CESTAT, NEW DELHI BENCH
International Tobacco Co. Ltd.
Commissioner of Central Excise, Ghaziabad
D.N. PANDA, JUDICIAL MEMBER
FINAL ORDER NOs. 1350/2012 SM (BR) & S/1016/2012 SM (BR)
APPLICATION NO. E/S/3300 of 2012 SM
APPEAL NO. E/2601 of 2012 SM
SEPTEMBER 10, 2012
1. Ld. Counsel submits that the invoice which was subject matter of dispute relating to service tax mentioned therein for the service provided by M/s. Mahaveera Build-Tech (P) Ltd., Ghaziabad clearly exhibited the cenvatable service tax paid by the appellant. 95% of the service tax was paid during the material period with the retention of 5% of such tax mentioned in the invoice. Once taxes have been paid, cenvat credit was permissible in absence of inadmissibility of cenvat credit to the appellant.
2. Ld. Representative for Revenue categorically submits that there is nothing wrong in the order passed by both the authorities below invoking rule 4(7) of the Cenvat credit Rules 2004, when the service tax indicated in the invoice, bill or as the case may be challan was not paid, the appellant was rightly denied the cenvat credit.
3. Heard both sides and perused the record.
4. Precisely the dispute is due to interpretation of rule 4(7) of Cenvat Credit Rules, 2004. Rule has become bottleneck to direct disallowance of cenvat credit in view of failure to make payment of entire service tax embodied in the invoice. Department considered the strict compliance to rule 4(7) which shall never benefit to the appellant while the appellant is on the rivalry submission.
5. For the reasons aforesaid, both stay application and appeal are taken up for disposal.
6. Certainly the procedure prescribed by rule 4(7) of Cenvat Credit Rules needs interpretation in favour of Revenue.
But to the extent service tax is paid in respect of an invoice and in a contingency of retention of part of payment for any dispute on the invoice or any other legal purpose, disallowance of cenvat credit to the extent of tax paid shall cause hardship to the taxpayer. Probably this may – be the interpretation by rule 4(7). Of course rule 4(7) can be interpreted as Revenue yielding measure instead of Revenue loss provision. However, it is settled principle of law that Rule shall not be tyrant but shall be servant of law. Therefore, to the extent service tax paid remaining undisputed may not be impermissible following Apex Court judgment in the case of Sambhaji v. Gangabai 2009 (240) ELT 161 (S.C.).
7. In view of the above, the matter is remanded to the ld. Adjudicating Authority to re-examine the issue in the light of aforesaid legal position causing enquiry at the level of M/s. Mahaveera Build-Tech (P) Ltd., Ghaziabad as to the reason why there was difference in the invoice which caused retention of 5% of the amount in respect of service tax exhibited by the invoice in question. If he is satisfied that there is a valid reason and rule 4 (7) should not be bottleneck, he shall pass appropriate order.
8. In the result, both stay application and appeal are disposed. It is needless to mention that the appellant shall get reasonable opportunity of hearing in the readjudication stage.