Is There A Need To Reverse Cenvat Credit On
The Amount Written Off As Bad Debts And
On Advertisement Services

Facts:

• The appellant is engaged in providing banking and other financial services, credit card, debit card etc. and business support services. The appellant received various input services for providing their output services and availed cenvat credit thereon.
• In some cases, the appellant could not recover certain payments from their customers and wrote them off as bad debts in their financial records.
• Appellant also entered into a co-brand credit card agreement with Indian Railway Catering and Tourism Corporation Limited (IRCTC)

Legal Precedence

SBI Cards And Payments Services Pvt Ltd Vs Commissioner of Service Tax, Delhi (CESTAT CHANDIGARH)

Two show cause notice were issued to appellant for reversal of cenvat credit on input services attributable to the amount written off as irrecoverable dues & on services received from IRCTC by classifying them as catering services.

Points Put Forth:

1. For amount written off as irrecoverable– Appellant submits that the similar issue has been decided in their favor by the adjudicating authority in their own case, wherein it has been held that the services received by the appellant were used in provision of taxable output service, therefore, condition of Rule 2(l) of the Cenvat Credit Rules, 2004 was satisfied and there is no provision in Cenvat Credit Rules, 2004 which provides for reversal of credit in the event of non-payment of service tax as a result of non-receipt of consideration, therefore, the said credit is not required to be reversed. As the appellant has provided taxable services, while in return has not received the required consideration, thus, this will still lead appellant in entitlement to take cenvat credit.
2. For services received from IRCTC – Adjudicating authority has held that the appellant has not furnished any proof of advertisement in nature of services received from IRCTC. However, the appellant provided the invoices raised by IRCTC. These documents clearly establish that IRCTC provides advertisement services by displaying appellant’s credit cards on its website, advertisements etc and was accordingly receiving a consideration.

Judgement:

No reversal of cenvat credit is required even if the amount/consideration receivable has been written off as irrecoverable. As for services received from IRCTC, the lower authority has fell in error holding that IRCTC is providing only ‘catering service’ and the denial of cenvat credit is only on the basis of assumption and presumption. Thus, no reversal of cenvat credit is required on the services received from IRCTC that are in the nature of advertisement.