Input service credit on supplementary invoices supports waiver of pre-deposit where tax was paid later and services were used in manufacture.

Credit on input services taken against later-paid service tax under supplementary invoices was treated as prima facie sustainable where the services were actually received and used in manufacture. The departmental restriction invoked for denying credit on supplementary invoices was noted to apply expressly to inputs and capital goods, while the parallel restriction for input services was stated to have been introduced only from 1 April 2011. On that basis, and relying on tribunal precedent, a strong prima facie case was found and pre-deposit of demand, interest and penalty was waived with recovery stayed pending appeal.

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Issues: Whether pre-deposit of the demand, interest and penalty was required where the service tax was paid later by the service provider under an invoice described as supplementary and the recipient had availed credit on that basis.

Analysis: The disputed services were admittedly received and used in relation to the manufacture of the final products. The credit was taken on service tax paid subsequently after audit had detected non-payment by the service provider. The provision relied upon by the department for denying credit on supplementary invoices was prima facie noted to be applicable to inputs and capital goods, while the comparable restriction for input services was stated to have been introduced only from 1.4.2011. In these circumstances, and in light of the cited tribunal decisions, the assessee was held to have a strong prima facie case.

Conclusion: Pre-deposit of the demand, interest and penalty was waived and recovery was stayed till disposal of the appeal, in favour of the assessee.

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