2022 (9) TMI 1285 - AT - Service Tax

Validity of Debit Notes for CENVAT Credit and Reimbursements for Tax Paid Costs

Commissioner of CGST & Central Excise, Mumbai Versus Vodafone Idea Limited

Commissioner of CGST & Central Excise, Mumbai Versus Vodafone Idea Limited - TMI Issues Involved:1. Whether a 'debit note' suffices for the documentation requirements prescribed in rule 9 of CENVAT Credit Rules, 2004.2. Whether debit notes/invoices pertaining to reimbursements of diesel and electricity costs incurred by the service provider, on which tax under Finance Act, 1994 has been duly discharged, enable the recipient to take credit.Detailed Analysis:Issue 1: Whether a 'debit note' suffices for the documentation requirements prescribed in rule 9 of CENVAT Credit Rules, 2004.The Tribunal examined whether 'debit notes' could be considered valid documents for availing CENVAT credit under rule 9 of the CENVAT Credit Rules, 2004. The respondent, M/s Idea Cellular Ltd, had availed credit based on such debit notes issued by M/s GTL Infrastructure Ltd, which included charges for electricity, diesel, and rent. The Revenue argued that these debit notes did not meet the documentation requirements, as diesel and electricity were not eligible inputs under the CENVAT Credit Rules, 2004.The Tribunal referred to several precedents to address this issue:- Commissioner of Central Excise, Jaipur - I v. Bharti Hexacom Ltd [2018 (6) TMI 435 RAJASTHAN HIGH COURT]: The High Court accepted debit notes for CENVAT credit, even if they were initially considered in contravention of Rule 9.- Tata Motors Ltd v. Commissioner of Central Excise [2017 (8) TMI 835 CESTAT MUMBAI]: The Tribunal held that if debit notes contained all required information as per Rule 4A of Service Tax Rules, they should be allowed for taking credit.- Commissioner of Central Excise, Indore v. Gwalior Chemical Industries Ltd [2011 (274) ELT 97 (Tri-Del.)]: The Tribunal found that debit notes containing all requisite information should be treated as invoices.- Tiara Advertising v. Union of India [2019 (30) GSTL 474 (Telangana)]: The High Court held that disallowance of CENVAT Credit on the ground of using debit notes instead of invoices was not acceptable.Based on these precedents, the Tribunal concluded that debit notes containing the necessary information as prescribed in rule 9 could be considered valid documents for availing CENVAT credit.Issue 2: Whether debit notes/invoices pertaining to reimbursements of diesel and electricity costs incurred by the service provider, on which tax under Finance Act, 1994 has been duly discharged, enable the recipient to take credit.The Tribunal reviewed the eligibility of reimbursements for diesel and electricity costs for CENVAT credit. The Revenue contended that diesel and electricity were not eligible inputs under the CENVAT Credit Rules, 2004, and therefore, credit should not be allowed.The Tribunal referred to the following decisions:- Idea Cellular Ltd v. Commissioner of Central Excise, Mumbai [final order no. A/89500/2016]: It was held that while CENVAT credit could not be availed on duty paid on diesel, there was no bar on availing credit of service tax paid on services associated with the delivery and running of diesel generator sets.- Commissioner of Central Excise, Jaipur - I v. Mangalam Cement Ltd [2017 (47) STR 349 (Tri-Del)]: The Tribunal clarified that credit could not be denied based on the classification of service by the provider and that the recipient could avail credit if the service tax was duly paid.The Tribunal observed that the debit notes and invoices in question reflected separate charges as per the master service agreements, and the tax liability under the Finance Act, 1994, was duly discharged by the service provider. The Tribunal emphasized that once the tax was collected, it was not within the jurisdiction of the tax authorities governing the recipient to contest the payment of tax.The Tribunal concluded that the competent authority failed to distinguish between diesel as goods and the charge raised upon the recipient of the service as the value of the service on which tax liability under the Finance Act, 1994, was duly discharged. Consequently, the Tribunal found that the grounds of appeal lacked merit and dismissed the Revenue's appeal.Conclusion:The Tribunal held that debit notes containing all required information as per rule 9 of the CENVAT Credit Rules, 2004, are valid for availing CENVAT credit. Additionally, reimbursements for diesel and electricity costs incurred by the service provider, on which tax under the Finance Act, 1994, has been discharged, enable the recipient to take credit. The appeal of the Revenue was dismissed.