CESTAT Allows Vodafone Idea To Avail CENVAT Credit Against Debit Notes

The Bench of Ajay Sharma (Judicial Member) and C J Mathew (Technical Member) ruled that CENVAT credit can be availed against invoices or debit notes that contain substantially the same information as prescribed in Rule 9 of the CENVAT Credit Rules, 2004.

The assessee- Vodafone Idea Limited, entered into agreements with owners of certain towers, in order to secure the said towers for installation of dishes/antenna. The owners/ service providers issued debit notes to the assessee/ service recipient, pertaining to reimbursements of diesel and electricity costs incurred by them, on which the service providers had paid service tax. The assessee took CENVAT credit against the debit notes issued to it. The case of assessee came under audit scrutiny. Proceedings for recovery of credit availed by the assessee were initiated against it on the ground that the CENVAT credit was availed against the debit notes. However, in appeal, the Commissioner of Service Tax dropped the recovery proceedings against the assessee. Against this, the revenue department filed an appeal before the CESTAT.

The revenue department contended before the CESTAT that diesel and electricity are not eligible 'inputs' or 'input service' under the CENVAT Credit Rules, 2004 and thus, the CENVAT credit was wrongly availed by the assessee.

The assessee Vodafone Idea submitted before the CESTAT that CENVAT credit can be availed by the assessee against the debit notes. The assessee placed reliance on the decision in Tata Motors Ltd. versus Commissioner of Central Excise (2017), where the Mumbai bench of CESTAT had ruled that though the CENVAT Rules prescribe challan and invoice as a valid document for availing the CENVAT credit, however, if all the information required to be mentioned in the invoice is otherwise appearing on the debit notes, the said debit notes must be allowed for taking the CENVAT credit.

The assessee further contended that in view of the decision of CESTAT Mumbai in Idea Cellular Ltd versus Commissioner of Central Excise (2016), though CENVAT credit cannot be availed on duty paid on diesel, however, there is no bar in availing CENVAT credit on the service tax paid on services associated with delivery of diesel.

The CESTAT reiterated that CENVAT credit can be availed against invoices or debit notes that contain substantially the same information as prescribed in Rule 9 of the CENVAT Credit Rules, 2004.

The Tribunal noted that the owners of towers/ service providers had issued debit notes/invoices to the assessee, pertaining to reimbursements of diesel and electricity costs incurred by them, on which service tax liability under Finance Act, 1994 had been duly discharged.

"It is seen from the debit notes, as well as the invoices in question, that, while the adjustments reflect the separate charges as provided in the master service agreements, discharge of tax liability therein under Finance Act, 1994 by the provider of service and raising of the amount as due from the recipient of the service is not in doubt. It is settled law that once the tax has been collected, it is not within the jurisdiction of the tax authorities governing the recipient to contend that such payment of tax was not in consonance with the law", the CESTAT said.

The Tribunal added that the revenue department had failed to draw a distinction between any duties paid on diesel as goods, which was ineligible for availment of CENVAT credit, and the reimbursements made by the assessee/ service receiver pertaining to the value of service, on which service tax had been duly discharged by the service provider.

The CESTAT thus dismissed the appeal.

Case Title: Commissioner of CGST & Central Excise versus Vodafone Idea Limited

Dated: 26.09.2022 (CESTAT)

Representative for the Appellant/ Revenue: Mr. Anand Kumar, Additional Commissioner (AR)

Representative for the Assessee/Respondent: Mr. SS Gupta, Chartered Accountant

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