Credit of service tax paid under reverse charge

[Kaustubh Karandikar]

XYZ paid service tax under reverse charge on 05.07.17 against the liability for June’ 17 and claimed credit of the same in the ER – 1 Return for June’ 17. Is it the correct way or they should have claimed it through TRAN – 1? Excise audit party is objecting the same saying that they should have claimed through TRAN – 1. What is the correct legal position?

[Mahadev R]

Only way was to show it in either ER-1 or ST-3 return as there was no provision to show such credits of tax paid on RCM in July 17 in TRAN-1.

[KASTURI SETHI]

It is technical lapse. Relief is cock-sure but after facing the rigours of litigation and matter may travel up to Tribunal. No hope prior to that stage.

AI Summary

Credit of service tax under reverse charge must be claimed in ER 1 or ST 3 returns, not via TRAN 1. Credit of service tax paid under the reverse charge should be claimed through the periodic service tax returns (ER 1 or ST 3) for the relevant period, because there was no provision at the relevant time to record such reverse charge credits in TRAN 1; recording the credit in ER 1/ST 3 therefore followed the available procedural mechanism.