Tribunal allows cenvat credit despite overpayment of service tax

The Tribunal set aside the denial of cenvat credit on input services due to incorrect payment of service tax by the service provider. The appellant's eligibility for credit and full payment of service tax were not in dispute. The Tribunal found that the service tax had been duly discharged to the government, even though the service provider paid 100% instead of the stipulated 25%. Therefore, the denial of credit based on the payment proportion was deemed unwarranted, and the appeal was allowed in favor of the appellant.

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Issues: Denial of cenvat credit on input service due to incorrect payment of service tax by the service provider.

Analysis:
The appellant appealed against the denial of cenvat credit amounting to Rs. 93,395 on manpower supply services used in their manufacturing activity. The issue revolved around the change in service tax liability from 1.7.2012, where both the service provider and recipient were liable in a 25:75 proportion. The appellant, during July and August 2012, received taxable services with the service provider paying the full service tax instead of the stipulated 25%. The Revenue objected to the credit claiming the appellant should have paid 75% of the service tax, leading to an inadmissible excess credit.

Upon hearing both sides and reviewing the records, it was noted that the appellant's eligibility for credit and full payment of service tax on the input service were not in dispute. The crux of the matter was the disagreement over the proportion of service tax payment. The appellant argued that since the service provider paid 100% of the tax instead of 25%, the 75% deemed payable by the appellant should not render the credit inadmissible. The Tribunal acknowledged that the service tax had been duly discharged to the government, albeit by the service provider, making the denial of credit on this ground unsustainable.

In light of the above facts, the Tribunal found no merit in the impugned order and set it aside, thereby allowing the appeal in favor of the appellant. The judgment emphasized that the service tax had been paid, and denying credit based on the payment proportion was unwarranted. The order was dictated and pronounced in open court, concluding the matter.

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