ITC on RCM - allowability

[umeshkumar jhawar]

Our client has availed services from Transporter for transportation and paid RCM on same. The client has availed the ITC which was paid in RCM.

Later on the transporter has denied for services during GST search proceeding, which was claimed by our client. And due to denial by the transporter the department is denying the ITC and asked to reverse the ITC which was claimed through RCM paid.

Whether department can do the same ?

Any remedy or argument against stand of GST department ?

Thanks in Advance.

[KASTURI SETHI]

If your transaction is genuine, ITC cannot be denied. Only statement by the transporter  cannot be the basis for denial of ITC.  You can  contest on the following grounds :-

1. Invoice/bill issued by supplier of service

2. Bank Statement showing debit and credit entries of making paying to the supplier of service. 

3. Entries of receipt of service  in the books of account (statutory records).

4. Builties /consignment note etc.

   

[VENU K]

In this case the ITC is sought to be denied solely going by the statement of the Transporter.In such a case is it not posiible for the tax payer to request for a cross examination of the transporter.The request will definitely be turned down by the adjudicating Officer. But the fact of such denial could be of use in Appellate proceedings.

Just a query to the experts

[KASTURI SETHI]

 If the statement of the transporter is relied upon in the SCN,  a  request for cross examination cannot be denied by the Adjudicating Authority. . If denied, it will be in violation of principles of natural justice. There are case laws to this effect in favour of the assessees. These case laws are easily traceable. 

[Amit Agrawal]

ITC - against taxes wrongly paid under RCM - is available to you. In other words, even assuming that subject transporter has not provided transport services to you and hence, you were not liable to pay GST under RCM, still, you can avail ITC against gst wrongly paid under RCM.

In this regard, your attention is invited to the case of BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. Versus COMMR. OF C. EX., PUNE-III as reported in 2014 (8) TMI 787 - CESTAT MUMBAI wherein in Para 7.5, it is held that as under:

"From the above discussion, it is very much clear that the insurance auxiliary services provided by the agents in the State of Jammu & Kashmir are not taxable. Therefore, the appellants are not liable to pay Service Tax for the said services of the insurance agents. In these terms, whatever credit is taken by the appellant is nothing but the refund of tax erroneously paid by them. Similar issue came before the Hon’ble Supreme Court in the case of CIT v. Mahalakshmi Textile Mills Ltd. - 1967 (5) TMI 4 - SUPREME COURT wherein the Hon’ble Supreme Court held that -

“5. By the first question the jurisdiction of the Tribunal to allow a plea inconsistent with the plea raised before the departmental authorities is canvassed. Under sub-s. (4) of s. 33 of the Indian IT Act, 1922, the Tribunal is competent to pass such orders on the appeal “as it thinks fit”. There is nothing in the IT Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal : If for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief.”

Furthermore, in Para 7.6 of above-said order, it was also held as follows:

"We further find that in the case of Nitco Tiles Ltd. v. CCE, Mumbai - 2007 (8) TMI 542 - CESTAT, MUMBAI, this Tribunal observed as under :-

“Further, the bar of unjust enrichment will also not apply in the present case. The appellants have taken credit of the tax paid by them; therefore the same cannot be said to be passed on to the customers.”

In these circumstances we hold that the Cenvat Credit taken by the appellant is nothing but refund of the Service Tax paid by them on the services on which they were not required to pay Service Tax."

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

In case department is taking a stand that you have not recevied services then you can take a stand that the GST paid under RCM was not payable at all. So it is a revenue neutral situation. No requirement to reverse any credit.

[Padmanathan KV]

I agree with the views of the experts. The demand has to be defended both on technical grounds as well as on merits.

AI Summary

ITC Reversal Demanded After Transporter Denies Services; Experts Urge Evidence Use and Cross-Examination Under Natural Justice Principles. A client paid Reverse Charge Mechanism (RCM) on transportation services and claimed Input Tax Credit (ITC). However, the transporter denied providing services during a GST investigation, leading the department to demand ITC reversal. Experts in the forum argue that ITC cannot be denied based solely on the transporter's statement if the transaction is genuine. They suggest using evidence like invoices, bank statements, and service receipts to contest the denial. Some recommend requesting a cross-examination of the transporter, citing principles of natural justice. Others argue that even if services weren't received, the situation is revenue-neutral, negating the need for ITC reversal.