Can service tax credit be disallowed if bills were hand written or that service provider had not remitted the amount collected to the account of Central Government?

PJ/Case Law/2016-17/3444

Case:- PARKER MARKWELL INDUS. LTD. Versus C.C., C. E. & S.T., HYDERABAD-I

Citation:- 2017 (48) S.T.R. 59 (Tri. - Hyd.)

Brief Facts:-   The appeal was filed challenging the disallowance of credit of service tax paid on inputs services on the following ground :
i.          That the invoices were hand written bills and that they do not contain all the details as required under Rule 4(A) of Service Tax Rules, 1994.
ii.          That the service provider, Shri C. Suresh did not remit the service tax collected from the appellant to the Central Government.
On perusal of the impugned order, it was seen that the Original Authority after analyzing the defect of the invoices to be hand written bills had allowed credit of Rs. 33,33,870/- on the ground that the Service provider Shri C. Suresh, had remitted the said amount to Central Government. An amount of Rs. 9,73,038/- had been denied vaguely stating that the invoices do not contain necessary particulars. The Commissioner (Appeals) had upheld the disallowance of Rs. 9,73,038/- stating that there was no evidence of payment produced by the appellant.

Appellant’s Contention:- Ld. Counsel Shri M. Karthikeyan submitted that in the show cause notice the department had not alleged as to what was the deficiency in the hand written bills, apart from the fact that these bills were hand written bills. He also argued that credit could not be disallowed for the reason that the bills were hand written or that service provider had not remitted the amount collected to the account of Central Government.

Respondent’s Contention:- The ld. AR Sri Nagaraj Naik strongly defended the findings in the impugned order. He argued that the adjudicating authority had allowed an amount of Rs. 33,33,870/- on being satisfied that the service provider Sri C. Suresh had paid the amount in the account of the Central Government. He also argued that the hand written bills did not contain the essential details. Therefore, the disallowance was legal and proper.

Reasoning of Judgment:- It was seen from records that the service provider Shri C. Suresh had paid Rs. 33,33,870/- to Central Government and credit of this amount had been allowed by both authorities below even though the invoices were hand written. The show cause notice did not allege what were the discrepancies in the invoices. Therefore, it was evident that the only reason for which the credit of Rs. 9,73,038/- had been disallowed was that the service provider Sri C. Suresh had not paid the said amount collected to the account of revenue. This definitely could not be a ground to deny the credit to the appellant who had paid service tax and produced the invoices/hand written bills. Though it was stated in the impugned order that the hand written bills do not contain essential details, it was not stated as to what were the essential details in terms of Rule 4(A) of Service Tax Rules, 1994 that was required to make the invoices in order.

Appeal allowed.

Comment:–The gist of the case was that service tax credit cannot be disallowed on the basis that the bills are hand written if such bills contain all the essential details in terms of Rule 4(A) of Service Tax Rules, 1994.
Also, service tax credit cannot be denied on the grounds that the service provider has not paid the amount so collected to the account of revenue to the receiver of service who has paid service tax and produced the invoices/hand written bills.

Prepared by- Alakh Bhandari

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PJ/Case Law/2016-17/3444

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