2017 (1) TMI 95 - AT - Service Tax

CENVAT credit - Enterprise Resource Planning Software system based services - denial on the ground that the credit availed prior to taking registration and the services do not qualify as input services - Held that - the CENVAT Credit Rules does not mandate taking registration for availing credit. The issue was discussed in the case of M/s. M Portal India wireless Solutions Pvt. Ltd., Vs. CST, Bangalore, 2011 (9) TMI 450 - KARNATAKA HIGH COURT and was held that Registration not compulsory for refund - the credit availed prior to taking registration is admissible. Credit on meal coupons denied stating these are welfare measures - Held that - The Tribunal as well as various High Courts have held that credit availed on outdoor catering services is eligible for credit. Providing meal coupons are nothing but providing food for employees and is similar to outdoor catering services or providing canteen facilities - credit allowed. Credit allowed - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Admissibility of credit availed prior to registration with the service tax department.
2. Eligibility of credit for service tax paid on meal coupons provided to employees.

Analysis:

Issue 1: Admissibility of credit availed prior to registration
The appellants, engaged in providing Enterprise Resource Planning Software system based services, availed various input services before registering with the service tax Department in May 2006. A Show Cause Notice was issued proposing to deny the credit availed on these services on the grounds that credit before registration is inadmissible. The original authority disallowed the credit on services availed before registration and on service tax paid on meal coupons. The appellant contended that registration is not mandatory for availing credit, citing relevant case law. The Tribunal agreed, referencing the case law of M/s. M Portal India Wireless Solutions Pvt. Ltd. and CST, Bangalore Vs. Tavant Technologies India Pvt. Ltd., holding that credit availed before registration is admissible under the CENVAT Credit Rules.

Issue 2: Eligibility of credit for service tax on meal coupons
The appellant argued that the service tax paid on meal coupons provided to employees should be eligible for credit, as these coupons are part of the compensation structure. The department contended that meal coupons are welfare measures and not eligible for credit. The Tribunal disagreed with the department, stating that meal coupons are akin to outdoor catering services or canteen facilities. As the definition of input services was broad before 01.04.2011, credit availed on such services is eligible. The Tribunal held that denying credit for meal coupons provided to staff/employees is unjustified, setting aside the disallowance and allowing the appeal with consequential reliefs.

In conclusion, the Tribunal ruled in favor of the appellant, holding that credit availed prior to registration is admissible under the CENVAT Credit Rules and that the disallowance of credit for service tax on meal coupons provided to employees was unjustified.