2017 (12) TMI 1441 - AT - Service Tax

CENVAT credit - consultancy services - denial on the ground that the project for which consultancy was received was fully abandoned without its implementation - Held that - CENVAT credit once rightly availed is indefeasible and subsequent development of abandoning of plant will not make the appellant liable to reverse the CENVAT credit which was rightly availed by them - the credit was rightly availed during the period 2004-06 for the purpose of availing the Management Consultancy Service received by the appellant during the said period - credit remains allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of CENVAT credit on consultancy services due to project abandonment.

Analysis:
The appellant, a Government of Kerala undertaking, availed CENVAT credit on consultancy services for a project expansion work that was later abandoned. The Department alleged irregular credit availed amounting to ?32,32,745/- along with penalties. The impugned order by the Commissioner (A) rejected the appeal, leading to the present appeal before the Appellate Tribunal.

The appellant argued that the consultancy services were availed before the project abandonment decision and that the demand was time-barred, as there was no suppression since regular ER-1 returns were filed. Citing precedents like Coca Cola India Pvt. Ltd. and CCE, Nagpur Vs. Ultratech Cement Ltd., the appellant contended that modernization or repair activities are creditable if they meet input service definitions.

The Tribunal found that the consultancy service was for the plant, and the credit was correctly availed and utilized between October 2004 to August 2006. It held that once credit is rightly availed, subsequent developments like project abandonment do not invalidate the credit. The Tribunal noted the regular filing of ER1 returns by the appellants and the correctness of credit availed during 2004-06 for management consultancy services. Relying on precedents like CCE, Bangalore Vs. Tafe Ltd., the Tribunal emphasized that rightly availed credit remains valid despite later events.

Ultimately, the Tribunal set aside the impugned order, allowing the appeal and providing consequential relief to the appellant. The decision was based on the indefeasibility of rightly availed CENVAT credit, supported by legal precedents and the regular compliance of the appellant.