2017 (10) TMI 973 - AT - Service Tax

CENVAT credit - input/input services - telecommunication services - Held that - at the time of availment of CENVAT credit, it was not disputed that the said credit has been used by the appellant for providing taxable output service. It is also a fact that the service which has been provided by the appellant is a taxable service. The only issue is that the appellant could not realize the amount from the service recipient and during the impugned period, the service tax was payable on realization of the service tax from the service recipient. In that circumstance, I hold that the services provided by the appellant is a taxable service and for providing output taxable service, as per Rule 3 of CCR, 2004, the appellant is entitled to avail CENVAT credit. The same issue was dealt by this Tribunal in the case of CST, Ahmedabad vs. Krishna Communication 2013 (6) TMI 137 - CESTAT AHMEDABAD , where it was held that It is settled law that there cannot be one to one co-relation in availing of the CENVAT Credit of the input service to the provision of output service. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Denial of CENVAT credit for input and input services in providing telecommunication services due to non-realization of service amount from recipients.

Analysis:
The appellant appealed against the denial of CENVAT credit for input and input services used in providing telecommunication services where the service amount was not received from recipients during the impugned period. The appellant contended that despite non-realization of service amount, they were entitled to avail CENVAT credit as the services provided were taxable. The Tribunal analyzed the case and referred to a similar case of CST, Ahmedabad vs. Krishna Communication. In the Krishna Communication case, it was established that there cannot be a direct correlation between input services and output services for CENVAT credit. The Tribunal held that the appellant's eligibility to avail CENVAT credit was not in question as the inputs were used in providing taxable output services. The Tribunal also highlighted that the non-realization of service tax did not render the input credit wrongly utilized, as per Rule 14 of the CENVAT Credit Rules, which pertains to recovery of wrongly taken credit. The Tribunal concluded that the denial of CENVAT credit was not sustainable and set aside the impugned order, allowing the appeal with consequential relief.

Judgment Summary:
The Appellate Tribunal CESTAT Bangalore, in the case of denial of CENVAT credit for input and input services in providing telecommunication services due to non-realization of service amount from recipients, ruled in favor of the appellant. The Tribunal emphasized that the services provided were taxable, and the appellant's eligibility to avail CENVAT credit was upheld. Referring to the Krishna Communication case, the Tribunal clarified that there was no requirement for a direct correlation between input and output services for availing CENVAT credit. The Tribunal further explained that the non-realization of service tax did not result in the wrongful utilization of input credit as per Rule 14 of the CENVAT Credit Rules. Consequently, the Tribunal set aside the denial of CENVAT credit, allowing the appeal with consequential relief.