2025 (7) TMI 351 - AT - Service Tax

Denial of CENVAT Credit to appellant - levy of penalty - appellant had sub-contracted the work assigned to them by M/s. Electrosteel Steels Ltd. which has been executed by M/s. STPL - HELD THAT - The appellant had assigned their work to M/s. STPL who executed the said work and issued invoice being the sub-contractor of the appellant. In these circumstances the appellant is entitled to avail CENVAT Credit for the services availed by them for providing output services. Further the fact is noted that the Revenue has not come up with evidence to show that if M/s. STPL has not provided the services to the appellant then from where the appellant got the work order assigned by M/s. Electrosteel Steels Ltd. executed which has been completed and a certificate to that effect has been received by the appellant from M/s. Electrosteel Steels Ltd. CENVAT Credit cannot be denied to the appellant - As the denial of CENVAT Credit is not sustainable no penalty is imposable on the appellants - the impugned order is set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the appellant-company is entitled to avail CENVAT Credit on invoices raised by M/s. Sakshi Tradelink Private Limited (STPL), a sub-contractor engaged by the appellant for execution of excavation and site formation work.

- Whether the CENVAT Credit availed by the appellant is inadmissible on the ground that STPL is a non-existent entity issuing invoices without providing any service.

- Whether penalties imposed on the appellant and STPL for availing inadmissible CENVAT Credit are justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement of appellant to avail CENVAT Credit on services availed from STPL

Relevant legal framework and precedents: The CENVAT Credit Rules allow a service recipient to avail credit on input services used for providing output taxable services, subject to fulfillment of conditions including receipt of services and proper documentation.

Court's interpretation and reasoning: The Tribunal examined the contractual chain wherein the appellant was awarded a work order by M/s. Electrosteel Steels Ltd. for excavation and site formation. The appellant subcontracted the work to STPL, which raised invoices on the appellant for the services rendered. The Tribunal noted the existence of a Work Order dated 15.04.2010 between the appellant and STPL, and the scope of work assigned to STPL was clearly defined and included excavation and disposal of earth and rock as per project requirements.

Key evidence and findings: The appellant produced a certificate from M/s. Electrosteel Steels Ltd. dated 20.08.2015 certifying that the work executed by STPL on behalf of the appellant was completed satisfactorily. This certificate corroborated the appellant's claim that services were indeed rendered by STPL.

Application of law to facts: Since the appellant had subcontracted the work and services were actually rendered by STPL, as evidenced by the completion certificate from the principal client, the appellant was entitled to avail CENVAT Credit on the invoices raised by STPL.

Treatment of competing arguments: The Revenue contended that STPL was a non-existent entity issuing invoices without providing services, based on intelligence gathered and admissions in the impugned order. However, the Tribunal found no evidence from the Revenue to disprove the actual execution of work or to show that the appellant did not receive the services. The existence of the work order and the completion certificate weighed heavily against the Revenue's contention.

Conclusions: The Tribunal held that the appellant was entitled to avail CENVAT Credit on the input services provided by STPL, as the services were genuinely rendered and utilized for output services.

Issue 2: Denial of CENVAT Credit and imposition of penalties

Relevant legal framework and precedents: Denial of CENVAT Credit and imposition of penalties are generally justified where input services are not actually received or when invoices are issued without provision of services, leading to wrongful availing of credit.

Court's interpretation and reasoning: Given the finding that the appellant did receive the services from STPL and that the work was executed satisfactorily as per the certificate from Electrosteel Steels Ltd., the denial of CENVAT Credit was not sustainable. Consequently, penalties imposed on the appellant and STPL for availing inadmissible credit were also found to be unjustified.

Key evidence and findings: Absence of concrete evidence from the Revenue to prove non-existence of STPL or non-provision of services, coupled with the certificate confirming completion of work, undermined the basis for denial of credit and penalties.

Application of law to facts: Since the appellant legitimately availed credit on services actually received, the legal basis for denying credit and imposing penalties was absent.

Treatment of competing arguments: The Revenue's reliance on intelligence reports and admissions in the impugned order was insufficient to override the documentary evidence and client certification presented by the appellant.

Conclusions: The Tribunal set aside the denial of credit and penalties, holding that no penalty was imposable on the appellants.

3. SIGNIFICANT HOLDINGS

"We find that the appellant had assigned their work to M/s. STPL, who executed the said work and issued invoice, being the sub-contractor of the appellant. In these circumstances, the appellant is entitled to avail CENVAT Credit for the services availed by them for providing output services."

"Further, we take note of the fact that the Revenue has not come up with evidence to show that if M/s. STPL has not provided the services to the appellant, then from where the appellant got the work order assigned by M/s. Electrosteel Steels Ltd. executed, which has been completed and a certificate to that effect has been received by the appellant from M/s. Electrosteel Steels Ltd."

"In view of this, we hold that CENVAT Credit cannot be denied to the appellant."

"As the denial of CENVAT Credit is not sustainable, we hold that no penalty is imposable on the appellants."

Core principles established:

• Availability of CENVAT Credit depends on actual receipt of input services used for output services, supported by credible evidence.
• Denial of credit and imposition of penalties require cogent evidence of non-provision of services or fraudulent invoicing.
• Certificates from the principal client confirming satisfactory completion of subcontracted work are strong evidence supporting the claim of receipt of services.

Final determinations:

• CENVAT Credit availed by the appellant on invoices from STPL was upheld.
• Denial of credit and recovery demands by Revenue were set aside.
• Penalties imposed on the appellant and STPL were quashed.