Cenvat credit on subcontractor invoices remains available where service tax is paid, even if part of the bill is retained as security.

Rule 4(7) of the Cenvat Credit Rules, 2004 permits credit of service tax reflected in a subcontractor's invoice where that tax has been paid, even if part of the invoice value is retained as a security deposit. The Tribunal, following CBEC Circular No. 122/3/2010-ST and its earlier view on the same issue, held that credit cannot be curtailed merely because the assessee has not immediately paid the full billed amount to the service provider. The operative consideration is payment of the service tax shown in the invoice, not settlement of the entire taxable value at the same time. Full Cenvat credit was therefore admissible.

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Issues: Whether Cenvat credit of the full service tax amount shown in the subcontractor's invoices can be denied merely because part of the billed value was retained as security deposit.

Analysis: The Tribunal applied Rule 4(7) of the Cenvat Credit Rules, 2004 along with CBEC Circular No. 122/3/2010-ST dated 30.04.2010 and followed its earlier decision on an identical issue. It held that where the service tax indicated in the invoice has been paid and no part of that tax has been withheld, credit cannot be restricted only because the assessee retained part of the taxable value payable to the service provider. The relevant consideration is payment of service tax on the invoice value, not full immediate payment of the billed amount to the service provider.

Conclusion: The denial of full Cenvat credit was unsustainable and the credit was admissible to the assessee.

Ratio Decidendi: Cenvat credit of service tax is not deniable merely because a part of the invoice value payable to the service provider is withheld, so long as the service tax charged in the invoice has been paid.

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