 was paid on 06.07.217 and 14.08.2018 and relevant return in which the said credit was availed and utilized was also filed on 14.08.2017, in time, well before the issue of show cause notice in June 2019. I find that there was no dispute regarding admissibility of the CENVAT credit in respect of the services received and used by the appellant for providing of output services. The fact that the appellant had paid the service tax, under RCM, albeit after some delay, and filed the requisite returns was also not in dispute. Once the service tax payable by the party on RCM basis, stood paid by him, he became entitled to CENVAT credit and the same was not deniable It was also on record that the party out of the total liability of service tax of RS 68,63,297/- (under RCM), had paid an amount of Rs.55,63,297/- on 06.07.2017 in terms of Rule 6 of the Service Tax Rules, 1994, against the total service tax (under RCM) liability for the month of June-2017 and the rest of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by appropriately reducing the penalty. Accordingly, the penalty imposed is reduced to Rs.50,000/- (Rupees fifty thousand only) and the rest of the penalty is set aside." 4.3 The entire thrust of the revenue appeal in the present case is on the provisions of Rule 9 of the CENVAT Credit Rules, 2004. The submission made by the revenue is that the credit could have been availed only on the basis of the challan evidencing the payment of service tax, in case where the recipient of the service tax was required to pay the service tax on reverse charge mechanism. Rule 9 of the CENVAT Credit Rules, 2004 prescribes the documents against which the CENVAT Credit can be taken. However Rule 4 of the CENVAT Credit prescribes the conditions for availing the CENVAT Credit. Rule 4 (7) of the CENVAT Credit Rules, 2004 reads as follow: RULE 4. Conditions for allowing CENVAT credit. - (7) The CENVAT credit in respect of input service shall be allowed, on or after the day on which the invoice, bill or, as the case may be, challan referred to in rule 9 is received: Provided that in respect of input service where whole or part of the service tax is liable to be paid by the recipient of service, cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in the said Rules." 4.5 From the above it is quite evident that the CENVAT Credit of the service tax on the input services is available to appellant on the receipt of invoice by the service recipient. The scheme of taxation of services provide for payment of the tax either by the service provider or the service recipient after the closure of the month in which the invoice is issued. In case of the reverse charge mechanism the scheme of taxation follows the same pattern. It is true in terms of Rule 9 the document prescribed for availing the CENVAT Credit is challan evidencing the payment of Service Tax by the service recipient. However Rule 9 will have to be read along with the Rule 4 (7), and the CENVAT Credit will be allowed only after the tax has been paid in terms of first proviso. However from the perusal of the Rule 4 (7) it is evident that the said rule talks about the date on which the credit will be allowed. 4.6 The appellant has taken CENVAT Credit and declared in their return filed for the Month of June 2017 only after the receipt of the challan evidencing the payment of Service Tax paid by them on the reverse charge basis. They have taken the credit and utilized ..... X X X X Extracts X X X X X X X X Extracts X X X X
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