2019 (10) TMI 626 - AT - Central Excise

Tribunal allows Cenvat credit under reverse charge, clarifies Rule 9(1)(bb) exceptions

The Tribunal ruled in favor of the appellants, holding that Rule 9(1)(bb) does not apply when service tax is paid under the reverse charge mechanism. The ... CENVAT Credit - duty paying invoices - supplementary invoices - Rule 9(1)(bb) of Cenvat Credit Rules, 2004 - HELD THAT:- There is no dispute to the fact that appellant has paid service tax, even though pointing out by the auditors subsequently, but under reverse charge mechanism on receipt of services namely, security agency service and man power recruitment service. They have availed Cenvat credit on the basis of bank challans as proof of payment of service tax. The provisions of taking credit on such challans, is provided under Rule 9(e) of Cenvat Credit Rules, 2004 - In the present case, credit was not taken on supplementary invoices, bills challans and therefore, the provisions of Rule 9(1)(bb) is not applicable. Thus, in case of payment of service tax under reverse charge mechanism, Rule 9(1)(bb) will not apply - appeal allowed - decided in favor of appellant. Issues involved:Whether the appellant is correct in taking Cenvat credit on input service on which service tax was paid under reverse charge mechanism.Analysis:The main issue in this case revolves around the eligibility of the appellant to claim Cenvat credit on input service for which service tax was paid under the reverse charge mechanism. The appellant paid the service tax, interest, and 15% penalty after being audited, leading to a dispute with the department. The department argued that the appellant, despite paying the necessary taxes and penalties, should not be entitled to the credit under Rule 9(1)(bb) of the Cenvat Credit Rules, 2004, due to alleged suppression of facts. The appellant's counsel contended that Rule 9(1)(bb) does not apply in cases where service tax is paid under reverse charge, emphasizing that the rule is not relevant to service recipients like the appellant. The counsel cited precedents such as Nissan Motor India Pvt. Limited vs. CST, Chennai and Columbia Machine Engineering India Pvt. Limited vs. CCE & ST, Vadodara to support their argument.The Tribunal analyzed the situation and found that the appellant had indeed paid the service tax under the reverse charge mechanism for services received, such as security agency service and manpower recruitment service. The appellant had availed Cenvat credit based on bank challans as proof of tax payment, in accordance with Rule 9(e) of the Cenvat Credit Rules, 2004. The Tribunal highlighted that since the credit was not claimed on supplementary invoices or bills, Rule 9(1)(bb) was deemed inapplicable. The Tribunal referred to the case of Nissan Motor India Pvt. Limited, where a similar issue was addressed, and ruled that payments made under reverse charge mechanism fall under Rule 9(e) rather than Rule 9(1)(bb). The Tribunal also cited relevant legal provisions and judgments to support the decision.In another case, Columbia Machine Engineering India Pvt. Limited, the Tribunal reiterated that denial of Cenvat credit under Rule 9(1)(bb) is only justified in cases involving fraud, collusion, willful misstatement, suppression of facts, or contravention of tax laws. The Tribunal emphasized that if the appellant had paid the service tax, interest, and penalty under Section 73(4A) without any adjudication process, it cannot be deemed as suppression of facts. The Tribunal concluded that the denial of Cenvat credit in such circumstances is not legally sound. The decision was supported by precedents and established legal principles.In both cases, the Tribunal ruled in favor of the appellants, emphasizing that Rule 9(1)(bb) does not apply when service tax is paid under the reverse charge mechanism. The judgments provided clarity on the interpretation and application of relevant rules and laws in similar scenarios. The impugned orders were set aside, and the appeals were allowed, confirming the appellants' entitlement to claim Cenvat credit under the given circumstances.