Trimurty Landcon vs Commissioner (Appeals), Central Excise & CGST - (Customs, Excise and Service Tax Appellate Tribunal) (10 May 2022)

Once it is not disputed that appropriate duty has been paid, the credit thereof cannot be denied

MANU/CE/0169/2022

Service Tax

The Appellant in the present case is the holder of Service Tax registration and is engaged in providing construction of residential complex services, construction of other than residential complex services, Sponsorship, Business Auxiliary Service, etc. During Audit, it was observed that Appellant was engaged in construction of residential complex service.

The Audit Team observed that, the Appellant have wrongly availed Cenvat credit of service tax charged on the invoice for free supply of material as an input service. From the details of the availed Cenvat credit given by the Appellant, Department observed that the Appellant has availed the Cenvat Credit on VAT as well. Accordingly, vide Show Cause Notice, the Cenvat Credit amounting to Rs.726,010 was alleged to have been availed in violation of Rule 2A of Service Tax (Determination of Value) Rules, 2006, and accordingly was proposed to be recovered along with the interest and the proportionate penalties. The said proposal was initially confirmed vide the Order. The appeal filed against the said order has been rejected vide Order -in-Appeal. Still being aggrieved, the Appellant is before this Tribunal.

Appellant shall be entitled to take Cenvat Credit on the amount of service tax paid by the contractor. Since the service tax has already been paid on the gross value /the total value, Appellant cannot be denied availment of credit proportionate to the said value till the occasion arises for refund of the said service tax on the ground that the gross value on which the service tax was paid was inclusive of VAT.

It is not the case of Department that excess Service Tax paid by the contractor has been refunded or has paid applied by the payee for the refund. Hence, it is held that the Commissioner (Appeals) has wrongly denied the entitlement of the Appellant for claiming the Cenvat Credit on the service tax paid by his contractor. The order accordingly is held liable to be set aside. However, discretion is given to the department to recalculate, if refund of excess service tax paid is to be processed and in that situation, differential credit availed can be recovered from the Appellant. High Court of Punjab and Haryana has time and again clarified the issue by holding that once it is not disputed that appropriate duty has been paid, the credit thereof cannot be denied.

In Ranbaxy Labs Ltd. vs CCE, Chandigarh and M/s. V G Steel Industry vs CCE, it was held that when the duty is paid in excess of what was payable, Cenvat credit cannot be denied unless excess duty paid has been refunded. The claim of Cenvat Credit cannot at all be denied as department is not allowed to have duty twice. Question of recovery of interest on the said amount also does not arise. High Court of Karnataka in the case of CCE vs. Pearl Insulation Ltd. and in case of CCE vs Strategic Engineering Pvt. Ltd. has held that, provision of Rule 14 of Cenvat Credit Rules, 2004 for recovery of interest on said Cenvat Credit i.e. the credit availed on excess amount of service tax paid will not be attracted. Hence, the Revenue's stand for recovery of interest under said Rule and imposition of penalty can not succeed. Order under challenge is set aside. Appeal allowed.

Tags : CENVAT CREDIT DENIAL LEGALITY