2019 (5) TMI 154 - AT - Service Tax

Refund claim - whether provision of output services are necessary for entitlement of CENVAT credit under CENVAT Credit Rules 2004 (whether such output services are exported or rendered domestically)? - Rule 3 of CENVAT Credit Rules 2004 - HELD THAT - Rule 3 of CENVAT Credit Rules 2004 is the only basis for anyone taking CENVAT credit. This rule provides for CENVAT credit to a manufacturer or a provider of output services of the tax/duty paid on inputs or capital goods or input services received by the manufacturer or provider of output services. In other words, the provision of output services is an essential requirement for entitlement to CENVAT credit under Rule 3 of CENVAT Credit Rules 2004. Whether there is sufficient evidence to show that the output services were rendered by the appellant from the seven new premises during the relevant period? - HELD THAT - On a specific question from the Bench if the invoices listed as other Non-STPI locations could be matched with the corresponding invoice numbers and the address of the premises where the services were provided, Learned Counsel replied in negative. Therefore, merely based on the assertions of the Learned Counsel, I find it impossible to come to any conclusion that the statement given by the appellant established that the services from these seven premises - there is not even a casual remark or mention in any of these invoices that the services were rendered from any of the seven disputed premises. In the absence of any evidence whatsoever, I am unable to come to a conclusion with these invoices that output services were rendered from any of the seven disputed premises. Extended period of limitation - penalty - HELD THAT - It was incumbent upon the appellant to ensure that they take credit as per the rules and not in violation of them. I do not find that the appellant had any reason to believe that they would have been entitled to CENVAT credit on the input services when they have not even kept a record of having rendered any output services from these seven premises - the SCN demanding the recovery of the CENVAT credit along with interest invoking extended period of limitation and proposing imposition of penalty under Section 78 was correctly issued. Appeal dismissed - decided against appellant.

Summary

Issues:
- Dispute over CENVAT credit on input services availed by the appellant before the inclusion of seven new premises in their centralised registration.
- Requirement of providing taxable output services from newly registered premises for availing CENVAT credit.
- Whether appellant demonstrated the provision of output services from the seven new premises during the relevant period.

Analysis:
1. Issue 1 - CENVAT Credit Dispute:
The appellant, engaged in IT Software Services, exported 100% of their services and claimed CENVAT credit. The original authority demanded recovery of irregularly taken credit. The First Appellate Authority held that registration is not a prerequisite for availing CENVAT credit on input services, contrary to the original authority's view. The appellate body also rejected the notion that services used for setting up new premises are ineligible for credit, emphasizing the nature of services availed. However, the appellant failed to provide evidence of taxable output services from the new premises during the credit period.

2. Issue 2 - Requirement of Output Services for CENVAT Credit:
The CENVAT Credit Rules mandate the provision of output services for entitlement to credit. The appellant argued that they rendered output services from the new premises, but failed to substantiate this claim adequately. Documents submitted, such as rent agreements and invoices, did not conclusively prove service provision from the disputed premises. The absence of specific details linking services to the new locations led to the inability to establish the provision of output services, a prerequisite for CENVAT credit eligibility.

3. Issue 3 - Demonstration of Output Services Provision:
Despite the appellant's assertion of rendering services from the new premises, the evidence provided was insufficient. Documents like attendance registers and invoices lacked explicit references to the disputed locations, hindering the verification of service provision. The appellant's reliance on a professional tax registration certificate did not establish output service provision. The failure to present concrete evidence linking services to the new premises weakened the appellant's case, resulting in the denial of CENVAT credit for input services utilized in the unregistered locations.

In conclusion, the appellate tribunal upheld the denial of CENVAT credit due to the appellant's inability to demonstrate the provision of taxable output services from the seven new premises. The judgment emphasized the necessity of concrete evidence linking services to specific locations for credit eligibility, highlighting the importance of compliance with CENVAT Credit Rules. The appeal was rejected, affirming the original authority's decision and underscoring the significance of substantiating claims for tax benefits.