2015 (12) TMI 266 - AT - Service Tax

Successful Appeal: Appellant rightfully availed Cenvat credit due to lack of awareness of service provider's non-payment.

MEMORIES PHOTOGRAPHY STUDIO Versus COMMR. OF C. EX. & S.T., VADODARA

The appeal was allowed, and it was held that the Cenvat credit was rightfully availed by the appellant. The court found that the appellant was not aware ... Denial of CENVAT Credit - whether Cenvat credit can be denied to the recipient of the inputs with respect to duty not paid by the service provider - Held that:- it has to be established by the Revenue for denial of such credit that appellant was aware of non-payment of tax before taking the credit. In the present case, there is no evidence on record that appellant was aware of non-payment of Service Tax before taking Cenvat credit. A service recipient will only see the cenvatable document under which service tax paid/ payable has been indicated. It is not the case of the Revenue that the service provider does not exist. Under the present facts and circumstances Cenvat credit is not deniable to the appellant and has been correctly availed. - Decided in favour of assessee. Issues involved:Whether Cenvat credit can be denied to the recipient of the inputs with respect to duty not paid by the service provider.Analysis:The appeal was filed against OIA No. SRP/295/VDR-I, dated 14-9-2012, raising the issue of whether Cenvat credit can be denied to the recipient of inputs if the duty was not paid by the service provider. During the hearing, the appellant did not appear, while the Revenue argued that the appellant should have verified if the service provider had paid the duty. The Revenue contended that since the service provider did not discharge the duty liability, Cenvat credit should not be allowed to the appellant.Upon hearing the arguments and examining the case records, the key issue for consideration was whether Cenvat credit could be denied to a service recipient when the service provider had not paid the tax. The Member (T) observed that the Revenue must establish that the appellant was aware of the non-payment of tax before claiming the credit. In this case, there was no evidence to show that the appellant knew about the non-payment of Service Tax before availing the Cenvat credit. The Member (T) noted that a service recipient typically relies on the cenvatable document indicating the service tax paid or payable and that there was no indication that the service provider was non-existent. Consequently, under the prevailing circumstances, the Cenvat credit was deemed admissible to the appellant and correctly utilized.Based on the above analysis, the appeal filed by the appellant was allowed, and it was held that the Cenvat credit was rightfully availed. The operative part of the order was pronounced in court, and the decision favored the appellant.