2017 (1) TMI 305 - AT - Service Tax

Tribunal reverses penalties and disallows credit order, ruling in favor of Dow Chemical.

The Tribunal overturned the order disallowing CENVAT credit and penalties imposed on M/s Dow Chemical International Pvt Ltd under sections 77 and 78 of ... CENVAT credit - Registration of premises not prerequisite for CENVAT credit - Availment of credit on tax paid under reverse charge - Identity of service provider irrelevant where tax discharged under reverse charge - Recovery of disallowed credit and interest - Penalty under Finance Act, 1994CENVAT credit - Registration of premises not prerequisite for CENVAT credit - Claim for CENVAT credit relating to inputs/services availed at an unregistered premises for the period September 2007 to December 2007. - HELD THAT: - The Tribunal accepted the appellant's contention, following the principle that there is no provision in the Cenvat Credit Rules rendering registration of premises a condition precedent to availment of CENVAT credit. Reliance was placed on the decision of the Hon'ble High Court of Karnataka in mPortal India Wireless Solutions P Ltd which held that rejection of credit solely on the ground of non-registration of premises is not sustainable in law in the absence of a statutory provision making registration mandatory. In view of this legal position, the disallowance of credit on the ground stated in the impugned order was set aside.Disallowance of CENVAT credit for the unregistered premises for September 2007 to December 2007 set aside; credit allowed.CENVAT credit - Availment of credit on tax paid under reverse charge - Identity of service provider irrelevant where tax discharged under reverse charge - Claim for CENVAT credit of tax paid as recipient of service under the reverse charge mechanism. - HELD THAT: - The Tribunal held that the CENVAT Credit Rules, 2004 permit availment of credit in respect of tax paid documents and, where tax has been discharged under the reverse charge mechanism by the recipient, the identity of the provider of the service does not preclude the recipient from availing credit. Applying this rule to the facts, the Tribunal found no legal basis to deny credit merely because the tax was paid under reverse charge, and therefore set aside the impugned disallowance in respect of such tax.Credit allowed for tax paid on reverse charge; disallowance set aside.Final Conclusion: The impugned order disallowing CENVAT credit was set aside and the appeal allowed; credits in respect of the unregistered premises for September 2007 to December 2007 and tax paid under reverse charge were held allowable. Issues:1. Disallowance of CENVAT credit and recovery with interest.2. Alleged incorrect availing of credit for unregistered premises and tax paid as recipient of service.3. Imposition of penalties under sections 77 and 78 of Finance Act, 1994.4. Demand dropped as unsustainable in law.Analysis:1. The appellant, M/s Dow Chemical International Pvt Ltd, appealed against an order disallowing CENVAT credit of &8377; 34,01,192/- and imposing penalties under sections 77 and 78 of the Finance Act, 1994. The Commissioner of Service Tax - VII, Mumbai had recovered the disallowed credit along with interest. However, a demand of &8377; 12,55,18,472/- was dropped as unsustainable in law.2. The allegation included the incorrect availment of credit amounting to &8377; 16,23,623/- for unregistered premises and &8377; 17,77,564/- of tax paid as a recipient of service. The appellant contested this allegation during the appeal.3. During the hearing, the appellant's Chartered Accountant referred to a decision of the Hon'ble High Court of Karnataka in a similar case to argue that registration of premises was not a prerequisite for availing credit. The appellant also cited a Tribunal decision to support their case.4. The appellant highlighted that the CENVAT Credit Rules, 2004 allow for the availment of credit against tax paid documents, even in cases of tax paid on a 'reverse charge' basis. The appellant argued that the identity of the service provider is irrelevant in such cases.5. Ultimately, the Tribunal set aside the impugned order disallowing the CENVAT credit and penalties, allowing the appeal based on the arguments presented by the appellant's representative. The decision was pronounced in court, overturning the earlier order.