Appellant upheld in claiming full Service Tax credit despite partial payment to service provider.

The Tribunal dismissed the Department's appeals, affirming the appellant's entitlement to avail the credit of full Service Tax paid on input services, despite withholding part payment to the service provider on account of a performance guarantee. The decision was based on the interpretation of relevant legal provisions, specifically Rule 3 of CCR, and established precedents supporting the appellant's position.

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Issues:
- Whether the appellant wrongly availed Cenvat Credit of Service Tax paid on input services due to withholding part payment of service provider on account of performance guarantee.
- Whether the appellant is entitled to avail the credit of full Service Tax paid irrespective of the amount payable to the service provider being withheld.

Analysis:
1. Issue 1 - Cenvat Credit of Service Tax:
The Department alleged that the appellant wrongly availed Cenvat Credit of Service Tax paid on input services as they were not making full payment to the service provider, retaining part payment on account of performance guarantee. Various show cause notices were initially issued, which were adjudicated confirming the demand. However, the Commissioner (Appeals) allowed the appeal, setting aside the original adjudicating authority's order. The Department filed the present appeals against this decision.

2. Commissioner's Decision and Arguments:
The Department argued that credit can only be allowed when the service recipient makes full payment of the value of input services and Service Tax within the stipulated time. Emphasis was placed on Rule 4(7) of Cenvat Credit Rules, stating that if payment is not made within the specified time, the Cenvat credit needs to be paid back. The Department sought to set aside the order under challenge and allow the appeal.

3. Appellant's Argument and Precedents:
The appellant argued that they were entitled to avail the credit of full Service Tax paid, regardless of withholding payment to the service provider. They referred to precedents where similar issues were decided in their favor. The appellant relied on specific case laws to support their argument.

4. Tribunal's Analysis and Decision:
After hearing both parties and reviewing the records, the Tribunal noted that the appellant had paid the Service Tax on the entire payment made to the contractor. Rule 3 of CCR allows the appellant to avail Cenvat Credit on the amount already paid. The Tribunal observed that Rule 4(7) of CCR, as amended, is not linked with payment to the service provider but with the invoice/bill/challan of input service. The circular further clarified that the credit would be equivalent to the amount paid as Service Tax.

5. Final Decision and Precedential Support:
The Tribunal dismissed the Department's appeals, citing precedents where it was established that the credit of full Service Tax paid by the service provider is available even if the amount payable to the service provider is withheld, as long as the service tax paid remains unchanged. The Tribunal's decision was based on the facts and legal provisions discussed, leading to the dismissal of the Department's appeals.

In conclusion, the Tribunal's detailed analysis and reliance on legal provisions and precedents led to the dismissal of the Department's appeals, affirming the appellant's entitlement to avail the credit of full Service Tax paid on input services, despite the withholding of part payment to the service provider on account of a performance guarantee.

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