By TIOL News Service

MUMBAI, MAY 23, 2018: THE appellant was supplied natural gas by M/s Gas Authority of India Ltd.

The price at which the supplies weremade included 'servicing charge' that was, in August 2009, withdrawn with retrospective effect on orders of the Central Government.

By issue of credit note, the supplier acknowledged debt of the servicing charge excluding the service tax and VAT levied thereon.

It is this service tax on 'servicing charge' that had been availed by the appellant that is at the centre of the dispute.

According to the adjudicating authority, there was no scope for liability of tax on non-existent 'servicing charge' and, therefore, entitlement of the appellant for CENVAT credit did notarise under rule 3 of CENVAT Credit Rules, 2004.

Inasmuch as CENVAT credit taken of the tax paid on such "servicing charge" which was "withdrawn" is not admissible. The demand of Rs.12,95,749/- was confirmed along with imposition of equivalent penalty. It was also held that the appellant was unable to discharge its obligation to submit evidence of eligibility for credit as mandated in the rule 9 of CCR, 2004.

The Commissioner(A), in addition to approving the finding of the adjudicating authority also held that availment of CENVAT credit on a component of the cost that was since reduced was tantamount to a double benefit.

The appellant is before the CESTAT and and inter alia relies on the Tribunal decision in Jollyboard Ltd. - 2012-TIOL-1264-CESTAT-MUM wherein it is held that –

'5.1. There is no dispute about the fact of service tax liability having been discharged on the documentation charges under the category of Clearing and Forwarding Agency. Suppliers invoice submitted by the appellant clearly reveals this fact and a copy of the same is available in the records of the case. If that be so, the officers in charge of the appellants factory (who is the recipient of the services) has no jurisdiction to deny the refund claim on the ground that the documentation charges are not covered under Clearing and Forwarding Agency Service. The ratio of the Hon'ble apex Court in the Sarvesh Refractories (P) Ltd. and MDS Switchgear Ltd., cited supra, clearly supports the appellants plea. Therefore, I find that the denial of refund claim of the service tax paid on account of documentation charges to the appellant is not sustainable in law.'

The Bench observed -

"5. It is not in dispute that CENVAT credit had been availed on the tax paid on the servicing charge as invoiced originally. It is also not in dispute that the credit note acknowledging reduction of the servicing charge did not include the tax paid on such charge. The credit was sought to be denied only on the ground that such servicing charge having been done away with, it was no longer a component of the price of input and, hence, outside the ambit of rule 3 of CENVAT Credit Rules, 2004. From the decisions cited above, it is clear that the authorities conferred with jurisdiction over the recipient is not competent to re-determine the tax liability suffered on the input at the supply end. Accordingly, the denial of CENVAT credit is not sustainable."

The impugned order was set aside and the appeal was allowed.

(See 2018-TIOL-1600-CESTAT-MUM)