2013 (10) TMI 862 - AT - Service Tax

Appellant wins tax credit dispute over supplier fraud, cites absence of relevant provision

M/s. Mangalam Cement Ltd. Versus CCE & ST, Jaipur-I

The appellant, a cement manufacturer, successfully argued for the admissibility of cenvat credit for service tax paid under a supplementary invoice ... CENVAT Credit - supplementary invoice issued for service tax paid later - Revenue was of the view that the invoice issued to the appellant is supplementary invoice and since non-payment of service tax was on account of wilful suppression of facts, the appellant cannot take cenvat credit of this service tax on the basis of this invoice, in view of the provisions of the Rule 9(1)(b) of the Cenvat Credit Rules – Waiver of Pre-deposit - Held that:- Prima facie such a provision was not there in respect of input services and was introduced w.e.f. 1.4.2011 - in this case the receipt of the services by the appellant is not disputed and the fact that the services were used in or in relation to the manufacture of finished goods is also not disputed - the appellant have strong prima facie case in their favour – Following Secure Meters Ltd. Vs. CCE, Jaipur-II [2010 (1) TMI 284 - CESTAT, NEW DELHI] and Imagination Technologies India P. Ltd. Vs. CCE, Pune-III [2011 (4) TMI 406 - CESTAT, MUMBAI] - the requirement of pre-deposit of cenvat credit demand, interest and penalty waived for hearing of the appeal and recovery stayed till the disposal of the appeal – Stay granted. Issues:1. Admissibility of cenvat credit for service tax paid under a supplementary invoice.2. Interpretation of Rule 9(1)(b) of the Cenvat Credit Rules.3. Consideration of wilful mis-statement and suppression of facts in relation to cenvat credit eligibility.Analysis:1. The appellant, a cement manufacturer, received taxable services from a provider who did not pay service tax initially. The service tax was later paid under a supplementary invoice. The dispute arose regarding the admissibility of cenvat credit for this service tax amount. The department contended that Rule 9(1)(b) of the Cenvat Credit Rules prohibited the appellant from claiming credit due to the supplier's non-payment resulting from fraudulent activities. However, the appellant argued that such a provision was not applicable during the relevant period and cited precedents supporting their position.2. The key contention revolved around the interpretation of Rule 9(1)(b) of the Cenvat Credit Rules. The rule restricts the admissibility of credit if the supplier pays an additional amount of duty due to fraud, wilful mis-statement, or suppression of facts. The department argued that this rule applied to the current scenario, barring the appellant from claiming cenvat credit. Conversely, the appellant highlighted the absence of a similar provision for input services during the relevant period, emphasizing the lack of grounds to deny the credit based on Rule 9(1)(b).3. The consideration of wilful mis-statement and suppression of facts played a crucial role in determining the appellant's eligibility for cenvat credit. The department contended that the supplier's non-payment of service tax was intentional to evade tax obligations, thereby disqualifying the appellant from claiming the credit. In contrast, the appellant stressed the undisputed receipt and utilization of services for manufacturing purposes, supported by tribunal judgments favoring the allowance of credit even for subsequently paid service tax under supplementary invoices. This argument, coupled with the absence of a specific provision during the relevant period, led to the waiver of the pre-deposit requirement and the stay of recovery pending appeal.This detailed analysis of the judgment highlights the nuanced legal arguments and interpretations surrounding the admissibility of cenvat credit in the context of service tax payment under a supplementary invoice.