CX - Though respondent retained a part of value of services, however, no part of service tax reflected in invoices was ever retained - CENVAT credit of service tax has to be allowed in full: CESTAT
By TIOL News Service
NEW DELHI, AUG 21, 2018: THIS is a Revenue appeal.
From each of the progressive bills raised by the contractors during the execution of the contract, the respondents used to deduct certain percentage as retention amount and made the balance payment to the contractors.
Nonetheless, the respondent assessee paid the full amount of service tax to the contractors at the time of retaining the amounts and took the cenvat credit of the entire tax so paid. The said retained amounts were paid at the end of stipulated period after completion of the projects.
Revenue was of the view that the respondent was not entitled to the proportionate CENVAT credit pertaining to the amount retained by them and not paid to the contractor.
This, the Revenue alleged, is due to the provisions of rule 4(7) of the CCR, 2004.
Show cause notices dated 30.7.2013, 29.10.2013, 7.5.2014 and 24.7.2014 respectively were issued to the respondents seeking the demand of proportionate cenvat credit of Rs.51,78,155/-.
The demands were confirmed and penalties were imposed by the adjudicating authority.
However, the Commissioner(A) set aside the orders-in-original and allowed the appeal filed by the respondents which led the Revenue to be aggrieved.
The Bench took note of the Circular No. 122/3/2010-ST dated 30.4.2010 wherein against paragraph 5(b) it is clarified thus –
“(b) In the cases where the receiver of service reduces the amount mentioned in the invoice /bill/ challan and makes discounted payment, then it should be taken as final payment towards the provision of service. The mere fact that finally settled amount is less than the amount shown in the invoice does not alter the fact that service charges have been paid and thus the service receiver is entitled to take credit provided he has also paid the amount of service tax, (whether proportionately reduced or the original amount) to the service provider. The invoice would in fact stand amended to that extent. The credit taken would be equivalent to the amount that is paid as service tax. However, in case of subsequent refund or extra payment of service tax, the credit would also be altered accordingly."
The AR sought to distinguish this Circular (supra) by inter alia submitting –
+ That provisions of Rule 4(7) ibid are unambiguous and are mandatory to be followed as the word 'shall' has been used and not 'will'.
+ Unless payment of both values as well as service tax has been made by the service recipient within three months of the date of the invoice etc., he is required to reverse the credit so taken on input service.
+ It is admitted fact that the service receiver had not made full payment of taxable amount even after expiry of three months of the date of invoice / bill/Challan as the case may be referred in Rule 9 of CCR, 2004.
+ The Circular has been issued to cater to the situations where finally settled amount of service is less than amount initially charged by the service provider. The present case is not covered by this Circular as it is not a case of final settlement of the bill at lesser amount. In the present case, the assessee has not made substantial payment to the service provider; the said Circular has been issued in respect of pre-amended provisions as applicable prior to 31.3.2011.
The respondent submitted that in assessee's own case on identical issue - 2017-TIOL-4243-CESTAT-DEL, by following its earlier order, this Tribunal allowed the appeal in favour of the assessee and set aside the demand after relying upon the Circular dated 30.4.2010.
The Bench, therefore, observed -
"10. There is no dispute regarding the fact that though the respondent retained a part of the value of services, however, no part of the service tax reflected in the invoices was ever retained by the Respondent. Respondent has paid the service tax on entire invoice value, as evident from para 5.1 of the impugned order. The credit of full service tax paid by the service provider in respect of services provided would be available even if amount payable to the service provider has been withheld so long as the service tax paid by the service provider has not changed. Therefore, the credit is admissible to the respondent."
The impugned order passed by the Commissioner(A) was upheld and the Revenue appeal was dismissed.
(See 2018-TIOL-2574-CESTAT-DEL)
