Tribunal allows appeal for service tax credit on retained amount, emphasizing payment importance

The Tribunal allowed the appeal, overturning the Commissioner's order denying the appellant credit for service tax on a retained amount after receiving taxable services. The Tribunal held that as long as service charges and service tax were paid proportionately, credit could be claimed, even if the final amount retained was less than the invoice value. Emphasizing the importance of paying service tax, the Tribunal relied on a Board Circular and precedent from a previous case to support its decision, ultimately finding the Revenue's denial of credit unfounded.

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Issues:
- Admissibility of service tax credit for retained amount by appellant
- Interpretation of Rule 4(7) regarding credit for service tax
- Clarification on payment of service tax for eligible input services

Analysis:
The case involved an appeal against the order of the Commissioner of Central Excise, Jaipur - II, where the appellants, engaged in cement manufacturing, were denied credit of service tax for a portion of the amount retained by them after receiving taxable services from three service providers. The Revenue contended that credit could only be claimed if the full value of the service was paid to the provider. However, the issue was clarified by a Board Circular stating that as long as the service charges were paid and service tax was also paid proportionately, the service receiver was entitled to take credit, even if the final settled amount was less than the invoice value. This clarification was supported by a previous Tribunal decision in Hindustan Zinc Ltd. vs. CCE, Jaipur - II, where it was held that full payment to the service provider was not mandatory for claiming credit.

The Tribunal, comprising Dr. Satish Chandra and Shri B. Ravichandran, after hearing arguments from both sides, found that the appellants had indeed received eligible input services and paid service tax as per the contractor's invoice. The Tribunal emphasized that the crucial factor was the payment of service tax, regardless of the final amount retained by the appellants. Citing the Board Circular and the precedent set by the Hindustan Zinc Ltd. case, the Tribunal concluded that the denial of credit by the Revenue was unfounded. Consequently, the impugned order denying credit to the appellant was set aside, and the appeal was allowed.

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