Sai Consulting Engineers Pvt Ltd Vs C.C.-Ahmedabad (CESTAT Ahmedabad)
In the case of Sai Consulting Engineers Pvt Ltd vs C.C.-Ahmedabad, heard by CESTAT Ahmedabad, the central issue revolved around the eligibility of the appellant to claim Cenvat Credit despite the absence of the Service Tax Registration number on the invoices. Sai Consulting Engineers Pvt Ltd, a company engaged in providing consulting engineer services, acted as a sub/associate consultant for various foreign-based firms during the relevant period.
The controversy arose from the issuance of show cause notices proposing substantial demands for service tax, interest, and penalties for two distinct periods: FY 2005-06 to 2006-07 and April 2007 to March 2008. These demands were based on the allegation that Sai Consulting Engineers Pvt Ltd had failed to pay service tax on the consulting engineer services it provided as a sub/associate consultant, despite the main consultants having already discharged their service tax liabilities on the total consultancy charges, which included payments made to Sai Consulting Engineers Pvt Ltd.
The appellant contested these demands primarily on two grounds:
- Applicability of Circulars: The appellant argued that as per Trade Notice No. 53-CE (Service Tax)/97 dated 04.07.1997, they were not liable to pay service tax because the main consultants had already paid it. This position was supported by the circular prevailing until 23.08.2007. Subsequently, Circular No. 96/7/2007 – ST clarified that subcontractors like Sai Consulting Engineers Pvt Ltd were also liable for service tax, irrespective of whether the main contractor paid it. The Tribunal held that since the demands were for periods before 23.08.2007, the appellant was not liable to pay service tax under the earlier circular.
- Denial of Cenvat Credit: Another contentious issue was the denial of Cenvat Credit amounting to Rs. 61,200 by the Adjudicating Authority. This denial was based on the incorrect application of Rule 9 (1) (g) of the Cenvat Credit Rules, 2004, along with Rule 4 A (ii) of the Service Tax Rules, 1994, which pertains to input service distributors. The Tribunal found that this provision was not applicable in this case as the appellant had received services directly from the service provider and not through an input service distributor. The denial of Cenvat Credit solely on the grounds of non-mention of the service tax registration number on the invoice was deemed improper, especially since there was no dispute regarding the payment of service tax by the service provider.
The Tribunal, after considering submissions from both sides, ruled in favor of Sai Consulting Engineers Pvt Ltd. It held that the demands for service tax prior to 23.08.2007 were unsustainable, adhering to the principle that circular benefits cannot be denied retrospectively. Additionally, it overturned the denial of Cenvat Credit, emphasizing that procedural lapses like the absence of a service tax registration number on invoices should not be a basis for denying legitimate credits, especially when the actual payment of service tax was not in question.
