Whether credit to service recipient can be denied for non-payment of service tax by service provider?

PJ/CASE LAW/2015-16/2858

Case:-MEMORIES PHOTOGRAPHY STUDIO VERSUS COMMR. OF C. EX. & S.T., VADODARA

Citation:- 2015 (39) S.T.R. 331 (Tri. - Ahmd.)

Brief Facts:-This appeal has been filed by the appellant against OIA No. SRP/295/VDR-I, dated 14-9-2012. The issue involved in these proceedings is whether Cenvat credit can be denied to the recipient of the inputs with respect to duty not paid by the service provider.

Appellants Contention:-None appeared on behalf of the appellant.

Respondents Contention:-Shri K. Sivakumar (AR) appearing on behalf of the Revenue argued that appellant should have taken precaution to verify whether the service provider has discharged service tax liability or not. That since the service provider has not discharged the duty liability therefore, Cenvat credit was not admissible to the appellant.

Reasoning of Judgement:-Heard the learned AR and perused the case records. The only issue which requires deliberation in these proceedings is whether Cenvat credit can be denied to a service recipient when the service provider has not discharged the tax liability. In tribunal’s opinion, it has to be established by the Revenue for denial of such credit that appellant was aware of non-payment of tax before taking the credit. In the present case, there is no evidence on record that appellant was aware of non-payment of Service Tax before taking Cenvat credit. A service recipient will only see the cenvatable document under which service tax paid/ payable has been indicated. It is not the case of the Revenue that the service provider does not exist. Under the present facts and circumstances Cenvat credit is not deniable to the appellant and has been correctly availed. In view of the above observations, appeal filed by the appellant allowed.

Decision:- Appeal allowed.

Comment:- The substance of the case is that credit to service recipient cannot be denied on ground of non-payment of Service Tax by service provider. A service recipient is only required to see the cenvatable document under which service tax is paid. It is not responsibility of service recipient to ensure that the service provider has paid the service tax.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2858

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