Availing service tax paid after huge delay.

[MANDAVILLI RAMAKRISHNA]

One of our client did man power supply up to 31.03.2012 on sub contract basis and not collected service tax and not shown those receipts in ST returns and paid taxes on the balance turnover only.

Now dept. gave notice stating as MIS DECLARED or SHORT SHOWN receipts and the adjudication shall be complete in this week.

Now his main contractor asked to submit invoices for release of service tax. Can the main contractor eligible to get input on the ST now proposed to be paid in the back drop of the mistake of the sub contractor???

What are the implications in this case and how to proceed further. Dept. going to conclude before payment of the tax, by issuing adjudication orders with penalty.

[Brijesh Verma]

Cenvat can be taken on the basis of a supplementary invoice under Rule 9 of  CCR.

Further if you would check the date of issue of the notice you can very well opt of VCES if all conditions are met.

You have not mentioned when inquiry / investigation or audit has been initiated i.e. before or after 01.03.2013 which is the cut off date for VcES Scheme. You can avail VCES 2013 immunity if inquiry / investigation or audit was initiated after 01.03.2013 and file declaration under the scheme.

There can be a problem in availing the CENVAT in case if it is on account of fraud or collision.

Supplementary invoice is issued in case short charging and in which case CREDIT can be availed under Rule 9.

 

[MANDAVILLI RAMAKRISHNA]

audit initiated in 2012 and SCN issued in December, 2012 for levying penalties and interest and tax.

PH completed 1 month back and adjudication orders shall reach in a week of time.

Mean while our service receiver told to pay the tax and submit challan and to raise supplement invoice

so that he will reimburse.  Is it correct? can they get credit? If they are eligible to take input credit then only reimbursement will be made.

further, the rule 9 is reproduced below for quick reference.........

 (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :-

(a) an invoice issued by-

(i) a manufacturer for clearance of -

(I) inputs or capital goods from his factory or depot or from the premises of the consignment agent of tr, as the case may be, in terms of the provisions of Central Excise Rule, 2002; or

(b) a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provisions of Central Excise Rule, 2002 from his factory or depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by, or on behalf of, the said manufacturer or importer, in case additional amount of excise duties or additional duty leviable under section 3 of the Customs Tariff Act, has been paid, except where the additional amount of duty became recoverable from the manufacturer or importer of inputs or capital goods on account of any non-levy or short-levy by reason of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any provisions of the Excise Act, or of the Customs Act 1962 (52 of 1962) or the rules made there under with intent to evade payment of duty.

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(e) a challan evidencing payment of service tax by the person liable to pay service tax under sub-clauses (iii), (iv), (v) and (vii) of clause (d) of sub-rule (1) of rule (2) of the Service Tax Rules, 1994; or
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 please give reply

 regards

rk

Firstly if service tax has not at all been paid on taxable services then bill you would be raising now won't be called supplementary as supplementary bill is raised in the case of  additional amount that becomes payable due enhancement in the value of the service etc., due to valuation or classification etc.,.

Please note that if there is allegation of fraud, collusion or any willful misstatement or suppression of facts and penalty has been levied under section 78 and confirmed by the adjudicating authority, then in my view credit can not be sustained.

It depends on the facts of the case.

[Rama Krishana]

though I agree with the views of my predecessor but with one addition that once you prove the bonafide belief and your main contractor helps you to prove the case that  he has deposited the entire service tax, in that either of your may be dropped or if you surrender, the main contractor would be eligible for cenvat credit on the basis of your supplementary invoice showing the details of calculation of service tax.

 

You may take a call in this matter if the facts of the case are in your favor and the bonafide belief can be proved.

AI Summary

Input tax credit eligibility: main contractor may claim CENVAT on supplementary invoice unless fraud or collusion is proven.
Rule 9 allows CENVAT credit on the basis of a supplementary invoice or a challan evidencing payment of service tax, but credit is precluded where the additional liability results from fraud, collusion, willful misstatement or suppression of facts; pending inquiries, show-cause notices and confirmed penalties critically affect eligibility, while proof of bona fide belief together with documentary evidence may permit reimbursement and a subsequent credit claim.