Cenvat credit on reverse-charge ocean freight tax was admissible where the recipient's challan was valid evidence of payment.

Cenvat credit of service tax paid by a service recipient under reverse charge on ocean freight could not be denied under Rule 9(1)(bb), because that provision applies to supplementary invoices, bills or challans issued by a provider of output service, while Rule 9(1)(e) recognises the recipient's own challan as valid credit evidence. The denial was therefore on the wrong legal footing. No suppression or misdeclaration was established, and the levy on ocean freight had already been held ultra vires in the cited High Court ruling. Credit was held admissible and the matter was remanded for fresh consideration in light of that conclusion.

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Issues: Whether Cenvat credit of service tax paid by the service recipient on reverse charge basis against ocean freight could be denied under Rule 9(1)(bb) of the Cenvat Credit Rules, 2004, and whether the refund claim based on such credit was sustainable.

Analysis: The credit was taken on the appellant's own challan evidencing payment of service tax as service recipient under reverse charge mechanism. Rule 9(1)(bb) governs credit on a supplementary invoice, bill or challan issued by a provider of output service, whereas Rule 9(1)(e) specifically recognises a challan evidencing payment of service tax by the service recipient as a valid for credit. The denial of credit under Rule 9(1)(bb) was therefore on a wrong footing. The record also did not establish suppression, misdeclaration, or similar conduct, and the levy on ocean freight had already been held ultra vires in the cited High Court decision.

Conclusion: Denial of Cenvat credit was unsustainable, and the appellant was entitled to take credit of the service tax paid on ocean freight. The matter was remanded for fresh consideration in the light of this finding.

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