Cenvat credit cannot be denied when service tax is paid by the recipient and supported by a valid challan.

Cenvat credit could not be denied merely because the service recipient, rather than the service provider, discharged the service tax, since the Credit Rules imposed no condition requiring payment only by the provider and the tax had been deposited into the Government exchequer. A challan evidencing such payment was also accepted as a valid document for availing credit, the point being treated as settled by prior authorities. The denial of credit on both grounds was therefore unsustainable, and entitlement to credit was upheld.

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Issues: (i) Whether Cenvat credit could be denied merely because service tax was paid by the service recipient instead of the service provider. (ii) Whether the challan evidencing payment of service tax was a valid document for availing Cenvat credit.

Issue (i): Whether Cenvat credit could be denied merely because service tax was paid by the service recipient instead of the service provider.

Analysis: The denial of credit was based on the premise that the service tax liability statutorily lay on the service provider. It was found that the Cenvat Credit Rules do not impose any condition that credit is available only when tax is paid by the service provider. Since the services were received, tax had been paid into the Government exchequer, and the requirements of the credit scheme stood satisfied.

Conclusion: Cenvat credit could not be denied on this ground.

Issue (ii): Whether the challan evidencing payment of service tax was a valid document for availing Cenvat credit.

Analysis: The objection that the challan was not a valid document was rejected as the issue was treated as no longer res integra. The relied upon authorities supported the position that a challan evidencing payment of service tax is a valid basis for availing credit.

Conclusion: The challan was accepted as a valid document for availing Cenvat credit.

Final Conclusion: The denial of Cenvat credit was unsustainable on both grounds, and the assessee's entitlement to credit was upheld.

Ratio Decidendi: Where service tax has been paid on received services and deposited into the Government exchequer, Cenvat credit cannot be denied merely because the recipient discharged the tax, and a challan evidencing such payment may constitute a valid document for credit.

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