2023 (5) TMI 334 - AT - Central Excise

CENVAT Credit - case of the department is that the GAR-7 challan is not the prescribed challan for availing the cenvat credit in terms of Rule 7 of Cenvat Credit Rules 2004 - reverse charge mechanism - HELD THAT - It is found that as per the undisputed fact of the case the service was received by the appellant the invoices are in favour of the appellant. It is only the head office who paid the service tax under its centralized registration under GAR-7 challan. In this position when the service was received by the appellant and service tax was undisputedly paid and particularly when the invoices are in favour of the appellant the credit cannot be denied. It is also not the case of the department that the part of the service was used by their other unit therefore we do not see any reason why the cenvat credit should not be allowed to the appellant. As regard the availment of credit on the basis of GAR-7 challan the challan is also a prescribed document under Rule 7 of Cenvat Credit Rules 2004. Moreover in case of payment of service tax under reverse charge mechanism the assessee pays the service tax on their own under GAR-7 challan therefore the only document which is available for taking credit in respect of service tax under reverse charge mechanism is the GAR-7 challan only therefore if the contention of the revenue is accepted then in every case of payment of service tax under Reverse Charge Mechanism the assessee cannot avail the Cenvat credit which is not the provision under the law. Since the entire service was received by the appellant s unit and their invoice of the same was also issued by the service provider in favour of the appellant s unit the credit cannot be denied only on the basis that the Head Office has not issued the ISD invoice. The significance of ISD invoice is for the purpose that where the input service credit has to be distributed to more than one unit the input service distributed invoice is required. However in the present case since entire service covered under the invoice of service provider was received and used by the appellant there is no case of distribution of input service credit to any other unit except the appellant unit. Only for this reason also even though the ISD invoice was not issued the credit cannot be denied. It is found that the adjudicating authority in the adjudication order dropped the demand not only on merit but also on limitation. From the perusal of the revenue s appeal before the Commissioner (Appeals) it is found that the revenue has not uttered a word as regard the dropping of demand on time bar therefore the revenue has not made out any ground on limitation - the dropping of demand on limitation by the adjudicating authority has attained finality therefore even if it is assumed that the demand on merit is tenable the same is not maintainable on limitation. Accordingly the demand is not sustainable on the ground of time bar also. The impugned order is set aside - Appeal is allowed.

Issues Involved:
1. Validity of GAR-7 challan for availing Cenvat credit.
2. Requirement of ISD registration and issuance of ISD invoice.
3. Allegations of fraud, willful misstatement, or suppression of facts.
4. Limitation period for raising demand.

Summary:

Validity of GAR-7 Challan for Availing Cenvat Credit:
The appellant received various services and paid service tax under the reverse charge mechanism through GAR-7 challan. The department argued that GAR-7 challan is not a prescribed document for availing Cenvat credit under Rule 7 of Cenvat Credit Rules, 2004. However, the tribunal found that since the service was received by the appellant and the service tax was undisputedly paid, the credit cannot be denied. The tribunal further noted that GAR-7 challan is a prescribed document under Rule 7 for payment of service tax under reverse charge mechanism, and thus, the appellant is entitled to avail Cenvat credit on this basis.

Requirement of ISD Registration and Issuance of ISD Invoice:
The department contended that the head office should have obtained ISD registration and issued ISD invoices for availing Cenvat credit. The tribunal observed that this specific allegation was not made in the show cause notice, making any order on this issue untenable. Additionally, since the entire service was received and used by the appellant's unit, there was no need for an ISD invoice. The tribunal referenced several judgments, including Mafatlal Industries Ltd and CCE vs. Dashion Ltd, which support the view that procedural lapses like not obtaining ISD registration do not invalidate the entitlement to Cenvat credit.

Allegations of Fraud, Willful Misstatement, or Suppression of Facts:
The appellant argued that there were no allegations of fraud, willful misstatement, or suppression of facts in the show cause notice or the impugned order. The tribunal agreed, noting the absence of any such allegations and thus found no basis for denying Cenvat credit on these grounds.

Limitation Period for Raising Demand:
The adjudicating authority had dropped the demand on both merit and limitation. The department did not raise any grounds on limitation in their appeal before the Commissioner (Appeals), nor did the Commissioner address the issue of limitation. The tribunal concluded that the dropping of the demand on limitation by the adjudicating authority had attained finality, making the demand unsustainable on the grounds of time bar.

Conclusion:
The tribunal set aside the impugned order and allowed the appeal, stating that the appellant is entitled to avail Cenvat credit based on GAR-7 challan and that the demand is not maintainable on both merit and limitation grounds.

(Pronounced in the open court on 02.05.2023)

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