2012 (5) TMI 266 - AT - Service Tax

Waiver of pre-deposit - Information Technology Software Held that - service tax on the output service provided by the applicant was effective from 16.05.2008 and that the rules specifically permitted registration within 30 days from the date of introduction of service tax on the said services. Once service tax is leviable from 16.05.2008, prima facie it is not correct to deny the benefit of credit on input services utilized from the said date. Further, the original authority has sanctioned the refund. pre-deposit waived

Summary

Issues:
1. Denial of Cenvat credit for services provided before registration under Service Tax Rules.
2. Disallowance and recovery of credit amount by Commissioner.
3. Interpretation of Rule 5 of Cenvat Credit Rules.

Analysis:
The judgment by the Appellate Tribunal CESTAT, BANGALORE involved a case where the applicant, a provider of Information Technology Software Services, registered themselves under the service tax net on 18.06.2008, which was after the introduction of service tax on 16.05.2008. The Commissioner disallowed an amount of Rs. 2,02,178/- for credit taken prior to registration, ordering its recovery. The key contention was whether Cenvat credit for input services utilized before registration could be denied.

The applicant argued that since service tax became payable from 16.05.2008, credit for input services should also be available from that date. They contended that the registration within 30 days was a procedural requirement, and the benefit of Cenvat credit under Rule 3 should not be denied. On the other hand, the SDR relied on a previous Tribunal decision to support the position that credit cannot be taken before registration, citing Rule 5 of the Cenvat Credit Rules.

After considering the submissions, the Tribunal noted that service tax on the applicant's output service was effective from 16.05.2008, and registration within 30 days was permitted by the rules. The Tribunal found it inappropriate to deny the benefit of credit on input services utilized from the effective date of service tax. Given that the original authority had already sanctioned the refund, the Tribunal decided to waive the pre-deposit of the amount ordered for recovery by the Commissioner and stayed the recovery until the appeal was disposed of. This decision was crucial in clarifying the interpretation of Rule 5 of the Cenvat Credit Rules in the context of registration and credit eligibility.