2022 (1) TMI 449 - AT - Service Tax

Tribunal grants cenvat credit on bad debts and advertisement services, emphasizing Rule 3.

The Tribunal ruled in favor of the appellant, allowing their appeals against the reversal of cenvat credit on bad debts and advertisement services. It was ... Seeking reversal of CENVAT Credit - amount written off as bad debts - advertisement & sales promotion services - appellant has written off certain amounts for consideration of services, they have not received - period April 2009 to March 2012 - Rule 3(5C) of Cenvat Credit Rules - HELD THAT:- Prior to 01.04.2011, the appellant was required to pay service tax on receipt of consideration for the service provided, which means that if the appellant is failed to received consideration qua service provided, the appellant is not required to pay service tax; which does not mean that the appellant has provided exempted/non-taxable service. Rule 3 of the Centvat Credit Rules, 2004 deals with the situation for entitlement of the cenvat credit, which prescribes that a provider of the output service shall be allowed to take cenvat credit of any input service received by the provider of output service on or after 10th day of September, 2004 - Admittedly, the services on which the appellant has taken cenvat credit are ‘input services’ in terms of Rule 2(l) of the Cenvat Credit Rules, 2004 and is a provider of output service. Therefore, in terms of Rule 3 of the Cenvat Credit Rules, 2004, we hold that the appellant is entitled to avail cenvat credit on input services in question. Further, there is no such provision in the Cenvat Credit Rules, 2004 or in the Finance Act, 1994 for reversal of cenvat credit for the services provided for which no consideration for service provided is received by an assessee. The appellant has correctly availed the cenvat credit on input services although the amount of non-recoverable taxable service has been written off by the appellant for the period prior to 01.04.2011. The appellant has admitted at bar that they have paid service tax on all the taxable services provided by them after 01.04.2011 at the time of provision of service. Therefore, if it is so, the appellant cannot be liable for reversal of cenvat credit for the services provided after 01.04.2011 on which the appellant has paid service tax. Advertisement & sales promotion services - HELD THAT:- On going through the said invoice, it is found that the description of the service provided by IRCTC is SBI co-brand registered as “SBI”. The said invoice does not prescribe that IRCTC has provided any ‘catering service’ to the appellant. In fact, the lower authority has fell in error holding that IRCTC is providing only ‘catering service’ and the denial of cenvat credit is only on the basis of assumption and presumption - the appellant is entitled for cenvat credit on the services provided by IRCTC as advertisement services. Appeal allowed - decided in favor of appellant. Issues:- Reversal of cenvat credit on bad debts and advertisement services- Entitlement to cenvat credit on input services- Denial of cenvat credit on services received from IRCTC- Applicability of Rule 3 of Cenvat Credit Rules, 2004- Interpretation of invoices for cenvat credit eligibilityAnalysis:1. Reversal of Cenvat Credit on Bad Debts and Advertisement Services: The appellant filed appeals against orders confirming the demand for reversal of cenvat credit on bad debts and advertisement services for the period April 2009 to March 2012. The impugned orders held that the appellant cannot avail cenvat credit on amounts written off as bad debts and denied credit on input services received from IRCTC. The appellant argued that a prior order favored them and there is no provision for reversal of credit due to non-payment of service tax. The Tribunal noted that the appellant provided taxable services and was entitled to cenvat credit as per Rule 3 of the Cenvat Credit Rules, 2004. The appellant had paid service tax on taxable services post-April 2011, making the demand post that period unsustainable.2. Entitlement to Cenvat Credit on Input Services: The Tribunal examined the appellant's entitlement to cenvat credit on input services and found that the appellant had correctly availed the credit even for non-recoverable taxable services written off before April 2011. Rule 3 of the Cenvat Credit Rules, 2004 allowed the appellant to take credit of input services, and there was no provision for credit reversal if consideration for the service was not received. The Tribunal held that the appellant was entitled to cenvat credit on input services provided after April 2011, for which service tax was paid at the time of provision.3. Denial of Cenvat Credit on Services from IRCTC: The Tribunal analyzed the invoices provided by the appellant from IRCTC and found that the description indicated advertisement services, not catering services as presumed by the lower authority. The denial of cenvat credit was based on incorrect assumptions. Therefore, the Tribunal held that the appellant was entitled to cenvat credit on the services provided by IRCTC as advertisement services.4. Applicability of Rule 3 of Cenvat Credit Rules, 2004: The Tribunal emphasized that Rule 3 of the Cenvat Credit Rules, 2004 allowed a provider of output services to take cenvat credit of any input service received. The appellant, being a provider of output services, was entitled to avail cenvat credit on input services as per the rules, irrespective of the recovery of consideration for the services provided.5. Interpretation of Invoices for Cenvat Credit Eligibility: The Tribunal scrutinized the invoices to determine the nature of services provided by IRCTC and found that they were advertisement services, not catering services as misinterpreted by the lower authority. The denial of cenvat credit based on this incorrect assumption was deemed unsustainable.In conclusion, the Tribunal found no merit in the impugned orders and arguments presented by the respondent, setting aside the orders and allowing the appeals with consequential relief.