Credit taken on service tax prior to Registration date - allowability of

PJ/Case Laws/2012-12/1016

Credit taken on service tax prior to Registration date - allowability of - stay granted.

Case: M/S SCHNEIDER ELECTRIC INDIA PVT LTD V/s COMMISSIONER OF SERVICE TAX, BANGALORE

Citation: 2012-TIOL-278-CESTAT-BANG

Issue:- Denial of Cenvat credit on ground that credit taken was related to prior to date of registration – stay granted.

Brief Facts:- Applicant is a provider of services under the category of ‘Information Technology Software Services' which came under the service tax net w.e.f. 16.05.2008. Rule 4(1) of the Service Tax Rules, 1994 provided a time limit of 30 days for registration of the service provider. The applicant has registered themselves on 18.06.2008 as their head office was in Delhi and they took sometime for getting the necessary documents from their head office. The applicant is exporting the services. The original authority sanctioned refund of Rs.3,13,199/- under Rule 5 of the CENVAT Credit Rules. The Commissioner vide Review Order dated 15.03.2011 disallowed an amount of Rs. 2,61,845/- and ordered recovery of the same on the ground that the said amount related to credit taken prior to the date of registration.

Appellant’s Contention:- Appellant contended that tax on these IT Software service were introduced from 16.05.2008 and since service tax is payable for the services provided from the said date, the credit of input services should also be made available from the said date. Registering a new entity to the service tax for which the time limit of 30 days has been provided by the Service Tax Rules is only a procedural requirement. The substantial benefit of Cenvat credit available under Rule 3 of the Cenvat Credit Rules cannot be denied having granted time for getting the registration providing the new service which became taxable.

Respondent’s Contention:- Revenue argued that the credit cannot be taken prior to the date of registration and that refund of credit taken prior to date of registration cannot be allowed in terms of Rule 5 of the Cenvat Credit Rules. He relies on the decision of the Tribunal's Final Oder No. 928/2010 dated 01.07.2010 in the case of M/s. mPortal (India) Wireless solutions Pvt. Ltd. in Appeal No. ST/177/2009.

Reasoning of Judgment:- The Tribunal held that it is not disputed that service tax, on the output service provided by the applicant was effective from 16.05.2008 and that the rules specifically permitted registration within 30 days from the date of introduction of service tax on the said services. Once service tax is leviable from 16.05.2008, prima facie it is not correct to deny the benefit of credit on input services utilized from the said date. Further, the original authority has sanctioned the refund. Under these circumstances, it is appropriate to waive pre-deposit of amount ordered to be recovered by the impugned order passed by the Commissioner and stay recovery thereof till disposal of the appeal.

Decision:- Appeal allowed.

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PJ/Case Laws/2012-12/1016

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