2018 (12) TMI 1535 - AT - Service Tax

CENVAT Credit - input services - consulting engineering service - input services received from foreign company - reverse charge mechanism - denial of credit on the ground that it is not input service - Held that - The appellant has explained that these services were availed in order to start the township project. These were consultancy services availed for preparatory work for developing the township for which they have taken registration for discharging the service tax on these input services under the reverse charge mechanism - During the disputed period, there was no bar for taking the credit on demand of service tax under reverse charge mechanism - The decision laid down in the case of Kansara Modler Ltd. 2014 (1) TMI 1095 - CESTAT NEW DELHI have categorically held that the assessees are eligible to take credit of the service tax paid under reverse charge mechanism - Credit allowed. CENVAT Credit - the appellant has not started providing output service and have taken registration for providing output service of works contract service only with effect from 23.10.2009 - Department is of the view that they are eligible to take credit only from the date of registration - Held that - The services which are needed to start providing output service for manufacturing finished products would be eligible for credit. The said issue has been sufficiently analyzed in various cases - Hon ble High Court of Karnataka in the case of Tavant Technologies Ltd. 2016 (3) TMI 353 - KARNATAKA HIGH COURT had followed the decision in mPortal Wireless Solutions Pvt. Ltd. 2011 (9) TMI 450 - KARNATAKA HIGH COURT and held that for availing as well as refund of unutilized credit, registration of service tax is not required - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of CENVAT credit on consulting engineer service under reverse charge mechanism.
2. Eligibility of CENVAT credit on input services prior to obtaining registration for output services.

Analysis:

Issue 1:
The appellant, a joint venture company, engaged foreign companies for consulting engineer services to develop a township. The department challenged the eligibility of the appellant to claim credit for service tax paid on input services. The appellant argued that the services were essential for the township project and were availed under reverse charge mechanism. CESTAT Chennai referred to precedents like the case of Kansara Modler Ltd. and Arvind Fashions Ltd., which upheld the eligibility of such credits. The tribunal ruled in favor of the appellant, setting aside the disallowance of credit on consulting engineer services under reverse charge.

Issue 2:
The appellant availed CENVAT credit on various input services before obtaining registration for output services like works contract service. The department contended that credit was only eligible post-registration. CESTAT Chennai analyzed precedents such as Tavant Technologies Ltd. and Spandana Spoorthy Financial Ltd., which emphasized that registration is not a prerequisite for availing credit. The tribunal concluded that the disallowance of credit on both counts was unjustified, setting aside the impugned orders and allowing the appeals with consequential relief.

This comprehensive analysis of the judgment highlights the legal intricacies involved in determining the eligibility of CENVAT credit for the appellant in the given case.