2017 (9) TMI 155 - AT - Service Tax

CENVAT credit - whether the appellant is entitled to Cenvat Credit on the Service Tax paid by M/s. Sapphire Consulting Group and whether such credit can be utilized by the appellant to pay service tax on their output service? - Held that - Rule 2(l) of the Cenvat Credit Rules, 2004, defines Input Service as any service used by provider of taxable service for providing an output service. With regard to Management or Business Consultation Service, It is on record that the appellant has utilized the services of M/s. Sapphire Consulting Group for providing the output service to M/s. Koutons Retail India Ltd - As long as, the service is used to provide output service, Cenvat credit of such Service Tax will be admissible - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility for Cenvat credit on service tax paid by a third party.
- Utilization of Cenvat credit for payment of service tax on output service.

Analysis:

Issue 1: Eligibility for Cenvat credit on service tax paid by a third party
The appeal challenged an order by the Commissioner (Appeals) concerning the eligibility of a firm of Chartered Accountants to avail Cenvat credit on service tax paid by a third party, M/s. Sapphire Consulting Group, under the category of "Management or Business Consultant's Service." The Revenue contended that such service cannot be considered an input service for providing Chartered Accountant services, leading to a show cause notice and subsequent adjudication. The Tribunal noted that the firm had utilized the services of M/s. Sapphire Consulting Group to provide its output service to M/s. Koutons Retail India Ltd. The key contention was whether the Cenvat credit on the service tax paid by the third party was admissible. The Tribunal analyzed Rule 2(l) of the Cenvat Credit Rules, 2004, which defines "Input Service" as any service used by the provider of taxable service for providing an output service. The Tribunal concluded that as long as the service is used to provide the output service, Cenvat credit of such Service Tax would be admissible. Therefore, the Tribunal held that the Cenvat credit availed was admissible, setting aside the impugned order and allowing the appeal.

Issue 2: Utilization of Cenvat credit for payment of service tax on output service
The second issue addressed in the judgment was the utilization of the Cenvat credit for payment of service tax on the output service provided by the firm of Chartered Accountants to M/s. Koutons Retail India Ltd. The Tribunal confirmed that the firm had discharged the service tax on the consideration received for the service provided in connection with syndication for raising funds via private equity. The question for decision was whether the Cenvat credit on the service tax paid by the third party could be utilized by the firm to pay service tax on their output service. The Tribunal's analysis of the relevant provisions led to the conclusion that the Cenvat credit availed was indeed admissible for such utilization. Consequently, the Tribunal allowed the appeal, emphasizing that as long as the service is used to provide the output service, the Cenvat credit would be valid for payment of service tax on the output service.

In summary, the judgment clarified the eligibility of a firm of Chartered Accountants to avail Cenvat credit on service tax paid by a third party under the category of "Management or Business Consultant's Service." The Tribunal held that as long as the service is used to provide the output service, the Cenvat credit would be admissible. Additionally, the judgment affirmed the firm's right to utilize the Cenvat credit for payment of service tax on their output service, ultimately allowing the appeal and setting aside the impugned order.