Whether registration is pre-requisite for taking input tax credit?

PJ/Case Law /2016-17/3302

Case:-PITHAMPUR TOOLS PVT. LTD. VERSUS COMMISSIONER OF C. EX., INDORE

Citation:- 2016 (43) S.T.R. 465 (Tri. - Del.)

Brief Facts:-The brief facts of the case are that the appellant is engaged in manufacture of copper quoted/non-quoted steel tubes classifiable under Chapter 73 of the Central Excise Tariff Act, 1985. The appellant undertook such manufacturing activity on job work basis and availed the duty exemption in terms of Notification No. 214/86, dated 14-3-1986 issued by the Central Government. Upon commencement of the production activities, the appellant was registered with the Central Excise department on 14-11-2008. The appellant availed Cenvat credit of service tax on the strength of invoice dated 31-10-2008 issued by M/s. INTERARCH Building Products (P) Ltd. Such credit was taken by the appellant on 1-3-2009. Taking of such Cenvat credit was disputed by the Central Excise Department on the ground that the invoices basing on which credit has been taken pertains to the period prior to obtaining the Central Excise registration and since no transitional provisions have been provided in respect of input services in Rule 3(2) of the Cenvat Credit Rules, 2004, taking of Cenvat credit is not in conformity with law. The Cenvat credit amounting to Rs. 8,21,940/- taken by the appellant was disallowed in the adjudication order and the same was also confirmed in the impugned order dated 22-6-2011. Hence this present appeal before this Tribunal.

Appellants Contention:-Sh. Abhishek Jaju, the ld. Advocate appearing for the appellant submits that service tax paid on the Industrial and Construction Service relates to construction of the new factory building for housing the machines/machineries for commencement of the manufacturing activities. He further submits that since Central Excise registration was taken by the appellant on 14-11-2008, the service tax indicated in the invoices dated 31-10-2008 was taken by the appellant on 1-3-2009, which is after the commencement of the production activities. According to the ld. Advocate, since the taking of credit is in conformity with Rule 3(1) of the Cenvat Credit Rules, denial of such benefit by referring to sub-rule (2) of the said rules is not proper. To substantiate his stand that the credit cannot be denied to the appellant under such circumstances, the ld. Advocate has relied on the two decisions of this Bench of the Tribunal in the case of Imagination Technologies India (P) Ltd.v. CCE, Pune-IIIreported in 2011 (23) S.T.R. 661 (Tri.-Mum.) and Well Known Polyesters Ltd.v. CCE, Vapi reported in 2011 (267) E.L.T. 221 (Tri.-Ahmd.).

Respondents Contention:-Per contra, the ld. DR Sh. R.K. Gupta appearing for the respondent reiterates the findings recorded in the impugned order and further submits that at the time of undertaking the construction activities of the factory building, the appellant was engaged in the activities of manufacturing goods on job work basis, which was exempted from payment of Central Excise duty in terms of Notification No. 241/86, dated 14-3-1986. Thus, according to the ld. DR, taking Cenvat credit prior to commencement of manufacturing activity and obtaining Central Excise Registration Certificate is contrary to the Provisions of Cenvat Statute.

Reasoning of Judgement:-Heard the ld. counsel for both the sides and perused the records. Rule 3(1) of the Cenvat Credit Rules is the enablingprovision, which entitles a manufacturer to take Cenvat credit of duties and taxes paid on the input, capital goods and the input services received by the manufacturer. So far as taking of Cenvat credit on the input service is concerned, the requirement of the said Rule is that the input service has to be received by the manufacturer of final product on or after the 10th day of September, 2004. On perusal of the Cenvat Credit Rules, 2004, it reveals that no restrictions have been imposed providing for not taking the Cenvat credit prior to obtaining the Central Excise registration. Therefore, they are of the considered view that in absence of any specific prohibitions contained in the Cenvat statue to that effect, Cenvat credit cannot be denied to the appellant.

With regard to the observations of the lower authorities that no transitional provisions having been provided in respect of input services in Rule 3(2) of the Cenvat Credit Rules, 2004, and thus, taking of credit is not in conformity with the said Rules, they are of the view that the said sub-rule has no application in the case of capital goods or service tax for the reason that the goods or services are not in relation to the raw material or input that is specifically used for manufacture of the exempted/dutiable final product. Therefore, in absence of specific mention of input service in the said Rule, Cenvat credit of Service Tax paid on the taxable service is permissible under Rule 3(1) of the said Rules. They also find support from the decisions cited by the ld. Advocate for the appellant wherein it has been held that input service received prior to Central Excise registration cannot be the reason for denial of Cenvat credit on the service tax paid on the taxable services. In view of above, they are of the considered opinion that denial of Cenvat benefit on the disputed services to the appellant is not in conformity with the Cenvat statute and thus, the impugned order is liable to be set aside. Therefore, the impugned order is set aside and the appeal is allowed in favour of the appellant.

Decision:- Appeal allowed.

Comment:- The essence of the case is that in the absence of any restriction under statutory provisions regarding inadmissibility of credit of input services prior to taking registration under Central Excise, credit could not be denied for construction service of factory.

Prepared by:- Neelam Jain

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PJ/Case Law /2016-17/3302

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