Appellant allowed credit for service tax pre & post 18.04.2006 under Cenvat Credit Rules

The appellant was allowed to avail credit for service tax paid under reverse charge mechanism both before and after 18.04.2006 under Rule 3 of Cenvat Credit Rules, 2004. The Tribunal held that the appellant could claim credit for service tax paid before 18.04.2006 based on a CBEC clarification, and the retrospective amendment from 18.04.2006 enabled them to avail credit for service tax paid post that date. Consequently, the impugned order was set aside, and the appeal was allowed with necessary consequential relief.

---

---

Issues:
1. Whether the appellant is entitled to avail credit of service tax paid under reverse charge mechanism prior to 18.04.2006 under Rule 3 of Cenvat Credit Rules, 2004Rs.
2. Whether the appellant can avail credit for service tax paid under reverse charge mechanism after 18.04.2006 under Rule 3 of Cenvat Credit Rules, 2004Rs.

Issue No.1:
The appellant contested the denial of Cenvat credit on service tax paid under reverse charge mechanism from 1.4.2005 to 31.3.2010. The appellant argued that they paid service tax under section 66 of the Finance Act, 1994, even though it was not the charging section. The appellant claimed entitlement to credit based on Rule 3 of Cenvat Credit Rules, 2004. The AR contended that as section 66 was not the charging section, the appellant was not obligated to pay service tax before 18.04.2006. However, a CBEC clarification highlighted that tax paid on imported services should be allowed as credit if they qualify as input services. Consequently, the Tribunal held that the appellant, being tax compliant, was entitled to avail credit for service tax paid before 18.04.2006 under Rule 3 of Cenvat Credit Rules, 2004.

Issue No.2:
Regarding the period after 18.04.2006, the appellant argued that amendments in the Finance Act, 2011 allowed them to claim credit under Rule 3 of Cenvat Credit Rules, 2004. The Tribunal acknowledged the retrospective amendment from 18.04.2006, enabling the appellant to avail credit for service tax paid under reverse charge mechanism. Consequently, it was held that the appellant correctly availed the credit for service tax paid post 18.04.2006 under Rule 3 of Cenvat Credit Rules, 2004. As a result, the impugned order was set aside, and the appeal was allowed with any necessary consequential relief.

---