2015 (1) TMI 1237 - AT - Service Tax

Denial of Cenvat credit - service tax paid on the software purchased from a consultant who is registered himself under the category of Management Consultant and has discharged service tax on the said transaction - Held that - In the absence of any dispute about the payment of tax by the appellant to the service provider and deposit of the same by the service provider to the State Exchequer, denial of credit on the sole reason that it was shown as IT service in the appellant s record is not justifiable. Accordingly set aside the denial of the same. Further, a part of the credit of service tax paid by the auditors at the time of filing of income tax returns of the appellants stands denied to them on the ground that the same is not covered by the definition of input service. As find that filing of income tax returns by the appellants are in connection with their business and as such would be covered by the definition of Input service. The same admittedly has a nexus with the running of business and the service tax paid by the auditors in respect of service of filing IT returns would be available as credit to them. - Decided in favour of assessee

Summary

Issues:
1. Denial of Cenvat credit for service tax paid on software purchased from a consultant.
2. Dispute regarding the categorization of service in records as IT service.
3. Denial of credit for service tax paid by auditors during filing of income tax returns.

Analysis:
1. The appellant was denied Cenvat credit of &8377; 72,676 for service tax paid on software purchased from a consultant registered as a Management Consultant. The Revenue contended that as IT service did not exist during the relevant period, the credit availed by the appellant was incorrect. The appellant categorized the service as IT service in their records. The Tribunal held that denial of credit solely based on the categorization in the appellant's records was unjustified, as there was no dispute about tax payment and deposit by the service provider. The denial was set aside.

2. The advocate argued that the service tax was paid by the consultant registered as a Management Consultant for software purchased, not for IT services as recorded by the appellant. The Tribunal agreed with the advocate's contention, emphasizing that the actual tax payment and deposit to the State Exchequer were not in question. Therefore, the denial of credit based on the categorization discrepancy was deemed unjustifiable, leading to the reversal of the denial.

3. Another issue arose regarding the denial of credit for service tax paid by auditors during the filing of income tax returns of the appellants. The denial was based on the grounds that it did not fall under the definition of input service. However, the Tribunal found that filing income tax returns was directly connected to the appellants' business activities and, therefore, qualified as an input service. The service tax paid by auditors for filing IT returns was considered to have a nexus with the business operations, making it eligible for credit. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief granted to the appellant.