Service Tax
TRT-2025-
Cestat New Delhi
Date:-25-07-22
In:-
Issue Favourable to Tax Payer ?:- 0
Order date – 25 July 2022
Facts
- The appellant, Ahlcon Parenterals India Ltd, entered into contracts with manpower recruitment and supply agencies for providing contract labour to them.
- The first bill was for reimbursement of actual wages including employees EPF and employees ESI paid to the workers. The service provider did not charge any Service tax on such reimbursement and accordingly, the same was not paid by the appellant.
- Investigation was initiated against the service providers in the year 2012 and post to that the Service tax against the reimbursable expenses was voluntarily paid by the service providers who later issued the supplementary invoices demanding the amount of Service tax from the appellant. The same was duly paid and appellant, being the manufacturer, and that the Cenvat Credit was accordingly availed.
- It was alleged that the appellant had availed Cenvat Credit of input services on the basis of supplementary invoices for an amount of Rs. 38,17,248/- which is in violation of Rule 9 (bb) of Cenvat Credit Rules, 2004.
- A show cause notice was issued and the said credit was disallowed and to recover from appellant along with interest.
- Aggrieved, the appellant appealed before Tribunal.
Issue
- Whether CENVAT credit on supplementary invoices by the appellant were rightly availed?
Order
- The authorities observed that Rule 3(1) of Cenvat Credit Rules, 2004 clarifies that the manufacturer can avail credit of final product for any input service received by him.
- They relied on the case of M/s. Intercontinental Consultants and held that Section 67 of the Finance Act does not include reimbursable expenses for providing such expenses for the period prior to 14.05.2015. The period of dispute in the present case is prior to May, 2015, hence the Tribunal hold that the appellant as well as its service providers were rightly under the bonafide belief that there is no service tax liability as far as the reimbursable part of the salary/ wages is concerned.
- Further, it was held that the issue of taking Cenvat credit on supplementary invoices is also no more res-integra. Relying on the Tribunal’s case of Madras Cements Ltd. vs. Commissioner of Central Excise, Trichy it was held that Rule 9 (1) (bb) of the CENVAT Credit Rules makes it abundantly clear that a recipient of input service who otherwise is a manufacturer is entitled to take Cenvat credit based upon the supplementary invoices also.
- Thus, there was no malafide intent on the part of the appellant nor even on the part of his service providers. Hence, it becomes clear that the case of appellant does not fall within the exception mentioned in rule 9 (1) (bb).
- Therefore, the entitlement of the appellant to avail Cenvat credit has been denied is hereby set aside.
Download Case Law
