CENVAT credit timing under pre-April 2011 rules turned on payment date, not later ledger entries.

For CENVAT credit under Rule 4(7) of the CENVAT Credit Rules, 2004, as applicable before 1 April 2011, admissibility turned on whether payment for the input service and the corresponding service tax had been made. The text states that construction and repair of a water reservoir, together with the invoices and payments, were completed before 1 April 2011, so a later ledger entry in March 2012 was not the material date. It also records that the contrary finding on the timing of the work and invoices was unsupported by the record. On that basis, the disallowance of credit and consequential recovery were treated as unsustainable.

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Issues: Whether CENVAT credit on service tax paid for construction and repair of a water reservoir was admissible when the work, invoices, and payments were completed before 1 April 2011, notwithstanding that the ledger entry was made later.

Analysis: The relevant test under Rule 4(7) of the CENVAT Credit Rules, 2004, as it stood prior to 1 April 2011, was whether payment for the input service and the corresponding service tax had been made. The record showed that the reservoir construction and repair work, the invoices, and the payments were all completed before 1 April 2011. The finding that the work and invoices were after 1 April 2011 was unsupported by the record and was therefore perverse. The later ledger entry in March 2012 was not the material date for deciding admissibility of credit.

Conclusion: CENVAT credit was admissible, and the disallowance was unsustainable.

Final Conclusion: The demand disallowing credit, along with the consequential recovery, did not survive and the assessee succeeded.

Ratio Decidendi: For credit governed by the pre-1 April 2011 regime, admissibility depends on the date of payment for the input service and service tax, not on the date of subsequent ledger entry.

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