CENVAT credit cannot be denied on mere recharacterization of dealer invoices when provider-side assessment remains undisturbed.

CENVAT credit taken on invoices issued by automobile dealers and manufacturers cannot be denied merely because the services described in those invoices are alleged not to have been actually provided or received. Applying earlier Tribunal reasoning under the CENVAT Credit Rules, 2004 and the service tax framework, the recipient-side credit was held to remain valid where dealer-wise service tax had been levied and the provider's assessment had not been lawfully reopened or disturbed. On that basis, the impugned demand, interest and penalty were set aside in favour of the assessee.

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Issues: (i) Whether CENVAT credit taken by the assessee on invoices issued by automobile dealers and manufacturers could be denied on the ground that the services described in those invoices were not actually provided or received.

Analysis: The dispute turned on the same pattern already examined in earlier decisions involving insurance companies and automobile dealers. The invoices were scrutinized in the context of the CENVAT Credit Rules, 2004 and the Service Tax framework, and the Tribunal noted that the controversy had already been considered in cases where dealer-wise service tax had been levied and the recipient's credit was questioned without disturbing the provider's assessment. Following the binding reasoning that the recipient-side credit cannot be denied merely by recharacterizing the transaction unless the assessment at the service provider's end is reopened, and finding the present facts to be covered by those decisions, the Tribunal held that the impugned demand, interest and penalty could not survive.

Conclusion: The issue was decided in favour of the assessee and against the Revenue; the CENVAT credit demand and consequential liabilities were set aside.

Ratio Decidendi: CENVAT credit at the recipient's end cannot be denied on a mere recharacterization of the underlying transaction where service tax has been collected on the invoices, unless the assessment at the service provider's end is lawfully reopened or disturbed.

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