Whether credit can be availed on the input services for the period prior to registration?

PJ/Case law/2014-15/2276

Case:- C. METRIC SOLUTION PVT. LTD. VERSUS COMMISSIONER OF C. EX., AHMEDABAD

Citation:- 2012 (28) S.T.R. 460 (Tri. - Ahmd.)

Brief facts:-This stay petition is filed for the waiver of pre-deposit of the amount of service tax confirmed by the adjudicating authority and upheld by the first appellate authority as ineligible Cenvat credit availed by the appellant with interest and also imposition of penalty under Section 78 of Finance Act, 1994.

After hearing both the sides for some time on the stay petition, they find that the appeal itself could be disposed of at this juncture, as it lies in a narrow compass. Accordingly, after allowing the application for waiver of pre-deposit of the amounts involved, they take the appeal itself for disposal.

The issue involved in this case is that the appellant has availed Cenvat credit of the service tax paid on input services during the period April 2008 to March 2009, after getting the service tax registration on 23 March 2009. Revenue authorities are of the view that appellant is not eligible for Cenvat credit on the input services for the period prior to the registration granted to the appellant.

Appellant’s contentions:-Learned Chartered Accountant submits that it is not in dispute that the appellant is an Software Technology Park unit (STP) and exporting the softwares manufactured by them. It is his submission that after getting registration they have availed the Cenvat credit and the procedural requirement of invoices on which the service tax has been paid and registration numbers of the service providers all have been complied. It is his submission that the Cenvat credit has been denied to them only on technical ground. It is his submission that the issue is now covered by following decisions :

(a)   Well Known Polyesters Limited - 2011 (267)E.L.T.221 (Tri.-Ahmd.) = 2012 (25)S.T.R.411 (Tribunal).
(b)   J.R. Herbal Care India Limited - 2010 (253)E.L.T.321 (Tri.-Del.)
(c)   Repro India Limited - 2009 (235)E.L.T.614 (Bom.)
(d)   Steel Strips -2011 (269)E.L.T.257 (Tri.-LB) = 2012 (26)S.T.R.270 (Tri. - LB).

Respondent’s contentions:-Learned SDR reiterates the findings of the lower authorities and states that they could not have availed the Cenvat credit before the registration, as provided under Rule 3 of Cenvat Credit Rules, 2004. It is his submission that during the period April 2008 to 23-3-2009, it can be said the appellant has not provided or received taxable service as they were not registered with the department.

Reasoning of judgment:- The tribunal found that the issue is no more res integra and the Division Bench of the Tribunal in the case of Well Known Polyesters Limited (supra) squarely settled the issue in favour of the assessee. The Tribunal respectfully reproduced the ratio which is recorded by the Division Bench, at Para 5 :-

“5. The first issue is whether the appellant was eligible for the Cenvat credit when they have not taken registration and the Cenvat credit taken by them for the period 1-11-2008 to October 2009 can be allowed. For this purpose, the appellant had relied upon the decision of the Tribunal in the case of J.R. Herbal Care India Limited v. CCE, Noida - 2010 (253)E.L.T.321 (Tri.-Del.). In this case the appellant had received the capital goods while availing SSI exemption without taking registration. Cenvat credit was taken on the capital goods for the years 2003-04 and 2004-05 but registration was taken in the year 2005-06. This was allowed by the Tribunal. The Tribunal took a view that there is no provision in the rules that credit was not available to unregistered manufacturers. Manufacturers exempted from the registration do not cease to be a manufacturer of excisable goods. This case squarely covers the issue in this case also. Therefore, in respect of the goods manufactured during the period when the appellant was not registered, credit can be taken subsequently also. This view is further supported by the consistent stand taken by various judicial forums in the case of clandestine removals, even if the duty is paid subsequently, Cenvat credit on inputs used will be available to the assessee/manufacturer subject to the conditions that proper documents showing the payment of duty are available. In the case of SSI Units also, wherever SSI benefits have been denied, Cenvat credit has been allowed. Therefore, In this case also the action of the appellants in taking credit on 9-10-2009 has to be upheld.”

It can be seen from the above reproduced ratio of the Division Bench decision that the appellant is eligible to avail Cenvat credit of the service tax paid on input services after getting registration. In this case, it is recorded that the appellant has shown or recorded the service tax paid on input services in a register which is considered as a Cenvat account. If the appellant is eligible for Cenvat credit, post registration, this availment or showing the account being credited by the service tax paid on input services, but not availing the same for the purpose of discharge of duty, would be more or less the same or an identical situation to indicate that as STP appellant is eligible for refund of unutilized credit.

In view of the above, they find that the impugned order is liable to be set aside and they do so with consequential relief.

Decision:- Appeal is allowed.

Comment:- The gist of the case is that the appellant is eligible to avail Cenvat credit of the service tax paid on input services after getting registration irrespective of the fact that the said services were availed prior to taking registration. The reason for the same being that it was concluded by the Tribunal in the case of Well Known Polyesters Ltd. that there is no provision in the Cenvat Credit Rules that the credit is not admissible to unregistered manufacturers or unregistered service providers. As such, credit cannot be denied for technical lapses.

Prepared by: Monika Tak

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PJ/Case law/2014-15/2276

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