Cenvat credit of the amount paid to caterer

[Rajeev Kalra]

my company has engaged a caterer for serving meal/snacks to our employee from 01.04.05 till date .till 31.03.2007 caterer did not take service tax registration no. and did not pay service tax to department on sum received from our company. from 01.04.2008 caterer discharged his liability of service tax after getting service tax registration no. now caterer has received a demand of Rs. 7 lacs and caterer has written a letter to our company for reimbersment of the same as he had not claimed service tax earlier in his bill. now i want to know 1)can we take cenvat credit of the amount if we paid to caterer even if he was not registered with service tax department during provision of service to our company and not eligible for claiming service tax from our company

[Surender Gupta]

The issue is a controversial once and judicial pronouncements on this issue are yet to settle this issue. But, in the meantime, if you look into the provisions of the cenvat credit rules, 2004, there is no restriction under any provision regarding availing not non availing of service tax paid by the service tax provider after detection by the department. Therefore, in my view, you may avail the cenvat credit on the basis of bill of the service provider stating the details of previous bills and service tax thereon. You may also enter into some safeguard agreement with your service provider in case credit is denied by the department.

[Rakesh Chitkara]

No worries. Go ahead and avail and utilise CENVAT credit for period prior to registration for tax paid (but no credit for interest or penalty for late payment). Payment of tax vets you with an inherent right to claim credit of such tax paid.

AI Summary

Cenvat credit may be claimed where a service provider later pays service tax, subject to documentary proof and exclusions. Entitlement to CENVAT credit arises where a service provider retrospectively pays service tax that was earlier not discharged, provided the recipient holds supplier bills or other documentary proof showing prior invoices and the subsequent tax payment; interest and penalty on delayed payment are not creditable, and claims remain subject to departmental scrutiny and potential denial.