Customs, Excise and Service Tax Appellate Tribunal, Chandigarh: Coram of Ashok Jindal (Judicial Member) and CJ Mathew (Technical Member) addressed whether the assessee will be liable to reverse CENVAT credit on the amount written off as bad debts.
Two appeals were filed against the impugned orders confirming the demand for reversal of CENVAT credit on the amount written off as bad debts and on advertisement & sales promotion services.
Appellant was engaged in providing banking and other financial services, credit card, debit card etc. and business support services, further, the appellant received various input services for providing their output services and availed CENVAT credit thereon.
It was stated that, in some cases, the appellant could not recover certain payments from their customers and wrote them off as bad debts in their financial records.
To launch a co-brand credit card, the appellant entered into a co-brand credit card agreement with Indian Railway Catering and Tourism Corporation Limited (IRCTC). Appellant paid fixed charges to IRCTC for every subscriber of credit card and in turn, IRCTC agreed to promote the credit card by modifying its website, through press advertisements and related collaterals.
IRCTC raised invoices on the appellant for the said purpose and the appellant availed the CENVAT credit of service tax paid thereon.
Two show-cause notices were issued for the reversal of CENVAT credit availed on input services attributable to the amount written off as irrecoverable dues; reversal of CENVAT credit where service tax was paid under reverse charge basis; reversal of CENVAT credit availed on the advertisement, catering and event management services.
Impugned orders were passed by confirming the demands holding that the amount written off as bad debts, the appellant was not entitled to avail CENVAT credit of input services attributable to the amounts written off and denial of CENVAT credit on input services received from IRCTC by classifying them as catering services.
Appellant approached the tribunal against the above-stated orders.
What was the dispute?
The appellant had written off certain amounts for consideration of services, they had not received.
Analysis and Discussion
Rule 3 of the CENVAT Credit Rules, 2004 deals with the situation for entitlement of the CENVAT credit, which prescribes that a provider of the output service shall be allowed to take CENVAT credit of any input service received by the provider of output service on or after 10th day of September, 2004.
The services on which appellant had taken CENVAT credit were ‘input services’ in terms of Rule 2(I) of the CENVAT credit Rules, 2004 and was a provider of output service.
Hence, in terms of Rule 3 of the CENVAT Credit Rules, Tribunal held that the appellant was entitled to avail CENVAT Credit on input services in question.
CENVAT Credit Rules or Finance Act there was no provision for reversal of CENVAT credit for the services provided for which no consideration for service provided was received by an assessee.
Therefore, the appellant had correctly availed the CENVAT Credit on input services although the amount of non-recoverable taxable service had been written off by the appellant for the period prior to 1-4-2011.
Appellant had admitted that they paid service tax on all the taxable services provided by them after 1-4-2011 at the time of provision of service. Hence the appellant cannot be liable for reversal of CENVAT Credit for the services provided after 1-4-2011 on which the service tax was paid.
Denial of CENVAT credit on Invoices issued by IRCTC
Coram found that the description of the service provided by IRCTC was SBI co-brand registered as “SBI” and the said invoice did not prescribe that IRCTC had provided any ‘catering service’ to the appellant.
Concluding the matter, Tribunal held that the appellant was entitled to CENVAT Credit in the services provided by IRCTC as advertisement services.
The impugned orders were set aside in view of the above. [SBI Cards and Payments Services (P) Ltd. v. Commr. Of Service Tax, 2022 SCC OnLine CESTAT 18, decided on 4-1-2022]
Advocates before the Tribunal:
Present for the Appellant: Sh. B.L. Narasimhan, Ms. Krati Singh, Ms. Priyanka Singla, Advocates
Present for the Respondent: Sh. H. S. Brar, A.R.