2023 (6) TMI 9 - AT - Service Tax

CENVAT Credit - input services or not - denial on the ground of lack of nexus with the output services provided by the appellants - appellants submitted that the learned Adjudicating Authority has not examined the invoices properly in respect of which the Cenvat credit was availed by the appellant - non-application of mind - violation of principles of natural justice - HELD THAT - Insofar as the nexus aspect is concerned, it is incumbent upon the original authority to examine not only the invoices, but also the nature of services and their participation or use in the provision of the output service. The original authority has not thoroughly examined the documentary evidences and other aspects in support of denial of the benefit of Cenvat credit to the appellants. Further, we also find that the disputed services involved in this case were also involved in the subsequent period 2015-17 and upon proper analysis of the documentary evidences, the original authority vide order dated 06.05.2022 has allowed the Cenvat benefit to the appellants. On minute study of both the orders, there are no justification found as to how and under what circumstances the Cenvat credit on the disputed services were allowed by the adjudicating authority for the subsequent period, which were denied for the previous period. Furthermore, it has also been noticed that the judgments relied upon by the appellants have also not been considered in their proper perspective for arriving at a conclusion whether the appellants should be entitled for the credit or otherwise. Therefore, this matter is required to be re-examined at the original stage. The original authority should properly examine the actual use/utilization of the disputed services in the provision of the output service and also the duty paying documents for a conclusion regarding lawful entitlement to the Cenvat credit by the appellants - appeal allowed by way of remand.

Summary

Issues involved:
The denial of Cenvat credit to the appellant by the department based on the lack of nexus between input services and output services provided by the appellant.

Summary:

Issue 1: Nexus between input services and output services

The appellants, engaged in Information Technology and Software Testing Services, availed Cenvat credit on input services procured for providing taxable services. The department denied Cenvat credit for certain services citing lack of nexus with output services. The impugned order allowed credit on some input services but denied on others. The appellant challenged the denial of Cenvat benefit amounting to Rs. 13,19,96,912. The Advocate argued that the authority failed to properly examine the invoices and documentary evidence supporting the nexus. He cited judgments establishing entitlement to Cenvat credit on disputed services. The Tribunal noted that the original authority did not thoroughly examine the evidence and failed to justify the denial. It observed that for the subsequent period, Cenvat benefit was allowed on the same services. The Tribunal held that the matter required re-examination at the original stage, setting aside the impugned order and directing denovo adjudication. The original authority was instructed to assess the actual use of disputed services in output provision, consider duty paying documents, and analyze the judgments relied upon by the appellants for a proper conclusion on Cenvat credit entitlement.

Conclusion:
The Tribunal allowed the appeal by remanding the case for fresh adjudication to determine the lawful entitlement of Cenvat credit to the appellant, emphasizing the need for a thorough examination of evidence and proper consideration of relevant judgments.