The Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has ruled that the Rajasthan Housing Board is entitled to CENVAT credit in relation to transitional issues concerning the payment of service tax.
This decision is based on the provisions outlined in Circular F. No. 137/16/2017-Service Tax, dated September 28, 2017, which specifically addresses the issue of Cenvat credit during transitional periods after June 30, 2017.
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The case involved two primary demands raised by the department. The first demand, amounting to Rs. 1,07,946, was based on a discrepancy between the Cenvat credit register and the credit reported in the ST-3 returns filed by the Rajasthan Housing Board.
The second demand involved a sum of Rs. 12,12,894, which was credited in June 2017 based on invoices that were allegedly issued in July 2017.
In their defence, the assessee argued that they had recorded Cenvat credit under the headings “input RHB” and “input – RCM” in their register. The “input RCM” category refers to Cenvat credit taken under the Reverse Charge Mechanism ( RCM ). The assessee explained that they recorded Input-RCM (Cenvat credit from contractors’ bills) on an accrual basis in their Cenvat credit register.
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However, in their service tax return, they recorded the Cenvat credit for “input-RCM” on a cash basis, meaning after payment was made under RCM. They further clarified that the Cenvat credit recorded under “input-RCM” in one month would appear in the following month’s ST-3 return. This practice was explained to the Service Tax Audit Team during their audit, and all relevant returns and documents were provided to them.
The department, however, only reviewed data from October 2015 to March 2016. The assessee contended that if the entire period from April 2015 to March 2016 were considered, it would reveal that they had claimed lower Cenvat credit in their ST-3 returns compared to the Cenvat credit register.
The tribunal concluded that the Commissioner (Appeals) had completely disregarded the Circular cited by the appellant.
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While the tribunal acknowledged that the issue appeared to be covered by the Circular, it determined that a more thorough examination of the relevant invoices was necessary.
Consequently, the case was remanded back to the original adjudicating authority for a fresh review of the issue in light of the Circular.
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