2013 (12) TMI 741 - AT - Service Tax

Demand of service tax - Denial of CENVAT Credit - Renting of cafeteria area - Refund of Cenvat Credit - Assessee 100% Export Oriented Unit - Service Tax Registration Certificate not submitted - Held That - there is nothing in CCR, 2004 to restrict taking of credit only for services received after the date of registration especially in a situation where provider of service is exporting the services and is not required to pay service tax - Rule 4 of Service Tax Rules is applicable to a person who is liable to pay service tax. If there is an offence of not complying with Rule 4 of Service Tax Rules, that matter has to be adjudicated as per the provisions of the Act and the Rules. Denial of Cenvat credit may not be the proper course in such situation. The delay in taking registration is only of 11 days. The claim for refund has been submitted after registration. Further the provision of CCR, 2004 which is not complied with is not precisely pointed out. The requirement of registration prior to having eligibility for credit is sought to be achieved by a laborious interpretation of Service Tax Rules, 1994 and Cenvat Credit Rules, 2004 by interpreting that a service provider has to get registered (as per Service Tax Rules, 1994) and only a service provider can take credit (as per Cenvat Credit Rules, 2004) and deducing that an unregistered service provider does not get eligibility for credit. By not getting registered a person does not cease to become a provider of taxable service if he is actually providing such service. Even if a service provider is not registered there will be tax liability on him if he is providing taxable service. The concomitant benefit of Cenvat credit also has to be seen accordingly, of course subject to provisions in Cenvat Credit Rules 2004, in the absence of clear provisions to the contrary - Following decision of Portal India Wireless Solutions (P) Ltd. Vs CST 2011 (9) TMI 450 - KARNATAKA HIGH COURT . No reason to hold that renting of cafeteria area cannot form input service when service of cafeteria itself is considered as input service as decided by Mumbai High Court in CCE Nagpur Vs Ultratech Cement Ltd. - 2010 (10) TMI 13 - BOMBAY HIGH COURT and in the case of CCE Bangalore Vs Stanzen Toyotetsu India (P) Ltd.- 2011 (4) TMI 201 - KARNATAKA HIGH COURT - Decided against Revenue.

Summary

Issues Involved:
1. Whether service tax registration is mandatory for eligibility of Cenvat credit.
2. Eligibility of Cenvat credit on certain specific services.

Detailed Analysis:

1. Whether service tax registration is mandatory for eligibility of Cenvat credit:

The respondent was engaged in providing various taxable services and had applied for modifying their registration to include "Information Technology Software Services" after it became taxable on 16-05-08. They filed a refund claim for unutilized Cenvat credit on 23-01-09, which was partially rejected by the adjudicating authority. The Commissioner (Appeals) allowed the refund, relying on the Karnataka High Court decision in Portal India Wireless Solutions (P) Ltd., which held that service tax registration is not mandatory for refund of accumulated Cenvat credit on input services used for export of services. The Revenue appealed this decision, arguing that combined reading of Service Tax Rules, 1994, and Cenvat Credit Rules, 2004, indicates that registration is mandatory for taking credit.

The Tribunal considered the submissions and found that there is nothing in CCR, 2004 that restricts taking of credit only for services received after registration, especially when the service provider is exporting services and not required to pay service tax. The Tribunal noted that Rule 4 of Service Tax Rules applies to persons liable to pay service tax, and the delay of 11 days in registration does not justify denial of credit. The Tribunal upheld the Commissioner (Appeals) order, stating that the Karnataka High Court's decision in Portal India Wireless Solutions Pvt. Ltd. should prevail, and procedural requirements for allowing Cenvat Credit are construed more liberally than conditions of an exemption notification.

2. Eligibility of Cenvat credit on certain specific services:

The adjudicating authority rejected credit on certain services, including rent for cafeteria area, AMC charges for air conditioners, and payments to a gym instructor. The Commissioner (Appeals) allowed credit on these services, which was contested by Revenue.

The Tribunal held that renting of cafeteria area forms input service as decided by the Mumbai High Court in CCE Nagpur Vs Ultratech Cement Ltd. and the Karnataka High Court in CCE Bangalore Vs Stanzen Toyotetsu India (P) Ltd. Similarly, AMC for air conditioners, essential for maintaining computers used in IT services, qualifies as input service. Regarding the gym instructor, the Tribunal considered physical fitness of employees as necessary for providing IT services and allowed credit, comparing it to canteen services provided to employees.

Conclusion:

The Tribunal rejected the Revenue's appeal, affirming the Commissioner (Appeals) decision on both issues. The Tribunal emphasized that there is no explicit provision in CCR, 2004 restricting credit based on registration date and procedural requirements for Cenvat Credit should be interpreted liberally. The Tribunal also validated the eligibility of Cenvat credit on the specific services contested by Revenue.