2011 (7) TMI 909 - AT - Service Tax

Cenvat credit - Input service distributor (ISD) - the credit in relation to the 5 invoices has been disallowed essentially on two grounds. Firstly on the ground that the invoices were found issued in the name of Evergreem Autocomp India Pvt. Ltd. and secondly on the ground that they were issued prior to the registration of the appellant company with the Excise Department. - held that - Once it was clearly established that apart from the fact that the company being the same was not in dispute and that merely the name of M/s Evergreen Autocomp India Pvt. Ltd was changed to M/s Showa India (P) Ltd. the appellants herein it was not permissible for the authorities to disallow. Regarding cenvat credit prior to registration - held that - in order to enable the party to avail cenvat credit in relation to service tax paid on service inputs obviously a person has to get registered in terms of the provisions of the Finance Act read with Rules framed thereunder. Therefore it is abundantly clear that the expression commencing of business would apply from the time the party seeks to pay service tax and avail credit in respect thereof in terms of the provisions of law. The term commencing of business in Rule 3 therefore cannot be understood in the manner whereby it will apply only to the cases where the actual manufacturing process would start. It would commence from the time the preparation commences for the establishment of manufacturing unit as the party is entitled to avail credit even prior to actual commencement of production. Benefit of cenvat credit denied - decided against the assessee.

Issues Involved:
1. Disallowance of Cenvat credit due to invoices issued in the name of the previous company name.
2. Disallowance of Cenvat credit due to invoices issued before the company's registration with the Excise Department.
3. Applicability of the extended period of limitation for issuing the show cause notice.

Detailed Analysis:

1. Disallowance of Cenvat Credit Due to Invoices Issued in the Name of the Previous Company Name:
The appellants argued that the original name of the company was M/s Evergreen Autocomp (India) Pvt. Ltd., which was later changed to M/s Showa India (P) Ltd. The change was approved by the Central Government and documented by the Registrar of Companies. The credit was claimed based on 12 invoices, all issued in the name of M/s Evergreen Autocomp (India) Pvt. Ltd. The Commissioner allowed credit for 7 invoices but disallowed it for 5 invoices on the grounds that they were issued in the name of the old company before registration with the Excise Department. The appellants contended that since there was no dispute about the change of name, the disallowance was unjustified. The Tribunal agreed, noting that the mere change of name should not result in disallowance of credit if the company remained the same entity.

2. Disallowance of Cenvat Credit Due to Invoices Issued Before the Company's Registration with the Excise Department:
The appellants contended that there was no legal requirement to be registered with the Central Excise Department to avail of Cenvat credit on input services. They argued that the provisions of the Service Tax (Registration of Special Category of Persons) Rules, 2005, which require registration within 30 days of commencing business, did not apply as their manufacturing process had not commenced. The Tribunal examined various rules under the Cenvat Credit Rules, 2004, and the Service Tax Rules, 1994, and concluded that registration is a prerequisite for availing of Cenvat credit. The Tribunal held that the term "commencing of business" should be interpreted to include the preparation phase for setting up a manufacturing unit, not just the actual start of production.

3. Applicability of the Extended Period of Limitation for Issuing the Show Cause Notice:
The appellants argued that the show cause notice issued on 26.2.2009 was beyond the one-year limitation period for the invoices dated before 28.11.2006. They claimed that the Department was informed on 10.5.2007 about their intention to avail of the credit, and thus, there was no suppression of facts. The Tribunal found that the appellants had not registered themselves as required by law at the relevant time and that the extended period of limitation was justified due to the suppression of facts revealed during the investigation.

Conclusion:
The Tribunal upheld the Commissioner's order disallowing the Cenvat credit amounting to Rs.63,32,281/- on the grounds that the invoices were issued before the company's registration and in the name of the old company. The Tribunal found no merit in the appellants' arguments and dismissed the appeal, affirming the recovery of the disallowed credit with interest and penalty.

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