2015 (3) TMI 1105 - AT - Service Tax

CENVAT Credit - exempted services - taxable output services provided by the appellants were written off - Telecommunication Services - Held that - It is nobody s case that the service when it was rendered was not taxable or exempt. In fact it is not even a case that service has not been rendered. The amount that was to be received has not been received. During the relevant period service tax was payable only when the consideration was received. We agree that appellant has made out a prima facie case in their favour under the facts and circumstances discussed above. Accordingly the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.

Summary

Issues:
Demand of service tax, imposition of penalties, eligibility for Cenvat credit, written off service charges, Telecommunication Services, consideration received for taxable services.

Analysis:
The judgment by the Appellate Tribunal CESTAT Bangalore pertains to a case where a demand of service tax amounting to Rs. 29,35,477 for the period from April 2006 to March 2007, along with penalties, was confirmed on the appellant. The issue revolved around service charges billed for certain taxable output services being written off in the books of accounts, leading to a denial of Cenvat credit under Rule 6 of Cenvat Credit Rules 2004. The appellant, a provider of Telecommunication Services, contested that the written off amounts for services rendered should not render them ineligible for Cenvat credit as the services were not exempted and were indeed taxable. The appellant argued that service tax was payable only upon receiving the consideration, which was not received in this case. The Tribunal agreed with the appellant's contention, acknowledging a prima facie case in their favor. Consequently, the requirement of pre-deposit was waived, and a stay against recovery was granted during the appeal process.

This judgment highlights the importance of considering the actual receipt of consideration for taxable services in determining the eligibility for Cenvat credit. It clarifies that the mere writing off of service charges for services rendered does not automatically disqualify a taxpayer from claiming Cenvat credit if the services were indeed taxable and consideration was yet to be received. The Tribunal's decision underscores the need to assess each case on its merits and the specific circumstances surrounding the provision of services and the subsequent billing and recovery processes.