2012 (9) TMI 1262 - AT - Service Tax

Tax Credit Dispute Resolved: Partial Payment Allows Proportional Credit Under Rule 4(7) of Cenvat Credit Rules, 2004

CESTAT New Delhi examined Rule 4(7) of Cenvat Credit Rules, 2004 regarding service tax invoice payment. Though Revenue advocated strict interpretation ... - The Appellate Tribunal (CESTAT New Delhi) addressed a dispute concerning interpretation of Rule 4(7) of the Cenvat Credit Rules, 2004, which mandates payment of service tax indicated in invoices as a precondition for availing cenvat credit. The appellant had paid 95% of the service tax shown on the invoice issued by M/s. Mahaveera Build-Tech (P) Ltd., retaining 5% due to a dispute.The Tribunal acknowledged the Revenue's strict interpretation that non-payment of the entire tax amount justifies denial of cenvat credit under Rule 4(7). However, it emphasized that 'Rule shall not be tyrant but shall be servant of law,' referencing the Apex Court decision in Sambhaji v. Gangabai 2009 (240) ELT 161 (S.C.), allowing cenvat credit proportionate to the undisputed tax paid.Consequently, the matter was remanded to the Adjudicating Authority to re-examine whether the 5% retention was justified and whether denial of credit should apply strictly or be relaxed to prevent undue hardship. The appellant is entitled to a reasonable opportunity of hearing during readjudication. Both the stay application and appeal were disposed accordingly.