CENVAT credit on directors' remuneration survives where reverse charge service tax was payable and actually paid.

CENVAT credit cannot be denied merely because the taxability of directors' remuneration was questioned, where service tax was payable under the reverse charge mechanism from 01.07.2012 and had in fact been paid. The Tribunal noted that the sole basis for rejection was the view that no service tax was payable on the remuneration, but once payment of service tax was established and there was no finding that the amount was not deposited in the treasury, denial of credit was unjustified. The assessee was therefore entitled to the CENVAT credit on the directors' remuneration-related service tax.

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Issues: Whether CENVAT credit can be denied on the ground that service tax was not payable on remuneration paid to directors, when tax was payable under the reverse charge mechanism and had been paid.

Analysis: The only reason for rejecting the credit was the view that no service tax was payable on the directors' remuneration. The Tribunal accepted that service tax was payable under the reverse charge mechanism with effect from 01.07.2012. It further noted that once service tax has been paid, and there is no adverse finding that the amount was not deposited in the treasury, denial of CENVAT credit is not justified.

Conclusion: CENVAT credit could not be denied on the stated ground, and the assessee succeeded.

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