availing cenvat credit-reg

[Guest]

Dear Sir,

Can cenvat credit be taken on payment of tax for past clearance if show cause notice is issued if the amount is paid before contesting the scn. If possible, kindly give reasons in either case to satisfy the deptt.

[YAGAY andSUN]

Dear Sir,

In the recent past CBEC had issued a Circular in this regard, please check that Circular. Further, if the SCN had been issued by alleging fraud, mis statment by extending the five years then the amount so collected will be transferred to consumer welfare account and no CENVAT credit would be allowed.

[Ganeshan Kalyani]

In my view credit can be taken. In one of my practical experience i have observed.

[YAGAY andSUN]

If the amount is paid before contesting the SCN even then you would have to pay interest and 25% penalty within 30 days of issuance of SCN. Further, No CENVAT credit is allowed. It is settled legal position. You may also check it from the jurisdictional commissioner office.

Further, it SCN is adjudicated in favour of Assessee then either refund is required to obtained or if SCN is adjudicated along with consequential relief then no need to file the refund claim.

[KASTURI SETHI]

Sh.Prasad Ji,

Pl. elaborate your query with full facts of the case for clearing your doubt.

[YAGAY andSUN]

Yes Sir, if possible please share with us material facts of your matter enabling us to revert.

[Guest]

Shri Kasturiji,

Thanks for your response. The matter in detail as below:-

During audit in 2015 it was found that a builder had made certain payments to various contractors as per their balance sheet.The audit, without any investigation,took stand in the audit memo that since this was a Works Contract the builder should pay S.T. under reverse charge.The builder initially showed their ignorance but later succumbed under departmental pressure and paid tax of more than 20 lakhs under the impression that matter would end then.

But later on the matter was referred to preventive for investigation at the contractor's end who were all builder's men.In the mean time the contractors also paid their liability under RCM. Since the contractors were not registered under VAT nor any written contract was entered nor the contractors had kept material purchase invoices, the department has not treated the service as works contract service and has issued notice demanding tax at full rate.The contractors want to pay tax to avoid litigation, if the builder gets benefit of CENVAT Credit.

Is it possible under the law and if not, what may be the other alternatives beneficial for the contractors.

With regards,

[Ganeshan Kalyani]

If tax is collected at one point of transaction then it should not be demanded at the second point.

[KASTURI SETHI]

Sh.Jagannath Prasad Ji,

In the absence of purchase bills of material and in the absence of the proof of payment of VAT, SP is not eligible for Works Contract Service. In terms of Notification no. 24/12-ST dated 20.6.12, proof of payment of VAT is required to determine service portion of WCS. Hence the SP is not entitled to the benefits of RCM and Service Portion under Notification No.30/12-ST and 24/12-STrespectively. Other factor regarding service should be provided to business entity (body corporate) is also to be examined.

In my view the department is legally right to the core. Burden of proof is cast upon the person who claims benefit under any notification..

[Guest]

Thank you sir,

In that case, the SP has to pay tax at full rate.

Now since SCN has been issued,will the SR be able to avail cenvat if SP pays the tax now OR if there is some other way out in your esteemed opinion.

[KASTURI SETHI]

Dear Sir,

Now the party i.e. contractor is out of WCS. The department has considered the contractor's as pure labour and ST at full rate has been paid. So this service is under erstwhile BAS or now under "Other Than Negative List". Credit is admissible on the strength of challan and it should not be more than one year old.There is no hurdle in availing Cenvat Credit. There is no 'buts and ifs' of WCS as this is pure labour. By demanding ST at full rate without giving benefits of RCM and abatement, the department has brought this service out of WCS or any construction service. This is my opinion.

[Himansu Sekhar]

I have a view. If the supplementary invoice is issued by way of suppression etc., the bar isd there for taking credit. But I think the provisionis not applicable when the document under rule 9 is a challah.

AI Summary

CENVAT Credit Denied if Tax Paid Before Contesting SCN Alleging Fraud; Interest and 25% Penalty Apply A discussion on a forum addresses whether CENVAT credit can be availed if tax is paid before contesting a show cause notice (SCN). The consensus is that if the SCN alleges fraud or misstatement, credit is not allowed, and the amount goes to the consumer welfare account. If the tax is paid before contesting, interest and a 25% penalty must be paid, and no CENVAT credit is allowed. The issue arises from a builder's audit where tax was paid under pressure, and contractors later paid their liability. The forum discusses potential legal outcomes and alternatives for availing credit.